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

## FORM 10-K

(Mark One)

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

#### For the fiscal year ended December 31, 2001

## OR

### 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 000-22327CONCERO, INC.(Exact name of Registrant as specified in its charter)

6300 Bridgepoint Parkway, Building 1, Suite 500, Austin Texas   78730(512) 343-6666

(Address, zip code and telephone number, including area code of Registrant's principal executive officer)

Securities registered pursuant to Section 12(b) of the Act:None
Securities registered pursuant to section 12(g) of the Act:Common Stock, $0.01 par value

Indicate by check mark whether the  Registrant  (1) has filed all reports
required to be filed by  Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the  preceding 12 months (or for
such shorter  period that the registrant was required to file such  reports),  and (2)has been subject to such filing  requirements
for the past 90 days.    Yesx     No__________

Indicate 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 informaiton statements incorporated by reference in Part III
of this Form 10-K or any amendmnet to this Form 10-K  x

The aggregate market value of the voting stock held by non-affiliaties
of the Registrant, based upon the closing sale price of common stock on March 1, 2002 as reported on the Nasdaq National Market, was approximately $1.5 million
(affiliates being, for these purposes only, directors, executive officers and holders of more than 5% of the Registrant's common stock).

As of March 1, 2002, the Registrant had outstanding 10,225,090 shares common stock.

`Documents Incorporated By Reference
          Portions of the Proxy Statement for Registrant's 2002 Annual Meeting of Stockholders are herein incorporated by
                             reference to the extent indicated in Part III of this Form 10-K.



Concero, Inc.                                                                                             Table of Contents

Form 10-K Item                                                                                                Page

Part I.
                   Item 1.     Business...................................................................       2
                   Item 2.     Properties.................................................................      12
                   Item 3.     Legal Proceedings..........................................................      12
                   Item 4.     Submission of Matters to a Vote of Security Holders........................      12

Part II.
                   Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters......      13
                   Item 6.     Selected Financial Data....................................................      14
                   Item 7.     Management's Discussion and Analysis of Financial Condition and
                               Results of Operations......................................................      15
                   Item 7A.    Quantitative and Qualitative Disclosures about Market Risk.................      19
                   Item 8.     Financial Statements and Supplementary Data................................      19
                   Item 9.     Changes in and Disagreements with Accountants on
                               Accounting and Financial Disclosure........................................      19

Part III.
                   Item 10.    Directors and Executive Officers of the Registrant.........................      20
                   Item 11.    Executive Compensation.....................................................      20
                   Item 12.    Security Owenership of Certain Beneficial Owners...........................      20

Part IV.
                   Item 13.    Certain Relationships and Related Transactions.............................      20
                   Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K...........      21
                               Signatures.................................................................      23`

#### PART I

##### Item 1.  Business

In addition to the historical  information  contained  herein,  the  discussion in this Form 10-K contains  forward-looking
statements,  within the meaning of Section 27A of the  Securities  Act of 1933 and Section 21E of the  Securities  Exchange
Act of 1934,  that  involve  risks and  uncertainties,  such as  statements  for the plans,  objectives,  expectations  and
intentions of Concero.  Such forward  looking  statements are generally  accompanied  by words such as "plan,"  "estimate,"
"expect,"  "believe,"  "could," "would,"  "anticipate,"  "may," or other words that convey  uncertainty of future events or
outcomes.  These forward-looking  statements and other statements made elsewhere in this report are made in reliance on the
Private  Securities  Litigation  Reform Act of 1995.  The  cautionary  statements  made in this Form 10-K should be read as
being  applicable to all related  forward-looking  statements  whenever they appear in this Form 10-K.  Our actual  results
could  differ  materially  from the  results  discussed  in the  forward-looking  statements.  Factors  that could cause or
contribute to such differences  include,  but are not limited to, those discussed under the section  captioned  "Additional
Factors  That May Affect  Future  Results"  in Item 1 of this Form 10-K as well as those  cautionary  statements  and other
factors set forth elsewhere herein.

### Overview

Concero has been providing software  development  services to customers that are innovators,  early technology adopters and
market  leaders  for more than a decade.  During  1999 and 2000,  we  transitioned  to a company  that  primarily  provides
e-business  services.  Beginning  in the second  quarter of 2000,  however,  the market for  e-business  services  began to
deteriorate  and our revenue  declined.  In 2000, we initiated cost reduction  measures and narrowed our service  offerings
around:  strategy,   enterprise  portals,  content  chains  and  interactive  television.  In  2001,  our  performance  was
considerably  and  negatively  affected by the weak U.S.  economy and a decrease in capital  spending by our  customers and
potential  customers.  We  implemented  cost  reduction  measures in 2001 to more  closely  align our cost  structure  with
near-term  future  revenue  opportunities.  As a result of these cost  reduction  measures,  we  recorded a charge in other
expense of $12.2 million in 2001 including  workforce  reductions and the  establishment  of reserves and  write-downs  for
the  elimination  of excess leased office space and  equipment.  We continue to provide  strategic  consulting  skills with
deep  technology  and  integration  expertise to existing  customers;  however,  we have further  narrowed our focus around
interactive television.

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

During  2002,  we will be  highly  focused  on the  successful  launch  of the  Concero  Marquee  suite  including  product
development, marketing and sales.  Concero Marquee is scheduled for release in the second half of 2002.

### Industry Background

For  years,  interactive  television  has been an  embryonic  market  as the  cable  operators  have been slow to adopt the
advanced  digital  set-top boxes and middleware  platforms  required to make this  technology  viable.  In stark  contrast,
spurred by aggressive competition from satellite providers,  cable operators have begun to deploy video-on-demand  services
in anticipation of driving consumer adoption of digital cable.  Unlike many interactive  applications,  video-on-demand can
be delivered on the large existing installed base of low-end digital set-top boxes.

With the growing realization that video-on-demand  infrastructure is becoming available,  content providers and application
providers  have also begun to view  video-on-demand  as an  opportunity  to bolster their profit  margins and introduce new
products and  services to meet the growing  consumer  appetite  for  on-demand  services.  However,  because of the diverse
head-end,  video-on-demand server and set-top box choices made by each cable operator,  there is no standard infrastructure
in place to support  applications.  Each  equipment  combination  presents a  significant  challenge  to creating a broadly
deployable solution due to significant differences in their design and functionality.

We believe our integration  expertise,  together with the launch of Concero Marquee in the second half of 2002 will provide
cross-platform  software  infrastructure and tools,  enabling application companies and content providers to rapidly create
and deliver  on-demand user interfaces and interactive  services to cable subscribers that are independent of the equipment
selected by the cable operator.

2

### Concero Solutions

We are a provider of interactive  television solutions.  We provide systems integration  consulting services and anticipate
providing  software  products that enable  application  providers,  studios,  content  programmers and network operators to
quickly  deploy  a  wide  range  of  broadband  services  such  as  entertainment-on-demand,  interactive  advertising  and
promotional  services.  Our  solutions  drive  profitable,  on-demand  interactive  services.  We possess  unique  delivery
capabilities   for  supporting   interactive   television   solutions.   In  conjunction   with   Motorola's   Horizon  and
Scientific-Atlanta's  CreativEdge  developers  programs,  we operate  state of the art  integration  labs with  specialized
equipment and expertise that enable  development of cross-platform  applications  that run on Motorola,  Scientific-Atlanta
and Harmonic  head-ends and leading  set-top  boxes.  These assets,  combined  with our dedicated and  experienced  team of
interactive  television  consultants and software  engineers,  offer customers  substantial  cost savings and rapid time to
market benefits.

### Strategy

Our goal is to be a leading interactive  television  solutions provider.  We are focusing on the development and successful
launch of the Concero Marquee software suite and completing the transition from a services only  consultancy,  specializing
in broadband solutions,  to a provider of interactive  television software products and services.  To achieve this goal, we
are pursuing the following strategies:

Successfully  Launch Concero  Marquee.  We anticipate the successful  launch of our new product,  Concero  Marquee,  in the
second half of 2002.  We believe  that  Concero  Marquee  will create a compelling  user  experience  that can  potentially
attract  viewers  with  visually  exciting  menus.  Concero  Marquee  will be  designed  to deliver a  multi-sensory,  user
experience  that is  markedly  more  entertaining  and  engaging  than the flat menus  prevalent  today and will  utilize a
powerful  merchandising  engine to vastly improve the ability of cable operators and content  providers to manage how their
content is packaged, priced and promoted.

Attract  New Customers and Expand Existing  Customer  Relationships.  We
have a  dedicated  sales force to help  maintain  and expand  existing  customer
relationships and have targeted potential new interactive  television  customers
for our  consulting  and  integration  services.  We have also targeted and must
attract cable  operators that are innovators and early  technology  adopters for
Concero  Marquee.  Through  our  dedicated  sales force and  utilizing  existing
alliances,  we have access to the cable  operators  that  constitute the primary
potential  customer  base for Marquee.  Our Concero  Marquee  sales  efforts are
primarily focused around the demonstration of Concero Marquee at trade shows and
conventions   such  as  the  Western   Cable   Show,   the   National   Cable  &
Telecommunications  Association's  "Cable  2002" and Cable &Telecommunications
Association for Marketing's "Digital Conference".

Maintain  and Add Alliance  Partners.  We believe that our interactive
television  alliance  partners  are an  important  element  of  our  interactive
television and Concero Marquee software strategy.  These alliances have provided
us with the head-end  hardware and set-top  boxes that help enable us to develop
applications for interactive television,  including Concero Marquee. We recently
entered  into a  program  with  SeaChange  that  has  provided  access  to their
video-on-demand servers. We believe that expanding our alliances to include most
of the hardware vendors associated with the delivery of video-on-demand by cable
operators is critical to the success of Concero  Marquee.  We believe the nature
of  these  alliances  will  also  enable  joint  marketing  of  our  interactive
television integration services and, in some cases, Concero Marquee.

Hire  and Retain  Qualified  Professionals.  Attracting  and retaining
professionals is essential to our business. We attract, hire, develop and retain
personnel by emphasizing  the skills and values required to provide our products
and services.  We have implemented an employee referral  program.  To retain our
professionals,  we will continue to foster our company culture,  provide ongoing
training  and  career   development   opportunities   and  provide   competitive
compensation.

### Services

We offer consulting  services tailored to the needs of the interactive  television  markets.  We deliver custom interactive
television  solutions,  including  interactive  programming  guides,  electronic  buying guides,  video-on-demand,  gaming,
entertainment-on-demand,  e-commerce,  advanced  user  interfaces,  and media asset  management.  Our  development  centers
incorporate  specialized equipment required to develop and test interactive  television  applications.  These centers allow
us  to  provide   cross-platform   development  services  for  applications  that  will  run  on  Harmonic,   Motorola  and
Scientific-Atlanta  head-ends and a variety of digital  set-top  boxes.  We provide  product  development  and  integration
support,  as well as limited  maintenance and support services for our customer's  software  products.  Our team of skilled
consultants, architects and developers deliver the following services:

3/P>

Strategy - We help companies  navigate  through key decisions for creating  successful  interactive  television  solutions,
including revenue models, return on investment, product selection, systems integration, customer service and billing.

Program  Management - Our team of  experienced  program  managers  plans and executes  complex  integration  and deployment
programs that bring together multi-vendor products and services for a complete interactive television offering.

Creative Design - Our creative team specializes in developing engaging user experiences for television applications.

Cross Platform  Development - We provide  cross-platform  architecture,  design and  development  services for platforms as
diverse as the  Motorola,  Scientific  Atlanta,  Pace,  Pioneer  and Sony  set-top boxes.  Our teams  leverage  state-of-the-art
facilities that include Motorola, Harmonic and Scientific-Atlanta head-ends.

Systems  Integration  - Our  architects  and  developers  design and build  application  programming  interfaces,  software
development  kits,  and  integration  frameworks  to bring  together  multi-vendor  products and services  into a complete,
reliable and efficient system that can be easily maintained and extended.

Verification  Services - Our quality assurance and testing services identify  technology  anomalies before applications are
rolled out onto networks.

We also intend to provide consulting services in conjunction with the implementation and support of Concero Marquee.

### Products

In the fourth  quarter of 2001, we announced  our Concero  Marquee  software  product which is scheduled for release in the
second  half of 2002.  The  product  suite  was  introduced  at the  Western  Cable  Show in  November  2001.  The  product
demonstrations  have been  favorably  received  during  initial  meetings  with  cable  operators,  cable  programmers  and
interactive television application providers.

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

In addition,  Concero  Marquee will include  design and management  tools which leverage the underlying  platform to create
and optimize user  experience.  We anticipate  that the "UI Designer"  will enable design  professionals  to rapidly create
and modify user  interfaces and the  "Merchandiser"  will enable business and marketing  analysts to methodically  test and
optimize the on-screen promotional and merchandizing processes.

### Alliances

We maintain  alliances  with leading  interactive  television  and internet  technology  providers.  We have alliances with
leading interactive  television  technology  providers such as Motorola,  Scientific-Atlanta  and SeaChange that provide us
access to their head-end hardware,  set-top boxes and video-on-demand  servers, along with training and support. We believe
that  expanding our  alliances to include most of the hardware vendors  associated  with the delivery of video-on-demand by
cable  operators is critical to the success of Concero  Marquee.  We are also pursing  alliances with content  providers of
cable programming to provide  additional access to cable operators and programming for demonstration  purposes.  We believe
the nature of these  alliances will enable us to jointly market our  interactive  television  integration  services and, in
some cases, Concero Marquee.

These relationships encompass a range of activities, including:

- joint marketing;
- product development services;
- product deployment and integration of our alliance partners' products as part of solutions we provide customers;
- providing feedback from our customers to help our partners enhance their products; and
- integration and certification of third party applications for use with our partners' products.

4/P>

We have substantial alliances with:

Motorola supplies integrated  communications  solutions and embedded electronic  solutions including end-to-end systems for
the delivery of interactive  digital video,  voice and high-speed data solutions for broadband  operators.  As announced in
early 2001, we entered into an agreement  with  Motorola to establish a preferred  software  development  center in Austin,
Texas that will take advantage of our expertise in interactive  television solutions.  As a result, we have been engaged by
companies  like TV Guide and  Integra5  to develop and assist  with the  development  of  interactive,  digital  television
applications.

Scientific-Atlanta  supplies  broadband  communications  systems,  satellite-based  video,  voice  and data  communications
networks  and  worldwide  customer  service and support.  Scientific-Atlanta  has been our  customer  since 1991.  Over the
course of many years,  we have  provided  Scientific-Atlanta  with a variety of services,  including  systems  architecture
consulting,  software  development  strategy and assessment,  assistance with their development of analog network solutions
for  set-top  boxes,  and system and network  management  projects  related to the  Scientific-Atlanta  Explorer  family of
digital  set-top  systems.  As a result,  we have been engaged by companies  such as  CommerceTV,  DIVA and  Intertainer to
develop and assist with the development of interactive, digital television set-top box applications.

### Sales and Marketing

We sell our  professional  services  through a team that includes  senior level personnel who have  significant  experience
with solution-based selling and delivery of information technology services.  Our sales team efforts include:

- direct mail and e-mail campaigns targeting corporate executives;
- coordination of public speaking engagements;
- attendance at industry conferences;
- participation in industry organizations; and
- joint marketing activities with our alliance partners.

While we believe that the opportunities  afforded through our solutions span a broad range of industries,  we are primarily
focused on the  interactive  television  markets.  We market our  services to large  cable  operators,  cable  programmers,
application  providers,  and other media and entertainment  companies ranging from Fortune 1000 corporations to early stage
companies.

Our five largest customers accounted for 34% and 47% of our revenue in 2000 and 2001, respectively.

### Employees and Culture

Beginning in 2000 and throughout 2001, we implemented  cost reduction  measures,  including a significant  reduction in our
staffing levels,  to more closely align our cost structure with anticipated  future revenue  opportunities.  As of March 1,
2002,  we had 74  full-time  employees,  of  which 59 were  technical  staff  performing  consulting  services  and 15 were
management and  administrative  personnel  performing  marketing,  sales,  human  resources,  finance,  accounting,  legal,
information technology and administrative functions.

5/P>

### Competition

We  compete  in both  the  consulting  services  market  and  interactive  television  product  and  services  market.  The
interactive  television  market is  relatively  new and intensely  competitive.  In today's  environment,  companies can be
partners,  customers,  potential  customers and competitors.  We expect  competition to intensify if the market evolves and
consolidates.  We compete with companies in the following categories:

- middleware companies, such as Liberate, Microsoft, OpenTV, Wink and Worldgate;
- video server companies, such as Concurrent, Diva, nCube and SeaChange;
- set-top box providers, such as Scientific-Atlanta and Motorola;
- internal engineering and IT departments of current and potential customers; and
- interactive television systems integration companies such as Rachis and Spyglass.

Many of our competitors  have longer  operating  histories,  larger customer bases,  longer  relationships  with customers,
greater  brand or name  recognition  and  significantly  greater  financial,  technical,  marketing  and  public  relations
resources than we do.  Several competitors offer a broader range of services than we do.

We believe that the main competitive forces in the interactive television product and services industry are:

- the quality of solutions;
- the speed of development;
- technical and business expertise;
- project management skills;
- referenceable customer base;
- integrated methodologies;
- effectiveness of business development efforts; and
- brand recognition.

We believe that we compete favorably with respect to most of these factors.

Our industry has low barriers to entry. We do not own any  technologies  that effectively  preclude or inhibit  competitors
from  entering  our  industry.   Existing  or  future  competitors  may  independently  develop  and  patent  or  copyright
technologies that are superior or substantially  similar to our technologies.  The cost to develop and provide  information
technology  consulting  services is relatively low.  Therefore,  we expect to continue to face additional  competition from
new entrants into our industry.

### Intellectual Property Rights

We have developed proprietary  methodologies,  tools, processes and software in connection with delivering our services. We
also have developed  reusable  objects for interactive and enhanced  television  applications.  We rely on a combination of
trade  secret,  nondisclosure  and other  contractual  arrangements,  and  copyright  and  trademark  laws,  to protect our
proprietary  rights.  Existing  trade secret and  copyright  laws afford us only limited  protection.  We do not posses any
patents.

We typically enter into  confidentiality  and  non-disclosure  agreements with our employees and generally require that our
customers  enter into  similar  agreements.  These  agreements  are  intended to limit  access to and  distribution  of our
proprietary  information.  We  cannot  ensure  that  the  steps we have  taken in this  regard  will be  adequate  to deter
misappropriation  of our proprietary  information or that we will be able to detect  unauthorized  use and take appropriate
steps to enforce our intellectual property rights.

6/P>

### Additional Factors That May Affect Future Results

In addition to the other  information  in this Form 10-K,  the following  factors  should be  considered in evaluating  our
business.

#### Risks that Relate to Our New Business Strategy

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

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

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

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

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

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

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

7/P>

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

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

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

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

#### We may be unable to develop our proposed software products and services.

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

#### We may not be able to integrate our software products with third-party technology.

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

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

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

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

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

#### Risks that Relate to Our Business

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

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

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

8/P>

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

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

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

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

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

#### We changed our name and intend to introduce the Concero Marquee Suite of Software.

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

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

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

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

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

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

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

9/P>

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

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

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

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

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

#### We may not collect all of our accounts receivable.

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

#### Risks that Relate to Our Industry

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

#### Our industry is intensely competitive.

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

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

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

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

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

10

#### Risks that Relate to Our Stock

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

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

The Nasdaq National  Market  maintains  certain  minimum  requirements to maintain the Nasdaq listing for our common stock.
These  requirements  include a minimum bid price for our common stock of $1.00 and a $5 million minimum market value of the
public  float for our common  stock.  The trading  price of our common  stock and the market value of our public float have
not been in compliance with these requirements for more than 30 consecutive days.

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

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

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

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

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

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

#### Our common stock may experience extreme price and volume fluctuations.

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

11



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

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

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

#### Item 2.  Properties

Our executive  offices and primary facility consist of approximately  15,700 square feet located in two adjacent  buildings
in Austin,  Texas. We lease these facilities under two leases that expire in December,  2003, and each are renewable at our
option for an additional five-year term.

We lease  approximately  4,500  square  feet of  office  space in San  Francisco,  California  located  in the heart of the
financial  district.  We lease  approximately  4,100 and  5,300  square  feet of  office  space in  Chicago,  Illinois  and
Framingham,  Massachusetts,  respectively.  In addition, we have approximately 45,400 square feet of unused office space in
Austin,  Texas under two leases that expire on December 31, 2003 and June 30, 2007,  respectively,  and each are  renewable
at our option for an  additional  five-year  term.  In 2001,  we sublet  approximately  17,900  square feet to two separate
companies whose leases expire in 2002.

Our employees are also located at customer  sites  throughout the United  States.  We believe that our existing  facilities
are adequate to meet our current needs and that suitable  additional or  alternative  space will be available in the future
on commercially reasonable terms, if and as needed.

#### Item 3.  Legal Proceedings

We are involved  from time to time in routine  legal  proceedings  incidental  to the conduct of our  business.  We are not
currently a party to any material legal proceedings.

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

No matters were submitted  during the fourth quarter of 2001 to a vote of security  holders,  through the  solicitation  of
proxies or otherwise.

12

##### PART II

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

Our common stock has traded on the Nasdaq  National  Market since our initial public  offering on June 5, 1997. We formally
began doing  business as Concero on April 17, 2000,  and our Nasdaq  ticker  symbol  changed from "PSWT" to "CERO" on April
28, 2000.  Prior to our initial  public  offering,  there had been no public  market for our common  stock.  The  following
table sets forth the  quarterly  high and low sale prices for our common  stock as reported by the Nasdaq  National  Market
for the two most recent fiscal years:

`Fiscal Year Ended December 31, 2000                   High                Low

         First quarter                                       $53.50             $16.63
         Second quarter                                       51.13               9.63
         Third quarter                                        12.88               3.50
         Fourth quarter                                        4.63               1.88

         Fiscal Year Ended December 31, 2001                   High                Low

         First quarter                                        $3.56             $ 1.63
         Second quarter                                        1.59               0.90
         Third quarter                                         1.00               0.47
         Fourth quarter                                        0.60               0.35`

As of March 1, 2002, there
were 10,225,090 shares of common stock outstanding held by 64 stockholders of
record. We currently intend to retain any earnings for the operations and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Future dividends, if any, will be determined by our Board of
Directors and will depend upon our earnings, financial condition, cash
requirements, future prospects, contractual restrictions and other factors
deemed relevant by the Board of Directors.

13

The selected  financial data presented  below have been derived from our audited  financial  statements.  The statements of
operations  data for the years ended  December 31, 1999,  2000 and 2001 and the balance  sheet data as of December 31, 2000
and 2001 are derived from our financial  statements  that appear herein.  The  statements of operations  data for the years
ended  December 31, 1997 and 1998 and the balance  sheet data as of December  31, 1997,  1998 and 1999 are derived from our
audited financial  statements that do not appear herein. The information  presented below reflects the financial  condition
and results of our operations  and it is not  necessarily  indicative of future  results.  The following  should be read in
conjunction  with  "Management's  Discussion  and  Analysis  of  Financial  Condition  and Results of  Operations"  and our
financial statements and notes thereto appearing elsewhere in this Form 10-K.

`---------------------------------------------------------------
                                                                         Year Ended December 31,
                                                     ---------------------------------------------------------------
                                                          1997         1998         1999         2000         2001
                                                     -----------   -----------   ----------   ----------   ----------
  In thousands, except per share data
  Statements of Operations Data:
  Revenue........................................     $   44,118   $   39,101   $   45,823   $   57,290   $   20,223
  Operating expenses:............................
      Technical staff............................         22,479       23,440       25,377       33,833       14,670
      Selling and administrative staff...........          8,405       10,121        9,034       10,872        5,424
      Other expenses*............................          7,979        8,933        9,520       18,178       20,094
      Special compensation expense...............            268           75            -            -            -
                                                      __________   ___________  __________   ___________  ___________
           Total operating expenses..............         39,131       42,569       43,931       62,883       40,188
                                                      __________   ___________  __________   ___________  ___________
  Income (loss) from operations..................          4,987       (3,468)       1,892       (5,593)     (19,965)
  Interest income (expenses), net................            431          946        1,018          943          596
                                                      __________   ___________  __________   ___________  ___________
  Income (loss) before provision (benefit) for
    income taxes.................................          5,418       (2,522)       2,910       (4,650)     (19,369)
                                                      __________   ___________  __________   ___________  ___________
  Provision (benefit) for income taxes:
       Nonrecurring charge for termination of
        Subchapter S election....................          1,200            -            -           -             -
        C corporation taxes......................          1,000       (1,060)       1,130        (725)        2,281
                                                      __________   ___________  __________   __________   ___________
  Net income (loss)..............................     $    3,218   $   (1,462)  $    1,780   $  (3,925)   $  (21,650)
                                                      ==========   ===========  ==========   ==========   ===========
  Diluted earnings (loss) per share..............                       (0.16)        0.17       (0.39)        (2.13)
                                                                   ===========  ==========   ==========   ===========
  Unaudited pro forma information:
  Historical income before provision for

      Income taxes...............................     $    5,418
      Pro forma provision for income taxes.......          1,900
                                                      __________
  Pro forma net income...........................     $    3,518
                                                      ==========
    Pro forma diluted earnings per share.........     $     0.41
                                                      ==========
  Shares used in diluted earnings (loss) per
      share calculation..........................          8,517       9,113        10,501       9,971        10,188
                                                      ===========  ==========   ==========   ==========   ===========

                                                     ----------------------------------------------------------------
                                                                              December 31,
                                                     ----------------------------------------------------------------
                                                            1997       1998           1999        2000          2001
                                                     -----------  ---------     ----------   ---------    ----------
  In thousands
  Balance Sheet Data:
  Working capital................................     $   28,074  $  27,379     $   29,260   $  24,161    $    9,579
  Total assets...................................         35,420     33,351         37,816      35,806        16,644
  Total stockholders' equity.....................         31,859     31,068         33,422      32,760        11,133


*The 2000 and 2001 other expenses include charges for additional bad debt reserves, expenses related to a cancelled stock offering
and cost reduction measures of $2.6 million and $12.2 million respectively.`

14

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

The following discussion
and analysis should be read in conjunction with our financial statements and the
related notes appearing elsewhere in this Form 10-K. The discussion and analysis
below contains forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, that involve risks and uncertainties, such as statements for the plans,
objectives, expectations and intentions of Concero. Such forward looking
statements are generally accompanied by words such as plan,
estimate, expect, believe,
could, would, anticipate, may,
or other words that convey uncertainty of future events or outcomes. These
forward-looking statements and other statements made elsewhere in this report
are made in reliance on the Private Securities Litigation Reform Act of 1995.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set
forth under Additional Factors That May Affect Future Results and
elsewhere in this Form 10-K.

### Overview

We have been providing
software development services to customers that are innovators, early technology
adopters and market leaders for more than a decade. Since 1999, we have
successfully transitioned to a company that primarily provides e-business
services. Beginning in the second quarter of 2000, however, the market for
e-business services began to deteriorate and our revenue declined. In 2000, we
initiated cost reduction measures and narrowed our service offerings around:
strategy, enterprise portals, content chains and interactive television. In
2001, our performance was considerably and negatively impacted by the weak U.S.
economy and a decrease in capital spending by our customers and potential
customers. We implemented cost reduction measures in 2001 to more closely align
our cost structure with near-term future revenue opportunities. As a result of
these cost reduction measures, we recorded a charge in other expense of $12.2
million in 2001 including workforce reductions and the establishment of reserves
and write-downs for the elimination of excess leased office space and equipment.
We continued to provide strategic consulting skills with deep technology and
integration expertise to existing customers; however, we further narrowed our
focus around interactive television.

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

During 2002, we will be
highly focused on the successful launch of the Concero Marquee suite including
product development, marketing and sales. While we not only carry with us the
expertise that allows us to utilize existing and new technologies to provide
reliable, flexible and scalable business solutions, we can also deliver
interactive television and entertainment on-demand solutions, extending our
customers reach to mass audiences.

### Critical Accounting Policies and Estimates

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

We believe the following represent our critical accounting policies:

Revenue from service  contracts is recognized when persuasive  evidence of an
arrangement exists,  delivery of the services has occurred, the fee is fixed and
determinable,  and  collection  is  probable.  Revenue  from time and  materials
contracts is  recognized  during the period for which the services are provided.
Revenue    from   fixed    price    contracts    is    recognized    using   the
percentage-of-completion  method,  measured by the  percentage of units of labor
incurred to the date of  measurement  relative to the  estimated  total units of
labor at  completion.  The  cumulative  impact of  revisions in estimates of the
percentage  to complete is  reflected in the period in which the  revisions  are
made.  Provisions for estimated  losses on  uncompleted  contracts are made on a
contract-by-contract basis and are recognized in the period in which such losses
are  determined.  Revenue earned in excess of billings is classified as unbilled
revenue  under  customer  contracts.  Billings  in excess of earned  revenue are
classified as deferred revenue. Revenue excludes reimbursable expenses.  Revenue
from product license fees is generally

15

recognized when persuasive evidence of an arrangement exists, delivery
and deployment of the product has occurred,  no  significant  obligations by the
Company with regard to implementation  remain, the fee is fixed and determinable
and  collectibility  is probable.  The Company has  recorded no product  license
revenue in 1999, 2000, or 2001.

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

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

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

### Revenue

We derive our revenue from
fees for services that are generated on an engagement-by-engagement basis. In
2001, we derived approximately 92% of revenue from time and materials contracts.
We recognize revenue generated under time and materials contracts as the
services are provided. For fixed price contracts, which accounted for the
balance of our 2001 revenue, we recognize revenue using the
percentage-of-completion method. Using this method, we recognize revenue
proportionate to the percentage of units of labor incurred to the date of
measurement relative to the estimated total units of labor at completion.
Revenue excludes expenses reimbursed by customers.

We experienced significant
declines in our revenue during 2001. With the weakness in the U.S. economy at
large and the market for e-business services in general, we initiated cost
reduction measures to more closely align our cost structure with near-term
future revenue opportunities. As a result, we recorded a $12.2 million charge in
2001 related to our cost reductions measures.

### Expenses

Our technical staff
expenses consist of the cost of salaries, payroll taxes, health insurance and
workers compensation for technical staff personnel assigned to customer
engagements and unassigned technical staff personnel, and fees paid to
sub-contractors for work performed in connection with a customer engagement.

Selling and administrative
staff expenses consist of the cost of salaries, payroll taxes, health insurance
and workers compensation for selling, marketing and administrative
personnel, and all commissions and bonuses whether paid to technical or
administrative staff.

Other expenses consist of
all non-staff related costs, such as occupancy costs, travel, business
insurance, business development, recruiting, training and depreciation.

In addition, in 2001, other
expenses include the charge for cost reduction measures of $12.2 million. These
costs include employee severance, the impairment of equipment and the
establishment of reserves for excess office space. We expect that other expenses
will decline from recent levels in absolute dollars as a result of these cost
reduction measures.

16

### Results of Operations

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

`--------------------------------------
                                                                                       Year ended December 31,
                                                                                --------------------------------------
                                                                                     1999          2000         2001
                                                                                -----------   -----------  -----------
Revenue....................................................................           100%          100%         100%
Operating Expenses:
   Technical staff.........................................................            55            59           73
   Selling and administrative staff........................................            20            19           27
   Other expenses..........................................................            21            32           99
Operating expenses.........................................................            96           110          199
Income (loss) from operations..............................................     ------------  -----------  -----------
                                                                                        4           (10)         (99)
Interest income, net.......................................................             2             2            3
Provision (benefit) for income taxes.......................................             2            (1)         (11)
                                                                                ------------  -----------  -----------
Net income (loss)..........................................................             4%           (7%)       (107%)
                                                                                ============  ===========  ===========`

### Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Revenue.  Revenue  decreased  65% to $20.2 million in 2001 from
$57.3 million in 2000,  principally due to a weak U.S. economy and the resultant
reduced demand and billed hours for e-business  services.  While much of this is
attributable  to the reduced  funding of, and spending by, Internet and start-up
businesses, we also experienced weaker demand for our services from Fortune 1000
companies.  Our  average  hourly bill rate  increased  6% in 2001 as a result of
shifting our focus from performing  primarily software  development  maintenance
and support services to delivering strategic  e-business services.  In 2001, our
e-business services average bill rate was 110% higher than the average bill rate
for our maintenance and support  services.  Our average bill rate for e-business
services remained stable from 2000 to 2001.

In 2001, three customers
accounted for 14%, 12% and 10% of our revenue. One customer accounted for 10% of
our revenue in 2000. No other customer accounted for more than 10% of revenue in
2000 or 2001.

Technical
Staff.  Technical  staff expenses were $14.7 million in 2001, a decrease
of 57% from 2000  technical  staff  expenses of $33.8  million.  The decrease in
technical  staff  expenses is primarily  due to the  reduction of personnel as a
result of our cost  reduction  measures.  As a percentage of revenue,  technical
staff  expenses  increased  to 73% in 2001 from 59% in 2000.  This  increase was
primarily  the result of a lower  utilization  of our  technical  staff in 2001.

Selling   and
Administrative  Staff.  Selling and  administrative  staff expenses were
$5.4 million in 2001, a decrease of 50% from $10.9 million in 2000. The decrease
was  primarily  due to the  reduction of selling and  administrative  staff as a
result of our cost reduction measures. Selling and administrative staff expenses
increased to 27% of revenue in 2001 from 19% of revenue in 2000. The increase in
selling and  administrative  staff  expenses as a  percentage  of revenue is due
primarily  to the  decrease  in  revenue  and  relative  fixed  basis of certain
overhead costs.

Other
Expenses.  Other expenses were $20.1 million in 2001, an increase of 11%
over other expenses of $18.2 million in 2000. As a percentage of revenue,  other
expenses  increased to 99% from 32% in 2000.  This increase was primarily due to
the decline in revenue  experienced  in 2001 without a ratable  decline in other
expenses,  which  include  significant  semi-fixed  costs  and the  individually
significant items described below.

Our other expenses were
significantly impacted by costs related to our cost reduction measures. During
2001, we implemented cost reduction measures resulting in the reduction in
personnel along with a related impairment of excess equipment and abandonment of
leased office space. As a result of these measures, we recorded a charge in other
expense of $12.2 million in 2001, which included $2.7 million severance payment
for terminated consultants and administrative personnel, $4.1 million for the
impairment of excess equipment and $5.4 million for excess office space
including future lease payments on abandoned office space (net of expected
sublease income). All severance payments were made in 2001. Accrued lease
payments of $4.0 million at December 31, 2001 are expected to be paid over the
remaining lease terms which extend to various dates through 2007. Other expenses
in 2001 were offset by the receipt of a $234,000 Texas Smart Jobs grant
associated with training costs incurred prior to 2001. For 2000, other expenses
include the addition of $1.7 million to our bad debt reserves, $500,000 related
to a cancelled stock offering, $125,000 to write-off the investment in a
start-up company and $266,000 associated with cost reduction measures. Other
expenses in 2000 also included approximately $500,000 associated with the
Concero name change.

17

Excluding   the
aforementioned  individually significant items, other expenses were $8.1 million
in 2001,  a decline of 46% over other  expenses  of $15.1  million in 2000,  and
increased  to  40% as a  percentage  of  revenue  in  2001  from  26%  in  2000.

Loss   from
Operations.  We recorded a loss from operations of $20.0 million in 2001
compared to $5.6 million in 2000.

Income Taxes.
The income  tax  provision  of $2.3  million  for 2001 is a  non-cash  charge to
establish  a  valuation  allowance  against  the  deferred  tax  asset for stock
options.  The income tax  benefit of  $725,000  for 2000 was  computed  using an
effective tax rate of 16%, which differed from the federal statutory rate of 34%
primarily  as a result of the  increase  in the  deferred  tax  asset  valuation
allowance of $965,000 and the impact of state taxes.

### Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Revenue.
Revenue  increased  25% to $57.3  million  in 2000 from  $45.8  million in 1999,
principally  due to  improvements  in our average  hourly bill rate. Our average
hourly  bill rate  increased  34%, as a result of two  primary  factors.  First,
beginning  in 1999,  we shifted  our focus from  performing  primarily  software
development  maintenance and support services to delivering strategic e-business
services.  In 2000,  our e-business  services  average bill rate was 141% higher
than the average bill rate for our maintenance and support services. Second, our
average bill rate for  e-business  services  increased by 29% from 1999 to 2000.

We experienced a 17%
decrease in our revenue in the second half of 2000 compared with the first half
of 2000. This decline was principally due to changing market dynamics that
resulted in lower demand and billed hours for e-business services in the last
six months of 2000 compared with the first six months of 2000. Much of this is
attributable to the reduced funding of, and spending by, Internet and start-up
businesses and lengthening sales cycles for more established companies.

In 2000, one customer
accounted for 10% of our revenue. Another customer accounted for 26% of our
revenue in 1999. No other customer accounted for more than 10% of revenue in
1999 or 2000.

Technical
Staff.  Technical staff expenses were $33.8 million in 2000, an increase
of 33% over 1999  technical  staff  expenses of $25.4  million.  The increase in
technical  staff  expenses  was  primarily  due to the  addition of personnel to
service  the  increase  in  scope  and  number  of  customer  engagements.  As a
percentage of revenue,  technical  staff expenses  increased to 59% in 2000 from
55% in 1999.  This  increase was primarily the result of a decline in revenue in
the third and fourth  quarters of 2000  coupled with an increase in our billable
staff over that same period.

Selling   and
Administrative  Staff.  Selling and  administrative  staff expenses were
$10.9  million  in 2000,  an  increase  of 20% from $9.0  million  in 1999.  The
increase was primarily due to the addition of selling and  administrative  staff
offset by lower bonus awards in 2000. Selling and administrative  staff expenses
decreased to 19% of revenue in 2000 from 20% of revenue in 1999. The decrease in
selling and  administrative  staff  expenses as a percentage  of revenue was due
primarily to the increase in revenue.

Other
Expenses.  Other expenses were $18.2 million in 2000, an increase of 91%
over other  expenses of $9.5 million in 1999. As a result of higher  revenue and
staffing levels during the first half of 2000, we initiated spending  activities
in  anticipation  of  further  revenue  increases.  These  activities  consisted
primarily of the addition and expansion of facilities and equipment,  and higher
recruiting,  advertising and public relations, training and travel costs. During
2000, we also had several  individually  significant  expenses  compared to 1999
including  the  addition of $1.7 million to our bad debt  reserves,  expenses of
$500,000  related to a  cancelled  stock  offering,  $125,000 to  write-off  the
investment in a start-up  company and $266,000  associated  with cost  reduction
measures. Other expenses in 2000 also included approximately $500,000 associated
with the Concero name change.

Income  (Loss) from
Operations.  We recorded a loss from  operations of $5.6 million in 2000
compared to income of $1.9 million in 1999.

Income Taxes.
The income tax benefit of $725,000 for 2000 was computed  using an effective tax
rate of 16%, which differed from the federal  statutory rate of 34% primarily as
a result of the increase in the  valuation  allowance of $965,000 and the impact
of state  taxes.  The  provision  for income  taxes of $1.1  million in 1999 was
computed  using an  effective  tax rate of 39%,  which  differs from the federal
statutory rate of 34% as a result of state taxes.

### Liquidity and Capital Resources

Our operating activities
used cash of $133,000 and $3.2 million in 2001 and 2000, respectively. We
purchased approximately $1.0 million, $3.9 million and $2.1 million of computer
and office equipment in 2001, 2000 and 1999, respectively. As of December 31,
2001, we had cash and cash equivalents and short-term investments totaling $13.1
million. As of December 31, 2001, we did not have any material commitments for
capital expenditures. Our capital expenditures normally consist

18

primarily of purchases of laptop  computers,  computer servers
and furniture,  the amount of which  fluctuates based on the number of employees
we hire and the number of offices we maintain in any period.

The number of days of
revenue in our accounts receivable balance was 64 days as of December 31, 2001.
We may experience longer collection periods if the work we perform for smaller
companies increases as a percentage of our total services. We anticipate that
our existing cash and cash equivalents balances, and potential cash flows from
operations will be adequate to fund our working capital and capital expenditure
requirements for at least the next 12 months. However, changes may occur that
could consume available capital resources before such time. Our capital
requirements depend on numerous factors, including potential acquisitions, the
timing of the receipt of accounts receivable, employee growth, and the
percentage of projects performed at our facilities.

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

#### Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

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

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

For our investment
securities at December 31, 2000 and December 31, 2001, which consisted of
corporate issues, the table below presents principal cash flows and related
weighted average fixed interest rates by expected maturity dates (in thousands,
except interest rates).

`2000                2001
                                                          ------------       -------------

Investments maturing before December 31, 2001......           $ 9,122                 n/a
Investments maturing before December 31, 2002......               n/a             $ 8,964
Weighted average interest rate.....................             5.89%               2.25%
Fair Value.........................................           $ 9,122             $ 8,964`

At December 31, 2000 and
December 31, 2001, we had $3.5 million and $3.8 million, respectively, in money
market funds that were classified as cash equivalents on the balance sheet.

#### Item 8.  Financial Statements and Supplementary Data

The information required by this item is included in Part IV Item 14 (a) (1) and (2).

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

None.

19

##### PART III

Certain information
required by Part III is omitted from this Form 10-K because we will file a
definitive Proxy Statement pursuant to Regulation 14A (the Proxy
Statement) no later than 120 days after the end of the fiscal year
covered by this Form 10-K, and certain information to be included therein is
incorporated herein by reference.

#### Item 10.  Directors and Executive Officers of the Registrant

The information required by
this Item is incorporated by reference to the Proxy Statement under the headings
Proposal 1 - Election of Directors, and Executive Compensation
- Directors and Executive Officers and Compliance with Section 16(a)
of the Exchange Act.

#### Item 11.  Executive Compensation

The information required by
this Item is incorporated by reference to the Proxy Statement under the heading
Executive Compensation.

#### Item 12.  Security Ownership of Certain Beneficial Owners and Management

The information required by
this Item is incorporated by reference to the Proxy Statement under the heading
Principal Stockholders.

#### Item 13.  Certain Relationships and Related Transactions

The information required by
this Item is incorporated by reference to the Proxy Statement under the heading
Executive Compensation - Certain Transactions with Management.

20

##### PART IV

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

(a).The following documents are filed as part of this Form 10-K:

`1.  Consolidated  Financial Statements.  The following consolidated financial statements of Concero, Inc. are filed as part
    of this Form 10-K on the pages indicated:

     Report of Independent Auditors.......................................................................     F-1
     Consolidated Balance Sheets as of December 31, 2000 and 2001.........................................     F-2
     Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and 2001...........     F-3
     Consolidated Statements of Stockholders' Equity for the years ended
       December 31, 1999, 2000 and  2001 .................................................................     F-4
     Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001...........     F-5
     Notes to Consolidated Financial Statements...........................................................     F-6


2.   Consolidated  Financial Statement Schedules.

     Schedule II --Valuation And Qualifying Accounts......................................................     S-1

     Schedules  other than the one listed above are omitted as the required  information is inapplicable or the information
     is presented in the consolidated financial statements or related notes.

3.   Exhibits.  The  exhibits  to this  Form 10-K have been  included  only with the copy of this Form 10-K  filed  with the
     Securities  and Exchange  Commission.  Copies of individual  exhibits will be furnished to  stockholders  upon written
     request to Concero and payment of a reasonable fee.


Number         Description
3.1**          Amended and Restated Certificate of Incorporation of the Registrant.
3.2**          Amended and Restated Bylaws of the Registrant.
4.1**          Specimen Common Stock Certificate.
4.2**          See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation
               and Bylaws of the Registrant defining rights of holders of Common Stock of
               the Registrant.
10.1**         Bridgepoint Lease Agreement dated October 31, 1996 between the Registrant and
               Investors Life Insurance Company of North America.
10.2(3)        Amendment to Bridgepoint Lease Agreement dated September 30, 1997.
10.3**         Agreement of Lease dated May 13, 1996 between Newport L.G.-I, Inc. and Pencom
               Systems Incorporated.
10.4**         Service Agreement No. 200.504 dated November 26, 1990 between the Registrant
               and International Business Machines Corporation, as amended to date.
10.5**         Stockholders Agreement dated October 1, 1996 between the Registrant and
               certain stockholders of the Registrant.
10.6**         Registration Rights Agreement dated October 1, 1996 between the Registrant
               and certain stockholders and warrant holders of the Registrant.
10.7**         1996 Stock Option/Stock Issuance Plan. *
10.8(4)        1996 Stock Option/Stock Issuance Plan Amendment No. 1. *`

21

`10.9(4)        1996 Stock Option/Stock Issuance Plan Amendment No. 2. *
10.10**        Employee Stock Purchase Plan. *
10.11**        Concero Profit Sharing Plan. *
10.12(4)       Amendment No. 1 To Concero Profit Sharing Plan. *
10.13**        Stock Purchase Agreement dated as of January 1, 1997 between Michael J.
               Maples and the Registrant.
10.14**        Stock Subscription dated October 1, 1996 between Pencom Systems Incorporated
               and the Registrant.
10.15**        Asset Contribution Agreement dated October 1, 1996 between Pencom Systems
               Incorporated and the Registrant.
10.16**        Assignment and Assumption Agreement dated October 1, 1996 between the
               Registrant and Pencom Systems Incorporated.
10.17**        Warrant dated October 1, 1996 issued by the Registrant to Pencom Systems
               Incorporated.
10.18**        Warrant dated October 1, 1996 issued by the Registrant to Stephen Markman.
10.19**        Warrant dated October 1, 1996 issued by the Registrant to Thomas Pallister.
10.20**        Warrant dated October 1, 1996 issued by the Registrant to Joy Venegas.
10.21(2)       Employment Agreement dated August 28, 1998 between the Registrant and Timothy
               D. Webb.  *
10.22          Addendum to Timothy D. Webb's employment agreement dated July 31, 2001.
10.23(3)       Employment Agreement dated January 25, 1999 between the Registrant and John
               M. Velasquez.  *
10.24          John Velasquez promissory note dated January 1, 2002.
10.25(3)       Office lease agreement (Bellevue, Washington) dated April 23, 1999 between
               the Registrant and G W Investments.
10.26(3)       Office lease agreement (Framingham, Massachusetts) dated January 31, 2000
               between the Registrant and BCIA New England Holdings LLC.
10.27(3)       2000 Non-Officer Stock Option/Stock Issuance Plan.  *
10.28(3)       Form of Indemnity Agreement between Concero, Inc. and each of its directors
               and executive officers.
21.1           List of subsidiaries.
23.1           Consent of Ernst & Young LLP, Independent Auditors.
24.1           Power of Attorney, pursuant to which amendments to this Form 10-K may be
               filed, is included on the signature page contained in Part IV of this Form
               10-K.
---------

      *  Indicates management contract or compensatory plan or arrangement.
    **   Incorporated herein by reference to the Company's Registration Statement on Form S-1 (File No. 333-21565).
    (1)       Incorporated herein by reference to the exhibits to the Company's Report on Form 10-Q for the
              three-month period ended June 30, 1998.
    (2)       Incorporated herein by reference to the exhibits to the Company's Report on Form 10-Q for the
              three-month period ended September 30, 1998.
    (3)       Incorporated herein by reference to the exhibits to the Company's Report on Form 10-K for the year ended
              December 31, 1999.
    (4)       Incorporated herein by reference to the exhibits to the Company's Report on Form S-8 as filed on July 28,
              2000.

 (b) Reports on Form 8-K:

     During the quarter ended December 31, 2001, no current reports on Form 8-K were filed.`

22

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 on March 29, 2002.

`CONCERO, INC.

                                              By: /s/ TIMOTHY D. WEBB 
                                                  Timothy D.Webb
                                                  President and Chief Executive Officer`

Power of Attorney

KNOW ALL PERSONS BY THESE PRESENTS,  that each individual  whose signature  appears below  constitutes and appoints Timothy
D. Webb and Keith D. Thatcher,  and each or any of them, his true and lawful  attorneys-in-fact  and agents,  each with the
power of  substitution  and  resubstitution,  for him in any and all  capacities,  to sign any and all  amendments  to this
Annual Report of Form 10-K and to file the same, with exhibits  thereto and other documents in connection  therewith,  with
the Securities and Exchange Commission,  hereby ratifying and confirming all that each said  attorney-in-fact and agent, or
his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

`Signature                                    Title                                                          Date
--------------------------------------    ----------------------------------------     ----------------------------------------

/s/    TIMOTHY D. WEBB                    President, Chief Executive Officer                                    March 29, 2002
--------------------------------------      and Director
Timothy D. Webb                             (principal executive officer)

/s/    KEITH D. THATCHER                  Chief Financial Officer, Sr. Vice                                     March 29, 2002
--------------------------------------      President of Finance and Treasurer
Keith D. Thatcher                            (principal financial officer)

/s/   COLLEEN M. SERRATA                  Controller                                                            March 29, 2002
--------------------------------------    (principal accounting officer)
Colleen M. Serrata

/s/   WADE E. SAADI                       Chairman of the Board of Directors                                    March 29, 2002
--------------------------------------
Wade E. Saadi

/s/   EDWARD C. ATEYEH, JR.               Director                                                              March 29, 2002
--------------------------------------
Edward C. Ateyeh, Jr.

/s/   W. FRANK KING                       Director                                                              March 29, 2002
--------------------------------------
Dr. W. Frank King

/s/    THOMAS A. HERRING                  Director                                                              March 29, 2002
--------------------------------------
Thomas A. Herring

/s/    KEVIN B. KURTZMAN                  Director                                                              March 29, 2002
--------------------------------------
Kevin B. Kurtzman

/s/    MICHAEL J. MAPLES                  Director                                                              March 29, 2002
--------------------------------------
Michael J. Maples`

23

Report of Independent Auditors

The Stockholders and Board of Directors
of Concero, Inc.

We have audited the
accompanying consolidated balance sheets of Concero, Inc. 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 Concero, Inc. and
subsidiaries at December 31, 2000 and 2001, and the 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

Austin, Texas



F-1

`Concero, Inc. and Subsidiaries
                                                Consolidated Balance Sheets
                                      (in thousands, except share and per share data)

                                                                          ------------------------------
                                                                                    December 31,
                                                                                    2000            2001
                                                                          -------------------------------
Assets
Current assets:
   Cash..............................................................    $         5,087     $     4,141
   Short-term investments............................................              9,122           8,964
   Accounts receivable, net of allowance for doubtful accounts of
      $1,520 and $612 in 2000 and 2001, respectively.................             11,243             823
   Unbilled revenue under customer contracts.........................                 86             557
   Income tax receivable.............................................                664              11
   Prepaid expenses and other current assets.........................              1,005             594
                                                                         ---------------     ------------
Total current assets.................................................             27,207          15,090

Deferred tax asset, net..............................................              2,281               -
Property and equipment, net..........................................              6,318           1,554
                                                                         ----------------    ------------
Total assets.........................................................    $        35,806     $    16,644
                                                                         ================    ============

Liabilities and stockholders' equity
Current liabilities:
   Trade payables....................................................    $           573     $        66
   Accrued expenses and other current liabilities....................              2,473           5,445
                                                                         ----------------    ------------
Total current liabilities............................................              3,046           5,511

Stockholders' equity:
   Preferred stock, par value $.01 per share, 1,000,000 shares
     authorized and none issued and outstanding......................                  -               -
   Common stock, par value $.01 per share, 34,000,000 shares authorized,
     10,162,618 and 10,225,090 shares issued and outstanding at
     December 31, 2000 and 2001, respectively........................                102             102
   Additional paid-in capital........................................             33,695          33,734
   Accumulated and other comprehensive income........................                 16               -
   Retained deficit..................................................             (1,053)        (22,703)
                                                                         ----------------    ------------
Total stockholders' equity...........................................             32,760          11,133
                                                                         ----------------    ------------
Total liabilities and stockholders' equity...........................    $        35,806     $    16,644
                                                                         ================    ============


                                                  See accompanying notes.`

F-2

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

                                                    -------------------------------------------------
                                                                  Year ended December 31,
                                                                 1999            2000              2001
                                                        -------------     ------------    --------------

Revenue...........................................          $  45,823      $   57,290         $  20,223

Operating expenses:
    Technical staff...............................             25,377          33,833            14,670
    Selling and administrative staff..............              9,034          10,872             5,424
    Other expenses................................              9,520          18,178            20,094
                                                       --------------    -------------    --------------
Total operating expenses..........................             43,931          62,883            40,188
                                                       --------------    -------------    --------------

Income (loss) from operations.....................              1,892          (5,593)          (19,965)

Interest income, net..............................              1,018             943               596
                                                       --------------    -------------    --------------
Income (loss) before income taxes.................              2,910          (4,650)          (19,369)
                                                       --------------    -------------    --------------
Provision (benefit) for income taxes..............              1,130            (725)            2,281
                                                       --------------    -------------    --------------

Net income (loss).................................          $   1,780      $   (3,925)        $ (21,650)
                                                       ==============    =============    ==============

Basic earnings (loss) per share...................          $    0.19      $    (0.39)        $   (2.13)
                                                       ==============    =============    ==============

Diluted earnings (loss) per share.................          $    0.17      $    (0.39)        $   (2.13)
                                                       ==============    =============    ==============

    Shares used in basic earnings (loss)
       per share calculation......................              9,452           9,971            10,188
                                                       ==============    =============    ==============

    Shares used in diluted earnings (loss)
       per share calculation......................             10,501           9,971            10,188
                                                       ==============    =============    ==============


                                                  See accompanying notes.`

F-3

`Concero, Inc. and Subsidiaries
                                      Consolidated Statements of Stockholders' Equity
                                             (in thousands, except share data)


                                      ------------------------
                                           Common Stock                                                          Other
                                         $0.01 Par Value          Additional                        Retained    Comprehensive     Total
                                      ------------------------      Paid-In          Deferred       Earnings        Income      Stockholders'
                                        Shares       Amounts         Capital        Compensation    (Deficit)       (Loss)        Equity
                                      ---------     ---------     ----------      ------------     ---------   -------------   --------------

 Balance at December 31, 1998.......   9,293,866    $     93      $  29,995       $       (44)     $   1,093   $         (69)   $      31,068
 Employee stock purchase plan
    issuance of stock...............      70,045           1            180                 -              -               -              181
 Exercise of stock options and
    warrants........................     302,624           3            153                 -              -               -              156
 Tax benefit related to stock
    option exercises................           -           -            191                 -              -               -              191
 Forfeiture of stock options........           -           -            (28)               28              -               -                -
 Amortization of deferred                      -           -              -                16              -               -               16
    compensation....................
 Comprehensive income:
    Net income......................           -           -              -                 -          1,780               -            1,780
    Net unrealized gain on investments         -           -              -                 -              -              30               30
                                                                                                                              ---------------
 Comprehensive income...............           -           -              -                 -              -               -            1,810
                                      -------------------------------------------------------------------------------------------------------
 Balance at December 31, 1999.......   9,666,535          97         30,491                 -          2,873             (39)          33,422
 Employee stock purchase plan
    issuance of stock...............      95,798           1            367                 -              -               -              368
 Exercise of stock options and
    warrants........................     400,285           4            556                 -              -               -              560
 Tax benefit related to stock
    option exercises................           -           -          2,281                 -              -               -            2,281
 Comprehensive loss:
 Net loss...........................           -           -              -                 -         (3,925)              -           (3,925)
 Net unrealized gain on investments.           -           -              -                 -              -              54               54
                                                                                                                              ---------------
    Comprehensive loss..............           -           -              -                 -              -               -           (3,871)
                                      -------------------------------------------------------------------------------------------------------
 Balance at December 31, 2000.......  10,162,618         102         33,695                 -         (1,053)             16           32,760
 Employee stock purchase plan
    issuance of stock...............      38,120           -             32                 -              -               -               32
 Exercise of stock options and
    warrants........................      24,352           -              7                 -              -               -                7
 Comprehensive loss:
    Net loss........................           -           -              -                 -        (21,650)              -          (21,650)
    Realized gain on investments....           -           -              -                 -              -             (16)             (16)
                                                                                                                              ---------------
 Comprehensive loss.................           -           -              -                 -              -               -          (21,666)
                                      -------------------------------------------------------------------------------------------------------
 Balance at December 31, 2001         10,225,090    $    102      $  33,734       $         -      $ (22,703)  $           -    $      11,133
                                      =======================================================================================================



                                                  See accompanying notes.`

F-4

`Concero, Inc. and Subsidiaries
                                           Consolidated Statements of Cash Flows
                                                      (in thousands)

                                                                           1999             2000             2001
                                                                   -------------    ------------    --------------

Operating activities
   Net income (loss)..........................................     $      1,780     $     (3,925)   $     (21,650)
   Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
     Valuation allowance for deferred tax asset...............                -                -            2,281
     Depreciation and amortization............................            1,363            2,211            1,628
       Impairment of property and equipment                                   -                -            4,131
     Bad debt expense, net of recoveries .....................               48            1,654              146
     Changes in operating assets and liabilities:
          Accounts receivable.................................           (4,717)          (2,057)          10,274
          Unbilled revenue under customer contracts...........              (80)           1,064             (471)
          Prepaid expenses and other current assets...........              127             (560)             411
          Trade payables......................................              465             (352)            (507)
          Accrued expenses and other current liabilities......            1,479             (385)           2,971
          Income taxes........................................            1,269             (828)             653
                                                                   -------------    ------------    --------------
         Net cash provided by (used in) operating activities..            1,734           (3,178)            (133)
                                                                   -------------    ------------    --------------

Investing activities
     Proceeds from sale of short-term investments.............            1,017            9,081              142
     Acquisition of property and equipment....................           (2,147)          (3,852)            (995)
                                                                   -------------    ------------    --------------
         Net cash provided by (used in) investing activities..           (1,130)           5,229             (853)
                                                                   -------------    ------------    --------------

Financing activities
     Proceeds from issuance of common stock, net of
       issuance costs.........................................              337              928               40
                                                                   -------------    ------------    -------------
       Net cash provided by financing activities............                337              928               40
                                                                   -------------    ------------    -------------


       Net increase (decrease) in cash........................              941            2,979             (946)
       Cash, beginning of year................................            1,167            2,108            5,087
                                                                   -------------    ------------    -------------
       Cash, end of year......................................     $      2,108     $      5,087    $       4,141
                                                                   =============    ============    =============


Supplemental disclosure of cash flow information
     Interest paid............................................     $         10     $          -    $           -
     Income taxes paid........................................     $        637     $        105    $           -
     Income taxes recovered...................................     $        776     $          -    $         555

Supplemental schedule of non-cash activities
     Unrealized gain (loss) on investments....................     $         30     $         54    $           -
     Reduction of income taxes payable associated
       with the exercise of stock options.....................     $        191     $      2,281    $           -
     Write-off of fully depreciated property and equipment....     $        112     $        186    $           -


                                                  See accompanying notes.`

F-5

Concero, Inc. and Subsidiaries
                                   Notes to Condensed Consolidated Financial Statements
                                                     December 31, 2001

### 1.  Nature of Business

Concero, Inc.
(Concero or the Company) is a provider of interactive
television solutions. Concero provides software products and systems integration
consulting services that enable application providers, content programmers,
studios, and cable operators to quickly deploy a wide range of broadband
services such as entertainment-on-demand, television commerce, interactive
advertising and promotional services. Conceros solutions create engaging
and entertaining user experiences and drive profitable, on-demand interactive
services.

Concero possesses unique
delivery capabilities for supporting interactive television solutions. In
conjunction with Motorolas Horizon and Scientific-Atlantas
CreativEdge developers programs, Concero operates state-of-the-art integration
labs with specialized equipment and expertise that enable development of
cross-platform applications that run on Harmonic, Motorola and
Scientific-Atlanta head-ends and leading set top boxes. These assets, combined
with Conceros dedicated and experienced team of interactive television
consultants and software engineers, offer customers substantial cost savings and
rapid time-to-market benefits.

Conceros customers
include @Security Broadband, CANAL+ U.S. TECHNOLOGIES, Digital Think, Grande
Communications, Keen Personal Media, Lodgenet Entertainment, Power TV and TV
Guide.

### 2.  Basis of Presentation

The consolidated financial
statements of the Company include the accounts of Concero, Inc. and its wholly
owned subsidiaries. All significant inter-company accounts and transactions have
been eliminated.

### 3.  Summary of Significant Accounting Policies

#### Revenue Recognition

Revenue from service
contracts is recognized when persuasive evidence of an arrangement exists,
delivery of the services has occurred, the fee is fixed and determinable, and
collection is probable. Revenue from time and materials contracts is recognized
during the period for which the services are provided. Revenue from fixed price
contracts is recognized using the percentage-of-completion method, measured by
the percentage of units of labor incurred to the date of measurement relative to
the estimated total units of labor at completion. The cumulative impact of
revisions in estimates of the percentage to complete is reflected in the period
in which the revisions are made. Provisions for estimated losses on uncompleted
contracts are made on a contract-by-contract basis and are recognized in the
period in which such losses are determined. Revenue earned in excess of billings
is classified as unbilled revenue under customer contracts. Billings in excess
of earned revenue are classified as deferred revenue. Revenue excludes
reimbursable expenses. Revenue from product license fees is generally recognized
when persuasive evidence of an arrangement exists, delivery and deployment of
the product has occurred, no significant obligations by the Company with regard
to implementation remain, the fee is fixed and determinable and collectibility
is probable. The Company has recorded no license revenue in 1999, 2000, or 2001.

#### Use of Estimates

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

#### Costs and Expenses

Technical staff expense
consists of the cost of (i) salaries, payroll taxes, health insurance and
workers compensation for technical staff personnel assigned to customer
projects, (ii) unassigned technical staff personnel and (iii) fees paid to
subcontractors for work performed in connection with customer projects.

Selling and administrative
staff expense consists of (i) the cost of salaries, payroll taxes, health
insurance and workers compensation for selling and administrative
personnel and (ii) all commissions and bonuses.

F-6

Concero, Inc. and Subsidiaries
                           Notes to Condensed Consolidated Financial Statements - (Continued)

Other expenses consist of
all non-staff related costs, such as occupancy costs, travel, business
insurance, business development, recruiting, training and depreciation, as well
as cost reduction measures (as described in footnote 4).

#### Cash and Cash Equivalents

Cash consists primarily of
money market funds with the ability to deposit or draw funds, as needed. Cash
equivalents consist primarily of marketable securities having original
maturities of ninety days, or less, when purchased. At December 31, 2000 and
December 31, 2001, the Company had $3.5 million and $3.8 million, respectively,
in money market funds that were classified as cash equivalents on the balance
sheet.

#### Fair Value of Financial Instruments

The Companys
financial instruments consist primarily of cash and cash equivalents, short-term
investments, receivables and accounts payable. The Company believes all of the
financial instruments recorded values approximate current market values.

#### Concentration of Credit Risk

Financial instruments that
potentially subject the Company to concentration of credit risk consist
principally of cash balances, short-term investments and trade accounts
receivable. The Company invests its excess cash in highly liquid investments
(short-term bank deposits) and places its investments in high quality securities
with financial institutions of high credit standing. The Company does not
require collateral from its customers who are headquartered primarily in North
America, and maintains allowances for potential credit losses.

#### Property and Equipment

Property and equipment is
recorded at cost. Depreciation and amortization are computed based on the cost
of the related assets, using the straight-line method over the estimated useful
lives of the assets which range from three to seven years. Leasehold
improvements are amortized over the term of the related lease or estimated life
of the leasehold improvements, whichever is shorter.

#### Advertising Expense

The Company expenses
advertising costs when incurred. Total advertising expense amounted to
approximately $45,000, $208,000 and $130,000 in 1999, 2000 and 2001,
respectively.

#### Stock Based Compensation

FASB  Statement No. 123, or SFAS No. 123,  Accounting for  Stock-Based  Compensation,  prescribes  accounting and reporting
standards for all stock-based  compensation  plans,  including  employee stock options.  As permitted by SFAS No. 123,  the
Company has elected to  continue  to account for its  employee  stock-based  compensation  in  accordance  with  Accounting
Principles Board Opinion No. 25, or APB No. 25, Accounting for Stock Issued to Employees.

F-7

Concero, Inc. and Subsidiaries
                           Notes to Condensed Consolidated Financial Statements - (Continued)

#### Earnings (Loss) per Share

`The following  table sets forth the computation of basic and diluted  earnings  (loss) per share (in thousands,  except per
share data):

                                                                    1999                2000                  2001
                                                       -----------------    ----------------     -----------------

Numerator:
   Net income (loss) ...........................       $          1,780     $        (3,925)     $        (21,650)
                                                       =================    ================     =================

Denominator:
   Shares used in basic earnings (loss)
      per share calculation.....................                  9,452               9,971                10,188

   Effect of dilutive securities:
      Employee stock options....................                    634                   -                     -
      Warrants..................................                    415                   -                     -
                                                       -----------------    ----------------     -----------------

   Shares used in diluted earnings (loss)
      per share calculation.....................                 10,501               9,971                10,188
                                                       =================    ================    ==================


Basic earnings (loss) per share ................       $           0.19      $        (0.39)     $          (2.13)
                                                       =================    =================    =================

Diluted earnings (loss) per share ..............       $           0.17      $        (0.39)     $          (2.13)
                                                       =================    =================    =================`

Options to purchase 3.2
million shares and 3.1 million shares of common stock at an average exercise
price of $8.14 and $3.16 per share were outstanding at December 31, 2000 and
December 31, 2001, but were not included in the computation of diluted net loss
per share as their effect would be anti-dilutive.

#### Recently Issued Accounting Standards

The FASB issued SFAS No.
141, Business Combinations, in June 2001. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001 be accounted for under the
purchase method and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination. The
adoption of SFAS No. 141 did not have a material impact on the financial
statements of the Company.

The FASB issued SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, in August
2001. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and other related
accounting guidance. SFAS No. 144 is effective for the Companys fiscal
year beginning January 1, 2003. Management does not expect the adoption of this
statement to have a material impact on the financial statements of the Company.

#### Segment Information

The Company identifies its
operating segments based on geographical location. In accordance with SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information, the
Company has aggregated its operating segments for reporting purposes as it
operates in a single business segment providing software products and systems
integration consulting services.

#### Reclassifications

Certain amounts in the
prior year financial statements have been reclassified to conform to the current
year presentation.

F-8

Concero, Inc. and Subsidiaries
                            Notes to Condensed Consolidated Financial Statements - (Continued)

### 4.  Cost Reduction Measures

With the weakness in the
U.S. economy at large and the market for e-business services in general, the
Company initiated cost reduction measures in 2000 which included $266,000
primarily in severance costs which were paid in 2000. In 2001, the Company
implemented cost reduction measures to continue to more closely align its cost
structure with near-term future revenue opportunities. These cost reduction
measures included workforce reductions, the impairment of equipment and the
establishment of reserves for the elimination of excess leased office space. As
a result of these cost reduction measures, the Company recorded a charge in
other expense of $12.2 million in 2001, as follows (in thousands):

`Impairment
                                                                          of               Lease
                                                    Severance          Equipment       Commitments               Total
                                               --------------    ---------------    --------------      --------------
Accrual balance at December 31, 2000           $           -     $            -     $           -       $           -
   Charge to other expense                             1,512              2,150               954               4,616
   Payments and charges made                            (584)            (2,150)              (16)             (2,750)
                                               --------------    ---------------    --------------      --------------
Accrual balance at March 31, 2001              $         928     $            -     $         938       $       1,866
                                               --------------    ---------------    --------------      --------------

   Charge to other expense                               811                391             1,177               2,379
   Payments and charges made                          (1,317)              (391)             (302)             (2,010)
                                               --------------    ---------------     -------------      --------------
Accrual balance at June 30, 2001               $         422     $            -      $      1,813       $       2,235
                                               --------------    ---------------     -------------      --------------

   Charge to other expense                               421              1,500             2,845               4,766
   Payments and charges made                            (555)            (1,500)             (379)             (2,434)
                                               --------------    ---------------     -------------      --------------
Accrual balance at September 30, 2001          $         288     $           -       $      4,279       $       4,567
                                               --------------    ---------------     -------------      --------------

   Charge to other expense                               (38)                90               426                 478
   Payments and charges made                            (250)               (90)             (680)             (1,020)
                                               --------------    ---------------     -------------      --------------
Accrual balance at December 31, 2001           $           -     $            -      $      4,025       $       4,025
                                               ==============    ===============     =============      ==============`

Workforce  reductions  included an aggregate of 242 and 83 personnel in 2001 and
2000,  respectively,  to which the  Company  paid a  severance  benefit.  Excess
equipment primarily related to leasehold  improvements,  equipment and furniture
utilized  by  terminated  personnel.  The  elimination  of the  office  space is
associated with the planned  reduction of  approximately  97,500 square feet, or
91% of the office space  occupied by the Company at December  31, 2000.  Accrued
lease  payments at December 31, 2001 are expected to be paid over the  remaining
lease terms which extend to various  dates  through  2007. At December 31, 2001,
the Company had entered  into  sublease  agreements  representing  approximately
28,310 square feet. The estimated costs of abandoning  these leased  facilities,
including  estimated  costs to  sublease,  brokerage commissions  and  resulting
sublease  income,  were  based on  market  information  and  trend  analysis  as
estimated by the Company. Actual results could differ from these estimates,  and
such differences could be material to the financial  statements.  In particular,
actual sublease income  attributable to the  consolidation of excess  facilities
might deviate from the assumptions  used to calculate the Company's  accrual for
facility  lease  commitments.  With the  exception of the  impairment  of excess
equipment, all payments and charges made involved the disbursement of cash.

F-9

Concero, Inc. and Subsidiaries
                            Notes to Condensed Consolidated Financial Statements - (Continued)

### 5.  Property and Equipment

Property and equipment consist of the following (in thousands):

`2000                   2001
                                                                  -------------------      -----------------

Furniture and fixtures..................................          $             1,612      $            309
Computer equipment......................................                        6,329                 2,219
Computer software.......................................                        2,194                   709
Leasehold improvements..................................                        1,288                     9
                                                                  -------------------      -----------------
                                                                               11,423                 3,246
Less accumulated depreciation and amortization..........                        5,105                 1,692
                                                                  -------------------      -----------------
                                                                  $             6,318      $          1,554
                                                                  ===================      =================`

### 6.  Short-term Investments

The Company determines the
appropriate classification of investments at the time of purchase and
re-evaluates such designation at each balance sheet date. The short-term
investments have been classified as available-for-sale and are carried at fair
value (quoted market prices), with unrealized holding gains and losses reported
as a separate component of stockholders equity. The cost of debt
securities is adjusted for amortization of premiums and accretion of discounts
to maturity. Such amortization, interest income, realized gains and losses and
declines in value judged to be other than temporary are included in net interest
income.

Information related to the
Companys short-term investments which consisted of corporate issues were
as follows at December 31, 2000 and 2001 (in thousands):

`2000             2001
                                                     -------------     ------------
Amortized cost.....................                  $       9,106      $     8,964
Unrealized gains...................                             17                -
Unrealized losses..................                              1                -
                                                     -------------     ------------
Market value.......................                  $       9,122     $      8,964
                                                     =============     ============`

Gross gains and losses on
the sale of investments, which are determined on the specific identification
method, were not significant in 2000 and 2001. Short-term investments are
generally comprised of variable rate securities that provide for optional or
early redemption within twelve months and the contractual maturities are
generally less than twelve months. As of December 31, 2001, the Companys
debt securities all had contractual maturities of less than one year.

### 7.  Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets at December 31, consist of the following (in thousands):

`2000                  2001
                                                                   ---------------------------------------

Refundable deposits.......................................         $             238         $         161                                                                                238
Prepaid rent expense......................................                       158                   201
Other prepaid expenses....................................                       188                   112
Travel and payroll advances...............................                       139                   120
Other current assets......................................                       282                     -
                                                                   ----------------------------------------
                                                                   $           1,005         $         594
                                                                   ========================================`

F-10

Concero, Inc. and Subsidiaries
                            Notes to Condensed Consolidated Financial Statements - (Continued)

### 8.  Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities at December 31, consist of the following (in thousands):

`2000                   2001
                                                                   ----------------------------------------

Accrued vacation..........................................         $            477         $          101
Accrued bonuses...........................................                      177                     56
Payroll and other taxes payable...........................                       50                     19
Employee stock purchase plan..............................                      138                      2
Lease commitment accrual................................                          -                  4,025
Other accrued expenses and current liabilities............                    1,631                  1,242
                                                                   ----------------------------------------
                                                                   $          2,473         $        5,445
                                                                   ========================================`

### 9.  Significant Customers

In 2001, three customers
accounted for 14%, 12% and 10% of the Companys revenue and, in total,
accounted for 3% of the Companys accounts receivable at December 31, 2001.
One customer accounted for 10% of revenue and, in total, accounted for 2% of
accounts receivable at December 31, 2000. In 1999, one customer accounted for
26% of revenue.

### 10. Employee Retirement Plan

The Company maintains a
defined contribution plan (the Plan) pursuant to Section 401(k) of
the Internal Revenue Code for employees who are at least 21 years of age.
Eligible employees can elect to reduce their current compensation up to the
statutory prescribed limit and have the amount of such reduction contributed to
the Plan. The Plan also allows for the Company to make discretionary
contributions on behalf of eligible employees. The Company contributed
approximately $180,000, $664,000 and $251,000 to the Plan in 1999, 2000 and
2001, respectively.

F-11

Concero, Inc. and Subsidiaries
                            Notes to Condensed Consolidated Financial Statements - (Continued)

### 11.  Stockholders' Equity

The Company maintains two
stock option plans, a 1996 Stock Option/Stock Issuance Plan (the 1996
Plan) and a 2000 Non-Officer Stock Option/Stock Issuance Plan (the
Non-Officer Plan). The 1996 Plan provides for the issuance of
incentive stock options, as defined in Section 422A of the Internal Revenue Code
of 1986, and nonqualified stock options. The exercise price for incentive stock
options may not be less than fair market value on the date of grant, or such
greater amount necessary to qualify as an incentive stock option. The options
outstanding under the 1996 Plan generally vest in four equal annual installments
commencing on the first anniversary of the grant and expire 10 years after the
date of grant. Certain of these options are subject to acceleration clauses. At
December 31, 2001, 5,028,000 shares of the Companys common stock were
authorized for issuance under the 1996 Plan. In May 2000, the Companys
stockholders approved an amendment to the 1996 Plan to affect the following:

- increase the number of shares of common stock reserved for issuance under the
1996 Plan by an additional 1,000,000 shares;
- implement an automatic share increase provision to such plan so that the number
of shares of common stock available for issuance under such plan will
automatically increase on the first trading day in January each year, beginning
with the 2001 calendar year, by an amount equal to eight percent (8%) of the
shares of common stock outstanding on the last trading day of December of the
immediately preceding calendar year, but in no event will any such annual
increase exceed 2,000,000 shares of common stock; and
- provide greater flexibility concerning the limited transferability of
non-statutory options in connection with the estate planning transfers and
transfers incident to domestic orders.

The Non-Officer Plan
provides for incentive and nonqualified stock options to employees who are not
officers or directors of the Company, and to consultants and other independent
advisors who provide services to the Company. The exercise price for incentive
stock options may not be less than fair market value on the date of grant, or
such greater amount necessary to qualify as an incentive stock option. The
options outstanding under the Non-Officer Plan vest at such time or times as
determined by the Plan Administrator, however, no option shall have a term in
excess of ten (10) years after the date of grant. At December 31, 2001, 250,000
shares of the Companys common stock were authorized for issuance under the
Non-Officer Plan.

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

F-12

Concero, Inc. and Subsidiaries
                           Notes to Condensed Consolidated Financial Statements - (Continued)

The following table summarizes stock option activity under the 1996 Plan and the Non-Officer Plan:

`Range of Exercise Prices
                                   -----------------------------------------------------------------------------------------------
                                        $0.04 - $2.65          $2.75 - $9.00          $9.62 - $46.00                Total
                                   --------------------  -----------------------  ----------------------   ----------------------
                                                Weighted                 Weighted               Weighted                 Weighted
                                     Number     Average     Number       Average      Number    Average       Number     Average
                                       of       Exercise      of         Exercise       of      Exercise        of       Exercise
                                     shares     Price       shares       Price        shares    Price         shares     Price
                                   ----------  ---------  ----------   ----------  ----------   ---------  ----------  ----------

Balance at December 31, 1999.....     570,174   $   1.71   1,728,621    $    3.88     245,436   $  13.88    2,544,231   $    4.34
Granted during the year .........      57,080       2.31     370,500         5.08   1,261,025      17.03    1,688,605       14.01
Exercised during the year........    (139,389)      1.08     (91,396)        4.39           _          -     (230,785)       2.39
Cancelled during the year........    (160,184)      1.94    (304,751)        4.85    (296,325)     19.14     (761,260)       9.85
Balance at December 31, 2000.....     327,681   $   1.97   1,702,974    $    3.96   1,210,136   $  15.95    3,240,791   $    8.14
                                   ==============================================================================================

Granted during the year .........   1,819,516   $   1.08      45,000    $    3.14           -   $      -    1,864,516   $    1.13
Exercised during the year........     (19,352)      0.22           -            -           -          -      (19,352)       0.22
Cancelled during the year........    (534,341)      1.69    (606,588)        4.40    (880,838)     17.10   (2,021,767)       9.05
Balance at December 31, 2001.....   1,593,504   $   1.07   1,141,386    $    3.68     329,298      12.98    3,064,188   $    3.16
                                   ==============================================================================================


Exercisable at December 31, 1999.     258,421   $   1.43     337,293    $    4.06      19,036   $  11.87      614,750   $    3.20
                                   ===========  ========  ===========   =========  ===========  ========   ==========   =========

Exercisable at December 31, 2000.     167,588   $   1.87     634,825    $    3.89      70,836   $  14.32      873,249   $    4.35
                                   ===========  ========  ===========  ==========  =========== =========   ==========   =========

Exercisable at December 31, 2001.     188,705   $   2.07     784,610    $    3.71     130,871   $  13.73    1,104,186   $    4.62
                                   ===========  ========  ===========  ==========  =========== =========   ==========   =========


Weighted average fair value of
  options granted during 2001....               $   1.04                $    3.20               $      -                $    1.05
                                                ========                =========               ========                =========

Weighted average remaining
  contractual life in years, at
  December 31, 2001..............               $   8.65                $    7.27               $   8.21                $    8.01
                                                ========                =========               ========                =========`

Pro forma information
regarding net income (loss) and earnings (loss) per share is required by SFAS
No. 123, and has been determined as if the Company had accounted for option
grants under the 1996 Plan and the Non-Officer Plan and purchases of common
stock using the fair value method of that Statement. The fair value of the
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions:

`1999                2000               2001
                                                   Option              Option             Option
Assumption                                         Grants              Grants             Grants
                                            ----------------     --------------    ---------------
Risk-free interest rate............                   6.00%              6.00%              4.41%
Dividend yield.....................                      0%                 0%                 0%
Volatility factor of the market price
  of the Company's common stock....                    1.14               1.35               1.35
Average life.......................                 6 years            6 years            6 years`

F-13

Concero, Inc. and Subsidiaries
                            Notes to Condensed Consolidated Financial Statements - (Continued)

For purposes of pro forma
disclosure, the estimated fair value of the options is amortized to expense over
the options vesting period, and is not likely to be representative of the
effects on reported net income (loss) for future years. The Companys pro
forma information follows (in thousands, except per share data):

`=============================================
                                                                           Year ended December 31,
                                                                 ---------------------------------------------
                                                                    1999             2000             2001
                                                                 -----------    -------------    -------------
Pro forma stock-based compensation expense..................     $    2,986     $      6,551     $        981
Pro forma net loss..........................................     $      (41)    $    (10,476)    $    (22,631)
Pro forma basic loss per share..............................     $        -     $      (1.05)    $      (2.22)
Pro forma diluted loss per share............................     $        -     $      (1.05)    $      (2.22)`

#### Warrants

Prior to October 1, 1996,
the Company  conducted  business and operations as a software division of Pencom
Systems Inc. (Pencom).  In connection with the spin-off, the Company
issued 5,538,463 shares of common stock and warrants to purchase an aggregate of
507,669  shares of common  stock at an  exercise  price of $0.04 per  share.  At
December 31, 2001, there were 158,771 warrants outstanding. The weighted average
fair value of the  warrants  at the grant date was $0.03.  The  warrants  may be
exercised in whole or in part, at any time prior to October 1, 2006.

#### Employee Stock Purchase Plan

The Company maintains an
Employee Stock Purchase Plan (the Purchase Plan). The Purchase Plan
allows eligible employees to purchase shares of common stock, at semi-annual
intervals, through periodic payroll deductions. Purchase periods begin on the
first business day in November and May of each year and end on the last business
day of April and October, respectively. Shares of common stock are purchased for
each participant at the end of each purchase period. At December 31, 2001,
900,000 shares of the Companys common stock were authorized for issuance
under the Purchase Plan. The Company issued 70,045, 95,798 and 38,120 shares of
common stock to employees through the Purchase Plan in 1999, 2000 and 2001,
respectively. The Purchase Plan will terminate on the last business day of April
2007.

At December 31, 2001, the
Company has reserved 6,178,000 shares of common stock for issuance under the
Companys stock purchase and stock option plans.

### 12. Related Party Transactions

During 2001, the Company
completed a project for Collective Technologies whose chief executive officer is
a member of the Board of the Company. At December 31, 2001, the accounts
receivable balance due from Collective Technologies was $57,300. The Company
utilizes non-exclusive recruiting services provided by Pencom. Two of
Pencoms majority stockholders and its chief financial officer are members
of the Board of the Company (one of whom is the chairman of the Board).
Management believes that the terms and fees paid in connection with such
recruiting services are comparable to agreements maintained by the Company with
other unrelated recruiting firms and will continue to use these recruiting
services on a non-exclusive basis pursuant to an agreement entered into with
Pencom. Services provided to, and contracted services used by, Concero were as
follows (in thousands):

`------------------------------------------------------
                                                                       Year ended December 31,
                                                        ------------------------------------------------------
                                                                   1999               2000               2001
                                                        ----------------    ---------------    ---------------
Services provided to a related party:
   Consulting services.............................     $             -              $   -     $           57
                                                        ----------------    ---------------    ---------------
Total related party revenues.......................     $             -              $   -     $           57
                                                        ================    ===============    ===============

Services performed by a related party:
   Recruiting services.............................     $            53     $           73     $            5
                                                        ----------------    ---------------    ---------------
Total related party expenses.......................     $            53     $           73     $            5
                                                        ================    ===============    ===============`

F-14

Concero, Inc. and Subsidiaries
                            Notes to Condensed Consolidated Financial Statements - (Continued)

### 13. Commitments

The Company leases its
office space through non-cancelable operating lease arrangements, which contain
escalating lease payments. Future minimum rental commitments under existing
leases are as follows (in thousands):

`Years ending December 31:
  2002..............................................     $        2,687
  2003..............................................              2,630
  2004..............................................              1,156
  2005..............................................                811
  2006..............................................                459
  Thereafter........................................                195
                                                         ----------------
  Total.............................................     $        7,938
                                                         ================`

Minimum future rentals
receivable under the non-cancelable operating subleases at December 31, 2001
amounted to $632,000. As discussed in footnote 4, the Company established a
reserve in 2001 for future lease costs on excess office space of $5.4 million as
part of its cost reduction measures of which the balance in the related accrual
was $4.0 million at December 31, 2001. The accrual covers lease obligations of
approximately $2.9 million, as well as ongoing operating expenses related to
those facilities and exit costs. The significant assumptions in calculating the
accrual are that majority of the excess space will be sublet by the fourth
quarter of 2002 at rates ranging from $15.00 per square foot to $30.00 per
square foot, depending upon the space available. The remaining future rental
commitments, net of the costs included in the accrual for excess lease
obligations, are as follows (in thousands):

`Years ending December 31:
  2002..............................................     $        1,461
  2003..............................................              1,963
  2004..............................................                733
  2005..............................................                520
  2006..............................................                277
  Thereafter........................................                 94
                                                         ----------------
  Total.............................................     $        5,048
                                                         ================`

Rent expense for the years
ended December 31, 1999, 2000 and 2001 was approximately $1.7 million, $2.5
million and $1.7 million, respectively; exclusive of sub-lease income of
$517,000, $501,000 and $384,000, respectively.

### 14. Taxes

The significant components
of the provision (benefit) for income taxes are as follows (in thousands):

`-------------    ------------
                                                          2000            2001
                                                 -------------    ------------
Current:
  Federal.............................           $      (621)        $      -
  State...............................                   (36)               -
                                                 -------------    ------------
     Total current....................                  (657)               -

Deferred:
  Federal.............................                   (64)           2,096
  State...............................                    (4)             185
                                                 -------------    ------------
     Total deferred...................                   (68)           2,281
                                                 -------------    ------------
                                                 $      (725)     $     2,281
                                                 =============    ============`

F-15

Concero, Inc. and Subsidiaries
                            Notes to Condensed Consolidated Financial Statements - (Continued)

The Company's  effective tax rate from continuing  operations  differs from the U.S. statutory income tax rate as set forth
below:

`1999             2000           2001
                                                 ------------    -------------    -----------
U.S. statutory income tax rate........                  34.0%          (34.0%)        (34.0%)
State taxes, net of federal income tax
   benefit............................                   3.1%           (2.0%)         (2.0%)
Permanent differences ................                   1.4%           (0.3%)          0.3%
Change in valuation allowance.........                      -           20.8%          49.8%
Other.................................                   0.3%           (0.1%)         (2.3%)
                                                 ------------    -------------    -----------
Effective tax rate....................                  38.8%          (15.6%)          11.8%
                                                 ============    =============    ===========`

Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of the
Companys deferred taxes as of December 31 are as follows (in thousands):

`2000                2001
                                              ---------------       -------------
Deferred tax assets:
   Allowances and reserves...............     $          466        $        220
   Accrued expenses......................                230                 157
   Tax carry-forwards....................              3,030               8,414
   Stock option compensation expense.....                171                 171
   Fixed assets..........................                  -                  66
   Lease commitment accrual..............                  -               1,959
                                              ---------------       -------------
Total deferred tax assets................              3,897              10,987
   Valuation allowance...................               (965)            (10,603)
                                              ---------------       -------------
Net deferred tax assets..................              2,932                 384

Deferred tax liabilities:
   Fixed assets..........................               (261)                  -
   Prepaid expenses and other............               (390)               (384)
                                              ---------------       -------------
Total deferred tax liabilities...........               (651)                  -
                                              ---------------       -------------
Net deferred tax assets (liabilities)....     $        2,281        $          -
                                              ===============       =============`

The Company has established
a valuation allowance equal to the net deferred tax assets due to uncertainties
regarding the realization of the deferred tax assets. The valuation allowance
increased by approximately $9.6 million during 2001. The exercise of certain
stock options which have been granted under the Companys stock option plan
give rise to compensation which is includable in the taxable income of the
applicable option holder and deductible by the Company for federal and state
income tax purposes. Approximately $2.3 million of any realized tax benefit
arising from exercised options in excess of the benefit was credited to
additional paid-in capital during 2000; the Company established a valuation
allowance for this item during 2001 due to uncertainties regarding its
realization.

As of December 31, 2001,
the Company had federal net operating loss carry-forwards of approximately $23.4
million. The net operating loss will expire beginning in 2020, if not utilized.
Utilization of the net operating loss may be subject to a substantial annual
limitation due to the change in ownership provisions of the Internal
Revenue Code of 1986. The annual limitation may result in the expiration of net
operating loss before utilization.

F-16

Concero, Inc. and Subsidiaries
                           Notes to Condensed Consolidated Financial Statements - (Continued)

### 15. Quarterly Information (Unaudited)

Summarized quarterly
financial information for 2000 and 2001 is as follows (in thousands, except per
share amounts):

`-------------------------------------------------------------------------
                                                                       Quarter ended
                                          -------------------------------------------------------------------------
                                              Restated           June 30         September 30          December 31
                                              March 31
                                          -------------     -------------    -----------------     ----------------
2000
  Total revenue.....................        $   14,225        $   17,068         $    14,224          $    11,773
  Operating income (loss)...........               695             1,420              (3,677)              (4,032)
  Net income (loss).................               584             1,093              (2,226)              (3,377)
  Diluted earnings (loss) per share.        $     0.05        $     0.10         $     (0.22)         $     (0.34)
  Shares used in diluted earnings
    per share calculation...........            11,462            11,364              10,018               10,066

2001
  Total revenue.....................        $    8,485        $    6,671         $     3,077          $     1,990
  Operating loss....................            (9,396)           (3,556)             (6,046)                (967)
  Net loss..........................           (11,435)           (3,394)             (5,920)                (901)
  Diluted loss per share............        $    (1.13)       $    (0.33)        $     (0.58)         $     (0.31)
  Shares used in diluted earnings
    per share calculation...........            10,164            10,188              10,212               10,222`

The information for the
quarter ended March 31, 2001 includes a non-cash income tax charge of $2.3
million to establish a valuation allowance against the deferred tax asset for
stock options which was originally recorded as a reduction of stockholders
equity in that quarter. Net loss and diluted loss per share for the quarter
ended March 31, 2001 of $11.4 million and $1.13, respectively, differs from the
net loss and diluted loss per share of $9.2 million and $0.90, respectively, as
disclosed in the Companys 10-Q as filed with the SEC, as a result of the
$2.3 million non-cash income tax charge.

F-17

Concero, Inc. and Subsidiaries
                            Notes to Condensed Consolidated Financial Statements - (Continued)

Beginning in the second
quarter of 2000, the market for e-business services began to deteriorate and our
revenue declined. In 2000, we initiated cost reduction measures and narrowed our
service  offerings  around:  strategy,  enterprise  portals,  content chains and
interactive  television.  During 2000, the Company recorded  additional bad debt
reserves,  cancelled a stock  offering,  wrote-off an  investment  in a start-up
company, reversed a previously accrued bonus pool and implemented cost reduction
measures.  In 2001, our performance was considerably and negatively  affected by
the weak U.S.  economy and  decrease in capital  spending by our  customers  and
potential  customers.  We implemented  cost  reduction  measures in 2001 to more
closely align our cost structure with near-term future revenue opportunities. As
a result of these cost reduction measures, we recorded a charge in other expense
of $12.2 million in 2001 including workforce reductions and the establishment of
reserves for the elimination of excess leased office space and the impairment of
equipment. During 2001, the Company established additional bad debt reserves and
a valuation  allowance  against the deferred tax asset for stock options,  which
were  partially  offset  by the  receipt  of a  Texas  smart  jobs  credit.  The
transaction  details,  timing and their impact on the quarterly  information for
2000 and 2001 is  summarized  below (in  thousands,  except per share  amounts):

`-----------------------------------------------------------------------------
                                                                         Quarter ended
                                          -----------------------------------------------------------------------------
                                                 March 31            June 30         September 30         December 31
                                          ----------------    ---------------     ----------------     ----------------
2000
  Additional bad debt reserves......                                              $         1,123      $          550
  Cancelled stock offering..........                                                          750                (245)
  Write-off investment in start-up
     company........................                                                          125                   -
  Accrued bonus pool................       $          300     $          290                 (590)                  -
  Cost reduction measures...........                    -                  -                    -                 265
                                           ---------------    ---------------     ----------------     ----------------
  Impact on operating loss..........       $         (300)    $         (290)     $        (1,408)     $         (570)
  Impact on net loss................       $         (300)    $         (290)     $        (1,408)     $         (570)
  Impact on loss per share..........       $        (0.03)    $        (0.03)     $         (0.14)     $        (0.06)
  Shares used in diluted earnings
    per share calculation...........               11,462             11,364               10,018              10,066

2001
  Additional bad debt reserves......       $          300                 66                    -                (220)
  Valuation allowance for deferred
    tax asset.......................                2,281                  -                    -                   -
  Receipt of smart jobs credit......                    -                  -                    -                (234)
  Cost reduction measures...........                4,616              2,379                4,766                 478
                                           ---------------    ---------------     ----------------     ----------------
  Impact on operating loss..........       $       (7,197)    $       (2,445)     $        (4,766)     $          (24)
  Impact on net loss................       $       (7,197)    $       (2,445)     $        (4,766)     $          (24)
  Impact on loss per share..........       $        (0.71)    $        (0.24)     $         (0.47)     $            -
  Shares used in diluted earnings
    per share calculation...........               10,164             10,188               10,212               10,222`

F-18

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

CONCERO, INC.

`Balance at                                                Balance at
   Reserves and allowances deducted          Beginning of        Charged to                               End of
          from asset accounts                   Period           Operations        Deductions(1)          Period
----------------------------------------    ----------------    -------------     ----------------     -------------

Year ended December 31, 1999
     Allowance for doubtful accounts        $      260,000      $     48,000      $      (72,000)      $    380,000

Year ended December 31, 2000
     Allowance for doubtful accounts               380,000         1,654,000             514,000          1,520,000

Year ended December 31, 2001
     Allowance for doubtful accounts             1,520,000           146,000           1,054,000            612,000

-------------
(1) Doubtful accounts written off, net of recoveries.`

S-1

EXHIBIT 10.22

Addendum to Employment Agreement

This Addendum  ("Addendum") to the Employment Agreement  ("Agreement") of Timothy Webb dated August 28, 1998, is made and
entered  into as of July 31,  2001,  by and between  Concero  Inc.  formerly  known as PSW  Technologies,  Inc., a Delaware
corporation (the "Company") and Timothy D. Webb, an individual (the "Executive").

### RECITALS

WHEREAS, the Company desires to incent Executive to continue employment with the Company by providing a specified cash
bonus and additional stock options;

WHEREAS, the Company desires to provide for the cash bonus and stock options in addition to benefits set forth in
the Employment Agreement dated August 28, 1998, between Executive and Company (the "Employment Agreement"); and

NOW THEREFORE, in consideration of the premises and the mutual covenants and promises  contained  herein,  and for other
good and valuable  consideration,  the receipt and sufficiency of which are hereby  acknowledged,  the parties hereto agree
as follows:

Section 1.4 of the Agreement is amended by addition of the following language:

1.4.Compensation and Benefits

> 1.4.1a Cash Bonus In addition to the compensation set out for Executive in the
> Agreement, a cash bonus of Fifty Thousand and no/100 Dollars ($50,000.00) shall
> be paid to Executive on March 31, 2002, provided that Executive is still
> employed by Company at the close of business on such date, provided that (a) the
> Company has not terminated Executives employment for Cause (as defined in
> the Employment Agreement) and (b) executive has not breached his obligation
> under Section 2 and 3 of the Employment Agreement. Such bonus shall be paid to
> Executive in addition to any severance payable pursuant to the Employment
> Agreement.

> 1.4.1b Option Grant of July 31, 2001 In addition to the above cash bonus, Executive has
> on this date received a grant of 100,000 stock options, the terms of which are
> governed by a Notice of Stock Option Grant of even date herewith. All provisions
> related to the acceleration of vesting of stock options in Section 1.7.2
> (Termination Without Cause) of the Employment Agreement shall remain in force
> and effect solely with respect to the stock option grants referred to therein
> and shall not affect the 100,000 stock options granted as of the date hereof.

All provisions of the Employment Agreement, as modified hereby, shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed on the date set forth above.

"COMPANY"
  Concero Inc.
  A Delaware Corporation
  By:/s/ Keith D. Thatcher
  Printed Name: Keith D. Thatcher
  Title: CFO
  "EXECUTIVE"/s/Timothy D. Webb
  Timothy D. Webb

EXHIBIT 10.24PROMISSORY NOTE

`$61,645.21                                                 Austin, Travis County, Texas
                                                                         January 1, 2002`

FOR VALUE RECEIVED,  the undersigned Maker, promises to pay to the order
of Concero LP at Building 1, Ste. 500, 6300 Bridgepoint  Parkway,  Austin, Texas
78730 or such other address as Payee may from time to time designate, the sum of
Sixty-One Thousand Six Hundred Forty-Five and 19/100 Dollars ($61,645.21)
in legal and  lawful  money of the  United  States  of  America,  together  with
interest  thereon  from the date  hereof  until  maturity at the rate of six and
three-quarters  percent (6.75%) per annum compounded  monthly;  matured,  unpaid
principal and interest shall bear interest at the rate of eighteen percent (18%)
per annum until paid.

This Note is due and payable as follows, to wit:

Principal and interest shall be due and payable in twenty-three (23) payments of Six hundred Seventy-One and 75/100
Dollars on the 15th and last day of each month beginning January 31, 2002 and ending December 31, 2002, which Maker
authorizes be deducted directly from his payroll check by Concero LP, with a final balloon payment of Fifty Thousand and
No/100 Dollars ($50,000.00) due and payable on December 31, 2002. If Maker's employment with Payee terminates prior to
such date, all unpaid principal and interest shall be due and payable ten days after the date on which Maker's employment
with Payee terminated.

It is expressly provided that upon default in the punctual payment of this Note or any part thereof, and the same is
placed in the hands of an attorney for collection, or suit is brought on same, or the same is collected through probate,
bankruptcy, or other judicial proceedings, then the Maker agrees and promises to pay ten percent (10%) additional on the
amount of principal and interest then owing as attorney's fees.

Maker expressly waives all notices of any kind or character, demands for payment, presentations for payment, notices of
intention to accelerate, notice of acceleration, the maturity, protest and notice of protest, as to this Note and as to
each, every and all installments hereof.

Maker may prepay all or any part hereof at anytime without penalty, and interest shall immediately cease on all amounts
so prepaid.  All prepayments shall be applied first to accrued unpaid interest and the balance to unpaid principal.

This Note shall be governed by and construed in accordance with the laws of the State of Texas.

MAKER:/s/ John S. Velasquez
John S. Velasquez
1406 West 29th Street
Austin, TX 78703
Witness:/s/ Keith Thatcher

`EXHIBIT 21.1




                                              Concero, Inc. and Subsidiaries

                                                   List of Subsidiaries


Subsidiary                                                    State of Incorporation/Formation   

Concero GP, LLC                                               Delaware

Concero LP, LLC                                               Delaware

Concero Group LP                                              Texas
d/b/a   Concero LP

Concero Interactive TV Development, LLC                       Delaware`

Exhibit 23.11
                                      CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration  Statements (Form S-8 No. 333-28739) pertaining to the Concero,
Inc. 1996 Stock Option/Stock  Issuance Plan and the Concero,  Inc. Employee Stock Purchase Plan, in the Registration  Statement
(Form S-8 No.  333-59873)  pertaining to the Concero,  Inc. 1996 Stock  Option/Stock  Issuance  Plan,  and in the  Registration
Statement (Form S-8 No. 333-42472)  pertaining to the Concero,  Inc. 1996 Stock Option/Stock  Issuance Plan, the Concero,  Inc.
2000  Non-Officer  Stock  Option/Stock  Issuance Plan and the Concero,  Inc.  Employee  Stock Purchase Plan of our report dated
January 22, 2002, with respect to the consolidated  financial  statements and schedule of Concero,  Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 2001, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP
Austin, Texas
January 22, 2002