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 June 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 3, Suite 200, 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:  10,215,590 shares of the Company's Common Stock,  $.01 par value, were
outstanding as of July 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 June 30, 2001...........................3

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

            Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2000
              and June 30, 2001...................................................................................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..........................................18


                                            Part II - Other Information

Item 2.     Changes in Securities................................................................................18

Item 4.     Submission of Matters to a Vote of Security Holders..................................................18

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

            Signatures...........................................................................................20

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

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

                                                                 December 31,           June 30,
                                                                     2000                 2001
                                                               -----------------     ---------------
                                                                                      (Unaudited)
Assets
Current assets:
   Cash                                                              $    1,611           $   3,158
   Short-term investments                                                12,598               7,964
   Accounts receivable, net of allowance for doubtful
      accounts of  $1,520 at December 31, 2000 and $1,209
      at June 30, 2001                                                   11,243               5,839
   Unbilled revenue under customer contracts                                 86                 114
   Income tax receivable                                                    664                 630
   Prepaid expenses and other current assets                              1,005                 823
                                                               -----------------     ---------------
Total current assets                                                     27,207              18,528
Deferred tax asset                                                        2,281                   -
Property and equipment, net                                               6,318               3,776
                                                               -----------------     ---------------

Total assets                                                         $   35,806          $   22,304
                                                               =================     ===============


Liabilities and stockholders' equity
Current liabilities:
   Trade payables                                                     $     573          $      215
   Accrued expenses and other current liabilities                         2,473               4,191
                                                               -----------------     ---------------
Total current liabilities                                                 3,046               4,406

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 10,201 shares issued and
     outstanding at December 31, 2000 and June 30, 2001,
     respectively                                                           102                 102
  Additional paid-in capital                                             33,695              33,728
  Accumulated other comprehensive income (loss)                              16                (50)
  Retained deficit                                                      (1,053)            (15,882)
                                                               -----------------     ---------------
Total stockholders' equity                                               32,760              17,898
                                                               -----------------     ---------------

Total liabilities and stockholders' equity                           $   35,806          $   22,304
                                                               =================     ===============

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

                                                         Three Months Ended                Six Months Ended
                                                              June 30,                         June 30,
                                                    -----------------------------    -----------------------------
                                                           2000         2001                2000         2001
                                                    ------------     ------------    ------------    -------------

Revenue                                                $ 17,068         $  6,671        $ 31,293         $ 15,156
Operating expenses:
   Technical staff                                        8,686            4,064          16,082           11,000
   Selling and administrative staff                       3,142            1,442           5,747            4,129
   Other expenses                                         3,820            4,721           7,349           12,979
                                                    ------------     ------------    ------------    -------------
Total operating expenses                                 15,648           10,227          29,178           28,108
                                                    ------------     ------------    ------------    -------------

Income (loss) from operations                             1,420           (3,556)          2,115          (12,952)

Interest income                                             238              162             472              404
                                                    ------------     ------------    ------------    -------------

Income (loss) before income taxes                         1,658           (3,394)          2,587          (12,548)

Provision for income taxes                                  565                -             910                -
                                                    ------------     ------------    ------------    -------------

Net income (loss)                                      $  1,093         $ (3,394)       $  1,677         $(12,548)
                                                    ============     ============    ============    =============

Basic earnings (loss) per share                        $   0.11         $  (0.33)       $   0.17         $  (1.23)
                                                    ============     ============    ============    =============

Diluted earnings (loss) per share                      $   0.10         $  (0.33)       $   0.15         $  (1.23)
                                                    ============     ============    ============    =============

Shares used in basic earnings (loss) per share
   calculation                                           10,000           10,188           9,901           10,176
                                                    ============     ============    ============    =============

Shares used in diluted earnings (loss) per share
   calculation                                           11,364           10,188          11,413           10,176
                                                    ============     ============    ============    =============

                                                See accompanying notes.
Concero, Inc.
                                    Condensed Consolidated Statements of Cash Flows
                                                    (in thousands)
                                                      (Unaudited)


                                                                                 Six Months
                                                                               Ended June 30,
                                                                     -----------------------------------
                                                                               2000                2001
                                                                     ---------------     ---------------
Operating activities
Net income (loss)                                                           $ 1,677           $ (12,548)
Adjustments to reconcile net income (loss) to net cash used
   in operating activities:
     Depreciation and amortization                                            1,031               1,020
     Write-off of excess property and equipment reserve                           -               2,541
     Bad debt expense, net of recoveries                                         31                 (66)
     Changes in operating assets and liabilities:
        Accounts receivable                                                  (4,065)              5,470
        Unbilled revenue under customer contracts                            (1,442)                (28)
        Prepaid expenses and other current assets                            (1,099)                182
        Other assets                                                           (498)                  -
        Trade payables                                                         (175)               (358)
        Deferred taxes                                                            -                  34
        Accrued expenses and other current liabilities                          547               1,718
        Income taxes                                                            844                   -
                                                                     ---------------     ---------------
Net cash used in operating activities                                        (3,149)             (2,035)
                                                                     ---------------     ---------------

Investing activities
Proceeds from the sale of short term investments, net                         3,568               4,568
Acquisition of property and equipment                                        (2,424)             (1,019)
                                                                     ---------------     ---------------
Net cash provided by investing activities                                     1,144               3,549
                                                                     ---------------     ---------------

Financing activities
Proceeds from issuance of common stock, net of issuance cost                    678                  33
                                                                     ---------------     ---------------
Net cash provided by financing activities                                       678                  33
                                                                     ---------------     ---------------

Net increase (decrease) in cash                                              (1,327)              1,547
Cash, beginning of period                                                     2,108               1,611
                                                                     ---------------     ---------------

Cash, end of period                                                        $    781            $  3,158
                                                                     ===============     ===============

Non-cash activities:
Unrealized gain (loss) on investments                                      $     31            $   (66)
Reduction of income taxes payable associated with the
   exercise of stock options                                               $  2,328            $     -
Deferred offering costs in accrued expenses                                $    427            $     -
Reversal of deferred tax asset                                             $      -            $  2,281


                                                See accompanying notses.`

Notes to Condensed Consolidated Financial Statements
                                                     June 30, 2001
                                                      (Unaudited)

1.     Nature of Business

Concero, Inc. ("Concero" or the "Company") is an e-business services firm that offers strategic consulting skills
with deep technology and integration expertise.  This combination enables the Company to utilize existing and new
technologies to provide reliable, flexible and scalable e-business solutions.  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 define, design, develop and deploy e-business solutions that enhance its
clients' competitive positions.

Concero's strategy involves providing high value-added e-business services and emphasizing relationships with leading
technology providers aligned with the Company's e-business focus.  Concero's focus service offerings consist of:

- Strategy - to help clients  create  e-business  strategies;
- Customer  Portals - to enable clients to present a unified view of their company
to their customers over the Internetand through television and mobile  devices;
- Content Chains - 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
- Interactive  Television - to deliver interactive  television and  entertainment  on demand  solutions,  extending the
     reach of e-business to mass audiences.

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 Income (Loss)

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

`Three months ended                 Six months ended
                                                                June 30,                          June 30,
                                                               2000           2001              2000            2001
                                                      --------------    -----------      ------------    ------------

Net income (loss)                                          $  1,093       $ (3,394)         $ 1,677        $ (12,548)

Unrealized gain (loss) on short term
 investments                                                     18              -               49              (66)
Income tax expense related to items of other
 comprehensive income                                            6              -               18                -
                                                      --------------    -----------      -----------     ------------
Comprehensive income (loss)                                $  1,105       $ (3,394)         $ 1,708        $ (12,614)
                                                      ==============    ===========      ============    ============`

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

4.     Earnings (Loss) per Share

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

`Three months ended                     Six months ended
                                                               June 30,                              June 30,
                                                             2000               2001               2000              2001
                                                   ---------------     --------------    ---------------    --------------
Numerator:
  Net income (loss)                                     $   1,093          $  (3,394)        $   1,677         $ (12,548)
                                                   ===============     ==============    ===============    ==============

Denominator:
  Shares used in basic earnings (loss) per
    share calculation                                      10,000             10,188              9,901           10,176

  Effect of dilutive securities:
    Employee stock options                                  1,247                  -              1,379                 -
    Warrants                                                  117                  -                136                 -
                                                   ---------------     --------------    ---------------    --------------
  Shares used in diluted earnings (loss) per
    share calculation                                      11,364             10,188             11,413           10,176
                                                   ===============     ==============    ===============    ==============

Basic earnings (loss) per share                         $    0.11          $   (0.33)        $     0.17        $   (1.23)
                                                   ===============     ==============    ===============    ==============

Diluted earnings (loss) per share                       $    0.10          $   (0.33)        $     0.15        $   (1.23)
                                                   ===============     ==============    ===============    ==============`

5.     Cost Reduction Measures

The Company initiated cost reduction measures which included a workforce reduction and elimination of excess office
space and equipment.  These cost reduction measures resulted in charges to other expense of  $2.4 million  and $7.0
million during the three months and six months ended June 30, 2001, respectively, as described below (in thousands):

`First Quarter of 2001                                  Second Quarter of 2001
                ----------------------------                           ----------------------------
                  Charge to        Payments        March 31, 2001        Charge to        Payments         June 30, 2001
                  Other                 and               Accrual        Other                 and               Accrual
                  Expense            Charges              Balance        Expense           Charges               Balance
                                        Made                                                  Made
          -------------    ------------    -----------------     ------------    ------------    ------------------

Severance           $ 1,512         $   584               $   928          $   811         $ 1,317                $  422
Excess equipment      2,150           2,150                     -              391             391                     -
Office space            954              16                   938            1,177             302                 1,813
                ------------    ------------     -----------------     ------------    ------------    ------------------
Total               $ 4,616        $ 2 ,750              $  1,866         $  2,379        $ 2 ,010               $ 2,235
                ============    ============     =================     ============    ============    ==================`

All cost reduction charges noted above are cash related charges except the write-off of excess equipment.   Workforce
reductions included 67 personnel in the second quarter of 2001 and an aggregate of 197 personnel in the six months ended June 30, 2001 to whom
the Company paid a severance benefit. The elimination of the office space results in a reduction of approximately
95,000 square feet, or 88% of the office space occupied by the Company at December 31, 2000. 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.

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

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 an e-business services firm that offers strategic  consulting skills with
deep  technology  and  integration  expertise.  This  combination  enables us to
utilize existing and new technologies to provide reliable, flexible and scalable
e-business  solutions.  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  e-business  solutions  that enhance  their
competitive positions.

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.   Since the initiation
of that strategy, we have successfully transitioned to providing e-business services, which is now the primary source
of our revenue as evidenced by a 55% improvement in our average hourly bill rates since 1998 as compared with 2000.
As a result of that change in strategy, we also experienced significant revenue growth from 1998 through the second
quarter of 2000 after which time the market for e-business services began to deteriorate and our revenue declined.
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.  We have also narrowed our focus service
offerings around:

- Strategy  - We help clients create e-business strategies;
- Customer Portals- We enable clients to deliver a unified view of their company to customers over the
       Internetand through television     and mobile devices;
- Content Chains- We enable our clients to efficiently produce and manage compelling content comprised of rich
     media, including video, audio, graphics and 3D models; and
- Interactive Television  - We deliver interactive television and entertainment on-demand solutions, extending
      the reach of e-business to mass audiences.

We form strategic alliances with leading technology providers such as Vignette Corporation, Scientific-Atlanta and
Artesia Technologies.  We believe the nature of these alliances enables us to develop "ecosystems" centered around
leading technology providers in which we serve as a catalyst for the widespread adoption of the provider's products.
We call these ecosystems "exponential networks", or "exponets" for short.  Exponets allow us to enter new markets,
gain early access to emerging technologies, jointly market products and services and gain enhanced access to vendor
training and support.

Our clients include both Fortune 1000 and early stage companies whose business strategies are designed and built
around the Internet.

In April 2000, we changed our name to Concero from PSW Technologies.  We engaged a national agency and a public
relations firm to launch our branding campaign and to assist with other on-going awareness activities.  We believe
that our name change and related advertising and promotional activities will enable us to communicate our
capabilities as a national e-business solutions provider to prospective clients and employees.

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                           Six Months
                                                     Ended June 30,                        Ended June 30,

                                                 2000              2001               2000               2001

Revenue                                          100%              100%               100%               100%
Operating expenses:
   Technical staff                                51                61                 51                 73
   Selling and administrative staff               19                21                 19                 27
   Other expenses                                 22                71                 23                 86
                                                                                  --------------    ---------------
                                            ---------------    --------------
Total operating expense                           92               153                 93                186
                                            ---------------    --------------     --------------    ---------------
Income (loss) from operations                      8               (53)                 7                (86)
Interest income                                    1                 2                  1                  3
Provision for income taxes                         3                 -                  3                 -
                                            ---------------    --------------     --------------    ---------------
Net income (loss)                                  6%              (51)%                5%               (83)%
                                            ===============    ==============     ==============    ===============`

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

Revenue

Our revenue consists primarily of fees for software services provided.  Revenues
decreased  61% to $6.7  million in the  quarter  ended June 30,  2001 from $17.1
million in the quarter ended June 30, 2000. The decline is principally  due to a
softening  in demand for  e-business  services due to a weak economy and reduced
information  technology spending which was partially offset by an improvement in
our average hourly bill rate. Comparing the second quarter of 2001 with the same
period in 2000, our average hourly bill rate increased 10% to $141 from $128.

During the second quarter of 2001, our top three clients,  American Airlines,
Digital  Think and Texas  Utilities,  provided 48% of revenue,  and  individually
provided 25%, 11% and 12% of revenue, respectively. During the second quarter
of 2001,  we had a very  large and  successful  project  for  American  Airlines
rapidly  scaled  down and  deferred  until  early  2002,  as  American  Airlines
implemented  spending  freezes due to changes in their  business.  In the second
quarter of 2000,  Christianity.com and IBM accounted for 26% and 11% of revenue,
respectively.  IBM accounted for 1% of revenue in the second quarter of 2001. 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 53%
to $4.1 million in the quarter ended June 30, 2001 from $8.7 million in the quarter ended June 30, 2000. The decrease
in technical staff expenses is primarily due to the workforce reductions which occurred during 2001 to more closely
align our cost structure with near-term revenue opportunities.

As a percentage of revenue, technical staff expenses increased to 61% in the quarter ended June 30, 2001 from 51% in
the same quarter last year. This increase was primarily the result of lower utilization of our technical staff.  Our
utilization rate was 62% for the second quarter of 2001, down from 70% in the second quarter of 2000.

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 all commissions and bonuses paid
to technical and administrative staff.  Selling and administrative staff expenses decreased 54% to $1.4 million in
the quarter ended June 30, 2001 from $3.1 million in the quarter ended June 30, 2000, primarily due to workforce reductions which
occurred during 2001. As a percentage of revenues, selling and administrative staff expenses increased to 21% in the quarter ended
June 30, 2001 from 19% in the quarter ended June 30, 2000 primarily as a result of lower revenues.

Other Expenses

Other expenses consist of all non-staff related costs, such as occupancy costs, travel, business insurance, business
development, recruiting, training and professional fees for our accounting and legal advisors, and depreciation. Included in other
expenses this quarter is a charge related to cost reduction measures of $2.4 million which includes $811,000 in severance costs,
$1.2 million for the elimination of excess office space and $391,000 for the write-down of excess capitalized equipment.  Other
expenses increased 24% to $4.7 million in the quarter ended June 30, 2001 from $3.8 million in the second quarter of 2000. As a
percentage of revenues, other expenses increased to 71% in the quarter ended June 30, 2001 from 22% for the quarter
ended June 30, 2000. These increases are primarily a result of the severance costs, the charge for the elimination of
excess office space and the write-down of equipment, as well as lower revenue.

Workforce reductions for the quarter included 67 personnel to whom we paid a severance benefit. During the
second quarter of 2001, the elimination of office space resulted in a reduction of approximately 51,000 square
feet, or 47% of the office space occupied by us at December 31, 2000. Our affected leases will be terminated or subleased to
others.

Income (Loss)from Operations

We recorded a loss from operations of $3.6 million for the quarter ended June 30, 2001 which represents a decrease
of $5.0 million from income from operations of $1.4 million for the quarter ended June 30, 2000.  As a percentage of
revenues, loss from operations was 53% for the quarter ended June 30, 2001 compared to income from operations of 8%
for the quarter ended June 30, 2000. Included in the 2001 loss from operations is a charge of $2.4 million
associated with the cost reduction measures described above.

Income Taxes

No tax benefit was recorded in connection  with our loss this quarter.  Accordingly,  future taxable  earnings will
benefit from a lower  effective  tax rate as a result of these  unrecognized  tax  carry-forwards.  The  provision  for
income taxes of $565,000 for the quarter  ended June 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 and
permanent differences for meals and entertainment expenses.

Liquidity and Capital Resources

We have historically financed our operations and met our capital expenditure requirements primarily through cash
flows from operations and proceeds from the sale of equity securities.  Our working capital consisted of $14.1 million as of June 30, 2001 down from $24.2 million as
of December 31, 2000.  Our operating activities used cash of $2.0 million and $3.1 million for the first six months
of 2001 and 2000, respectively.  We purchased approximately $1.0 million and $2.4 million of computers, office and
system equipment and software in the first six months of 2001 and 2000, respectively.  At June 30, 2001, we had cash,
cash equivalents and short-term investments totaling $11.1 million, down from $14.2 million at December 31, 2000.

At June 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 81 days to 92 days during the
second quarter of 2001 ending at 81 days at June 30, 2001, a decrease 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, 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 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 second
quarter of 2001, we experienced a 61% decrease in revenue as compared to the second 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 the first and second quarters of 2001 with addiitional actions expected to take place in the third
quarter of 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 incureasing demand generation programs.  The
workforce reductions could result in a temporary lack of focus and reduced productivity of our remaining employeees, 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 porspects may delay or forgo purchasing our services due to a perceived uncertainty
caused by these changes.  Failure to achieve the desired results of these changes 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 197 people, including approximately 125 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 who 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 planned 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 six months of  2000 and 2001, we derived 46% and 53% of our revenue from our five largest clients,
respectively.  Our largest client in the first six months of 2000 and 2001 accounted for 18% and 16% 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 six months of 2000 and 2001, we generated approximately 12% 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 six 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 reduce our utilization rates and 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 trading price of our common stock has been below $1.00 per share for more than 30 consecutive days and from time
to time the public market float of our common stock has been below the minimum $5.0 million required by the Nasdaq.
We recently were notified by Nasdaq that if the trading price of our common stock does not comply with the Nasdaq
National Market's $1.00 minimum bid requirement for ten consecutive trading days on or before November 5, 2001, our
common stock may be delisted from the Nasdaq National Market.  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.

The stock market, from time to time, 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 July 1, 2000,
the market price of our common stock on the Nasdaq National Market has fluctuated between $12.88 and $0.35 per share. 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 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

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.

The table below provides information about our non-trading investment portfolio.  For investment securities, the
table presents principal cash flows and related weighted average fixed interest rates by expected maturity dates.

`Investments
                                                            Maturing            Weighted           Fair Value
                                                             Before             Average                At
                     At June 30, 2001                       June 30,            Interest            June 30,
          (in thousands, except interest rates)               2002                Rate                2001
       ---------------------------------------------    ------------------    -------------    -------------------

       Money market funds                                  $           12            3.76%        $            12                                      12
       Corporate issues                                             7,952            3.54%                  7,952
                                                        ------------------    -------------    -------------------
                                                           $        7,964            3.54%        $         7,964                                   7,964
                                                        ==================    =============    ===================


                                                           Investments
                                                            Maturing            Weighted           Fair Value
                                                             Before             Average                At
                   At December 31, 2000                   December 31,          Interest          December 31,
          (in thousands, except interest rates)               2001                Rate                2000
       ---------------------------------------------    ------------------    -------------    -------------------

       Money market funds                                     $     3,476            6.38%              $   3,476                                   3,476
       Corporate issues                                             9,122            5.89%                  9,122
                                                        ------------------    -------------    -------------------
                                                              $    12,598            6.03%              $  12,598
                                                        ==================    =============    ===================`

PART II - OTHER INFORMATION

Item 2. Change in Securities.

We issued 5,000 shares of our common stock from April 2, 2001 through June 30, 2001 pursuant to exercises of stock purchase
warrants.  The warrants were originally issued in connection with the transfer of assets from Pencom Systems Incorporated to us in
October 1996.  The warrants have an exercise price of $0.04 per share.  The issuances were deemed exempt from registration under
Section 5 of the Securities Act of 1933 in reliance upon Section 4(2) thereof or Rule 701 thereunder and appropriate restrictive
transfer legends were affixed to the share certificates issue in such transaction.

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

At our Annual Meeting of Stockholders held on May 23, 2001 in Austin, Texas, our stockholders voted on the
following matters.

1. The  election of seven  directors  to serve  until the annual  stockholders'  meeting in 2002,  or until their
     successors have been elected and qualified.  The nominees of the Board of Directors were elected.
AGAINST OR
                                                           FOR             WITHHELD            ABSTAIN
                                                       ------------    ------------------    -------------
           Edward C. Ateyeh, Jr.                         9,123,461               636,933                -
           Thomas A. Herring                             9,222,961               537,433                -
           W. Frank King, Ph.D.                          9,222,961               537,433                -
           Kevin B. Kurtzman                             9,222,961               537,433                -
           Michael J. Maples                             9,222,961               537,433                -
           Wade E. Saadi                                 9,123,461               636,933                -
           Timothy D. Webb                               9,221,781               538,613                -
2. Approval of an amendment to our Amended and Restated  1996 Stock  Option/Stock  Issuance  Plan (the "Plan") to
         effect the    following:

- increase the number of shares of our common stock subject to initial option grants under the Automatic
         Option Grant Program from     10,000 shares to 20,000 shares; and
- provide for additional option grants of 20,000 shares under the Automatic Option Grant Program to each
         non-employee board member     on the date of the first annual meeting of stockholders following such board member's
         completion of each four-year period of service     after joining our board.

The amendment was approved.

`AGAINST OR
                                                           FOR             WITHHELD            ABSTAIN
                                                       ------------    ------------------    -------------
          Approval of an amendment to 1996               8,827,902               929,641            2,851
          Stock Option/Stock Issuance Plan`

The appointment of Ernst & Young LLP was ratified.

`AGAINST OR
                                                           FOR             WITHHELD            ABSTAIN
                                                       ------------    ------------------    -------------
          Ratification of Ernst & Young LLP              9,751,165                 9,004              225
          as independent auditors`

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 August 10, 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                         August 10, 2001
       Timothy D. Webb                                          Officer and Director
                                                                (principal executive officer)

/s/    KEITH D. THATCHER                                      Chief Financial Officer,                           August 10, 2001
       Keith D. Thatcher                                        Treasurer, Sr. Vice President, Finance                                                                (principal financial officer)

/s/   COLLEEN M. SERRATA                                      Controller                                         August 10, 2001
      Colleen M. Serrata                                        (principal accounting officer)`