Our Market is Highly Competitive and We May Not Be Able to Continue to Compete Effectively.

                           The business and technology consulting market in which we operate includes a large number of companies and is highly competitive.  Our primary competitors are large accounting and consulting firms and systems consulting and implementation firms.  We compete to a lesser extent with specialized e-business consulting firms, strategy-consulting firms, other package technology vendors, and internal information systems groups. Furthermore, the competitive landscape is changing rapidly.  We compete for client engagements against companies with far larger revenues and numbers of consultants than we have.  These larger competitors may have the ability to offer a wider range of services and to deploy a large number of professionals.  Certain other consulting firms that we competed against during 2001 and 2000 have experienced financial difficulties.  These firms may attempt to win new business by offering large pricing concessions, which could impair our ability to compete for that business.  If we cannot keep pace with the intense competition in our marketplace, our business, financial condition and results of operations could suffer.

                           If Our Marketing Relationships with Software Vendors Deteriorate, We Would Lose Their Potential Client Referrals.

                           We currently have marketing relationships with software vendors, including PeopleSoft, iPlanet, Siebel, and Sun Microsystems. Although we have historically received a number of business leads from these software vendors to implement their products, they are not required to refer business to us and they may terminate these relationships at any time. If our relationships with these software vendors deteriorate, we may lose their client leads and our ability to develop new clients could be negatively impacted. Any decrease in our ability to obtain clients may cause a reduction in our revenue growth.

                           Our Business is Dependent on Our Ability to Keep Pace with the Latest Technological Changes.

                           Our market and the enabling technologies used by our clients are characterized by rapid technological change.  Failure to respond successfully to these technological developments, or to respond in a timely or cost-effective way, will result in serious harm to our business and operating results.  We expect to derive a substantial portion of our revenues from creating e-business systems that are based upon today’s leading technologies and that are capable of adapting to future technologies.  As a result, our success will depend, in part, on our ability to offer services that keep pace with continuing changes in technology, evolving industry standards and changing client preferences.  There can be no assurance that we will be successful in addressing these developments on a timely basis or that if addressed we will be successful in the marketplace.  Our failure to address these developments could have a material adverse effect on our business, financial condition and results of operations.

                           If We Do Not Attract and Retain Qualified Professional Staff, We May Not Be Able to Adequately Perform Our Client Engagements and Could Be Limited in Accepting New Client Engagements.

                           Our business is labor intensive and our success will depend upon our ability to attract, retain, train and motivate highly skilled employees.  Although many specialized e-business and other business and technology companies have reduced their workforces or slowed their hiring efforts, and we reduced our workforce in October 2000 and March 2001, intense competition still exists for certain employees who have specialized skills or significant experience in business and technology consulting.  We may not be successful in attracting a sufficient number of these highly skilled employees in the future.  Additionally, the industry turnover rates for these types of employees are high, and we may not be successful in retaining, training and motivating the employees we are able to attract.  Any inability to attract, retain, train and motivate employees could impair our ability to adequately manage and complete existing projects and to bid for or accept new client engagements.

                           The Price of Our Common Stock Is Subject to Significant Fluctuation.

                           The trading price of our common stock could be subject to wide fluctuations in response to:

                           We Depend Heavily on Our Principal Clients.

                           We have derived, and believe that we will continue to derive, a significant portion of our revenues from a limited number of large clients.  In the second quarter 2001, four clients each accounted for more than 5% of our revenues and two accounted for 52% of our revenue.  The volume of work performed for specific clients is likely to vary from year to year, and a major client in one year may not use our services in a subsequent year.  The loss of any large client could have a material adverse effect on our business, financial condition and results of operations.  In addition, revenues from a large client may constitute a significant portion of our total revenues in a particular quarter.

                           We Have Significant Fixed Operating Costs and Our Operating Results Are Subject to Fluctuation.

                           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, or progress toward completion, of our projects or in employee utilization rates may cause significant variations in operating results in any particular quarter and could result in losses for such quarter.

                           An unanticipated termination of a major project, a client’s decision not to proceed to the subsequent stage of a project, or the completion during a quarter of several major client projects could require us to maintain underutilized employees and could therefore have a material adverse effect on our business, financial condition and results of operations.  Our revenues and earnings may also fluctuate from quarter to quarter based on such factors as the contractual terms and degree of completion of such projects, any delays incurred in connection with projects, the accuracy of estimates of resources required to complete ongoing projects, and general economic conditions.

                           We Sometimes Enter into Fixed-Price Contracts.

                           Some of our projects are based on fixed-price, fixed-timeframe contracts, rather than contracts in which payment to us is determined on a time and materials basis.  Our failure to accurately estimate the resources required for a project or our failure to complete our contractual obligations in a manner consistent with the project plan upon which our fixed-price, fixed-timeframe contract was based would adversely affect our overall profitability and could have a material adverse effect on our business, financial condition and results of operations.  We have at times been required to commit unanticipated additional resources to complete certain projects, which has resulted in losses on certain contracts.  We recognize that we may experience similar situations in the future.  In addition, for certain projects we may fix the price before the design specifications are finalized, which could result in a fixed price that turns out to be too low and therefore adversely affects our profitability.

                           Many of Our Contracts Can Be Cancelled with Limited Notice and Without Significant Penalty.

                           Many of our contracts are terminable by the client following limited notice and without significant penalty. Such terminations could result in a loss of expected revenue and additional unreimbursed expenses for staff, which were allocated to that client’s project.  The cancellation or significant reduction in the scope of a large project could have a material adverse effect on our business, financial condition and results of operations.

                           We Face Significant Competition in Markets that Are New, Intensely Competitive and Rapidly Changing.

                           The markets for the services we provide are highly competitive.  We believe that we currently compete principally with strategy consulting firms, Internet and e-business professional services providers, software integration firms, application software vendors, and internal information systems groups.  Many of the companies that provide such services have significantly greater financial, technical and marketing resources than we do and generate greater revenues and have greater name recognition than we do.  In addition, there are relatively low barriers to entry into our markets and we have faced, and expect to continue to face, additional competition from new entrants into our markets.  We believe that the principal competitive factors in our markets include:

                           We believe that our ability to compete also depends in part on a number of competitive factors outside our control, including:

There can be no assurance that we will be able to compete successfully with our competitors.

                           Our Business is Sensitive to Economic Downturns.

                           Our revenues and results of operations are likely to be influenced by general economic conditions.  In the event of a general economic downturn or a recession in the United States, Europe or Asia, our clients and potential clients may substantially reduce their information technology and related budgets.  Such an economic downturn may materially and adversely affect our business, financial condition and results of operations.

                           Increasing Government Regulation Could Affect Our Business.

                           We are subject not only to regulations applicable to businesses generally, but also laws and regulations directly applicable to electronic commerce.  Although there are currently few such laws and regulations, state, federal and foreign governments may adopt a number of these laws and regulations.  Any such legislation or regulation could dampen the growth of the Internet and decrease our acceptance as a communications and commercial medium.  If such a decline occurs, companies may decide in the future not to use our services to create an electronic business channel.  This decrease in the demand for our services would seriously harm our business and operating results.

                           Our Business Could be Adversely Affected if We Are Unable to Protect Our Proprietary Technology.

                           Our success depends, in part, upon our proprietary methodologies and other intellectual property rights.  We rely upon a combination of trade secret, nondisclosure and other contractual arrangements, and copyright and trademark laws to protect our proprietary rights.  We enter into confidentiality agreements with our employees; generally require that our consultants and clients enter into such agreements, and limit access to and distribution of our proprietary information.  There can be no assurance that the steps taken by us 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.  In addition, although we believe that our services and products do not infringe on the intellectual property rights of others, there can be no assurance that such a claim will not be asserted against us in the future, or that if asserted any such claim will be successfully defended.  A successful claim against us could have material adverse affect on our business, financial condition and results of operations.

                           We May Not Have the Right to Resell or Reuse Applications Developed for Specific Clients.

                           A portion of our business involves the development of Internet and software applications for specific client engagements.  Ownership of such software is the subject of negotiation and is frequently assigned to the client, although we may retain a license for certain uses.  Issues relating to the ownership of and rights to use software applications can be complicated and there can be no assurances that disputes will not arise that affect our ability to resell or reuse such applications.  Any limitation on our ability to resell or reuse an application could require us to incur additional expenses to develop new applications for future projects.

                           We are Dependent on a Number of Key Personnel.

                           Our success will depend in large part upon the continued services of a number of key employees, including our CEO, key consultants and practice leaders.  The loss of the services of any of these individuals or of one or more of our other key personnel could have a material adverse effect on us.  In addition, if one or more of our key employees resigns to join a competitor or to form a competing company, the loss of such personnel and any resulting loss of existing or potential clients to any such competitor could have a material adverse effect on our business, financial condition and results of operations.  In the event of the loss of any such personnel, there can be no assurance that we would be able to prevent the unauthorized disclosure or use of our technical knowledge, practices or procedures by such personnel.

                           We May Need to Raise Additional Capital, Which May Not Be Available.

                           Although we have recently received $800,000 of initial funding under a Promissory Note which is agreed to be no less than $2,000,000 and will not exceed $3,000,000, as more fully described elsewhere in this Form 10-Q, we may need to raise additional funds to continue to operate beyond 2001, and it is uncertain that we will be able to obtain additional financing on favorable terms or at all. Additionally, we have experienced a sharp decline in our stock price and as a result, any financing equity transaction will likely be highly dilutive to existing shareholders.  If we cannot raise additional capital on acceptable terms, we will not be able to implement our current operating plan or continue to operate in our existing form.  Issuance of debt may require us to agree to restrictive covenants that could hamper our business and operations.  These uncertainties could have a material adverse affect on us.

                           We Face Intense Competition in Our Market

                           Our services are targeted at the new and rapidly evolving market for e-commerce solutions.  Although the competitive environment in this market has yet to develop fully, we anticipate that it will be intensely competitive, subject to rapid change and significantly affected by new service and product introductions and other market activities of industry participants.

                           Increased competition could result in pricing pressures, reduced margins or the failure of our services to achieve or maintain market acceptance, any of which could have a serious adverse effect on our business, financial condition and results of operations.

                           Our Industry is Subject to Rapid Technological Change

                           The emerging market for e-commerce solutions and related services is characterized by rapid technological developments and services and evolving industry standards.  The emerging nature of this market and its rapid evolution will require us to improve existing services as well as be first to market new services in the e-commerce environment. Our failure to develop and introduce new and existing services successfully and on a timely basis could have a significant adverse effect on our business, financial condition and result of operations.

                           Our Stock Price May be Volatile in the Future

                           The trading price of our common stock has been, and is expected to continue to be, highly volatile and may be significantly and adversely affected by factors such as: (1) actual or anticipated fluctuations in our operating results,  (2) new services, products or contracts offered by us or our competitors, (3) developments with respect to patents, copyrights and propriety rights, (4)conditions and trends in the e-commerce industry, (5) changes in financial estimates by securities analysts, (6) private placement  transactions completed to raise needed capital and, (7) general market conditions and other factors.

                           The public markets have from time-to-time experienced significant price and volume fluctuations that have particularly affected the market prices for the stock of technology companies as a group but have been unrelated to the performance of particular companies. The market price of our common stock may be adversely affected by these broad market fluctuations as well as (1) shortfalls in sales or earnings as compared with securities analysts' expectations, (2) changes in such analysts' recommendations or projections, and (3) general economic and market conditions.

                           Our Common Stock May be Delisted from The American Stock Exchange. If it is Delisted, the Market Price of the Common Stock Could Decline Potentially to Zero and You Could Lose Your Investment.

                           We have received a letter from The American Stock Exchange (“AMEX”) that due to the information contained in our 2000 filings with the SEC and recent Press Releases that they are reviewing our continued listing eligibility. We met with AMEX in February and reviewed our plans and expectations with them.  However, as a result of our delay in filing of our Form 10-KSB, the first quarter 10-Q, and this second quarter 10-Q, they have suspended the trading of our stock on the AMEX.  They will re-evaluate our trading status once they have reviewed these items.

                           However, AMEX may decide to delist our common stock at an earlier time based upon our financial condition. Although we intend to take steps to maintain our listing, we can give no assurances that our securities will not be delisted from trading by AMEX.  If we lose our AMEX listing status, our common stock would most likely trade in the over-the-counter market, which is viewed by most investors as a less desirable and less liquid marketplace. In that event, trading in shares of our common stock would likely decrease substantially or cease altogether, and the market price of the common stock would likely decline further, potentially to zero.

                           Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results

                           This report contains "forward-looking statements" within the meaning of section 27(a) of the Securities Act of 1933 and section 21(e) of the Securities Exchange Act of 1934 and are subject to the safe harbor provisions of those sections and The Private Securities Litigation Reform Act of 1995.  These forward-looking statements relate to expected reductions in our operating expenses, to expected increases in our revenues and earnings before non-cash and interest expenses, and to our ability to continue providing a complete range of services.  These forward-looking statements are based on management's current views and assumptions and are not guarantees of future performance.  Actual results may vary materially from those set out in the forward-looking statements.  Furthermore, such statements are subject to risks and uncertainties, including the following: our ability to raise additional capital to continue operations, the continued development of the internet as a means for commerce; unauthorized access or computer viruses affecting our information systems; our ability to keep pace with rapidly changing technologies; general economic conditions; our ability to successfully manage our growth and to integrate acquired businesses; increased competition from competitors  with  greater financial and other resources; our ability to attract and retain qualified employees; our dependence on principal clients and the effects of governmental regulation, all as more fully described in our SEC  filings.  The foregoing important factors should not be construed as exhaustive.  We undertake no obligation to update the forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company does not believe there is any material market risk exposure with respect to derivative or other financial instruments, which would require disclosure under this item.  However, we have obligations that have fixed interest rates and, therefore, contain market rate risk.

Revolving Lines of Credit and Term Loan Facility - On August 10, 1999, the Company entered into a Loan and Security Agreement (the “Agreement”) for a total credit facility of up to $5,000,000, limited to the available borrowing base, which is based on levels of eligible accounts receivable and inventory, as defined in the Agreement, expiring August 10, 2001, with three one-year renewals at the lender’s option.  On December 29, 1999, the Company amended its Agreement to include a $1,000,000 term loan under the total credit facility of $5,000,000.  In connection with this amendment, the Company entered into a warrant purchase agreement with the lender and issued warrants to purchase 25,000 shares of the Company's common stock.  The fair value assigned to these warrants of $115,000 was accounted for as a debt discount and amortized over the period of the term loan.  At December 31, 2000, there was no available unused balance under the Agreement.  In February 2001, the entire outstanding balance of the Agreement of $2,275,000 was paid in full by the use of a portion of the proceeds from the IPS sale.

Convertible Notes Payable - In July 2000, the Company completed a $5,000,000 convertible debt offering (the "$5,000,000 Convertible Notes") with certain private investors, who are stockholders, Edgewater Private Equity Fund III, L.P. and Fleck T.I.M.E. Fund, L.P.  The $5,000,000 Convertible Notes bear annual interest of 9.5%.  Principal and interest was due at maturity on December 30, 2000, if not converted earlier.  The principal and accrued and unpaid interest is convertible at the option of the holder into common stock of the Company at a 25% discount from the per-share price of a Qualified Financing consummated prior to the maturity date.  A Qualified Financing is defined as an equity financing in which the Company raises at least $7,000,000.  If a Qualified Financing is not consummated prior to the maturity date, then the principal and accrued and unpaid interest is convertible at the option of the holder into common stock of the Company at a conversion price of $5.00 per share.  The Company recorded an imputed debt discount of $5,000,000 related to the beneficial conversion feature and based on the quoted market price of our common stock of $19.50 per share on the date of issuance.  At December 31, 2000, this debt was due on demand, and the imputed discount was fully amortized to expense. On July 20, 2001, the Company reached an agreement related to the $5,000,000 Convertible Notes, which were due on demand, under which the maturity date was extended to August 1, 2002. The conversion terms were to be renegotiated by August 15, 2001; otherwise, a penalty of $500,000 would have been assessed and payable in February 2002.  The Company is in the process of completing these renegotiations and the new terms are the principal and accrued interest underlying the $5,000,000 Convertible Notes shall be exchanged into Series B Preferred Stock with a stated value of approximately $5 million dollars.  These new terms also include a waiver of the penalty.  These Series B Preferred Stock shall have the following terms: a conversion rate equal to one share of common stock for each $.75 of stated value or a liquidation preference such that in the event of any liquidation, dissolution or winding up of the Company, the holders thereof shall be entitled to receive, at their option, either (a) in preference to the holders of the common stock an amount equal to two and one-half (2½) times the stated value, or (b) a ratable share of the distribution of assets and property with the holders of the common stock, participating on an as converted basis.  A merger, acquisition or sale of all or substantially all of the assets of the Company in which the shareholders of the Company do not own a majority of the outstanding shares of the surviving corporation shall be deemed to be a liquidation.