---

---

# UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

| |           | 
| | --------- | 
| | FORM 10-K | 
| |           | 

| |  | (Mark One)
| |  | ----------

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

# For the fiscal
year ended December 31, 2002

# 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 No. 000-29239

INFORTE CORP.(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction ofincorporation or organization) | 36-3909334(I.R.S. EmployerIdentification Number)
|--------------------------------------------------------------------- | ------------------------------------------------

150 North Michigan Avenue
Suite 3400, Chicago, Illinois 60601(Address of principal executive offices) (Zip Code)

# Registrants
telephone number, including area code: (312) 540-0900

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

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

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

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

Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes |_| No
|X|

The
aggregate market value of the registrants voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrants most recently
completed second fiscal quarter, is $63,572,965.

Certain
portions of the Registrants definitive proxy statement dated March 22,
2003 for the Annual Meeting of Stockholders to be held April 30, 2003 are
incorporated by reference into Part III of this report.

---

---



# Inforte
Corp.Form 10-KDecember 31, 2002

# Table of Contents

|Item     |  | Page No.                                                                             
|-------- |  | -------------------------------------------------------------------------------------
|Part I   |  |                                                                                      
|        
|1.       |  | Business                                                                             
|2.       |  | Properties                                                                           
|3.       |  | Legal Proceedings                                                                    
|4.       |  | Submission of Matters to a Vote of Security Holders                                  
|4A.      |  | Executive Officers of the Registrant                                                 
|        
|Part II  | 
|        
|5.       |  | Market for Registrants Common Equity and Related Stockholder Matters                
|6.       |  | Selected Consolidated Financial Data                                                 
|7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations
|7A.      |  | Quantitative and Qualitative Disclosures About Market Risk                           
|8.       |  | Consolidated Financial Statements and Supplementary Data                             
|9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|        
|Part III | 
|        
|10.      |  | Directors and Executive Officers of the Registrant                                   
|11.      |  | Executive Compensation                                                               
|12.      |  | Security Ownership of Certain Beneficial Owners and Management                       
|13.      |  | Certain Relationships and Related Transactions                                       
|14.      |  | Controls and Procedures                                                              
|        
|Part IV  | 
|        
|15.      |  | Exhibits, Consolidated Financial Statement Schedules and Reports on Form 8-K         
|        
|         |  | SIGNATURES                                                                           

---



# PART I

## ITEM 1. BUSINESS

The
information in this document contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
based upon current expectations that involve risks and uncertainties. Any
statements contained in this document that are not of historical fact, are
intended to be, and are, forward-looking statements, which involve
known and unknown risks. We generally use the following terms and similar
expressions to identify forward-looking statements: anticipate,
believe, estimate, expect, intend,
may, plan, potential, should,
could and will. Our actual results could differ
materially from those indicated by the forward-looking statements made in this
report. Accordingly, you should not place undue reliance on these
forward-looking statements.

Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity or
performance. Additionally, we do not assume responsibility for the accuracy or
completeness of these statements. We are under no duty to update any of the
forward-looking statements in this document to conform these statements to
actual results or to changes in our expectations.

## Overview

Inforte
is a customer and demand management consultancy. We help clients increase
profitability by maximizing the effectiveness of their customer-facing
initiatives. Inforte consultants deliver strategy, process and technology
solutions that enhance visibility across our clients enterprise, making
their customer interactions more strategic and lucrative.

Our
client base consists primarily of Global 2000 companies. Representative clients
in the past year included Blue Cross & Blue Shield of Illinois, BMC
Software, BNP Paribas, California State Automobile Association, CUNA Mutual, Dow
Corning, Experian, The Hartford, Home Depot, John H. Harland, Lexis-Nexis,
Moore, Option One Mortgage, Prudential, PSS World Medical, Royal Automobile
Club, Sabre, Sprint, Toshiba and Wrigley.

Inforte
has grown entirely through organic means since its inception in September 1993
rather than through mergers or acquisitions. Historically, we have funded our
growth primarily through internally generated free cash flow and we have
continued to generate positive free cash flow since becoming a public company in
February 2000. As of December 31, 2002, we employed 229 people in our offices in
Atlanta, Chicago, Dallas, London, Los Angeles, New York and San Francisco.

## Industry Background

A
fluctuating economic environment has created many challenges for companies
seeking growth, optimal profitability and increased efficiencies in highly
competitive and rapidly changing markets. In order to achieve these goals in any
economic environment, companies need to integrate, manage and better respond to
customer demand. Customer and demand management solutions apply well-established
forecasting techniques, allowing companies to trust the results, communicate
them consistently and design an organization that systematically responds to
demand.

The
analysis, design and implementation of an effective customer and demand
management solution requires special skills and expertise that many companies do
not possess. These special skills include the ability to:

| |  |  | Identify the vital
planning information that companies need to manage their business better in response to
demand changes;
| | - |  | --------------------------------------------------------------------------------------------------------------------------

| |  |  | Integrate
planning processes and systems across business functions;
| | - |  | -------------------------------------------------------------------

| |  |  | Develop
integrated, demand-driven approaches to planning and executing operations;
| | - |  | ----------------------------------------------------------------------------------

| |  |  | Drive
profitability from customers by linking customer-facing strategies to the back office; and
| | - |  | ------------------------------------------------------------------------------------------------

| |  |  | Implement
the technology required to support these solutions.
| | - |  | -------------------------------------------------------------

The
availability of high-quality professionals experienced in creating, implementing
and integrating these strategic and technological solutions is limited. It is
often inefficient and difficult for companies seeking to implement their own
demand solutions to hire, train and retain in-house personnel. As a result,
businesses engage professional services firms to help them design and implement
these strategies and solutions.

1

---



## Inforte Services &
Solutions

Infortes
offerings include the following types of services:

Operational Strategy.
Inforte helps clients establish customer-related operational strategies that
support their strategic positioning. These customer strategies may relate to
Customer Relationship Management (CRM) programs; product, service or
distribution channel approaches; or operational excellence initiatives, such as
a demand responsiveness strategy. Inforte helps clients develop new operating
strategies or improve on existing ones by validating, refining and building our
clients value propositions to their customers, conducting competitive
analysis, developing customer value and customer segmentation approaches,
developing benefits or return on investment models and creating branding or
marketing strategies.

Process
Design.Inforte helps clients develop a detailed design of their desired
business processes in preparation for planned organizational and technology
changes. Inforte recognizes that driving sustainable process change is difficult
to accomplish, and we draw upon our significant depth of experience to design
business processes that are practical and adoptable. Inforte provides the
support needed to ensure that a process is adopted after introduction. We assist
clients with the implementation planning, key metrics identification and
organizational change planning activities that are integral to the successful
deployment of redesigned processes.

Technology
Delivery.Infortes technology delivery services identify, define and
implement initiatives to meet a specific set of business objectives. Inforte
creates a technology roadmap for its clients, assessing the clients
existing technology infrastructure and applications along with current and
planned projects. Inforte creates a gap analysis to identify initiatives needed
to implement the required business capabilities. Inforte identifies and uses the
latest application software packages and technology to design and build
solutions for clients to interact with their customers effectively.

Program
Management.Inforte enhances the successful delivery of projects through the
establishment of a Program Management Office (PMO) to define, deploy and support
common processes, techniques and tools to be used by all projects throughout the
program.

Organizational
Change.Inforte helps clients plan for the organizational changes that may
be required to enact and sustain new or modified operational strategies,
processes or technology. Inforte conducts a thorough assessment of its
clients current leadership, structure, culture and workforce to determine
the organizations readiness for change. This assessment produces a
prioritized list of initiatives that address organization-wide and
individual-level activities required to support the successful deployment of
integrated solutions within the organization.

Customer
and Demand Management Solutions.We combine our operational strategy,
process design, technology delivery, program management and organizational
change services to deliver customer and demand management solutions that address
client business problems. These customer solutions help clients drive
profitability from all customer interactions, and allow clients to maximize
existing and future Customer Relationship Management (CRM) investments by
extending CRM strategy from the front-office throughout the enterprise. We help
our clients focus enterprise-wide decision-making processes around a true
understanding of what their market demand is likely to be. We increase our
clients knowledge of their customers and help them plan profit-driving
marketing and sales activities around that knowledge. We assist our clients with
their customer segmentation approaches, customer differentiation programs and
marketing campaign management.

Methodology
and Tools.Our proprietary approach to planning and delivering projects,
Velocity to Value (V2V), has produced industry leading project efficiency
metrics to help ensure we deliver projects on time and within budget. We believe
our client advocacy approach and our rigorous delivery methodologies have helped
us to achieve high levels of client satisfaction.

All
Inforte projects are governed by our V2V project delivery methodology. We
structure and price our projects in shorter, multiple phases to ensure that each
phase meets the clients business objectives.

2

---



To
continuously maintain the high level of advanced technological skills among our
staff, Inforte identifies, captures, organizes and disseminates our knowledge
capital internally through an intranet-based system we call the Inforte
Collaborative Environment, or ICE.

Collaborative
Client Involvement.We believe our solutions are successful because they are
developed in collaboration with our clients. Because the ultimate success of any
project will depend upon the clients ability to effectively operate and
support the related strategies, processes and technology on an ongoing basis,
our co-management approach is designed to include substantial client
participation in all phases of the project. This enables the client to have a
thorough understanding of what has been done, how it was completed and why it
was performed. The collaborative environment is further supported by allowing
clients to access project deliverables through our ICE intranet. We believe our
co-management philosophy differs from that of many service providers, who limit
the clients role in project delivery. We believe our collaborative
knowledge transfer philosophy has contributed to consistently high project
success rates and client satisfaction.

## Inforte Strategy

Infortes
strategy is to focus on one specific solution area, customer and demand
management solutions. Inforte is a specialist in this area, we are not a
generalist covering multiple solution areas. Inforte believes that by being a
focused specialist, with all of our time, thinking, experience, intellectual
capital and effort expended on one solution area, we can offer our clients
best-in-world capabilities within that area. We think that our capabilities will
compare favorably with competitors, who may be larger and may have more
resources, but who are unfocused and have not developed a specialty. Elements
supporting this strategy are:

Maintain
customer and demand management solutions focus.Inforte helps clients
increase profitability by maximizing the effectiveness of their customer-facing
initiatives. Inforte consultants deliver strategy, process and technology
solutions that enhance visibility across our clients enterprise, making
their customer interactions more strategic and lucrative. We believe our focus
enhances our ability to generate assignments from existing and new clients,
achieve high margins, maintain our position of technological and thought
leadership and provide challenging assignments to our employees.

Ensure
Continued Client Satisfaction.Inforte strives to ensure high client
satisfaction. We survey clients each quarter to assess their satisfaction and
link management compensation to these results. Our quarterly surveys ask clients
open-ended questions on measurements they consider important and ask them to
numerically score us on these factors. For comparability purposes, our client
surveys also request numerical scores on nine set factors, including expertise,
project management skills, business understanding, price and responsiveness.

Continue
to Attract and Retain High Quality Personnel.Infortes strategic focus
requires that we retain highly motivated, intelligent people of exceptional
quality. We believe the best way to continue to attract and retain highly
qualified personnel is to provide an intellectually challenging environment, an
opportunity to personally impact our companys future and a strong
corporate culture.

Continue
Superior External and Internal Business Execution.Inforte is committed to
outstanding internal and external execution to deliver superior results for our
clients and for our investors. We believe that our high gross margin relative to
peer companies indicates our ability to deliver fixed fee projects on time and
on budget to a degree greater than other consulting firms. We believe that our
record of continued positive free cash flow and profitable performance during a
severe industry downturn where many peer companies are losing money or going
bankrupt demonstrates our ability to execute well in any environment. We believe
that our record of always delivering on the revenue and earnings guidance we set
for the current quarter at the time when we release the prior quarters
results, with no pre-announcements, shows our superior forecasting ability
relative to other companies.

Inforte
emphasizes continuous improvement of our client delivery expertise, including
our V2V methodology, knowledge management and other internal processes to
compete effectively in the future. We continue to refine the systems and
processes that comprise our internal infrastructure, which we consider to be
advanced for a company of our size.

## Clients

Our
client base consists primarily of Global 2000 companies. Representative clients
are listed in the Overview. During 2002 our top five clients equaled
37 percent of total revenue and our top ten clients equaled 58 percent of total
revenue. No single customer has provided Inforte with over 10 percent of our
annual revenue since 1997. To most effectively address the needs of our
customers and the market environments of their businesses, we are organized
along vertical industries.

3

---



## Sales and Marketing

Inforte
markets with a team-selling approach that combines dedicated sales
professionals, senior client executives and specific subject matter experts,
strategists or senior delivery personnel. We believe our team model is superior
to a traditional professional services sales model where one individual must
manage the sales process in addition to providing the services. Our dedicated
sales professionals focus primarily on selling to new customers, while our
client executives focus primarily on maintaining and extending relationships
with existing customers.

We
use a proprietary sales and marketing methodology called SAMM to capture
detailed information on sales opportunities. SAMM is based on a heavily
customized customer relationship management system to track potential contracts
at each stage of our sales cycle. We project revenue based on a probability
analysis of each sales opportunity, allowing us to manage continually our
staffing needs and spending plans.

Our
market development efforts are designed to build Infortes brand name and
recognition in the marketplace and generate leads for new business. Our
activities include strategic direct marketing programs, seminars and briefings
that target corporate executives, public speaking opportunities, attendance at
industry conferences, regular meetings with industry analysts, public relations
programs, electronic brochures and use of web site properties such as
inforte.com.

We
complement our internal sales and marketing processes with select formalized
industry alliances. We co-market and share leads with software vendors with whom
we have strategic, non-exclusive marketing relationships. We also work with
other software vendors with whom we do not have formalized relationships.

## People

Our
headcount was 122 people at the end of 1998, 257 people at the end of 1999, 442
people at the end of 2000, 294 people at the end of 2001 and 229 employees as of
December 31, 2002. Of these, 172 are consultants, 22 are in sales and marketing,
including 14 quota-based sales personnel, 5 are in human resources and 30 are
management or administrative personnel. None of our employees are represented by
a labor union, and we believe our employee relations are good.

## Competition

We
compete in the strategy and technology professional services market, which is
highly competitive. Despite the elimination of many players over the past two
years, competition remains intense due to restrained spending on information
technology in a tough economic environment. We expect intense competition to
continue. We believe that our competitors fall into several categories,
including the following:

| |  |  | The
successor organizations to the Big 5 consulting firms: Accenture, BearingPoint, Braxton
Consulting, Cap Gemini Ernst & Young and IBM Business Consulting Services
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Technology
consulting firms such as Answerthink, Braun Consulting, DiamondCluster and Sapient
| | - |  | ---------------------------------------------------------------------------------------------

| |  |  | Strategy consulting
firms such as Bain, Booz
| | - |  | --------------------------------------------

| |  |  | Allen & Hamilton,
Boston  Consulting Group and McKinsey
| | - |  | -------------------------------------------------------

| |  |  | Professional
services divisions of application software vendors
| | - |  | ---------------------------------------------------------------

| |  |  | Internal
information technology departments of current and potential clients
| | - |  | ----------------------------------------------------------------------------

| |  |  | Indian
offshore development firms such as Cognizant Technology, Infosys Technologies, Satyam
Computer Services, Tata  Consultancy Services and Wipro
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Large  systems integration or
outsourcing firms such as Computer Sciences, EDS, and Unisys.
| | - |  | -------------------------------------------------------------------------------------------

Many
of our competitors have longer operating histories, larger client bases, longer
relationships with clients, greater brand or name recognition and significantly
greater financial, technical, marketing and public relations resources than we
do. However, we believe that only a few of our competitors have the focus and
possess all of the skills necessary to offer the comprehensive customer and
demand management strategies and solutions that we provide.

4

---



There
are relatively low barriers to entry into the strategy and technology
professional services market. Existing or future competitors may develop or
offer services that are comparable or superior to ours at a lower price, which
could cause our revenues to decline.

## Risk Factors

In
addition to other information in this Form 10-K, the following risk factors
should be carefully considered in evaluating Inforte and its business because
such factors currently may have a significant impact on Infortes business,
operating results and financial condition. As a result of the risk factors set
forth below and elsewhere in this Form 10-K, and the risk factors discussed in
Infortes other Securities and Exchange Commission filings, actual results
could differ materially from those projected in any forward-looking statements.

# RISKS RELATED TO INFORTE

If we are unable to
accurately forecast our quarterly revenue, our profitability may be reduced or
eliminated.

The
level of IT spending growth by current and potential clients in the United
States has slowed and become less certain. We believe the uncertainty stems from
the slowing of growth in Gross Domestic Product in the United States that began
in the second half of calendar 2000. In some cases the uncertainty has reduced
the overall number and size of projects available for bid. In other cases the
uncertainty has resulted in project deferrals, project scope reductions, longer
decision making cycles or limited follow-on projects at existing clients. With
fewer opportunities available in the market, competition on some opportunities
has become more intense. While our revenue forecast methods are sophisticated
and have proven accurate historically, we believe the current environment adds
greater risk and uncertainty to our forecasts. If we fail to accurately forecast
revenue, our actual results may differ materially from the amounts planned, and
our profitability may be reduced or eliminated.

If we fail to identify
and successfully transition to the latest and most demanded solutions or keep up
with an evolving industry, we will not compete successfully for clients and our
profits may decrease.

If
we fail to identify the latest solutions, or if we identify but fail to
successfully transition our business to solutions with growing demand, our
reputation and our ability to compete for clients and the best employees could
suffer. If we cannot compete successfully for clients, our revenues may
decrease. Also, if our projects do not involve the latest and most demanded
solutions, they would generate lower fees.

Because
our market changes constantly, some of the most important challenges facing us
are the need to:

| |  |  | develop
new services that meet changing customer needs;
| | - |  | -------------------------------------------------------

| |  |  | identify and effectively market solutions with growing demand during a period
of slower technological advancement and adoption;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

| |  |  | enhance
our current services;
| | - |  | -----------------------------

| |  |  | continue
to develop our strategic expertise;
| | - |  | --------------------------------------------

| |  |  | effectively
use the latest technologies; and
| | - |  | --------------------------------------------

| |  |  | influence
and respond to emerging industry standards and other technological changes.
| | - |  | -------------------------------------------------------------------------------------

All
of these challenges must be met in a timely and cost-effective manner. We cannot
assure you that we will succeed in effectively meeting these challenges,
especially during a substantial economic slowdown when adjusting the size of the
business for lower demand diverts resources and senior managements
attention.

If we fail to satisfy
our clients expectations, our existing and continuing business could be
adversely affected.

If
we fail to satisfy the expectations of our clients, we could damage our
reputation and our ability to retain existing clients and attract new clients.
In addition, if we fail to perform adequately on our engagements, we could be
liable to our clients for breach of contract. Although most of our contracts
limit the amount of any damages based upon the fees we receive we could still
incur substantial cost, negative publicity, and diversion of management
resources to defend a claim, and as a result, our business results could suffer.

5

---



We may be unable to
hire and retain employees who are highly skilled, which would impair our ability
to perform client services, generate revenue and maintain profitability.

If
we are unable to hire and retain highly-skilled individuals, our ability to
retain existing business and compete for new business will be harmed.
Individuals who have successfully sold and delivered services similar to those
we provide to our clients are limited and competition for these individuals is
intense. Further, in the current depressed spending environment, individuals who
were previously successful may no longer be successful. Identifying individuals
who will succeed in this environment is extraordinarily difficult. To attract
and retain these individuals, we invest a significant amount of time and money.
In addition, we expect that both bonus payments and equity ownership will be an
important component of overall employee compensation. In the current economic
and market environment, overall bonus payments have been below target,
increasing the risk that key employees will leave Inforte. Also, if our stock
price does not increase over time, it may be more difficult to retain employees
who have been compensated with stock options. Options granted to employees from
the IPO date, February 17, 2000, through December 31, 2002 have exercise prices
of $4.76 to $71.81. The average exercise price of all options outstanding at
December 31, 2002 is $13.82. Since the current market price for Inforte stock
has recently been below this average strike price, it may be more difficult to
retain employees. If key employee turnover rates grow to unacceptable levels
because compensation is not at competitive rates, Inforte may increase the level
of stock option grants or cash compensation. These actions would reduce net
income (loss) per share and may cause Inforte to become unprofitable.

If we fail to
adequately manage rapid changes in demand, our profitability and cash flow may
be reduced or eliminated.

If
we cannot keep pace with the rapid changes in demand, we will be unable to
effectively match resources with demand, and maintain high client satisfaction,
which may eliminate our profitability and our ability to achieve positive free
cash flow. Our business grew dramatically from 1993 through 2000. For example,
our net revenue increased by 100% or more for seven consecutive years, reaching
$63.8 million in 2000. As a result of the current depressed IT spending
environment and overcapacity in our industry however, net revenue has declined
in each of the last two years, dropping to $40.4 million. If the level of
spending declines further, we may not be profitable or achieve positive free
cash flow. If, on the other hand, our growth exceeds our expectations, our
current resources and infrastructure may be inadequate to handle the growth.

If our marketing
relationships with software vendors deteriorate, we would lose their client
referrals. If these vendors continue to increase their professional services
revenue, our revenue could be adversely affected.

We
currently have marketing relationships with software vendors, including Siebel
and Vignette. Although we have historically received a large number of business
leads from these and other software vendors to implement their products, they
are not required to refer business to us and they may terminate these
relationships at any time. If our relationships with these software vendors
deteriorate, we may lose their client leads and our ability to develop new
clients could be negatively impacted. Any decrease in our ability to obtain
clients may cause a reduction in our net revenues.

Historically
our software partners have primarily relied on licensing fees and maintenance
contracts to generate revenue. However, more recently as software licensed sales
have declined, software vendors have sought to supplement their revenue through
increased implementation services for their software. This business strategy
puts us in competition with our software partners on some deals, reducing client
leads and our ability to develop new clients and revenue.

If we are unable to
rapidly integrate third-party software, we may not be able to deliver solutions
to our clients on a timely basis, resulting in lost revenues and potential
liability.

In
providing client services, we recommend that our clients use software
applications from a variety of third-party vendors. If we are unable to
implement and integrate this software in a fully functional manner for our
clients, we may experience difficulties that could delay or prevent the
successful development, introduction or marketing of services.

6

---



Software often contains
errors or defects, particularly when first introduced or when new versions or
enhancements are released. Despite internal testing and testing by current and
potential clients, our current and future solutions may contain serious defects
due to third-party software or software we develop or customize for clients.
Serious defects or errors could result in liability for damages, lost revenues
or a delay in implementation of our solutions.

Our revenues could be
negatively affected by the loss of a large client or our failure to collect a
large account receivable.

At
times, we derive a significant portion of our revenue from large projects for a
limited number of varying clients. During 2002 our five largest clients
accounted for 37% of net revenue and our ten largest clients accounted for 58%
of net revenue. Frequently we have one or more clients in a quarter accounting
for over 10% of net revenue. Although these large clients vary from time to time
and our long-term revenues do not rely on any one client, our revenues could be
negatively affected if we were to lose one of our top clients or if we were to
fail to collect a large account receivable.

In
addition, many of our contracts are short-term and our clients may be able to
reduce or cancel our services without incurring any penalty. If our clients
reduce or terminate our services, we would lose revenue and would have to
reallocate our employees and our resources to other projects to attempt to
minimize the effects of that reduction or termination. Accordingly,
terminations, including any termination by a major client, could adversely
impact our revenues. We believe the uncertain economic environment increases the
probability that services may be reduced or canceled.

If we estimate
incorrectly the time required to complete our projects, we will lose money on
fixed-price contracts.

Historically,
a majority of our contracts are fixed-price contracts, rather than contracts in
which the client pays us on a time-and-materials basis. We must estimate the
number of hours and the materials required before entering into a fixed-price
contract. Our future success will depend on our ability to continue to set rates
and fees accurately and to maintain targeted rates of employee utilization and
project quality. If we fail to accurately estimate the time and the resources
required for a project, any required increase in the time and resources to
complete the project could cause our profits to decline.

Fluctuations in our
quarterly revenues and operating results due to cyclical client demand may lead
to reduced prices for our stock.

Our
quarterly revenues and operating results have fluctuated significantly in the
past and we expect them to continue to fluctuate significantly in the future.
Historically, we have experienced our greatest sequential growth during the
first and second quarters. We typically experience significantly lower
sequential growth in the third and fourth quarters. We attribute this to the
budgeting cycles of our customers, most of whom have calendar-based fiscal years
and as a result are more likely to initiate projects during the first half of
the year. In 2001, this traditional seasonal pattern was overwhelmed by a
cyclical decline in information technology spending, causing our net revenue to
decline sequentially in each quarter of 2001. More recently, in February and
March 2002, we did experience an increase in demand which did allow our net
revenue in the second quarter 2002 to exceed the first quarter 2002 level. We
believe that increase in demand was due to positive seasonal effects, while the
subsequent lower revenue in the third quarter 2002 was due to negative seasonal
effects. This existence of both seasonal and cyclical effects does make it more
difficult to predict demand, and if we are unable to predict client demand
accurately in a slower growth or distressed economic environment, our expenses
may be disproportionate to our revenue on a quarterly basis and our stock price
may be adversely affected.

Others could claim
that we infringe on their intellectual property rights, which may result in
substantial costs, diversion of resources and management attention, and harm to
our reputation.

A
portion of our business involves the development of software applications for
specific client engagements. Although we believe that our services do not
infringe on the intellectual property rights of others, we may be the subject of
claims for infringement, which even if successfully defended could be costly and
time-consuming. An infringement claim against us could materially and adversely
affect us in that we may:

| |  |  | experience
a diversion of our financial resources and management attention;
| | - |  | ---------------------------------------------------------------------------

7

---



| |  |  | incur
damages and litigation costs, including attorneys fees;
| | - |  | --------------------------------------------------------------

| |  |  | be
enjoined from further use of the intellectual property;
| | - |  | ----------------------------------------------------------

| |  |  | be
required to obtain a license to use the intellectual property, incurring licensing fees;
| | - |  | -------------------------------------------------------------------------------------------

| |  |  | need
to develop a non-infringing alternative, which could be costly and delay projects; and
| | - |  | -------------------------------------------------------------------------------------------

| |  |  | have to
indemnify clients with respect to losses incurred as a result of our infringement of the
intellectual property.
| | - |  | -----------------------------------------------------------------------------------------------------------------------

Because we are newer
and smaller than many of our competitors, we may not have the resources to
effectively compete, causing our revenues to decline.

Many
of our competitors have longer operating histories, larger client bases, longer
relationships with clients, greater brand or name recognition, and significantly
greater financial, technical, marketing, and public relations resources than we
do. We may be unable to compete with full-service consulting companies,
including the former consulting divisions of the largest global accounting
firms, who are able to offer their clients a wider range of services. If our
clients decide to take their IT strategy and technology projects to these
companies, our revenues may decline. It is possible that in uncertain economic
times our clients may prefer to work with larger firms to a greater extent than
normal. In addition, new professional services companies may provide services
similar to ours at a lower price, which could cause our revenues to decline.

Our expansion and
growth internationally could negatively affect our business.

For
the year ended 2002, our international net revenue exceeded 20% of our total net
revenue. We face additional risks internationally that we do not face
domestically. Such risks include longer customer payment cycles, adverse taxes
and compliance with local laws and regulations. Further, the effects of
fluctuations in currency exchange rates may adversely affect the results of
operations. Finally, as the U.S. economic slowdown has spread to the rest of the
world, our ability to obtain international net revenue going forward will likely
be reduced. These risk factors, as well as others not cited here, may negatively
impact our business.

If clients view
offshore development as a viable alternative to our service offerings, our
pricing and revenue may be negatively affected.

Gradually,
over the past two decades, numerous IT service firms have been founded in
countries such as India, which have well-educated and technically trained
English-speaking workforces available at wage rates that are only a fraction of
U.S. and European wages rates. Additionally, some larger clients have
established internal IT operations at offshore locations. While traditionally we
have not competed with offshore development, presently this form of development
is seeing rapid and increasing acceptance in the market, especially for routine
and repetitive types of development. While offshore development has greater risk
due to distance, geopolitical and cultural issues, we believe its lower cost
advantage will likely overwhelm these risks. Inforte does not currently intend
to establish offshore development capabilities as some of our competitors have
done. Instead, we intend to continue our ongoing evolution toward more valued
and more differentiated service offerings  including more organizational
strategy, process design and organizational change consulting  which are
difficult for offshore developers to replicate. If we are unable to evolve our
service offerings, or if the rate of acceptance of offshore development advances
even faster than we anticipate, then our pricing and our revenue may be
negatively affected.

# RISKS RELATED TO OUR INDUSTRY

If the rate of
adoption of advanced information technology slows substantially, our revenues
may decrease.

We
market our services primarily to firms that want to adopt information technology
that provides an attractive return on investment or helps provides a sustainable
competitive advantage. Our revenues could decrease if companies decide not to
integrate the latest technologies into their businesses due to economic factors,
governmental regulations, financial constraints or other reasons.

Infortes
market research suggests that the level of information technology spending in
the United States is closely linked with the growth rate of the Gross Domestic
Product (GDP). The slowdown in the U.S. GDP growth rate that began in the second
half of 2000 has caused a slower rate of adoption of advanced information
technology by our target clients. We expect information technology spending and
Inforte revenue to be highly dependent on the health of the U.S. economy. We
believe that corporate revenue-driven profit growth must resume for IT spending
to improve. If the overall level of business capital investment remains
depressed or declines further, this may cause our revenue to decline further.

8

---



If the supply of
information technology companies and personnel continues to exceed demand, this
may adversely impact the pricing of our projects and our ability to win
business.

Beginning
in the second half of 2000, many firms in our industry announced significant
employee layoffs and lower rates of utilization of billable personnel. An
oversupply of technology professionals may reduce the price clients are willing
to pay for our services. An oversupply may also increase the talent pool for
potential clients who may choose to complete projects in-house rather than use
an outside consulting firm such as Inforte. Lower utilization rates increase the
likelihood that a competitor will reduce their price to secure business in order
to improve their utilization rate. The extent to which pricing and our ability
to win business may be impacted is a function of both the magnitude and duration
of the supply and demand imbalance in our industry.

Geopolitical
instability may cause our revenues to decrease.

Our
clients often avoid large IT spending commitments during periods of geopolitical
instability and economic uncertainty. The war with Iraq, the possibility of
terrorists attacking the United States interests, or geopolitical concerns
in other areas such as North Korea may cause clients to freeze their decision
making processes. This would slow demand for our services and would negatively
impact our revenue.

# RISKS
RELATED TO THE OWNERSHIP OF OUR COMMON STOCK

Our stock price could
be extremely volatile, like many technology stocks.

The
market prices of securities of technology companies, particularly information
technology services companies, have been highly volatile. We expect continued
high volatility in our stock price, with prices at times bearing no relationship
to Infortes operating performance.

Infortes
average trading volume during 2002 averaged approximately 38,000 shares per day.
On any particular day, Infortes trading volume can be less than 1,000
shares, increasing the potential for volatile stock prices.

Volatility of our
stock price could result in expensive class action litigation.

If
our common stock suffers from volatility like the securities of other technology
companies, we have a greater risk of further securities class action litigation
claims. One such claim is pending presently. Litigation could result in
substantial costs and could divert our resources and senior managements
attention. This could harm our productivity and profitability.

Officers and directors
own a significant percentage of outstanding shares and, as a group, may control
a vote of stockholders.

As
of March 5, 2003 our executive officers and directors own over 47% of the
outstanding shares of our common stock. The largest owners and their percentage
ownership are set forth below:

| |  Philip
S. Bligh |  | 22.3%
| | ----------------- |  | -----

| |  Stephen
C.P. Mack |  | 17.3%
| | ------------------- |  | -----

| |  Nick
Padgett |  | 6.5%
| | -------------- |  | ----

If
the stockholders listed above act or vote together with other employees who own
significant shares of our common stock, they will have the ability to control
the election of our directors and the approval of any other action requiring
stockholder approval, including any amendments to the certificate of
incorporation and mergers or sales of all or substantially all assets, even if
the other stockholders perceive that these actions are not in their best
interests.

Our
stock repurchase program has had the effect of increasing the concentration of
insider ownership. If we make further repurchases, insider ownership could
increase further.

9

---



Over
time, the influence or control executive officers have on a stockholder vote may
decrease as officers supplement below-market salaries and diversify overall
equity wealth with sales of Inforte stock. As permitted by SEC Rule 10b5-1,
Inforte executive officers have or may set up a predefined, structured stock
trading program. The trading program allows brokers acting on behalf of company
insiders to trade company stock during company blackout periods or while the
insiders may be aware of material, non-public information, if the transaction is
performed according to a pre-existing contract, instruction or plan that was
established with the broker during a non-blackout period and when the insider
was not aware of any material, non-public information. Inforte executive
officers may also trade company stock outside of plans set up under SEC Rule
10b5-1, however such trades would be subject to company blackout periods and
insider trading rules.

The authorization of
preferred stock, a staggered board of directors and supermajority voting
requirements will make a takeover attempt more difficult, even if the takeover
would be favorable for stockholders.

Infortes
certificate of incorporation and bylaws may have the effect of deterring,
delaying or preventing a change in control of Inforte. For example, our charter
documents provide for:

| |  |  | the ability of the
board of directors to issue preferred stock and to determine the price and other terms,
including preferences and voting rights, of those shares without stockholder
approval;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
inability of our stockholders to act by written consent or to call a special meeting;
| | - |  | -----------------------------------------------------------------------------------------

| |  |  | advance
notice provisions for stockholder proposals and nominations to the board of directors;
| | - |  | ----------------------------------------------------------------------------------------------

| |  |  | a staggered board of
directors, with three-year terms, which will lengthen the time needed to gain control of
the board of directors; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------

| |  |  | supermajority voting
requirements for stockholders to amend provisions of the  charter documents described
above.
| | - |  | -----------------------------------------------------------------------------------------------------------------

We
are also subject to Delaware law. Section 203 of the Delaware General
Corporation Law prohibits us from engaging in a business combination with any
significant stockholder for a period of three years from the date the person
became a significant stockholder unless, for example, our board of directors
approved the transaction that resulted in the stockholder becoming an interested
stockholder. Any of the above could have the effect of delaying or preventing
changes in control that a stockholder may consider favorable.

## ITEM 2. PROPERTIES

Our
headquarters are located in Chicago, Illinois. Senior management, sales,
marketing, human resources and administrative personnel, as well as the
Chicago-based consultants use this facility. We have two subleases for a total
of 50,765 square feet in Chicago. The primary sublease for 33,065 square feet
expires in December 2005 with no option to renew. The secondary sublease for
17,700 square feet expires in June 2006 with no option to renew. We have
regional offices for our regional personnel. We lease 22,529 square feet in
Irvine, California and this lease term expires in July 2006 with an option to
renew. We lease 4,480 square feet in Irving, Texas and this lease term expires
in May 2005 with an option to renew. We have also entered into various
short-term leases for professional office space in San Mateo, California, Jersey
City, New Jersey, Alpharetta, Georgia, and London, England.

## ITEM 3. LEGAL PROCEEDINGS

Inforte
Corp. and Philip S. Bligh, Stephen C.P. Mack and Nick Padgett, officers of
Inforte, have been named as defendants in Mary C. Best v. Inforte Corp.;
Goldman, Sachs & Co.; Salomon Smith Barney, Inc.; Philip S. Bligh; Stephen
C.P. Mack and Nick Padgett, Case No. 01 CV 10836, filed on November 30, 2001 in
Federal Court in the Southern District of New York. The case is also known as In
re Inforte Corp. Initial Public Offering Securities Litigation. An amended class
action complaint was filed on April 19, 2002. The amended complaint alleges
violations of federal securities laws in connection with our initial public
offering occurring in February 2000 and seeks certification of a class of
purchasers of Inforte stock, unspecified damages, interest, attorneys and
expert witness fees and other costs. The amended complaint does not allege any
claims relating to any alleged misrepresentations or omissions with respect to
our business. The individual defendants (Messrs. Bligh, Mack and Padgett) have
been dismissed from the case without prejudice pursuant a stipulated dismissal
and a tolling agreement. We have moved to dismiss the plaintiffs case. On
February 19, 2002, the Court granted this motion in part, denied it in part and
ordered that discovery in the case may commence. The Court dismissed with
prejudice the plaintiffs purported claim against Inforte under Section
10(b) of the Securites Exchanges Act of 1934, but left in place the
plaintiffs claim under Section 11 of the Securites Act of 1933.

10

---



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

Not applicable.

## ITEM 4A. EXECUTIVE OFFICERS OF THE
REGISTRANT

The
following table provides information with respect to our executive officers:

|Name              | Age |    | Position |                                                
|----------------- | --- | -- | -------- | -----------------------------------------------
|Philip S. Bligh   |     | 35 |          | Chief Executive Officer and Chairman           
|Stephen C.P. Mack |     | 37 |          | Chief Operating Officer, President and Director
|Nick Padgett      |     | 36 |          | Chief Financial Officer and Director           

Philip S. Bligh
co-founded Inforte and has served as chairman of the board of directors of Inforte since inception in
September 1993. Mr. Bligh also currently serves as chief executive officer. Before founding Inforte, Mr. Bligh
served in various technology consulting roles for Accenture from October 1988 to February 1991 and as a
project manager for Systems Software Associates, an enterprise software provider, from April 1991 through
Infortes founding. Mr. Bligh holds a B.S. in chemical engineering from University College London,
England.

Stephen
C.P. Mackjoined Inforte in October 1994 and has served as a director since
that time. Mr. Mack is currently Infortes chief operating officer and
president. Before joining Inforte, from February 1988 to October 1994, Mr. Mack
worked at Accenture, where he was, most recently, a project manager responsible
for the design and implementation of enterprise-wide operational and decision
support systems for large, multinational corporations. Mr. Mack holds a
Masters degree in engineering and management from the University of
Birmingham, England.

Nick Padgett has
served as Infortes chief financial officer since December 1997. Mr. Padgett has been a director of
Inforte since its founding in September 1993. Before joining Inforte, Mr. Padgett served as an equity research
analyst for William Blair & Company, from August 1994 to December 1997. Before William Blair, Mr. Padgett
served in various technology consulting roles for Accenture from June 1988 to September 1992. Mr. Padgett
holds an M.B.A. from the Amos Tuck School of Business Administration at Dartmouth College and a B.S. in
computer science from Western Illinois University.

11

---



## ITEM 5. MARKET FOR REGISTRANTS
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our
common stock is traded on the NASDAQ National Market under the symbol
INFT. Our initial public offering of stock was February 17, 2000 at
$32.00 per share. The price range reflected in the table below, is the highest
and lowest closing sale price for our stock as reported by the NASDAQ National
Market during each quarter the stock had been publicly traded. Our present
policy is to retain earnings, if any, to finance future growth. We have never
paid cash dividends, although we may consider doing so if the double taxation of
dividends in the United States is reduced or eliminated. In January 2001,
Inforte announced that the board of directors approved a stock repurchase
program that allows Inforte to buy up to $25 million of Inforte shares. The
program was completed in August 2002. The board of directors approved an
additional $5.0 million stock repurchase program on August 22, 2002. We stated
at that time that we had no present plans to make additional repurchases of
stock, and as of December 31, 2002, we have made no repurchases under this
second program. As of March 5, 2003, there were approximately 3,213
stockholders, including stockholders of record and holders in street name, and
the price per share of our common stock was $6.24.

|                       | Three Months Ended | 
|---------------------- | ------------------ | 
|
|Price range per share: |                    | 
|Low                    |                    | 
|High                   |                    | 

The
following table sets forth Infortes securities authorized for issuance
under equity compensation plans as of December 31, 2002.

|Plan category                          |  | Number of securities to beissued upon exercise ofoutstanding options |           | Weighted averageexercise price ofoutstanding options |  | Number of securitiesavailable for futureissuance under equitycompensation plans(1)
|-------------------------------------- |  | -------------------------------------------------------------------- | --------- | ---------------------------------------------------- |  | ----------------------------------------------------------------------------------
|Equity compensation plans approved by  |  |                                                                      |           |                                                      |  |                                                                                   
|security shareholders                  |  |                                                                      | 2,789,264 |                                                      |  |                                                                                   
|Equity compensation plans not approved |  |                                                                      |           |                                                      |  |                                                                                   
|by security shareholders               |  |                                                                      |          |                                                      |  |                                                                                   
|Total                                  |  |                                                                      | 2,789,264 |                                                      |  |                                                                                   
|                                       |  |                                                                      |           |                                                      |  |                                                                                   

---

| | (1) |  | Includes
1,593,662 in shares available under Infortes 1997 Incentive Stock  Option Plan,
365,000 shares available under the 1995 Incentive Stock Option Plan  and 347,479 shares
available under Infortes Employee Stock Purchase Plan.  For the 1997 Incentive
Stock Option Plan Inforte has reserved an aggregate of  4,000,000 shares of common stock
for issuance, plus annual increases beginning  in 2001 equal to the lesser of: (1)
1,000,000 shares, (2) 5% of the total shares  of common stock outstanding or (3) a number
determined by the Board of  Directors. For the 1995 Incentive Stock Option Plan Inforte
has reserved an  aggregate of 4,900,000 shares for issuance. There is no provision in the
1995  plan to increase the number of shares available for granting. For the Employee
Stock Purchase Plan, Inforte has reserved 200,000 shares for issuance, plus  annual
increases beginning in 2001 equal to the lesser of (1) 400,000 shares,  (2) 2% of the
total shares of common stock outstanding or (3) a number  determined by the Board of
Directors. The Purchase Plan became effective upon  the completion of the Companys
initial public offering, in February 2000.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

---



## ITEM 6. SELECTED FINANCIAL
DATA

The
following selected financial data should be read in conjunction with our
consolidated financial statements and related notes and Managements
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this Form 10-K. The consolidated statement of operations
data for the years ended 2000, 2001 and 2002 and the balance sheet data as of
December 31, 2001 and 2002 are derived from our audited consolidated financial
statements, which are included elsewhere in this Form 10-K. The consolidated
statement of operations data for the years ended 1998 and 1999 and the balance
sheet data as of December 31, 1998, 1999, and 2000 are derived from our audited
consolidated financial statements, which are not included in this Form 10-K.

|                                            | Year ended December 31, | 
|------------------------------------------- | ----------------------- | 
|
|
|Consolidated Statement of Operations Data   |                         | 
|Revenue before reimbursements (net revenue) |                         | 
|Operating expenses:                         |                         | 
|Project personnel and related expenses      |                         | 
|Sales and marketing                         |                         | 
|Recruiting, retention and training          |                         | 
|Management and administrative               |                         | 
|Non-cash, non-recurring stock compensation  |                         | 
|expense                                     |                         | 
|                                            |                         | 
|Total operating expenses                    |                         | 
|                                            |                         | 
|Operating income (loss)                     |                         | 
|Interest income, net and other              |                         | 
|                                            |                         | 
|Income before income taxes                  |                         | 
|Income tax expense                          |                         | 
|                                            |                         | 
|Net income (loss)                           |                         | 
|                                            |                         | 
|Net income (loss) per share:                |                         | 
|Basic                                       |                         | 
|                                            |                         | 
|Diluted                                     |                         | 
|                                            |                         | 
|Weighted Average common shares outstanding: |                         | 
|Basic                                       |                         | 
|                                            |                         | 
|Diluted                                     |                         | 
|                                            |                         | 
|Reconciliation of net income on a GAAP      |                         | 
|basis to Non-GAAP supplemental net          |                         | 
|income:                                     |                         | 
|Net income (loss)                           |                         | 
|Add:                                        |                         | 
|Non-cash, non-recurring stock compensation  |                         | 
|expense(1)                                  |                         | 
|Subtract:                                   |                         | 
|Tax effect of converting to C-corp. from    |                         | 
|S-corp.(2)                                  |                         | 
|                                            |                         | 
|Non-GAAP supplemental net income            |                         | 
|                                            |                         | 
|Non-GAAP supplemental net income (loss) per |                         | 
|share:                                      |                         | 
|Basic                                       |                         | 
|                                            |                         | 
|Diluted                                     |                         | 
|                                            |                         | 
|Weighted-average common shares outstanding: |                         | 
|Basic                                       |                         | 
|                                            |                         | 
|Diluted                                     |                         | 
|                                            |                         | 

13

---



|                                             | Year ended December 31, | 
|-------------------------------------------- | ----------------------- | 
|
|
|Balance Sheet Data (at period end):          |                         | 
|Cash and short-term and long-term marketable |                         | 
|securities                                   |                         | 
|Working capital                              |                         | 
|Total assets                                 |                         | 
|Long-term debt, net of current portion       |                         | 
|Stockholders equity                         |                         | 

---

| | (1) |  | In 2001 Inforte incurred a non-cash,
non-recurring stock compensation expense of $1,374 for a performance-based option, which
is recognized as an expense under GAAP. This option was granted in 1997 with an exercise
price equal to the fair market value at the time of the grant and with vesting based on
achieving specified corporate performance criteria. Once vesting is probable (the
measurement date) GAAP requires recording of an expense equal to the
difference between fair market value on the measurement date and exercise price times the
number of shares granted under the option. With typical time based vesting criteria the
measurement date equals the grant date and no expense is recorded normally. Even though
the vesting criteria on this performance-based option were more difficult to achieve than
the criteria on a normal time-based option  making the option less valuable from the
employees perspective and more advantageous from Infortes perspective 
GAAP results in lower earnings with this performance-based option than if the option were
time based.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Non-GAAP supplemental information shows results excluding the non-cash, non-recurring stock compensation
expense described in the previous paragraph. This Non-GAAP supplemental information is a non-GAAP financial
measure that may not conform to similarly titled measures reported by other companies. We present this
Non-GAAP supplemental information to allow for comparability of our results for this period with the results
of other periods. The stock compensation expense from this performance-based option did not occur in prior
periods and will not occur in future periods. We believe that comparability of results from different periods
is reduced significantly without this Non-GAAP supplemental presentation, considering the magnitude of the
stock compensation expense relative to our normal level of operating expenses. In addition to providing
comparability, we believe the Non-GAAP supplemental information corrects for an anomalous situation where GAAP
earnings are lower with this performance-based option than with a time-based option even though Inforte is
economically better off with the performance-based option since it has more difficult to achieve vesting
criteria. The stock compensation expense had no impact on income tax expense.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) |  | In
1999, Inforte was a C corporation; however, the conversion from a sub-chapter S corporation to a C corporation
on January 1, 1999 resulted in a tax benefit for accounting purposes due to the recording of deferred tax
benefits, increasing net income (loss) per share. The Non-GAAP supplemental net income (loss) per share for
the year ended December 31, 1999 reflects the net income (loss) per share Inforte would have reported without
the one-time conversion to a C corporation.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the three years ended December 31, 1998, Inforte operated as a sub-chapter S corporation under the Internal
Revenue Code and in some of the states in which we did business. As a result, any taxable earnings or loss
flowed through to Inforte stockholders. The Non-GAAP supplemental net income data for 1998 assumes that
Inforte was subject to income tax had we always operated as a C corporation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

---



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

You
should read the following discussion in conjunction with Selected Financial Data and our
consolidated financial statements, together with the notes to those statements, included elsewhere in this
Form 10-K. The following discussions contains forward-looking statements that involve risks, uncertainties,
and assumptions such as statements of our plans, objectives, expectations and intentions. Our actual results
may differ materially from those discussed in these forward-looking statements because of the risks and
uncertainties inherent in future events, particularly those identified in Risk
Factors.

# OVERVIEW

Inforte
is a customer and demand management consultancy that helps clients improve
customer interactions, revenue forecasting and profitability. Inforte creates
strategies and implements technology solutions that enhance visibility, optimize
customer and channel profitability, and integrate demand information with supply
and resource planning processes. Inforte has applied a client advocacy approach
and rigorous delivery methodologies to help garner references from 100 percent
of its Global 2000 client base. Founded in 1993, Inforte is headquartered in
Chicago and has offices in Atlanta, Dallas, London, Los Angeles, New York and
San Francisco.

The
majority of our revenue historically is from professional services performed on
a fixed-price basis; however, we also perform services on a time-and-materials
basis. Typically, the first portion of an engagement involves a strategy project
or a discovery phase lasting 30 to 60 days, which we perform on a fixed-price
basis. This work enables us to determine with our clients the scope of
successive phases for design and implementation, which in total generally last
three to nine months, and to decide whether we will perform these additional
phases for a fixed price or on a time-and-materials basis. Whether we use fixed
pricing or time-and-material pricing depends upon our assessment of the
projects risk, how precisely our clients are able to define the scope of
activities they wish us to perform and client preference. Fixed prices are based
on estimates from senior personnel in our consulting organization who project
the length of the engagement, the number of people required to complete the
engagement and the skill level and billing rates of those people. We then adjust
the fixed price based on various qualitative risk factors such as the
aggressiveness of the delivery deadline, the technical complexity of the
solution and the value of the solution delivered to the client.

We
typically ask clients to pay 25%50% of our fixed-price projects in advance
to enable us to secure a project team in a timeframe that is responsive to the
clients needs. We typically bill the remainder in advance of the work.

15

---



## Results of Operations

The
following table sets forth the percentage of net revenue of certain items
included in Infortes Non-GAAP supplemental(1) consolidated statement of
operations:

|                                            | Year ended December 31, | 
|------------------------------------------- | ----------------------- | 
|
|Revenue before reimbursements (net revenue) |                         | 
|Operating expenses:                         |                         | 
|Project personnel and related expenses      |                         | 
|Sales and marketing                         |                         | 
|Recruiting, retention and training          |                         | 
|Management and administrative               |                         | 
|                                            |                         | 
|Total operating expenses                    |                         | 
|                                            |                         | 
|Operating income (loss)                     |                         | 
|Interest income, net and other              |                         | 
|                                            |                         | 
|Income before income taxes                  |                         | 
|Income tax expense                          |                         | 
|                                            |                         | 
|Net income                                  |                         | 
|                                            |                         | 
|Reconciliation of net income on a Non-GAAP  |                         | 
|supplemental basis to GAAP net income:      |                         | 
|Non-GAAP supplemental net income            |                         | 
|                                            |                         | 
|Subtract: Non-cash, non-recurring stock     |                         | 
|compensation expense(1)                     |                         | 
|                                            |                         | 
|GAAP basis net loss                         |                         | 
|                                            |                         | 

---

| | (1) |  | In 2001 Inforte incurred a non-cash,
non-recurring stock compensation expense of $1,374 for a performance-based option, which
is recognized as an expense under GAAP. This option was granted in 1997 with an exercise
price equal to the fair market value at the time of the grant and with vesting based on
achieving specified corporate performance criteria. Once vesting is probable (the
measurement date) GAAP requires recording of an expense equal to the
difference between fair market value on the measurement date and exercise price times the
number of shares granted under the option. With typical time based vesting criteria the
measurement date equals the grant date and no expense is recorded normally. Even though
the vesting criteria on this performance-based option were more difficult to achieve than
the criteria on a normal time-based option  making the option less valuable from the
employees perspective and more advantageous from Infortes perspective 
GAAP results in lower earnings with this performance-based option than if the option were
time based.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Non-GAAP supplemental information shows results excluding the non-cash, non-recurring stock compensation
expense described in the previous paragraph. This Non-GAAP supplemental information is a non-GAAP financial
measure that may not conform to similarly titled measures reported by other companies. We present this
Non-GAAP supplemental information to allow for comparability of our results for this period with the results
of other periods. The stock compensation expense from this performance-based option did not occur in prior
periods and will not occur in future periods. We believe that comparability of results from different periods
is reduced significantly without this Non-GAAP supplemental presentation, considering the magnitude of the
stock compensation expense relative to our normal level of operating expenses. In addition to providing
comparability, we believe the Non-GAAP supplemental information corrects for an anomalous situation where GAAP
earnings are lower with this performance-based option than with a time-based option even though Inforte is
economically better off with the performance-based option since it has more difficult to achieve vesting
criteria. The stock compensation expense had no impact on income tax expense.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16

---



## Non-GAAP Supplemental Quarterly Results
of Operations(1)

The
following tables set forth certain unaudited quarterly results of operations of
Inforte for 2001 and 2002. The quarterly operating results are not necessarily
indicative of future results of operations.

|                                            | Three Months Ended (unaudited) | 
|------------------------------------------- | ------------------------------ | 
|
|Revenue before reimbursements (net revenue) |                                | 
|Operating expenses:                         |                                | 
|Project personnel and related expenses      |                                | 
|Sales and marketing                         |                                | 
|Recruiting, retention and training          |                                | 
|Management and administrative               |                                | 
|                                            |                                | 
|Total operating expenses                    |                                | 
|                                            |                                | 
|Operating income (loss)                     |                                | 
|Interest income, net, and other             |                                | 
|                                            |                                | 
|Income before income taxes                  |                                | 
|Income tax expense                          |                                | 
|                                            |                                | 
|Net income                                  |                                | 
|                                            |                                | 
|Net income (loss) per share:                |                                | 
|Diluted                                     |                                | 
|                                            |                                | 
|Weighted-average common shares outstanding: |                                | 
|Diluted                                     |                                | 
|                                            |                                | 
|Reconciliation of net income on a Non-GAAP  |                                | 
|supplemental basis to GAAP net income:      |                                | 
|Non-GAAP supplemental net income            |                                | 
|Subtract: Non-cash, non-recurring stock     |                                | 
|compensation expense(1)                     |                                | 
|                                           
|GAAP basis net loss                         |                                | 
|                                            |                                | 

---

| | (1) |  | In 2001 Inforte incurred a non-cash,
non-recurring stock compensation expense of $1,374 for a performance-based option, which is recognized as an
expense under GAAP. This option was granted in 1997 with an exercise price equal to the fair market value at
the time of the grant and with vesting based on achieving specified corporate performance criteria. Once
vesting is probable (the measurement date) GAAP requires recording of an expense equal to the
difference between fair market value on the measurement date and exercise price times the number of shares
granted under the option. With typical time based vesting criteria the measurement date equals the grant date
and no expense is recorded normally. Even though the vesting criteria on this performance-based option were
more difficult to achieve than the criteria on a normal time-based option  making the option less
valuable from the employees perspective and more advantageous from Infortes perspective 
GAAP results in lower earnings with this performance-based option than if the option were time
based.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Non-GAAP supplemental information shows results excluding the non-cash,  non-recurring
stock compensation expense described in the previous paragraph.  This Non-GAAP
supplemental information is a non-GAAP financial measure that may  not conform to
similarly titled measures reported by other companies. We present  this Non-GAAP
supplemental information to allow for comparability of our results  for this period with
the results of other periods. The stock compensation  expense from this performance-based
option did not occur in prior periods and  will not occur in future periods. We believe
that comparability of results from  different periods is reduced significantly without
this Non-GAAP supplemental  presentation, considering the magnitude of the stock
compensation expense  relative to our normal level of operating expenses. In addition to
providing  comparability, we believe the Non-GAAP supplemental information corrects for
an  anomalous situation where GAAP earnings are lower with this performance-based  option
than with a time-based option even though Inforte is economically better  off with the
performance-based option since it has more difficult to achieve  vesting criteria. The
stock compensation expense had no impact on income tax  expense.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

17

---



|                                            | Three Months Ended (unaudited) | 
|------------------------------------------- | ------------------------------ | 
|
|As a percentage of net revenue:             |                                | 
|Revenue before reimbursements (net revenue) |                                | 
|Operating expenses:                         |                                | 
|Project personnel and related expenses      |                                | 
|Sales and marketing                         |                                | 
|Recruiting, retention and training          |                                | 
|Management and administrative               |                                | 
|                                            |                                | 
|Total operating expenses                    |                                | 
|                                            |                                | 
|Operating income (loss)                     |                                | 
|Interest income, net, and other             |                                | 
|                                            |                                | 
|Income before income taxes                  |                                | 
|Income tax expense                          |                                | 
|                                            |                                | 
|Net income                                  |                                | 
|                                            |                                | 
|Reconciliation of net income on a Non-GAAP  |                                | 
|supplemental basis to GAAP net income:      |                                | 
|Non-GAAP supplemental net income            |                                | 
|Subtract: Non-cash, non-recurring stock     |                                | 
|compensation expense(1)                     |                                | 
|GAAP basis net loss                         |                                | 
|                                            |                                | 

---

| | (1) |  | In 2001 Inforte incurred a non-cash,
non-recurring stock compensation expense of $1,374 for a performance-based option, which is recognized as an
expense under GAAP. This option was granted in 1997 with an exercise price equal to the fair market value at
the time of the grant and with vesting based on achieving specified corporate performance criteria. Once
vesting is probable (the measurement date) GAAP requires recording of an expense equal to the
difference between fair market value on the measurement date and exercise price times the number of shares
granted under the option. With typical time based vesting criteria the measurement date equals the grant date
and no expense is recorded normally. Even though the vesting criteria on this performance-based option were
more difficult to achieve than the criteria on a normal time-based option  making the option less
valuable from the employees perspective and more advantageous from Infortes perspective 
GAAP results in lower earnings with this performance-based option than if the option were time
based.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Non-GAAP supplemental information shows results excluding the non-cash,  non-recurring
stock compensation expense described in the previous paragraph.  This Non-GAAP
supplemental information is a non-GAAP financial measure that may  not conform to
similarly titled measures reported by other companies. We present  this Non-GAAP
supplemental information to allow for comparability of our results  for this period with
the results of other periods. The stock compensation  expense from this performance-based
option did not occur in prior periods and  will not occur in future periods. We believe
that comparability of results from  different periods is reduced significantly without
this Non-GAAP supplemental  presentation, considering the magnitude of the stock
compensation expense  relative to our normal level of operating expenses. In addition to
providing  comparability, we believe the Non-GAAP supplemental information corrects for
an  anomalous situation where GAAP earnings are lower with this performance-based  option
than with a time-based option even though Inforte is economically better  off with the
performance-based option since it has more difficult to achieve  vesting criteria. The
stock compensation expense had no impact on income tax  expense.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

---



|                                            | Three Months Ended (unaudited) | 
|------------------------------------------- | ------------------------------ | 
|
|Revenue before reimbursements (net revenue) |                                | 
|Operating expenses:                         |                                | 
|Project personnel and related expenses      |                                | 
|Sales and marketing                         |                                | 
|Recruiting, retention and training          |                                | 
|Management and administrative               |                                | 
|                                            |                                | 
|Total operating expenses                    |                                | 
|                                            |                                | 
|Operating income (loss)                     |                                | 
|Interest income, net, and other             |                                | 
|                                            |                                | 
|Income before income taxes                  |                                | 
|Income tax expense (benefit)                |                                | 
|                                            |                                | 
|Net income                                  |                                | 
|                                            |                                | 
|Net income (loss) per share                 |                                | 
|Diluted                                     |                                | 
|                                            |                                | 
|Weighted-average common shares outstanding: |                                | 
|Diluted                                     |                                | 
|                                            |                                | 

|                                            | Three Months Ended (unaudited) | 
|------------------------------------------- | ------------------------------ | 
|
|As a percentage of net revenue:             |                                | 
|Revenue before reimbursements (net revenue) |                                | 
|Operating expenses:                         |                                | 
|Project personnel and related expenses      |                                | 
|Sales and marketing                         |                                | 
|Recruiting, retention and training          |                                | 
|Management and administrative               |                                | 
|                                            |                                | 
|Total operating expenses                    |                                | 
|                                            |                                | 
|Operating income (loss)                     |                                | 
|Interest income, net, and other             |                                | 
|                                            |                                | 
|Income before income taxes                  |                                | 
|Income tax expense (benefit)                |                                | 
|                                            |                                | 
|Net income                                  |                                | 
|                                            |                                | 

## Years ended December 31, 2001 and
2002

Net
revenue.Net revenue excludes reimbursable expenses that are billed to our
clients. Net revenue decreased $7.4 million or 15% to $40.4 million for the year
ended December 31, 2002 from $47.7 million for the year ended December 31, 2001.
We attribute this decline in net revenue to the slow growth rate of the U.S.
economy and the negative impact that economic uncertainty has had on information
technology (IT) spending. These factors have depressed the market for strategic
technology services over the last 24 months. For the year ended December 31,
2002, we had 29 significant clients with each of these clients contributing $1.3
million to net revenue on average. We had 43 significant clients during the year
ended December 31, 2001, each contributing $1.0 million to net revenue on
average. We have not had a client accounting for more than 10% of our net
revenue since 1997.

Project
personnel and related expenses.Project personnel and related expenses
consist primarily of compensation and benefits for our professional employees
who deliver consulting services and non-reimbursable project costs. All labor
costs for project personnel are included in project personnel and related
expenses. Project personnel and related expenses decreased $6.4 million or 24%
to $19.9 million for the year ended December 31, 2002, from $26.3 million for
the year ended December 31, 2001. The decrease results from reductions in
consulting headcount. We employed 172 and 217 consultants on December 31, 2002
and 2001, respectively. Further, project personnel and related expenses declined
due to a $550,000 reduction in the allowance for doubtful accounts during 2002.
Our allowance for doubtful accounts was $0.6 million as of December 31, 2002,
compared to $1.15 million as of December 31, 2001. The revised allowance for
doubtful accounts balance more accurately reflects our exposure to loss from
non-paying customers, due to an overall reduction in business activity. This
reduction was not due to any write-off of a specific customer account.

19

---



Project
personnel and related expenses represented 49.4% of net revenue for the year
ended December 31, 2002, compared to 55.2% for the year ended December 31, 2001.
This decrease is due to consulting headcount declining at a faster rate than the
rate of net revenue decline. Net revenue per consultant was $214,000 in the year
ended December 31, 2002, up from $173,000 in the year ended December 31, 2001.
The increase in net revenue per consultant versus the prior year results from
higher consultant utilization as excess consulting capacity was reduced, offset
slightly by a small decline in our effective hourly rate

In
June 2001 Inforte offered a six-to-nine-month voluntary leave of absence program
and a voluntary resignation program to employees in underutilized areas.
Approximately 90 people participated in the programs. Individuals who selected
the leave of absence program received compensation at 20%25% of regular
pay if they remained available to return to full-time service. Individuals who
chose the voluntary resignation package received pay through the end of August
2001. All costs related to resigning employees were included either in our June
2001 quarter results or our September 2001 quarter results. Salary costs for
employees on leave of absence were expensed as incurred and included in the
quarters ended September 2001 through June 2002 with the amounts declining in
the later quarters. In October 2001 and in January 2002, Inforte again offered
voluntary programs similar to the June 2001 program, however these latter
programs were smaller in scope, involving approximately 20 and 30 people,
respectively. In the fourth quarter 2002, Inforte enacted a further headcount
reduction program, affecting approximately 20 individuals. All costs for this
program were expensed in fourth quarter 2002.

Sales
and marketing.Sales and marketing expenses consist primarily of
compensation, benefits and travel costs for employees in the market development
and practice development groups and costs to execute marketing programs. Sales
and marketing and expenses decreased $1.0 million or 14% to $6.1 million for the
year ended December 31, 2002 from $7.1 million in 2001. This decrease is due to
lower headcount in this area, resulting in lower salary and benefit costs and a
decrease in travel expense. Total sales and marketing headcount was 31 as of
December 31, 2000, 26 as of December 31, 2001 and 22 as of December 31, 2002.
Sales and marketing expenses as a percentage of net revenue was stable in 2002
at 15.0% versus 14.8% in 2001.

Recruiting,
retention and training.Recruiting, retention and training expenses consist
of compensation, benefits, and travel costs for personnel engaged in human
resources; costs to recruit new employees; costs of human resources programs;
and training costs. Recruiting, retention and training expenses decreased by
$1.6 million or 57% to $1.2 million for the year ended December 31, 2002 from
$2.9 million for the year ended December 31, 2001. The decrease in spending is
due primarily to less training activity due to lower company-wide headcount and
reduced headcount for employees engaged in recruiting, retention and training.
Total employees declined from 442 as of December 31, 2000 to 294 as of December
31, 2001 to 229 as of December 31, 2002. Total recruiting retention and training
headcount was 18 as of December 31, 2000, 9 as of December 31, 2001 and 5 as of
December 31, 2002. Also, in the current economic environment of higher
unemployment, recruiting efforts require fewer expenses, such as recruiting
finder fees, signing bonuses, relocation allowances and employee referral
bonuses to identify and attract qualified candidates. Recruiting, retention and
training expenses as a percentage of net revenue decreased to 3.0% for the year
ended December 31, 2002 from 6.0% in 2001.

Management
and administrative. Management and administrative expenses consist primarily
of compensation, benefits and travel costs for management, finance, information
technology and facilities personnel, together with rent, telecommunications,
audit, legal, business insurance, and depreciation and amortization of
capitalized computers, purchased software and property. Management and
administrative expenses decreased $0.3 million or 2% to $12.9 million for the
year ended December 31, 2002 from $13.2 million in 2001 For the year ended
December 31, 2002, management and administrative expenses increased as a percent
of revenue to 31.9% from 27.7% in the prior year period, as net revenue declined
at a greater rate than management and administrative expenses. During 2002 some
management and administrative areas had lower expenses relative to 2001, while
other areas had higher expenses. Expense reductions related primarily to lower
headcount and lower facilities costs. Total management and administrative
headcount declined from 53 as of December 31, 2000 to 42 as of December 31, 2001
and 30 as of December 31, 2002. Lease expense in 2002 is lower than lease
expense in 2001 due to a write-down of $1.1 million in 2001 for abandoned lease
space which we are currently working to sublet. The 2001 charge was determined
based on future lease obligations less estimated sublease income. During 2002 we
recorded an additional charge of $0.6 million to lease expense as our estimate
of sublease income has decreased due to a reduction in the rental price of
office space. Offsetting the overall reduction in management and administrative
salary expense were increased costs for variable executive compensation
resulting from improved operating income, severance costs related to senior
management terminations and start-up costs for new practice areas. Business
insurance costs also increased significantly.

20

---



Interest
income, net and other.During the year ended December 31, 2002, interest
income, net and other decreased $1.3 million, or 38% to $2.1 million. The
decrease was due to the reinvestment of matured securities into similar type
securities at lower market interest yields and also due to the lower average
cash balances as a result of Infortes stock buyback program.

Income
tax expense.Income tax expense for the year ended December 31, 2002 was
28.2% of pre-tax income versus income tax expense of 161.5% of pre-tax income in
2001. The unusually high tax rate for 2001 results primarily from expenses not
deductible for income tax purposes including the non-cash, non-recurring stock
compensation expense. Excluding the non-cash, non-recurring stock compensation
expense, effective income tax expense was 29.9% of pre-tax income in 2001. The
decrease of the tax rate in 2002 versus 2001, excluding the non-cash,
non-recurring stock compensation expense, reflects the adjustment of certain
estimates for non-deductible expenses and state and internal tax obligations.
This decrease is partially offset by the tax effect of having less interest
income from tax exempt and tax advantaged investments. The 2002 income tax
expense was the sum of a) operating income times a 41.6% combined federal and
state tax rate and b) interest income, net and other times a reduced tax rate of
26.5%.

## Years ended December 31, 2000 and
2001

Net
revenues.Net revenue excludes reimbursable expenses that are billed to our
clients. Net revenue decreased $16.1 million or 25% to $47.7 million for the
year ended December 31, 2001 from $63.8 million for the year ended December 31,
2000. We attribute this decline in net revenue to the U.S. recession in 2001 and
the negative impact that heightened economic uncertainty had on information
technology spending. For the year ended December 31, 2001, we had 43 significant
clients with each of these clients contributing $1.0 million to net revenue on
average. We had 43 significant clients during the year ended December 31, 2000,
each contributing $1.3 million to net revenue on average. We have not had a
client accounting for more than 10% of our net revenue since 1997. On a
quarterly basis in 2000, revenue followed typical seasonal patterns with higher
sequential growth during the first half of 2000. This pattern did not hold in
2001, however, as revenue declined sequentially each quarter due to the U.S.
recession and the technology spending slowdown.

Project
personnel and related expenses.Project personnel and related expenses
decreased $1.8 million or 7% to $26.3 million for the year ended December 31,
2001, from $28.2 million for year ended December 31, 2000. The decrease results
from reductions in consulting headcount, primarily in the third quarter of 2001.
We employed 217 and 340 consultants on December 31, 2001 and 2000, respectively.
Further, project personnel and related expenses declined in 2001 as there was no
expense to increase the allowance for doubtful account in 2001. In 2000, due to
increased business activity, we increased the allowance for doubtful accounts
from $0.6 million as of December 31, 1999 to $1.15 million as of December 31,
2000, resulting in $550,000 of project personnel and related expenses in 2000
that were not present in 2001.

Project
personnel and related expenses represented 55.2% of net revenue for the year
ended December 31, 2001, compared to 44.1% for the year ended December 31, 2001.
This increase is due to net revenue declining at a higher rate than the rate of
expense declines. Net revenue per consultant was $173,000 in the year ended
December 31, 2001, down from $214,000 in the year ended December 31, 2000. The
decline in net revenue per consultant versus the prior year results primarily
from lower consultant utilization and secondarily from a slightly lower
effective hourly rate due to more price sensitivity in the consulting market.

In
June 2001 Inforte offered a six-to-nine-month voluntary leave of absence program
and a voluntary resignation program to employees in underutilized areas.
Approximately 90 people participated in the programs.

21

---



Individuals who selected
the leave of absence program received compensation at 20%25% of regular
pay if they remained available to return to full-time service. Individuals who
chose the voluntary resignation package received pay through the end of August
2001. All costs related to resigning employees were included either in our June
2001 quarter results or our September 2001 quarter results. Salary costs for
employees on leave of absence were expensed as incurred and included in the
quarters ended September 2001 and December 2001. In October 2001, Inforte again
offered voluntary programs similar to the June 2001 program, however this
program was smaller in scope, involving approximately 20 people.

Sales
and marketing.Sales and marketing expenses decreased $1.5 million or 18% to
$7.1 million for the year ended December 31, 2001 from $8.6 million in 2000.
Factors causing the spending decrease include lower sales bonuses because of
lower revenue during the year, reduced market development spending in 2001 by
our partners resulting in less co-marketing expenses related to those
partnerships, and lower spending on discretionary marketing activities. These
decreases were partially offset by a higher average number of commissioned
salespeople in 2001 compared to 2000. Sales and marketing expenses as a
percentage of net revenue increased to 14.8% for the year ended December 31,
2001 from 13.4% in 2000.

Recruiting,
retention and training.Recruiting, retention and training expenses
decreased by $3.5 million or 55% to $2.9 million for the year ended December 31,
2001 from $6.4 million in the year of 2000. The decrease in spending is due
primarily to reduced recruiting activities and the lower costs associated with
recruiting finder fees, signing bonuses, relocation allowances, employee
referral bonuses and candidate travel. Other factors causing spending to decline
include less spending on company-wide meetings and other employee events and
less training activity due to lower headcount and fewer new hires. As a
percentage of net revenue, recruiting, retention and training dropped to 6.0% in
2001 from 10.0% in 2000.

Management
and administrative.Management and administrative expense increased 3% to
$13.2 million in 2001 from $12.8 million in 2000. For the year ended December
31, 2001, management and administrative expenses increased as a percent of net
revenue to 27.7% from 20.1% in the prior year period, as revenue declined and
expenses increased slightly. We reduced spending in most departments in 2001.
Additionally, executive bonus compensation was lower in 2001. These declines,
however, were offset by costs associated with our effort to consolidate office
space at the Chicago location where Inforte had multiple contractual rental
commitments. Estimated costs for the consolidation of facilities consist of
contractual rental commitments for office space being vacated and related costs
in addition to future depreciation of the related leasehold improvements, offset
by estimated sub-lease income. The total charge related to this reduction of
office space in 2001 was $1.1 million.

Interest
income, net and other.During the year ended December 31, 2001, interest
income, net and other was $3.4 million, similar to the amount in the year ended
December 31, 2000. The negative effect of lower interest rates in 2001 was
offset by the higher average cash and marketable securities balances we
maintained in 2001 as compared to 2000.

Income
tax expense.Income tax expense for the year ended December 31, 2001 was
161.5% of pre-tax income versus income tax expense of 39.0% of pre-tax income in
2000. This unusually high tax rate for 2001 results primarily from expenses not
deductible for income tax purposes including the non-cash, non-recurring stock
compensation expense. Excluding the non-cash, non-recurring stock compensation
expense, effective income tax expense was 29.9% of pre-tax income in 2001. The
decrease of the tax rate, excluding the non-cash, non-recurring stock
compensation expense, in 2001 versus 2000 reflects the increase in tax-free and
tax-advantaged investment earnings as a percentage of total pre-tax book income.

## Liquidity and Capital
Resources

Cash
and cash equivalents decreased from $20.2 million as of December 31, 2001 to
$19.2 million as of December 31, 2002. Short-term marketable securities
decreased from $32.7 million as of December 31, 2001 to $31.3 million as of
December 31, 2002. Long-term marketable securities decreased from $22.2 million
as of December 31, 2001 to $16.8 million as of December 31, 2002. Short-term and
long-term marketable securities are available-for-sale securities consisting of
commercial paper, U.S. government or municipal notes and bonds, corporate bonds
and corporate auction preferreds. In total, cash and cash equivalents,
short-term and long-term marketable securities decreased from $75.1 million to
$67.3 million during the quarter ended December 31, 2002.

22

---



During
2002, Infortes cash flow from operations was positive $2.4 million and
capital expenditures were $0.2 million, resulting in $2.2 million of positive
free cash flow (cash flow from operation minus capital expenditures). Financing
activities resulted in a cash outflow of $9.5 million, resulting from $10.5
million used for stock repurchases and $1.0 received from employees
participating in stock purchase and stock option plans.

In
January 2001, Inforte announced that the board of directors approved a stock
repurchase program that allows Inforte to buy up to $25 million of Inforte
shares. The program was completed in August 2002. The board of directors
approved an additional $5.0 million stock repurchase program on August 22, 2002.
We stated at that time that we had no present plans to make additional
repurchases of stock, and as of December 31, 2002, we have made no repurchases
under this second program. On December 31, 2002, Inforte had 10,799,386 shares
outstanding and $67.3 million in cash and marketable securities, resulting in
$6.24 of cash and marketable securities per basic share. As of December 31,
2002, the public float (shares not held by executive officers and directors)
totaled 5.7 million shares or 53% of total outstanding shares.

Inforte
believes that its current cash, cash equivalents and marketable securities will
be sufficient to meet working capital and capital expenditure requirements for
the foreseeable future.

All
highly liquid investments with maturities of three months or less when purchased
are considered cash equivalents. Cash and cash equivalent balances consist of
obligations of U.S. and U.K. banks, high-grade commercial paper and other high
quality, short-term obligations of U.S. companies. Short-term and long-term
marketable securities are available-for-sale securities that are recorded at
fair market value. The difference between amortized cost and fair market value,
net of tax effect, is shown as a separate component of stockholders
equity. The cost of securities available-for-sale is adjusted for amortization
of premiums and discounts to maturity. Interest and amortization of premiums and
discounts for all securities are included in interest income.

Inforte
has several operating leases that have contractual cash obligations for future
payments. There are no other contractual obligations that require future cash
obligations or other commitments. The table below identifies all future
commitments.

|                                   | Payments Due by Period | 
|---------------------------------- | ---------------------- | 
|
|
|Long-term debt                     |                        | 
|Capital lease obligations          |                        | 
|Operating leases                   |                        | 
|Unconditional purchase obligations |                        | 
|Other long-term obligations        |                        | 
|                                   |                        | 
|Total contractual cash obligations |                        | 
|                                   |                        | 
|                                   |                        | 

## Critical Accounting Policies

Revenue
recognition, losses on fixed-price contracts, deferred revenue.We recognize
revenue when all of the following four criteria are met: persuasive evidence
exists that we have an agreement, service has been rendered, our price is fixed
or determinable and collectibility is reasonably assured. We recognize net
revenue from fixed-price contracts based on the ratio of hours incurred to total
estimated hours. The cumulative impact of any change in estimated hours to
complete is reflected in the period in which the changes become known. We
recognize time-and-materials net revenue as we perform the services.

Reimbursed
expenses.In November 2001, the Financial Accounting Standards Boards
Emerging Issues Task Force issued Topic 01-14, Income Statement
Characterization of Reimbursements Received for Out-of-Pocket
Expenses Incurred stating these costs should be characterized as revenue
in the income statement if billed to customers. For each quarter beginning with
the March 31, 2002 quarter, we included reimbursable expenses in revenue and
expense and we have reclassified prior periods in the comparative consolidated
financial statements as required by the Financial Accounting Standards Board.
This reclassification had no effect on current or previously reported net income
(loss) per share. For presentation purposes, we show two components of total
revenue: 1) revenue before reimbursements, which we call net revenue, consisting
of revenue for performing consulting services; and 2) reimbursements, consisting
of reimbursements we receive from clients for out-of-pocket expenses incurred.
We believe net revenue is a more meaningful representation of our economic
activity than total revenue since it excludes pass-through, zero-margin expense
reimbursements.

23

---



Allowance
for doubtful accounts.An allowance for doubtful accounts is maintained for
potential credit losses. The amount of the reserve is established analyzing all
client accounts to determine credit risk. In establishing a clients
creditworthiness we consider whether the client has a deteriorating or poor
financial condition, limited financial resources, poor or no payment history, a
large relative accounts receivable balance or a non-U.S. location.

Stock
compensation.At December 31, 2002, Inforte has three stock-based employee
compensation plans, which are described more fully in footnote 9 of the
Consolidated Financial Statements. We account for stock-based employee
compensation in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and have adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation(SFAS 123)
related to options issued to employees. All options granted under our plans had
an exercise price equal to the market value of the underlying common stock on
the date of grant.

Bonus
accruals.We have several bonus programs that are based on individual and
company performance. Revenue bonuses are earned based on individual or roll up
revenue credit assigned to salespeople, client executives, other senior delivery
personnel and senior management. Margin bonuses are earned by all employees
based on company or business unit operating income performance. In addition,
senior management may award discretionary bonuses. All of these bonuses are
expensed in the period in which they are earned. A corresponding accrual is
included on the balance sheet in accrued expenses until the bonus is paid.

Income
TaxesWe account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes(SFAS
109), which requires the recognition of deferred income taxes based upon
the tax consequences of temporary differences between financial reporting and
income tax reporting by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax basis of existing assets and liabilities. SFAS 109 also requires that
deferred tax assets be reduced by a valuation allowance if it is more likely
than not that some portion of the deferred tax asset will not be realized.

In
connection with the preparation of our consolidated financial statements, we are
required to estimate our income tax liability for each of the tax jurisdictions
in which we operate. This process involves estimating our actual current income
tax expense and assessing temporary differences resulting from differing
treatment of certain income or expense items for income tax reporting and
financial reporting purposes. We also recognize as deferred tax assets the
expected future tax benefits of net operating loss carry forwards. In evaluating
the realizability of deferred tax assets associated with net operating loss
carry forwards, we consider, among other things, expected future taxable income,
the expected timing of the reversals of existing temporary reporting
differences, and the expected impact of tax planning strategies that may be
implemented to prevent the potential loss of future tax benefits. Changes in,
among other things, income tax legislation, statutory income tax rates or future
taxable income levels could materially impact the our valuation of income tax
assets and liabilities and could cause our income tax provision to vary
significantly among financial reporting periods.

## Recently Issued Accounting
Pronouncements

In
2002 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 146,
Accounting for Costs Associated With Exit or Disposal Activities.
This statement addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring). The principal difference between this Statement and
Issue 94-3 relates to its requirements for recognition of a liability for a cost
associated with an exit or disposal activity. This Statement requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. Under Issue 94-3, a liability for an exit cost
as defined in Issue 94-3 was recognized at the date of an entitys
commitment to an exit plan. Adoption of this statement is required for exit or
disposal activity initiated after December 31, 2002. Any exit or disposal
activity which has been completed or has already been committed to as of
December 31, 2002 is accounted for under EITF 94-3. Currently, Inforte does not
have any new exit or disposal activity that will occur after December 31, 2002,
beyond the exit of a portion of our office space at our Chicago location, which
will continue to be accounted under Issue 94-3. Thus we do not believe that the
adoption of this statement at present has an effect on Infortes results of
operations or financial position.

24

---



In
July 2000, the Financial Accounting Standards Boards Emerging Issues Task
Force issued abstract 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables. This abstract addresses certain aspects of the
accounting by a vendor for arrangements under which it will perform multiple
revenue-generating activities. Under this abstract, companies which have
multiple revenue generating activities are required to segment their activities
into separate units of accounting for revenue recognition purposes. For example,
a company that engages a client to integrate an enterprise-wide software
application and manage the ongoing maintenance of that application in a
production environment, would have to separate the project into phases and
recognize revenue for those phases under the FASB and SEC pronouncement that is
appropriate for each phase. This abstract has not been finalized by the EITF,
and any further changes may affect Infortes reporting of revenue. However,
under the current abstract, we believe that Infortes revenue generating
activities are all similar in nature, and thus would not require separate
accounting treatment.

In
December 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 148, Accounting
for Stock Based CompensationTransition and Disclosure. This
Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. We do not
intend to adopt the fair value method, thus the sections of this statement which
address transition to the fair value method, will not affect the presentation of
our consolidated financial statements. However, we report pro forma disclosures
in accordance with SFAS 123, in the notes to the annual financial statements,
and thus, these pro forma disclosures will now be provided on a quarterly basis.

25

---



## ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

## Foreign Currency Risk

During
2002, our international revenues were over 20% of our total net revenue. We face
additional risks internationally that we do not face domestically. Such risks
include longer customer payment cycles, adverse taxes and compliance with local
laws and regulations. Further, the effects of fluctuations in currency exchange
rates may adversely affect the results of operations. Finally, as the U.S.
economic slowdown has spread to the rest of the world, our ability to obtain
international revenue going forward could be limited.

## Interest Rate Risk

As
of December 31, 2002 Infortes total short-term and long-term marketable
securities equaled $67.3 million. During 2002, interest income represented 89%
of Infortes pre-tax income. As a result, fluctuations in interest rates
can have a significant impact on our net income (loss) per share. We estimate
that the impact on interest income from a 1 percentage point change in interest
rates could change our annual net income (loss) per share by approximately $0.05
per diluted share. Our estimate is calculated using December 31, 2002 investment
balances and fourth quarter 2002 diluted weighted average shares outstanding.

## ITEM 8. CONSOLIDATED FINANCIAL
STATEMENTS

The
following consolidated financial statements, and the related notes thereto, of
Inforte and the Report of Independent Auditors are filed as a part of this Form
10-K.

|                                               | Page
|---------------------------------------------- | ----
|Report of Independent Auditors                 |     
|                                              
|Balance Sheets                                 |     
|                                              
|Consolidated Statements of Operations          |     
|                                              
|Statements of Stockholders Equity             |     
|                                              
|Statements of Cash Flows                       |     
|                                              
|Notes to the Consolidated Financial Statements |     

26

---



# REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of DirectorsInforte Corp.

We
have audited the accompanying balance sheets of Inforte Corp. as of December 31,
2002 and 2001, and the related consolidated statements of operations,
stockholders equity, and cash flows for each of the three years in the
period ended December 31, 2002. Our audits also included the financial statement
schedule listed in the Index at Item 15. These financial statements and schedule
are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.

We
conducted our audits in accordance with auditing standards generally accepted in
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Inforte Corp. at
December 31, 2002 and 2001 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG
LLP

Chicago, Illinois
January 21, 2003

27

---



# INFORTE
CORP.CONSOLIDATED BALANCE SHEETS

|                                                                        | December 31, | 
|----------------------------------------------------------------------- | ------------ | 
|
|Assets                                                                  |              | 
|Current assets:                                                         |              | 
|Cash and cash equivalents                                               |              | 
|Short-term marketable securities                                        |              | 
|Accounts receivable, less allowance for doubtful accounts of $1,150,000 |              | 
|at December 31, 2001 and $600,000 at December 31, 2002                  |              | 
|Prepaid expenses and other current assets                               |              | 
|Interest receivable on investment securities                            |              | 
|Deferred income taxes                                                   |              | 
|                                                                        |              | 
|Total current assets                                                    |              | 
|Computers, purchased software and property, net                         |              | 
|Long-term marketable securities                                         |              | 
|Deferred income taxes                                                   |              | 
|                                                                        |              | 
|Total assets                                                            |              | 
|                                                                        |              | 
|Liabilities and stockholders equity                                    |              | 
|Current liabilities:                                                    |              | 
|Accounts payable                                                        |              | 
|Income taxes payable                                                    |              | 
|Accrued expenses                                                        |              | 
|Accrued loss on disposal of leased property                             |              | 
|Deferred revenue                                                        |              | 
|                                                                        |              | 
|Total current liabilities                                               |              | 
|Stockholders equity:                                                   |              | 
|Preferred stock, $0.001 par value; 5,000,000 shares authorized, none    |              | 
|issued and outstanding at December 31, 2001 and 2002                    |              | 
|Common stock, $0.001 par value in 2000; authorized  50,000,000         |              | 
|shares; issued and outstanding  11,591,564 as of December 31,          |              | 
|2001 and 10,799,386 as of December 31, 2002                             |              | 
|Additional paid-in capital                                              |              | 
|Cost of common stock in treasury, 1,492,702 as of December 31,          |              | 
|2001 and 2,720,823 shares as of December 31, 2002                       |              | 
|Retained earnings                                                       |              | 
|Accumulated other comprehensive income                                  |              | 
|                                                                        |              | 
|Total stockholders equity                                              |              | 
|                                                                        |              | 
|Total liabilities and stockholders equity                              |              | 
|                                                                        |              | 

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

28

---



# INFORTE
CORP.CONSOLIDATED STATEMENTS OF OPERATIONS

|                                            | Year ended December 31, | 
|------------------------------------------- | ----------------------- | 
|
|Revenues:                                   |                         | 
|Revenue before reimbursements (net revenue) |                         | 
|Reimbursements                              |                         | 
|                                            |                         | 
|Total Revenues                              |                         | 
|Operating expenses:                         |                         | 
|Project personnel and related expenses      |                         | 
|Reimbursed expenses                         |                         | 
|Sales and marketing                         |                         | 
|Recruiting, retention and training          |                         | 
|Management and administrative               |                         | 
|Non-cash, non-recurring stock compensation  |                         | 
|expense (see footnote 2)                    |                         | 
|                                            |                         | 
|Total operating expenses                    |                         | 
|                                            |                         | 
|Operating income (loss)                     |                         | 
|Interest income, net and other              |                         | 
|                                            |                         | 
|Income before income taxes                  |                         | 
|Income tax expense                          |                         | 
|                                            |                         | 
|Net income (loss)                           |                         | 
|                                            |                         | 
|Net income (loss) per share:                |                         | 
|Basic                                       |                         | 
|                                            |                         | 
|Diluted                                     |                         | 
|                                            |                         | 
|Weighted Average common shares outstanding: |                         | 
|Basic                                       |                         | 
|                                            |                         | 
|Diluted                                     |                         | 
|                                            |                         | 

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

29

---



# INFORTE
CORP.CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

|                              | Common Stock |  | Additional |            |   |   |        | AccumulatedOther |   | Total      | 
|----------------------------- | ------------ |  | ---------- | ---------- | - | - | ------ | ---------------- | - | ---------- | 
|
|Balance at January 1, 2000    |              |  |            | 9,721,154  |   | $ | 9,721  |                  | $ | 411,886    | 
|Stock option and purchase     |              | 
|plans                         |              |  |            | 681,772    |   |   | 682    |                  |   | 4,448,654  | 
|Proceeds from public offering |              |  |            | 2,300,000  |   |   | 2,300  |                  |   | 66,857,951 | 
|Compensation recognized       |              | 
|related to stock options      |              |  |            |           |   |   |       |                  |   | 50,000     | 
|Tax benefit of disqualifying  |              | 
|dispositions of stock         |              | 
|options                       |              |  |            |           |   |   |       |                  |   | 2,423,714  | 
|Comprehensive income:         |              | 
|Foreign currency              |              | 
|Translation adjustments       |              |  |            |           |   |   |       |                  |   |           | 
|Unrealized gain on            |              | 
|available-for-sale            |              | 
|securities                    |              |  |            |           |   |   |       |                  |   |           | 
|Net income                    |              |  |            |           |   |   |       |                  |   |           | 
|                              |              | 
|Comprehensive Income          |              |  |            |           |   |   |       |                  |   |           | 
|                              |              |  |            |            |   |   |        |                  |   |            | 
|Balance at December 31, 2000  |              |  |            | 12,702,926 |   | $ | 12,703 |                  | $ | 74,192,205 | 
|Stock option and purchase     |              | 
|plans                         |              |  |            | 381,340    |   |   | 382    |                  |   | 1,319,317  | 
|Compensation recognized       |              | 
|related to stock options      |              |  |            |           |   |   |       |                  |   | 1,549,000  | 
|Tax benefit of disqualifying  |              | 
|dispositions of stock         |              | 
|options                       |              |  |            |           |   |   |       |                  |   | 855,862    | 
|Purchase of common stock      |              | 
|for treasury                  |              |  |            | (1,492,702 | ) |   | (1,493 | )                |   |           | 
|Comprehensive income:         |              | 
|Foreign currency translation  |              | 
|adjustments                   |              |  |            |           |   |   |       |                  |   |           | 
|Unrealized gain on            |              | 
|available-for-sale            |              | 
|securities                    |              |  |            |           |   |   |       |                  |   |           | 
|Net loss                      |              |  |            |           |   |   |       |                  |   |           | 
|                              |              | 
|Comprehensive loss            |              |  |            |           |   |   |       |                  |   |           | 
|                              |              |  |            |            |   |   |        |                  |   |            | 
|Balance at December 31, 2001  |              |  |            | 11,591,564 |   | $ | 11,592 |                  | $ | 77,916,384 | 
|Stock option and purchase     |              | 
|plans                         |              |  |            | 435,943    |   |   | 435    |                  |   | 952,616    | 
|Tax benefit of disqualifying  |              | 
|dispositions of stock         |              | 
|options                       |              |  |            |           |   |   |       |                  |   | 323,280    | 
|Purchase of common stock      |              | 
|for treasury                  |              |  |            | (1,228,121 | ) |   | (1,228 | )                |   |           | 
|Comprehensive income:         |              | 
|Foreign currency translation  |              | 
|adjustments                   |              |  |            |           |   |   |       |                  |   |           | 
|Unrealized loss on            |              | 
|available-for-sale            |              | 
|securities                    |              |  |            |           |   |   |       |                  |   |           | 
|Net income                    |              |  |            |           |   |   |       |                  |   |           | 
|                              |              | 
|Comprehensive income (loss)   |              |  |            |           |   |   |       |                  |   |           | 
|                              |              |  |            |            |   |   |        |                  |   |            | 
|Balance at December 31, 2002  |              |  |            | 10,799,386 |   | $ | 10,799 |                  | $ | 79,192,280 | 
|                              |              |  |            |            |   |   |        |                  |   |            | 

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

30

---



# INFORTE
CORP.CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                       | Year ended December 31, | 
|------------------------------------------------------ | ----------------------- | 
|
|Cash flows from operating activities                   |                         | 
|Net income (loss)                                      |                         | 
|Adjustments to reconcile net income (loss) to net cash |                         | 
|provided by operating activities:                      |                         | 
|Depreciation and amortization                          |                         | 
|Non-cash stock compensation                            |                         | 
|Deferred income taxes                                  |                         | 
|Changes in operating assets and liabilities:           |                         | 
|Accounts receivable                                    |                         | 
|Prepaid expenses and other current assets              |                         | 
|Accounts payable                                       |                         | 
|Income taxes                                           |                         | 
|Accrued expenses and other                             |                         | 
|Deferred revenue                                       |                         | 
|                                                       |                         | 
|Net cash provided by operating activities              |                         | 
|                                                       |                         | 
|Cash flows from investing activities                   |                         | 
|(Purchases of) Proceeds from marketable securities     |                         | 
|Purchases of property and equipment                    |                         | 
|                                                       |                         | 
|Net cash (used in) provided by investing activities    |                         | 
|                                                       |                         | 
|Cash flows from financing activities                   |                         | 
|Proceeds from issuance of common stock                 |                         | 
|Stock option and purchase plans                        |                         | 
|Purchase of common stock                               |                         | 
|                                                       |                         | 
|Net cash provided (used in) by financing activities    |                         | 
|                                                       |                         | 
|Effect of change in exchange rates on cash             |                         | 
|                                                       |                         | 
|Net increase (decrease) in cash and cash equivalents   |                         | 
|Cash and cash equivalents, beginning of year           |                         | 
|                                                       |                         | 
|Cash and cash equivalents, end of year                 |                         | 
|                                                       |                         | 

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

31

---



# INFORTE
CORP.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

## 1. Nature of Business

Inforte
is a customer and demand management consultancy that helps clients improve
customer interactions, revenue forecasting and profitability. Inforte creates
strategies and implements technology solutions that enhance visibility, optimize
customer and channel profitability, and integrate demand information with supply
and resource planning processes.

Throughout 2002, Inforte
Corp. owned a wholly owned subsidiary, Inforte Investments Inc., a Delaware corporation, which functioned as a
holding company for Inforte Corp.s investments. Inforte Investments Inc. had no operations other than
holding investments of Inforte Corp. and no contractual commitments requiring future cash
obligations.

Inforte Investments Inc.
has been dissolved effective December 31, 2002, and all its assets have been reverted back to the parent
company, Inforte Corp.

## 2. Significant Accounting
Policies

## Cash and Cash
Equivalents

All
highly liquid investments with maturities of three months or less when purchased
are considered cash equivalents. Cash and cash equivalent balances consist of
obligations of U.S. and U.K. banks, high-grade commercial paper and other high
quality, short-term obligations of U.S. companies. At December 31, 2001 and
2002, Inforte classified its cash equivalent investments, totaling approximately
$13.3 million and $13.4 million, respectively, as available-for-sale. These
investments are stated at amortized costs, which approximates fair value.

## Accounts receivable,
net

Accounts
receivable balances are presented on the Consolidated Balance Sheets net of the
allowance for doubtful accounts of $600,000 and $1,150,000 at December 31, 2002
and 2001, respectively. The reduction in the allowance for doubtful accounts of
$550,000 during 2002 results in a balance that more accurately reflects the
companys exposure to loss from non-paying customers as overall business
activity has declined. This change in estimate was not due to any write-off of a
specific customer account.

## Financial Instruments

Short-term
and long-term marketable securities are available-for-sale securities which are
recorded at fair market value. The difference between amortized cost and fair
market value, net of tax effect, is shown as a separate component of
stockholders equity. The cost of securities available-for-sale is adjusted
for amortization of premiums and discounts to maturity. Interest and
amortization of premiums and discounts for all securities are included in
interest income. Realized gains and losses from sales of available-for-sale
securities were $19,560 in 2001 and were not material in 2002. At December 31,
2001 and 2002, unrealized gains were $233,708 and $237,523, respectively, and
were accounted for in other comprehensive income.

## Principles of
consolidation

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

32

---



# INFORTE
CORP.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 2. Significant Accounting Policies
(Continued)

## Computers, Purchased Software, and
Property

Computers,
purchased software, and property are stated at cost. Inforte provides for
depreciation and amortization using the straight-line method over their
estimated useful lives as follows:

|Asset Classification    |  |  | Estimated Useful Life |                                                            
|----------------------- |  |  | --------------------- | -----------------------------------------------------------
|Office furniture        |  |  |                       | 35 years                                                  
|Computers and equipment |  |  |                       | 23 years                                                  
|Purchased software      |  |  |                       | 23 years                                                  
|Leasehold improvements  |  |  |                       | Estimated useful life or life oflease, whichever is shorter
|                        |  |  |                       |                                                            

Significant
improvements are capitalized and depreciated. Upon retirement or sale, the cost
of the assets disposed of and the related accumulated depreciation are removed
from the accounts, and any resulting gain or loss is included in the results of
operations.

## Revenue Recognition

We
recognize revenue when all of the following four criteria are met: persuasive
evidence exists that we have an agreement, service has been rendered, our price
is fixed or determinable and collectibility is reasonably assured. We recognize
net revenue from fixed-price contracts based on the ratio of hours incurred to
total estimated hours. The cumulative impact of any change in estimated hours to
complete is reflected in the period in which the changes become known. We
recognize time-and-materials net revenue as we perform the services.

In
November 2001, the Financial Accounting Standards Boards Emerging Issues
Task Force issued Topic 01-14, Income Statement Characterization of
Reimbursements Received for Out-of-Pocket Expenses Incurred
stating these costs should be characterized as revenue in the income statement
if billed to customers. For each quarter beginning with the March 31, 2002
quarter, we included reimbursable expenses in revenue and expense and we have
reclassified prior periods in the comparative consolidated financial statements
as required by the Financial Accounting Standards Board. This reclassification
had no effect on current or previously reported net income (loss) per share. For
presentation purposes, we show two components of total revenue: 1) revenue
before reimbursements, which we call net revenue, consisting of revenue for
performing consulting services; and 2) reimbursements, consisting of
reimbursements we receive from clients for out-of-pocket expenses incurred

## Stock-Based
Compensation

Inforte
accounts for stock-based employee compensation in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and have adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation(SFAS 123) related to options and warrants issued
to employees. For options issued to employees during the years ended December
31, 2002, 2001 and 2000, no stock-based employee compensation is reflected in
net income in the accompanying consolidated statements of operations, as all
such options had an exercise price equal to the market value of the underlying
common stock on the date of the grant. Had we applied the fair value recognition
provisions of SFAS 123 to stock-based employee compensation during the years
ended December 31, 2002, 2001 and 2000, net income and net income (loss) per
share would have been as follows:

33

---



# INFORTE
CORP.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 2. Significant Accounting Policies
(Continued)

|                                                       | Year Ended December 31 | 
|------------------------------------------------------ | ---------------------- | 
|
|Net income (loss), as reported                         |                        | 
|Add: Stock-based compensation expense recorded, net of |                        | 
|related tax effects                                    |                        | 
|                                                       |                        | 
|Deduct: Total stock-based compensation expense         |                        | 
|determined under fair value based method for all       |                        | 
|awards, net of related tax effects                     |                        | 
|                                                       |                        | 
|Pro forma net income (loss)                            |                        | 
|                                                       |                        | 
|Net income (loss), per share:                          |                        | 
|Basic  as reported                                    |                        | 
|                                                       |                        | 
|Basic  pro forma                                      |                        | 
|                                                       |                        | 
|Diluted  as reported                                  |                        | 
|                                                       |                        | 
|Diluted  pro forma                                    |                        | 
|                                                       |                        | 

There
are two exceptions where compensation expense was recorded. In 2000,
compensation expense for $50,000 relates to stock options that were granted to a
member of the Board of Directors for consulting services. In 2001, the
compensation expense related to options is $1,549,000, of which $1,374,000 was
for a performance-based stock option and the remaining $175,000 was for the
aforementioned stock options granted to a member of the Board of Directors for
consulting services. We have listed the performance-based stock option expense
as a separate line of the consolidated statements of operations due its
magnitude and non-recurring nature. Note that this expense would otherwise be
included entirely in the management and administrative expense line. The
exercise price on all of these options grants equaled fair market value at the
time of grant.

## Income taxes

Deferred
income taxes are provided on all differences between the tax bases of assets and
liabilities and their reported amounts in the consolidated financial statements
based upon enacted statutory tax rates in effect in the periods when such
differences are expected to reverse.

## Net income (loss) per
share

Basic
and diluted net loss per share is computed by dividing the net loss available to
common stockholders for the period by the weighted average number of shares of
common stock outstanding during the period. The calculation of diluted net
earnings (loss) per share excludes potential common shares if the effect is
antidilutive. Potential common shares are composed of common stock issuable upon
the exercise of stock options.

## Comprehensive Income

Comprehensive
income includes net income as currently reported under accounting principles
generally accepted in the United States and also considers the effect of
additional economic events that are not required to be recorded in determining
net income but are rather reported as a separate component of stockholders
equity. Inforte reports foreign currency translation adjustments and unrealized
gains and losses on marketable securities as components of comprehensive income.

## Foreign Currency
Translation

Assets
and liabilities of the Companys foreign operations are translated into
United States dollars at the exchange rate in effect at the balance sheet date
while income and expenses are translated at the weighted-average exchange rate
for the year. Translation adjustments are classified as a separate component of
stockholders equity.

34

---



# INFORTE
CORP.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 2. Significant Accounting Policies
(Continued)

Net gains and losses
resulting from foreign exchange transactions are included in the consolidated
statements of operations and were not significant during the periods presented.

## Concentration of Credit
Risk

Infortes
financial instruments consist of cash and cash equivalents, short-term and
long-term marketable securities, accounts receivable and accounts payable. At
December 31, 2001 and 2002, the fair value of these instruments approximated
their consolidated financial statement carrying amounts.

Inforte
performs periodic credit evaluations of its customers financial condition
and generally does not require collateral. Inforte maintains an allowance for
potential credit losses, and such losses have been within managements
expectations.

For
the year ended December 31, 2000, one customer accounted for 1% of revenue and
11% of accounts receivable at December 31, 2000. For the year ended December 31,
2001, two customers accounted for 9% and 1%, respectively, of revenue and 17%
and 16%, respectively, of accounts receivable at December 31, 2001. For the year
ended December 31, 2002, two customers accounted for 9% and 2%, respectively, of
revenue and 19% and 10%, respectively, of accounts receivable at December 31,
2002.

## Use of Accounting
Estimates

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

## Advertising Costs

Inforte
expenses the cost of advertising as incurred. Such costs are included in sales
and marketing in the consolidated statements of operations. In the years 2000,
2001 and 2002 advertising costs were immaterial.

## Reclassifications

Certain
2001 balances have been reclassified to conform to 2002 financial statement
presentation.

## 3. Financial Instruments

The
portfolio of short-term and long-term marketable securities (including cash and
cash equivalents) consisted of the following:

|                             | Year ended December 31, 2001 |  | Year ended December 31, 2002 |           
|---------------------------- | ---------------------------- |  | ---------------------------- | ----------
|
|Cash                         |                              |  | $                            | 6,860,511 
|Commercial paper             |                              |  |                              | 8,992,282 
|Municipal notes/bonds        |                              |  |                              | 23,647,797
|Corporate bonds              |                              |  |                              | 14,712,542
|Corporate auction preferreds |                              |  |                              | 14,800,925
|U.S. government agencies     |                              |  |                              | 5,869,622 
|                             |                              |  |                              |           
|                             |                              |  | $                            | 74,883,679
|                             |                              |  |                              |           

35

---



# INFORTE
CORP.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 3. Financial Instruments
(Continued)

Inforte
considers all marketable securities with maturities of one year or less as of
December 31, 2001 or December 31, 2002 to be short term. Long-term marketable
securities consist of marketable securities with remaining maturities of greater
than twelve months.

Contractual
maturities of investments in debt securities (excluding commercial paper) at
December 31, 2001 and 2002:

|                              | Year ended December 31, 2001 |  | Year ended December 31, 2002 |           
|----------------------------- | ---------------------------- |  | ---------------------------- | ----------
|
|Less than one year            |                              |  | $                            | 25,147,991
|Due in 12 years              |                              |  |                              | 13,212,348
|                              |                              |  |                              |           
|Investment in debt securities |                              |  | $                            | 38,360,339
|                              |                              |  |                              |           

## 4. Accrued loss on disposal of leased
property

During
2001 Inforte took major steps to reduce its costs to better align its overall
cost structure and organization with anticipated demand for its services. These
steps included consolidating office space at the Chicago location where Inforte
had multiple contractual rental commitments. Estimated costs for the
consolidation of Chicago facilities consist of contractual rental commitments
for office space being vacated and unamortized leasehold improvements related to
this space less estimated sub-lease income. The total reduction of office space
resulting from this consolidations of our Chicago office space was approximately
17,770 square feet, all of which were vacated as of December 31, 2001. Total
charges related to this reduction of office space in 2001 and 2002 were
$1,107,841 and $605,062, respectively. These charges were recorded as a
component of Management and Administrative expenses in the 2001 and 2002
Consolidated Statement of Operations. At December 31, 2001 and 2002 the Company
recorded $1,107,841 and $1,126,229 as Accrued Expenses on the Consolidated
Balance Sheet. If we vacate additional space, if future sub-lease income is less
than estimated, or if we are unable to sub-lease our vacated space, additional
charges in future periods will be necessary.

## 5. Computers, Purchased Software, and
Property

Computers,
purchased software and property at December 31 consist of the following:

|                                                | 2001 |  | 2002 |          
|----------------------------------------------- | ---- |  | ---- | ---------
|Office furniture                                |      |  | $    | 328,126  
|Computers and equipment                         |      |  |      | 1,816,031
|Leasehold improvements                          |      |  |      | 796,524  
|Purchased software                              |      |  |      | 835,951  
|                                                |      |  |      |          
|                                                |      |  |      | 3,776,632
|Less: Accumulated depreciation and amortization |      |  |      | 1,915,687
|                                                |      |  |      |          
|                                                |      |  | $    | 1,860,945
|                                                |      |  |      |          

36

---



# INFORTE
CORP.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 6. Income Taxes and Distribution to
Shareholders

Federal
taxes paid were $3,470,215 in 2000 and there were no federal taxes paid in 2001
and 2002. State income taxes paid were $974,066 and $61,372 in 2000 and 2001,
respectively, and there were no state taxes paid in 2002.

Income
tax expense (credit) for the years ended December 31, 2000, 2001 and 2002
consists of the following:

|                                  | 2000 |  | 2001 |           | 2002 |  
|--------------------------------- | ---- |  | ---- | --------- | ---- | -
|Current:                          |      |  |      |           |      |  
|Federal                           |      |  | $    | 4,348,692 |      | $
|State                             |      |  |      | 615,564   |      |  
|Foreign                           |      |  |      |          |      |  
|                                  |      |  |      |           |      |  
|Total current provision           |      |  |      | 4,964,256 |      |  
|Deferred:                         |      | 
|Federal                           |      |  |      | (498,819  | )    |  
|State                             |      |  |      | (70,608   | )    |  
|                                  |      |  |      |           |      |  
|Total deferred provision (credit) |      |  |      | (569,427  | )    |  
|                                  |      |  |      |           |      |  
|Total provision for income taxes  |      |  | $    | 4,394,829 |      | $
|                                  |      |  |      |           |      |  

The
reconciliation of income taxes computed using the federal statutory rate of 35%
for the years ended December 31, 2000, 2001 and 2002 is as follows:

|                                              | 2000 |  | 2001 |       | 2002 |  
|--------------------------------------------- | ---- |  | ---- | ----- | ---- | -
|
|Federal statutory income tax                  |      |  | $    | 3,944 |      | $
|State income tax, net of federal tax benefit  |      |  |      | 763   |      |  
|Nondeductible expenses                        |      |  |      | 330   |      |  
|Tax exempt and tax advantaged interest income |      |  |      | (710  | )    |  
|Non-deductible stock compensation expense     |      |  |      |      |      |  
|Effect of international taxes                 |      |  |      |      |      |  
|Other                                         |      |  |      | 67    |      |  
|                                              |      |  |      |       |      |  
|                                              |      |  | $    | 4,394 |      | $
|                                              |      |  |      |       |      |  

The
tax effects of temporary differences that give rise to deferred tax assets and
liabilities at December 31, 2001 and 2002 are as follows:

|                                                     | December 31, | 
|---------------------------------------------------- | ------------ | 
|
|Deferred income tax assets:                          |              | 
|Allowance for doubtful accounts                      |              | 
|Accrued loss on lease                                |              | 
|Book over tax depreciation                           |              | 
|Accrued bonuses, vacation and health insurance costs |              | 
|Other                                                |              | 
|Deferred rent                                        |              | 
|                                                     |              | 
|Total deferred tax assets                            |              | 
|                                                     |              | 

37

---



# INFORTE
CORP.NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 7. Net Income (Loss) per
Share

The
following table sets forth the computation of basic and diluted net income
(loss) per share.

|                                                      | Year ended December 31, | 
|----------------------------------------------------- | ----------------------- | 
|
|Numerator                                             |                         | 
|Numerator for basic and diluted net income (loss) per |                         | 
|common share:                                         |                         | 
|Net income (loss)                                     |                         | 
|                                                      |                         | 
|Denominator                                           |                         | 
|Denominator for basic earnings per common share:      |                         | 
|Weighted-average shares                               |                         | 
|                                                      |                         | 
|Effect of dilutive securities:                        |                         | 
|Employee stock options                                |                         | 
|                                                      |                         | 
|Denominator for diluted earnings per common share:    |                         | 
|Adjusted weighted-average shares                      |                         | 
|                                                      |                         | 
|Weighted-average anti-dilutive stock options          |                         | 
|                                                      |                         | 

The
following table sets forth common stock equivalents that are not included in the
diluted net income per share calculation above because to do so would be
antidilutive for the periods indicated:

|                                        | Year ended December 31, | 
|--------------------------------------- | ----------------------- | 
|
|Weighted average effect of common stock |                         | 
|equivalents:                            |                         | 
|Employee stock options                  |                         | 
|                                        |                         | 

## 8. Related Party Transactions

Transactions
with related parties are entered into only upon approval by a majority of the
independent directors of Inforte and only with terms comparable to those that
would be available from unaffiliated parties.

In
October 2000, Inforte granted 62,500 options to a non-employee member of the
Board of Directors, in exchange for consulting services. The options were
granted at the fair market value of the Inforte stock on the grant date and vest
as services are completed. The options expire at the end of ten years. These
options were accounted for under SFAS 123, and the total expense to be recorded
over the service period equals $400,000, the estimated fair value of the
services provided.

38

---



# INFORTE
CORP.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 9. Stockholders Equity

## Stock Option and Incentive
Plans

The
1995 Incentive Stock Option Plan (the 1995 Plan) provides for the
issuance of incentive stock options and nonqualified stock options to officers
and other key employees of Inforte. Inforte has reserved an aggregate of
4,900,000 shares for issuance under the 1995 Plan, of which 365,000 were
available for grant as of December 31, 2002. As of December 31, 2002, Inforte
does not intend to issue any additional options under the 1995 Plan.

On
December 31, 1997, the stockholders approved the 1997 Incentive Compensation
Plan (the 1997 Plan), which permits the grant of stock options and
other stock awards to employees and directors of Inforte.

On
December 1, 1999, the stockholders approved the Amended and Restated Inforte
Corp. 1997 Incentive Compensation Plan. Inforte has reserved an aggregate of
4,000,000 shares of common stock for issuance through the amended 1997 Plan,
plus annual increases beginning in 2001 equal to the lesser of: (1) 1,000,000
shares, (2) 5% of the total shares of common stock outstanding or (3) a number
determined by the Board of Directors. Of the shares of common stock available
under this 1997 Plan, 1,593,662 were available for grant as of December 31,
2002. The 1997 Plan authorizes the grant of both incentive and nonqualified
stock options, and further authorizes the grant of stock appreciation rights
independently of or with respect to options granted or outstanding. Stock
options generally have 10-year terms and vest in accordance with provisions
determined by the Board of Directors. A restricted stock program, performance
program and bonus shares program have also been established under the 1997 Plan.
Awards under the restricted stock program and performance program are earned
over a period of time upon the achievement of certain criteria. Restricted share
grants may not be sold or otherwise disposed of until the restrictions lapse.
Performance shares are payable in cash, common stock, or a combination thereof
when earned. Bonus shares allow participants to elect to receive shares of
common stock in lieu of a portion or all of cash bonuses paid by Inforte. Stock
appreciation rights and restricted stock have not been granted as of December
31, 2002.

A
combined summary of stock option information from the 1995 Plan and the 1997
Plan follows:

|                                                      | Numberof Shares |  | Weighted AverageExercise Price |          
|----------------------------------------------------- | --------------- |  | ------------------------------ | ---------
|Outstanding on December 31, 1999                      |                 |  |                                | 1,929,046
|Granted                                               |                 |  |                                | 1,295,980
|Exercised                                             |                 |  |                                | (501,367 
|Canceled                                              |                 |  |                                | (132,222 
|                                                      |                 |  |                                |          
|Outstanding on December 31, 2000                      |                 |  |                                | 2,591,437
|Granted                                               |                 |  |                                | 1,003,418
|Exercised                                             |                 |  |                                | (267,339 
|Canceled                                              |                 |  |                                | (453,943 
|                                                      |                 |  |                                |          
|Outstanding on December 31, 2001                      |                 |  |                                | 2,873,573
|Granted                                               |                 |  |                                | 1,036,326
|Exercised                                             |                 |  |                                | (391,938 
|Canceled                                              |                 |  |                                | (728,697 
|                                                      |                 |  |                                |          
|Outstanding on December 31, 2002                      |                 |  |                                | 2,789,264
|                                                      |                 |  |                                |          
|Exercisable at December 31, 2002                      |                 |  |                                | 950,429  
|Weighted average fair value of options granted during |                 | 
|twelve months ended December 31, 2002                 |                 |  |                                |          

39

---



# INFORTE
CORP.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 9. Stockholders Equity
(Continued)

|                                                         | Year ended December 31, | 
|-------------------------------------------------------- | ----------------------- | 
|
|Shares available for grant under 1995 Plan and 1997 Plan |                         | 
|                                                         |                         | 

|              | Options Outstanding |  | Options Exercisable |          
|------------- | ------------------- |  | ------------------- | ---------
|
|$0.05-$3.50   |                     |  |                     | 153,223  
|$3.51-$7.75   |                     |  |                     | 384,338  
|$7.76-$11.00  |                     |  |                     | 832,524  
|$11.01-$13.97 |                     |  |                     | 963,999  
|$13.98-$32.00 |                     |  |                     | 264,702  
|$32.01-$71.81 |                     |  |                     | 190,478  
|              |                     |  |                     |          
|Total         |                     |  |                     | 2,789,264
|              |                     |  |                     |          

In
December 1999, the Company adopted the Employee Stock Purchase Plan (the
Purchase Plan) reserving 200,000 shares for issuance, plus annual
increases beginning in 2001 equal to the lesser of (1) 400,000 shares, (2) 2% of
the total shares of common stock outstanding or (3) a number determined by the
Board of Directors. The Purchase Plan became effective upon the completion of
the Companys initial public offering, in February 2000. The Purchase Plan
permits eligible employees to purchase common stock, through payroll deductions
at a price equal to 85% of the fair market value of the common stock at either
the beginning or the end of each offering period, whichever is lower. For the
years ended December 31, 2000, 2001 and 2002, 180,099, 144,000 and 44,001
shares, respectively, were purchased under the Purchase Plan with weighted
average prices of $21.57, $7.31 and $6.70 per share, respectively. In December
of 2002 the Purchase Plan was modified to establish the purchase price at 92% of
fair market value at the date of purchase for any new enrollees of the Purchase
Plan on or after December 31, 2002.

To
date, Inforte has granted options with exercise prices equal to market value on
the grant date.

In
2001 Inforte incurred a non-cash, non-recurring stock compensation expense of
$1,374,000 for a performance-based option with an exercise price equal to fair
market value at the time of grant. As the entire intrinsic value of this option
was recorded in the fourth quarter of 2001, there will be no future expense from
this option. Excluding this non-cash expense, which had no effect on income tax
expense, net income would have been $1,182,329 for 2001.

The
fair value of stock options used to compute pro forma net income and pro forma
net income per share is the estimated present value at grant date using the
Black Scholes option pricing model for option grants issued on or after February
17, 2000 and the minimum value method on option grants issued prior to February
17, 2000. The option pricing models assumptions were:

|                                                 | 2000 |             | 2001 |             | 2002
|------------------------------------------------ | ---- | ----------- | ---- | ----------- | ----
|Dividend yield                                   |      | 0%          |      | 0%          |     
|Volatility                                       |      | 80%         |      | 80%         |     
|Risk-free interest rate                          |      | 5.06%6.36% |      | 3.75%4.89% |     
|Weighted-average expected option life (in years) |      | 4.0         |      | 4.0         |     

Pro
forma net income and net income (loss) per share assuming we had applied the
fair value recognition provisions of SFAS 123 to stock-based employee
compensation during the years ended December 31, 2002, 2001 and 2000, are
disclosed in Note 2.

40

---



# INFORTE
CORP.NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 10. Lease Commitments

Inforte
leases certain office facilities under noncancelable operating leases that
expire at various dates through 2006.

At
December 31, 2002, Inforte was obligated for future minimum lease payments under
operating leases that have initial or remaining non-cancelable terms in excess
of one year, as follows:

|2003                         |  |  | $ | 2,400,400 | 
|---------------------------- |  |  | - | --------- | 
|2004                         |  |  |   | 2,462,532 | 
|2005                         |  |  |   | 2,475,099 | 
|2006                         |  |  |   | 568,795   | 
|                             |  | 
|Total minimum lease payments |  |  | $ | 7,906,826 | 
|                             |  | 

Rent
expense for operating leases was $1,706,267, $3,362,463 and $2,679,019 for the
years ended December 31, 2000, 2001 and 2002, respectively.

## 11. Benefit Plan

Inforte
sponsors a 401(k) savings plan covering all employees. Inforte has not made any
matching or discretionary contributions to the plan. We do not consider
administrative costs during 2000, 2001 and 2002 related to this plan to be
material.

## 12. Common Stock in Treasury

During
2002, Inforte repurchased 1,228,121 shares of its common stock for $10.5 million
at an average price of $8.55. In total, during 2001 and 2002, Inforte
repurchased 2,720,823 shares of its common stock for $25.0 million at an average
price of $9.19. Infortes Board Of Directors approved a $25.0 million stock
repurchase program on January 24, 2001 and as of December 31, 2002 the entire
amount authorized had been repurchased. The Board approved an additional $5.0
million stock repurchase program on August 22, 2002, although we stated at that
time that we had no present plans to make additional repurchases of stock. The
entire $5.0 million remains authorized for repurchase as of December 31, 2002.

41

---



# INFORTE
CORP.NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 13. Quarterly Financial Results
(unaudited)

The
following tables set forth certain unaudited quarterly results of operations of
Inforte for 2001 and 2002. The quarterly operating results are not necessarily
indicative of future results of operations.

The
net loss of $1,354,914 in the fourth quarter 2001 resulted from a non-cash,
non-recurring stock compensation expense of $1,374,000 for a performance-based
option with an exercise price equal to fair market value at the time of the
grant. This option did not have any expense associated with it in the first
three quarters of 2001, nor will there be any expense from this option after
fourth quarter 2001. Excluding this non-cash expense, which had no effect on
income tax expense, net income would have been $19,086 for the fourth quarter
2001 and $1,182,329 for the full year 2001.

|                                            | Three Months Ended (unaudited) | 
|------------------------------------------- | ------------------------------ | 
|
|Revenues:                                   |                                | 
|Revenue before reimbursements (net          |                                | 
|revenue)                                    |                                | 
|Reimbursements                              |                                | 
|                                            |                                | 
|Total revenues                              |                                | 
|Operating expenses:                         |                                | 
|Project personnel and related expenses      |                                | 
|Reimbursed expenses                         |                                | 
|Sales and marketing                         |                                | 
|Recruiting, retention and training          |                                | 
|Management and administrative               |                                | 
|Non-cash, non-recurring, stock              |                                | 
|compensation expense                        |                                | 
|                                            |                                | 
|Total operating expenses                    |                                | 
|                                            |                                | 
|Operating income (loss)                     |                                | 
|Interest income, net, and other             |                                | 
|                                            |                                | 
|Income before income taxes                  |                                | 
|Income tax expense                          |                                | 
|                                            |                                | 
|Net income (loss)                           |                                | 
|                                            |                                | 
|Net income (loss) per share:                |                                | 
|Diluted(1)                                  |                                | 
|                                            |                                | 
|Weighted-average common shares outstanding: |                                | 
|Diluted                                     |                                | 
|                                            |                                | 

42

---



# INFORTE
CORP.NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

## 13. Quarterly Financial Results
(unaudited) (Continued)

|                                            | Three Months Ended (unaudited) | 
|------------------------------------------- | ------------------------------ | 
|
|Revenues:                                   |                                | 
|Revenue before reimbursements (net          |                                | 
|revenue)                                    |                                | 
|Reimbursements                              |                                | 
|                                            |                                | 
|Total revenues                              |                                | 
|Operating expenses:                         |                                | 
|Project personnel and related expenses      |                                | 
|Reimbursed expenses                         |                                | 
|Sales and marketing                         |                                | 
|Recruiting, retention and training          |                                | 
|Management and administrative               |                                | 
|                                            |                                | 
|Total operating expenses                    |                                | 
|                                            |                                | 
|Operating income (loss)                     |                                | 
|Interest income, net, and other             |                                | 
|                                            |                                | 
|Income before income taxes                  |                                | 
|Income tax expense (benefit)                |                                | 
|                                            |                                | 
|Net income                                  |                                | 
|                                            |                                | 
|Net income (loss) per share                 |                                | 
|Diluted                                     |                                | 
|                                            |                                | 
|Weighted-average common shares outstanding: |                                | 
|Diluted                                     |                                | 
|                                            |                                | 

---

| | (1) |  | Sum
of quarters does not  equal year due to differences in average shares outstanding.
| | --- |  | --------------------------------------------------------------------------------------

## 14. Segment Reporting

Inforte
engages in business activities in one operating segment, which provides
consulting services on both a fixed-price, fixed-time frame and a
time-and-materials basis. Infortes services are delivered to clients in
North America and Europe, and Infortes long-lived assets are located in
North America and Europe. Domestic and foreign operating revenues are based on
the location of customers. Long-lived assets consist of property, plant and
equipment, software, furniture and fixtures and leasehold improvements (net of
accumulated depreciation). During the year ended December 31, 2002,
Infortes European operations had $8,481,492 of revenues and $9,620 of
long-lived assets at December 31, 2002. During the year ended December 31, 2001,
this segment had $5,022,922 of revenues and $27,782 of long-lived assets at
December 31, 2001. In 2000 operating revenues and long-lived assets related to
foreign operations were immaterial.

## 15. Changes in Securities and Use of
Proceeds

On
February 28, 2000, Inforte closed its offering of an aggregate of 2,300,000
shares of its Common Stock at an offering price of $32.00 per share. Net
proceeds to Inforte, of $66,860,251 were invested in cash and marketable
securities for general corporate use.

43

---



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

None

# PART III

## ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT

Information
concerning Infortes directors is incorporated herein by reference to
Infortes definitive proxy statement with respect to its 2003 annual
meeting of stockholders to be filed with the Securities and Exchange Commission
within 120 days after the end of the fiscal year covered by this Form 10-K.
Information concerning Infortes executive officers is included in Part I
of this report under the caption Executive Officers of the
Registrant.

## ITEM 11. EXECUTIVE
COMPENSATION

Information
concerning executive compensation is incorporated herein by reference to
Infortes definitive proxy statement with respect to its 2003 annual
meeting of stockholders to be filed with the Securities and Exchange Commission
within 120 days after the end of the fiscal year covered by this Form 10-K.

## ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

Information
concerning ownership of Infortes stock is incorporated herein by reference
to Infortes definitive proxy statement with respect to its 2003 annual
meeting of stockholders to be filed with the Securities and Exchange Commission
within 120 days after the end of the fiscal year covered by this Form 10-K.

## ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS

Information
concerning certain relationships and related transactions involving
Infortes directors and executive officers is incorporated herein by
reference to Infortes definitive proxy statement with respect to its 2003
annual meeting of stockholders to be filed with the Securities and Exchange
Commission within 120 days after the end of the fiscal year covered by this Form
10-K.

## ITEM 14. CONTROLS AND
PROCEEDURES

Within
the 90-day period prior to the filing of this report, an evaluation was carried
out under the supervision and with the participation of the Corporations
management, including the Corporations Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the Corporations disclosure
controls and procedures (as defined in Rule 13a-14(c) under the Securities
Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that these disclosure controls and
procedures were effective.

## Changes in Internal Controls

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

44

---



# PART IV

## ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL
STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

# Financial Statements

Infortes
financial statements included in Item 8 of this report are listed in the index
preceding the financial statements.

# Statement
Schedules and Reports on Form 8-KFinancial Statement Schedules

(i) Schedule II -- Valuation and Qualifying Accounts.

# Exhibits

|3.1 |  | Certificate
of Incorporation. Incorporated herein by reference to Exhibit 3 to Infortes Form
S-1, as amended,  Registration No. 333-92325.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Amended
and Restated Bylaws dated January 30, 2003.
|--- |  | ---------------------------------------------------

|H 10.3 |  | Amended
and Restated 1995 Incentive Stock Option Plan. Incorporated herein by reference to
Exhibit 10.3 to Infortes  Form S-1, as amended, Registration No. 333-92325.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|H 10.4 |  | Amended
and Restated 1997 Incentive Compensation Plan. Incorporated herein by reference to
Exhibit 10.4 to Infortes  Form S-1, as amended, Registration No. 333-92325.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|H 10.5 |  | Form
of Stock Option Agreement. Incorporated herein by reference to Exhibit 10.5 to Infortes
Form S-1, as amended,  Registration No. 333-92325.
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | Amended
and Restated 1999 Employee Stock Purchase Plan. Incorporated herein by reference to
Exhibit 10.6 to Infortes  Form S-1, as amended, Registration No. 333-92325.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|H 10.7 |  | Form
of Director/Officer Indemnification Agreement. Incorporated herein by reference to
Exhibit 10.7 to Infortes  Form S-1, as amended, Registration No. 333-92325.
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|23.1 |  | Consent
of Independent Auditors.
|---- |  | --------------------------------

|99.1 |  | Section
906 certification of the Chief Executive Officer
|---- |  | --------------------------------------------------------

|99.2 |  | Section
906 certification of the Chief Financial Officer
|---- |  | --------------------------------------------------------

Management
or compensatory plan or arrangement required to be filed pursuant to item 14(c)
of Form 10-K.

# Reports on Form 8-K

Form
8-K filed November 5, 2002 (Item 9 Regulation FD Disclosure for reporting change
in directors)

45

---



# SIGNATURE PAGE

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934 the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on March 7, 2003.

| |  | INFORTE CORP.
By /s/ Philip S. Bligh
Philip S. Bligh, Chief Executive Officer & Chairman
| |  | ----------------------------------------------------------------------------------------------------------------

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

|Signature                                    |  | Title                                         |  | Date         
|-------------------------------------------- |  | --------------------------------------------- |  | -------------
|                                            
|                                            
|/s/ Philip S. BlighPhilip S. Bligh           |  | Chief Executive Officer & Chairman            |  | March 7, 2003
|                                            
|                                            
|/s/ Stephen C. P. MackStephen C. P. Mack     |  | Chief Operating Officer, President & Director |  | March 7, 2003
|                                            
|                                            
|/s/ Nick PadgettNick Padgett                 |  | Chief Financial Officer & Director            |  | March 7, 2003
|                                            
|                                            
|/s/ Harvey H. Bundy, IIIHarvey H. Bundy, III |  | Director                                      |  | March 7, 2003
|                                            
|                                            
|/s/ Ray C. KurzweilRay C. Kurzweil           |  | Director                                      |  | March 7, 2003
|                                            
|                                            
|/s/ Michael E. PorterMichael E. Porter       |  | Director                                      |  | March 7, 2003
|                                            
|                                            
|/s/ Al RiesAl Ries                           |  | Director                                      |  | March 7, 2003
|                                            
|                                            
|/s/ Steven GettoSteven Getto                 |  | Controller                                    |  | March 7, 2003

46

---



# CERTIFICATIONS

I, Philip Bligh, certify
that:

| | 1. |  | I
have reviewed this annual report on Form 10-K of Inforte Corp.;
| | -- |  | -----------------------------------------------------------------

| | 2. |  | Based on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. |  | Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) |  | designed
such disclosure controls and procedures to ensure that material  information relating to
the registrant, including its consolidated subsidiaries,  is made known to us by others
within those entities, particularly during the  period in which this annual report is
being prepared;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) |  | evaluated
the effectiveness of the registrants disclosure controls and  procedures as of a
date within 90 days prior to the filing date of this annual  report (the Evaluation
Date); and
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) |  | presented
in this annual report our conclusions about the effectiveness of the  disclosure controls
and procedures based on our evaluation as of the Evaluation  Date;
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (a) |  | all
significant deficiencies in the design or operation of internal controls  which could
adversely affect the registrants ability to record, process,  summarize and report
financial data and have identified for the  registrants auditors any material
weaknesses in internal controls; and
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) |  | any
fraud, whether or not material, that involves management or other employees  who have a
significant role in the registrants internal controls; and
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

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

|March 7, 2003 |  | By: |  | /s/ Philip S. BlighPhilip S. Bligh,Chief Executive Officer | 
|------------- |  | --- |  | ---------------------------------------------------------- | 

47

---



I, Nick Padgett, certify
that:

| | 1. |  | I
have reviewed this annual report on Form 10-K of Inforte Corp.;
| | -- |  | -----------------------------------------------------------------

| | 2. |  | Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this annual report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. |  | Based on my knowledge, the financial
statements, and other financial information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. |  | The registrants other certifying
officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) |  | designed such disclosure controls and
procedures to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which
this annual report is being prepared;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) |  | evaluated
the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation Date); and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) |  | presented in this annual report our
conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (a) |  | all
significant deficiencies in the design or operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) |  | any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrants internal controls;
and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

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

|March 7, 2003 |  | By: |  | /s/ Nick PadgettNick Padgett,Chief Financial Officer | 
|------------- |  | --- |  | ---------------------------------------------------- | 

48

---



SCHEDULE II

# VALUATION
AND QUALIFYING ACCOUNTS

# INFORTE CORP.

|                                            | Additions |  |   |          
|------------------------------------------- | --------- |  | - | ---------
|
|Year ended December 31, 2000                |           |  |   |          
|Reserves and allowances deducted from asset |           | 
|accounts                                    |           | 
|Allowance for doubtful accounts             |           |  | $ | 600,000  
|Year ended December 31, 2001                |           | 
|Reserves and allowances deducted from asset |           | 
|accounts                                    |           | 
|Allowance for doubtful accounts             |           |  | $ | 1,150,000
|Year ended December 31, 2002                |           | 
|Reserves and allowances deducted from asset |           | 
|accounts                                    |           | 
|Allowance for doubtful accounts             |           |  | $ | 1,150,000
|                                            |           |  |   |          

---

|* |  | Reduction
in the allowance for doubtful accounts during 2002 due to an overall reduction in business
activity. Recorded as a reduction in project personnel and related expenses during 2002.
This reduction was not due to any write-off of a specific customer account.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

49

---



# EXHIBIT INDEX

|3.1 |  | Certificate
of Incorporation. Incorporated herein by reference to Exhibit 3 to Infortes Form
S-1, as amended,  Registration No. 333-92325.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Amended
and Restated Bylaws dated January 30, 2003.
|--- |  | ---------------------------------------------------

|H 10.3 |  | Amended
and Restated 1995 Incentive Stock Option Plan. Incorporated herein by reference to
Exhibit 10.3 to Infortes  Form S-1, as amended, Registration No. 333-92325.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|H 10.4 |  | Amended
and Restated 1997 Incentive Compensation Plan. Incorporated herein by reference to
Exhibit 10.4 to Infortes  Form S-1, as amended, Registration No. 333-92325.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|H 10.5 |  | Form
of Stock Option Agreement. Incorporated herein by reference to Exhibit 10.5 to Infortes
Form S-1, as amended,  Registration No. 333-92325.
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | Amended
and Restated 1999 Employee Stock Purchase Plan. Incorporated herein by reference to
Exhibit 10.6 to Infortes  Form S-1, as amended, Registration No. 333-92325.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|H 10.7 |  | Form
of Director/Officer Indemnification Agreement. Incorporated herein by reference to
Exhibit 10.7 to Infortes  Form S-1, as amended, Registration No. 333-92325.
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|23.1 |  | Consent
of Independent Auditors.
|---- |  | --------------------------------

|99.1 |  | Section
906 certification of the Chief Executive Officer
|---- |  | --------------------------------------------------------

|99.2 |  | Section
906 certification of the Chief Financial Officer
|---- |  | --------------------------------------------------------

Management
or compensatory plan or arrangement required to be filed pursuant to item 14(c)
of Form 10-K.