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 September 30, 2001

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:  10,225,090 shares of the Company's Common Stock,  $.01 par value, were
outstanding as of October 31, 2001.

`CONCERO, INC.

                                                   Table of Contents

                                                                                                               Page
                                                                                                               ----
                                            Part I-- Financial Information

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

            Condensed Consolidated Balance Sheets-- December 31, 2000 and September 30, 2001......................3

            Condensed Consolidated Statements of Operations-- Three Months and Nine Months Ended
              September 30, 2000 and September 30, 2001...........................................................4

            Condensed Consolidated Statements of Cash Flows-- Nine Months Ended September 30, 2000
              and September 30, 2001..............................................................................5

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

Item 2.     Management's Discussion and Analysis of
            Financial Condition and Results of Operations.........................................................8

Item 3.     Quantitative and Qualitative Disclosures about Market Risks..........................................18


                                            Part II-- Other Information


Item 6.     Exhibits and Reports on Form 8-K.....................................................................18

            Signatures...........................................................................................19`

`PART 1 - FINANCIAL INFORMATION


Item 1. Financial Statements


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





                                                                 December 31,         September 30,
                                                                     2000                  2001
                                                               -----------------     -----------------
                                                                                       (Unaudited)
                                                                                       -----------
Assets
Current assets:
   Cash                                                              $    1,611             $   1,593
   Short-term investments                                                12,598                 9,981
   Accounts receivable, net of allowance for doubtful
      accounts of  $1,520 at December 31, 2000 and $1,197
      at September 30, 2001                                              11,243                 3,728
   Unbilled revenue under customer contracts                                 86                    74
   Income tax receivable                                                    664                   630
   Prepaid expenses and other current assets                              1,005                   743
                                                               -----------------     -----------------
Total current assets                                                     27,207                16,749
Deferred tax asset                                                        2,281                     -
Property and equipment, net                                               6,318                 1,861
                                                               -----------------     -----------------

Total assets                                                         $   35,806            $   18,610
                                                               =================     =================


Liabilities and stockholders' equity
Current liabilities:
   Trade payables                                                    $      573            $      216
   Accrued expenses and other current liabilities                         2,473                 6,362
                                                               -----------------     -----------------
Total current liabilities                                                 3,046                 6,578

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, 10,163 and 10,216 shares issued and
     outstanding at December 31, 2000 and September 30,
     2001, respectively                                                     102                   102
  Additional paid-in capital                                             33,695                33,732
  Accumulated other comprehensive income                                     16                     -
  Retained deficit                                                       (1,053)              (21,802)
                                                               -----------------     -----------------
Total stockholders' equity                                               32,760                12,032
                                                               -----------------     -----------------

Total liabilities and stockholders' equity                           $   35,806            $   18,610
                                                               =================     =================

                                                See accompanying notes.`

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




                                                      Three Months Ended               Nine Months Ended
                                                           September 30,                    September 30,
                                                    -----------------------------    -----------------------------
                                                           2000         2001                2000         2001
                                                    ------------     ------------    ------------    -------------

Revenue                                               $  14,224         $  3,077        $ 45,517        $  18,233
Operating expenses:
   Technical staff                                        9,160            2,180          25,242           13,180
   Selling and administrative staff                       2,320              732           8,067            4,861
   Other expenses                                         6,421            6,211          13,770           19,190
                                                                                     ------------
                                                    ------------     ------------                    -------------
Total operating expenses                                 17,901            9,123          47,079           37,231
                                                    ------------     ------------    ------------    -------------

Loss from operations                                     (3,677)          (6,046)         (1,562)         (18,998)

Interest income                                             226              126             698              530
                                                    ------------     ------------    ------------    -------------

Loss before income taxes                                 (3,451)          (5,920)           (864)         (18,468)

Benefit from income taxes                                (1,225)               -            (315)               -
                                                    ------------     ------------    ------------    -------------

Net loss                                              $  (2,226)        $ (5,920)       $   (549)       $ (18,468)
                                                    ============     ============    ============    =============

Basic loss per share                                  $   (0.22)        $  (0.58)       $  (0.06)       $   (1.81)
                                                    ============     ============    ============    =============

Diluted loss per share                                $   (0.22)        $  (0.58)       $  (0.06)       $   (1.81)
                                                    ============     ============    ============    =============

Shares used in basic loss per share
  calculation                                            10,018           10,212           9,940           10,188
                                                    ============     ============    ============    =============

Shares used in diluted loss per share
  calculation                                            10,018           10,212           9,940           10,188
                                                    ============     ============    ============    =============

                                                See accompanying notes.`

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


                                                                                Nine Months
                                                                               Ended September 30,
                                                                     -----------------------------------
                                                                               2000                2001
                                                                     ---------------     ---------------
Operating activities
Net loss                                                                    $  (549)          $ (18,468)
Adjustments to reconcile net loss to net cash used in
   operating activities:
     Depreciation and amortization                                            1,696               1,403
     Write-off of excess property and equipment reserve                           -               4,041
     Bad debt expense, net of recoveries                                      1,154                 (66)
     Changes in operating assets and liabilities:
        Accounts receivable                                                  (4,643)              7,581
        Unbilled revenue under customer contracts                               619                  12
        Prepaid expenses and other current assets                              (985)                262
        Other assets                                                              -                   -
        Trade payables                                                          223                (357)
        Deferred taxes                                                            -                  34
        Accrued expenses and other current liabilities                          599               3,889
        Income taxes                                                           (388)                  -
                                                                     ---------------     ---------------
Net cash used in operating activities                                        (2,274)             (1,669)
                                                                     ---------------     ---------------

Investing activities
Proceeds from the sale of short term investments, net                         3,358               2,601
Acquisition of property and equipment                                        (3,481)               (987)
                                                                     ---------------     ---------------
Net cash provided by (used in) investing activities                            (123)              1,614
                                                                     ---------------     ---------------

Financing activities
Proceeds from issuance of common stock, net of issuance cost                    730                  37
                                                                     ---------------     ---------------
Net cash provided by financing activities                                       730                  37
                                                                     ---------------     ---------------

Net decrease in cash                                                         (1,667)                (18)
Cash, beginning of period                                                     2,108               1,611
                                                                     ---------------     ---------------

Cash, end of period                                                       $     441           $   1,593
                                                                     ===============     ===============

Non-cash activities:
Unrealized gain (loss) on investments                                     $      45           $     (16)
Reduction of income taxes payable associated with the
     exercise of stock options                                            $   2,266           $       -
Deferred offering costs in accrued expenses                               $       -           $       -
Reversal of deferred tax asset                                            $       -           $   2,281


See accompanying notes.`

# Concero, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2001
(Unaudited)

## 1.      Nature of
Business

Concero, Inc. (Concero or the Company) is a broadband
services firm committed to transforming business through the creative application of new technologies. Alliances with leading
Internet and interactive television technology providers allow the Company to gain a thorough understanding of the providers
products and perspective on other products as well as next-generation technologies.

Using its technology insight and skills, Concero assists its clients to design,
develop and deploy solutions that enable clients to offer new revenue producing services such as entertainment-on-demand, enhanced
television and targeted interactive advertising, while simultaneously streamlining operations. Conceros service offerings
consist of:

- Interactive Television - to deliver interactive television and entertainment on demand solutions, extending the reach of
e-business to mass audiences;
- Content Management - to enable clients to efficiently produce and manage compelling content that can be packaged and marketed
for delivery to customers when and where the customer wants it; and
- Customer Portals - to enable clients to present a unified view of their company to their customers over the Internet and through
television and mobile devices.

Concero possesses unique delivery capabilities for supporting Interactive
Television Solutions. In conjunction with Motorolas Horizon and Scientific-Atlantas CreativeEdge developers programs,
Concero maintains development centers with specialized equipment and deep technical expertise that enable development of
cross-platform applications that run on Harmonic, Motorola and Scientific-Atlanta head-ends and set-top boxes. These assets combined
with our dedicated and experienced team of interactive TV consultants and software engineers offer our clients substantial cost
savings and rapid time-to-market benefits.

## 2.      Basis of Presentation

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 of 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, 2000 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.

## 3.     Comprehensive Loss

The components of comprehensive loss for the three and nine months ended September 30, are as follows (in thousands):

`Three months ended               Nine months ended
                                                               September 30,                    September 30,
                                                            2000              2001              2000            2001
                                                      ------------       -----------      ------------     ------------
Net income loss                                         $  (2,226)         $ (5,920)        $    (549)       $ (18,468)

Unrealized gain (loss) on short term
  investments                                                  22                50                70              (16)
Income tax expense related to items of other
  comprehensive loss                                            8                 -                25                -
                                                      ------------       -----------      ------------     ------------
Comprehensive loss                                      $  (2,212)         $ (5,870)        $    (504)       $ (18,484)
                                                      ============       ===========      ============     ============`

# Concero, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2001
(Unaudited)

## 4.      Loss per Share

The following table sets forth the computation of basic and diluted loss per
share (in thousands, except per share data) for the three and nine months ended September 30:

`Three months ended                     Nine months ended
                                                             September 30,                         September 30,
                                                             2000               2001               2000              2001
                                                   ---------------     --------------    ---------------    --------------
Numerator:
  Net loss                                              $  (2,226)         $  (5,920)          $   (549)       $  (18,468)
                                                   ===============     ==============    ===============    ==============

Denominator:
  Shares used in basic loss per share
    calculation                                            10,018             10,212              9,940            10,188

  Effect of dilutive securities:
    Employee stock options                                      -                  -                  -                 -
    Warrants                                                    -                  -                  -                 -
                                                   ---------------     --------------    ---------------    --------------
  Shares used in diluted loss per share
    calculation                                            10,018             10,212              9,940            10,188
                                                   ===============     ==============    ===============    ==============

Basic loss per share                                    $   (0.22)         $   (0.58)          $  (0.06)        $   (1.81)
                                                   ===============     ==============    ===============    ==============

Diluted loss per share                                  $   (0.22)         $   (0.58)          $  (0.06)        $   (1.81)
                                                   ===============     ==============    ===============    ==============`

## 5.      Cost
Reduction Measures

The Company initiated cost reduction measures, which included a workforce
reduction and elimination of excess leased office space and equipment. These cost reduction measures resulted in charges to other
expense of $4.8 million and $11.8 million during the three months and nine months ended September 30, 2001, respectively, as
described below (in thousands):

`Severance        Excess equipment       Office space               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
                                               ==============    ====================    ===============     ===============
Charge to other expense                                  811                     391              1,177               2,379
Payments and charges made                              1,317                     391                302               2,010

                                               --------------    --------------------    ---------------     ---------------
Accrual balance at June 30, 2001                     $   422                 $     -          $   1,813           $   2,235
                                               ==============    ====================    ===============     ===============
Charge to other expense                                  421                   1,500              2,845               4,766
Payments and charges made                                555                   1,500                379               2,434

                                               --------------    --------------------    ---------------     ---------------
Accrual balance at September 30, 2001                $   288                 $     -          $   4,279           $   4,567
                                               ==============    ====================    ===============     ===============`

# Concero, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2001
(Unaudited)

All payments and charges noted above are cash related charges except the
write-off of excess equipment. Workforce reductions included 38 personnel in the third quarter of 2001 and an aggregate of 235
personnel in the nine months ended September 30, 2001 to which the Company paid a severance benefit. The elimination of the office
space is associated with the planned reduction of approximately 97,500 square feet, or 91% of the office space occupied by the
Company at December 31, 2000. At September 30, 2001 the Company had entered into sublease agreements representing approximately
24,550 square feet. Charges to other expense associated with the elimination of lease expense represent future costs associated
with excess leased office space net of expected future sublease proceeds. Expected future sublease proceeds requires estimates for
sublease start dates and rates. The Companys applicable leases will be terminated or subleased to others. The Company intends
to continue to aggressively manage costs to maintain better alignment of expenses with near-term revenue opportunities.

## 6.      Stock Option Cancellation/New
Grant Program

During the first quarter of 2001, Concero established a program whereby each
employee with outstanding stock options was given the opportunity to cancel some, or all of their option grants in exchange for an
obligation by the Company to grant a new stock option in approximately six months and two days from the date of their election to
cancel such options. The new grant will be for the same number of shares cancelled and will have an exercise price equal to the
market closing price on the date of the new grant. New grants will vest 75% in equal installments over the three years following the
grant with the remaining 25% vesting at three and a half years.  The program ended on April 30, 2001, and 232,600 shares were
cancelled pursuant to the program.

## 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 are a broadband services firm committed to transforming business through the
creative application of new technologies. Our alliances with leading Internet and interactive television technology providers allow
us to gain a thorough understanding of their products and perspective on other products as well as next-generation technologies.
Using our technology insight and skills, we assist our clients to define, design, develop and deploy solutions that enable clients
to offer new revenue producing services such as entertainment-on-demand, enhanced television and targeted interactive advertising, w
hile simultaneously streamlining operations.

In 1999, our management team began executing a strategy of providing high
value-added e-business services and emphasizing relationships with leading technology providers aligned with our e-business focus.
With the successful implementation of that strategy our e-business services became the primary source of our revenue and we
experienced significant revenue growth through the second quarter of 2000 after which time the market for e-business services began
to deteriorate and our revenue declined. As a result of the increasingly weak U.S. economy, since the second quarter of 2000, we
have initiated cost reduction measures including a significant reduction in our staffing levels to more closely align our cost
structure with anticipated future revenue opportunities, and focused our sales and marking efforts around our interactive TV
services. We have also narrowed our service offerings to include:

- Interactive Television  we deliver interactive television and entertainment on demand solutions, extending the reach
of e-business to mass audiences;
- Content Management  we enable clients to efficiently produce and manage compelling content that can be packaged and
marketed for delivery to customers when and where the customer wants it; and
- Customer Portals  we enable clients to present a unified view of their company to their customers over the Internet and
through television and mobile devices.

We possess unique delivery capabilities for supporting Interactive Television
Solutions. In conjunction with Motorolas Horizon and Scientific-Atlantas CreativeEdge developers programs, we maintain
development centers with specialized equipment and deep technical expertise that enables development of cross-platform applications
that run on Harmonic, Motorola and Scientific-Atlanta head-ends and set-top boxes. These assets combined with our dedicated and
experienced team of interactive TV consultants and software engineers offer our clients substantial cost savings and rapid
time-to-market benefits.

## Results of Operations

The following table sets forth the percentage of revenue of certain items included in our condensed statement of
operations for the periods indicated:

`Three Months                          Nine Months
                                                  Ended September 30,                   Ended September 30,

                                                    2000              2001               2000            2001
                                            -------------     -------------       ------------    ------------

Revenue                                             100%              100%               100%            100%
Operating expenses:
   Technical staff                                   64                71                 55              72
   Selling and administrative staff                  16                24                 18              27
   Other expenses                                    46               201                 30             105
                                            -------------     -------------      -------------    ------------
Total operating expense                             126               296                103             204
                                            -------------     -------------      -------------    ------------
Loss from operations                                (26)             (196)                (3)           (104)
Interest income                                       1                 4                  1               3
Benefit for income taxes                             (9)                -                 (1)              -
                                            -------------     -------------      -------------    ------------
Net loss                                            (16)%            (192)%               (1)%          (101)%
                                            =============     =============      =============    ============`

Three Months Ended September 30, 2001 Compared to the Three Months Ended September 30, 2000

Revenue

Our revenue consists primarily of fees for software services provided. Revenues
decreased 78% to $3.1 million in the quarter ended September 30, 2001 from $14.2 million in the quarter ended September 30, 2000.
The decline was principally due to an increasingly weak U.S. economy resulting in reduced broadband and information technology
spending and a reduction in our average hourly bill rate. Comparing the third quarter of 2001 with the same period in 2000, our
average hourly bill rate decreased 7% to $113 from $122.

During the third quarter of 2001, our top two clients, Texas Utilities and
@Security Broadband Corp., provided 36% of revenue, and provided 22% and 14% of revenue, respectively. In the third quarter of 2000,
two clients accounted for 21% of revenue, or 11% and 10%, individually. No other client accounted for more than 10% of revenue for
either period.

Technical Staff

Technical staff expenses consist of the cost of salaries, payroll taxes, health
insurance and workers compensation insurance for technical staff personnel assigned to client engagements and unassigned
technical staff personnel, and fees paid to sub-contractors for work performed in connection with a client engagement.  Technical
staff expenses decreased 76% to $2.2 million in the quarter ended September 30, 2001 from $9.2 million in the quarter ended
September 30, 2000.  The decrease in technical staff expenses was primarily due to the workforce reductions, which occurred during
2001.

As a percentage of revenue, technical staff expenses increased to 71% in the
quarter ended September 30, 2001 from 64% in the same quarter last year. This increase was primarily the result of lower hourly bill
rates for our technical staff. Our average hourly bill rate decreased 7% to $113 in the third quarter of 2001 from $122 in the same
quarter of 2000. However, our utilization rate increased slightly from 59% for the third quarter of 2000 to 61% in the third quarter
of 2001.

Selling and Administrative Staff

Selling and administrative staff expenses consist of the cost of salaries,
payroll taxes, health insurance and workers compensation insurance for selling, marketing and administrative personnel as well
as any commissions and bonuses paid to technical and administrative staff. Selling and administrative staff expenses decreased 69%
to $732,000 in the quarter ended September 30, 2001 from $2.3 million in the quarter ended September 30, 2000, primarily due to work
force reductions which occurred during 2001. As a percentage of revenues, selling and administrative staff expenses increased to 24%
in the quarter ended September 30, 2001 from 16% in the quarter ended September 30, 2000, primarily as a result of lower revenue.

Selling and administrative staff expenses included the reversal of an accrued
bonus pool of $590,000 in the third quarter of 2000. Excluding the effect of that bonus reversal, selling and administrative staff
expenses decreased 75% from $2.9 million in the quarter ended September 30, 2000. Excluding the effect of that bonus reversal,
selling and administrative staff expenses increased to 24% of revenue in the quarter ended September 30, 2001 from 21% of revenue
in the quarter ended September 30,2000.

Other Expenses

Other expenses consist of all non-staff related costs, such as occupancy costs,
travel, business insurance, business development, recruiting, training, depreciation and professional fees for our accounting and
legal advisors. As a percentage of revenues, other expenses increased to 201% in the quarter ended September 30,
2001 from 46% for the quarter ended September 30, 2000. Other expenses decreased 3% to $6.2 million in the quarter ended September
30, 2001 from $6.4 million in the third quarter of 2000.

Other expenses for the quarter ended September 30, 2001 included costs totaling
$4.8 million which included $421,000 in workforce severance, $2.8 million for the elimination of excess leased office space and $1.5
million for the write-off of excess capitalized equipment. During the third quarter of 2000, other expenses included costs totaling
$2.0 million which included $1.1 million of additional bad debt reserves, the recognition of $750,000 of deferred expenses related
to a cancelled secondary offering and the write-off of a $125,000 investment in a start-up company. Excluding the effect of these
items, other expenses decreased 68% to $1.4 million in the quarter ended September 30, 2001 from the same quarter in the prior year,
primarily as a result of cost reduction measures.

Workforce reductions for the quarter ended September 30, 2001 included 38
personnel to whom we paid a severance benefit. During the third quarter of 2001, the elimination of office space resulted in a
reduction of approximately 2,200 square feet, or 2% of the office space occupied by us at December 31, 2000. More importantly, due
to changes in the economy our accruals for excess office space were expanded to include longer time frames to sublease the space at
reduced market rates. Our affected leases will be terminated or subleased to others.

Income Taxes

No tax benefit was recorded in connection with our loss this quarter.
Accordingly, any future taxableearnings will benefit from a lower effective tax rate as a result of these unrecognized tax
carry-forwards. The benefit for income taxes of $1.2 million for the quarter ended September 30, 2000 was computed using an
estimated annual effective tax rate of 35%, which differs from the federal statutory rate of 34% as a result of state taxes,
tax-exempt interest income and permanent differences for meals and entertainment expenses.

Net Loss

We recorded a net loss of $5.9 million for the quarter ended September 30, 2001
which represents an increase of $3.7 million from a net loss of $2.2 million for the quarter ended September 30, 2000. The increase
in our net loss this quarter was largely attributable to the decline in our revenue and the $4.8 million increase in other expenses
associated with the cost reduction measures described above.

Our net loss per share was $0.58 for the quarter ended September 30, 2001, an
increase from the net loss per share of $0.22 for the quarter ended September 30, 2000. Excluding the effect of the cost reduction
measures totaling $4.8 million in the quarter ended September 30, 2001 and the additional bad debt, expenses related to secondary
offering, write-off of an investment in a start-up company and reversal of accrued bonuses reported in the quarter ended September
30, 2000 which increased net loss by approximately $900,000, our net losses per share for the third quarters of 2001 and 2000 were
$0.13 and $0.11, respectively.

Liquidity and Capital Resources

Our working capital consisted of $10.2 million as of September 30, 2001 down
from $24.2 million as of December 31, 2000. Our operating activities used cash of $1.7 million and $2.3 million for the first nine
months of 2001 and 2000, respectively. We purchased approximately $1.0 million and $3.5 million of computers, office and system
equipment and software in the first nine months of 2001 and 2000, respectively. At September 30, 2001, we had cash, cash equivalents
and short-term investments totaling $11.6 million, down from $14.2 million at December 31, 2000.

At September 30, 2001, we did not have any material commitments for capital
expenditures. Our capital expenditures normally consist primarily of purchases of laptop computers, computer servers and furniture,
the amount of which fluctuates based on the number of additional employees we hire and the number of new offices that we open in any
period.

The number of days of revenue in our accounts receivable balance fluctuated
between 79 days to 113 days during the third quarter of 2001 ending at 113 days at September 30, 2001, an increase from 89 days at
December 31, 2000. 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, cash equivalents and short-term
investment 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 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 or other debt or equity financing, 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.

We refocused our business strategy.  This may not be successful.

We have refocused our business strategy. This strategy is described in the
section captioned Business in our Annual Report on Form 10-K which was filed on March 27, 2001. Some of the changes to
our business strategy include:

- expansion into new and largely untested business areas such as interactive television and broadband services;
- realignment of our internal corporate structure on a geographic basis as opposed to a product basis;
- a shift in focus of our client base from technology vendors to technology users; and
- a shift from longer-term development and maintenance arrangements to specific, shorter-term e-business project engagements.

Our shift from ongoing development and maintenance engagements to strategic
engagements has favorably affected our average billing rates but negatively affected our technical staff utilization rates. If we
are unable to offset decreases in our utilization rates through increases in our billing rates, our operating results will be
increasingly harmed. Adverse economic conditions, a lack of consumer acceptance of interactive television, broadband and other
advanced technologies, increased competition and other factors could hurt both our utilization rates and our billing rates. As a
result, it is too early to know whether the refocusing of our business strategy will help us achieve long-term success. Companies
that implement major changes in their business strategy can face more challenging risks and unexpected difficulties. These risks and
difficulties apply particularly to us because the market for our e-business consulting services is new and rapidly evolving.

The success of our business strategy depends on our ability to identify emerging technologies that will gain wide
acceptance in future markets.

Our business strategy requires us to:

- identify promising technologies at an early stage in their development;
- accurately assess their long-term viability; and
- rapidly gain expertise in these technologies.

Our business may suffer if we invest time and resources in technologies that
ultimately do not reach widespread use or commercial success. Even if we identify the best technologies, their widespread use and
deployment may not occur within a time span that is compatible with our business plans and revenue expectations.

In particular, some of the technologies that we are focusing on heavily, such
as interactive television and broadband, 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. As a result, we may commit substantial resources developing expertise in areas that will not yield
substantial revenue or profit for us.

Our business strategy depends on our ability to create and maintain
strategic alliances with other e-business and 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. This is one of the principles of our exponet strategy. 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.

Some of our clients are emerging companies that have little or no operating history and may lack the resources to pay our
fees.

Because we focus on emerging technologies, we derive some of our revenue from
small companies, particularly start-up companies that have limited operating histories and resources to pay our fees. These
companies often have little or no earnings or cash flow and their business is generally at a greater risk of failing than more
established businesses. As a result, these clients may not be able to pay for our services in a timely manner, or at all. These
effects would lead to an extension of our collection period, which would harm our liquidity, and an increase in our bad debt
expense, which would harm our profitability.

We may make investments in clients or potential clients that are emerging
companies. These investments are risky, we have limited experience in making these investments and we could lose all of our
investment.

Although not a key part of our strategy, we may make strategic investments in
small, emerging clients or potential clients. We may also agree to take some or all of our fees in the form of equity securities
issued by these clients as part of our engagement.  Investments in such emerging companies are extremely risky and some or all of
our investment could be lost. We have limited experience in these investments and in managing these arrangements.

Potential acquisitions could be difficult to integrate, disrupt our business, dilute stockholder value and hurt our
operating results.

We may pursue acquisitions of businesses and technologies that are
complementary to our core businesses. Our ability to grow through acquisitions will depend on the availability of attractive
acquisition candidates, our ability to compete for these acquisition candidates and the availability of capital to finance these
acquisitions.

The benefits of an acquisition often may take considerable time to develop, and
the acquisition may never produce the intended benefits. Factors that could cause an acquisition to be unsuccessful include:

- the loss of employees or clients of the acquired business, and thus a loss of one of the key rationales for making the
acquisition;
- our failure to appreciate the dynamics of markets in which we have limited or no prior experience;
- the diversion of management's attention from our core businesses;
- any difficulties we experience in assimilating the operations of an acquired business or in realizing projected efficiencies,
cost savings and revenue synergies;
- our failure to assess or discover liabilities;
- the dilution of our stockholders' equity and earnings per share, particularly if we finance the acquisitions with equity;
and
- an increase in our debt and contingent liabilities, which in turn could restrict our ability to access additional capital when
needed or to pursue other important elements of our business plan.

## 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 the third quarter of 2001, we experienced a 78% decrease in revenue as compared to the third quarter of
2000. We believe this decrease was attributable to reduced or deferred spending for e-business services by established companies
resulting from efforts of these companies to reduce expenses in light of the recent deterioration of general economic conditions.
A continuation of these factors would continue to adversely affect our operating results.

Our cost reduction measures and other strategic initiatives may not
achieve our desired results and could result in business distractions that could seriously harm our business.

We implemented a cost reduction plan in 2001. The objective of our cost
reduction plan is to reduce our cost structure to a sustainable level that is consistent with the current macroeconomic environment.
We also implemented other strategic initiatives designed to strengthen our operations. These plans involve, among other things,
reductions in our workforce facilities, aligning our organization around our business objectives, realignment of our sales force and
changes in our sales management, and increasing demand generation programs. The workforce reductions could result in a temporary
lack of focus and reduced productivity of our remaining employees, including those directly responsible for sales, which may impact
our future revenues. Further, the failure to retain and effectively manage remaining employees could increase our costs, hurt our
development and sales efforts and cause degradation in the quality of our services. Additionally, our customers and prospects may
delay or forgo purchasing our services due to a perceived uncertainty caused by these changes which could seriously harm our
business, results of operations and financial condition.

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 clients.

In 2001, we reduced our workforce by approximately 235 people, including
approximately 154 technical staff personnel who performed consulting services, in order to more closely match our workforce level to
recent levels of demand for our services. We believe that the retained workforce will allow us to continue to execute our strategy
at our anticipated lower levels of activity 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.

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. Other parties may claim that
our use of Concero violates their intellectual property rights. If we are prevented from using the Concero name, it may become more
difficult for us to carry out our business plans. In addition, our advertisement of the change and promotion of our new brand may
fail to reach important segments of our potential customer base, and our marketing campaign may yield little results.

We may not be able to protect our intellectual property and proprietary rights.

Our proprietary intellectual property consists of the business processes and
software that we develop to assist clients. 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.

We depend on a small number of clients for a significant portion of our revenue.

During the first nine months of 2000 and 2001, we derived 40% and 50% of our
revenue from our five largest clients, respectively. Our largest client in the first nine months of 2000 and 2001 accounted for 13%
and 15% of our revenue, respectively. The volume of work performed for specific clients is likely to vary from year to year, and a
major client 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 client could harm our business.

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

Our clients retain us on an engagement-by-engagement basis, rather than under
long-term contracts. As a result, the size and number of client 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 clients can generally reduce the scope of our services or cancel
our engagements without penalty and with little or no notice. If a client 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 client 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 the first nine months of 2000 and 2001, we generated approximately 9%
and 3%, 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.

We may not collect all of our accounts receivable.

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 2000 and the first nine months of 2001, we increased our reserve for doubtful accounts by $1.7 million and $366,000,
respectively 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 industry is intensely competitive.

We expect competition to persist and intensify in the future. We cannot be
certain that we will be able to compete successfully with existing or new competitors. If we fail to compete successfully, our
business would be seriously harmed. Competition can make it more difficult for us to:

- attract and retain customers;
- expand our sales and marketing activities;
- create and maintain the strategic relationships that are vital to success in the Internet and e-business marketplace, and thus
develop and acquire knowledge of leading-edge technologies; and
- recruit and maintain the highly skilled technical staff that our business model demands.

We compete against numerous companies that offer Internet services, software
engineering, systems integration, or management consulting, as well as the consulting arms of large accounting firms. Because
relatively low barriers to entry characterize the market, we expect other companies to enter our market. Some large information
technology consulting firms have announced that they will focus more resources on e-business opportunities.

Many of our current competitors have longer operating histories, larger client
bases, larger professional staffs, greater brand recognition and greater financial, technical, marketing and other resources than
we do. This may place us at a disadvantage in responding to our competitors pricing strategies, technological advances,
advertising campaigns, strategic partnerships and other initiatives. In addition, many of our competitors have well-established
relationships with our current and potential clients and have extensive knowledge of our industry. As a result, our competitors may
be able to respond more quickly to new or emerging technologies and changes in customer requirements, and they may also be able to
devote more resources to the development, promotion and sale of their services than we can. Competitors that offer more standardized
or less customized services than we do may have a substantial cost advantage, which could force us to lower our prices and billing
rates, adversely affecting our operating margins.

Current and potential competitors also have established or may establish
cooperative relationships among themselves or with third parties to increase their ability to address customer needs. Accordingly,
it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share. In
addition, some of our competitors may develop services that are superior to, or have greater market acceptance than, the services
that we offer.

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

Our future success depends heavily on the further widespread use of the
Internet as a means for commerce, and 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. The trading price of our common stock and the market value of
our public float have not been in compliance with these requirements for more than 30 consecutive days. Nasdaq recently notified us
that it had implemented a moratorium on the minimum bid price and market value of public float requirements until January 2, 2002 at
which time Nasdaq will resume enforcement of these requirements.

If a delisting 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 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 may
cause 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.

Our common stock may experience extreme price and volume fluctuations.

From time to time, the stock market has experienced extreme price and volume
fluctuations. The market prices of the securities of Internet and 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. For example, since October 1, 2000, the market price of our common stock on the Nasdaq National Market has fluctuated
between $4.63 and $0.35 per share. Our stock price could continue to fluctuate significantly due to a variety of factors, including:

- public announcements or perceptions 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 target 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

Information concerning market risk is contained on page 21 of our 2000 Annual Report on Form 10-K and is incorporated by
reference to such annual report.

# PART II
 OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits
                         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 November 13, 2001.

#### 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              November 13, 2001
       Timothy D. Webb                      Officer and Director
                                             (principal executive officer)

/s/    KEITH D. THATCHER                  Chief Financial Officer,                November 13, 2001
       Keith D. Thatcher                    Treasurer, Sr. Vice President,
                                            Finance
                                            (principal financial officer)

/s/    COLLEEN M. SERRATA                 Controller                              November 13, 2001
       Colleen M. Serrata                   (principal accounting officer)`