LANTE CORP, 10-K, 2000-03-30

LANTE CORP
10-K, 2000-03-30
BUSINESS SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 1999

Commission File Number 00-28785

LANTE CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 36-3322393
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)

161 North Clark Street, Suite 4900, Chicago, Illinois 60601
(Address of principal executive offices) (zip code)

Registrant's telephone number, including area code: (312) 696-5000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)

Indicate by check mark whether the registrant 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). Yes X No __

Indicate by check mark whether the registrant has been subject to such
filing requirements for the past 90 days. Yes __No X

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

The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant, based upon the closing sale price of the
registrant's Common Stock on March 23, 2000, was $336,666,044.

The number of shares of the registrant's Common Stock outstanding as of
March 23, 2000, was 39,393,423.

DOCUMENTS INCORPORATED BY REFERENCE:
None.
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PART I

Because we want to provide you with more meaningful and useful information,
this annual report includes forward-looking statements that reflect our current
expectations and projections about our future results, performance, prospects
and opportunities. We have tried to identify these forward-looking statements by
using words including "may," "will," "expect," "anticipate," "believe," "intend"
and "estimate" and similar expressions. These forward-looking statements are
based on information currently available to us and are subject to a number of
risks, uncertainties and other factors that could cause our actual results,
performance, prospects or opportunities in 2000 and beyond to differ materially
from those expressed in, or implied by, these forward-looking statements. These
risks, uncertainties and other factors include, but are not limited to: our
ability to attract, train and retain executive management, regional managing
directors and other qualified personnel; the highly competitive Internet
professional services market; our ability to manage growth; our ability to meet
client expectations; the rate of acceptance and the use of the Internet as a
means for commerce; and our ability keep pace with technological changes and
other factors described under "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors that Could Affect Our Operations."

You should not place undue reliance on any forward-looking statements.
Except as otherwise required by federal securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, changed circumstances or any
other reason after the date of this annual report.

Item 1. Business

Overview

Lante is an Internet services company that develops sophisticated
technology-based solutions for emerging electronic markets. These markets, which
we refer to as e-markets, are Internet based networks through which multiple
buyers and sellers efficiently conduct business online. For example, we helped
one of our clients, SciQuest.com, develop and build an e-market for the
scientific products industry that links lab technicians and purchasing agents
with suppliers of scientific products over the Internet, thereby streamlining
the traditional procurement process for these products. To date, most of our e-
market engagements have been with Internet startup companies. We believe our
success with these early adopters of e-markets and our focus on e-market
solutions position us to obtain engagements with other Internet startup
companies, as well as with larger, more traditional companies as they progress
from their existing business models toward e-markets.

We design and build solutions for our clients that are secure, reliable and
scalable, and integrated with multiple back-end systems. Our strategists, user
experience experts and technologists work as a multi-disciplinary team to build
these solutions. We integrate our competencies through an iterative development
process with the client that is overseen by our delivery management specialists.
We believe this approach helps to achieve rapid time to market, maximize our
clients' revenue generation and cost reduction, and foster more efficient
customer and supplier relationships.

Industry

International Data Corporation estimates that the worldwide e-commerce
market will grow from approximately $64.8 billion in 1999 to more than $978.4
billion in 2003, representing a compound annual growth rate of 97%. We believe
this growth in the worldwide e-commerce market also will lead to a

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significant increase in demand for Internet services. International Data
Corporation also forecasts that the worldwide market for Internet services will
grow from approximately $12.9 billion in 1999 to $78.5 billion in 2003,
representing a compound annual growth rate of 57%.

We believe the next stage of growth for Internet services will involve
building systems that require a greater degree of security, scalability and
reliability and are integrated with multiple back-end systems in addition to web
site design and user experience capabilities. We further believe that we are
well positioned to benefit from this market opportunity because of our early
focus on e-markets, our experience and expertise in building complex solutions
and our strong legacy system integration skills.

The Lante Approach

We deploy an integrated, multi-disciplinary team approach to developing
solutions for our clients. Each team is composed of experts from each of our
four competencies--strategy, user experience, technology and delivery
management. Our professionals work closely with the client through an iterative
development process in which we incrementally refine our assumptions from
engagement inception to a final delivered solution. Our work in each iteration
augments the preceding iteration, mitigating risks and adjusting to inevitable
changes. We believe this approach strikes a healthy and successful balance
between the desire for a structured process and the dynamic nature of our
clients' needs.

Over the course of a client engagement, we emphasize different competencies
at various phases. The following graph illustrates the changing degrees of
emphasis that often occur from project inception through solution delivery:

[GRAPH APPEARS HERE]

As shown by the changing lines in the graph above:

. during an engagement's inception, we primarily emphasize our strategy
competency;

. as we progress to the design phase, our user experience competency plays
a greater role;

. as we build our solution and integrate it with the client's back-end
systems, our technology competency takes on a more predominant role; and

. throughout the engagement, our delivery management professionals oversee
the process and work closely with the client.

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Strategy

Our strategy professionals are skilled in market research, strategy
development, assessment and business modeling. Our strategy professionals help
our clients with the following:

. Opportunities and readiness assessment: We clarify the client's
proposed business model, identify opportunities to leverage the
Internet, validate the client's objectives, identify critical success
factors and assess the organization's preparedness for capitalizing on
these opportunities.

. Strategy development: We refine the client's strategic objectives by
identifying the gap between their current business model and the
requirements for a successful Internet based business model. We also
help the client identify the nature of the relationship among the
buyers, sellers and suppliers participating in the new business model.

. Business modeling: Our professionals explore various business and user
scenarios with the client to establish a model of the desired business
processes and systems. We often identify and establish key business
metrics that will help in assessing the future success of the new
business model.

In addition, we are currently focused on enchancing our level of
expertise in targeted vertical industries.

User Experience

Our user experience professionals are skilled in content strategy,
information architecture, interaction and visual design, as well as front-end
development and usability testing. Our user experience professionals help our
clients build an Internet presence that attracts, engages and retains users
through the following:

. Content strategy: We work with the client to assess the market and
audience for which the site is to be designed. This effort includes
initial considerations for developing and establishing online identity
and brand, as well as assessing user capability, understanding and
behavioral patterns that will influence the visual design of the site.

. Content design: We develop and deliver a set of prototypes to
demonstrate alternative content designs that will be effective in
delivering the solution. We collaborate with the client and often
include testing the user experience among focus groups and select
customers to determine which prototype will best meet their needs.

. Front-end development: We build out the content design and navigation
of the web site and work with our technology professionals to integrate
the web site with the system's back-end data and processing components.

Technology

Our technology professionals are skilled in leading-edge, Internet-based
platforms and technologies, including CORBA, COM, Java, and XML; SQL database
products from Oracle, Microsoft and Sybase; Internet-based packaged application
software and tools; as well as Unix and Windows NT server platforms. Our
technology professionals provide our clients with the following:

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. System Architecture: We identify the hardware, software, network,
security and personnel needed to successfully construct and deliver the
specifications dictated by the new business model.

. Software Architecture: We identify the various software components that
need to be developed and integrated in our systems architecture. These
software components include packaged software from third-party vendors
as well as customized software that we develop for the solution.

. Construction: We develop and integrate the application software,
database and platform tools and products identified by our system and
software architectures into an overall technology solution.

Delivery Management

Our delivery management professionals are responsible for managing our
iterative delivery model and ensuring client satisfaction. Our delivery
management personnel usually possess a hybrid set of skills across our
competencies.

Clients

As of December 31, 1999, we had 47 ongoing client engagements. Our five
largest clients accounted for 56% of our revenues in 1999, of which ZixIt
Corporation and Microsoft Corporation contributed 30% and 13%, respectively. In
1998, our five largest clients accounted for 60% of our revenues, of which
Microsoft and IntraLinks, Inc. contributed 21% and 12%, respectively. In 1997,
our five largest clients accounted for 56% of our revenues, of which Microsoft
and Saranac Software, Inc. contributed 27% and 13%, respectively.

The majority of our engagements have been billed on a fixed-fee basis that
requires we accurately estimate the time and expenses necessary to complete a
particular engagement. Because it is difficult to predict the resources that we
will need on a particular engagement, we cannot give any assurances that our
estimates are accurate.

Marketing and Sales

We target a wide range of clients from Internet startup ventures to Fortune
1000 companies. We also plan to focus our efforts on the Fortune e-50 companies
that represent the leading brand name companies of the Internet economy. Our
marketing efforts are dedicated to strengthening our brand name, differentiating
us in the Internet services market, generating business and recruiting leads and
building employee understanding and support for our mission. We have eight
professionals dedicated to our marketing efforts. We generate leads through the
relationships of our management team and our strategic alliance program. Leads
are directed to the appropriate regional managing director or principal based on
the location of the lead. The marketing department works with our regional
delivery teams to tailor programs and activities designed to help generate
qualified leads. We use a variety of tools in our integrated marketing program
to provide information about us to potential clients. Our marketing strategies
include:

. sponsoring and speaking at targeted industry conferences and e-commerce
events;

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. promoting our brand through an aggressive public relations campaign;

. developing customized local marketing programs for each of our regional
operations; and

. creating co-marketing programs with our clients and strategic alliance
partners.

Strategic Alliances

Strategic alliances are important to the growth of our business. We define
strategic alliances as mutually beneficial relationships between us and other
organizations that include mutual investments of resources -- time, people and
money. Some of the important benefits we derive from our strategic alliances
include enhanced capability to deploy end-to-end solutions, greater name
recognition in the marketplace and enhanced lead and revenue generation.

We undertake a comprehensive review of potential strategic alliance
partners before entering into a strategic alliance. We target partners that have
leading-edge technologies and share our focus on e-markets and our collaborative
culture.

Our strategic alliances can be grouped into three major categories:
packaged software applications (Eprise Corporation, InterWorld Corp., Tradex
Technologies and Yantra Corporation), infrastructure products and services
(Digital Island and GTE Internetworking) and application development tools and
platforms (Persistence Software, Rational Software, Versata and webMethods).

Internal Information Systems

We continuously work to improve our infrastructure, management systems and
knowledge sharing systems. Our current management systems consist of various
internal processes, financial reporting, human resources and benefits
information, client engagements, intellectual capital and marketing systems. We
are currently in the process of making improvements in these areas because
scalable infrastructure, efficient management of business, and effective sharing
of our knowledge base are key components of our strategy.

Competition

The Internet services market is relatively new and highly competitive. This
market has grown dramatically in recent years as a result of the increasing use
of the Internet by businesses to increase revenue, reduce costs and deepen
relationships with customers, suppliers and other key partners. Our competitors
include:

. Internet service firms, including Scient Corporation, Viant Corporation,
Razorfish, Inc., Proxicom Inc., Sapient Corporation and MarchFirst, Inc.

. technology consulting firms and integrators, including Andersen
Consulting, the major accounting firms, Diamond Technology Partners,
Inc., EDS and IBM;

. strategy consulting firms, including Bain & Company, Booz Allen &
Hamilton Inc., The Boston Consulting Group, Inc. and McKinsey & Company;
and

. in-house information technology, marketing and design service
departments of our current and potential clients.

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Many of our competitors have longer operating histories, larger client
bases, longer relationships with their clients, greater brand or name
recognition and significantly greater financial, technical and marketing
resources than we do.

Several of these competitors have announced their intention to offer a
broader range of Internet based solutions. Furthermore, greater resources may
enable a competitor to respond more quickly to new or emerging technologies and
changes in customer requirements and to devote greater resources to the
development, promotion and sale of its products and services than we can. In
addition, competition may intensify because there are relatively low barriers to
entry into the Internet services market.

We believe that the principal competitive factors in this market, in
relative importance, are technical knowledge and creative skills, brand
recognition and reputation, reliability of the delivered solution, client
service and price. We also believe that our ability to compete in our market
depends on our ability to attract and retain qualified professionals.

Employees

As of December 31, 1999, we had 345 employees, which included 254 billable
professionals, 67 support staff and 24 officers, including principals and
managing directors. Our employees are not represented by any union and generally
are retained on an at-will basis. We consider our relations with our employees
to be satisfactory.

Item 2. Facilities

Our corporate office is located in Chicago, Illinois and consist of 13,429
square feet. The lease for our corporate office expires on March 31, 2007. We
also lease other office space in Chicago, as well as office space in Austin,
Charlotte, Dallas, Los Angeles, New York, San Francisco and Seattle. We do not
own any real estate. We do not consider any specific leased location to be
material to our operations, and we believe that equally suitable alternative
locations are available in all areas where we currently do business.

Item 3. Legal Proceedings

Pantelis Georgiadis, our former chief operating officer, filed a complaint
against us on October 21, 1999 in the Circuit Court of Cook County, Illinois.
Mr. Georgiadis previously owned 2,000,000 shares of our common stock with
respect to which we exercised our contractual right to repurchase upon the
termination of his employment. Pursuant to this contractual right, we tendered
to Mr. Georgiadis $4,010,000, or approximately $2.00 per share, payable in the
form of cash and a promissory note. Mr. Georgiadis contends that we breached our
contractual obligations by improperly valuing these shares in connection with
the repurchase. Mr. Georgiadis' complaint asserts that the repurchase price of
his shares should have been as high as $8.10 per share. We deny Mr. Georgiadis'
allegations, believe they are without merit and intend to defend this lawsuit
vigorously.

From time to time, we may be involved in litigation incidental to the
conduct of our business. Except as described above, however, we are not
currently party to any material legal proceedings.

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

No matters were submitted to any of our security holders during the fourth
quarter of 1999.

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PART II

Item 5. Market for Our Common Equity and Related Stockholder Matters

Price Range of Common Stock

Our common stock is traded on the Nasdaq Stock Market's National Market under
the symbol "LNTE". Our common stock has traded at a high of $87.50 and a low of
$30.00 between the inception of its trading on February 11, 2000 and March 23,
2000. On March 23, 2000, the last reported sale price of our common stock was
$39.75 per share, and there were approximately 124 holders of record of our
common stock.

Dividends

Prior to June 17, 1999, we were an S-corporation and paid out dividends to
compensate stockholders for their estimated tax liabilities. These dividends
totaled approximately $59,000, $20,000 and $582,000 for 1997, 1998 and 1999,
respectively. In addition, on June 15, 1999, we declared a dividend in
conjunction with our conversion to a C-corporation consisting of, in the
aggregate, an undivided interest in approximately $2.5 million of our accounts
receivable and $1.5 million in cash.

We plan to retain all future earnings to finance the development and growth
of our business. Therefore, we do not currently anticipate paying any further
cash dividends on our common stock in the foreseeable future. Any future
determination as to the payment of dividends will be at our board of directors'
discretion and will depend on our results of operations, financial condition,
capital requirements and other factors our board of directors considers
relevant.

Sales of Unregistered Securities.

The following information reflects our sales of unregistered securities in
1999.

On or about June 17, 1999, we issued 3,536,069 shares of Series A
convertible preferred stock in exchange for $25,000,000. Exemption from
registration for this issuance was claimed in reliance on Section 4(2) of the
Securities Act regarding transactions not involving a public offering.

On June 30, 1999, we issued 2,400,000 shares of common stock to C. Rudy
Puryear for a purchase price of $3,228,000. Exemption from registration for
this transaction was claimed pursuant to Section 4(2) of the Securities Act
regarding transactions made by the issuer not involving a public offering, in
that this transaction was made without general solicitation or advertising and
to a sophisticated investor with access to all relevant information.

On July 1, 1999, we issued an aggregate of 2,700,000 shares of common stock
to holders of our convertible subordinated notes due 2007, in exchange for
cancellation of such Notes. The price paid for such shares translates to
approximately $0.86 per share. These Notes were issued on June 30, 1998, for
the aggregate amount of $2,595,000, in exchange for monies loaned to us.
Exemption from registration for these transactions was claimed pursuant to
Section 4(2) of the Securities Act regarding transactions made by the issuer not
involving a public offering, in that these transactions were made without
general solicitation or advertising and to sophisticated investors with access
to all relevant information.

<PAGE>

In August 1999, we issued a warrant to purchase up to 200,000 shares of
common stock at an exercise price of $2.02 per share to Heidrick & Struggles,
Inc. The warrant will expire on July 1, 2006. Exemption from registration for
this transaction was claimed pursuant to Section 4(2) of the Securities Act
regarding transactions made by the issuer not involving a public offering.

On September 2, 1999, we issued 430,000 shares of common stock in the
aggregate to Julie Pokorny and Jamie Bellanca, in exchange for all of the stock
of Ingenious, Inc. Exemption from registration for this transaction was claimed
pursuant to Section 4(2) of the Securities Act regarding transactions made by
the issuer not involving a public offering, in that this transaction was made
without general solicitation or advertising and to sophisticated investors with
access to all relevant information. In addition, Pokorny and Bellanca
represented to Lante that the shares were being acquired for investment and not
for resale.

On October 29, 1999, we issued 300,000 shares of common stock to Brian
Henry for a purchase price of $673,500. We also granted an option to Brian
Henry to purchase 700,000 shares of common stock pursuant to our 1998 Stock
Option Plan. Exemption from registration for this purchase of shares and option
grant was claimed in reliance on Section 4(2) of the Securities Act regarding
transactions not involving a public offering.

On December 8, 1999, we sold 1,510,186 shares of common stock to Dell USA,
L.P. and certain of our officers, directors and stockholders for an aggregate
purchase price of $16,612,046. Exemption from registration for this purchase of
shares was claimed in reliance on Section 4(2) of the Securities Act regarding
transactions not involving a public offering.

In December 1999, the Executive Committee of the Board of Directors of the
Company authorized the issuance of 335,976 shares of common stock to the Lante
Foundation, a charitable foundation established by the Company. Exemption from
registration for the transaction was claimed in reliance of Section 4(2) of the
Securities Act regarding transactions not involving a public offering.

Use of Proceeds

On February 10, 2000 our registration statement on Form S-1 (File No. 333-
92373) relating to the initial public offering of our common stock was declared
effective by the SEC. With this registration statement, we registered 4,600,000
shares of our common stock. In connection with the offering, we issued
4,600,000 shares of common stock at $20.00 per share, for an aggregate offering
amount of $92,000,000. All of these shares have been sold and the offering has
been terminated. The managing underwriters of the offering were Credit Suisse
First Boston Corporation, Deutsche Bank Securities Inc., Thomas Weisel Partners
LLC and Friedman, Billings, Ramsey & Co., Inc. After payment of underwriting
discounts and expenses of $8,500,000, we received net proceeds of $83,500,000
from the offering. We have invested the net proceeds, pending its use for
working capital and general corporate purposes, in short-term, investment grade,
interest-bearing securities.

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Item 6. Selected Financial Data

In this Section we present our selected consolidated financial data. You
should read the following data along with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our consolidated
financial statements and the related notes, each of which is included in this
annual report. We derived the consolidated statement of operations data for the
three-year period ended December 31, 1999 and the consolidated balance sheet
information as of December 31, 1997, 1998 and 1999 from our consolidated
financial statements, which have been audited by PricewaterhouseCoopers LLP,
independent accountants, and are included in this annual report. We derived the
consolidated balance sheet data as of December 31, 1996 from our audited
financial statements, which are not included in this annual report. We derived
the statement of operations data for the year ended December 31, 1995 and the
balance sheet data as of December 31, 1995 from our unaudited financial
statements, which are not included in this annual report. Pro forma net income
(loss) reflects an adjustment to show assumed federal and state income taxes
based on statutory (federal and state) tax rates for the periods presented,
during which we were treated as an S-corporation for income tax purposes.

Year ended December 31,
-------------------------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(In thousands, except per share data)
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenues.......................................... $ 7,423 $ 8,640 $11,134 $15,369 $32,964
Operating Expenses:
Professional services........................ 3,246 4,381 6,175 7,001 17,477
Selling, general and administrative........ 3,692 4,019 4,722 6,803 18,104
Amortization of deferred compensation...... -- -- -- -- 1,188
------- ------- ------- ------- -------
Total operating expenses.......................... 6,938 8,400 10,897 13,804 36,769
Income (loss) from operations..................... 485 240 237 1,565 (3,805)
Other (expense) income, net....................... (4) (19) (20) (1) 792
------- ------- ------- ------- -------
Income (loss) before income taxes................. 481 221 217 1,564 (3,013)
Income tax (provision) benefit.................... (2) (1) (4) (8) 431
------- ------- ------- ------- -------
Net income (loss)................................. $ 479 $ 220 $ 213 $ 1,556 $(2,582)
======= ======= ======= ======= =======
Net income (loss) available to common
stockholders................................. $ 479 $ 220 $ 213 $ 1,556 $(3,559)
Net income (loss) per share, basic and diluted.... $ 0.02 $ 0.01 $ 0.01 $ 0.08 $ (0.16)
Pro forma net income (loss) available to common
stockholders..................................... $ 355 $ 157 $ 153 $ 881 $(3,239)
Pro forma net income (loss) per share, basic and
diluted...................................... $ 0.02 $ 0.01 $ 0.01 $ 0.04 $ (0.15)
Weighted average number of shares outstanding,
basic and diluted......................... 20,225 20,250 20,167 20,607 22,204
</TABLE>

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Year ended December 31,
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $ 695 $ 824 $ 850 $ 3,377 $ 13,692
Working capital................................... 981 1,097 544 4,880 12,733
Total assets...................................... 2,596 3,307 3,893 7,320 41,486
Long-term debt and redeemable preferred stock, net
of current portion................................ 800 800 350 2,660 27,733
Total common stockholders' equity................. 481 601 797 2,915 1,235

</TABLE>

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

You should read the following discussion along with our financial
statements and the related notes included in this annual report. The following
discussion contains forward-looking statements that are subject to risks,
uncertainties and assumptions, including those discussed under "Factors that
Could Affect Our Operations." Our actual results, performance and achievements
in 2000 and beyond may differ materially from those expressed in, or implied by,
these forward-looking statements.

Overview

We are an Internet services company that develops sophisticated technology-
based solutions that are secure, reliable and scalable and integrated with
multiple back-end systems. Our strategists, user experience experts and
technologists work as a multi-disciplinary team to build these solutions. We
integrate our competencies through an iterative development process with the
client that is overseen by our delivery management specialists.

Since our inception in 1984, we have been innovators in applying emerging
technologies to businesses, evolving from personal computer networks to database
applications to distributed client-server architectures to the Internet. We
began focusing on e-markets in late 1996. Since that time, our revenue mix has
shifted from a client-server base to virtually 100% Internet services in 1999.
We expect revenues from Internet services to continue to represent virtually all
of our revenues for the foreseeable future.

Our revenues consist of fees generated for professional services. We
provide services on a fixed-fee basis, including retainer arrangements, and a
time-and-materials basis. In 1999, we derived a majority of our revenues from
fixed-fee engagements. We may enter into further fixed-fee engagements where we
believe we can adequately assess the time and expenses necessary for the
engagement. However, where we cannot assess these criteria we will seek to
establish a time-and-materials engagement. To determine the proposed fixed fee
for an engagement, we use an estimation process that takes into account the
complexity of the engagement, the anticipated number and experience of billable
professionals needed, associated billing rates and the estimated duration of the
engagement. At the same time, we build into our fixed-fee engagements the
ability to renegotiate the fee if the scope of the engagement changes. A member
of our senior management team must approve each fixed-fee proposal.

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Revenues from a few large clients have historically constituted a
significant portion of our total revenues in a particular quarter or year. For
example, in 1998, our five largest clients represented 60% of our revenues. In
1999, our five largest clients represented 56% of our revenues. The following
table identifies these clients and the percentage of revenues derived from each.

Year ended December 31, 1998 Year ended December 31, 1999
- ----------------------------------------------- ----------------------------------------------
Client % of Client % of
Revenue Revenue
- --------------------------- -------------- ------------------------------- ---------
<S> <C> <C> <C>
Microsoft Corporation 21% ZixIt Corporation 30%

IntraLinks, Inc. 12 Microsoft Corporation 13

Classified Ventures, Inc. 11 IntraLinks, Inc. 5

HD Vest, Inc. 9 ChemPoint.com 4

Saranac Software, Inc. 7 Etera, LLC 4

</TABLE>

We expect a relatively high level of client concentration to continue,
although not necessarily involving the same clients from period to period. For
example, we completed our engagement with ZixIt in the three-month period ended
December 31, 1999, and we do not anticipate material revenues from ZixIt in the
near future. At the same time, we have entered into a strategic relationship
with Dell Computer Corporation that contemplates Dell providing us with at least
$40.0 million of total revenues over a five-year period. To the extent that any
significant client uses less of our services or terminates its relationship with
us, our revenues could decline substantially and our operating results could be
adversely affected to the extent we are unable to quickly redeploy our billable
professionals to other client engagements.

Costs of professional services consist of salaries, bonuses and benefits
for our billable professionals, the cost of subcontractors and other engagement
costs that are not reimbursed directly by the client. We expect that salaries
for our billable professionals will increase over time due to the intense
competition in our industry for qualified individuals. We use the term
"professional services margin" to mean revenues less costs of professional
services, stated as a percentage of revenues. Professional services margins are
affected by our ability to utilize our billable professionals, to incorporate
any wage increases of our professionals into our billing rates and to price and
execute effectively our fixed-fee engagements. Professional services margins may
be reduced in any given period to the extent that we use subcontractors or hire
new billable professionals who we may not be able to utilize immediately on
client engagements. We expect that our professional services margins will vary
from quarter to quarter.

Our number of employees increased from 94 on January 1, 1997 to 345 on
December 31, 1999. We employed 254 billable professionals as of December 31,
1999. We actively recruit billable professionals and support staff and expect
our total number of employees to increase significantly in 2000.

Selling, general and administrative expenses consist primarily of salaries,
bonuses and benefits for non-project personnel, facility costs, staff recruiting
and training costs, depreciation and amortization, general operating expenses
and selling and marketing expenses. We largely develop new business through our
regional managing directors and principals. Our selling, general and
administrative expenses are expected to increase in the future as we add
additional personnel, expand our information systems, open new offices, increase
our recruiting efforts and incur additional costs related to the growth of our
business and operations as a public company.

12
<PAGE>

As we strive to grow our business, we expect to spend significant funds for
marketing, recruiting and hiring additional personnel, upgrading our
infrastructure, including internal information systems, and expanding into new
geographical markets. To the extent revenues do not increase at a rate
commensurate with these costs and expenditures, our results of operations and
liquidity could be materially and adversely affected.

Results of operations

The following table presents for the periods indicated, our selected
statement of operations data as a percentage of our revenues. We have derived
these percentages from our audited financial statements for all periods
presented

<TABLE>
<CAPTION>
Year ended December 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenues................................. 100% 100% 100%
Operating expenses.
Professional services.................. 56 46 53
Selling, general and administrative.... 42 44 55
Amortization of deferred compensation.. -- -- 4
---- ---- ----
Total operating expenses................. 98 90 112
Income (loss) from operations............ 2 10 (12)
---- ---- ----
Other income, net........................ -- -- 3
Income tax benefit....................... -- -- 1
Net income (loss)........................ 2% 10% (8%)
==== ==== ====
</TABLE>

Comparison Of Years Ended December 31, 1999 And 1998

Revenues

Revenues increased $17.6 million, or 114%, to $33.0 million in 1999 from
$15.4 million in 1998. The increase in revenues reflects an increase in the
average size and number of client engagements and an increase in average
realized billing rates.

Operating expenses

Professional services

Costs of professional services increased $10.5 million, or 150%, to $17.5
million in 1999 from $7.0 million in 1998. This increase was primarily due to
the hiring of additional billable professionals to support increases in revenues
and prepare for anticipated rapid growth. The increase also reflects an

<PAGE>

overall increase in salary and benefit costs and an increase in the use of
subcontractors. As a percentage of professional services, subcontractor costs
for 1998 and 1999 were approximately 2.0% and 18.0%, respectively.

Our professional services margin decreased to 47.0% in 1999 from 54.4% in
1998. This decrease is attributed to an increased use of subcontractors in 1999
and the completion of engagements in 1998 that had better than expected margins
for that period.

Selling, general and administrative

Our selling, general and administrative expenses increased $11.3 million,
or 166.1%, to $18.1 million in 1999 from $6.8 million in 1998. This increase in
selling, general and administrative expenses was primarily the result of efforts
to significantly expand our business and prepare for rapid growth. During 1999,
we hired several new senior managers, including a new chief executive officer,
established new office space, enhanced internal systems and communication
infrastructure, and increased personnel in internal systems, marketing, finance
and recruiting. During 1999, we also incurred approximately $1.8 million in
professional recruiting costs related to the hiring of several members of our
management team.

Amortization of deferred compensation

Amortization of deferred compensation was $1.2 million in 1999. Deferred
compensation was recorded during 1999 related to certain options that were
deemed granted in-the-money, a loan made to our chief executive officer that is
being recorded as compensation expense, the sale of restricted shares to our
chief executive officer at a price that was deemed less than our common stock's
fair value, and deferred compensation related to one of our acquisitions.

Net loss

Net loss for 1999 was $2.6 million compared to net income of $1.6 million
in 1998.

Comparison Of Years Ended December 31, 1998 And 1997

Revenues

Revenues increased $4.2 million, or 38.0%, to $15.4 million in 1998 from
$11.1 million in 1997. This increase in revenues reflects an increase in the
average size of client engagements and an increase in average realized billing
rates.

Operating expenses

Professional services

Costs of professional services increased $0.8 million, or 13.4%, to $7.0
million in 1998 from $6.2 million in 1997. This increase was primarily due to an
increase in the number of billable professionals and increases in wage rates.
Our professional services margin increased to 54.4% in 1998 from 44.5% in 1997
as a result of the start of a few engagements during 1997 for which costs were
incurred in 1997 while revenues were deferred due to the uncertainty of the
contractual terms of the engagements. Professional services margin was
positively affected by improved utilization due to an increase in the average
size and number of client engagements and more effective sharing of billable
professionals across offices in 1998.

<PAGE>

Selling, general and administrative

Selling, general and administrative expenses increased $2.1 million, or
44.1%, to $6.8 million in 1998 from $4.7 million in 1997. This increase was
primarily the result of additional non-project personnel being hired in 1998,
including human resource, finance and senior personnel. The increase also
reflects an increase in facility costs related to the expansion of our
operations.

Net income

Net income increased to $1.6 million in 1998 from $0.2 million in 1997 as a
result of the above factors.

Quarterly results

The following table presents our unaudited quarterly data for the periods
indicated. We derived these data from our unaudited consolidated interim
financial statements, and, in our opinion, these data include all necessary
adjustments, which consist only of normal recurring adjustments necessary to
present fairly the financial results for the periods. Our quarterly operating
results have varied significantly in the past and will continue to do so in the
future due to a number of factors including, but not limited to, the number,
size and scope of engagements, unanticipated delays, deferrals or cancellation
of significant engagements, unanticipated changes in the scope of major
engagements, utilization rates, the extent to which we use subcontractors,
realized hourly billing rates and general economic conditions. Accordingly, our
results for any given quarter or series of quarters are not necessarily
indicative of our results that may be expected for any future period. However,
our quarterly operating results may represent trends that aid in understanding
our business.

<PAGE>

<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
------- ------- -------- ------- ------- ------- -------- -------
1998 1998 1998 1998 1998 1999 1999 1999
---- ---- ---- ---- ---- ---- ---- ----
(In millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues....................................... $ 3.1 $ 3.8 $ 4.1 $ 4.2 $ 4.9 $ 7.1 $ 9.3 $ 11.7
Operating expenses:
Professional services........................ 1.7 1.7 1.8 1.8 2.5 3.8 5.0 6.2
Selling, general and administrative.......... 1.4 1.8 1.6 1.9 2.3 3.5 4.9 7.4
Amortization of deferred compensation........ -- -- -- -- -- 0.1 0.5 0.6
------- ------- -------- ------- ------- ------- -------- -------
Total operating expenses....................... 3.1 3.5 3.4 3.7 4.8 7.4 10.4 14.2
------- ------- -------- ------- ------- ------- -------- -------
Income (loss) from operations.................. -- 0.3 0.7 0.5 0.1 (0.3) (1.1) (2.5)
Other income, net.............................. -- -- -- -- 0.1 0.3 0.4
Income tax (expense) benefit................... -- -- -- -- -- 1.0 (0.4) (0.2)
------- ------- -------- ------- ------- ------- -------- -------
Net income (loss).............................. $ 0.0 $ 0.3 $ 0.7 $ 0.5 $ 0.1 $ 0.8 $ (1.2) $ (2.3)
======= ======= ======== ======= ======= ======= ======== =======
</TABLE>

The increases in 1999 quarterly revenues are primarily due to increases in
the number of billable professionals, average realized billing rate increases
and improved utilization. Costs of providing professional services for the same
quarters reflect the costs associated with the increased number of billable
professionals and the use of subcontractors on certain of our larger
engagements. Selling, general and administrative expenses during 1999 reflect
costs associated with preparing for rapid growth.

Liquidity and capital resources

During 1998, we financed our operations and investments in property and
equipment primarily through cash generated from operations and a portion of the
proceeds from the issuance of subordinated convertible debt due 2007, which
resulted in aggregate net proceeds to us of approximately $2.6 million. The
notes had a stated interest rate of 5.79% and in July 1999 were redeemed in
exchange for 2.7 million shares of our common stock. We also used a portion of
the proceeds from the sale of the subordinated convertible debt to pay off
approximately $1.2 million of outstanding debt during 1998.

During 1999, we financed our operations, investments in property and
equipment and two acquisitions primarily through cash generated from operations
and the sale of 3,536,069 shares of our Series A convertible preferred stock
resulting in net proceeds to us of approximately $24.8 million. The rights of
the Series A convertible preferred stock include voting rights equal to an
equivalent number of shares of common stock into which it is convertible; the
right to receive dividends at a rate of 7% per annum; liquidation preferences;
and a requirement for us to redeem all outstanding shares in one-fourth
increments on an annual basis beginning in June 2004 at a redemption price equal
to the greater of (1) $7.07 plus all accrued and unpaid dividends or (2) the
fair market value of the shares of the common stock on an as converted basis. In
the event of a change in control, each holder of the Series A convertible
preferred stock may elect to require us to redeem all or a portion of the
holders' preferred stock at the
16
<PAGE>

redemption price. All outstanding shares of preferred stock were converted
into an aggregate of 7,072,138 shares of our common stock upon consummation of
our initial public offering in February 2000.

Also during 1999, we repurchased 2.46 million shares of our common stock at
approximately $2.24 per share. We used proceeds from the sale of our Series A
convertible preferred stock to complete this repurchase. We also exercised our
right to repurchase 2.0 million shares from our former chief operating officer
for approximately $2.00 per share. We paid cash of $724,000, forgave $278,000
due to us by the former employee and issued a promissory note in the amount of
$3.0 million as payment for the repurchased shares. The note is due at various
dates through September 30, 2002 and bears interest at prime, which was 8.5% at
December 31, 1999.

Prior to June 17, 1999, we were an S-corporation and paid out dividends to
compensate stockholders for their estimated tax liabilities. These dividends
totaled approximately $59,000, $20,000 and $582,000 for 1997, 1998 and 1999,
respectively. In addition, on June 15, 1999, we declared a one-time dividend in
conjunction with our conversion to a C-corporation consisting of, in the
aggregate, an undivided interest in approximately $2.5 million of our accounts
receivable and $1.5 million in cash.

In June 1999, we entered into an employment agreement with Rudy Puryear,
our new chief executive officer. Pursuant to this agreement, we loaned him $2.5
million. Based on the terms of the note, we have recorded the loan as deferred
compensation and are amortizing the loan over 30 months, the shortest period in
which the loan may be forgiven. Upon execution of the employment agreement, Mr.
Puryear also purchased 2.4 million shares of restricted common stock at $1.35
per share. We recorded $2.1 million in deferred compensation related to this
sale of securities. We are amortizing such amount over the 48 month period in
which the restrictions lapse. The restrictions on these shares lapse over four
years at 1/48 per month, subject to acceleration provisions which become
effective upon a change in control or upon termination of employment. We loaned
Mr. Puryear $3.2 million on a fully recourse basis to purchase the shares of
restricted stock. Because the proceeds from the $3.2 million loan were used to
purchase the stock, this loan had no effect on our liquidity. The loans bear
interest at 5.37%. The loan and related interest is due on February 11, 2003.

Historically, we have generated positive cash flows from our operating
activities. During 1999, we used net cash in our operating activities totaling
$3.4 million. Cash flows used in investing activities principally relate to
capital expenditures for all periods presented. Cash flows used in investing
activities increased during 1999 as a result of investments in our facilities
and information systems. Cash flows used in investing activities during 1999
also reflect the cash portion of two acquisitions during 1999.

Cash and cash equivalents increased to $13.7 million at December 31, 1999
from $3.4 million at December 31, 1998. This increase was primarily due to cash
provided as a result of the completion of our convertible preferred stock
transaction. We invest available cash in short-term liquid investments.
Accounts receivable increased approximately $7.3 million from December 31, 1998
to December 31, 1999 primarily as a result of higher revenue levels. As we
continue to grow, any increases in our accounts receivable balance will
adversely impact our ability to generate positive cash flows from our operating
activities. Other non-current assets increased by approximately $9.3 million
from December 31, 1998 to December 31, 1999 primarily as a result of our
recording approximately $2.3 million as deferred compensation expense, net,
related to a loan made to our chief executive officer that is amortized over a
30-month period; $4.9 million related to our recording of our receipt of a fully
vested option to purchase 167 shares from our largest customer during 1999; and
the deferral of approximately $1.0 million in

17
<PAGE>

compensation expense related to one of our acquisitions that will be amortized
over the three-year service period.

We have a $3.5 million line of credit. The annual interest rate on amounts
borrowed under the line of credit is calculated using the lender's "index
rate", which was 8.5% at December 31, 1999. The credit facility contains
customary covenants and expires in December 2000. Our accounts receivable and
our other general assets secure the loan. Due to dividends paid during 1999 and
expected operating losses for 1999, in the second half of 1999, we anticipated
that we would be in violation of the required debt service ratio as of December
31, 1999. Consequently, we received a waiver from our lender for non-compliance
that waived the covenant until December 31, 2000. But for this waiver, we would
have been in violation of this financial covenant. During the first quarter of
2000, we have begun discussions with our existing lender and potential new
lenders to replace our existing facility so as to allow for our anticipated
growth. At December 31, 1999, we had no outstanding borrowings under the line of
credit.

In December 1999, we entered into an agreement with Dell USA, L.P., a
wholly owned subsidiary of Dell Computer Corporation, and some of our officers,
advisors and other stockholders regarding the sale of shares of our common
stock. Under this agreement, Dell USA purchased 1.0 million shares of our common
stock from us and 1.0 million shares from Mark Tebbe, our chairman of the board,
and some family trusts for a purchase price of $11.00 per share. In conjunction
with this agreement, some of our officers, directors and other stockholders also
purchased an aggregate of 510,186 shares from us at the same price, the majority
of which were acquired pursuant to contractual preemptive rights. These
preemptive rights terminated upon completion of our initial public offering in
February 2000. The closing of these purchases occurred on December 10, 1999 and
January 10, 2000.

We are obligated under various non-cancelable operating leases for our
office space. As of December 31, 1999 future, annual minimum rental commitments
under these leases ranged in the aggregate from $1.7 million to $1.9 million
over the next five years. Total future minimum rental commitments are
approximately $14.1 million.

We anticipate that we will expend capital to develop the infrastructure
needed to support our future growth. Specifically, we expect capital
expenditures during 2000 will be between $8.0 million and $13.0 million. We may
attempt to expand our solutions and service offerings and gain access to new
markets through acquisitions. We do not, however, have any agreements,
commitments or understandings with respect to any material acquisitions.
Accordingly, we have not included any expenses related to acquisitions in the
above description of expected capital expenditures. We expect to use cash from
operations and the net proceeds from our recently completed offerings to meet
capital expenditures and

18
<PAGE>

working capital necessary to support our growth. We believe that the cash
provided from operations, and cash on hand will be sufficient to meet our
anticipated working capital and capital expenditure requirements through
December 31, 2000. However, during this period, we may seek additional capital
in the private and/or public equity markets.

Year 2000 Issue

To become ready for year 2000, in 1999 we conducted a survey of all our
equipment, systems and services upon which our business depends and classified
these according to how severely and immediately they could impact our business
and our year 2000 compliance. Focusing foremost on the areas deemed most
critical, we upgraded our network and operating systems and purchased year 2000
compliant servers, workstations, software packages and peripheral devices, and
obtained year 2000 representation letters from service providers. We have also
purchased year 2000 compliance testing software, which we have used to test our
systems. These tests resulted in no material failures. As a result of our
upgrades, new purchases and our year 2000 testing, we believe that our principal
internal systems are year 2000 compliant. However, we will continue to assess
and test our internal systems to ensure that all additions or modifications to
our systems meet our specifications for year 2000 compliance. Because our
clients and we depend, to a very substantial degree, upon the proper functioning
of our computer systems, a failure of our systems could materially disrupt our
operations and adversely affect our business, financial condition and results of
operations.

The year 2000 problem may also affect third-party software products that
are incorporated into the business systems that we create for our clients. Our
clients license software directly from third-party suppliers, but at our
clients' request, we will discuss year 2000 issues with these suppliers and will
perform internal testing on their products. Any failure on our part to provide
year 2000 compliant e-business systems to our clients could result in financial
loss, harm to our reputation and liability to others.

In August 1998, we began to incorporate into our standard engagement
contract, language that provides a limited year 2000 warranty on our work
product. This language was intended to:

. limit our warranty to defects discovered within sixty days of system
delivery, unless the engagement specifically includes year 2000 testing
services;

. limit our responsibility for third-party platforms to those
recommended by us; and

. disclaim liability for (1) operation of our system under platforms,
including future versions, not recommended or tested by us or (2)
interoperation with other systems or (3) user error.

Furthermore, our standard engagement contract has a provision to limit our
liability (1) to direct damages incurred by clients, while specifically
excluding incidental, consequential, exemplary, special or punitive damages and
(2) to fees paid. Notwithstanding those protections, there may be claims made
against us which arise from engagements that predate our use of this year 2000
warranty language, and some engagement contracts have specially negotiated
provisions which are broader than those described above.

We have funded the cost to become year 2000 compliant from operating cash
flows and have not separately accounted for these costs in the past.

19
<PAGE>

Recently Issued Accounting Standards

During 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This statement specifies
revised guidelines for determining an entity's operating segments and the type
and level of financial information to be disclosed. This standard requires that
management identify operating segments based on the way that management
desegregates the entity for making internal operating decisions. We believe that
we operate in one business segment.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including some derivative
instruments embedded in other contracts, and for hedging activities. In June
1999, the FASB issued SFAS No. 137 which postponed the mandatory adoption of
SFAS 133 until January 1, 2001. We have not entered into any significant
derivative financial instrument transactions.

Factors that Could Affect Our Operations

You should carefully consider the risks and uncertainties described below
because they could materially adversely affect our business, financial condition
or operating results.

Risks Related to Our Business

We expect to report an operating loss in 2000 and may not achieve or sustain
future profitability

Although Lante was incorporated in 1984, our business strategy has been
constantly evolving and, since 1996, we have primarily focused on competing in
the Internet services market. In 1999, we reported an operating loss, and we
anticipate incurring losses in 2000 as well. As we strive to grow our business,
we expect to spend significant funds for general corporate purposes, including
working capital, marketing, recruiting and hiring additional personnel,
upgrading our infrastructure, including internal information systems, and
expanding into new geographical markets. To the extent that our revenues do not
increase as quickly as these costs and expenditures, our results of operations
and liquidity could be materially and adversely affected. In particular, we
expect that our plans for increases in expenses and capital expenditures over
the next year to support our expected growth will adversely affect our operating
results. We may not sustain our historical revenue growth rates. If we
experience slower revenue growth than expected or if our operating expenses
exceed our expectations, we may not achieve profitability. If we achieve
profitability in the future, we may not sustain it.

If we lose a major client or complete an engagement for a major client, our
revenues could decline and our operating results could be adversely affected to
the extent we are unable to quickly redeploy our billable professionals

Since we began shifting our focus to Internet based businesses in 1996, our
client base has been concentrated among, and our revenues have depended upon, a
few companies. For example, ZixIt Corporation and Microsoft Corporation
accounted for 30% and 13% of our revenues, respectively, in 1999, and our five
largest clients accounted for 56% of our revenues in 1999. These clients also
utilized a significant portion of our resources during 1999. To the extent that
any significant client uses less of our services or terminates its relationship
with us, our revenues in the relevant fiscal period could substantially decline
and our operating results could be adversely affected to the extent we are
unable to quickly redeploy our billable professionals to other client
engagements. We expect a relatively high level of client concentration to
continue, but not necessarily involve the same clients from period to period.
For

20
<PAGE>

example, we completed our engagement with ZixIt in the three-month period ended
December 31, 1999, and we do not anticipate material revenues from ZixIt in the
near future.

The loss of executive management personnel or regional managing directors may
harm our ability to obtain and retain client engagements, maintain a cohesive
culture and compete effectively

We believe that our success will depend on the continued employment of our
executive management personnel and regional managing directors because personal
relationships are critical to obtaining and retaining client engagements and
maintaining a cohesive culture. If one or more members of our executive
management personnel or any of our regional managing directors were unable or
unwilling to continue in their present positions, these persons would be very
difficult to replace. In addition, if any of these key employees joined a
competitor or formed a competing company, some of our clients might choose to
use the services of that competitor or new company instead of our own.
Furthermore, clients or other companies seeking management talent may hire away
some of our executive management personnel or regional managing directors. This
would not only result in the loss of key employees, but could also result in the
loss of client relationships or new business opportunities and impede our
ability to implement our business strategy. Many of our key employees have
entered into agreements with us that contain covenants not to solicit business
from our clients for periods of up to two years following termination. To date,
we have not sought judicial enforcement of these restrictive covenants. The
enforceability of restrictive covenants of these types is difficult to predict
because a court would have the authority to consider a variety of equitable
factors. If a court were to view the scope or duration of the restrictive
covenants as excessive, the covenants may not be enforceable as written or at
all.

The loss of our professionals, or inability to hire new qualified professionals,
could hinder our ability to grow and serve our clients

The Internet services market is labor intensive. Currently, companies in
our industry and similar industries face a shortage of qualified personnel, and
we do not foresee any improvement in this situation. We compete intensively with
other companies to hire and retain qualified labor from the available pool of
talent. We may not be successful in hiring and retaining qualified personnel. If
we cannot hire, train and retain qualified personnel or if a significant number
of our current employees depart, we may be unable to complete or retain existing
engagements or bid for new engagements of similar scope and revenues.

Our business may be harmed if we fail to accurately estimate the cost, scope,
expectations or duration of an engagement or fail to communicate changes to
these specifications to our clients

A majority of our revenues were derived from fixed-fee engagements during
1999. Because of the complexity of many of our client engagements, accurately
estimating the cost, scope, expectations and duration of a particular engagement
can be a difficult task. If we fail to accurately estimate the cost, scope,
expectations or duration of one or more engagements, we could be forced to
devote additional resources to these engagements for which we will not receive
additional compensation. To the extent that an expenditure of additional
resources is required on an engagement, this could reduce the profitability of,
or result in a loss on, the engagement. In the past, we have, on occasion,
engaged in significant negotiations with clients regarding changes to the cost,
scope, expectations or duration of specific engagements. To the extent we do not
sufficiently communicate to our clients, or our clients fail to adequately
appreciate, the nature and extent of any of these types of changes to an
engagement, our reputation may be harmed and we may suffer losses on an
engagement.

21
<PAGE>

Our revenues are difficult to predict because they are derived from project-
based client engagements

We primarily derive our revenues from project-based client engagements,
which vary in size and scope. As a result, our revenues are difficult to predict
from period to period, as any client that accounts for a significant portion of
our revenues in a given period may not generate a similar amount of revenues, if
any, in subsequent periods. After completion of an engagement, a client may not
retain us in the future. For example, we completed our engagement with ZixIt in
the three-month period ended December 31, 1999, and we do not anticipate
material revenues from ZixIt in the near future. In addition, because several of
our client engagements involve sequential stages, each of which represents a
separate contractual commitment, there is a risk that a client may choose not to
retain us for additional stages of an engagement. Furthermore, our existing
clients can generally reduce the scope of an engagement or cancel their use of
our services without penalty and with little or no notice. If clients terminate
existing engagements or if we are unable to enter into new engagements, our
revenues in the relevant fiscal period could substantially decline and we may
underutilize existing resources that we cannot quickly redeploy to other client
engagements.

Our quarterly financial results are subject to significant fluctuations due to
many factors, any of which could adversely affect our stock price

Our revenues and operating results may vary significantly from quarter to
quarter. It is possible that in some future periods our operating results may
fall below the expectations of public market analysts and investors. Any decline
in revenues or earnings or a greater than expected loss for any quarter could
cause the market price of our common stock to decline. The factors, some of
which are outside our control, which may cause our financial results to vary
from quarter to quarter include:

. the number, size and scope of our client engagements;

. unanticipated delays, deferrals or cancellations of major client
engagements;

. unanticipated changes in the scope of major client engagements;

. the efficiency with which we utilize our billable professionals, plan
and manage our existing and new client engagements and manage future
growth;

. the extent to which we use subcontractors or hire new billable
professionals whom we may not be able to immediately utilize on client
engagements;

. variability in market demand for Internet services;

. our ability to attract qualified professionals in a timely and effective
manner;

. our ability to complete fixed-fee engagements on budget;

. changes in pricing policies by us or our competitors; and

. general economic conditions.

In addition, because a percentage of our expenses, particularly labor
costs, are fixed in amount, these factors may cause our operating income and
operating margins to vary significantly from quarter to quarter. Due to these
factors, we believe that quarter-to-quarter comparisons of our operating results
may not be meaningful. Therefore, you should not rely on quarter-to-quarter
comparisons of our operating results as an indication of our future performance.

22
<PAGE>

If we are unable to manage our growth, it will adversely affect our business,
the quality of our solutions and our ability to retain key personnel

Although we have grown rapidly in recent years, we may not be able to
continue to grow at a similar pace or manage our growth. Our growth has placed
significant demands on our management and other resources and will continue to
do so in the future. Our revenues increased 114% in 1999 compared to 1998. Our
number of employees increased from 94 on January 1, 1997 to 345 on December 31,
1999. Managing our growth effectively will involve:

. accurately estimating time and resources for engagements;

. improving our business development capabilities;

. continuing to retain, motivate and manage our existing employees and
attract and integrate new employees;

. maintaining the quality of our solutions;

. maintaining acceptable utilization rates for our billable
professionals;

. opening and staffing offices in new geographic areas; and

. developing and improving our operational, financial, accounting and
other internal systems and controls on a timely basis.

If we are unable to manage our growth effectively, it could have a material
adverse effect on our ability to achieve or maintain profitability, the quality
of the solutions we provide and our ability to retain key personnel.

Our executive management team has limited experience working together, which may
make it difficult to conduct and grow our business

There has been little or no opportunity to evaluate the effectiveness of
our executive management team as a combined unit. For example, our president and
chief executive officer has only been employed by us since June 30, 1999, our
chief financial officer and chief technology officer have only been employed by
us since October 29, 1999 and our chief creative officer has only been employed
by us since February 16, 2000. The failure of executive management to function
effectively as a team may have an adverse effect on our ability to obtain and
execute client engagements, maintain a cohesive culture and compete effectively.

Intense competition in the Internet services market could impair our ability to
grow and achieve profitability

We may not be able to compete effectively with current or future
competitors. The Internet services market is relatively new and highly
competitive. We expect competition to further intensify as this market rapidly
evolves. Some of our competitors have longer operating histories, larger client
bases, longer relationships with their clients, greater brand or name
recognition and significantly greater financial, technical and marketing
resources than we do. As a result, our competitors may be in a stronger position
to respond more quickly to new or emerging technologies and changes in client
requirements and to devote greater resources than we can to the development,
promotion and sale of their services. Competitors could lower their prices,
potentially forcing us to lower our prices and suffer reduced operating margins.
We face competition from the following companies:

23
<PAGE>

. Internet services firms, including Scient Corporation, Viant
Corporation, Razorfish, Inc., Proxicom Inc., Sapient Corporation and
MarchFirst, Inc.;
. technology consulting firms and integrators, including Andersen
Consulting, the major accounting firms, Diamond Technology Partners,
Inc., EDS and IBM;
. strategy consulting firms, including Bain & Company, Booz Allen &
Hamilton Inc., The Boston Consulting Group, Inc. and McKinsey & Company;
and
. in-house information technology, marketing and design service
departments of our current and potential clients.

In addition, there are relatively low barriers to entry into the Internet
services market. We do not own any patented technology that would stop
competitors from entering this market and providing services similar to ours. As
a result, the emergence of new competitors may pose a threat to our business.
Existing or future competitors may develop and offer services that are superior
to, or have greater market acceptance than, ours, which could significantly
decrease our revenues and the value of your investment.

We may need additional capital in the future, which may not be available to us;
the raising of additional capital would dilute your ownership in Lante

In the future, we may need to raise additional funds, either through public
or private debt or equity financing, to take advantage of expansion or
acquisition opportunities, develop new solutions or compete effectively in the
marketplace. Any additional capital raised through the sale of equity or equity-
linked securities would dilute your ownership percentage in us. These securities
could also have rights, preferences or privileges senior to those of your common
stock. Furthermore, we may not be able to obtain additional financing when
needed or on terms favorable to us or our stockholders. If additional financing
is not available on favorable terms or at all, this may adversely affect our
ability to develop or enhance our services, take advantage of business
opportunities or respond to competitive pressures.

It is possible that other parties may assert that we have infringed on their
intellectual property rights or that our employees have misappropriated their
proprietary information, which could result in substantial costs and diversion
of management's attention

It is possible that other parties may assert infringement claims against us
in the future or claim that we have violated their intellectual property rights.
While we know of no basis for any claims of this type, authorship of
intellectual property rights can be difficult to verify. Competitors could
assert, for example, that former employees of theirs whom we have hired have
misappropriated their proprietary information for our benefit. Regardless of the
merits, infringement or misappropriation claims by third parties could be time
consuming and costly to defend, divert our attention and resources or require us
to make changes to our technologies.

Our business may suffer if we have disputes over our right to reuse intellectual
property developed for specific clients

Part of our business involves the development of software applications for
discrete client engagements. Ownership of client-specific software is generally
retained by the client, although we typically retain the right to reuse some of
the applications, processes and other intellectual property developed in
connection with client engagements. Issues relating to the rights to
intellectual property can be complicated, and disputes may arise that could
adversely affect our ability to reuse these applications, processes and other
intellectual property. These disputes could damage our relationships with our
clients

24
<PAGE>

and our business reputation, divert our management's attention and have a
material adverse effect on our ability to grow our business.

Our current services may become obsolete and unmarketable if we are not able to
keep pace with the latest technological changes and client preferences

Our business and the Internet services market are characterized by rapid
technological change. We must respond successfully on a timely and cost-
effective basis to changes in technology, industry standards and client
preferences to remain competitive and serve our clients effectively. We may
experience technical or other difficulties that prevent or delay our development
or introduction of solutions that address changes in technology, industry
standards and client preferences. These difficulties could cause our current
services to become obsolete and unmarketable.

If we are unable to maintain our reputation and expand our name recognition, we
may have difficulty attracting new business and retaining current clients and
employees, and our business may suffer

We believe that establishing and maintaining a good reputation and name
recognition are critical for attracting and retaining clients and employees. We
also believe that the importance of reputation and name recognition is
increasing and will continue to increase due to the growing number of providers
of Internet services. If our reputation is damaged or if potential clients are
not familiar with us or the solutions we provide, we may be unable to attract
new, or retain existing, clients and employees. Promotion and enhancement of our
name will depend largely on our success in continuing to provide effective
solutions. If clients do not perceive our solutions to be effective or of high
quality, our brand name and reputation will suffer. In addition, if solutions we
provide have defects, critical business functions of our clients may fail, and
we could suffer adverse publicity as well as economic liability.

Potential acquisitions may result in increased expenses, difficulties in
integrating target companies and diversion of management's attention

We may attempt to expand our solutions and service offerings and gain
access to new markets through strategic acquisitions and investments. We may
encounter the following risks in implementing this strategy:

. diversion of management's attention during the acquisition and
integration process;

. costs, delays and difficulties of integrating the acquired company's
operations, technologies and personnel into our existing operations,
organization and culture;

. adverse impact on earnings of amortizing the acquired company's
intangible assets, which could be significant in light of the high
valuations of many Internet and other information technology services
companies;

. issuances of equity securities which may be dilutive to existing
stockholders to pay for acquisitions;

. impact on our financial condition due to the timing of the acquisition
or our failure to meet operating expectations for acquired businesses;
and

. expenses of any undisclosed or potential legal liabilities of the
acquired company, including intellectual property, employment and
warranty and product liability-related problems.

25
<PAGE>

If realized, any of these risks could have a material adverse effect on our
business, financial condition and results of operations.

We may encounter problems with any potential international operations

We have no experience in promoting and selling our solutions within foreign
countries or in integrating international operations into our company. As we
begin pursuing international opportunities, including acquisitions, we will face
a number of potential difficulties, including cultural differences, currency
exchange risks, the underdevelopment of an Internet infrastructure in some
international markets and different government regulatory schemes. Additionally,
we will need to devote significant managerial and financial resources to locate
and retain qualified personnel for international operations, as well as to
obtain the necessary technical and strategic support for international
expansion. As a result, we may not be able to successfully promote our services
or perform client engagements in international markets. If we fail to expand our
operations internationally in a timely and effective manner, it may hinder our
growth and ability to compete effectively and could harm our business
reputation.

Risks Related to Our Industry

Our business may suffer if growth in Internet usage does not continue to
increase

If the usage and volume of commercial transactions on the Internet does not
continue to increase, demand for our services may decrease and our business and
results of operations could materially suffer. The future of our business
depends upon continued growth in Internet usage by our clients, prospective
clients and their customers and suppliers. Growth in Internet usage has caused
capacity constraints which may potentially impede further growth if left
unresolved. Factors which may affect Internet usage or e-commerce adoption
include:

. actual or perceived lack of security of information;

. congestion of Internet traffic or other usage delays;

. inconsistent quality of service;

. increases in Internet access costs;

. increases in government regulation;

. uncertainty regarding intellectual property ownership;

. reluctance to adopt new business methods;

. costs associated with the obsolescence of existing infrastructure; and

. economic viability of e-commerce models.

Increasing government regulation could adversely affect our business

Due to the increasing popularity of the Internet, various laws or
regulations relating to the Internet may be adopted. An increase in federal,
state or foreign legislation or regulation of e-commerce could hinder the
Internet's growth and could decrease its usage as a commercial marketplace. If
this decline occurs, existing and prospective clients may decide not to use our
solutions. In addition, a number of legislative proposals have been made at the
federal, state and local levels and by foreign governments that could impose
taxes on online commerce. The three-year moratorium preventing state and local
governments from taxing Internet access, taxing electronic commerce in multiple
states and discriminating against electronic

26
<PAGE>

commerce. In addition, existing state and local laws that tax Internet related
matters were expressly excluded from this moratorium. These regulations, and
other attempts at regulating commerce over the Internet, could impair the
viability of e-commerce and the growth of our business.

Risks Related to Our Common Stock

If the market price of our common stock fluctuates significantly, you may not be
able to sell our shares at or above the price at which you purchased them and,
therefore, you may suffer a loss on your investments

The market price of our common stock could fluctuate significantly in
response to any of the following:

. changes in financial estimates or investment recommendations by
securities analysts following our business;

. quarterly variations in our operating results falling below analysts' or
investors' expectations in any given period;

. general economic and information technology services market conditions;

. changes in economic and capital market conditions for Internet and other
information technology services companies;

. changes in market valuations of, or earnings and other announcements by,
providers of Internet and other information technology services;

. announcements by us or our competitors of new solutions, service
offerings, acquisitions or strategic relationships;

. changes in business or regulatory conditions; and

. trading volume of our common stock.

Many companies' equity securities, including equity securities of Internet
and other technology companies, have experienced extreme price and volume
fluctuations in recent years. Often, these fluctuations are unrelated to the
companies' operating performance. Elevated levels in market prices for
securities, often reached following these companies' initial public offerings,
may not be sustainable and may not bear any relationship to operating
performances. Our common stock may not trade at the same levels as other
Internet stocks, and Internet stocks in general may not sustain their current
market prices. In the past, following periods of market volatility, stockholders
have instituted securities class action litigation. If we were involved in
securities litigation, it could have a substantial cost and divert resources and
the attention of executive management from our business.

Provisions of our charter and bylaws and Delaware law could deter takeover
attempts that may offer you a premium, which could adversely affect our stock
price

Provisions of our certificate of incorporation, our bylaws and Delaware law
make acquiring control of us without the support of our board of directors
difficult for a third party, even if the change of control would be beneficial
to you. The existence of these provisions may deprive you of an opportunity to
sell your shares at a premium over prevailing prices. The potential inability of
our stockholders to obtain a control premium could adversely affect the market
price for our common stock. For example, our certificate of incorporation
provides that the board of directors will be divided into three classes as
nearly equal in size as possible with staggered three-year terms. This
classification of the board of directors has the effect of making it more
difficult for stockholders to change the composition of the board of directors.

27
<PAGE>

In addition, our certificate of incorporation authorizes our board of directors
to issue up to 10,000,000 shares of "blank check" preferred stock. This means
that, without stockholder approval, the board of directors has the authority to
attach special rights to this preferred stock, including voting and dividend
rights. With these rights, preferred stockholders could make it more difficult
for a third party to acquire our company. A special meeting of stockholders may
only be called by a majority of the board of directors or by our president,
chief executive officer or chairman. In addition, a stockholder proposal for an
annual meeting must be received within a specified period of time to be placed
on the agenda. Because stockholders do not have the ability to require the
calling of a special meeting of stockholders and are subject to timing
requirements in submitting stockholder proposals for consideration at an annual
meeting, any third-party takeover not supported by the board of directors would
be subject to significant delays and difficulties.

Absence of dividends could reduce our attractiveness to investors

Some investors favor companies that pay dividends. We anticipate that for
the foreseeable future we will follow a policy of not declaring dividends on
common stock and instead retaining earnings, if any, for use in our business. If
we do not pay dividends, your return on an investment in our common stock likely
will depend on your ability to sell our stock at a profit.

Our affiliates can control matters requiring stockholder approval because they
own a large percentage of our common stock, and they may vote this common stock
in a way with which you do not agree

Our affiliates own approximately 78.5% of the outstanding shares of our
stock. As a result, if these persons act together, they will have the ability to
exercise substantial control over our affairs and corporate actions requiring
stockholder approval, including the election of directors, a sale of
substantially all our assets, a merger with another entity or an amendment to
our certificate of incorporation. The ownership position of these stockholders
could delay, deter or prevent a change in control and could adversely affect the
price that investors might be willing to pay in the future for shares of our
common stock.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our primary financial instruments are cash in banks and commercial paper.
We do not believe that these instruments are subject to material potential near-
term losses in future earnings from reasonably possible near-term changes in
market rates or prices. We do not have derivative financial instruments for
speculative or trading purposes.

Item 8. Financial Statements and Supplementary Data

The financial statements and financial statement schedules, with the report
of independent accountants, listed in Item 14 are included in this annual
report.

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

None.

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<PAGE>

PART III

Item 10. Executive Officers, Directors and Key Employees of the Registrant

The following table contains information with respect to our executive officers,
directors and key employees:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Executive officers and directors:
Mark Tebbe(1)....................... 38 Chairman of the Board of Directors
C. Rudy Puryear(1).................. 48 President, Chief Executive Officer and Director
Brian Henry......................... 43 Executive Vice President and Chief Financial
Officer
Marvin Richardson................... 37 Chief Technology Officer
John Harne.......................... 43 Chief Creative Officer
Rick Gray........................... 43 Vice President--Marketing
Marla Mellies....................... 40 Vice President--Human Resources
John Oltman(1)...................... 54 Vice Chairman of the Board of Directors
Paul Carbery(2)(3).................. 38 Director
James Cowie(1)...................... 45 Director
Judith Hamilton(3).................. 55 Director
John Kraft(3)....................... 58 Director
John Landry(2)...................... 52 Director
Paul Yovovich(2).................... 46 Director
</TABLE>
__________________
(1) Member of the executive committee
(2) Member of the audit committee
(3) Member of the compensation committee

Mark Tebbe, a founder of Lante, served as our president and chief executive
officer from inception until June 1999. Since June 1999, Mr. Tebbe has been our
chairman of the board. Mr. Tebbe also serves as a director of ZixIt Corporation,
a company which provides a technology platform for on-line security and privacy
to Internet based businesses, as well as several technology-based and not-for-
profit corporations.

C. Rudy Puryear has served as our president and chief executive officer
since June 1999. Mr. Puryear was Andersen Consulting's global managing partner
for e-commerce from September 1997 to June 1999. Mr. Puryear served as Andersen
Consulting's managing partner for information technology strategy from March
1991 to September 1997. Prior to his tenure at Andersen Consulting, Mr Puryear
was managing director for Nolan, Norton & Co., an information technology
strategy-consulting firm.

Brian Henry joined Lante as executive vice president and chief financial
officer in October 1999 and is responsible for our financial and information
technology functions. From April 1998 to October 1999, Mr. Henry was chief
operating officer of the information management group of Convergys Corporation,
a leader in billing and customer care for the communications industry. He has
also held several senior positions, including executive vice president and chief
financial officer of Cincinnati Bell Inc., a diversified communications service
company, from 1993 to 1998, and vice president and chief financial officer of
Mentor Graphics Corporation, a public software company, from 1986 to 1993.

29
<PAGE>

Marvin Richardson has been our chief technology officer since October 1999.
From April 1999 to October 1999, he was vice president and chief technology
officer for EDS E. Solutions. From July 1996 to April 1999, he was vice
president and chief technology officer for MCI Systemhouse, Inc., a network
services company. From 1993 to 1995, he was chief architect at SHL Systemhouse,
a company involved in client-server consulting and systems integration.

John Harne has been our chief creative officer since February 2000. From
January 1997 to February 2000, he was vice president of creative services and
co-chief creative officer at IXL, Inc., a subsidiary of IXL Enterprises, Inc.,
an Internet services company. From 1994 to 1996, Mr. Harne served as studio
manager and creative director of intermedia at Design EFX, a subsidiary of
Crawford Communications, Inc., an interactive and video production company.
From 1993 to 1994, he was a principal of Hummingbird Studio, Inc., a visual
design studio specializing in visual interface design.

Rick Gray has been our vice president of marketing and communications since
November 1998. From May 1996 to November 1998, he was the worldwide director of
public relations at A.T. Kearney, a subsidiary of EDS that is an international
management consultancy and executive search firm. From June 1993 to May 1996,
Mr. Gray served as director of corporate marketing and communications for SHL
Systemhouse, Inc., a client-server outsourcing and systems integration firm.
Prior to June 1993, he served as director of public and investor relations for
Technology Solutions Company, and as vice president, group director and head of
the Midwest Advanced Technology Practice for Hill and Knowlton, Inc.

Marla Mellies has been our vice president of human resources since June
1998. From June 1995 to June 1998, Ms. Mellies was vice president of human
resources for client access products at 3Com Corporation/U.S. Robotics, a
provider of information networking systems. From 1992 to May 1995, Ms. Mellies
served as human resources director for the International Business Group of
Caremark, Inc.

John Oltman has been vice chairman of the board of directors since July
1998. Since 1996, Mr. Oltman has served as the president of JRO Consulting,
Inc., which advises and invests in technology companies. From February 1996 to
August 1997, he served as chairman and senior member of the executive committee
of TSW International, a provider of application software and related services.
From 1991 to 1995, he served as chairman and chief executive officer of SHL
Systemhouse, Inc. Prior to 1991, Mr. Oltman was a worldwide managing partner for
Andersen Consulting's Chicago consulting group and a member of the Andersen
Worldwide Organization board of directors. He joined Arthur Andersen in 1970.
Mr. Oltman also serves as a director of InaCom Corp., an information services
technology provider, and Alysis Technologies, Inc., a provider of application
software solutions to financial services organizations.

Paul Carbery has been a director since June 1999. Mr. Carbery has been a
general partner of Frontenac Company, a Chicago-based private equity investing
firm, since 1993. He is also a director of Allegiance Telecom, Inc., a provider
of voice, data and Internet services, and MarchFirst, Inc.

James Cowie has been a director since June 1999. Mr. Cowie has been a
general partner of Frontenac Company, a Chicago-based private equity investing
firm, since 1989. He is also a director of 3Com Corporation, a provider of
information networking systems. He also served on the board of PLATINUM
technology International, inc., a provider of system software products and
related consulting services, until its sale to Computer Associates, Inc.

Judith Hamilton has been a director since March 1999. She has been
president and chief executive officer at Classroom Connect, a leader in
Internet-based curriculum and professional

30
<PAGE>

development for K-12 education since January 1999. From April 1996 to July 1998,
she served as president and chief executive officer of First Floor, Inc., an
Internet information management company. From July 1992 to December 1995, she
was president and chief executive officer of Dataquest, Inc., an information
technology research company. Ms. Hamilton also serves as a director of R.R.
Donnelley & Sons Company, Software.com, Inc., an Internet messaging solutions
provider, and Classroom Connect.

John Kraft has been a director since July 1998. Since 1993, Mr. Kraft has
been active in consulting and assisting many startup companies including Modem
Media, a provider of interactive marketing and communications, Two Way
Communications, a provider of interactive marketing and media services, T-Zero
Inc., a producer of software that delivers and manages images to digital point-
of-sales displays, and BioSafe Medical Technologies, a developer of innovative
technologies to exploit small blood samples for analysis. Prior to 1993, Mr.
Kraft was employed for over twenty years at Leo Burnett, a leader in the
advertising industry, most recently as vice chairman.

John Landry has been a director since October 1999. Since 1995, Mr. Landry
has served as vice president of technology strategy for IBM. Mr. Landry has also
served as chairman of AnyDay.com, an Internet calendar and personal information
management company, since February 1999. From March 1996 to January 1999, he
also served as chairman of Narrative Communications, an Internet based media
advertising and direct marketing company. From December 1990 to June 1995, Mr.
Landry served as the senior vice president of development and chief technology
officer for Lotus Development Corporation, a provider of software products and
services. He also serves as a director of GIGA Information Group, a technology
market research firm, MCK Communications, Inc., a voice-over-IP
telecommunications company, and Interliant, Inc., an applications service
provider, as well as several other private companies.

Paul Yovovich has been a director since July 1998. He currently serves as
director for several companies, including 3Com Corporation, APAC Customer
Service, Inc., a customer relationship marketing firm, Focal Communications
Corporation, a telecommunications provider, Comarco, Inc., a provider of
wireless communication, engineering and management services, and Van Kampen Open
End Funds. From 1993 to 1996, he was president of Advance Ross Corporation, an
international transaction services company. Prior to 1993, he served in a
variety of executive positions with Centel Corporation.

Our Advisory Group

In 1998, we established an advisory group to assist our management team in
addressing strategic issues as we position ourselves as a leader in the Internet
services industry. Our nine-member advisory group consists of Judith Hamilton,
John Kraft, John Landry, John Oltman and Paul Yovovich, each of whom is a
director of Lante, as described above, and the following members:

. Michael Dell, chairman and chief executive officer of Dell Computer
Corporation;

. Dan Lynch, chairman of CyberCash, Inc.;

. Michael Maples, former executive vice president of products for
Microsoft Corporation; and

. Morton Meyerson, chairman and chief executive officer of 2M Companies,
Inc. and the former chairman and chief executive officer of Perot
Systems and president and vice-chairman of EDS.

31
<PAGE>

Each advisor is expected to devote at least five days per year to
performing his or her duties as a member of the advisory group, including
attending semi-annual strategy sessions. We granted each of the members of the
advisory group an option to purchase 200,000 shares of our common stock under
our 1998 stock option plan on the date they joined the advisory group. These
options vest over five years so long as they remain a member of the advisory
group and terminate on the seventh anniversary of their grant date. At the time
of grant, John Oltman received options for another 200,000 shares in
consideration for additional consulting and advisory services he has provided to
us. Each of the advisors also has invested in Lante. To date, the advisory group
has been instrumental in developing plans to accelerate our growth rate,
recruiting top executive and professional talent, referring qualified business
leads and helping us establish a differentiated market position from our
competitors.

Board of Directors

Our certificate of incorporation authorizes a board of directors consisting
of at least five, but not more than 15, members. The current board of directors
consists of nine members. Our certificate of incorporation provides that the
terms of office of the members of our board of directors will be divided into
three classes. The Class I directors are Paul Carbery, John Kraft and John
Oltman, the Class II directors are Judith Hamilton, C. Rudy Puryear and Paul
Yovovich, and the Class III directors are James Cowie, John Landry and Mark
Tebbe. At each annual meeting of stockholders, the successors to directors whose
term will then expire will be elected to serve three-year terms. Our bylaws
provide that the authorized number of directors may be changed only by
resolution of our board of directors. Any additional directorships resulting
from an increase in the number of directors may be changed only by resolution of
the board of directors and will be distributed among the three classes so that,
as nearly as possible, each class will consist of one-third of the total number
of directors. This classification of the board of directors may have the effect
of delaying or preventing changes in control or management of Lante.

Each officer is elected by, and serves at the discretion of, the board of
directors. Each of our officers and directors, other than non-employee
directors, devotes full-time efforts to our affairs. Our non-employee directors
devote time to our affairs as is necessary to fulfill their duties. There are no
family relationships among any of our directors, officers or key employees.

Committees of the Board of Directors

Our board of directors has established an executive committee, audit
committee and compensation committee.

Our executive committee has the powers in the management of our business
and affairs as our board of directors may delegate or assign to the executive
committee. These powers may include evaluating and negotiating acquisitions and
strategic alliances. The current members of the executive committee are Messrs.
Cowie, Oltman, Puryear and Tebbe. Mr. Tebbe serves as the chairman of this
committee.

Our audit committee recommends to our entire board the independent public
accountants to be engaged by us, reviews the plan, scope and results of our
annual audit and reviews our internal controls and financial management policies
with our independent public accountants. The current members of our audit
committee are Messrs. Carbery, Landry and Yovovich. Mr. Yovovich serves as the
chairman of this committee.

32
<PAGE>

Our compensation committee establishes guidelines and standards relating to
the determination of executive compensation, reviews executive compensation
policies and recommends to our entire board compensation for our executive
officers. Our compensation committee also administers our stock option and
incentive award plans and determines the number of shares covered by, and terms
of, options to be granted to executive officers and key employees pursuant to
these plans. Our compensation committee currently consists of Messrs. Carbery
and Kraft and Ms. Hamilton. Mr. Kraft serves as the chairman of this committee.

Director Compensation

No additional compensation is provided to our employees for serving as a
director. Directors who are not our employees do not receive a cash fee for
serving as a director, but are reimbursed for reasonable expenses incurred in
connection with attendance at directors' meetings. During 1999, we granted
options to Ms. Hamilton and Messrs. Kraft, Landry, Oltman and Yovovich for
serving as directors. Ms. Hamilton and Mr. Landry each received options to
purchase 80,000 shares, Mr. Oltman received options to purchase 100,000 shares
and Messrs. Kraft and Yovovich each received options to purchase 120,000 shares.
These options vest over periods ranging from three to four years.

Compensation Committee Interlocks and Insider Participation

No member of the compensation committee has been an officer or employee of
us at any time. None of our executive officers serves as a member of the board
of directors or compensation committee of any other company that has one or more
executive officers serving as a member of our board of directors or compensation
committee. Prior to the formation of the compensation committee in June 1999,
the board of directors as a whole made decisions relating to compensation of our
executive officers.

Item 11. Executive Compensation

The following table contains information concerning all compensation paid by
Lante during 1999 to our chief executive officer and our four other most highly
compensated executive officers.

33
<PAGE>
<TABLE>
<CAPTION>
Long-term
compensation awards
Securities underlying All other
Salary ($) Bonus ($) options (#) compensation ($)
---------- --------- --------------------- ----------------
<S> <C> <C> <C> <C>
Mark Tebbe ............................ $360,000 $216,000 -- $ 2,872(1)
Chairman of the Board of Directors
C. Rudy Puryear(2) .................... 251,894 125,000 7 2,149,513
President and Chief Executive Officer
Rick Gray ............................. 200,000 52,500 -- --
Vice President--Marketing
Marla Mellies ......................... 150,000 53,000 70,000 --
Vice President--Human Resources
Pantelis Georgiadis(3) ................ 202,079 -- -- (4) 90,909(5)
Chief Operating Officer
</TABLE>
__________________
(1) Represents premiums paid by us for term life and short-term disability
insurance.
(2) Mr. Puryear was not affiliated with Lante until June 16, 1999. "All Other
Compensation" includes $2,148,000 attributable to the difference between
the fair value of our common stock and the price paid by Mr. Puryear for
2.4 million shares of our common stock.
(3) Mr. Georgiadis' employment as chief operating officer was terminated as of
September 10, 1999.
(4) We entered into an agreement with Mr. Georgiadis dated June 3, 1999 whereby
previously granted options to purchase 1,000,000 shares were fully vested
and previously granted options to purchase 750,000 shares were canceled.
(5) We paid this amount to Mr. Georgiadis in connection with the termination of
his employment.

Option Grants in 1999

The following table contains information concerning our grant of stock
options during 1999 to our chief executive officer and our four other most
highly compensated executive officers. Potential realizable value is presented
net of the option exercise price, but before any federal or state income taxes
associated with exercise, and is calculated assuming that the fair market value
on the date of the grant appreciates at the indicated annual rates, compounded
annually, for the term of the option. The 5% and 10% assumed rates of
appreciation are mandated by the rules of the SEC and do not represent our
estimate or projection of future increases in the price of our common stock.
Actual gains will be dependent on the future performance of our common stock and
the option holder's continued employment throughout the vesting period. The
amounts reflected in the following table may not be achieved.

34
<PAGE>

<TABLE>
<CAPTION>
Potential realizable
value at assumed
annual rates of stock
Number of shares Percent of total price appreciation
underlying options granted Exercise or for option term
options granted to employees base price Expiration ---------------------
Name (#) in fiscal year ($/Sh) date 5% 10%
- ------------------------ ---------------- ---------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mark Tebbe ............. -- -- -- -- -- --
C. Rudy Puryear ........ -- -- -- -- -- --
Rick Gray .............. -- -- -- -- -- --
Marla Mellies .......... 70,000 1.66% $.0365 5/28/08 $14,086 $34,696
Pantelis Georgiadis(1) .. -- -- -- -- -- --
</TABLE>
- --------------------
(1) Mr. Georgiadis entered into an agreement with us dated June 3, 1999 whereby
options to purchase 1,000,000 shares were fully vested and options to
purchase 750,000 shares were canceled. Mr. Georgiadis' employment was
terminated as of September 10, 1999.

1999 Option Exercises and Option Values

The following table contains information regarding unexercised options held
at, and options exercised during the fiscal year ended, December 31, 1999 by our
chief executive officer and our four other most highly compensated executive
officers. The value of "in-the-money" options represents the difference between
the exercise price of an option and the fair market value of our common stock as
of December 31, 1999, which, solely for purposes of this calculation, we
estimate to have been $11.00 per share.

<TABLE>
<CAPTION>
Shares Value Number of shares underlying Value of unexercised
acquired on realized unexercised options at in-the-money options at
exercise (#) ($) December 31, 1999 (#) December 31, 1999 ($)
------------ -------- --------------------------- -------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Mark Tebbe .............. -- -- --/-- --/--
C. Rudy Puryear ......... -- -- --/-- --/--
Rick Gray ............... 75,000 $729,938 6,250/218,750 $67,078/2,347,734
Marla Mellies ........... 61,458 600,752 4,167/204,375 44,899/2,192,341
Pantelis Georgiadis(1) .. 1,000,000 620,000 --/-- --/--
</TABLE>
- --------------------
(1) Mr. Georgiadis entered into an agreement with us dated June 3, 1999 whereby
options to purchase 1,000,000 shares were fully vested and options to
purchase 750,000 shares were canceled. Mr. Georgiadis' employment was
terminated as of September 10, 1999.

Employment Agreements

We have entered into an employment agreement with Mark Tebbe, our chairman
of the board, that provides for an annual base salary of $360,000 and an annual
bonus based upon his performance. The employment agreement may be terminated by
either Mr. Tebbe or us, provided that the board of directors may elect, other
than in the case of termination of the employment agreement by us for cause, to
pay a severance amount to Mr. Tebbe in the amount of $360,000 plus his most
recent annual bonus. This agreement imposes upon Mr. Tebbe noncompetition and
non-solicitation restrictions for two years after termination of his employment.

<PAGE>

We have entered into an employment agreement with Rudy Puryear, our
president and chief executive officer, that provides for an annual base salary
of $500,000 in each of 2000 and 2001 and a guaranteed bonus of $250,000, pro-
rated for the days of employment, for 1999, $250,000 for 2000 and $125,000 for
2001. This agreement imposes on Mr. Puryear nonsolicitation restrictions for two
years following termination of his employment and noncompetition restrictions
for six months following termination of his employment.

In connection with his employment agreement, Mr. Puryear purchased 2.4
million restricted shares of common stock for $1.345 per share. These shares
vest over 48 months. In connection with this purchase, we loaned Mr. Puryear
$3.2 million. As of December 31, 1999, $3,314,672 of principal and accrued
interest on the loan was outstanding. All principal and accrued interest on this
loan are due on February 14, 2003. In addition, we made a second loan to Mr.
Puryear for his personal use in the amount of $2.5 million. As of December 31,
1999, $2.5 million of principal and accrued interest on the loan was
outstanding. Principal and accrued interest on this loan are due upon the
earlier of June 30, 2003 or six months from the termination of Mr. Puryear's
employment. If Mr. Puryear is still employed as of June 30, 2003 and a liquidity
event has not occurred or a valuation target of $16.67 per share for Mr.
Puryear's stock has not been reached, then this loan will be forgiven
prospectively at the rate of $100,000 per month.

Mr. Puryear is entitled to a one-time bonus pursuant to his employment
agreement, payable upon the earliest of (1) six months from the date of
termination of employment, (2) June 30, 2003 or (3) the date the accrued
interest on the $2.5 million loan is paid in full. If Mr. Puryear repays this
loan, he is entitled to a bonus equal to $20,833 times the number of full months
of his employment from June 16, 1999 until the accrued interest is paid.

If Mr. Puryear's employment is terminated other than by us for cause, he
will be entitled to severance pay equal to one year's base salary plus the
current year's target bonus, 18 months' acceleration on the release of shares of
restricted stock from our right to repurchase for cost and the unpaid principal
balance of the $2.5 million loan being forgiven at the rate of $83,333 for each
full month of service provided to us. Upon any termination of Mr. Puryear's
employment, except following a change of control, we have the right to
repurchase from Mr. Puryear the unvested portion of the 2.4 million shares
purchased by Mr. Puryear at the price he paid for these shares. Upon a change in
control, all of these shares will become fully vested. We have also granted
registration rights to Mr. Puryear requiring that we file a Form S-8
registration statement, including a resale prospectus as necessary, to allow Mr.
Puryear to resell his shares at the same time and in the same amount as would be
available under Rule 144 had Mr. Puryear not acquired his shares pursuant to a
secured loan.

We have entered into an employment agreement with Brian Henry, our chief
financial officer, that provides for an annual base salary of $250,000 and an
annual bonus, with a target bonus of $100,000, pro-rated for the days of
employment for 1999. This employment agreement imposes upon Mr. Henry non-
solicitation obligations for two years after termination of his employment.

In connection with his employment agreement, we issued 300,000 shares of
our common stock to Mr. Henry for the aggregate amount of $673,500. Of these
shares, 200,000 shares are subject to our right to repurchase at the then fair
market value, and 50,000 of these shares will be released from our repurchase
right for each full year of service. Mr. Henry also received an option grant for
700,000 shares of common stock which will vest over four years. The exercise
price of Mr. Henry's options is $2.245 per share.

<PAGE>

If Mr. Henry's employment is terminated without cause, we will be obligated
to pay Mr. Henry severance of six months' base salary plus a pro-rated portion
of his target bonus and the vesting of his stock options will be accelerated by
one year. Upon a change in control, Mr. Henry may terminate his employment and
will be entitled to severance of six months' base salary plus a pro-rated
portion of his target bonus, the vesting of his stock options will be
accelerated by one year and the 200,000 restricted shares originally purchased
by Mr. Henry in connection with his employment agreement will be released from
our repurchase right.

Stock Option Plan

In 1998, we adopted, and our stockholders approved, the establishment of
our 1998 stock option plan, which is designed to promote our overall financial
objectives by attracting and motivating board members, officers, employees and
other persons who are instrumental to our long-term growth. The 1998 plan is
administered by the compensation committee of our board and provides the
committee with broad discretion to fashion the terms of grants of options,
including type, size and exercise price, as it deems appropriate. The committee
also selects the persons to whom options are granted. The plan permits the
issuance of stock options for the purchase of up to 15 million shares of our
common stock. As of December 31, 1999, 6,379,750 shares of our common stock
remained available for grants under the 1998 plan.

Subject to the terms of the specific option agreement, each option to
purchase common stock issued under our 1998 plan will become exercisable in
stages beginning one year after its grant date, when 1/4th of the participant's
options will become exercisable. An additional 1/48th of each option will become
exercisable as of the last day of each month thereafter. As a result, each
option will be exercisable in full 48 months after its grant date. An optionee
may only transfer options to his or her immediate family members, trusts for the
benefit of the optionholder or his or her immediate family or an entity in which
the optionee owns all of the equity interests. Generally, there is no
acceleration of vesting in the event of a change in control or otherwise.
However, on June 17, 1999, we amended the option agreements of Marla Mellies,
Rick Gray and the members of the advisory group to provide for acceleration of
all unvested options upon a change in control. All vested options at the date of
termination of employment will be exercisable for 90 days following termination.

The outstanding options that have been granted to our non-employee
directors and advisory group members have terms of seven years and all other
outstanding option grants under the plan have terms of nine years.

Stock Purchase Plan

We have adopted an employee stock purchase plan under which a total of
800,000 shares of our common stock will be made available for sales to our
employees. The compensation committee of our board will administer the stock
purchase plan. Employees are eligible to participate in the stock purchase plan
if they are employed by us for at least 20 hours per week and for more than five
months in any calendar year. The stock purchase plan will permit our eligible
employees to purchase our common stock through payroll deductions.

The stock purchase plan will operate on a calendar year basis. The stock
purchase plan will be implemented in a series of consecutive offering periods,
each approximately six months long. Each participant will be granted an option
to purchase our common stock on the first day of the six-month period and this
option will be automatically exercised on the last day of each offering period
to the extent of funds deducted from the participant's compensation during the
specific offering period. The exercise

<PAGE>

price of the option granted under the stock purchase plan will be not less than
85% of the lower of our stock's closing price on the first day of the offering
period and the last day of the offering period. Employees may end or modify
their participation in the stock purchase plan at any time during an offering
period. Participation ends automatically upon termination of employment, except
in the case of death, disability or retirement, in which case payments may still
be made for the current offering period in the amount the participant would have
contributed if his or her employment had not been terminated. Payroll deductions
may not exceed $25,000 for any employee in any calendar year.

No person will be able to purchase our common stock under the stock
purchase plan if that person, immediately after the purchase, would own stock
possessing 5% or more of the total combined voting power or value of all
outstanding shares of all classes of our stock.

Limitation of Liability and Indemnification Matters

Our certificate of incorporation contains provisions that eliminate the
personal liability of our directors to us or our stockholders for monetary
damages for breach of their fiduciary duty as a director to the fullest extent
permitted by the Delaware General Corporation Law, except for liability:

. for any breach of their duty of loyalty to us or our stockholders;

. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. for unlawful payments of dividends or unlawful stock repurchases or
redemptions; or

. for any transaction from which the director derived an improper personal
benefit.

These provisions do not affect a director's responsibilities under any
other laws, including the federal securities laws or state or federal
environmental laws.

Our bylaws also contain provisions that require us to indemnify our
directors, and permit us to indemnify our officers and employees, to the fullest
extent permitted by Delaware law. However, we are not obligated to indemnify any
such person:

. with respect to proceedings, claims or actions initiated or brought
voluntarily by any such person and not by way of defense; or

. for any amounts paid in settlement of an action indemnified against by
us without our prior written consent.

We have entered into indemnity agreements with each of our directors and
executive officers providing for the indemnification described above. We believe
that these limitations on liability are essential to attracting and retaining
qualified persons as directors and officers. We have obtained directors' and
officers' liability insurance.

<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table contains information regarding the beneficial ownership
of our common stock as of March 23, 2000 by:

. each person or group of affiliated persons known by us to beneficially
own more than 5% of the outstanding shares of our common stock;
. each of our directors;
. each executive officer; and
. all of our directors and executive officers as a group.

Unless otherwise indicated below the persons in this table have sole voting
and investment power with respect to all shares shown as beneficially owned by
them. Beneficial ownership is determined in accordance with the rules of the
SEC. The number of shares beneficially owned by a person and the percentage
ownership of that person includes shares of our common stock subject to options
held by that person that are currently exercisable or exercisable on or before
May 22, 2000, as disclosed in the "Options to purchase shares included in
beneficial ownership" column.

Unless otherwise indicated, the address of each person who beneficially
owns 5% or more of our common stock is c/o Lante Corporation, 161 North Clark
Street, Suite 4900, Chicago, Illinois 60601.

<TABLE>
<CAPTION>
Options to
Number of shares purchase shares
of Percentage of included in
common stock voting power beneficial
beneficially owned owned ownership
------------------ ------------- ---------------
Name and Address
- ----------------
Executive officers and directors:
<S> <C> <C> <C>
Mark Tebbe............................... 13,020,500 33.1% --
C. Rudy Puryear(1)....................... 2,445,500 6.2 --
Brian Henry(2)........................... 325,000 * --
Marvin Richardson........................ 20,200 * --
John Harne............................... -- -- --
Rick Gray................................ 122,500 * 37,500
Marla Mellies............................ 95,416 * 23,958
Pantelis Georgiadis(3)................... -- -- --
Paul Carbery(4).......................... 5,391,532 13.7 --
James Cowie(4)........................... 5,391,532 13.7 --
Judith Hamilton.......................... 255,495 * 20,000
John Landry.............................. 542,233 1.4 91,667
John Kraft(5)............................ 681,006 1.7 20,000
John Oltman(6)........................... 1,102,638 2.8 20,000
Paul Yovovich............................ 678,380 1.7 21,500
Five percent stockholders:
Frontenac Company VII LLC(7)............ 5,391,532 13.7 --
John Meyer(8)............................ 2,946,500 7.5 32,125
Dell USA L.P.(9)......................... 3,414,428 8.7 --
Michael Dell(10)......................... 4,051,204 10.3 --

All executive officers and directors as a
group:
(14 people).............................. 24,680,400 62.3 234,625
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

39
<PAGE>

___________________
*less than 1%.
(1) Includes 80,000 shares in the aggregate held by family members of Mr.
Puryear. Mr. Puryear disclaims beneficial ownership of these 80,000 shares.
(2) Includes 300,000 shares held by BRH Wynstone Limited Partnership, an entity
of which Mr. Henry is a general partner.
(3) Mr. Georgiadis' employment was terminated as of September 10, 1999.
(4) Represents 5,134,456 shares held by Frontenac VII Limited Partnership and
257,076 shares held by Frontenac Masters VII Limited Partnership. Mr. Cowie
and Mr. Carbery are each a member of Frontenac Company VII LLC, which is
the sole general partner of Frontenac VII Limited Partnership and Frontenac
Masters VII Limited Partnership. As a result, Mr. Cowie and Mr. Carbery may
each be deemed to have beneficial ownership of the shares held by Frontenac
VII Limited Partnership and Frontenac Masters VII Limited Partnership. Mr.
Cowie and Mr. Carbery each disclaim beneficial ownership of these shares,
except to the extent of their pecuniary interests.
(5) Includes 357,006 shares held by Kraft Enterprises Ltd., an entity directly
controlled by Mr. Kraft.
(6) Represents 1,033,134 shares held by JRO Consulting, Inc., a corporation
controlled by Mr. Oltman, and 49,504 shares held by the John R. Oltman
Charitable Foundation.
(7) Includes 5,134,456 shares held by Frontenac VII Limited Partnership and
257,076 shares held by Frontenac Masters VII Limited Partnership. Frontenac
Company VII LLC is the sole general partner of both limited partnerships.
The address of Frontenac Company VII LLC is 135 South LaSalle Street, Suite
3800 Chicago, Illinois 60603.
(8) Includes 2,425,000 shares held by trusts for the benefit of family members
of Mark Tebbe, of which Mr. Meyer serves as trustee. Mr. Meyer disclaims
beneficial ownership of these 2,425,000 shares. Also includes 3,636 shares
in the aggregate held by family members of Mr. Meyer.
(9) Does not include 600,000 shares held by Michael Dell, individually, and
36,776 shares held by DBV Investments, L.P., an entity affiliated with MSD
Capital, L.P., the private investment firm for Mr. Dell. Dell USA L.P. does
not have any ownership interest in, or voting or investment power with
respect to, shares owned by DBV Investments, L.P. or Michael Dell. The
address of Dell USA L.P. is One Dell Way, Round Rock, Texas 78682.
(10) Includes 600,000 shares held by Michael Dell individually, 36,776 shares
held by DBV Investments, L.P., an entity affiliated with MSD Capital, L.P.,
the private investment firm for Mr. Dell, and 3,414,428 shares held by Dell
USA L.P., a wholly-owned subsidiary of Dell Computer Corporation. Mr. Dell
is the chairman, chief executive officer and a principal stockholder of
Dell Computer Corporation. Mr. Dell disclaims beneficial ownership of the
shares held by Dell USA L.P.

40
<PAGE>

Item 13. Certain Relationships and Related Transactions

On June 15, 1999, we repurchased the following number of shares from
officers and directors: 2.35 million shares from Mark Tebbe and trusts for the
benefit of his family members and 56,250 from John Meyer, each at a repurchase
price of $2.245 per share.

In connection with a purchase by Pantelis Georgiadis of 1.0 million shares
of common stock in June 1999, we loaned Mr. Georgiadis $276,000 pursuant to a
secured promissory note. On September 30, 1999, we cancelled this note by
offsetting all amounts owed to us under the note against the proceeds to Mr.
Georgiadis from our repurchase of all of his shares on this date.

On June 17, 1999, we sold an aggregate of 3,323,904 shares of Series A
convertible preferred stock to Frontenac VII Limited Partnership, Frontenac
Masters VII Limited Partnership and Dell USA, L.P. for the aggregate amount of
$23.5 million. The conversion price of the Series A convertible preferred stock
is $3.54 per share. Two members of our board of directors, Paul Carbery and
James Cowie, are affiliated with Frontenac Company, the sole general partner of
Frontenac VII Limited Partnership and Frontenac Masters VII Limited Partnership.
On June 17, 1999, we also entered into a registration agreement with the holders
of our Series A convertible preferred stock and some of the holders of our
common stock, which provides these holders with demand and piggyback
registration rights.

On June 30, 1998, we raised $2,595,000 through the issuance of convertible
subordinated notes due 2007. We redeemed all of these notes on July 1, 1999 in
exchange for 2.7 million shares of our common stock at $0.86 per share. The
holders of these notes included Michael Dell, John Kraft, whose directly-
controlled entity, Kraft Enterprises Ltd., was issued a note, John Landry, John
Oltman and Paul Yovovich.

On July 16, 1999, we sold an aggregate of 212,165 shares of Series A
convertible preferred stock to a number of our advisors, for an aggregate price
of $1.5 million. The purchasers of stock on July 16, 1999 included Judith
Hamilton, John Kraft, John Landry, John Oltman, Paul Yovovich and DBV
Investments, L.P., an entity affiliated with MSD Capital, L.P., a private
investment firm for Michael Dell.

ZixIt Corporation retained us in 1999 to architect, design and develop a
signature server and two related products. In 1999, fees under this engagement
represented 30% of our total revenues. Mark Tebbe, our chairman of the board,
became a member of ZixIt's board of directors in March 1999. In connection with
the completion of our engagement by ZixIt in the three-month period ended
December 31, 1999, we issued to ZixIt an option to purchase up to 400,000 shares
of our common stock at an exercise price of $7.00 per share. Pursuant to an
agreement executed simultaneously with this grant, we have an option to purchase
up to 166,666 shares of ZixIt's common stock at an exercise price of $7.625 per
share. The number of shares of common stock issuable upon exercise of either of
these options will not exceed a number of shares having a fair market value at
the time of exercise of $12.0 million in the aggregate. ZixIt and we have agreed
not to transfer any of the shares issuable upon exercise of our respective
options until after the earlier of 180 days from February 10, 2000 and certain
changes of control of us or ZixIt.

In December 1999, we entered into an agreement with Dell USA, L.P., a
subsidiary of Dell Computer Corporation, and some of our officers, advisors and
other stockholders regarding the sale of shares of our common stock. Under this
agreement, Dell USA purchased 1.0 million shares of our common stock from us and
1.0 million shares from Mark Tebbe and some family trusts for a purchase price
of $11.00 per share. In conjunction with this agreement, some of our officers,
directors and other

41
<PAGE>

stockholders also purchased an aggregate of 510,186 shares from us at the same
price, the majority of which were acquired pursuant to contractual preemptive
rights. The closing of these purchases occurred on December 10, 1999 and January
10, 2000. We also have entered into a master services agreement that
contemplates Dell providing us with at least $40.0 million of total revenues
over a five-year period. Dell may terminate the agreement after three years, and
the guaranteed revenues for the first three years would be $15 million. We
believe this agreement is on customary business terms.

PART IV

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

(a) We have filed the following documents as part of this annual report:

1. We have filed the following financial statements, with the report of
independent auditors, as part of this annual report:

Report of PricewaterhouseCoopers LLP, Independent Public Accountants
Statements of Operations for the Years Ended December 31, 1997, 1998
and 1999
Balance Sheets as of December 31, 1998 and 1999
Statements of Stockholders' Equity for the Years Ended December 31,
1997, 1998 and 1999
Statements of Cash Flows for the Years Ended December 31, 1997, 1998
and 1999
Notes to Financial Statements

2. We have filed the following financial statement schedules as part of
this annual report:

Schedule II -- Valuation and Qualifying Accounts

3. We have filed, or incorporated by reference, the following exhibits
with this annual report:

Exhibit
Number Exhibit
- ------- ----------------------------------------------
<C> <S>

3.1 + Form of Amended and Restated Certificate of
Incorporation of the Registrant.

3.2 + Form of Amended By-laws of the Registrant

4 + Specimen stock certificate representing Common
Stock

10.1* + 1998 Stock Option Plan

10.2* + Registrant's Stock Purchase Plan

10.3 + Form of Indemnification Agreement
</TABLE>

42
<PAGE>

Exhibit
Number Exhibit
- ---------- -------------------------------------------------------
<C> <S>
10.4 + Registration Agreement

10.5 + Software License and Services Agreement between Evolve
Software, Inc. and Registrant dated September 3, 1999

10.6* + Employment, Confidentiality and Noncompete Agreement
between Registrant and Mark A. Tebbe

10.7* + Employment Agreement between Registrant and C. Rudy
Puryear

10.8* + Employment, Confidentiality and Noncompete Agreement
between Registrant and Brian Henry

10.9 + Restricted Stock Agreement between Registrant and C.
Rudy Puryear dated as of June 30, 1999

10.10 + Pledge Agreement by and between Registrant and C. Rudy
Puryear dated June 30, 1999

10.11 + Promissory Note in the amount of $2,500,000 by C. Rudy
Puryear to the Registrant, dated June 30, 1999

10.12 + Secured Promissory Note in the amount of $3,228,000 by
C. Rudy Puryear to the Registrant dated June 30, 1999

10.13 + Amended and Restated Loan and Security Agreement between
Registrant and Old Kent Bank, dated December 29, 1998,
as amended on June 15, 1999

10.14 + Common Stock Purchase Agreement between Registrant and
certain stockholders

10.15 + Master Services Agreement between Registrant and Dell
Products, L.P.

21 + Subsidiaries of Registrant

27 Financial Data Schedule
</TABLE>
________________________
*Management Contract or compensatory plan or arrangement required to be filed as
an exhibit to this annual report.

+Previously filed with the Company's registration statement on Form S-1 (File
No. 333-92373) and incorporated herein by reference.

43
<PAGE>

(b) Reports on Form 8-K:

We did not file any current reports on Form 8-K during the quarter ended
December 31, 1999.

44
<PAGE>

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 on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
____ day of March, 2000.

LANTE CORPORATION

By: /s/ C. Rudy Puryear
-------------------
C. Rudy Puryear, Chief Executive
Officer and President

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 indicated on the _____ day of March, 2000.

Signature Title
- ----------------------------------- ------------------------------------

/s/ Mark Tebbe
- -----------------------------------
Mark Tebbe Chairman of the Board of Directors

/s/ C. Rudy Puryear
- ----------------------------------- Chief Executive Officer, President
C. Rudy Puryear and Director (Principal Executive
Officer

/s/ Brian Henry
- ----------------------------------- Executive Vice President, Chief
Brian Henry Financial Officer (Principal
Financial Officer)

/s/ William J. Davis
- ----------------------------------- Controller (Principal Accounting
William J. Davis Officer)

/s/ Paul Carbery
- ----------------------------------- Director
Paul Carbery

/s/ James Cowie
- ----------------------------------- Director
James Cowie

/s/ Judith Hamilton
- ----------------------------------- Director
Judith Hamilton

/s/ John Kraft
- ----------------------------------- Director
John Kraft

/s/ John Landry
- ----------------------------------- Director
John Landry

/s/ John Oltman
- ----------------------------------- Director
John Oltman

/s/ Paul Yovovich
- ----------------------------------- Director
Paul Yovovich

45
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
-------
<S> <C>
Consolidated Financial Statements of Lante Corporation:
Report of Independent Accountants........................................... F-2
Consolidated Statements of Operations....................................... F-3
Consolidated Balance Sheets................................................. F-4
Consolidated Statements of Stockholders' Equity............................. F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>

F-1
<PAGE>

Report of Independent Accountants
---------------------------------

To the Board of Directors and
Stockholders of Lante Corporation

In our opinion, the consolidated financial statements listed in the index
appearing under item 14(a)(1) present fairly, in all material respects, the
financial position of Lante Corporation and its subsidiary at December 31,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States. In addition, in
our opinion, the financial statement schedule listed in the index appearing
under item 14(a)(2) presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

Chicago, Illinois
February 18, 2000

F-2
<PAGE>
LANTE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues............................................... $11,134 $15,369 $23,078
Related party revenues -- ZixIt Corporation (Note 9)... -- -- 9,886
------- ------- -------
Total revenues......................................... 11,134 15,369 32,964
Operating expenses:
Professional services................................ 6,175 7,001 17,477
Selling, general and administrative.................. 4,722 6,803 18,104
Amortization of deferred compensation................ -- -- 1,188
------- ------- -------
Total operating expenses............................... 10,897 13,804 36,769
------- ------- -------

Income (loss) from operations.......................... 237 1,565 (3,805)
Other income, net...................................... -- -- 283
Interest (expense) income, net......................... (20) (1) 509
------- ------- -------
Income (loss) before income taxes...................... 217 1,564 (3,013)
Income tax (provision) benefit......................... (4) (8) 431
------- ------- -------

Net income (loss)...................................... $ 213 $ 1,556 $(2,582)
Dividends and accretion on mandatorily redeemable
preferred stock....................................... -- -- (977)
------- ------- -------
Net income (loss) available to common stockholders..... $ 213 $ 1,556 $(3,559)
======= ======= =======

Basic and diluted net income (loss) per common share... $ 0.01 $ 0.08 $ (0.16)

Unaudited pro forma basic and diluted net income (loss)
per common share (Note 2)............................ $ 0.01 $ 0.04 $ (0.15)

Basic and diluted weighted average shares outstanding.. 20,167 20,607 22,204
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>

LANTE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

<TABLE>
<CAPTION>
December 31,
1998 1999
------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents......................................................................... $ 3,377 $ 13,692
Trade accounts receivable (net of allowance of $313 and $896 at December 31,
1998 and 1999, respectively)..................................................................... 3,088 10,171
Trade accounts receivable--related party.......................................................... -- 178
Deferred income taxes -- current.................................................................. -- 487
Other current assets.............................................................................. 103 607
------- --------
Total current assets............................................................................ 6,568 25,135
Property and equipment, net......................................................................... 682 6,380
Deferred income taxes -- long term.................................................................. -- 585
Other assets........................................................................................ 70 9,386
------- --------
Total assets.................................................................................... $ 7,320 $ 41,486
======= ========

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable.................................................................................. $ 328 $ 5,717
Accrued compensation and related costs............................................................ 1,284 3,151
Deferred revenues................................................................................. 62 2,005
Deferred revenues--related party.................................................................. -- 150
Other current liabilities......................................................................... 14 377
Current portion of note payable--redeemed shares.................................................. -- 1,002
------- --------
Total current liabilities....................................................................... 1,688 12,402
Subordinated convertible debt....................................................................... 2,644 --
Other noncurrent liabilities........................................................................ 73 116
Noncurrent portion of note payable--redeemed shares................................................. -- 2,005
------- --------
Total liabilities............................................................................... 4,405 14,523
------- --------

Commitments and contingencies

Mandatorily redeemable preferred stock:
Series A convertible preferred stock, $0.01 par value; 4,243 shares allocated and 3,536
shares issued and outstanding as of December 31, 1999............................................ -- 25,728
------- --------

Stockholders' equity:
Preferred stock, $0.01 par value; 10 shares authorized as of December 31,
1998, 10,000 shares authorized as of December 31, 1999; 4,243 shares allocated to
Series A convertible preferred stock as of December 31, 1999..................................... -- --
Common stock, $0.01 par value; none authorized, issued or outstanding at December 31,
1998, 50,000 authorized, 26,069 shares issued and outstanding at
December 31, 1999................................................................................ -- 260
Common stock class A, $0.01 par value, 10,191 shares issued and
outstanding at December 31, 1998; none authorized, issued and
outstanding at December 31, 1999................................................................. 102 --
Common stock class B, $0.01 par value, 12,291 shares issued and
outstanding at December 31, 1998; none authorized, issued and
outstanding at December 31, 1999................................................................. 123 --
Additional paid in capital........................................................................ 577 18,509
Retained earnings (deficit)....................................................................... 2,113 (9,606)
Deferred compensation............................................................................. -- (4,613)
Note receivable--stockholder...................................................................... -- (3,315)
------- --------
Total stockholders' equity...................................................................... 2,915 1,235
------- --------
Total liabilities and stockholders' equity...................................................... $ 7,320 $ 41,486
======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>

LANTE CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)

Shares Par Value
------------------------- ------------------------ Total
Additional Retained Deferred Note Stock-
Paid In Earnings Compensa- Receiv- holders'
Common Class A Class B Common Class A Class B Capital (Deficit) tion able Equity
------ ------- ------- ------ ------- ------- ---------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................. -- 10,125 10,125 $ -- $ 101 $ 101 $ 35 $ 364 $ -- $ -- $ 601
Net income.............. -- -- -- -- -- -- -- 213 -- -- 213
Redemption of common
stock................. -- (84) (84) -- (1) (1) (15) -- -- -- (17)
------ ------- ------ ------ ----- ------ -------- ------- -------- ------- -------
Balance at December 31,
1997.................. -- 10,041 10,041 -- 100 100 20 577 -- -- 797
Redemption of common
Stock--Class A and B.. -- (150) (150) -- (1) (1) (30) -- -- -- (32)
Issuance of common stock--
Class A and B......... -- 300 1,200 -- 3 12 322 -- -- -- 337
Exercise of stock options
and Issuance of
restricted shares.... -- -- 1,200 -- -- 12 258 -- -- -- 270
Amortization of
compensation expense.. -- -- -- -- -- -- 7 -- -- -- 7
Net income.............. -- -- -- -- -- -- -- 1,556 -- -- 1,556
Dividends............... -- -- -- -- -- -- -- (20) -- -- (20)
------ ------- ------ ------ ----- ----- ------- ------- -------- ------- -------
Balance at December 31,
1998.................. -- 10,191 12,291 -- 102 123 577 2,113 -- -- 2,915
Conversion of Class A
and Class B common
stock to one class
of common shares...... 22,481 (10,191) (12,291) 225 (102) (123) -- -- -- -- --
Redemption of common
stock................. (4,460) -- -- (45) -- -- (4,916) (4,567) -- -- (9,528)
Issuance of common
stock................. 3,640 -- -- 36 -- -- 10,399 -- -- (3,315) 7,120
Conversion of debt to
Common stock.......... 2,700 -- -- 27 -- -- 2,667 -- -- -- 2,694
Exercise of stock
options............... 1,708 -- -- 17 -- -- 387 -- -- -- 404
Preferred stock
dividends and
Accretion............. -- -- -- -- -- -- (977) -- -- -- (977)
Deferred compensation... -- -- -- -- -- -- 5,190 -- (5,190) -- --
Amortization of
compensation expense.. -- -- -- -- -- -- -- 577 -- 577
Issuance of options and
warrants.............. -- -- -- -- -- -- 1,258 -- -- -- 1,258
Stock committed to Lante
Foundation............ -- -- -- -- -- -- 3,360 -- -- -- 3,360
Income tax benefit from
exercise of stock
options............... -- -- -- -- -- -- 564 -- -- -- 564
Net loss................ -- -- -- -- -- -- -- (2,582) -- -- (2,582)
Dividends............... -- -- -- -- -- -- -- (4,570) -- -- (4,570)
------ ------- ------ ------ ----- ----- ---- ------- -------- ------- -------
Balance at December 31,
1999.................. 26,069 -- -- $ 260 $ -- $ -- $18,509 $(9,606) $(4,613) $(3,315) $1,235
====== ======= ====== ====== ===== ===== ======= ======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>

LANTE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
Year ended December 31,
1997 1998 1999
----- ------ -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................... $ 213 $1,556 $(2,582)
Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities:
Depreciation and amortization.................................... 255 267 645
Deferred income taxes............................................ -- -- (508)
Interest income from loan to executive officer................... -- -- (87)
Option issued ZixIt Corporation.................................. -- -- 1,258
Option received from ZixIt Corporation........................... -- -- (4,902)
Amortization of compensation and warrant expense................. -- 7 1,188
Charitable stock contribution.................................... -- -- 3,360
Other, net....................................................... 8 (11) 50
Increase (decrease) in cash attributable to changes in assets
and liabilities:
Trade accounts receivable.................................... (312) (750) (7,107)
Other current assets......................................... 94 (69) (504)
Other assets................................................. (9) 4 (3,882)
Accounts payable............................................. 57 174 5,349
Accrued compensation and related costs....................... (345) 164 2,226
Deferred revenues............................................ 387 (537) 2,093
Other liabilities............................................ (8) 65 15
----- ------ -------
Net cash provided by (used in) operating activities........ 340 870 (3,388)
----- ------ -------
Cash flows from investing activities:
Capital expenditures................................................. (588) (367) (6,157)
Acquisitions, net of cash acquired................................... -- -- (426)
----- ------ -------
Net cash used in investing activities...................... (588) (367) (6,583)
----- ------ -------
Cash flows from financing activities:
Payments on bank debt and note payable............................... -- (800) (24)
Payments on note payable to stockholder.............................. (450) (350) --
Proceeds from issuance of bank debt and note payable................. 800 24 --
Proceeds from issuance of subordinated convertible debt.............. -- 2,595 --
Proceeds from issuance of mandatorily redeemable preferred stock, net -- -- 24,751
Proceeds from issuance of common stock, net.......................... -- 607 9,878
Redemption of common stock........................................... (17) (32) (6,521)
Loan to executive officer............................................ -- -- (3,228)
Dividends paid ..................................................... (59) (20) (4,570)
----- ------ -------
Net cash provided by financing activities.................. 274 2,024 20,286
----- ------ -------
Net increase in cash and cash equivalents.................. 26 2,527 10,315
Cash and cash equivalents, beginning of period......................... 824 850 3,377
----- ------ -------
Cash and cash equivalents, end of period............................... $ 850 $3,377 $13,692
===== ====== =======

Supplemental disclosure of cash flow information:
Cash paid for interest............................................... $ 68 $ 47 $ 82
===== ====== =======
Cash paid for taxes.................................................. $ 5 $ 4 $ 408
===== ====== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

1. Nature of Business

Lante Corporation (the "Company"), a Delaware corporation, is an Internet
services company that develops sophisticated technology-based solutions that
enable emerging electronic markets. These markets, which the Company refers to
as e-markets, are dynamic Internet based business networks that enable multiple
buyers and sellers to conduct business efficiently online. Lante's strategists,
user experience experts and technologists work as a multi-disciplinary team to
build these solutions. Lante integrates its competencies through an iterative
development process with the client that is overseen by Lante's delivery
management specialists. This approach helps Lante achieve rapid time to market,
maximize its clients' revenue generation and cost reduction and develop
effective customer and supplier relationships.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary (see Note 3) after elimination of all significant
intercompany accounts and transactions.

Revenue Recognition

Revenues from fixed-fee engagements are recognized on the percentage-of-
completion method of accounting, based on the cost incurred compared to total
estimated cost. Revenues from time and materials engagements are recognized as
services are provided. Anticipated losses on engagements, if any, are charged to
earnings when identified.

Unbilled revenues on engagements consist of revenues recognized in excess of
billings, and deferred revenues consist of billings or cash received in excess
of revenues recognized.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and overnight investments and
investment-grade commercial paper with original maturities of three months or
less and whose carrying amount approximates market value.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and
amortization. Expenditures for renewals and improvements that significantly
extend the useful life of an asset are capitalized. Expenditures for maintenance
and repairs are charged to operations as incurred. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the assets. Leasehold improvements are amortized over the lesser of the
estimated useful lives of the assets or the remaining lease term. The estimated
useful lives are as follows:

<TABLE>
<CAPTION>
<S> <C>
Computers, computer peripherals and software 3-5 years

Office machines and equipment 5-7 years
Furniture and fixtures 10 years
</TABLE>

F-7
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

The Company reviews the carrying values of long-lived assets for impairment
when events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable.

Income Taxes

Prior to June 17, 1999, the Company had elected S-Corporation status for tax
purposes. It was the Company's policy to distribute to its stockholders amounts
at least equal to their estimated federal and state tax liabilities resulting
from the pass-through of the Company's taxable income. As of June 17, 1999, the
Company terminated its S-Corporation status for federal and state income tax
purposes. At that time, deferred taxes were provided for temporary differences
between the financial reporting basis and the tax basis of the Company's assets
and liabilities in accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes".

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. The estimates and
assumptions used in the accompanying financial statements are based upon
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration
of credit risk consist of cash and cash equivalents and trade accounts
receivable.

The Company performs ongoing credit evaluations of its customers and generally
does not require collateral on accounts receivable. The Company maintains
allowances for potential credit losses and such losses have been within
management's expectations. The two largest clients accounted for 15% and 13% of
the accounts receivable balance at December 31, 1999. As of December 31, 1998,
the three largest clients accounted for 15%, 12% and 11% of the accounts
receivable balance. The two largest clients (in excess of 10%) accounted for 31%
and 13% of total revenues for the year ended December 31, 1999. The three
largest clients in 1998 accounted for 21%, 12% and 11% of total revenues. In
1997, the two largest clients accounted for 27% and 13% of total revenues.

Fair Value of Financial Instruments

The carrying value of current assets and liabilities approximated their fair
value at December 31, 1998 and 1999. The carrying value of notes payable and
subordinated convertible debt approximates fair value based on current rates of
interest available to the Company for notes of similar maturities.

F-8
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

Stock-Based Compensation

The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations and
elects the disclosure option of SFAS No. 123. SFAS No. 123 requires that
companies either recognize compensation expense for grants of stock, stock
options, and other equity instruments based on fair value, or provide pro forma
disclosure of net income and earnings per share in the notes to the financial
statements. Accordingly, compensation expense for stock options is measured as
the excess, if any, of the fair value of the Company's stock at the date of
grant over the exercise price (see Note 12).

Comprehensive Income

Effective January 1, 1998, the Company implemented SFAS No. 130 "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for reporting
comprehensive income and its components in the financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. To date, the Company has not had any
transactions that are required to be reported in comprehensive income.

Reclassification

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

Stock Split

In October 1999, the Board of Directors declared a two for one stock split of
the common stock effected in the form of a dividend. The accompanying
consolidated financial statements and related notes give retroactive effect to
this stock split.

Basic and Diluted Net Income (Loss) Per Share

The Company computes basic and diluted net income (loss) per share in
accordance with SFAS No. 128, "Earnings per Share", and SEC Staff Accounting
Bulletin No. 98 ("SAB 98"). Basic net income (loss) per common share is computed
by dividing the net income available to common stockholders for the period by
the weighted average number of shares of common stock outstanding during the
period. The calculation of diluted net income per share is based on the weighted
average number of shares of common stock outstanding, adjusted, if dilutive, for
the effect of common stock equivalents. Common stock equivalents are composed of
incremental shares of common stock issuable upon the exercise of stock options
and warrants, common stock subject to restrictions and incremental shares of
stock issuable upon the conversion of subordinated convertible debt and Series A
convertible preferred stock.

F-9
<PAGE>
LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

The following table sets forth the weighted average effect of common stock
equivalents that are not included in the diluted net income (loss) per share
calculation for each respective period because the exercise price exceeded the
average estimated fair market value price for that period. There were no common
stock equivalents outstanding prior to 1998.

<TABLE>
<CAPTION>
1998 1999
----- -----
Weighted average effect of common stock equivalents:
<S> <C> <C>
Restricted shares................................. 479 --
Options outstanding............................... 1,948 14
Convertible debt.................................. 1,380 --
Warrants.......................................... -- 41
----- --
3,807 55
===== ==
</TABLE>

For the year ended December 31, 1999, additional shares potentially issuable for
restricted shares, stock options, convertible debt, and the Company's Series A
convertible preferred stock would have been 9,060, but for the net loss
recorded.

The following table gives pro forma effect for income taxes assuming that the
Company was a C-Corporation for all periods presented (see Note 6).

<TABLE>
<CAPTION>
Year ended December 31,
------------------------
Pro forma (unaudited): 1997 1998 1999
----- ------ -------
<S> <C> <C> <C>
Net income (loss) available to common
stockholders.................................... $ 213 $1,556 $(3,559)
Pro forma adjustment to tax (provision) benefit... (60) (675) 320
----- ------ -------
Pro forma net income (loss) available to common
stockholders.................................... $ 153 $ 881 $(3,239)
===== ====== =======
Pro forma earnings (loss) per share:
Basic and diluted.............................. $0.01 $ 0.04 $ (0.15)
</TABLE>

3. Acquisitions

On September 2, 1999 the Company acquired Ingenious, Inc. ("Ingenious"), a
consulting company, for total consideration of $1,121. The acquisition was
recorded under the purchase method of accounting. As part of the acquisition,
the two principal owners of Ingenious agreed to employment agreements with the
Company through August 31, 2002. If these individuals do not comply with the
employment agreements, they will be required to remit to the Company $1,000 of
the consideration received. Consequently, $1,000 of the purchase price has been
recorded as deferred compensation and is being amortized ratably as professional
service expense through August 31, 2002. The balance of the total purchase price
principally has been allocated to other current operating assets. The Ingenious
acquisition and one other acquisition consumated during 1999 are not significant
and as such, separate pro forma financial information is not necessary.

F-10
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

4. Property and Equipment

Property and equipment consists of the following:

<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
------ -------
<S> <C> <C>
Computers, computer peripheral and software.................. $ 753 $ 4,172
Furniture and fixtures....................................... 328 840
Office machines and equipment................................ 258 608
Leasehold improvements....................................... 54 2,066
------ -------
1,393 7,686
Less: accumulated depreciation and amortization.............. (711) (1,306)
------ -------
Property and equipment, net.................................. $ 682 $ 6,380
====== =======
</TABLE>

5. Debt

Bank Line of Credit

The Company has a line of credit in place pursuant to a loan agreement with its
commercial bank dated December 29, 1998 and maturing two years thereafter. There
were no borrowings under the loan as of December 31, 1998 or 1999. The line has
a maximum borrowing amount of $3,500 of which $3,000 is subject to a formula
based on 75% of eligible accounts receivable. Borrowings are secured by accounts
receivable and general Company assets. Borrowings bear interest at the lender's
"index rate" of 7.75% and 8.50% at December 31, 1998 and 1999, respectively. An
unused facility fee is due semiannually in an amount equal to 0.25% of the
difference between $3,500 and the average daily outstanding principal. The loan
agreement contains certain financial covenants, including maintenance of 1.75 to
1 debt service ratio and capital funds greater than $7,500 (both as defined).
The Company was not in violation of its financial covenants at December 31, 1998
and received a waiver in respect to certain covenants at December 31, 1999.

Subordinated Convertible Debt

The Company issued eight notes on June 30, 1998 to the Company's advisors,
directors and former Chief Operating Officer. The notes had an aggregate face
value of $2,190 and were issued at a premium of $405. The stated interest rate
was 5.79%. The accrued interest aggregated $64 at December 31, 1998. The notes
were carried on the books at their face value, plus unamortized original issue
premium, plus accrued interest. The original issue premium was being amortized
using the effective interest rate method over the ten-year life of the notes.

On July 1, 1999, the holders converted the notes into 2,700 shares of
common stock pursuant to an agreement with the Company. The face value of the
notes plus accrued interest at conversion aggregated $2,317. As provided in the
terms of the notes, the conversion rate was adjusted to $0.86 per share as a
result of the common stock dividend distributions prior to conversion of the
notes.

F-11
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

6. Income Taxes

The Company's income tax provision consisted solely of current state taxes of
$4 and $8 for the years ended December 31, 1997 and 1998, respectively. The
Company's income tax benefit of $431 for the year ended December 31, 1999
consisted of current state tax expense of $77, deferred federal tax benefit of
$375 and deferred state tax benefit of $133.

The Company terminated its S-Corporation election for federal and state
purposes on June 17, 1999. Accordingly, all income that was earned in the
subsequent C-Corporation period was taxable at the statutory federal and state
tax rates. In order to present amounts in a comparable format, the statements of
operations include a pro forma adjustment for additional taxes that would have
been recorded if the Company had been a C-Corporation for all periods presented,
based upon the tax laws in effect during those periods. Unaudited pro forma
income tax provisions (benefits) calculated on a separate company basis in
conformity with SFAS 109, are as follows:

Year ended December 31,
--------------------------
Unaudited pro forma 1997 1998 1999
- ------------------- ---- ---- -----
<S> <C> <C> <C>
Current:
Federal......................................... $11 $124 $ 100
State........................................... 3 28 22
Deferred:
Federal......................................... 44 468 (769)
State........................................... 6 63 (105)
--- ---- -----
Total income tax expense (benefit)......... $64 $683 $(752)
=== ==== =====
</TABLE>

The pro forma provisions for income taxes differ from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate to
income from operations as a result of the following differences:

<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
Unaudited pro forma 1997 1998 1999
- ------------------- ---- ---- -------
<S> <C> <C> <C>
Income tax provision at statutory U.S. tax rates $ 74 $532 $(1,024)
of 34%............................................
Increase (decrease) in rates resulting from:
Graduated average rate.......................... (26) -- --
Change in graduated average rate................ -- 64 --
State taxes..................................... 13 74 (120)
Other, net...................................... 3 13 392
--- ---- -------
Pro forma provision (benefit) for income taxes...... $ 64 $683 $ (752)
==== ==== =======
</TABLE>

F-12
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

Deferred tax (liabilities) assets at December 31, 1998 and 1999, respectively,
are as follows:

<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
----------- --------
(Pro forma)
(unaudited) (Actual)
<S> <C> <C>
Current:
Accrual to cash.................................. $(682) $ (22)
Provision for doubtful accounts.................. 121 336
Net operating loss carryforward.................. -- 1,731
Option transactions with ZixIt Corporation....... -- (1,407)
Other, net....................................... (111) (226)
----- -------
Current deferred tax (liabilities) assets....... (672) 412
----- -------
Noncurrent:
Depreciation..................................... (17) (66)
Charitable contribution.......................... -- 1,298
Other, net....................................... 1 272
Valuation allowance.............................. -- (844)
----- -------
Noncurrent deferred tax (liabilities) assets.... (16) 660
----- -------
Net deferred tax (liabilities) assets........... $(688) $ 1,072
===== =======
</TABLE>

7. Commitments and Contingencies

Operating Leases

The Company is obligated under various noncancellable operating leases for
its office space in Charlotte, Chicago, Dallas, New York, San Francisco and
Seattle. Future minimum rental commitments under all noncancellable operating
leases with initial or remaining terms in excess of one year are as follows for
each respective year ending December 31:

<TABLE>
<CAPTION>
<S> <C>
2000 ................. $ 1,949
2001 ................. 1,826
2002 ................. 1,883
2003 ................. 1,776
2004 ................. 1,711
Thereafter ........... 4,966
-------
$14,111
=======
</TABLE>

Rent expense for the years ended December 31, 1997, 1998 and 1999 was $580, $657
and $827, respectively.

Letters of Credit

As of December 31, 1999, the Company had standby letters of credit issued
by its bank in the amounts of $200 and $222 related to security deposits on
office leases.

F-13
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

Litigation

A former employee has filed a claim against the Company alleging that the
Company failed to comply with a shareholder's agreement to repurchase common
stock held by the former employee. The Company intends to vigorously defend the
litigation. Since this case has not proceeded to a hearing on the merits, the
Company is unable to evaluate or estimate the extent of any potential loss.

8. Employee Loans

In June 1999, the Company entered into an employment agreement with one of
its executive officers. Pursuant to this agreement the Company loaned the
executive $2,500 under a note that will mature and be due on the earlier of six
months after termination of employment or June 30, 2003. The note bears interest
at 5.37% per annum. The loan will be payable upon maturity if the executive is
still employed by the Company but only if the Company has a liquidity event (as
defined) and the fair market value of the executive's holdings in the Company's
common stock is greater than an agreed-upon amount, provided that if these
conditions are met, but the executive does not have the ability to liquidate his
stock, the maturity will be postponed. Otherwise, if these conditions are not
met, the loan will be forgiven at the rate of $100 per month commencing on the
maturity date until all principal and interest is forgiven. The Company recorded
the loan, included in other assets, as deferred compensation and is amortizing
the loan over 30 months, the period in which the loan may be forgiven. In
addition, upon execution of the employment agreement, the executive purchased
2,400 restricted shares of common stock at $1.35 per share. The Company recorded
$2,148 in deferred compensation related to this sale of securities and is
amortizing such amount over the 48 month period during which the restrictions
lapse. The restrictions lapse over four years at 1/48 month, subject to certain
acceleration provisions upon a change in control and upon termination of
employment. The Company loaned the executive $3,228 on a fully recourse basis to
purchase the restricted stock. The loan bears interest at 5.37%. The loan and
related interest is due upon the earlier of June 20, 2005 or three years after a
liquidity event (as defined).

9. Related Party Transactions

The Company's chairman is a member of the Board of Directors of a
corporation that was the Company's most significant client during the fiscal
year ended December 31, 1999. In addition, he is a stockholder with beneficial
ownership of less than 1% of this client's outstanding common stock. The Company
believes that the fees billed to this client have been at customary business
terms.

In 1999, the Board of Directors authorized the Company to make a
contribution to the Lante Foundation in the amount of 336 shares of the
Company's common stock. The Company recorded a charge of $3,360 in 1999 related
to this contribution.

Significant Contract

Upon completion of an engagement for its major client in November 1999, the
Company granted to the client a fully vested option to purchase up to 400 shares
of the Company's common stock at an exercise price of $7.00 per share resulting
in a charge of $1,258. Pursuant to an agreement executed simultaneously with
this grant, the Company has a fully vested option to purchase 167 shares of the
client's common shares at $7.625 per share resulting in a benefit of $4,902.
This investment is included in other assets in the accompanying balance sheet at
December 31, 1999. The net effect of $3,644 is included in other income. The
number of shares of common stock issuable upon exercise of either of the options
will not exceed a number of shares having a fair market value at the time of
exercise of $12 million in the aggregate. The Company and the client agreed not
to transfer any of the shares issuable upon the exercise of the respective
options until after the earlier of 180 days from February 10, 2000 or a change
in control, as defined, of either party.

F-14
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

10. Retirement Plan

The Company has a defined contribution profit sharing plan which is
qualified under section 401(K) of the Internal Revenue Code and for which most
employees are eligible. The plan provides for discretionary Company
contributions based on a percentage of eligible participants' compensation, as
defined. In addition, the Company may make year-end matching contributions based
on eligible participants' deferral contributions. In 1997, 1998 and 1999, the
Company expensed matching contributions in the amounts of $137, $260 and $266,
respectively.

11. Mandatorily Redeemable Preferred Stock

In 1999, the Company issued 3,536 shares of Series A redeemable convertible
preferred stock, par value $0.01 per share for an aggregate value of $25,000,
net of issuance costs of $186. The rights of the Series A convertible preferred
stock are as follows:

Voting

Each share of Series A convertible preferred stock has voting rights equal
to an equivalent number of shares of common stock into which it is convertible
and votes together as one class with common stock.

Dividends

Holders of the Series A convertible preferred stock are entitled to receive
dividends at the rate of 7% per annum on the sum of the liquidation value plus
all accumulated and unpaid dividends, subject to reduction (as defined) based
upon increases in the fair market value of the common stock at the date of
conversion of the Series A convertible preferred stock. Any dividends declared
or paid upon the common stock shall also be declared and paid to holders of the
Series A convertible preferred stock based upon the number of shares of common
stock issuable upon conversion of the preferred stock.

Liquidation

In the event of liquidation, dissolution or winding up of the Company, the
holders of the Series A convertible preferred stock shall be entitled to receive
the greater of (i) $7.07 per share plus any accrued and unpaid dividends or (ii)
such amount per share as would have been payable had such shares been converted
into common stock immediately prior to liquidation.

Conversion

Each share of Series A convertible preferred stock will be convertible at
the option of the holder at any time into two shares of common stock, or 7,072
shares in total, subject to anti-dilution adjustments. Each share of Series A
convertible preferred stock automatically converts into common stock at the then
effective conversion ratio upon (i) the written request of the holders of a
majority of the outstanding shares, or (ii) the completion of an initial public
offering with aggregate proceeds of at least $20,000 and a minimum specified
initial offering price based on the timing of the initial offering.

F-15
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

Redemption

Absent a conversion, the Company shall redeem from each holder of Series A
convertible preferred stock one fourth of such holder's Series A convertible
preferred stock annually beginning on June 30, 2004 at a redemption price equal
to the greater of (i) $7.07 plus all accrued and unpaid dividends or (ii) the
fair market value of the shares of the common stock on an as converted basis. In
the event of a change in control, each holder of the Series A convertible
preferred stock may elect to require the Company to redeem all or a portion of
the holder's preferred stock at the redemption price. The difference between the
net issuance price and the redemption value of the Series A convertible
preferred stock is being accreted by periodic charges to additional paid-in
capital.

12. Stockholders' Equity and Other Stock Related Information

Preferred Stock and Common Stock

In June 1999, the Company amended its Certificate of Incorporation to
provide for one class of common stock and one class of preferred stock. The
amendment authorized 50,000 shares of common and 10,000 shares of preferred
stock and allocated 4,243 shares as Series A convertible preferred stock (see
Note 11). Each previously issued and outstanding share of voting Class A common
stock and non-voting Class B common stock was converted and exchanged into one
share of common stock, $0.01 par value.

The effect of stock splits and recapitalization has been retroactively
reflected in the consolidated financial statements for all periods presented.

In June 1999, the Company repurchased 2,460 shares of common stock at
approximately $2.24 per share, from certain employee stockholders. The
repurchased shares were cancelled upon redemption. The Company issued promissory
notes aggregating $5,519 in payment for the repurchased shares, which notes were
fully repaid on June 22, 1999.

In September 1999, pursuant to a stockholder's agreement, the Company
executed its right to repurchase 2,000 shares of common stock held by a former
employee. The Company paid cash of $724 net of $278 due to the Company by the
stockholder, and issued a promissory note aggregating $3,007 as payment for the
repurchased shares, which note is due at various dates through September 30,
2002. The promissory note bears interest at prime, which was 8.5% at December
31, 1999 (see Note 7).

Employee Stock Plan--Redemptions

In 1993, the Company adopted an employee Stock Benefit Plan under which
certain key employees were permitted to purchase shares of common stock at then
current estimated fair value. In 1997 and 1998, the Company redeemed from
terminating employees 169 shares and 300 shares, respectively, at then current
estimated fair values of $0.10 and $0.11 per share.

F-16
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

S-Corporation Dividends

Prior to June 17, 1999, the Company was treated as an S-Corporation for income
tax purposes and paid out dividends to compensate stockholders for their
estimated tax liabilities. These dividends totaled $59, $20 and $582 in the
years ended December 31, 1997, 1998 and 1999, respectively. In addition, on June
15, 1999, the Company declared a dividend in conjunction with the conversion to
a C-Corporation consisting of $2,488 of accounts receivable and $1,500 of cash.

Stock Option Plan

In June 1998, the Company adopted its 1998 Option Plan ("the Plan"), under
which it may grant nonqualified stock options for Common Shares to employees,
directors, and advisors. In December 1999, the Plan was amended to increase the
number of nonqualified stock options for Common Shares available to be granted
from 10,000 to 15,000. The Plan is administered, and grants are determined, by
the compensation committee of the Board of Directors. Options granted under the
plan generally vest over a four-year period and expire nine years from the date
of grant. Stock option activity under the Plan is summarized as follows:

<TABLE>
<CAPTION>
Weighted
Average
Exercise
Option Price per
shares Share
----------- -------------
Outstanding at December 31, 1997.................. -- $ --
<S> <C> <C>
Granted...................................... 5,469 0.230
Exercised.................................... (1,200) 0.225
Cancelled.................................... (87) 0.225
------
Outstanding at December 31, 1998................ 4,182 0.232
Granted...................................... 4,215 2.334
Exercised.................................... (1,708) 0.237
Cancelled.................................... (976) 0.293
------
Outstanding at December 31, 1999................ 5,713 1.771
======
</TABLE>

At December 31, 1998, the Company had 4,182 stock options outstanding with
exercise prices between $0.225 and $0.268 per option and a weighted average
exercise price of $0.232 per option. The weighted average remaining contractual
life of the options was 8.17 years. None of the options were exercisable at
December 31, 1998.

The following table summarizes information about stock options outstanding at
December 31, 1999.
<TABLE>
Weighted
Number average Weighted Number Weighted
outstanding remaining average Exercisable average
as of contractual exercise as of exercise
Range of exercise prices period end life price period-end price
- ---------------------------------- ------------ ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.225-0.3650..................... 2,756 7.54 $ 0.281 374 $ 0.232
0.845-1.875...................... 630 8.23 1.562 -- --
2.005-2.245...................... 1,493 8.69 2.213 -- --
3.42............................. 544 8.03 3.420 -- --
11.00............................ 290 8.96 11.00 -- --
$0.225-11.00...................... ----- ---- ------ --- ------
5,713 8.25 $ 1.234 374 $ 0.232
===== ==== ======= === =======
</TABLE>

The Company had 6,380 stock options available for grant at December 31, 1999.

F-17
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

In June 1999, the Company changed the vesting schedule for options granted
under the Plan such that the vesting period was reduced from five years to four
years. This change in vesting periods did not increase the estimated fair value
of the options granted.

In June 1999, the options previously granted to one employee were reduced to
1,000 from 1,750. In conjunction with this change, the vesting of the employee's
remaining options was accelerated so that the options were fully vested and the
options were immediately exercised at the original price of $0.23 per share.

The Company applies Accounting Principle Board Option No. 25, "Accounting for
Stock Issued to Employees," ("APB 25") and related interpretations in accounting
for its option plans. In accordance with the provisions of APB 25, the Company
recorded deferred compensation and compensation expense of $2,858 and $115,
respectively, for the year ended December 31, 1999 for options granted to
advisors and options issued to employees with an exercise price below the
estimated fair value of the common stock at the date of grant. The weighted
average exercise price of such options was $1.46, and the weighted average fair
value was $2.93. The Company's board of directors, in assessing the fair value
of the Company's common stock, considers factors relevant at the time, including
recent issuances and sales of the Company's securities, third party independent
valuations, significant customer wins, composition of the management team,
recent hiring results, the Company's financial condition and operating results
and the lack of a public market for the Company's common stock. Had compensation
expense for the Company's stock option plans been determined based on the fair
value at the grant date for awards under these plans consistent with the
methodology prescribed under SFAS No. 123, the Company's net income would have
been reduced to the supplemental unaudited pro forma amounts indicated as
follows:

<TABLE>
<CAPTION>
Year ended December 31,
1997 1998 1999
----- ------ -------
Unaudited
- ---------
<S> <C> <C> <C>
Net income (loss) as reported......................... $ 213 $1,556 $(2,582)
Supplemental pro forma compensation expense, net of -- 26 184
tax..................................................
----- ------ -------
Pro forma net income (loss)........................... $ 213 $1,530 $(2,766)
===== ====== =======

Net income (loss) per diluted share, as reported...... $0.01 0.08 $ (0.16)
Net income per diluted share, pro forma............... 0.01 0.08 (0.17)
</TABLE>

Because additional stock options are expected to be granted each year and the
pro forma net income (loss) includes the effect of options granted in 1998 and
1999, the above pro forma disclosures are not representative of the pro forma
effects on reported financial results for future years.

The following assumptions were used by the Company to determine the fair value
of stock options granted using the Black-Scholes options-pricing model: risk
free interest rate ranging from 4.59% to 6.11%; expected option life ranging
from two to six years; zero dividend yield, and expected volatility zero.

The Company granted 1,200 and 2,400 shares of restricted stock at weighted
average grant prices of $0.23 and $1.35 during the year ended December 31, 1998
and 1999, respectively.

F-18
<PAGE>

LANTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands, except per share data)

Strategic Alliance

On December 8, 1999, the Company and Dell Computer Corporation ("Dell")
entered into a strategic alliance. As part of the strategic alliance, Dell has
purchased 1,000 shares of the Company's common stock at $11.00 per share
(closing occurred in January 2000) and 1,000 shares from one of the Company's
stockholders and trusts for the benefit of his family at $11.00 per share. The
Company and a subsidiary of Dell have also entered into a master services
agreement under which the subsidiary guarantees minimum annual revenues to the
Company totaling $40 million over a five-year period, although the subsidiary
may terminate the agreement after three years. The guaranteed revenues for the
first three years would be $15 million. Pursuant to a shareholders agreement,
certain defined holders of preferred and common stock elected to purchase 310
shares of common stock from the Company at $11.00 per share. Additionally,
certain members of management elected to purchase 200 shares of common stock
from the Company at $11.00 per share.

13. Recent Accounting Pronouncements

During 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS No. 131 specifies revised guidelines
for determining an entity's operating segments and the type and level of
financial information to be disclosed. This standard requires that management
identify operating segments based on the way that management desegregates the
entity for making internal operating decisions. Management believes that the
Company operates in one business segment.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In June
1999, the FASB issued SFAS No. 137 which postpones the mandatory adoption of
SFAS 133 by the Company until January 1, 2001. The Company has not entered into
any significant derivative financial instrument transactions.

14. Subsequent Events

Authorized Common Stock

The Board of Directors has authorized the Company to increase the authorized
number of shares of common stock to 150,000.

Stock Purchase Plan

The Board of Directors has authorized the adoption of a Stock Purchase Plan
with 800 shares of common stock reserved for issuance thereunder.

Initial Public Offering

On February 14, 2000 the Company completed an initial public offering of
4.6 million shares and received net proceeds of $83.5 million.

F-19
<PAGE>

LANTE CORPORATION

SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULE

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
Balance at Charged to Costs Charged to Balance at
Description Beg. of Period and Expenses Other Accounts Deductions(a) End of Period
----------- -------------- ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1996 Allowance for Doubtful
Accounts.................. 185 129 (94) 220
1997 Allowance for Doubtful
Accounts.................. 220 51 (55) 216
1998 Allowance for Doubtful
Accounts.................. 216 106 (9) 313
1999 Allowance for Doubtful
Accounts.................. 313 735 (152) 896
</TABLE>
- -----------------

(a) Accounts receivable write-offs, net of recoveries.

<PAGE>

<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
S-1 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 13,692
<SECURITIES> 0
<RECEIVABLES> 10,484
<ALLOWANCES> (313)
<INVENTORY> 0
<CURRENT-ASSETS> 25,135
<PP&E> 7,686
<DEPRECIATION> (1,306)
<TOTAL-ASSETS> 41,486
<CURRENT-LIABILITIES> 12,402
<BONDS> 2,005
25,728
0
<COMMON> 260
<OTHER-SE> 975
<TOTAL-LIABILITY-AND-EQUITY> 41,484
<SALES> 0
<TOTAL-REVENUES> 32,964
<CGS> 0
<TOTAL-COSTS> (17,477)
<OTHER-EXPENSES> (18,274)
<LOSS-PROVISION> (735)
<INTEREST-EXPENSE> (509)
<INCOME-PRETAX> (3,013)
<INCOME-TAX> 431
<INCOME-CONTINUING> (2,582)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,582)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)

</TABLE>