SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|(Mark One)                                  |                                                                                         
|------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                           | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31, 2003
|OR                                         
|o                                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|For the Transition period from
 to         

Commission File No. 1-15213

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BRAUN CONSULTING LOGO

Braun Consulting, Inc.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

36-3702425(I.R.S. Employer Identification No.)20 West Kinzie, Suite 1500
Chicago, Illinois(Address of principal executive offices)

60610(Zip Code)


Registrant's
telephone number including area code:(312) 984-7000

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

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

| |  | Title of class                          |  | 
| |  | --------------------------------------- |  | 
| |  | Common stock, par value $.001 per share |  | 
| |  |                                         |  | 

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes o    No ý.

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of June 30, 2003, (computed by reference to the
quoted last selling price of such stock on June 30, 2003), was $12,193,651. For the purpose of this calculation only, the assumption was that the registrant's directors and executive officers
are affiliates.

The
number of shares outstanding of the registrant's common stock as of March 17, 2004, was 17,134,153 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions
of the registrant's definitive Proxy Statement in connection with its 2004 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.



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PART I

ITEM 1. Business

This Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by
forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate," "plan," "intend" and "continue" or similar words. You should read statements that contain these words
carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state other "forward-looking" information. This
Form 10-K also contains third-party estimates regarding the size and growth of markets and Internet usage in general.

You
should not place undue reliance on these forward-looking statements. The section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations," as
well as any cautionary language in this Form 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations.

Although
we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
We are under no duty to update any of the forward-looking statements after the date of this Form 10-K or to conform these statements to actual results or to changes in our
expectations, except with respect to material developments related to previously disclosed information.

In
this Form 10-K, "Braun Consulting," the "Company," "we," "us" and "our" refer to Braun Consulting, Inc. and its subsidiaries and predecessors.

Our Company

Braun Consulting, Inc. ("Braun Consulting") is a professional services firm delivering customer-focused business solutions. Founded in 1993, Braun
Consulting helps companies solve complex business problems through the delivery of integrated strategy and technology solutions ("Business Solutions"). Our Business Solutions span the functional
disciplines of sales, marketing, customer and field service, manufacturing, finance, and information technology primarily across the following industry sectors: healthcare and pharmaceuticals; media
and telecommunications; financial services; manufacturing and technology; and retail and consumer packaged goods. We work with Fortune 1000 and middle market companies to develop business and customer
growth strategies, integrated marketing programs, organizational change plans and technology solutions. Business Solutions enable organizations to realize value from their customer base, optimize the
relationship between supply and customer demand, and ultimately, improve business performance.

Braun
Consulting combines strategy consulting, industry specific business expertise and advanced technology capabilities to build pragmatic, customized Business Solutions that solve
organizations' business challenges and improve return on investment. We create value for clients by:



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Industry Background

The evolution and widespread adoption of pervasive technologies, including the Internet, continue to fundamentally change the way organizations conduct business.
The Internet has grown from an information delivery medium to an interactive platform through which companies are restructuring the way they market products and services, transact business and manage
their operations. In addition, the Internet economy has created an explosion in the number and variety of delivery channels through which companies can interact with customers. By integrating the
Internet and other related emerging technologies, organizations have a greater opportunity to reduce operating costs, reduce product and marketing cycle times, create and strengthen customer
relationships and business alliances, and improve and accelerate communication and the flow of information, both internally and externally.

Organizations
have embraced these new technologies and channels as powerful mediums for creating new business models, conducting both business-to-consumer and
business-to-business transactions, and extending their customer reach and global footprint. Yet, many organizations that made significant investments in building their Web
presence, call centers, supply and distribution systems, and data management systems failed to see significant tangible return on investment ("ROI"). Today, companies are continuing to focus on
selective initiatives that offer clear and compelling business value. They are seeking to leverage existing technology investments, refine organizational support mechanisms and optimize ROI within
information technology budgets that face mounting economic pressures. As a result, we believe they are seeking professional service providers who understand their particular business needs, and can
help them strategically position their investments to solve complex business problems and realize ROI.

Investments
in initiatives that support the acquisition and retention of customers, identify the relative value of different customers, enable enterprise-wide integration of
customer data and improve profitability continue to be at the top of organizations' investment priorities. While investments in customer relationship management ("CRM") to date have enhanced
organizations' ability to interact with customers and capture relevant insights and data, organizations continue to struggle to develop a single enterprise-wide view of the customer. We
continue to believe there is a significant market opportunity to create seamless interplay among all customer channels (for example, customer service, field service, Web, marketing and sales) in order
to create a consistent, valuable experience for customers regardless of how they choose to interact with an organization. International Data Corporation estimates that despite the current economic
climate, strong opportunities exist within CRM services marketplace. A 2003 study predicts the CRM market to hit $101 billion by 2007, with a 2002 - 2007 compound
annual growth rate of 11.3%.

The
emphasis on ROI has also triggered increased investment in the strategic use of data to drive business decisions. In this market environment, customer knowledge is critical to
competitive advantage. The effective allocation and use of information in business strategies depends on an organization's capabilities in business intelligence, which is the technology that turns
data into actionable knowledge. Business intelligence solutions are part of the fundamental systems infrastructure that businesses need to succeed in a competitive marketplace. We have been working
with clients since 1993 to put in place the strategies and infrastructure to collect, organize, and strategically use business and customer information. We believe our experience positions us to
capitalize on this market opportunity.

We
believe technology fundamentally affects the ways an organization relates to and interacts with its customers, employees, business partners, investors and competitors. Consequently,
we believe that companies will continue to seek outside consultants that possess the knowledge and expertise necessary

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to
create pragmatic business and information technology strategies, and the resources required to implement those strategies.

The Braun Consulting AdvantageOur Integrated Capabilities

Braun Consulting combines strategy consulting, industry specific business expertise and advanced technology capabilities, including business intelligence,
customer and Web analytics, supply chain management, multi-channel integration and information technology architecture, to help clients improve their customer and business relationships, their
products and services, and their profitability. Our ability to meet client needs stems from our broad knowledge of the complex challenges facing businesses today and a deep understanding of the
customer. Braun Consulting delivers its services through a multi-disciplinary team of strategists and technologists who work closely with the client to understand,
develop, and manage the implementation of these solutions. We bring the following capabilities together to deliver Business Solutions that address the broad-ranging and complex needs of clients:

Strategy

Braun Consulting's strategy discipline focuses on helping clients achieve sustainable, profitable growth by recognizing and realizing value from their customer
base. We understand that strategy and implementation are inseparable and that performance improvement for any client is based on insightful assessment, analysis and hands-on
implementation. Our experienced consultants work with clients' senior management teams in a collaborative approach that is built upon joint accountability, effective project management and interactive
working relationships. Our strategy services include:



Customer Relationship Management and Business Intelligence

Since 1993, the Company has been advising clients about technologies and methods to collect and analyze business and customer information. Our success has been
built upon services that effectively
incorporate data warehousing, campaign management systems and applications for data analysis with new marketing approaches in order to: facilitate information sharing and analysis; identify, predict
and respond to customer and market trends; and make timely, objective business decisions. Our customer relationship management expertise enables better assessment of customer value, prospective
customer opportunities and customer preferences for new products and services.

Our
experience in customer relationship management and business intelligence services consists of:



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Information Architecture and Data Integration

Our information technology architecture and integration services help clients effectively manage the technology-based interaction between them and their
customers, suppliers and employees. Our services include:



Extended Enterprise Applications

We bring Web integration expertise and insights to enterprise resource planning projects and offer experience in extending the functionality through data
warehousing, reporting interfaces and customer relationship management. We help clients integrate customer-facing processes and applications with back-office systems to ensure information
and transactions are synchronized across the entire enterprisefrom the supply chain to the demand chain. With expertise in the functional disciplines of finance, human resources, sales,
marketing, customer and field service and manufacturing, we help clients improve the way they manage their customer relationships and deliver more innovative products in shorter
time-frames and more cost-effectively. Core services include:



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Strategic Alliances

We continue to develop alliances with emerging and established technology vendors whose capabilities complement our own. These relationships enable us to deliver
business insights and innovative solutions that meet our clients' diverse business needs.

Growth Strategy

Braun Consulting's objective is to grow by capitalizing on our position as a professional services provider. Our strategies for achieving this objective include:

Expanding and Developing Our Client Base

Since 1993, we have provided services to more than 500 middle-market and Fortune 1000 companies. We believe there is significant potential to expand our
relationships within these companies. We will continue to target new clients in industries and emerging markets where success requires integrated business solutions.

Recruiting and Retaining Qualified Professionals

We need to continuously attract qualified professionals from industry, other consulting organizations and selected colleges and universities. Our recruiting model
and training curriculum allow us to prepare recently hired employees to perform services under the guidance of experienced management. Our training curriculum includes training to understand our
clients' business needs and the technologies to provide solutions to meet those needs. Braun Consulting's culture includes a focus on leading edge technologies, professional development programs,
incentive-based compensation and a balanced lifestyle. We believe our culture has resulted in a manageable voluntary employee turnover rate of approximately 9%, 13% and 19% in 2001, 2002 and 2003,
respectively.

Capitalizing on Our Existing Infrastructure

Braun Consulting has developed the infrastructure to support our future growth, which includes the following:



Pursuing Selected Acquisitions

Braun Consulting has senior management personnel focused on identifying and evaluating potential acquisitions in order to:



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Clients

We work with Fortune 1000 and middle-market companies across a wide variety of industries, including media and telecommunications, healthcare and pharmaceuticals,
manufacturing and technology, retail and consumer packaged goods, and financial services. In 2003, our ten largest clients generated approximately 72% of our revenue before expense reimbursements,
with Hillenbrand Industries Inc. and Pfizer Inc. accounting for 15% and 10%, respectively, of our revenue before expense reimbursements. Most of our large clients have retained us for
multiple projects on an ongoing basis. Existing clients from the previous fiscal year generated approximately 53% of our revenue before expense reimbursements in 2003. The volume of work performed for
specific clients is likely to vary from year to year, and a significant client in one year may not use our services in a subsequent year. Since the beginning of 2001, our significant clients have
included:

|Media and TelecommunicationsALLTel
  AT&T Broadband
  BMG Entertainment
  Cable & Wireless
  Cingular Wireless
  DIRECTV
  Dow Jones
  Home Shopping Network
  The New York Times Company
  Nextel
  Nortel
  OnStar
  Qwest
  Rogers Communications
  The Tribune Company Healthcare and PharmaceuticalsAventis
  Baxter
  Baylor College of Medicine
  Biogen
  Bristol Myers Squibb
  Eli Lilly
  Endo Pharmaceuticals
  GE Medical Systems
  Hillenbrand
  Ilex Oncology
  Johnson and Johnson
  Life Cell
  Organon
  Oxford Health Plans
  Pfizer
  Pharmacia
  Roche Diagnostics
  Schering-Plough
  Wyeth |  | Manufacturing and TechnologyCase New Holland
  Delano
  Dell
  Emerson
  Ford
  General Electric
  Honeywell
  Hyperion
  Motorola
  Raytheon
  SPSS, Inc.
  Sunnen
  Trane
  TRW Retail and Consumer Packaged
Goods7-Eleven
  American Greetings
  Brown and Williamson
  Coty
  Kohl's
  Mattel
  Orbitz
  Pep Boys
  Pepsi
  Staples
  United Stationers Supply |  | Financial ServicesAegon
  Allstate
  The CIT Group
  Conseco
  Development Bank of
    Singapore
  First Data Corp
  Insurance Auto
  J. P. Morgan Chase
  Minnesota Mutual Life
  New York Life
  First Data Corp OtherCendant
  Heritage
  RR Donnelly
  Starwood Hotels & Resorts
  State of Vermont
  Monster Worldwide
  Williams Energy Services
  Ziegler Coal Holdings
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sales and Marketing

Braun Consulting has made significant investments in sales and marketing initiatives, and believes strongly that these business functions will be important to our
future growth and success. We have a

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dedicated
team of experienced business development managers who are focused on securing new opportunities and maximizing client satisfaction.

Our
marketing team is engaged in a strategic initiative to develop brand and image recognition. We have invested in our corporate identity and continue to engage in activities designed
to build awareness. For example, current programs include promotional material and brochures, Web site development, lead generation and executive seminars, market research and trade shows. We utilize
public relations, online marketing efforts and industry events to brand Braun Consulting as a professional services provider. In addition, we participate in speaking, publishing and presentation
opportunities to generate awareness in our target markets and among our target clients.

Culture, People and Recruiting

Braun Consulting's employees and culture are the cornerstone of our success. Through our balanced work philosophy and our strategic recruiting efforts, we have
been able to attract and retain qualified professionals.

Culture

Our demanding, engaging and rewarding environment is combined with a culture that also supports family time, community service and outside personal interests. We
strive to achieve a balanced approach to work and personal life and believe that this component of our culture is significant to recruiting and retaining quality professionals.

People

We employ professionals from industry, consulting organizations and selective colleges and universities. Our people at all levels understand the importance of
quality work and client satisfaction. Working in teams, consultants are rewarded for contributions and accountability. Our compensation programs include incentive-based opportunities to participate in
our discretionary bonus and stock option plans.

We
contribute to the success of our people through ongoing professional development and training. New employees typically receive professional training and attend a team orientation.
Recent graduates that are hired by Braun Consulting receive four to twelve weeks of training in our culture, business, specific technologies and our delivery methodology. We offer computer-based
training through the Internet to enhance our ongoing education commitment to employees.

As
of December 31, 2003, we had 203 employees. Of these, 159 were project personnel, 9 were selling and marketing personnel, and 35 were general and administrative personnel. None
of our employees are represented by a labor union, and we consider our employee relations to be good.

Recruiting

To support anticipated growth, we have built a recruiting organization. To recruit quality people, we use full-time recruiters, external recruiting
resources, the Internet, employee referrals and campus recruiting events.

Diversity
in experience is one of our strengths. In 2003, approximately 95% of our new hires were experienced professionals and approximately 5% were recent college and university
graduates. Our new hires include industry experts, professional services leaders, technology specialists, CPAs and graduates with Ph.D., M.B.A., liberal arts, engineering and computer science degrees.

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Operations

Braun Consulting is continuously enhancing operational infrastructure to support our anticipated growth. Our management team focuses on business operations
through key proprietary internal systems and reporting capabilities that have been developed in several areas, including:

Business Development/Sales Pipeline

Opportunities are monitored by business development managers and practice leaders. Reviewed weekly, opportunities are discussed by client, line of service,
revenue, likelihood of selling a project, date of closing an agreement and work start date.

Forecast Reports

Resources management is reviewed for optimal staffing, revenue forecasting and demand-based allocation of available consultants. Our forecasts are based on
90-day projections derived from client engagements. The forecast report covers projected billable hours by practice, average billing rates, utilization and comparison to planned budget.
Practice leaders, finance personnel, human resources and senior management review reports weekly.

Time and Expense Reports and Billing

Time and expense reports are generally available online within 12 hours of weekly period closing. This system allows for timely revenue information and
detailed management reporting. The system allows invoicing of clients within two days of period closing.

Flash Reports

Performance is monitored by practice area utilizing weekly, month-to-date and year-to-date reports.
Flash reports compare actual results to budget and forecast, and contain information on revenue generated, hours worked, total headcount, new hires, utilization rates and average billing rates.

Hiring Pipeline Report

Budgeted hiring is tracked by practice area and the various stages of individual candidates. Individuals in process are tracked through resume review, interview
process, and offer status. The hiring pipeline report is designed to optimize resources and is integrated with the business development and forecast reports.

Competition

Competition in the professional services marketplace is strong. Our current and anticipated competitors include:



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The
market for our services is subject to rapid technological change and increased competition from large existing players, new entrants, and internal management and information
technology groups. We believe the principal competitive factors in our market include Internet and customer relationship management expertise and talent, client references, integrated strategy,
business intelligence and data warehousing capabilities, quality executive management, consulting skills, pricing and speed of service delivery, and industry-specific knowledge and experience. We
believe the market will continue to offer significant opportunity for multiple players. We believe we compete favorably with respect to these factors.

Risks Related to Our Business

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 presented elsewhere by management from time to time.

Our expenses may increase more rapidly than our revenue, and we may continue to incur net losses.

In 2003, our revenue before expense reimbursements decreased versus 2002 by 31.2% and the number of our employees and key executives decreased over the year by
25.1%. In 2003, our net loss was $11.2 million. Our expenses are primarily comprised of compensation costs and rent, which can be difficult to control in a short time frame. Our management must
effectively balance our need to control costs with our need to respond timely to client demands. Any failure to effectively manage cost and resource levels will adversely affect our business. As a
result of the continued difficult economic climate
during 2003, we executed various cost control measures throughout the year, including headcount reductions, office closings, and office space reductions. In addition to closing our Dallas office, we
reduced our office space in Chicago and Boston. We may be required to further reduce our headcount, close more offices or further reduce other expenses if our revenue before expense reimbursements
declines or is insufficient to support our current cost structure. If demand for our services increases in the future, we may not be able to expand our operations, including hiring additional
employees, to meet this demand in a timely fashion or at all. If we cannot increase our revenue before expense reimbursements in future periods, our financial results will suffer. We can give no
assurances that the measures to date, or any additional cost reduction steps taken, will be sufficient to mitigate our current net losses and return to profitability.

We have relied, and expect to continue to rely, on a limited number of clients for a significant portion
of our revenue.

We currently derive, and expect to continue to derive, a significant portion of our revenue from a limited number of clients. To the extent that any significant
client uses less of our services or terminates its relationship with us, our revenue could decline substantially. The loss of any significant client could seriously harm our business. In 2003, our ten
largest clients generated approximately 72% our revenue before expense reimbursements, with Hillenbrand Industries Inc. and Pfizer Inc. accounting for 15% and 10%, respectively, of our
revenue before expense reimbursements. Our ten largest clients generated approximately 72.0% and 65.4% of our revenue before expense reimbursements in 2002 and 2001, respectively.

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We may lose money on fixed-price contracts.

Approximately 49% of our revenue before expense reimbursements in 2003 was derived from fixed-price contracts, and we anticipate this percentage to stabilize at
around 50% in the future. If we miscalculate the resources or time we need to complete fixed-price engagements, our operating results could be seriously harmed.

A reduction in, or the termination of, our services could lead to under-utilization of our employees and could harm our operating results.

Our existing clients can generally reduce the scope of, or cancel their use of, our services without penalty and with little or no notice. If a client defers,
modifies or cancels an engagement or chooses not to retain us for additional phases of a project, we may not be able to rapidly redeploy our employees to other engagements in order to minimize
underutilization of employees and the resulting harm to our operating results.

Our lack of long-term contracts with clients reduces the predictability of our revenue.

Our clients retain us on an engagement-by-engagement basis, rather than under long-term contracts. Our operating expenses are
relatively fixed and cannot be reduced on short notice to compensate for unanticipated variations in the number or size of engagements in progress. These factors make it difficult for us to predict
our revenue and operating results. Our failure to accurately predict our revenue may seriously harm our financial condition and results of operations because we incur costs based on our expectations
of future revenue. We may be retained to design or implement discrete segments of a business solution rather than the comprehensive business solution. Because large client projects may involve
multiple engagements or stages, there is a risk that a client may choose not to retain us for additional stages of a project or that the client will cancel or delay additional planned projects. During
2003, two of our approximately 230 engagements were canceled or reduced in scope.

Our failure to meet client expectations could result in losses and negative publicity.

We create, implement and maintain business solutions and other applications that are often critical to our clients' businesses. Errors in the development,
deployment and execution of our solutions or failure to meet clients' expectations could result in:



While
many of our contracts limit our liability for damages that may arise from negligent acts, errors, mistakes or omissions in rendering services to our clients, we cannot be sure that
these contractual provisions will protect us from liability for damages in the event we are sued. Furthermore, our general liability insurance coverage may not continue to be available on reasonable
terms or in sufficient amounts to cover one or more large claims, or the insurer may disclaim coverage as to any future claim. The successful assertion of any large claim against us could seriously
harm our business. Even if not successful, such claims could result in negative publicity, significant legal and other costs, and may be a distraction to management.

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We depend on our senior management team, and the loss of any member may adversely affect our business.

We believe that our success will depend on the continued employment of our senior management team. This dependence is particularly important to our business
because personal relationships are a critical element of obtaining and maintaining client engagements. If one or more members of our senior management team were unable or unwilling to continue in
their present positions, such persons may be difficult to replace and our business could be seriously harmed. Accordingly, the loss of one or more members of our senior management team could impact
our future revenue. In addition, if any of these key employees joins a competitor or forms a competing company, some of our clients might choose to use the services of that competitor or new company
instead of our own. Furthermore, clients or other companies seeking to develop in-house capabilities may hire away some of our key employees. Employee defections to clients could not only
result in the loss of key employees but could also result in the loss of a client relationship or a new business opportunity. Any losses of client relationships could seriously harm our business.

We must recruit and retain qualified professionals to succeed in our labor-intensive business.

Our future success depends in large part on our ability to recruit and retain qualified project and engagement managers, business strategists, and other technical
personnel, and sales and marketing professionals. Our ability to attract these individuals may be negatively impacted in the future as a result of the significant employee reductions through 2003.
Qualified professionals are in demand and are likely to remain a limited resource in the foreseeable future. Any inability to recruit and retain a sufficient number of qualified employees could hinder
the growth of our business. Our voluntary retention rate was approximately 81%, 87% and 91% in 2003, 2002 and 2001, respectively.

Potential future acquisitions could be difficult to integrate and could therefore, adversely affect our
operating results.

One of our strategies for growth is the acquisition of businesses. Currently, we do not have any acquisitions pending. We may not be able to find and consummate
acquisitions on terms and conditions reasonably acceptable to us. The acquisitions we do undertake may involve a number of special risks, including:



Our
failure to successfully manage future acquisitions could seriously harm our operating results.

Special risks presented by international factors could negatively affect our business.

International engagements are subject to a variety of risks that are beyond our control and could seriously harm our financial condition and operating results.
These risks include the following:



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We may not be able to protect our confidential information and proprietary rights.

While our employees execute confidentiality agreements, we cannot guarantee that this will be adequate to deter misappropriation of our confidential information.
In addition, we may not be able to detect unauthorized use of our intellectual property and take appropriate steps to enforce our rights. If third parties infringe or misappropriate our copyrights,
trademarks or other proprietary information, our business could be seriously harmed. In addition, other parties may assert infringement claims against us or claim that we have violated their
intellectual property rights. Such claims, even if not true, could result in significant legal and other costs and may be a distraction to management. Our copyright, trademark and proprietary
information rights include our proprietary project management approach, our training materials, our name, our business processes, our personnel information and our business strategies.

Risks Related to the Nature of the Market for Business Solutions

Our growth could be impacted by the development of the market for Business Solutions.

We believe that the market for Business Solutions is distinct from traditional information technology and systems integration services markets, which requires a
different set of skills and capabilities. In contrast to traditional information technology and systems integration services, Business Solutions combine Internet application development skills with
business intelligence and strategy focused on the client's customers. We cannot be certain that a viable market for Business Solutions will emerge or be sustainable. If a viable and sustainable market
for our Business Solutions does not develop, our growth could be negatively affected. Even if a Business Solutions market develops, we may not be able to differentiate our services from those of our
competitors. If we do not differentiate our services, our revenue growth and operating margins may decline.

Our business will be harmed if the growth of commerce on the Internet is slower than expected.

If commerce on the Internet does not continue to grow, or grows more slowly than expected, our growth would decline and our business would be harmed. The
widespread acceptance and adoption of the Internet for conducting business is likely only in the event that the Internet provides businesses
with greater efficiencies and operating improvements. Factors which may affect Internet usage or electronic commerce adoption include:



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Lack of detailed written contracts could impair our ability to recognize revenue, 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 conditions of the project engagement. In some
cases, however, consistent with what we believe to be the 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 recognize revenue, collect fees, protect our intellectual property and protect
ourselves from liability to others may be impaired.

Competition could result in price reductions, reduced profitability and loss of market share.

Competition in the professional services marketplace is strong. Our current and anticipated competitors include:



The
market for our services is subject to rapid technological change and increased competition from large existing players, new entrants, and internal management and information
technology groups. We believe the principal competitive factors in our market include Internet and customer relationship management expertise and talent, client references, integrated strategy,
business intelligence and data warehousing capabilities, quality executive management, consulting skills, pricing and speed of service delivery, and industry-specific knowledge.

Our business will be negatively affected if we do not keep pace with the latest technological changes and client preferences.

Our market and the leading technologies used by our clients are characterized by rapid technological change. If we are unable to respond successfully to these
technological developments or do not respond in a timely or cost-effective way, our business and operating results will be seriously harmed. We have derived a substantial portion of our
revenue from Business Solutions based upon the Internet and other leading information technologies. As a result, our success will depend, in part, on our ability to offer services that keep pace with
continuing changes in technology, evolving industry standards and changing client preferences. In addition, we must recruit and retain professionals who are apprised of technological advances and
developments so that they can fulfill the increasingly sophisticated needs of our clients.

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Our quarterly revenue and operating results could be volatile and may cause our stock price to fluctuate.

Our quarterly revenue and operating results may fluctuate significantly in the future. Our operating results could be volatile and difficult to predict. Our
revenue before expense reimbursements increased 6.5% from fourth quarter 2002 to first quarter 2003, decreased 1.9% in the second quarter of 2003, and increased 2.3% and 23.2% in the third and fourth
quarters of 2003, respectively. As a result, period-to-period comparisons of our operating results may not be indicative of our future performance. In addition, operating
expenses may increase in the third and fourth quarters, both on absolute terms and as a percentage of revenue, due to the potential hiring of large numbers of recent college graduates each year, which
results in increased salary expenses before such new employees begin to generate substantial revenue.

A
significant portion of our operating expenses, such as personnel and facilities costs, is fixed in the short term. Therefore, any failure to generate revenue according to our
expectations in a particular quarter could result in losses for the quarter. In addition, our future quarterly operating results may not meet the expectations of securities analysts or investors,
which in turn may have an adverse effect on the market price of our common stock. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Our
revenue and earnings may vary significantly from quarter to quarter as a result of a number of factors, including:



Our clients may be unable or unwilling to pay us for services provided.

We assume a certain level of credit risk with our clients in order to do business. Conditions affecting any of our clients could cause them to become unable or
unwilling to pay us in a timely manner, or at all, for services that we have provided. In the past we experienced significant delays from some clients, and we are unable to predict in the future
whether we will experience similar problems. For example, during 2001 and 2002, we wrote off approximately $2.8 million and $255,000, respectively, in receivables from various clients. In 2003
we wrote off approximately $148,000 in receivables from various clients.

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Risks Related to Ownership of Our Stock

Our officers and directors own 54.2% of our stock and could control matters submitted to stockholders.

As of March 17, 2004, our directors, executive officers and their affiliates beneficially own, in the aggregate, 54.2% of our outstanding common stock.
Steven J. Braun, our Chief Executive Officer, beneficially owns approximately 50.3% of our outstanding common stock. As a result, these stockholders will be able to exercise control over all matters
requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or
preventing a change in control of Braun Consulting.

We have various mechanisms in place that may prevent a change in control that a stockholder may consider favorable.

Our certificate of incorporation and bylaws may discourage, delay or prevent a change in control of Braun Consulting that a stockholder may consider favorable.
Our certificate of incorporation and bylaws:



In
addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of Braun Consulting by prohibiting a publicly held Delaware
corporation from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder.

Corporate Information

Braun Consulting, Inc. was incorporated as RNW, Inc. on April 20, 1990. In May 1993, RNW, Inc. changed its name to Shepro Braun
Consulting, Inc., and subsequently changed its name to Braun Consulting, Inc. We reincorporated in Delaware on August 3, 1999. Braun Consulting's principal executive offices are
located at 20 West Kinzie, Suite 1500, Chicago, Illinois, 60610, and our telephone number is (312) 984-7000. We invite you to visit our Internet site at www.braunconsult.com. The
information contained on our Internet site is not incorporated in this Form 10-K.

16

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Website Information

The Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on the Company's internet website at
http://www.braunconsult.com as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

ITEM 2.    Properties

The Company leases office facilities under noncancelable and cancelable operating lease agreements expiring at various date through 2012. Our headquarters are
located in Chicago, Illinois. Our administrative, finance, sales and marketing operations are located in Chicago, Illinois; Boston, Massachusetts; and New York, New York. Our facilities in Chicago are
located in approximately 81,575 square feet of leased office space; our facilities in Boston are located in approximately 11,700 square feet of leased office space; our facilities in New York are
located in approximately 16,500 square feet of leased office space. We also serve clients out of leased office space in Dallas, Texas and Indianapolis, Indiana.

All
leased space is considered to be adequate for the operations of our business, and no difficulties are foreseen in meeting any future space requirements.

ITEM 3.    Legal Proceedings

Braun Consulting and Steven Braun, Thomas Duvall, and John Burke, as officers of Braun Consulting, are defendants in a lawsuit,Luciano
Mor v. Braun Consulting, Inc.; Steven Braun; Thomas Duvall; John Burke; Adams, Harkness & Hill, Inc.; Credit Suisse First Boston Corp.; FleetBoston Robertson
Stephenson, Inc.; J.P. Morgan Chase & Co.; Lehman Brothers Holdings, Inc.; Prudential Securities Incorporated; and Salomon Smith Barney Holdings, Inc.,
Case No. 01 CV 10629, filed on November 26, 2001, in the United States District Court for the Southern District of New York ("the Case"). Messrs. Duvall and Burke are former
officers of Braun Consulting. The class action complaint in the Case alleges violations of federal securities laws in connection with the Company's initial public offering occurring in
August 1999 based on alleged omissions in the Company's prospectus relating to compensation payable to, and the manner of distribution of the Company's initial public offering shares by, Braun
Consulting's underwriters. The complaint does not allege any claims relating to any alleged misrepresentations or omissions with respect to the Company's business. The Case is among approximately 300
putative class actions against certain issuers, their officers and directors, and underwriters with respect to such issuers' initial public offerings, coordinated as In re Initial Public Offering
Securities Litigation, 21 MC 92 (SAS) (collectively, the "IPO Securities Litigation").

Braun
Consulting has entered into a Memorandum of Understanding (the "MOU"), along with most of the other defendant issuers in the IPO Securities Litigation, whereby such issuers and
their officers and directors (including Braun Consulting and Messrs. Braun, Duvall and Burke) will be dismissed with prejudice from the IPO Securities Litigation, subject to the satisfaction of
certain conditions. Under the terms of the MOU, neither Braun Consulting nor any of its formerly named individual defendants admit any basis for liability with respect to the claims in the Case. The
MOU provides that insurers for Braun Consulting and the other defendant issuers participating in the settlement will guaranty that the plaintiffs will recover at least $1 billion to settle the
IPO Securities Litigation, except that no such payment will occur until claims against the underwriters are resolved and such payment will be paid only if the recovery against the underwriters for
such claims is less than $1 billion and then only to the extent of any shortfall. Under the terms of the MOU, neither Braun Consulting nor any of its named directors will pay any amount of the
settlement. The MOU further provided that participating defendant issuers will assign certain claims they may have against the

17

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defendant
underwriters in connection with the IPO Securities Litigation. The MOU is subject to the satisfaction of certain conditions, including, among others, approval of the court and the issuers'
insurers.

Braun
Consulting was a defendant in an adversary proceeding filed on or about May 29, 2003, in the United States District Bankruptcy Court for the Southern District of New York,
styledBernard Katz, Trustee v. Braun Consulting, Inc., Adversary Case No. 03-03441, with respect to the Chapter 11 bankruptcy case
of Metiom, Inc. ("Metiom"). Prior to the filing of its bankruptcy case, Metiom was a customer of Braun. The proceeding was seeking to avoid and recover certain payments
on account made to Braun by Metiom within the ninety days prior to the filing of Metiom's bankruptcy case, pursuant to Section 547 of the United States Bankruptcy Code. The Chapter 11
bankruptcy trustee, as the plaintiff in the adversary proceeding, was seeking to recover $108,051 plus interest. On March 5, 2004, the Company paid $22,500 to settle the adversary proceeding.

Braun
Consulting is not involved in any other material legal proceedings.

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

No matters were submitted to a vote of shareholders during the fourth quarter of 2003.

18

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PART II

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

Our common stock is quoted on the Nasdaq National Market under the symbol "BRNC." The following table shows the high and low per share closing sale prices of our
common stock, as reported on the Nasdaq National Market for the periods indicated:

High

Low2002First Quarter

$
5.04

$
3.03Second Quarter


5.01


3.34Third Quarter


3.36


1.08Fourth Quarter


1.30


0.712003First Quarter


1.15


0.81Second Quarter


1.72


0.95Third Quarter


2.13


1.40Fourth Quarter


3.08


1.90


We currently intend to retain our future earnings to finance the operation and expansion of our business and we do not anticipate paying cash
dividends on our common stock in the foreseeable future. Any future determination as to the payment of dividends will be at the discretion of the Company's board of directors.

On
March 17, 2004, the last reported sale price per share of our common stock on the Nasdaq National Market was $2.63. As of March 17, 2004, there were approximately 188
holders of record and 2,257 beneficial shareholders of our common stock.

ITEM 6. Selected Financial Data

The following selected financial data should be read in conjunction with the financial statements and the notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this Form 10-K. The information for the five years have been

19

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derived
from audited financial statements. The audited financial statements for the three most recent years have been included herein.

|                                        |                                       | Years Ended December 31, |           
|--------------------------------------- | ------------------------------------- | ------------------------ | ----------
|
|
|Statement of Operations Data:           |                                       |                          |           
|Revenue:                                |                                       |                          |           
|                                        | Revenue before expense reimbursements |                          | $         
|                                        | Expense reimbursements                |                          |           
|                                        |                                       |                          |           
|                                        |                                       | Total revenue            |           
|Costs and expenses:                     |                                       |                          |           
|                                        | Project personnel and expenses        |                          |           
|                                        | Reimbursable expenses                 |                          |           
|                                        | Selling and marketing expenses        |                          |           
|                                        | General and administrative expenses   |                          |           
|                                        | Amortization of intangible assets     |                          |           
|                                        | Stock compensation                    |                          |           
|                                        | Merger costs                          |                          |           
|                                        |                                       |                          |           
|                                        |                                       | Total costs and expenses |           
|                                        |                                       |                          |           
|Operating income (loss)                 |                                       |                          | 3,945     
|Interest income                         |                                       |                          | 461       
|Interest expense                        |                                       |                          | 137       
|                                        |                                       |                          |           
|Income (loss) from before income taxes  |                                       |                          | 4,269     
|Provision (benefit) for income taxes    |                                       |                          | 1,230     
|                                        |                                       |                          |           
|Net Income (loss)                       |                                       |                          | 3,039     
|                                        |                                       |                          |           
|Pro forma provision for income taxes(1) |                                       | $                        | 2,249     
|                                        |                                       |                          |           
|Pro forma net income(1)                 |                                       | $                        | 2,020     
|                                        |                                       |                          |           
|Loss per share(2):                      |                                       |                          |           
|                                        | Basic                                 |                          |           
|                                        | Diluted                               |                          |           
|Weighted average shares:                |                                       |                          |           
|Basic                                   |                                       |                          | 13,979,808
|Diluted                                 |                                       |                          | 15,340,809

|                                                                  |  | As of December 31,
|----------------------------------------------------------------- |  | ------------------
|
|
|Balance Sheet Data:                                               |  |                   
|Cash, cash equivalents, restricted cash and marketable securities |  | $                 
|Total assets                                                      |  |                   
|Total debt                                                        |  |                   
|Stockholders' equity                                              |  |                   

---

20

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

The following section should be read in conjunction with the financial statements and notes thereto contained on pages 32 to 54 of
this Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions which could
cause actual results to differ materially from management's expectations.

Overview

Braun Consulting, Inc. ("Braun Consulting," or the "Company") is a professional services firm delivering customer-focused business solutions. Founded in
1993, Braun Consulting helps companies solve complex business problems through the delivery of integrated strategy and technology solutions ("Business Solutions"). Our Business Solutions span the
functional disciplines of sales, marketing, customer and field service, manufacturing, finance, and information technology primarily across the following industry sectors: healthcare and
pharmaceuticals; media and telecommunications; financial services; manufacturing and technology; retail and consumer packaged goods; and other sectors. We work with Fortune 1000 and middle market
companies to develop business and information technology strategies, integrated marketing programs, organizational change plans and technology solutions. Business Solutions enable organizations to
realize value from their customer base, optimize the relationship between supply and customer demand, and ultimately, improve business performance.

The
Company enters into various consulting arrangements that are billed either on a time-and-materials basis or on a fixed-price basis. The majority of these
contracts are generally less than 120 days in duration and either require an up-front
payment or are billed in bi-weekly installments ratably over the term of the contract. Termination of the contract by the customer would require the customer to pay the Company for hours
incurred to date. Costs under the Company's contracts are expensed as incurred.

The
Company's revenue before expense reimbursements derived from time and materials contracts was approximately 51% of revenue before expense reimbursements in 2003, as compared to 32%
and 36% in 2002 and 2001, respectively. Revenue before expense reimbursements derived from fixed-price contracts was approximately 49% of revenue before expense reimbursements in 2003, as compared to
68% and 64% in 2002 and 2001, respectively, and we anticipate this percentage to stabilize at around 50%. Revenue on fixed-price projects is based upon the ratio of hours worked to total estimated
hours to complete the project. The cumulative impact of any revision in estimates of the percentage-of-completion is reflected in the period in which the revision becomes
known. Losses on contracts, if any, are provided for in full in the period when first determined. The Company recognizes unearned revenue when client billing exceeds the amount of revenue recognized.
In certain instances, client arrangements require that a project milestone must be reached and written acceptance received from the client prior to billing. In these cases, revenue is recognized when
milestones are reached, written acceptance from the client is received and other contractual specifications have been achieved.

The
Company also recognizes a limited amount of revenue from product sales on a gross basis as a value-added reseller of software products. The Company currently resells software
products primarily as an occasional accommodation to clients who prefer to retain a single-source provider. In 2003, product sales accounted for less than 1.0% of revenue before expense reimbursements
as compared to 3.3% and 2.3% in 2002 and 2001, respectively.

Business
conditions continued to deteriorate further in the first half of 2003, with revenue before expense reimbursements declining by $521,000 or 6.5% in the first quarter as compared
to the fourth quarter of 2002, and by $140,000 or 1.9% in the second quarter as compared to the first quarter. Revenue before expense reimbursements in the second quarter was lower than any quarterly
period since the third quarter of 1998 and was negatively impacted by the loss of our largest client, Pharmacia, who accounted for 26% of our revenue before expense reimbursements during 2002.
Accordingly,

21

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management
took further actions to better match the Company's capacity with the lower demand level. During the year 2003, project personnel headcount was further reduced to 159 as of
December 31, 2003 through both restructuring programs and voluntary attrition (see Note 8). Furthermore, additional office space consolidation was undertaken in Boston, Chicago and
Dallas with resulting write-offs of office furniture and fixtures as well as leasehold improvements. Additional measures to reduce our operating expense may be required in the future
depending on market conditions and revenue growth.

2003
cost reduction measures, which included office consolidations and headcount reductions, resulted in restructuring and other related charges of $1.3 million. The Company
anticipates that these actions
will provide savings of approximately $495,000 in 2004. Cost cutting measures undertaken in 2002 were anticipated to, and did result in, cost savings of approximately $11.6 million in 2003.

Existing
clients from the previous fiscal year generated approximately 53% of revenue before expense reimbursements in 2003 and approximately 67% and 70% of revenue before expense
reimbursements in 2002 and 2001, respectively. The Company manages client development efforts through specific account management efforts.

The
Company's most significant expense is project personnel and expenses, which consists primarily of project personnel salaries and benefits, and non-reimbursed direct
expenses incurred to complete projects. The Company continues to manage employee expenses by calculating a variable portion of employee compensation payable upon the achievement of measurable
performance goals.

The
Company's project personnel and expenses as a percentage of revenue are also related to consultant utilization. The Company manages utilization by monitoring project requirements and
timetables. The number of consultants assigned to a project varies according to the size, complexity, duration and demands of the project. Project completions and scheduling delays may result in
periods when consultants are not fully utilized. An unanticipated termination of a significant project could also cause us to experience lower consultant utilization, resulting in a higher than
expected number of unassigned consultants. In addition, the Company does not fully utilize consulting personnel on billable projects during the initial months of their employment. During that time
they undergo training and become integrated into the Company's operations.

Selling
and marketing expenses consist primarily of: salaries, employee benefits and travel costs of selling and marketing personnel and promotional costs. General and administrative
expenses consist primarily of: costs associated with executive management, finance and administrative groups, including personnel devoted to recruiting, employee retention and training; occupancy
costs including depreciation, amortization and office equipment leases; travel; and all other branch and corporate costs.

The
Company has made substantial investments in infrastructure, including senior management and other experienced administrative personnel, experienced business development managers and
advanced management reporting systems.

Management's Use of 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 revenue and expenses during the reporting periods. For example, significant estimates and assumptions have been made with regard to the revenue recognition under fixed-price contracts,
deferred taxes, and estimated costs associated with restructuring charges. Actual results could differ from those estimates.

22

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Critical Accounting Policies

Revenue Recognition.The Company enters into various consulting arrangements that are billed either on a
time-and-materials basis or on a fixed-price basis. The majority of these contracts are generally less than 120 days in duration and either require an
up-front payment or are billed in bi-weekly installments ratably over the term of the contract. Termination of the contract by the customer would require the customer to pay
the Company for hours incurred to date. Costs under the Company's contracts are expensed as incurred.

The
Company recognizes a large part of its revenue before expense reimbursements on fixed-price projects. Revenue on these projects is based upon the ratio of hours worked to total
estimated hours to complete the project. The cumulative impact of any revision in estimates of the percentage-of-completion is reflected in the period in which the revision
becomes known. Losses on contracts, if any, are provided for in full in the period when first determined. The Company recognizes unearned revenue when client billing exceeds the amount of revenue
recognized. In certain instances, client arrangements require that a project milestone must be reached and written acceptance received from the client prior to billing. In these cases revenue is
recognized when milestones are reached and written acceptance from the client is received. In addition, the Company recognizes a portion of its revenue before expense reimbursements on a
time-and-materials basis. The Company provides an allowance for doubtful accounts against the portion of accounts receivable that are estimated to be uncollectible. The
balances owed by several clients could materially impact the financial statements if such balances are not collected. In prior years, the Company's collection experience has varied substantially from
quarter to quarter and accordingly, has resulted in quarterly fluctuations of write-offs and bad debt expense.

The
Company also recognizes a limited amount of revenue from product sales on a gross basis as a value-added reseller of software products. The Company currently resells software
products primarily as an occasional accommodation to clients who prefer to retain a single-source provider.

Deferred Taxes.We recorded a valuation allowance to reduce our deferred tax assets to the amount that is more likely than
not to be realized. In making this assessment, we considered future taxable income, feasible tax planning strategies, and other factors in determining the need for a valuation allowance. In the event
that we determine that we would not be able to realize all or part of our net deferred tax assets, we record a valuation allowance in the period such determination is made. Conversely, if we later
determine that it is more likely than not that the net deferred tax assets would be realized based on changes in facts and circumstances at the time of our assessment, then the previously provided
valuation allowance would be reversed. The Company's current valuation allowance covers all deferred tax assets (see Note 9).

Restructuring Charges.During 2003, 2002 and 2001, we recorded significant charges in connection with our restructuring
programs. The related reserves reflect judgments and estimates of our ultimate costs for severance, asset abandonments and settlement of contractual obligations under our operating leases, including
sublease rental rates, absorption period to relet space, brokerage commissions 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. Such charges have been recorded under Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring),"and Securities and Exchange Commission Staff Accounting Bulletin
No. 100, "Restructuring and Impairment Charges." Actual experience may differ from these estimates and changes to our previous estimates are
adjusted when first determined (see Note 8).

23

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Results of Operations

The following table sets forth, for the years indicated, selected statement of operations data as a percentage of total revenue:

|                                                 |                                       | Years Ended
December 31, |     
|------------------------------------------------ | ------------------------------------- | ------------------------ | ----
|
|Revenue:                                         |                                       |                          |     
|                                                 | Revenue before expense reimbursements |                          | 90.9
|                                                 | Expense reimbursements                |                          | 9.1 
|                                                 |                                       |                          |     
|                                                 |                                       | Total revenue            |     
|Costs and expenses:                              |                                       |                          |     
|                                                 | Project personnel and expenses        |                          | 60.6
|                                                 | Reimbursable expenses                 |                          | 9.1 
|                                                 | Selling and marketing expenses        |                          | 8.0 
|                                                 | General and administrative expenses   |                          | 50.9
|                                                 | Amortization of intangible assets     |                          | 7.9 
|                                                 | Stock compensation                    |                          | 0.5 
|                                                 |                                       |                          |     
|                                                 |                                       | Total costs and expenses |     
|                                                 |                                       |                          |     
|Operating loss                                   |                                       | (37.0                    | )   
|Interest income                                  |                                       | 2.2                      |     
|Interest expense                                 |                                       | 0.1                      |     
|                                                 |                                       |                          |     
|Loss before provision (benefit) for income taxes |                                       | (34.9                    | )   
|Provision (benefit) for income taxes             |                                       | (5.2                     | )   
|                                                 |                                       |                          |     
|Net loss                                         |                                       | (29.7                    | )%  

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Revenue.Revenue before expense reimbursements decreased 31.2% to $31.6 million in 2003 from $45.9 million in
2002. The decrease in revenue before expense reimbursements was due primarily to the loss of a major client during the third quarter of 2002, a decrease in the volume of consulting services provided
to existing and new clients, and a $1.5 million reduction in sales of third party software. The decline in revenue before expense reimbursements was partially offset by an increase in average
hourly bill rates to $139 in 2003 from $137 in 2002, and an increase in revenue before expense reimbursements per consultant to $194,000 in 2003 from $166,000 in 2002. Continued uncertainty around IT
spending and an economic recovery inhibit the Company's ability to forecast demand for its products and services and the impact on its revenue. The Company had 159 project personnel at
December 31, 2003, compared to 205 project personnel at December 31, 2002. The Company continues to sell software products as an occasional accommodation to clients. Such sales
represented less than 1.0% of revenue before expense reimbursements in 2003 and less than 3.3%% in 2002. Reimbursements, including travel and out-of-pocket expenses, are
included in revenue, and equivalent amounts of reimbursable expenses are included in costs and expenses.

Project Personnel and Expenses.Project personnel and expenses decreased 34.3% to $24.4 million in 2003 from
$37.1 million in 2002. The decrease in project personnel and expenses for 2003 was due primarily to a decrease in compensation costs as a result of reductions in headcount from 2002 cost
reduction initiatives ($11.2 million) and a reduction in the costs associated with third party software sales ($1.5 million).

24

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During
2003, project personnel decreased by 46 employees, 23 as part of reductions in force and the remainder through voluntary attrition. Project personnel and expenses decreased as a
percentage of revenue before expense reimbursements to 77.1% in 2003 from 80.8% in 2002.

Selling and Marketing Expenses.Selling and marketing expenses decreased 28.3% to $3.4 million in 2003 from
$4.7 million in 2002. The decrease in selling and marketing expenses for 2003 was due primarily to a reduction in compensation costs ($921,000) and business development costs ($419,000). The
Company had 10 selling and marketing personnel at December 31, 2003, compared to 11 at December 31, 2002 (excluding the transition of 8 sales and marketing personnel into project
delivery roles at the start of 2003). Selling and marketing expenses increased as a percentage of revenue before expense reimbursements to 10.7% in 2003 from 10.3% in 2002.

General and Administrative Expenses.General and administrative costs decreased 38.9% to $15.1 million in 2003 from
$24.7 million in 2002. The decrease in general and administrative costs for 2003 is due primarily to a reduction in personnel compensation costs from 2002 cost reduction initiatives
($2.3 million), a decrease in depreciation expense due to fixed assets taken out of service in 2002 ($728,000), a decrease in rent expense ($4.6 million) due to office closings and
consolidations (the Company closed offices in Dallas, Texas; Denver, Colorado and Minneapolis, Minnesota; and reduced office space in Boston, Massachusetts and Chicago, Illinois during 2002), and a
net decrease in other costs ($2.0 milion).

There
were 31 general and administrative personnel at December 31, 2003, compared to 47 at December 31, 2002. General and administrative costs decreased as a percentage of
revenue before expense reimbursements to 47.9% in 2003 from 48.7% in 2002.

Interest Income.Interest income decreased to $251,000 in 2003 from $752,000 in 2002. The decrease was due primarily to the
use of $16.4 million of proceeds from the Company's secondary offering to fund both working capital and capital expenditures and a decrease in interest rates from an average yield of 2.1% in
2002 versus 1.2% in 2003.

Provision (Benefit) for Income Taxes.During 2003, there was a tax expense of $161,000 as compared to a tax expense of
$8.2 million in 2002. The tax expense for 2003 relates primarily to revenue based state taxes not impacted by the Company's net operating losses. In addition, the Company recorded a valuation
allowance for the entire deferred tax asset balance of $15.7 million as of December 31, 2002 due to uncertainties regarding the realization of the asset, including: growing net operating
losses in 2002; three years of increasing net losses at that time; uncertainty associated with forecasting a recovery in IT spending; loss of a significant client, Pharmacia, during the third quarter
2002 which represented 26% of the Company's 2002 revenue before expense reimbursements; and given the Company's cost structure, the revenue base was not expected to generate substantial taxable income
in the near term. The Company recorded an additional $5.2 million increase in the valuation allowance for all deferred tax assets primarily due to operating losses incurred during 2003.

Net Loss.Net loss decreased to $11.2 million in 2003 from $28.1 million in 2002. The decrease in net loss was
primarily due to a decrease in tax expense to $161,000 in 2003 versus $8.2 million in 2002, a decrease in restructuring charges to $1.3 million in 2003 versus $7.4 million in
2002, and significant reductions in total costs and expenses.

25

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Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenue.Revenue before expense reimbursements decreased 40.1% to $45.9 million in 2002 from $76.7 million in
2001. The decrease in revenue before expense reimbursements was due primarily to a decrease in average hourly bill rates to $137 in 2002 from $156 in 2001, and a decrease in revenue before expense
reimbursements per consultant to $166,000 in 2002 from $179,000 in 2001. In addition, the continued weakening in IT spending during 2002, lower utilization per consultant, and the loss of a major
client during third quarter 2002 contributed to the decline in revenue before expense reimbursements. Continued uncertainty around IT spending and an economic recovery inhibit the Company's ability to
forecast demand for our products and services and the impact. During the second and fourth quarters, project personnel decreased by 9 and 50, respectively, due to reductions in force as part of the
cost reduction initiatives executed in response to the lowered demand for IT consulting services. In addition, the Company's headcount was further reduced by not replacing employees who left
voluntarily. The Company had 205 project personnel at December 31, 2002 as compared to 335 project personnel at December 31, 2001. The Company continues to sell some software products as
an occasional accommodation to clients. Such sales represented less than 3.3% of revenue before expense reimbursements in 2002 and less than 2.3% in 2001. Reimbursements, including travel and
out-of-pocket expenses, are included in revenue, and equivalent amounts of reimbursable expenses are included in costs and expenses.

Project Personnel and Expenses.Project personnel and expenses decreased 27.5% to $37.1 million in 2002 from
$51.2 million in 2001. The decrease in project personnel and expenses for 2002 was due primarily to a decrease in compensation costs and a reduction in sub-contractor costs for the
year ended December 31, 2002, as compared to the year ended December 31, 2001 as a result of reductions in headcount and lower incentive compensation payments. The Company had 205
project personnel at December 31, 2002 as compared to 335 project personnel at December 31, 2001. During 2002, project personnel decreased by 130 employees, 59 as part of
reductions in force (discussed in Note 8) and the remainder through voluntary attrition. Project personnel and expenses increased as a percentage of revenue before expense reimbursements to
80.8% in 2002 from 66.7% in 2001.

Selling and Marketing Expenses.Selling and marketing expenses decreased 29.6% to $4.7 million in 2002 from
$6.7 million in 2001. The decrease was due primarily to the decision to reduce the number of selling and marketing personnel and business development costs. During 2002, selling and marketing
personnel decreased by eight as part of reductions in force (discussed in Note 8). Excluding the transition of eight project personnel to selling and marketing positions during the second
quarter of 2002, there were 11 selling and marketing personnel at December 31, 2002, compared to 19 at
December 31, 2001. Selling and marketing expenses increased as a percentage of revenue before expense reimbursements to 10.3% in 2002 from 8.8% in 2001.

General and Administrative Expenses.General and administrative expenses decreased 42.4% to $24.7 million in 2002 from
$43.0 million in 2001. The decrease in general and administrative costs is due primarily to a reduction in personnel compensation costs, a decrease in the provision for losses on accounts
receivable due to improved collection experience, a decrease in depreciation expense due to fixed asset impairments recorded in 2001, and an overall reduction in other general and administrative
costs. During 2002, general and administrative personnel headcount was reduced by 34 employees, 29 as part of reductions in force (discussed in Note 8) and the remainder through voluntary
attrition. There were 47 general and administrative personnel at December 31, 2002, compared to 81 at December 31, 2001. Also during 2002, the Company closed offices in Dallas, Texas;
Denver, Colorado and Minneapolis, Minnesota and reduced office space in Boston, Massachusetts and Chicago, Illinois.

Stock Compensation.Stock compensation expense decreased to $30,000 in 2002 from $454,000 in 2001. The decrease in stock
compensation expense was due to the departure of certain senior personnel during the first quarter 2001.

26

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Interest Income.Interest income decreased to $752,000 in 2002 from $1.8 million in 2001. The decrease was due
primarily to a decrease in interest rates from an average yield of 4.68% in 2001 versus 2.1% in 2002 and the use of $8.7 million of proceeds from the Company's secondary offering to fund both
working capital and capital expenditures.

Provision (Benefit) for Income Taxes.During 2002, there was a tax expense of $8.2 million as compared to a tax
benefit of $4.4 million in 2001 as a result of the Company recording a valuation allowance for the entire deferred tax asset of $15.7 million due to uncertainties regarding the
realization of the asset, including: growing net operating losses in 2002; three years of increasing net losses; uncertainty associated with forecasting a recovery in IT spending; loss of a
significant client, Pharmacia, during the third quarter 2002 which represented 26% of the Company's 2002 revenues, and given the Company's current cost structure, the current revenue base is not
expected to generate substantial taxable income in the near term.

Net Loss.Net loss increased to $28.1 million in 2002 from $25.0 million in 2001. The increase in net loss was
primarily due to an increase in restructuring charges to $7.4 million in 2002 versus $6.4 million in 2001, and the recording of a valuation allowance of $15.7 million for all
deferred tax assets, as previously discussed, offset by significant reductions in total costs and expenses.

Liquidity and Capital Resources

As of December 31, 2003, the Company maintains a line of credit with LaSalle Bank, N.A. ("LaSalle"), providing for borrowings of up to $3.5 million.
The Company's line of credit bears interest at LaSalle's prime rate and expires on October 31, 2004. The Company's line of credit is secured with $3.5 million in restricted cash held in
escrow by LaSalle. The restricted cash is invested at the Company's direction. There is no restriction on the interest earned on the restricted cash. The Company expects to renew this line of credit
upon its expiration. As of December 31, 2003, there were no borrowings outstanding under the $3.5 million line of credit. As of December 31, 2003, there were three letters of
credit totaling $580,500 for office leases and equipment drawn on the line of credit.

Inflation
did not have a material impact on the Company's revenue or loss from operations in 2001, 2002 or 2003.

As
of December 31, 2003, the Company had cash, cash equivalents, restricted cash and marketable securities of approximately $15.7 million. Based on the Company's current
business plan, the Company believes that its existing cash position along with cash provided from operations and borrowings available under its credit facility will be sufficient to meet working
capital and capital expenditure requirements for at least the next 12 months. To the extent future revenue is inadequate or recoverability of its receivables may be impaired to support costs
and expenditures, the Company's liquidity may be materially and adversely affected.

Capital
expenditures of approximately $6.9 million, $481,000 and $143,000 for 2001, 2002 and 2003, respectively, were used primarily for computers, office equipment and leasehold
improvements. The Company estimates capital expenditures for 2004 will be less than $1.0 million. Additionally, the Company may continue to purchase shares under the Company's Stock Repurchase
Program as discussed in Note 6.

27

---

Off-Balance Sheet Arrangements

The Company maintains three letters of credit against the line of credit for office equipment and office leases in Chicago, New York and Boston at
December 31, 2003 as follows:

|                                  |  | Amount of Commitment Expiration Per Period
|--------------------------------- |  | ------------------------------------------
|
|Letter of creditNew York office  |  | $                                         
|Letter of creditBoston office    |  |                                           
|Letter of creditOffice equipment |  |                                           
|                                  |  |                                           
|Total                             |  | $                                         
|                                  |  |                                           

The terms of the leases allow the lessor to draw on the line of credit should the Company be in default of the lease payment terms.

Contractual Obligations and Commercial Commitments

The following table summarizes operating lease obligations of the Company at December 31, 2003.

|                            |  |   |        | Payments due by period
|--------------------------- |  | - | ------ | ----------------------
|
|Operating lease obligations |  | $ | 18,665 |                       
|Other(1)                    |  |   | 3,615  |                       
|                            |  |   |        |                       
|Total                       |  | $ | 22,280 |                       
|                            |  |   |        |                       

---

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of Variable Interest
Entities" ("FIN 46"). In general, a variable interest entity is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does
not have equity investors with voting rights or (b) has equity investors that do not provide significant financial resources for the entity to support its activities. FIN 46 requires
certain variable interest entities to be consolidated by the primary beneficiary of the entity if the investors do not have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation requirements of FIN 46 apply
immediately to variable interest entities created after January 31, 2003. The Company adopted the provisions of FIN 46 effective February 1, 2003 and such adoption did not have a
material impact on its financial statements since it currently has no variable interest entities. In December 2003, the FASB issued FIN 46R with respect to variable interest entities
created before January 31, 2003, which, among other things, revised the implementation date to the first fiscal year or interim period ending March 15, 2004, with the exception of
Special Purpose Entities ("SPE"). The consolidation requirements apply to all SPE's in the first fiscal year or interim period ending after December 15, 2003. The Company adopted the provisions
of FIN 46R effective December 31, 2003 and such adoption did not have a material impact on its financial statements since it currently has no SPE's.

In
April 2003, FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities"("SFAS 149"). SFAS 149 amends and

28

---

clarifies
accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133. SFAS 149 is effective
for contracts and hedging relationships entered into or modified after June 30, 2003. The Company adopted the provisions of SFAS 149 effective June 30, 2003 and such adoption did
not have a material impact on its consolidated financial statements since the Company has not entered into any derivative or hedging transactions.

In
May 2003, FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity"("SFAS 150"). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with
characteristics of both debt and equity and requires an issuer to classify the following instruments as liabilities in its balance sheet:



In
November 2003, FASB issued FASB Staff Position No. 150-3 ("FSP 150-3") which deferred the effective dates for applying certain provisions
of SFAS 150 related to mandatorily redeemable financial instruments of certain non-public entities and certain mandatorily redeemable non-controlling interests for
public and
non-public companies. For public entities, SFAS 150 is effective for mandatorily redeemable financial instruments entered into or modified after May 31, 2003 and is effective
for all other financial instruments as of the first interim period beginning after June 15, 2003. For mandatorily redeemable non-controlling interests that would not have to be
classified as liabilities by a subsidiary under the exception in paragraph 9 of SFAS 150, but would be classified as liabilities by the parent, the classification and measurement
provisions of SFAS 150 are deferred indefinitely. The measurement provisions of SFAS 150 are also deferred indefinitely for other mandatorily redeemable non-controlling
interests that were issued before November 4, 2003. For those instruments, the measurement guidance for redeemable shares and non-controlling interests in other literature shall
apply during the deferral period. The adoption of FAS 150 did not have a material impact on the consolidated financial statements of the Company.

On
December 17, 2003, the Staff of the SEC issued Staff Accounting Bulletin No. 104 ("SAB 104"),"Revenue Recognition."which supercedes SAB 101, "Revenue Recognition in Financial Statements."SAB 104's primary purpose is to rescind accounting guidance
contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, "Accounting for Revenue
Arrangements with Multiple Deliverables." Additionally, SAB 104 rescinds the SEC's Revenue Recognition in Financial Statements Frequently Asked Questions and Answers
(the FAQ) issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition. Selected portions of the FAQ have been incorporated into SAB 104. The adoption of
SAB 104 did not materially affect our revenue recognition policies, nor our results of operations, financial position or cash flows.

29

---

EITF
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables," was issued in May 2003. Issue
No. 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. The provisions are effective
for revenue arrangements entered into in reporting periods beginning after June 15, 2003. The adoption of EITF Issue No. 00-21 did not materially affect our revenue
recognition policies, nor our results of operations, financial position or cash flows.

ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk

The Company's investments in cash, cash equivalents, restricted cash and marketable securities of approximately $15.7 million at December 31, 2003
primarily consist of investment grade debt securities of varying short-term maturities (28-30 days) issued by various organizations. The Company does not invest in
complex derivatives. Based on the nature of these investments, the cost of the securities equals the fair market value of the securities at December 31, 2003. If interest rates on investments
were to decrease immediately and uniformly by 10% from levels at December 31, 2003, from approximately 1.10% to 0.99%, loss before income taxes would increase by $17,270 which is
equal to the product of the 10% decrease in the interest rate multiplied by the approximately $15.7 million of short-term investments in cash equivalents and marketable securities
as of December 31, 2003.

ITEM 8. Financial Statements and Supplemental Information

The information in response to this item is included in the financial statements together with the reports of BDO Seidman, LLP and Deloitte &
Touche LLP, appearing on pages 32 through 54 of this Form 10-K, and in Item 7 under the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Changes in Accountants was previously reported in a Current Report on Form 8-K filed July 18, 2003.

ITEM 9A. Controls and Procedures



The
term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 ("Exchange Act"). These
rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is
recorded, processed, summarized, and reported within required time periods. As required by paragraph (b) of Rules 13a-15 and 15d-15 of the Exchange Act, Our Chief
Executive Officer and our Principal Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2003 (the "Evaluation Date"), and they have
concluded that, based on that evaluation, as of the Evaluation Date, such controls and procedures were effective at ensuring
that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.



We
maintain a system of internal accounting controls that is designed to provide reasonable assurance that our books and records accurately reflect our transactions and that our
established policies and procedures are followed. Based on the evaluation described above, there have been no changes to our internal controls over financial reporting that occurred during the last
fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

30

---

PART III

The information required by Part III (Items 10, 11, 12, 13 and 14) has been omitted because the Company intends to file with the Securities and
Exchange Commission not later than 120 days after the close of its fiscal year a definitive proxy statement pursuant to Regulation 14A. The information required by Items 10, 11,
12, 13 and 14 will be set forth in the Company's definitive proxy statement and is incorporated by reference into this Annual Report on Form 10-K.

31

---



BRAUN CONSULTING, INC.  INDEX TO FINANCIAL STATEMENTS

|                                                                                                                              |                                    | Page
|----------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ----
|Report of Independent Certified Public Accountants                                                                            |                                    | 33  
|Independent Auditors' Report                                                                                                  |                                    | 34  
|Financial Statements as of December 31, 2002 and 2003, and for Each of the Three Years in the Period Ended December 31, 2003: |                                    |     
|                                                                                                                              | Balance Sheets                     |     
|                                                                                                                              | Statements of Operations           |     
|                                                                                                                              | Statements of Stockholders' Equity |     
|                                                                                                                              | Statements of Cash Flows           |     
|                                                                                                                              | Notes to Financial Statements      |     

32

---



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The
Board of Directors and Stockholders of
Braun Consulting, Inc.:

We
have audited the accompanying balance sheet of Braun Consulting, Inc. (the "Company") as of December 31, 2003 and the related statements of operations, stockholders'
equity, and cash flows for the year then ended. We have also audited the schedule for the year ended December 31, 2003 listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

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

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Braun Consulting, Inc. as of December 31,
2003, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Also
in our opinion, the 2003 schedule presents fairly, in all material respects, the information set forth therein.

BDO
SEIDMAN, LLP

Chicago,
Illinois
January 29, 2004

33

---

INDEPENDENT AUDITORS' REPORT

The
Board of Directors and Stockholders of
Braun Consulting, Inc.:

We
have audited the accompanying balance sheet of Braun Consulting, Inc. (the "Company") as of December 31, 2002 and the related statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15(a)2. These
financial statements and financial statement schedule for each of the two years in the period ended December 31, 2002 are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and financial statement schedule based on our audits.

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

In
our opinion, such financial statements present fairly, in all material respects, the financial position of Braun Consulting, Inc. as of December 31, 2002, and the
results of its operations and its cash flows for
each of the two years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial
statement schedule for each of the two years in the period ended December 31, 2002, when considered in relation to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

DELOITTE &
TOUCHE LLP

Chicago,
Illinois
February 4, 2003

34

---



BRAUN CONSULTING, INC.  BALANCE SHEETS

|                                                                                                                                                                                                                                                                    |                                                                    | As of December 31,                       |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ---------------------------------------- | -------
|
|
|ASSETS                                                                                                                                                                                                                                                              |                                                                   
|Current assets:                                                                                                                                                                                                                                                     |                                                                    |                                          |        
|                                                                                                                                                                                                                                                                    | Cash and cash equivalents                                          |                                          | $      
|                                                                                                                                                                                                                                                                    | Restricted cash                                                    |                                          |        
|                                                                                                                                                                                                                                                                    | Marketable securities                                              |                                          |        
|                                                                                                                                                                                                                                                                    | Accounts receivable (net of allowance: $290 in 2002; $280 in 2003) |                                          |        
|                                                                                                                                                                                                                                                                    | Prepaid expenses and other current assets                          |                                          |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total current assets                     |        
|Equipment, furniture and softwarenet                                                                                                                                                                                                                               |                                                                    |                                          | 8,015  
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total assets                             |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                |                                                                   
|Current liabilities:                                                                                                                                                                                                                                                |                                                                    |                                          |        
|                                                                                                                                                                                                                                                                    | Accounts payable                                                   |                                          | $      
|                                                                                                                                                                                                                                                                    | Accrued compensation                                               |                                          |        
|                                                                                                                                                                                                                                                                    | Accrued restructuring expenses                                     |                                          |        
|                                                                                                                                                                                                                                                                    | Other accrued liabilities                                          |                                          |        
|                                                                                                                                                                                                                                                                    | Unearned revenue                                                   |                                          |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total current liabilities                |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        
|Deferred rent                                                                                                                                                                                                                                                       |                                                                    |                                          | 1,134  
|Accrued restructuring expenses, net of current portion                                                                                                                                                                                                              |                                                                    |                                          | 2,800  
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total liabilities                        |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        
|Stockholders' equity:                                                                                                                                                                                                                                               |                                                                    |                                          |        
|Preferred stock, $0.001 par value at December 31, 2002 and December 31, 2003; authorized 10,000,000 shares at December 31, 2002 and 2003; no shares have been issued at December 31, 2002 and
2003                                                                  |                                                                    |                                          |       
|Common stock, $0.001 par value at December 31, 2002 and December 31, 2003; authorized 50,000,000 shares at December 31, 2002 and December 31, 2003; issued and outstanding shares 18,279,765 shares at
December 31, 2002 and 17,122,453 shares at December 31, 2003 |                                                                    |                                          | 18     
|Additional paid-in capital                                                                                                                                                                                                                                          |                                                                    |                                          | 104,070
|Unearned deferred compensation                                                                                                                                                                                                                                      |                                                                    |                                          | (2     
|Accumulated deficit                                                                                                                                                                                                                                                 |                                                                    |                                          | (67,184
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total stockholders' equity               |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total liability and stockholders' equity |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                          |        

See notes to financial statements.

35

---

BRAUN CONSULTING, INC.  STATEMENTS OF OPERATIONS

|                                                 |                                       | Years Ended December 31, |        
|------------------------------------------------ | ------------------------------------- | ------------------------ | -------
|
|
|Revenue:                                         |                                       |                          |        
|                                                 | Revenue before expense reimbursements |                          | $      
|                                                 | Expense reimbursements                |                          |        
|                                                 |                                       |                          |        
|                                                 |                                       | Total revenue            |        
|Costs and expenses:                              |                                       |                          |        
|                                                 | Project personnel and expenses        |                          |        
|                                                 | Reimbursable expenses                 |                          |        
|                                                 | Selling and marketing expenses        |                          |        
|                                                 | General and administrative expenses   |                          |        
|                                                 | Amortization of intangible assets     |                          |        
|                                                 |                                       |                          |        
|                                                 |                                       | Total cost and expenses  |        
|                                                 |                                       |                          |        
|Operating loss                                   |                                       |                          | (31,269
|Interest income                                  |                                       |                          | 1,842  
|Interest expense                                 |                                       |                          | 64     
|                                                 |                                       |                          |        
|Loss before provision (benefit) for income taxes |                                       |                          | (29,491
|Provision (benefit) for income taxes             |                                       |                          | (4,447 
|                                                 |                                       |                          |        
|Net loss                                         |                                       | $                        | (25,044
|                                                 |                                       |                          |        
|Loss per share:                                  |                                       |                          |        
|                                                 | Basic                                 |                          | $      
|                                                 | Diluted                               |                          | $      
|Weighted average shares:                         |                                       |                          |        
|                                                 | Basic                                 |                          |        
|                                                 | Diluted                               |                          |        

See
notes to financial statements.

36

---



BRAUN CONSULTING, INC.  STATEMENTS OF STOCKHOLDERS' EQUITY

|                           |                                                    | Shares     |            | Common
Stock |    | Additional
Paid-In
Capital |   | Unearned
Deferred
Compensation |        | Retained
Earnings
(Accumulated
Deficit) |        | Total |  
|-------------------------- | -------------------------------------------------- | ---------- | ---------- | ------------ | -- | -------------------------- | - | ------------------------------ | ------ | --------------------------------------- | ------ | ----- | -
|
|BALANCE, JANUARY 1, 2001   |                                                    | 20,235,006 |            | $            | 20 |                            | $ | 106,165                        |        | $                                       | (1,834 | )     | $
|                           | Exercise of stock options                          |            | 388,233    |              |    | 1                          |   |                                | 724    |                                         |        |      |  
|                           | Employee stock purchase plan                       |            | 99,462     |              |    |                           |   |                                | 760    |                                         |        |      |  
|                           | Common stock repurchase                            |            | (205,974   | )            |    |                           |   |                                | (727   | )                                       |        |      |  
|                           | Income tax benefit from disqualifying dispositions |            |           |              |    |                           |   |                                | 476    |                                         |        |      |  
|                           | Issuance of stock options                          |            |           |              |    |                           |   |                                | (1,487 | )                                       |        | 1,487 |  
|                           | Amortization of deferred compensation expense      |            |           |              |    |                           |   |                                |       |                                         |        | 286   |  
|                           | Initial public offering adjustment                 |            |           |              |    |                           |   |                                | 129    |                                         |        |      |  
|                           | Net loss                                           |            |           |              |    |                           |   |                                |       |                                         |        |      |  
|                           |                                                    |            |            |              |    |                            |   |                                |        |                                         |        |       |  
|BALANCE, DECEMBER 31, 2001 |                                                    | 20,516,727 |            |              | 21 |                            |   | 106,040                        |        |                                         | (61    | )     |  
|                           | Exercise of stock options                          |            | 267,754    |              |    |                           |   |                                | 729    |                                         |        |      |  
|                           | Employee stock purchase plan                       |            | 117,732    |              |    |                           |   |                                | 225    |                                         |        |      |  
|                           | Common stock repurchase                            |            | (2,622,448 | )            |    | (3                         | ) |                                | (2,895 | )                                       |        |      |  
|                           | Issuance of stock options                          |            |           |              |    |                           |   |                                | (29    | )                                       |        | 29    |  
|                           | Amortization of deferred compensation expense      |            |           |              |    |                           |   |                                |       |                                         |        | 30    |  
|                           | Net loss                                           |            |           |              |    |                           |   |                                |       |                                         |        |      |  
|                           |                                                    |            |            |              |    |                            |   |                                |        |                                         |        |       |  
|BALANCE, DECEMBER 31, 2002 |                                                    | 18,279,765 |            |              | 18 |                            |   | 104,070                        |        |                                         | (2     | )     |  
|                           | Exercise of stock options                          |            | 28,125     |              |    |                           |   |                                | 33     |                                         |        |      |  
|                           | Employee stock purchase plan                       |            | 49,563     |              |    |                           |   |                                | 62     |                                         |        |      |  
|                           | Common stock repurchase                            |            | (1,235,000 | )            |    | (1                         | ) |                                | (1,345 | )                                       |        |      |  
|                           | Other                                              |            |           |              |    |                           |   |                                | 72     |                                         |        |      |  
|                           | Amortization of deferred compensation expense      |            |           |              |    |                           |   |                                |       |                                         |        | 2     |  
|                           | Net loss                                           |            |           |              |    |                           |   |                                |       |                                         |        |      |  
|                           |                                                    |            |            |              |    |                            |   |                                |        |                                         |        |       |  
|BALANCE, DECEMBER 31, 2003 |                                                    | 17,122,453 |            | $            | 17 |                            | $ | 102,892                        |        | $                                       |       |       | $
|                           |                                                    |            |            |              |    |                            |   |                                |        |                                         |        |       |  

See notes to financial statements.

37

---

BRAUN CONSULTING, INC.  STATEMENTS OF CASH FLOWS

|                                                     |                                                                                | Years Ended December 31,                           |                                          
|---------------------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------- | -----------------------------------------
|
|
|Cash flows from operating activities:                |                                                                                |                                                    |                                          
|                                                     | Net loss                                                                       |                                                    | $                                        
|                                                     | Adjustments to reconcile net loss to net cash flows from operating activities: |                                                    |                                          
|                                                     |                                                                                | Compensation expense related to stock options      |                                          
|                                                     |                                                                                | Income tax benefit from disqualifying dispositions |                                          
|                                                     |                                                                                | Loss on disposal of assets                         |                                          
|                                                     |                                                                                | Loss on impairments                                |                                          
|                                                     |                                                                                | Deferred income taxes                              |                                          
|                                                     |                                                                                | Provision for losses on accounts receivable        |                                          
|                                                     |                                                                                | Depreciation and amortization                      |                                          
|                                                     |                                                                                | Changes in assets and liabilities:                 |                                          
|                                                     |                                                                                |                                                    | Accounts receivable                      
|                                                     |                                                                                |                                                    | Income taxes receivable                  
|                                                     |                                                                                |                                                    | Prepaid expenses and other current assets
|                                                     |                                                                                |                                                    | Accounts payable                         
|                                                     |                                                                                |                                                    | Accrued liabilities                      
|                                                     |                                                                                |                                                    | Deferred rent                            
|                                                     |                                                                                |                                                    | Accrued restructuring                    
|                                                     |                                                                                |                                                    | Unearned revenue                         
|                                                     |                                                                                |                                                    |                                          
|                                                     |                                                                                |                                                    |                                          
|Cash flows from investing activities:                |                                                                                |                                                    |                                          
|                                                     | Purchases of marketable securities                                             |                                                    |                                          
|                                                     | Sales of marketable securities                                                 |                                                    |                                          
|                                                     | Purchases of equipment, furniture and software                                 |                                                    |                                          
|                                                     | Proceeds from sale of equipment, furniture and software                        |                                                    |                                          
|                                                     |                                                                                |                                                    |                                          
|                                                     |                                                                                |                                                    |                                          
|Cash flows from financing activities:                |                                                                                |                                                    |                                          
|                                                     | Borrowings                                                                     |                                                    |                                          
|                                                     | Repayments of debt                                                             |                                                    |                                          
|                                                     | Net proceeds from initial public offering                                      |                                                    |                                          
|                                                     | Increase in restricted cash                                                    |                                                    |                                          
|                                                     | Exercise of stock options                                                      |                                                    |                                          
|                                                     | Proceeds from issuance of common stock                                         |                                                    |                                          
|                                                     | Treasury stock purchase and retirement                                         |                                                    |                                          
|                                                     |                                                                                |                                                    |                                          
|                                                     |                                                                                |                                                    |                                          
|Net increase (decrease) in cash and cash equivalents |                                                                                |                                                    | (50                                      
|Cash and cash equivalents at beginning of year       |                                                                                |                                                    | 2,723                                    
|                                                     |                                                                                |                                                    |                                          
|Cash and cash equivalents at end of year             |                                                                                | $                                                  | 2,673                                    
|                                                     |                                                                                |                                                    |                                          
|Supplemental disclosure of cash flow information:    |                                                                                |                                                    |                                          
|                                                     | Interest paid                                                                  |                                                    | $                                        
|                                                     |                                                                                |                                                    |                                          
|                                                     | Income taxes paid                                                              |                                                    | $                                        
|                                                     |                                                                                |                                                    |                                          

See notes to financial statements.

38

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BRAUN CONSULTING, INC.

Notes to Financial Statements
Years Ended December 31, 2001, 2002 and 2003
(In thousands, except share and per share data)

1. DESCRIPTION OF BUSINESS

Braun Consulting, Inc. (the "Company" or "Braun Consulting") combines strategy consulting, industry specific business expertise and advanced technology
capabilities to build pragmatic, customized solutions that solve organizations' business challenges and improve return on investment.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Management's Use of 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 revenue and expenses during the reporting periods. For example, significant estimates and
assumptions have been made with regard to the revenue recognition under fixed-price contracts, deferred taxes, and estimated costs associated with restructuring charges. Actual results could differ
from those estimates.

Revenue RecognitionThe Company enters into various consulting arrangements that are billed either on a
time-and-materials basis or on a fixed-price basis. The majority of these contracts are generally less than 120 days in duration and either require an
up-front payment or are billed in bi-weekly installments ratably over the term of the contract. Termination of the contract by the customer would require the customer to pay
the Company for hours incurred to date. Costs under the Company's contracts are expensed as incurred.

The
Company derives substantially all of its revenue from fees for consulting services. In all cases, revenue is recognized when earned and realizable. Revenue on
time-and-materials contracts is recognized as the services are provided. The Company recognizes revenue on fixed-price projects based upon the ratio of hours worked to total
estimated hours to complete the project. The cumulative impact of any revision in estimates of the percentage-of-completion is reflected in the period in which the revision
becomes known. Losses on contracts, if any, are provided for in full in the period when first determined. The Company recognizes unearned revenue when client billing exceeds the amount of revenue
recognized. In certain instances, client arrangements require that a project milestone must be reached and written acceptance received from the client prior to billing. In these cases, revenue is
recognized when milestones are reached and written acceptance from the client is received. In cases where collectibility is not assured from the client, revenue recognition is deferred until cash
collection occurs or is reasonably assured. We typically use cash-based revenue recognition for clients with one of the following characteristics: deteriorating or poor financial condition
or limited financial resources.

Revenue
from sales of software is recognized on a gross basis upon delivery of the product and client acceptance, when all significant contractual obligations are satisfied and the
collection of the resulting receivables is reasonably assured.

Revenue
before expense reimbursements includes revenue from consulting services and product sales. Those amounts have been combined in the presentation as product sales amounts were
substantially less than 10% of revenue in each period presented.

The
Company provides an allowance for doubtful accounts against the portion of accounts receivable that are estimated to be uncollectible. Such allowance is reviewed quarterly based upon
the recovery experiences of the Company, management's estimate of future collection and a review of all

39

---

accounts
receivable. The balances owed by several clients could materially impact the financial statements if such balances are not collected. In prior years, the Company's collection experience has
varied substantially from quarter to quarter and accordingly, has resulted in quarterly fluctuations of write-offs and bad debt expense.

Cash and Cash EquivalentsCash and cash equivalents include cash deposits in banks and highly liquid investments with original
maturities of three months or less at the time of purchase.

Restricted CashRestricted cash of $3,500 represents cash held in escrow by LaSalle Bank N.A. ("LaSalle") as security for the
Company's line of credit. The restricted cash is invested at the Company's direction. There is no restriction on the interest earned on the restricted cash. The line of credit will expire on
October 31, 2004.

Marketable SecuritiesMarketable securities are comprised of a portfolio of investment grade debt securities of varying
short-term maturities (every 28-30 days) and are classified as available-for-sale securities under SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities."Each
28-30 days, the Company makes an investment decision to
reinvest in the debt security for an additional 28-30 days or to redeem it at par value, which is its original cost. The interest earned on the securities is reset every
28-30 days and as a result, the securities are similar to variable interest rate instruments. Based on the nature of these investments, the cost of the securities equals the fair
market value of the securities at December 31, 2003. The Company does not invest in complex derivatives. Interest on marketable securities is included in interest income.

Equipment, Furniture and SoftwareEquipment and furniture are stated at cost less accumulated depreciation. Depreciation is
provided over the estimated useful lives of the related assets using the double-declining balance method. Leasehold improvements are depreciated over the shorter of the useful life or lease term.
Software is stated at cost less accumulated amortization. The estimated useful lives are:

Computer and office equipment

3-5 yearsOffice furniture

7-10 yearsSoftware

3-5 years


Long-Lived AssetsThe Company periodically assesses the recoverability of its
long-lived assets based on its expectations of future profitability and undiscounted cash flow of the related operations. These factors, along with management's plans with respect to
operations, are considered in assessing the recoverability of long-lived assets. If the Company determines, based on such measures, that the carrying amount is impaired, the
long-lived assets will be written down to their recoverable value with a corresponding charge to earnings. Recoverable value is calculated as the amount of estimated future cash flows
(discounted at a rate commensurate with the risk involved) for the remaining amortization period. In 2001 and 2002, an impairment charge was recorded for long-lived assets (see
Note 4).

Deferred RentThe Company leases its facilities under operating leases that expire at various dates through 2012. Some of the
operating leases provide for increasing rents over the terms of the leases; total rent expense under these leases is recognized ratably over the lease terms. Any difference between the amount paid per
the lease terms and the amount expensed is reflected as deferred rent on the balance sheets.

Stock-Based CompensationThe Company accounts for stock-based employee compensation arrangements in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and complies with the disclosure provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based

40

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Compensation"
as amended by SFAS No. 148 (SFAS 148), "Accounting for Stock-Based Compensation-Transition and Disclosurean Amendment of FASB Statement No. 123." The
Company accounts for the Employee Stock Purchase Plan in accordance with the provisions of SFAS 123. Under APB Opinion No. 25, compensation expense is based on the difference, if any, on
the date of the grant, between the fair value of the Company's stock and the exercise price. Compensation expense is recognized at the date of grant for options fully vested. For options granted over
a vesting period, the expense is recognized over the vesting period (see Note 11).

Income TaxesDeferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in earnings in the period of enactment. A valuation allowance is provided for deferred tax assets whenever it is more likely than not that future tax benefits will not be realized.
During 2002 and through December 31 2003, a valuation allowance was recorded for the entire deferred tax asset (see Note 9).

Earnings (Loss) Per ShareBasic loss per share is computed based on the weighted average number of common shares outstanding
during the period. Diluted loss per share is computed based on the weighted average number of common shares outstanding plus the dilutive effect of stock options outstanding during the period. The
Company is in a net loss position for the years ended December 31, 2001, 2002 and 2003. Therefore, the common stock equivalents are not considered in loss per share-diluted, since their effect
is anti-dilutive.

Potentially
dilutive securities of 784,762, 222,206, and 2,682,790, respectively, were excluded from the diluted loss per share calculations for the years ended December 31, 2001,
2002 and 2003.

Recent Accounting PronouncementsIn January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation
No. 46, 'Consolidation of Variable Interest Entities' ("FIN 46"). In general, a variable interest entity is a corporation, partnership, trust or any other legal structure used for business
purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide significant financial resources for the entity to support its
activities. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The Company adopted the provisions of FIN 46 effective February 1,
2003 and such adoption did not have a material impact on its financial statements since it currently has no variable interest entities. In December 2003, the FASB issued FIN 46R with
respect to variable interest entities created before January 31, 2003, which, among other things, revised the implementation date to the first fiscal year or interim period ending
March 15, 2004, with the exception of Special Purpose Entities ("SPE"). The consolidation requirements apply to all SPE's in the first fiscal year or interim period ending after
December 15, 2003. The Company adopted the provisions of FIN 46R effective December 31, 2003 and such adoption did not have a material impact on its financial statements since it
currently has no SPE's.

In
April 2003, FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities"("SFAS 149"). SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS 133. SFAS 149 is effective for contracts and

41

---

hedging
relationships entered into or modified after June 30, 2003. The Company adopted the provisions of SFAS 149 effective June 30, 2003 and such adoption did not have a
material impact on its consolidated financial statements since the Company has not entered into any derivative or hedging transactions.

In
May 2003, FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity"("SFAS 150"). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with
characteristics of both debt and equity and requires an issuer to classify the following instruments as liabilities in its balance sheet:



In
November 2003, FASB issued FASB Staff Position No. 150-3 ("FSP 150-3") which deferred the effective dates for applying certain provisions of
SFAS 150 related to mandatorily redeemable financial instruments of certain non-public entities and certain mandatorily redeemable non-controlling interests for public
and non-public companies. For public entities, SFAS 150 is effective for mandatorily redeemable financial instruments entered into or modified after May 31, 2003 and is
effective for all other financial instruments as of the first interim period beginning after June 15, 2003. For mandatorily redeemable non-controlling interests that would not have
to be classified as liabilities by a subsidiary under the exception in paragraph 9 of SFAS 150, but would be classified as liabilities by the parent, the classification and measurement
provisions of SFAS 150 are deferred indefinitely. The measurement provisions of SFAS 150 are also deferred indefinitely for other mandatorily redeemable non-controlling
interests that were issued before November 4, 2003. For those instruments, the measurement guidance for redeemable shares and non-controlling interests in other literature shall
apply during the deferral period. The adoption of FAS 150 did not have a material impact on the consolidated financial statements of the Company.

On
December 17, 2003, the Staff of the SEC issued Staff Accounting Bulletin No. 104 ("SAB 104"),"Revenue
Recognition."which supercedes SAB 101, "Revenue Recognition in Financial Statements."SAB 104's primary purpose is to rescind
accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, "Accounting for
Revenue Arrangements with Multiple Deliverables." Additionally, SAB 104 rescinds the SEC's Revenue Recognition in Financial Statements Frequently Asked Questions and Answers
(the "FAQ") issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition. Selected portions of the FAQ have been incorporated into SAB 104. The adoption of SAB 104 did not
materially affect our revenue recognition policies, nor our results of operations, financial position or cash flows.

42

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EITF
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables," was issued in May 2003. Issue
No. 00-21 addresses certain aspects of the accounting by a vendor for
arrangements under which it will perform multiple revenue-generating activities. The provisions are effective for revenue arrangements entered into in reporting periods beginning after June 15,
2003. The adoption of EITF Issue No. 00-21 did not materially affect our revenue recognition policies, nor our results of operations, financial position or cash flows.

3. EQUIPMENT, FURNITURE AND SOFTWARE

Equipment, furniture and software, and the related accumulated depreciation and amortization consist of the following:

2002

2003Computer and office equipment

$
8,770

$
8,859Office furniture


2,349


2,151Software


3,741


3,787Leasehold improvements


2,726


2,51917,586


17,316Accumulated depreciation and amortization


(9,571
)

(11,481
)Total

$
8,015

$
5,835


During 2003, assets with a cost of $412 and accumulated depreciation of $195 associated with office consolidations were abandoned with a net charge to general and
administrative expenses of $217.

During
2002, assets with a cost of $1,526 and accumulated depreciation of $488 associated with office consolidations were abandoned. Also during 2002, the Company recorded an impairment
charge on computer equipment with a cost of $801 and accumulated amortization of $680 (see Note 4).

During
2001, assets with a cost of $1,253 and accumulated depreciation of $379 associated with office consolidations were abandoned. Other assets with a cost of $42 and accumulated
depreciation of $30 were sold for $21. Also during 2001, the Company recorded impairment charges on software with a cost of $2,002 and accumulated amortization of $267 (see Note 4).

4. ASSET IMPAIRMENTS

During the fourth quarter of 2002, the Company recorded an impairment charge of $121 related to excess computer equipment. The impairment charge resulted from the
Company having excess computer equipment on hand due to significant staff reductions throughout 2002. Continued uncertainty around the recovery in IT spending in 2003, estimated future cash flows
related to these assets, age of the technology, anticipated limited hiring of employees and the lack of a viable resale market for these computers indicated that an impairment of the full value
occurred during the fourth quarter 2002.

During
the third quarter of 2001, the Company recorded an impairment charge of $1,735 related to software purchased for business development purposes. The impairment charge resulted from
changes in economic conditions and the decline in demand from prospective clients for such software. Estimated future cash flows related to this asset and the lack of a viable resale market for the
software indicated that an impairment of the full value occurred.

In
1999, the Company acquired ETCI, a consulting firm specializing in the use and implementation of Clarify customer relationship management software. In the second half of 2001, the
volume of

43

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Clarify-related
revenue declined sharply and no new service opportunities involving Clarify products were foreseen in the third quarter. Furthermore, Nortel Networks, then the owner of the Clarify
product, announced in September 2001 that it would make no further investments in the Clarify business unit. Based on an analysis of the goodwill associated with ETCI, management determined
that estimated future cash flows would be inadequate to support the remaining unamortized balance of goodwill and recorded a charge of $9,868 during the third quarter of 2001.

5. NOTES PAYABLE

As of December 31, 2002 and 2003, the Company maintained a line of credit with LaSalle, providing for borrowings of up to $3,500. The Company's line of
credit bears interest at LaSalle's prime rate and expires on October 31, 2004. The Company's line of credit is secured with $3,500 in restricted cash held in escrow by LaSalle. The restricted
cash is invested at the Company's direction. There is no restriction on the interest earned on the restricted cash. The Company expects to renew this line of credit upon its expiration. As of
December 31, 2002 and 2003, there were no borrowings outstanding under the $3,500 line of credit. As of December 31, 2002 and 2003, there were three letters of credit totaling $799.4 and
$580.5, respectively, for office leases and equipment drawn on the line of credit.

The
Company maintains three letters of credit against the line of credit for office leases in Chicago, New York and Boston at December 31, 2003 as follows:

Amount of Commitment Expiration
Per PeriodTotal Amounts
Committed

Less Than
1 Year

1-3 YearsLetter of creditNew York office

$
203.5

$
50.9

$
Letter of creditBoston office


265.0


40.0


Letter of creditOffice equipment


112.0


22.0


90.0Total

$
580.5

$
112.9

$
90.0


The terms of the leases allow the lessor to draw on the line of credit should the Company be in default of the lease payment terms.

6. COMMON STOCK

Prior to July 28, 1999, Braun Consulting was organized as an S corporation. In connection with the Company's re-incorporation in
Delaware in 1999, Braun Consulting converted its no par value common stock to $0.001 par value and authorized 10,000,000 shares of preferred stock, $0.001 par value per share. No preferred
stock has been issued as of December 31, 2003.

On
May 1, 2001, 66,874 treasury shares, originally issued at $3.00 per share, were purchased as part of an employment agreement at $5.67 per share for a total cost of $379. On
June 27, 2001, the Board of Directors approved the retirement of these treasury shares, resulting in a charge to retained earnings of $178.

On
November 2, 2001, the Board of Directors approved a stock repurchase program. The Company purchased 1,000,000 shares of its common stock at an average price of $1.72 per
share through December 31, 2002. The par value method of accounting was used for these share repurchases and all shares purchased were retired. The cost of shares acquired was allocated to par
value and additional paid-in-capital.

44

---

On
November 4, 2002, the Board of Directors approved a second Stock Repurchase Program (the "Second Program"). Under the Second Program, the Company was authorized to purchase up
to two million dollars of its shares over the 24 months beginning November 4, 2002. As of December 31, 2002, the Company had purchased 1,761,548 shares of its common stock at an
average price of $0.97 per share. The Second Program was terminated on March 31, 2003, at which time the Company had purchased 2,055,848 shares of its common stock at an average price of $0.97
per share. The par value method of accounting was used for these share repurchases and all shares purchased were retired. The cost of shares acquired was allocated to par value and additional
paid-in-capital.

On
February 4, 2003, the Board of Directors approved a third Stock Repurchase Program (the "Third Program"). Under the Third Program, the Company is authorized to purchase up to
two million dollars of its shares over the 24 months beginning February 4, 2003. As of December 31, 2003 the Company had purchased 940,700 shares of its common stock at an average
price of $1.12 per share. The par value method of accounting was used for these share repurchases and all shares purchased were retired. The
cost of shares acquired was allocated to par value and additional paid-in-capital.

7. COMMITMENTS AND CONTINGENCIES

The Company leases office facilities under operating lease agreements through 2012. In addition, the Company leases equipment under various operating lease
agreements expiring from 2003 through 2006.

Future
minimum lease payments under all non-cancelable operating leases are as follows:

|           |  |   |        | Payments due by period
|---------- |  | - | ------ | ----------------------
|
|Facilities |  | $ | 22,087 |                       
|Equipment  |  |   | 193    |                       
|           |  |   |        |                       
|Total      |  | $ | 22,280 |                       
|           |  |   |        |                       

Of the $22,087 total facilities minimum lease payments, $3,615 represents costs, before projected sublease income, for office space that has been closed or
reduced in size. Of the costs for office space that has been closed or reduced in size, $1,168 will be in 2004; $1,062 will be in 2005; $769 will be in 2006; $454 will be in 2007; and the remainder of
$162 will be in 2008.

Rent
expense for facilities and equipment was $5,469, $5,548, and $4,772 for the years ended December 31, 2001, 2002 and 2003, respectively. Rent expense for facilities in 2003
includes real estate taxes paid ($641), straight-line rent adjustments for 2002 ($54), and rent expense associated with leases that terminated during 2002 ($273). Rent expense was reduced
by sublease proceeds received for office space in Chicago, Indianapolis, New York and St. Louis in the amount of $651.

Braun
Consulting and Steven Braun, Thomas Duvall, and John Burke, as officers of Braun Consulting, are defendants in a lawsuit,Luciano Mor v. Braun
Consulting, Inc.; Steven Braun; Thomas Duvall; John Burke; Adams, Harkness & Hill, Inc.; Credit Suisse First Boston Corp.; FleetBoston Robertson Stephenson, Inc.; J.P.
Morgan Chase & Co.; Lehman Brothers Holdings, Inc.; Prudential Securities Incorporated; and Salomon Smith Barney Holdings, Inc., Case No. 01 CV 10629,
filed on November 26, 2001, in the United States District Court for the Southern District of New York ("the Case"). Messrs. Duvall and Burke are former officers of Braun Consulting. The
class action complaint in the Case alleges violations of federal securities laws in connection with the Company's initial public offering occurring in August 1999 based on alleged omissions in
the Company's prospectus relating to

45

---

compensation
payable to, and the manner of distribution of the Company's initial public offering shares by, Braun Consulting's underwriters. The complaint does not allege any claims relating to any
alleged misrepresentations or omissions with respect to the Company's business. The Case is among approximately 300 putative class actions against certain issuers, their officers and directors, and
underwriters with respect to such issuers' initial public offerings, coordinated as In re Initial Public Offering Securities Litigation, 21 MC 92 (SAS) (collectively, the "IPO Securities Litigation").

Braun
Consulting has entered into a Memorandum of Understanding (the "MOU"), along with most of the other defendant issuers in the IPO Securities Litigation, whereby such issuers and
their officers and directors (including Braun Consulting and Messrs. Braun, Duvall and Burke) will be dismissed with prejudice from the IPO Securities Litigation, subject to the satisfaction of
certain conditions. Under the terms of the MOU, neither Braun Consulting nor any of its formerly named individual defendants admit any basis for liability with respect to the claims in the Case. The
MOU provides that insurers for Braun Consulting and the other defendant issuers participating in the settlement will guaranty that the plaintiffs will recover at least $1,000,000 to settle the IPO
Securities Litigation, except that no such payment will occur until claims against the underwriters are resolved and such payment will be paid only if the recovery against the underwriters for such
claims is less than $1,000,000 and then only to the extent of any shortfall. Under the terms of the MOU, neither Braun Consulting nor any of its named directors will pay any amount of the settlement.
The MOU further provided that participating defendant issuers will assign certain claims they may have against the defendant underwriters in
connection with the IPO Securities Litigation. The MOU is subject to the satisfaction of certain conditions, including, among others, approval of the court and the issuers' insurers.

Braun
Consulting was a defendant in an adversary proceeding filed on or about May 29, 2003, in the United States District Bankruptcy Court for the Southern District of New York,
styledBernard Katz, Trustee v. Braun Consulting, Inc., Adversary Case No. 03-03441, with respect to the Chapter 11 bankruptcy case
of Metiom, Inc. ("Metiom"). Prior to the filing of its bankruptcy case, Metiom was a customer of Braun. The proceeding was seeking to avoid and recover certain payments on account made to Braun
by Metiom within the ninety days prior to the filing of Metiom's bankruptcy case, pursuant to Section 547 of the United States Bankruptcy Code. The Chapter 11 bankruptcy trustee, as the
plaintiff in the adversary proceeding, was seeking to recover $108 plus interest. On March 5, 2004, the Company paid $22.5 to settle the adversary proceeding.

The
Company is not involved in any other material legal proceedings.

8. RESTRUCTURING CHARGES

Throughout 2003, the Company enacted several cost cutting measures, in addition to the measures taken in 2002 and 2001 to address the challenging business
conditions. As a result, in 2003, the Company recorded restructuring and other related charges of $1,340, consisting of $1,123 for closure and consolidation of facilities and $217 related to the
abandonment of associated fixed assets and leasehold improvements. The $1,123 for closure and consolidation of facilities represents future minimum facility lease payments to exit the facilities, net
of estimated sublease proceeds to be received.

The
restructuring charge related to the closure of facilities has been computed as the sum of the estimated total minimum lease costs to be incurred, including holding costs less the
estimated sublease proceeds to be received from subleasing the properties, plus the estimated costs of the services necessary to close the properties and secure tenants. These cost estimates are based
upon the expertise and input provided by local real estate professionals and internal Company resources.

46

---

During
2002, the Company enacted several cost cutting measures to address the challenging business conditions. As a result, the Company recorded restructuring and other related charges
of $7,436, consisting of $4,151 for closure and consolidation of facilities, $1,035 related to the abandonment of associated fixed assets and leasehold improvements, and $2,250 for headcount
reductions. The $4,151 for closure and consolidation of facilities represents future minimum facility lease payments to exit the
facilities, net of estimated sublease proceeds to be received. These plans also resulted in headcount reductions of 96 employees, consisting of 59 billable consultants and 37 internal services staff.

Restructuring
reserve activities during the year ended December 31, 2003, were as follows:

|                       |  | Balance at
December 31, 2002 |       | Expense |   | Utilization |  | Accrual Reversal |        | Balance at
December 31, 2003
|---------------------- |  | ---------------------------- | ----- | ------- | - | ----------- |  | ---------------- | ------ | ----------------------------
|Facilities             |  | $                            | 5,099 |         | $ | 1,340       |  | $                | (4,255 | )                           
|Severance and benefits |  |                              | 272   |         |   |            |  |                  | (247   | )                           
|                       |  |                              |       |         |   |             |  |                  |        |                             
|Totals                 |  | $                            | 5,371 |         | $ | 1,340       |  | $                | (4,502 | )                           
|                       |  |                              |       |         |   |             |  |                  |        |                             

During 2003, restructuring charges of $1,340 are included in the Statements of Operations in general and administrative expenses. Of the total restructuring and
other related charges utilized, $4,285 was in cash, $217 was non-cash resulting from the abandonment of fixed assets and leasehold improvements. Estimated office closing expenses of $291,
accrued during the fourth quarter of 2002, were reversed as a reduction of general and administrative expenses when office space was subleased sooner than anticipated. Estimated severance and benefits
expenses of $25, accrued during the fourth quarter of 2002, were reversed as a reduction of general and administrative expenses when actual outplacement service fees incurred were less than expected.

Facilities
costs of $642 are expected to be paid during 2004 with the remaining costs of $1,251 expected to be paid during 2005 through 2008, based on the required lease payments under
the subject operating leases.

Restructuring
reserve activities during the year ended December 31, 2002, were as follows:

|                       |  | Balance at
December 31, 2001 |       | Expense |   | Utilization |  | Accrual Reversal |        | Balance at
December 31, 2002
|---------------------- |  | ---------------------------- | ----- | ------- | - | ----------- |  | ---------------- | ------ | ----------------------------
|Facilities             |  | $                            | 2,566 |         | $ | 5,186       |  | $                | (2,595 | )                           
|Severance and benefits |  |                              | 999   |         |   | 2,250       |  |                  | (2,948 | )                           
|                       |  |                              |       |         |   |             |  |                  |        |                             
|Totals                 |  | $                            | 3,565 |         | $ | 7,436       |  | $                | (5,543 | )                           
|                       |  |                              |       |         |   |             |  |                  |        |                             

During 2002, restructuring and other related charges of $7,436 are included in the Statements of Operations in the following amounts and categories: $1,854 in
project personnel and expenses; $193 in selling and marketing expenses; and $5,389 in general and administrative expenses. Of the total restructuring and other related charges utilized in 2002, $4,508
was in cash, $1,035 was non-cash resulting from the abandonment of fixed assets and leasehold improvements. Estimated office closing expenses of $58, accrued in the second quarter of 2002,
were reversed as a reduction of general and administrative expenses when office space was subleased sooner than anticipated. Estimated severance and benefits expenses of $29, accrued during the third
and fourth quarters of 2002, were reversed as a reduction of general and administrative expenses when actual severance costs incurred were less than expected.

47

---

Restructuring
reserve activities during the year ended December 31, 2001, were as follows:

|                       |  | Balance at
December 31, 2000 |   | Expense |   | Utilization |  | Accrual Reversal |        | Balance at
December 31, 2001
|---------------------- |  | ---------------------------- | - | ------- | - | ----------- |  | ---------------- | ------ | ----------------------------
|Facilities             |  | $                            |  |         | $ | 4,026       |  | $                | (1,460 | )                           
|Severance and benefits |  |                              |  |         |   | 2,242       |  |                  | (1,243 | )                           
|Other                  |  |                              |  |         |   | 90          |  |                  | (90    | )                           
|                       |  |                              |   |         |   |             |  |                  |        |                             
|Totals                 |  | $                            |  |         | $ | 6,358       |  | $                | (2,793 | )                           
|                       |  |                              |   |         |   |             |  |                  |        |                             

During 2001, restructuring and other related charges of $6,358 are included in the Statements of Operations in the following amounts and categories, $1,676 in
project personnel and expenses, $163 in selling and marketing expenses, and $4,519 in general and administrative expenses. Of the total restructuring and other related charges utilized, $1,971 was in
cash, $874 was non-cash resulting from the abandonment of fixed assets and leasehold improvements, and $52 was related to estimated office closing expenses accrued in the third quarter,
but reversed as a reduction of general and administrative expenses during the fourth quarter when office space was subleased sooner than anticipated.

9. INCOME TAXES

The components of the provision (benefit) for income taxes for the years ended December 31, 2001, 2002 and 2003 consisted of:

2001

2002

2003Current:Federal

$


$


$
State


474


76


89Foreign





101


Total current


474


177


89Deferred:Federal


(3,875
)

(6,010
)

(3,186
)State


(1,143
)

(1,604
)

(1,948
)Valuation allowance


97


15,650


5,206Total deferred


(4,921
)

8,036


72Total provision (benefit)

$
(4,447
)
$
8,213

$
161


At December 31, 2003, Braun Consulting had approximately $49,500 of federal and $48,000 of state net operating loss carryforwards available to offset
future taxable income, which expire from 2019 to 2022, respectively. Under the Tax Reform Act of 1986, the amounts of and benefits from net operating loss carryforwards may be impaired or limited in
certain circumstances. Events which cause limitations in the amount of net operating losses that Braun Consulting may utilize in any one year include, but are not limited to, Braun Consulting's
ability to generate profits.

In
2002, a valuation allowance was recorded for the entire deferred net tax asset as a result of uncertainties regarding the realization of the net asset including: growing net operating
losses in 2002; three years of increasing net losses; uncertainty associated with forecasting a recovery in IT spending; loss of a significant client, Pharmacia, during the third quarter 2002, which
represented 26% of the Company's 2002 revenue before expense reimbursements; and given the Company's current cost

48

---

structure,
the current revenue base is not expected to generate substantial taxable income in the near term. An additional $5,206 of valuation was recorded in 2003.

Income
tax expense (benefit) for the years ended December 31, 2001, 2002 and 2003 differed from the amounts computed by applying the U.S. statutory income tax rate to
pre-tax loss as a result of the following:

2001

2002

2003Income tax benefit computed at statutory rate

(34.0
)%
(34.0
)%
(34.0
)%Amortization of intangible assets

19.0



Stock compensation

0.5



State income taxes, net of federal benefit

(1.2
)
(3.6
)
(11.6
)Valuation allowance

0.4

78.6

47.1Other, net

0.2

0.2

Effective income tax rate

(15.1
)%
41.2
%
1.5
%


At December 31, 2002 and 2003, deferred income tax assets and liabilities resulted from reporting differences in the recognition of income and expense for
income tax and financial reporting purposes. The sources and tax effects of these temporary differences are presented below:

2002

2003Deferred tax assets:Net operating loss carryforward

$
12,855

$
19,725Restructuring reserve


2,733


1,016Accrued expenses


443


444Depreciation and amortization


18


12Capital loss carryforwards


69


70Other accruals


216


183Total gross deferred tax assets


16,334


21,450Deferred tax liabilities:Internally developed software, net


(568
)

(478
)Total gross deferred tax liabilities


(568
)

(478
)Net deferred tax assets before valuation allowance


15,766


20,972Valuation allowance


(15,766
)

(20,972
)Net deferred tax asset

$


$



49

---

10. EMPLOYEE BENEFIT PLANS

Retirement Savings PlanThe Company-sponsored Retirement Savings Plan (the "RSP") covers substantially all of its employees. Annual contributions
under the RSP are based on an employer-matching basis of 20% of the participant's "eligible contribution," as defined. A participant's "eligible contribution" is equal to the amount of the
participant's elective deferrals for the RSP year that does not exceed 5% of compensation. During the years ended December 31, 2001, 2002 and 2003, the Company expensed $396, $314 and $209,
respectively, related to the RSP's employer contributions.

During
2002, the Company reduced its workforce by 96 employees through a series of involuntary terminations. Those terminations represented approximately a 22% reduction in the number of
the Company's RSP participants. During 2003, the Company determined that those terminations constituted a partial plan termination as defined under Treasury Regulation 1.411(d)-2
and, therefore, unvested employer contributions of approximately $35 became fully vested and distributable to the terminated RSP participants.

2001
Employee Stock Purchase PlanIn December 2000, the Board of Directors of the Company approved the adoption of an Employee Stock Purchase Plan (the "ESPP") to
promote the interests of the Company by providing employees the opportunity to acquire a proprietary interest in the Company. Under the ESPP, employees may contribute through payroll deductions of not
less than 1% and not more than 20% of after-tax compensation on each pay period during the offering period, not to exceed $6 and may not purchase more than 1,000 shares during the offering
period. The purchase price with respect to an offering period is an amount equal to 85% of the fair market value of the Company's common stock on the offering date or the purchase date, whichever is
lower. On August 1, 2001, the Company issued 99,462 shares of common stock to employees at a purchase price of $5.95, generating compensation expense of $168. On February 1, 2002 and
September 3, 2002, the Company issued 68,416 and 49,316 shares, respectively, of common stock to employees at a purchase price of $2.58 and $.99, respectively, generating no stock compensation
expense. On March 3, 2003, the Company issued 29,632 shares of common stock to employees at a purchase price of $.91, generating no stock compensation expense. On October 3, 2003, the
Company issued 19,931 shares of common stock to employees at a purchase price of $.86, generating stock compensation expense of $19.

11. STOCK OPTION COMPENSATION PLANS

Braun Consulting 1995 PlanIn 1995, the Company adopted the 1995 Director Stock Option Plan (the "1995 Plan"). Under the 1995 Plan, certain employees
were given the right to acquire shares of common stock. The number of shares, exercise price of shares, and vesting conditions were determined by the Compensation Committee of the Board of Directors.
Options generally vest over 6 years and have a maximum term of 8 years. In 1998, all options granted had a fair market value equal to their exercise price. Accordingly, no compensation
expense was recognized in 1998. In 1999 and 2000, the exercise price of 8,500 and 210,213 options granted, respectively, under the 1995 Plan was less than the fair market value at the date of grant,
creating unearned deferred compensation. The difference between the fair market value and the option price was recorded as unearned deferred compensation and is being charged to operations over the
vesting periods of the options. During the years ended December 31, 2001, 2002 and 2003, $92, $1 and $0, respectively, were charged to operations. In 2001, all options granted had a fair market
value equal to their exercise price. Accordingly, no compensation expense was recognized in 2001. No options were granted under the 1995 Plan in 2002 or 2003. On September 25, 2003, the 1995
Plan was terminated.

Braun
Consulting 1998 PlansThe Company adopted the 1998 Employee Long Term Stock Investment Plan and the 1998 Executive Long Term Stock Investment Plan (the "1998 Plans") in
1998. Under the 1998 Plans, certain employees and executives were given the right to acquire shares of

50

---

common
stock. The number of shares, exercise price and vesting conditions were determined by the Compensation Committee of the Board of Directors. Options generally vest over 3 to 5 years and
have a maximum term of 7 years. The exercise price of 432,241 options granted under the 1998 Plans was less than the fair market value at the date of grant, creating unearned deferred
compensation, which is being charged to operations over the vesting periods of the options. During the years ended December 31, 2001, 2002 and 2003, $98, $22 and $2, respectively, were charged
to operations. On September 25, 2003, the 1998 Plans were closed.

Braun
Consulting 1999 PlanThe Company adopted the 1999 Independent Director Stock Option Plan (the "1999 Plan") in 1999. Under the 1999 Plan, independent directors were
given the right to acquire shares of common stock. Options generally vest over 1 year and have a maximum term of 10 years. These options have an exercise price equal to the closing
market price of the Company's stock on the date of grant. Accordingly, no compensation expense was recognized. The number of shares available for future grants at December 31, 2003 was 25,000.

Braun
Consulting 2002 PlanThe Company adopted the 2002 Employee Long Term Stock Investment Plan (the "2002 Plan") in 2002. The 2002 Plan was amended in
September 2003. Under the 2002 Plan, certain employees and executives were given the right to acquire shares of
common stock. Options generally vest over 1 to 4 years and have a maximum term of 54 months. These options have an exercise price equal to the closing market price of the Company's stock
on the date of grant. Accordingly, no compensation expense was recognized. The number of shares available for future grants at December 31, 2003 was 843,581.

ETCI
PlanIn connection with the acquisition of ETCI in December 1999, the Company assumed the Non Qualified Stock Option Plan of ETCI (the "ETCI Plan"). Under the
ETCI Plan, employees of ETCI who had been employed by ETCI prior to the Company's acquisition of ETCI were given the right to acquire shares of common stock in ETCI. The number of shares, exercise
price of shares and vesting conditions were determined by the Board of Directors of ETCI. Options generally vest over 4 years and have a maximum life of 5 years. The exercise price of
23,396 options granted under the ETCI Plan prior to the Company's acquisition of ETCI was less than the fair market value at the date of grant, creating unearned deferred compensation, which is being
charged to operations over the vesting periods of the options. During the years ended December 31, 2001, 2002 and 2003, $96, $7 and $0, respectively, were charged to operations. On
September 25, 2003, the ETCI Plan was closed.

The
following summarizes changes in stock options under the plans for the years ended December 31, 2001, 2002 and 2003:

|                                                               |  | 2001 |           | 2002 |   | 2003
|-------------------------------------------------------------- |  | ---- | --------- | ---- | - | ----
|
|Options outstanding, beginning of year                         |  |      | 3,227,396 |      | $ | 6.94
|Options granted                                                |  |      | 261,236   |      |   | 4.46
|Options exercised                                              |  |      | (388,239  | )    |   | 1.84
|Options forfeited                                              |  |      | (837,305  | )    |   | 7.80
|                                                               |  |      |           |      |   |     
|Options outstanding, end of year                               |  |      | 2,263,088 |      |   | 7.22
|                                                               |  |      |           |      |   |     
|Options exercisable, end of year                               |  |      | 1,269,669 |      |   | 7.40
|                                                               |  |      |           |      |   |     
|Weighted average fair value of options granted during the year |  | $    | 2.61      |      |   |     
|                                                               |  |      |           |      |   |     

51

---

Additional information for options outstanding and options exercisable under the plans at December 31, 2003 is as follows:

Range of Exercise Prices

Outstanding
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life in
Years

Exercisable
Shares

Weighted
Average
Exercise
Price$0.86 - $21.04

769,000

$
0.95

2.6

117,000

$
0.861.08 -     3.23

786,014


2.28

2.5

249,785


3.043.39 -     3.46

695,850


3.39

2.1

277,740


3.393.86 -     3.95

224,563


3.94

0.1

220,763


3.944.20 -   52.75

207,363


9.77

0.2

191,956


9.532,682,790


2.90



1,057,244


4.26


As permitted by SFAS No. 123 and amended by SFAS 148, the Company continues to measure the plans' cost in accordance with APB Opinion No. 25.
Had compensation cost for the Company's plans been determined consistent with the fair value method prescribed by SFAS No. 123, as amended, the impact on the Company's net loss and pro forma
loss per share would have been as follows:

2001

2002

2003Net loss as reported

$
(25,044
)
$
(28,138
)
$
(11,216
)Add: Stock based employee compensation expense included in reported net loss, net of related tax effects


286


30


2Deduct: Total stock based employee compensation expense determined under fair value based method for all awards,net of related tax effects

$
(4,892
)
$
(3,748
)
$
(2,413
)Pro forma net loss

$
(29,650
)
$
(31,856
)
$
(13,627
)Loss per sharebasic (Unaudited):As reported

$
(1.22
)
$
(1.39
)
$
(0.65
)Pro forma


(1.45
)

(1.57
)

(0.79
)Loss per sharediluted (Unaudited):As reported


(1.22
)

(1.39
)

(0.65
)Pro forma


(1.45
)

(1.57
)

(0.79
)


The effects of applying SFAS No. 123 in this pro forma disclosure may not be indicative of effects on reported net income (loss) for future years. Common
stock equivalents are not considered in loss per sharediluted, since their effect was anti-dilutive in all years presented.

52

---

For
purposes of this disclosure, the fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average
assumptions:

Years Ended December 31,2001

2002

20031995, 1998, 2002 and ETCI Plans:Expected future dividend yield





Risk-free interest rate

4.6
%
3.9
%
3.1
%Expected life (months)

34

46

481999 Plan:Expected future dividend yield





Risk-free interest rate

4.4
%
2.4
%
1.4
%Expected life (months)

9

12

8


Expected volatility was 108%, 97% and 146% for options granted in 2001, 2002 and 2003, respectively.

12. SEGMENT REPORTING AND SIGNIFICANT CLIENTS

The Company engages in business activities in one operating segment which provides integrated management consulting services with advanced Internet application
development skills. Senior management is provided information about the revenue generated in key client industries and service areas. The resources needed to deliver the Company's services are not
separately managed by industry or service area.

Certain
of the Company's projects involve foreign operations of clients based in the United States. These projects sometimes require project personnel to travel and work temporarily
outside the United States. However, in the majority of instances, the Company is engaged by the clients' U.S. enterprise and contracts are denominated in U.S. dollars. During 2001, $400 in revenue
before expense reimbursements was generated from work for a Singapore company in that country denominated in U.S. dollars. During 2003, $2,548 in revenue before expense reimbursements was generated
from work for a Canadian company in that country denominated in U.S. dollars. No international work was performed in 2002 for clients with foreign operations.

One
client, Pharmacia, accounted for 29.9%, 26.0% and 0.0% of revenue before expense reimbursements in 2001, 2002 and 2003, respectively. Two clients accounted for 14.9% and 10.3% of
revenue before expense reimbursements in 2003. Our ten largest clients generated approximately 65.4%, 72.0% and 72.0% of our revenue before expense reimbursements in 2001, 2002 and 2003, respectively.
Loss of any significant client can seriously harm the Company's business.

53

---

13. QUARTERLY FINANCIAL INFORMATION (Unaudited)

|                                                 |                                     | March 31,
2002           |        | June 30,
2002 |        | Sept. 30,
2002 |        | Dec. 31,
2002 |        | March 31,
2003 |        | June 30,
2003 |       | Sept. 30,
2003 |        | Dec. 31,
2003 |       
|------------------------------------------------ | ----------------------------------- | ------------------------ | ------ | ------------- | ------ | -------------- | ------ | ------------- | ------ | -------------- | ------ | ------------- | ----- | -------------- | ------ | ------------- | ------
|Revenue:                                         |                                     |                          |        |               |        |                |        |               |        |                |        |               |       |                |        |               |       
|Revenue before expense reimbursements            |                                     | $                        | 15,914 |               | $      | 13,256         |        | $             | 8,766  |                | $      | 8,007         |       | $              | 7,486  |               | $     
|Expense reimbursements                           |                                     |                          | 1,540  |               |        | 1,400          |        |               | 873    |                |        | 1,015         |       |                | 794    |               |       
|                                                 |                                     |                          |        |               |        |                |        |               |        |                |        |               |       |                |        |               |       
|                                                 |                                     | Total revenue            |        |               | 17,454 |                |        | 14,656        |        |                | 9,639  |               |       | 9,022          |        |               | 8,280 
|Costs and expenses:                              |                                     |                          |        |               |        |                |        |               |        |                |        |               |       |                |        |               |       
|                                                 | Project personnel and expenses      |                          |        | 10,703        |        |                | 10,184 |               |        | 7,987          |        |               | 8,230 |                |        | 6,881         |       
|                                                 | Reimbursable expenses               |                          |        | 1,540         |        |                | 1,400  |               |        | 873            |        |               | 1,015 |                |        | 794           |       
|                                                 | Selling and marketing expenses      |                          |        | 814           |        |                | 1,290  |               |        | 1,268          |        |               | 1,367 |                |        | 889           |       
|                                                 | General and administrative expenses |                          |        | 5,038         |        |                | 6,755  |               |        | 4,834          |        |               | 8,120 |                |        | 4,044         |       
|                                                 | Stock compensation                  |                          |        | 18            |        |                | 8      |               |        | 2              |        |               | 2     |                |        | 1             |       
|                                                 |                                     |                          |        |               |        |                |        |               |        |                |        |               |       |                |        |               |       
|                                                 |                                     | Total costs and expenses |        |               | 18,113 |                |        | 19,637        |        |                | 14,964 |               |       | 18,734         |        |               | 12,609
|                                                 |                                     |                          |        |               |        |                |        |               |        |                |        |               |       |                |        |               |       
|Operating loss                                   |                                     |                          | (659   | )             |        | (4,981         | )      |               | (5,325 | )              |        | (9,712        | )     |                | (4,329 | )             |       
|Interest income                                  |                                     |                          | 204    |               |        | 210            |        |               | 192    |                |        | 146           |       |                | 95     |               |       
|                                                 |                                     |                          |        |               |        |                |        |               |        |                |        |               |       |                |        |               |       
|Loss before provision (benefit) for income taxes |                                     |                          | (455   | )             |        | (4,771         | )      |               | (5,133 | )              |        | (9,566        | )     |                | (4,234 | )             |       
|Provision (benefit) for income taxes             |                                     |                          | (129   | )             |        | (1,822         | )      |               | (1,971 | )              |        | 12,135        |       |                | 138    |               |       
|                                                 |                                     |                          |        |               |        |                |        |               |        |                |        |               |       |                |        |               |       
|Net loss                                         |                                     | $                        | (326   | )             | $      | (2,949         | )      | $             | (3,162 | )              | $      | (21,701       | )     | $              | (4,372 | )             | $     
|                                                 |                                     |                          |        |               |        |                |        |               |        |                |        |               |       |                |        |               |       
|Basic loss per share                             |                                     | $                        | (0.02  | )             | $      | (0.14          | )      | $             | (0.15  | )              | $      | (1.14         | )     | $              | (0.25  | )             | $     
|Diluted loss per share                           |                                     | $                        | (0.02  | )             | $      | (0.14          | )      | $             | (0.15  | )              | $      | (1.14         | )     | $              | (0.25  | )             | $     

54

---



SCHEDULE II

BRAUN CONSULTING, INC.
VALUATION AND QUALIFYING ACCOUNTS

|Description of Allowance Reserves |  | Balance at
Beginning
of Year |     | Additions(1) |   | Deductions(2) |  | Balance at
End of Year
|--------------------------------- |  | ---------------------------- | --- | ------------ | - | ------------- |  | ----------------------
|Allowance for doubtful accounts:  |  |                              |     |              |   |               |  |                       
|Year ended December 31, 2001      |  | $                            | 400 |              | $ | 2,921         |  | $                     
|Year ended December 31, 2002      |  |                              | 500 |              |   | 45            |  |                       
|Year ended December 31, 2003      |  |                              | 290 |              |   | 138           |  |                       

|Description of Allowance Reserves            |  | Balance at
Beginning
of Year |        | Additions |   | Deductions |  | Balance at
End of Year
|-------------------------------------------- |  | ---------------------------- | ------ | --------- | - | ---------- |  | ----------------------
|Valuation allowance for deferred tax assets: |  |                              |        |           |   |            |  |                       
|Year ended December 31, 2001                 |  | $                            |       |           | $ | 97         |  |                      
|Year ended December 31, 2002                 |  |                              | 97     |           |   | 15,669     |  |                      
|Year ended December 31, 2003                 |  |                              | 15,766 |           |   | 5,206      |  |                      

---

55

---



PART IV

ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K





All
schedules other than those indicated in the index have been omitted as the required information is inapplicable or the information is presented in the financial statements or notes
thereto.



|**3.1        |  | Certificate of Incorporation.                                                                                                                                                 
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**3.2        |  | Bylaws.                                                                                                                                                                       
|**4.1        |  | Specimen Certificate representing Common Stock.                                                                                                                               
|**4.2        |  | Registration Rights Agreement dated as of May 4, 1999 by and among Braun Consulting, Inc., Michael J. Evanisko, James M. Kalustian and Paul J. Bascobert.                     
|***4.3       |  | First Amended and Restated Registration Rights Agreement dated as of December 5, 1999 by and among Braun Consulting, Inc., Helene O. Amster, John D. Vairo and Randy Dieterle.
|**10.1       |  | Employment Agreement dated effective as of May 5, 1999 between Braun Consulting, Inc. and Paul J. Bascobert.(1)                                                               
|**10.2       |  | Employment Agreement dated effective as of May 5, 1999 between Braun Consulting, Inc. and Michael J. Evanisko.(1)                                                             
|**10.3       |  | Employment Agreement dated effective as of May 5, 1999 between Braun Consulting, Inc. and James M. Kalustian.(1)                                                              
|*******10.4  |  | Termination Agreement dated February 13, 2001, between Braun Consulting, Inc. and Thomas J. Duvall.(1)                                                                        
|**10.5       |  | Agreement dated September 1, 1998 between Steven J. Braun and Stephen J. Miller.                                                                                              
|***10.6      |  | Amended and Restated 1995 Director Stock Option Plan.(1)                                                                                                                      
|**10.7       |  | 1998 Employee Long-Term Stock Investment Plan.(1)                                                                                                                             
|**10.8       |  | 1998 Executive Long-Term Stock Investment Plan.(1)                                                                                                                            
|*****10.9    |  | 1999 Independent Director Stock Option Plan.(1)                                                                                                                               
|******10.10  |  | Non Qualified Stock Option Plan of Emerging Technologies Consultants, Inc.(1)                                                                                                 
|*******10.11 |  | 2001 Employee Stock Purchase Plan.(1)                                                                                                                                         
|****11.1     |  | Statements Regarding Computation of Per Share Earnings.                                                                                                                       
|****23.1     |  | Consent of BDO Seidman, LLP                                                                                                                                                   
|****23.2     |  | Consent of Deloitte & Touche LLP                                                                                                                                              
|****31.1     |  | Certification of Chief Executive OfficerSection 302 Certification                                                                                                            
|****31.2     |  | Certification of Principal Financial OfficerSection 302 Certification                                                                                                        
|****32.1     |  | Certification of Chief Executive OfficerSection 906 Certification                                                                                                            
|****32.2     |  | Certification of Principal Financial OfficerSection 906 Certification                                                                                                        

56

---



Current Report on Form 8-K dated November 4, 2003 and filed November 4, 2003 (furnishing, under item 12,
Braun Consulting, Inc.'s press release reporting financial results for the quarter ended September 30, 2003).

---

|(1)     |  | Management contract or compensatory plan or arrangement.                                                                                     
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|*       |  | Incorporated by reference to the identically numbered exhibit to the Current Report on Form 8-K filed December 16, 1999, by Braun Consulting.
|**      |  | Incorporated by reference to the identically numbered exhibit to Braun Consulting's Registration Statement on Form S-1 (Reg. No. 333-79251). 
|***     |  | Incorporated by reference to the identically numbered exhibit to Braun Consulting's Registration Statement on Form S-1 (Reg. No. 333-31824). 
|****    |  | Filed herewith.                                                                                                                              
|*****   |  | Incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999.              
|******  |  | Incorporated by reference to Exhibit 99.5 to Braun Consulting's Registration Statement on Form S-8 (Reg. No. 333-30788).                     
|******* |  | Incorporated by reference to the identically numbered exhibit to the Annual Report on Form 10-K filed March 29, 2001, by Braun Consulting.   

57

---



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 Chicago, and State of Illinois, on the 30th day of March, 2004.

| |  | BRAUN CONSULTING, INC.
| |  | ----------------------
| |  | By:                   

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
indicated on March 30, 2004.

|Signature             |  | Title                                                                          
|--------------------- |  | -------------------------------------------------------------------------------
|                      |  |                                                                                
|/s/STEVEN J. BRAUN    |  | Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
|/s/THOMAS A. SCHULER  |  | Senior Vice President (Principal Financial Officer)                            
|/s/STEVEN J. MERRIMAN |  | Controller (Principal Accounting Officer)                                      
|/s/JAMES M. KALUSTIAN |  | Director                                                                       
|/s/WILLIAM M. CONROY  |  | Director                                                                       
|/s/WILLIAM H. INMON   |  | Director                                                                       
|/s/ERIC V. SCHULZ     |  | Director                                                                       

58

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