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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2001

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

For the transition period from  to

Commission file number 0-23315

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enherent Corp.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

13-3914972(I.R.S. Employer
Identification No.)12300 Ford Road, Suite 450
Dallas, Texas(Address of principal executive offices)

75234(Zip Code)


Registrant's telephone number, including area code: (972) 243-8345

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registeredNone

NoneSecurities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value


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Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o

The
aggregate market value of the registrant's voting and non-voting Common Stock held by non-affiliates of the registrant as of March 14, 2002, was
approximately $2,975,372.

The
number of shares outstanding of each of the registrant's classes of Common Stock, as of March 14, 2002 was approximately 17,502,188 shares.

Documents Incorporated by Reference

Portions of the registrant's Proxy Statement for the 2002 Annual Meeting of Stockholders, to be held on May 10, 2002, are incorporated by reference into
Part III hereof.

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PART I

Item 1.Business

The following description of the business of enherent Corp. ("enherent" or the "Company") contains certain forward-looking statements that
involve substantial risks and uncertainties. When used in this section and elsewhere in this Form 10-K, the words "anticipate," "believe," "expect," "estimate," "predict," "plan,"
"will," "should," "intend" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. The Company's actual results, performance
or achievements could differ materially from the results expressed in, or implied by, such forward-looking statements. Factors that could cause or contribute to such differences include, without
limitation, those discussed in "Factors that May Affect Future Results" below.

GENERAL

enherent Corp. (f/k/a PRT Group Inc.) was first incorporated as PRT Corp. of America, a New York corporation, in 1989. The Company was reincorporated in
Delaware in 1996 as PRT Group Inc. The Company maintains its principal executive offices at 12300 Ford Road, Suite 450, Dallas, Texas 75234. The Company's telephone number is
(972) 243-8345.

enherent,
in partnership with its clients and through the utilization of its Balanced Development MethodologySM, accelerates the design, development and delivery of
discrete and seamless end-to-end solutions along the application development lifecycle. enherent addresses cross-industry business needs by focusing on the critical disciplines
of project management, business requirements management and technology integration, while leveraging its intellectual capital to deliver scalable solutions that create value for its clients. On
January 31, 2002, the Company had approximately 265 employees in the United States and in its near-shore Solution Center in Barbados, West Indies.

enherent
provides its services through two primary lines of business. The firstApplication Development Lifecycle Solutionsenables clients to turn over to
enherent the management of an application development project, application maintenance project, application production support function or an entire IT departmentwith a goal of improving
efficiency and maximizing results. The secondIT Staffingprovides clients with access to a wide range of IT professionals to augment their staffing needs.

enherent's
near-shore, CMM Level 3 rated Solution Center in Barbados, West Indies provides centralized and comprehensive Application Development Lifecycle Solutions that
combine skilled IT professionals and proven quality processes and knowledge management systems. enherent's Balanced Development MethodologySM is designed to ensure that its solutions
meet industry standards while reflecting the realities of the client's business priorities. The Balanced Development Methodology is a dynamic approach that draws on four sources for setting and
meeting quality goals for each solution component: rigorous quality principles based on the Software Engineering Institute's Capability Maturity Model (CMM); iRAD, enherent's own iterative rapid
application development process; project management principles based on the Project Management Institute's Project Management Book of Knowledge (PMBOK); and the business value of the function as
stated by the client.

To
strengthen quality measurement and control, enherent keeps its quality assurance teams independent from project management teams. It also maintains a proprietary, Lotus Notes-based
Knowledge Asset DatabaseSM with best-practice methods, tool sets and work products that are available to all project teams.

IT Staffing

enherent's IT Staffing delivers individual or team staffing with a focus on the critical disciplines of project management, business requirements management and
application development, from legacy

2

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systems and client servers to Internet and network solutions. The Company provides specific industry expertise in the insurance, financial services, capital markets/banking, pharmaceutical and
high-tech industry sectors. To keep skills sharp, the Company provides Internet-based and classroom training for employees.

Application Development Lifecycle Solutions

enherent provides clients access to expert technical support without the expense and administrative burden of maintaining facilities and technology or adding
full-time personnel. Application Development Lifecycle Solutions include: 1) Application Engineeringarchitecture, strategy and design services: 2) Application
Development and Integrationbusiness analysis, project management, planning, development, coding, testing and deployment services: and 3) Performance
Optimizationimprovement, maintenance, enhancement, and production support services.

Target Markets

enherent supports cross-industry platforms and technologies with targeted industry sectors including insurance, financial services, banking and capital markets,
pharmaceuticals, healthcare and high-tech. enherent is active in several geographic markets, including the northeastern United States, from Washington, D.C. to Maine; the central United
States including Texas and Illinois; and the Caribbean and Latin America through enherent Solutions International in Barbados, West Indies.

enherent
focuses its marketing efforts primarily at Fortune 1000-sized companies with significant IT and application development business needs. For the 12 months
ending Dec. 31, 2001, enherent's top 10 clients, listed alphabetically, were Aetna, ASCAP, Cigna, Guy Carpenter, Hartford Insurance, J.P. Morgan Chase, Mass Mutual, Pfizer, Prudential Insurance
and SNET.

THE IT SERVICES INDUSTRY

enherent believes that a number of key industry trends will continue to have a major influence on the worldwide IT services market and, therefore, on enherent's
business.

General Business Conditions

The current and continued economic recession and world events after the September 11, 2001 terrorist attacks on the United States coupled with the general
macroeconomic drivers of the global economy have caused a significant negative impact on overall Information Technology spending. The market for application development services has demonstrated a
continued decline throughout 2001 and the Company believes that at the present time there do not appear to be signs of recovery in the near-term.

Budget ConstraintsIT Spending

As a result of the general economic climate there are several significant trends that continue to affect spending on application development and IT staffing
services. enherent believes that its existing and potential clients are experiencing reduced budgets and are choosing to delay and or cancel projects. In addition, the Company has faced a significant
increase in price pressure as a result of overall budget constraints and the abundance of IT professionals in the core IT market space. In those industries hardest hit by the economic slowdown clients
are implementing rate reductions without negotiation and in the Company's experience these reductions have approached greater than 10 percent of billing rates.

3

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Vendor Management OrganizationsHuman Capital Management

enherent has observed that throughout 2001 and with continuing momentum into 2002, companies increasingly are engaging Vendor Management Organizations (Human
Capital Management) firms to assist them with managing and reducing their overall IT expenditures. As a result of this increase in Vendor Managed organizations the supplier side resource providers,
such as enherent, are encountering the elimination of preferred vendor status, increased competition, reduced revenues and the advent of Vendor Management fees that are paid by the suppliers to the
Vendor Managers. In the Company's experience these fees can range from 1% to greater than 5% of billing rates.

Application Integration Will Generate Business Innovation

According toGartner, January 2002, few enterprises can escape the need to integrate internal applications
if they want to develop new business processes or exploit business-to-business trading-partner management. Nevertheless, many businesses have failed to invest seriously in
developing an application-level network that provides unifying connectivity among people, application systems and devices across locations and business units. That highly integrated application-level
network is the prerequisite for quick-change systems for business agility, for composite applications and for such sophisticated initiatives as real-time business activity monitoring
(BAM). enherent believes that during 2002, leading-edge businesses will form integration competency centers and intensively pursue integration of applications both inside and outside the
enterprise. In so doing, they will build an "enterprise nervous system" that will serve as a backbone for BAM, agile response and operational effectiveness. Application integration is an enabler of
innovation and enherent's Application Development and Integration services provide the framework to implement leading edge integration competencies.

Software Engineering Challenges

Software engineering organizations face significant challenges in delivering high-quality applications on time and on budget. Because software
development is plagued with problems, the push for standards and benchmarks will continue to intensify. One systemthe Capability Maturity Model (CMM) developed by the Software Engineering
Institute at Carnegie Mellon Universityhas gained worldwide acceptance in the industry.

CMM
documents best practices for software development and provides an orderly plan for improving software development methods gradually. CMM defines a set of five maturity levels for
software development organizations and details the attributes of each level. Level 1, the entry level, covers any software development process in existence. Level 5 characterizes a sophisticated
software development organization that consistently produces high-quality results, on time and in budget. Level 5 organizations systematically improve themselves by
self-examination and internal process tuning. Levels 2, 3 and 4 define various steps along the road to improvement. enherent has achieved Level 3 certification at its Barbados Solution
Center.

FOREIGN OPERATIONS

In addition to its United States operations, the Company has operations in the West Indies. (For additional information, see Footnote 14 in the Notes to
Consolidated Financial Statements.)

COMPETITION

The IT services industry is highly competitive and served by numerous international, national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors of enherent include "Big Five" accounting firms, software consulting and implementation firms, applications software firms, service groups of
computer equipment companies,

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general management consulting firms, programming companies and temporary staffing firms as well as the internal IT staff of enherent's clients. The Company believes that the principal competitive
factors in the IT services industry include the range of services offered, cost, technical expertise, responsiveness to client needs, speed in delivering IT solutions, quality of service and perceived
value.

INTELLECTUAL PROPERTY RIGHTS

The Company believes that its success and ability to compete is dependent in part upon its proprietary systems and technology. The Company relies on a combination
of copyright, trademark and trade secret laws as well as confidentiality agreements with its employees, subcontractors, key suppliers and customers to establish and protect its technology and other
proprietary rights. The Company does not have any patents. The Company has copyright protection with respect to certain of its proprietary software, its web site and certain marketing materials, as
well as U.S. trademark registration for many of its trade and service marks. While the Company relies on trademark, trade secret and copyright laws to protect its proprietary rights, the Company
believes that the technical and creative skills of its personnel, high-quality service standards, continued software development and maintenance needs of its proprietary systems and
technology, and brand-name recognition are more important to establish and maintain a leadership position and strengthen its brand.

As
part of its confidentiality procedures, the Company typically enters into agreements with its employees, subcontractors and certain clients which limit access to and distribution of
its software, documentation and other proprietary information. There can be no assurance that steps taken by the Company will be adequate to prevent misappropriation of its technology, that agreements
entered into for that purpose will be enforceable or that the Company will be able to detect unauthorized use and take appropriate steps to enforce its intellectual property rights. Policing
unauthorized use of the Company's proprietary rights is difficult. Any misappropriation of the Company's technology or development of competitive technologies could have a material adverse effect on
the Company's business, results of operations or financial condition. The Company could incur substantial costs and management's attention could be diverted from the Company's operations in protecting
and enforcing its intellectual property. Moreover, there can be no assurance that claims asserting that the intellectual property rights of the Company infringe on the intellectual property rights of
others will not arise. There can be no assurance that such a claim will not result in litigation or that the Company would prevail in such litigation or be able to obtain a license for the use of any
infringing intellectual property from a third party on commercially reasonable terms, if at all, in the event of an adverse determination. The Company typically has agreed to indemnify its customers
and key suppliers for liability in connection with the infringement of a third party's intellectual property. While the Company is not currently subject to any such claims, any future claim, with or
without merit, could result in material adverse effect on the Company's business, results of operations or financial condition.

RECENT DEVELOPMENTS

Electronic Data Systems Corporation ("EDS") has informed enherent that EDS plans to de-emphasize the markets targeted under the terms of the reseller
agreement announced by EDS and enherent on September 20, 2001. Therefore, enherent does not expect to derive significant revenue from that reseller agreement.

On
January 30, 2002, with the approval of its Board of Directors, enherent entered into a Stock Purchase Agreement with The Travelers Indemnity Company ("The Travelers"). The
Travelers converted 1,000,000 shares of its Series A Senior Participating Redeemable Convertible Preferred Stock to 1,000,000 shares of enherent Common Stock. Under the terms of the Stock
Purchase Agreement, The Travelers then sold the 1,000,000 shares of Common Stock to enherent for $200,000. enherent has retired the 1,000,000 shares of Series A Senior Participating Redeemable
Convertible Preferred Stock.

5

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Item 2.Properties

The Company leases all of its facilities, consisting of approximately 52,000 square feet of space in three locations. enherent currently operates in three types
of facilities: (i) Computer Software Engineering
Centers (CSECs), (ii) sales and account management offices and (iii) administration and operations offices in Dallas, Texas; Windsor, Connecticut; and Barbados, West Indies. enherent has
sales and account management offices located in Texas, and Connecticut. Currently, the Company operates one CSEC, located in Barbados, West Indies. At this time, the Company does not anticipate
requiring additional space. In 2001, the Company was able to end the lease on a portion of its Windsor facility, reducing its leased square footage by approximately 11,000 square feet.

Item 3.Legal Proceedings

A former Chief Financial Officer of the Company filed a Demand for Arbitration on or about October 27, 2000 claiming that at the time of his termination,
he was entitled to stock options worth $3,000,000 or the stock option value in cash. enherent filed a Motion for Summary Judgment which was denied on November 13, 2001. A full evidentiary
hearing will be held on June 20 and 21, 2002.

On
September 10, 2001 enherent filed a lawsuit in Federal District Court in Virginia for breach of contract to recover monies owed to enherent by Interior Systems, Inc.
("ISI") for services provided by enherent in the amount of approximately $785,000. On October 12, 2001, ISI filed a counterclaim against enherent claiming that enherent breached the contract
and inflated invoices during the performance of those services in the amount of approximately $1,153,000. enherent denied these allegations. In December 2001 the parties reached a settlement
agreement whereby ISI will pay $250,000 to enherent. This settlement amount is to be paid in three installments, $150,000 on December 15, 2001 (payment received), $50,000 on or before
May 31, 2002, and $50,000 on or before November 30, 2002.

In
the normal course of business, various claims are made against the Company. At this time, in the opinion of management, there are no pending claims, including the above-mentioned
Demand for Arbitration, the outcome of which are expected to result in a material adverse effect on the consolidated financial position or results of operations of the Company.

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

None

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PART II

Item 5.Market for Registrant's Common Stock and Related Stockholder Matters

The Common Stock of the Company is currently traded on the Over-the-Counter Bulletin Board ("OTCBB") under the symbol
"ENHT." The Common Stock commenced trading on the Nasdaq National Market ("Nasdaq") on November 20, 1997 in connection with the underwritten
initial public offering of shares of the Company's Common Stock at an initial price to the public of $13.00 per share (the "Offering"). On May 30, 2001 the Nasdaq delisted the Company's Common
Stock from trading on the Nasdaq for failure to comply with Nasdaq's minimum bid price of $1.00 over the previous 30 consecutive trading days as required.

Set
forth below are the high and low sales prices as quoted on the Nasdaq for shares of the Common Stock for the periods indicated:

Fiscal Period

High

Low2000First Quarter

$
6.50

$
1.39Second Quarter

$
1.89

$
0.85Third Quarter

$
1.25

$
0.64Fourth Quarter

$
1.14

$
0.282001First Quarter

$
1.06

$
0.15Second Quarter (through May 30)

$
0.32

$
0.11


Set
forth below is the high and low bid information as quoted on the OTCBB for the periods indicated, which information reflects inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions:

Fiscal Period

High

Low2001Second Quarter (after May 30)

$
0.18

$
0.10Third Quarter

$
0.33

$
0.07Fourth Quarter

$
0.26

$
0.11


The
approximate number of stockholders of record of the Common Stock as of March 14, 2002 was approximately 3000 based on transfer agent reports; the closing sale price of the
Common Stock on the OTCBB on March 14, 2002 was $.17.

The
Certificate of Designations of the Company's Series A Senior Participating Redeemable Convertible Preferred Stock provides that, so long as any shares of Series A
Senior Participating Redeemable Convertible Preferred Stock are outstanding, the Company may not pay dividends to holders of its Common Stock without the prior approval of the holders of ten percent
(10%) of the shares of Series A Senior Participating Redeemable Convertible Preferred Stock then outstanding. The Company does not intend to declare or pay cash dividends in the foreseeable
future. Management anticipates that all earnings and other cash resources of the Company, if any, will be retained by the Company for investment in its business.

In
August 2000, the Board of Directors approved the buy-back of up to 2,000,000 shares of the Company's outstanding Common Stock. As of December 31, 2001 the
Company had purchased approximately 849,000 shares of its outstanding Common Stock for approximately $166,000. On January 30, 2002, with the approval of the Board of Directors, the Company
entered into a Stock Purchase Agreement to purchase 1,000,000 shares of its Common Stock for $200,000 in cash that were outstanding as a result of the conversion of 1,000,000 shares of its
Series A Senior Participating Redeemable Convertible Preferred Stock.

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Item 6.Selected Financial Data

Selected Consolidated Financial Data
(In Thousands, Except Per Share Data)

|                                                           |  | Years Ended December 31 |           
|---------------------------------------------------------- |  | ----------------------- | ----------
|
|Statement of Operations Data:                              |  |                         |           
|Revenues                                                   |  | $                       | 59,816    
|Cost of revenues                                           |  |                         | 40,898    
|                                                           |  |                         |           
|Gross profit                                               |  |                         | 18,918    
|Selling, general and administrative expenses               |  |                         | 19,332    
|Restructuring charges and impairment of goodwill           |  |                         |          
|                                                           |  |                         |           
|Loss from operations                                       |  | $                       | (414      
|Other income (expense)                                     |  |                         | (139      
|                                                           |  |                         |           
|Net loss                                                   |  | $                       | (553      
|Preferred stock dividends and accretion                    |  |                         | 758       
|                                                           |  |                         |           
|Net loss available to common shareholders                  |  | $                       | (1,311    
|                                                           |  |                         |           
|Basic and Diluted loss per Common share                    |  | $                       | (.09      
|                                                           |  |                         |           
|Weighted average common shares and equivalents outstanding |  |                         | 14,728,087
|                                                           |  |                         |           

|                                                                     |  | December 31
|-------------------------------------------------------------------- |  | -----------
|
|Balance Sheet Data:                                                  |  |            
|Working capital                                                      |  | $          
|Total assets                                                         |  |            
|Current portions of long-term obligations                            |  |            
|Long-term obligations, less current portions                         |  |            
|Total liabilities                                                    |  |            
|Series A senior participating redeemable convertible preferred stock |  |            
|Total stockholders' equity (deficit)                                 |  |            

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operation

The following "Management's Discussion and Analysis of Financial Condition and Results of Operation" contains certain forward-looking
statements that involve substantial risks and uncertainties. When used in this section or elsewhere in this Form 10-K, the words "anticipate," "believe," "expect," "estimate,"
"predict," "plan," "will," "should," "intend" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. The Company's actual
results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences
include those discussed below under the caption "Factors That May Affect Future Results."

Results of Operations

The following table sets forth selected statement of operations data as a percentage of revenues for the periods indicated:

Years ended December 311999

2000

2001Revenues

100.0
%
100.0
%
100.0
%Cost of revenues

73.2

70.4

73.3Gross profit

26.8

29.6

26.7Selling, general and administrative expenses

48.1

49.9

49.6Restructuring charges and impairment of goodwill

11.4



50.4Loss from operations

(32.7
)
(20.3
)
(73.3
)Other income (expense)

.2

.7

.1Net loss

(32.5
)
(19.6
)
(73.2
)Preferred stock dividends and accretion



12.5

1.7Net loss available to common shareholders

(32.5
)%
(32.1
)%
(74.9
)%


Fiscal Year 2001 Compared to Fiscal Year 2000

Revenues.Revenues decreased approximately 32.1% to $29.7 million in fiscal year 2001 from $43.7 million in
fiscal year 2000. The decrease in revenue was the result of several projects coming to an end, the non-renewal of certain client assignments and lower rates realized for billable
consultants.

Cost of Revenues.Cost of revenues decreased approximately 29.2% to $21.8 million in fiscal year 2001 from
$30.8 million for the comparable period in 2000. As a percentage of revenues, cost of revenues increased to approximately 73.3% in fiscal year 2001 from approximately 70.4% for fiscal year
2000. The increase in cost of revenues as a percentage of revenues was due to lower rates realized for billable consultants.

Gross Profit.For the reasons set forth above, gross profit decreased as a percentage of revenues to approximately 26.7% in
2001 from 29.6% for the comparable period in 2000.

Selling, General and Administrative Expenses (SG&A).SG&A expenses decreased approximately 32.5% to $14.7 million in
fiscal year 2001 from $21.8 million for the comparable period in 2000. As a percentage of revenues, SG&A expenses decreased to approximately 49.6% in fiscal year 2001 from approximately
49.9% for the comparable period in 2000. The decrease in SG&A expenses resulted from cost cutting measures implemented in 2000 and 2001, offset by an increase in bad debt expense of approximately
$.8 million.

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Restructuring Charges and Impairment of Goodwill.Due to significant negative industry and economic trends affecting both our
current and expected future revenues, management performed an analysis of the undiscounted cash flow from the Computer Management Resources, Inc. ("CMR") and Advanced Computing
Techniques, Inc. ("ACT") acquisitions and concluded that the goodwill was impaired. Based on the analysis of the discounted cash flow, an impairment charge of approximately $15 million
was recorded in the fourth quarter of 2001.

Loss from Operations.For the reasons set forth above, loss from operations for the fiscal year 2001 was $21.8 million
compared to a loss of $8.8 million in the comparable period in 2000. As a percentage of revenues, the loss from operations for the fiscal year 2001 was approximately (73.3)% compared to
approximately (20.3)% in the comparable period in 2000.

Other Income (Expense).Other income (expense) includes interest income, interest expense and miscellaneous income (expense).
Interest income decreased 51.5% to $206,000 in 2001 from $425,000 in 2000. This decrease in interest earned was due to lower cash balances and the sale of marketable
securities.Interest expense decreased $187,000 in 2001 due to the retirement of a promissory note in the second quarter of 2000 and no borrowings
against the credit facility. In 2001, miscellaneous expense includes a loss on the disposal of certain fixed assets related to office closures.

Preferred Stock Dividends and Accretion.Preferred Stock Dividends decreased $5.2 million in 2001 due to the sale of
8,000,000 shares of Series A Senior Participating Redeemable Convertible Preferred Stock by the Company in the second quarter of 2000, at a price below the then current market price of the
Company's common stock. This discount, aggregating approximately $5.2 million, was deemed a dividend on Preferred Stock. The Preferred Stock is being accreted to its liquidation value at
April 12, 2005. Accretion increased $.2 million in 2001 due to a full year of expense in 2001 compared to a partial year in 2000.

Fiscal Year 2000 Compared to Fiscal Year 1999

Revenues.Revenues decreased approximately 33.1% to $43.7 million in fiscal year 2000 from $65.4 million in
fiscal year 1999. The decrease in revenue was a result of the continuing effects in 2000 of shedding
low-margin business in 1999, the reduced number of billable consultants, a general slowdown in the industry and the completion and non-renewal of certain assignments.

Cost of Revenues.Cost of revenues decreased approximately 35.7% to $30.8 million in fiscal year 2000 from
$47.8 million for the comparable period in 1999. As a percentage of revenues, cost of revenues decreased to approximately 70.4% in fiscal year 2000 from approximately 73.2% for fiscal year
1999. The decrease in cost of revenues as a percentage of revenues was due to higher utilization and billable rates realized for e-business assignments offset partially by lower margins
realized in the outsourcing solutions business.

Gross Profit.For the reasons set forth above, gross profit increased as a percentage of revenues to approximately 29.6% in
2000 from 26.8% for the comparable period in 1999.

Selling, General and Administrative Expenses (SG&A).SG&A expenses decreased approximately 30.7% to $21.8 million in
fiscal year 2000 from $31.4 million for the comparable period in 1999. As a percentage of revenues, SG&A expenses increased to approximately 49.9% in fiscal year 2000 from approximately 48.1%
for the comparable period in 1999. In 2000, enherent incurred $1.8 million in charges related to the relocation of its Hawthorne, New York office to Dallas, Texas and the reduction of its
delivery capabilities in its computer software engineering centers, offset by $700,000, the unused portion of the $7.5 million restructuring charge in 1999. The
year-to-year reduction was due primarily to personnel and facility cost reductions.

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Restructuring Charges and Impairment of Goodwill.In 1999 the Company incurred $7.5 million in restructuring charges
comprised of $2 million in severance costs, $3 million in office closures and $2.5 million for the write-off of goodwill related to the acquisition of the Institute
for Software Process Improvement, Inc. Furthermore, the Company moved its headquarters to Windsor, Connecticut and converted its former Manhattan headquarters to a smaller sales office and
sublet the excess space in the former headquarters. In 1999, the Company was unable to sublet the unproductive portion of the Hartford Software Engineering Center leased by the Company and estimated
that it would take 18-24 months to sublease, which accounted for a provision of approximately $786,000 remaining at December 31, 1999. The Company was able to terminate this
lease effective in June 2000. Additional provisions for restructuring charges remained as of December 31, 1999 consisting of legal and brokers' fees related to the sublease of the
Hartford space of approximately $213,000, continuing severance and related costs of approximately $520,000, closure of India operations of approximately $59,000 and sublease of a portion of the New
York City office of approximately $81,000. The Company completed the planned restructuring, however, approximately $700,000 of the amount accrued in 1999 was not required and has been included in
Selling, General and Administrative expenses in 2000.

Loss from Operations.For the reasons set forth above, loss from operations for the fiscal year 2000 was $8.8 million
compared to a loss of $21.4 million in the comparable period in 1999. As a percentage of
revenues, the loss from operations for the fiscal year 2000 was approximately (20.3)% compared to approximately (32.7)% in the comparable period in 1999.

Other Income (Expense).Interest income increased 15.5% to $425,000 from $368,000 due to the investing of the cash received
in connection with the issuance of the 8,000,000 shares of Series A Senior Participating Redeemable Convertible Preferred Stock. In 2000, miscellaneous income includes a gain on the sale of
certain fixed assets of $.1 million.

Preferred Stock Dividends and Accretion.In 2000, the Company sold 8,000,000 shares of Series A Senior Participating
Redeemable Convertible Preferred Stock at a price below the then current market price of the Company's common stock. This discount, aggregating approximately $5.2 million, was deemed a dividend
on Preferred Stock. The Preferred Stock is being accreted to its liquidation value at April 12, 2005.

11

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Quarterly Results

The following table sets forth certain unaudited quarterly operations information for the most recent eight quarters ending with the quarter ended
December 31, 2001. This information has been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, all adjustments consist only of
normal recurring adjustments necessary for the fair presentation of the information for the period presented. This information should be read in conjunction with the Company's Consolidated Financial
Statements and related Notes thereto. Results of operations for any previous fiscal quarter are not indicative of results for the full year or any future quarter.

|                                                 |  | Three Months Ended |       
|------------------------------------------------ |  | ------------------ | ------
|
|
|Statement of Income Data:                        |  |                    |       
|Revenues                                         |  | $                  | 12,057
|Cost of revenues                                 |  |                    | 8,713 
|                                                 |  |                    |       
|Gross profit                                     |  |                    | 3,344 
|Selling, general and administrative              |  |                    | 6,456 
|Restructuring charges and impairment of goodwill |  |                    |      
|                                                 |  |                    |       
|Loss from operations                             |  | $                  | (3,112
|Other income (expense)                           |  |                    | 70    
|                                                 |  |                    |       
|Net loss                                         |  |                    | (3,042
|Preferred stock dividends and accretion          |  |                    |      
|                                                 |  |                    |       
|Net loss available to common shareholders        |  | $                  | (3,042
|                                                 |  |                    |       
|As a Percentage of Revenue:                      |  |                    |       
|Revenues                                         |  |                    | 100.0 
|Cost of revenues                                 |  |                    | 72.3  
|                                                 |  |                    |       
|Gross profit                                     |  |                    | 27.7  
|Selling, general and administrative              |  |                    | 53.5  
|Restructuring charges and impairment of goodwill |  |                    |      
|                                                 |  |                    |       
|Loss from operations                             |  |                    | (25.8 
|Other income (expense)                           |  |                    | .6    
|                                                 |  |                    |       
|Net loss                                         |  |                    | (25.2 
|Preferred stock dividends and accretion          |  |                    |      
|                                                 |  |                    |       
|Net loss available to common shareholders        |  |                    | (25.2 
|                                                 |  |                    |       

Liquidity and Capital Resources

The Company's working capital decreased to $7.1 million at December 31, 2001 from $11.3 million at December 31, 2000. Cash and
equivalents were $5.3 million at December 31, 2001 compared to $6.4 million at December 31, 2000. The primary uses of cash during the year ended December 31, 2001
were to fund the cash used in operations as a result of the net operating loss of $21.7 million and a decrease in accounts payable, accrued compensation and other accrued expenses of
$1.1 million, partially offset by a decrease in accounts receivable of $2.8 million.

12

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The
Company anticipates that its primary uses of working capital in the near term will be to fund current operations. The Company continues to review the costs associated with operating
its business. The Company believes that it's current cash equivalents will be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next
12 months. If cash generated from operations is insufficient to satisfy it's liquidity requirements, the Company may seek to sell additional equity or debt securities or establish a credit
facility. Currently the Company does not have a credit facility. The sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. The incurrence of
additional indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. The Company cannot assure you that financing will be
available in amounts or on terms acceptable to us, if at all.

Critical Accounting Policies

In preparing the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States, the Company uses
certain estimates and assumptions that affect the reported amounts and related disclosures and may vary from actual results. The Company considers the following accounting policies as those most
important to the portrayal of its financial condition and those that require the most subjective judgement. Although the Company believes that its estimates and assumptions are reasonable, actual
results may differ, and such differences could be significant to our financial results.

Revenue Recognition

Revenue is primarily derived from placing consultants on engagements with clients for a specified period of time. Revenue is recognized on a time and materials
basis and calculated from a consultant's time sheet and expense report. From time to time, project development work with a defined scope and a detailed budget is sold at a fixed price. Revenue for
fixed price contracts is recognized using the percentage of completion method. In 2001, less than one percent of the Company's revenues were from fixed price contracts.

Accounts ReceivableAllowance for Doubtful Accounts

The Company's accounts receivable balance is reported net of allowances for amounts not expected to be collected from clients. Because our accounts receivables
typically are unsecured, the Company periodically evaluates the collectability of these accounts based on a combination of factors, including a particular customer's ability to pay as well as the age
of the receivables. To evaluate a specific customer's ability to pay, the Company analyzes financial statements, payment history and third-party credit analysis reports. In cases where the evidence
suggests a customer may not be able to satisfy its obligations, the Company sets up a specific reserve in an amount determined to be appropriate for the perceived risk.

Goodwill

In assessing the recoverability of the Company's goodwill the Company must make assumptions regarding estimated future cash flows and other factors to determine
the fair value of the goodwill. Due to significant negative industry and economic trends affecting both our current and expected future revenues, management performed an analysis of the undiscounted
cash flow from the CMR and ACT acquisitions and concluded that the goodwill was impaired. Based on the analysis of the discounted cash flow, an impairment charge of approximately $15 million
was recorded in the fourth quarter of 2001, reducing the balance of goodwill to zero.

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Deferred Taxes

For U.S. federal income tax purposes, at December 31, 2001, the Company had a net loss carryforward of approximately $32.2 million which begins to
expire in 2018. Due to the uncertainty of our ability to utilize these deferred tax assets, the Company has provided a valuation allowance to offset these deferred tax assets. If the Company generates
U.S. taxable income in future periods, reversal of this valuation could have a significant positive impact on net income.

FACTORS THAT MAY AFFECT FUTURE RESULTS

General Business Conditions

The current and continued economic recession and world events after the September 11, 2001 terrorist attacks on the United States coupled with the general
macroeconomic drivers of the global economy have caused a significant negative impact on overall Information Technology spending. The market for application development services has demonstrated a
continued decline throughout 2001 and the Company believes that at the present time there do not appear to be signs of recovery in the near-term. The Company's business could be impacted
by customer actions to delay, reduce in scope or cancel orders for the Company's services. There can be no assurance that there will be continued demand for the Company's services, which could have a
material adverse effect on the Company's business, operating results and financial condition.

Budget ConstraintsIT Spending

As a result of the general economic climate there have been several significant trends that continue to affect spending on application development and IT staffing
services. enherent believes that its existing and potential clients are experiencing reduced budgets and are choosing to delay and or cancel projects. In addition there has been a significant increase
in price pressure as a result of overall budget constraints and the abundance of IT professionals in the core IT market space. In those industries hardest hit by the economic slowdown clients are
implementing rate reductions without negotiation. In the Company's experience, these reductions have approached greater than 10 percent of billing rates.

Vendor Management OrganizationsHuman Capital Management

enherent has observed that throughout 2001 and with continuing momentum into 2002, companies increasingly are engaging Vendor Management Organizations (Human
Capital Management) firms to assist them with managing and reducing their overall IT expenditures. As a result of this increase in Vendor Managed organizations the supplier side resource providers,
such as enherent, are encountering the elimination of preferred vendor status, increased competition, reduced revenues and the advent of Vendor Management fees that are paid by the suppliers to the
Vendor Managers. In the Company's experience these fees can range from 1% to greater than 5% of billing rates.

Recruitment and Retention of IT Professionals

The Company's business is labor-intensive. The Company's success depends upon its ability to attract, develop, motivate and retain IT consultants and IT sales
professionals who possess the necessary technical skills and experience or can be trained to deliver the Company's services. Qualified IT consultants and IT sales professionals are in high demand
worldwide and are likely to remain a limited resource for the foreseeable future. There can be no assurance that enherent will continue to have access to qualified IT and IT sales professionals, will
be successful in retaining current or future IT
professionals or that the cost of employing and subcontracting such IT professionals will not increase due to shortages. Failure to attract or retain qualified IT professionals in sufficient numbers

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could have a material adverse effect on the Company's business, operating results and financial condition.

Risks Associated with International Operations

During the years ended December 31, 1999, 2000 and 2001, the percentage of the Company's revenue generated outside the United States was 8.3%, 8.6% and
9.7%, respectively. There were no revenues generated by the Company outside the United States prior to 1995. The Company's international operations depend greatly upon business, immigration and
technology transfer laws in those countries and upon the continued development of the local technology infrastructure. As a result, the Company's business is subject to the risks generally associated
with non-United States operations including, among other things: (i) unexpected changes in regulatory environments; (ii) difficulties in managing international operations;
(iii) potential adverse foreign tax consequences, including impact upon repatriation of earnings; (iv) tariffs and other trade barriers and (v) political unrest and changing
conditions in countries in which the Company's services are provided or facilities are located. In addition, although nearly all of the Company's foreign sales are payable in U.S. Dollars, there can
be no assurance that the Company's future contracts will be payable in U.S. Dollars; to the extent that the Company's future contracts are payable in foreign currencies, the Company could be exposed
to fluctuations in currency exchange rates. Although the Company does not engage in currency-hedging transactions, to date the Company has not sustained any foreign currency losses. If any of the
above factors were to render the conduct of business in a particular country undesirable or impracticable, there could be a material adverse effect on the Company's business, operating results and
financial condition.

enherent
has operated its Barbados CSEC for approximately five years. enherent believes Barbados is one of the most stable countries in the Caribbean with a long tradition of democracy.
The Company currently has good relations with the government of Barbados. While enherent (Barbados) Ltd. ("enherent Barbados") is an international business company incorporated under the laws
of Barbados, enherent has negotiated special incentives with the government of Barbados including, among other things, certain advantageous tax rates, an exclusivity and non-compete
agreement (which expires in 2011)and the ability to secure an unlimited number of employee work permits and visas. There is no guarantee that this
relationship will continue or that these special incentives will not be curbed or eliminated. While the Company believes that the expiration of the non-compete agreement will not have a
material adverse effect on enherent's business, operating results or financial condition, there can be no assurance that this will be the case. If the government of Barbados were to take any such
action in the future, it could have a material adverse effect on the Company's business, operating results and financial condition.

Limited Operating History; Losses

The Company has a limited operating history and has incurred losses from the year ended December 31, 1995 through the year ended December 31, 2001.
In order to operate profitably in the future, the Company must accomplish some or all of the following objectives: (i) increase the amount of services rendered to existing clients and develop
new clients, (ii) develop and realize additional revenue sources or (iii) reduce costs of providing services or (iv) control operating expense.

Fluctuations in Operating Results

The Company's revenues and operating results are subject to significant variation from quarter to quarter depending on a number of factors, including, but not
limited to: (i) the timing and number of client projects commenced (or delayed by the client) and completed during the quarter, (ii) the number of working days in a quarter and
(iii) employee hiring, attrition and utilization rates. Because a high percentage of the Company's expenses, in particular personnel and facilities costs, is relatively fixed,

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variations in revenues may cause significant variations in operating results. Additionally, the Company periodically incurs cost increases due to both the hiring of new employees and strategic
investments in its infrastructure in anticipation of future projects and opportunities for revenue growth. Quarterly results are likely to fluctuate, which may cause a material adverse effect on the
market price of enherent's Common Stock.

Concentration of Revenues

In fiscal year 2001, approximately 68% of the Company's revenues were derived from five clients with one client accounting for approximately 20% of the Company's
revenues in 2001, 14% of the Company's revenue in 2000 and 11% of the Company's revenue in 1999. During each of fiscal years 1999 and 2000, approximately 53% of the Company's revenues were derived
from its five largest clients.

Certain
stockholders of the Company are significant enherent clients. Although the Company has no reason to expect it, a client-stockholder could be less inclined to maintain the same
volume of business with the Company in the future if such client-stockholder were to sell most or all of its shares of enherent Common Stock.

Potential Liability to Clients

Many of the Company's engagements involve services that are critical to the operations of its clients' businesses and provide benefits that may be difficult to
quantify. Although the Company attempts to contractually limit its liability for damages arising from errors, mistakes, omissions or negligent acts in rendering its services, there can be no assurance
that its attempts to limit liability will be successful. Additionally, the Company's attempts to contractually reduce liability with many of its largest clients have met with limited success. The
Company's failure or inability to meet a client's expectations in the performance of its services could result in a material adverse effect on the client's operations and, therefore, could give rise
to claims against the Company or damage the Company's reputation, which could have a material adverse effect on the Company's business, operating results and financial condition.

Reliance on Key Personnel

The Company's future success depends on the continued services of certain key management personnel, in particular, Dan S. Woodward, Chief Executive Officer,
George Warman, Chief Financial Officer and EVP, and Robert D. Merkl, Chief Operating Officer and President, each of whom has entered into an employment agreement with enherent. In addition, the
Company's growth depends on its ability to attract and retain capable management personnel. Failure to do so or the loss of either of Messrs. Woodward, Warman or Merkl could have a material
adverse effect on the Company's business, operating results and financial condition.

Contract Risk

Most of the Company's contracts are terminable by the client following limited notice and without early termination payments or liquidated damages due to
enherent. In addition, each stage of a project often represents a separate contractual commitment, at the end of which the client may elect to delay or not to proceed to the next stage of the project.
While, to date, none of the Company's clients has terminated a material contract or materially reduced the scope of a large project, there can be no assurance that one or more of the Company's clients
will not take such actions in the future. The delay, cancellation or significant reduction in the scope of a large project or number of projects could have a material adverse effect on the Company's
business, operating results and financial condition.

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Fixed-Price Engagements

The Company principally bills for its services on a time-and-materials or line-of-code basis. The Company
occasionally has entered into fixed-price billing engagements and may in the future enter into additional engagements billed on a fixed-price basis. While the Company's business, operating results and
financial condition have not been materially adversely affected by any failure of the Company to complete a fixed-price engagement within budget in the past and the Company does not anticipate any
such failure in the future, any such failure could expose the Company to risks associated with cost overruns, which could have a material adverse effect on the Company's business, operating results
and financial condition.

Risks of Technological Change and Evolving Industry Standards

The IT services industry is characterized by rapid technological change, shifting client preferences and new product developments. The introduction of competitive
IT solutions embodying new technologies and the emergence of new industry standards may render the Company's existing IT solutions, skills base or underlying technologies obsolete or unmarketable. As
a result, the Company will be dependent in large part upon its ability to develop new IT solutions and capabilities that address the increasingly sophisticated needs of its clients and keep pace with
new, competitive service and product offerings and emerging industry standards to achieve broad market acceptance. There can be no assurance that: (i) the Company will be successful in
developing and marketing new IT solutions that respond to technological changes, shifting client requirements or evolving industry standards; (ii) that the Company will not experience
difficulties that could delay or prevent the successful development, introduction and marketing of these new IT solutions; or (iii) its IT solutions will adequately meet the requirements of the
marketplace and achieve market acceptance. Any failure to respond to technological change or evolving industry standards could have a material adverse effect on the Company's business, operating
results and financial condition.

Competition

The Company experiences intense competition. The market for services such as those enherent offers is very broad and such services are offered by a large number
of private and public companies, many of which are significantly larger than, and have greater financial, technical and marketing resources than, enherent. Additionally, in certain sectors of the
Company's business, particularly IT Services, there are few barriers to entry and new competitors do and are expected to enter the market. As competitors enter the market to provide services similar
to the Company, enherent's ability to compete effectively will increasingly depend upon the quality and price of its services. Competition could have a material adverse effect on the Company's
business, operating results and financial condition.

United States Government Regulation of Immigration

The Company recruits employees from around the world. Some of these employees work in the United States under H-1B, L-1 or TN temporary
work permits. As of December 31, 2001, approximately 22% of enherent's worldwide workforce was working under such temporary work permits in the United States. Although, to date, enherent has
not experienced difficulties in obtaining sufficient H-1B work permits, in the future the Company may be unable to obtain work permits to bring necessary employees to the United States for
any number of reasons including, without limitation, limits set by the United States Immigration and Naturalization Service. Continued compliance with existing United States or foreign immigration
laws or changes in such laws, making it more difficult to hire foreign nationals or limiting the ability of the Company to retain work permit employees in the United States or employees working under
work permits in other countries, could increase the

17

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Company's cost of recruiting and retaining the requisite number of IT professionals, which could have a material adverse effect on the Company's business, operating results and financial condition.

Intellectual Property Rights

In order to protect its proprietary rights in its various intellectual properties, the Company currently relies on copyrights, trade secrets and unpatented
proprietary know-how that may be duplicated by others. The Company employs various methods, including nondisclosure agreements and other contractual arrangements with employees and
suppliers and technical protective measures to protect its proprietary know-how. As a signatory to the Berne Convention, an international treaty, the government of Barbados has agreed to
recognize protections on copyrighted materials conferred under the laws of foreign countries, including the laws of the United States. The Company believes that laws, rules, regulations and treaties
in effect in the United States and Barbados are adequate to protect it from misappropriation or unauthorized use of its intellectual property. However, there can be no assurance that such laws will
not change and, in particular, that the laws of Barbados will not change in ways that may prevent or restrict the transfer of software components, libraries and tool sets from Barbados to the United
States. There can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to deter misappropriation of its intellectual property, or that the Company
will be able to deter unauthorized use and take appropriate steps to enforce its rights. In addition, the failure of such protective measures could have a material adverse effect on the Company's
business, operating results and financial condition. There can be no assurance that other persons will not independently develop such know-how or obtain access to it, or independently
develop technologies that are substantially equivalent or superior to enherent's technology. The Company presently holds no patents or registered copyrights, but enherent has several registered
trademarks for "enherent" and the enherent logo. Although the Company believes that its intellectual property rights, including intellectual property rights licensed from third parties by the Company,
do not infringe on the intellectual property rights of others, there can be no assurance that: (i) such a claim will not be asserted against the Company in the future; (ii) assertion of
such claims will not result in litigation or that the Company would prevail in such litigation or be able to obtain a license for the use of any infringed intellectual property from a third party on
commercially reasonable terms; or (iii) any of enherent's software could be redesigned on an economical basis or at all, or that any such redesigned software would be competitive with the
software of the Company's competitors. The Company expects that the risk of infringement claims against the Company will increase if more of enherent's competitors are able to
successfully obtain patents for software products and processes. Any such claims, regardless of their outcome, could result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, operating results and financial condition.

Certain Anti-Takeover Effects

The Company's Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws and the Delaware General Corporation Law include
provisions that may be deemed to have anti-takeover effects and may delay, deter or prevent a takeover attempt that stockholders might consider in their best interests. These include
provisions under which only the Board of Directors, the Chairman of the Board or the President may call meetings of stockholders and certain advance-notice procedures for nominating candidates for
election to the Board of Directors. Directors of the Company are divided into three classes and are elected to serve staggered three-year terms. The Board of Directors of the Company is
empowered to issue up to 10,000,000 shares of Preferred Stock and to determine the price, rights, preferences and privileges of such shares without any further stockholder action. The existence of
this "blank-check" Preferred Stock could render more difficult or discourage an attempt to obtain control of the Company by means of a tender offer, merger, proxy contest or

18

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otherwise. In addition, this "blank-check" Preferred Stock, and any issuance thereof, may have an adverse effect on the market price of the Company's Common Stock.

Control by Principal Stockholders

As of December 31, 2001, Douglas K. Mellinger, Gregory S. Mellinger and Paul L. Mellinger owned approximately 23% of the outstanding shares of voting
equity securities and therefore had significant control of the vote on all matters submitted to a vote of the Company's stockholders, including extraordinary transactions such as mergers, sales of all
or substantially all of the Company's assets or going-private transactions. Such control may discourage certain types of transactions involving an actual or potential change of control of the Company,
including transactions in which the holders of Common Stock might receive a premium for their shares over prevailing market prices.

Douglas
K. Mellinger is a former Chairman of the Board of Directors and former Chief Executive Officer of enherent. Douglas K. Mellinger beneficially owns approximately 8% of the
Company's voting equity securities. Gregory S. Mellinger is a former Chief Operating Officer, Director and President of the Company's Professional Services division. Gregory S. Mellinger beneficially
owns approximately 7% of the Company's voting equity securities. Paul L. Mellinger, brother of Douglas and Gregory Mellinger, is not and never has been an employee of the Company. Paul Mellinger owns
approximately 8% of the Company's voting equity securities.

In
March 2000, the Company received an exemption from the Nasdaq Stock Market pursuant to NASD Rule 4460 to permit the Company to issue Common Stock equivalents in excess
of 20% of enherent's outstanding shares in the investment described herein without shareholder approval.

enherent
accepted the proposal of two existing shareholders of the Company, Tudor Investment Corporation and The Travelers, which was designed to allow enherent to receive an immediate
infusion of equity capital to meet its working capital needs.

enherent
entered into a Securities Purchase Agreement with Tudor Investment Corporation, The Travelers and EGF Eurofinancial Investment Company for $8,000,000 in working capital funding
in exchange for the private placement of enherent Series A Senior Participating Redeemable Convertible Preferred Stock and Warrants. Under the terms of the Agreement, the Company's
Series A Senior Participating Redeemable Convertible Preferred Stock was purchased at a price per share of $1.00. The Preferred Stock is convertible into an equal number of shares of the
Company's Common Stock, subject to adjustment under certain circumstances. The Company would further issue to the investors Warrants to purchase four million shares of Common Stock, subject to
adjustment under certain circumstances, at an exercise price of $1.00 per share.

As
a consequence of the Tudor Investment Corporation's purchase of Series A Senior Participating Redeemable Convertible Preferred Stock and Tudor's ownership of Common Stock,
Tudor owns approximately 18% of the Company's voting equity securities. Tudor's Series A preferred shares vote on an as-converted basis, representing approximately 15% of the
Company's voting equity securities.

The
Travelers (through its ownership of Common Stock and purchase of Series A Senior Participating Redeemable Convertible Preferred Stock) owns approximately 17% of the Company's
voting equity securities. The Travelers' Series A preferred shares vote on an as-converted basis, representing approximately 15% of the Company's voting equity securities.

Possible Volatility of Stock Price

The stock market has from time to time experienced extreme price and volume fluctuations that have often been unrelated to the operating performance of particular
companies. In addition, factors such as announcements of acquisitions of businesses, technological innovations, new products or services or new client engagements by the Company or its competitors or
third parties, as well as

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market conditions in the IT services industry or the flow of Company business, may have a significant impact on the market price of the Company's Common Stock.

Shares Eligible for Future Sale; Registration Rights

As of December 31, 2001, the Company had an aggregate of 17,502,188 shares of Common Stock and Non-Voting Common Stock outstanding, 16,794,618
of which were freely tradable without restriction or further registration under the Securities Act of 1933 and the rules and regulations promulgated thereunder, as amended (the "Securities Act"),
except those shares, if any, owned or acquired by affiliates of the Company. The remaining 707,570 shares in the aggregate of Common Stock and Non-Voting Common Stock outstanding are
"restricted securities" within the meaning of Rule 144 under the Securities Act. Furthermore, on January 27, 2000, the Company filed a registration statement on
Form S-8 registering 1,000,000 shares of Common Stock reserved for issuance to employees who elect to purchase such Common Stock as an investment option under the Company's Stock
Option Plan.

Tudor
owns approximately 28% of the Company's Common Stock and Common Stock equivalents outstanding (through its ownership of Common Stock, Warrants and Convertible Preferred Stock). The
shares of Common Stock issuable upon conversion of the Convertible Preferred Stock have been registered under an effective registration statement and can be resold upon conversion of the Convertible
Preferred Stock. Similarly, The Travelers owns approximately 27% of the Company's Common Stock and Common Stock equivalents outstanding (through its ownership of Common Stock, Warrants and Convertible
Preferred Stock). Again, the shares of Common Stock issuable upon conversion of the Convertible Preferred Stock have been registered under an effective registration statement and can be resold upon
conversion of the Convertible Preferred Stock. The Company cannot predict the effect that future sales of stock, especially by Tudor or Travelers, will have on the market price of enherent Common
Stock prevailing from time to time. Sales of substantial amounts of enherent Common Stock (including shares issued upon the conversion of the Convertible Preferred Stock or the exercise of stock
options or Warrants), and even the perception that such sales could occur, may adversely affect prevailing market prices for enherent Common Stock.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Our accounts receivable are subject, in the normal course of business, to collection risks. The Company regularly assesses these risks and has established
policies and business practices to protect against the adverse effects of collection risks. As a result, the Company does not anticipate any material losses in this area.

Interest Rate Risk

Our investments are classified as cash and cash equivalents with original maturities of three months or less. Therefore, changes in the market's interest rates do
not affect the value of the investments as recorded by us.

Item 8.Financial Statements and Supplementary Data

The Consolidated Financial Statements of enherent Corp. and Subsidiaries, Exhibit 1.1 hereto, and the Independent Auditors' Report included therein, are
each incorporated by reference herein as Exhibit 1.1 hereto.

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There have been no disagreements with the Company's independent accountants involving accounting and financial disclosure matters.

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PART III

Item 10.Directors and Executive Officers of the Registrant

The information called for by Item 10 with respect to identification of directors of the Company is included in the Company's Proxy Statement for its 2001 Annual
Meeting of Stockholders which is expected to be filed with the Securities and Exchange Commission on or before April 5, 2002 (the "2001 Proxy Statement").

Item 11.Executive Compensation

The information called for by Item 11 with respect to management remuneration and transactions is incorporated herein by reference to the material under the
caption "Executive Compensation" in the 2001 Proxy Statement.

Item 12.Security Ownership of Certain Beneficial Owners and Management

The information called for by Item 12 with respect to security ownership of certain beneficial owners and management is incorporated herein by reference to the
material under the caption "Security Ownership of Management and Certain Beneficial Owners" in the 2001 Proxy Statement.

Item 13.Certain Relationships and Related Transactions

The information called for by Item 13 with respect to transactions between the Company and certain related entities is incorporated herein by reference to the
material under the caption "Executive Compensation" in the 2001 Proxy Statement.

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PART IV

Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K

|    |     |  |                                                                                                                                                                                                                                                                              
|--- | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | (1) |  | Financial Statements                                                                                                                                                                                                                                                         
|    |     |  | See Index to Consolidated Financial Statements of enherent Corp. and Subsidiaries, Exhibit 1.1 hereto.                                                                                                                                                                       
|    | (2) |  | Financial Statement Schedules                                                                                                                                                                                                                                                
|    |     |  | See Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
|    | (3) |  | Exhibits                                                                                                                                                                                                                                                                     

|Exhibit
No. |  | Description                                                                                                                                                                                                                        
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Restated Certificate of Incorporation (Incorporated by referenced to Exhibit 4.1 of the Company's Form S-8 filed January 22, 1998).                                                                                                
|3.2         |  | Certificate of Amendment of Restated Certificate of Incorporation of enherent Corp. (Incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K filed April 4, 2001).                                    
|3.3         |  | Amended and Restated Bylaws (Incorporated by reference to Exhibit 4.2 of the Company's Form S-8 filed January 22, 1998).                                                                                                           
|4.1         |  | Form of Certificate of Common Stock (filed herewith).                                                                                                                                                                              
|4.2         |  | Securities Purchase Agreement dated as of April 13, 2000, by and among PRT Group Inc. and the Investors named therein (Incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K filed April 14,
2000).
|4.3         |  | Form of Certificate of Designations (Incorporated by reference to Exhibit 99.2 of the Company's Current Report on Form 8-K filed April 14, 2000).                                                                                  
|4.4         |  | Form of Warrant (Incorporated by reference to Exhibit 99.3 of the Company's Form 8-K filed April 14, 2000).                                                                                                                        
|10.1        |  | Employment Agreement between Dan Woodward and the Company dated May 17, 1999 (Incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K filed April 4, 2001).                                          
|10.2        |  | Employment Agreement between Jack Mullinax and the Company dated August 1, 1999 (Incorporated by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K filed April 4, 2001).                                       
|10.3        |  | Addendum to Employment Agreement between Jack Mullinax and the Company dated July 23, 2001 (Incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q filed August 6, 2001).                        
|10.4        |  | Employment Agreement between George Warman and the Company dated November 1, 2000 (Incorporated by reference to Exhibit 10.4 of the Company's Annual Report on Form 10-K filed April 4, 2001).                                     
|            |  |                                                                                                                                                                                                                                    

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|10.5 |  | Employment Agreement between Robert D. Merkl and the Company dated November 1, 2000 (Incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q filed August 6, 2001).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.6 |  | Amended and Restated 1996 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 of the Company's Form S-8 filed January 22, 1998).                                                        
|10.7 |  | Stock Purchase Agreement between Travelers Indemnity Company and enherent, dated January 30, 2002. (filed herewith).                                                                                
|21.1 |  | List of Subsidiaries (filed herewith).                                                                                                                                                              
|23.1 |  | Consent of Ernst & Young LLP, dated March 20, 2002 (filed herewith).                                                                                                                                



On
October 24, 2001, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission that included disclosure under Item 5 related to
equity holdings by enherent's institutional investors. This Current Report on Form 8-K did not include financial statements.

23

---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                     |  | ENHERENT CORP.
|-------------------- |  | --------------
|Date: March 22, 2002 |  | By:           

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on the dates indicated:

|Date: March 22, 2002 |  | By: |  | /s/DAN S. WOODWARDDan S. Woodward Chairman and Chief
Executive Officer
(Principal Executive Officer) 
|-------------------- |  | --- |  | -----------------------------------------------------------------------------------------------------
|Date: March 22, 2002 |  | By: |  | /s/ROBERT D. MERKLRobert D. Merkl President and Chief Operating Officer
(Principal Operating Officer)
|Date: March 22, 2002 |  | By: |  | /s/GEORGE WARMANGeorge Warman Chief Financial Officer (Principal
Financial and Accounting Officer)   
|Date: March 22, 2002 |  | By: |  | /s/MICHAEL ENTHOVENMichael Enthoven Director                                                         
|Date: March 22, 2002 |  | By: |  | /s/ROBERT P. FORLENZARobert P. Forlenza Director                                                     
|Date: March 22, 2002 |  | By: |  | /s/DOUGLAS K. MELLINGERDouglas K. Mellinger Director                                                 
|                     |  |     |  |                                                                                                      

24

---

|Date: March 22, 2002 |  | By: |  | /s/ISAAC SHAPIROIsaac Shapiro Director          
|-------------------- |  | --- |  | ------------------------------------------------
|Date: March 22, 2002 |  | By: |  | /s/IRWIN J. SITKINIrwin J. Sitkin Director      
|Date: March 22, 2002 |  | By: |  | /s/JACK L. RIVKINJack L. Rivkin Director        
|Date: March 22, 2002 |  | By: |  | /s/RONALD E. WEINBERGRonald E. Weinberg Director

25

---



Exhibit 1.1        enherent Corp. and Subsidiaries        Index to Consolidated Financial Statements

|Report of Independent Auditors                                                                       |  | F-2
|---------------------------------------------------------------------------------------------------- |  | ---
|Consolidated Balance Sheets as of December 31, 2000 and 2001                                         |  | F-3
|Consolidated Statements of Operations for the years ended
December 31, 1999, 2000 and 2001           |  | F-4
|Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 2000 and 2001 |  | F-5
|Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 2000 and 2001           |  | F-6
|Notes to Consolidated Financial Statements                                                           |  | F-7

F-1

---



Report of Independent Auditors

The
Board of Directors and Stockholders
enherent Corp.

We
have audited the accompanying consolidated balance sheets of enherent Corp. and Subsidiaries as of December 31, 2000 and 2001, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in the Index
at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based
on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of enherent Corp. and Subsidiaries
at December 31, 2000 and 2001, the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.

|                                |  |                     
|------------------------------- |  | --------------------
|                                |  | /s/ERNST & YOUNG LLP
|Dallas, Texas
February 15, 2002 |  |                     

F-2

---



enherent Corp. and Subsidiaries        Consolidated Balance Sheets        (In Thousands, Except Number of Shares)

|                                                                                                                                                                                                     |                                                                                                                                                                                                           | December 31 |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ------
|
|Assets                                                                                                                                                                                               |                                                                                                                                                                                                           |             |       
|Current assets:                                                                                                                                                                                      |                                                                                                                                                                                                           |             |       
|                                                                                                                                                                                                     | Cash and equivalents                                                                                                                                                                                      |             | $     
|                                                                                                                                                                                                     | Marketable securities                                                                                                                                                                                     |             |       
|                                                                                                                                                                                                     | Accounts receivable, net of allowance of $700 in 2000 and $256 in 2001                                                                                                                                    |             |       
|                                                                                                                                                                                                     | Prepaid expenses and other current assets                                                                                                                                                                 |             |       
|                                                                                                                                                                                                     |                                                                                                                                                                                                           |             |       
|Total current assets                                                                                                                                                                                 |                                                                                                                                                                                                           |             | 14,329
|Fixed assets, net                                                                                                                                                                                    |                                                                                                                                                                                                           |             | 3,214 
|Goodwill, net                                                                                                                                                                                        |                                                                                                                                                                                                           |             | 15,886
|Other assets                                                                                                                                                                                         |                                                                                                                                                                                                           |             | 101   
|                                                                                                                                                                                                     |                                                                                                                                                                                                           |             |       
|Total assets                                                                                                                                                                                         |                                                                                                                                                                                                           | $           | 33,530
|                                                                                                                                                                                                     |                                                                                                                                                                                                           |             |       
|Liabilities and stockholders' equity                                                                                                                                                                 |                                                                                                                                                                                                           |             |       
|Current liabilities:                                                                                                                                                                                 |                                                                                                                                                                                                           |             |       
|                                                                                                                                                                                                     | Accrued compensation                                                                                                                                                                                      |             | $     
|                                                                                                                                                                                                     | Accounts payable and other accrued expenses                                                                                                                                                               |             |       
|                                                                                                                                                                                                     | Current portion of capital lease obligations                                                                                                                                                              |             |       
|                                                                                                                                                                                                     | Deferred revenue                                                                                                                                                                                          |             |       
|                                                                                                                                                                                                     |                                                                                                                                                                                                           |             |       
|Total current liabilities                                                                                                                                                                            |                                                                                                                                                                                                           |             | 3,007 
|Capital lease obligations, net of current portion                                                                                                                                                    |                                                                                                                                                                                                           |             | 28    
|Deferred rent                                                                                                                                                                                        |                                                                                                                                                                                                           |             | 121   
|                                                                                                                                                                                                     |                                                                                                                                                                                                           |             |       
|Total liabilities                                                                                                                                                                                    |                                                                                                                                                                                                           |             | 3,156 
|Series A senior participating redeemable convertible preferred stock, $0.001 par value; authorized10,000,000 shares; 8,000,000 issued and outstanding at December 31, 2000 and at December 31, 2001 |                                                                                                                                                                                                           |             | 5,258 
|Common stockholders' equity:                                                                                                                                                                         |                                                                                                                                                                                                           |             |       
|                                                                                                                                                                                                     | Common stock, $0.001 par value; authorized50,000,000 shares; issued and outstanding18,351,311 shares at December 31, 2000: issued18,351,311 shares, outstanding17,502,188 shares at
December 31, 2001 |             |       
|                                                                                                                                                                                                     | Additional paid-in capital                                                                                                                                                                                |             |       
|                                                                                                                                                                                                     | Treasury stock, at cost849,123 shares                                                                                                                                                                    |             |       
|                                                                                                                                                                                                     | Accumulated deficit                                                                                                                                                                                       |             |       
|                                                                                                                                                                                                     |                                                                                                                                                                                                           |             |       
|Total common stockholders' equity                                                                                                                                                                    |                                                                                                                                                                                                           |             | 25,116
|                                                                                                                                                                                                     |                                                                                                                                                                                                           |             |       
|Total liabilities and stockholders' equity                                                                                                                                                           |                                                                                                                                                                                                           | $           | 33,530
|                                                                                                                                                                                                     |                                                                                                                                                                                                           |             |       

See
accompanying notes.

F-3

---

enherent Corp. and Subsidiaries        Consolidated Statements of Operations        (In Thousands, Except Per Share Data)

|                                                                        |                                | Years ended December 31 |        
|----------------------------------------------------------------------- | ------------------------------ | ----------------------- | -------
|
|Revenues                                                                |                                | $                       | 65,359 
|Cost of revenues                                                        |                                |                         | 47,815 
|                                                                        |                                |                         |        
|Gross profit                                                            |                                |                         | 17,544 
|Selling, general and administrative expenses                            |                                |                         | 31,441 
|Restructuring charges and impairment of goodwill                        |                                |                         | 7,483  
|                                                                        |                                |                         |        
|Loss from operations                                                    |                                |                         | (21,380
|Other income (expense):                                                 |                                |                         |        
|                                                                        | Miscellaneous income (expense) |                         |        
|                                                                        | Interest expense               |                         |        
|                                                                        | Interest income                |                         |        
|                                                                        |                                |                         |        
|Net loss                                                                |                                |                         | (21,215
|Preferred stock dividends and accretion                                 |                                |                         |       
|                                                                        |                                |                         |        
|Net loss available to common stockholders                               |                                | $                       | (21,215
|                                                                        |                                |                         |        
|Basic and diluted net loss per share                                    |                                | $                       | (1.16  
|                                                                        |                                |                         |        
|Number of shares used in computing basic and diluted net loss per share |                                |                         | 18,275 
|                                                                        |                                |                         |        

See
accompanying notes.

F-4

---



enherent Corp. and Subsidiaries        Consolidated Statements of Stockholders' Equity        Years Ended December 31, 1999, 2000 and 2001        (In
Thousands, Except Number of Shares)

|                             |                                                                               | Common Stock |          |   |    |    |   |        |       |   |        
|---------------------------- | ----------------------------------------------------------------------------- | ------------ | -------- | - | -- | -- | - | ------ | ----- | - | -------
|
|
|Balance at December 31, 1998 |                                                                               | 18,245,571   |          | $ | 18 |    | $ | 86,262 |       | $ | (33,893
|                             | Net loss                                                                      |              |         |   |    |   |   |        |      |   |        
|                             | Exercise of stock options                                                     |              | 38,071   |   |    | 99 |   |        |      |   |        
|                             |                                                                               |              |          |   |    |    |   |        |       |   |        
|Balance at December 31, 1999 |                                                                               | 18,283,642   |          |   | 18 |    |   | 86,361 |       |   | (55,108
|                             | Net loss                                                                      |              |         |   |    |   |   |        |      |   |        
|                             | Exercise of stock options                                                     |              | 67,669   |   |    |   |   |        | 210   |   |        
|                             | Issuance of preferred shares and common stock warrants, net of issuance costs |              |         |   |    |   |   |        | 2,475 |   |        
|                             | Dividends on preferred stock                                                  |              |         |   |    |   |   |        | 5,166 |   |        
|                             | Accretion of preferred stock                                                  |              |         |   |    |   |   |        |      |   |        
|                             |                                                                               |              |          |   |    |    |   |        |       |   |        
|Balance at December 31, 2000 |                                                                               | 18,351,311   |          |   | 18 |    |   | 94,212 |       |   | (69,114
|                             | Net loss                                                                      |              |         |   |    |   |   |        |      |   |        
|                             | Purchase of treasury stock                                                    |              | (849,123 | ) |    |   |   |        |      |   |        
|                             | Accretion of preferred stock                                                  |              |         |   |    |   |   |        |      |   |        
|                             |                                                                               |              |          |   |    |    |   |        |       |   |        
|Balance at December 31, 2001 |                                                                               | 17,502,188   |          | $ | 18 |    | $ | 94,212 |       | $ | (91,363
|                             |                                                                               |              |          |   |    |    |   |        |       |   |        

See
accompanying notes.

F-5

---



enherent Corp. and Subsidiaries        Consolidated Statements of Cash Flows        (In Thousands)

|                                                                                                     |                                              | Years Ended December 31                     |        
|---------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------- | -------
|
|Cash flows from operating activities                                                                 |                                              |                                             |        
|Net loss                                                                                             |                                              | $                                           | (21,215
|Adjustments to reconcile net loss to net cash used in operating activities net of business acquired: |                                              |                                             |        
|                                                                                                     | Depreciation and amortization                |                                             |        
|                                                                                                     | Loss on disposal of fixed assets             |                                             |        
|                                                                                                     | Loss on the sale of marketable securities    |                                             |        
|                                                                                                     | Provision for doubtful accounts              |                                             |        
|                                                                                                     | Goodwill impairment                          |                                             |        
|                                                                                                     | Deferred rent                                |                                             |        
|                                                                                                     | Changes in operating assets and liabilities: |                                             |        
|                                                                                                     |                                              | Accounts receivable                         |        
|                                                                                                     |                                              | Prepaid expenses and other current assets   |        
|                                                                                                     |                                              | Other assets                                |        
|                                                                                                     |                                              | Accrued compensation                        |        
|                                                                                                     |                                              | Accounts payable and other accrued expenses |        
|                                                                                                     |                                              | Deferred revenue                            |        
|                                                                                                     |                                              |                                             |        
|Net cash used in operating activities                                                                |                                              |                                             | (5,824 
|                                                                                                     |                                              |                                             |        
|Cash flows from investing activities                                                                 |                                              |                                             |        
|Purchases of fixed assets                                                                            |                                              |                                             | (2,423 
|Purchases of marketable securities                                                                   |                                              |                                             | (1,756 
|Sales of marketable securities                                                                       |                                              |                                             | 555    
|Proceeds from sale of fixed assets                                                                   |                                              |                                             | 67     
|Return of cash paid for ISPI acquisition                                                             |                                              |                                             | 80     
|                                                                                                     |                                              |                                             |        
|Net cash (used in) provided by investing activities                                                  |                                              |                                             | (3,477 
|                                                                                                     |                                              |                                             |        
|Cash flows from financing activities                                                                 |                                              |                                             |        
|Repayment of note payable                                                                            |                                              |                                             |       
|Exercise of stock options                                                                            |                                              |                                             | 99     
|Purchase on treasury stock                                                                           |                                              |                                             |       
|Principal payments under capital lease obligations                                                   |                                              |                                             | (518   
|Issuance of preferred shares and common stock warrants, net of issuance costs                        |                                              |                                             |       
|                                                                                                     |                                              |                                             |        
|Net cash (used in) provided by financing activities                                                  |                                              |                                             | (419   
|                                                                                                     |                                              |                                             |        
|Net (decrease) increase in cash and equivalents                                                      |                                              |                                             | (9,720 
|Cash and equivalents at beginning of period                                                          |                                              |                                             | 14,772 
|                                                                                                     |                                              |                                             |        
|Cash and equivalents at end of period                                                                |                                              | $                                           | 5,052  
|                                                                                                     |                                              |                                             |        
|Supplemental disclosure of cash flow information                                                     |                                              |                                             |        
|Interest paid                                                                                        |                                              | $                                           | 191    
|                                                                                                     |                                              |                                             |        
|Income taxes paid                                                                                    |                                              | $                                           | 98     
|                                                                                                     |                                              |                                             |        
|Noncash financing activities                                                                         |                                              |                                             |        
|Acquisition of fixed assets through capital leases                                                   |                                              | $                                           |       
|                                                                                                     |                                              |                                             |        

See
accompanying notes.

F-6

---



enherent Corp. and Subsidiaries        Notes to Consolidated Financial Statements        Years ended December 31, 1999, 2000 and 2001

1.    Description of Business

The accompanying consolidated financial statements include the accounts of enherent Corp. ("enherent") and its wholly owned subsidiaries (collectively, the
"Company"), formerly PRT Group Inc. and subsidiaries ("PRT"). enherent is a provider of information technology services including strategic consulting, project solutions and staff augmentation
principally to industries including insurance, financial services, banking and capital markets.

On
July 2, 2000, PRT received shareholder approval to change its name from PRT Group Inc. to enherent Corp. and received approval from Nasdaq to trade its listed shares
under the ticker symbol ENHT (changed from PRTG). The Company amended its charter to reflect the name change on July 13, 2000.

The
Company has sales and account management offices located in Connecticut and Texas and sales locations in Connecticut, the New York/New Jersey area, Florida, Texas, and Washington,
D.C. The Company has a Solutions Center in Barbados, West Indies and serves clients throughout the United States. During 2000, the Company relocated its corporate headquarters to Dallas, Texas.

2.    Summary of Significant Accounting Policies

Revenue Recognition

Revenue from time and materials contracts is recognized during the period in which the related services are provided. Revenue from fixed price contracts is
recognized using the percentage-of-completion method. Cash payments received but unearned are recorded as deferred revenue.

Principles of Consolidation

The consolidated financial statements include the accounts of enherent and its subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.

Research and Software Development Costs

The Company expenses as incurred or capitalizes costs incurred to develop new software products in accordance with the Statement of Position 98-1,
"Accounting for the Cost of Computer Software Development or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires that costs incurred in the preliminary and
post-implementation stages of an internal use software project are expensed as incurred and that certain costs incurred in the application development stage of the project be capitalized.
No research and software development costs were capitalized in 1999, 2000 and 2001

Fair Value of Financial Instruments

The carrying values of financial instruments approximate their estimated fair value as a result of variable market interest rates and the short-term
maturity of these instruments.

F-7

---

Cash and Equivalents and Marketable Securities

Cash and equivalents includes all cash, demand deposits, money market accounts and debt instruments purchased with an original maturity of three months or less.
Marketable securities are debt instruments purchased with a maturity of more than three months.

The
Company classifies its investments in debt securities, including those considered to be cash equivalents, as securities held-to-maturity and carries them at
amortized cost, which approximates market value, in the accompanying consolidated balance sheets. The purchase cost of such securities is included in either cash and equivalents or marketable debt
securities.

Fixed Assets

Fixed assets are stated at cost and depreciation on furniture and equipment, computer equipment and software is calculated on the straight-line method
over the estimated useful lives of the assets ranging from three to seven years. Equipment held under capital leases and leasehold improvements are amortized using the straight-line method
over the shorter of the lease term or estimated useful life of the asset.

Income Taxes

The Company accounts for income taxes on the liability method. Under this method, deferred tax assets and liabilities are recognized with respect to the future
tax consequences attributable to differences between the financial statement carrying values and tax bases of existing assets and liabilities and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

Goodwill

Goodwill was being amortized over 20 years using the straight-line method. The Company systematically reviews the recoverability of its
goodwill by comparing the unamortized carrying value to anticipated undiscounted future cash flows. If it is determined that impairment exists, the future cashflows are discounted to determine the
impairment amount. Any impairment is charged to expense when such determination is made. Based on the results of this analysis in 2001 it was determined that goodwill was impaired and a charge of
$14,974,000 was recorded (see note 7).

F-8

---

Net Loss Per Share

The Company calculates earnings per share in accordance with SFAS No. 128, "Computation of Earnings Per Share." Accordingly basic earnings per share is
computed using the weighted average number of common shares outstanding during the period. Dilutive shares consist of the incremental common shares issuable upon the conversion of the redeemable
convertible preferred stock (using the if converted method) and related warrants and shares issuable upon the exercise of stock options (using the treasury stock method); such additional shares are
excluded from the calculation if their effect is anti-dilutive.

The
following is a summary of the calculation of loss per share (in thousands, except per share data):

Years Ended December 311999

2000

2001Numerator:Net loss applicable to common shareholders

$
(21,215
)
$
(14,006
)
$
(22,249
)Denominator:Weighted average shares outstanding


18,275


18,347


17,708Basic and diluted loss per share

$
(1.16
)
$
(.76
)
$
(1.26
)


The
Company has excluded the impact of the redeemable convertible preferred stock and related warrants and stock options outstanding under the Company's Stock Option Plan as the effect
of including such shares would be anti-dilutive.

Stock-Based Compensation

Pro forma information regarding net income (loss) and earnings (loss) per share is required by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), and has been determined as if the Company had accounted for its employees' stock options under the fair value method provided by that
Statement.

The
Company accounts for stock option grants in accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and, accordingly,
recognizes compensation expense only if the fair value of the underlying Common Stock exceeds the exercise price of the stock option on the date of grant. As permitted by SFAS No. 123, the
Company continues to account for stock-based compensation in accordance with APB Opinion No. 25 and has elected the pro forma disclosure alternative of SFAS No. 123.

Segment Information

The Company discloses information regarding segments in accordance with SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 establishes standards for reporting of financial information about operating segments in annual financial statements and requires reporting selected information about operating
segments in interim financial reports. The disclosure of segment information was not required as the Company operates in only one business segment.

F-9

---

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, marketable securities
and accounts receivables. Concentrations of credit risk with respect to accounts receivable are limited due to the creditworthiness of customers comprising the Company's customer base. Management
regularly monitors the creditworthiness of its customers and generally requires no collateral. Management believes that it has adequately provided for any exposure to potential credit losses.

3.    Cash Equivalents and Marketable Securities

The following is a summary of the Company's marketable securities, which are classified as cash equivalents and marketable securities (in thousands):

Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Market
ValueDecember 31, 2000
Cash Equivalents

$
4,039

$


$


$
4,039Marketable Debt Securities:Commercial Paper


728








728Total

$
4,767

$


$


$
4,767


At
December 31, 2001 there are no marketable securities included in cash and cash equivalents. All of the Company's investments in debt securities are classified as
held-to-maturity and, at December 31, 2000, have scheduled maturities of less than one year. The gross realized loss on the sale of marketable securities was $56,000 in
2000. There were no gross realized gains or losses on sales of marketable securities during 2001.

4.    Fixed Assets

Fixed assets consist of the following (in thousands):

December 312000

2001Furniture and equipment

$
3,183

$
2,497Computer equipment and software


9,027


8,665Leasehold improvements


665


34212,875


11,504Less accumulated depreciation and amortization


(9,661
)

(10,122
)$
3,214

$
1,382


F-10

---

Fixed
assets include assets under capital lease aggregating approximately $827,000 and $541,000 at December 31, 2000 and 2001, respectively. The accumulated amortization related
to assets under capital leases is approximately $520,000 and $485,000 at December 31, 2000 and 2001, respectively.

5.    Series A Senior Participating Redeemable Convertible Preferred Stock

On April 13, 2000, the Company issued 8,000,000 shares of its Series A Senior Participating Redeemable Convertible Preferred Stock ("Preferred
Stock") for $8,000,000. The Company also issued a warrant to the Preferred Stock investors to purchase 4,000,000 shares of the Company's Common Stock at an initial exercise price of $1.00 per share
subject to adjustment, as defined. The Preferred Stock is convertible, subject to adjustment, as defined, into Common Stock on a one-for-one basis at any time, and is
redeemable after April 12, 2005 at the option of the holder at its liquidation value plus accrued and unpaid dividends and contains voting rights on an as-converted basis. Each
warrant entitles the holder to purchase one share of Common Stock prior to April 14, 2005. The Preferred Stock and related Warrants were sold below the then-market value of the
Company's Common Stock. Accordingly, the guaranteed discount on the conversion of the Preferred Stock and the value of the Warrants, aggregating approximately $5,200,000, was deemed to be a dividend
for purpose of calculating loss per share. The Preferred Stock is being accreted to its liquidation value at April 12, 2005. (See note 16.)

6.    Stockholders' Equity

In August 2000, the Board of Directors approved the buy-back of up to 2,000,000 shares of the Company's outstanding Common Stock. In 2001, the
Company repurchased approximately 849,000 shares of its outstanding Common Stock for approximately $166,000.

In
June 1996, the Company established a Stock Option Plan (the "Option Plan") for officers, employees, consultants and non-employee directors to purchase shares of the
Company's Common Stock. The Option Plan requires the Company to reserve a sufficient number of authorized shares for issuance upon the exercise of all options that may be granted under the Option
Plan. In January 2000, the Board of Directors approved an amendment to the Option Plan that increased the shares reserved by 1,000,000. At December 31, 2001, the Company had reserved
4,108,425 shares of Common Stock for the exercise and future grants of stock options under such Option Plan.

The
Compensation Committee of the Board of Directors is responsible for determining the type of award, when and to whom awards are granted, the number of shares and terms of the awards
and the exercise price. The exercise price shall not be less than the fair market value of the Company's Common Stock at the date the option is granted. As such, the Company has not recorded
compensation expense in connection with these awards. The options are exercisable for a period not to exceed ten years from the date of the grant. Vesting periods range from immediate vesting to five
years.

F-11

---

Activity
in the Option Plan is summarized as follows (in shares):

Shares

Weighted Average
Exercise PriceOutstanding at December 31, 1998

2,140,023

$
3.68Granted

2,837,453

$
2.52Exercised

(38,071
)
$
2.75Canceled and expired

(1,976,813
)
$
3.43Outstanding at December 31, 1999

2,962,592

$
2.75Granted

1,618,301

$
1.09Exercised

(67,669
)
$
3.10Canceled and expired

(1,197,537
)
$
2.84Outstanding at December 31, 2000

3,315,687

$
1.89Granted

250,500

$
.40Canceled and expired

(792,783
)
$
1.59Outstanding at December 31, 2001

2,773,404

$
1.82Exercisable at December 31, 1999

413,647Exercisable at December 31, 2000

791,090Exercisable at December 31, 2001

1,553,610Available for grant at December 31, 2001

1,335,021


The
weighted average fair value of options granted during the years ended December 31, 1999, 2000 and 2001 was $1.81, $.90 and $.35, respectively.

Information
regarding the options outstanding under the Option Plan at December 31, 2001 is as follows:

|Exercise Price Range |  | Number of
Options
Currently
Outstanding |  | Weighted-
Average
Exercise Price |       | Weighted-
Average
Contractual
Life |     | Number
Exercisable |           | Weighted-
Average
Exercise
Price
|-------------------- |  | --------------------------------------- |  | -------------------------------- | ----- | ---------------------------------- | --- | ------------------ | --------- | --------------------------------
|$  .10-$    .12      |  | 100,500                                 |  | $                                | .10   |                                    | 9.6 |                    | 166       |                                 
|$  .16-$    .16      |  | 15,000                                  |  | $                                | .16   |                                    | 9.8 |                    |          |                                 
|$  .38-$    .38      |  | 23,500                                  |  | $                                | .38   |                                    | 8.9 |                    | 7,832     |                                 
|$  .63-$    .69      |  | 409,500                                 |  | $                                | .67   |                                    | 8.6 |                    | 161,484   |                                 
|$1.13-$  1.19        |  | 558,656                                 |  | $                                | 1.19  |                                    | 8.2 |                    | 192,073   |                                 
|$1.88-$  2.75        |  | 1,543,973                               |  | $                                | 2.32  |                                    | 7.3 |                    | 1,105,368 |                                 
|$3.63-$  5.00        |  | 114,850                                 |  | $                                | 3.86  |                                    | 6.8 |                    | 79,262    |                                 
|$5.63-$  5.63        |  | 5,100                                   |  | $                                | 5.63  |                                    | 5.0 |                    | 5,100     |                                 
|$9.50-$12.00         |  | 2,325                                   |  | $                                | 10.79 |                                    | 5.8 |                    | 2,325     |                                 
|                     |  |                                         |  |                                  |       |                                    |     |                    |           |                                 
|                     |  | 2,773,404                               |  |                                  |       |                                    |     |                    | 1,553,610 |                                 
|                     |  |                                         |  |                                  |       |                                    |     |                    |           |                                 

F-12

---

Pro
forma information regarding net income (loss) and earnings (loss) per share is required by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), and has been determined as if the Company had accounted for its employees' stock options under the fair value method provided by that Statement. The fair value of
the options was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions for vested and non-vested options:

December 31Assumption1999

2000

2001Risk-free interest rate

5.58
%
6.22
%
4.77
%Dividend yield

0
%
0
%
0
%Volatility factor of the expected market price of the Company's Common Stock

.85

1.12

1.28Average life

5 years

5 years

5 years


The
Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

For
purposes of pro forma disclosures, the estimated fair value of the options under SFAS 123 is amortized to expense over the options' vesting period. For the years ended
December 31, 1999, 2000 and 2001, pro forma net loss available to common shareholders under SFAS 123 amounted to approximately $(23,747,000), $(16,936,000) and $(23,905,000),
respectively. The pro forma net loss per share under SFAS 123 amounted to $(1.30), $(.93) and $(1.35) respectively, for the years ended December 31, 1999, 2000, and 2001 respectively.

7.    Acquisitions and Impairment of Goodwill

Effective July 1, 1997, the Company purchased all of the issued and outstanding capital stock of Computer Management Resources, Inc. ("CMR") for
approximately $6,294,000. CMR is a provider of
information technology services. The excess of costs over net assets acquired, was approximately $6,180,000. The purchase price consisted of $2,864,000 in cash, 119,181 shares of the Company's Common
Stock valued at such time at approximately $1,430,000, or $12.00 per share, and a promissory note in the principal amount of $2,000,000 (the "CMR Note"). The CMR Note, which was secured by a
$1,000,000 letter of credit, bears interest at 9.75% per annum with the principal balance due no later than July 18, 2002. In 1999, the Company repaid $1,000,000 of the CMR note and in 2000 the
Company repaid the entire outstanding balance.

On
January 31, 1998, the Company purchased substantially all of the assets of Advanced Computing Techniques, Inc. ("ACT"), a Connecticut corporation, for approximately
$13,010,000, including acquisition costs, in cash. The excess of cost over net assets acquired was approximately $12,129,000

F-13

---

Due
to significant negative industry and economic trends affecting both our current and expected future revenues, management performed an analysis of the undiscounted cash flow from the
CMR and ACT acquisitions and concluded that the goodwill was impaired. Based on the analysis of the discounted cash flow, an impairment charge of approximately $15 million was recorded in the
fourth quarter of 2001.

On
April 15, 1998, the Company consummated the purchase of substantially all the assets of Institute For Software Process Improvements, Inc. ("ISPI"), a Pennsylvania
corporation, for approximately $2,745,000, including acquisition costs, in cash. The excess of cost over net assets acquired was approximately $2,758,000.

During
the quarter ended June 30, 1999, management performed an analysis of the undiscounted 1999 cash flow of the ISPI operations and concluded that the goodwill was impaired.
Based on the analysis of the discounted cash flow, an impairment charge of approximately $2,500,000 was recorded in the quarter ended June 30, 1999.

The
aforementioned acquisitions were accounted for by the purchase method of accounting and the results of operations are included in the Company's results of operations since the
respective dates of acquisition.

8.    Restructuring Charges

On June 30, 1999, the Company announced a restructuring, the purpose of which was to refocus the Company's efforts on its core business and reduce costs.
In connection with the restructuring, the
Company recorded aggregate charges of approximately $7,500,000 relating to $2,000,000 in severance costs, $3,000,000 in office closures and the write-off of goodwill related to the ISPI
acquisition of $2,500,000 (see note 7). The Company completed the planned restructuring. However, approximately $700,000 of the amount accrued in 1999 was not required and has been included in
Selling, General and Administration expenses in 2000.

9.    Income Taxes

For financial reporting purposes, loss before taxes includes the following components (in thousands):

1999

2000

2001Pre-tax lossU.S.

$
(14,853
)
$
(5,581
)
$
(20,062
)Foreign


(6,362
)

(2,951
)

(1,676
)Net loss

$
(21,215
)
$
(8,532
)
$
(21,738
)


There
were no current or deferred federal or state and local taxes for the years ended December 31, 1999, 2000 and 2001.

F-14

---

The
actual income tax expense (benefit) differs from the "expected" tax expense computed by applying the U.S. Federal corporate tax rate of 34% to income taxes, as follows (in
thousands):

December 311999

2000

2001Computed "expected" tax (benefit)

$
(7,213
)
$
(2,901
)
$
(7,391
)Nondeductible losses of foreign subsidiaries


2,163


1,003


413Non-deductible U.S. expenses


189


122


7Valuation allowance relating primarily to U.S. net operating losses


4,885


2,064


7,033State tax benefit, net of federal tax effect at state statutory rate





(215
)

(734
)Other


(24
)

(73
)

672$


$


$



The
Company has net operating loss carryforwards of approximately $32.2 million to offset future taxable income which begin to expire in 2018. Deferred tax assets are recognized
if realization of such assets is more likely than not. Based on the weight of available evidence, which included the Company's historical operating performance and the reported cumulative net losses
in all prior years, the Company has provided a full valuation allowance against its net deferred tax assets.

The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows (in thousands):

December 312000

2001Deferred tax assets:Accounts receivable allowances

$
201

$
97Accrued vacation





51Accrued bonuses





80Net operating loss carryforwards


10,769


12,239Amortization expense


59


4,190Deferred rent expense





34Other





3Total gross deferred assets


11,029


16,694Deferred tax liabilities:Depreciation of fixed assets

$
(271
)
$
(85
)Prepaid expenses


(29
)

Total gross deferred liabilities


(300
)

(85
)Net deferred tax asset


10,729


16,609Valuation allowance


(10,729
)

(16,609
)Net deferred tax asset

$


$



F-15

---

10.    Significant Clients

During the years ended December 31, 1999, 2000 and 2001, approximately 53%, 53% and 68% of revenue was derived from the Company's five largest clients,
respectively. Two clients accounted for 19% and 11% of total revenues for the year ended December 31, 1999. Three clients accounted for 14%, 13% and 13% of total revenues for the year ended
December 31, 2000. Three clients accounted for 20%, 15% and 11% of total revenues for the year ended December 31, 2001.

11.    Commitments

The Company is obligated under capital leases for computer and office equipment that expire at various dates through July 2004 with interest ranging from
8% to 10%. Future minimum lease payments relating to office space under noncancelable operating leases and future minimum capital lease payments as of December 31, 2001 are as follows (in
thousands):

Capital
Leases

Operating
LeasesDecember 31:2002

$
25

$
4142003


15


3042004


6


1562005





42006





Total minimum lease payments


46

$
878Less amount representing interest


(5
)Present value of net minimum capital lease payments


41Less current installments of obligations under capital leases


(21
)Obligations under capital leases, net of current installments

$
20


Rent
expense was approximately $1,341,000, $1,082,000 and $939,000 for the years ended December 31, 1999, 2000 and 2001, respectively.

The
Company vacated its office space at 342 Madison Ave. in New York, upon the expiration of its lease on April 30, 2001, and exercised a termination clause and vacated a portion
of its leased space at 80 Lamberton Road in Windsor Connecticut. The termination clause for the Connecticut space required a nine-month notification period prior to the termination of the
lease. In conjunction with this termination clause, the Company recorded a charge in the quarter ended March 31, 2001 of $120,000. In conjunction with vacating these offices, the Company
recorded a charge in the quarter ended March 31, 2001 of approximately $355,000 for the losses incurred upon the disposal of office furniture and abandonment of leasehold improvements.

12.    Deferred Compensation Plan

The Company maintains a 401(k) plan (the "Plan") covering all its eligible employees. The Plan is currently funded by voluntary salary deductions by plan members
and is limited to the maximum amount that can be deducted for Federal income tax purposes. The Company is not required to make

F-16

---

contributions to the Plan, however, employer contributions were made on a discretionary basis for plan years 1998 and 1999. Effective January 1, 2000 the Plan was modified providing a 100%
Company match of up to 3% of eligible employee contributions. For the years ended December 31, 1999, 2000 and 2001, the Company recognized contributions of $215,000, $402,000, and $323,000
respectively.

13.    Related Party Transactions

Revenue generated from a client who is also a significant stockholder was approximately $7,100,000 and $6,100,000 for the years ended December 31, 1999 and
2000, respectively. During the year ended December 31, 2001, no revenue was generated from the client who is also a significant stockholder.

On
May 1, 1998, the Company agreed to pay Forum Computer Services, Inc. ("Forum") a one-time fee of $200,000 in lieu of all past or future unpaid finder's fees
relating to certain consultant contracts placed with Forum's marketing assistance. In exchange for this one-time payment, Forum agreed to release the Company from all claims for finder's
fees related to these consultants. Forum is owned 57% by the father of the Company's former CEO and Chairman of the Board of Directors and 43% by a stockholder of the Company.

14.    Geographic Areas

The Company operates in one industry segment, providing information technology solutions to its clients. In addition to its domestic operations, which include the
United States, the Company has operations in the West Indies.

Geographic
information is as follows (in thousands):

|                  |  | December 31
|----------------- |  | -----------
|
|
|Revenues          |  | $          
|                  |  |            
|Long-lived assets |  | $          
|                  |  |            
|Total assets      |  | $          
|                  |  |            

15.    Litigation

A former Chief Financial Officer of the Company filed a Demand for Arbitration on or about October 27, 2000 claiming that at the time of his termination,
he was entitled to stock options worth $3,000,000 or the stock option value in cash. enherent filed a Motion for Summary Judgment which was denied on November 13, 2001. A full evidentiary
hearing will be held on June 20 and 21, 2002.

On
September 10, 2001 enherent filed a lawsuit in Federal Court in Virginia for breach of contract to recover monies owed from Interior Systems, Inc. ("ISI") for services
provided by enherent in the amount of approximately $785,000. On October 12, 2001, ISI filed a counterclaim against enherent claiming that enherent breached the contract and inflated invoices
during the performance of those

F-17

---

services in the amount of approximately $1,153,000. enherent denied these allegations. In December 2001 the parties reached a settlement agreement whereby ISI will pay $250,000 to enherent.
This settlement amount is to be paid in three installments, $150,000 on December 15, 2001 (payment received), $50,000 on or before May 31, 2002, and $50,000 on or before
November 30, 2002.

In
the normal course of business, various claims are made against the Company. At this time, in the opinion of management, there are no pending claims, including the above-mentioned
Demand for Arbitration, the outcome of which are expected to result in a material adverse effect on the consolidated financial position or results of operations of the Company.

16.    Subsequent Event

On January 30, 2002, with the approval of the Board of Directors, enherent entered into a Stock Purchase Agreement with The Travelers Indemnity Company.
The Travelers converted 1,000,000 shares of its Series A Senior Participating Redeemable Convertible Preferred Stock to 1,000,000 shares of enherent Common Stock. Under the terms of the Stock
Purchase Agreement, The Travelers then sold the 1,000,000 shares of Common Stock to enherent for $200,000. enherent has retired the 1,000,000 shares of Series A Senior Participating Redeemable
Convertible Preferred Stock.

As
a result of this event, the Control by Principal Stockholders with reference to the Tudor Investment Corporations ownership and The Travelers ownership are as follows:

Tudor
(through its ownership of Common Stock and Series A Senior Participating Redeemable Convertible Preferred Stock) owns approximately 18% of the Company's voting equity
securities. Tudor's Series A preferred shares vote on an as-converted basis, representing approximately 15% of the Company's voting equity securities.

The
Travelers (through its ownership of Common Stock and Series A Senior Participating Redeemable Convertible Preferred Stock) owns approximately 14% of the Company's voting
equity securities. The Traveler's Series A preferred shares vote on an as-converted basis, representing approximately 11% of the Company's voting equity securities.

F-18

---



VALUATION AND QUALIFYING ACCOUNTS        (In Thousands)

|Column A                                             |                                 | Column B |   | Column C |  | Column D |       | Column E
|---------------------------------------------------- | ------------------------------- | -------- | - | -------- |  | -------- | ----- | --------
|
|Year ended December 31, 1999                         |                                 |          |   |          |  |          |       |         
|Allowances deducted from assets to which they apply: |                                 |          |   |          |  |          |       |         
|                                                     | Allowance for doubtful accounts |          | $ | 539      |  | $        | 411   |         
|Year ended December 31, 2000                         |                                 |          |   |          |  |          |       |         
|Allowances deducted from assets to which they apply: |                                 |          |   |          |  |          |       |         
|                                                     | Allowance for doubtful accounts |          | $ | 529      |  | $        | 581   |         
|Year ended December 31, 2001                         |                                 |          |   |          |  |          |       |         
|Allowances deducted from assets to which they apply: |                                 |          |   |          |  |          |       |         
|                                                     | Allowance for doubtful accounts |          | $ | 700      |  | $        | 1,369 |         

---

F-19

---

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