---

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




FORM
10-K




(Mark
One)




[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM ________ TO ________ COMMISSION FILE NUMBER 0-24343




Answerthink, Inc.




(Exact name
of registrant as specified in its charter)




|FLORIDA                                  |  |  |  | 65-0750100            
|---------------------------------------- |  |  |  | ----------------------
|(State or other
jurisdiction of          |  |  |  | (I.R.S.
Employer      
|incorporation or
organization)           |  |  |  | Identification Number)
|1001 Brickell Bay Drive,
Suite 3000      |  |  |  |                       
|Miami,
Florida                           |  |  |  | 33131                 
|(Address of principal
executive offices) |  |  |  | (Zip
Code)            

(305) 375-8005



(Registrants telephone number, including area code) 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 $.001 per share




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




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




Indicate by check mark whether the registrant is an
accelerated filer (as defined in Exchange Act Rule 12b-2 of the Securities Exchange Act of 1934). YES [X] NO [  ]




The aggregate market value of the common stock held
by non-affiliates of the registrant was $271,840,816 on July 2, 2004 based on the last reported sale price of the registrants common stock on the
Nasdaq National Market.




The number of shares of the registrants common
stock outstanding on March 4, 2005 was 43,451,221.


DOCUMENTS INCORPORATED BY REFERENCE



Part III of the Form 10-K incorporates by reference
certain portions of the registrants proxy statement for its 2005 Annual Meeting of Stockholders to be filed with the Commission not later than
120 days after the end of the fiscal year covered by this report.


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ANSWERTHINK, INC. FORM 10-K


TABLE OF CONTENTS

|                  |  |    |  |                                                                                                             |  | Page
|----------------- |  | -- |  | ----------------------------------------------------------------------------------------------------------- |  | ----
|PART I           
|ITEM
1.           |  |    |  | Business                                                                                                    |  |     
|ITEM
2.           |  |    |  | Properties                                                                                                  |  |     
|ITEM
3.           |  |    |  | Legal Proceedings                                                                                           |  |     
|ITEM
4.           |  |    |  | Submission of Matters to a Vote of Security Holders                                                         |  |     
|PART II          
|ITEM
5.           |  |    |  | Market for Registrants Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities |  |     
|ITEM
6.           |  |    |  | Selected Financial Data                                                                                     |  |     
|ITEM
7.           |  |    |  | Managements Discussion and Analysis of Financial Conditionand Results of Operations                        |  |     
|ITEM
7A.          |  |    |  | Quantitative and Qualitative Disclosures about Market Risk                                                  |  |     
|ITEM
8.           |  |    |  | Financial Statements and Supplementary Data                                                                 |  |     
|ITEM
9.           |  |    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures                       |  |     
|ITEM
9A.          |  |    |  | Control and Procedures                                                                                      |  |     
|ITEM
9B.          |  |    |  | Other Information                                                                                           |  |     
|PART III         
|ITEM
10.          |  |    |  | Directors and Executive Officers of the Registrant                                                          |  |     
|ITEM
11.          |  |    |  | Executive Compensation                                                                                      |  |     
|ITEM
12.          |  |    |  | Security Ownership of Certain Beneficial Owners and Management                                              |  |     
|ITEM
13.          |  |    |  | Certain Relationships and Related Transactions                                                              |  |     
|ITEM
14.          |  |    |  | Principal Accountant Fees and Services                                                                      |  |     
|PART IV          
|ITEM
15.          |  |    |  | Exhibits and Financial Statement Schedules                                                                  |  |     
|Signatures        |  | 50 | 
|Index to Exhibits |  | 51 | 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



This report and the information incorporated by
reference in it include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in
these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and
forecasted demographic and economic trends relating to our industry are forward-looking statements. These statements can sometimes be identified by our
use of forward-looking words such as may, will, anticipate, estimate, expect, or
intend and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the
forward-looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that
impact such forward looking statements include, among others, our ability to attract additional business, the timing of projects and the potential for
contract cancellation by our customers, changes in expectations regarding the business and information technology advisory and consulting industries,
our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin
trends, and changes in general economic conditions and interest rates. An additional description of our risk factors is described in Part 1Item 1
BusinessRisk Factors. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of
new information, future events or otherwise.


PART I

|ITEM 1. |  | BUSINESS
|------- |  | --------

GENERAL



Answerthink, Inc. is a strategic business advisory
and technology consulting firm that provides services designed to enable companies to achieve world-class business performance. By leveraging the
comprehensive database of The Hackett Group, the worlds leading repository of enterprise best practice metrics and business process knowledge,
our business and technology solutions help clients improve performance and maximize returns on technology investments. Our capabilities include
benchmarking, business advisory, business transformation, business applications, business intelligence, and offshore application development and
support.




In this Form 10-K, unless the context otherwise
requires, Answerthink, the Company, we, us, and our refer to Answerthink, Inc. and its
subsidiaries and predecessors.


INDUSTRY BACKGROUND



The economy showed modest growth in 2004 as interest
rates and inflation continued to remain low and employment rates increased. Business and technology consultancies had modest increases in business
activity that followed the growth rate of the economy. There was some disruption of client IT integration projects in the latter part of 2004 as a
result of the need to freeze control environments through the end of fiscal reporting periods in order to support Sarbanes-Oxley compliance. We feel
that this demand disruption in the IT implementation marketplace will continue until Sarbanes-Oxley adoption efforts are substantially completed.
Companies continue to place heavy emphasis on risk management and tangible return on their business and technology investments. As the economy
continues to grow, we believe large enterprises will continue to focus their business consulting and IT spending on strategies and tools that help them
generate more value from past investments in the form of enhanced productivity and efficiency. Specifically, we still believe they will be looking to
derive maximum value from their existing enterprise applications. We believe enabling technologies will continue to be used to complement and extend
the capabilities of enterprise and key functional systems. For example, Business Process Management (BPM) tools will give companies increased
visibility into key business processes that reach across functional and organizational boundaries. Not only may BPM help reduce error rates and cycle
times by automating workflow, it may also increase the efficiency and productivity of all the people and systems that collaborate on individual
processes.




We believe there will still be market opportunities
around the need for better real-time performance measurement and strategic decision-making. Many companies seek to link optimized processes directly to
technology and consolidate the gains of their business process re-engineering efforts. Enterprise applications and BPM software will continue to play a
key role. We expect companies to continue to embed optimized processes directly into Enterprise Resource Planning (ERP) systems, and use BPM and other
enabling technologies to improve


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ongoing management and control, so they can
ensure that streamlined or re-engineered processes continue to deliver cost and performance improvements in the future. Business intelligence,
analytics and knowledge management applications are expected to also play an increasingly significant role as companies seek to generate more valuable
insight and analysis from their operational and financial data. We believe that these enabling technologies will produce real-time enterprises, capable
of nearly instantaneous views of current performance and more accurate and efficient planning, forecasting and reporting.


OUR APPROACH



We provide services designed to enable companies to
achieve world-class business performance by combining intellectual capital from The Hackett Group, with its extensive database of business process best
practices and performance measurement results, and our proprietary Best Practice Implementation (BPI) approach. Our BPI approach leverages our
knowledge of world-class best practices gathered through Hackett benchmarks and incorporates that detail throughout a tool set to ensure that best
practices are identified and implemented throughout a project. This coordinated approach addresses people, process, information and technology. Hackett
services help clients understand how well they are performing today compared with the worlds most effective companies. Its specialists have the
skills and experience to implement solutions, based on client performance measurement results, to drive them toward world-class performance. Hackett
provides deep insight into how top-performing companies operate, and applies those best practices to generate cost and performance gains for clients.
Answerthink uses Hackett intellectual capital in the form of best practice process flows and configuration guides to integrate Hacketts
empirically proven best practices directly into business processes and workflow and functionality that is enabled by enterprise
applications.




Because our solutions are based on Hackett-certified
best practices, clients gain a significant advantage. They can have confidence that their solutions are based on strategies from the worlds
leading companies. This clearly defined path to world-class performance delivers enhanced efficiency, improved effectiveness, increased flexibility,
optimized return on investment and reduced implementation risk.




The BPI approach often begins with a clear
understanding of current performance, which is gained through measuring key processes and comparing the results to world-class levels and industry
standards captured in the Hackett database. We then help clients prioritize and select the appropriate best practices to implement through a
coordinated performance improvement strategy. Without a coordinated strategy that addresses the four key business drivers of people, process,
technology and information, companies risk losing a significant portion of business case benefits. We have designed detailed best practice process
flows based on Hacketts deep knowledge of world-class business performance which enable clients to streamline and automate key processes, and
generate performance improvements quickly and efficiently at both the functional and enterprise level.




Similarly, we integrate Hackett Best Practices
directly into technology solutions. It is imperative to simplify and automate processes to meet best practice standards before new technology
implementations and upgrades are completed. The automation of inefficient processes only serves to continue to drive up costs, cycle times and error
rates. We have completed detailed fit-gap analyses, in most functional areas of major business application packages from Lawson, Oracle, Hyperion,
PeopleSoft and SAP to determine their ability to support best practices. Application-specific tools, implementation guides and process flows allow us
to optimize the configuration of ERP software, while limiting customization. Best practice implementations establish the foundation for improved
performance. Building on that foundation, a new breed of enabling technologies complement enterprise systems to drive further performance gains. These
technologies, which include business process management software, portals, business intelligence and analytics, and knowledge management, enhance
real-time business process management, visibility and decision-making.




The combination of optimized processes, a best
practices-based business application environment and the right enabling technologies allows our clients to achieve and sustain significant business
performance improvement.


COMPETITION



The strategic business advisory and technology
consulting marketplace continues to be extremely competitive. The marketplace will remain competitive as the economy grows and companies begin to spend
more on improving their business models and IT infrastructure. Our competitors include international, national and regional strategic consulting and
technology implementation firms, and the IT services divisions of application software firms. Mergers, consolidation and bankruptcies throughout our
industry have resulted in higher levels of competition. There is great pressure to complete projects quickly, control costs and maintain efficient
operations.


-4-

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Still, we believe our competitive position is
strong. With Hackett intellectual capital and its direct link to our BPI approach, we believe we can assist clients better than our competitors. Our
ability to apply best practices to client operations via proven techniques further strengthens our competitive standing.




Our culture of collaboration leverages the power of
our cross-functional and service line teams to increase revenue and strengthen relationships. We believe that this culture, along with our
multidisciplinary approach, allows us to compete favorably.


STRATEGY



Moving forward, our focus is on executing the
following strategies:


| |  | Continue to rapidly grow The Hackett Group with new and
renewable multi-year offerings. Our benchmarking offerings help companies identify and quantify opportunities for operational improvements and
efficiently measure and track the degree of improvement against specific internal and peer performance targets over multi-year periods. Our business
advisory services target executives seeking guidance and proven strategies on operational and strategic issues. During 2004 we experienced strong
growth in our Hackett benchmarking and subscription based advisory programs. We continue to develop subscription advisory products that will allow
clients to efficiently realize the benefits identified in the Hackett benchmarking services. As subscription sales continue to grow an increasing
number of sales will involve multi-year commitments which will improve the predictability of our results.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Continue to expand our Best Practices Implementation
tools. BPI incorporates intellectual capital from The Hackett Group into our implementation tools and techniques. For clients, the end results
are tangible cost and performance gains and the improved return on investment. Our clients attribute their decision to use us to our Best Practice
Implementation (BPI) approach and tools. Our objective is to help clients make smarter business process and software configuration decisions as a
result of our Best Practice Implementation methods and knowledge. The recent launch of version two of our BPI tools resulted in an expanded best
practice repository along with key revisions in business process areas that have been impacted by emerging information technologies. We expect this new
and expanded version of our tools and methods to further differentiate our ability to serve our clients. We will continue to train associates in all of
our practices about BPI so they are equipped with the knowledge and tools necessary to share our vision with existing and prospective
clients.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Continue to leverage our unique best practice knowledge
through select strategic alliances. Because of our understanding of how to optimize processes and software configuration with proven best
practices, a relationship with a larger provider of comprehensive business and IT services represents a logical opportunity to expand our client base.
Our strategic relationship with Accenture, L.L.P., a leading provider of consulting services, gives them the exclusive right to collaborate with
Answerthink and The Hackett Group in offering best practices benchmarking services and our BPI tools in designated functional areas, including finance,
accounting, performance management, business intelligence and procurement. In situations where Accenture uses our intellectual capital, we have an
opportunity to staff up to 15% of the project positions of each engagement jointly pursued. If we are the lead source on jointly pursued opportunities
with Accenture, then we will have the opportunity to staff up to 25% of the positions. Our strategy is to execute on this current alliance and expand
to other functional areas as well as geographic locations outside of North America. In addition, we continue to build upon joint marketing initiatives
with Oracle, SAP, Lawson, and Hyperion and other strategic business and IT providers.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Seek out strategic acquisitions. We will continue
to pursue strategic acquisitions that strengthen our ability to compete. We believe that our unique Hackett access and our BPI approach coupled with
our strong balance sheet and infrastructure can be utilized to support a larger organization. Acquisitions must be accretive or have strong growth
prospects, but most importantly, have strong synergy with our best practice intellectual capital focus.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Expand our dual shore capabilities. Developing an
offshore resource capability to support all of our offerings has been a key strategy for our organization. In late 2004, we opened our new facility in
Hyderabad, India which will allow us to more aggressively market this capability in our proposals in 2005. With this improved infrastructure in place,
we are expecting our headcount and utilization of India resources to expand in 2005.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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OUR SOLUTION



We offer a comprehensive range of services,
including benchmarking, business advisory programs and business transformation, enterprise business applications implementation, business intelligence
and offshore application development support. With strategic and functional knowledge in finance, human resources, information technology, procurement
supply chain management, customer service and sales and marketing, our expertise extends across the enterprise. We have completed successful
engagements in a variety of industries, including automotive, consumer goods, financial services, technology, life sciences, manufacturing, media and
entertainment, retail, telecommunications, transportation and utilities.


The Hackett Group

| |  | Benchmarking & Executive Advisory
Programs
|- |  | ------------------------------------------



Since Hacketts inception in 1991, The Hackett
Group has measured and evaluated the efficiency and effectiveness of enterprise functions at nearly 2000 global organizations. This includes 93 percent
of the Dow Jones Industrials, 80 percent of the Fortune 100, and 90 percent of the Dow Jones Global Titans Index. Ongoing studies are conducted in a
wide range of areas, including finance, human resources, information technology, procurement, SG&A and shared service centers. Hackett has
identified nearly 1,300 best practices for approximately 100 processes in these key functional areas. Hackett uses proprietary performance measurement
tools and data collection process that enables companies to complete the performance measurement cycle and identify and quantify improvement
opportunities in as little as four weeks. Additionally, Hackett offers a full range of services to executives such as advisory inquiries, peer
interaction, and access to an online repository of best practices data. Topics range from finance and accounting and ERP optimization to planning and
performance management and outsourcing considerations.


| |  | Business Transformation
|- |  | -----------------------



Our Business Transformation programs help clients
develop a coordinated strategy for achieving performance improvements across the enterprise. Our experienced teams use Hackett performance measurement
data to link performance gains to industry best practices. Our strategic capabilities include operational planning, process and organization design,
change management and the effective application of technology. We combine best practices knowledge with business expertise and broad technology
capabilities, which we believe enables our programs to optimize return on client investments in people, processes, technology and
information.


Best Practices Solutions

| |  | Business Applications
|- |  | ---------------------



Our Business Applications professionals help clients
choose and deploy the software applications that best meet their needs and objectives. Our expertise is focused on the following application providers:
Lawson, Oracle, PeopleSoft, SAP, and several leading time and attendance providers. The group offers comprehensive services from planning,
architecture, and vendor evaluation and selection through implementation, customization, testing and integration. Comprehensive fit-gap analyses of all
major packages against Hackett Best Practices are utilized by our Business Applications teams. BPI tools and templates help integrate best practices
into business applications. The group also offers post-implementation support, change management, system documentation and end-user training, all of
which are designed to enhance return on investment. We also provide offshore application development and support services. These services include
post-implementation support for select business application platforms. Our Business Applications group also includes a division responsible for the
sale and maintenance support of the SAP suite of enterprise resource planning applications.


| |  | Business Intelligence
|- |  | ---------------------



Based on our extensive best practices knowledge, our
Business Intelligence group designs, develops and implements IT solutions for more effective enterprise performance management (EPM) and business
intelligence (BI). Our BI experts know how to apply and implement custom or packaged analytical applications such as Hyperion and Cognos to increase
process transparency, exception management, and create continuous improvement environments. Similarly, our BI services are designed to increase
visibility into current performance, improve access to key financial and operational data, and enhance strategic decision making. The group offers
strategy and management services, including operational diagnostics and planning and enterprise architecture. Further, we assist


-6-

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| |  | clients in improving business performance by rationalizing IT
infrastructures, and selecting the right enabling technologies, such as Web services, portals and BPM software, to complement enterprise systems and
facilitate information sharing and process integration inside and outside the enterprise.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CLIENTS



We focus on long-term client relationships with
Global 2000 firms and other sophisticated strategic buyers of business and IT consulting. During 2004, our ten most significant clients accounted for
approximately 28% of revenues. No clients generated more than 10% of total revenues.




We believe that we have achieved a high level of
satisfaction across our client base in 2004. The responses to the surveys we send to clients continue to be extremely positive. During 2004, we
received surveys from a significant number of our engagements with an average score of 4.6 on a 5.0 scale. The direct feedback and suggestions we
receive on surveys are captured and used to continuously improve our delivery execution, sales processes, methodologies and training.


BUSINESS DEVELOPMENT AND MARKETING AND MARKET SEGMENTATION



Our extensive client base and relationships with
Global 2000 firms remain our most significant sources of new business. Our revenue generation strategy is formulated to ensure we are addressing
multiple facets of business development. The categories below define our business development resources and market segmentation. Our primary goal in
2005 is to continue to increase awareness of our brand that we have created around Hackett and BPI. Our Hackett and BPI message will remain the central
focus of our marketing and communications programs this year as we drive both an understanding of and demand for this approach. Similarly, we have
realigned our sales force so it can market business transformation programs along with our benchmarking and executive advisory programs. We continue to
maintain compensation programs that reward the linkage between sales of benchmarking and business advisory programs provided by The Hackett Group and
best practices solutions provided by our Business Applications and Business Intelligence groups.


BUSINESS DEVELOPMENT RESOURCES



Although virtually all of our consultants have the
ability to and are expected to contribute to new revenue opportunities, our primary internal business development resources are comprised of the
following:


| |  | The Leadership Team
|- |  | -------------------

| |  | The Sales Organization
|- |  | ----------------------

| |  | The Solution Strategist Network
|- |  | -------------------------------

| |  | Lead Generation Specialists
|- |  | ---------------------------

| |  | The Delivery Organization
|- |  | -------------------------

| |  | The Leadership Team is comprised of our senior leaders
who have a combination of executive, functional, practice and anchor account responsibilities. In addition to their management responsibilities, this
group of associates is responsible for growing business by fostering executive level relationships within accounts and leveraging their existing
contacts in the marketplace.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The Sales Organization is comprised of associates who are
100% dedicated to generating sales. They are deployed geographically in key markets and are primarily focused on developing new relationships within
their target accounts. Each sales associate has between two and ten target accounts split between existing clients and select Global 2000 prospects.
They represent our entire offering. They also handle geographic-related opportunities as they arise.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The Solution Strategist Network is comprised of
associates throughout our various practices who are primarily dedicated to developing new business. Solution strategists possess deep subject matter
expertise within a specific discipline and receive incentive compensation on the amount of revenue they generate in addition to other criteria.
Solution strategists sell new business in geographic accounts and collaborate with the sales organization on specific account opportunities to provide
content expertise.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Lead Generation Specialists are comprised of trained
groups of lead development specialists who are conversant with its various solution areas. Lead generation is coordinated with our marketing and sales
groups to ensure that our inbound and outbound efforts are synchronized with targeted marketing and sales programs.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | The Delivery Organization is comprised of our billable
associates who work at client locations. We encourage associates to pursue additional business development opportunities through their normal course of
delivering existing projects and help us expand our business within existing accounts.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to our business development team, we
have a corporate marketing and communications organization responsible for overseeing our marketing programs, public relations and employee
communications activities.




We have segmented our market focus into the
following categories:


| |  | Top 25 Accounts
|- |  | ---------------

| |  | Target Accounts
|- |  | ---------------

| |  | Geographic Focus Accounts
|- |  | -------------------------

| |  | Strategic Alliance Accounts
|- |  | ---------------------------

| |  | Top 25 Accounts are a mix of our largest existing clients
and our most strategic prospects. To facilitate proper account management, each top 25 account has a leadership team member assigned to perform the
role of client executive, an associate from the sales, solution strategist or delivery organizations to perform the role of account manager, and an
associate from the delivery organizations to perform the role of delivery leader.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Target Accounts are comprised of prospects and clients
who are geographically situated where a sales representative resides. Criteria for inclusion as a target account includes the size of the company,
industry affiliation, propensity to buy external consulting services and contacts within the account. The sales representative is primarily responsible
for identifying business opportunities in the account, acting as the single point of coordination for the client, and performing the general duties of
account manager.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Geographic Focus Accounts are accounts within a specified
geographic location that fall neither within the top 25 or target account lists. These accounts can include large prospects, dormant clients, existing
medium-sized clients and mid-tier market accounts. This account set is handled primarily on an opportunistic basis, except for active clients where
delivery teams are focused on driving additional revenue.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Strategic Alliance Accounts are accounts that allow us to
partner with organizations with greater scale or different skill sets or with software developers so that all parties can jointly market their products
and services to prospective clients. An example of this type of alliance is the agreement with Accenture that was signed in late 2003. This agreement
gives Accenture the exclusive right to collaborate with us in offering its clients our best practice benchmarking programs and best practices solutions
in designated functional areas, including finance, accounting, performance management, business intelligence and procurement. Under the agreement, we
have the ability to expand into additional enterprise functional areas and geographic locations. The agreement gives us access to Accentures
global client base and sales distribution channel. By working with more clients, The Hackett Group will be able to broaden the base of critical metrics
and best practices, thereby creating even richer benchmark data to help companies achieve world-class performance. Our alliance allows us to staff a
portion of the consulting positions for each engagement that is jointly closed with Accenture. We continue to seek alliances that broaden our
distribution channel.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

MANAGEMENT SYSTEMS



Our management control systems are comprised of
various accounting, billing, financial reporting, human resources, marketing and resource allocations systems, many of which are integrated with our
knowledge management system, Mind ̃Share. We continuously work to improve Mind ̃Share, as well as our infrastructure and management control
systems, which we believe represents a competitive advantage for us. We believe that Mind ̃Share significantly enhances our ability to serve our
clients efficiently by allowing our knowledge base to be shared by all of our consultants worldwide on a real-time basis. Our well-developed, flexible,
scalable infrastructure has allowed us to quickly integrate the new employees and systems of businesses we have acquired.


HUMAN RESOURCES



We believe that our culture fosters intellectual
rigor and creativity, collaboration and innovation. We believe in building relationships with both our associates and clients. We believe the best
solutions come from teams of diverse individuals addressing problems collectively and from multiple dimensions, including the business, technological
and human dimensions. We believe that the most effective working environment is one where everyone is encouraged to contribute and is rewarded for that
contribution.


-8-

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Our core values are the strongest expression of our
working style. They are what we stand for. These core values are:


| |  | Development of our associates our unique content business model
and knowledge base creates a highly unique learning opportunity
|- |  | -------------------------------------------------------------------------------------------------------------------------------

| |  | Diversity of backgrounds, skills and experiences
|- |  | ------------------------------------------------

| |  | Knowledge capture, contribution and utilization
|- |  | -----------------------------------------------

| |  | Collaboration with one another, with our partners and with our
clients
|- |  | ----------------------------------------------------------------------



Our human resources staff includes dedicated
resources to recruit consultants with both business and technology expertise. Our recruiting team drives our hiring process by focusing on the highest
demand solution areas of our business to ensure an adequate pipeline of resources. Our human resources staff also includes seasoned professionals that
support our practices by, among other things, administering our benefit programs and facilitating the hiring process. We also have an employee referral
program, which rewards existing employees who source new hires.




The benefits package that we provide includes
comprehensive health and welfare insurance, work/life balance programs and a 401(k) program including a company match for associates below the level of
senior director. Our associates are paid competitive salaries and incentive pay. Incentive pay for delivery resources is based on an individuals
contribution to the projects on which he or she is staffed. Incentive pay for sales associates is based on achievement of sales quotas. Incentive pay
for management is based on company performance, sales contributions, client management and practice management.




As of December 31, 2004, we had approximately 720
associates, approximately 80% of whom were billable professionals. None of our associates are subject to collective bargaining arrangements. We have
entered into nondisclosure and non-solicitation agreements with virtually all of our personnel. We engage consultants as independent contractors from
time to time.


COMMUNITY INVOLVEMENT



One important way we put our values into action is
through our commitment to the communities where we work. The mission of our Community Council, which operates in each of the cities where we have
offices, is to strive to leave the markets, communities and clients we serve better than we found them. We do it by building a strong sense of
community, collaboration and personal interaction among all of our associates, through both volunteer and service programs and social gatherings. Our
associates are actively involved in many valuable and high-impact community programs, including United Way, Ronald McDonald House, Big Brothers &
Sisters, Race for the Cure, Make-A-Wish Foundation, Habitat for Humanity, the National Adoption Center, the National Heart Association and Special
Olympics.


AVAILABLE INFORMATION



We make our public filings with the Securities and
Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all exhibits and
amendments to these reports, available free of charge at our web site http://www.answerthink.com as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the Securities and Exchange Commission. Any material that we file with the Securities and
Exchange Commission may be read and copied at the Securities and Exchange Commissions Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 [or at www.sec.gov]. Information on the operation of the Public Reference Room may be obtained by calling the Securities and
Exchange Commission at 1-800-SEC-0330.




Also available on our web site, free of charge, are
copies of our Code of Conduct and Ethics, and the charter for our audit committee of our Board of Directors. We intend to disclose any amendment to, or
waiver from, a provision of our Code of Conduct and Ethics on our web site within five business days following the date of the amendment or
waiver.


-9-

---

RISK FACTORS



The following important factors, among others, could
cause actual results to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K or printed
elsewhere by management from time to time.




Our quarterly operating results may
vary.




Our financial results may fluctuate from quarter to
quarter. In future quarters, our operating results may not meet public market analysts and investors expectations. If that happens, the
price of our common stock may fall. Many factors can cause these fluctuations, including:


| |  | the number, size, timing and scope of client
engagements;
|- |  | ---------------------------------------------------------

| |  | customer concentration;
|- |  | -----------------------

| |  | long and unpredictable sales cycles;
|- |  | ------------------------------------

| |  | contract terms of client engagements;
|- |  | -------------------------------------

| |  | degrees of completion of client engagements;
|- |  | --------------------------------------------

| |  | client engagement delays or cancellations;
|- |  | ------------------------------------------

| |  | competition for and utilization of employees;
|- |  | ---------------------------------------------

| |  | how well we estimate the resources and effort we need to
complete client engagements;
|- |  | -------------------------------------------------------------------------------------

| |  | the integration of acquired businesses;
|- |  | ---------------------------------------

| |  | pricing changes in the industry;
|- |  | --------------------------------

| |  | economic conditions specific to business and information
technology consulting; and
|- |  | -----------------------------------------------------------------------------------

| |  | general economic conditions.
|- |  | ----------------------------



A high percentage of our operating expenses,
particularly personnel and rent, are fixed in advance of any particular quarter. As a result, if we experience unanticipated changes in client
engagements or in employee utilization rates, we could experience large variations in quarterly operating results and losses in any particular quarter.
Due to these factors, we believe you should not compare our quarter-to-quarter operating results to predict future performance.




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.




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 number of providers of business consulting and IT services. If our reputation
is damaged or if potential clients are not familiar with us or with 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.




We depend heavily on a limited number of
clients.




We have derived, and believe that we will continue
to derive, a significant portion of our revenues from a limited number of clients for which we perform large projects. In 2004, our ten largest clients
accounted for approximately 28% of our revenues in the aggregate. In addition, revenues from a large client may constitute a significant portion of our
total revenues in a particular quarter. The loss of any principal client for any reason, including as a result of the acquisition of that client by
another entity, our failure to meet that clients expectations, or that clients decision to reduce spending on technology-related projects,
could have a material adverse effect on our business, financial condition and results of operations.




We have risks associated with potential
acquisitions or investments.




Since we were founded, we have significantly
expanded through acquisitions. In the future, we plan to pursue additional acquisitions as opportunities arise. We may not be able to integrate
successfully businesses which we may


-10-

---

acquire
in the future without substantial expense, delays or  other operational or financial
problems. We may not be able to identify, acquire or profitably manage additional
businesses. Also, acquisitions may  involve a number of risks, including:

| |  | diversion of managements attention;
|- |  | ------------------------------------

| |  | failure to retain key personnel;
|- |  | --------------------------------

| |  | failure to retain existing clients;
|- |  | -----------------------------------

| |  | unanticipated events or circumstances;
|- |  | --------------------------------------

| |  | unknown claims or liabilities; and
|- |  | ----------------------------------

| |  | amortization of certain acquired intangible assets.
|- |  | ---------------------------------------------------



We cannot assure you that client satisfaction or
performance problems at a single acquired firm will not have a material adverse impact on our reputation as a whole. Further, we cannot assure you that
our recent or future acquired businesses will generate anticipated revenues or earnings.




Difficulties in integrating businesses we may
acquire in the future may demand time and attention from our senior management.




Integrating businesses we may acquire in the future
may involve unanticipated delays, costs and/or other operational and financial problems. In integrating acquired businesses, we may not achieve
expected economies of scale or profitability or realize sufficient revenues to justify our investment. If we encounter unexpected problems at one of
the acquired businesses as we try to integrate it into our business, our management may be required to expend time and attention to address the
problems, which would divert their time and attention from other aspects of our business.




Our markets are highly
competitive.




We may not be able to compete effectively with
current or future competitors. The business consulting and IT services market is highly competitive. We expect competition to further intensify as
these markets continue to evolve. 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 international accounting firms; international, national and regional
strategic consulting and systems implementation firms; and the IT services divisions of application software firms.




In addition, there are relatively low barriers to
entry into the business consulting and IT 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 not be able to hire, train, motivate,
retain and manage professional staff.




To succeed, we must hire, train, motivate, retain
and manage highly skilled employees. Competition for skilled employees who can perform the services we offer is intense. We might not be able to hire
enough of them or to train, motivate, retain and manage the employees we hire. This could hinder our ability to complete existing client engagements
and bid for new client engagements. Hiring, training, motivating, retaining and managing employees with the skills we need is time consuming and
expensive.




We could lose money on our
contracts.




As part of our strategy, we enter into capped or
fixed-price contracts, in addition to contracts based on payment for time and materials. Because of the complexity of many of our client engagements,
accurately estimating the cost, scope and duration of a particular engagement can be a difficult task. We maintain an office of risk management that
evaluates and attempts to mitigate delivery risk associated with complex projects. In connection with their review, the office of risk management
analyzes the critical estimates associated with these projects. If we fail to make these estimates accurately, 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


-11-

---



could reduce the profitability of, or result in
a loss on, the engagement. In the past, we have, on occasion, engaged in negotiations with clients regarding changes to the cost, scope 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.




Lack of detailed written contracts could
impair our ability to collect fees, protect our intellectual property and protect ourselves from liability to others.




We try to protect ourselves by entering into
detailed written contracts with our clients covering the terms and contingencies of the client engagement. In some cases, however, consistent with what
we believe to be industry practice, work is performed for clients on the basis of a limited statement of work or verbal agreements before a detailed
written contract can be finalized. To the extent that we fail to have detailed written contracts in place, our ability to collect fees, protect our
intellectual property and protect ourselves from liability to others may be impaired.




Our corporate governance provisions may deter
a financially attractive takeover attempt.




Provisions of our charter and by-laws may
discourage, delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which stockholders would
receive a premium for their shares. These provisions include the following:


| |  | stockholders must comply with advance notice requirements before
raising a matter at a meeting of stockholders or nominating a director for election;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

| |  | our board of directors is staggered into three classes and the
members may be removed only for cause upon the affirmative vote of holders of at least two-thirds of the shares entitled to vote;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | we would not be required to hold a special meeting to consider a
takeover proposal unless holders of more than a majority of the shares entitled to vote on the matter were to submit a written demand or demands for us
to do so; and
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | our board of directors may, without obtaining stockholder
approval, classify and issue up to 1,250,000 shares of preferred stock with powers, preferences, designations and rights that may make it more
difficult for a third party to acquire us.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, our board of directors has adopted a
shareholder rights plan. Subject to certain exceptions, in the event that a person or group in the future becomes the beneficial owner of 15% or more
of our common stock or commences, or publicly announces an intention to commence, a tender or exchange offer which would result in its ownership of 15%
or more of our outstanding common stock (or in the case of Liberty Wanger Asset Management, L.P. (now known as Columbia Wanger Asset Management, L.P.)
and its affiliates, 20%) then the rights issued to our shareholders in connection with this plan will allow our shareholders to purchase shares of our
common stock at 50% of its then current market value. In addition, if we are acquired in a merger, or 50% or more of our assets are sold in one or more
related transactions, our shareholders would have the right to purchase the common stock of the acquiring company at half the then current market price
of such common stock.




We may lose large clients or not be able to
secure targeted follow-on work or client retention rates.




Our client engagements are generally short-term
arrangements, and most clients can reduce or cancel their contracts for our services with 30 days notice and without penalty. As a result, if we lose a
major client or large client engagement, our revenues will be adversely affected. We perform varying amounts of work for specific clients from year to
year. A major client in one year may not use our services in another year. In addition, we may derive revenue from a major client that constitutes a
large portion of total revenue for particular quarters. If we lose any major clients or any of our clients cancel programs or significantly reduce the
scope of a large client engagement, our business, financial condition and results of operations could be materially and adversely affected. Also, if we
fail to collect a large account receivable, we could be subjected to significant financial exposure. Consequently, you should not predict or anticipate
our future revenue based upon the number of clients we currently have or the number and size of our existing client engagements.




We also derive an increasing portion of our revenues
from annual memberships for our business advisory programs. Our growth prospects therefore depend on our ability to achieve and sustain high retention
rates on programs and to successfully launch new programs. Failure to achieve high renewal rate levels or to successfully launch new programs and
services could have a material adverse effect on our operating results.


-12-

---



If we are unable to protect our intellectual
property rights or infringe on the intellectual property rights of third parties, our business may be harmed.




We rely upon a combination of nondisclosure and
other contractual arrangements and trade secret, copyright and trademark laws to protect our proprietary rights and the proprietary rights of third
parties from whom we license intellectual property. Although we enter into confidentiality agreements with our employees and limit distribution of
proprietary information, there can be no assurance that the steps we have taken in this regard will be adequate to deter misappropriation of
proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property
rights.




Although we believe that our services do not
infringe on the intellectual property rights of others and that we have all rights necessary to utilize the intellectual property employed in our
business, we are subject to the risk of claims alleging infringement of third-party intellectual property rights. Any claims could require us to spend
significant sums in litigation, pay damages, develop non-infringing intellectual property or acquire licenses to the intellectual property that is the
subject of asserted infringement.




The market price of our common stock may
fluctuate widely.




The market price of our common stock could fluctuate
substantially due to:


| |  | future announcements concerning us or our
competitors;
|- |  | ------------------------------------------------------

| |  | quarterly fluctuations in operating results;
|- |  | --------------------------------------------

| |  | announcements of acquisitions or technological innovations;
or
|- |  | --------------------------------------------------------------

| |  | changes in earnings estimates or recommendations by
analysts.
|- |  | -------------------------------------------------------------



In addition, the stock prices of many technology
companies fluctuate widely for reasons which may be unrelated to operating results. Fluctuations in our common stocks market price may impact our
ability to finance our operations and retain personnel.




Our initiatives that leverage The Hackett
Groups best practices knowledge may not be successful.




The BPI tools that we developed using Hackett best
practice knowledge continue to be introduced to our existing client base and to client prospects. We still do not have enough experience with them to
ensure that clients and prospects will perceive any additional benefit associated with the BPI tools versus other traditional implementation
methodologies. As such, BPI may not enable us to differentiate ourselves in the marketplace, and we may not achieve any benefits from this new
methodology.




Planned enhancements to The Hackett Groups
advisory product offerings which will include business transformation programs represent a departure from its traditional benchmarking offerings. We
may not be able to adequately support these new offerings. Clients or prospects may view The Hackett Group as a new and unproven entrant into this
space. As such, clients and client prospects may choose to purchase these types of products and services from companies with a longer track record of
providing these types of offerings.




The anticipated benefits from the Joint
Marketing and Alliance Agreement with Accenture LLP may not be achieved.




The initial term of our Joint Marketing and Alliance
Agreement expires on October 7th of 2005. It may be renewed upon mutual agreement of the parties. We are still developing our relationship
with Accenture. Accenture client partners may choose not to involve Answerthink or The Hackett Group in their client pursuits. This would have an
adverse affect on our ability to achieve the participation entitlements contained in the agreement. The client engagements won jointly may be of a
complex nature and very large in scale. We may not be able to staff all of the positions that we would have a right to staff on a timely basis, and
Accenture may not be satisfied with the quality or performance of the resources that we staff. This may lead to the termination of the agreement, which
either party can seek upon ninety days notice.


|ITEM 2. |  | PROPERTIES
|------- |  | ----------



Our principal executive offices currently are
located at 1001 Brickell Bay Drive, Suite 3000, Miami, Florida 33131. The lease on these premises covers 10,780 square feet and expires June 30, 2005.
We also have offices in Atlanta, Boston, Chicago, Frankfurt, London, New York, Philadelphia, Princeton, San Jose and Hyderabad, India. We believe that
we will be able to obtain suitable space as needed. We own no real estate and do not intend to invest in real estate or real estate-related
assets.


-13-

---

|ITEM 3. |  | LEGAL PROCEEDINGS
|------- |  | -----------------



Between November 2002 and January 2003, six class
actions seeking unspecified damages were filed against Answerthink and certain of its current and former officers and directors alleging violations of
the Securities and Exchange Act of 1934. The complaints alleged misstatements and omissions concerning, among other things, related party transactions
during the alleged class period of February 8, 2000 to April 25, 2002. On January 7, 2003 the federal district court entered an order closing and
consolidating these cases and any subsequently filed related cases into Druskin, et al. v. Answerthink, Inc., et al., Case No. 02-23304-CIV-GOLD. A
consolidated amended complaint was filed on May 9, 2003. The Company filed a motion to dismiss the consolidated amended complaint on July 15, 2003. The
court granted the Companys motion to dismiss the consolidated and amended complaint on January 5, 2004 and allowed the plaintiffs leave to amend
the consolidated amended complaint. The plaintiffs did not file an amended complaint within the time allowed by the court. On February 11, 2004, the
court entered a final judgment dismissing the case against all parties with prejudice and closed the case. The time for appeal has expired. This matter
is concluded.




We are involved in legal proceedings, claims, and
litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such
other matters will not have a material adverse effect on our financial position or results of operations.


|ITEM 4. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|------- |  | ---------------------------------------------------



No matters were submitted to a vote of security
holders during the fourth quarter of 2004.


-14-

---

PART II

|ITEM 5. |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- |  | ------------------------------------------------------------------------------------------------------------



Our common stock has been traded on the Nasdaq
National Market since our initial public offering on May 28, 1998 under the Nasdaq symbol ANSR. The following table sets forth for the
fiscal periods indicated the high and low sales prices of the common stock, as reported on the Nasdaq National Market.







|               |  |  |  | High |      | Low
|-------------- |  |  |  | ---- | ---- | ---
|2004           |  |  |  |      |      |    
|Fourth
Quarter |  |  |  | $    | 5.49 |    
|Third
Quarter  |  |  |  | $    | 6.35 |    
|Second
Quarter |  |  |  | $    | 8.45 |    
|First
Quarter  |  |  |  | $    | 8.19 |    
|               |  |  |  |      |      |    
|2003           |  |  |  |      |      |    
|Fourth
Quarter |  |  |  | $    | 6.35 |    
|Third
Quarter  |  |  |  | $    | 4.03 |    
|Second
Quarter |  |  |  | $    | 2.59 |    
|First
Quarter  |  |  |  | $    | 2.97 |    



The closing sale price for the common stock on March
4, 2005 was $4.00.




As of March 4, 2005, there were approximately 358
holders of record of our common stock and 43,451,221 shares of common stock outstanding.


Company Dividend Policy



We do not expect to pay any cash dividends on our
common stock in the foreseeable future. Our present policy is to retain earnings, if any, for use in the operation of our business.


Purchases of Equity Securities






|Period                                         |  |  | Total
      Number
      of Shares
      Purchased |         | Average
      Price
      paid per Share |  | Total
      Number of
      Shares Purchased
      as Part of the
      Repurchase
      Program |   | Approximate
      Dollar
      Value of Shares that
      May Yet Be Purchased
      Under the Repurchase
      Program
|---------------------------------------------- |  |  | -------------------------------------------------- | ------- | ---------------------------------------- |  | ------------------------------------------------------------------------------------------------ | - | -----------------------------------------------------------------------------------------------------------------------
|October
        2, 2004 to October 29, 2004    |  |  |                                                    | 433,950 |                                          |  |                                                                                                  | $ | 3.96                                                                                                                   
|October
        30, 2004 to November 26, 2004  |  |  |                                                    | 82,200  |                                          |  |                                                                                                  | $ | 4.48                                                                                                                   
|November
        27, 2004 to December 31, 2004 |  |  |                                                    | 52,000  |                                          |  |                                                                                                  | $ | 4.52                                                                                                                   
|Total                                          |  |  |                                                    | 568,150 |                                          |  |                                                                                                  | $ | 4.09                                                                                                                   



The Company has an ongoing authorization, as
amended, from the Board of Directors to repurchase shares of the Companys common stock in the open market or in negotiated transactions. The
Companys authorization is for up to $25 million, of which approximately $6.8 million is currently still available. All repurchases were made in
the open market, subject to market conditions and trading restrictions. There is no expiration date on the current authorization and during the period
covered by the table, no determination was made by the Company to suspend or cancel purchases under the program.


-15-

---

|ITEM 6. |  | SELECTED FINANCIAL DATA
|------- |  | -----------------------



The following selected consolidated financial data
sets forth selected financial information for Answerthink as of and for each of the years in the five-year period ended December 31, 2004, and has been
derived from our audited financial statements. The selected consolidated financial data should be read together with our consolidated financial
statements and related notes thereto and with Managements Discussion and Analysis of Financial Condition and Results of
Operations.







|                                                                                                                                       |  |  |  | Year Ended |        
|-------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ---------- | -------
|
|
|Consolidated Statement of Operations Data:                                                                                             |  |  |  |            |        
|Revenues:                                                                                                                              |  |  |  |            |        
|Revenues
before reimbursements                                                                                                         |  |  |  | $          | 129,339
|Reimbursements                                                                                                                         |  |  |  |            | 14,208 
|Total
revenues                                                                                                                         |  |  |  |            | 143,547
|Costs and
expenses:                                                                                                                    |  |  |  |            |        
|Project
personnel and expenses:                                                                                                        |  |  |  |            |        
|Project
personnel and expenses before reimbursable expenses                                                                            |  |  |  |            | 75,774 
|Reimbursable
expenses                                                                                                                  |  |  |  |            | 14,208 
|Total project
personnel and expenses                                                                                                   |  |  |  |            | 89,982 
|Selling,
general and administrative expenses                                                                                           |  |  |  |            | 48,491 
|Impairment of
goodwill                                                                                                                 |  |  |  |            |       
|Restructuring
costs                                                                                                                    |  |  |  |            | 3,749  
|Stock
compensation expense                                                                                                             |  |  |  |            | 2,321  
|Total costs
and operating expenses                                                                                                     |  |  |  |            | 144,543
|Income (loss)
from operations                                                                                                          |  |  |  |            | (996   
|Other income
(expense):                                                                                                                |  |  |  |            |        
|Litigation
settlement                                                                                                                  |  |  |  |            |       
|Non-cash
investment losses                                                                                                             |  |  |  |            |       
|Interest
income (expense), net                                                                                                         |  |  |  |            | 802    
|Income (loss)
before income taxes, income (loss) from discontinued operations, and cumulative effect of change in accounting principle |  |  |  |            | (194   
|Income
taxes                                                                                                                           |  |  |  |            | 324    
|Income (loss)
from continuing operations                                                                                               |  |  |  |            | (518   
|Income (loss)
from discontinued operations,net of income taxes                                                                         |  |  |  |            | 370    
|Income (loss)
before cumulative effect of change in accounting principle                                                               |  |  |  |            | (148   
|Cumulative
effect of change in accounting principle                                                                                    |  |  |  |            |       
|Net income
(loss)                                                                                                                      |  |  |  | $          | (148   
|Basic net
income (loss) per common share:                                                                                              |  |  |  |            |        
|Income (loss)
from continuing operations                                                                                               |  |  |  | $          | (0.01  
|Income (loss)
from discontinued operations, net of income taxes                                                                        |  |  |  | $          | 0.01   
|Cumulative
effect of change in accounting principle                                                                                    |  |  |  | $          |       
|Net income
(loss) per common share                                                                                                     |  |  |  | $          | (0.00  
|Weighted
average common shares outstanding                                                                                             |  |  |  |            | 44,188 
|Diluted net
income (loss) per common share:                                                                                            |  |  |  |            |        
|Income (loss)
from continuing operations                                                                                               |  |  |  | $          | (0.01  
|Income (loss)
from discontinued operations, net of income taxes                                                                        |  |  |  | $          | 0.01   
|Cumulative
effect of change in accounting principle                                                                                    |  |  |  | $          |       
|Net income
(loss) per common share                                                                                                     |  |  |  | $          | (0.00  
|Weighted
average common shares and common share equivalents                                                                            |  |  |  |            | 44,188 

-16-

---






|                                 |  |  |  | December 31, 2004 |         | January 2, 2004 |  | January 3, 2003 |         | December 28, 2001 |  | December 29, 2000
|-------------------------------- |  |  |  | ----------------- | ------- | --------------- |  | --------------- | ------- | ----------------- |  | -----------------
|
|Consolidated Balance Sheet Data: |  |  |  |                   |         |                 |  |                 |         |                   |  |                  
|Cash and cash
equivalents        |  |  |  | $                 | 38,890  |                 |  | $               | 54,441  |                   |  | $                
|Restricted
cash                  |  |  |  | $                 | 3,000   |                 |  | $               | 3,000   |                   |  | $                
|Marketable
investments           |  |  |  | $                 | 9,902   |                 |  | $               | 10,000  |                   |  | $                
|Working
capital                  |  |  |  | $                 | 49,860  |                 |  | $               | 58,826  |                   |  | $                
|Total
assets                     |  |  |  | $                 | 128,733 |                 |  | $               | 135,223 |                   |  | $                
|Shareholders equity             |  |  |  | $                 | 99,854  |                 |  | $               | 105,235 |                   |  | $                

|ITEM 7. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------

Overview



Answerthink, Inc. is a strategic business advisory
and technology consulting firm that provides services designed to enable companies to achieve world-class business performance. By leveraging the
comprehensive database of The Hackett Group, the worlds leading repository of enterprise best practice metrics and business process knowledge,
our business and technology solutions help clients improve performance and maximize returns on technology investments. Our capabilities include
benchmarking, business advisory, business transformation, business applications, business intelligence, and offshore application development and
support. Answerthink was formed on April 23, 1997.


Critical Accounting Policies



In the ordinary course of business, we make a number
of estimates and assumptions relating to the reporting of results of operations and financial position in conformity with generally accepted accounting
principles. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the following
discussion addresses our most critical accounting policies. These policies require management to exercise judgements that are often difficult,
subjective and complex due to the necessity of estimating the effect of matters that are inherently uncertain.




Revenue Recognition




Our revenues are principally derived from fees for
services generated on a project-by-project basis. Revenues for services rendered are recognized on a time and materials basis or on a fixed-fee or
capped-fee basis. Revenues for time and materials contracts are recognized based on the number of hours worked by our consultants at an agreed upon
rate per hour and are recognized in the period in which services are performed. Revenues related to fixed-fee or capped-fee contracts are recognized on
the proportional performance method of accounting based on the ratio of labor hours incurred to estimated total labor hours. This percentage is
multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period. The contracted
dollar amount used in this calculation excludes the amount the client pays us for reimbursable expenses. There are situations where the number of hours
to complete projects may exceed our original estimate. These increases can be as a result of an increase in project scope, unforeseen events that
arise, or the inability of the client or the delivery team to fulfill their responsibilities. On an on-going basis, our project delivery, office of
risk management and finance personnel review hours incurred and estimated total labor hours to complete projects and any revisions in these estimates
are reflected in the period in which they become known.




Unbilled revenues represent revenues for services
performed that have not been invoiced. If we do not accurately estimate the scope of the work to be performed, or we do not manage our projects
properly within the planned periods of time or we do not meet our clients expectations under the contracts, then future consulting margins may be
negatively affected or losses on existing contracts may need to be recognized. Any such resulting reductions in margins or contract losses could be
material to our results of operations. Revenues before reimbursements exclude reimbursable expenses charged to clients. Reimbursements, which include
travel and out-of-pocket expenses, are included in revenues, and an equivalent amount of reimbursable expenses is included in project personnel and
expenses.




The agreements entered into in connection with a
project, whether time and materials based or fixed-fee or capped-fee based, typically allow our clients to terminate early due to breach or for
convenience with 30 days notice. In the event of termination, the client is contractually required to pay for all time, materials and
expenses


-17-

---



incurred by us through the effective date of the
termination. In addition, from time to time we enter into agreements with our clients that limit our right to enter into business relationships with
specific competitors of that client for a specific time period. These provisions typically prohibit us from performing a defined range of our services
that we might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply
only to specific employees or the specific project team.




Accounts Receivable and Allowances for Doubtful
Accounts




We maintain allowances for doubtful accounts for
estimated losses resulting from our clients not making required payments. Periodically, we review accounts receivable to assess our estimates of
collectibility. Management critically reviews accounts receivable and analyzes historical bad debts, past-due accounts, client credit-worthiness and
current economic trends when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of our clients were to
deteriorate, resulting in their inability to make payments, additional allowances may be required.




Goodwill




We assess goodwill for impairment when events or
circumstances indicate that the carrying value may not be recoverable, or, at a minimum, on an annual basis. We have made determinations as to what our
reporting units are and what amounts of goodwill and intangible assets should be allocated to those reporting units.




In assessing the recoverability of long-lived
identifiable assets and goodwill, we must make assumptions regarding estimated future cash flows, discount rates and other factors to determine if
impairment tests are met. These estimates contain managements best estimates, using appropriate and customary assumptions and projections at the
time. If these estimates or their related assumptions change in the future, we may be required to record additional impairment
charges.




Restructuring Reserves




Restructuring reserves reflect judgements and
estimates of our ultimate costs of severance, closure and consolidation of facilities and settlement of contractual obligations under our operating
leases, including sublease rental rates, absorption period to sublease space and other related costs. We reassess the reserve requirements to complete
each individual plan under our restructuring programs at the end of each reporting period. If these estimates change in the future or actual results
are different than our estimates, we may be required to record additional charges in the future.




Income Taxes




We record income taxes using the liability method.
Under this method, we record deferred taxes based on temporary taxable and deductible differences between the tax bases of our assets and liabilities
and our financial reporting bases. The liability method of accounting for deferred income taxes requires a valuation allowance against deferred tax
assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be
realized.




Contingent Liabilities




We have certain contingent liabilities that arise in
the ordinary course of our business activities. We accrue contingent liabilities when it is probable that future expenditures will be made and such
expenditures can be reasonably estimated. Reserves for contingent liabilities are reflected in our consolidated financial statements based on
managements assessment, along with legal counsel, of the expected outcome of the contingencies. If the final outcome of our contingencies differs
adversely from that currently expected, it would result in a charge to earnings when determined.




The foregoing list is not intended to be a
comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the United States, with no need for us to judge the application. There are also areas in which our judgment
in selecting any available alternative would not produce a materially different result. Please see our consolidated financial statements and related
notes thereto included elsewhere in this Annual Report on Form 10-K, which contain accounting policies and other disclosures required by accounting
principles generally accepted in the United States.


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Results of Operations



Our fiscal year generally consists of a 52-week
period and periodically consists of a 53-week period because the fiscal year ends on the Friday closest to December 31. Fiscal years 2004, 2003 and
2002 ended on December 31, 2004, January 2, 2004 and January 3, 2003, respectively. Our fiscal year 2002 was a 53-week period. References to a year
included in this section refer to a fiscal year rather than a calendar year.




The following table sets forth, for the periods
indicated, our results of operations and the percentage relationship to net revenues of such results:







|                                                                                                                                             |  | Year
      Ended
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------
|
|
|Revenues:                                                                                                                                    |  |                 
|Revenues
        before reimbursements                                                                                                       |  | $               
|Reimbursements                                                                                                                               |  |                 
|Total
        revenues                                                                                                                       |  |                 
|Costs
        and expenses:                                                                                                                  |  |                 
|Project
        personnel and expenses:                                                                                                      |  |                 
|Project
        personnel and expenses before reimbursable expenses                                                                          |  |                 
|Reimbursable
        expenses                                                                                                                |  |                 
|Total
        project personnel and expenses                                                                                                 |  |                 
|Selling,
        general and administrative expenses                                                                                         |  |                 
|Impairment
        of goodwill                                                                                                               |  |                 
|Restructuring
        costs                                                                                                                  |  |                 
|Stock
        compensation expense                                                                                                           |  |                 
|Total
        costs and operating expenses                                                                                                   |  |                 
|Loss
        from operations                                                                                                                 |  |                 
|Other
        income (expense):                                                                                                              |  |                 
|Interest
        income (expense), net                                                                                                       |  |                 
|Loss
        before income taxes, income (loss) from discontinued operations
        and cumulative effect of change in accounting principle |  |                 
|Income
        taxes                                                                                                                         |  |                 
|Loss
        from continuing operations                                                                                                      |  |                 
|Income
        (loss) from discontinued operations, net of income taxes                                                                      |  |                 
|Loss
        before cumulative effect of change in accounting principle                                                                      |  |                 
|Cumulative
        effect of change in accounting principle                                                                                  |  |                 
|Net
        loss                                                                                                                             |  | $               

Comparison of 2004 to 2003



Overview. We reported a net loss of $148
thousand in 2004 compared to a net loss of $4.8 million in 2003. Our $148 thousand loss during 2004 included restructuring costs of $3.7 million and
non-cash stock compensation expense of $2.3 million. Our $4.8 million loss during 2003 included restructuring costs of $4.9 million and non-cash stock
compensation expense of $1.2 million. The restructuring costs related to increases in previously established reserves in 2002 and 2001 for the closure
and consolidation of facilities. The compensation expense was primarily related to the issuance of restricted stock units to employees at a senior
director level or above pursuant to a voluntary stock option exchange program which ended on July 14, 2003.




Revenues. Revenues increased 8.4% to $143.5
million in 2004 from $132.4 million in 2003. The increase in revenues was primarily attributable to increased revenue from benchmarking and business
advisory sales and related follow-on consulting projects, and the acquisitions of EZCommerce, a dual-shore ERP implementation company, and Beacon
Analytics, Inc., a business performance management consulting company, focusing on the implementation of Hyperion software. These impacts were
partially offset by a decline in IT implementation revenues due to the disruption of client IT integration projects in 2004 as a result of the need to
freeze control


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environments through the end of fiscal reporting
periods in order to support Sarbanes-Oxley compliance. Reimbursements as a percentage of revenues were 10% and 11% during fiscal years 2004 and 2003,
respectively. In fiscal year 2004, one customer had revenues greater than 5% of total revenues, accounting for 7% of total revenues. In fiscal year
2003, three customers had revenues greater than 5% of total revenues, which, in the aggregate, accounted for approximately 20% of total revenues. With
respect to our largest customer in 2004, our contract can be cancelled for convenience by the customer upon 30 days notice. Our project with this
customer expires on September 2005. We do not anticipate any credit and/or collection issues with this customer. As is customary with most of our
significant relationships, we may be able to continue with new and follow-on projects as this initiative progresses into subsequent phases. However,
there is no assurance that we will be able to renew this contract. The cancellation or significant reduction in the use of services from our key
customer could have a material adverse effect on our results of operations.




Project Personnel and Expenses. Project
personnel costs and expenses primarily consist of salaries, benefits and incentive compensation for consultants and reimbursable expenses associated
with projects. Project personnel costs and expenses increased 2.8% to $90.0 million in 2004 from $87.5 million in 2003. This slight increase was
primarily attributable to an increase in the number of consultants in order to balance workforce capacity with market demand for services, partially
offset by lower average cost per consultant. Consultant headcount was 550 as of December 31, 2004 compared to 483 as of January 2, 2004. Project
personnel and expenses as a percentage of revenues decreased to 63% during 2004 from 66% in 2003, primarily as the result of lower average cost per
consultant attributable to the addition of lower cost offshore resources as part of the acquisition of EZ Commerce.




Selling, General and Administrative. Selling,
general and administrative expenses increased 10.3% to $48.5 million in 2004 from $44.0 million in 2003. The overall increases in selling, general and
administrative expenses were primarily due to additional sales personnel and recruiting expenses to accommodate the growth in our benchmarking and
business advisory services, partially offset by lower legal fees. Selling, general and administrative expenses as a percentage of revenues increased to
34% in 2004 from 33% in 2003. The increase is primarily attributable to the increase in selling and recruiting expenses for our benchmarking and
business advisory services, partially offset by the impact of fixed expenses on higher levels of revenue in 2004 as compared to 2003.




Restructuring Costs and Discontinued
Operations. Restructuring costs were $3.7 million and $4.9 million in 2004 and 2003, respectively. Restructuring costs in 2004 and 2003 relate to
increases in previously established reserves for the closure and consolidation of facilities. Existing reserves were increased to account for higher
estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease
facilities based on current market conditions. Also in 2004, the restructuring accrual was reduced by $370 thousand relating to the final settlement of
a lease obligation for our discontinued interactive marketing business. This amount was recorded as income from discontinued operations in the
consolidated statement of operations for the year ended December 31, 2004.




Stock Compensation Expense. Stock
compensation expense of $2.3 million and $1.2 million in 2004 and 2003, respectively, primarily related to our outstanding restricted stock units which
were granted in July 2003 in connection with a voluntary stock exchange program. Restricted stock unit expense is based on the vesting provisions of
the restricted stock units and the fair market value of the stock on the grant date. We expect to incur approximately $600 thousand of stock
compensation expense per quarter over the remaining vesting period of the restricted stock units. Most of the restricted stock units fully vest in the
third quarter of 2007. In addition, as of December 31, 2004 we had 182,858 stock options accounted under variable plan accounting pursuant to FASB
Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans. During 2004 and 2003, variable
plan accounting resulted in $62 thousand and $103 thousand of stock compensation expense, respectively.




Income Taxes. In 2004 and 2003, we recorded
$324 thousand and $350 thousand, respectively, of income tax expense for certain state and foreign taxes, which represented 167.6% and 7.8% of our
pre-tax loss, respectively. We did not recognize an income tax benefit for federal and state taxes due to the establishment of a valuation allowance
for the tax benefit generated on losses during 2004 and 2003. The liability method of accounting for deferred income taxes requires a valuation
allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized.




In 2002, we discontinued our interactive marketing
business which was acquired with THINK New Ideas. In connection therewith, we claimed a worthless stock deduction for our investment in THINK New Ideas
in our 2002


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---



tax return as a result of the discontinuance of
THINK New Ideas. We voluntarily requested that the Internal Revenue Service (IRS) review this position on an expedited basis. On August 5,
2004, we reached an agreement with the IRS representing the final step in the review process. Pursuant to the agreement, the IRS agreed that we are
entitled to a worthless stock deduction of $77.3 million on our 2002 tax return. Including this deduction, we have approximately $74 million of U.S.
federal net operating loss carryforwards as of December 31, 2004.


Comparison of 2003 to 2002



Overview. We reported a net loss of $4.8
million in 2003 compared to a net loss of $69.0 million in 2002. Our $4.8 million loss during 2003 included restructuring costs of $4.9 million and
non-cash stock compensation expense of $1.2 million. The restructuring costs related to increases in previously established reserves in 2002 and 2001
for the closure and consolidation of facilities. The compensation expense was primarily related to the issuance of restricted stock units to employees
at a senior director level or above pursuant to a voluntary stock option exchange program which ended on July 14, 2003. Our $69.0 million net loss
during 2002 included a $31.2 million cumulative effect of change in accounting principle as a result of the adoption of Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, a non-cash goodwill impairment charge of $20.0 million,
restructuring costs of $10.9 million and a loss from discontinued operations of $8.9 million related to our interactive marketing
business.




Revenues. Revenues decreased 25.1% to $132.4
million in 2003 from $176.8 million in 2002. The decrease in revenues was primarily attributable to lower revenues from a few of our larger customers
due to the completion of some of their larger projects, as well as lower demand for information technology services as clients continued to reduce or
defer expenditures for these services in 2003. Reimbursements as a percentage of revenues were 11% and 12% during fiscal years 2003 and 2002,
respectively. In fiscal year 2003, three customers had revenues greater than 5% of total revenues, which, in the aggregate, accounted for approximately
20% of total revenues. In fiscal year 2002, three customers had revenues greater than 5% of total revenues, which, in the aggregate, accounted for 36%
of total revenues.




Project Personnel and Expenses. Project
personnel costs and expenses consist primarily of salaries, benefits and incentive compensation for consultants. Project personnel costs and expenses
decreased 30.3% to $87.5 million in 2003 from $125.5 million in 2002. The decrease in project personnel and expenses was primarily due to the reduction
in the number of consultants in order to balance workforce capacity with market demand for services. Consultant headcount was 483 as of January 2, 2004
compared to 620 as of January 3, 2003. Project personnel and expenses as a percentage of revenues decreased to 66.1% in 2002 from 71.0% in 2002. This
decrease was primarily the result of higher utilization of consultants during 2003 compared to 2002, partially offset by slightly higher average cost
per consultant attributable to a greater percentage of senior resources during 2003 compared to 2002.




Selling, General and Administrative. Selling,
general and administrative expenses decreased 17.7% to $44.0 million in 2003 from $53.4 million in 2002. The overall decrease in selling, general and
administrative expenses was primarily due to our continued cost control initiatives and reduced discretionary spending. We reduced functional support
headcount and as a result incurred $755 thousand of severance costs in 2003 compared to $202 thousand in 2002. Additionally, we incurred lower
recruiting, selling, marketing and bad debt expenses and reduced property and facility expenses as a result of a decrease in the number of offices from
12 at the end of 2002 to 9 at the end of 2003. These reductions in expenses were partially offset by an increase in selling, general and administrative
expenses for our benchmarking and business advisory services related to an increased sales force and other administrative personnel. Selling, general
and administrative expenses as a percentage of revenues increased to 33% in 2003 from 30% in 2002. This is primarily attributable to increased selling,
general and administrative expenses in our benchmarking and business advisory services and the impact of fixed expenses on a lower level of revenues in
2003 compared to 2002.




Impairment of Goodwill and Cumulative Effect of
Change in Accounting Principle. We adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets, during the first quarter of 2002. The new accounting rule eliminated the amortization of goodwill and changed the method of determining
whether there is a goodwill impairment from an undiscounted cash flow method to a fair value method. As a result of the adoption of this standard, we
incurred a non-cash transitional impairment charge of $31.2 million in the first quarter of 2002 due to the cumulative effect of a change in accounting
principle. The new statement also requires that goodwill be tested for impairment on an annual basis and between annual tests in certain circumstances.
We


-21-

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performed an impairment test primarily as a
result of the decline in our stock price and that of our peer group during the third quarter of 2002 and recorded a non-cash impairment charge of $20.0
million.




Restructuring Costs. Restructuring costs were
$4.9 million and $10.9 million in 2003 and 2002, respectively. Restructuring costs in 2003 relate to an increase in previously established reserves
recorded in the fourth quarters of 2002 and 2001 for the closure and consolidation of facilities. Existing reserves were increased to account for
potentially higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time
estimates to sublease facilities. The 2002 costs consisted of $1.5 million for reduction in consultants and functional support personnel and $9.4
million for closure and consolidation of facilities and related exit costs, including a $5.0 million write-off of leasehold improvements and other
assets. The 2002 restructuring plan involved the termination of approximately 100 employees. These actions were taken as a result of the continued
decline in demand for technology services throughout 2002 and 2003. We took steps to reduce our costs to better align our overall cost structure and
organization with anticipated demand for our services.




Stock Compensation Expense. Stock
compensation expense in 2003 primarily related to the issuance of restricted stock units under a voluntary stock option exchange program, which ended
on July 14, 2003. This program involved voluntary stock option exchanges for employees at a senior director level or above who had been with the
Company since July 4, 2002. We recorded non-cash compensation expense of $1.1 million for the year ended January 2, 2004 based on the vesting
provisions of the restricted stock units and the fair market value of the stock on the grant date.




Income Taxes. In 2003, we recorded $350
thousand of income tax expense for state and foreign taxes, which represented 7.8% of our pre-tax loss. We did not recognize an income tax benefit for
federal and state taxes due to the establishment of a valuation allowance for the tax benefit generated on losses during 2003. The liability method of
accounting for deferred income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be realized. We recorded an income tax benefit of $3.5 million in 2002, which
represented 10.8% of our 2002 loss before discontinued operations and cumulative effect of change in accounting principle. The low effective tax rate
for 2002 was primarily due to the $20.0 million charge for the impairment of goodwill which was not deductible for tax purposes and to the
establishment of a valuation allowance on our net deferred tax assets that existed at the end of the year.




Loss from Discontinued Operations. Results
for 2002 included a net loss of $8.9 million from the discontinued operations of our interactive marketing business. The operating results of the
interactive marketing business have been reported as discontinued operations and results for prior periods have been restated. The 2002 loss from
discontinued operations includes restructuring costs of $3.4 million for reduction in consultants and for closure and consolidation of facilities and
related exit costs. For the year ended January 3, 2003, total revenues for discontinued operations were $7.2 million.


Liquidity and Capital Resources



We have funded our operations primarily with cash
flow generated from operations and the proceeds from our initial public offering. At December 31, 2004, we had $38.9 million of cash and cash
equivalents compared to $54.4 million at January 2, 2004. We had $3.0 million at December 31, 2004 and January 2, 2004, on deposit with a financial
institution as collateral for letters of credit and have classified this deposit as restricted cash on the accompanying consolidated balance sheets. We
also had marketable investments of $9.9 million and $10 million at December 31, 2004 and January 2, 2004, respectively.




There were no material capital commitments at
December 31, 2004. The following summarizes our lease commitments under non-cancelable operating leases for premises at December 31, 2004 (in
thousands):







|Less than 1
year                                   |  |  |  | $ | 5,240  | 
|-------------------------------------------------- |  |  |  | - | ------ | 
|13
years                                          |  |  |  |   | 10,050 | 
|45
years                                          |  |  |  |   | 9,096  | 
|After 5
years                                      |  |  |  |   | 14,558 | 
|                                                   |  |  |  |   | 38,944 | 
|Less:
sublease income                              |  |  |  |   | 8,581  | 
|Total minimum
lease payments, less sublease income |  |  |  | $ | 30,363 | 

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Net cash provided by operating activities was $2.4
million in 2004 compared to $9.9 million for 2003. During 2004, net cash provided by operating activities was primarily attributable to $8.6 million of
non-cash expenses offset by a $3.2 million increase in accounts receivable and unbilled revenue and a decrease of $3.0 million in accrued expenses and
other liabilities. Non-cash expenses included depreciation and amortization, non-cash compensation expense and provision for doubtful accounts. During
2003, net cash provided by operating activities was primarily attributed to $6.0 million of non-cash expenses, a $10.1 million decrease in prepaid
expenses and other assets primarily related to an $8.5 million tax refund received in the second quarter of 2003, and a $1.3 million decrease in
accounts receivable and unbilled revenue. These effects were partially offset by our net loss of $4.8 million, a $2.1 million decrease in accounts
payable and a $600 thousand decrease in accrued expenses and other liabilities.




Net cash used in investing activities was $10.4
million in 2004 compared to net cash provided by investing activities of $13.4 million in 2003. The uses of cash for investing activities in 2004 were
primarily attributable to $7.2 million used in the acquisition of a business and $3.2 million for purchases of property and equipment. Net cash
provided by investing activities in 2003 was attributable to proceeds of $76.5 million from sales of marketable investments, partially offset by
purchases of $58.5 million of marketable investments, $1.2 million for purchases of property and equipment and $3.3 million used in the acquisition of
a business.




Net cash used in financing activities was $7.6
million in 2004 compared to $4.2 million during 2003. During 2004 cash used in financing activities consisted of $10.5 million for the repurchase of
our common stock, partially offset by proceeds of $2.9 million from the sale of stock through our Employee Stock Purchase Plan, and from the exercises
of our common stock options. Cash used in financing activities during 2003 consisted of $5.5 million for repurchases of our common stock, offset by
$1.3 million of proceeds from the sale of stock through our Employee Stock Purchase Plan, and from exercises of stock options.




On July 30, 2002, we announced that our Board of
Directors approved the repurchase of up to $5.0 million of our common stock. During the second quarter of 2003, and the second, third and fourth
quarters of 2004, our Board of Directors approved the repurchase of an additional $5.0 million of our common stock for each of these four quarters,
thereby increasing the total program size to $25 million. Under the repurchase plans, we may buy back shares of our outstanding stock from time to time
either on the open market or through privately negotiated transactions, subject to market conditions and trading restrictions. As of December 31, 2004,
we had repurchased 5,526,855 shares of our common stock at an average price of $3.29 per share. In June 2003, we repurchased 465,120 shares from the
Companys President, who is also a director, at $2.15 per share. We hold repurchased shares of our common stock as treasury
stock.




In May 2004, the Company purchased the U.S. and
India operations of EZCommerce Global Solutions, Inc., a business specializing in the dual-shore implementation of primarily SAP and, to a lesser
extent, Oracle software. The purchase price for this acquisition was $9.0 million in cash, which included $3.0 million of deferred payments payable in
equal installments on the first and second anniversary of the purchase. In addition, approximately $3.0 million of contingent consideration will be
payable over the next two years if certain earnings goals are achieved. In July 2003, we purchased the assets of Beacon Analytics, Inc., a business
performance management consulting company focusing on the implementation of Hyperion software. The purchase price for this acquisition was $4.0 million
in cash and approximately $2.5 million of contingent consideration due over the next three years if certain earnings goals are achieved. In 2004, we
paid $1.1 million of earned contingent consideration.




We currently believe that available funds and cash
flows generated by operations, if any, will be sufficient to fund our working capital and capital expenditures requirements for at least the next
twelve months. We may decide to raise additional funds in order to fund expansion, to develop new or enhanced products and services, to respond to
competitive pressures or to acquire complementary businesses or technologies. There is no assurance, however, that additional financing will be
available when needed or desired.


Recently Issued Accounting Standards



In December 2004, the Financial Accounting Standards
Board issued SFAS 123 (revised 2004), Share-Based Payment, (SFAS 123R). SFAS 123R addresses the accounting for share-based payments
to employees, including grants of employee stock options. Under the new standard, companies will no longer be able to account for share-based
compensation transactions using the intrinsic method in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees. Instead,
companies will be required to account for such transactions using a fair-value method and recognize the expense in the consolidated statement of
income. SFAS 123R will be effective for periods beginning after June 15, 2005 and allows, but does not require, companies to restate the full fiscal
year of 2005


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to reflect the impact of expensing share-based
payments under SFAS 123R. We have not yet determined which fair-value method and transitional provision we will follow, or if the adoption of SFAS 123R
will have a significant impact on our results of operations.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK



At December 31, 2004, our exposure to market risk
related primarily to changes in interest rates on our investment portfolio. Our marketable investments consist primarily of short-term variable
interest rate securities. We invest only with high credit quality issuers and we do not use derivative financial instruments in our investment
portfolio. We do not believe that a significant increase or decrease in interest rates would have a material impact on the fair value of our investment
portfolio.


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|ITEM 8. |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- |  | -------------------------------------------



ANSWERTHINK, INC. INDEX TO FINANCIAL STATEMENTS







|                                                                                                                                                           |  |  |  | Page
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ----
|Report of
Independent Registered Certified Public Accounting Firm                                                                                          |  |  |  |     
|Consolidated
Balance Sheets as of December 31, 2004 and January 2, 2004                                                                                    |  |  |  |     
|Consolidated
Statements of Operations for the Years Ended December 31, 2004, January 2, 2004 and January 3, 2003                                           |  |  |  |     
|Consolidated
Statements of Shareholders Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2004, January 2, 2004 and January 3,
2003 |  |  |  |     
|Consolidated
Statements of Cash Flows for the Years Ended December 31, 2004, January 2, 2004 and January 3, 2003                                           |  |  |  |     
|Notes to
Consolidated Financial Statements                                                                                                                 |  |  |  |     
|Schedule
IIValuation and Qualifying Accounts and Reserves                                                                                                 |  |  |  |     

-25-

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Report of Independent Registered Certified Public Accounting
Firm



To the Board of
Directors and Shareholders of Answerthink, Inc.


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders equity and comprehensive income (loss) and of cash flows present fairly, in all material
respects, the financial position of Answerthink, Inc. and its subsidiaries at December 31, 2004 and January 2, 2004, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of
the Public Company Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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 our opinion.



/s/
PricewaterhouseCoopers LLP




Miami,
Florida March 14, 2005


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ANSWERTHINK, INC.



CONSOLIDATED BALANCE SHEETS(in thousands, except share data)







|                                                                                                                                                   |  |  |  | December 31, 2004 |          | January 2, 2004
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ----------------- | -------- | ---------------
|ASSETS                                                                                                                                             |  |  |  |                   |          |                
|Current
assets:                                                                                                                                    |  |  |  |                   |          |                
|Cash and cash
equivalents                                                                                                                          |  |  |  | $                 | 38,890   |                
|Accounts
receivable and unbilled revenue, net of allowance of $2,109 and $1,757 in 2004 and 2003, respectively                                     |  |  |  |                   | 28,883   |                
|Prepaid
expenses and other assets                                                                                                                  |  |  |  |                   | 3,459    |                
|Total current
assets                                                                                                                               |  |  |  |                   | 71,232   |                
|                                                                                                                                                   |  |  |  |                   |          |                
|Marketable
investments                                                                                                                             |  |  |  |                   | 9,902    |                
|Restricted
cash                                                                                                                                    |  |  |  |                   | 3,000    |                
|Property and
equipment, net                                                                                                                        |  |  |  |                   | 7,568    |                
|Other
assets                                                                                                                                       |  |  |  |                   | 3,245    |                
|Goodwill,
net                                                                                                                                      |  |  |  |                   | 33,786   |                
|Total
assets                                                                                                                                       |  |  |  | $                 | 128,733  |                
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                               |  |  |  |                   |          |                
|Current
liabilities:                                                                                                                               |  |  |  |                   |          |                
|Accounts
payable                                                                                                                                   |  |  |  | $                 | 3,462    |                
|Accrued
expenses and other liabilities                                                                                                             |  |  |  |                   | 17,910   |                
|Total current
liabilities                                                                                                                          |  |  |  |                   | 21,372   |                
|Accrued
expenses and other liabilities, non-current                                                                                                |  |  |  |                   | 7,507    |                
|Total
liabilities                                                                                                                                  |  |  |  |                   | 28,879   |                
|                                                                                                                                                   |  |  |  |                   |          |                
|Commitments
and contingencies                                                                                                                      |  |  |  |                   |          |                
|                                                                                                                                                   |  |  |  |                   |          |                
|Shareholders equity:                                                                                                                              |  |  |  |                   |          |                
|Preferred
stock, $.001 par value, 1,250,000 shares authorized, none issued and outstanding                                                         |  |  |  |                   |         |                
|Common stock,
$.001 par value, authorized 125,000,000 shares; issued: 48,969,181 shares at December 31, 2004; 48,290,640 shares at January 2,
2004 |  |  |  |                   | 49       |                
|Additional
paid-in capital                                                                                                                         |  |  |  |                   | 277,356  |                
|Unearned
compensation                                                                                                                              |  |  |  |                   | (6,011   | )              
|Treasury
stock, at cost, 5,526,855 shares at December 31, 2004 and 3,550,279 shares at January 2, 2004                                             |  |  |  |                   | (18,178  | )              
|Accumulated
deficit                                                                                                                                |  |  |  |                   | (153,389 | )              
|Accumulated
other comprehensive income                                                                                                             |  |  |  |                   | 27       |                
|Total
shareholders equity                                                                                                                         |  |  |  |                   | 99,854   |                
|Total
liabilities and shareholders equity                                                                                                         |  |  |  | $                 | 128,733  |                

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

-27-

---

ANSWERTHINK, INC.



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







|                                                                                                                             |  |  |  | Year Ended |        
|---------------------------------------------------------------------------------------------------------------------------- |  |  |  | ---------- | -------
|
|Revenues:                                                                                                                    |  |  |  |            |        
|Revenues
before reimbursements                                                                                               |  |  |  | $          | 129,339
|Reimbursements                                                                                                               |  |  |  |            | 14,208 
|Total
revenues                                                                                                               |  |  |  |            | 143,547
|Costs and
expenses:                                                                                                          |  |  |  |            |        
|Project
personnel and expenses:                                                                                              |  |  |  |            |        
|Project
personnel and expenses before reimbursable expenses                                                                  |  |  |  |            | 75,774 
|Reimbursable
expenses                                                                                                        |  |  |  |            | 14,208 
|Total project
personnel and expenses                                                                                         |  |  |  |            | 89,982 
|Selling,
general and administrative expenses                                                                                 |  |  |  |            | 48,491 
|Impairment of
goodwill                                                                                                       |  |  |  |            |       
|Restructuring
costs                                                                                                          |  |  |  |            | 3,749  
|Stock
compensation expense                                                                                                   |  |  |  |            | 2,321  
|Total costs
and operating expenses                                                                                           |  |  |  |            | 144,543
|Loss from
operations                                                                                                         |  |  |  |            | (996   
|Other income
(expense):                                                                                                      |  |  |  |            |        
|Interest
income                                                                                                              |  |  |  |            | 866    
|Interest
expense                                                                                                             |  |  |  |            | (64    
|Loss before
income taxes, income (loss) from discontinued operations and cumulative effect of change in accounting principle |  |  |  |            | (194   
|Income
taxes                                                                                                                 |  |  |  |            | 324    
|Loss from
continuing operations                                                                                              |  |  |  |            | (518   
|Income (loss)
from discontinued operations, net of income taxes                                                              |  |  |  |            | 370    
|Loss before
cumulative effect of change in accounting principle                                                              |  |  |  |            | (148   
|Cumulative
effect of change in accounting principle                                                                          |  |  |  |            |       
|Net
loss                                                                                                                     |  |  |  | $          | (148   
|Basic net
loss per common share:                                                                                             |  |  |  |            |        
|Loss from
continuing operations                                                                                              |  |  |  | $          | (0.01  
|Income (loss)
from discontinued operations, net of income taxes                                                              |  |  |  | $          | 0.01   
|Cumulative
effect of change in accounting principle                                                                          |  |  |  | $          |       
|Net loss per
common share                                                                                                    |  |  |  | $          | (0.00  
|Weighted
average common shares outstanding                                                                                   |  |  |  |            | 44,188 
|Diluted net
loss per common share:                                                                                           |  |  |  |            |        
|Loss from
continuing operations                                                                                              |  |  |  | $          | (0.01  
|Income (loss)
from discontinued operations, net of income taxes                                                              |  |  |  | $          | 0.01   
|Cumulative
effect of change in accounting principle                                                                          |  |  |  | $          |       
|Net loss per
common share                                                                                                    |  |  |  | $          | (0.00  
|Weighted
average common and common equivalent shares outstanding                                                             |  |  |  |            | 44,188 

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

-28-

---

ANSWERTHINK, INC.



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY ANDCOMPREHENSIVE INCOME (LOSS)(in thousands)







|                                                                               |  | Common
      Stock |        | Additional
      Paid-In
      Capital |  | Treasury
      Stock |    | Unearned
      Compensation |  | Accumulated
      Deficit |         | Accumulated
      Other
      Comprehensive
      Income |  | Total
      Shareholders
      Equity |        | Comprehensiv
      Income
      (Loss)
|------------------------------------------------------------------------------ |  | ------------------ | ------ | -------------------------------------- |  | -------------------- | -- | --------------------------- |  | ------------------------- | ------- | -------------------------------------------------------- |  | -------------------------------------- | ------ | --------------------------------------
|
|Balance
        at December 28, 2001                                           |  |                    | 45,880 |                                        |  | $                    | 46 |                             |  | $                         | 257,115 |                                                          |  |                                        |       |                                       
|Issuance
        of common stock                                               |  |                    | 1,848  |                                        |  |                      | 2  |                             |  |                           | 6,511   |                                                          |  |                                        |       |                                       
|Treasury
        stock purchased                                               |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        | (1,146 | )                                     
|Net
        loss                                                               |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Total
        Comprehensive Loss                                               |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Balance
        at January 3, 2003                                             |  |                    | 47,728 |                                        |  | $                    | 48 |                             |  | $                         | 263,626 |                                                          |  |                                        | (1,146 | )                                     
|Issuance
        of common stock                                               |  |                    | 563    |                                        |  |                      |   |                             |  |                           | 1,252   |                                                          |  |                                        |       |                                       
|Treasury
        stock purchased                                               |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        | (2,404 | )                                     
|Issuance
        of restricted stock units, net of cancellations               |  |                    |       |                                        |  |                      |   |                             |  |                           | 9,487   |                                                          |  |                                        |       |                                       
|Amortization
        of restricted stock units                                 |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Stock
        compensation expense                                             |  |                    |       |                                        |  |                      |   |                             |  |                           | 13      |                                                          |  |                                        |       |                                       
|Variable
        stock options                                                 |  |                    |       |                                        |  |                      |   |                             |  |                           | 103     |                                                          |  |                                        |       |                                       
|Net
        loss                                                               |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Total
        Comprehensive Loss                                               |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Balance
        at January 2, 2004                                             |  |                    | 48,291 |                                        |  | $                    | 48 |                             |  | $                         | 274,481 |                                                          |  |                                        | (3,550 | )                                     
|Issuance
        of common stock                                               |  |                    | 678    |                                        |  |                      | 1  |                             |  |                           | 2,910   |                                                          |  |                                        |       |                                       
|Treasury
        stock purchased                                               |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        | (1,977 | )                                     
|Issuance
        of restricted stock units, net of cancellations               |  |                    |       |                                        |  |                      |   |                             |  |                           | (97     | )                                                        |  |                                        |       |                                       
|Amortization
        of restricted stock units                                 |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Variable
        stock options                                                 |  |                    |       |                                        |  |                      |   |                             |  |                           | 62      |                                                          |  |                                        |       |                                       
|Net
        loss                                                               |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Unrealized
        holding losses on available for sale marketable investments |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Foreign
        currency translations                                          |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Total
        Comprehensive Loss                                               |  |                    |       |                                        |  |                      |   |                             |  |                           |        |                                                          |  |                                        |       |                                       
|Balance
        at December 31, 2004                                           |  |                    | 48,969 |                                        |  | $                    | 49 |                             |  | $                         | 277,356 |                                                          |  |                                        | (5,527 | )                                     

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

-29-

---

ANSWERTHINK, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)







|                                                                                |  |  |  | Year Ended |        
|------------------------------------------------------------------------------- |  |  |  | ---------- | -------
|
|Cash flows
from operating activities:                                           |  |  |  |            |        
|Net
loss                                                                        |  |  |  | $          | (148   
|Adjustments
to reconcile net loss to net cash provided by operating activities: |  |  |  |            |        
|Cumulative
effect of change in accounting principle                             |  |  |  |            |       
|Impairment of
goodwill                                                          |  |  |  |            |       
|Write-off of
leasehold improvements and other assets                            |  |  |  |            |       
|Depreciation
and amortization                                                   |  |  |  |            | 5,177  
|Non-cash
compensation expense                                                   |  |  |  |            | 2,321  
|Provision for
doubtful accounts                                                 |  |  |  |            | 1,060  
|Deferred
income taxes                                                           |  |  |  |            |       
|Changes in
assets and liabilities, net of effects from acquisitions:            |  |  |  |            |        
|Decrease
(increase) in accounts receivable and unbilled revenue                 |  |  |  |            | (3,210 
|Decrease
(increase) in prepaid expenses and other assets                        |  |  |  |            | 920    
|Decrease in
accounts payable                                                    |  |  |  |            | (707   
|Decrease in
accrued expenses and other liabilities                              |  |  |  |            | (2,974 
|Net cash
provided by operating activities                                       |  |  |  |            | 2,439  
|Cash flows
from investing activities:                                           |  |  |  |            |        
|Purchases of
property and equipment                                             |  |  |  |            | (3,199 
|Increase in
restricted cash                                                     |  |  |  |            |       
|Purchases of
marketable investments                                             |  |  |  |            | (39,750
|Proceeds from
sales, calls and maturities of marketable investments             |  |  |  |            | 39,750 
|Cash used in
acquisition of businesses, net of cash acquired                    |  |  |  |            | (7,210 
|Net cash
provided by (used in) investing activities                             |  |  |  |            | (10,409
|Cash flows
from financing activities:                                           |  |  |  |            |        
|Proceeds from
issuance of common stock                                          |  |  |  |            | 2,911  
|Repurchases
of common stock                                                     |  |  |  |            | (10,492
|Net cash
provided by (used in) financing activities                             |  |  |  |            | (7,581 
|Net increase
(decrease) in cash and cash equivalents                            |  |  |  |            | (15,551
|Cash and cash
equivalents at beginning of year                                  |  |  |  |            | 54,441 
|Cash and cash
equivalents at end of year                                        |  |  |  | $          | 38,890 
|Supplemental
disclosure of cash flow information:                               |  |  |  |            |        
|Cash paid for
interest                                                          |  |  |  | $          |       
|Cash paid for
income taxes                                                      |  |  |  | $          | 193    

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

-30-

---

ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|1. |  | Nature of Business and Significant Accounting
Policies
|-- |  | ------------------------------------------------------



Nature of Business




Answerthink, Inc. (the Company or
Answerthink) is a strategic business advisory and technology consulting firm. Answerthinks capabilities include benchmarking,
business advisory, business transformation, business applications, business intelligence, and offshore application development and
support.




Principles of Consolidation




The consolidated financial statements and
information herein include the accounts of Answerthink and its subsidiaries. All material intercompany accounts and transactions have been eliminated
in consolidation.




Fiscal Year




The Companys fiscal year generally consists of
a 52-week period and periodically consists of a 53-week period because the fiscal year ends on the Friday closest to December 31. Fiscal years 2004,
2003, and 2002 ended on December 31, 2004, January 2, 2004 and January 3, 2003, respectively. Fiscal year 2002 was a 53-week period. References to a
year included in this section refer to a fiscal year rather than a calendar year.




Cash and Cash Equivalents




The Company considers all short-term investments
with maturities of three months or less when purchased to be cash equivalents. The Company places its temporary cash investments with high credit
quality financial institutions. At times, such investments may be in excess of the F.D.I.C. insurance limits. The Company has not experienced any loss
to date on these investments.




Marketable investments




Marketable investments are available-for-sale
securities which are recorded at fair market value. Unrealized gains and losses on these investments are reported in comprehensive income or loss and
accumulated as a separate component of stockholders equity, net of any related tax effect. Declines in value that are judged to be other than
temporary result in a reduction of the carrying amount of the investment to fair value and the recognition of an impairment charge in other income
(expense). Realized gains and losses from sales of available-for-sale securities were not material for any period presented. For the purpose of
determining realized gains and losses, the cost of securities sold is based upon specific identification.




Accounts Receivables and Allowances for Doubtful
Accounts




The Company maintains allowances for doubtful
accounts for estimated losses resulting from the our clients not making required payments. Management makes estimates of the uncollectibility of the
accounts receivables. Management critically reviews accounts receivable and analyzes historical bad debts, past-due accounts, client credit-worthiness
and current economic trends when evaluating the adequacy of the allowance for doubtful accounts.




Property and Equipment, Net




Property and equipment are recorded at cost, less
accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful life of the assets ranging from three to
five years. Leasehold improvements are amortized on a straight-line basis over the term of the lease or the estimated useful life of the improvement,
whichever is shorter. Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for betterments and major improvements
are capitalized. The carrying amount of assets sold or retired and related accumulated depreciation are removed from the accounts in the year of
disposal and any resulting gains or losses are included in the statement of operations.


-31-

---

ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

1.  Nature of Business and Significant Accounting Policies
(continued)



The Company capitalizes the costs of internal-use
software in accordance with Statement of Position No. 98-1 (SOP 98-1), Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use. SOP 98-1 provides guidance on applying generally accepted accounting principles in addressing whether and under what conditions the
costs of internal-use software should be capitalized. The Company capitalizes certain costs, which generally include hardware, software, and payroll
related costs for employees who are directly associated with and who devote time to the development of internal-use computer software.




Goodwill and Other Intangible
Assets




Effective December 29, 2001, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, goodwill and
intangible assets deemed to have indefinite lives are no longer amortized but are reviewed at least annually for impairment. Other intangible assets
will continue to be amortized over their estimated useful lives. SFAS No. 142 requires that goodwill be tested for impairment at the reporting unit
level at adoption and at least annually thereafter, utilizing a fair value methodology versus an undiscounted cash flow method required
under previous accounting rules. The Company evaluates the fair values of its reporting units utilizing various valuation techniques including
discounted cash flow analysis. Based on the new method for recording impairment, the Company recognized a transitional impairment loss of $31.2 million
as the cumulative effect of a change in accounting principle in the first quarter of 2002.




The new statement also requires that goodwill be
tested for impairment on an annual basis and between annual tests in certain circumstances. The Company performed an impairment test primarily as a
result of the decline in stock prices for the Company and its peer group during the quarter ended September 27, 2002 and recorded a non-cash impairment
charge of $20.0 million. In our fiscal 2004 and 2003 annual analysis conducted in the fourth quarters of fiscal 2004 and 2003, respectively, we
concluded that we did not have any additional impairment of goodwill.




Revenue Recognition




The Company principally derives revenues from fees
for services generated on a project-by-project basis. Revenues for services rendered are recognized on a time and materials basis or on a fixed-fee or
capped-fee basis. Revenues for time and materials contracts are recognized based on the number of hours worked by the Companys consultants at an
agreed upon rate per hour and are recognized in the period in which services are performed. Revenues related to fixed-fee or capped-fee contracts are
recognized on the proportional performance method of accounting based on the ratio of labor hours incurred to estimated total labor hours. This
percentage is multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period. The
contracted dollar amount used in this calculation excludes the amount the client pays for reimbursable expenses. There are situations where the number
of hours to complete projects may exceed the Companys original estimate. These increases can be as a result of an increase in project scope,
unforeseen events that arise, or the inability of the client or the delivery team to fulfill their responsibilities. On an on-going basis, the
Companys project delivery, office of risk management and finance personnel review hours incurred and estimated total labor hours to complete
projects and any revisions in these estimates are reflected in the period in which they become known.




Unbilled revenues represent revenues for services
performed that have not been invoiced. If the Company does not accurately estimate the scope of the work to be performed, or does not manage the
projects properly within the planned periods of time or does not meet the clients expectations under the contracts, then future consulting
margins may be negatively affected or losses on existing contracts may need to be recognized. Any such resulting reductions in margins or contract
losses could be material to the Companys results of operations. Revenues before reimbursements exclude reimbursable expenses charged to clients.
Reimbursements, which include travel and out-of-pocket expenses, are included in revenues, and an equivalent amount of reimbursable expenses is
included in project personnel and expenses.


-32-

---

ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

1.  Nature of Business and Significant Accounting Policies
(continued)



The agreements entered into in connection with a
project, whether time and materials based or fixed-fee or capped-fee based, typically allow the Companys clients to terminate early due to breach
or for convenience with 30 days notice. In the event of termination, the client is contractually required to pay for all time, materials and
expenses incurred by the Company through the effective date of the termination. In addition, from time to time the Company enters into agreements with
clients that limit the Companys right to enter into business relationships with specific competitors of that client for a specific time period.
These provisions typically prohibit the Company from performing a defined range of services that it might otherwise be willing to perform for potential
clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project
team.




Reimbursable Expenses




During the first quarter of 2002, the Company
adopted Emerging Issues Task Force (EITF) Issue No. 01-14, Income Statement Characterization of Reimbursements Received for Out of
Pocket Expenses Incurred. In accordance with the provisions of EITF Issue No. 01-14, reimbursements received from customers for out-of-pocket
expenses incurred by employees are classified as revenue in the statement of operations. Adoption of the provisions had no impact on the reported net
loss or net loss per share.




Stock Compensation




The Company applies Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations in accounting for its stock option plans.
The Company measures compensation expense related to the grant of stock options and stock-based awards to employees (including independent directors)
in accordance with the provisions of APB No. 25. In accordance with APB Opinion No. 25, compensation expense, if any, is generally based on the
difference between the exercise price of an option, or the amount paid for an award, and the market price or fair value of the underlying common stock
at the date of the award or at the measurement date for variable awards. Stock-based compensation arrangements involving non-employees are accounted
for under Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, under which such
arrangements are accounted for based on the fair value of the option or award.




Under SFAS No. 123, compensation cost for the
Companys stock-based compensation plans would be determined based on the fair value at the grant dates for awards under those plans. The
assumptions underlying the fair value calculations of the stock option grants are presented in Note 11. Had the Company adopted SFAS No. 123 in
accounting for its stock option plans, the Companys consolidated net loss and net loss per share for the years ended December 31, 2004, January
2, 2004, January 3, 2003 would have been adjusted to the pro forma amounts indicated as follows (in thousands, expect per share data):







|                                                                                                                                                      |  |  |  | Year Ended |       
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ---------- | ------
|
|Net loss, as
reported                                                                                                                                 |  |  |  | $          | (148  
|Add:
Stock-based employee compensation expense included in reported net loss, net of related tax effects                                              |  |  |  |            | 2,321 
|Deduct: Total
stock-based employee pro forma compensation expense determined under fair value based method for all awards, net of related tax
effects |  |  |  |            | (5,354
|Pro forma net
loss                                                                                                                                    |  |  |  | $          | (3,181
|Basic net
loss per common share                                                                                                                       |  |  |  |            |       
|As
reported                                                                                                                                           |  |  |  | $          | (0.00 
|Pro
forma                                                                                                                                             |  |  |  | $          | (0.07 
|Diluted net
loss per common share                                                                                                                     |  |  |  |            |       
|As
reported                                                                                                                                           |  |  |  | $          | (0.00 
|Pro
forma                                                                                                                                             |  |  |  | $          | (0.07 

-33-

---

ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

1.  Nature of Business and Significant Accounting Policies
(continued)



Included in the pro forma net loss for the year
ended January 3, 2003 is $10.6 million of expense related to the reversal of pro forma accumulated deferred tax benefits established in previous years
to provide a pro forma valuation allowance on all deferred tax assets.




Income Taxes




The Company records income taxes using the liability
method. Under this method, the Company records deferred taxes based on temporary taxable and deductible differences between the tax bases of the
Companys assets and liabilities and their financial reporting bases. The liability method of accounting for deferred income taxes requires a
valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.




Net Income (Loss) Per Common
Share




Basic net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of common shares outstanding during the period. With regard to restricted stock or
restricted stock units issued to employees, the calculation includes only the vested portion of such stock.




Net income (loss) per share assuming dilution is
computed by dividing the net income (loss) by the weighted average number of common shares outstanding, increased by the assumed conversion of other
potentially dilutive securities during the period.




Potentially dilutive shares were excluded from the
diluted loss per share calculation for the years ended December 31, 2004, January 2, 2004 and January 3, 2003 because their effects would have been
anti-dilutive to the loss incurred by the Company. Therefore, the amounts reported for basic and diluted net loss per share were the same for those
years. Potentially dilutive shares which were not included in the diluted loss per share calculation for the years ending December 31, 2004, January 2,
2004 and January 3, 2003 were 3,601,100 shares, 1,806,963 shares and 333,644 shares, respectively, of unvested restricted stock issued to employees and
667,728 shares, 289,647 shares and 310,478 shares, respectively, of common stock issuable upon the exercise of stock options and warrants following the
treasury stock method.




Fair Value of Financial
Instruments




The Companys financial instruments consist of
cash and cash equivalents, restricted cash, marketable investments, accounts receivable and unbilled revenue, accounts payable, and accrued expenses
and other liabilities. At December 31, 2004, and January 2, 2004, the fair value of these instruments approximated their carrying
value.




Concentration of Credit Risk




The Company provides services primarily to Global
2000 companies and other sophisticated buyers of business consulting and IT services. The Company performs ongoing credit evaluations of its major
customers and maintains reserves for potential credit losses. In fiscal year 2004, one customer had revenues greater than 5% of total revenues,
accounting for approximately 7% of total revenues. In fiscal year 2003, three customers had revenues greater than 5% of total revenues, which, in the
aggregate, accounted for approximately 20% of total revenues. In fiscal year 2002, three customers had revenues greater than 5% of total revenues,
which, in the aggregate, accounted for approximately 36% of total revenues.




Managements Estimates




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


-34-

---

ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

1.  Nature of Business and Significant Accounting Policies
(continued)



Other Comprehensive Income
(Loss)




Other comprehensive income consists of unrealized
gains and losses on available-for-sale securities, and cumulative foreign currency translation adjustments.




Translation of Non-U.S. Currency
Amounts




The net assets and operations of entities outside of
the United States are translated into U.S. dollars. Assets and liabilities are translated at year-end exchange rates and income and expense items are
translated at average exchange rates prevailing during the year. Translation adjustments are included in accumulated other comprehensive income (loss).
Gains and losses arising from intercompany foreign currency transactions that are of a long-term-investment nature are reported in the same manner as
translation adjustments.




Segment Reporting




The Company engages in business activities in one
operating segment, which provides business and technology consulting services.




Recent Accounting
Pronouncements




In December 2004, the Financial Accounting Standards
Board issued SFAS 123 (revised 2004), Share-Based Payment, (SFAS 123R). SFAS 123R addresses the accounting for share-based payments
to employees, including grants of employee stock options. Under the new standard, companies will no longer be able to account for share-based
compensation transactions using the intrinsic method in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees. Instead,
companies will be required to account for such transactions using a fair-value method and recognize the expense in the consolidated statement of
income. SFAS 123R will be effective for periods beginning after June 15, 2005 and allows, but does not require, companies to restate the full fiscal
year of 2005 to reflect the impact of expensing share-based payments under SFAS 123R. The Company has not yet determined which fair-value method and
transitional provision it will follow, or if the adoption of SFAS 123R will have a significant impact on its results of operations.




Reclassifications




Certain prior year amounts in the consolidated
financial statements have been reclassified to conform current year presentation, including reflecting the gross purchases and sales of investment
grade variable rate securities as investing activities rather than as a component of cash and equivalents. This reclassification did not affect
previously reported cash flows from operations.


|2. |  | Acquisitions and Investing Activities
|-- |  | -------------------------------------



During the three year period ended December 31,
2004, the Company acquired four businesses providing information technology services (collectively, the Acquired Entities) in separate
transactions. One was completed in 2004, one was completed in 2003, and two were completed in 2002. Aggregate consideration for the Acquired Entities
was $11.4 million. This amount has been allocated, on an entity-by-entity basis, to the assets acquired and liabilities assumed based on their
respective fair values on the dates of acquisition.




The components of the purchase price allocation for
the Acquired Entities, contingent consideration earned for previous acquisitions, and fees and expenses incurred are as follows (in
thousands):







|                                                              |  |  |  | 2004 |        | 2003 |  | 2002
|------------------------------------------------------------- |  |  |  | ---- | ------ | ---- |  | ----
|Fair value of
net assets (excluding cash) acquired            |  |  |  | $    | 1,121  |      |  | $   
|Goodwill                                                      |  |  |  |      | 7,066  |      |  |     
|Intangible
assets                                             |  |  |  |      | 1,943  |      |  |     
|Deferred
payment                                              |  |  |  |      | (2,920 | )    |  |     
|Accrued
earn-out                                              |  |  |  |      |       |      |  |     
|Cash used in
acquisitions of businesses, net of cash acquired |  |  |  | $    | 7,210  |      |  | $   

-35-

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ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

2.  Acquisitions and Investing Activities
(continued)



These acquisitions have been accounted for using the
purchase method of accounting. Accordingly, the results of the acquisitions are included in the Companys consolidated results of operations from
the respective dates of acquisition. For each acquisition, the excess of the purchase price including any contingent consideration over the estimated
fair value of the net identifiable assets acquired has been recorded as goodwill and/or intangible assets. The pro forma impact of the acquisitions
completed in 2004, 2003 and 2002 was not significant to the results of the Companys consolidated operations for the years ended December 31,
2004, January 2, 2004 and January 3, 2003.




In May 2004, the Company purchased the US and India
operations of EZCommerce Global Solutions, Inc., a business specializing in the dual-shore implementation of primarily SAP and, to a lesser extent,
Oracle software. The purchase price for this acquisition was $9.0 million in cash, which included $3.0 million of deferred payments payable in equal
installments on the first and second anniversary of the purchase. In addition, approximately $3.0 million of contingent consideration will be payable
over the next two years if certain earnings goals are achieved. The excess of the purchase price of the acquisition over the estimated fair value of
the net identifiable assets acquired has been recorded as $1.4 million of intangible assets and $6.5 million of goodwill. The intangible assets are
being amortized over periods ranging from 8 months to 4 years.




In July 2003, the Company purchased the assets of
Beacon Analytics, Inc., a business performance management consulting company focusing on the implementation of Hyperion software. The purchase price
for this acquisition was $4.0 million in cash and approximately $2.5 million of contingent cash consideration due over the next three years if certain
earnings goals are achieved. The excess of the purchase price of the acquisition over the estimated fair value of the net identifiable assets which
totaled $2.0 million has been recorded as intangible assets and are being amortized over periods ranging from 6 months to 3 years. During 2004, the
Company paid $1.1 million for earned contingent consideration related to the purchase of Beacon. Of this amount, $566 thousand was recorded as
intangible assets and $528 thousand as goodwill.




The Company includes its acquired intangible assets
with definitive lives in other assets in the accompanying consolidated balance sheets. As of December 31, 2004 and January 2, 2004, intangible assets
totaled approximately $2.3 million and $2.4 million, respectively, net of accumulated amortization of $3.1 million and $1.1 million, respectively.
Acquired intangible assets with definite lives are amortized over periods ranging from 6 months to 4 years. Amortization expense for such intangible
assets was $2.0 million, $893 thousand and $208 thousand for the fiscal years ended December 31, 2004, January 2, 2004 and January 3, 2003,
respectively. As of December 31, 2004, the Company estimates remaining amortization expense to be approximately $1.6 million, $645 thousand and $90
thousand in fiscal years 2005, 2006 and 2007, respectively.


|3. |  | Accounts Receivable and Unbilled Revenue, Net
|-- |  | ---------------------------------------------



Accounts receivable and unbilled revenues, net
consists of the following (in thousands):







|                                |  |  |  | December 31, 2004 |        | January 2, 2004
|------------------------------- |  |  |  | ----------------- | ------ | ---------------
|Accounts
receivable             |  |  |  | $                 | 24,932 |                
|Unbilled
revenue                |  |  |  |                   | 6,060  |                
|Allowance for
doubtful accounts |  |  |  |                   | (2,109 | )              
|                                |  |  |  | $                 | 28,883 |                

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ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

|4. |  | Marketable investments
|-- |  | ----------------------



At December 31, 2004 and January 2, 2004, all of the
Companys marketable securities were U.S. Government Agencies and were classified as available for sale. Marketable investments are carried on the
balance sheet at their fair value.




The following tables summarize the Companys
marketable investments (in thousands):







|                         |  |  |  | Amortized Cost |        | Gross Unrealized Gains |  | Gross Unrealized Losses |   | Market Value
|------------------------ |  |  |  | -------------- | ------ | ---------------------- |  | ----------------------- | - | ------------
|2004                     |  |  |  |                |        |                        |  |                         |   |             
|U.S.
Government Agencies |  |  |  | $              | 10,000 |                        |  | $                       |  |             
|2003                     |  |  |  |                |        |                        |  |                         |   |             
|U.S.
Government Agencies |  |  |  | $              | 10,000 |                        |  | $                       |  |             



Contractual maturities of marketable investments at
December 31, 2004 are as follows (in thousands):







|                   |  |  |  | Amortized Cost |        | Market Value
|------------------ |  |  |  | -------------- | ------ | ------------
|Less than one
year |  |  |  | $              |       |             
|Due in
12 years   |  |  |  |                | 10,000 |             
|Due in
35 years   |  |  |  |                |       |             
|Due after 5
years  |  |  |  |                |       |             
|                   |  |  |  | $              | 10,000 |             



Actual maturities may differ from contractual
maturities because some borrowers have the right to call or prepay obligations. Gross realized gains and losses on the sale of securities were not
material to the Companys consolidated results of operations for the years ended December 31, 2004, January 2, 2004 and January 3,
2003.


|5. |  | Property and Equipment
|-- |  | ----------------------



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







|                              |  |  |  | December 31, 2004 |         | January 2, 2004
|----------------------------- |  |  |  | ----------------- | ------- | ---------------
|Equipment                     |  |  |  | $                 | 8,997   |                
|Furniture and
fixtures        |  |  |  |                   | 149     |                
|Software                      |  |  |  |                   | 5,478   |                
|Leasehold
improvements        |  |  |  |                   | 3,310   |                
|                              |  |  |  |                   | 17,934  |                
|Less
accumulated depreciation |  |  |  |                   | (10,366 | )              
|                              |  |  |  | $                 | 7,568   |                



During fiscal years 2004 and 2002, write-offs of
$1.2 million and $5.0 million for leasehold improvements and other assets were recorded as part of the restructuring costs.




Depreciation expense for the years ended December
31, 2004, January 2, 2004 and January 3, 2003 was $3.2 million, $4.1 million and $5.1 million, respectively. Of these amounts, $1.0 million was
included in the loss from discontinued operations in the consolidated statements of operations for the year ended January 3, 2003.


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ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

|6. |  | Accrued Expenses and Other Liabilities
|-- |  | --------------------------------------



Accrued expenses and other liabilities consist of
the following (in thousands):







|                                                     |  |  |  | December 31, 2004 |        | January 2, 2004
|---------------------------------------------------- |  |  |  | ----------------- | ------ | ---------------
|Accrued
compensation and benefits                    |  |  |  | $                 | 4,418  |                
|Accrued
restructuring related expenses               |  |  |  |                   | 2,021  |                
|Deferred
revenue                                     |  |  |  |                   | 4,680  |                
|Other accrued
expenses                               |  |  |  |                   | 5,355  |                
|Acquisition
related deferred payment                 |  |  |  |                   | 1,436  |                
|Current
accrued expenses and other liabilities       |  |  |  |                   | 17,910 |                
|Accrued
restructuring related expenses  non-current |  |  |  |                   | 6,023  |                
|Acquisition
related deferred payment  non-current   |  |  |  |                   | 1,484  |                
|Non-current
accrued expenses and other liabilities   |  |  |  |                   | 7,507  |                
|Total accrued
expenses and other liabilities         |  |  |  | $                 | 25,417 |                

|7. |  | Letters of Credit
|-- |  | -----------------



The Company has outstanding letters of credit of
$2.6 million to secure our obligations on various operating leases. The Company has deposited $3.0 million at December 31, 2004 and January 2, 2004,
with a financial institution as collateral for these letters of credit and has classified this deposit as restricted cash on the accompanying
consolidated balance sheets.


|8. |  | Lease Commitments
|-- |  | -----------------



The Company has operating lease agreements for its
premises that expire on various dates through 2015. Rent expense for the years ended December 31, 2004, January 2, 2004 and January 3, 2003 was $2.0
million, $2.2 million and $4.9 million, respectively.




Future minimum lease commitments under
non-cancelable operating leases for premises having a remaining term in excess of one year at December 31, 2004 are as follows (in
thousands):







|2005                                               |  |  |  | $ | 5,240  | 
|-------------------------------------------------- |  |  |  | - | ------ | 
|2006                                               |  |  |  |   | 5,246  | 
|2007                                               |  |  |  |   | 4,804  | 
|2008                                               |  |  |  |   | 4,573  | 
|2009                                               |  |  |  |   | 4,523  | 
|Thereafter                                         |  |  |  |   | 14,558 | 
|                                                   |  |  |  |   | 38,944 | 
|Less:
sublease income                              |  |  |  |   | 8,581  | 
|Total minimum
lease payments, less sublease income |  |  |  | $ | 30,363 | 

-38-

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ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

|9. |  | Income Taxes
|-- |  | ------------



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







|                              |  |  |  | Year Ended |    
|----------------------------- |  |  |  | ---------- | ---
|
|Current tax
expense (benefit) |  |  |  |            |    
|Federal                       |  |  |  | $          |   
|State                         |  |  |  |            | 231
|Foreign                       |  |  |  |            | 93 
|                              |  |  |  |            | 324
|Deferred tax
expense          |  |  |  |            |    
|Federal                       |  |  |  |            |   
|State                         |  |  |  |            |   
|Foreign                       |  |  |  |            |   
|                              |  |  |  |            |   
|Income
taxes                  |  |  |  | $          | 324



A reconciliation of the federal statutory tax rate
with the effective tax rate is as follows:







|                                                      |  |  |  | Year Ended |         
|----------------------------------------------------- |  |  |  | ---------- | --------
|
|U.S.
statutory income tax (benefit) rate              |  |  |  |            | (35.0   
|State income
taxes, net of Federal income tax benefit |  |  |  |            | 77.7    
|Loss on
investment in subsidiary                      |  |  |  |            | 2,573.4 
|Valuation
allowance                                   |  |  |  |            | (2,559.2
|Impairment of
goodwill                                |  |  |  |            |        
|Other,
net                                            |  |  |  |            | 110.7   
|Effective
rate                                        |  |  |  |            | 167.6   



The components of the net deferred income tax asset
are as follows (in thousands):







|                                                |  |  |  | December 31, 2004 |         | January 2, 2004
|----------------------------------------------- |  |  |  | ----------------- | ------- | ---------------
|Deferred
income tax assets:                     |  |  |  |                   |         |                
|Purchased
research and development              |  |  |  | $                 | 817     |                
|Allowance for
doubtful accounts                 |  |  |  |                   | 833     |                
|Net operating
loss and tax credits carryforward |  |  |  |                   | 30,581  |                
|Accrued
expenses and other liabilities          |  |  |  |                   | 6,373   |                
|                                                |  |  |  |                   | 38,604  |                
|Valuation
allowance                             |  |  |  |                   | (35,360 | )              
|                                                |  |  |  |                   | 3,244   |                
|Deferred
income tax liabilities:                |  |  |  |                   |         |                
|Depreciation
and amortization                   |  |  |  |                   | (2,060  | )              
|Other
items                                     |  |  |  |                   | (1,184  | )              
|                                                |  |  |  |                   | (3,244  | )              
|Net deferred
income tax asset                   |  |  |  | $                 |        |                

-39-

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ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

9.  Income Taxes (continued)



At December 31, 2004 and January 2, 2004, the
Company had $74.0 million and $88.0 million, respectively, of U.S. federal net operating loss carryforwards available for tax purposes, most of which
expire in 2022 if not utilized.




In 2002, the Company discontinued its interactive
marketing business which was acquired with THINK New Ideas. The Company claimed a worthless stock deduction for its investment in THINK New Ideas in
its 2002 tax return as a result of the discontinuance of THINK New Ideas. The Company voluntarily requested that the Internal Revenue Service
(IRS) review this position on an expedited basis. On August 5, 2004, the Company reached an agreement with the IRS representing the final
step in the review process. Pursuant to the agreement, the Company and the IRS agreed that the Company was entitled to a worthless stock deduction of
$77.3 million on the Companys 2002 tax return.




The liability method of accounting for deferred
income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized. At December 31, 2004 and January 2, 2004, the Company had established a valuation
allowance of $35.4 million and $40.8 million, respectively, to reduce deferred income tax assets primarily related to net operating loss
carryforwards.


|10. |  | Shareholders Equity
|--- |  | --------------------



Securities Purchase
Agreement




In March 1999, THINK New Ideas entered into a
securities purchase agreement (the Securities Purchase Agreement) with Capital Ventures International and Marshall Capital Management, Inc.
(the Purchasers) whereby the Purchasers agreed to purchase shares of common stock and warrants to acquire shares of common stock. Pursuant
to the Securities Purchase Agreement, on March 5, 1999, THINK New Ideas issued, for proceeds of $6 million, 609,799 shares of its common stock at $9.84
per share. In connection with this agreement, at any time prior to March 5, 2000 the Purchasers also had the right but not the obligation to purchase
371,353 additional shares of common stock at $13.46 per share, together with warrants for 1/5 share for each additional share purchased, exercisable at
an exercise price of 150% of the market price on the date the related additional shares were purchased. Pursuant to the Securities Purchase Agreement,
the additional shares were sold in March 2000 for $5.0 million and warrants to acquire 74,270 shares of common stock, exercisable for a five-year term,
were issued at an exercise price of $36.94. All of these warrants were outstanding as of December 31, 2004.




Stock Plans




Effective July 1, 1998, the Company adopted an
Employee Stock Purchase Plan to provide substantially all employees who have completed three months of service as of the beginning of an offering
period an opportunity to purchase shares of its common stock through payroll deductions. Purchases on any one grant are limited to 10% of eligible
compensation. Participant account balances are used to purchase shares of stock at the lesser of 85 percent of the fair market value of shares on the
first trading day of the six-month offering period or on the last trading day of such offering period. The aggregate fair market value, determined as
of the first trading date of the offering period, as to shares purchased by an employee may not exceed $25,000 annually. The Employee Stock Purchase
Plan expires on July 1, 2008. A total of 4,275,000 shares of common stock are available for purchase under the plan with a limit of 400,000 shares of
common stock to be issued per offering period. For plan years 2004, 2003 and 2002, 316,889 shares, 455,482 shares and 734,047 shares, respectively,
were issued.




The Company has granted stock options to employees
and directors of the Company at exercise prices equal to the market value of the stock at the date of grant. The options generally vest ratably over
four years with a maximum term of 10 years. The number of shares available for future issuance at December 31, 2004 is 10,882,169
shares.




On June 11, 2003, the Company commenced two tender
offer programs involving voluntary stock option exchanges for the Companys employees. The offering periods for the two stock option exchange
programs ended on July 14, 2003.


-40-

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ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

10.  Shareholders Equity (continued)



One program was offered to employees at a director
level or below. Under this exchange program, employees holding nonqualified or incentive stock options to purchase the Companys common stock with
an exercise price of $4.50 or more were given the opportunity to exchange their existing options for new options to purchase shares of the
Companys common stock equal to an amount depending on the exercise price of the surrendered options. Options for 521,991 shares were tendered on
July 14, 2003 in the exchange program. On January 15, 2004, the Company granted 163,995 options to purchase shares of the Companys common stock
in exchange for the options tendered. The new options were granted six months and one day after acceptance of the old options for exchange and
cancellation. The exercise price of the new options was $6.34, which was the last reported sale price of the Companys common stock on the Nasdaq
Stock Markets National Market on January 15, 2004. The new options vest over a two-year period from the date of grant.




The other program was offered to employees at a
senior director level or above who had been with the Company since July 4, 2002. Under this exchange program, employees holding nonqualified options to
purchase the Companys common stock with an exercise price of $2.80 or more were given the opportunity to exchange their existing options for
restricted stock units which were granted on a one-to-one ratio and are subject to a new four-year vesting schedule. On July 14, 2003, the Company
accepted for cancellation options to purchase 3,826,561 shares of the Companys common stock representing 95% of the 4,045,182 options that were
eligible to be tendered in the exchange program. Pursuant to the terms of the exchange program, the Company issued 3,826,561 restricted stock units in
exchange for the options surrendered. Eligible options that were not exchanged are required to be accounted for under variable plan accounting pursuant
to FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans. As of December 31, 2004,
182,858 remaining eligible options were outstanding. The weighted average exercise price of these remaining eligible options is $2.07. Variable plan
accounting resulted in approximately $62 thousand and $103 thousand of stock compensation expense for the years ended December 31, 2004 and January 2,
2004, respectively.




As of December 31, 2004 and January 2, 2004 the
Company had 3,476,996 and 3,618,209 restricted stock units outstanding, respectively, of which 3,385,223 and 3,585,636 related to the exchange program.
The Company recorded non-cash compensation expense of $2.3 million and $1.2 million, respectively in 2004 and 2003, based on the vesting provisions of
the restricted stock units and the fair market value of the stock on the grant date. The Company expects to incur approximately $600 thousand of stock
compensation expense per quarter over the remaining vesting period of the restricted stock units which fully vest in the third quarter of
2007.




Stock option activity under the Companys stock
option plans is summarized as follows:







|                                                                         |  | Year
      Ended
|------------------------------------------------------------------------ |  | ----------------
|
|
|Outstanding
        at beginning of year                                 |  |                 
|Granted                                                                  |  |                 
|Exercised                                                                |  |                 
|Canceled                                                                 |  |                 
|Outstanding
        at end of year                                       |  |                 
|Weighted
        average fair value of options granted during the period |  | $               

-41-

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ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

10.  Shareholders Equity (continued)



The following assumptions were used by the Company
to determine the fair value of stock options granted using the Black-Scholes options-pricing model:







|                                     |  | Year
      Ended    | 
|------------------------------------ |  | ------------------- | 
|
|Expected
        volatility          |  | 75%
        to 100% | 
|Average
        expected option life |  | 4
        years     | 
|Risk-free
        rate               |  | 3.5%                | 
|Dividend
        yield               |  | 0%                  | 



The following table summarizes information about the
Companys stock options outstanding at December 31, 2004:







|              |  | Options
      Outstanding |           | Options
      Exercisable
|------------- |  | ------------------------- | --------- | -------------------------
|
|$1.45$2.74   |  |                           | 400,661   |                          
|$2.75$3.79   |  |                           | 493,725   |                          
|$3.80$5.35   |  |                           | 195,499   |                          
|$5.36$5.99   |  |                           | 392,868   |                          
|$6.00$6.20   |  |                           | 408,948   |                          
|$6.21$6.25   |  |                           | 817,500   |                          
|$6.26$6.99   |  |                           | 216,146   |                          
|$7.00$9.99   |  |                           | 186,099   |                          
|$10.00$32.56 |  |                           | 148,006   |                          
|              |  |                           | 3,259,452 |                          



Treasury Stock




On July 30, 2002, the Company announced that its
Board of Directors approved the repurchase of up to $5.0 million of the Companys common stock. During the second quarter of 2003, and the second,
third and fourth quarters of 2004, the Board of Directors approved the repurchase of an additional $5 million of the Companys common stock for
each of the these four quarters, thereby increasing the total program size to $25 million. Under the repurchase plans, the Company may buy back shares
of its outstanding stock from time to time either on the open market or through privately negotiated transactions, subject to market conditions and
trading restrictions. As of December 31, 2004 and January 2, 2004, the Company had repurchased 5,526,855 shares and 3,550,279 shares of its common
stock at an average price of $3.29 and $2.16 per share, respectively. The amount of shares repurchased includes 465,120 shares purchased in 2003 from
the Companys president, who is also a director, at $2.15 per share. The Company holds repurchased shares of its common stock as treasury stock
and accounts for treasury stock under the cost method.




Shareholder Rights Plan




On February 13, 2004, the Board of Directors of the
Company adopted a Shareholder Rights Plan. Under the plan, a dividend of one preferred share purchase right (a Right) was declared for each
share of common stock of the Company that was outstanding on February 26, 2004. Each right entitles the holder to purchase from the Company one
one-thousandth of a share of Series A Junior Preferred Stock at a purchase price of $32.50, subject to adjustment.


-42-

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ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

10.  Shareholders Equity (continued)



The Rights will trade automatically with the common
stock and will not be exercisable until a person or group has become an acquiring person by acquiring 15% or more of the Companys
outstanding common stock, or a person or group commences or publicly announces a tender offer that will result in such a person or group owning 15% or
more of the Companys outstanding common stock. However, Liberty Wanger Asset Management, L.P. (now known as Columbia Wanger Asset Management,
L.P.), together with its affiliates and associates will be permitted to acquire up to 20% or more of the common stock without making the rights
exercisable. Upon announcement that any person or group has become an acquiring person, each Right will entitle all rightholders (other than the
acquiring person) to purchase, for the exercise price of $32.50, a number of shares of the Companys common stock having a market value equal to
twice the exercise price. Rightholders would also be entitled to purchase common stock of the acquiring person having a value of twice the exercise
price if, after a person had become an acquiring person, the Company were to enter into certain mergers or other transactions. If any person becomes an
acquiring person, the Board of Directors may, at its option and subject to certain limitations, exchange one share of common stock for each
right.




The rights have certain anti-takeover effects, in
that they would cause substantial dilution to a person or group that attempts to acquire a significant interest in the Company on terms not approved by
the Board of Directors. In the event that the Board of Directors determines a transaction to be in the best interests of the Company and its
stockholders, the Board of Directors may redeem the Rights for $0.001 per share at any time prior to a person or group becoming an acquiring person.
The Rights will expire on February 13, 2014.




Equity Related Commitments




Pursuant to an agreement with the Chief Executive
Officer (CEO) of the Hackett Group, Inc. (Hackett), one of our wholly owned subsidiaries, in the event of an initial public
offering (IPO) of common stock or sale of Hackett, the CEO will receive a 5% pre-sale/distributed equity ownership interest in Hackett.
This ownership interest will be given in exchange for the surrender of Answerthink stock options held by the CEO. The equity value distributed will
vest 50% at the IPO or sale and 50% on the first anniversary of such IPO or sale.




In addition, in the event of an IPO or sale of
Hackett and subject to meeting certain performance criteria, certain employees of Hackett may elect to convert on a 1:1 to 3:1 basis, the in-the-money
cash value of each of their Answerthink options or restricted stock units to an equivalent number of options or shares of Hackett common stock at the
IPO price.


|11. |  | Benefit Plan
|--- |  | ------------



The Company maintains a 401(k) plan covering all
eligible employees. Subject to certain dollar limits, eligible employees may contribute up to 15% of their pre-tax annual compensation to the plan. The
Company may make discretionary contributions on an annual basis. During fiscal years 2004, 2003 and 2002, the Company made matching contributions of
25% of employee contributions up to 4% of their gross salaries. The Companys matching contributions were $289,000, $169,000 and $656,000 for the
years ended December 31, 2004, January 2, 2004 and January 3, 2003, respectively.


-43-

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ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

|12. |  | Restructuring Costs
|--- |  | -------------------



The Company recorded restructuring costs of $10.9
million and $5.6 million in fiscal years 2002 and 2001, respectively, for reductions in consultants and functional support personnel and for closure
and consolidation of facilities and related exit costs. These actions were taken as a result of the continued decline in demand for technology services
throughout 2001 and 2002. The Company took steps to reduce its costs to better align its overall cost structure and organization with anticipated
demand for its services. In 2004 and 2003, the Company recorded restructuring costs of $3.7 and $4.9 million, respectively, to increase existing
reserves to account for potentially higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer
than expected time estimates to sublease excess facilities. The 2004 and 2003 restructuring costs consisted of additions of $1.8 million and $3.1
million to the 2002 restructuring accrual and $1.9 million and $1.8 million to the 2001 restructuring accrual, respectively. Also in 2004, the 2002
restructuring accrual was reduced by $370 thousand relating to the final settlement of a lease obligation which was recorded as income from
discontinued operations in the accompanying consolidated statement of operations for year ended December 31, 2004.




The following table sets forth the detail and
activity in the restructuring expense accruals during the years ended December 31, 2004, January 2, 2004 and January 3, 2003 (in
thousands):


2001 Restructuring Accrual






|                                                               |  |  |  | Accrual Balance at December 29, 2000 |   | Additions to Accrual from Continuing Operations |  | Additions to Accrual from Discontinued Operations |       | 2001 Expenditures |  | 2002 Expenditures |       | 2003 Expenditures |  | 2004 Expenditures |        | 2004 Asset Write-offs |  | Accrual Balance at December 31, 2004
|-------------------------------------------------------------- |  |  |  | ------------------------------------ | - | ----------------------------------------------- |  | ------------------------------------------------- | ----- | ----------------- |  | ----------------- | ----- | ----------------- |  | ----------------- | ------ | --------------------- |  | ------------------------------------
|Severance and
other employee costs                             |  |  |  | $                                    |  |                                                 |  | $                                                 | 3,694 |                   |  | $                 | 559   |                   |  | $                 | (3,186 | )                     |  | $                                   
|Closure and
consolidation of facilities and related exit costs |  |  |  |                                      |  |                                                 |  |                                                   | 5,553 |                   |  |                   | 2,311 |                   |  |                   | (248   | )                     |  |                                     
|Total
restructuring accrual                                    |  |  |  | $                                    |  |                                                 |  | $                                                 | 9,247 |                   |  | $                 | 2,870 |                   |  | $                 | (3,434 | )                     |  | $                                   

2002 Restructuring Accrual






|                                                               |  |  |  | Accrual Balance at December 28, 2001 |   | Additions to Accrual from Continuing Operations |  | Additions to Accrual from Discontinued Operations |        | 2002 Asset Write-offs |  | 2002 Expenditures |       | 2003 Expenditures |  | 2004 Expenditures |        | Accrual Balance at December 31, 2004 | 
|-------------------------------------------------------------- |  |  |  | ------------------------------------ | - | ----------------------------------------------- |  | ------------------------------------------------- | ------ | --------------------- |  | ----------------- | ----- | ----------------- |  | ----------------- | ------ | ------------------------------------ | 
|Severance and
other employee costs                             |  |  |  | $                                    |  |                                                 |  | $                                                 | 1,528  |                       |  | $                 | 616   |                   |  | $                 |       |                                      | 
|Closure and
consolidation of facilities and related exit costs |  |  |  | $                                    |  |                                                 |  | $                                                 | 13,984 |                       |  | $                 | 2,747 |                   |  | $                 | (5,217 | )                                    | 
|Total
restructuring accrual                                    |  |  |  | $                                    |  |                                                 |  | $                                                 | 15,512 |                       |  | $                 | 3,363 |                   |  | $                 | (5,217 | )                                    | 

-44-

---

ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

|13. |  | Discontinued Operations
|--- |  | -----------------------



As a result of a decline in the demand for
interactive marketing services, during 2002, the Company discontinued the interactive marketing business which was acquired in the merger with THINK
New Ideas in 1999. In accordance with Financial Accounting Standards Board Statement No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the results of the interactive marketing business have been reported as discontinued operations in the consolidated statements
of operations and results for prior periods have been restated.




The following table sets forth revenues, pre-tax
income (loss), income tax benefit and income (loss) from discontinued operations for the years ended December 31, 2004, January 2, 2004 and January 3,
2003 (in thousands):







|                                                   |  |  |  | December 31, 2004 |     | January 2, 2004 |  | January 3, 2003
|-------------------------------------------------- |  |  |  | ----------------- | --- | --------------- |  | ---------------
|Revenues                                           |  |  |  | $                 |    |                 |  | $              
|Pre-tax
income (loss) from discontinued operations |  |  |  | $                 | 370 |                 |  | $              
|Income tax
benefit                                 |  |  |  | $                 |    |                 |  | $              
|Income (loss)
from discontinued operations         |  |  |  | $                 | 370 |                 |  | $              



During 2004, the Company reduced the restructuring
accrual by $370 thousand relating to the final settlement of a lease obligation resulting in income from discontinued operations.




Included in the loss from discontinued operations
for fiscal year 2002 were restructuring costs of $3.4 million, for reduction in consultants and for closure and consolidation of facilities and related
exit costs.


|14. |  | Litigation
|--- |  | ----------



Between November 2002 and January 2003, six class
actions seeking unspecified damages were filed against Answerthink and certain of its current and former officers and directors alleging violations of
the Securities and Exchange Act of 1934. The complaints alleged misstatements and omissions concerning, among other things, related party transactions
during the alleged class period of February 8, 2000 to April 25, 2002. On January 7, 2003 the federal district court entered an order closing and
consolidating these cases and any subsequently filed related cases into Druskin, et al. v. Answerthink, Inc., et al., Case No. 02-23304-CIV-GOLD. A
consolidated amended complaint was filed on May 9, 2003. The Company filed a motion to dismiss the consolidated amended complaint on July 15, 2003. The
court granted the Companys motion to dismiss the consolidated and amended complaint on January 5, 2004 and allowed the plaintiffs leave to amend
the consolidated amended complaint. The plaintiffs did not file an amended complaint within the time allowed by the court. On February 11, 2004, the
court entered a final judgment dismissing the case against all parties with prejudice and closed the case. The time for appeal has expired. This matter
is concluded.




The Company is involved in legal proceedings,
claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final
disposition of such other matters will not have a material adverse effect on the Companys financial position or results of
operations.


-45-

---

ANSWERTHINK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

15.  Related Party Transactions



During 2002, the Company and HCL Technologies
Limited, an Indian information technology services and product engineering firm, formed HCL-Answerthink, Inc. to provide offshore custom application
development and support services. The Company has a non-controlling equity interest of 50% in this joint venture. For the year ended December 31, 2004
and January 2, 2004, the Companys net equity income from the joint venture was $32,000 and $30,000, respectively. During 2004, 2003 and 2002, the
Company sold services of $22,000, $232,000 and $233,000, respectively, to the joint venture. The Company also incurred costs of $27,000, $194,000 and
$230,000 for consulting services provided by the joint venture to Answerthink in 2004, 2003 and 2002, respectively. In addition, the Company reduced
general and administrative expenses by $14,000 and $856,000 for administrative services billed to the joint venture during 2003
and 2002, respectively. At December 31, 2004 and January 2, 2004, the Company had receivables of $1,000 and $258,000, respectively, due from the joint
venture. At January 2, 2004 the Company had payables due to the joint venture of $193,000.


|16. |  | Quarterly Financial Information (unaudited)
|--- |  | -------------------------------------------



The following table presents unaudited supplemental
quarterly financial information for the years ended December 31, 2004 and January 2, 2004 (in thousands, except per share data):







|                                                                                  |  | Quarter
      Ended
|--------------------------------------------------------------------------------- |  | -------------------
|
|Total
        revenues                                                            |  | $                  
|Income
        (loss) from operations                                             |  |                    
|Income
        (loss) before income taxes and income from discontinued operations |  |                    
|Income
        (loss) from continuing operations                                  |  |                    
|Income
        from discontinued operations                                       |  |                    
|Net
        income (loss)                                                         |  | $                  
|Basic
        and diluted income (loss) per common share                          |  |                    
|Income
        (loss) from continuing operations                                  |  | $                  
|Income
        from discontinued operations                                       |  | $                  
|Net
        income (loss)                                                         |  | $                  
|
|
|
|Total
        revenues                                                            |  | $                  
|Income
        (loss) from operations                                             |  |                    
|Income
        (loss) before income taxes                                         |  |                    
|Net
        income (loss)                                                         |  | $                  
|Basic
        net income (loss) per common share                                  |  | $                  
|Diluted
        net income (loss) per common share                                |  | $                  



Quarterly basic and diluted net
income or loss per common share were computed independently for each quarter and do not necessarily total to the year to date basic and diluted net
income (loss) per common share.


-46-

---



ANSWERTHINK, INC.

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS AND RESERVES



YEARS
ENDED DECEMBER 31, 2004, JANUARY 2, 2004 AND JANUARY 3, 2003(in thousands)







|Allowance for Doubtful Accounts |  |  |  | Balance at Beginning of Year |       | Charge to Expense |  | Write-offs |       | Balance at Ending of Year
|------------------------------- |  |  |  | ---------------------------- | ----- | ----------------- |  | ---------- | ----- | -------------------------
|Year Ended
December 31, 2004    |  |  |  | $                            | 1,757 |                   |  | $          | 1,060 |                          
|Year Ended
January 2, 2004      |  |  |  | $                            | 3,526 |                   |  | $          | (235  | )                        
|Year Ended
January 3, 2003      |  |  |  | $                            | 6,810 |                   |  | $          | 779   |                          

-47-

---

|ITEM  9. |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
|-------- |  | -------------------------------------------------------------------------------------



None.


|ITEM  9A. |  | CONTROL AND PROCEDURES
|--------- |  | ----------------------

Conclusion Regarding the Effectiveness of Disclosure Controls and
Procedures



Under the supervision and with the participation of
our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and
procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on
this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this annual report.


Managements Report on Internal Control Over Financial
Reporting



SEC rules require us to include in our Annual Report
on Form 10-K, beginning with this Annual Report on Form 10-K, (1) a report of our management on internal control over financial reporting as of
December 31, 2004 and (2) a report of our independent certified registered public accounting firm, on
such assessment by our management of internal control over financial reporting. We have omitted these two reports from this Annual Report on Form 10-K
as originally filed in reliance on the SECs Order Under Section 36 of the Securities Exchange Act of 1934 Granting an Exemption from Specified
Provisions of Exchange Act Rules 13a-1 and 15d-1, as set forth in SEC Release No. 34-50754 (the Order). In accordance with the Order, we
will file the foregoing two reports in an amendment to this Annual Report on Form 10-K within the period, and subject to the other conditions,
prescribed in the Order.


|ITEM  9B. |  | OTHER INFORMATION
|--------- |  | -----------------



None


PART III

|ITEM  10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
|--------- |  | --------------------------------------------------



Information responsive to this Item is incorporated
herein by reference to the Companys definitive 2005 proxy statement for the 2005 Annual Meeting of Shareholders.


|ITEM  11. |  | EXECUTIVE COMPENSATION
|--------- |  | ----------------------



Information responsive to this Item is incorporated
herein by reference to the Companys definitive 2005 proxy statement for the 2005 Annual Meeting of Shareholders.


|ITEM  12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|--------- |  | --------------------------------------------------------------



Information responsive to this Item is incorporated
herein by reference to the Companys definitive 2005 proxy statement for the 2005 Annual Meeting of Shareholders.


|ITEM  13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|--------- |  | ----------------------------------------------



Information responsive to this Item is incorporated
herein by reference to the Companys definitive 2005 proxy statement for the 2005 Annual Meeting of Shareholders.


|ITEM  14. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|--------- |  | --------------------------------------



Information appearing under the caption Fees
Paid to Independent Accountants in the 2005 Proxy Statement is hereby incorporated by reference.


-48-

---

PART IV

|ITEM  15. |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|--------- |  | ------------------------------------------

|(a) |  | The following documents are filed as a part of this
Form:
|--- |  | ---------------------------------------------------------

|1. |  | Financial Statements
|-- |  | --------------------



The Consolidated Financial Statements filed as part
of this report are listed and indexed on page 25. Schedules other than those listed in the index have been omitted because they are not applicable or
the required information has been included elsewhere in this report.


|2. |  | Financial Statement Schedules.
|-- |  | ------------------------------



Schedule IIValuation and Qualifying Accounts
and Reserves are included in this report. Schedules other than those listed in the index have been omitted because they are inapplicable or the
information required to be set forth therein is contained, or incorporated by reference, in the Consolidated Financial Statements of Answerthink or
notes thereto.


|3. |  | Exhibits: See Index to Exhibits on page 51.
|-- |  | -------------------------------------------



The Exhibits listed in the accompanying Index to
Exhibits are filed or incorporated by reference as part of this report.


-49-

---

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Miami, State of Florida, on the 16th day of March, 2005.


| | ANSWERTHINK,
INC. By: /s/ Ted A. Fernandez Ted A. Fernandez Chief
Executive Officer and Chairman
| | ------------------------------------------------------------------------------------------------

Pursuant
to the requirements of the Securities Act of  1934, this Form 10-K has been signed by the
following persons in the capacities and on  the date  indicated.

|Signatures                                                  |  | Title                                                                                                              |  | Date                  
|----------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ----------------------
|/s/
        Ted A. Fernandez
        Ted A. Fernandez       |  | Chief Executive Officer and Chairman (Principal Executive Officer)                                                 |  | March
        16, 2005
|/s/
        John F. Brennan
        John F. Brennan         |  | Executive Vice President, Finance and Chief Financial Officer (Principal
        Financial and Accounting Officer) |  | March
        16, 2005
|/s/
        Allan R. Frank
        Allan R. Frank           |  | President and Director                                                                                             |  | March
        16, 2005
|/s/
        David N. Dungan
        David N. Dungan         |  | Chief Operating Officer and Director                                                                               |  | March
        16, 2005
|/s/
        Richard Hamlin
        Richard Hamlin           |  | Director                                                                                                           |  | March
        16, 2005
|/s/
        Edwin A. Huston
        Edwin A. Huston         |  | Director                                                                                                           |  | March
        16, 2005
|/s/
        Jeffrey E. Keisling
        Jeffrey E. Keisling |  | Director                                                                                                           |  | March
        16, 2005
|/s/
        Alan T. G. Wix
        Alan T. G. Wix           |  | Director                                                                                                           |  | March
        16, 2005

-50-

---

INDEX TO EXHIBITS






|Exhibit No. |  |  |  | Exhibit Description                                                                                                                                                                                                                                                 
|----------- |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1++++     |  |  |  | Second Amended and Restated Articles of Incorporation of the Registrant, as amended                                                                                                                                                                                 
|3.2++++     |  |  |  | Amended and Restated Bylaws of the Registrant, as amended                                                                                                                                                                                                           
|9.1+        |  |  |  | Shareholders Agreement dated April 23, 1997 among the Registrant, GTCR V, MG, the Miller Group, Messrs. Fernandez, Frank, Knotts and Miller
and certain other shareholders of the Registrant parties thereto                                                        
|9.2+        |  |  |  | Amendment No. 1 to Shareholders Agreement dated February 24, 1998                                                                                                                                                                                                   
|9.3+        |  |  |  | Letter Agreement dated as of March 15, 1998 to amend Shareholders Agreement                                                                                                                                                                                         
|9.4+        |  |  |  | Form
of Restricted Securities Agreement dated April 23, 1997 among the Initial Investors and each of Messrs. Fernandez, Frank, Knotts and
Miller                                                                                                                    
|10.1+       |  |  |  | Purchase Agreement dated April 23, 1997 among the Registrant, GTCR V, MG, Gator and Tara                                                                                                                                                                            
|10.2+       |  |  |  | Series A Preferred Stock Purchase Agreement dated February 24, 1998 among the Registrant, GTCR V, GTCR Associates and Miller
Capital                                                                                                                                
|10.3+       |  |  |  | Stock Purchase Agreement dated March 5, 1998 between the Registrant and FSC                                                                                                                                                                                         
|10.4+       |  |  |  | Second Amended and Restated Registration Rights Agreement dated as of May 5, 1998 among the Registrant, GTCR V, MG, GTCR Associates, Miller
Capital, FSC, Messrs. Fernandez, Frank, Knotts and Miller and certain other shareholders of the Registrant named therein
|10.5+       |  |  |  | Second Amended and Restated Registration Rights Agreement dated as of May 5, 1998 among the Registrant and the eight former shareholders of
RTI                                                                                                                     
|10.6*+      |  |  |  | Registrants 1998 Stock Option and Incentive Plan                                                                                                                                                                                                                   
|10.7*+++++  |  |  |  | Amendment to Registrants 1998 Stock Option and Incentive Plan                                                                                                                                                                                                      
|10.8*+      |  |  |  | Form
of Senior Management Agreement dated April 23, 1997 between the Registrant and each of Messrs. Fernandez, Frank and Knotts                                                                                                                                     
|10.9*++++   |  |  |  | Senior Management Agreement dated July 11, 1997 between Registrant and Mr. Dungan                                                                                                                                                                                   
|10.10*+++++ |  |  |  | Form
of Employment Agreement entered into between the Registrant and Mr. Dungan                                                                                                                                                                                     
|10.11*+     |  |  |  | Form
of Employment Agreement entered into between the Registrant and each of Messers. Fernandez, Frank and Knotts                                                                                                                                                   
|10.12+      |  |  |  | Amendment No. 2 dated as of May 5, 1998 to Purchase Agreement dated April 23, 1997 among the Registrant, GTCR V, MG, Gator and
Tara                                                                                                                                 
|10.13+      |  |  |  | Amendment No. 2 dated as of May 5, 1998 to Stock Purchase Agreement dated March 5, 1998 between the Registrant and FSC                                                                                                                                              
|10.14*+     |  |  |  | Amendment to Certain Senior Management Agreements dated March 27, 1998 among the Company, the Board of Directors and each of Messrs.
Fernandez, Frank, Knotts and Dungan                                                                                            
|10.15*+     |  |  |  | Second Amendment to Certain Senior Management Agreements dated May 26, 1998 among the Company, the Board of Directors and each of Messrs.
Fernandez, Frank, Knotts and Dungan                                                                                       
|10.16*++    |  |  |  | AnswerThink Consulting Group, Inc. Employee Stock Purchase Plan                                                                                                                                                                                                     
|10.17*+++++ |  |  |  | Amendment to Registrants Employee Stock Purchase Plan dated February 16, 2001                                                                                                                                                                                      
|10.18*+++   |  |  |  | Employment Agreement dated March 23, 1999 between the Registrant and Mr. Brennan                                                                                                                                                                                    
|10.19*+++   |  |  |  | Restricted Stock Agreement dated July 31, 1997 between the Registrant and Mr. Brennan                                                                                                                                                                               

-51-

---

|Exhibit
      No. |  | Exhibit
      Description                                                                                                                                                       
|----------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.20*+++         |  | Amendment to Restricted Stock Agreement dated March 27, 1998 between
        the Registrant and Mr. Brennan                                                                     
|10.21*+++         |  | Form
        of Senior Management Agreement dated July 31, 1997 between the Registrant
        and Mr. Brennan                                                                  
|10.22++++++       |  | Securities Purchase Agreement by and among THINK New Ideas, Inc., Capital
        Ventures International and Marshall Capital Management, Inc.                                  
|10.23++++++       |  | Registration Rights Agreement dated as of March 3, 1999 by and among
        THINK New Ideas, Inc., Capital Ventures International and Marshall Capital
        Management, Inc.
|10.24+++++++      |  | Joint Marketing and Alliance Agreement, dated October 7, 2003, by and
        among Answerthink, Inc., The Hackett Group, Inc. and Accenture, L.L.P.                            
|11.1++++++++      |  | Amendment to Executive Agreement between Answerthink, Inc. and Ted A.
        Fernandez                                                                                         
|11.2++++++++      |  | Amendment to Executive Agreement between Answerthink, Inc. and David
        N. Dungan                                                                                          
|11.3++++++++      |  | Amendment to Executive Agreement between Answerthink, Inc. and Allan
        R. Frank                                                                                           
|11.4++++++++      |  | Amendment to Executive Agreement between Answerthink, Inc. and John F.
        Brennan                                                                                          
|21.1ˆ             |  | Subsidiaries of the Registrant                                                                                                                                                  
|23.1ˆ             |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                           
|31.1ˆ             |  | Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act
        of 2002                                                                                          
|31.2ˆ             |  | Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act
        of 2002                                                                                          
|32ˆ               |  | Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant
        to Section 906 of the Sarbanes-Oxley Act of 2002                                                  

---

|* |  | Management agreement or compensatory plan or
arrangement
|- |  | --------------------------------------------------------

|ˆ |  | Exhibits filed herewith.
|- |  | ------------------------

|+ |  | Incorporated herein by reference to the Companys
Registration Statement on Form S-1 (333-48123).
|- |  | -------------------------------------------------------------------------------------------------

|++ |  | Incorporated herein by reference to the Companys
Registration Statement on Form S-8 (333-69951).
|-- |  | -------------------------------------------------------------------------------------------------

|+++ |  | Incorporated herein by reference to the Companys Form 10-K
for the year ended January 1, 1999.
|--- |  | -----------------------------------------------------------------------------------------------

|++++ |  | Incorporated herein by reference to the Companys Form 10-K
for the year ended December 29, 2000.
|---- |  | -------------------------------------------------------------------------------------------------

|+++++ |  | Incorporated herein by reference to the Companys Form 10-K
for the year ended December 28, 2001.
|----- |  | -------------------------------------------------------------------------------------------------

|++++++ |  | Incorporated herein by reference to THINK New Ideas, Inc.s
Form 8-K dated March 12, 1999.
|------ |  | ------------------------------------------------------------------------------------------

|+++++++ |  | Incorporated herein by reference to the Companys Form 8-K
dated October 14, 2003.
|------- |  | ----------------------------------------------------------------------------------

|++++++++ |  | Incorporated herein by reference to the Companys Form 10-Q
dated November 10, 2004
|-------- |  | -----------------------------------------------------------------------------------

-52-

---