##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-QSB



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

For the quarterly period ended June 30, 2001



|(BOX) |  | 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 0-8164

APERIAN, INC.

|                                         |  |                         |            |  |  | 
|---------------------------------------- |  | ----------------------- | ---------- |  |  | 
|DELAWARE                                 |  |                         | 74-2971167 | 
|                                        
|                                        
|                                        
|                                        
|(State of incorporation or organization) |  | (IRS Employer I.D. No.)
|                                        
|                                        
|                                        
|                                        
|                                         |  |                         |            | 
|                                        
|                                        
|                                        
|                                        
|3030 N. 3RD ST., 7TH FLOOR
PHOENIX, AZ   |  |                         | 85012      | 
|                                        
|                                        
|                                        
|                                        
|(Address of principal executive offices) |  | (Zip Code)             

602-776-0883
(Issuers telephone number)

Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes (X) No ( )

As of July 31, 2001 the Registrant had 16,168,711 shares of common stock issued
and outstanding.

Transitional Small Business Disclosure Format
(check one): Yes (   )    No (X)

1



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TABLE OF CONTENTS



|                              |                                                                                                        |  |  |  |  |  |  | 
|----------------------------- | ------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|PART 1. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                          
|                              | CONDENSED CONSOLIDATED BALANCE SHEET                                                                  
|                              | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                       
|                              | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                       
|                              | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                  
|                              | ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|                              | PART II. OTHER INFORMATION                                                                            
|                              | Item 1. Legal Proceedings.                                                                            
|                              | Item 2. Changes in Securities and Use of Proceeds.                                                    
|                              | Item 3. Defaults Upon Senior Securities.                                                              
|                              | Item 4. Submission of Matters to a Vote of Security Holders.                                          
|                              | Item 5. Other Information.                                                                            
|                              | Item 6. Exhibits and Reports on Form 8-K.                                                             
|SIGNATURES                   



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##### Table of Contents



APERIAN, INC. AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2001

INDEX

|                               |         |                                                                                               |  |     
|------------------------------ | ------- | --------------------------------------------------------------------------------------------- |  | ----
|                               |         |                                                                                               |  | PAGE
|                               |         |                                                                                               |  |     
|PART I - FINANCIAL INFORMATION |         |                                                                                              
|                              
|                              
|                              
|                              
|                               | Item 1. | Financial Statements (unaudited)                                                              |  | 3   
|                              
|                              
|                              
|                              
|                               |         | Condensed Consolidated Balance Sheet June 30, 2001                                           |  | 3   
|                              
|                              
|                              
|                              
|                               |         | Condensed Consolidated Statements of Operations Three
Months Ended June 30, 2001 and 2000    |  | 4   
|                              
|                              
|                              
|                              
|                               |         | Condensed Consolidated Statements of Cash Flows Three
Months Ended June 30, 2001 and 2000    |  | 5   
|                              
|                              
|                              
|                              
|                               |         | Notes to Condensed Consolidated Financial Statements                                          |  | 7   
|                              
|                              
|                              
|                              
|                               | Item 2. | Managements Discussion and Analysis of Interim Financial
Condition and Results of Operations |  | 9   
|                              
|                              
|                              
|                              
|PART II - OTHER INFORMATION    |         |                                                                                              
|                              
|                              
|                              
|                              
|                               | Item 1. | Legal Proceedings                                                                             |  | 12  
|                              
|                              
|                              
|                              
|                               | Item 2. | Changes in Securities and Use of Proceeds                                                     |  | 12  
|                              
|                              
|                              
|                              
|                               | Item 3. | Defaults upon Senior Securities                                                               |  | 12  
|                              
|                              
|                              
|                              
|                               | Item 4. | Submission of Matters to a Vote of Security Holders                                           |  | 12  
|                              
|                              
|                              
|                              
|                               | Item 5. | Other Information                                                                             |  | 12  
|                              
|                              
|                              
|                              
|                               | Item 6. | Exhibits and Reports on Form 8-K                                                              |  | 12  
|                              
|                              
|                              
|                              
|SIGNATURES                     |         | 13                                                                                           

2



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##### Table of Contents









PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS




APERIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)

|                                                        |                                                                                                          |                                                                                                                                           |                   |                             |              |               |            |  
|------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | --------------------------- | ------------ | ------------- | ---------- | -
|                                                        |                                                                                                          |                                                                                                                                           |                   |                             |              | June 30, 2001
|                                                        |                                                                                                          |                                                                                                                                           |                   |                             |              |              
|ASSETS:                                                 |                                                                                                          |                                                                                                                                           |                   |                            
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Current assets                                                                                           |                                                                                                                                           |                   |                             |             
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Cash                                                                                                                                      |                   | $                           | 1,660,728    |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Accounts receivable trade                                                                                                                |                   |                             | 3,556,938    |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Accounts
receivable  affiliates                                                                                                          |                   |                             | 29,980       |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Other current assets                                                                                                                      |                   |                             | 498,338      |              
|                                                        |                                                                                                          |                                                                                                                                           |                   |                            
|                                                        |                                                                                                          |                                                                                                                                           |                   | Total current assets        |              |               | 5,745,984  |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Property, plant, and equipment, net                                                                      |                                                                                                                                           |                   | 33,025,124                  |             
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Restricted cash                                                                                          |                                                                                                                                           |                   | 690,000                     |             
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Intangible assets                                                                                        |                                                                                                                                           |                   | 15,605,515                  |             
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other assets                                                                                             |                                                                                                                                           |                   | 739,678                     |             
|                                                        |                                                                                                          |                                                                                                                                           |                   |                            
|TOTAL ASSETS                                            |                                                                                                          | $                                                                                                                                         | 55,806,301        |                            
|                                                        |                                                                                                          |                                                                                                                                           |                   |                            
|LIABILITIES,
REDEEMABLE STOCK AND STOCKHOLDERS DEFICIT |                                                                                                          |                                                                                                                                           |                   |                            
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Current liabilities                                                                                      |                                                                                                                                           |                   |                             |             
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Accounts payable                                                                                                                          |                   | $                           | 6,122,866    |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Other accrued expenses                                                                                                                    |                   |                             | 3,150,616    |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Restructuring accrual                                                                                                                     |                   |                             | 2,698,080    |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Current maturities of notes payable                                                                                                       |                   |                             | 21,000,000   |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Current portion of obligations under capital leases                                                                                       |                   |                             | 3,677,592    |              
|                                                        |                                                                                                          |                                                                                                                                           |                   |                            
|                                                        |                                                                                                          |                                                                                                                                           |                   | Total current liabilities   |              |               | 36,649,154 |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Long-term liabilities:                                                                                   |                                                                                                                                           |                   |                             |             
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Notes payable                                                                                                                             |                   |                             | 579,151      |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Obligations under capital leases                                                                                                          |                   |                             | 7,241,594    |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Deferred rent                                                                                                                             |                   |                             | 1,510,790    |              
|                                                        |                                                                                                          |                                                                                                                                           |                   |                            
|                                                        |                                                                                                          |                                                                                                                                           |                   | Total long-term liabilities |              |               | 9,331,535  |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Commitments and Contingencies                                                                            |                                                                                                                                           |                   |                            |             
|                                                        |                                                                                                          |                                                                                                                                           |                   |                            
|                                                        |                                                                                                          |                                                                                                                                           | Total liabilities |                             |              | 45,980,689    |           
|                                                        |                                                                                                         
|                                                        | Preferred
stockredeemable, at liquidation value; 8,500,000 authorized,
8,396,067 issued and outstanding |                                                                                                                                           |                   | 9,825,917                   |             
|                                                       
|                                                        | Stockholders
deficit                                                                                    |                                                                                                                                           |                   |                             |             
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Common stock at $.01 par value; 75,000,000 authorized, 16,168,717 shares (excluding 1,696 shares held in treasury) issued and outstanding |                   |                             | 161,687      |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Additional paid-in-capital                                                                                                                |                   |                             | 113,109,260  |              
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Deferred compensation                                                                                                                     |                   |                             | (918,032     | )            
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                          | Accumulated deficit                                                                                                                       |                   |                             | (112,353,220 | )            
|                                                        |                                                                                                          |                                                                                                                                           |                   |                            
|                                                        |                                                                                                          |                                                                                                                                           |                   | Total
stockholders deficit |              |               | (305       | )
|                                                        |                                                                                                          |                                                                                                                                           |                   |                            
|                                                        | TOTAL
LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS DEFICIT                                            |                                                                                                                                           | $                 | 55,806,301                  |             
|                                                        |                                                                                                          |                                                                                                                                           |                   |                            

See accompanying notes.

3



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##### Table of Contents






APERIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                      |                   |                            |                                           |           |                    |            |            |         |            |           | 
|----------------------------------------------------- | ----------------- | -------------------------- | ----------------------------------------- | --------- | ------------------ | ---------- | ---------- | ------- | ---------- | --------- | 
|                                                      |                   |                            |                                           |           | Three months ended
|                                                      |                   |                            |                                           |           | June 30,          
|                                                      |                   |                            |                                           |           | 2001               |            | 2000      
|                                                      |                   |                            |                                           |           |                    |            |           
|Revenues                                              |                   | $                          | 7,230,331                                 |           |                    | $          | 909,445    |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Costs of revenues |                            |                                           | 8,411,314 |                    |            |            | 782,195 |           
|                                                      |                   |                            |                                           |           |                    |            |            |        
|                                                      |                   | Gross margin (deficit)     |                                           |           | (1,180,983         | )          |            |         | 127,250    |          
|                                                     
|                                                     
|                                                     
|                                                     
|Selling, general and administrative expenses:         |                   |                            |                                           |           |                    |            |            |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                   | Sales and marketing        |                                           |           | 3,188,739          |            |            |         | 1,818,936  |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                   | General and administrative |                                           |           | 3,183,022          |            |            |         | 3,071,580  |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                   | Goodwill amortization      |                                           |           | 1,308,381          |            |            |         |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                   | Restructuring charge       |                                           |           | 5,900,000          |            |            |         |           |          
|                                                      |                   |                            |                                           |           |                    |            |            |        
|                                                      |                   |                            | Total selling, general and administrative |           |                    | 13,580,142 |            |         |            | 4,890,516 | 
|                                                      |                   |                            |                                           |           |                    |            |            |        
|                                                      |                   | Operating loss             |                                           |           | (14,761,125        | )          |            |         | (4,763,266 | )        
|                                                     
|                                                     
|                                                     
|                                                     
|Interest income (expense), net                        |                   |                            | (798,614                                  | )         |                    |            | 504,027    |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                   |                            |                                           |           |                    |            |            |        
|Net loss                                              |                   | $                          | (15,559,739                               | )         |                    | $          | (4,259,239 | )      
|                                                      |                   |                            |                                           |           |                    |            |            |        
|Basic and diluted net loss per share                  |                   | $                          | (1.01                                     | )         |                    | $          | (0.35      | )      
|                                                      |                   |                            |                                           |           |                    |            |            |        
|Basic and diluted weighted average shares outstanding |                   |                            | 15,473,236                                |           |                    |            | 12,181,089 |        
|                                                      |                   |                            |                                           |           |                    |            |            |        

See accompanying notes

4



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##### Table of Contents






APERIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                 |                                                                              |                                                                              |                                                     |             |                    |             |            |            |            |             |  
|------------------------------------------------ | ---------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | --------------------------------------------------- | ----------- | ------------------ | ----------- | ---------- | ---------- | ---------- | ----------- | -
|                                                 |                                                                              |                                                                              |                                                     |             | Three months ended
|                                                 |                                                                              |                                                                              |                                                     |             | June 30,          
|                                                 |                                                                              |                                                                              |                                                     |             | 2001               |             | 2000      
|                                                 |                                                                              |                                                                              |                                                     |             |                    |             |           
|Cash flows from operating activities:            |                                                                              |                                                                              |                                                     |             |                    |             |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Net loss                                                                     |                                                                              | $                                                   | (15,559,739 | )                  |             | $          | (4,259,239 | )         
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net loss to net cash used in operating activities:  |                                                                              |                                                     |             |                    |             |            |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Depreciation, including amortization of leased assets                        |                                                     |             | 1,748,462          |             |            |            | 510,088    |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Amortization of intangibles                                                  |                                                     |             | 1,337,989          |             |            |            |           |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Amortization of deferred compensation                                        |                                                     |             | 274,160            |             |            |            |           |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Accretion of debt discount                                                   |                                                     |             | 4,065              |             |            |            | 105,747    |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Accrued interest on debt                                                     |                                                     |             | 9,625              |             |            |            |           |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Loss on disposal of property, plant and equipment                            |                                                     |             |                   |             |            |            | 12,372     |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Common stock and options issued for compensation                             |                                                     |             | 290,500            |             |            |            | (234,906   | )          
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Restructuring charge                                                         |                                                     |             | 5,900,000          |             |            |            |           |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Cash paid for restructuring                                                  |                                                     |             | (1,138,330         | )           |            |            |           |            
|                                                
|                                                
|                                                
|                                                
|                                                 | Changes in operating assets and liabilities, net of effects of
acquisitions: |                                                                              |                                                     |             |                    |             |            |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Accounts receivable trade                                                   |                                                     |             | (1,023,471         | )           |            |            | (563,467   | )          
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Other receivables affiliates                                                |                                                     |             | 7,561              |             |            |            | 376,106    |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Other current assets                                                         |                                                     |             | 823,471            |             |            |            | 280,460    |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Other assets                                                                 |                                                     |             | (288,937           | )           |            |            | 35,000     |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Accounts payable trade                                                      |                                                     |             | 349,931            |             |            |            | (5,969,238 | )          
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Deferred rent                                                                |                                                     |             | 87,443             |             |            |            | 124,215    |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Other accrued expenses                                                       |                                                     |             | (1,075,614         | )           |            |            | (425,521   | )          
|                                                 |                                                                              |                                                                              |                                                     |             |                    |             |            |           
|                                                 |                                                                              |                                                                              | Net cash used in operating activities               |             |                    | (8,252,884  | )          |            |            | (10,008,383 | )
|                                                
|                                                
|                                                
|                                                
|Cash flows from investing activities:            |                                                                              |                                                                              |                                                     |             |                    |             |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Purchase of property, plant, and equipment                                   |                                                     |             | (456,373           | )           |            |            | (4,533,931 | )          
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Proceeds from sale of property, plant, and equipment                         |                                                     |             |                   |             |            |            | 11,400     |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Payment for purchase of Fourthstage Technologies, Inc., net of cash acquired |                                                     |             | (1,439,667         | )           |            |            |           |            
|
|                                                 |                                                                              |                                                                              |                                                     |             |                    |             |            |           
|                                                 |                                                                              |                                                                              | Net cash used in investing activities               |             |                    | (1,896,040  | )          |            |            | (4,522,531  | )
|                                                
|                                                
|                                                
|                                                
|Cash flows from financing activities:            |                                                                              |                                                                              |                                                     |             |                    |             |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Payments on obligations under capital leases                                 |                                                     |             | (770,211           | )           |            |            | (79,978    | )          
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Payments on notes payable                                                    |                                                     |             | (5,086             | )           |            |            | (456,500   | )          
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Proceeds exercise of warrants                                               |                                                     |             |                   |             |            |            | 528,000    |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Proceeds exercise of stock options                                          |                                                     |             |                   |             |            |            | 226,000    |            
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                              | Repayment of shareholder receivable                                          |                                                     |             |                   |             |            |            | 500,000    |            
|                                                 |                                                                              |                                                                              |                                                     |             |                    |             |            |           
|                                                 |                                                                              |                                                                              | Net cash (used in) provided by financing activities |             |                    | (775,297    | )          |            |            | 717,522     |  
|                                                 |                                                                              |                                                                              |                                                     |             |                    |             |            |           
|                                                 |                                                                              |                                                                              | Net change in cash and cash equivalents             |             |                    | (10,924,221 | )          |            |            | (13,813,392 | )
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                              |                                                                              | 12,584,949                                          |             |                    |             | 48,759,109 |           
|                                                 |                                                                              |                                                                              |                                                     |             |                    |             |            |           
|Cash and cash equivalents at end of period       |                                                                              | $                                                                            | 1,660,728                                           |             |                    | $           | 34,945,717 |           
|                                                 |                                                                              |                                                                              |                                                     |             |                    |             |            |           

See accompanying notes.

5



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##### Table of Contents



APERIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

|                         |                                                     |  |                    |         |      |  |   |        | 
|------------------------ | --------------------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------ | 
|                         |                                                     |  | Three months ended
|                         |                                                     |  | June 30,          
|                         |                                                     |  | 2001               |         | 2000
|                         |                                                     |  |                    |         |     
|Supplemental disclosure: |                                                     |  |                    |         |      |  |   |       
|                        
|                        
|                        
|                        
|                         | Cash paid during the period for interest:           |  | $                  | 525,000 |      |  | $ | 90,600 | 
|                         |                                                     |  |                    |         |      |  |   |       
|                         | Common stock exchanged for payment of payroll taxes |  | $                  | 390,936 |      |  | $ | 0      | 
|                         |                                                     |  |                    |         |      |  |   |       

See accompanying notes.

6



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##### Table of Contents






APERIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and have been prepared on
substantially the same basis as the Companys audited annual consolidated
financial statements. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for the fair
presentation of financial position and results of operations and cash flows
for the interim periods presented have been reflected herein. The results
of operations for the three months ended June 30, 2001 are not necessarily
indicative of the results to be expected for the full year. Certain
information and footnote disclosures normally contained in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.

For further information, refer to the consolidated financial
statements and footnotes thereto included in the Companys annual report on
Form 10-KSB for the fiscal year ended March 31, 2001.

2. ACQUISITIONS

On April 9, 2001, the Company consummated a merger with Fourthstage
Technologies, Inc. (Fourthstage), a technology integration and
development company that provides enterprise integration,
professional and managed services, as well as enterprise product
development to its enterprise customers. Fourthstage is now a
wholly-owned subsidiary of the Company. The merger was accounted for as a
purchase. Under the terms of the Merger Agreement, the Fourthstage
shareholders were entitled to receive total consideration of (i) cash equal to
$3,000,000, half of which was paid at closing; (ii) 2,698,423 shares of our
common stock; and (iii) 8,396,067 shares of our Series A Preferred Stock with
the rights and preferences set forth on the Certificate of Designation for the
Series A Preferred Stock (the Certificate of Designation). The holders of
the Series A Preferred Stock enjoy dividend, liquidation and redemption rights
and preferences senior to those rights and preferences enjoyed by holders of
our common stock. Dividends accrue at a rate of 18% per annum and are payable
quarterly subject to availability of funds and declaration of payment by the
board of directors. Accrued unpaid dividends are cumulative and are payable
upon redemption of the preferred stock and before any dividends are paid on
common stock.

The Series A
Preferred Stock is convertible into the Companys common stock,
subject to shareholder vote. If our shareholders
approve the conversion, then each share of Series A
Preferred Stock will convert automatically into one share of our common stock,
and the former Fourthstage shareholders will not be entitled to receive any
accrued but unpaid dividends on the Series A Preferred Stock that would be
otherwise payable to them. Pursuant to the Certificate of Designation, any
time after July 15, 2002, the former Fourthstage shareholders may exercise
their right to redeem the Series A Preferred Stock. Upon redemption of the
Series A Preferred Stock, the former Fourthstage shareholders are entitled to
receive an amount in cash per share equal to the greater of (a) $1.1703 plus
any compounded dividends or (b) the average of the daily closing prices of the
Companys common stock as reported by The Nasdaq National Market System during
the ten (10) trading days preceding the date of the first annual meeting of
shareholders following the issue date of the Series A Preferred Stock, plus all
accrued but unpaid dividends up to the date of redemption.

The pro forma unaudited results of operation for the three months ended
June 30, 2001 and 2000, assuming consummation of the purchase and the issuance
of the common stock and the Series A Preferred Stock as of April 1, 2000, are
as follows:

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|                                      |  |                                       |         |      |  |   |        |  
|------------------------------------- |  | ------------------------------------- | ------- | ---- |  | - | ------ | -
|                                      |  | Pro
forma
Three months ended June 30,
|                                      |  | 2001                                  |         | 2000
|                                      |  |                                       |         |     
|                                      |  | (in thousands, except per share data)
|Net revenues                          |  | $                                     | 7,230   |      |  | $ | 2,391 
|                                      |  |                                       |         |     
|                                     
|                                     
|                                     
|                                     
|Net loss                              |  |                                       | (15,560 | )    |  |   | (4,266 | )
|                                      |  |                                       |         |     
|                                     
|                                     
|                                     
|                                     
|Basic and diluted earnings
per share: |  | $                                     | (1.01   | )    |  | $ | (.29   | )
|                                      |  |                                       |         |     

3. EARNINGS PER SHARE

Earnings per share is computed in accordance with Statement of Financial
Accounting Standards No. 128, Earnings Per Share. Basic earnings per share
is computed using the weighted average number of common shares. Diluted
earnings per share is computed using the weighted average number of common
share equivalents outstanding during the period. Dilutive common share
equivalents consist of stock options and warrants using the treasury method and
dilutive convertible securities using the if-converted method. Net loss per
share is presented in the consolidated statements of operations.

During the quarter
ended June 30, 2001, the Company granted restricted stock to two
officers of the Company. Subsequent to the grant, the officers
separated from the Company. As a result of the officers' termination,
the restricted stock vested and the Company recognized $.3
million of compensation expense related to the grant. This
compensation expense was included in the restructuring charge
discussed below.

A number of
other employees that were granted restricted stock in the prior fiscal year were
terminated during the quarter ended June 30, 2001. Under the
terms of the original grant, the restricted stock vested upon
termination. As a result, $2.3 million of deferred compensation was
recognized and included in the restructuring charge discussed
below.

To satisfy income tax
liabilities related to the vesting of the restricted stock, employees
surrendered 287,000 shares of common stock. The Company cancelled
these shares, valued at $.4 million dollars, the amount of payroll
taxes owed by the employees.

4. RESTRUCTURING

During the quarter ended June 30, 2001, the Company recorded a
restructuring charge of $5.9 million related to the transition from the
Companys web-hosting and co-location business to the Fourthstage business
model, which provides integration, professional and managed services to
enterprise customers.

This restructuring eliminated redundant and unnecessary positions and
resulted in a reduction in our workforce of approximately 45%. Employee termination
benefits include severance and other benefits as well as the compensation
expense related to restricted stock that vested upon the termination of certain
employees. The cost of rent for facilities that are to be closed was accrued
and is included in lease termination costs.

The restructuring is summarized as follows:

|                              |  |                 |       |                  |  |                 |  |  |  |  |         |   |  |  |  |  |  |   |        | 
|----------------------------- |  | --------------- | ----- | ---------------- |  | --------------- |  |  |  |  | ------- | - |  |  |  |  |  | - | ------ | 
|                              |  | Charged to      |       |                  |  | Balance at June
|                              |  | expense in 2001 |       | Utilized in 2001 |  | 30, 2001       
|                              |  |                
|                              |  |                 |       |                  |  | (in
thousands)  |  |  |  |  |         |   |  | 
|Employee termination benefits |  | $               | 4,220 |                  |  |                 |  |  |  |  | ($3,202 | ) |  |  |  |  |  |   | $1,018 | 
|                             
|                             
|                             
|                             
|Lease termination costs       |  |                 | 1,680 |                  |  |                 |  |  |  |  | 0       |   |  |  |  |  |  |   | 1,680  | 
|                              |  |                 |       |                  |  |                 |  |  |  |  |         |   |  |  |  | 
|                             
|                             
|                             
|                             
|Restructuring charge          |  | $               | 5,900 |                  |  |                 |  |  |  |  | ($3,202 | ) |  |  |  |  |  | $ | 2,698  | 
|                              |  |                 |       |                  |  |                 |  |  |  |  |         |   |  |  |  | 

5. SUBSEQUENT EVENTS

On July 26, 2001, the Company entered into a loan agreement with the Swiss
bank Pictet & Cie, for $10.0 million. The loan is partially guaranteed by
Goldmann Sachs Bank AG. Interest is payable quarterly and is calculated based
on a three-month average of LIBOR plus 1.0%. The term of the loan is one year.
Funds from this loan were used in the restructuring of the Companys existing
debts and capital lease obligations.

In August 2001, the Company restructured a significant portion of its
existing debts and capital lease obligations outstanding as of June 30, 2001.
As part of this restructuring, the Company has repaid and fully satisfied its
$20.0 million convertible preferred note payable and accrued interest with
Hewlett-Packard Company (HP) through a one-time cash
payment of $7.5 million and significantly reduced its financial
commitments to bandwidth providers Worldcom, Inc. and Genuity, Inc.

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The Company has
canceled 91,951 stock options outstanding as of June 30, 2001. On February 4, 2002, the
Company will be obligated to issue 15,891 fully vested stock options at an
exercise price equal to fair market value at the grant date, provided that
these participants remain active, full-time employees through February 4, 2002.




ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This quarterly report on Form 10-QSB contains forward-looking statements,
which reflect the Companys current views with respect to future events and
financial performance. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or those anticipated. Words used in this report such as
believe, anticipate, expect, may, will and similar expressions are
intended to identify forward-looking statements but are not the exclusive means
of identifying such statements. The Companys actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. The Company does not undertake any
obligation to update or revise these forward-looking statements to reflect any
future events or circumstances. Readers are urged to carefully review and
consider the various disclosures made by the Company in previous
reports, including
those under the section entitled Risk Factors, Business and elsewhere in
our Securities and Exchange Commission filings, including our Annual Report on
Form 10-KSB for the fiscal year ended March 31, 2001.

Overview

As a result of the
April 9, 2001 merger between Aperian, Inc. and Fourthstage
Technologies, Inc.,
a privately held Arizona-based company, the Company has begun a transition from
Aperians web-hosting and co-location business toward the Fourthstage business
model, which provides integration, professional and managed services to its
enterprise customers. Much of this business
transition has been completed since the merger.

Related to the merger, the Companys board has approved the relocation of
its headquarters to the main office of Fourthstage, in Phoenix,
Arizona. The board has
also adopted a calendar-based fiscal year, which will result in a shortened
year (stub year) over the remainder of calendar year 2001. Adoption of the
change in name from Aperian, Inc. to Fourthstage Technologies, Inc. has been
approved by the board and is pending shareholder approval at the Annual Meeting
on August 15, 2001.

Going forward, the Company intends to provide integration, professional
and managed services to enterprise-level customers. Aspects of Aperians
former stand-alone business will be retained, such as the capabilities of its
Network Operations Control Center, although the Companys business will
increasingly resemble the Fourthstage business. In the process, the Company
will target a different set of customers, offering a different set of products
and services than has formerly characterized its business. The Company will
also establish a broader physical presence in the continental United States.
Logistically, the Company now operates from offices in Phoenix, Arizona; Austin,
Houston and Dallas, Texas; Atlanta, Georgia; Tampa, Florida; and Las Vegas,
Nevada.

Results of Operations

Revenues. Total revenues increased from
$.9 million in the three months
ended June 30, 2000 to $7.2 million in the three months ended June 30, 2001, an
increase of $6.3 million or 695%. The increase in revenues is due primarily
from a shift in focus from the Companys data center and co-location business
to the Fourthstage business model, which provides integration and professional
as well as managed services to its enterprise customers.

Costs of Revenues. Total costs of revenues
increased from $.8 million in the
three months ended June 30, 2000 to $8.4 million in the three months ended June
30, 2001, an increase of $7.6 million. The increase in costs of revenues is
due to the completion of additional data centers since the same period of the
last fiscal year coupled with

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a shift in focus from the Companys data center
and co-location business to the Fourthstage business model, which provides
integration and professional as well as managed services to its enterprise
customers. The current gross deficit reflects the high fixed cost
structure of the Company's co-location and data center business.

Operating Expenses

Sales and Marketing. Total sales and marketing
increased from $1.8 million in
the three months ended June 30, 2000 to $3.2 million in the three months ended
June 30, 2001, an increase of $1.4 million or 75%. The
increase in sales and marketing expenses reflects increased headcount
due to overall growth coupled with the Fourthstage merger,
increased sales commissions due to the increase in revenues and
expanded promotional activities due to increased revenues. Sales and
marketing expenses represented 200% and 44% of our total revenues for
the three months ended June 30, 2000 and 2001, respectively.

General and administrative expenses. General and administrative expenses
increased from $3.1 million for the three months ended
June 30, 2000 to $3.2
million for the three months ended June 30, 2001, an increase of
$.1 million
or 4%. The increase is primarily related to an increase in salaries and wages
due to the growth of the company offset by decreases in contract
labor, travel expense and office related expenses. General and
administrative expenses represented 338% and 44% of our total
revenues for the three months ended June 30, 2000 and 2001,
respectively.

Restructuring Charge. The Company recorded a restructuring charge of $5.9
million related to the transition from the Companys web-hosting and
co-location business to the Fourthstage business model, which provides
integration, professional and managed services to enterprise customers.

This restructuring eliminated redundant and unnecessary positions and
resulted in a reduction in our workforce of approximately 45%. Employee termination
benefits include severance and other benefits as well as the compensation
expense related to restricted stock that vested upon the termination of certain
employees. The cost of rent for facilities that are to be closed was accrued
and is included in lease termination costs.

Interest income (expense), net. Net interest
expense for the three months ended June 30, 2001 was $.8 million resulting primarily from interest on outstanding
notes payable and capital leases. Net interest income for the three months
ended June 30, 2000, was $.5 million. This is attributable to interest earned on
the proceeds from the various private placements of common stock of the Company.

Liquidity and Capital Resources

As of June 30,
2001, we had cash of $1.7 million, a decrease of $10.9
million from March 31, 2001, our previous fiscal year end.

Our operating activities resulted in net cash outflows of $8.3 million in
the three months ended June 30, 2001, compared to $10.0 million in the three
months ended June 30, 2000. The cash outflows from operating losses, increases
in accounts receivables and decreases in accrued expenses were partially offset
by decreases in other current assets, depreciation, amortization of
intangibles, including goodwill from the Fourthstage merger, and a
restructuring charge of $5.9 million less $1.1 million in cash
paid for restructuring.

Cash used in investing activities was $1.9 million for the three months
ended June 30, 2001, resulting from the Fourthstage merger and the
purchase of property, plant and equipment. Net cash used in investing
activities was
$4.5 million for the three months ended June 30, 2000, resulting primarily
from the purchase of property, plant and equipment.

Cash used in
financing activities was $.8 million for the three months
ended June 30, 2001, resulting primarily from payments on capital leases. Net
cash provided by financing activities was $.7 million for the three months ended
June 30, 2000, resulting primarily from proceeds received on exercises of
warrants and options and the repayment of a shareholder receivable, offset by
payments on notes payable and capital leases.

We intend to generate
working capital through profitable operations subsequent to the
Internet data centers (IDCs) being
sold. We will fund future growth through budgeted use of existing cash reserves
generated from profitable operations. We believe our current estimated

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working
capital (after the sale of the IDCs) and capital expenditure
requirements could
be met with existing cash and cash equivalents, cash from sales of services,
and equipment financing lines of credit. We have been approached by several
strategic investors who have offered to supply sources of additional working capital, but have
chosen to delay the use of this avenue of obtaining capital which would result
in dilution to our existing shareholders at this time.

However, we may seek to raise additional funds through public or private
financing, strategic relationships and other arrangements. There can be no
assurance that we will be successful in generating sufficient cash flows to
support our operations or in raising capital in sufficient amounts on terms
acceptable to us. If the Company is unable to sell its IDCs or
achieve profitability with the IDCs, and thereby
satisfy its $10.0 million obligation to Pictet & Cie, the Company may not be
able to continue its operations.



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PART II. OTHER INFORMATION




Item 1. Legal Proceedings.

There are no material changes to the information included in Item 3 -
Legal Proceedings of our Annual Report on Form 10-KSB for the fiscal year ended
March 31, 2001.




Item 2. Changes in Securities and Use of Proceeds.

(a)  None

(b)  During the quarter ended June 30, 2001, we issued shares of Series A
18% Cumulative Convertible Redeemable Preferred Stock (Series A Preferred
Stock) as described in (c) below. The Series A Preferred Stock is senior to
all other capital stock of the Company, including specifically the common stock
and any other series or class of stock as may be designated by the board from
time to time, in right of priority to distributions paid as dividends or
otherwise. No dividends or other distribution with respect to any other series
or class of capital stock of the Company shall be declared or paid prior to the
declaration and payment in full of all cumulative dividends accrued as of the
last day of the preceding quarter.

(c)  On April 9, 2001, we issued 2,698,423 shares of common stock and
8,396,067 shares Series A Preferred Stock to the shareholders of Fourthstage
Technologies, Inc. The terms of the Series A Preferred Stock are
described in our Current Report on From 8-K filed with the SEC on April 19,
2001 and in our Definitive Proxy Statement dated July 11, 2001 under Proposal Three -
Approval of Conversion of our Series A 18% Cumulative Convertible Redeemable
Preferred Stock into Common Stock.

The sale of the above securities was determined to be exempt from
registration under the Securities Act in reliance on Regulation D promulgated
under the Securities Act as a transaction by an issuer not involving any public
offering. In addition, the recipients of securities represented their
intentions to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, or were informed of
the restrictions on resale of such securities, and appropriate legends were
affixed to the share certificates issued in these transactions. All recipients
had adequate access to information about us.




Item 3. Defaults Upon Senior Securities.

None.




Item 4. Submission of Matters to a Vote of Security Holders.

None




Item 5. Other Information.

None.




Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits.

None.

(b) Reports on Form 8-K.
 
     April 19,
2001(amended June 20, 2001) Item 2. Acquisition or Disposition of Assets     May 10,
2001 Item 5. Other Events     June 6,
2001 Item 8. Change in Fiscal Year

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SIGNATURES

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

APERIAN, INC.

|                      |  |     |  |                                                                  
|--------------------- |  | --- |  | -----------------------------------------------------------------
|Date: August 14, 2001 |  | By: |  | /s/ Kevin CraigKevin Craig, President and
Chief Executive 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
this Registrant and in the capacities and on the dates indicated.

|          |                |       |                                       |      |                 |  |  |  |  |  |  | 
|--------- | -------------- | ----- | ------------------------------------- | ---- | --------------- |  |  |  |  |  |  | 
|Signature |                | Title |                                       | Date
|          |                |       |                                       |     
|/s/       | Kevin Craig    |       | President and Chief Executive Officer |      | August 14, 2001
|          |                |       |                                       |      |                 |  | 
|          | Kevin Craig    |       |                                       |      |                 |  |  |  | 
|         
|         
|         
|         
|          |                |       |                                       |      |                 |  |  |  |  |  |  | 
|         
|         
|         
|         
|/s/       | Stacy LaFrance |       | Chief Financial Officer               |      | August 14, 2001
|          |                |       |                                       |      |                 |  | 
|          | Stacy LaFrance |       |                                       |      |                 |  |  |  | 

13