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________________________________________________________________________________
________________________________________________________________________________

                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549


                                   FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
              OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                      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: 0-26795

                        TANNING TECHNOLOGY CORPORATION
            (Exact Name of Registrant as Specified in Its Charter)

          Delaware                                    84-1381662
(State or other jurisdiction of                     (I.R.S. Employer
Incorporation or organization)                   Identification Number)

4600 South Syracuse Street, Suite 1200
        Denver, Colorado                                 80237
(Address of principal executive offices)               (Zip Code)


      Registrant's telephone number, including area code: (303) 220-9944

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

          Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, $.01 par value per share

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

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

    As of March 23, 2000, the aggregate market value of common stock held by
non-affiliates of the Registrant approximated $189 million based upon the
closing price of the common stock as reported on the Nasdaq National Market as
of the close of business on that date.

    As of March 23, 2000, there were 20,679,370 shares of common stock
outstanding.


                      DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the Registrant's definitive Proxy Statement to be filed in
connection with the Registrant's 2000 Annual Meeting of Shareholders are
incorporated by reference in Part III herein.


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                               TABLE OF CONTENTS

                                                                           Page
                                                                           ----
PART I
     Item 1.  Business............................................             1
     Item 2.  Properties..........................................            18
     Item 3.  Legal Proceedings...................................            18
     Item 4.  Submission of Matters to a Vote of Security
               Holders............................................            18

PART II
     Item 5.  Market for Registrant's Common Equity and Related
               Stockholder Matters................................            19

     Item 6.  Selected Financial Data.............................            21
     Item 7.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations................            22

     Item7A.  Quantitative and Qualitative Disclosure About
               Market Risk........................................            27
     Item 8.  Financial Statements and Supplementary Data.........            27
     Item 9.  Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure................            28


PART III
     Item 10. Directors and Executive Officers of the
              Registrant..........................................            29
     Item 11. Executive Compensation..............................            29
     Item 12. Security Ownership of Certain Beneficial Owners
               and Management.....................................            29
     Item 13. Certain Relationships and Related Transactions......            29


PART IV
     Item 14. Exhibits, Financial Statement Schedules and
               Reports on Form 8-K................................            30

Signatures

Exhibit Index


               SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

    Certain statements contained in this Annual Report on Form 10-K, including
information with respect to the Company's future business plans, constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act which are subject to the "safe harbor"
created by those sections. For this purpose, any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes," "plans,"
"expects," "anticipates" and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the results of the Company to differ materially from those indicated by
such forward-looking statements. These factors include those set forth in Item 1
"Business - Risks Related to Our Business" The Company undertakes no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.


<PAGE>

                                     PART I

ITEM 1.  BUSINESS

    We are an information technology services provider that architects, builds
and deploys enterprise solutions for companies in the United States and
internationally. We specialize in large, complex, integrated solutions that
incorporate online transaction processing and very large databases. Internet
technologies are central to our solutions, enabling direct interaction among
customers and business partners on the World Wide Web, and among employees
within organizations on their private intranets. Our clients include Ameritech,
Blockbuster, BSkyB, E*Trade, Earthweb, Federal Express, The Hartford, Internet
Appliance Network, Maersk Line, MCI WorldCom, R.R. Donnelley Financial and U S
WEST.

    We focus on the most challenging and critical assignments in the information
technology industry. Our solutions typically involve:

    .  ultra-high transaction rates (up to millions per hour);

    .  very large databases (terabytes of information); and

    .  business-critical operational requirements for reliability, scalability,
       flexibility and availability.

    Our key solutions are:

    .  Electronic commerce solutions, which enable businesses to interact with
       customers, suppliers and other business partners directly and sell
       products and services through the Internet. For example, we designed
       international extensions to E*Trade's domestic trading system to enable
       it to expand its trading services into foreign countries.

    .  Enterprise customer relationship management solutions, which enhance a
       business' ability to identify, attract, retain and support customers
       using emerging and established channels such as the World Wide Web,
       direct sales, telemarketing and call centers, direct mail and retail
       facilities. For example, we redesigned Blockbuster's existing enterprise
       architecture to effectively manage customer data and account activity
       information for over 40 million customers and more than 6,000 stores.

    .  Core operations solutions, which improve business processes such as
       billing system integration and order, claim, trade, credit card
       transaction and operation transaction processing. For example, we created
       an online transaction processing system for Federal Express capable of
       handling 1,000 transactions per second on a one-plus terabyte database,
       enabling Federal Express to obtain information about the performance of
       its package delivery system in significantly shorter time frames (hours
       vs. days).

    With advances in the Internet and technology, new business models and
innovative information technology solutions are emerging that can transform the
way companies run their businesses. As part of this evolution of business
models, companies are seeking value from electronic commerce, customer
relationship management and core operations solutions. We believe that we are
differentiated by our focus on, and expertise in, the architecture, complex
integration, high volume online transaction processing capabilities and very
large databases required to successfully deploy these advanced solutions. For
many clients, the systems we build are at the core of their efforts to
capitalize on information technology and the Internet.

    Our company traces its history back to 1993 and was incorporated in Delaware
in 1997. Our principal executive office is located at 4600 South Syracuse
Street, Suite 1200, Denver, Colorado 80237, and our telephone number is (303)
220-9944. We maintain a site on the World Wide Web at http://www.tanning.com;
however, the information found on our website is not part of this report.


The Tanning Difference

    We believe that the following capabilities and characteristics differentiate
us from other information technology services providers.

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Large, complex solutions

    We specialize in architecting, developing and deploying large and complex
business-critical solutions that require high degrees of integration across
diverse portfolios of applications and technologies. Clients that seek to
transform their businesses with advanced electronic commerce, customer
relationship management and core operations solutions rely on the systems we
build to run their businesses without failure. Our solutions typically involve
ultra-high transaction rates (up to millions per hour) in online transaction
processing environments and very large databases (terabytes of information). We
believe that we are able to address our clients' greatest information technology
challenges because we are able to extend the accepted performance and
feasibility limits of leading-edge technologies. For many clients, the systems
we build are at the core of their efforts to capitalize on information
technology and the Internet.

Business-value driven

    We focus on delivering solutions to our clients' business challenges, not
simply on technology. These solutions provide value to our clients by enhancing
their ability to communicate with their customers and business partners,
allowing our clients to offer new or enhanced products and services, and
providing them opportunities for revenue enhancement and cost reductions. We
align technology deployment with business objectives and processes and plan
deployments in phases to deliver business benefits rapidly. Through extensive
business analysis and work with clients to define and articulate their business
goals and constraints, we are able to discern a project's critical business
requirements before proceeding to technology considerations.

Architecture-based solutions

    Our architecture-based approach enables us to provide large and complex
integrated solutions that accommodate our clients' goals in a rapidly changing
business environment. Our overall architecture identifies the component and
technology frameworks required for the successful construction and deployment of
our solutions. Through rigorous systems analysis, we design solutions that
address requirements for:

    .  reliability, to ensure accurate processing and robust backup and
       recovery;

    .  scalability, to accommodate the rapid growth associated with electronic
       commerce, customer relationship management and core operations solutions
       under changing business conditions;

    .  full time availability (24 hours a day and 7 days a week);

    .  performance, to deliver the required end-user response times and
       transaction rates;

    .  flexibility, to accommodate new functions and interfaces;

    .  complex interfaces to, and coexistence with, legacy systems, software
       packages and departmental solutions in a heterogeneous technology
       environment;

    .  transaction and data integration, both within a company's business and
       among the company and its trading partners; and

    .  the ability to dynamically change features, services or product offerings
       based on real-time Internet customer interaction.

Deployment-focused

    We deliver high-value business solutions that are deployment-focused, rather
than development-focused. Our deployment focus allows us to architect and design
solutions for successful roll-out to, and use by, the hundreds,

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thousands and potentially millions of users of that system. We focus on
deployment to ensure that our solution is constructed for scalable performance,
reliable and consistent service levels, and high levels of flexibility and
longevity. We identify performance and service level requirements in the early
stages of the solution process, architect and design the system so that it will
meet these requirements and benchmark and develop proofs of concept to ensure
that our solution will work before construction of the application begins.
Benchmarking is a process of evaluating the performance of alternative system
configurations and components in order to determine which approach would best
meet the client's goals. We develop proofs of concept in order to demonstrate
the feasibility of our innovative architectures and combinations of components
as well as emerging technologies.

    The project lifecycles of many information technology service providers and
companies do not adequately address the constraints of interfaces or the
challenges of operating the system in the intended environment.  We believe our
focus on deployment allows us to deliver successful projects and business value
for our clients and constitutes a significant competitive advantage. As a
result, since 1993, we have established a strong track record of repeat business
from large corporations throughout the world, including Ameritech, BSkyB,
E*Trade, The Hartford, Maersk Line and R.R. Donnelley Financial.

Experienced and talented staff

    Today's complex, data-intensive business solutions require broad, as well as
deep, technology skills to successfully tackle the technological challenges and
integration complexities typically encountered. We staff our projects based on
our philosophy that there is no substitute for experience, in contrast to the
common approach of relying on primarily inexperienced staff and building a
heavily "leveraged" staffing model that depends on methodology rather than
experience to guide the judgments and activities of project teams.  Our breadth
of skills comes from the experience our staff has with four generations of
technology--mainframe and parallel processing environments, minicomputers,
client/server architectures and web technology architectures. Our depth of
skills began with our early work in benchmarking large applications and
databases that required multi-tier software architecture, in which the key
layers of an application system are separated and optimized independently to
improve performance, scalability and reliability.

    Our employees have expertise in a broad range of competencies, including
project management, business analysis, object modeling, architecture, software
development, database modeling and administration, quality assurance,
integration and testing, architecture and performance tuning, and system and
network management. We believe our staff is recognized in the industry for its
rich capabilities in building applications that deal with high transaction
volumes and very large database requirements.


Strategy

    Our strategy for growth centers around scaling our capabilities in
architecting, developing and deploying large, complex, business-critical
enterprise solutions. We will continue to identify areas of growing demand for
these types of solutions and differentiate ourselves based upon our experience,
capabilities and references. These areas may take the form of geographic
regions, industries or solution areas.

    To achieve our objectives, we plan to:

    .  Maintain our leading edge capabilities

            We believe that our clients choose to work with us because of our
       reputation for successfully handling information technology's most
       challenging assignments. A key source for new and advanced capabilities
       is our experience in developing solutions that are innovative, and of
       industry-leading scale and complexity. For example, we deployed a
       solution for Blockbuster that assembled customer data and account
       activity information for over 40 million customers and 6,000 stores. The
       solution involved terabytes of information and difficult integration
       issues, including hardware design and configuration, database
       architecture, fault tolerance and operations support. We plan to continue
       to actively manage our portfolio of client engagements to ensure that we
       work on complex assignments that will allow us to refine and advance our


                                      -3-
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       capabilities on an ongoing basis. We also believe that our reputation for
       working on the industry's most difficult assignments will assist us in
       continuing to recruit professionals who further add to our skills and
       knowledge base. In addition, we intend to continue and expand our
       practice of coordinating with our business and technology partners to
       share expertise and innovations.

    .  Expand our solutions and service offerings

            We have increased our focus on rapidly growing solution areas in
       which we believe our expertise is relevant, such as supply chain
       management and knowledge management. For example, building off of our
       successful engagements with Federal Express and Blockbuster, we have
       developed an enhanced presence in the area of supply chain management. We
       intend to expand our service offerings in areas such as business
       consulting, process innovation and creative design and to create service
       offerings that incorporate Web-hosting, operations support and
       application service provider ("ASP") solutions. For example, our recent
       alliance with GlobalCenter Inc. is directed, among other things, at
       creating solution offerings that incorporate Web hosting, operational
       support and ASP solutions. In addition, our strategy includes expanding
       our solutions and service offerings and gaining access to new
       technologies, skills and other resources through strategic acquisitions
       and investments when attractive opportunities arise. In some cases we may
       also invest in ventures that may not be directly related to our business.
       Our investments may be structured to provide our management with equity
       interests in the form of stock options, carried interests, co-investment
       rights or other equity arrangements. Although we believe that the areas
       in which we currently specialize are among the fastest growing and
       critical in the information technology industry, we believe that our
       ability to provide expanded integrated service offerings will allow us to
       establish relationships with a greater range of clients who have a need
       for our expertise and to engage them earlier in the determination of
       their business needs .

    .  Expand our vertical industry focus

            We intend to organize our sales and marketing efforts in the
       industries in which there is significant potential demand for our
       services and expertise. We intend to organize industry practice groups in
       sales and marketing because we believe that businesses seek out service
       providers who are familiar with the types of issues faced by their
       industry and who are conversant with the language of the industry.
       Currently, we are formally organized in telecommunications, an industry
       in which we have a significant amount of experience. We currently have an
       industry focus, and plan to organize formal industry practice groups, in
       other high growth industries such as media and entertainment, financial
       services, healthcare, and logistics and transportation as our business in
       these industries grows.

    .  Expand our relationships with existing clients and develop new clients

            We intend to base our growth on long-term client relationships,
       rather than on a project-by-project approach. Our client relationship
       philosophy is that clients will choose to do business with us based on
       the quality of our work, the value of our advice and solutions, and the
       level of trust and respect that develops over time. Expanding our
       existing client relationships will allow us to jointly plan future
       projects and, in particular, develop large, multiyear engagements. This
       will improve our ability to forecast projects, thereby helping us to
       manage growth. We will continue to assign each of our clients a
       relationship manager who will be responsible for ensuring that the client
       is satisfied with the services we are providing. Relationship managers
       work with their clients in an advisory capacity to clarify and prioritize
       their business needs and secure additional high value projects, based
       upon their in-depth knowledge of each client's business and information
       technology needs.

            We will continue to develop new clients through multiple channels
       including our sales and marketing teams, industry analysts, marketing
       events and public relations, as well as through relationships with
       hardware and software suppliers. Our dedicated sales and marketing team
       will allow us to focus on solutions common across industries and will
       seek out opportunities for high value and long-term engagements. We will
       also expand our relationships with hardware and software suppliers such
       as IBM,


                                      -4-
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       Sun Microsystems, Hewlett Packard and others, including service providers
       in complementary business areas, to identify project opportunities
       consistent with our capabilities and to provide us with client leads. In
       addition, in connection with our marketing alliance with GlobalCenter
       Inc., we are working to develop new services and solution offerings and
       identify new client opportunities.

    .  Continue to attract and retain experienced, knowledgeable professionals

            We have consistently attracted and retained leading information
       technology talent interested in solving our industry's toughest
       challenges. We plan to continue to recruit experienced staff from
       consulting companies, corporate information technology organizations and
       the benchmarking and product development centers of the industry's
       leading hardware and software product companies. We expect that our
       talented staff will also continue to provide us with employee referrals,
       which have accounted for a significant proportion of our new recruits in
       the last two years.

    .  Serve clients globally

            We plan to expand our services and solution capabilities to client
       locations around the world. Our expansion will be revenue-based--we
       intend to open additional offices primarily where we have existing
       clients in the geographic region. We believe this will enable us to
       develop closer relationships with and provide more convenience to our
       clients who are increasingly seeking service providers with global
       presence and experience deploying solutions that address issues of
       multiple currencies and languages, infrastructure diversity and around-
       the-clock operations. We also expect that global expansion will allow us
       to capitalize on high growth geographic regions and diversify our revenue
       base.

    .  Expand our infrastructure for growth

            We plan to continue our commitment to growth by making investments
       in recruitment and retention, staff development, sales and marketing,
       management information systems and other areas of infrastructure. We have
       created a "Knowledge Net" on our internal network in order to accumulate
       and make readily available to our employees (1) expertise we have derived
       from our engagements, (2) best practices and (3) a repository of
       information that can be used in sales, marketing and service delivery. We
       have expanded our formal employee orientation program and intend to
       continue to invest in our employees through advanced education programs
       focused on technology and the new economy. We will continue to improve
       our scalable global information systems, in order to more effectively
       manage client lead generation and tracking, sales forecasting, project
       profitability and employee utilization. We believe that these investments
       will provide a foundation for the continued expansion of our client and
       revenue base.


The Tanning Approach

    The Tanning Approach flows directly from the Tanning Difference--we are
business-value driven, architecture-based and deployment-focused. We emphasize
rigorous business alignment during our assessment and architecture phases, and
address critical performance and operational requirements during our
architecture and development phases to ensure successful system deployment and
operation.

    The Tanning Approach is composed of distinct phases, and each phase can be
adapted to the unique needs and requirements of an individual project. Each
phase also builds upon the deliverables of the previous phase. Our approach is
designed to deliver business value rapidly, by delivering the results in several
successive installments, rather than committing to extended projects where
business deliverables are produced only at the end of a protracted period of
time. This approach is also flexible, because not all phases are required by
every project.

    Our clients typically engage us in strategic initiatives in which we help
architect, develop and deploy a new high-value business solution. Strategic
initiatives begin with an assessment and continue sequentially through the
phases of the Tanning Approach.

                                      -5-
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Assessment

    Every project begins with an assessment. Each assessment results in a clear
definition of the client's business problem, a set of recommendations and an
outline of the next steps as well as a statement of the project's contemplated
business benefits. The assessment and the presentation of its results to our
client are key entry level service offerings that enable us to demonstrate our
capabilities and serve as a platform for establishing a more extensive project
engagement and a continuing client relationship.

    Assessments typically address one or more of the following:

    .  business case and business requirements;

    .  enterprise architecture;

    .  systems architecture;

    .  application design;

    .  development processes;

    .  integration testing processes;

    .  application migration considerations;

    .  deployment considerations; and

    .  operational readiness considerations.

    Enterprise/system architecture

    A well-defined architecture provides a critical foundation for the
successful definition, development, deployment and operation of information
technology systems. Enterprise architectures address the entire portfolio of
applications and technologies across the enterprise, while system architectures
address the more focused scope of a specific application or system. The
architecture is particularly critical when an iterative, phased approach for
development and deployment is used because it provides a rational framework for
each of the components and subsystems, as they are developed and deployed. A
well-defined architecture and technical framework greatly reduces the effort and
risk associated with the integration of components and subsystems because each
of the subsystems is integrated using proven interfaces and methods. We deliver
the architecture phase of the Tanning Approach to our clients either as part of
a specific application or solution project, or alternatively, as a stand-alone
engagement that addresses the entire enterprise architecture or specific
components of it.

    An architecture is also more than just an inventory of vendors and
standards. It specifies all of the subsystems and components required to deploy
an effective information technology system. Further, this architecture defines
the dependencies and interfaces between the components and the functional,
operational and performance requirements of each subsystem and component.

    The architecture phase of the Tanning Approach also focuses on identifying
and mitigating the major risks involved in the project. It can include building
proofs of concept for high-risk system components and new technologies.
Benchmarking may be performed to identify and resolve major system bottlenecks
for performance. Prototypes may also be developed to visualize key user
scenarios, functions or processes to make sure that there is consensus in their
definition and that the project is resolving the key business issues and
delivering the expected business value. Prototypes are also used to validate and
test critical components of the architecture. This phase also involves detailing
aspects of the architecture that need further definition before beginning
component development.

                                      -6-
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Phased development and product integration

    This stage of the Tanning Approach is characterized by phased design,
development and testing of various individual components (including user and
system interfaces) of the final business solution. If software packages or
technology components will be integrated into the solution, then this phase also
includes their integration. The phased system components are typically organized
into releases that deliver meaningful business value in rapid time frames. We
use standard methodologies and tools to conduct and document the design and
development of system releases. Each system release goes through integration
testing, as part of our quality assurance, to ensure that the components
function properly as a complete system.

Deployment services

    The deployment phase of the Tanning Approach is designed to ensure the
successful deployment of the completed software into the client's computing
environment where it will support real-world business activities. Deployment
addresses issues related to systems management, data center operations and
performance testing to ensure that the system will provide the performance
demanded by business users and defined in the system service level agreements.
Our deployment phase typically includes a period where any systems or components
being replaced are run in parallel with the new system to ensure proper
operation before converting to the exclusive use of the new system.

Operational support services

    The operational support phase of the Tanning Approach gives clients the
opportunity to engage us for ongoing maintenance and support of applications and
systems. We can also provide both remote and local system administration to
ensure proper operation, maintenance and enhancement of systems.


Clients

    The following is a representative list of our clients for 1998 and 1999.

            Ameritech                           The Hartford
            Ameritrade                          Internet Appliance Network
            Blockbuster                         Maersk Line
            BSkyB                               MCI WorldCom
            CableTel                            Oxford Health Plans
            CSX Technology                      The Polk Company
            E*Trade                             Qwest
            EarthWeb                            R.R. Donnelley Financial
            Energis                             TeleDanmark
            Federal Express                     U S WEST


    In 1997, our five largest clients accounted for approximately 81% of our
services revenue, with Ameritech accounting for approximately 41% of our
services revenue and Oxford Health Plans accounting for approximately 23% of our
services revenue. In 1998, our five largest clients accounted for approximately
70% of our services revenue, with Maersk Line accounting for approximately 31%
of our services revenue, U S WEST accounting for approximately 12% of our
services revenue and E*Trade and CSX Technology each accounting for
approximately 10% of our services revenue.  In 1999, our five largest clients
accounted for approximately 71% of our services revenue, with Maersk Line
accounting for approximately 26% of our services revenue and E*Trade accounting
for approximately 24% of our services revenue. We believe that we will continue
to derive a significant portion of our revenue from a limited number of clients.
Any cancellation, deferral or significant reduction in work performed for these
principal clients or a significant number of smaller clients could have a
material adverse effect on our business, financial condition and results of
operations.

Marketing and sales

                                      -7-
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    We market and sell our services through multiple channels including our
client service organization, our marketing organization, long-term client
relationships, relationships with industry analysts, marketing events and public
relations. We also cultivate relationships with hardware and software suppliers
such as IBM, Sun Microsystems, Hewlett Packard and others to identify project
opportunities consistent with our capabilities and to provide us with client
leads. For example, some of these suppliers maintain sales forces in the
hundreds and thousands with a significant presence at large companies around the
world. These suppliers also introduce us to clients and assist in our efforts to
secure business opportunities. In return, we provide them with solution
capabilities, which are of high importance to their clients. In addition, in
connection with our marketing alliance with GlobalCenter Inc., we are working to
develop new services and solution offerings and identify new client
opportunities.

    While our account managers, marketing organization and relationships with
hardware and software suppliers are used to generate business with new accounts,
we also have an organization of relationship managers who are responsible for
managing relationships with existing clients. Relationship managers seek to
ensure client satisfaction, the successful delivery of projects and are able to
identify additional opportunities for our services at a client site.

Industry Segments

    See Note 11 "Segment Reporting" of the Notes to Consolidated Financial
Statements included in Part IV of this Form 10-K for industry segment
information.

Competition

    The business areas in which we compete are intensely competitive and subject
to rapid technological change. We expect the competition to continue and
intensify. Our competitors fall into four major categories:

    .  large information technology consulting services providers, such as
       Andersen Consulting, KPMG, PricewaterhouseCoopers, IBM, EDS and CSC;

    .  mid-tier information technology services providers, such as Cambridge
       Technology Partners and Sapient;

    .  Internet professional service providers, such as iXL, US Interactive,
       Proxicom, Viant and Scient; and

    .  internal information technology departments of current and potential
       clients.

    Many of our competitors have longer operating histories and client
relationships, greater financial, technical, marketing and public relations
resources, larger client bases and greater brand or name recognition than we
have.  Our competitors may be able to respond more quickly to technological
developments and changes in clients' needs.

    Further, there are low barriers to entry into our business. We do not own
any technologies that preclude or inhibit competitors from entering our
industry. Existing or future competitors may independently develop and patent or
copyright technologies that are superior or substantially similar to our
technologies. The costs to develop and to provide information technology
services are relatively low. Therefore, we expect to continue to face additional
competition from new entrants into our industry.

    We believe that the principal competitive factors in our business are:

    .  client value and service;

    .  the reputation and experience of professionals delivering solutions;

    .  the success and reliability of the delivered solution;

                                      -8-
<PAGE>

    .  technical knowledge and creative skills; and

    .  the ability to attract and retain professionals.

We believe that we presently compete favorably with respect to each of these
factors. The market for our services is evolving, however, and we cannot be
certain that we will compete successfully in the future.

Employees

    As of December 31, 1999, we had 281 employees. We believe our relationship
with our employees is satisfactory. None of our employees is represented by a
union. Generally, our employees are retained on an at-will basis.

Risks Related to Our Business

The following important factors, among others, could cause actual results to
differ materially from those contained in forward-looking statements made in
this Annual Report on Form 10-K or presented elsewhere by management from time
to time

Inability to manage our growth could have a material adverse effect on the
quality of our services, our ability to retain key personnel, and our business

    Our growth has placed significant demands on our management and other
resources. Our revenues increased approximately 28% from 1997 to 1998, and 76%
from 1998 to 1999.  Our staff increased from 120 full-time employees at December
31, 1997 to 281 at December 31, 1999. Our future success will depend on our
ability to manage our growth effectively, including:

    .  continuing to train, motivate, manage and retain our existing employees
       and attract and integrate new employees;

    .  improving our business development capabilities;

    .  maintaining high rates of employee utilization;

    .  accurately estimating time and resources for engagements;

    .  developing and improving our operational, financial, accounting and other
       internal systems and controls; and

    .  maintaining project quality.

    Our management has limited experience managing a business of Tanning's size.
If we are unable to manage our growth and projects effectively, it could have a
material adverse effect on the quality of our services, our ability to retain
key personnel, and our business and results of operations.

If our revenues do not increase proportionately with our planned increases in
costs and capital expenditures, then our results of operations and liquidity
will suffer

    In anticipation of business growth, we expect to incur costs and expend
capital. We can give no assurances that we will continue to grow, or that we
will grow at a pace that will support these costs and expenditures. To the
extent revenues do not increase at a rate commensurate with these additional
costs and expenditures, our results of operations and liquidity could be
materially and adversely affected. In particular, we expect that our plans for
increases in expenses and capital expenditures over the next year to support our
growth will negatively impact profitability.

                                      -9-
<PAGE>

The loss of our professionals, or the inability to recruit additional
professionals, would make it difficult to complete existing projects and bid for
new projects, which could cause our business to suffer

    Our business is labor intensive, and our success depends on identifying,
hiring, training and retaining experienced, knowledgeable professionals. If a
significant number of our current employees or any of our project managers or
senior technical personnel leave, we may be unable to complete or retain
existing projects or bid for new projects of similar scope and revenue. In
addition, former employees may compete with us in the future.

    Even if we retain our current employees, our management must continually
recruit talented professionals in order for our business to grow. There is
currently a shortage of qualified project managers and senior technical
personnel in the information technology services field, and this shortage is
likely to continue. Furthermore, there is significant competition for employees
with the skills required to perform the services we offer. We cannot give any
assurances that we will be able to attract a sufficient number of qualified
employees in the future, or that we will be successful in motivating and
retaining the employees we are able to attract. If we cannot attract, motivate
and retain qualified professionals, our business, financial condition and
results of operations will suffer.

We depend on our key personnel, and the loss of any key personnel may harm our
ability to obtain and retain client engagements, maintain a cohesive culture and
compete effectively

    We believe that our success will depend on the continued employment of our
key management personnel. This dependence is particularly important to our
business because personal relationships are critical to obtaining and
maintaining client engagements and maintaining a cohesive culture. If one or
more members of our key management personnel were unable or unwilling to
continue in their present positions, such persons would be very difficult to
replace and our business could be seriously harmed. In addition, if any of these
key employees joins a competitor or forms a competing company, some of our
clients might choose to use the services of that competitor or new company
instead of our own. Furthermore, clients or other companies seeking to develop
in-house information technology services capabilities may hire away some of our
key employees. This would not only result in the loss of key employees but could
also result in the loss of a client relationship or a new business opportunity.
Any of the foregoing could seriously harm our business.

We depend heavily on our principal clients; a significant reduction in the work
we perform for any of them could harm our revenues and earnings

    We derive a large portion of our services revenue from a limited number of
clients. Services revenue constitutes substantially all of our revenues. In
1997, our five largest clients accounted for approximately 81% of our services
revenue, with Ameritech accounting for approximately 41% of our services revenue
and Oxford Health Plans accounting for approximately 23% of our services
revenue. In 1998, our five largest clients accounted for approximately 70% of
our services revenue, with Maersk Line accounting for approximately 31% of our
services revenue, U S WEST accounting for approximately 12% of our services
revenue and E*Trade and CSX Technology each accounting for approximately 10% of
our services revenue. In 1999, our five largest clients accounted for
approximately 71% of our services revenue, with Maersk Line accounting for
approximately 26% of our services revenue and E*Trade accounting for
approximately 24% of our services revenue. The volume of work performed for our
principal clients may not be sustained from year to year, and there is a risk
that these principal clients may not retain us in the future. Any cancellation,
deferral or significant reduction in work performed for these principal clients
or a significant number of smaller clients could have a material adverse effect
on our financial condition and results of operations. See "Business--Clients"
for more information relating to our clients.

We may fail to accurately estimate the time and resources necessary for the
performance of our services, which could reduce the profitability of, or result
in a loss on, our projects and damage our customer relationships

    To date, we have generally provided services to our clients on a time and
materials basis, although we sometimes work on a fixed-fee or capped fee basis.
In the future, we anticipate that an increasing percentage of our client
engagements will be subject to arrangements that are not solely based on time
and materials, including

                                      -10-
<PAGE>

fixed-fee, value-based or other arrangements. Some of our fixed-fee, fixed-time
arrangements provide for significant penalties for late delivery. Because we
work with complex technologies in compressed timeframes and because we have
limited experience in pricing engagements on these terms, it can be difficult to
judge the time and resources necessary to complete a project. Our failure to
accurately estimate the time and resources required for a project, or our
failure to complete our obligations in a manner consistent with the project plan
upon which our fixed-fee or other arrangements are based, could reduce the
profitability of, or result in a loss on, our projects if we are required to
devote additional resources to project engagements for which we will not receive
additional compensation or are assessed penalties, and could damage our customer
relationships and our reputation. For example, difficulties encountered in
performing a project engagement entered into in 1999 on a fixed fee basis
resulted in an adverse effect on our gross profits in the second half of 1999,
because we were required to devote more resources to perform the work than we
had originally anticipated. We expect that this project will continue to have an
adverse effect on our results. For a further discussion of the impact of this
project, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Our clients may terminate projects before completion; this could adversely
affect our revenues and earnings

    In general, our clients may terminate project engagements upon limited
notice and without significant penalty. This makes our results of operations
difficult to predict. Our clients' termination of our project engagements would
result in lower revenues and underutilized employees and, as a result, would
negatively affect our earnings. For example, a client's termination of a
significant project in the fourth quarter of 1997 adversely affected revenues,
employee utilization and earnings in the first half of 1998. For a further
discussion of the impact of this project termination, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Our international operations and expansion involve risks relating to
difficulties in complying with foreign laws and regulations, including complex
foreign tax requirements, staffing difficulties, currency related risks,
difficulties in collecting accounts receivable, and seasonal reductions in
business activity; these risks could result in increased costs, unanticipated
liabilities, operational difficulties and decreases in revenues and earnings.

    We currently have significant operations in Europe and intend to expand our
business to other regions, as attractive opportunities arise. Revenues from our
existing international operations represented 35% of services revenue in 1998
and 34% of services revenue in 1999.  We may incur significant costs in
connection with our international expansion.

    We also encounter risks in doing business in foreign countries, including:

    .  lack of ability to determine the taxation to which we or our employees
       may be subject in foreign countries, including the failure to evaluate
       complex payroll tax regulations of foreign countries, which could cause
       us to underestimate our tax liabilities;

    .  increased costs due to the need to comply with visa or other work permit
       requirements, which may impair our ability to move personnel between
       countries and properly staff our projects;

    .  to the extent we bill for our services in the functional currency of our
       foreign subsidiaries, any depreciation of such currencies against the
       dollar would negatively impact our results of operations;

    .  expenses incurred to modify our accounting systems as we do more business
       in the countries that are converting their currencies to the euro;

    .  difficulties in staffing and managing foreign offices, such as our office
       in Chertsey, England, as a result of, among other things, distance and
       time zone differences;

    .  seasonal reductions in business activity, such as the August slowdown in
       Europe, which may adversely impact our business and results of
       operations; and

                                      -11-
<PAGE>

    .  longer payment cycles and problems in collecting accounts receivable,
       which may adversely impact our results of operations due to required
       allowances for doubtful accounts and increased cost of collection
       efforts.

Any of these factors could result in increased costs, unanticipated liabilities,
operational difficulties and decreases in revenues and earnings.

Quarter to quarter fluctuations in our revenues and earnings could affect the
market price of our common stock

    Our revenues and earnings may vary from quarter to quarter as a result of a
number of factors, including:

    .  number, size and scope of client engagements commenced or completed
       during a quarter;

    .  employee utilization rates;

    .  unanticipated project terminations, delays or deferrals;

    .  the accuracy of estimates of resources required to complete ongoing
       projects; and

    .  the contractual terms and degree of completion of projects in which we
       are engaged.

    Because a high percentage of our expenses, particularly compensation and
rent, are fixed in advance of any particular quarter, any of the factors listed
above could cause significant variations in our earnings in any given quarter.
Any decline in revenues or earnings or a greater than expected loss for any
quarter could materially adversely affect the market price of our common stock,
even if not reflective of any long-term problems with our business.

Competition from bigger, more established competitors who have greater financial
and technical resources, and from new entrants, could cause us to lose current
or future business opportunities and harm our business, results of operations
and ability to grow

    The business areas in which we compete are intensely competitive and subject
to rapid technological change. We expect competition to continue and intensify.
Our competitors fall into four major categories:

    .  large information technology consulting services providers, such as
       Andersen Consulting, KPMG, PricewaterhouseCoopers, IBM, EDS and CSC;

    .  mid-tier information technology services providers, such as Cambridge
       Technology Partners and Sapient;

    .  Internet professional service providers, such as iXL, US Interactive,
       Proxicom, Viant and Scient; and

    .  internal information technology departments of current and potential
       clients.

    Many of our competitors have longer operating histories and client
relationships, greater financial, technical, marketing and public relations
resources, larger client bases and greater brand or name recognition than we
have. Our competitors may be able to respond more quickly to technological
developments and changes in clients' needs.

    Further, there are low barriers to entry into our business. We do not own
any technologies that preclude or inhibit competitors from entering our
industry. Existing or future competitors may independently develop and patent or
copyright technologies that are superior or substantially similar to our
technologies. The costs to develop and provide information technology consulting
services are relatively low. Therefore, we expect to continue to face additional
competition from new entrants into our industry. See "Business--Competition" for
a further discussion of competition within our industry.

                                      -12-
<PAGE>

Expansion of our solutions and service offerings may not be successful and we
may lose opportunities to expand our business

    In addition to growing our business within the disciplines on which we
currently focus, an element of our strategy is to expand our solutions in the
area of supply chain management, knowledge management and distributed
applications and content and our service offerings in areas such as web and
application hosting, business consulting, process innovation and creative
design. Successful expansion in these areas will require:

    .  attracting, integrating and retaining talented personnel;

    .  successfully marketing and delivering these services; and

    .  successfully establishing relationships with vendors and technology
       providers.

    Failure to develop additional solutions and service offerings on a timely
basis could cause us to lose opportunities for business with both existing and
potential clients. We cannot assure you that this expansion will be successful.

We may have difficulty responding to changing technology, industry standards and
client preferences, which could cause us to lose business

    Our success will depend in part on our ability to develop information
technology solutions that keep pace with continuing changes in technology,
evolving industry standards and changing client preferences. We cannot give any
assurances that we will be successful in addressing these developments on a
timely basis or at all. Our failure to respond quickly and cost-effectively to
new developments could cause us to lose current and potential business
opportunities and have a material adverse effect on our business and results of
operations.

    In particular, we have derived a significant portion of our revenues from
projects based primarily on:

    .  open system technologies, which are standards-based, non-proprietary
       technologies;

    .  multi-tier software architecture, in which the key layers of an
       application system are separated and optimized independently to improve
       performance, scalability and reliability;

    .  web-based architectures; and

    .  electronic commerce, generally.

    These areas are continuing to develop and are subject to rapid change. Any
factors negatively affecting the acceptance of information processing systems
using client/server and web-based architectures could have a material adverse
effect on our business, especially if we are unable to develop skills and
replacement technologies for these types of information processing systems.

Our business may suffer if growth in the use of the Internet declines

    Because Internet technologies are central to many of our solutions, our
business depends upon continued growth in the use of the Internet by our
clients, prospective clients and their customers and suppliers. Capacity
constraints caused by growth in Internet usage may, unless resolved, impede
further growth in Internet use. If the number of users on the Internet does not
increase and commerce over the Internet does not become more accepted and
widespread, demand for our services may decrease and our business and results of
operations could suffer. Factors which may affect Internet usage or electronic
commerce adoption include:

    .  actual or perceived lack of security of information;

                                      -13-
<PAGE>

    .  lack of access and ease of use;

    .  congestion of Internet traffic or other usage delays;

    .  inconsistent quality of service;

    .  increases in access costs to the Internet;

    .  excessive government regulation;

    .  uncertainty regarding intellectual property ownership;

    .  reluctance to adopt new business methods;

    .  costs associated with the obsolescence of existing infrastructure; and

    .  actual or perceived lack of economic viability of the Internet commerce
       model.

If we are unable to maintain our reputation and expand our name recognition, we
may have difficulty attracting new business and retaining current clients, and
our business may suffer

    We believe that establishing and maintaining a good reputation and name
recognition are critical for attracting and expanding our client base. We also
believe that the importance of reputation and name recognition will increase due
to the growing number of information technology services providers. If our
reputation is damaged or if potential clients are not familiar with us or the
services we provide, we may become less competitive or lose our market position.
Promotion and enhancement of our name will depend largely on our success in
continuing to provide large, complex, integrated information technology
solutions that provide significant business value. If clients do not perceive
our solutions to be effective or of high quality, our brand name and reputation
will suffer. In addition, if solutions we provide have defects, critical
business functions of our clients may fail, and we would likely suffer adverse
publicity as well as economic liability.

Misappropriation of our intellectual property could harm our reputation, affect
our competitive position and cost us money

    We believe our intellectual property, including our proprietary
methodologies, is important to our success and competitive position. If we are
unable to protect our intellectual property against unauthorized use by others,
our reputation among existing and potential clients could be damaged and our
competitive position adversely affected.

    Our strategies to deter misappropriation could be inadequate in light of the
following risks:

    .  non-recognition of the proprietary nature of or inadequate protection of
       our methodologies in the United States or foreign countries;

    .  undetected misappropriation of our proprietary methodologies;

    .  development of similar software or applications by our competitors; and

    .  unenforceability of the non-competition and confidentiality agreements
       entered into by our key employees.

    If any of these risks materialize, we could be required to spend significant
amounts to defend our rights and our managerial resources could be diverted. In
addition, our proprietary methodologies may decline in value or our rights to
them may not be enforceable. See "Business--Intellectual property rights" for
more information concerning our intellectual property.

                                      -14-
<PAGE>

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

    Although we believe that our services do not infringe on the intellectual
property rights of others, we cannot give any assurances that an infringement
claim will be successfully defended. A successful infringement claim against us
could materially and adversely affect us in the following ways:

    .  we may be liable for damages and litigation costs, including attorneys'
       fees;

    .  we may be enjoined from further use of the intellectual property;

    .  we may have to license the intellectual property, incurring licensing
       fees;

    .  we may have to develop a non-infringing alternative, which could be
       costly and delay projects; and

    .  we may have to indemnify clients with respect to losses incurred as a
       result of our infringement of the intellectual property.

    Regardless of the outcome, an infringement claim could result in substantial
costs, diversion of resources and management attention, clients' termination of
project engagements and harm to our reputation.

Our business and our client relationships may suffer if we have disputes over
our right to resell or reuse intellectual property developed for specific
clients

    A portion of our business involves the development of software applications
for specific client engagements. Ownership of client-specific software is
generally retained by the client, although we retain rights to some of the
applications, processes and other intellectual property developed in connection
with client engagements. Issues relating to the rights to intellectual property
can be complicated. We cannot give any assurances that disputes will not arise
that affect our ability to resell or reuse such applications, processes and
other intellectual property, damage our relationships with our clients, divert
our management's attention or have a material adverse effect on our business,
financial condition and results of operations.

Potential acquisitions may result in, among other things, increased expenses,
difficulties in integrating target companies and diversion of management's
attention

    An element of our strategy includes expanding our solutions and service
offerings and gaining access to new technologies, skills and other resources
through strategic acquisitions and investments when attractive opportunities
arise. Some of the risks that we may encounter in implementing this element of
our strategy include:

    .  expenses and difficulties in identifying potential targets and the costs
       associated with acquisitions that are abandoned before completion;

    .  expenses, delays and difficulties of integrating the acquired company
       into our existing organization and our company's culture;

    .  diversion of management's attention during the acquisition process;

    .  diversion of management's attention following the acquisition process
       where management has options or other equity incentive rights in the
       acquired company;

    .  expenses of amortizing the acquired company's intangible assets, which
       could be significant in light of the high valuations of many companies in
       the information technology industry;

                                      -15-
<PAGE>

    .  impact on our financial condition due to the timing of the acquisition;
       and

    .  expenses of any undisclosed or potential legal liabilities of the
       acquired company, including intellectual property, employment, and
       warranty and product liability-related problems.

If realized, any of these risks could have a material adverse effect on our
business, financial condition and results of operations.

Lack of detailed written contracts could impair our ability to collect fees,
protect our intellectual property and protect ourselves from liability to others

    We try to protect ourselves by entering into detailed written contracts with
our clients covering the terms and contingencies of the project engagement. In
some cases, however, consistent with what we believe to be industry practice,
work is performed for clients on the basis of a limited statement of work or
verbal agreements before a detailed written contract can be finalized. To the
extent that we fail to have detailed written contracts in place, our ability to
collect fees, protect our intellectual property and protect ourselves from
liability to others may be impaired.

Concentration of ownership of our common stock may limit your ability to
influence corporate matters

    Our executive officers and directors, or entities controlled by them, own a
majority of the outstanding shares of our common stock.

    Holders of approximately 61% of the outstanding shares of our common stock
are parties to an agreement under which they have agreed to vote in favor of
their nominees to our board of directors. As a result of their voting power,
they currently have the ability to cause their nominees to be elected. If our
significant stockholders choose to act or vote together on other matters, they
will have the power to control the approval of any other action requiring the
approval of our stockholders, including any amendments to our certificate of
incorporation and mergers, acquisitions or sales of all of our assets. In
addition, without the consent of these stockholders, we could be prevented from
entering into transactions that could be beneficial to us. Also, third parties
could be discouraged from making a tender offer or bid to acquire our company at
a price per share that is above the then-prevailing market price.

Government regulation and legal uncertainties relating to the Internet could
result in decreased demand for our services, increased costs, or otherwise harm
our business

    Increased regulation of the Internet might slow the growth in use of the
Internet, which could decrease demand for our services, increase our cost of
doing business or otherwise harm our business. Congress, federal regulatory
agencies and the states have recently passed legislation or taken other actions
regulating certain aspects of the Internet, including:

    .  on-line content;

    .  interaction with children;

    .  copyright infringement;

    .  user privacy;

    .  taxation;

    .  access charges;

    .  liability for third-party activities;

    .  transmission of sexually explicit material;

                                      -16-
<PAGE>

    .  defamation;

    .  consumer protection; and

    .  jurisdiction.

    Foreign governments have also taken actions to regulate aspects of the
Internet, including user privacy and on-line content. In addition, federal,
state and local governmental organizations as well as foreign governments are
considering other legislative and regulatory proposals that would regulate these
and other aspects of the Internet. We do not know how courts will interpret laws
governing the Internet or the extent to which they will apply existing laws to
the Internet. Therefore, we are not certain how existing or future laws
governing the Internet or applied to the Internet will affect our business.

Year 2000 issues could seriously harm our business as a result of reduced demand
for our services, internal and external operations difficulties, and potential
disputes with, or liabilities to, clients

    The Year 2000 problem refers to system and processing failures of date-
related data arising from the use of two digits by computer-controlled systems,
rather than four digits, to define the applicable year.  To the extent clients'
and potential clients' have experienced problems relating to the Year 2000 issue
and/or continue to expend significant resources to make their current systems
Year 2000 compliant, they may have less funds available to purchase our
services, which could adversely affect our business, financial condition and
results of operations. We also rely, directly and indirectly, on the systems of
business enterprises such as clients, suppliers, utilities, creditors and
financial institutions, both domestic and international, which could be subject
to operational difficulties arising out of Year 2000 issues.  Although to date
we have not experienced, nor have we been advised by any clients, suppliers,
utilities, creditors and financial institutions that they have experienced
problems relating to Year 2000 issues, we can not provide any assurance that
such problems may not arise or be reported to us in the future. Any failure on
the part of our principal internal systems, other business' systems or the
systems that we create for our clients as a result of the Year 2000 problem
could seriously harm our business, reputation, financial condition and results
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000."

Intellectual property rights

    Our success is dependent, in part, upon our proprietary processes,
components, and other intellectual property rights. We do not have any patents
or patent applications pending. We rely on a combination of trade secret,
nondisclosure and other contractual agreements, and copyright and trademark
laws, to protect our proprietary rights. Existing trade secret and copyright
laws afford us only limited protection. We enter into confidentiality agreements
with our employees, generally require that our consultants and clients enter
into similar agreements, and limit access to and distribution of our proprietary
information. In addition, we have entered into non-competition agreements with
certain of our key employees. There can be no assurance that the steps we have
taken in this regard will be adequate to deter misappropriation of our
proprietary information or that we will be able to detect unauthorized use and
take appropriate steps to enforce our intellectual property rights.

    A portion of our business involves the development of software applications
for specific client engagements. Ownership of client-specific software is
generally retained by the client, although we retain some rights to the
applications, processes and intellectual property developed in connection with
client engagements.

                                      -17-
<PAGE>

ITEM 2.  PROPERTIES

    Our principal headquarters is located in Denver, Colorado and comprises
approximately 50,000 square feet. The lease for our headquarters expires in
February 28, 2007 and we have the option to extend the term to February 28,
2017. We also have offices in Phoenix, Arizona; Stamford, Connecticut; San
Diego, California; San Jose, California; Boston, Massachusetts; New York, New
York; Portland, Oregon; Chertsey, England; and Hyderabad, India. We do not own
any real estate. We do not consider any specific leased location to be material
to our operations, and we believe that equally suitable alternative locations
are available in all areas where we currently do business.



ITEM 3.  LEGAL PROCEEDINGS

    We are not a party to any pending material legal proceedings.


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

    None.

                                      -18-
<PAGE>

                                    PART II

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

    (a) Market Price of and Dividends on the Registrant's Common Equity

    Our common stock is quoted on the Nasdaq National Market System under the
symbol "TANN".  The following table sets forth, for the periods indicated, the
high and low closing sale prices for our common stock:

<TABLE>
<CAPTION>
1999:                                                        High                   Low
-----                                                  -----------------     -----------------
<S>                                                    <C>                   <C>
July 23, 1999 through September 30, 1999..........                $31.63                $13.03
Fourth Quarter....................................                $64.63                $23.00
</TABLE>

    As of March 23, 2000, there were approximately 169 holders of record of our
common stock.

    We have never declared or paid any cash dividends on our common stock and do
not expect to declare dividends on our common stock in the foreseeable future.
Payment of any future dividends will depend upon our earnings and capital
requirements, and other factors the Board of Directors considers appropriate. We
currently intend to retain our earnings, if any, to support future growth and
expansion. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."

    (b)(1) Recent Sales of Unregistered Securities

    We have issued and sold the securities listed below during the period of
this report. All sales were made in reliance on Section 4(2) of the Securities
Act and/or Regulation D or Rule 701 promulgated under the Securities Act and
were made without general solicitation or advertising. All share numbers set
forth below reflect the stock splits described in Note 4 to the Financial
Statements, which are included in this Annual Report on Form 10-K.

    1.  During the period from January 1, 1999 to July 22, 1999 we issued and
        sold 587,008 shares of common stock upon exercise of options granted
        under our 1997 and 1998 stock option plans for an aggregate
        consideration of $2,284,724 in cash. The weighted average exercise price
        of options associated with these share purchases was $3.89.

    2.  During the period from January 1, 1999 to July 22, 1999 we issued and
        sold 59,094 shares of common stock to our employees pursuant to our 1999
        stock purchase plan for an aggregate consideration of $315,8 76.

    3.  On February 1, 2000 we issued and sold 229,227 shares of common stock to
        GlobalCenter Inc. for an aggregate consideration of $10,000,028.

    (b)(2) Use of Proceeds from Registered Securities

    On July 28, 1999, we completed an initial public offering of common stock,
par value $.01 per share, pursuant to a Registration Statement on Form S-1 (File
No. 333-78657) in which we sold 4,000,000 shares of common stock at $15.00 per
share. On August 23, 1999, we issued an additional 310,920 shares of common
stock in connection with the exercise of the underwriters' over-allotment
option. Proceeds to us from these transactions, net of underwriting discounts
and costs of the offering, were approximately $57.8 million. Through December
31, 1999, the proceeds of the offering have been applied as follows:

                                      -19-
<PAGE>

<TABLE>
<S>                                                             <C>
Aggregate offering price..................................            $64,664,000

Direct and indirect payments to others for:
   Underwriting discounts and commissions.................            $ 4,527,000
   Other offering expenses................................            $ 2,298,000
</TABLE>

    The net proceeds of the offering (including the net proceeds of the
underwriters' exercise of the over-allotment option) have been invested in
short-term, interest bearing, investment grade obligations, pending their use
for other purposes. None of the net proceeds of the offering were paid directly
or indirectly to any of our directors, officers, general partners or their
associates, persons owning 10% or more of any class of our equity securities or
our affiliates. We expect to use such proceeds for working capital and general
corporate purposes.

                                      -20-
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

    The following selected financial data should be read in conjunction with,
and are qualified by reference to, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and the notes to our consolidated financial statements, each of which
is included in this Annual Report on Form 10-K. The selected financial data
presented are for the five years from our formation in February 1995 through
year end 1999. The statement of operations data for the three-year period ended
December 31, 1999 and the balance sheet information as of December 31, 1998 and
1999 are derived from our financial statements, which have been audited by Ernst
& Young LLP, independent auditors, and are included elsewhere in this Annual
Report on Form 10-K. The statement of operations data for the year ended
December 31, 1996 and the balance sheet data as of December 31, 1996 and 1997
are derived from our audited financial statements, which are not included in
this Annual Report on Form 10-K. The statement of operations data for the year
ended December 31, 1995 and the balance sheet data as of December 31, 1995 are
derived from our unaudited financial statements, which are not included in this
Annual Report on Form 10-K.

<TABLE>
<CAPTION>

                                                                     Year ended December 31,
                                                     --------------------------------------------------------
                                                      1995     1996        1997         1998         1999
                                                     ------  --------  ------------  -----------  -----------
                                                         (in thousands, except share and per share data)
Statement of Operations Data:
<S>                                                  <C>     <C>       <C>           <C>          <C>
Services revenue...................................  $4,815  $12,763   $    25,235   $    30,313  $    58,464
Product sales......................................      --       46           872         2,976           --
                                                     ------  -------   -----------   -----------  -----------
  Net revenues.....................................   4,815   12,809        26,107        33,289       58,464
Project personnel costs............................   2,017    6,569        14,722        14,941       28,148
                                                     ------  -------   -----------   -----------  -----------
  Gross profit.....................................   2,798    6,240        11,385        18,348       30,316
Selling, marketing and administrative..............     574    2,055         7,856        12,178       27,833
Product development costs..........................      --      431         1,608         2,786           --
Sign-on bonus related to stock purchase
 agreement.........................................      --       --         2,117            --           --
Management fees--related parties...................   1,270      902            73            --           --
                                                     ------  -------   -----------   -----------  -----------
Income (loss) from operations......................     954    2,852          (269)        3,384        2,483
Interest income (expense) and other, net...........      --      (29)          130           285        1,681
                                                     ------  -------   -----------   -----------  -----------
Income (loss) before income taxes..................     954    2,823          (139)        3,669        4,164
Income tax provision (benefit).....................      --       --          (212)        1,366        1,715
                                                     ------  -------   -----------   -----------  -----------
Net income.........................................  $  954  $ 2,823   $        73   $     2,303  $     2,449
                                                     ======  =======   ===========   ===========  ===========
Basic earnings per
 share.............................................                          $0.01         $0.15        $0.14
                                                                       ===========   ===========  ===========
Basic weighted average shares
 outstanding.......................................                     13,718,710    14,968,974   17,556,487
                                                                       ===========   ===========  ===========
Diluted earnings per share.........................                          $0.01         $0.15        $0.12
                                                                       ===========   ===========  ===========
Diluted weighted average shares
 outstanding.......................................                     13,718,710    15,232,236   20,032,171
                                                                       ===========   ===========  ===========
Gross profit from services.........................  $2,798  $ 6,194   $    10,513   $    15,372  $    30,316
Income from operations from
 services..........................................  $  954  $ 3,238   $       467   $     3,194  $     2,483
</TABLE>

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                        --------------------------------------------------------
                                                                           1995        1996        1997       1998       1999
                                                                        ----------  ----------  ----------  ---------  ---------
                                                                                             (in thousands)
Balance Sheet Data:
<S>                                                                     <C>         <C>         <C>         <C>        <C>
Cash and cash equivalents.............................................      $   47     $1,612      $ 7,769    $10,446    $68,617
Working capital.......................................................         840        (82)      10,204     14,005     78,235
Total assets..........................................................       2,118      3,233       16,846     23,923     94,368
Long-term debt, net of current portion................................         203      1,000           --        460         --
Total stockholders' equity............................................       1,100         83       12,737     16,772     84,602
</TABLE>

                                      -21-
<PAGE>

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

    The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the notes to our consolidated financial
statements, each of which is included in this Annual Report on Form 10-K. This
Annual Report on Form 10-K contains forward-looking statements relating to
future events and our future financial performance. Actual results could be
significantly different from those discussed in this Annual Report on Form 10-K.
Factors that could cause or contribute to such differences include those
summarized in the section entitled "Business -Risks Related To Our Business," as
well as those discussed in other sections of this Annual Report on Form 10-K.

Overview

    Our revenue is comprised primarily of fees generated for professional
services. To date, we have generally provided services to our clients on a time
and materials basis, although we sometimes work on a fixed-fee basis. Under time
and materials contracts, we recognize revenue as services are provided. Under
fixed-fee contracts, we recognize revenue on a percentage of completion basis.
In the future, we anticipate that an increasing percentage of our client
engagements will be subject to arrangements that are not solely based on time
and materials, including fixed-fee, value-based or other arrangements.  We are
generally reimbursed for reasonable expenses under our contracts.

    Our revenue from foreign operations represents revenue for professional
services performed for clients outside the United States. Revenue from foreign
operations makes a significant contribution to our total services revenue and we
anticipate continued growth in revenue from foreign operations.  Foreign
operations represented approximately 35% of services revenues in 1998 and 34% of
services revenues in 1999.

    Revenue from a limited number of clients has comprised a very substantial
portion of our revenues and is expected to represent a very substantial portion
of our revenues in the foreseeable future. In 1997, our five largest clients
accounted for approximately 81% of our services revenue. In 1998, our five
largest clients accounted for approximately 70% of our services revenue. In
1999, our five largest clients accounted for approximately 71% of our services
revenue. Any cancellation, deferral or significant reduction in work performed
for these principal clients or a significant number of smaller clients could
have a material adverse effect on our business, financial condition and results
of operations. Historically, we have been able to collect the applicable
accounts receivable for work performed up to the termination date from clients
that have terminated projects. See "Business--Clients."

    In 1998, we had revenue from both services and, to a lesser extent, product
sales. We completed the sale of the rights to one of our software products in
the third quarter of 1998.  There were no product sales during 1999 as we have
shifted our business focus to concentrate solely on generating revenues from
services.

    Project personnel costs represent our most significant expense and consist
primarily of salaries, bonuses and employee benefits for company personnel
dedicated to client assignments, and fees paid to subcontractors for work
performed on our projects. Subcontractors generally cost us more than our own
project personnel; consequently, we usually generate lower gross profit margins
by using subcontractors. Non-billable time incurred by our project personnel
resulting from start-up time for new hires and training time incurred to upgrade
the skills of existing staff may cause gross profit margins to decrease.  We
plan to increase the number of our project personnel in order to support our
planned revenue growth.

    Selling, marketing and administrative expenses consist primarily of
salaries, bonuses and employee benefits for non-project personnel, occupancy
costs, staff recruiting costs, travel expenses, depreciation expenses and
promotional costs. We expect selling, marketing and administrative expenses to
increase as we expand our sales force, open new offices, increase our recruiting
efforts and incur additional costs related to the growth of our business and
operation as a public company.

    In anticipation of business growth, we expect to incur costs and expend
capital. We can give no assurances that we will continue to grow, or that we
will grow at a pace that will support these costs and expenditures. To the
extent

                                      -22-
<PAGE>

revenues do not increase at a rate commensurate with these additional costs and
expenditures, our results of operations and liquidity could be materially and
adversely affected. In particular, we expect that our plans for increases in
expenses and capital expenditures over the next year to support our growth will
negatively impact profitability.

    Our predecessor is Tanning Technology Group, LLC, which was formed on
February 8, 1995 as a result of the combination of four entities affiliated with
our co-founders, Larry G. Tanning, Bipin Agarwal, Toni S. Hippeli and Stephen
Brobst. Pursuant to a stock purchase agreement entered into with AEA Tanning
Investors Inc., the managing member of TTC Investors I LLC, TTC Investors IA
LLC, TTC Investors II LLC and TTC Investors IIA LLC (together with AEA Tanning
Investors Inc., the "TTC Investors Group"), our predecessor was converted into a
Delaware corporation and the TTC Investors Group purchased, between January 1997
and June 1998, a total of 5,696,770 shares of our common stock for an aggregate
purchase price of $14.6 million.

Results of operations

    The following table presents the relative composition of revenue and
selected statements of operations data as a percentage of revenue, as well as
certain other revenue and profitability statistics.

<TABLE>
<CAPTION>


                                                                                   Year ended December 31,
                                                                         --------------------------------------------
                                                                              1997           1998           1999
                                                                         --------------  -------------  -------------
Statement of Operations Data:
<S>                                                                      <C>             <C>            <C>
Services revenue.......................................................             97%            91%           100%
Product sales..........................................................              3              9              0
                                                                         --------------  -------------  -------------
 Net revenues..........................................................            100            100            100
Project personnel costs................................................             56             45             48
                                                                         --------------  -------------  -------------
 Gross profit margin...................................................             44             55             52

Selling, marketing and administrative..................................             30             37             48
Product development costs..............................................              6              8              0
Sign-on bonus related to stock purchase agreement......................              8              0              0
Management fees--related parties.......................................              0              0              0
                                                                         --------------  -------------  -------------
Income (loss) from operations..........................................             (1)            10              4
Interest income and other, net.........................................              0              1              3
                                                                         --------------  -------------  -------------
Income (loss) before income taxes......................................             (1)            11              7
Income tax provision (benefit).........................................             (1)             4              3
                                                                         --------------  -------------  -------------
Net income.............................................................              0%             7%             4%
                                                                         ==============  =============  =============
Growth in net revenues.................................................            104%            28%            76%
Growth in services revenue.............................................             98             20             93
Gross profit margin from services......................................             42             51             52
Income from operations from services...................................              2             11              4
</TABLE>


    Comparison of years ended December 31, 1998 and 1999

    Net revenues

    Our net revenues increased $25.2 million, or 76%, to $58.5 million in 1999
from $33.3 million in 1998.  The increase in services revenue of 93% in 1999
reflects increases in both the size and number of client projects. In 1998, we
earned revenues of $3.0 million from the sale of software products; there was no
revenue from product sales in 1999. The product sales in 1998 included the sale
of the rights to certain software products. Revenues derived from our five
largest clients as a percentage of total net revenues were 71% in 1999 and 65%
in 1998.

                                      -23-
<PAGE>

Project personnel costs

    Project personnel costs increased $13.2 million, or 88%, to $28.1 million in
1999 from $14.9 million in 1998. The increase in project personnel costs in 1999
was due to an increase in project personnel from 107 at the end of 1998 to 207
at the end of 1999. The gross profit margin from services increased from 51% in
1998 to 52% in 1999 as a result of improved utilization and increased average
billing rates.  The gross profit margin from services in 1999 was adversely
affected by difficulties encountered in performing a project engagement entered
into in 1999 on a fixed fee basis, because we were required to devote more
resources to perform the work than we had originally anticipated.  Approximately
6% of total revenues were attributable to this project during 1999, a proportion
that is likely to continue or increase in the foreseeable future.  We expect
that this project will continue to have an adverse effect on our results as we
work to improve the efficiency of our delivery on this project, and make
appropriate modifications in the terms of the engagement.

Selling, marketing and administrative

    Selling, marketing and administrative expenses increased $15.6 million, or
128%, to $27.8 million in 1999 from $12.2 million in 1998. Selling, marketing
and administrative expenses increased as a percentage of revenues from 37% in
1998 to 48% in 1999. These increases were primarily a result of our decision to
expand our selling and marketing group and the administrative staff to support
revenue growth. Also contributing to the increase in staffing expenses of $9.7
million were increases in occupancy costs of $1.4 million and increases in
depreciation expense of $0.6 million associated with fixed asset additions
during 1999. Our sales, marketing and administrative staff grew from 37
employees at the end of 1998 to 74 employees at the end of 1999.

Product development costs

    We incurred costs associated with software product sales of $2.8 million
during 1998, or 8% of net revenues. No such costs were incurred in 1999. We have
no plans to continue the development of software for resale purposes.

Provision for (benefit from) income taxes

    Our provision for income taxes increased to approximately $1.7 million on
pre-tax profits of $4.2 million for 1999 compared to a tax provision of
approximately $1.4 million on pre-tax profits of $3.7 million in 1998. Our
effective tax rate in 1999 was 41%.

Comparison of years ended December 31, 1997 and 1998

Net revenues

    Our net revenues increased $7.2 million, or 28%, to $33.3 million in 1998
from $26.1 million in 1997. The increase in services revenue of 20% in 1998
reflects increases in both the size and number of client projects. Utilization
and revenues were adversely affected for the first half of 1998, principally as
a result of a significant project termination in the fourth quarter of 1997
following a change in the client's strategic plans due in part to regulatory
changes. As a result of this termination, we generated $5.7 million less
revenues from this client in the first half of 1998 than we did in the second
half of 1997, without a proportionate decrease in project personnel costs.
Utilization and revenues improved in the second half of 1998 as new projects
commenced, including additional work for the same client. Our net revenues from
foreign operations increased $7.5 million, or 253%, from $3.0 million in 1997 to
$10.5 million in 1998. In 1997, we earned revenues of $0.9 million from the sale
of software products compared to $3.0 million earned in 1998. The software sales
in 1998 included the sale of the rights to certain software products. Revenues
derived from our five largest clients as a percentage of total net revenues were
65% in 1998 and 78% in 1997.

Project personnel costs

    Project personnel costs increased $0.2 million, or 1%, to $14.9 million in
1998 from $14.7 million in 1997. The increase in project personnel costs in 1998
was due to an increase in project personnel from 81 at the end of 1997 to

                                      -24-
<PAGE>

107 at the end of 1998, which was nearly offset by a decrease in fees paid to
subcontractors. The gross profit margin from services increased from 42% in 1997
to 51% in 1998 as a result of improved utilization and a shift in staffing mix
to using fewer subcontractors and more internal project personnel.

Selling, marketing and administrative

    Selling, marketing and administrative expenses increased $4.3 million, or
55%, to $12.2 million in 1998 from $7.9 million in 1997. Selling, marketing and
administrative expenses increased as a percentage of revenues from 30% in 1997
to 37% in 1998. These increases were primarily a result of our decision to
expand our selling and marketing group and the administrative staff to support
revenue growth. Also contributing to the increase in staffing expenses of $2.2
million were increases in occupancy costs of $0.6 million and increases in
depreciation expense of $0.8 million associated with fixed asset additions
during 1998. Our sales, marketing and administrative staff grew from 28
employees at the end of 1997 to 37 employees at the end of 1998.

Product development costs

    We incurred costs associated with software product sales of $1.6 million in
1997 and $2.8 million in 1998, representing 6% of 1997 net revenues and 8% of
1998 net revenues. We have no plans to continue the development of software for
resale purposes.

Sign-on bonus related to stock purchase agreement

    In conjunction with the stock purchase agreement entered into with the TTC
Investors Group, we paid sign-on bonuses aggregating $2.1 million in order to
retain the members and certain employees of our predecessor. This expense was a
single occurrence in 1997 and was not incurred in any other periods reported.

Management fees--related parties

    We incurred management fees of $73,000 to members of our predecessor in
January 1997. No management fees were incurred after the formation of our
company in January 1997. These fees represent payment for services performed on
behalf of our predecessor. Subsequent to the formation of our company, the
payments made to members of our predecessor are reflected in salary expenses in
selling, marketing and administrative expenses, or as project personnel cost for
billable time incurred by these employees.

Provision for (benefit from) income taxes

    Our provision for income taxes increased to approximately $1.4 million on
pre-tax profits of $3.7 million for 1998 compared to a tax benefit of
approximately $0.2 million on pre-tax losses of $0.1 million in 1997. Our
effective tax rate in 1998 was 37%. The 1997 tax benefit is the result of 11
months of net (loss) from operations before taxes of $0.4 million and the
implications of a change in that status after the merger of Tanning Technology
Group, LLC into Tanning Technology Corporation on January 31, 1997. No income
taxes were paid by Tanning Technology Group since members included their
distributive shares of revenue and deductions of the limited liability company
in their personal capacities, pursuant to Subchapter K of the Internal Revenue
Code.

Quarterly results

    The following table presents our unaudited quarterly results of operations
for 1999. We derived this data from our unaudited consolidated financial
statements, and, in the opinion of management, they include all necessary
adjustments, which consist only of normal recurring adjustments necessary to
present fairly the financial results for the periods. Results of operations for
any fiscal quarter do not necessarily indicate what results may be for any
future period.

                                      -25-
<PAGE>

<TABLE>
<CAPTION>
                                                                      Three months ended
                                         --------------------------------------------------------------------------
                                             March 31,           June 30,         September 30,       December 31,
                                                1999               1999                1999               1999
                                         ----------------   ----------------    ----------------   ----------------
<S>                                        <C>                <C>                 <C>                <C>
                                                              (in thousands)
Services revenue......................            $11,305            $13,214             $16,005            $17,940
Project personnel costs...............              5,492              6,378               7,745              8,533
                                         ----------------   ----------------    ----------------   ----------------
   Gross profit.......................              5,813              6,836               8,260              9,407
Selling, marketing and administrative.              4,679              6,504               7,936              8,714
                                         ----------------   ----------------    ----------------   ----------------
Income from operations................              1,134                332                 324                693
Interest income and other, net........                163                113                 489                916
                                         ----------------   ----------------    ----------------   ----------------
Income before income taxes............              1,297                445                 813              1,609
Income tax provision..................                478                157                 364                716
                                         ----------------   ----------------    ----------------   ----------------
Net income............................            $   819            $   288             $   449            $   893
                                         ================   ================    ================   ================

</TABLE>

Stock-based compensation

    We have elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations in
accounting for our employee stock options. Under Accounting Principles Board
Opinion No. 25, because the exercise price of our employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recorded. We have adopted the disclosure-only provisions of the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 123.

Liquidity and capital resources

    During 1998, we financed our operations and investments in property and
equipment primarily through cash generated from operations and the sale of
common stock.  During 1999, we had a bank note outstanding of approximately
$520,000, the proceeds of which were used to acquire office furniture and
fixtures. We repaid this note during the third quarter and had no outstanding
debt as of December 31, 1999.

    On July 28, 1999, we completed a public offering of common stock which
resulted in the issuance of 4,000,000 shares of common stock. On August 23,
1999, we issued an additional 310,920 shares of common stock in connection with
the exercise of the underwriters' over-allotment option. Proceeds to our company
from these transactions, net of underwriting discounts and costs of the
offering, were approximately $57.8 million. The net proceeds of the offering
(including the net proceeds of the underwriters' exercise of the over-allotment
option) have been invested in short-term, interest bearing, investment grade
obligations. Based on our current business plan, we believe that the cash
provided from operations, cash on hand, and the proceeds from this offering will
be sufficient to meet our cash requirements at least through the end of 2000.

    On February 1, 2000, we issued and sold 229,227 shares of our common stock
to GlobalCenter Inc. for a total purchase price of $10 million.

    Cash and cash equivalents increased to $68.6 million at December 31, 1999
from $10.4 million at December 31, 1998. The increase was primarily due to $63.3
million in net proceeds from the issuance of common stock and the exercise of
stock options, partially offset by investments in property and equipment, and a
$0.95 million net decrease in cash from operating activities. Proceeds from the
issuance of common stock in connection with the exercise of stock options and
purchases under our stock purchase plan amounted to $5.48 million during 1999.
We currently have no material commitments for capital expenditures.

    We anticipate that we will expend capital to develop the infrastructure
needed to support our future growth. As a result, we expect to use cash from
operations and the net proceeds from equity offerings to meet capital
expenditures and working capital necessary to support our growth. We currently
have no material commitments for capital expenditures. Based on our current
business plan, we believe that the cash provided from operations, cash on


                                      -26-
<PAGE>

hand and our net proceeds from equity offerings will be sufficient to meet our
cash requirements, including for working capital and capital expenditures, at
least through the end of 2000.

Year 2000

    Until recently, computer programs were written to store only two digits of
date-related information in order to more efficiently handle and store data.
These programs were unable to distinguish properly between the year 1900 and the
year 2000, and as such, risked failure with the changing of the century. This
circumstance is frequently referred to as the "Year 2000 issue."

    We rely on information technology systems, applications and devices in
several aspects of our business, including service delivery, time reporting, and
financial accounting.  To date, we have neither been advised of nor have
experienced problems related to the Year 2000 issue in connection with our
internal hardware and software systems, but we will continue to monitor our
systems for such problems. Based on currently available information, we believe
that any further expenses related to Year 2000 issues will not have a material
impact on our results of operations.

    In addition to our internal systems, we also rely, directly and indirectly,
on the systems of business enterprises such as clients, suppliers, utilities,
creditors and financial institutions, both domestic and international. To date,
we have neither been advised of nor have experienced any interruptions in
service from those material third party vendors with which we transact business
as a result of the Year 2000 issue.  In addition, we have not been advised by
any of our clients that there will be a delay in the payment of invoices we have
issued for services rendered as a result of the failure of such client's
accounting systems due to the Year 2000 issue.  A delay in payment of invoices
could have a material negative effect on us.

    Although our principal service offerings generally do not include Year 2000
remediation services, former, present and future clients could assert claims
against us related to the Year 2000 issue. There can be no assurance that all
information technology systems we have designed, developed, recommended or
deployed are Year 2000 compliant. Any Year 2000-related failure of critical
client systems in which we were involved could result in claims being asserted
against us, regardless whether the failure is related to the services provided
by us. If asserted, any liability that may result, and the time and resources
used in resolving these claims, could have a material adverse effect on us.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    We provide our services to customers primarily in the United States, the
United Kingdom and Denmark. As a result, our financial results could be affected
by factors such as changes in foreign currency exchange rates or weak economic
conditions in those foreign markets.  Sales by Tanning Technology Europe
Limited, a United Kingdom subsidiary, are currently made in U.S. dollars or its
functional currency of pounds sterling.  To the extent Tanning Technology Europe
has monetary assets and liabilities denominated in any currency other than
pounds sterling, any significant variation in exchange rate between the pound
sterling and these other currencies could have a material effect on our
operating results. To the extent that we bill clients in a currency other than
their local currency, exchange rate fluctuations that strengthen the currency in
which we bill relative to their local currency could make our services less
competitive to such clients.  Historically, we have not experienced material
fluctuations in our results due to foreign currency exchange rate changes.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The financial statements required by this Item are submitted as a separate
section of this Form 10-K.  See Item 14.

                                      -27-
<PAGE>

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

     None.

                                      -28-
<PAGE>

                                    PART III

    Certain information required by Part III is omitted from this Form 10-K
because we will file a definitive Proxy Statement pursuant to Regulation 14A in
connection with our 2000 Annual Meeting of Shareholders (the "Proxy Statement")
not later than 120 days after the end of the fiscal year covered by this Form
10-K, and certain information to be included therein is incorporated herein by
reference.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this Item is set forth under the captions
"Election of Directors," "Executive Officers," and "Section 16(a) Beneficial
Ownership Reporting Compliance" in our Proxy Statement which information is
incorporated herein by reference.


ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this Item is set forth under the caption
"Executive Compensation and Other Information" in our Proxy Statement which
information is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is set forth under the captions
"Election of Directors" and "Equity Security Ownership" in our Proxy Statement
which information is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is set forth under the caption
"Certain Relationships and Related Transactions" in our Proxy Statement which
information is incorporated herein by reference.

                                      -29-
<PAGE>

                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a)  Documents Filed as Part of this Report:

         1.   Financial Statements.

              The Consolidated Financial Statements and Notes thereto are listed
              and indexed on page F-1.

         2.   Financial Statement Schedules.

              Schedule II - Valuation and Qualifying Accounts is filed as part
              of this report and is attached hereto as page S-1. All other
              schedules other than those listed in the Consolidated Financial
              Statements and Notes thereto have been omitted because they are
              not applicable or the required information has been included
              elsewhere in this report.

         3.   List of Exhibits.

              See Exhibit Index included herein. The exhibits listed in the
              accompanying Exhibit Index are filed or incorporated by reference
              as part of this Form 10-K.

    (b)  Reports on Form 8-K:

         None.

                                      -30-
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Auditors............................................  F-2

Consolidated Balance Sheets at December 31, 1999 and 1998.................  F-3

Consolidated Statements of Income for the years ended December 31, 1999,
 1998 and 1997............................................................  F-5

Consolidated Statements of Stockholders'/Members' Equity for the years
 ended December 31, 1999, 1998 and 1997...................................  F-6

Consolidated Statements of Cash Flows for the years ended
 December 31, 1999, 1998 and 1997.........................................  F-7

Notes to Consolidated Financial Statements................................  F-8


                                      F-1
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
 Tanning Technology Corporation

    We have audited the accompanying consolidated balance sheets of Tanning
Technology Corporation as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholders'/members' equity, and cash flows
for each of the three years in the period ended December 31, 1999. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tanning
Technology Corporation at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.


                                                 Ernst & Young LLP

Denver, Colorado
February 3, 2000

                                      F-2
<PAGE>

                        TANNING TECHNOLOGY CORPORATION

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               December 31,

                                                                        1998                 1999
                                                                 -------------------  -------------------
<S>                                                              <C>                  <C>

Assets
Current assets:
  Cash and cash equivalents....................................         $10,446,111          $68,617,336
  Accounts receivable--trade, net of allowance for doubtful
   accounts of $956,656 and $874,949 at   December 31, 1998
   and 1999, respectively......................................           9,225,153           16,726,619


  Accounts receivable--other...................................             152,743              308,861
  Income taxes receivable......................................                  --              699,423
  Deferred income taxes........................................             417,315              475,147
  Prepaid expenses and other assets............................             344,867              664,340
                                                                        -----------          -----------
Total current assets...........................................          20,586,189           87,491,726

Property and equipment, at cost:
  Computer equipment...........................................           2,081,553            3,057,499
  Office furniture and equipment...............................           1,342,097            2,253,808
  Computer software............................................             917,757            1,751,421
  Leasehold improvements.......................................             258,484            1,043,711
                                                                        -----------          -----------
                                                                          4,599,891            8,106,439

  Less accumulated depreciation and amortization...............          (1,384,859)          (2,867,859)
                                                                        -----------          -----------
                                                                          3,215,032            5,238,580

Long-term receivables -- related parties.......................                  --              810,000
Deposits and other long-term assets............................             121,854              827,738
                                                                        -----------          -----------
Total assets...................................................         $23,923,075          $94,368,044
                                                                        ===========          ===========
</TABLE>

                                      F-3
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

                    CONSOLIDATED BALANCE SHEETS--(Continued)

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                    --------------------------------
                                                                         1998             1999
                                                                    ---------------  ---------------
<S>                                                                 <C>              <C>

Liabilities and stockholders' equity
Current liabilities:
  Accounts payable................................................     $ 1,554,871      $ 2,656,108
  Accrued compensation............................................       2,280,842        4,917,691
  Accrued distribution to former members..........................         165,257               --
  Other accrued liabilities.......................................         629,190        1,192,431
  Deferred revenue................................................         400,146          490,188
  Income taxes payable............................................       1,432,518               --
  Current portion of long-term debt...............................         118,670               --
                                                                       -----------      -----------
Total current liabilities.........................................       6,581,494        9,256,418
Deferred income taxes.............................................          87,291           75,019
Long-term debt, net of current portion............................         460,183               --
Other long-term liabilities.......................................              --          325,079
Minority interest.................................................          22,062          109,790
Commitments and contingencies.....................................
Stockholders' equity:
  Preferred Stock, $0.01 par value:
     Authorized shares--5,000,000
     Issued and outstanding shares--none at December 31, 1998 and
      1999........................................................              --               --

  Common stock:
  Common Shares, $0.01 par value:
     Authorized shares--70,000,000
     Issued and outstanding shares--none at December 31, 1998 and
      20,439,546 at December 31, 1999.............................              --          204,395

  Class A shares, $0.01 par value:
     Authorized shares--9,520,293
     Issued and outstanding shares--9,520,293 at   December 31,
      1998 and none at December 31, 1999..........................         290,795               --

  Class B shares, $0.01 par value:
     Authorized shares--5,696,770
     Issued and outstanding shares--5,696,770 at December 31,
      1998 and none at December 31, 1999..........................         151,376               --

  Class C shares, $0.01 par value:
     Authorized shares--8,536,568
     Issued and outstanding shares--none at December 31, 1998 and
      1999........................................................              --               --

  Additional paid-in capital......................................      14,178,203       79,844,186
  Retained earnings...............................................       2,159,428        4,608,521
  Accumulated comprehensive (loss)................................          (7,757)         (55,364)
                                                                       -----------      -----------
Total stockholders' equity........................................      16,772,045       84,601,738
                                                                       -----------      -----------
Total liabilities and stockholders' equity........................     $23,923,075      $94,368,044
                                                                       ===========      ===========
</TABLE>



                            See accompanying notes.

                                      F-4
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                           Years ended December 31,
                                                ----------------------------------------------------
                                                    1997                1998                 1999

<S>                                      <C>                  <C>                  <C>

Services revenue.......................         $25,235,268          $30,313,139          $58,463,963
Product sales..........................             872,038            2,975,417                   --
                                                -----------          -----------          -----------
Net revenues...........................          26,107,306           33,288,556           58,463,963
Operating expenses:
  Project personnel costs..............          14,722,065           14,941,164           28,147,987
  Selling, marketing and
    administrative expenses............           7,855,759           12,177,973           27,832,772
  Product development costs............           1,608,178            2,785,723                   --
  Management fees--related
    parties............................              73,000                   --                   --
  Sign-on bonus related to stock
    purchase agreement.................           2,117,664                   --                   --
                                                -----------          -----------          -----------
     Total operating expenses..........          26,376,666           29,904,860           55,980,759
                                                -----------          -----------          -----------
Income (loss) from operations..........            (269,360)           3,383,696            2,483,204
Other income (expense):
  Interest income......................             291,292              333,195            1,613,252
  Interest expense.....................             (69,765)             (81,576)             (31,272)
  Other................................             (90,589)              33,979               98,692
                                                -----------          -----------          -----------
Income (loss) before provision for
 (benefit from) income taxes...........            (138,422)           3,669,294            4,163,876
Provision for (benefit from) income
 taxes.................................            (211,829)           1,366,323            1,714,783
                                                -----------          -----------          -----------
Net income.............................         $    73,407          $ 2,302,971          $ 2,449,093
                                                ===========          ===========          ===========
Basic earnings  per share..............               $0.01                $0.15                $0.14
                                                ===========          ===========          ===========
Basic weighted average shares
 outstanding...........................          13,718,710           14,968,974           17,556,487
                                                ===========          ===========          ===========
Diluted earnings  per share............               $0.01                $0.15                $0.12
                                                ===========          ===========          ===========
Diluted weighted average shares
 outstanding...........................          13,718,710           15,232,236           20,032,171
                                                ===========          ===========          ===========
</TABLE>


                            See accompanying notes.

                                      F-5
<PAGE>

                        TANNING TECHNOLOGY CORPORATION

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS'/MEMBERS' EQUITY

<TABLE>
<CAPTION>


                                                                                                 Class A
                                                                                               common stock
                                                    Member contributions  Accumulated   ----------------------------
                                                         (distributions)   earnings        Shares         Amount
                                                        ----------------  -----------   -------------   ------------
<S>                                                     <C>                    <C>           <C>            <C>
Balance, January 1, 1997..............................      $(3,706,639)  $ 3,777,131             --   $         --
Member distributions..................................         (977,455)           --             --             --
Member contributions, net.............................          838,565            --             --             --
Net income and comprehensive income for month ended
 January 31, 1997.....................................               --       216,950             --             --
Conversion to C corporation and sale of common stock..         3,845,529    (3,994,081)     9,520,293          2,763
                                                        ----------------  -----------   -------------   ------------
Balance, January 1, 1997..............................                --            --      9,520,293          2,763
Stock split, March 17, 1997...........................                --            --             --         55,396
Sale of common stock..................................                --            --             --             --
Net loss for the 11 months ended
 December 31, 1997....................................                --            --             --             --
Foreign currency translation..........................                --            --             --             --
Comprehensive income (loss)...........................
                                                        ----------------  -----------   -------------   ------------
Balance, December 31, 1997............................                --            --      9,520,293         58,159
Stock split, April 30, 1998...........................                --            --             --        232,636
Sale of common stock..................................                --            --             --             --
Distribution to former members of Tanning Technology
 Group, LLC...........................................                --            --             --             --
Net income............................................                --            --             --             --
Foreign currency translation..........................                --            --             --             --
Comprehensive income..................................
                                                        ----------------  -----------   -------------   ------------
Balance, December 31, 1998............................                --            --      9,520,293        290,795
Exercised stock options...............................                --            --             --             --
Reclass to one class of common stock..................                --            --     (9,520,293)      (290,795)
Issuance of common stock, IPO.........................                --            --             --             --
Issuance costs........................................                --            --             --             --
Employee stock purchase plan..........................
Exercised stock options...............................                --            --             --             --
Disqualifying disposition.............................                --            --             --             --
Net income............................................                --            --             --             --
Foreign currency translation..........................                --            --             --             --
Comprehensive Income..................................
                                                        ----------------  -----------   -------------   ------------
Balance, December 31, 1999............................  $             --  $         --  $         --    $         --
                                                        ================  ===========   =============   ============
</TABLE>

<TABLE>
<CAPTION>


                                                              Class B             Class C                               Additional
                                                            common stock        common stock        Common Stock         paid-in
                                                          Shares    Amount    Shares     Amount     Shares    Amount     capital
                                                        ----------   -------  --------  --------  ----------  -------- -----------
<S>                                                     <C>        <C>       <C>        <C>        <C>       <C>        <C>
Balance, January 1, 1997..............................          --  $     --        --   $    --          --   $    --          --
Member distributions..................................          --        --        --        --          --        --          --
Member contributions, net.............................          --        --        --        --          --        --          --
Net income and comprehensive income for month ended
 January 31, 1997.....................................          --        --        --        --          --        --          --
Conversion to C corporation and sale of common stock..   3,657,342       927        --        --          --        --   9,233,851
                                                        ----------   -------  --------  --------  ----------  -------- -----------
Balance, January 1, 1997..............................   3,657,342       927        --        --          --        --   9,233,851
Stock split, March 17, 1997...........................          --    17,927        --        --          --        --     (73,323)
Sale of common stock..................................   1,469,917     7,846        --        --          --        --   3,640,244
Net loss for the 11 months ended
December 31, 1997.....................................          --        --        --        --          --        --          --
Foreign currency translation..........................          --        --        --        --          --        --          --
Comprehensive income (loss)...........................
                                                        ----------   -------  --------  --------  ----------  -------- -----------
Balance, December 31, 1997............................   5,127,259    26,700        --        --          --        --  12,800,772
Stock split, April 30, 1998...........................          --   109,476        --        --          --        --    (342,112)
Sale of common stock..................................     569,511    15,200        --        --          --        --   1,884,800
Distribution to former members of Tanning Technology
 Group, LLC...........................................          --        --        --        --          --        --    (165,257)
Net income............................................          --        --        --        --          --        --          --
Foreign currency translation..........................          --        --        --        --          --        --          --
Comprehensive income..................................
                                                        ----------   -------  --------  --------  ----------  -------- -----------
Balance, December 31, 1998............................   5,696,770   151,376        --        --          --        --  14,178,203
Exercised stock options...............................          --        --   327,388     3,274          --        --   1,266,726
Reclass to one class of common stock..................  (5,696,770) (151,376) (327,388)   (3,274) 15,544,451   155,445     290,000
Issuance of common stock, IPO.........................          --        --        --        --   4,310,920    43,109  64,620,691
Issuance costs........................................          --        --        --        --          --        --  (6,824,926)
Employee stock purchase plan..........................          --        --        --        --     224,914     2,249   2,445,162
Exercised stock options...............................                              --        --     359,261     3,592   1,755,914
Disqualifying disposition.............................          --        --        --        --          --        --   2,112,416
Net income............................................          --        --        --        --          --        --          --
Foreign currency translation..........................          --        --        --        --          --        --          --
Comprehensive Income..................................
                                                        ----------   -------  --------  --------  ----------  -------- -----------
Balance, December 31, 1999............................          --   $    --        --  $     --  20,439,546  $204,395 $79,844,186
                                                        ==========   =======  ========  ========  ==========  ======== ===========
</TABLE>

<TABLE>
<CAPTION>




                                                                                              Total
                                                            Retained       Accumulated    stockholders'/
                                                            earnings      comprehensive      members'
                                                            (deficit)      income (loss)      equity
                                                           -----------   ---------------   ------------
<S>                                                     <C>                    <C>           <C>
Balance, January 1, 1997..............................          $   --          $ 12,079    $    82,571
Member distributions..................................              --                --       (977,455)
Member contributions, net.............................              --                --        838,565
Net income and comprehensive income for month ended
 January 31, 1997.....................................              --                --        216,950
Conversion to C corporation and sale of common stock..              --           (12,079)     9,076,910
                                                           -----------   ---------------   ------------
Balance, January 1, 1997..............................              --                --      9,237,541
Stock split, March 17, 1997...........................              --                --             --
Sale of common stock..................................              --                --      3,648,090
Net loss for the 11 months ended
December 31, 1997.....................................        (143,543)               --       (143,543)
Foreign currency translation..........................              --            (5,408)         5,408
                                                                                           ------------
Comprehensive income (loss)...........................                                         (148,951)
                                                           -----------   ---------------   ------------
Balance, December 31, 1997............................        (143,543)           (5,408)    12,736,680
Stock split, April 30, 1998...........................              --                --             --
Sale of common stock..................................              --                --      1,900,000
Distribution to former members of Tanning Technology
 Group, LLC...........................................              --                --       (165,257)
Net income............................................       2,302,971                --      2,302,971
Foreign currency translation..........................              --            (2,349)        (2,349)
                                                                                           ------------
Comprehensive income..................................                                        2,300,622
                                                           -----------   ---------------   ------------
Balance, December 31, 1998............................       2,159,428            (7,757)    16,772,045
Exercised stock options...............................              --                --      1,270,000
Reclass to one class of common stock..................              --                --             --
Issuance of common stock, IPO.........................              --                --     64,663,800
Issuance costs........................................              --                --     (6,824,926)
Employee stock purchase plan..........................              --                --      2,447,411
Exercised stock options...............................              --                --      1,759,506
Disqualifying disposition.............................              --                --      2,112,416
Net income............................................       2,449,093                --      2,449,093
Foreign currency translation..........................              --           (47,607)       (47,607)
                                                                                           ------------
Comprehensive Income..................................                                        2,401,486
                                                           -----------   ---------------   ------------
Balance, December 31, 1999............................      $4,608,521          $(55,364)   $84,601,738
                                                           ===========   ===============   ============
</TABLE>

                            See accompanying notes.

                                      F-6
<PAGE>

                        TANNING TECHNOLOGY CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>

                                                                                 Years ended December 31,
                                                                      ---------------------------------------------------
                                                                          1997                1998               1999
                                                                      -----------         -----------         -----------
Operating activities
<S>                                                             <C>                 <C>                 <C>
Net income....................................................        $    73,407         $ 2,302,971         $ 2,449,093
Adjustments to reconcile net income to net cash provided by
 (used in) operating activities:
  Loss on disposal of equipment...............................                 --             128,609                  --
  Depreciation and amortization...............................            443,977             916,699           1,419,315
  Deferred income taxes.......................................           (227,285)           (102,739)            (70,104)
  Minority interest...........................................                 --              22,062              87,728
  Changes in operating assets and liabilities:
     Accounts receivable -- trade.............................         (5,036,989)         (3,868,096)         (7,598,466)
     Accounts receivable -- other.............................            (54,442)            (46,437)           (157,118)
     Income taxes receivable..................................           (603,500)            603,500            (699,423)
     Prepaid expenses and other assets........................              6,634            (267,661)           (322,473)
     Long-term receivables -- related parties.................                 --                  --            (810,000)
     Deposits and other long-term assets......................                744            (108,906)           (705,884)
     Accounts payable.........................................            746,104             460,498           1,120,237
     Accrued compensation.....................................          1,072,000             870,726           2,651,849
     Deferred revenue.........................................             45,000             355,146              90,042
     Other accrued liabilities................................           (265,892)            171,327             563,241
     Other long-term liabilities..............................                 --                  --             325,079
     Income taxes payable.....................................             15,223           1,417,295             707,898
                                                                      -----------         -----------         -----------
Net cash provided by (used in) operating activities...........         (3,785,019)          2,854,994            (948,986)

Investing activities
Purchase of property and equipment, net.......................         (1,899,060)         (1,654,023)         (3,450,863)
                                                                      -----------         -----------         -----------
Net cash used in investing activities.........................         (1,899,060)         (1,654,023)         (3,450,863)

Financing activities
Principal payments under capital lease obligations............            (40,471)                 --                  --
Principal payments on long-term debt..........................           (700,000)         (1,073,478)           (578,853)
Borrowings on long-term debt..................................                 --             652,331                  --
Exercise of stock options.....................................                 --                  --           3,029,506
Proceeds from employee stock purchase plan....................                 --                  --           2,447,411
Net proceeds from issuance of common stock....................         12,725,000           1,900,000          57,838,874
Distributions to members, net.................................           (138,890)                 --            (165,257)
                                                                      -----------         -----------         -----------
Net cash provided by financing activities.....................         11,845,639           1,478,853          62,571,681
Effect of exchange rate on cash...............................             (5,408)             (2,349)               (607)
                                                                      -----------         -----------         -----------
Net increase in cash and cash equivalents.....................          6,156,152           2,677,475          58,171,225
Cash and cash equivalents at beginning of period..............          1,612,484           7,768,636          10,446,111
                                                                      -----------         -----------         -----------
Cash and cash equivalents at end of period....................        $ 7,768,636         $10,446,111         $68,617,336
                                                                      ===========         ===========         ===========

Supplemental disclosures of cash flow information
Cash paid for interest........................................        $    40,026         $   163,897         $    31,272
Cash paid for income taxes....................................            603,723              30,686         $ 1,741,815

</TABLE>

Supplemental disclosures of noncash investing and financing transactions

    During 1997, the Company distributed $977,455 of its accounts receivable to
    its members.

                            See accompanying notes.

                                      F-7
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  BUSINESS AND ORGANIZATION

    Tanning Technology Corporation (the "Company" or "Tanning") is an
information technology services provider that architects, builds and deploys
enterprise solutions for corporations throughout the world. The Company
specializes in large, complex, integrated solutions that incorporate online
transaction processing and very large databases. Internet technologies are a
central part of the Company's solutions, enabling direct interaction among
customers and business partners on the World Wide Web and among employees within
organizations on their private intranets.

    Tanning Technology Group, LLC ("TTG") was formed under the laws of the state
of Colorado on February 8, 1995, as a result of the combination of Courtney Rose
Corporation, WinSoft Corporation, Strategic Technologies and Systems, and
Hippeli Enterprises. The assets and liabilities contributed by the members were
recorded at historical cost as reflected on the accounts of the respective
entities prior to the formation of TTG.

    On December 24, 1996, TTG entered into a Stock Purchase Agreement with AEA
Tanning Investors Inc. (AEA Tanning Investors Inc., together with certain
limited liability companies of which it is the managing member, the "TTC
Investors Group"). As a result of this agreement, on January 31, 1997 TTG
effected a series of transactions whereby TTG was merged into Tanning Technology
Corporation, a Delaware corporation newly formed in conjunction with this
transaction. The membership interests of the members of TTG were converted into
shares of Class A common stock of the Company. On the same date, the TTC
Investors Group purchased 3,657,342 shares of Class B common stock from the
Company for $9,076,910 and purchased directly from the former members of TTG
$3,648,090 of accounts receivable that had been distributed to the members of
TTG (see Note 7). On June 6, 1997, the TTC Investors Group purchased an
additional 1,469,917 shares of Class B common stock from the Company for
$3,648,090, which was comprised of $3,126,636 cash and accounts receivable with
a value of $521,454. On June 9, 1998, the TTC Investors Group purchased an
additional 569,511 shares of Class B common stock from the Company for
$1,900,000.

    On July 28, 1999, the Company completed an initial public offering of common
stock, par value $.01 per share, in which it sold 4,000,000 shares of common
stock at $15.00 per share. On August 23, 1999, the Company issued an additional
310,920 shares of common stock in connection with the exercise of the
underwriters' over-allotment option. Proceeds to the Company from these
transactions, net of underwriting discounts and costs of the offering, were
approximately $57.8 million.

    The Company's wholly-owned direct subsidiaries include Nextek Software Corp.
and a United Kingdom subsidiary, Tanning Technology Europe Limited ("TTEL").
During 1998, the Company established a 51% owned Indian subsidiary, Tanning
Technology India Pvt Ltd ("TTI").  Through additional investments, the Company
increased its ownership interest in TTI to 76% during 1999.  The operating
results of TTI are not material to the consolidated results of operations.
Nextek Software Corporation sold the rights to certain developed software during
1998 and has no current plans for future product sales.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

    The accompanying financial statements include the accounts of the Company
and all majority-owned subsidiaries. All significant intercompany transactions
have been eliminated.

                                      F-8
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Limited Liability Company ("LLC")

    An LLC is an unincorporated association of two or more persons, whose
members have limited personal liability for the obligations or debts of the
entity. For federal income tax purposes, the Company was classified as an LLC
through January 31, 1997, at which time the Company converted from an LLC to a C
Corporation.

Revenue Recognition

    Substantially all of the Company's contracts are billed on a time and
materials basis. Under time and materials contracts, the Company recognizes
revenue as services are provided. In addition, the Company is generally
reimbursed for reasonable expenses incurred under its contracts. The Company
recognizes revenue for fixed price contracts on a percentage of completion basis
(based on the ratio of costs incurred to the total estimated project cost at
completion). The Company recognizes revenue from its software sales in
accordance with the provisions of the American Institute of Certified Public
Accountants' Statement of Financial Position 97-2, Software Revenue Recognition,
which provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions.

Cash and Cash Equivalents

    The Company considers all highly liquid investments (including money market
accounts) with a maturity of three months or less when purchased to be cash
equivalents.

Property and Equipment

    Property and equipment is stated at cost. Depreciation and amortization,
which includes amortization of assets under capital leases, is based on the
straight-line method over the following estimated useful lives:

Computer equipment.......................  4-5 years
Office furniture and equipment...........  7 years
Computer software........................  3 years
Leasehold improvements...................  Lesser of the life
                                           of the improvement
                                           or the related asset

Long-lived Assets

    The Company recognizes impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. In such circumstances, those assets are written down to
estimated fair value. Long-lived assets consist principally of computer
equipment and office furniture and equipment. During the year ended December 31,
1998, the Company determined that computer and other equipment having an
original cost of approximately $296,633 was no longer being used. Accordingly,
the Company disposed of those assets and wrote off the remaining net book value
of $128,609.  There were no material dispositions of long-lived assets during
the year ended December 31, 1999.

Income Taxes

    The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standard ("SFAS") No. 109, Accounting for Income Taxes,
which requires that the Company account for income taxes using the liability
method. Under SFAS No. 109, deferred income taxes are provided for temporary
differences in recognizing certain income and expense items for financial
reporting and tax reporting purposes. Upon completion

                                      F-9
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

of the merger of TTG with the Company (see Note 1), the LLC status was
terminated and the Company began providing for current and deferred income taxes
as a C corporation. Accordingly, the consolidated statement of income for the
year ended December 31, 1997 includes a one-time credit (included in benefit
from income taxes) of approximately $70,000 to record the related deferred tax
asset.

Foreign Currency Translation

    The financial statements of TTEL are prepared in pound sterling and
translated into U.S. dollars based on the current exchange rate at the end of
the period for the balance sheet and a weighted-average rate for the period on
the statement of income. Translation adjustments are reflected as foreign
currency translation adjustments within comprehensive income in stockholders'
equity and accordingly have no effect on net income. Transaction adjustments for
TTEL are included in income. Foreign currency transaction adjustments are not
material to income.

Fair Value of Financial Instruments

    The carrying amounts of the Company's cash and cash equivalents,
receivables, payables and accrued expenses approximate fair value due to the
short maturity of these instruments. The fair value of the Company's long-term
debt approximates carrying value and was estimated by discounting future cash
flows using rates currently available for debt with similar terms and remaining
maturities.

Sales to Significant Customers

    The Company provides services to a small number of customers.  Two customers
accounted for 40% and 22%, respectively, of total revenues in 1997. Two
customers accounted for 28% and 11%, respectively, of total revenues in 1998.
Two customers accounted for 26% and 24%, respectively, of total revenues in
1999.  The Company performs periodic credit evaluations of its customers'
financial condition and collateral generally is not required.  Overall credit
losses are within management's expectations.

Accounting Estimates in the Preparation of Financial Statements

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

Stock-Based Compensation

    The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recorded. The Company has adopted the disclosure-only provisions of
SFAS No. 123.

Earnings Per Share

    The Company has adopted the provisions of SFAS No. 128, Earnings Per Share.
SFAS 128 requires entities to present both basic earnings per share ("EPS") and
diluted EPS. Basic EPS excludes dilution and is computed by dividing income
(loss) available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock

                                      F-10
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

that then shared in the earnings of the entity. Potential dilution of securities
exercisable into common stock was computed using the treasury stock method based
on the average fair market value of the stock.

The following table reflects the basic and diluted weighted average shares.
<TABLE>
<CAPTION>
                                                                       Years ended December 31
                                                          -------------------------------------------------
                                                               1997             1998             1999
                                                          ---------------   --------------   --------------
<S>                                                       <C>              <C>              <C>
Weighted-average shares outstanding.....................       13,718,710       14,968,974       17,556,487
Dilutive impact of options outstanding..................               --          263,262        2,475,684
                                                          ---------------   --------------   --------------
Weighted-average shares and potential dilutive shares
 outstanding............................................       13,718,710       15,232,236       20,032,171
                                                          ===============   ==============   ==============
</TABLE>

Reclassifications

    Certain of the prior year amounts have been reclassified to conform with the
1999 presentation.

Recent Accounting Pronouncements

    In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," ("SFAS 133"), which is required to be adopted in years
beginning after June 15, 2000. We anticipate that the adoption of SFAS No. 133
will not have a significant effect on the financial condition of the Company.


3.    LONG-TERM DEBT

    Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                                December 31,
                                                                      ---------------------------------
                                                                            1998             1999
                                                                      ----------------  ---------------
<S>                                                                   <C>               <C>

  Note and security agreements with bank, interest at 8.71%,
    principal and interest payable over sixty equal monthly
    installments....................................................        $  578,853  $            --
  Less current portion..............................................          (118,670)              --
                                                                      ----------------  ---------------
  Long-term debt....................................................        $  460,183  $            --
                                                                      ----------------  ---------------
</TABLE>

    The proceeds from the note and security agreements (the "Notes") totaling
$652,331 were used by the Company to purchase office furniture and fixtures. The
Notes were collateralized by the purchased assets.

4.  STOCKHOLDERS' EQUITY

    On July 28, 1999, the Company completed an initial public offering of common
stock, in which it sold 4,000,000 shares of common stock at $15.00 per share. On
August 23, 1999, the Company issued an additional 310,920 shares of common stock
in connection with the exercise of the underwriters' over-allotment option.
Proceeds to the Company from these transactions, net of underwriting discounts
and costs of the offering, were approximately $57.8 million.

    In connection with the initial public offering, the Company effected a 1 for
3.05 reverse stock split of its Class A and Class C common shares and a 1 for
2.67 reverse stock split of its Class B common shares, and the Class A, Class B
and Class C nonvoting common stock was converted into one class of voting common
stock. All references to common stock in the accompanying financial statements
reflect these reverse stock splits, but not the conversion to one class of
common stock, retroactively applied to all periods presented.

                                      F-11
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    During the year ended December 31, 1999, the Company issued 911,563 shares
of common stock in conjunction with purchases under our qualified stock purchase
plan, as well as the exercise of vested stock options.

    On March 17, 1997, the Board of Directors declared a 21.053:1 stock split of
the Company's Class A and B common stock, effected in the form of a stock
dividend of 20.053 shares of Class A and B common stock for each one share
issued and outstanding. Class A and B common stock issued and additional paid-in
capital as of December 31, 1997 have been restated to reflect this split. The
number of shares issued at December 31, 1997, after giving effect to both the
purchases by the TTC Investors Group and the stock splits, was 9,520,293,
5,127,259 and 0 of Class A, B and C common stock, respectively.

    Effective April 30, 1998, the Board of Directors declared a 5:1 stock split
of the Company's Class A and B common stock, effected in the form of a stock
dividend of 4 shares of Class A and B common stock for each one share issued and
outstanding. The split was effected so that no change was made to the par value
of all outstanding shares. In conjunction with the stock split, each outstanding
stock option granted under the Stock Option Plan was also increased while the
exercise price of each stock option was decreased by the corresponding 5:1
ratio.

    In July 1998, the number of authorized shares of Class C nonvoting common
stock was increased to 8,536,560.  The number of shares issued at December 31,
1998, after giving effect to both the stock splits and the purchases by the TTC
Investors Group, was 9,520,293, 5,696,770, and 0 of Class A, B and C common
stock, respectively. As of December 31, 1999, there were 20,439,546 shares of
common stock issued and outstanding.

5.    INCOME TAXES

  The components of income tax expense  are as follows:

<TABLE>
<CAPTION>
                                                                Years ended December 31,
                                                  --------------------------------------------------
                                                         1997             1998             1999
                                                    ---------------  ---------------  ---------------
Provision for (benefit from) income taxes:
Current:
<S>                                                 <C>              <C>              <C>
        Federal...................................       $       -       $  268,823       $ (263,386)
        State.....................................           2,903           68,352           41,950
        Foreign...................................          12,553        1,131,887          (97,777)
                                                         ---------       ----------       ----------
     Total current................................          15,456        1,469,062         (319,213)
     Deferred:
        Federal...................................        (194,058)         (86,379)       1,779,341
        State.....................................         (33,227)         (16,360)         254,655
                                                         ---------       ----------       ----------
     Total deferred...............................        (227,285)        (102,739)       2,033,996
                                                         ---------       ----------       ----------
  Provision for (benefit from) income taxes.......       $(211,829)      $1,366,323       $1,714,783
                                                         =========       ==========       ==========
</TABLE>

                                      F-12
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    The components of the deferred tax provision (benefit), which arise from
timing differences between financial and tax reporting, are presented below:

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                   ---------------------------------
                                                                                         1998             1999
                                                                                   ----------------  ---------------
<S>                                                                                 <C>              <C>
   Allowance for uncollectible accounts...........................................       $(237,109)        $(56,710)
   Accrued bonuses................................................................         141,330               --
   Accrued vacation...............................................................         (10,462)          59,722
   Deferred revenue...............................................................           8,364           63,319
   Net operating loss carryforward................................................          41,215               --
   Accelerated depreciation.......................................................         (43,461)          12,272
   Deferred state income taxes....................................................          17,139           (3,195)
   Organization costs.............................................................         (19,755)          (5,303)
                                                                                   ---------------   --------------
                                                                                         $(102,739)        $ 70,105
                                                                                   ===============   ==============
</TABLE>

    The total of the components of the deferred tax provision disclosed above
 differs from the total deferred tax provision for 1999 because of tax expense
 recognized in the current year resulting from employees' exercise of non-
 qualified stock options. Under SFAS 109, this expense generates a deferred tax
 expense which is required to be recognized as additional paid-in-capital.

    Variation from the federal statutory rate is as follows:


<TABLE>
<CAPTION>
                                                                         Years ended December 31,
                                                            --------------------------------------------------
                                                                  1997             1998             1999
                                                            ----------------  ---------------  ---------------
<S>                                                         <C>               <C>              <C>
Expected provision for (benefit from) federal income taxes
   at statutory rate of 34%...............................        $ (47,063)       $1,247,561       $1,415,718
Election of C corporation status..........................          (69,681)                -                -
Tanning Technology Group, LLC income nontaxable due
   to LLC status..........................................          (86,780)                -                -
Permanent differences.....................................                -            25,892           50,525
State taxes, net of federal benefit.......................           (8,305)           34,315          195,759
Other.....................................................                -            58,555           52,781
                                                            ---------------   ---------------  ---------------
                                                                  $(211,829)       $1,366,323       $1,714,783
                                                            ===============   ===============  ===============
</TABLE>


    The components of the net deferred income tax asset are as follows:

<TABLE>
<CAPTION>
                                                           December 31,
                                                    --------------------------
                                                        1998          1999
                                                    ------------  ------------
Deferred tax assets:
<S>                                                 <C>           <C>
     Allowance for uncollectible accounts.........      $358,436      $301,726
     Accrued vacation.............................        31,232        90,955
     Deferred revenue.............................         9,807        73,125
     Foreign tax credit...........................        12,553        12,553
     Other........................................        19,756        14,452
                                                    ------------  ------------
                                                         431,784       492,811
  Deferred tax liabilities:
     Deferred state income taxes..................        14,469        17,664
     Accelerated depreciation.....................        87,291        75,019
                                                    ------------  ------------
  Deferred tax asset, net.........................      $330,024      $400,128
                                                    ============  ============
</TABLE>

                                      F-13
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    For the year ended December 31, 1999, income (loss) before income taxes for
domestic and foreign operations was $4,524,055 and ($360,179), respectively.
For the year ended December 31, 1998, income before income taxes for domestic
and foreign operations was $521,137 and $3,148,157, respectively.


6.  LEASES

    The Company leases equipment and office space. Rental expense under
operating leases included in selling, marketing and administrative expenses was
$2,150,312, $1,153,562 and $601,341 for the years ended December 31, 1999, 1998,
and 1997, respectively.

    The following represents the future minimum lease payments for all
noncancelable operating leases at December 31, 1999:

   2000.......................................................   $ 2,773,583
   2001.......................................................     2,266,073
   2002.......................................................     2,102,645
   2003.......................................................     2,121,881
   2004.......................................................     1,644,386
                                                                 -----------
   Total minimum lease payments...............................   $10,908,568
                                                                 ===========


    During 1997, all capital leases, which were substantially with members of
 the Company, were paid in full.

7.    RELATED PARTY TRANSACTIONS

    In conjunction with the Stock Purchase Agreement with the TTC Investors
Group (see Note 1), the Company entered into employment agreements with certain
stockholders of the Company on January 31, 1997. These employment agreements
were for three years and consisted of annual minimum salary payments of $950,000
(in the aggregate for the employees who are party to these agreements) plus
annual bonuses, as defined. In connection with the initial public offering, the
Company amended these agreements to change the annual salary payments to
$570,000 (in the aggregate for the employees who are party to these agreements)
plus annual bonuses. Effective October 1, 1999, the Company amended these
agreements to reduce the annual salary payments to $399,000 (in the aggregate
for the employees who are party to these agreements). In addition, in February
1997 the Company paid sign-on bonuses totaling $1,573,212 to certain
stockholders of the Company and $544,452 to certain employees of the Company.

    On January 24, 1997, TTG distributed $977,455 of accounts receivable
balances which were generated from January 1997 sales in the United States, to
its members. The amount distributed of $977,455 is included in member
distributions in the accompanying consolidated statement of
stockholders'/members' equity.

    Effective December 31, 1998, the Company agreed to distribute $165,257 to
the former members of TTG. This distribution was for reimbursement of taxes paid
by the members resulting from the conversion of an LLC to a C Corporation on
January 31, 1997. The company made this distribution during 1999.

    The Company incurred management fees of $0, $0 and $73,000 to certain of its
members for the years ended December 31, 1999, 1998, and 1997, respectively.

    Receivable balances, owed to the Company by employees, totaled $25,831,
$66,024 and $60,753 at December 31, 1999 and 1998, and 1997, respectively.

                                      F-14
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    During 1999, the Company extended loans to certain employees for an
aggregate amount of $810,000. These loans bear interest at Applicable Federal
Rates ranging from 5.25% to 6.02% per annum, as prescribed by the Internal
Revenue Service. All outstanding principal and unpaid interest amounts
associated with these loans become due on various dates between July 31, 2001
and November 12, 2004.

8.  COMMITMENTS AND CONTINGENCIES

    During 1997, the Company entered into an agreement with two individuals
whereby these individuals would receive commissions and royalties earned on
sales made by Nextek Software Corporation as defined in the agreement. The
Company incurred royalty and commission expenses of $0, $104,569 and $28,210
related to this agreement for the years ended December 31, 1999, 1998 and 1997,
respectively.

9.  EMPLOYEE BENEFIT PLAN

    The Company has a defined contribution plan under Section 401(k) of the
Internal Revenue Code. Employees age twenty-one or older are eligible to
participate in the plan upon employment with the Company and may elect to defer
up to 15 percent of their annual compensation up to the maximum amount as
determined by the Internal Revenue Service. Under the retirement plan agreement,
the Company, at its discretion, may make voluntary contributions to the plan.
Each employee must complete one year of service, as defined, in order to receive
any voluntary contributions made by the Company. Total employer contributions to
the plan during 1999 were $138,542.  No employer contributions were made to the
plan in either 1998 or 1997.

10.  STOCK OPTIONS

    Effective February 1, 1997, the Company adopted the Tanning Technology
Corporation Stock Option Plan (the "1997 Plan"). Under the provisions of the
1997 Plan, nonqualified stock options may be granted by a committee of the Board
of Directors at its discretion to key employees, officers or independent
contractors of the Company. The Company's 1997 Plan authorized the grant of
options for up to 3,289,094 shares of Class C nonvoting common stock. All awards
are for the right to purchase one share of Class C nonvoting common stock at a
price to be determined by the committee. Generally, all options vest over a
period of 3-4 years. All options, once vested, are exercisable until February 1,
2007, at which time the 1997 Plan shall terminate.

    Effective July 24, 1998, the Company adopted the Tanning Technology
Corporation 1998 Stock Option Plan (the "1998 Plan"). The 1998 plan, which
carries similar terms and conditions as the 1997 plan, authorizes the grant of
options for up to 5,247,474 shares of Class C nonvoting common stock. All
options granted under the 1998 Plan, once vested, are exercisable until July 24,
2008, at which time the 1998 Plan shall terminate.

    Effective July 22, 1999, the Company adopted the Tanning Technology
Corporation 1999 Stock Option Plan (the "1999 Plan").  The 1999 Plan provides
for the granting of incentive stock options to key employees, and nonqualified
stock options to key employees, contractors and directors of the Company.  The
maximum number of shares of common stock available for awards under the 1999
Plan is 5 million.  All awards are for the right to purchase one share of common
stock at a price to be determined by a committee of the Board of Directors.  The
exercise price per share, however, may not be less than 100% of the fair market
value of a share on the date the option is granted.  Options generally vest over
a period of 4-5 years; however, other vesting periods may be authorized by the
committee.  All options granted under the 1999 Plan, once vested, are
exercisable until July 22, 2009, at which time the 1999 Plan shall terminate.

    Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value of these
options was estimated at the date of grant using a Black-Scholes option-pricing
model with the following

                                      F-15
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

weighted average assumptions for 1999 and 1998, respectively: risk-free interest
rates of 4.64%-5.36%; dividend yields of 0; volatility factors of 1.183 and 0
and a weighted-average expected life of the option of 5 years.

    The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.

    For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
pro forma net income (loss) and earnings per share was as follows:

<TABLE>
<CAPTION>
                                                         Year ended December 31,
                                               -----------------------------------------
                                                  1997            1998           1999
                                               -----------     ----------     ----------
<S>                                           <C>             <C>             <C>
     Net income (loss).......................  $  (149,000)    $2,047,000     $ (829,000)
                                               ===========     ==========     ==========
     Basic earnings (loss) per share.........  $     (0.01)    $     0.14     $    (0.05)
                                               ===========     ==========     ==========
     Diluted earnings (loss) per share.......  $     (0.01)    $     0.13     $    (0.05)
                                               ===========     ==========     ==========
</TABLE>


    A summary of the Company's stock option activity, and related information,
for the years ended December 31, 1997, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                                                                         Weighted-average
                                                                                             Options      exercise price
                                                                                          -------------  ----------------
<S>                                                                                       <C>            <C>

   Outstanding January 1, 1997..........................................................            --             $   --
   Granted..............................................................................     1,934,869               2.90
   Exercised............................................................................            --                 --
   Forfeited...........................................................................       (130,956)              2.90
                                                                                             ---------
   Outstanding December 31, 1997........................................................     1,803,913               2.90
   Granted..............................................................................     3,846,330               3.79
   Exercised............................................................................            --                 --
   Forfeited............................................................................      (318,386)              2.90
                                                                                             ---------
   Outstanding December 31, 1998........................................................     5,331,857               3.57
   Granted..............................................................................     4,665,459              13.70
   Exercised............................................................................      (686,647)              4.41
   Forfeited............................................................................      (639,000)              5.92
                                                                                             ---------
   Outstanding December 31, 1999........................................................     8,671,669               8.78
                                                                                             =========             ======
</TABLE>

<TABLE>
<CAPTION>
                              Outstanding Options                                               Exercisable Options
-----------------------------------------------------------------------------------   --------------------------------------
                                               Weighted
                                                Average
                                                Remaining
                                            Contractual Life     Weighted Average     Shares Currently     Weighted Average
 Option Price Range       Shares Under                            Exercise Price         Exercisable        Exercise Price
                             Option

<S>                    <C>                 <C>                  <C>                  <C>                  <C>
$2.90 to $4.50                  4,741,332      8.8 years                     $ 3.54            1,814,875               $ 3.37
$5.00 to $7.50                    624,543       10 years                     $ 5.35                4,296               $ 5.35
$8.00 to $12.00                 1,676,346       10 years                     $ 9.55               84,290               $ 8.18
$15.00 to $22.50                1,045,373       10 years                     $15.53                    -               $ 0.00
$22.50 to $35.00                  347,675       10 years                     $31.92               26,877               $34.59
$40.00 to $65.00                  236,400       10 years                     $53.67                    -               $ 0.00
</TABLE>

The weighted average fair value of options granted during 1999 and 1998 was
$11.45 and $.86, respectively.

                                      F-16
<PAGE>

                         TANNING TECHNOLOGY CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11.  SEGMENT REPORTING

    During 1998, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 requires a business enterprise, based upon a management
approach, to disclose financial and descriptive information about its operating
segments. Operating segments are components of an enterprise about which
separate financial information is available and regularly evaluated by the chief
operating decision maker(s) of an enterprise. Under this definition, the Company
operated as a single segment for all years and periods presented.

    SFAS 131 also requires the disclosure of certain financial information
pertaining to geographic areas.  Information about the Company's revenues and
long-lived assets by geographic area is as follows (in thousands):

<TABLE>
<CAPTION>
                                                      December 31,
                                             -------------------------------
                                               1997       1998       1999
                                             ---------  ---------  ---------
Revenues from external customers:
<S>                                          <C>        <C>        <C>
  United States............................    $23,139    $22,811    $38,872
  Denmark..................................      1,532      9,595     15,369
  UK and other Europe......................      1,436        883      4,223
                                             ---------  ---------  ---------
  Total....................................    $26,107    $33,289    $58,464
                                             =========  =========  =========
</TABLE>

                                                   December 31,
                                                 -----------------
                                                  1998       1999
  Long-lived assets, net:                        ------     ------
  United States............................      $3,055     $3,735
  Foreign..................................         160      1,503
                                                 ------     ------
  Total....................................      $3,215     $5,238
                                                 ======     ======

12.  EMPLOYEE STOCK PURCHASE PLAN

    In March 1999, the Company established the Tanning Technology Corporation
1999 Qualified Stock Purchase Plan (the "Plan"). The Company intends that the
Plan qualify as an employee stock purchase plan under Section 423 of the
Internal Revenue Code. Employees scheduled to work at least 20 hours per week
and who have completed at least three months of continuous full-time employment
in the service of the Company are eligible to participate in the Plan. Under the
Plan, eligible employees can purchase shares, subject to limitations, of the
Company's Class C nonvoting common stock at a discount not to exceed 15% of the
market price as defined. During the year ended December 31, 1999, the Company
issued 59,094 shares of nonvoting Class C nonvoting common stock and 165,820
shares of Common Stock in conjunction with this plan.


13.  SUBSEQUENT EVENT

    On February 1, 2000, the Company announced the formation of a strategic
relationship with GlobalCenter Inc. ("GlobalCenter").  GlobalCenter, a
subsidiary of Global Crossing Ltd., is a commerce service and Internet network
solutions provider.

    The terms of the relationship involve three components: an equity investment
by GlobalCenter in the Company, a preferred marketing arrangement between the
two companies, and a direct engagement by GlobalCenter of the Company's
services. GlobalCenter purchased, on February 1, 2000, 229,227 shares of the
Company's common stock for an aggregate price of $10,000,028, or $43.625 per
share.

                                      F-17
<PAGE>

                                  SCHEDULE II

                       VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>

                                                     Balance at   Charged to  Charged to              Balance at
                                                    beginning of  costs and     other                   end of
                                                       period      expenses    accounts   Deductions    period
                                                    ------------  ----------  ----------  ----------  ----------
<S>                                                 <C>           <C>         <C>         <C>         <C>
Period ending December 31, 1997
   Allowance for doubtful accounts................  $          -    $534,787           -    $234,323    $300,464

Period ending December 31, 1998
   Allowance for doubtful accounts................      $300,464    $767,587           -    $111,395    $956,656

Period ending December 31, 1999
   Allowance for doubtful accounts................      $956,656    $594,950           -    $676,657    $874,949


</TABLE>



                                      S-1
<PAGE>

                                   SIGNATURES

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

                                    TANNING TECHNOLOGY CORPORATION

Date:  March 28, 2000               By: /s/ Henry F. Skelsey
                                       -----------------------------------
                                              Henry F. Skelsey
                                           Chief Financial Officer

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

<TABLE>
<CAPTION>
             Signature                                Title                             Date
             ---------                                -----                             ----
<S>                                   <C>                                     <C>

 /s/ Larry G. Tanning                 President, Chief Executive              March 28, 2000
------------------------------------
Larry G. Tanning                      Officer and Director
                                      (Principal Executive Officer)

 /s/ Henry F. Skelsey                 Executive Vice President,               March 28, 2000
------------------------------------
Henry F. Skelsey                      Chief Financial Officer and
                                      Director (Principal Financial
                                      and Accounting Officer)

 /s/ Bipin Agarwal                    Director                                March 28, 2000
------------------------------------
 Bipin Agarwal

 /s/ Toni S. Hippeli                  Director                                March 28, 2000
------------------------------------
 Toni S. Hippeli

 /s/ Dan J. Hesser                    Director                                March 28, 2000
------------------------------------
 Dan J. Hesser
</TABLE>
<PAGE>

                                 EXHIBIT INDEX

Exhibit            Description
-------            -----------
3.1                Certificate of Incorporation of Tanning, as amended and
                   restated *
3.2                Bylaws of Tanning, as amended and restated *
4.1                Form of certificate of common stock *
4.2                Amended and Restated Registration Rights Agreement, dated as
                   of July 20, 1999, by and among Tanning and the parties listed
                   as signatories thereto **
10.1               Form of Employment, Confidentiality and Non-Competition
                   Agreement (including Employee-Specific Terms) between Tanning
                   and Larry Tanning *
10.2               Form of Promissory Note in the amount of $250,000, made by
                   Larry Tanning in favor of Tanning *
10.3               Form of Employment, Confidentiality and Non-Competition
                   Agreement (including Employee-Specific Terms) between Tanning
                   and Bipin Agarwal *
10.4               Form of Promissory Note in the amount of $250,000, made by
                   Bipin Agarwal in favor of Tanning *
10.5               Form of Employment, Confidentiality and Non-Competition
                   Agreement between Tanning and each of P. Tracy Currie, Louis
                   A. D'Alessandro, Henry F. Skelsey, John Piccone, Mark Tanning
                   and Frederick H. Fogel *
10.6               Employee-Specific Terms of Employment, Confidentiality and
                   Non-Competition Agreement between Tanning and P. Tracy
                   Currie, dated as of January 30, 1999 *
10.7               Employee-Specific Terms of Employment, Confidentiality and
                   Non-Competition Agreement between Tanning and Louis A.
                   D'Alessandro, dated as of February 1, 1999 *
10.8               Employee-Specific Terms of Employment, Confidentiality and
                   Non-Competition Agreement between Tanning and Henry F.
                   Skelsey, dated as of June 1, 1999 *
10.9               Employee-Specific Terms of Employment, Confidentiality and
                   Non-Competition Agreement between Tanning and John Piccone,
                   dated as of June 30, 1999 *
10.10              Employee-Specific Terms of Employment, Confidentiality and
                   Non-Competition Agreement between Tanning and Mark Tanning,
                   dated as of February 1, 1999 *
10.11              Employee-Specific Terms of Employment, Confidentiality and
                   Non-Competition Agreement between Tanning and Frederick H.
                   Fogel, dated as of June 30, 1999 *
10.12              Amended and Restated Shareholder Agreement, dated as of July
                   20, 1999, by and among Tanning and the parties listed as
                   signatories thereto **
10.13              Lease, dated as of June 3, 1998, by and between Denver Hines
                   Development, LLC and Tanning for premises at 4600 South
                   Syracuse Street *
10.14              Amendment No. 1 to Lease, dated as of March 11, 1999, by and
                   between Denver Hines Development, LLC and Tanning for
                   premises at 4600 South Syracuse Street *
10.15              Amendment No. 2 to Lease, dated as of May 28, 1999, by and
                   between Denver Hines Development, LLC and Tanning for
                   premises at 4600 South Syracuse Street *
10.16              Form of Excise Tax Agreement *
10.17              1997 Stock Option Plan *
10.18              1998 Stock Option Plan *
10.19              1999 Employee Stock Purchase Plan *
10.20              1999 Stock Option Plan *
10.21              Letter Agreement dated November 1, 1999 between Tanning
                   Technology Corporation and Bipin Agarwal, regarding Five
                   Quarter Compensation Plan
10.22              Letter Agreement dated November 1, 1999 between Tanning
                   Technology Corporation and Frederick H. Fogel, regarding Five
                   Quarter Compensation Plan


<PAGE>

Exhibit            Description
-------            -----------
10.23              Letter Agreement dated November 1, 1999 between Tanning
                   Technology Corporation and Henry F. Skelsey, regarding Five
                   Quarter Compensation Plan
10.24              Letter Agreement dated November 1, 1999 between Tanning
                   Technology Corporation and Mark W. Tanning, regarding Five
                   Quarter Compensation Plan
10.25              Letter Agreement dated November 1, 1999 between Tanning
                   Technology Corporation and John N. Piccone, regarding Five
                   Quarter Compensation Plan
10.26              Letter Agreement dated November 1, 1999 between Tanning
                   Technology Corporation and Larry G. Tanning, regarding Five
                   Quarter Compensation Plan
21.1               Subsidiaries of Tanning*
23.1               Consent of Ernst & Young LLP
27.1               Financial data schedule

*   Incorporated herein by reference from the Company's Registration Statement
    on Form S-1 (SEC File No. 333-78657) filed with the Commission on July 22,
    1999.
**  Incorporated herein by reference from the Company's Quarterly Report on Form
    10-Q for the period ending June 30, 1999.