UNITED  STATES

SECURITIES AND EXCHANGE
COMMISSION

WASHINGTON,  D.C.  20549

___________________

## FORM 10-Q

(Mark One)

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

For the quarterly period ended March 30, 2002

OR

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

___________________

Commission file number 000-22327

## CONCERO INC.

Incorporated Pursuant to the Laws of the State of Delaware

___________________

Internal Revenue Service-Employer Identification No. 74-2796054
6300 Bridgepoint Parkway, Building 1, Suite 500, Austin Texas   78730
(512) 343-6666

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.

Yesx      No __________

Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock,  as of the latest practicable  date:  10,233,090 shares of the Company's Common Stock,  $.01 par value, were
outstanding as of April 30, 2002.

`CONCERO INC.

                                                   Table of Contents

                                                                                                               Page
                                                                                                               ----
                                            Part I-Financial Information

Item 1.     Financial Statements (Unaudited)......................................................................3

            Condensed Consolidated Balance Sheets-- December 31, 2001 and March 31, 2002..........................3

            Condensed Consolidated Statements of Operations-- Three Months Ended March 31, 2001
              and March 31, 2002..................................................................................4

            Condensed Consolidated Statements of Cash Flows-- Three Months Ended March 31, 2001
              and March 31, 2002..................................................................................5

            Notes to Condensed Consolidated Financial Statements..................................................6

Item 2.     Management's Discussion and Analysis of
            Financial Condition and Results of Operations.........................................................9

Item 3.     Quantitative and Qualitative Disclosures about Market Risks..........................................20


                                            Part II-Other Information


Item 6.     Exhibits and Reports on Form 8-K.....................................................................21

            Signatures...........................................................................................22`

`PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

                                                     Concero Inc.
                                         Condensed Consolidated Balance Sheets
                                         (in thousands, except per share data)

                                                                 December 31,            March 31,
                                                                     2001                  2002
                                                               -----------------     ---------------
                                                                                        (Unaudited)
                                                                                     ---------------
Assets
Current assets:
   Cash....................................................       $     4,141           $    3,120
   Short-term investments..................................             8,964                8,964
   Accounts receivable, net of allowance for doubtful
      accounts of  $612 at December 31, 2001 and $320
      at March 31, 2002....................................               823                  263
   Unbilled revenue under customer contracts...............               557                    -
   Income tax receivable...................................                11                  607
   Prepaid expenses and other current assets...............               594                  402
                                                               -----------------     ---------------
Total current assets.......................................            15,090               13,356
Property and equipment, net................................             1,554                1,156
                                                               -----------------     ---------------

Total assets...............................................       $    16,644           $   14,512
                                                               =================     ===============


Liabilities and stockholders' equity
Current liabilities:
   Trade payables..........................................       $        66           $      236
   Accrued expenses and other current liabilities..........             5,445                4,907
                                                               -----------------     ---------------
Total current liabilities..................................             5,511                5,143

Stockholders' equity:
  Preferred stock, par value $.01 per share, 1,000 shares
     authorized and none issued and outstanding............                 -                    -
  Common stock, par value $.01 per share 34,000 shares
     authorized, 10,225 and 10,225 shares issued and
     outstanding at December 31, 2001 and March 31,
     2002, respectively....................................               102                  102
  Additional paid-in capital...............................            33,734               33,734
  Retained deficit.........................................           (22,703)             (24,467)
                                                               -----------------     ----------------
Total stockholders' equity.................................            11,133                9,369
                                                               -----------------     ----------------

Total liabilities and stockholders' equity.................        $   16,644           $   14,512
                                                               =================     ================

                                                See accompanying notes.

Concero Inc.
                                    Condensed Consolidated Statements of Operations
                                         (in thousands, except per share data)
                                                      (Unaudited)

                                                                             Three Months Ended
                                                                                   March 31,
                                                                       -------------------------------
                                                                               2001         2002
                                                                       -------------    --------------

Revenue....................................................                $  8,780           $   781
Operating expenses:
   Technical staff.........................................                   7,232               634
   Research and development................................                       -               754
   Selling and administrative staff........................                   2,687               595
   Other expenses..........................................                   8,257             1,236
                                                                       -------------    --------------
Total operating expenses...................................                  18,176             3,219                                                                       -------------    --------------

Loss from operations.......................................                  (9,396)           (2,438)

Interest income............................................                     242                68
                                                                       -------------    --------------

Loss before income taxes...................................                  (9,154)           (2,370)

Provision for (benefit from) income taxes..................                   2,281              (605)
                                                                       -------------    --------------

Net loss...................................................                $ 11,435)          $(1,765)
                                                                       =============    ==============

Basic loss per share.......................................                $  (1.13)          $ (0.17)
                                                                       =============    ==============

Diluted loss per share.....................................                $  (1.13)          $ (0.17)
                                                                       =============    ==============
Shares used in basic loss per share calculation............                  10,164            10,225
                                                                       =============    ==============

Shares used in diluted loss per share calculation..........                  10,164            10,225
                                                                       =============    ==============

                                                See accompanying notes.

Concero Inc.
                                    Condensed Consolidated Statements of Cash Flows
                                                    (in thousands)
                                                      (Unaudited)


                                                                               Three Months
                                                                              Ended March 31,
                                                                     ----------------------------------
                                                                               2001               2002
                                                                     ---------------    ---------------
Operating activities
Net loss...................................................                $(11,435)          $ (1,765)
Adjustments to reconcile net loss to net cash used in
   operating activities:
     Depreciation and amortization.........................                     620                195
     Excess property and equipment reserve.................                   2,150                280
     Changes in operating assets and liabilities:
        Accounts receivable................................                   4,024                852
        Allowance for doubtful accounts....................                     (11)              (292)
        Unbilled revenue under customer contracts..........                      44                557
        Prepaid expenses and other current assets..........                    (148)               192
        Trade payables.....................................                    (282)               170
        Accrued expenses and other current liabilities.....                   1,470               (538)
        Valuation allowance for deferred tax asset.........                   2,281                  -
        Income taxes.......................................                      76               (596)
                                                                     ---------------    ---------------
Net cash used in operating activities......................                  (1,211)              (945)
                                                                     ---------------    ---------------

Investing activities
Sale (purchase) of short-term investments..................                   4,559                  -
Acquisition of property and equipment......................                    (478)               (76)
                                                                     ---------------    ---------------
Net cash provided by (used in) investing activities........                   4,081                (76)
                                                                     ---------------    ---------------

Financing activities
Issuance of common stock...................................                       3                  -
                                                                     ---------------    ---------------
Net cash provided by financing activities..................                       3                  -
                                                                     ---------------    ---------------

Net increase (decrease) in cash............................                   2,873             (1,021)
Cash, beginning of period..................................                   1,611              4,141
                                                                     ---------------    ---------------

Cash, end of period........................................                $  4,484           $  3,120
                                                                     ===============    ===============

Non-cash activities:
Unrealized loss on investments.............................                $    (66)          $     -
Reversal of deferred tax asset.............................                $  2,281           $     -

                                                See accompanying notes.`

# Concero Inc.

# Notes to
Condensed Consolidated Financial Statements

# March 31,
2002

# (Unaudited)

Concero Inc.
(Concero or the Company) is a provider of interactive
television solutions. Concero provides systems integration consulting services
that enable cable operators, content providers and application providers to
deliver compelling entertainment-on-demand services and other video-on-demand
enabled applications and intends to provide related software products.

Concero possesses unique
delivery capabilities for supporting interactive television solutions. In
conjunction with Motorolas Horizon and Scientific-Atlantas
CreativEdge developers programs, Concero operates state-of-the-art integration
facilities with head-ends, set-top boxes, video-on-demand servers, operating
systems and middleware from Motorola, Scientific-Atlanta, SeaChange, Concurrent
and other major technology providers. These assets, combined with Conceros
dedicated and experienced team of interactive television consultants and
software engineers, offer customers substantial cost savings and rapid
time-to-market benefits.

The accompanying unaudited
condensed consolidated financial statements include the accounts of Concero Inc.
and its wholly owned subsidiaries. All significant inter-company balances and
transactions have been eliminated in consolidation. The accompanying unaudited
condensed consolidated financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (the
SEC) regarding interim financial reporting. Accordingly, they do not
include all the information and notes required by accounting principles
generally accepted in the United States for complete financial statements and
should be read in conjunction with the financial statements and notes thereto
for the year ended December 31, 2001 included in the Companys annual
report on Form 10-K. The accompanying financial statements reflect adjustments,
all of which are of a normal recurring nature, which are, in the opinion of
management, necessary for a fair presentation. The results for interim periods
are not necessarily indicative of full year results.

In November 2001, the FASB
issued staff announcement (Topic No. D-103), Income Statement
Characterization of Reimbursements Received for Out-of-Pocket
Expenses Incurred, which was subsequently incorporated in Emerging Issues
Task Force Issue No. 01-14 (EITF Issue No. 01-14). EITF Issue No.
01-14 requires companies to characterize reimbursements received for
out-of-pocket expenses as revenues in the statement of operations. EITF Issue
No. 01-14 had no effect on net loss as it increased both revenues and expenses.
As a result of the adoption of EITF Issue No. 01-14, the Company has restated
its condensed consolidated statement of operations for the quarter ended March
31, 2001 to reflect reimbursements received for out of pocket expenses as
revenue and technical staff expenses.

The components of
comprehensive loss for the three months ended March 31 are as follows (in
thousands):

`2001             2002
                                                      --------------    -------------
Net loss......................................            $(11,435)        $ (1,765)
Unrealized loss on short-term investments.....                 (66)               -
                                                      --------------    -------------
                                                      --------------    -------------
Comprehensive loss............................            $(11,501)        $ (1,765)
                                                      ==============    =============`

# Concero Inc.

# Notes to
Condensed Consolidated Financial Statements (Continued)

# (Unaudited)

## 4. Earnings
(Loss) per Share

`2001               2002
                                                                       ----------------    ---------------
Numerator:
  Net loss.................................................                 $  (11,435)         $  (1,765)
                                                                       ================    ===============

Denominator:
  Shares used in basic loss per share calculation..........                     10,164             10,225

  Effect of dilutive securities:
    Employee stock options.................................                          -                  -
    Warrants...............................................                          -                  -
                                                                       ----------------    ---------------
  Shares used in diluted loss per share calculation........                     10,164             10,225
                                                                       ================    ===============

Basic loss per share.......................................                 $    (1.13)         $   (0.17)
                                                                       ================    ===============

Diluted loss per share.....................................                 $    (1.13)         $   (0.17)
                                                                       ================    ===============`

## 5. Cost
Reduction Measures

In 2001, the Company
implemented cost reduction measures to continue to more closely align its cost
structure with near-term future revenue opportunities. These cost reduction
measures continued in the first quarter of 2002 and included workforce
reductions, the establishment of reserves for excess leased office space and the
impairment of equipment. As a result of these cost reduction measures, the
Company recorded a charge to other expense of approximately $4.6 million and
$680,000 in the first quarter of 2001 and 2002, respectively, as follows (in
thousands):

`Impairment               Lease
                                                   Severance        of Equipment         Commitments             Total
                                              --------------      --------------       --------------    --------------
Accrual balance at December 31, 2000...             $     -             $     -             $      -          $      -
   Charge to other expense.............               1,512               2,150                  954             4,616
   Payments and charges made...........                (584)             (2,150)                 (16)           (2,750)

                                              --------------      --------------       --------------    --------------
Accrual balance at March 31, 2001......             $   928             $     -             $    938          $  1,866
                                              --------------      --------------       --------------    --------------

Accrual balance at December 31, 2001...             $     -             $     -             $  4,025          $  4,025
   Charge to other expense.............                 170                 280                  230               680
   Payments and charges made...........                (104)               (280)                (845)           (1,229)

                                              --------------      --------------       --------------    --------------
Accrual balance at March 31, 2002......             $    66             $     -             $  3,410          $  3,476
                                              --------------      --------------       --------------    --------------`

# Concero Inc.

# Notes to
Condensed Consolidated Financial Statements (Continued)

# (Unaudited)

Severance costs involve an
aggregate of 130 and 13 technical, sales and administrative personnel in the
first quarter of 2001 and 2002, respectively, to which the Company paid a
severance benefit. Impairment of equipment relates to excess property and
equipment, primarily leasehold improvements, equipment and furniture utilized by
terminated personnel. Lease commitments relate to the excess office space of
approximately 97,500 square feet, or 91% of the office space occupied by the
Company at December 31, 2000.

Accrued lease payments at
March 31, 2002 are expected to be paid over the remaining lease terms, which
extend to various dates through 2007. At March 31, 2002, the Company had entered
into sublease agreements representing approximately 36,000 square feet. The
estimated costs of abandoning these leased facilities, including estimated costs
to sublease, brokerage commissions and resulting sublease income, were based on
market information and trend analysis as estimated by the Company. Actual
results could differ from these estimates, and such differences could be
material to the financial statements. In particular, actual sublease income
attributable to the consolidation of excess facilities might deviate from the
assumptions used to calculate the Companys accrual for facility lease
commitments. With the exception of the impairment of excess equipment, all
payments and charges made involved the disbursement of cash.

## 6. Income Taxes

The  exercise of certain
stock options which have been granted under the Companys stock option plan
give rise to  compensation  which is  includable  in the  taxable  income of the
applicable  option  holder and  deductible  by the Company for federal and state
income tax  purposes.  The  information  for the  quarter  ended  March 31, 2001
includes a non-cash  income tax charge of $2.3  million to establish a valuation
allowance against the deferred tax asset for stock options, which was originally
recorded  as a reduction  of  shareholders  equity in that  quarter due to
uncertainties  regarding the realization of the deferred tax assets. In March of
2002,  a new  U.S.  federal  income  tax  law  was  passed  which  allows  for a
temporarily  lengthened loss carry-back period.  This new law allows the Company
to  carry-back  a  portion  of the tax loss  incurred  in 2001 to  prior  years,
resulting  in an  income  tax  receivable  of  approximately  $605,000  in 2002.

## Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to the
historical information contained herein, the discussion in this Form 10-Q
contains forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
that involve risks and uncertainties, such as statements for the plans,
objectives, expectations and intentions of Concero. Such forward looking
statements are generally accompanied by words such as plan,
estimate, expect, believe,
could, would, anticipate, may,
or other words that convey uncertainty of future events or outcomes. These
forward-looking statements and other statements made elsewhere in this report
are made in reliance on the Private Securities Litigation Reform Act of 1995.
The cautionary statements made in this Form 10-Q should be read as being
applicable to all related forward-looking statements whenever they appear in
this Form 10-Q. Our actual results could differ materially from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
under the section below entitled Factors That May Affect Future Results,
Financial Condition and Market Price of Securities as well as those
cautionary statements and other factors set forth elsewhere herein.

## Overview

We have been providing
software development services to customers that are innovators, early technology
adopters and market leaders for more than a decade. We had successfully
transitioned to a company that primarily provides e-business services by 1999.
Beginning in the second quarter of 2000, however, the market for e-business
services began to deteriorate and our revenue declined. In 2000, we initiated
cost reduction measures and narrowed our service offerings around: strategy,
enterprise portals, content chains and interactive television. In 2001, our
performance was considerably and negatively impacted by the weak U.S. economy
and a decrease in capital spending by our customers and potential customers. We
implemented further cost reduction measures in 2001 and 2002 to more closely
align our cost structure with near-term future revenue opportunities. As a
result of these cost reduction measures, we recorded charges in other expense of
$4.6 million and $680,000 in the first quarter of 2001 and 2002, respectively,
including workforce reductions, the impairment of equipment and the
establishment of reserves for the elimination of excess leased office space. We
continued to provide strategic consulting skills with deep technology and
integration expertise to existing customers; however, we further narrowed our
focus around interactive television.

In November 2001, we
announced our Concero Marquee software product at the Western Cable Show.
Concero Marquee is a suite of software that will be designed to enable the
development of interactive television applications that leverage video-on-demand
services. We anticipate that these applications will include
entertainment-on-demand for movies, music, games, subscription video-on-demand,
interactive advertising, commerce and promotional services. Concero Marquee will
utilize unique cross-platform software to reduce the cost and complexity of
designing, delivering and presenting user interfaces and interactive services
across multi-vendor digital set-top boxes and video-on-demand applications.

During 2002, we are highly
focused on the successful launch of the Concero Marquee suite, including product
development, marketing and sales.

## Critical
Accounting Policies and Estimates

The discussion and analysis
of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an on-going basis,
we evaluate our estimates, including those related to bad debts, income taxes,
restructuring and litigation. We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

Revenue from service
contracts is recognized when persuasive evidence of an arrangement exists,
delivery of the services has occurred, the fee is fixed and determinable, and
collection is probable. Revenue from time and materials contracts is recognized
during the period for which the services are provided. Revenue from fixed price
contracts is recognized using the percentage-of-completion method, measured by
the percentage of units of labor incurred to the date of measurement relative to
the estimated total units of labor at completion. The cumulative impact of
revisions in estimates of the percentage to complete is reflected in the period
in which the revisions are made. Provisions for estimated losses on uncompleted
contracts are made on a contract-by-contract basis and are recognized in the
period in which such losses are determined. Revenue earned in excess of billings
is classified as unbilled revenue under customer contracts. Billings in excess
of earned revenue are classified as deferred revenue. Revenue includes
reimbursable expenses. Revenue from product license fees is generally recognized
when persuasive evidence of an arrangement exists, delivery and deployment of
the product has occurred, no significant obligations by the Company with regard
to implementation remain, the fee is fixed and determinable and collectibility
is probable. The Company has recorded no product license revenue in 2001 or
2002.

We maintain allowances for
doubtful accounts for estimated losses resulting from the uncollectibility of
our accounts receivable, specifically, our customers inability to make required
payments. We use a combination of the aging method, based on historical
collection experience, and customer-specific identification of potential bad
debt losses to estimate our allowance for doubtful accounts. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.

We vacated excess leased
facilities as a result of the cost reduction measures taken during 2001. We
recorded an accrual for the remaining lease liabilities of such vacated
properties as well as brokerage commissions, partially offset by estimated
sublease income. We estimated the costs of these excess leased facilities,
including estimated costs to sublease and resulting sublease income, based on
market information and trend analysis. Actual results could differ from these
estimates, in particular, actual sublease income attributable to the
consolidation of excess facilities might deviate from the assumptions used to
calculate our accrual for facility lease commitments.

We account for income taxes
using the liability method, whereby deferred tax asset and liability account
balances are determined based on differences between financial reporting and tax
bases for assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.

## Results of
Operations

`Three Months
                                                                           Ended March 31,
                                                                          2001          2002
                                                                          ----          ----

Revenue....................................................               100%          100%
Operating expenses:
   Technical staff.........................................                82            81
   Research and development................................                 -            97
   Selling and administrative staff........................                32            76
   Other expenses..........................................                97           158
                                                                      ----------   ----------
Total operating expense....................................               211           412
                                                                      ----------   ----------
Income (loss) from operations..............................              (111)         (312)
  Interest income..........................................                 3             9
  Provision for (benefit from) income taxes................                27           (77)
                                                                      ----------   ----------
  Net income (loss)........................................              (135)%        (226)%
                                                                      ==========   ==========`

Our revenue consists
primarily of fees for software services provided. Revenues decreased 91% to
$781,000 in the quarter ended March 31, 2002 from $8.8 million in the quarter
ended March 31, 2001. The decline is principally due to reduced demand for
e-business services due to a weak economy and low capital spending on
information technology. Additionally, in conjunction with our cost reduction
measures and shift in strategy from e-business services to a provider of
software and related integration services, we eliminated our regional offices
and staff that historically provided material support of the sale and delivery
of our e-business services, and much of our sales and marketing focus is on the
expected release of Concero Marquee in the third quarter of 2002. Comparing the
first quarter of 2002 with the same period in 2001 our average hourly bill rate
decreased 29% to $95 from $133. We do not anticipate any recovery in our average
hourly bill rate unless we are able to deploy staff in support of Concero
Marquee integrations in the future.

In the first quarter of
2002, two customers accounted for 40% and 38% of our revenue and, in total,
accounted for 45% of our accounts receivable as of March 31, 2002. Two customers
accounted for 15% and 13% of revenue in the first quarter of 2001. No other
client accounted for more than 10% of revenue for either period.

Technical staff expenses
consist of the cost of salaries, payroll taxes, health insurance and
workers compensation for technical staff personnel assigned to client
engagements and unassigned technical staff personnel, as well as fees paid to
sub-contractors for work performed in connection with a client engagement.
Technical staff expenses decreased 91% to $634,000 in the quarter ended March
31, 2002 from $7.2 million in the quarter ended March 31, 2001. The decrease in
technical staff expenses is primarily due to workforce reductions in conjunction
with our cost reduction measures.

As a percentage of revenue,
technical staff expenses decreased to 81% in the quarter ended March 31, 2002
from 82% in the same quarter last year. This decrease was primarily the result
of improvement in our utilization, which benefited from the development of
Concero Marquee. Adjusted for hours associated with Concero Marquee, our
utilization rate was 85% for the first quarter of 2002, up from 46% in the first
quarter of 2001, largely offset by the decline in our average hourly bill rate.

Research and development
expenses consist of the costs associated with the development of our new
product, Concero Marquee including salaries, payroll taxes, health insurance and
workers compensation for technical staff personnel assigned to the
research and development team. Research and development was approximately
$754,000 for the first quarter of 2002. We did not incur research and
development costs in the first quarter of 2001.

Selling and administrative
staff expenses consist of the cost of salaries, payroll taxes, health insurance
and workers compensation for selling, marketing and administrative
personnel as well as commissions and bonuses paid to technical and
administrative staff. Selling and administrative staff expenses decreased 78% to
approximately $595,000 in the quarter ended March 31, 2002 from $2.7 million in
the quarter ended March 31, 2001 primarily due to workforce reductions in
conjunction with our cost reduction measures. As a percentage of revenues,
selling and administrative staff expenses increased to 76% in the quarter ended
March 31, 2002 from 32% in the quarter ended March 31, 2001, primarily as a
result of lower revenues.

Other expenses consist of
all non-staff related costs, such as occupancy costs, travel, business
insurance, business development, recruiting, training and depreciation. Other
expenses decreased to $1.2 million in the quarter ended March 31, 2002 from $8.3
million in the first quarter of last year. As a percentage of revenues, other
expenses increased to 158% in the quarter ended March 31, 2002 from 97% for the
quarter ended March 31, 2001. These fluctuations are primarily a result of cost
reduction measures and lower revenue. Other expenses this quarter include
severance costs of $170,000, excess office space of $230,000, the impairment of
excess capitalized equipment for $280,000 and a reduction of our allowance for
bad debts of $192,000. Included in other expenses for the first quarter of 2001
are severance costs of $1.5 million, excess office space of $950,000, the
impairment of excess capitalized equipment of $2.2 million and an increase in
our allowance for bad debt of $300,000.

Excluding the
aforementioned individually significant items, other expenses were $748,000 in
the quarter ended March 31, 2002, a decline from $3.3 million in the first
quarter of last year.

We recorded a loss from
operations of $2.4 million for the quarter ended March 31, 2002, a decrease from
a loss from operations of $9.4 million for the quarter ended March 31, 2001.

A tax benefit of $605,000
was recorded in the first quarter of 2002 in connection with a carry-back made
available by recent Federal tax legislation. The income tax provision of $2.3
million for the first quarter of 2001 is a non-cash charge to establish a
valuation allowance against deferred tax assets for stock options.

We recorded a net loss of
$1.8 million for the quarter ended March 31, 2002, a decrease from the net loss
of $11.4 million for the quarter ended March 31, 2001. Excluding the effect of
the aforementioned individually significant items affecting other expenses and
income taxes, our net losses were $1.9 million and $4.2 million for the first
quarters of 2002 and 2001, respectively. While our revenue declined
significantly in the first quarter of 2002 from the same quarter of 2001, net
loss declined primarily as a result of lower costs resulting from our cost
reduction measures.

## Liquidity and
Capital Resources

Our operating activities
used cash of $1.2 million and $945,000 for the first quarter of 2001 and 2002,
respectively. We purchased approximately $478,000 and $76,000 of computers,
office and system equipment and software in the first quarter of 2001 and 2002,
respectively. As of March 31, 2002, we had cash, cash equivalents and short-term
investments totaling $12.1 million, down from $13.1 million at December 31,
2001.

As of March 31, 2002, we
did not have any material commitments for capital expenditures. Our capital
expenditures currently consist primarily of purchases to support our interactive
television facilities.

We lease our office and
facilities space through non-cancelable operating lease arrangements. At March
31, 2002, our future minimum rental commitments totaled approximately $7.5
million. While future commitments under these operating lease arrangements are
generally not recorded as liabilities, much of the committed space in excess of
our current needs as a result of our cost reduction measures. Accordingly, we
have established reserves totaling approximately $3.4 million, net of estimated
sublease revenue which assumes that excess space is leased by the end of 2002 at
rates ranging from $15.00 to $30.00 annually per square foot depending upon
location.

The number of days of
revenue in our accounts receivable balance was 27 days as of March 31, 2002. We
may experience longer collection periods if the work we perform for smaller
companies increases as a percentage of our total services. We anticipate that
our existing cash and cash equivalents balances, and potential cash flows from
operations will be adequate to fund our working capital and capital expenditure
requirements for at least the next 12 months. However, changes may occur that
could consume available capital resources before such time. Our capital
requirements depend on numerous factors, including potential acquisitions, the
timing of the receipt of accounts receivable, employee growth and the percentage
of projects performed at our facilities.

We currently do not
maintain any committed credit facilities. We cannot assure you that commercial
credit, if necessary, will be available to us on favorable terms, or at all.

## Factors That
May Affect Future Results, Financial Condition and Market Price of Securities

## Risks that
Relate to Our Business Strategy

We are subject to a number
of risks related to our business strategy. We describe some of these risks
below. If any of these risks materializes, our business, financial condition and
results of operations could be harmed, and our stock price could fall.

## Risks that
Relate to Our New Business Strategy

We are subject to a number
of risks related to our new business strategy. We describe some of these risks
below. If any of these risks materializes, our business, financial condition and
results of operations could be harmed, and our stock price could fall.

We have narrowed our
strategic focus to interactive television. This may not be successful.

Recently, our management
team decided to implement a new business strategy and narrow our core product
and service offering to software, tools and services to facilitate interactive
television. The market for interactive television may not achieve business or
consumer acceptance in the near term, or at all. For example, companies
promoting interactive television and broadband services may find that consumers
are reluctant to use these services due to prohibitive cost or complexity.
Further, if interactive television does gain acceptance, cable operators, cable
programmers or interactive television application providers may not adopt our
software suite. As a result, our commitment of a substantial portion of our
resources to interactive television may not yield substantial revenues or profit
for us in the next few years or at all. It is too early to know whether the
narrowing of our business focus will help us achieve long-term success.
Companies that implement major changes in their business strategy can face more
challenging risks and unexpected difficulties.

Our transition from a
services only consulting organization to a provider of interactive television
software and services is risky and expensive.

Our successful transition
to a provider of interactive television software and services involves several
risks. These risks include:

- reliance on undeveloped and unproven products and technology;
- our unproven and evolving business model;
- market acceptance of any new software and services we develop;
- our ability to anticipate and adapt to the developing interactive television market;
- competition in the marketplace;
- our need to structure our internal  resources to support the  development,  marketing and potential  growth of
    our software and service offerings;
- uncertainties concerning our strategic direction;
- our need for cable  operators to launch and maintain  video-on-demand  services that create a need for the new
    software and services we intend to develop;
- the uncertainty of business or consumer  acceptance of  video-on-demand  services utilizing our proposed suite
    of software and services; and
- our need to realign and enhance our business development, research and development, software development and consulting
    and support organizations to develop our proposed software and service offering.

Internal and external
changes resulting from our transition may cause concern among our current
customers, potential customers, strategic partners and employees, and create a
prolonged period of uncertainty. Our new strategy requires substantial
organizational changes, including pursuing new strategic relationships,
increasing our research and development expenditures, adding employees who
possess the skills we believe we will need going forward, investing in new
technologies, establishing leadership positions in the interactive television
market and realigning and enhancing our sales and marketing groups. Many factors
may affect our ability to implement our new strategy, including our ability to
finalize agreements with other companies, manage the implementation internally,
sustain the productivity of our workforce, introduce innovative new software in
a timely manner, manage operating expenses and quickly respond to, and recover
from, unforeseen events associated with our transition and realignment.

We expect to incur
operating losses throughout the remainder of 2002, and it is possible that we
may not become profitable again.

As a result of our
transition to a software and service provider, it is extremely difficult to
forecast our future financial performance. We are now in the initial stages of
pursuing a new business strategy. We expect to incur significant research and
development, software development, administrative and operating expenses in the
future. Only if we are able to successfully develop our proposed products, bring
them to market before our competitors and achieve market acceptance will we be
able to generate any significant revenues from our new business model. It is
possible that we will exhaust all available funds before we reach the positive
cash flow phase of our proposed business model.

We may have
difficulty in raising capital and making an effective transition because of our
history.

It may be difficult for us
to make an effective transition from an e-business consulting company to a
software and service provider. We may have difficulty raising capital,
attracting and retaining talented employees, attracting research analyst
coverage of our common stock and gaining the confidence of possible strategic
partners, substantial investors and new customers for our proposed software and
services.

We hope to be able to
develop and then deliver to market a suite of software and tools that will
enable the development of interactive television applications. If we are
unsuccessful in developing this software suite, we will have no products or
services to bring to market and, therefore, will not be able to generate revenue
from our proposed products and services. We may exhaust all available funds
before we can develop our proposed software products and services.

If developed, our proposed
software products must be able to integrate with video-on-demand services and
set-top boxes used by our potential customers. For example, if, as a result of
technology enhancements or upgrades of these systems, we are unable to integrate
our software and tools with the servers or set-top boxes, we would be required
to redesign our software and tools or they would be considered obsolete.

Our business strategy
depends on our ability to create and maintain strategic alliances with other
technology companies. These alliances may shift or terminate suddenly.

We currently maintain
strategic alliances with other companies that help us to gain access to new
technology and business opportunities. Like many in our industry, we sometimes
refer to these companies as our partners, but they are not partners
in a legal sense. In particular, these companies are under no binding obligation
to remain in relationships with us or to continue to cooperate with us, and
these relationships are generally not exclusive.

Any of our alliance
partners may choose to end the alliance, alter the terms of the alliance in a
way that harms our business or increase the level of business they conduct with
one of our competitors. Similarly, if one of our alliance partners undergoes a
management or ownership change, we could lose access to critical technology and
business opportunities. The publicity that could accompany these kinds of
changes could have a damaging effect on our stock price.

Moreover, our brand may be
closely associated with the business success or failure of our alliance
partners, many of whom are pursuing unproven business models in competitive
markets. As a result, the failure or difficulties of these companies may damage
our brand and hurt our business opportunities.

## Risks that
Relate to Our Business

We are subject to a number
of risks that are particular to our business and that may or may not affect our
competitors. We describe some of these below. If any of these risks
materializes, our business, financial condition and results of operations could
be harmed, and our stock price could fall.

Our business is
subject to declines in demand due to changing market dynamics affecting our
customers.

Our business is subject to
declines in demand due to changing market dynamics affecting our customers. In
2001, we experienced a 65% decrease in revenue as compared to 2000. We believe
this decrease was attributable in part to reduced spending by Internet and
start-up businesses resulting from a less favorable investment climate for
Internet and start-up companies engaged in e-business. This decrease was also
attributable to reduced or deferred spending for computer consulting services by
established companies resulting from efforts of these companies to reduce
expenses in light of the recent deterioration of economic conditions in the
United States. These factors affecting demand for our services have continued
into the early part of 2002, and we would expect that a continuation of these
factors would continue to adversely affect our revenue and profitability.

Our key employees are
critical to our  continued  success.  The loss of any of these  employees  could
impair  our  ability  to  execute  our  strategy  or grow our  business.

Our future success will
depend in part upon the continued services of a number of key management and
technical employees. The loss of any of our key personnel could hurt our ability
to execute our strategy and grow our business. We do not maintain key-person
life insurance on any of our employees. In addition, if one or more of our key
employees resigns to join a competitor or to form a competing business, we could
lose existing or potential customers.

In 2001, we reduced our
workforce by approximately 242 people, including approximately 161 technical
staff who perform consulting services, in order to more closely match our
workforce level to our recent levels of demand for our services. We believe that
the retained workforce will allow us to execute our new business strategy
although it is possible that our workforce reduction plans will result in the
loss of key personnel whom we desire to retain.

We need to recruit,
train and retain qualified employees to successfully grow our business.

Our success depends on our
ability to recruit, train, retain, motivate and manage highly skilled employees.
Qualified project managers, software architects and senior technical and
professional staff with the skills we need are in demand worldwide. If we are
not able to hire, train and retain a sufficient number of highly skilled
employees, our ability to manage and staff existing projects and to obtain new
projects might suffer. In addition, a competitive labor market may require us to
raise salaries faster than we have in the past, and faster than we raise our
billing rates.

We changed our name to
Concero Inc. Although we have filed a trademark application for this name, we
may be unable to protect our name or prevent others from using our name. We also
intend to launch the Concero Marquee suite of software. We have not filed a
trademark application for this new product name. Other parties may claim that
our use of Concero or Concero Marquee violates their intellectual property
rights. If we are prevented from using the Concero or Concero Marquee name, it
may become more difficult for us to carry out our business plans. In addition,
our planned advertisement of the change and promotion of our new brand and
product may fail to reach important segments of our potential customer base, and
our marketing campaign may yield little results.

Our proprietary
intellectual property consists of the business processes and software that we
develop to assist customers. Our efforts to protect our proprietary rights may
not be adequate to deter theft or misuse of our intellectual property. We may
not be able to detect unauthorized use of our intellectual property and take
appropriate steps to enforce our rights. If third parties infringe,
misappropriate or copy our trade secrets, proprietary processes, copyrights,
trademarks or other proprietary information, we could lose important competitive
advantages.

We could be subject
to claims that we infringe the intellectual property rights of others.

There has been a marked
increase in patent and intellectual property litigation in recent months,
particularly involving competitors in the technology sector. Although we are not
aware that any of our activities infringe the patent or other intellectual
property rights of others, we have not sought any formal assurances that this is
the case. Other parties may assert infringement claims against us or claim that
we have violated their intellectual property rights. These claims even if not
true, could result in significant legal and other costs and may distract our
management. If we are required to stop using a particular methodology or
technology because of an infringement lawsuit, it could become extremely
difficult to carry out our business plans.

In 2000 and 2001, we
derived 34% and 47% of our revenue from our five largest customers,
respectively. In 2001, three customers accounted for 14%, 12% and 10% of our
revenue. One customer accounted for 10% of our revenue in 2000. The volume of
work performed for specific customers is likely to vary from year to year, and a
major customer in one year may not use our services in another year. The loss or
reduction of our revenue due to a decline in services performed for any large
customer could harm our business.

Our lack of long-term
contracts with customers makes our revenue difficult to predict.

Our customers retain us on
an engagement-by-engagement basis, rather than under long-term contracts. As a
result, the size and number of customer engagements are difficult to predict,
and vary markedly from quarter to quarter. At the same time, our operating
expenses are relatively fixed and cannot be reduced on short notice for
unanticipated shortfalls in our revenue. This is because our most significant
operating expense is employee salaries.

Moreover, our customers can
generally reduce the scope of our services or cancel our engagements without
penalty and with little or no notice. If a customer postpones, modifies or
cancels an engagement or chooses not to retain us for additional phases of a
project, we might not be able to re-deploy our employees quickly to other
engagements.

Some of our customer
contracts are on a fixed-price basis. If we fail to accurately estimate the
resources required for a fixed-price project, our profitability would be harmed.

During 2000 and 2001, we
generated approximately 7% and 8%, respectively, of our revenue on a
fixed-price, fixed-delivery-schedule basis, rather than on a time-and-materials
basis. If we fail to accurately estimate the resources required for a
fixed-price project or fail to complete our obligations on time, our revenue
could be harmed and our expenses could increase.

The accounts receivable we
generate from our services are subject to the risk of non-payment, either due to
the lack of financial resources of a customer or due to a dispute with respect
to the services provided. In 2001, we increased our reserve for doubtful
accounts by $146,000 in order to take into account the likelihood of non-payment
on a portion of our accounts receivable. We periodically analyze our accounts
receivable and these reviews may result in increases to our reserve for doubtful
accounts.

## Risks that
Relate to Our Industry

We are subject to a number
of risks that are inherent in the technology industry. We describe some of these
below. If any of these risks materializes, our business, financial condition and
results of operations could be harmed, and our stock price could fall.

Our competitors offer a
wide variety of broadband solutions, including software related to interactive
television applications. Relative to us, our competitors may have one or more of
the following advantages:

- longer operating history.
- greater financial, technical, marketing, sales and other resources.
- superior product functionality in specific areas.
- greater name recognition.
- a broader range of products to offer.
- a larger installed base of customers.

Current and potential
competitors have established, or may establish, cooperative relationships among
themselves or with third parties to enhance their products, which may result in
increased competition. In addition, we expect to experience increasing price
competition as we compete for market share, and we may not be able to compete
successfully with our existing or new competitors. Any of these conditions could
cause substantial harm to our business, operating results and financial
condition.

Our success depends
on the continued growth and acceptance of advanced technologies.

Our future success depends
heavily on consumer and commercial acceptance of interactive television and
broadband. Despite the large amount of investor and media attention these
technologies have received, they are in early stages of development and it is
difficult to predict whether or how they will continue to develop. Development
of these technologies could be hindered by a number of factors, such as
government regulation, taxation, general economic conditions and lack of
consumer acceptance. If these new technologies fail to gain widespread
acceptance or grow more slowly than expected, our business opportunities will
diminish.

## Risks that
Relate to Our Stock

Our stock price is subject
to a number of risks. We describe some of these below. If any of these risks
materializes, our stock price could fall.

Our common stock is
subject to delisting from the NASDAQ. If that occurs, our stock price and our
general business reputation may be adversely impacted.

The Nasdaq National Market
maintains certain minimum requirements to maintain the Nasdaq listing for our
common stock. These requirements include a minimum bid price for our common
stock of $1.00 and a $5 million minimum market value of the public float for our
common stock. Nasdaq has notified us that if we are unable to comply with these
requirements by May 15, 2002 or if we do not transfer our listing to the Nasdaq
SmallCap Market by May 15, 2002, we will receive written notification that our
common stock will be delisted.

If a delisting from the
Nasdaq National Market occurs because of noncompliance with the minimum bid
price or public market float or otherwise, our common stock likely would trade
in a less efficient market, such as the Nasdaq SmallCap Market, OTC Bulletin
Board or in the pink sheets maintained by the National Quotation
Bureau, Inc. Because these alternatives generally are considered to be less
efficient markets, our stock price, the liquidity of our common stock and our
general business reputation may be adversely impacted as a result.

Our quarterly
operating results will vary, which may affect the market price of our common
stock in a manner unrelated to our long-term performance.

Our quarterly operating
results have varied in the past and we expect that they will continue to vary in
the future depending on a number of factors, many of which are outside of our
control. Factors that have caused our quarterly operating results to vary
include:

- the number, size and scope of projects in which we are engaged;
- the contractual terms and degree of completion of these projects;
- any delays incurred in connection with a project;
- our success in earning bonuses or other contingent payments;
- our employee hiring and utilization rates;
- the adequacy of provisions for losses;
- the accuracy of our estimates of resources required to complete ongoing projects;
- customer budget cycles and spending priorities; and
- general economic conditions.

A high percentage of our
operating expenses, particularly personnel and rent, are fixed in advance of any
particular quarter. As a result, unanticipated variations in the number of our
projects, in our progress on projects or in our employee utilization rates may
cause significant variations in operating results in any particular quarter.
Given the possibility of these quarterly fluctuations, we believe that
comparisons of our quarterly results are not necessarily meaningful and that
results for one quarter should not be relied upon to predict our future
performance.

Any quarterly shortfall in
revenue or earnings from expected levels, or other short-term failures to meet
the expectations of securities analysts or the market in general, can have an
immediate and damaging effect on the market price of our common stock.

The stock market, from time
to time, has experienced extreme price and volume fluctuations. The market
prices of the securities of technology companies have been especially volatile,
including fluctuations that often are unrelated to the operating performance of
the affected companies. Broad market fluctuations of this type may adversely
affect the market price of our common stock.

The market price of our
common stock has fluctuated since we became a public company. Our stock price
could continue to fluctuate significantly due to a variety of factors,
including:

- public announcements concerning us, our competitors or the technology industry;
- fluctuations in our operating results;
- introductions of new products or services by us or our competitors;
- changes in analysts' revenue or earnings estimates; and
- announcements of technological innovations.

In the past, companies that
have experienced volatility in the market price of their stock have been the
targets of securities class action litigation. If we were sued in a securities
class action, we could incur substantial costs and suffer from a diversion of
our managements attention and resources.

## Item 3.
Quantitative and Qualitative Disclosures about Market Risks

We do not use derivative
financial instruments in our non-trading investment portfolio. We place our
investments in instruments that meet high credit quality standards, as specified
by our investment policy and which mature within one year from the date
purchased.

We are exposed to cash flow
and fair value risk from changes in interest rates, which may affect our
financial position, results of operations and cash flows. In seeking to minimize
the risks from interest rate fluctuations, we manage exposures through ongoing
evaluation of our investment portfolio. We do not use financial instruments for
trading or other speculative purposes.

For our investment
securities at December 31, 2001 and March 31, 2002, which consisted of corporate
issues, the table below presents principal cash flows and related weighted
average fixed interest rates by expected maturity dates (in thousands, except
interest rates).

`2001                2002
                                                                  ------------       -------------
Investments maturing before December 31, 2002..............          $ 8,964                 n/a
Investments maturing before March 31, 2003.................              n/a             $ 8,964
Weighted average interest rate.............................             2.25%               1.86%
Fair Value.................................................          $ 8,964             $ 8,964`

At December 31, 2001 and
March 31, 2002, we had $3.8 million and $1.5 million, respectively, in money
market funds that were classified as cash equivalents on the balance sheet.

# PART II-OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits
      Number        Description
                               None.

(b)  Reports on Form 8-K
                         None.

# SIGNATURES

Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized on May 13, 2002.

#### CONCERO, INC.

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/    TIMOTHY D. WEBB                              President, Chief Executive
--------------------------------------------------              Officer and Director                      May 13, 2002
                 Timothy D. Webb                                (principal executive officer)

         /s/    KEITH D. THATCHER                             Chief Financial Officer, Sr. Vice
--------------------------------------------------              President of Finance and Treasurer        May 13, 2002
                 Keith D. Thatcher                              (principal financial officer)`