SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

---

FORM 10-Q

---

(Mark One)


[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2004

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
For the transition period from ________to _________
Commission file number 000-31003



Corio, Inc.



|Delaware                                                       | 77-0492528                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

959 Skyway Road, Suite 100
San Carlos, California    94070

650-232-3000







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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes

Indicate by check mark whether the registrant is an accelerated filer as
defined in Rule 12b-2 of the Act.   Yes

As of April 30, 2004, there were 62,842,478 shares of the Registrant's common stock outstanding.







Corio, Inc.

      QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2004
                                TABLE OF CONTENTS



|PART I.   FINANCIAL INFORMATION                                                                                         | Page No.
|----------------------------------------------------------------------------------------------------------------------- | --------
|                                                                                                                        |         
|Item 1.   Financial Statements                                                                                          |         
|                                                                                                                        |         
|Unaudited Condensed Consolidated  Balance Sheets 
            
March 31, 2004 and December 31, 2003                     | 3       
|                                                                                                                        |         
|Unaudited Condensed Consolidated  Statements of Operations
            
    Three months ended March 31, 2004 and 2003  | 4       
|                                                                                                                        |         
|Unaudited Condensed Consolidated  Statements of Cash Flows 
            
    Three months ended March 31, 2004 and 2003 | 5       
|                                                                                                                        |         
|Notes to Unaudited Condensed Consolidated  Financial Statements                                                         | 6       
|                                                                                                                        |         
|Item 2.   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations   | 11      
|                                                                                                                        |         
|Item 3.   Quantitative and Qualitative Disclosures About Market Risk                                                    | 30      
|                                                                                                                        |         
|Item 4.   Controls and Procedures                                                                                       | 30      
|                                                                                                                        |         
|PART II.  OTHER INFORMATION                                                                                             |         
|                                                                                                                        |         
|Item 1.   Legal Proceedings                                                                                             | 31      
|                                                                                                                        |         
|Item 2: Changes in Securities and Use of Proceeds                                                                       | 31      
|                                                                                                                        |         
|Item 3: Defaults Upon Senior Securities                                                                                 | 31      
|                                                                                                                        |         
|Item 4: Submission of Matters to a Vote of Security Holders                                                             | 31      
|                                                                                                                        |         
|Item 5: Other Information                                                                                               | 31      
|                                                                                                                        |         
|Item 6.   Exhibits and Reports on Form 8-K                                                                              | 32      
|                                                                                                                        |         
|Signatures                                                                                                              | 33      

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

---





CORIO, INC.

                            CONDENSED CONSOLIDATED BALANCE SHEETS

                                (In thousands, except share amounts)

                                               (unaudited)

`March 31,   December 31,
                                                                          2004          2003
                                                                      ------------  ------------
ASSETS                                                                                          
Current assets:
    Cash and cash equivalents....................................... $     18,387  $     15,440
    Short-term investments..........................................       18,426        19,591
    Accounts receivable, net of allowance of $552 and $591
        at March 31, 2004 and December 31, 2003, respectively.......        5,797         6,484
    Prepaid expenses and other current assets.......................        3,161         2,502
                                                                      ------------  ------------
        Total current assets........................................       45,771        44,017
Restricted cash.....................................................        7,853         7,680
Property and equipment, net.........................................       10,819        10,907
Other assets........................................................        8,987         9,539
                                                                      ------------  ------------
        Total assets................................................       73,430  $     72,143
                                                                      ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY                                                            
Current liabilities:
    Accounts payable................................................ $      6,277  $      6,759
    Accrued liabilities.............................................        6,775         7,216
    Accrued restructuring...........................................          707           701
    Deferred revenue................................................        3,780         4,017
    Current portion of bank term commitment payable.................          743            --
    Current portion of capital lease obligations....................          365           476
                                                                      ------------  ------------
        Total current liabilities...................................       18,647        19,169
Capital lease obligations less current portion......................          310           387
Accrued restructuring...............................................        3,884         4,068
Bank term commitment payable less current portion...................        3,157            --
Other liabilities...................................................        1,309         1,283
                                                                      ------------  ------------
        Total liabilities...........................................       27,307        24,907
                                                                      ------------  ------------
Commitments and contingencies (Note 8)
Stockholders' equity:
    Preferred stock: $0.001 par value; 10,000,000
        shares authorized, none issued and outstanding..............           --            --
    Common stock: $0.001 par value; 200,000,000 shares authorized;
       62,763,152 and 61,767,102 shares issued and outstanding
        at March 31, 2004 and December 31, 2003, respectively.......           62            61
    Additional paid-in capital......................................      307,863       306,735
    Accumulated other comprehensive income..........................           16            12
    Deferred stock-based compensation...............................           --            (3)
    Accumulated deficit.............................................     (261,818)     (259,569)
                                                                      ------------  ------------
        Total stockholders' equity..................................       46,123        47,236
                                                                      ------------  ------------
        Total liabilities and stockholders' equity.................. $     73,430  $     72,143
                                                                      ============  ============`

See accompanying notes to condensed consolidated financial statements.

---





CORIO, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share amounts)

                                   (Unaudited)

`Three Months Ended
                                                            March 31,
                                                     ----------------------
                                                        2004        2003
                                                     ----------  ----------
REVENUES:                                                                                          
    Application management services................ $   14,921  $   16,629
    Professional services and other................      2,694       2,374
                                                     ----------  ----------
    Total revenues.................................     17,615      19,003
                                                     ----------  ----------                        
COSTS AND EXPENSES:                                                                                
    Application management services *..............     11,335      13,214
    Professional services and other ...............      2,364       2,013
    Research and development *.....................        648       1,350
    Sales and marketing *..........................      2,710       2,205
    General and administrative *...................      2,295       2,390
    Restructuring charges..........................         --       2,334
    Amortization of stock-based compensation.......          3         272
    Amortization of intangible assets..............        644         453
                                                     ----------  ----------
    Total operating expenses.......................     19,999      24,231
                                                     ----------  ----------
Loss from operations...............................     (2,384)     (5,228)
Interest and other income..........................        152         200
Interest and other expense.........................        (15)       (127)
                                                     ----------  ----------
Net loss before income tax expense.................     (2,247)     (5,155)
Income tax expense.................................         (2)         --
                                                     ----------  ----------
Net loss........................................... $   (2,249) $   (5,155)
                                                     ==========  ==========

Basic and diluted net loss per share .............. $    (0.04) $    (0.09)
                                                     ==========  ==========

Shares used in computation-basic and diluted.......     62,372      54,955
                                                     ==========  ==========
                                                                                                   
*  Amortization (reversal) of stock-based                                                          
   compensation not included in expense line item:
    Application management services................ $      0.5  $       36
    Research and development.......................        0.5         (14)
    Sales and marketing............................        1.0          98
    General and administrative.....................        1.0         152
                                                     ----------  ----------
    Total amortization of stock-based compensation. $        3  $      272
                                                     ==========  ==========`

See accompanying notes to condensed consolidated financial statements.

---





CORIO, INC.

                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (In thousands)

                                   (unaudited)

`Three Months Ended
                                                                               March 31,
                                                                        --------------------
                                                                           2004       2003
                                                                        ---------  ---------
CASH FLOWS FROM OPERATING ACTIVITIES:                                                       
    Net loss.......................................................... $  (2,249) $  (5,155)
    Adjustments to reconcile net loss to net
    cash provided by (used in) operating activities:
        Depreciation..................................................     1,943      3,217
        Amortization of intangible assets.............................       644        453
        Amortization of stock-based compensation......................         3        272
        Amortization of investments...................................       164        169
        Compensation for grants of stock, options and warrants
          in exchange for services....................................         3         82
        Changes in assets and liabilities:
            Accounts receivable.......................................       687      1,988
            Prepaid expenses and other current assets.................      (659)       145
            Accounts payable..........................................      (482)      (784)
            Accrued liabilities.......................................      (129)    (1,883)
            Deferred revenue..........................................      (237)       229
            Other liabilities.........................................      (159)     2,157
                                                                        ---------  ---------
    Net cash provided by (used in) operating activities...............      (471)       890
                                                                        ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:                                                       
    Purchases of short-term investments...............................    (9,563)   (15,020)
    Sales of short-term investments...................................    10,569      7,563
    Purchase of property and equipment................................    (1,855)    (1,011)
    Other assets......................................................       (95)         2
    Cash paid for acquisition.........................................        --       (516)
                                                                        ---------  ---------
    Net cash used in investing activities.............................      (944)    (8,982)
                                                                        ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:                                                       
    Proceeds from sale of common stock and exercise of stock options..     1,129        279
    Borrowings (repayments) on debt obligations.......................     3,900       (128)
    Payments on capital lease obligations.............................      (494)    (1,821)
                                                                        ---------  ---------
    Net cash provided by (used in) financing activities...............     4,535     (1,670)
                                                                        ---------  ---------
Increase in cash and cash equivalents.................................     3,120     (9,762)
Cash and cash equivalents, beginning of period........................    15,440     26,908
                                                                        ---------  ---------
Cash and cash equivalents, end of period.............................. $  18,560  $  17,146
                                                                        =========  =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                           
    Cash paid for interest and taxes.................................. $      17  $     120
                                                                        =========  =========
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:                                   
    Deferred stock-based compensation/forfeitures, net................ $      --  $     254
                                                                        =========  =========

    Net unrealized gain (loss) on investments......................... $       4  $     (21)
                                                                        =========  =========`

See accompanying notes to condensed consolidated financial statements.

---





CORIO, INC.

              Notes to Condensed Consolidated Financial Statements

NOTE 1-SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed
consolidated financial statements have been prepared by Corio, Inc.
("Corio" or the "Company") and reflect all adjustments that
are, in the opinion of management, necessary for a fair presentation of the
interim periods presented. Such adjustments are of a normal recurring nature.
The results of operations for the interim periods presented are not necessarily
indicative of the results for any future interim period or for the entire fiscal
year. Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, although the Company believes that the disclosures
included are adequate to make the information presented not misleading. The
unaudited condensed consolidated financial statements and notes included herein
should be read in conjunction with the audited consolidated financial statements
and accompanying notes included in the Company's Annual Report on Form 10-K/A
for the year ended December 31, 2003.

NET LOSS PER SHARE

Basic net loss per share is computed by
dividing the net loss for the period by the weighted average number of shares of
common stock outstanding during the period (excluding shares subject to
repurchase). Diluted net loss per share is computed by dividing the net loss for
the period by the weighted average number of shares of common stock and
potentially dilutive common securities outstanding during the period.
Potentially dilutive shares of common stock are excluded from the diluted net
loss per share computation in loss periods, as their effect would be
antidilutive.

The following table sets forth
potentially dilutive shares of common stock that are not included in the diluted
net loss per share calculation as their effect would have been antidilutive for
the periods indicated (in thousands except weighted average exercise price).

`March 31, 2004     March 31, 2003
                                        ------------------  ------------------
                                        Weighted            Weighted
                                         Average             Average
                                        Exercise            Exercise
                                          Price    Shares     Price    Shares
                                        --------- --------  --------- -------- 
Preferred stock warrants.............. $      --       --  $    1.70      746
Common stock subject to repurchase.... $      --       --  $    0.01    1,925
Common stock options and warrants..... $    1.98   18,174  $    1.82   18,811`

STOCK-BASED COMPENSATION

The Company accounts for stock-based
employee compensation arrangements in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees and related interpretations and complies with the
disclosure provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, Accounting for Stock-Based Compensation.
Under APB No. 25, compensation expense is based on the difference, if any, on
the date of the grant between the fair value of the Company's stock and the
exercise price of the underlying option. Deferred compensation is amortized and
expensed in accordance with the graded vesting approach provided for in
Financial Accounting Standards Board ("FASB") Interpretation No.
28.

The Company accounts for stock issued to
non-employees in accordance with the provisions of SFAS No. 123 and FASB
Emerging Issues Task Force Issue No. 96-18, Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services. The Company uses the Black-Scholes
option-pricing model to value options granted to non-employees. The expense is recorded
over the period in which the related services are received.

If compensation cost for the Company's stock-based
compensation plans had been determined based on fair value at the grant dates
for the awards under a method prescribed by SFAS No. 123, the Company's net loss
would have increased to the pro forma amounts indicated below (in thousands,
except per share data):

`Three Months Ended
                                                              March 31,
                                                       --------------------
                                                          2004       2003
                                                       ---------  ---------  
Net loss as reported................................. $  (2,249) $  (5,155)
Add stock-based employee compensation expense
   included in reported net loss, net of tax of $0...         3        272
Deduct total stock-based employee compensation
   determined under the fair-value-based method
   for all awards, net of tax of $0..................    (1,675)    (1,926)
                                                       ---------  ---------
Pro forma net loss................................... $  (3,921) $  (6,809)
                                                       =========  =========
Basic and diluted net loss per share:
   As reported....................................... $   (0.04) $   (0.09)
   Pro forma......................................... $   (0.06) $   (0.12)`

The Company calculated the fair value of each option granted
under the Company's stock option plans on the date of grant using the
Black-Scholes option pricing model and calculated amortization using the graded
vesting approach with the following weighted-average assumptions:

`Three Months Ended
                                                              March 31,
                                                       --------------------
                                                          2004       2003
                                                       ---------  ---------  
Expected life (in years).............................       4.0        4.0
Risk free interest rate..............................      2.67%      2.38%
Volatility...........................................       113%       105%
Dividend yield.......................................         0%         0%`

Weighted-average fair values per share for options granted
under the Company's stock option plans during the three months ended March 31,
2004 and 2003 were:

`Three Months Ended
                                                              March 31,
                                                       --------------------
                                                          2004       2003
                                                       ---------  ---------  
Weighted-average fair values per share for options
   granted under the Company's stock option plans.... $    2.13  $    0.56`

The Company calculated the fair value of each option granted
under the Company's employee stock purchase plan on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:

`Three Months Ended
                                                              March 31,
                                                       --------------------
                                                          2004       2003
                                                       ---------  ---------  
Expected life (in years).............................       0.5        0.5
Risk free interest rate..............................      0.93%      1.08%
Volatility...........................................        84%       105%
Dividend yield.......................................         0%         0%`

Weighted-average fair values per share for options granted
under the Company's employee stock purchase plan during the three months ended
March 31, 2004 and 2003 were:

`Three Months Ended
                                                              March 31,
                                                       --------------------
                                                          2004       2003
                                                       ---------  ---------  
Weighted-average fair values per share for
   options granted under the Company's
   employee stock purchase plan...................... $    1.08  $    0.31`

RESTRICTED CASH

In connection with two facility leases,
the Company was required to issue letters of credit to the facility lessors as
security for the leases. The letters of credit may initially be drawn upon for a
period of one year and each letter provides for automatic one-year renewal
periods. The letters of credit are collateralized by a $7.9 million cash
deposit, which is recorded as restricted cash on the accompanying condensed
consolidated balance sheet. In the three months ended March 31, 2004, the amount
of restricted cash the Company recorded increased by $173,000 due to additional
collateral requirements related to a standby letter of credit we issued in
connection with our leased operations office in Phoenix, Arizona.

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial
statements include the accounts of Corio and its wholly owned subsidiary. All
intercompany accounts and transactions have been eliminated.

RECLASSIFICATION

Certain reclassifications have been made to prior period
amounts to be consistent with current period presentation in the condensed
consolidated statements of cash flows.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2003, the SEC issued Staff Accounting Bulletin
("SAB") No. 104, Revenue Recognition, which supersedes SAB No.
101, Revenue Recognition in Financial Statements. SAB No. 104 rescinds
accounting guidance in SAB No. 101 related to multiple-element arrangements as
this guidance has been superseded as a result of the issuance of EITF 00-21,
Accounting for Revenue Arrangements with Multiple Deliverables. The
adoption of SAB No. 104 did not have a material effect on our financial position
or results of operations.

In May 2003, the FASB issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity, which establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. SFAS No. 150 requires that an issuer classify a
financial instrument that is within its scope, many of which were previously
classified as equity, as a liability. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise shall be
effective on July 1, 2003. The adoption of SFAS No. 150 did not have a material
effect on the Company's financial position, cash flows or results of
operations.

In March 2004, the EITF reached consensus on Issue 03-01
("EITF 03-01"), The Meaning of Other-Than-Temporary Impairment and
Its Application to Certain Investments, EITF 03-01 includes new guidance for
evaluating and recording impairment losses on debt and equity investments, as
well as new disclosure requirements for investments that are deemed to be
temporarily impaired. The accounting guidance of EITF 03-01 is effective for
fiscal years beginning after June 15, 2004, while the disclosure requirements
are effective for fiscal years ending after June 15, 2004. The Company does not
believe that the adoption of EITF 03-01 will have a material effect on its
financial position or results of operations.

NOTE 2-ACCOUNTS RECEIVABLE

The Company records accounts receivable
when amounts are billed in accordance with the contract terms or as services are
performed under non-cancelable contractual services arrangements. At March 31,
2004 and December 31, 2003, the Company's accounts receivable balance excludes
outstanding invoices of $1,740,677 and $1,444,000, respectively, related to
customers, which the Company deemed as cash basis due to the customer's credit
risks determined by the Company.
Since
the revenue related to the collection of these invoices is recognized on a cash
basis, these amounts have not been included in the accounts receivable or
deferred revenue balances.

Included in accounts receivable at March 31, 2004 and
December 31, 2003 were $181,000 and $332,000, respectively, of unbilled
receivables under various application management and professional services
contracts.

NOTE 3-WARRANTS

On September 27, 2000, Cap Gemini Ernst & Young U.S., L.L.C exercised its
right to convert a portion of its initial warrant representing 2,333,333 shares
into 960,810 shares of common stock through a cashless exercise. Because the
exercised shares outstanding were repurchaseable under certain circumstances,
the fair value of the shares was remeasured each reporting period from exercise
until May 2003, when the Company's repurchase right lapsed. There will be no
further amortization expense related to the warrants. With respect to these
shares, the Company recorded amortization expense of $0 and $79,000 in sales and
marketing for the three months ended March 31, 2004 and 2003, respectively.

NOTE 4-STOCK-BASED COMPENSATION

In connection with stock options granted
to employees to purchase common stock, the Company recorded reductions in
deferred stock-based compensation of $0 and $254,000 for the three months ended
March 31, 2004 and 2003, respectively.  Such amounts represent unamortized
deferred stock compensation for unvested options that were forfeited upon
termination of employment. The deferred charges for employee options are being
amortized to expense using the graded vesting approach, prescribed by FASB
Interpretation No. 28, through 2004. Amortization of deferred stock-based
compensation expense was $3,000 and $272,000 for the three months ended March
31, 2004 and 2003, respectively, net of stock options forfeited.

NOTE 5-SIGNIFICANT CUSTOMER
INFORMATION AND SEGMENT REPORTING INFORMATION

The Company's operations have been
classified into two reportable segments (i) application management services and
(ii) professional services. Corporate expenses, including those for sales and
marketing, general and administrative and research and development, are not
allocated to reportable segments.

Disaggregated information is as
follows (in thousands):

`Application
                                               Management  Professional
                                                Services    Services    Unallocated    Total
                                               ----------  -----------  -----------  ---------
For the Three Months Ended March 31, 2004                                                      
Revenues..................................... $   14,921  $     2,694  $        --  $  17,615
Depreciation.................................      1,713            1          229      1,943
Amortization of stock-based compensation.....          1           --            2          3
Amortization of warrants.....................         --           --            3          3
Amortization of intangible assets............        523          121           --        644
                                               ----------  -----------  -----------  ---------
Segment profit (loss)........................ $    3,062  $       209  $    (5,520) $  (2,249) 
                                               ==========  ===========  ===========  =========

For the Three Months Ended March 31, 2003                                                      
Revenues..................................... $   16,629  $     2,374  $        --  $  19,003
Depreciation.................................      2,687            9          514      3,210
Amortization of stock-based compensation.....         36           --          236        272
Amortization of warrants.....................         --           --           82         82
Amortization of intangible assets............        453           --           --        453
                                               ----------  -----------  -----------  ---------
Segment profit (loss)........................ $    2,962  $       361  $    (8,478) $  (5,155)
                                               ==========  ===========  ===========  =========`

The Company does not allocate all assets to its reportable
segments, nor does it allocate interest income or interest expense.

Significant customer information is as
follows:

`Percentage of Total
                       Revenue              Percent of Total
                   -------------------     Accounts Receivable
                   Three Months Ended   ---------------------------
                        March 31           March 31,   December 31,
                   -------------------  ------------- -------------
                     2004      2003         2004          2003
                   --------- ---------  ------------- ------------- 
Customer A........       11%       --             --            --
Customer B........       --        --             --            13%
Customer C........       --        --             --            12%`

Percentages are listed in the table above only when the
result is 10% or greater. Customer A is a cash basis customer and therefore its
outstanding invoices have not been included in the Company's accounts receivable
balances. Customer A has notified the Company that it is terminating its
customer contract effective July 29, 2004.

NOTE 6-RESTRUCTURING AND IMPAIRMENT ACCRUAL

The following table sets forth the
charges taken against the restructuring and impairment accrual in the three
months ended March 31, 2004.

`December 31,   Additions/       Cash       March 31,
                               2003      Adjustments     Payments        2004
                           ------------  ------------  ------------  ------------ 
Office lease obligations. $      4,769  $       (171) $         (7) $      4,591
                           ============  ============  ============  ============`

The $171,000 adjustment reflects the amortization for the quarter ended March
31, 2004.

In May 2003, the Company signed an agreement to sublease the
vacated portion of its headquarters facility through the end of its lease, which
is March 2010. In the first quarter of 2003, the Company adjusted its estimated
loss related to the vacated space and recorded an additional restructuring
charge of $2.5 million to reflect the terms of the sublease agreement. The
impact of this charge was partially offset by the favorable resolution of a
liability related to various leases, which resulted in a reduction of $139,000
to the previously established restructuring reserve.

NOTE 7-INCOME TAXES

Since inception, the Company
has incurred net losses for federal and state tax purposes, and anticipates
losses for the foreseeable future. The Company has therefore only recognized
$2,000 state franchise tax expense for the three months ended March 31,
2004.

NOTE 8-COMMITMENTS AND CONTINGENCIES

Equipment and Software Financing Agreement

On March 17, 2004, the Company entered
into a $7 million term commitment payable with a bank. The proceeds from this
financing are to be used to finance the purchase of new equipment and software.
In connection with the term commitment payable the Company issued a promissory
note dated March 17, 2004 for a loan up to $7 million. Under the term commitment
payable the Company can draw against the note through September 2004.
Outstanding balances under the note will accrue interest at a rate of LIBOR plus
1.75%, however, the interest rate can be changed, at the option of the Company,
to a floating rate of prime minus 0.25%. Additionally, the Company is obligated
to pay interest on outstanding balances until October 1, 2004, at which time,
the term commitment payable converts into a term loan with principal and
interest payments due monthly. The outstanding principal balance under the term
loan and interest payments will be payable over 30 months. The term loan
interest rate can either be LIBOR or fixed. Principal is due in full February
2007. As of March 31, 2004, the balance was $3.9 million and the interest rate
was 2.875%. This agreement contains various financial covenants regarding
liquidity, net worth and results from operations. At March 31, 2004, the Company
was in compliance with all these covenants.

Service Level Agreements

The Company's application management
services contracts contain service level agreements that obligate the Company to
provide software applications at certain levels of performance. Numerous factors
can affect the service level provided by the Company. If the Company fails to
meet the committed service levels, the Company may be contractually obligated to
provide a partial credit for the services rendered. If the Company were to
continue to fail to meet these service levels, certain customers may then have
the right to cancel their contracts with the Company. The Company's contracts
generally limit the circumstances in which the Company would provide credits to
its customers. The Company believes its policies and practices limit its
exposure relating to these service level obligations, however, the Company
cannot determine the maximum amount of future credits, if any, related to such
service level obligations. The Company's services contracts have standard
indemnification provisions.

Lease Guarantees

In connection with a San Carlos facility
lease, the Company issued a $7 million letter of credit for the lease. As of
March 31, 2004, a $7 million cash deposit is held as collateral by a financial
institution for guarantee of the letter of credit. The cash deposit is recorded
as restricted cash on the balance sheet.

In connection with a Phoenix facility lease, the Company
issued a $853,430 letter of credit as security for the lease. As of March 31,
2004, a $853,430 cash deposit made by the Company is held as collateral by a
financial institution for guarantee of the letter of credit. The cash deposit is
recorded as restricted cash on the balance sheet.

Legal Proceedings

In November 2001, a securities class action lawsuit was filed
in the U.S. District Court for the Southern District of New York against Corio,
certain of its officers and certain of the underwriters involved in Corio's
initial public offering. This is one of approximately 300 similar lawsuits in a
coordinated proceeding sometimes referred to as "IPO allocation
lawsuits" or "laddering lawsuits." The plaintiffs generally
allege that the underwriters engaged in undisclosed improper practices by giving
favorable allocations of IPO shares to certain investors in exchange for
excessive brokerage commissions and/or agreements for those investors to
purchase additional shares in the aftermarket at predetermined higher prices.
The plaintiffs seek an unspecified amount of damages. In June 2003, the
plaintiffs in these cases presented a settlement proposal to all of the issuer
defendants. Under the proposed settlement, the plaintiffs proposed to dismiss
and release all claims against participating defendants in exchange for a
contingent payment guaranty by the insurance companies collectively responsible
for insuring the issuers in all the related cases, and the assignment or
surrender to the plaintiffs of certain claims the issuer defendants may have
against the underwriters. Under the guaranty, the insurers or companies will be
required to pay the amount, if any, by which $1 billion exceeds the aggregate
amount ultimately collected by the plaintiffs from the underwriter defendants in
all the cases. If the plaintiffs fail to recover $1 billion and payment is
required under the guaranty, Corio would be responsible to pay its pro rata
portion of the shortfall, up to the amount of the self-insured retention under
its insurance policy, which is $1 million. In July 2003, Corio tentatively
agreed to accept this settlement proposal. The settlement is subject to
acceptance by a substantial majority of the issuer defendants and execution of a
definitive settlement agreement. The settlement is also subject to approval by
the Court, which cannot be assured. If the settlement is not accepted by the
requisite number of defendants or if it is not approved by the Court or if it
otherwise is not consummated, Corio intends to defend the lawsuit vigorously.
However, the litigation is in the preliminary stage, and we cannot predict its
outcome. The litigation process is inherently uncertain. If the outcome of the
litigation is adverse to us and if we are required to pay significant monetary
damages, our business would be significantly harmed. This lawsuit may be time
consuming and expensive to defend and may divert management's attention and may
be costly to Corio even if the plaintiff's settlement proposal is
consummated.

In November 2001, Corio filed a demand for arbitration
against LivePerson, Inc. with the American Arbitration Association in San
Francisco County. The arbitration related to a dispute around a services
contract between the parties. On July 23, 2003, the arbitrator in this dispute
issued a judgment awarding Corio damages of $1,115,440 plus interest.
LivePerson, Inc. filed a motion to vacate the award in the Superior Court of
California. On November 18, 2003, the Superior Court of California issued a
judgment, relating to the arbitration, awarding Corio damages of $1,346,605 plus
interest from October 17, 2003 until the date of payment. LivePerson, Inc. paid
Corio $1,369,479 on December 18, 2003 and subsequently appealed the judgment.
For any portion of the cash paid that is affirmed on appeal or otherwise finally
committed, such cash received pursuant to this award will be recorded as
termination fee revenue.

The Company is subject to other legal proceedings, claims and
litigation arising in the ordinary course of business. While the outcome of
these matters is currently not determinable, management does not expect that the
ultimate costs to resolve these other matters will have a material adverse
effect on the Company's financial statements.

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

The following Management's Discussion and
Analysis of our Financial Condition and Results of Operations should be read in
conjunction with the unaudited condensed consolidated financial statements and
notes thereto included in Part I-Item 1 of this Quarterly Report and the audited
financial statements and notes thereto and Management's Discussion and Analysis
in the Company's 2003 Annual Report to Stockholders.

Notes Regarding Forward-Looking Statements

This Report on Form 10-Q includes statements that reflect our
belief concerning future events and financial performance. Statements which are
not purely historical in nature are called "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. We sometimes identify
forward-looking statements with such words as "may", "will",
"should", "expect", "anticipate",
"estimate", "seek", "project", "plan",
"intend", "believe" or similar words concerning future
events.

You should not place undue reliance on these forward-looking
statements. They are subject to certain risks and uncertainties that may cause
actual results to differ materially from past results or our predictions.
Factors that could contribute to differences include, but are not limited to,
those risks and uncertainties identified under "Additional Factors That May
Affect Future Results" in this Report. You should also carefully review the
risk factors set forth in other documents we file from time to time with the
Securities and Exchange Commission particularly the Annual Reports on Form 10-K,
the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.

All statements included in this document are based on
information available to us as of the date of this Report on Form 10-Q, and we
assume no obligation to update any such statements, or to update the reasons why
actual results could differ from those projected in forward-looking
statements.

OVERVIEW

Corio was established in September 1998 and is an enterprise
application service provider, or ASP. Our services include the implementation
and management of business software for companies. We perform our services
across a secure network from data centers, allowing our customers to outsource
some or almost all aspects of their application management services needs. By
allowing our customers to outsource certain information technology services
needs, we enable our customers to avoid many of the significant and
unpredictable ongoing application management challenges, and to reduce costs and
extend the value of their technology. By providing software application
implementation, integration, management and various upgrade services and related
hardware and network infrastructure, our services help reduce the information
technology burdens of our customers, enabling them to focus on their core
businesses and react quickly to dynamic market conditions.

We operate through two lines of business:

- Application Management Services-Our application
management services consist of ongoing services for business software
application systems, which often includes providing the computers, data center
facilities and networks to support the software applications and working with
our customers to address problems that arise with these applications or the
computers or networks that run them.
- Professional Services-Our professional services
engagements consist of discrete projects on behalf of our customers such as
implementing business software applications in a manner that meets the
customer's requirements.

Our net loss for the three months ended March 31, 2004 and 2003 was $2.2
million and $5.2 million, respectively.  The reduction in our net loss for the
three months ended March 31, 2004 as compared to the comparable period in 2003
was due, in part, to a $2.5 million restructuring charge taken in the 2003
quarter without a similar charge in 2004, approximately $1 million less
depreciation expense in the 2004 quarter as many assets purchased in 2000 became
fully depreciated in 2003 and a $153,000 reduction in professional services
expenses related to the reduction of our provision for contract losses in the
three months ended March 31, 2004.

To drive sales growth and extend our market share, we are
making investments in our sales and marketing and professional services areas in
fiscal 2004. Our research and development team will continue to focus on further
automation and enhancement of our customer interaction processes. Avaya Inc., a
customer that accounted for 12% of fiscal 2003 revenue, has notified us that it
is terminating its customer contract with us effective at the end of July 2004,
and we expect this will put downward pressure on revenue.

CRITICAL ACCOUNTING POLICIES

Management's Discussion and Analysis of
Financial Condition and Results of Operations are based on our unaudited
condensed consolidated financial statements. The preparation of our unaudited
condensed consolidated financial statements and related disclosures requires
management to make judgments, assumptions and estimates that affect the amounts
reported in the condensed consolidated financial statements and accompanying
notes.

Estimates are used for, without
limitation, the accounting for revenue recognition, allowance for doubtful
accounts, certain loss contingencies, valuation allowances and other special
charges. Actual results could differ from these estimates. We review these
accounting policies we use in reporting our financial results on a regular
basis. In addition, our senior management has reviewed these critical accounting
policies and related disclosures with our Audit Committee. We have identified
the policies below as critical to our business operations and the understanding
of our financial condition and results of operations:

- Cash basis customers.
- Allowance for doubtful accounts.
- Loss contingencies.
- Valuation allowance.

Cash Basis Revenue Recognition Customers

We recognize revenue from application management services as
the services are provided to our customers provided that collection of the
receivable is reasonably assured. We regularly monitor the payment activity and
credit worthiness of our customers. If we determine that collection of revenue
from a particular customer or contract is no longer reasonably assured, we
designate those customers as "cash basis customers" and start to
recognize revenue from that customer on a cash basis, after services have been
rendered and payment for services has been received. We consider the following
factors in determining whether collection of revenue is no longer reasonably
assured from a customer: (i) the customer's payment history and outstanding
receivables balance, (ii) the increased probability of non-payment as a result
of a deterioration in the customer's financial health as indicated by our review
of publicly available information, bankruptcy announcements, or other factors
demonstrating a serious weakness in a customer's business such as significant
layoffs, decreases in revenues, loss of customers or litigation, or (iii) the
increased probability of non-payment due to service-related issues or the
receipt of an early termination notice from a customer. If we receive any
payment from a cash basis customer in advance of services, we would recognize
the payment as revenue as the services are performed. At the time a customer is
designated as a cash basis customer any uncollected accounts receivable are
evaluated for collectibility. Any amounts that are deemed uncollectible are
written off as a reduction to our revenue. The remaining balances remain
recorded on an accrual basis and are monitored for collection. Subsequent
receipts are applied to these balances before we recognize any additional
revenue.

If we believe that there is a reasonable chance that we will receive payment
from a customer, even if payment is not reasonably assured and the customer is
cash basis, we will typically not terminate the customer and will continue to
provide services to that customer. We have set forth below the amount of revenue
recognized from cash basis customers for the three months ended March 31, 2004
and 2003 and the period in which the underlying services were performed:

`Three Months Ended
                                                                                         March 31,
                                                                                     (In thousands)
                                                                                  ---------------------
                                                                                     2004       2003
                                                                                  ---------  --------- 
Cash Basis Revenue Recorded Related to Services Performed in Current Quarter.... $   2,962  $   2,726
Cash Basis Revenue Recorded Related to Services Performed in Prior Quarter......     1,215      3,577
                                                                                  ---------  ---------
      Total Cash Basis Revenue Recorded......................................... $   4,177  $   6,303
                                                                                  =========  =========`

Revenue earned from cash basis customers but not recognized
due to the cash basis designation were $1.7 million and $3.4 million for the
quarters ended March 31, 2004 and 2003, respectively.
Since
revenue related to the collection of these invoices is recognized on a cash
basis, these amounts have not been included in our accounts receivable
balances.
In addition, only one of our cash basis customers is
obligated to pay recurring application management services fees in advance.

Allowance For Doubtful
Accounts

The allowance for doubtful accounts is
based on our assessment of the collectibility of specific customer accounts and
the aging of the accounts receivable. If there is a deterioration of a major
customer's credit worthiness or actual defaults are higher than our historical
experience, our estimates of the recoverability of amounts due us could be
adversely affected. We regularly review the adequacy of our allowance for
doubtful accounts through the identification of specific receivables where we
expect that payment will not be received, in addition to establishing an
unallocated reserve that is applied to all amounts that are not specifically
identified. In determining specific receivables where collection may not be
received, we review past due receivables and give consideration to prior
collection history, changes in the customer's overall business condition and the
potential risk associated with the customer's industry, among other factors. An
unallocated reserve is established for all amounts, which have not been
specifically identified, based on applying a graduated percentage to each
invoice's relative aging category. The allowance for doubtful accounts reflects
our best estimate as of the reporting dates. Changes may occur in the future,
which may make us reassess the collectibility of amounts and at which time we
may need to provide additional allowances in excess of that currently provided.
At March 31, 2004 and December 31, 2003, our allowance for doubtful accounts was
$552,000 and $591,000, respectively.

Loss Contingencies

We are subject to various loss
contingencies such as the risks associated with estimates included in both our
restructuring liability and our professional services fixed fee contracts. We
consider the likelihood of the loss or the incurrence of a liability as well as
our ability to reasonably estimate the amount of loss in determining loss
contingencies. An estimated loss is accrued when it is probable that a liability
has been incurred or an asset has been impaired and the amount of loss can be
reasonably estimated.

We evaluate long-lived
 assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount
of any asset to future undiscounted net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.

For our office lease restructuring liability, our estimate is based on
our contracted lease obligation offset by estimated sublease income over the
lease term. We increased our office lease restructuring liability in the first
quarter of 2003 as a result of the sublease agreement signed in May 2003 because
the total sublease income for the restructuring period was less than initially
estimated.

In addition, since we perform some of our professional services on a fixed
fee basis, if we incur more costs than estimated, our profitability will suffer.
We track our progress to completion on such arrangements by detailing individual
project plans for each arrangement and then regularly comparing the labor hours
actually spent on a project against the number of hours we estimate to complete
the project. We believe this process results in a reasonable estimate of our
progress to completion. When estimates of costs to complete the project indicate
that a loss will be incurred, these losses are estimated and recognized
immediately. Additionally, we regularly evaluate current information available
to us to determine whether such recorded losses should be adjusted. In the first
quarter of 2004, we determined that our professional services provision for
contract losses recorded was no longer appropriate due to our decreased number
of fixed fee contracts. We reduced our provision for contract losses by
$153,000, which resulted in a corresponding reduction to professional services
expenses for the three months ended March 31, 2004. As of March 31, 2004, the
provision for contract losses was $0.

Valuation Allowance

We provided a valuation allowance against
our entire net deferred tax asset, primarily consisting of net operating loss
carryforwards. The valuation allowance was recorded given the losses we incurred
through the current quarter, and our uncertainties regarding future operating
profitability and taxable income. If we do not achieve profitability or if we
were to consummate certain types of mergers, we will not fully realize the
deferred tax benefits.

Selected Financial Data

The following tables set forth, for the periods presented, certain data
from our condensed consolidated statements of operations as percentages of total revenues.

`Three Months Ended
                                               Three Months Ended     Three Months Ended       March 31, 2004
                                                 March 31, 2004         March 31, 2003            versus
                                              -------------------    -------------------       March 31, 2003
                                                        Percentage             Percentage   -------------------
                                                        of Total               of Total      Dollar   Percentage
                                               Amount   Revenues      Amount   Revenues      Change    Change
                                              --------- ---------    --------- ---------    --------- ---------
REVENUES:                                                                                                      
    Application management services......... $  14,921        85 %  $  16,629        88 %  $  (1,708)      (10)%
    Professional services and other.........     2,694        15 %      2,374        12 %        320        13 %
                                              --------- ---------    --------- ---------    ---------
    Total revenues..........................    17,615       100       19,003       100       (1,388)       (7)%
                                                                                                               
COSTS AND EXPENSES:                                                                                            
    Application management services ........    11,335        64 %     13,214        70 %     (1,879)      (14)%
    Professional services and other ........     2,364        13 %      2,013        11 %        351        17 %
    Research and development ...............       648         4 %      1,350         7 %       (702)      (52)%
    Sales and marketing ....................     2,710        15 %      2,205        12 %        505        23 %
    General and administrative .............     2,295        14 %      2,390        12 %        (95)       (4)%
    Restructuring charges...................        --         0 %      2,334        12 %     (2,334)     (100)%
    Amortization of stock-based compensation         3         0 %        272         1 %       (269)      (99)%
    Amortization of intangible assets.......       644         4 %        453         2 %        191        42 %
                                              --------- ---------    --------- ---------    ---------
    Total operating expenses................    19,999       114 %     24,231       127 %     (4,232)      (17)%
                                              --------- ---------    --------- ---------    ---------          %
Loss from operations........................    (2,384)      (14)%     (5,228)      (27)%      2,844       (54)%
Interest and other income...................       152         1 %        200         1 %        (48)      (24)%
Interest and other expense..................       (15)        0 %       (127)       (1)%        112       (88)%
Income tax expense..........................        (2)        0 %         --        -- %         (2)         0%
                                              --------- ---------    --------- ---------    ---------
Net loss.................................... $  (2,249)      (13)%  $  (5,155)      (27)%  $   2,906       (56)%
                                              ========= =========    ========= =========    =========`

RESULTS OF OPERATIONS

Revenues

Total revenue was $17.6 million and $19.0 million for the
three months ended March 31, 2004 and 2003, respectively, a decrease of $1.4
million. One of our customers Avaya Inc., which accounted for 11% of our total
revenues for the three-month period ended March 31, 2004, recently notified us
that it would terminate its contract at the end of July 2004.

In the ordinary course of business, we recorded
revenue of $47,000 and $0 for the three months ended March 31, 2004 and 2003,
respectively, arising from transactions with one company with which we have
directors in common. At March 31, 2004, we had $8,000 in the accounts receivable
balance arising from such transactions. We paid $49,000 to another company, with
which we have, directors in common, for the period ending March 31, 2004. For
the period ending March 31, 2003, we paid $127,000 to three companies with which
we have directors in common.



Application Management Services Revenues.

Professional Services and Other Revenues. Ourprofessional services and other revenues were $2.7 million for the three
months ended March 31, 2004, including $55,000 recognized as a result of
payments from cash basis customers, compared to $2.4 million for the three
months ended March 31, 2003, including $390,000 recognized as a result of
payments from cash basis customers. The $300,000 increase in professional
services revenues for the three months ended March 31, 2004 was primarily due to
additional customers we obtained through our acquisition of Nexus Technology,
Inc. At March 31, 2004 and December 31, 2003, we had balances of $95,000 and
$76,000, respectively, for deferred professional services revenues resulting
from customer payments that we required in advance of providing our professional
services work. We anticipate that professional services revenue and the
associated margins will fluctuate significantly from period to period depending
on the timing and size of projects, the amount of such work completed by
independent third parties and other factors.

Costs and Expenses

Total expenses were approximately $20.0 million and $24.2
million for the three months ended March 31, 2004 and 2003, respectively.

Application Management Services. Application
management services expenses, excluding stock-based compensation of $500 and
$36,000 for the three months ended March 31, 2004 and 2003, respectively, were
$11.3 million for the three months ended March 31, 2004 and $13.2 million for
the three months ended March 31, 2003. The $1.9 million decrease in expenses for
the three months ended March 31, 2004 compared to the three months ended March
31, 2003 was mainly attributable to a $1.0 million reduction in depreciation. A
number of our assets were purchased in 2000 and had a three-year useful life.
Approximately, $800,000 was attributable to a decrease in office expenses
primarily related to software licenses and equipment rental reductions. The
remainder was related to the reduction of contractor expense for application
management services that are now performed internally.

Professional Services and
Other

Research and Development.

Sales and Marketing Expenses.

General and Administrative
Expenses

Restructuring Charges

Amortization of Stock-Based Compensation

Amortization of Other Intangibles.Amortization
of intangible assets was $644,000 for the three months ended March 31, 2004 and
$453,000 for the three months ended March 31, 2003. In 2003, we recorded an
intangible asset of $2.6 million for application management services and
professional services contracts acquired in connection with our acquisition of
Nexus. This intangible asset is being amortized over estimated lives ranging
from four months to five years. In 2002, we recorded an intangible asset of $2.7
million for contracts acquired in connection with our acquisition of QCS, which
is included in other assets in the accompanying, condensed consolidated balance
sheet. This intangible asset is being amortized over an estimated life of 18
months.

Interest and Other Income and Expenses.Net interest and other income and expense was $137,000 for the three months
ended March 31, 2004 and $73,000 for the three months ended March 31, 2003. The
primary reason for the net increase in interest and other income was the lower
interest expense resulting from a buy-out of some of our leased capital
equipment and approximately $57,000 higher net gain on sale of marketable
securities.

Income Taxes

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2004, we had cash and
cash equivalents, short-term investments, and restricted cash of $44.7 million,
an increase of $2.0 million from $42.7 million as of December 31, 2003. The $2.0
million increase was primarily the result of increased operating expenses offset
by the issuance of a bank term commitment payable of $3.9 million for equipment
purchases.

Net cash used in operating
activities was $471,000 for the three months ended March 31, 2004 compared to
$890,000 provided by operating activities for the three months ended March 31,
2003. The $1.4 million net change was primarily due to significantly lower
depreciation and increased accounts receivable offset by payments of
professional services and equipment purchases, which lowered accrued expenses.
Operating expenses less depreciation basically stayed flat.

We lease office facilities and fixed assets under non-cancelable operating
and capital leases. Rental expense under operating lease agreements was $0.9
million and $1.1 million for the three months ended March 31, 2004 and 2003.

The following summarizes our principal facilities and
equipment contractual commitments, excluding open orders for purchases to
support normal operations, as of March 31, 2004:

`Payments due by Period
                                     -------------------------------------------------------------------------------
                                                 Nine months
                                                   Ending
                                                December 31,
                                       Total        2004         2005       2006       2007       2008    Thereafter
                                     ---------  -------------  ---------  ---------  ---------  --------  ----------
Capital lease obligations.......... $     707  $         308  $     283  $     116  $        0 $     --  $       --
Operating lease obligations........    26,030          3,250      4,234      4,220      4,325     4,316       5,685
Equipment Operating leases.........        57             29         27          1         --        --          --
                                     ---------  -------------  ---------  ---------  ---------  --------  ----------
                                    $  26,794  $       3,587  $   4,544  $   4,337  $   4,325  $  4,316       5,685
                                     =========  =============  =========  =========  =========  ========  ==========`

The following summarizes our principal vendor contractual commitments as of
March 31, 2004:

`Payments due by Period
                                     -------------------------------------------------------------------------------
                                                 Nine months
                                                   Ending
                                                December 31,
                                       Total        2004         2005       2006       2007       2008    Thereafter
                                     ---------  -------------  ---------  ---------  ---------  --------  ----------
Vendor Commitments................. $   7,090  $       3,316  $   2,755  $     452  $     324  $    243  $       --
                                     =========  =============  =========  =========  =========  ========  ==========`

Net cash used in investing activities was $1.1 million for
the three months ended March 31, 2004 compared to $9.0 million used in investing
activities for the three months ended March 31, 2003. The $7.9 million decrease
was primarily related to a reduction in short-term investment purchases that
were offset by an increase in equipment purchases for customer work related to
first quarter 2004 bookings and internal use purposes.

Net cash provided by financing activities
was $4.5 million for the three months ended March 31, 2004 compared to $1.7
million used for the three months ended March 31, 2003, respectively. The $6.2
million change in cash provided by financing activities consisted primarily of
the proceeds from the issuance of common stock and exercise of stock options,
reduced payments on capital leases as buy-outs increased, and $3.9 million in
borrowings from a bank term commitment payable entered into in the first quarter
2004 for equipment purchases.

On March 17, 2004, the Company entered into a $7 million
bank term commitment payable for which the proceeds are to be used to finance
the purchase of new equipment and software. In connection with the term
commitment payable, the Company issued a promissory note dated March 17, 2004
for a loan up to $7 million. Under the term commitment payable the Company can
draw against the note through September 2004. Outstanding balances under the
note will accrue interest at a rate of LIBOR plus 1.75%, however, the interest
rate can be changed to a floating rate of prime minus 0.25%. Additionally, the
Company is obligated to pay interest on outstanding balances until October 1,
2004 at which time the term commitment payable converts into a term loan with
principal and interest payments due monthly. The outstanding principal balance
under the term loan and interest payments will be payable over 30 months. The
term loan interest rate can either be LIBOR or fixed. Principal is due in full
February 2007. As of March 31, 2004 the balance was $3.9 million and the
interest rate was 2.875%. We anticipate due to new customer requirements and the
build out of new data centers that the full line of credit will be utilized by
the end of June 30, 2004.

Except for equipment operating leases, we have no off balance
sheet financing arrangements (see Note 8 in this Report).

On October 22, 2003, the Company
completed the purchase of the assets and the assumption of certain liabilities
of Nexus. The Company paid Nexus approximately $10.2 million, consisting of $1.9
million in cash and 2,921,390 shares of Corio common stock, including $177,000
related to legal expenses. In addition, Nexus is entitled to receive an earn-out
payment of up to $2.0 million payable in shares of Corio common stock contingent
upon specified revenue milestones for the three-month period ending December 31,
2004 from identified existing and prospective customers of Nexus. Per the asset
purchase agreement, $500,000 of the purchase price was also deposited into an
escrow account. The deposited funds are to be held as security until the later
of April 2004 and the date any claims against the escrow are resolved for any
losses incurred by the Company in the event, among other matters, of any breach
by Nexus of the agreements, covenants, representations and warranties it made
under or in connection with the purchase agreement. The Company has filed claims
against the escrow and is in discussions with Nexus to resolve these claims.

We expect that our current cash balances
and existing debt arrangements will be sufficient to meet our cash requirements
for at least the next 12 months. However, any major changes in the nature of our
business or structure, a significant reduction in demand for our services, the
need for significant new capital expenditures, or mergers or acquisitions could
further utilize our cash reserves. To the extent we require additional cash,
there can be no assurances that we will be able to obtain such financing on
terms favorable to us, or at all.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

Risks Related to Our Business

We expect to continue to incur losses
and experience negative cash flow and we may never be profitable.

We have spent significant funds to date to develop and refine
our current services, to create and run our operations organization, to build
and run a professional services organization and to develop and run our sales
and marketing resources. We have incurred significant operating and net losses
and negative cash flow and have not achieved profitability. As of March 31,
2004, we had an accumulated deficit of $262 million.

We expect to continue to invest significantly in our
organization to provide services, enhance current services and expand our
service offerings. We also may hire additional people in certain areas of our
company in order to support our business and promote and sell our services. In
addition, we expect to continue to incur significant fixed and other costs
associated with customer acquisitions and with the implementation and
configuration of software applications, and ongoing services, for customers. As
a result of all of these factors, to achieve operating profitability on a
consistent basis, excluding non-cash charges, we will need to increase our
customer base and number of customers, to increase our revenue, to decrease our
overall costs of providing services, including the costs of our licensed
technology and our operations and the costs of customer acquisitions. We cannot
assure you that we will be able to increase our revenues or increase our
operating efficiencies in this manner. Also, we may continue to invest in our
business faster than we anticipate growth in our revenues, and we may continue
to incur significant losses and negative cash flow for the foreseeable future
and we may never be profitable.

Because of the nature of our customer base, we may
experience greater than expected customer loss and instability as well as
difficulties collecting fees, which could result in reduced revenues.

A significant portion of our current revenue is derived from
technology and middle-market companies. Middle-market companies consist of
companies or divisions with annual revenues of between approximately $200
million and $1 billion. Technology and middle-market companies may be more
likely to be acquired, experience financial difficulties or cease operations
than companies that are larger and better established or are in more stable
industries. In particular, technology and middle-market companies may experience
difficulties in raising capital needed to fund their operations. As a result,
our client base will likely be more volatile than those companies whose customer
base consists of more mature and established businesses. Over the past four
years we experienced early terminations of customer agreements with
approximately one hundred customers, many of which entered into agreements with
us in 1999 and 2000 and whose terminations were based on the dot com crash and
many of which are no longer in business. We expect additional customer
agreements to terminate in the future. If we continue to experience greater than
expected customer loss or an inability to collect fees from our customers in a
timely manner because of this volatility, our operating results could be
seriously harmed.

The loss of key customers could reduce our revenues and
could be perceived as a loss of momentum for our business.

We have experienced customer attrition in the past and expect
to experience it in the future. Historically, we have generated a substantial
portion of our revenues from a limited number of customers and we expect that in
the future a limited number of customers will continue to account for a
substantial portion of our revenues. As a result, if we lose a major customer
for any reason, including non-renewal of a customer contract, failure to meet
performance requirements, or because of an acquisition or bankruptcy, our
revenues could be adversely affected. We may lose customers if they are acquired
by a company which does not need access to the kinds of services we provide,
either because the acquiring company has in-house capabilities, existing
contractual arrangements that preclude them from using our services, or for a
variety of other reasons. If we do not grow our revenue, we may never achieve
profitability or positive cash flow and therefore the loss of any significant
customers could adversely affect our operating results. In addition, our
potential customers and investors may perceive any customer loss as a loss of
momentum in our business, which may adversely affect future opportunities to
sell our products and services and cause our stock price to decline. We cannot
be certain that customers that have accounted for significant revenues in past
periods will continue to generate revenues in any future period.

For example, one of our customers, Quadrem, who represented
11% of total revenues in fiscal 2002, had its contract expire in May 2003.
Although Quadrem renewed for a short-term contract, the new contract was for
significantly less recurring monthly revenue. In addition, another customer,
Expanets, Inc., that accounted for 12% of total revenues for fiscal 2003, was
acquired by Avaya in November 2003. Avaya recently notified us that it will
terminate its customer contract associated with supporting this platform at the
end of July 2004. If we lose Avaya/Expanets as a customer, or any other
significant customer, or if a significant customer makes a significant reduction
in fees paid to us, and if we are unable to replace this revenue with revenue
from new or existing clients, this will have a significant adverse effect on our
ability to achieve profitability and positive cash flow.

Our failure to collect payments for our services from
"cash basis" customers could significantly decrease our revenues and
profitability.

In the event we decide payment by a customer is no longer
reasonably assured then we designate that customer as a "cash basis"
customer. Historically we have generated a significant portion of our revenue
from payments by cash basis customers. The percentage of our customers
designated as cash basis customers as of the end of March 31, 2004 was 14% and
for the years ended 2003, 2002 and 2001 was 12%, 29% and 42%, respectively. For
the quarter ending March 31, 2004 we recorded revenue of $4.2 million (24%) of
revenues related to services provided to cash basis customers. For the years
ended December 31, 2003, 2002 and 2001, we recorded revenue of $22.2 million
(32% of total revenue), $17.0 million (31% of total revenue) and $16.6 million
(32% of total revenue), respectively, related to services provided to cash basis
customers.

For the quarter ending March 31, 2004 we did not recognize
approximately $1.7 million in revenue related to services provided during this
period due to customers designated as cash basis customer for which we did not
receive payment.
For
the 2003 fiscal year we did not recognize approximately $1.4 million in revenue
related to services provided during this period due to customers designated as
cash basis customers for which we did not receive payment. For 2002, this amount
was $3.0 million and for 2001 it was $2.3 million. A significant portion of our
customer base remains on a cash basis and we expect to continue to have a
significant number of customers on a cash basis going forward. For these
customers we are at risk of not receiving payment for services we have already
performed. Failure by these customers to pay could decrease revenue and result
in our having incurred costs to provide services without being compensated for
those services, which could adversely affect our ability to become
profitable.

The fact that we operate in a relatively new and rapidly
evolving industry exposes us to risks that may result in our inability to
successfully execute on our business model, which could adversely affect our
operating results.

The ASP market is relatively new and has not yet received
universal acceptance by the enterprises we target. An investor in our common
stock must consider these facts as well as the risks, uncertainties, expenses
and difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets such as
the market for Internet-based software application services. Some of the risks
and difficulties relate to our potential inability to:

- acquire and retain customers, particularly larger, more
established companies desirable to create a stable revenue and customer
base;
- acquire new customers at a rate sufficient to create
growth taking into account loss of customers;
- reduce costs associated with the delivery of services to
our customers;
- expand and maintain our pipeline of sales prospects in
order to promote greater predictability in our period-to-period sales
levels;
- acquire or license third party software applications at
a reasonable cost or at a structure beneficial to us;
- complete successful implementations of software
applications in a manner that is repeatable and scalable;
- integrate successfully software applications we manage
with each other and with our customers' existing systems;
- continue to offer new services that complement our
existing offerings;
- increase awareness of our brand; and
- maintain our current, and develop new, strategic
relationships.

We cannot assure you that we will successfully address these
risks or difficulties. If we fail to address any of these risks or difficulties
adequately, we will likely be unable to execute our business model.

If we are unable to adjust our spending to offset future
revenue shortfalls, our short-term operating results could be adversely affected
causing our stock price to fall.

We expend significant sums in order to run our business and
to promote future growth in our business, operations, professional services,
research and development, and sales and marketing organizations. Although we are
monitoring our spending, we expect to continue to expend significant sums on
these activities. Because the expenses associated with these activities are
relatively fixed in the short-term, we may be unable to adjust spending quickly
enough to offset any unexpected shortfall in revenue growth or any decrease in
revenue levels. As our operating results fluctuate, they may fall short of the
expectations of public market analysts or investors. If this occurs, the price
of our common stock may fall.

Our quarterly operating results may fluctuate, which could
cause our stock price to fall.

Our financial results will vary due to factors such as the
nature of our services and the timing of payments received from cash basis
customers. For individual customers, we may recognize professional services
revenues associated with the implementation of our applications during the early
months of our engagement. We then recognize monthly fees from these customers,
consisting primarily of application management services revenues, over the
balance of the contractual relationship. As a result, for some customers we have
a high proportion of up-front professional services revenues associated with
implementation. We expect that our financial results may continue to vary over
time as monthly fees vary in relation to other revenue. In addition, third
parties also provide professional services for some of our application
management services customers, and whether professional services will be
provided by us or by third parties may be difficult to predict. Changes in our
revenue mix from professional services revenues to application management
services revenues could be difficult to predict and could cause our quarterly
results and stock price to fluctuate.

Other important factors that could cause our quarterly
results and stock price to fluctuate materially include:

- the timing of obtaining, implementing and establishing
connectivity with individual customers;
- the loss of or change in our relationship with important
customers and our ability or inability to collect termination fees from
terminating customers;
- any increase or decrease in termination fees, settlement
fees or judgments paid in a quarter versus other quarters;
- the timing and magnitude of expanding our operations and
of other capital expenditures;
- the timing and amount of payments received from cash
basis customers as well as the change in composition of these customers;
- costs, including license fees, relating to the software
applications we use;
- changes in our pricing policies or those of our
competitors;
- potential changes in the accounting standards associated
with accounting for stock options, stock or warrant issuances and for revenue
recognition; and
- accounting charges we may incur in the future relating
to stock options, stock or warrant issuances.

Our financial results may vary over time as our business
model evolves, which could cause our stock price to fall.

Our financial results could vary over time as our ASP
business and financial models mature and evolve. For example, we historically
included a broad range of customer support in our fixed monthly fees but now
bill certain customers for support services in excess of specified limits in
certain circumstances. As another example, we have unbundled the cost of
enterprise software licenses from our fixed monthly fee and require our
customers to obtain licenses to enterprise software applications directly from
third party software providers. Any such changes to our business or financial
model would likely cause financial results to vary, which could cause our stock
price to fall.

In this regard, from time to time we negotiate with some of
our major third party software vendors to modify the pricing and other terms
currently in place with these vendors. We may agree to restructure our current
arrangements with some of our third party software providers. For example, we
have migrated substantially all of our customers from a model whereby some rent
enterprise application licenses from us to a model whereby they all purchase the
licenses directly from independent software vendors. Such pricing structures or
business models may not in fact be more beneficial to us and may ultimately
hinder our ability to become profitable.

The loss of access or the obsolescence of third party
software necessary to deliver our services may adversely affect our revenues and
increase our costs.

We offer our customers software application services for
applications from third parties such as PeopleSoft, Oracle, SAP, Ariba and
Siebel Systems. We have agreements in place with certain third party software
vendors, and our agreements with third party software vendors are non-exclusive,
are for limited terms and typically permit termination in the event of our
breach of the agreements. Additionally, a substantial majority of our customers
are "host-only", whereby they must obtain licenses directly from
independent software vendors such as PeopleSoft, Oracle, SAP, Ariba and Siebel,
and, in these situations, we may rely on the independent software vendors to
consent to allow us to access the software to provide our services. If we lose
the right to host the software from third party software vendors, if the cost of
licensing the software applications becomes prohibitive, or if we change the
vendors from whom we currently license software, our business and our customers'
businesses could be significantly disrupted, which could harm our revenues and
increase our costs. Our financial results may also be harmed if the cost
structure we negotiate in the future with the third party software vendors
changes in a manner that is less beneficial to us compared to our current cost
structure with software vendors. We cannot assure you that our services will
continue to support the software of our third party vendors, or that we will be
able to adapt our own offerings to changes in third party software. In addition,
if our vendors were to experience financial or other difficulties, it could
adversely affect the availability of their software. It is also possible that
improvements in software by third parties with which we have no relationship
could render the software we offer to our customers less compelling or
obsolete.

The limits imposed on our uses of the third party software
necessary to deliver our services may impair our growth and operating
results.

Certain agreements we have for the third party software for
which we provide hosting or application management services restrict our ability
to sell our services in specified countries and to customers with revenue above
or below specified revenue levels. For example, one agreement restricts us from
selling our services to customers with annual revenues greater than $1 billion,
and restricts our ability to sell to customers outside of North America. In
addition, certain agreements contain limits on our ability to sell our services
to certain types of customers. Our operating results and ability to grow could
be harmed to the extent these licenses prohibit us from selling our services to
customers to which we would otherwise sell our services, or in countries in
which we would otherwise sell our services.

Poor performance of the software we deliver to our
customers or disruptions in our business-critical services could harm our
reputation, delay market acceptance of our services and subject us to
liabilities.

Our customers depend on our hosted software applications for
their critical systems and business functions, including enterprise resource
planning, customer relationship management and e-commerce. Our customers'
businesses could be seriously harmed if the applications we provide to them work
improperly or fail, or if we have other service disruptions, even if only
temporarily. Accordingly, if the software that we deliver to our customers or
our implementation or ongoing management of such software performs poorly,
experiences errors or defects or is otherwise unreliable, our customers would
likely be extremely dissatisfied, which could cause our reputation to suffer,
force us to divert research and development and management resources, cause a
loss of revenues or hinder market acceptance of our services. It is also
possible that any customer disruptions resulting from failures in our
applications could force us to refund all or a portion of the fees customers
have paid for our services or result in other significant liabilities to our
customers.

We may fail to implement, host or manage enterprise
software applications successfully due to the complicated nature of the services
we provide, which would harm our reputation and sales.

Implementations and management of enterprise software
applications are very complex. We cannot assure you that we can convince
customers that we have the requisite expertise required to implement, host or
manage these applications. Our reputation will be harmed and sales of our
services would decline significantly if we are not able to complete successfully
repeated implementations of our enterprise software applications or if we are
not able to successfully manage enterprise applications, including those
applications with which we have limited or no implementation, hosting or
management experience to date.

Our inability to sufficiently expand our enterprise
software implementation and systems consulting capabilities could harm our
ability to service our customers effectively and could hinder our growth.

A failure to maintain and expand relationships with third
party systems integrators that we use to implement our services could harm our
ability to service our customers effectively. As we seek to provide applications
management services for larger, more established customers, they may frequently
utilize the systems integration and consulting services of independent, third
party systems integrators rather than Corio. In such cases, we may receive only
modest revenue for implementation and integration services if any. In addition,
we frequently contract with our customers for implementation on a fixed price
basis. As a result, unexpected complexities in implementing software
applications for our customers could result in unexpected losses for us or
increases in losses. Our business and reputation could also be seriously harmed
if third party systems integrators were unable to perform their services for our
customers in a manner that meets customer expectations.

Increased demand for customization of our services beyond
what we currently provide or anticipate could reduce the scalability and
profitability of our business.

Companies may prefer more customized applications and
services than our business model contemplates. Most of our customers have
required some level of customization of our services, and our customers may
continue to require customization in the future, perhaps to a greater extent
than we currently provide or anticipate. If we do not offer the desired
customization, there may be less demand for our services. Conversely, providing
customization of our services increases our costs and reduces our flexibility to
provide similar services to many customers. Accordingly, increased demand for
customization of our services could reduce the scalability and profitability of
our business and increase risks associated with completing software
upgrades.

A significant increase in our customer base could strain
our operations and may result in our inability to properly manage our
organizational structure.

Growth could strain our operations and require us to incur
costs to upgrade our infrastructure and expand our personnel. If our customer
base grows significantly, we cannot be sure that we will successfully manage our
growth. In order to manage any such growth successfully, we must:

- expand our management team, financial and information
systems and controls and operations team;
- maintain a high level of customer service and
support;
- expand our implementation and consulting resources
internally and with third parties;
- expand, train, manage and retain our employee base
effectively; and
- manage costs for employees, hardware, software, data
centers and networks in a manner that will permit our business to scale.

Any failure to effectively meet the above requirements could
adversely affect our business. In addition, if our customer base grows
significantly, there will be additional demands on our customer service support,
research and development, sales and marketing and administrative resources as we
try to increase our service offerings and expand our target markets. Any delay
in the implementation of, or disruption in the transition to, new or enhanced
systems and controls could harm our ability to accurately forecast demand for
our services, manage our billing of customers, manage our sales cycle and
implementation services and record and report management and financial
information on a timely and accurate basis. Moreover, any inability to expand
our service offerings and employee base commensurate with any increase in the
demand for our services could cause our revenues to decline.

Our inability to successfully perform required software
upgrades for our customers could cause interruptions or errors in our customers'
applications, which could increase our costs and delay market acceptance of our
services.

Our software vendors from time to time will upgrade their
software applications, and at such time we may be required to implement these
software upgrades for certain of our customers. Implementing software upgrades
can be a complicated and costly process, particularly implementation of an
upgrade simultaneously across multiple customers. Accordingly, we cannot assure
you that we will be able to perform these upgrades successfully or at a
reasonable cost. We may also experience difficulty implementing software
upgrades to a large number of customers, particularly if different software
vendors release upgrades simultaneously. If we are unable to perform software
upgrades successfully and to a large customer base, our customers could be
subject to increased risk of interruptions or errors in their business-critical
software, our reputation and business would likely suffer and the market would
likely delay the acceptance of our services. It will also be difficult for us to
predict the timing of these upgrades, the cost to us of these upgrades and the
additional resources that we may need to implement these upgrades. Additionally,
as we continue to evolve our business model to charge customers for the cost of
software upgrades, we may lose prospective customers who choose not to pay for
these upgrades. Therefore, any such upgrades could strain our development and
engineering resources, require significant unexpected expenses and cause us to
miss our financial forecasts or those of securities analysts. Any of these
problems could impair our customer relations and our reputation and subject us
to litigation.

Security risks and concerns may decrease the demand for
our services, and security breaches with respect to our systems may disrupt our
services or make them inaccessible to our customers.

Our services involve the storage and transmission of
business-critical, proprietary information, and security breaches could expose
us to a risk of loss of this information, litigation and possible liability.
Anyone who circumvents our security measures could misappropriate business-
critical proprietary information or cause interruptions in our services or
operations. In addition, computer "hackers" could introduce computer
viruses into our systems or those of our customers, which could disrupt our
services or make them inaccessible to customers. We may be required to expend
significant capital and other resources to protect against the threat of
security breaches or to alleviate problems caused by breaches. Our security
measures may be inadequate to prevent security breaches, and our business and
reputation would be harmed if we do not prevent them.

If we are unable to adapt our services to rapidly changing
technology, our reputation and our ability to grow our revenues could be
harmed.

The markets we serve are characterized by rapidly changing
technology, evolving industry standards, emerging competition and the frequent
introduction of new services, software and other products. We cannot assure you
that we will be able to enhance existing or develop new services that meet
changing customer needs in a timely and cost-effective manner. For example, as
software application architecture changes, the software for which we provide
services could become out of date or obsolete and we may be forced to upgrade or
replace our technology. For example, this is of particular concern with regard
to our enterprise resource planning, or ERP, software, including PeopleSoft,
Oracle and SAP. The architecture of the software we currently use for ERP
applications is not designed to be hosted. We believe that future software may
be written to be hosted. Our existing software application providers may face
competition from new vendors who have written hostable software. It may be
difficult for us to acquire hostable ERP software from these new vendors and for
our software application providers to develop this software quickly or
successfully. In either event, the services we offer would likely become less
attractive to our customers, which could cause us to lose revenue and market
share. Performing upgrades may also require substantial time and expense and
even then we cannot be sure that we will succeed in adapting our business to
these technological developments. Prolonged delays resulting from our efforts to
adapt to rapid technological change, even if ultimately successful, could harm
our reputation within our industry and our ability to grow our revenues.

Our application management agreements are typically long-
term, fixed-price contracts, and if we are not able to manage our costs, these
agreements may become unprofitable for us.

We enter into agreements with our customers to provide
application management services for long periods, typically three years for our
full service contracts.  Most of these agreements are in the form of fixed-price
contracts that do not provide for price adjustments to reflect any cost overruns
associated with providing our services, such as potential increases in the costs
of software applications we license from third parties, and the costs of
upgrades or inflation. As a result, unless we are able to provide our services
in a more cost-effective manner than we do today and unless the number of users
at individual customers increases to provide us higher revenue levels per
customer, we may never achieve profitability for a particular customer. In
addition, customers may not be able to pay us or may cancel our services before
becoming profitable for us.

Our business is relatively new and, accordingly, our business
and financial models may evolve as the understanding of our business evolves. We
may be unable to adjust our pricing or cost structure with respect to our
current customers in response to changes we make in our business or financial
model due to the long-term, fixed price nature of the application management
agreements we have with our customers. This potential inflexibility may hurt our
ability to become profitable.

Downward pricing pressure may decrease our revenue.

Customers often request reductions in pricing upon contracts
coming up for renewal and sometimes even prior to renewal. We have accommodated
some of these requests in the past and may accommodate others in the future. As
information technology services evolve we have noted that customers expect these
services to be provided on a more efficient and cost-effective basis. We may not
be able to increase efficiencies so as to maintain current profit margins on an
individual customer basis, taking into account such reduced revenue. The
downward pressure on pricing may result in decreased revenues and may make it
difficult for us to become profitable.

Proposed changes to GAAP that may require recording
compensation expense for employee stock options.

The FASB and various legislative proposals have proposed
changes to GAAP that may require us to adopt a different method of determining
the compensation expense for our employee stock options. We currently use the
intrinsic value method to measure compensation expense for stock-based awards to
our employees. Under this standard, we generally do not consider stock option
grants issued under our employee stock option plans to be compensation when the
exercise price of the stock option is equal to the fair market value on the date
of grant. If any change to GAAP is adopted that requires us to adopt a different
method of determining the compensation expense for our employee stock options,
our reported results of operations may be adversely affected.

We have focused on reducing costs, particularly in certain
areas of our business, and these reductions may hinder sales and development of
new technology.

In response to the difficult business environment and in
order to try to bring our cost structure more in line with our revenues, we have
been focusing on reducing our costs for some time. We have attempted to do this
in a way that permits us to continue to provide excellent levels of service for
customers, focusing on reducing costs by automating services, negotiating with
vendors and headcount reductions in areas that have less direct impact on
customers. We have significantly reduced our marketing expenses and this may
adversely affect our ability to attract new customers and to increase our
revenues. We have also significantly reduced our research and development
expenses and this may adversely affect our ability to develop new technology,
although we have attempted to augment our research and development capabilities
through less expensive means such as through our Indian subsidiary.

If we do not meet the service levels we establish in our
customer contracts, we may lose existing customers and revenue and our
reputation and ability to engage potential customers may be adversely
affected.

Our application management services contracts contain service
level guarantees that obligate us to provide our applications at a guaranteed
level of performance. If we fail to meet those service levels, we may be
contractually obligated to provide our customers credit for free service. If we
were to continue to fail to meet these service levels, our customers would then
have the right to cancel their contracts with us. These credits or cancellations
could harm our reputation and hinder our ability to grow our revenues.

If we cannot obtain additional software applications that
meet the evolving business needs of our customers, the market for our services
may not grow and may decline, and sales of our services may suffer.

Part of our strategy may be to expand our services by
offering our customers services related to additional software applications that
address their evolving business needs. We cannot be sure, however, that we will
be able to license these applications at a commercially viable cost or at all or
that we will be able to cost-effectively develop the applications in-house. If
we cannot obtain these applications on a cost-effective basis or otherwise
cannot effectively expand our service offering and, as a result, cannot expand
the range of our service offerings, the market for our services may not grow and
may decline, and sales of our services may suffer.

We have many competitors and expect new competitors to
enter our market, which could adversely affect our ability to increase revenues,
maintain our margins or grow our market share.

The market for our services is extremely competitive and the
barriers to entry in our market are relatively low. We currently have no
patented technology that would bar competitors from our market.

Our current and potential competitors primarily include:

- application service providers and business process
outsourcers, such as Appshop, Bluestar Solutions, CSC, Electronic Data Systems,
Hewlett-Packard, IBM Global Services, Surebridge and USinternetworking;
- systems integrators, such as Accenture and Bearing
Point;
- offshore providers such as Wipro, Tata and Infosys;
- software vendors, such as Oracle, PeopleSoft, SAP, Ariba
and Siebel Systems; and
- major technology providers, such as Microsoft.

Many of our competitors and potential competitors have
substantially greater financial, customer support, technical and marketing
resources, larger customer bases, longer operating histories, greater name
recognition and more established relationships in the industry than we do. We
cannot be sure that we will have the resources or expertise to compete
successfully in the future. Our competitors may be able to:

- develop and expand their network infrastructures and
service offerings more quickly;
- adapt to new or emerging technologies and changing
customer needs faster;
- take advantage of acquisitions and other opportunities
more readily;
- negotiate more favorable agreements with software
application vendors;
- devote greater resources to the marketing and sale of
their products; and
- address customers' service-related issues more
effectively.

Some of our competitors may also be able to provide customers
with additional benefits at lower overall costs or to reduce their application
service charges aggressively in an effort to increase market share. We cannot be
sure that we will be able to match cost reductions by our competitors.

Our competitors and other companies may form strategic
relationships with each other to compete with us. These relationships may take
the form of strategic investments, joint-marketing agreements, licenses or other
contractual arrangements, which arrangements may increase our competitors'
ability to address customer needs with their product and service offerings. We
believe that there is likely to be consolidation in our markets, which could
lead to increased price competition and other forms of competition that could
cause our business to suffer.

We may lose customers or have to credit customers for our
services if our network infrastructure is not delivered or serviced in a timely,
consistent and cost-effective manner by third parties.

We depend on third parties, such as XO Communications, Qwest
and (i)Structure, for our data center management services and for key components
of our network infrastructure. Our contracts with these data center and network
infrastructure providers are for a fixed term and for a specified amount of
services, which may be insufficient to meet our needs. The services we provide
could be materially disrupted by any disruption in the services provided by our
data center management service providers. For example, downtime caused by our
data center providers could materially disrupt our services, and, in the event
any of these data center providers terminate or decline to renew their contracts
with us, we could experience significant disruption and costs related to
migrating customers to a different data center. We depend on suppliers such as
Sun Microsystems for our computer hardware and WebMethods and Netegrity and
others for our software technology platform. If any of these relationships fail
to provide needed products or services in a timely and consistent manner or at
an acceptable cost, we may be unable to deliver our services to our customers in
an effective manner and these customers may terminate their contracts with us as
a result or demand credits against fees. Some of the key components of our
infrastructure are available only from sole or limited sources in the quantity
and quality we demand. We do not carry significant inventories of those
components that we obtain from third parties and have no guaranteed supply
arrangements for some of these components. Additionally, some of our service and
product providers have recently experienced financial difficulty, and financial
problems they experience may cause disruptions in our service, loss of customers
and expose us to additional costs.

Computer system failures could render us unable to service
our customers and may cause us to lose our customers and subject us to liability
and increased expenses.

Our operations depend upon our ability and the ability of our
third party data center and network services providers to maintain and protect
the computer systems on which we host our customers' applications. Any loss of
customer data or an inability to provide service for a period of time could
cause us to lose our customers and subject us to significant potential
liabilities. We currently use six data center providers to house our hardware
and to provide network services, but most of our customers are serviced at a
single site. While our data center and network providers maintain back-up
systems and we have disaster recovery processes, a natural disaster or other
disruption at their site could impair our ability to provide our services to our
customers until the site is repaired or back-up systems become operable. Some of
our data center providers, as well as our corporate headquarters, are located in
Northern California, near known earthquake fault zones. Our systems and the data
centers are also vulnerable to damage from fire, flood, power loss,
telecommunications failures, terrorist attacks and similar events.

Our inability to retain and hire qualified and effective
executive officers and critical personnel may adversely affect our ability to
successfully manage our business or achieve our business objectives.

Our future success depends upon the continued service of our
executive officers and other key personnel. None of our executive officers or
key employees is bound by an employment agreement for any specific term. Key
personnel may voluntarily terminate due to various reasons. If we lose the
services of one or more of our executive officers or key employees, or if one or
more of them decides to join a competitor or otherwise compete directly or
indirectly with us, we may not be able to successfully manage our business or
achieve our business objectives.

Our inability to retain and hire qualified and effective
personnel may adversely affect our ability to grow our business.

In the future, we may expand our sales, operations and
marketing efforts in order to try to increase market awareness and sales of our
services. We may also need to increase our technical staff in order to service
customers and perform research and development. There is competition for
qualified and effective sales, marketing, technical and operations personnel as
these personnel are in limited supply and in high demand and we might not be
able to hire and retain sufficient numbers of these personnel to grow our
business or to service our customers effectively. Also, past reductions in our
workforce, although designed to not affect service levels and demand generation,
may adversely affect these areas of our business.

In the event we are not able to achieve the anticipated
benefits from our acquisition of Nexus this may increase our expenses without
the expected increase in revenue, which will adversely affect our operating or
financial results.

In October 2003 we acquired substantially all of the assets
of Nexus as part of our efforts to expand our applications management business
and product offerings. The rationale for the asset purchase was to expand
Corio's customer base and expertise in the SAP market space. SAP AG is a
significant software vendor, providing enterprise resource planning and e-
commerce software for businesses. We expect Corio's overall revenues in this
market space to grow as a result of the asset purchase; however, we may
experience difficulties in achieving and may never fully realize this
anticipated benefit. Potential risks with this acquisition include, among
others:

- possible impairment of relationships with employees and
customers as a result of the acquisition of Nexus;
- inability to retain key employees of Nexus;
- inability to retain the SAP customers of Nexus:
- diversion of management's attention from other business
concerns; and
- difficulties in assimilation of acquired personnel,
operations, technologies or products.

In the event we are unable to retain Nexus's SAP customers or
use this acquisition as a basis for expanding our customer base in the SAP
market, or in the event the risks identified above lead to increased costs or a
loss of benefits from the acquisition then we may never achieve the anticipated
benefits of this acquisition and this will adversely impact our operating
results. In addition, Corio has an obligation to issue additional shares of
common stock to Nexus in the event Corio attains specified revenue milestones
for the 3-month period ending December 31, 2004. Any such issuance would dilute
our existing stockholders and increase the costs of the acquisition.

Any acquisitions of businesses, technologies or services
may result in distraction of our management and disruptions to our business and
additional costs.

In September 2002 and October 2003, we completed the
acquisition of the ASP assets of Qwest Cyber Solutions LLC and Nexus,
respectively. The integration of the ASP assets of Qwest Cyber Solutions and
Nexus into our business is ongoing, and we may experience related disruptions
and distractions as well as unexpected costs. We have lost, and may continue to
lose, customers acquired from Qwest Cyber Solutions, and we may experience
similar losses of customers acquired from Nexus.

We expect that further consolidation in our industry may
occur. We may acquire or make investments in additional complementary
businesses, technologies or services if appropriate opportunities arise. From
time to time we may engage in discussions and negotiations with companies
regarding acquiring or investing in their businesses, technologies or services.
We cannot make assurances that we will be able to identify suitable acquisition
or investment candidates, or that if we do identify suitable candidates, we will
be able to make the acquisitions or investments on commercially acceptable terms
or at all. If we acquire or invest in another company, we could have difficulty
assimilating that company's personnel, customers, operations, technology or
products and service offerings. In addition, the key personnel of the acquired
company may decide not to work for us. These difficulties could disrupt our
ongoing business, distract our management and employees, cause customer loss,
increase our expenses and adversely affect our results of operations.
Furthermore, we may incur indebtedness or issue equity securities to pay for any
future acquisitions. The issuance of equity or convertible debt securities could
be dilutive to our existing stockholders. Furthermore, any future acquisitions
could materially deplete our cash.

Any inability to protect our intellectual property rights
could reduce our competitive advantage, divert management attention, and require
additional intellectual property to be developed or cause us to incur expenses
to enforce our rights.

We cannot assure you that we will be able to protect or
maintain our intellectual property from infringement or misappropriation from
others. In particular, our business would be harmed if we were unable to protect
our technology platform and processes, our trademarks or our other software and
confidential and proprietary information. Agreements on which we rely to protect
our intellectual property rights and the trade secret, copyright and other laws
on which we rely may only afford limited protection to these rights. In
addition, we currently have no patents issued, which limits significantly our
ability to protect our proprietary rights in the event they are infringed. Any
infringement or misappropriation of our intellectual property could reduce our
competitive advantage, divert management attention, require us to develop
technology and cause us to incur expenses to enforce our rights.

Any infringement claims involving our technology or the
applications we offer or other lawsuits could cost a significant amount of money
and could divert management's attention away from our business.

If the number of software applications used by us and our
customers increases and the functionality of these products further overlaps and
integrates, software industry participants may become increasingly subject to
infringement claims. In addition, we have agreed, and may agree in the future,
to indemnify some of our customers against claims that our services infringe
upon the intellectual property rights of others. Someone may claim that our
technology or the applications or services we offer infringes their proprietary
rights. Someone may also claim that we do not have adequate licenses to perform
the services we offer. Any infringement claims, even if without merit, can be
time consuming and expensive to defend, may divert management's attention and
resources and could cause service delays. Such claims could require us to enter
into costly royalty or licensing agreements. If successful, a claim of
infringement against us and our inability to modify or license the infringed or
similar technology could adversely affect our business. In addition, if our
software vendors cease to offer their software applications to us because of
infringement claims against them or us we would be forced to license different
software applications to our customers that may not meet our customers' needs.
This could result in a loss of customers and a decline in our revenues.

In November 2001, a securities class action lawsuit was filed
in the U.S. District Court for the Southern District of New York against Corio,
certain of its officers and certain of the underwriters involved in Corio's
initial public offering. This is one of approximately 300 similar lawsuits in a
coordinated proceeding sometimes referred to as "IPO allocation
lawsuits" or "laddering lawsuits." In June 2003, the plaintiffs
in these cases presented a settlement proposal to all of the issuer defendants.
Under the proposed settlement, the plaintiffs proposed to dismiss and release
all claims against participating defendants in exchange for a contingent payment
guaranty by the insurance companies collectively responsible for insuring the
issuers in all the related cases, and the assignment or surrender to the
plaintiffs of certain claims the issuer defendants may have against the
underwriters. Under the guaranty, the insurers or companies will be required to
pay the amount, if any, by which $1 billion exceeds the aggregate amount
ultimately collected by the plaintiffs from the underwriter defendants in all
the cases. If the plaintiffs fail to recover $1 billion and payment is required
under the guaranty, Corio would be responsible to pay its pro rata portion of
the shortfall, up to the amount of the self-insured retention under its
insurance policy, which is $1 million. In July 2003, Corio tentatively agreed to
accept this settlement proposal. The settlement is subject to acceptance by a
substantial majority of the issuer defendants and execution of a definitive
settlement agreement. The settlement is also subject to approval by the Court,
which cannot be assured. If the settlement is not accepted by the requisite
number of defendants or if it is not approved by the Court or if it otherwise is
not consummated, Corio intends to defend the lawsuit vigorously. However, the
litigation is in the preliminary stage, and we cannot predict its outcome. The
litigation process is inherently uncertain. If the outcome of the litigation is
adverse to us and if we are required to pay significant monetary damages, our
business would be significantly harmed. This lawsuit may be time consuming and
expensive to defend and may divert management's attention and may be costly to
Corio even if the plaintiff's settlement proposal is consummated.

Risks Related to our Industry

We cannot assure you that the ASP market will become
viable or grow at a rate that will allow us to achieve profitability.

Growth in demand for and acceptance of ASPs and their hosted
business software applications is highly uncertain. This is especially true
given the uncertainty in the macroeconomic environment. Companies in the ASP
industry, such as Pandesic and Red Gorilla and others, have ceased operations.
Other companies in the ASP industry, such as USinternetworking, have filed for
bankruptcy. We cannot assure you that this market will become viable or, if it
becomes viable, that it will grow at a rate that will allow us to achieve
profitability. The market for Internet services, private network management
solutions and widely distributed Internet-enabled application software has only
recently begun to develop and is now evolving rapidly. We believe that many of
our potential customers are not fully aware of the benefits of hosted and
managed solutions. It is possible that these solutions will never achieve market
acceptance. It is also possible that potential customers will decide that the
risks associated with hiring ASPs in general (or smaller service providers in
particular) to implement and manage their critical systems and business
functions outweigh the efficiencies associated with the products and services we
provide. Concerns over transaction security and user privacy, inadequate network
infrastructure for the entire Internet and inconsistent performance of the
Internet and the financial viability of ASPs could also limit the growth of
Internet-based business software solutions.

Increasing government regulation could limit the market
for, or impose sales and other taxes on the sale of, our services, which could
cause our revenues to decline or increase our expenses.

We offer our suite of software applications over networks,
which subject us to government regulation concerning Internet usage and
electronic commerce. We expect that state, federal and foreign agencies will
adopt and modify regulations covering issues such as user and data privacy,
pricing, taxation of goods and services provided over the Internet, the use and
export of cryptographic technology and content and quality of products and
services. It is possible that legislation could expose us and other companies
involved in electronic commerce to liability or require permits or other
authorizations, which could limit the growth of electronic commerce generally.
Legislation could dampen the growth in Internet usage and decrease its
acceptance as a communications and commercial medium. If enacted, these laws,
rules or regulations could limit the market for or make it more difficult to
offer our services.

The taxation of commerce activities in connection with the
Internet has not been established, may change in the future and may vary from
jurisdiction to jurisdiction. One or more states or countries may seek to impose
sales or other taxes on companies that engage in or facilitate electronic
commerce. A number of proposals have been made at the local, state, national and
international levels that would impose additional taxes on the sale of products
and services over the Internet. These proposals, if adopted, could substantially
impair the growth of electronic commerce and could subject us to taxation
relating to our use of the Internet as a means of delivering our services.
Moreover, if any state or country were to assert successfully that we should
collect sales or other taxes on the exchange of products and services over the
Internet, our customers may refuse to continue using our services, which could
cause our revenues to decline significantly.

If we expand our business outside the United States we may
be subject to unfavorable international conditions and regulations that could
cause our international business to fail.

We have customers with international operations, have
established a subsidiary in India, and may expand our business outside of the
United States in the future. Conducting our business in international markets is
subject to complexities associated with foreign operations and to additional
risks related to our business, including the possibility that the scarcity of
cost-effective, high-speed Internet access and the slow pace of future
improvements in access to the Internet will limit the market for hosting
software applications over the Internet or adversely affect the delivery of our
services to customers. Additionally, some countries outside of the United States
do not permit hosting applications on behalf of companies. The European Union
has adopted a privacy directive that regulates the collection and use of
information. This directive may inhibit or prohibit the collection and sharing
of personal information in ways that could harm us. The globalization of
Internet commerce may be harmed by these and similar regulations since the
European Union privacy directive prohibits transmission of personal information
outside the European Union unless the receiving country has enacted individual
privacy protection laws at least as strong as those enacted by the European
Union privacy directive.

General political and economic conditions may reduce our
revenues and harm our operations.

Because of the economic and political environment, many
industries have delayed or reduced technology expenditures. If this trend
continues, we may fall short of our revenue expectations, and ultimately may
fail to achieve profitability. Moreover, weakness in the technology sector as a
whole could negatively affect the cash flow of some of our customers, which in
turn could impact their ability to meet their obligations to us as they come
due. This could increase our credit risk exposure and harm our overall financial
position.

In addition, global and domestic political conditions,
terrorist acts, or acts of war (wherever located in the world) may damage or
disrupt global and domestic markets and negatively affect our business,
employees, customers, and suppliers, which in turn could have an adverse effect
on our operations and our overall profitability.

Market prices of Internet and technology companies have
been highly volatile, and the market for our stock may be volatile as well.

The stock market has experienced significant price and
trading volume fluctuations, and the market prices of technology companies
generally, and Internet-related software companies particularly, have been
volatile. The market prices of technology companies generally, and technology
service companies in particular, have been subject to significant downward
pressure. In the past, following periods of volatility in the market price of a
public company's securities, securities class action litigation has often been
instituted against that company. Such litigation could result in substantial
costs to us and a diversion of our management's attention and resources.

Many significant corporate actions are controlled by our
officers, directors and affiliated entities regardless of the opposition of
other investors or the desire of other investors to pursue an alternative cause
of action.

Our executive officers, directors and entities affiliated
with them, in the aggregate, beneficially own approximately 40% of our common
stock as of March 31, 2004. If they were to act together, these stockholders
would be able to exercise control over most matters requiring approval by our
stockholders, including the election of directors and approval of significant
corporate transactions. This concentration of ownership may also have the effect
of delaying or preventing a change in control of our company, which could cause
our stock price to drop. These actions may be taken even if they are opposed by
the other investors, including those who purchased shares in the initial public
offering.

Delaware law and our charter, bylaws and contracts provide
anti-takeover defenses that could delay or prevent an acquisition of us, even if
an acquisition would be beneficial to our stockholders.

Provisions of Delaware law, our certificate of incorporation,
bylaws and contracts could delay, defer or prevent an acquisition or change of
control of us, even if an acquisition would be beneficial to our stockholders,
and this could adversely affect the price of our common stock.

- Our bylaws limit the ability of our stockholders to call
a special meeting and do not permit stockholders to act by written consent.
- We are subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law, which prohibits us from
engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction
in which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner.
- Several members of our senior management have contracts
with us that provide for the acceleration of the vesting of their stock options
upon termination following a change of control, and members of our board of
directors have contracts with us that provide for the acceleration of vesting of
their stock options upon a change of control.
- Our certificate of incorporation permits our board to
issue shares of preferred stock without stockholder approval. In addition to
delaying or preventing an acquisition, the issuance of a substantial number of
shares of preferred stock could adversely affect the price of the common
stock.

Additional provisions of our certificate of incorporation
that may serve to delay or prevent an acquisition include a staggered board,
advance notice procedures for stockholders to nominate candidates for election
as directors, authorization of our board to alter the number of directors
without stockholder approval and lack of cumulative voting.

ITEM
3.   Quantitative and Qualitative Disclosures About Financial
Market Risk

We develop and market our services primarily in the United
States. As we expand our operations outside of the United States, our financial
results could be affected by factors such as changes in foreign currency rates
or weak economic conditions in foreign markets. Because all of our revenues are
currently denominated in U.S. dollars, a strengthening of the dollar could make
our services less competitive in international markets.

Interest Rate Risk

The primary objective of our investment activities is to
preserve principal while at the same time maximize the income we receive from
our investments without significantly increasing risk. Some of the securities
that we have invested in may be subject to market risk. This means that a change
in prevailing interest rates may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing interest rate and the prevailing interest
rate later rises, the fair value amount of our investment will probably decline.
To minimize this risk, we maintain our portfolio of cash equivalents and short-
term investments in a variety of securities, including Government Securities,
Commercial Paper, Corporate Bonds and money market funds. In general, money
market funds are not subject to market risk because the interest paid on such
funds fluctuates with the prevailing interest rate. The following table presents
the amounts of our cash equivalents and short-term investments that are subject
to market risk by range of expected maturity and weighted-average interest rates
as of March 31, 2004.

`Maturing in
                                                                           Between
                                                         Three months   Three months and
                                                           or less        Sixteen months
                                                         ------------  ------------------
March 31, 2004 (in thousands, except percentages):
   Included in cash and cash equivalents............... $      7,357   $             --
      Weighted average interest rate...................         1.08 %               --
   Included in short-term investments.................. $      3,019   $         15,407
      Weighted average interest rate...................         1.62 %             1.43 %`

ITEM 4.   Controls
and Procedures

(a)     Evaluation of disclosure
controls and procedures.

Our management evaluated, with the participation of our Chief
Executive Officer and our Chief Financial Officer, the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive
Officer and our Chief Financial Officer have concluded that our disclosure
controls and procedures are effective to ensure that information we are required
to disclose in reports that we file or submit under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.

(b)     Changes
in internal controls.

There was no change in our internal control over financial
reporting that occurred during the period covered by this Quarterly Report on
Form 10-Q that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



ITEM 1.  LEGAL PROCEEDINGS

In November 2001, securities class action lawsuit was
filed in the U.S. District Court for the Southern District of New York against
Corio, certain of its officers and certain of the underwriters involved in
Corio's initial public offering. This is one of approximately 300 similar
lawsuits in a coordinated proceeding sometimes referred to as "IPO
allocation lawsuits" or "laddering lawsuits." The plaintiffs
generally allege that the underwriters engaged in undisclosed improper practices
by giving favorable allocations of IPO shares to certain investors in exchange
for excessive brokerage commissions and/or agreements for those investors to
purchase additional shares in the aftermarket at predetermined higher prices.
The plaintiffs seek an unspecified amount of damages. In June 2003, the
plaintiffs in these cases presented a settlement proposal to all of the issuer
defendants. Under the proposed settlement, the plaintiffs proposed to dismiss
and release all claims against participating defendants in exchange for a
contingent payment guaranty by the insurance companies collectively responsible
for insuring the issuers in all the related cases, and the assignment or
surrender to the plaintiffs of certain claims the issuer defendants may have
against the underwriters. Under the guaranty, the insurers or companies will be
required to pay the amount, if any, by which $1 billion exceeds the aggregate
amount ultimately collected by the plaintiffs from the underwriter defendants in
all the cases. If the plaintiffs fail to recover $1 billion and payment is
required under the guaranty, Corio would be responsible to pay its pro rata
portion of the shortfall, up to the amount of the self-insured retention under
its insurance policy, which is $1 million. In July 2003, Corio tentatively
agreed to accept this settlement proposal. The settlement is subject to
acceptance by a substantial majority of the issuer defendants and execution of a
definitive settlement agreement. The settlement is also subject to approval by
the Court, which cannot be assured. If the settlement is not accepted by the
requisite number of defendants or if it is not approved by the Court or if it
otherwise is not consummated, Corio intends to defend the lawsuit vigorously.
However, the litigation is in the preliminary stage, and we cannot predict its
outcome. The litigation process is inherently uncertain. If the outcome of the
litigation is adverse to us and if we are required to pay significant monetary
damages, our business would be significantly harmed. This lawsuit may be time
consuming and expensive to defend and may divert management's attention and may
be costly to Corio even if the plaintiff's settlement proposal is
consummated.

In November 2001, Corio filed a demand for arbitration
against LivePerson, Inc. with the American Arbitration Association in San
Francisco County. The arbitration related to a dispute around a services
contract between the parties. On July 23, 2003, the arbitrator in this dispute
issued a judgment awarding Corio damages of $1,115,440 plus interest.
LivePerson, Inc. filed a motion to vacate the award in the Superior Court of
California. On November 18, 2003, the Superior Court of California issued a
judgment, relating to the arbitration, awarding Corio damages of $1,346,605 plus
interest from October 17, 2003 until the date of payment. LivePerson, Inc. paid
Corio $1,369,479 on December 18, 2003 and subsequently appealed the judgment.
For any portion of the cash paid that is affirmed on appeal or otherwise finally
committed, such cash received pursuant to this award will be recorded as
termination fee revenue.

The Company is subject to other legal proceedings, claims and
litigation arising in the ordinary course of business. While the outcome of
these matters is currently not determinable, management does not expect that the
ultimate costs to resolve these other matters will have a material adverse
effect on the Company's financial statements.

ITEM 2. CHANGES IN SECURITIES, USE OF
PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

Not applicable

ITEM 3.  DEFAULTS UPON SENIOR
SECURITIES

Not applicable

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

Not applicable

ITEM
5.	OTHER INFORMATION

Not applicable

ITEM 6.	EXHIBITS AND REPORTS
ON FORM 8-K

(a)	Exhibits



|31.1 | Section 302 Certification of Chief Executive Officer
|---- | ----------------------------------------------------
|    
|31.2 | Section 302 Certification of Chief Financial Officer
|    
|32.1 | Section 906 Certification of Chief Executive Officer
|    
|32.2 | Section 906 Certification of Chief Financial Officer

(b)	Reports on Forms 8-K

On April 27, 2004, Corio filed a Report on Form 8-K reporting
the announcement of its financial results for the quarter ended March 31, 2004.
Under Form 8-K, Corio furnished under Item 12 the press release relating to its
financial results for the quarter ended March 31, 2004.

---

SIGNATURES

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

Dated: May 14, 2004



|    | CORIO, INC.                                                     
|--- | ----------------------------------------------------------------
|   
|By: | /s/    GEORGEKADIFA                                             
|    | George Kadifa
President and Chief Executive Officer             
|    |                                                                 
|By: | /s/    BRETTWHITE                                               
|    | Brett White
Executive Vice President and
Chief Financial Officer

---

EXHIBIT INDEX



|ExhibitNumber | Description                                         
|------------- | ----------------------------------------------------
|31.1          | Section 302 Certification of Chief Executive Officer
|31.2          | Section 302 Certification of Chief Financial Officer
|32.1          | Section 906 Certification of Chief Executive Officer
|32.2          | Section 906 Certification of Chief Financial Officer

---