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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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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, 2001

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

COMMISSION FILE NUMBER: 0-26795

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

Delaware

84-1381662(State or other jurisdiction of
Incorporation or organization)

(I.R.S. Employer
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 February 15, 2002, the aggregate market value of common stock held by non-affiliates of the Registrant approximated $18 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 February 15, 2002, there were 21,203,829 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 2002 Annual Meeting of Shareholders are incorporated by
reference in Part III herein.

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TABLE OF CONTENTS



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|PART I       
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|PART II      
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|PART III     
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|PART IV      
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|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 our 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 our
results 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". We undertake
no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I

ITEM 1. BUSINESS

Tanning Technology Corporation is an information technology services provider that develops and deploys IT systems that reduce cost, improve performance and drive
competitive advantage for leading companies worldwide. We focus on mission-critical business systems that are engineered to integrate, perform and scale, reliably and predictably. Our years of
experience in pushing system performance limits has resulted in a unique family of Powering Performance solutions and methodologies that are at the core of everything we do.

The
systems we build bridge the gap between the promise of packaged applications and components and the enormous challenges of real-world business environments, which
include:



Our
experience has shown that even the promised benefits of large-scale, third-party, enterprise-wide applications are not achieved without extensive customization. Moreover,
complex integration, performance, scalability and reliability challenges abound. By providing focused solutions targeted at optimum performance from the earliest conceptual stages of a
business/technology initiative through system building and operations, our Powering Performance solutions provide end-to-end service level assurance and predictable development
and deployment. This reduces cost, mitigates risk, improves business and technical performance and drives competitive advantage for our customers.

In
addition to offering specialized Powering Performance solutions that optimize and assure the performance of a wide range of complex and mission-critical business applications, we also
offer focused solutions and expertise in the areas of Straight Through Processing for financial services, Financial Portals, Enterprise Customer Profile, and Order Management. Our offerings are
targeted, and our domain expertise is focused, on industries in which mission-critical high-performance IT systems provide a competitive advantage, including financial services, logistics,
travel and transportation, insurance, healthcare and telecommunications.

Our
current and former customers are among the world's largest and most sophisticated providers and users of IT and include: Ameritech, Ameritrade, Blockbuster, British Telecom, CIBC,
E*TRADE, eBay, FedEx, Ford Motor Company, The Hartford, Honda Finance, ING Barings, Qwest/USWest, Maersk Sealand, MCI WorldCom, Royal Bank of Scotland, R.R. Donnelley Financial, Standard Chartered
Bank, Sun Microsystems, United Airlines and Union Pacific Railroad.

Our
mission is to provide unmatched value to the world's leading companies, building and perfecting systems that reduce cost, mitigate risk, improve performance and drive competitive
advantage.

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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Our performance-based solution family exploits our specialized core information technology skills and experience, and covers and optimizes the entire IT system
lifecycle, from business concept to operations. Components of our Powering Performance solution family address mission-critical needs in areas such as technology and business integration; performance
testing and optimization; and capacity
management, trend analysis and business metrics measurement and optimization. Applicable to a wide range of information technology initiatives, our Powering Performance solution family and
methodologies provide our customers the benefits of reduced cost, controlled risk, and improved technical and business performance for systems at the core of their businesses.

Central
to our Powering Performance family of solutions is our Proof of Integration offering. Our Proof of Integration solution provides "forward integration" capability
that allows proposed customer-specific environments to be emulated, analyzed and modified while they are being architectedprior to development. The solution encompasses:



By
using the Proof of Integration solution, educated integration decisions can be made which are based on data, fact, and real-world insightin place of guesswork and
conjectureand alignment of business and IT can be assured.

Our
Proof of Integration offering is supplemented by our Performance Test Engineering offering, to identify and eliminate performance bottlenecks, and Performance Operations
Engineering offering, to manage capacity and service levels of deployed systems. Our Powering Performance solution family and methodology is fully incorporated into the vertically focused
business solutions we offer, including Straight Through Processing for financial services, Financial Portals, Enterprise Customer Profile, and Order Management.



We focus on delivering solutions to our clients' business challenges, not simply on technology. Our offerings provide value to our clients by optimizing core
business processes, centered on order management and fulfillment and customer interactions. We enable our clients to harness existing and emerging technologies, rapidly and reliably integrating
complex business and technology infrastructures into systems that reduce cost, mitigate risk, and improve the technical and business performance of these core processes. In the industries on which we
focus, these business processes are core to our clients' overall performance and competitive posture, and our solutions enable meaningful competitive advantage.

Our
offerings are replicable business solutions, not merely information technology competencies. Because they place the business value proposition at the forefront, and rely on
repeatable processes and assets, our solution focus provides us the benefits of easier and more profitable sale and delivery.

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Cost and risk of delivery is reduced, and opportunities for premium pricing and higher margins are available.



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
information technology professionals have an average of more than 15 years of industry experience. 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.

The
technology skills of our staff are recognized in the industry. Forrester Research acknowledged this in its June 2000 eIntegrator Report, with Tanning receiving the highest
score in the critical technology category of the 152 eIntegrators researched, ahead of such well-regarded competitors as Accenture, Sapient, and EDS. Our IT professionals have deep
business domain knowledge, and premier skills in the critical areas of performance engineering, architecture, and complex integration. It is part of our culture to learn, adapt, and successfully
integrate new technologies as they are developed.



During our eight-year history, we have successfully delivered large-scale core business systems in many industry categories, including financial
services, logistics, travel and transportation, insurance, healthcare and telecommunications. From this broad experience, we have attained highly differentiated vertical market domain expertise. Our
focused solutions and expertise in the areas of Straight Through Processing for financial services, Financial Portals, Enterprise Customer Profile applications and Order Management are the product of
years of experience and insight into the challenges of industry domains in which mission-critical high-performance information technology systems provide a competitive advantage:



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Established in 1998, Tanning Technology India Private Limited ("TTI") is a majority-owned subsidiary operating in Hyderabad, India that is central to our delivery
strategy. Initially started to provide offshore software maintenance, it has grown to enable us to provide increased quality and value to our customers in all phases of our engagements. We expect that
full integration of our Indian operation will allow us to maximize the cost advantage it provides as well as enhance the repeatability and predictability of our delivery processes.

In
2000, TTI moved into a new 25,000-sq. ft. development facility with integrated knowledge management and network connectivity to our other development centers. After an
independent evaluation involving analysis and review of its software development capabilities and processes, TTI received Capability Maturity Model Level-3 certification in
January 2001. With its focus on quality and its attractive cost model, TTI adds a meaningful value proposition and growth opportunity to our business.

Strategy

Our strategy is to create sustainable and profitable growth by leveraging our Powering Performance solutions and methodologies, enhancing our business development
and delivery capabilities, and developing and expanding our new vertically focused solutions.

To
achieve our objectives, we plan to:



Our
focused Powering Performance solutions provide an attractive entry point for many leading businesses that commonly experience challenges in achieving required levels of reliability,
response times, and user and transaction volumes in the systems that run their core business processes. Engagements targeted at specific performance and integration challenges in systems at various
stages of maturity, from concept to deployment and operations, provide us the ability both to demonstrate the value of our performance-based approach and to learn of and influence opportunities to
deploy the full range of our information technology competencies, including development, architectural consulting, system integration, and performance services. As we successfully deliver on
performance-focused engagements, we expect to create opportunities for larger, more diverse, and longer-lasting engagements at our clients. As we continue to improve the value, repeatability and
reusability of our processes and assets, we expect to reduce the cost of delivery, and improve the profitability, of our offerings.



We
intend to base our business 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 program and relationship manager who will be responsible for ensuring that the client is satisfied with the services we
are providing. Program and relationship managers strive to become

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trusted advisors to their clients, 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 internal sales and marketing teams, external marketing and lead-generation partners, industry
analysts, marketing events and public relations, as well as through strategic relationships with hardware, software and services suppliers. Our dedicated sales and marketing teams are supported by
substantial participation from our senior executives, and will allow us to focus on opportunities for high value and long-term engagements based on our Powering Performance solutions and
methodologies. We expect to continue to utilize specialized marketing organizations for focused lead generation in areas applicable to our solutions. We will also deepen our relationships with
selected hardware, software and service suppliers, with the goal of establishing strategic alliances that leverage complementary client bases, products and services. We expect to regularly be involved
in negotiations of strategic, technology and services alliances or similar arrangements in order to support our business development and related activities. These arrangements may include equity
investments in or by Tanning, referral or commission arrangements, joint marketing agreements, product or services education, and other types of agreements.



Our
Powering Performance solutions, including Proof of Integration, Performance Test Engineering and Performance Operations Engineering, form the core of our solution offerings. These
solutions are applicable to mission-critical information technology systems in a wide variety of business domains in which we have experience, including financial services, logistics, travel and
transportation, insurance, healthcare and telecommunications. Our Powering Performance solutions and related methodologies are also incorporated in our new vertically focused business solutions,
including Straight Through Processing for financial services, Financial Portals, Enterprise Customer Profile and Order Management. We intend to continue to improve our expertise and experience in the
core business domains to which our solutions apply, and refine the marketing and delivery of our vertically focused
solutions. We expect our focused solutions to become an increasing portion of our business due to the business value, repeatability, marketing effectiveness, and cost advantage associated with them.

In
addition, our strategy includes enhancing our solutions and service offerings and gaining access to new technologies, skills and other resources through strategic acquisitions,
alliances 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. We expect to be regularly involved in
discussions and negotiations with parties who provide technologies, skills, services, products or solutions that could supplement or enhance our internal capabilities. Potential arrangements could
include equity investments in or by Tanning, partnerships or similar alliances, referral or commission arrangements, joint marketing agreements, product or services education, and other types of
agreements.



We
believe that our clients choose to work with us because of the value of our business solutions, and our reputation for successfully handling information technology's most challenging
assignments. We intend to continue to actively sponsor internal education programs to enhance and disseminate skills in critical new technology areas. In addition, a key source for new and advanced
capabilities is our

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experience in developing and optimizing solutions that are innovative, and of industry-leading scale and complexity. 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 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.



We
have consistently attracted and retained leading information technology talent interested in solving our industry's toughest challenges. We plan to continue to selectively 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 consistently accounted for a significant proportion of our new recruits.

Our
goal is to create and grow a culture that itself is a competitive advantage by focusing on providing to our employees not only the industry's most challenging and rewarding
information technology engagements, but also a training and development organization centered around building, in addition to technical skills, teaming, relationship, and leadership skills as critical
competencies. We believe that a significant number of information technology projects fail or are seriously challenged as a result of improperly functioning teams, rather than technology decisions. We
have created a process that includes a team kickoff and multiple team-dynamics reviews for teaching leadership, teaming and relationship skills in the context of active projects.



Tanning
India in Hyderabad is central to our integrated delivery strategy. As economic conditions create increased pressures for higher quality and lower cost solutions, we expect to
enjoy significant advantages from the growing integration of our Indian operations into our delivery model. Our delivery strategy for this model encompasses consistent and scalable processes in the
areas of program management, project management, development, deployment, intellectual property management and reuse, and customer satisfaction on a global basis founded on best practices, quality,
and value.

As
part of our focus on quality, we achieved Capability Maturity Model (CMM) Level 3 certification for our Hyderabad facility. The CMM-based Appraisal for Internal Process
Improvement (CBA-IPI) is an independent evaluation involving analysis and review of a company's software development capabilities and processes. Tanning India provides a scalable
lower-cost capability to our delivery processes while maintaining high quality. By moving a significant component of our development to India, we will be better able to pass on price
advantages to our customers while maintaining attractive margins.

The Tanning Approach

The Tanning Approach flows directly from the Tanning Differencewe are performance focused and business solution driven.

The
Tanning Approach leverages our Powering Performance solutions, each of which we can execute as a stand-alone solution or include as building blocks for larger initiatives, including
building systems based on our vertically focused business solutions, and providing the entire range of architecture, design, development, integration, deployment and operational services required for
a performance-optimized, mission critical IT system.

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Our Proof of Integration solution is a set of end-to-end performance services that provide information to business owners and systems
designers early in the development lifecycle to ensure that optimal architectural, design, development and deployment decisions are made at the start of an IT initiative.    By emulating
the environment to be deployed, the Proof of Integration solution minimizes the risks associated with system development and deployment relative to specific reference architectures. The delivery of
the solution involves:



Our
Proof of Integration solution encompasses volume testing, stress testing, and reliability engineering on an implementation that is designed to address our clients' key concerns and
decision making criteria. The statistics captured during testing are used to provide early insight into resource needs in light of production demands.

We
use our reference business models and architectures to create a customer-specific Proof of Integration. This ensures that previously successful architecture and design patterns are
fully leveraged. We deploy best practices to define architecture component models complete with prototypes, to define technical frameworks, and to develop proofs of concept for validation of
technologies and architecture. We architect application components and all infrastructure components with a focus on their operational and performance characteristics, including scalability,
availability, response time, system load throughput, and flexibility.

In
addition to being offered as a stand-alone solution, we incorporate our Proof of Integration solution into all of the systems we build, including our vertically focused solution
offerings and our custom system development projects. Our Proof of Integration solution and related methodologies underlie the critical early stages of system building, including business and
requirements analysis, system and application analysis, architecture definition and application design. By relying on our Proof of
Integration solution and methodologies, we are able to minimize cost, mitigate risk and optimize performance in the systems we build.



Businesses with complex mission-critical systems that experience performance problems and unreliable operationsand the increasing pressure to fix
themcall upon our performance analysts and our Performance Test Engineering solution. We assess system performance and availability for both existing and new systems under development,
and identify and eliminate performance bottlenecks and remove single points of failure that jeopardize the integrity and serviceability of an application. We review the existing hardware and software
architecture, examine business requirements and performance expectations, and develop a plan to make sure the business objectives align with the information technology systems.

Our
Performance Test Engineering methodologies encompass volume testing, large data sets, stress testing, reliability engineering, and fail-over testing on a model of the
customer's production environment to fully isolate problems before introducing new systems or modifications into actual business use. The statistics captured during testing are used to provide the
capacity requirements and metrics necessary to size and configure the production environment.

In
addition to being offered as a stand-alone solution, all of the systems we build depend on our Performance Test Engineering. During an application development effort, we stress test
high-risk system

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components to ensure that they are fully capable of handling the workloads for which they were designed. Next, as application components successfully complete integration and functionality testing,
they are tested in isolation to understand their performance characteristics and determine inherent bottlenecks that would limit reliability, security, fail-over, and scalability. Finally,
testing is performed on a duplicate of the production system, for all components, to explore system behavior and impact. As a result, the development and integration phases of our large-scale projects
build in sophisticated performance measurement and assurance disciplines, and the finished system is reliable, scalable, and performance optimized.



Our Performance Operations Engineering solution assesses an organization's current environment to identify gaps and areas in which high-impact
improvement is possible, develops custom component models, and recommends commercially-available products for integration. It also deploys solution
components and conducts a post-deployment benefits analysis to insure that the anticipated value has been realized.

Tanning's
Performance Operations Engineering solution creates a capacity management and service level management system that ties business activity to computing resources in a way that
allows business owners and IT organizations to proactively understand and manage their systems. Tanning's offering consists of operational "dashboards" of information that can be compared and used in
planning future system capacity and improving operating service levels and costs. This allows organizations to recognize trends early and avoid problems that would otherwise result in customer
disservice.

The
Tanning Performance Operations Engineering solution targets three areas:



Tanning's
Performance Operations Engineering is offered as a stand-alone solution, or as part of our overall system performance lifecycle to ensure that our clients achieve optimal
performance during the deployment and operations phases of their project, and realize high return on their IT investment.

Clients

The following is a representative list of our clients for 1999, 2000 and 2001.

|Ameritech          |  | Maersk Sealand          
|------------------ |  | ------------------------
|Ameritrade         |  | MCI WorldCom            
|Blockbuster        |  | Qwest/US WEST           
|British Telecom    |  | Royal Bank of Scotland  
|CIBC               |  | R.R. Donnelley Financial
|E*TRADE            |  | Standard Chartered Bank 
|eBay               |  | Sun Microsystems        
|Ford Motor Company |  | The Hartford            
|Honda Finance      |  | United Airlines         
|ING Barings        |  | Union Pacific Railroad  

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In
1999, our five largest clients accounted for approximately 71% of our services revenue, with Maersk Sealand accounting for approximately 26% of our services revenue and E*TRADE accounting for
approximately 24% of our services revenue. In 2000, our five largest clients accounted for approximately 67% of our services revenue, with Maersk Sealand and E*TRADE each accounting for approximately
21% of our services revenue and GlobalCenter, Inc. accounting for approximately 12% of our services revenue. In 2001, our five largest clients accounted for approximately 69% of our services
revenue, with Maersk Sealand and Qwest each accounting for 22% 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 affects our business and could have a material
adverse effect on our financial condition and results of operations. For example, in September 2000, Global Crossing Ltd. and Exodus Communications, Inc. entered into an agreement
for the acquisition from Global Crossing of our client GlobalCenter, Inc. As a result, our revenues from GlobalCenter were very significantly reduced in the fourth quarter of 2000, and we did
not derive significant revenue from that source thereafter. Further, as a result of projects ending and client budget pressure, our work for a number of clients who were among our five largest in 2001
has sharply declined, significantly adversely affecting our revenue at the end of 2001 and continuing into 2002.

Marketing and sales

We market and sell our services through multiple channels, including our internal client service and marketing teams, external marketing and
lead-generation partners, industry analysts, marketing events and public relations, as well as through strategic relationships with hardware, software and services suppliers. Our dedicated
sales and marketing teams are supported by substantial participation from our senior executives, and allow us to focus on opportunities for high value and long-term engagements based on
our Powering Performance solutions and methodologies.

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
program and relationship managers who are responsible for managing relationships with existing clients. Program and 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 9 "Segment Reporting" of the Notes to Consolidated Financial Statements included in Part II 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 competition to continue and intensify. Our
competitors fall into four major categories:



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

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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.

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



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

On December 31, 2001, we had 376 employees. In January 2002, we executed a workforce reduction of approximately 100 employees. We believe our
relationship with our employees is good. None of our employees are 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.

We have experienced, and expect in the future to experience, a decline in our services revenue, which will negatively impact our financial results

Our services revenue for the year ended December 31, 2001 declined $35.8 million, or 44%, to $46.2 million compared to our services revenue
for the year ended December 31, 2000. We believe the decline in services revenue was primarily due to a broad-based general economic slowdown in which clients have significantly tightened
technology budgets, increased competitive pressure from traditional management consulting, information technology services and other competitors and a lack of urgency by Global 2000 companies to
immediately fund IT projects. We have made changes in our solution offerings and sales and marketing approach in order to respond to these industry and business dynamics, but there can be no assurance
that our actions will be successful. We expect services revenue for the quarter ended March 31, 2002 to decline significantly compared to our services revenue for the quarter ending
December 31, 2001.

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If we are unable to effectively manage cost and resource levels, our financial performance will be adversely affected

The revenue in our business is difficult to predict, particularly in current economic conditions, and our expenses are in large part comprised of compensation and
rent, which can be difficult to change on short notice. Our management must effectively balance our need to control costs with our need to respond timely to client demands. Any failure to effectively
manage cost and resource levels will adversely affect our business. As a result of the decline in demand for our services, during the third quarter of 2001, we executed cost control measures in our
North American operation, resulting in a workforce reduction of 37 employees, as well as certain office closures. During the fourth quarter of
2001, we commenced the closure of our European facilities, which will result in a total workforce reduction of approximately 70 employees. During January 2002, we executed additional cost
control measures in our North American and Indian operations, resulting in a workforce reduction of approximately 100 employees, as well as certain office closures. We may be required to further
reduce our headcount, close more offices or further reduce expenses if our services revenue continues to decline or continues to be insufficient to support our cost structure. In addition, our ability
to generate services revenue will be impaired to the extent we have reduced our professional services resources and our core services support functions. If demand for our services increases in the
future, we may not be able to expand our operations, including hiring additional employees, to meet this demand in a timely fashion or at all. If we cannot increase our services revenue in future
periods, our financial results will suffer. We can give no assurances that these measures, or any additional cost-cutting steps taken, will be sufficient to mitigate our expected decline
in revenues for the quarter ending March 31, 2002, or for any future periods, or to return our operations to profitability.

If we are unable to generate revenues from new clients and maintain and expand our revenues from existing clients, our business will suffer

Our ability to generate revenues will be adversely affected if we are unable to attract business from new clients and maintain and expand business from our
existing clients. Factors that affect our ability to sell our services include the attractiveness and perceived value of our service offerings, our reputation for quality and reliability, and
variations in demand for information technology services and in economic conditions generally. These variations could cause our existing clients to reduce or cease their investment in our services,
and potential clients not to engage us. Our operating results and financial condition may also be adversely affected by difficulties we may encounter in collecting our accounts receivable and
maintaining our profit margins during an economic downturn. Many of these factors are beyond our control, and we may not be successful in our efforts to create, market, sell, and deliver services and
solutions that are attractive to potential clients. These factors have materially and adversely affected our business in recent periods. To the extent these factors continue to adversely affect demand
for our services, our business will suffer.

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

Our five largest customers accounted for 69%, 67% and 71% of total revenues during 2001, 2000 and 1999, respectively. The volume of work performed for our
principal clients may not be sustained from year to year or quarter to quarter, 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 affects our business and could have a material adverse effect on our financial condition
and results of operations. Many factors can result in a cancellation, reduction or deferral of services requested by our customers, including budget constraints, perceived project progress, perceived
project success or value, industry shifts and consolidation, and economic factors. For example, during the second quarter of 2000 we reached an agreement to terminate a

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contract with British Sky Broadcasting ("BSkyB"), a client accounting for 6% of our total revenues during 1999 and 8% of our total revenues for the first quarter of 2000. In connection with this
termination, we recognized a $5.8 million loss, consisting of a write off of accounts receivable of $3.3 million, $2.0 million in project personnel costs, and $0.5 million
in other related costs. GlobalCenter, Inc., one of our five largest clients during each quarter of 2000, was purchased by Exodus Communications, Inc. in a transaction that closed during
January of 2001. As a result, our revenues from GlobalCenter, Inc. were very significantly reduced in the fourth quarter of 2000, and even further reduced during 2001. Further, as a result of
projects ending and client budget pressure our work for a number of clients who were among our five largest in 2001 has sharply declined, significantly adversely affecting our revenue at the end of
2001 and continuing into 2002.

The recent terrorist attacks on the United States have negatively impacted the U.S. economy and are expected to adversely affect our financial performance

The September 11, 2001 terrorist attacks in New York and Washington have disrupted the U.S. financial markets and have negatively impacted the U.S. economy
in general. Any future terrorist attacks, the anticipation of any such attacks, or the consequences of military or other responses to such attacks may have a further adverse impact on the financial
markets, economy and our business. These factors have contributed, and may continue to contribute, to downward pressure on stock prices of publicly traded companies, such as our company, in the
technology sector in particular. It is likely that such factors will negatively affect, among other things, the financial condition and business plans of current and prospective clients, the demand
for our services, and the ability of our employees to travel as and when needed in order to provide needed sales and service support. In particular, the economic effects of the attacks and potential
attacks are likely to cause existing or potential customers to significantly reduce their information technology services spending. We have seen significant reductions in short-term
spending among our clients in the transportation and logistics industries, which will materially affect our revenue expectations over the next few quarters.

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

Our revenues and earnings are volatile and difficult to predict. Our services revenue increased on a quarter-to-quarter basis during the
first three quarters of 2000, and then decreased approximately 35% for the quarter ended December 31, 2000, 19% for the quarter ended March 31, 2001 and 12% for the quarter ended
June 30, 2001. After a slight increase for the quarter ended September 30, 2001, our services revenue again decreased 29% for the quarter ended December 31, 2001. It is possible
that in future periods our operating results will be below the expectations of public market analysts or investors. The market price for our common stock has decreased significantly in recent months,
and if our future operating results are below the expectations of public market analysts or investors, or for other reasons, the market price of our common stock may decline further.

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



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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. In addition,
the market price of our common stock could fluctuate substantially due to future announcements concerning us, our competitors or acquisitions, or changes in earnings estimates or recommendations by
analysts.

Our clients may become unable or unwilling to pay us for services performed

We assume a certain level of credit risk with our clients in order to do business. Conditions affecting any of our clients could cause them to become unable or
unwilling to pay us in a timely manner, or at all, for services we have already provided them. In the past we have experienced significant collection delays from some clients, and we cannot predict
whether we will experience similar problems in the future. If one or more of our clients fails or refuses to pay us in a timely manner or at all, or if we are unable to collect a number of large
accounts receivable, it could have a material adverse effect on business, operating results and financial condition. For example, one of our top five clients during 2000 experienced difficulty in
raising external financing needed in order to fund its operations and satisfy debts owed to us. As a result, during the fourth quarter of 2000, we wrote off approximately $2.4 million in
accounts receivable from this client and were unable to recognize approximately $2.0 million in revenues earned from services provided to this client. In 2001, we started a project with a
significant customer and we are currently in negotiation with this customer regarding its outstanding balance. We do not expect to recover the full invoiced amount from this customer.

Our failure to meet client expectations or deliver error-free services could result in losses and negative publicity

Our client engagements involve the design, development and deployment of IT applications that are often critical to our clients' businesses. Any defects or errors
in these applications or failure to meet clients' expectations could result in:



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Our
contracts generally limit our liability for certain amounts or types of damages that may arise from negligent acts, errors, mistakes or omissions in rendering services to our
clients. However, we cannot be sure that these contractual provisions will protect us from liability for damages in the event we are sued. Furthermore, our general liability insurance coverage may not
continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims, or the insurer may disclaim coverage as to any future claim. The successful assertion of any
such large claim against us could seriously harm our business, financial condition and operating results.

We may fail to accurately estimate or manage 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

We generally provide services to our clients on a time and materials or a fixed-fee basis. Our fixed-fee, fixed-time
arrangements may provide for significant penalties for late delivery. Because we work with complex technologies in compressed timeframes and because we have limited experience in pricing and managing
engagements on these terms, it can be difficult to judge the time and resources necessary to complete a project and properly manage delivery within agreed time and cost limitations. 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 the BSkyB project engagement
entered into in 1999 on a fixed-fee, fixed-time basis resulted in an adverse effect on our gross profits, because we were required to devote more resources to perform the work
than we had originally anticipated. For a further discussion of the impact of this project, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." Even in
engagements not contracted on a fixed-fee, fixed-time basis, failure to deliver projects in accordance with client expectations and budgets can impair our ability to collect
payment for our services, and damage our customer relationships and our reputation.

Our lack of long term contracts with clients and our clients' ability to terminate projects before completion reduce the predictability of our revenue and could adversely
affect our earnings

Our clients generally retain us on an engagement-by-engagement basis, rather than under long-term contracts. As a result, our
revenue is difficult to predict. Because we incur costs based on our expectations of future revenue, our failure to predict our revenue accurately may seriously harm our financial condition and
results of operations. Although it is our goal to provide the full range of our IT services to our clients, we are generally retained to design and perform discrete segments of work on an
engagement-by-engagement basis. Since large client projects involve multiple engagements or stages, there is a risk that a client may choose not to retain us for additional
stages of a project or that the
client will cancel or delay additional planned projects. For example, many of our potential Global 1000 customers have recently shown a lack of urgency to pursue large IT initiatives and a number of
our clients have recently slowed or stopped altogether the use of our services. In addition, our clients generally may terminate project engagements upon limited notice and without significant
penalty. If a client defers, modifies or cancels an engagement or chooses not to retain us for additional phases of a project, we must be able to rapidly redeploy our employees to other engagements in
order to minimize underutilization of employees and the resulting harm to our operating results. Our operating expenses are relatively fixed and cannot be reduced on short notice to compensate for
unanticipated variations in

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the number or size of engagements in progress. 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. Further, as a result of projects ending and client budget pressure our work for a number of clients who were among our five largest in 2001 has sharply declined,
significantly adversely affecting our revenue, employee utilization and earnings at the end of 2001 and continuing into 2002.

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:



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.

Our solutions and service offerings may not be successful and we may lose opportunities to generate business

We have recently refocused our solution and service offerings to center on our Powering Performance family of solutions. In addition, we offer vertically focused
solutions in the areas of Straight Through Processing for financial services, Financial Portals, Enterprise Customer Profile, and Order management, as well as services in the areas of architectural
consulting, performance engineering, and development.    Successful execution of our business plan relating to our solutions and service offerings will require:



Failure
to successfully implement these solutions and service offerings on a timely basis could cause us to lose opportunities for business with both existing and potential clients and
lose the benefits of potentially reduced delivery costs. We cannot assure you that our solutions and service offerings will be successful.

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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. If clients do not perceive our solutions or our delivery approach 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 and could suffer economic liability.

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 senior management, 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. This dependence is particularly important to our business because personal relationships are critical to obtaining and maintaining client engagements and maintaining a
cohesive culture. In addition, former employees may compete with us in the future.

In
light of our recent restructurings and reductions in headcount, as well as the fact that many of our employees hold options with exercise prices above the current market price of our
common stock, our ability to retain our employees or to recruit and hire new employees may be difficult.

Even
if we retain our current employees, our management must recruit talented professionals in order to support our long term growth. Even if we are able to expand our employee base, the
expenditure of resources required to attract and retain these employees may adversely affect our operating margins. 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.

Our international operations involve risks relating to difficulties in complying with foreign laws and regulations, 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

Revenues from our clients outside of North America represented 34% of services revenue in 1999, 27% of services revenue in 2000, and 30% of services revenues in
2001. We may incur significant costs in connection with our international operations. In addition, we have limited experience in marketing,
selling and supporting our services in foreign countries. Development of these skills may be more difficult or take longer than we anticipate.

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



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

Potential acquisitions or joint ventures, partnerships or similar alliance opportunities may result in, among other things, increased expenses, difficulties in integrating
target companies, interference with relationships with clients or business partners, and diversion of management's attention

An element of our strategy includes expanding our solutions and service offerings, enhancing business development and gaining access to new technologies, skills
and other resources through strategic acquisitions, partnerships and investments when attractive opportunities arise. These arrangements may include equity investments in or by Tanning, referral or
commission arrangements, joint marketing agreements, product or services education, and other types of relationships and agreements. Some of the risks that we may encounter in implementing this
element of our strategy include:



---



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

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:



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.

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:



---



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.

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:



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.

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:



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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, although we believe that our clients are legally obligated to pay for our services even in the absence of written contracts, or on the basis of a limited statement of work.

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:



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

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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.

ITEM 2. PROPERTIES

Our principal headquarters is located in Denver, Colorado and comprises approximately 75,000 square feet. The lease for our headquarters expires on
February 28, 2007 and we have the option to extend the term to February 28, 2017. We also have offices in Chicago, Illinois; Boston, Massachusetts; Stamford, Connecticut; New York, New
York; 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.

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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:

|                                          |  | High |       | Low
|----------------------------------------- |  | ---- | ----- | ---
|2000:                                     |  |      |       |    
|First Quarter                             |  | $    | 70.38 |    
|Second Quarter                            |  | $    | 34.81 |    
|Third Quarter                             |  | $    | 20.19 |    
|Fourth Quarter                            |  | $    | 12.00 |    
|2001:                                     |  |      |       |    
|First Quarter                             |  | $    | 6.50  |    
|Second Quarter                            |  | $    | 5.90  |    
|Third Quarter                             |  | $    | 4.94  |    
|Fourth Quarter                            |  | $    | 3.37  |    
|2002:                                     |  |      |       |    
|January 1, 2002 through February 15, 2002 |  | $    | 3.55  |    

As
of February 15, 2002, there were approximately 162 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."

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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 statement of operations data for the three-year period ended December 31, 2001 and the balance sheet information as of December 31, 2000 and
2001 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 two-year period ended December 31, 1998 and the balance sheet data as of December 31, 1997, 1998 and
1999 are derived from our audited financial statements, which are not included in this Annual Report on Form 10-K. Results of operations for any historical period do not indicate
results for any future period.

|                                                  |              | Year ended December 31, |           
|------------------------------------------------- | ------------ | ----------------------- | ----------
|
|
|Statement of Operations Data:                     |              |                         |           
|Services revenue                                  |              | $                       | 25,235    
|Product sales                                     |              |                         | 872       
|                                                  |              |                         |           
|                                                  | Net revenues |                         |           
|Project personnel costs                           |              |                         | 14,722    
|                                                  |              |                         |           
|                                                  | Gross profit |                         |           
|Selling, marketing and administrative             |              |                         | 7,856     
|Product development costs                         |              |                         | 1,608     
|Restructuring charges                             |              |                         |          
|Loss on contract and termination costs            |              |                         |          
|Sign-on bonus related to stock purchase agreement |              |                         | 2,117     
|Management feesrelated parties                   |              |                         | 73        
|                                                  |              |                         |           
|Income (loss) from operations                     |              |                         | (269      
|Interest income (expense) and other, net          |              |                         | 130       
|                                                  |              |                         |           
|Income (loss) before income taxes                 |              |                         | (139      
|Income tax provision (benefit)                    |              |                         | (212      
|                                                  |              |                         |           
|Net income (loss)                                 |              | $                       | 73        
|                                                  |              |                         |           
|Basic earnings (loss) per share                   |              | $                       | 0.01      
|                                                  |              |                         |           
|Basic weighted average shares outstanding         |              |                         | 13,718,710
|                                                  |              |                         |           
|Diluted earnings (loss) per share                 |              | $                       | 0.01      
|                                                  |              |                         |           
|Diluted weighted average shares outstanding       |              |                         | 13,718,710
|                                                  |              |                         |           
|Gross profit from services                        |              | $                       | 10,513    
|Income (loss) from operations from services       |              | $                       | 467       
|
|
|
|Balance Sheet Data:                               |              |                         |           
|Cash and cash equivalents                         |              | $                       | 7,769     
|Working capital                                   |              |                         | 10,204    
|Total assets                                      |              |                         | 16,846    
|Long-term debt, net of current portion            |              |                         |          
|Total stockholders' equity                        |              |                         | 12,737    

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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

We are an information technology services provider that develops and deploys IT systems that reduce cost, improve performance and drive competitive advantage for
leading companies worldwide. We focus on mission-critical business systems that are engineered to integrate, perform and scale, reliably and predictably. Our years of experience in pushing system
performance limits has resulted in a unique family of Powering Performance solutions and methodologies that are at the core of everything we do. Our offerings are targeted, and our domain expertise is
focused, on industries in which mission-critical high-performance IT systems provide competitive advantage, including financial services, logistics, travel and transportation, insurance,
healthcare and telecommunications.

Our
revenue is comprised of fees generated for professional services. We generally provide services to clients on a time and materials or 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, which relies on estimates of total
expected contract revenues and costs. We follow this method because we believe we can make reasonably dependable estimates of the revenue and costs applicable to various stages of a contract. Because
the financial reporting of these contracts depends on estimates, which are assessed continually during the contract term, recognized revenues and profits are subject to revisions as the contract
progresses to completion. We are generally reimbursed for reasonable expenses under our contracts. These expenses are not reflected on our statements of operations.

During
the second quarter of 2001, we implemented a plan to realign our European staffing profile. The aggregate financial impact of this plan was a restructuring charge of approximately
$0.5 million,
primarily consisting of severance pay associated with a workforce reduction of 16 employees in our European operation.

During
the third quarter of 2001, we executed cost control measures in our North American operation, resulting in a workforce reduction of 37 employees, as well as certain office
closures. The aggregate financial impact of these measures was a restructuring charge of approximately $1.0 million, primarily consisting of severance pay and lease termination costs.

During
the fourth quarter of 2001, we commenced the closure of our European facilities which will result in a total workforce reduction of approximately 70 employees. The aggregate
financial impact of the closure of our European facilities was a restructuring charge of approximately $3.6 million, primarily consisting of severance pay, losses on computer hardware and software and
furniture/fixture dispositions, lease termination costs, and the disposition of cumulative translation adjustments. We expect quarterly savings associated with this closure to be approximately
$3.5 million. We will continue to serve international clients from our North American and Indian facilities.

During
January 2002, we executed additional cost control measures in our North American and Indian operations, resulting in a workforce reduction of approximately 100 employees,
as well as certain office closures. The aggregate financial impact of these measures will be a charge restructuring of

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approximately $1.3 million, taken during the first quarter of 2002, primarily consisting of severance pay and lease termination costs. We expect quarterly savings as a result of this
reorganization to be approximately $2.7 million.

Revenue
from foreign operations represents revenue for professional services performed for clients outside North America. Foreign operations represented 34% of revenues in 1999, 27% of
revenues in 2000, and 30% in 2001.

Historically,
a large portion of our revenues has been derived from a limited number of clients. Our top five customers accounted for 69%, 67% and 71% of total revenues during 2001, 2000
and 1999, respectively. To the extent we are unable to mitigate this revenue concentration through new business development, any cancellation, reduction or deferral in work performed for our principal
clients will have an adverse effect on us. Many factors can result in a cancellation, reduction or deferral of services requested by our customers, including budget constraints, perceived project
progress, perceived project success or value, industry shifts and consolidation, and economic factors. For example, GlobalCenter, Inc., one of our five largest clients during each quarter of
2000, was purchased by Exodus Communications, Inc. in a transaction that closed during January of 2001. As a result, our revenues from GlobalCenter, Inc. were very significantly reduced
in the fourth quarter of 2000, and even further reduced during 2001. Further, as a result of projects ending and client budget pressure, our work for a number of clients who were among our five
largest in 2001 has sharply declined, significantly adversely affecting our revenue at the end of 2001 and continuing into 2002.

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our 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. Significant estimates relied upon in preparing these financial statements include expected future earnings and cash flows used to evaluate the recoverability of deferred
tax assets, and the adequacy of the allowances for bad debts. Actual results could differ from those estimates.

In
order to fully realize the deferred tax asset of $6.5 million, the Company must generate $17 million of future taxable income. If we fail to begin to generate pre-tax profits
in the United States, a valuation allowance of up to $6.5 million may be required. In preparing estimates of future taxable income, we have used the same assumptions and projections utilized in
our internal forecasts. Based on these projections, we estimate that the loss carryforwards will be fully realized within 3 years. Estimates of future earnings are based on generating pre-tax profits
on a quarterly basis in the United States before the end of 2002. We expect to achieve pre-tax profits principally through the cost reduction measures announced in our restructuring programs, and
through increased revenue.

We
evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer's inability or unwillingness to
meet its financial obligations to us, we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. If
circumstances change (i.e. higher than expected defaults or the unexpected material change in a major customer's ability or willingness to meet its financial obligations to us), our estimates of the
recoverability of amounts due could increase or decrease by a material amount.

Bad
debt expense was approximately $0.6 million, $5.0 million and $2.2 million for the years ended December 31, 1999, 2000 and 2001, respectively. With
respect to 2001, the bad debt expense is principally associated with amounts due from one of our large customers. We are currently in negotiations with the customer regarding its outstanding balance,
therefore, the estimate of the amount that will ultimately be collected is subject to change.

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The
demand for the services that we provide is sensitive to a variety of factors, including industry trends and economic conditions. Throughout 2001, poor general economic conditions and
industry-specific shifts in demand have caused existing and/or potential clients to reduce or eliminate their investment in the types of services we provide, and have made it more difficult to replace
principal clients of ours that have reduced their level of investment in our services. Further, competitive and pricing pressures have increased. Our ability to generate near-term revenues
will continue to be adversely affected by these factors.

In
addition, the adverse impact of the September 11, 2001 terrorist attacks have caused existing and prospective customers to significantly reduce or eliminate their information
technology services spending. In particular, we have seen significant reductions in short-term spending among our clients in the transportation and logistics industries, which will
materially negatively affect our revenue expectations over the next few quarters.

Project
personnel costs represent a 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.    Historically, our business model has been supported by using subcontracted personnel in billable positions. This model has
allowed us the flexibility to rapidly adjust our capacity to fit the changes in demand for billable resources. In recent quarters, with the decline in demand for resources, we have been able to reduce
our capacity, as well as our project personnel costs, by reducing our subcontractor population. On average, the number of subcontractors working for us during 2000 was 35, compared to 5 during 2001.
During the third quarter of 2001, we eliminated 30 project personnel positions in our North American operation, to more closely align needed skill sets with market demand. During the fourth quarter of
2001, we commenced the closure of our European operations, which, when completed, will result in the elimination of 50 project personnel positions. We recently announced further global reorganization
initiatives in our North American and Indian operations, which were implemented during the first quarter of 2002. These initiatives resulted in the elimination of 75 project personnel positions.

Selling,
marketing and administrative expenses consist primarily of salaries, bonuses, commissions and employee benefits for non-project personnel, occupancy costs, staff
recruiting costs, travel expenses, depreciation expense, bad debt expense and promotional costs. During the third quarter of 2001, we eliminated 7 selling, marketing and administrative positions in
our North American operation as part of our workforce reduction. During the fourth quarter of 2001, we commenced the closure of our European operations, which, when completed during the first quarter
of 2002, will result in the elimination of 22 selling, marketing and administrative positions. We recently announced further global reorganization initiatives in our North American and Indian
operations, which were implemented during the first quarter of 2002. These initiatives resulted in the elimination of 23 selling, marketing and administrative positions.

In
anticipation of long-term business growth, we expect to incur costs and expend capital. Our ability to generate revenues fluctuates from quarter to quarter as a result of
a number of factors, and we can give no assurances that we will grow, or that our growth will support these costs and expenditures. To the extent revenues are inadequate to support our costs and
expenditures, our results of operations and liquidity would be materially and adversely affected.

---

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 revenue growth
statistics.

|                                       |                     | Year ended December 31, |   
|-------------------------------------- | ------------------- | ----------------------- | --
|
|Statement of Operations Data:          |                     |                         |   
|Revenues                               |                     | 100                     | % 
|Project personnel costs                |                     | 48                      |   
|                                       |                     |                         |   
|                                       | Gross profit margin |                         | 52
|Selling, marketing and administrative  |                     | 48                      |   
|Restructuring charges                  |                     | 0                       |   
|Loss on contract and termination costs |                     | 0                       |   
|                                       |                     |                         |   
|Income (loss) from operations          |                     | 4                       |   
|Interest income and other, net         |                     | 3                       |   
|                                       |                     |                         |   
|Income (loss) before income taxes      |                     | 7                       |   
|Income tax provision (benefit)         |                     | 3                       |   
|                                       |                     |                         |   
|Net income (loss)                      |                     | 4                       | % 
|                                       |                     |                         |   
|Growth in revenues                     |                     | 76                      | % 



Our revenues decreased $35.8 million, or 44%, to $46.2 million in 2001 from $82.0 million in 2000. The decrease in revenue is attributable to
a decline in the number and size of projects being worked on for certain existing clients, the conclusion of our relationship with certain clients, as well as difficulty generating revenue from new
clients. The uncertainty in the economy has reduced IT spending for many of our existing and targeted customers, which has made developing new business, both with existing and potential clients,
difficult in recent quarters.



Our project personnel costs decreased $15.1 million, or 37%, to $25.2 million in 2001 from $40.3 million in 2000. This decrease was primarily
due to a decrease of $6.1 million attributed to the reduction in the number of subcontractors used during 2001, as well as an approximate $5.9 million reduction in performance based
compensation during 2001, as compared to 2000. Further, employee project personnel decreased from 326 at the end of 2000 to 275 at the end of 2001. This decrease in project personnel was the net
result of increasing our lower-cost, off-shore Indian personnel by 42, and decreasing our combined North American and European technical population by 93. Our gross profit
margin decreased from 51% in 2000, to 45% in 2001. The decrease in gross margin was attributable to decreased utilization during 2001, partially offset by the lower cost of labor associated with our
Indian development center.



Our selling, marketing and administrative expenses decreased $4.6 million, or 10%, to $41.5 million in 2001 from $46.1 million in 2000. These
decreases in selling, marketing and administrative expenses were primarily attributable to decreases in recruiting expenses of approximately $1.3 million, performance based compensation of
approximately $0.6 million, and bad debt expense of

---

approximately $2.8 million during 2001 as compared to 2000. During 2001, bad debt expense totaled approximately $2.2 million, compared to $5.0 million in 2000. The decrease in
bad debt expense during 2001 was primarily the result of un-collectible receivables associated with a start-up venture that experienced difficulties in obtaining external
financing during the second half of 2000. In addition, our selling, marketing and administrative staff decreased from 111 employees at the end of 2000 to 101 employees at the end of 2001.



During the second quarter of 2001, we implemented a plan to realign our European staffing profile to more closely follow the strategic model being employed in
North America. The aggregate financial impact of this plan was a restructuring charge of approximately $0.5 million. This charge consists primarily of severance pay associated with a workforce
reduction in our European operation.

During
the third quarter of 2001, we executed cost control measures in our North American operation, resulting in a workforce reduction of 37 employees, as well as certain office
closures. The aggregate financial impact of these measures was a restructuring charge of approximately $1.0 million, primarily consisting of severance pay and lease termination costs.

During
the fourth quarter of 2001, we commenced the closure of our European operations, which will result in a total workforce reduction of 70 employees. The aggregate financial impact
of this closure was a restructuring charge of approximately $3.6 million in the fourth quarter of 2001, primarily consisting of severance pay, losses on computer hardware and software and
furniture/fixture dispositions, lease termination costs, and the disposition of cumulative translation adjustments. We expect this closure to be completed during the first quarter of 2002, and to
yield quarterly savings of approximately $3.5 million.

During
January 2002, we executed additional cost control measures in our North American and Indian operations, resulting in a workforce reduction of approximately 100 employees,
as well as certain office
closures. The aggregate financial impact of these measures will be a charge of approximately $1.3 million, taken during the first quarter of 2002, primarily consisting of severance pay and
lease termination costs. We expect quarterly savings as a result of this reorganization to be approximately $2.7 million.



During the second quarter of 2000, we reached an agreement to terminate a fixed-price contract with British Sky Broadcasting Ltd. The aggregate financial
impact of this contract and its termination costs during 2000 was a $5.8 million loss. This loss consists of a write off of accounts receivable of $3.3 million, $2.0 million in
project personnel costs, and $0.5 million in other related costs.



Other income decreased $0.6 million, to $3.2 million in 2001 from $3.8 million in 2000. This decrease was attributable to a decrease in
interest income, partially offset by a write off of an equity investment taken in 2000. The decrease in interest income during 2001 was a result of a decrease in interest rates as well as a decrease
in cash and equivalents at the end of 2001 as compared to the end of 2000. All cash has been invested in short-term, interest bearing, investment grade obligations.



Income tax expense (benefit) represents combined federal, state, and foreign taxes. Our income tax provision, which was attributable to U.S. operations, was
$1.5 million on consolidated pre-tax losses of $6.4 million in 2000, as compared to a $4.3 million tax benefit on pre-tax losses of $22.5 million
during

---

2001. Our ability to realize tax benefits is contingent upon our ability to generate taxable income in the future. Due to uncertainty surrounding future profitability, we did not recognize a tax
benefit associated with European pre-tax losses of $6.5 million during 2001. Similarly, we did not recognize a tax benefit associated with domestic pre-tax losses of
$4.2 million during the fourth quarter of 2001. If we fail to begin to generate pre-tax profits in the United States in 2002, there is uncertainty regarding the realizable value of
recorded deferred tax assets of approximately $6.5 million at December 31, 2001. We expect to begin generating domestic pre-tax earnings by the end of 2002. Until then, we
plan to fully reserve further tax benefits on any near term domestic losses.



Our revenues increased $23.5 million, or 40%, to $82.0 million in 2000 from $58.5 million in 1999. This increase in revenues reflects an
increase in the number of client projects, as well as higher average billing rates. An increase in revenues from our foreign operations also contributed to this increase in overall revenues. Revenues
from foreign operations increased $2.5 million, or 13%, to $22.2 million in 2000 from $19.7 million in 1999. During 2000, we recognized $1.6 million in revenue from a
fixed-price contract that was terminated during the second quarter. All of this revenue was recognized during the first quarter of 2000. During 1999, we recognized $3.3 million in revenue from
this fixed-price contract. Revenues from this fixed-price contract, as a percentage of total revenues, were 2% in 2000, and 6% in 1999. Revenues from our five largest clients as a percentage of total
revenues were 67% in 2000, and 71% in 1999. During the third quarter of 2000, GlobalCenter, Inc. announced that it was being acquired by Exodus Communications, Inc.; a transaction which
was completed during January of 2001. GlobalCenter, Inc. was one of our five largest clients during 2000, representing in excess of $9 million in revenues. As a result of this
acquisition, our revenues from GlobalCenter, Inc. were very significantly reduced in the fourth quarter of 2000. We have not derived, and do not expect to derive, significant revenue from this
source in the foreseeable future.



Our project personnel costs increased $12.2 million, or 43%, to $40.3 million in 2000 from $28.1 million in 1999. This increase was primarily
due to an increase in project personnel, including subcontractors, from 237 at the end of 1999 to 340 at the end of 2000, partially offset by the lower cost of labor associated with our
off-shore Indian development center. Our gross profit margin decreased from 52% in 1999 to 51% in 2000. The decrease in gross margin was attributable to decreased utilization during the
fourth quarter of 2000, partially offset by higher average bill rates as well as the lower cost of labor associated with our Indian development center. Not included in project personnel costs during
2000 is approximately $2 million in labor costs associated with a fixed-price project that was terminated during the second quarter. This $2 million cost is included as part of "Loss on
contract and termination costs" on the statement of operations for the year ended December 31, 2000.



Our selling, marketing and administrative expenses increased $18.3 million, or 66%, to $46.1 million in 2000 from $27.8 million in 1999.
Selling, marketing and administrative expenses increased as a percentage of revenues from 48% in 1999 to 56% in 2000. These increases in selling, marketing and administrative expenses were primarily
due to additional selling and marketing activities undertaken to drive our revenue growth, an increase in bad debt expense, an increase in facility costs, and higher administrative expenses resulting
from increases in our employee headcount and related infrastructure costs. During 2000, bad debt expense totaled approximately $5.0 million, compared to $0.6 million in 1999. The
increase in bad debt expense during 2000 was primarily the result of uncollectible receivables associated with a start-up venture which experienced difficulties in obtaining

---

external financing during the second half of 2000. Our selling, marketing and administrative staff grew from 74 employees at the end of 1999 to 111 employees at the end of 2000.



During the second quarter of 2000, we reached an agreement to terminate a fixed-price contract with British Sky Broadcasting Ltd. The aggregate financial
impact of this contract and its termination costs during 2000 was a $5.8 million loss. This loss consists of a write off of accounts receivable of $3.3 million, $2.0 million in
project personnel costs, and $0.5 million in other related costs.



Other income increased $2.1 million, to $3.8 million in 2000 from $1.7 million in 1999. This increase was attributable to an increase in
interest income, partially offset by a write off, in 2000, of an equity investment made during 1999. The increase in interest income during 2000 was a result of the investment of the proceeds from our
initial public offering in July 1999, as well as the proceeds from the sale of common stock to GlobalCenter, Inc. in February 2000. Proceeds from these transactions have been
invested in short-term, interest bearing, investment grade obligations.



Income tax expense represents combined federal, state, and foreign taxes. Our income tax provision, which is attributable to U.S. operations, was
$1.5 million on consolidated pre-tax losses of $6.4 million in 2000, as compared to a provision of $1.7 million on pre-tax income of $4.2 million in
1999. Domestically, our tax provision totaled $1.5 million on pre-tax income of $2.9 million, representing an effective tax rate of 51%, compared to an effective tax rate of
40% during 1999. Due to uncertainty surrounding future European profitability, we did not recognize a tax benefit associated with European pre-tax losses of $9.4 million during
2000. In conjunction with this future uncertainty, European tax benefits recognized earlier in 2000, totaling $2.4 million, were fully reserved during the fourth quarter of 2000.

Quarterly results

The following table presents our unaudited quarterly results of operations for 2000 and 2001. 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 historical period do not indicate results for any future period.

|                                          |  | Three months ended |       
|----------------------------------------- |  | ------------------ | ------
|
|
|Services revenue                          |  | $                  | 19,578
|Project personnel costs                   |  |                    | 9,718 
|                                          |  |                    |       
|Gross profit                              |  |                    | 9,860 
|Selling, marketing and administrative     |  |                    | 9,118 
|Loss on contract and termination costs    |  |                    |      
|Restructuring charges                     |  |                    |      
|                                          |  |                    |       
|Income (loss) from operations             |  |                    | 742   
|Interest income and other, net            |  |                    | 964   
|                                          |  |                    |       
|Income (loss) before income taxes         |  |                    | 1,706 
|Provision for (benefit from) income taxes |  |                    | 787   
|                                          |  |                    |       
|Net income (loss)                         |  | $                  | 919   
|                                          |  |                    |       
|Basic earnings (loss) per share           |  | $                  | 0.04  
|                                          |  |                    |       
|Diluted earnings (loss) per share         |  | $                  | 0.04  
|                                          |  |                    |       

Liquidity and capital resources

Historically, we have funded operations and investments in property and equipment primarily through cash generated from operations, the sale of common stock and,
to a lesser extent, borrowings. All outstanding debt was paid off during 1999. We had no outstanding debt as of December 31, 2001.

On
July 28, 1999, we completed a public offering of common stock which resulted in the issuance of 4,000,000 shares of our 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. On February 1, 2000, GlobalCenter,Inc. purchased 229,227 shares of our common stock in a private offering. Proceeds
to our company from this transaction were $10.0 million. The net proceeds from each of these offerings (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, and cash on hand will be sufficient to meet our cash requirements at least through the end of 2002.
To the extent future revenues are inadequate to support our costs and expenditures, our liquidity may be materially and adversely affected.

Cash
and cash equivalents decreased to $57.3 million at December 31, 2001 from $82.9 million at December 31, 2000. The $25.6 million decrease in cash
was primarily due to a $22.1 million net decrease in cash from operating activities, a $2.5 million net investment in property and equipment, and a $1.0 million net decrease in
cash from financing activities. Financing activities include the purchase of treasury shares for $2.2 million, partially offset by the proceeds from the issuance of commons stock, primarily in
connection with the exercise of stock options and purchases under our employee stock purchase plan. We currently have no material commitments for capital expenditures. We may, in the future, continue
to purchase treasury shares under our stock repurchase program.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We provide our services to customers primarily in the United States, Canada, 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 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.

During
the fourth quarter of 2001, we commenced the closure of our European operations. Accordingly, future risk associated with foreign currency translation has been significantly
reduced. We may continue to serve and bill international clients from the United States.

The
net proceeds from the sale of common stock have been invested in short-term, interest bearing, investment grade obligations. As such, our interest income could be
affected by fluctuations in prevailing interest rates.

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.

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

None.

---



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 2001 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.

---



PART IV

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









---



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                    
|----------------------------------------------------------------------------------------------------
|Report of Independent Auditors                                                                      
|Consolidated Balance Sheets at December 31, 2001 and 2000                                           
|Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999          
|Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999
|Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999          
|Notes to Consolidated Financial Statements                                                          

---



REPORT OF INDEPENDENT AUDITORS

Board
of Directors and StockholdersTANNING TECHNOLOGY CORPORATION

We
have audited the accompanying consolidated balance sheets of Tanning Technology Corporation as of December 31, 2001 and 2000, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. Our audits also include the financial statement schedule listed in the Index
at Item 14(a)2. 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, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, 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.



Denver,
Colorado
January 30, 2002

---



TANNING TECHNOLOGY CORPORATION        CONSOLIDATED BALANCE SHEETS

|                                    |                                                                                                                                            | December 31, |            
|----------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | ------------ | -----------
|
|Assets                              |                                                                                                                                            |              |            
|Current assets:                     |                                                                                                                                            |              |            
|                                    | Cash and cash equivalents                                                                                                                  |              | $          
|                                    | Accounts receivabletrade, net of allowance for doubtful accounts of $1,752,962 and $2,731,365 at December 31, 2000 and 2001, respectively |              |            
|                                    | Accounts receivableother                                                                                                                  |              |            
|                                    | Income taxes receivable                                                                                                                    |              |            
|                                    | Deferred income taxes, net                                                                                                                 |              |            
|                                    | Prepaid expenses and other assets                                                                                                          |              |            
|                                    |                                                                                                                                            |              |            
|Total current assets                |                                                                                                                                            |              | 101,806,672
|Property and equipment, at cost:    |                                                                                                                                            |              |            
|                                    | Computer equipment                                                                                                                         |              |            
|                                    | Office furniture and equipment                                                                                                             |              |            
|                                    | Computer software                                                                                                                          |              |            
|                                    | Leasehold improvements                                                                                                                     |              |            
|                                    |                                                                                                                                            |              |            
|                                    |                                                                                                                                            |              | 10,001,484 
|                                    | Less accumulated depreciation and amortization                                                                                             |              |            
|                                    |                                                                                                                                            |              |            
|                                    |                                                                                                                                            |              | 5,424,589  
|Deferred income taxes, net          |                                                                                                                                            |              |           
|Long-term receivablesrelated party |                                                                                                                                            |              | 303,349    
|Deposits and other long-term assets |                                                                                                                                            |              | 213,574    
|                                    |                                                                                                                                            |              |            
|Total assets                        |                                                                                                                                            | $            | 107,748,184
|                                    |                                                                                                                                            |              |            

See
accompanying notes.

---

TANNING TECHNOLOGY CORPORATION        CONSOLIDATED BALANCE SHEETS(Continued)

|                                           |                                                                  | December 31,                                                                           |            
|------------------------------------------ | ---------------------------------------------------------------- | -------------------------------------------------------------------------------------- | -----------
|
|Liabilities and stockholders' equity       |                                                                  |                                                                                        |            
|Current liabilities:                       |                                                                  |                                                                                        |            
|                                           | Accounts payable                                                 |                                                                                        | $          
|                                           | Accrued compensation                                             |                                                                                        |            
|                                           | Accrued restructuring charges                                    |                                                                                        |            
|                                           | Other accrued liabilities                                        |                                                                                        |            
|                                           | Deferred revenue                                                 |                                                                                        |            
|                                           |                                                                  |                                                                                        |            
|Total current liabilities                  |                                                                  |                                                                                        | 14,195,087 
|Other long-term liabilities                |                                                                  |                                                                                        | 652,267    
|Minority interest                          |                                                                  |                                                                                        | 154,094    
|Commitments and contingencies              |                                                                  |                                                                                        |            
|Stockholders' equity:                      |                                                                  |                                                                                        |            
|                                           | Preferred Stock, $0.01 par value:                                |                                                                                        |            
|                                           |                                                                  | Authorized shares5,000,000                                                            |            
|                                           |                                                                  | Issued and outstanding sharesnone at December 31, 2000 and 2001                       |            
|                                           | Common stock:                                                    |                                                                                        |            
|                                           | Common Stock, $0.01 par value:                                   |                                                                                        |            
|                                           |                                                                  | Authorized shares70,000,000                                                           |            
|                                           |                                                                  | Issued shares21,560,956 at December 31, 2000 and 21,785,590 at December 31, 2001      |            
|                                           |                                                                  | Outstanding shares21,560,956 at December 31, 2000 and 21,166,869 at December 31, 2001 |            
|                                           | Additional paid-in capital                                       |                                                                                        |            
|                                           | Treasury stock, at cost (618,721 shares as of December 31, 2001) |                                                                                        |            
|                                           | Stock subscription receivable                                    |                                                                                        |            
|                                           | Retained deficit                                                 |                                                                                        |            
|                                           | Accumulated comprehensive loss                                   |                                                                                        |            
|                                           |                                                                  |                                                                                        |            
|Total stockholders' equity                 |                                                                  |                                                                                        | 92,746,736 
|                                           |                                                                  |                                                                                        |            
|Total liabilities and stockholders' equity |                                                                  | $                                                                                      | 107,748,184
|                                           |                                                                  |                                                                                        |            

See
accompanying notes.

---



TANNING TECHNOLOGY CORPORATION        CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                               |                                                | Year ended December 31,  |           
|-------------------------------------------------------------- | ---------------------------------------------- | ------------------------ | ----------
|
|Revenues                                                       |                                                | $                        | 58,463,963
|Operating expenses:                                            |                                                |                          |           
|                                                               | Project personnel costs                        |                          |           
|                                                               | Selling, marketing and administrative expenses |                          |           
|                                                               | Restructuring charges                          |                          |           
|                                                               | Loss on contract and termination costs         |                          |           
|                                                               |                                                |                          |           
|                                                               |                                                | Total operating expenses |           
|                                                               |                                                |                          |           
|Income (loss) from operations                                  |                                                |                          | 2,483,204 
|Other income (expense):                                        |                                                |                          |           
|                                                               | Interest income                                |                          |           
|                                                               | Interest expense                               |                          |           
|                                                               | Other, net                                     |                          |           
|                                                               |                                                |                          |           
|Income (loss) before provision for (benefit from) income taxes |                                                |                          | 4,163,876 
|Provision for (benefit from) income taxes                      |                                                |                          | 1,714,783 
|                                                               |                                                |                          |           
|Net income (loss)                                              |                                                | $                        | 2,449,093 
|                                                               |                                                |                          |           
|Basic earnings (loss) per share                                |                                                | $                        | 0.14      
|                                                               |                                                |                          |           
|Basic weighted average shares outstanding                      |                                                |                          | 17,556,487
|                                                               |                                                |                          |           
|Diluted earnings (loss) per share                              |                                                | $                        | 0.12      
|                                                               |                                                |                          |           
|Diluted weighted average shares outstanding                    |                                                |                          | 20,032,171
|                                                               |                                                |                          |           

See
accompanying notes.

---



TANNING TECHNOLOGY CORPORATION    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

|                                                   |  | Class A
Common Stock |   | Class B
Common Stock |          | Class C
Common Stock |            | Common Stock |   | Treasury Stock |  
|-------------------------------------------------- |  | -------------------- | - | -------------------- | -------- | -------------------- | ---------- | ------------ | - | -------------- | -
|
|Balance, January 1, 1999                           |  | 9,520,293            |   | $                    | 290,795  |                      | 5,696,770  |              | $ | 151,376        |  
|Exercised stock options                            |  |                     |   |                      |         |                      |           |              |   |               |  
|Reclass to one common stock                        |  | (9,520,293           | ) |                      | (290,795 | )                    | (5,696,770 | )            |   | (151,376       | )
|Issuance of common stock, IPO                      |  |                     |   |                      |         |                      |           |              |   |               |  
|Issuance costs                                     |  |                     |   |                      |         |                      |           |              |   |               |  
|Employee stock purchase plan                       |  |                     |   |                      |         |                      |           |              |   |               |  
|Exercised stock options                            |  |                     |   |                      |         |                      |           |              |   |               |  
|Income tax benefit from stock option exercises     |  |                     |   |                      |         |                      |           |              |   |               |  
|Net income                                         |  |                     |   |                      |         |                      |           |              |   |               |  
|Foreign currency translation                       |  |                     |   |                      |         |                      |           |              |   |               |  
|Comprehensive income                               |  |                     |   |                      |         |                      |           |              |   |               |  
|                                                   |  |                      |   |                      |          |                      |            |              |   |                |  
|Balance, December 31, 1999                         |  |                     |   |                      |         |                      |           |              |   |               |  
|Issuance of common stock                           |  |                     |   |                      |         |                      |           |              |   |               |  
|Employee stock purchase plan                       |  |                     |   |                      |         |                      |           |              |   |               |  
|Exercised stock options                            |  |                     |   |                      |         |                      |           |              |   |               |  
|Income tax benefit from stock option exercises     |  |                     |   |                      |         |                      |           |              |   |               |  
|Income tax benefit from disqualifying dispositions |  |                     |   |                      |         |                      |           |              |   |               |  
|Net loss                                           |  |                     |   |                      |         |                      |           |              |   |               |  
|Foreign currency translation                       |  |                     |   |                      |         |                      |           |              |   |               |  
|Comprehensive income                               |  |                     |   |                      |         |                      |           |              |   |               |  
|                                                   |  |                      |   |                      |          |                      |            |              |   |                |  
|Balance, December 31, 2000                         |  |                     |   |                      |         |                      |           |              |   |               |  
|Employee stock purchase plan                       |  |                     |   |                      |         |                      |           |              |   |               |  
|Exercised stock options                            |  |                     |   |                      |         |                      |           |              |   |               |  
|Income tax benefit from stock option exercises     |  |                     |   |                      |         |                      |           |              |   |               |  
|Income tax benefit from disqualifying dispositions |  |                     |   |                      |         |                      |           |              |   |               |  
|Treasury stock purchases                           |  |                     |   |                      |         |                      |           |              |   |               |  
|Issuance of treasury stock                         |  |                     |   |                      |         |                      |           |              |   |               |  
|Stock subscription receivable                      |  |                     |   |                      |         |                      |           |              |   |               |  
|Net loss                                           |  |                     |   |                      |         |                      |           |              |   |               |  
|Foreign currency translation                       |  |                     |   |                      |         |                      |           |              |   |               |  
|Comprehensive income                               |  |                     |   |                      |         |                      |           |              |   |               |  
|                                                   |  |                      |   |                      |          |                      |            |              |   |                |  
|Balance, December 31, 2001                         |  |                     |   | $                    |         |                      |           |              | $ |               |  
|                                                   |  |                      |   |                      |          |                      |            |              |   |                |  

---

|                                                   |  | Stock subscription receivable |          | Additional paid-in capital |   | Retained earnings (deficit) |   | Accumulated comprehensive income (loss) |             | Total stockholders' equity |  
|-------------------------------------------------- |  | ----------------------------- | -------- | -------------------------- | - | --------------------------- | - | --------------------------------------- | ----------- | -------------------------- | -
|Balance, January 1, 1999                           |  | $                             |         |                            | $ | 14,178,203                  |   | $                                       | 2,159,428   |                            | $
|Exercised stock options                            |  |                               |         |                            |   | 1,266,726                   |   |                                         |            |                            |  
|Reclass to one common stock                        |  |                               |         |                            |   | 290,000                     |   |                                         |            |                            |  
|Issuance of common stock, IPO                      |  |                               |         |                            |   | 64,620,691                  |   |                                         |            |                            |  
|Issuance costs                                     |  |                               |         |                            |   | (6,824,926                  | ) |                                         |            |                            |  
|Employee stock purchase plan                       |  |                               |         |                            |   | 2,445,162                   |   |                                         |            |                            |  
|Exercised stock options                            |  |                               |         |                            |   | 1,755,914                   |   |                                         |            |                            |  
|Income tax benefit from stock option exercises     |  |                               |         |                            |   | 2,112,416                   |   |                                         |            |                            |  
|Net income                                         |  |                               |         |                            |   |                            |   |                                         | 2,449,093   |                            |  
|Foreign currency translation                       |  |                               |         |                            |   |                            |   |                                         |            |                            |  
|Comprehensive income                               |  |                               |         |                            |   |                            |   |                                         |            |                            |  
|                                                   |  |                               |          |                            |   |                             |   |                                         |             |                            |  
|Balance, December 31, 1999                         |  |                               |         |                            |   | 79,844,186                  |   |                                         | 4,608,521   |                            |  
|Issuance of common stock                           |  |                               |         |                            |   | 9,997,736                   |   |                                         |            |                            |  
|Employee stock purchase plan                       |  |                               |         |                            |   | 392,287                     |   |                                         |            |                            |  
|Exercised stock options                            |  |                               |         |                            |   | 2,995,654                   |   |                                         |            |                            |  
|Income tax benefit from stock option exercises     |  |                               |         |                            |   | 2,285,578                   |   |                                         |            |                            |  
|Income tax benefit from disqualifying dispositions |  |                               |         |                            |   | 507,085                     |   |                                         |            |                            |  
|Net loss                                           |  |                               |         |                            |   |                            |   |                                         | (7,913,237  | )                          |  
|Foreign currency translation                       |  |                               |         |                            |   |                            |   |                                         |            |                            |  
|Comprehensive income                               |  |                               |         |                            |   |                            |   |                                         |            |                            |  
|                                                   |  |                               |          |                            |   |                             |   |                                         |             |                            |  
|Balance, December 31, 2000                         |  |                               |         |                            |   | 96,022,526                  |   |                                         | (3,304,716  | )                          |  
|Employee stock purchase plan                       |  |                               |         |                            |   | (35,864                     | ) |                                         |            |                            |  
|Exercised stock options                            |  |                               |         |                            |   | 695,472                     |   |                                         |            |                            |  
|Income tax benefit from stock option exercises     |  |                               |         |                            |   | 91,626                      |   |                                         |            |                            |  
|Income tax benefit from disqualifying dispositions |  |                               |         |                            |   | 43,662                      |   |                                         |            |                            |  
|Treasury stock purchases                           |  |                               |         |                            |   |                            |   |                                         |            |                            |  
|Issuance of treasury stock                         |  |                               | 117,000  |                            |   | (108,395                    | ) |                                         |            |                            |  
|Stock subscription receivable                      |  |                               | (724,831 | )                          |   | 724,831                     |   |                                         |            |                            |  
|Net loss                                           |  |                               |         |                            |   |                            |   |                                         | (18,160,319 | )                          |  
|Foreign currency translation                       |  |                               |         |                            |   |                            |   |                                         |            |                            |  
|Comprehensive income                               |  |                               |         |                            |   |                            |   |                                         |            |                            |  
|                                                   |  |                               |          |                            |   |                             |   |                                         |             |                            |  
|Balance, December 31, 2001                         |  | $                             | (607,831 | )                          | $ | 97,433,858                  |   | $                                       | (21,465,035 | )                          | $
|                                                   |  |                               |          |                            |   |                             |   |                                         |             |                            |  

---



TANNING TECHNOLOGY CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                   |                                              | Year ended December 31,               |           
|-------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | ----------
|
|Operating activities                                                                               |                                              |                                       |           
|Net income (loss)                                                                                  |                                              | $                                     | 2,449,093 
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                              |                                       |           
|                                                                                                   | Loss on disposal of equipment                |                                       |           
|                                                                                                   | Depreciation and amortization                |                                       |           
|                                                                                                   | Loss on accounts and other receivables       |                                       |           
|                                                                                                   | Loss on other assets                         |                                       |           
|                                                                                                   | Deferred income taxes                        |                                       |           
|                                                                                                   | Minority interest                            |                                       |           
|                                                                                                   | Restructuring charges                        |                                       |           
|                                                                                                   | Changes in operating assets and liabilities: |                                       |           
|                                                                                                   |                                              | Accounts receivabletrade             |           
|                                                                                                   |                                              | Accounts receivableother             |           
|                                                                                                   |                                              | Income taxes receivable               |           
|                                                                                                   |                                              | Prepaid expenses and other assets     |           
|                                                                                                   |                                              | Long-term receivablesrelated parties |           
|                                                                                                   |                                              | Deposits and other long-term assets   |           
|                                                                                                   |                                              | Accounts payable                      |           
|                                                                                                   |                                              | Accrued compensation                  |           
|                                                                                                   |                                              | Deferred revenue                      |           
|                                                                                                   |                                              | Other accrued liabilities             |           
|                                                                                                   |                                              | Other long-term liabilities           |           
|                                                                                                   |                                              | Income taxes payable                  |           
|                                                                                                   |                                              |                                       |           
|Net cash provided by (used in) operating activities                                                |                                              |                                       | (948,986  
|Investing activities                                                                               |                                              |                                       |           
|Purchase of property and equipment, net                                                            |                                              |                                       | (3,450,863
|                                                                                                   |                                              |                                       |           
|Net cash used in investing activities                                                              |                                              |                                       | (3,450,863
|Financing activities                                                                               |                                              |                                       |           
|Principal payments on long-term debt                                                               |                                              |                                       | (578,853  
|Purchase of treasury shares                                                                        |                                              |                                       |          
|Exercise of stock options                                                                          |                                              |                                       | 3,029,506 
|Proceeds from employee stock purchase plan                                                         |                                              |                                       | 2,447,411 
|Net proceeds from issuance of common stock                                                         |                                              |                                       | 57,838,874
|Distributions to members Tanning Technology Group, LLC, net                                        |                                              |                                       | (165,257  
|                                                                                                   |                                              |                                       |           
|Net cash provided by (used in) financing activities                                                |                                              |                                       | 62,571,681
|Effect of exchange rate on cash                                                                    |                                              |                                       | (607      
|                                                                                                   |                                              |                                       |           
|Net increase (decrease) in cash and cash equivalents                                               |                                              |                                       | 58,171,225
|Cash and cash equivalents at beginning of period                                                   |                                              |                                       | 10,446,111
|                                                                                                   |                                              |                                       |           
|Cash and cash equivalents at end of period                                                         |                                              | $                                     | 68,617,336
|                                                                                                   |                                              |                                       |           
|Supplemental disclosures of cash flow information                                                  |                                              |                                       |           
|Cash paid for interest                                                                             |                                              | $                                     | 31,272    
|Cash paid for income taxes                                                                         |                                              | $                                     | 1,741,815 

See
accompanying notes.

---



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 develops and deploys IT systems for leading
companies worldwide. The Company focuses on mission-critical business systems that are engineered to integrate, perform and scale, reliably and predictably. Tanning's offerings are targeted, and its
domain expertise is focused, on industries including financial services, logistics, travel and transportation, insurance, healthcare and telecommunications.

Tanning
Technology Group, LLC ("TTG") was formed under the laws of the state of Colorado on February 8, 1995. On January 31, 1997 TTG effected a series of transactions
whereby TTG was merged into Tanning Technology Corporation, a newly formed Delaware corporation.

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.

Tanning
Technology Europe Limited ("TTEL") is a wholly-owned direct subsidiary of the Company, organized under the laws of the United Kingdom. During the fourth quarter of
2001, the Company commenced a plan to close its offices in the United Kingdom. The Company expects this plan to be completed during the first quarter of 2002.

During
1998, the Company established a 51% indirectly 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.

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.

Revenue Recognition

The Company's contracts are billed on either a time and materials basis or a fixed price basis. Under time and materials contracts, the Company recognizes revenue
as services are provided. 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). In addition, the Company is generally reimbursed for reasonable expenses incurred under its contracts. These expenses are not reflected in the statements of operations.

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 yearsOffice furniture and equipment

7 yearsComputer software

2-3 yearsLeasehold improvements

Lesser of the life of the improvement or the related lease


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. There were no material dispositions of long-lived assets during the year ended December 31, 1999.
During the year ended December 31, 2000, the Company determined that computer equipment having an original cost of $537,757 was no longer being used. Accordingly, the Company disposed of those
assets and wrote off the remaining net book value of $94,412. During the year ended December 31, 2001 the Company decided to close its operations in the United Kingdom and dispose of the
related computer hardware and software and furniture/fixtures. These assets have been written off as part of the related restructuring charge. The total impairment charge was $168,000 and the assets
were determined to have a fair value of zero. See footnote 12 for further discussion.

During
the year ended December 31, 2000, the Company also determined that the estimated remaining useful life of certain computer equipment and computer software required
adjustment. In the fourth quarter of 2000, the Company reduced the useful life of all remaining computer equipment that was historically depreciated over five years to four years, and reduced the
useful life of all remaining desktop software that was historically depreciated over three years to two years. This reduction in useful lives resulted in a $242,271 increase to depreciation expense
during the fourth quarter of 2000. As of December 31, 2000, all computer equipment is being depreciated over four years, all desktop
software is being depreciated over two years, and all infrastructure software is being depreciated over three years.

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.

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 operations. Translation adjustments are reflected as

---

foreign currency translation adjustments within comprehensive income in stockholders' equity. In 2001, as a result of the decision to close our European operations, the Company included a $322,000
foreign currency translation adjustment in restructuring charges. These translation adjustments had previously been included within comprehensive income in stockholders' equity. 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.

Sales to Significant Customers

The Company provides services to a small number of customers. Two customers accounted for 26% and 24%, respectively, of total revenues in 1999. Two customers
accounted for 21% each, of total revenues in 2000. Two customers accounted for 22% each, of total revenues in 2001. The Company performs periodic credit evaluations of its customers' financial
condition, including the consideration of macroeconomic factors, and external financing circumstances. Collateral generally is not required.

As
a result of projects ending and client budget pressure, the Company's work for a number of clients who were among the five largest in 2001 sharply declined at the end of 2001 and
continuing into 2002.

Accounting Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Significant estimates relied upon in preparing these financial statements include allowances for bad debts and expected future earnings
and cash flows used to evaluate the recoverability of deferred tax assets. Actual results could differ from those estimates.

Bad
debt expense was $595,000, $5,024,000 and $2,230,000 for the years ended December 31, 1999, 2000 and 2001, respectively. Bad debt expense is recorded based upon the Company's
estimate regarding the likelihood of collections, as well as historical collection experience. With respect to 2001, the bad debt expense is principally associated with amounts due from one of the
Company's largest customers. The Company is currently in negotiations with the customer regarding its outstanding balance, therefore, the estimate of the amount that will ultimately be collected is
subject to change.

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 stock options were exercised, resulting in the issuance of common stock that then shared in the earnings of the Company. Potential dilution of stock options exercisable into common
stock was computed using the treasury stock method based on the average fair market value of the stock. The Company has a net loss for the years ended December 31, 2000 and 2001. Therefore, for
these periods, the effect of common stock equivalents is excluded in the computation of earnings (loss) per share since their effect is anti-dilutive. Under the treasury stock method, if
the Company were not in a net loss position, the securities included from the computation would have been 2,818,300 shares and 445,452 shares for the years ended December 31, 2000 and 2001,
respectively.

The
following table reflects the basic and diluted weighted average shares.

|                                                                  |  | Year ended December 31,
|----------------------------------------------------------------- |  | -----------------------
|
|Weighted-average shares outstanding                               |  | 17,556,487             
|Dilutive impact of options outstanding                            |  | 2,475,684              
|                                                                  |  |                        
|Weighted-average shares and potential dilutive shares outstanding |  | 20,032,171             
|                                                                  |  |                        

Reclassifications

Certain of the prior year amounts have been reclassified to conform with the 2001 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"). The Company adopted SFAS 133 on January 1, 2001. The adoption of SFAS 133 has not had a significant effect on the
financial condition or results of operations of the Company.

3.    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.

---

During
the year ended December 31, 2001, the Company issued 362,476 shares of common stock in conjunction with purchases under its qualified employee stock purchase plan, as well
as the exercise of vested stock options.

During
the year ended December 31, 2001, the Company repurchased 785,100 shares of its common stock for an aggregate price of $2,238,760. The Company reissued 166,379 of these
treasury shares in conjunction with purchases under its qualified employee stock purchase plan, as well as a purchase of company stock made by a key executive during November 2001.

During
the third quarter of 2001, the Company entered into a stock subscription agreement with a key executive who commenced employment on November 1, 2001. This agreement
provides that the executive will purchase, on various dates from November 2001 to November 2002, a total of 176,788 shares of the Company's common stock at a per share price of $4.10,
for an aggregate purchase price of $724,831. This obligation to purchase common stock is not contingent upon future employment of the key executive. During the fourth quarter of 2001, 28,537 shares of
common stock were issued out of treasury in conjunction with this agreement.

In
connection with the formation of a strategic relationship, GlobalCenter, Inc. purchased, on February 1, 2000, 229,227 shares of the Company's common stock at a per share
price of $43.625, for an aggregate purchase price of $10,000,028.

4.    INCOME TAXES

The components of income tax expense (benefit) are as follows:

|                            |                | Year ended December 31, |          
|--------------------------- | -------------- | ----------------------- | ---------
|
|Provision for income taxes: |                |                         |          
|                            | Current:       |                         |          
|                            |                | Federal                 |          
|                            |                | State                   |          
|                            |                | Foreign                 |          
|                            |                |                         |          
|                            | Total current  |                         |          
|                            | Deferred:      |                         |          
|                            |                | Federal                 |          
|                            |                | State                   |          
|                            |                |                         |          
|                            | Total deferred |                         |          
|                            |                |                         |          
|Provision for income taxes  |                | $                       | 1,714,783
|                            |                |                         |          

---

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

|                                     |  | December 31,
|------------------------------------ |  | ------------
|
|Allowance for uncollectible accounts |  | $           
|Accrued commissions                  |  |             
|Accrued vacation                     |  |             
|Deferred revenue                     |  |             
|Deferred rent                        |  |             
|Accelerated depreciation             |  |             
|Deferred state income taxes          |  |             
|Other                                |  |             
|                                     |  |             
|                                     |  | $           
|                                     |  |             

Variation
from the federal statutory rate is as follows:

|                                                                                    |  | Year ended December 31, |          
|----------------------------------------------------------------------------------- |  | ----------------------- | ---------
|
|Expected provision for (benefit from) federal income taxes at statutory rate of 34% |  | $                       | 1,415,718
|Permanent differences                                                               |  |                         | 50,525   
|State taxes, net of federal benefit                                                 |  |                         | 195,759  
|Valuation allowance on capital loss                                                 |  |                         |         
|Other                                                                               |  |                         | 52,781   
|Valuation allowance on domestic losses                                              |  |                         |         
|Valuation allowance on foreign losses                                               |  |                         |         
|Difference between U.S. and foreign tax rates                                       |  |                         |         
|                                                                                    |  |                         |          
|                                                                                    |  | $                       | 1,714,783
|                                                                                    |  |                         |          

---

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

|                                       |  | December 31, |           
|-------------------------------------- |  | ------------ | ----------
|
|Allowance for uncollectible accounts   |  | $            | 654,548   
|Accrued vacation                       |  |              | 194,147   
|Accrued compensation                   |  |              |          
|Deferred revenue                       |  |              |          
|Deferred rent                          |  |              |          
|Deferred state income taxes            |  |              | (19,224   
|Accelerated depreciation               |  |              | (416,825  
|Other                                  |  |              | 9,150     
|Net operating lossesdomestic          |  |              | 1,612,905 
|Net operating lossesforeign           |  |              | 2,411,073 
|Valuation allowance on domestic losses |  |              |          
|Valuation allowance on foreign losses  |  |              | (2,411,073
|                                       |  |              |           
|Deferred tax asset, net                |  | $            | 2,034,701 
|                                       |  |              |           

For the year ended December 31, 2001, loss before income taxes for domestic and foreign operations was ($15,658,676) and ($6,845,237), respectively. For the year ended
December 31, 2000, income (loss) before income taxes for domestic and foreign operations was $2,884,697 and ($9,267,704), respectively. The history of operating losses has created uncertainty
regarding the future benefit of deferred tax assets arising from both foreign and domestic operations. As such, at December 31, 2000, all foreign deferred tax assets were fully reserved. The
Company did not record any additional deferred tax assets relating to foreign operations during the year ended December 31, 2001. The Company also recorded a valuation allowance of
approximately $1.3 million against domestic deferred tax assets during the fourth quarter of 2001. If the Company fails to begin to generate pre-tax profits in the United States in
2002, there is uncertainty regarding the realizable value of recorded deferred tax assets of approximately $6.5 million at December 31, 2001.

The
Company has accumulated net operating loss carry-forwards as follows:

|         |  | Amount |            | Expire
|-------- |  | ------ | ---------- | ------
|Domestic |  | $      | 15,269,987 |       
|Foreign  |  | $      | 12,306,543 |       

5.    COMMITMENTS AND CONTINGENCIES

The Company leases equipment and office space. Rental expense under operating leases included in selling, marketing and administrative expenses was $4,935,533,
$3,610,683 and $2,150,312 for the years ended December 31, 2001, 2000 and 1999, respectively.

---

The
following represents the future minimum lease payments for all noncancelable operating leases at December 31, 2001:

|2002                         |  | $ | 4,140,830 
|---------------------------- |  | - | ----------
|2003                         |  |   | 3,318,123 
|2004                         |  |   | 2,900,475 
|2005                         |  |   | 2,669,545 
|2006                         |  |   | 2,690,464 
|Thereafter                   |  |   | 2,767,577 
|                             |  |  
|Total minimum lease payments |  | $ | 18,487,014
|                             |  |  

At
December 31, 2001, the Company has approximately $582,000 in future office lease payments accrued as a restructuring charge. See further discussion in footnote 12.

During
the third quarter of 2001, the Company entered into an employment agreement with a key executive who commenced employment on November 1, 2001. This agreement provides that
the executive receive, on various dates from November 2001 to November 2002, gross payments from the Company aggregating approximately $1,450,000. At December 31, 2001, the
Company has a current liability recorded in the amount of approximately $528,000 associated with these payments.

6.    RELATED PARTY TRANSACTIONS

The Company has entered into employment agreements with certain stockholders of the Company. 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 through December 31, 2000, 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).

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.

During
2000 and 2001, the Company extended loans to certain employees for an aggregate amount of $684,000 and $25,000, respectively. These loans bear interest at Applicable Federal Rates
ranging from 3.90% to 6.60% 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
through November 2004.

During
2000, the Company received principal payments against these loans in the amount of $381,651, and recorded reserves against employee loans in the amount of $154,500. The Company
also granted six month due date extensions on employee loans aggregating $273,000 during the year ended December 31, 2000.

During
2001, the Company received principal payments against these loans in the amount of $85,414 and wrote off loans totaling $16,000 against amounts previously reserved. The Company

---

granted one year extensions on employee loans aggregating $500,000 and a six month extension on a $25,000 loan during the year ended December 31, 2001.

7.    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, 2000 and 2001 were $138,542, $251,239 and $279,611, respectively.

8.    STOCK OPTIONS

In 1997, the Company adopted the Tanning Technology Corporation Stock Option Plan (as amended, the "1997 Plan"). The 1997 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 1997 Plan is 3,289,094. 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. Unless
otherwise terminated or cancelled, options under the 1997 Plan have a ten year life from the date of grant. Terminated or cancelled options may be reissued under the 1997 Plan. The 1997 Plan shall
terminate on July 22, 2009.

In
1998, the Company adopted the Tanning Technology Corporation 1998 Stock Option Plan (as amended, the "1998 Plan"). The 1998 Plan, which carries similar terms and conditions as the
1997 Plan, authorizes the grant of options for up to 6,229,640 shares of common stock. The 1998 Plan shall terminate on July 24, 2008.

Effective
July 22, 1999, the Company adopted the Tanning Technology Corporation 1999 Stock Option Plan (the "1999 Plan"). The 1999 Plan, which carries similar terms and conditions
as the 1997 Plan and 1998 Plan, authorizes the grant of options for up to 5,000,000 shares of common stock. The 1999 Plan shall terminate on July 22, 2009.

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 weighted average assumptions for 2001, 2000
and 1999, respectively: volatility factors of 1.076, 1.247 and 1.183; risk-free interest rates of 4.51%-5.00%; dividend yields of 0 for each year; 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

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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:

|                                  |  | Year ended December 31, |         
|--------------------------------- |  | ----------------------- | --------
|
|Net income (loss)                 |  | $                       | (829,000
|                                  |  |                         |         
|Basic earnings (loss) per share   |  | $                       | (0.05   
|                                  |  |                         |         
|Diluted earnings (loss) per share |  | $                       | (0.05   
|                                  |  |                         |         

A
summary of the Company's stock option activity, and related information, for the years ended December 31, 1999, 2000 and 2001 is as follows:

|                              |  | Options    |   | Weighted-average
exercise price
|----------------------------- |  | ---------- | - | -------------------------------
|Outstanding January 1, 1999   |  | 5,331,857  |   | $                              
|Granted                       |  | 4,665,459  |   |                                
|Exercised                     |  | (686,647   | ) |                                
|Forfeited                     |  | (639,000   | ) |                                
|                              |  |            |   |                                
|Outstanding December 31, 1999 |  | 8,671,669  |   |                                
|Granted                       |  | 3,959,380  |   |                                
|Exercised                     |  | (810,539   | ) |                                
|Forfeited                     |  | (1,591,227 | ) |                                
|                              |  |            |   |                                
|Outstanding December 31, 2000 |  | 10,229,283 |   |                                
|Granted                       |  | 3,131,493  |   |                                
|Exercised                     |  | (202,394   | ) |                                
|Forfeited                     |  | (2,794,939 | ) |                                
|                              |  |            |   |                                
|Outstanding December 31, 2001 |  | 10,363,443 |   |                                
|                              |  |            |   |                                

|Outstanding Options |                 | Exercisable Options
|------------------- | --------------- | -------------------
|
|$                   | 2.60 to $3.99   |                    
|$                   | 4.00 to $6.99   |                    
|$                   | 7.00 to $11.99  |                    
|$                   | 12.00 to $19.99 |                    
|$                   | 20.00 to $35.00 |                    
|$                   | 37.00 to $65.00 |                    

The
weighted average fair value of options granted during 2001, 2000 and 1999 were $3.26, $17.16 and $11.45, respectively.

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9.    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):

|                                  |  | Year ended December 31,
|--------------------------------- |  | -----------------------
|
|Revenues from external customers: |  |                        
|North America                     |  | $                      
|Denmark                           |  |                        
|Other international               |  |                        
|                                  |  |                        
|Total                             |  | $                      
|                                  |  |                        

|                        |  | December 31,
|----------------------- |  | ------------
|
|Long-lived assets, net: |  |             
|United States           |  | $           
|Foreign                 |  |             
|                        |  |             
|Total                   |  | $           
|                        |  |             

10.  LOSS ON CONTRACT AND TERMINATION COSTS

During the second quarter of 2000, the Company reached an agreement to terminate a fixed-price contract with British Sky Broadcasting Ltd. The aggregate
financial impact on this contract and its termination costs during the second quarter of 2000 was a $5.8 million pretax loss, consisting of the following (in thousands):

|Write-off of accounts receivable                       |            | $ | 3,332
|------------------------------------------------------ | ---------- | - | -----
|Project personnel costs incurred in the second quarter |            |   | 2,000
|Other related costs                                    |            |   | 510  
|                                                       |            |  
|                                                       | Total loss |   | $    
|                                                       |            |  

The
Company did not recognize any revenue associated with this fixed-price contract after the first quarter of 2000. The Company recognized $1.6 million in revenue, or 8% of total
revenues, and incurred $1.6 million in project personnel costs associated with this fixed-price contract during the first quarter of 2000. For the year ended December 31, 1999, this
fixed-price contract accounted for 6% of total revenues.

---

11.  EMPLOYEE STOCK PURCHASE PLAN

In March 1999, the Company established the Tanning Technology Corporation 1999 Qualified Stock Purchase Plan (the "1999 Plan"). The Company intends that
the 1999 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 1999 Plan. Under the 1999 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 common stock in conjunction with the 1999 Plan.

In
July 1999, the Company replaced the 1999 Plan with the adoption of the Tanning Technology Corporation 1999 Employee 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. All full-time employees who have completed at least four months of service prior
to the expiration of the purchase period are eligible to participate in the Plan. Under the Plan, eligible employees can purchase shares, subject to limitations, of the Company's Common Stock at a
discount not to exceed 15% of the market price as defined. During the years ended December 31, 1999, 2000 and 2001, the Company issued 165,820, 81,644 and 160,082 shares of Common Stock in
conjunction with this plan, respectively. Due to immateriality, the estimated fair value of employees' purchase rights under the Employee Stock Purchase Plan have not been included in the
SFAS 123 pro-forma disclosure in footnote 8.

12.  RESTRUCTURING CHARGES

In June 2001, the Company recorded restructuring charges of $513,570 in conjunction with the realignment of its European staffing profile. The Company executed
this restructuring as a cost reduction measure. The charge primarily consists of severance pay and other incidental costs associated with a workforce reduction of 16 employees, of which 11 were
billable consultants, and 5 were sales, general or administrative employees, in the Company's European operation. During the third quarter of 2001, the Company reversed $163,384 in restructuring
charges related to this realignment.

During
September 2001, the Company recorded an additional charge of $1,204,822 in conjunction with the restructuring of its North American operations. The Company executed this
restructuring as a cost reduction measure. The charge includes approximately $560,000 in severance pay and other costs associated with a workforce reduction of 37 employees, of which 30 were billable
consultants, and 7 were sales, general or administrative employees, in the Company's North American operation. This charge also includes approximately $460,000 of Boston facility rent expense for the
14 months following the September 2001 restructuring, as the lease for this facility was abandoned. The remainder of the restructuring charge relates to lease termination costs associated with the
closure and sub-lease of the Company's San Jose offices.

During
the fourth quarter of 2001, the Company commenced the closure of its European operations. In conjunction with this closure, the Company recorded a restructuring charge of
$3,589,271 in the fourth quarter. The charge includes approximately $2,530,000 in severance pay and other costs associated with a workforce reduction of 70 employees, of which 48 were billable
consultants, and 22 were sales, general or administrative employees, in the Company's European operation. The remainder of the restructuring charge relates to losses on computer hardware and software
and furniture/fixture disposals, the disposition of cumulative translation adjustments, and rent expense associated with our United Kingdom offices for the 9 months following the fourth quarter of
2001 restructuring.

---

The
Company expects quarterly cost savings associated with the closure of its European operations to be approximately $3.5 million, which consists of a reduction in project
personnel costs of approximately $1.9 million, and a reduction of selling, marketing and administrative expenses of approximately $1.6 million.

Including
restructuring charges, the revenues and net losses of the Company's European operations are as follows (in thousands):

Year ended December 31,1999

2000

2001Revenues

$
19,591

$
22,230

$
12,403Net loss


(361
)

(9,490
)

(6,504
)


Approximately
$2,476,000 in restructuring charges remains unpaid and are included in current liabilities as of December 31, 2001.

Restructuring
charges, reversals and utilization, both cash and non-cash, as of December 31, 2001 are as follows (in thousands):

|                                  |                           |   |       |       |   |       |      | Utilization |       |      
|--------------------------------- | ------------------------- | - | ----- | ----- | - | ----- | ---- | ----------- | ----- | -----
|
|
|Workforce reduction costs         |                           | $ | 3,668 |       | $ | (163  | )    | $           | 3,505 |      
|Lease terminations                |                           |   | 1,149 |       |   | 1,149 |      |             | (286  | )    
|Depreciable assets                |                           |   | 168   |       |   | 168   |      |             | (168  | )    
|Cumulative translation adjustment |                           |   | 322   |       |   | 322   |      |             | (322  | )    
|                                  |                           |   |       |       |   |       |      |             |       |      
|                                  | Total restructuring costs |   | $     | 5,307 |   | $     | (163 | )           | $     | 5,144
|                                  |                           |   |       |       |   |       |      |             |       |      

13.  SUBSEQUENT EVENT

On January 16, 2002, the Company executed a global business reorganization associated with its North American and Indian operations. This reorganization
will result in a workforce reduction of approximately 100 employees, and an estimated restructuring charge, to be taken in the first quarter of 2002, of $1.3 million.

---



SCHEDULE II    VALUATION AND QUALIFYING ACCOUNTS

|                                |                                            | Balance at
beginning of
period |   | Charged to
costs and
expenses |  | Charged to
other
accounts |           | Deductions |   | Balance at
end of
period
|------------------------------- | ------------------------------------------ | ------------------------------ | - | ----------------------------- |  | ------------------------- | --------- | ---------- | - | ------------------------
|Period ending December 31, 1999 |                                            |                                |   |                               |  |                           |           |            |   |                         
|                                | Allowance for doubtful accounts            |                                | $ | 956,656                       |  | $                         | 594,950   |            |  |                         
|Period ending December 31, 2000 |                                            |                                |   |                               |  |                           |           |            |   |                         
|                                | Allowance for doubtful accounts            |                                | $ | 874,949                       |  | $                         | 5,024,182 |            |  |                         
|                                | Valuation allowance on deferred tax assets |                                |   |                              |  | $                         | 2,411,073 |            |  |                         
|Period ending December 31, 2001 |                                            |                                |   |                               |  |                           |           |            |   |                         
|                                | Allowance for doubtful accounts            |                                | $ | 1,752,962                     |  | $                         | 2,230,478 |            |  |                         
|                                | Valuation allowance on deferred tax assets |                                | $ | 2,411,073                     |  | $                         | 3,479,136 |            |  |                         

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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: February 22, 2002 |  | By: /s/ Henry F. SkelseyHenry 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.

|Signature                                   |  | Title                                                                                                       |  | Date             
|------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | -----------------
|                                            |  |                                                                                                             |  |                  
|/s/LARRY G. TANNINGLarry G. Tanning         |  | President, Chief Executive Officer and Director (Principal Executive Officer)                               |  | February 22, 2002
|/s/HENRY F. SKELSEYHenry F. Skelsey         |  | Executive Vice President, Chief Financial Officer and Director (Principal Financial and Accounting Officer) |  | February 22, 2002
|/s/GREGORY A. CONLEYGregory A. Conley       |  | Director                                                                                                    |  | February 22, 2002
|/s/DAN J. HESSERDan J. Hesser               |  | Director                                                                                                    |  | February 22, 2002
|/s/CHRISTOPHER P. MAHANChristopher P. Mahan |  | Director                                                                                                    |  | February 22, 2002
|/s/JOSEPH P. ROEBUCKJoseph P. Roebuck       |  | Director                                                                                                    |  | February 22, 2002
|/s/MICHAEL E. SHANAHANMichael E. Shanahan   |  | Director                                                                                                    |  | February 22, 2002
|/s/J. CLIFFORD DODDJ. Clifford Dodd         |  | Director                                                                                                    |  | February 22, 2002

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EXHIBIT INDEX

|Exhibit |  | Description                                                                                                                                                                                                            
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1     |  | Certificate of Incorporation of Tanning, as amended and restated(1)                                                                                                                                                    
|3.2     |  | Bylaws of Tanning, as amended and restated(1)                                                                                                                                                                          
|4.1     |  | Form of certificate of common stock(1)                                                                                                                                                                                 
|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(2)                                                                   
|10.1    |  | Form of Employment, Confidentiality and Non-Competition Agreement (including Employee-Specific Terms) between Tanning and Larry Tanning(1)                                                                             
|10.2    |  | Form of Promissory Note in the amount of $250,000, made by Larry Tanning in favor of Tanning(1)                                                                                                                        
|10.3    |  | Form of Employment, Confidentiality and Non-Competition Agreement (including Employee-Specific Terms) between Tanning and Bipin Agarwal(1)                                                                             
|10.4    |  | Form of Promissory Note in the amount of $250,000, made by Bipin Agarwal in favor of Tanning(1)                                                                                                                        
|10.5    |  | Form of Employment, Confidentiality and Non-Competition Agreement between Tanning and each of Louis A. D'Alessandro, Henry F. Skelsey, John Piccone, Mark Tanning and Frederick H. Fogel(1)                            
|10.6    |  | Employee-Specific Terms of Employment, Confidentiality and Non-Competition Agreement between Tanning and Louis A. D'Alessandro, dated as of February 1, 1999(1)                                                        
|10.7    |  | Employee-Specific Terms of Employment, Confidentiality and Non-Competition Agreement between Tanning and Henry F. Skelsey, dated as of June 1, 1999(1)                                                                 
|10.8    |  | Employee-Specific Terms of Employment, Confidentiality and Non-Competition Agreement between Tanning and John Piccone, dated as of June 30, 1999(1)                                                                    
|10.9    |  | Employee-Specific Terms of Employment, Confidentiality and Non-Competition Agreement between Tanning and Mark Tanning, dated as of February 1, 1999(1)                                                                 
|10.10   |  | Employee-Specific Terms of Employment, Confidentiality and Non-Competition Agreement between Tanning and Frederick H. Fogel, dated as of June 30, 1999(1)                                                              
|10.11   |  | Employment Agreement between Tanning and Richard Herman, dated May 22, 2000(5)                                                                                                                                         
|10.12   |  | Employment Agreement between Tanning and Michael Cooper, dated October 16, 2000(5)                                                                                                                                     
|10.13   |  | Employment Agreement between Tanning and Stephen Mahoney, dated January 15, 2001(5)                                                                                                                                    
|10.14   |  | Employment Agreement between Tanning and Mark Teflian, dated June 19, 2001(6)                                                                                                                                          
|10.15   |  | Employment Agreement between Tanning and Gregory Conley, dated September 14, 2001(7)                                                                                                                                   
|10.16   |  | Subscription Agreement between Tanning and Gregory Conley, dated September 14, 2001(7)                                                                                                                                 
|10.17   |  | Employment Agreement between Tanning and AVR Venkatesa, dated October 5, 2001 Amended and Restated Shareholder Agreement, dated as of July 20, 1999, by and among Tanning and the parties listed as signatories
thereto
|10.18   |  | Lease, dated as of June 3, 1998, by and between Denver Hines Development, LLC and Tanning for premises at 4600 South Syracuse Street(1)                                                                                
|10.19   |  | 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(1)                                                           
|10.20   |  | 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(1)                                                             
|10.21   |  | Amendment No. 3 to Lease, dated as of May 28, 1999, by and between Denver Hines Development, LLC and Tanning for premises at 4600 South Syracuse Street(5)                                                             
|10.22   |  | Form of Excise Tax Agreement(1)                                                                                                                                                                                        
|10.23   |  | 1997 Stock Option Plan, as amended and restated(6)                                                                                                                                                                     
|10.24   |  | 1998 Stock Option Plan, as amended and restated(6)                                                                                                                                                                     
|10.25   |  | 1999 Employee Stock Purchase Plan(1)                                                                                                                                                                                   
|10.26   |  | 1999 Stock Option Plan(1)                                                                                                                                                                                              

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|10.27 |  | Letter Agreement dated November 1, 1999 between Tanning Technology Corporation and Bipin Agarwal, regarding Five Quarter Compensation Plan(3)     
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|10.28 |  | Letter Agreement dated November 1, 1999 between Tanning Technology Corporation and Frederick H. Fogel, regarding Five Quarter Compensation Plan(3)
|10.29 |  | Letter Agreement dated November 1, 1999 between Tanning Technology Corporation and Henry F. Skelsey, regarding Five Quarter Compensation Plan(3)  
|10.30 |  | Letter Agreement dated November 1, 1999 between Tanning Technology Corporation and Mark W. Tanning, regarding Five Quarter Compensation Plan(3)   
|10.31 |  | Letter Agreement dated November 1, 1999 between Tanning Technology Corporation and John N. Piccone, regarding Five Quarter Compensation Plan(3)   
|10.32 |  | Letter Agreement dated November 1, 1999 between Tanning Technology Corporation and Larry G. Tanning, regarding Five Quarter Compensation Plan(3)  
|10.33 |  | June 30, 2000 Agreement between Tanning Technology Europe Limited and British Sky Broadcasting Limited(4)                                         
|10.34 |  | Letter Agreement dated January 25, 2002 between Tanning Technology Corporation and Bipin Agarwal, regarding transfer of Tanning shares            
|21.1  |  | Subsidiaries of Tanning(1)                                                                                                                        
|23.1  |  | Consent of Ernst & Young LLP, Independant Auditors                                                                                                

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