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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, 2002
|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 1600
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, 2002, (computed by reference to the quoted last
selling price of such stock on June 28, 2002), was $35,813,954. The aggregate market value of the registant's common stock held by non-affiliates of the registrant as of
February 14, 2003 (based upon the per share closing price of $0.93 on February 14, 2003), was $7,443,477. 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 February 14, 2003, was 17,913,365 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions
of the registrant's definitive Proxy Statement in connection with its 2003 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; 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.

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 strategic 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 better 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. Gartner Dataquest estimates that, despite the continued
economic downturn of 2002, enterprises will spend approximately $29 billion worldwide on all CRM-specific service segments in 2003.

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

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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, improve their
products and services, and improve 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, fact-based 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 with 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 12%, 9% and 13% in 2000, 2001 and 2002,
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 2002, our ten largest clients generated approximately 72% of our revenue before expense reimbursements,
with Pharmacia, Inc. accounting for 26% of our revenue before expense reimbursements. During the fourth quarter 2002, Pharmacia accounted for $15,000 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 67% of our revenue before
expense reimbursements in 2002 and approximately 70% of our revenue before expense reimbursements in 2001. 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 2000 our clients have included:

|Media and TelecommunicationsALLTel
  AT&T
  AT&T Broadband
  BMG Entertainment
  Cable & Wireless
  Cingular Wireless
  DIRECTV
  Embratel
  Home Shopping Network
  Lucent
  Nextel
  Nortel
  OnStar
  Qwest
  The New York Times Company
  The Tribune Company Healthcare and PharmaceuticalsBaylor College of Medicine
  Biogen
  Clinical Reference Laboratory
  Depuy Orthopedics
  Eli Lilly
  GE Medical Systems
  Hillenbrand
  Ilex Oncology
  Medtronic
  Organon
  Pharmacia
  Pfizer
  Schering-Plough
  Wyeth |  | Manufacturing and TechnologyAnderson
  Andrew Corp.
  Carrier
  Case New Holland
  Cummins
  Dell
  Donaldson
  Eaton
  Emerson
  Ford
  General Electric
  Hubbard Media
  Honeywell
  John Deere
  Motorola
  Raytheon
  Sunnen
  Tellabs
  Thomson Consumer Electronics
  Trane
  TRW Retail and Consumer Packaged Goods7-Eleven
  American Greetings
  Brown and Williamson
  Fingerhut
  Frito-Lay
  Kmart
  Kohl's
  Mattel
  Orbitz
  Quaker Oats
  Ralston Purina
  Staples |  | Financial ServicesAegon
  Allstate
  Cigna
  Citigroup
  Development Bank of Singapore
  First National Bank of Omaha
  J. P. Morgan Chase
  Madison Dearborn
  Minnesota Mutual Life
  The CIT Group OtherAmeren
  Delano
  Heritage
  Hyperion
  Marathon Oil
  MatchLogic
  New Century Energies
  RR Donnelly
  Shaker Advertising
  SPSS, Inc.
  State of Vermont
  TMP Worldwide
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 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. We attribute our low
voluntary turnover rate to our quality professional opportunities and the strong balance between work and personal life.

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, 2002, we had 271 employees. Of these, 205 were project personnel, 19 were selling and marketing personnel, and 47 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. Our campus recruiting program has earned brand name recognition among students on campuses of leading educational
institutions.

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Diversity
in experience is one of our strengths. In 2002, approximately 74% of our new hires were experienced professionals and approximately 26% 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.

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 Report

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 Report

Performance is monitored by practice area in 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 incur net losses.

In 2002, our revenue before expense reimbursements decreased versus 2001 and the number of our employees and key executives decreased over the year by a total of
37.7%. In 2002, our net loss increased 12.4% to $28.1 million from $25.0 million in 2001. Our expenses are in a large part comprised of compensation costs and rent, which can be
difficult to control on short notice. 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 2002, we executed various cost control measures throughout the year, including
headcount reductions, office closings, and office space reductions. In addition to closing our Denver and Minneapolis offices, 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 2002, our ten largest clients generated approximately 72% our revenue before expense reimbursements, with Pharmacia, Inc. accounting for 26% of our revenue
before

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expense reimbursements. During the fourth quarter 2002, Pharmacia accounted for only $15,000 of our revenue before expense reimbursements. The volume of work that we perform for a specific client is
likely to vary from year to year, and a significant client in one year may not use our services in a subsequent year. Our ten largest clients generated approximately 42.0% and 65.4% of our revenue
before expense reimbursements in 2000 and 2001, respectively. Loss of any significant client can seriously harm our business.

We may lose money on fixed-price contracts.

Approximately 68% of our revenue before expense reimbursements in 2002 was derived from fixed-price contracts, and we anticipate this percentage to stabilize at
around 70% 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
2002, three of our approximately 340 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

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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 significant legal and other costs and may be a distraction to management.

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 2002.
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 87%, 91% and 88% in 2002, 2001 and 2000, 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 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 collect fees, protect our intellectual property and protect ourselves from liability
to others may be impaired, although we believe that our clients are legally obligated to pay for our services even in the absence of written contracts, or on the basis of a limited statement of work.

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

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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.

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 4.0% from fourth quarter 2001 to first quarter 2002, and decreased 16.7%, 33.9% and 8.7% in the second, third and fourth quarters of 2002, 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
quarter, 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. During 2000 and 2001, we hired a large number of personnel in core
support services, including technology infrastructure, recruiting, business development, finance and administration, in order to support our anticipated growth. 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 2000 and 2001, we wrote off approximately $1.9 million and $2.8 million, respectively, in receivables from various
clients. However, in 2002, we wrote off approximately $255,000 in receivables from various clients.

15

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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.

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 47.5% 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 1600, 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 practical after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

ITEM 2. Properties

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 36,000
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.

ITEM 3. Legal Proceedings

Braun Consulting and Steven Braun, Thomas Duvall, and John Burke, as officers of Braun Consulting, have been named as 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.
Messrs. Duvall and Burke are former officers of Braun Consulting. The complaint 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 plaintiffs are seeking
unspecified damages. The Company believes it and its officers have meritorious defenses to the claims and intends to vigorously defend the lawsuit.

The
Company is a defendant in an adversary proceeding filed on September 23, 2002, in the United States District Bankruptcy Court for the District of Columbia(the "Bankruptcy
Court"), styledWendell W. Webster, Trustee v. Braun Consulting, Inc.,Adversary No. 02-0108, arising out of the Chapter 7
bankruptcy cases NETtel Corporation and NETtel Communications, Inc. (collectively, "NETtel"), wherein the Chapter 7 bankruptcy trustee has sought to avoid and recover payments made by NETtel to
the Company within 90 days prior to the filing of NETtel's bankruptcy cases in the amount of $350,000, pursuant to Section 547 of the United States Bankruptcy Code. The Company has
reached a compromise and entered into a settlement agreement with the bankruptcy trustee to settle this litigation. Under the terms of the settlement agreement, the Company will pay the sum of
$205,000 to the bankruptcy trustee, all claims of the Company and the bankruptcy trustee will be released, and the adversary proceeding will be dismissed with prejudice to any refiling thereof.
Consummation of the compromise is subject to approval of the Bankruptcy Court. The Company anticipates that the compromise will be approved by the Bankruptcy Court and consummated in the near future.

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.

17

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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

Low2001First Quarter

$
7.13

$
2.81Second Quarter


10.82


3.05Third Quarter


8.05


3.15Fourth Quarter


4.69


3.352002First Quarter


5.04


3.03Second Quarter


5.01


3.34Third Quarter


3.36


1.08Fourth Quarter


1.30


0.71


On
February 14, 2003, the last reported sale price per share of our common stock on the Nasdaq National Market was $0.93. As of February 14, 2003, there
were approximately 198 holders of record and 2,270 beneficial shareholders of our common stock.

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 our board of directors.

On
April 12, 2000, we sold 2,400,000 shares of common stock in our secondary public offering. In addition, on April 22, 2000, the underwriters exercised a portion of their
over-allotment option by selling 45,000 shares of the Company's common stock. The net proceeds of approximately $47.7 million were used to invest in cash, cash equivalents and
marketable securities.

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 balance sheet data as of December 31, 2001 and 2002 and the statement of
operations data for the years ended December 31, 2000, 2001 and 2002 have been derived from the financial statements included in this Form 10-K, which have been audited by
Deloitte & Touche LLP, our independent auditors. The balance sheet data as of December 31, 1998,

18

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1999 and 2000 and the statement of operations for the years ended December 31, 1998 and 1999 have been derived from audited financial statements which have not been included in this
Form 10-K.

|                                                             |                                       | 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)                                      |                                       |                          | 748 
|Interest income                                              |                                       |                          | 16  
|Interest expense                                             |                                       |                          | 137 
|                                                             |                                       |                          |     
|Income (loss) from continuing operations before income taxes |                                       |                          | 627 
|Provision (benefit) for income taxes                         |                                       |                          | (3  
|                                                             |                                       |                          |     
|Income (loss) from continuing operations                     |                                       |                          | 630 
|Loss from discontinued operations                            |                                       |                          | (101
|Gain on sale of discontinued operations                      |                                       |                          | 254 
|                                                             |                                       |                          |     
|Net income (loss)                                            |                                       | $                        | 783 
|                                                             |                                       |                          |     
|Pro forma provision for income taxes(1)                      |                                       | $                        | 457 
|                                                             |                                       |                          |     
|Pro forma net income(1)                                      |                                       | $                        | 323 
|                                                             |                                       |                          |     
|Loss per share(2):                                           |                                       |                          |     
|                                                             | Basic                                 |                          |     
|                                                             | Diluted                               |                          |     

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

---

19

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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 30 to 50 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") 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 derives substantially all of its revenue from fees for consulting services, which are billed on a time-and-materials or fixed-price basis. Invoices
are typically issued bi-weekly to monitor client satisfaction and manage outstanding accounts receivable balances. Recently, more of the Company's consulting engagements are fixed-price
projects. As a result, the Company's revenue before expense reimbursements derived from fixed-price contracts increased to 68% of revenue before expense reimbursements in 2002 as compared to 64% and
41% in 2001 and 2000, respectively.

The
Company also realizes a limited amount of revenue before expense reimbursements from product sales 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 2002, product sales accounted for 3.3% of revenue before expense reimbursements
as compared to 2.3% and 4.7% in 2001 and 2000, respectively.

Business
conditions continued to deteriorate further in the second half of 2002, with revenue before expense reimbursements declining by $4.5 million or 33.9% in the third quarter
as compared to the second quarter, and $759,000 or 8.7% in the fourth quarter as compared to the third quarter. Revenue before expense reimbursements in the fourth 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, management took further actions to better match the Company's capacity with the lower demand level. During the year 2002, project personnel headcount was further reduced to 205 as of
December 31, 2002 through both restructuring programs and voluntary attrition. Furthermore, additional office space consolidation was undertaken in Boston, Chicago, Denver and Minneapolis 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.

Throughout
2002, the Company announced several cost reduction measures to address challenging business conditions (see Note 8). The measures, which included office consolidations
and headcount reductions, resulted in restructuring and other related charges of $7.4 million. The Company anticipates that these actions will provide savings of approximately
$11.6 million in 2003. Cost cutting measures undertaken in 2001 were anticipated to result in cost savings of approximately $11.3 million in 2002. The Company realized actual cost
savings of approximately $11.3 million in 2002.

20

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Existing
clients from the previous fiscal year generated approximately 67% of revenue before expense reimbursements in 2002 and approximately 70% and 65% of revenue before expense
reimbursements in 2001 and 2000, 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. In November 2002, the Company hired Craig B. Lashmet, 42, as President of the Company. Mr. Lashmet, formerly with eLoyalty, an enterprise customer
relationship management services and solutions company, reports to Chairman and Chief Executive Officer Steven J. Braun, and is based in Chicago. Mr. Lashmet focuses on the management and
growth of client relationships, employee development and rewards, and delivery of service excellence. Mr. Lashmet also oversees internal functions including sales and marketing, human
resources, and financial administration.

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.

Critical Accounting Policies

Revenue Recognition.The Company recognizes the majority 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. In

21

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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 debts expense.

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 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 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).

Recent Developments

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.

22

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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 |                          | 91.6
|                                                 | Expense reimbursements                |                          | 8.4 
|                                                 |                                       |                          |     
|                                                 |                                       | Total revenue            |     
|Costs and expenses:                              |                                       |                          |     
|                                                 | Project personnel and expenses        |                          | 54.1
|                                                 | Reimbursable expenses                 |                          | 8.4 
|                                                 | Selling and marketing expenses        |                          | 9.2 
|                                                 | General and administrative expenses   |                          | 32.8
|                                                 | Amortization of intangible assets     |                          | 11.5
|                                                 | Stock compensation                    |                          | 5.3 
|                                                 |                                       |                          |     
|                                                 |                                       | Total costs and expenses |     
|                                                 |                                       |                          |     
|Operating loss                                   |                                       | (21.3                    | )   
|Interest income                                  |                                       | 3.3                      |     
|Interest expense                                 |                                       | 0.2                      |     
|                                                 |                                       |                          |     
|Loss before provision (benefit) for income taxes |                                       | (18.2                    | )   
|Provision (benefit) for income taxes             |                                       | (0.8                     | )   
|                                                 |                                       |                          |     
|Net loss                                         |                                       | (17.4                    | )%  
|                                                 |                                       |                          |     

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 an decrease in compensation costs and a reduction in sub-contractor costs for the
year

23

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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. The Company expects to save approximately $6.7 million during 2003 as a result of these cost-cutting
measures (discussed in Note 8). 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). The Company expects to save approximately $900,000 during 2003 as a result of these cost-cutting measures.
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. Excluding certain charges resulting from asset impairments of $121,000 (discussed in Note 4) and office closings of $5.4 million, general and administrative
costs decreased 30.8% to $19.2 million in 2002 from $27.8 million (excluding non-recurring charges resulting from asset impairments of $11.6 million and office
closings of $3.6 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. The Company expects to save approximately
$2.6 million during 2003 as a result of these employee reductions. General and administrative costs increased as a percentage of revenue before expense reimbursements to 41.9% (excluding
non-recurring charges resulting from asset impairments of $121,000 and office closings of $5.4 million) in 2002 from 36.2% (excluding non-recurring charges resulting
from asset impairments of $11.6 million and office closings of $3.6 million) in 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. The Company expects to save approximately $1.4 million during 2003 as a result of these office closings and
reductions.

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.

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

24

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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.

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

Revenue.Revenue before expense reimbursements increased slightly to $76.7 million in 2001 from $76.6 million
in 2000. The small increase in revenue before expense reimbursements was due primarily to an increase in the number of project personnel and average bill rates during the first six months of 2001 as
compared to the first six months of 2000, offset by unfavorable changes in economic conditions and decreases in consultant utilization. During the third and fourth quarters, project personnel
decreased by 36 and 35, respectively, as part of reductions in force (discussed in Note 8). The Company continues to sell some software products as an occasional accommodation to clients. Such
sales represented less than 2.3% of revenue before expense reimbursements in 2001 and less than 4.7% in 2000.

Project Personnel and Expenses.Project personnel and expenses increased 13.0% to $51.2 million in 2001 from
$45.3 million in 2000. The increase in project personnel and expenses for 2001 was due primarily to an increase in the number of project personnel during the first six months of 2001 as
compared to the first six months of 2000 and higher per person average compensation costs for the twelve months ended December 31, 2001, as compared to the twelve months ended
December 31, 2000. There were 450 and 420 project personnel at the end of the first and second quarters of 2001, respectively, compared to
369 and 405 project personnel and the end of the first and second quarters of 2000, respectively. During 2001, project personnel decreased by 95 as part of reductions in force (discussed in
Note 8). The Company expects to save approximately $8.2 million during 2002 as a result of these cost-cutting measures (discussed in Note 8). Project personnel and
expenses increased as a percentage of revenue before expense reimbursements to 66.7% in 2001 from 59.1% in 2000.

Selling and Marketing Expenses.Selling and marketing expenses decreased 12.8% to $6.7 million in 2001 from
$7.7 million in 2000. The decrease was due primarily to the decision to reduce selling and marketing personnel and business development costs. During 2001, selling and marketing personnel
decreased by eight as part of reductions in force (discussed in Note 8). The Company expects to save approximately $929,000 during 2002 as a result of these cost-cutting measures.
There were 19 selling and marketing personnel as of December 31, 2001, compared to 29 as of December 31, 2000. Selling and marketing expenses decreased as a percentage of revenue before
expense reimbursements to 8.7% in 2001 from 10.1% in 2000.

General and Administrative Expenses.General and administrative expenses increased 56.9% to $43.0 million in 2001 from
$27.4 million in 2000. Excluding certain charges resulting from asset impairments of $11.6 million (discussed in Note 4) and office closings of $3.6 million, general and
administrative costs increased 1.5% to $27.8 million in 2001 from $27.4 million in 2000. The increase in general and administrative costs is due primarily to an increase in occupancy
costs and an increase in personnel compensation costs. In 2000, the Company expanded offices in Boston, Denver and Indianapolis, and moved to new offices in Dallas and St. Louis. In 2001, the Company
moved to new offices in Chicago and New York. As of December 31, 2001, the Company leased approximately 192,000 square feet of office space, as compared to 114,000 square feet at
December 31, 2000. As of

25

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December 31, 2001, the Company was utilizing 147,000 square feet of office space. See Note 8 for additional information related to the Company subleasing office space from facilities
that have been closed or have been reduced in size. These increases are partially offset by stricter cost control measures and a substantial reduction in the costs attributed to hiring personnel.
During 2001, general and administrative personnel decreased by 17 as part of reductions in force (discussed in Note 8). The Company expects to save approximately $988,000 during 2002 as a
result of these cost-cutting measures. There were 81 general and administrative personnel as of December 31, 2001, compared to 88 as of December 31, 2000. Also during 2001,
the Company closed offices in Cleveland, Ohio; Reston, Virginia; Detroit, Michigan; Mt. Laurel, New Jersey; and St. Louis, Missouri; and reduced office space in Dallas, Texas and Chicago, Illinois.
The Company expects to save approximately $1.2 million during 2002 as a result of these actions.

Stock Compensation.Stock compensation expense decreased to $454,000 in 2001 from $4.5 million in 2000. The decrease
in stock compensation expense was due to the departure of certain senior personnel during the first quarter 2001.

Interest Income.Interest income decreased to $1.8 million in 2001 from $2.7 million in 2000. The decrease was
due primarily to a decrease in interest rates from an average yield of 4.68% in 2001 versus 6.71%
in 2000 and the use of $7.4 million of proceeds from the Company's secondary offering to fund both working capital and capital expenditures.

Provision (Benefit) for Income Taxes.In 2001 the tax benefit increased to $4.4 million from $640,000 in 2000 as a
result of the Company generating a net operating loss in 2001. No valuation allowance was recorded in 2001 related to net operating loss carryforwards and other deferred tax assets of
$2.4 million. The Company assessed the future realization of these deferred tax assets utilizing taxable income projections for the years 2002 through 2004. These projections applied revenue
estimates based upon no revenue growth in 2002 over 2001 and a growth rate of 5% over the remaining years. The projections resulted in the majority of deferred tax assets being utilized from 2002
through 2004. In addition, the Company took into consideration that a profit had been earned in all years before 2000. Management believes that, based upon the history of such profits, the ability to
reduce costs and other factors, the Company will realize the benefits from its net operating loss carryforwards and other deferred tax assets.

The
effective tax rate was a benefit of 15.1% for 2001 compared to the benefit of 4.2% for 2000. The Company's effective tax rate may vary from period to period based on changes in
estimated taxable income or loss. To a significant extent, the amortization of intangible assets and stock compensation expense are non-deductible for income tax purposes.

Net Loss.Net loss increased to $25.0 million in 2001 from $14.6 million in 2000. The increase in the net loss
was primarily due to restructuring charges, the impairment of goodwill related to the acquisition of ETCI, the impairment of certain software purchased for business development purposes, as previously
discussed, offset by a reduction in stock compensation, selling and marketing costs, and goodwill amortization costs.

Liquidity and Capital Resources

As of December 31, 2002, 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 September 30, 2003. The Company's line of credit is secured with $3.5 million in restricted cash held
in escrow by LaSalle. The restricted cash will be 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, there were no borrowings outstanding under the $3.5 million line of credit. As of December 31, 2002, there were three letters
of credit totaling $799,375 for office leases drawn on the line of credit.

26

---



As of September 30, 2002, the Company was in violation of certain financial covenants of the line of credit agreement. The Company and LaSalle amended the agreement effective
December 24, 2002, and the Company expects to maintain compliance with the covenants, as amended, through September 30, 2003, the maturity date of the agreement.

Inflation
did not have a material impact on the Company's revenue or loss from operations in 2000, 2001 or 2002.

As
of December 31, 2002, the Company had cash, cash equivalents, restricted cash and marketable securities of approximately $32.1 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 $9.6 million, $6.9 million and $481,000 for 2000, 2001 and 2002, respectively, were used primarily for computers, office equipment and
leasehold improvements. The Company estimates capital expenditures for 2003 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.

Contractual Obligations and Commercial Commitments

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

|                                 |  | Amount of Commitment Expiration Per Period
|-------------------------------- |  | ------------------------------------------
|
|Letter of creditChicago office  |  | $                                         
|Letter of creditNew York office |  |                                           
|Letter of creditBoston office   |  |                                           
|                                 |  |                                           
|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.

The
following table summarizes operating lease obligations of the Company.

Year Ending December 31,

Operating Lease
Obligations2003

$
4,8002004


4,8052005


4,7232006


4,1532007


2,733Thereafter


9,133Total

$
30,347


27

---

Operating lease obligations.The Company leases office facilities and certain office equipment under noncancelable and
cancelable operating lease agreements expiring at various date through 2012. The Company leases office space under noncancelable operating leases.

Of
the $30,347 total operating lease obligations, $8,488 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, $2,148 will be in 2003; $2,130 will be in 2004; $2,024 will be in 2005; $1,570 will be in 2006; $454 will be in 2007; and the remainder of $162
will be in years 2008 through 2012.

Recent Accounting Pronouncements

In April 2002, the Financial Accounting Standards Board ("FASB") issued a new pronouncement: Statement of Financial Accounting Standards ("SFAS")
No. 145, "Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Generally, SFAS No. 145 has the effect of
suspending the treatment of debt extinguishment costs as extraordinary items. Due to the minimal use of debt instruments, the Company does not expect the implementation of this statement to impact the
Company's reported financial results.

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires that costs associated with exit
or disposal activities be recognized and measured at fair value when the liability is incurred and replaces the existing accounting for such costs under 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)." The provisions
of this statement are effective for exit or disposal activities initiated after December 31, 2002. The Company has not early adopted this statement.

In
November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others." This interpretation expands the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees and requires the guarantor to
recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 clarifies the requirements of SFAS No. 5, "Accounting for Contingencies," relating to
guarantees. In general, FIN 45 applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party. The disclosure requirements
of FIN 45 are effective to us as of December 31, 2002, and require disclosure of the nature of the guarantee, the maximum potential amount of future payments that the guarantor could be
required to make under the guarantee, and the current amount of the liability, if any, for the guarantor's obligations under the guarantee. The recognition requirements of FIN 45 are to be
applied prospectively to guarantees issued or modified after December 31, 2002. We do not expect the requirements of FIN 45 to have a material impact on results of operations, financial
position, or liquidity.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosurean Amendment of FASB Statement
No. 123," which is effective for financial statements for fiscal years ending after December 15, 2002, with early adoption permitted. SFAS No. 148 will enable companies
that choose to adopt the preferable fair value based method to report the full effect of employee stock options in their financial statements immediately upon adoption, and to make available to
investors better and more frequent disclosure about the cost of employee stock options. The Company will continue to account for stock options in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," but will comply with the disclosure only provision of both SFAS 123, as amended by SFAS 148
(see Note 11).

28

---

In
January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." The objective of this interpretation is to provide
guidance on how to identify a variable interest entity ("VIE") and determining when the assets, liabilities, noncontrolling interests, and results of operations of a VIE need to be included in a
company's consolidated financial statements. A company that holds variable interests in an entity will need to consolidate the entity if the company's interest in the VIE is such that the company will
absorb a majority of the VIE's expected losses and/or receive a majority of the entity's expected residual returns, if they occur. FIN 46 also requires additional disclosure by primary beneficiaries
and other significant variable interest holders. The provisions of this interpretation became effective upon issuance. As of December 31, 2002, the Company does not have any VIE.

ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk

The Company may be exposed to market risk related to changes in interest rates. The Company's borrowing arrangements and short-term investments are
based on variable rates of varying maturities. The Company does not have any agreements to protect against the risk presented by a change in interest rates. If interest rates on borrowings were to
increase immediately and uniformly by 10% from levels as of December 31, 2002, from 4.25% to 4.68%, the Company's net loss would be unchanged because there were no outstanding bank borrowings
as of December 31, 2002.

The
Company's investments in cash, cash equivalents, restricted cash and marketable securities of approximately $32.1 million at December 31, 2002 primarily consist of
investment grade securities issued by various organizations. The Company does not invest in complex derivatives. The fair market value approximates the Company's cost at December 31, 2002. If
interest rates on investments were to decrease immediately and uniformly by 10% from levels at December 31, 2001, from approximately 1.75% to 1.57%, loss before income taxes would increase by
$57,780, which is equal to the product of the 10% decrease in the interest rate multiplied by the approximately $32.1 million of short-term investments in cash equivalents and
marketable securities as of December 31, 2002.

ITEM 8. Financial Statements and Supplemental Information

The information in response to this item is included in the financial statements together with the report of Deloitte & Touche LLP, appearing on pages 30
through 50 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

None.

PART III

The information required by Part III (Items 10, 11, 12 and 13) 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 and 13 will be set forth in the Company's definitive proxy statement and is incorporated by reference into this Annual Report on Form 10-K.

29

---



BRAUN CONSULTING, INC.  INDEX TO FINANCIAL STATEMENTS

|                                                                                                                              |                                    | Page
|----------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ----
|Independent Auditors' Report                                                                                                  |                                    | 31  
|Financial Statements as of December 31, 2001 and 2002, and for Each of the Three Years in the Period Ended December 31, 2002: |                                    |     
|                                                                                                                              | Balance Sheets                     |     
|                                                                                                                              | Statements of Operations           |     
|                                                                                                                              | Statements of Stockholders' Equity |     
|                                                                                                                              | Statements of Cash Flows           |     
|                                                                                                                              | Notes to Financial Statements      |     

30

---

INDEPENDENT AUDITORS' REPORT

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

We
have audited the accompanying balance sheets of Braun Consulting, Inc. and subsidiaries (the "Company") as of December 31, 2001 and 2002 and the related statements of
operations, stockholders' equity, and cash flows for each of the three 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 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, 2001 and 2002, and
the results of its operations and its cash flows for each of the three 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, 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

31

---



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: $500 in 2001; $290 in 2002) |                                            |        
|                                                                                                                                                                                                                                                                    | Accounts receivableemployees                                      |                                            |        
|                                                                                                                                                                                                                                                                    | Income taxes receivable                                            |                                            |        
|                                                                                                                                                                                                                                                                    | Deferred income taxes (Note 9)                                     |                                            |        
|                                                                                                                                                                                                                                                                    | Prepaid expenses and other current assets                          |                                            |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total current assets                       |        
|Equipment, furniture and softwarenet (Note 3)                                                                                                                                                                                                                      |                                                                    |                                            | 11,527 
|Deferred tax asset (net of allowance: $97 in 2001; $15,766 in 2002) (Note 9)                                                                                                                                                                                        |                                                                    |                                            | 7,829  
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total assets                               |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                |                                                                   
|Current liabilities:                                                                                                                                                                                                                                                |                                                                    |                                            |        
|                                                                                                                                                                                                                                                                    | Accounts payable                                                   |                                            | $      
|                                                                                                                                                                                                                                                                    | Accrued compensation                                               |                                            |        
|                                                                                                                                                                                                                                                                    | Accrued restructuring expenses (Note 8)                            |                                            |        
|                                                                                                                                                                                                                                                                    | Other accrued liabilities                                          |                                            |        
|                                                                                                                                                                                                                                                                    | Unearned revenue                                                   |                                            |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total current liabilities                  |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        
|Deferred income taxes (Note 9)                                                                                                                                                                                                                                      |                                                                    |                                            |       
|Deferred rent                                                                                                                                                                                                                                                       |                                                                    |                                            | 810    
|Accrued restructuring expenses, net of current portion (Note 8)                                                                                                                                                                                                     |                                                                    |                                            | 1,342  
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total liabilities                          |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        
|Stockholders' equity:                                                                                                                                                                                                                                               |                                                                    |                                            |        
|Preferred stock, $0.001 par value at December 31, 2001 and December 31, 2002; authorized 10,000,000 shares at December 31, 2001 and 2002; no shares have been issued at December 31, 2001 and 2002                                                                  |                                                                    |                                            |       
|Common stock, $0.001 par value at December 31, 2001 and December 31, 2002; authorized 50,000,000 shares at December 31, 2001 and December 31, 2002; issued and outstanding shares 20,516,727 shares at December 31, 2001 and
18,279,765 shares at December 31, 2002 |                                                                    |                                            | 21     
|Additional paid-in capital                                                                                                                                                                                                                                          |                                                                    |                                            | 106,040
|Unearned deferred compensation (Note 11)                                                                                                                                                                                                                            |                                                                    |                                            | (61    
|Retained earnings (accumulated deficit)                                                                                                                                                                                                                             |                                                                    |                                            | (39,046
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total stockholders' equity                 |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        
|                                                                                                                                                                                                                                                                    |                                                                    | Total liabilities and stockholders' equity |        
|                                                                                                                                                                                                                                                                    |                                                                    |                                            |        

See notes to financial statements.

32

---

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     |                          |        
|                                                 | Stock compensation                    |                          |        
|                                                 |                                       |                          |        
|                                                 |                                       | Total costs and expenses |        
|                                                 |                                       |                          |        
|Operating loss                                   |                                       |                          | (17,827
|Interest income                                  |                                       |                          | 2,734  
|Interest expense                                 |                                       |                          | 136    
|                                                 |                                       |                          |        
|Loss before provision (benefit) for income taxes |                                       |                          | (15,229
|Provision (benefit) for income taxes             |                                       |                          | (640   
|                                                 |                                       |                          |        
|Net loss                                         |                                       | $                        | (14,589
|                                                 |                                       |                          |        
|Loss per share:                                  |                                       |                          |        
|                                                 | Basic                                 |                          | $      
|                                                 | Diluted                               |                          | $      
|Weighted average shares:                         |                                       |                          |        
|                                                 | Basic                                 |                          |        
|                                                 | Diluted                               |                          |        

See
notes to financial statements.

33

---



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, 2000   |                                                     | 17,130,783 |            | $            | 17 |                            | $ | 48,041                         |        | $                                       | (837   | )      | $
|                           | Exercise of stock options                           |            | 659,223    |              |    | 1                          |   |                                | 1,804  |                                         |        |       |  
|                           | Income tax benefit from disqualifying dispositions  |            |           |              |    |                           |   |                                | 2,957  |                                         |        |       |  
|                           | Issuance of stock options, net of retirements       |            |           |              |    |                           |   |                                | 5,471  |                                         |        | (5,471 | )
|                           | Amortization of deferred compensation expense       |            |           |              |    |                           |   |                                |       |                                         |        | 4,474  |  
|                           | Distributions to stockholders declared              |            |           |              |    |                           |   |                                | (22    | )                                       |        |       |  
|                           | Proceeds from secondary public offering             |            | 2,445,000  |              |    | 2                          |   |                                | 47,914 |                                         |        |       |  
|                           | Net loss                                            |            |           |              |    |                           |   |                                |       |                                         |        |       |  
|                           |                                                     |            |            |              |    |                            |   |                                |        |                                         |        |        |  
|BALANCE, DECEMBER 31, 2000 |                                                     | 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, net of retirements       |            |           |              |    |                           |   |                                | (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, net of retirements       |            |           |              |    |                           |   |                                | (29    | )                                       |        | 29     |  
|                           | Amortization of deferred compensation expense       |            |           |              |    |                           |   |                                |       |                                         |        | 30     |  
|                           | Net loss                                            |            |           |              |    |                           |   |                                |       |                                         |        |       |  
|                           |                                                     |            |            |              |    |                            |   |                                |        |                                         |        |        |  
|BALANCE, DECEMBER 31, 2002 |                                                     | 18,279,765 |            | $            | 18 |                            | $ | 104,070                        |        | $                                       | (2     | )      | $
|                           |                                                     |            |            |              |    |                            |   |                                |        |                                         |        |        |  

See notes to financial statements.

34

---

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                                              |                                          
|                                                  |                                                                                | Realized loss on investment in application service provider                                     |                                          
|                                                  |                                                                                | 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, net of assets acquired and liabilities incurred and assumed: |                                          
|                                                  |                                                                                |                                                                                                 | 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                                 |                                                                                                 |                                          
|                                                  | Investment in application service provider                                     |                                                                                                 |                                          
|                                                  | Proceeds from sale of equipment, furniture and software                        |                                                                                                 |                                          
|                                                  | Acquisition of intangibles                                                     |                                                                                                 |                                          
|                                                  |                                                                                |                                                                                                 |                                          
|                                                  |                                                                                |                                                                                                 |                                          
|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                                         |                                                                                                 |                                          
|                                                  | Distributions paid to stockholders                                             |                                                                                                 |                                          
|                                                  |                                                                                |                                                                                                 |                                          
|                                                  |                                                                                |                                                                                                 |                                          
|Net decrease in cash and cash equivalents         |                                                                                |                                                                                                 | (3,224                                   
|Cash and cash equivalents at beginning of period  |                                                                                |                                                                                                 | 5,947                                    
|                                                  |                                                                                |                                                                                                 |                                          
|Cash and cash equivalents at end of period        |                                                                                | $                                                                                               | 2,723                                    
|                                                  |                                                                                |                                                                                                 |                                          
|Supplemental disclosure of cash flow information: |                                                                                |                                                                                                 |                                          
|                                                  | Interest paid                                                                  |                                                                                                 | $                                        
|                                                  |                                                                                |                                                                                                 |                                          
|                                                  | Income taxes paid                                                              |                                                                                                 | $                                        
|                                                  |                                                                                |                                                                                                 |                                          

See notes to financial statements.

35

---

BRAUN CONSULTING, INC.

Notes to Financial Statements
Years Ended December 31, 2000, 2001 and 2002
(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 derives substantially all of its revenue from fees for consulting services, which are billed
on a time-and-materials or fixed-price basis. Invoices are typically issued bi-weekly to monitor client satisfaction and manage outstanding accounts receivable
balances. 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. 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 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 current year presentation as product sales
amounts were substantially less than 10% of revenue in each period presented. Accordingly, all prior period amounts have been reclassified to conform to the current year presentation.

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 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.

36

---

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 $3.5 million represents cash held in escrow by LaSalle Bank N.A. ("LaSalle") as
security for the Company's line of credit. The restricted cash will be 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 September 30, 2003.

Marketable SecuritiesMarketable securities represent available-for-sale securities, consisting
primarily of investment grade securities issued by various organizations, recorded at fair market value. Realized gains and losses from individual sales of available-for-sale
securities were not material for any period presented. 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 lives of the leases. 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


In
March 1998, the American Institute of Certified Public Accountants issued Statement of Position No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on applying generally accepted accounting principles in addressing whether and under what
conditions the costs of internal-use software should be capitalized. The Company capitalized $110 and $0 in 2001 and 2002, respectively, related to the implementation of computer software
obtained for internal use. These costs primarily include licensing fees and internal labor costs of employees directly associated with the implementation project.

Intangible AssetsGoodwill and other intangibles were amortized on a straight-line basis over lives ranging from
one to three years (see Note 4).

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).

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 Compensation" as amended by SFAS No. 148 (SFAS 148), "Accounting for Stock-Based
Compensation-Transition and Disclosurean Amendment of FASB Statement No. 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).

37

---

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, a valuation allowance was recorded for the entire deferred tax asset (see Note 9).

Earnings (Loss) Per ShareBasic earnings per share is computed based on the weighted average number of common shares
outstanding. Diluted earnings per share is computed based on the weighted average number of common shares outstanding plus the dilutive effect of stock options outstanding. Common stock equivalents
are not considered in the calculation of earnings (loss) per share-diluted in 2000 and 2001, since their effect is anti-dilutive. The following summarizes the effects of dilutive
securities for the periods in arriving at diluted earnings per share:

2000

2001

2002Weighted average common sharesbasic

19,372,159

20,483,868

20,245,150Impact of dilutive securities:Stock options

1,327,637

784,762

222,206Weighted average common sharesdiluted

20,699,796

21,268,630

20,467,356


At
December 31, 2001 and 2002, the closing stock prices per share did not exceed the exercise prices for 1,151,752 and 2,495,606 stock options outstanding, respectively.
Accordingly, those options have been excluded from the impact of dilutive securities in determining the weighted average common sharesdiluted.

Recent Accounting PronouncementsIn April 2002, the Financial Accounting Standards Board ("FASB") issued a new
pronouncement: Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." Generally, SFAS No. 145 has the effect of suspending the treatment of debt extinguishment costs as extraordinary items. Due to the minimal use of debt instruments, the Company
does not expect the implementation of this statement to impact the Company's reported financial results.

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires that costs associated with exit
or disposal activities be recognized and measured at fair value when the liability is incurred and replaces the existing accounting for such costs under 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)." The provisions
of this statement are effective for exit or disposal activities initiated after December 31, 2002. The Company has adopted the provisions of this statement effective for financial statements
for periods beginning January 1, 2003.

In
November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others." This interpretation expands the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees and requires the guarantor to
recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 clarifies the

38

---

requirements of SFAS 5. Accounting for Contingencies, relating to guarantees. In general, FIN 45 applies to contracts or indemnification agreements that contingently require the guarantor to make
payments to the guaranteed party. The disclosure requirements of FIN 45 are effective to us as of December 31, 2002, and require disclosure of the nature of the guarantee, the maximum potential
amount of future payments that the guarantor could be required to make under the guarantee, and the current amount of the liability, if any, for the guarantor's obligations under the guarantee. The
recognition requirements of FIN 45 are to be applied prospectively to guarantees issued or modified after December 31, 2002. We do not expect the requirements of FIN 45 to have a material
impact on results of operations, financial position, or liquidity.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosurean Amendment of FASB Statement
No. 123," which is effective for financial statements for fiscal years ending after December 15, 2002, with early adoption permitted. SFAS No. 148 will enable companies
that choose to adopt the preferable fair value based method to report the full effect of employee stock options in their financial statements immediately upon adoption, and to make available to
investors better and more frequent disclosure about the cost of employee stock options. The Company will continue to account for stock options under APB No. 25, but will comply with the
disclosure only provision of both SFAS 123, as amended by SFAS 148 (see Note 11).

In
January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." The objective of this interpretation is to provide
guidance on how to identify a variable interest entity ("VIE") and determining when the assets, liabilities, noncontrolling interests, and results of operations of a VIE need to be included in a
company's consolidated financial statements. A company that holds variable interests in an entity will need to consolidate the entity if the company's interest in the VIE is such that the company will
absorb a majority of the VIE's expected losses and/or receive a majority of the entity's expected residual returns, if they occur. FIN 46 also requires additional disclosure by primary beneficiaries
and other significant variable interest holders. The provisions of this interpretation became effective upon issuance. As of December 31, 2002, the Company does not have any VIE.

3. EQUIPMENT, FURNITURE AND SOFTWARE

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

2001

2002Computer and office equipment

$
9,531

$
8,770Office furniture


2,900


2,349Software


3,542


3,741Leasehold improvements


3,459


2,72619,432


17,586Accumulated depreciation and amortization


(7,905
)

(9,571
)Total

$
11,527

$
8,015


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).

39

---

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 ($73 after tax) 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 ($1,041 after tax) 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 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, the Company maintained 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 September 30, 2003. The Company's line of credit is secured with $3.5 million in
marketable securities held in escrow by LaSalle. The Company expects to renew this line of credit upon its expiration. As of December 31, 2002, there were no borrowings outstanding under the
$3.5 million line of credit. As of December 31, 2002, there were three letters of credit totaling $799,375 for office leases drawn on the line of credit.

As
of September 30, 2002, the Company was in violation of certain financial covenants of the line of credit agreement. The Company and LaSalle amended the agreement effective
December 24, 2002, and the Company expects to maintain compliance with the covenants, as amended, through September 30, 2003, the maturity date of the agreement.

40

---

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

Amount of Commitment Expiration
Per PeriodTotal Amounts
Committed

Less Than
1 Year

1-3 YearsLetter of creditChicago office

$
250,000

$
250,000

$
0Letter of creditNew York office


254,375


50,875


50,875Letter of creditBoston office


295,000


30,000


40,000Total

$
799,375

$
330,875

$
90,875


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, 2001.

On
August 13, 1999, the Company closed its initial public offering of its common stock and issued 4,000,000 shares of common stock at $7.00 per share. Proceeds to the Company from
its initial public offering, net of underwriting discounts and costs of the offering, were approximately $24,500.

On
April 12, 2000, Braun Consulting sold 2,400,000 shares of common stock in its secondary public offering. Proceeds to the Company from its secondary public offering, net of
underwriting discounts and costs of the offering, were approximately $47,700.

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 $179.

On
November 2, 2001, the Board of Directors approved the Stock Repurchase Program (the "Program"). Under the Program, the Company is authorized to purchase up to one million of
its shares over the next 24 months. As of December 31, 2002, the Company had purchased 1,000,000 shares of its common stock at an average price of $1.72 per share.

On
November 4, 2002 the Board of Directors approved a second Stock Repurchase Program (the "Second Program"). Under the Second Program, the Company is 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 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.

41

---

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 2005.

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

Year Ending December 31,

Facilities

Equipment2003

$
4,737

$
632004


4,795


102005


4,718


52006


4,153


2007


2,733


Thereafter


9,133


Total

$
30,269

$
78


Of
the $30,269 total facilities minimum lease payments, $8,488 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, $2,148 will be in 2003; $2,130 will be in 2004; $2,024 will be in 2005; $1,570 will be in 2006; $454 will be in 2007; and the remainder of
$162 will be in years 2008 through 2012.

Rent
expense for facilities and equipment was $2,585, $5,469 and $5,548 for the years ended December 31, 2000, 2001 and 2002, respectively. Rent expense for facilities in 2002
includes real estate taxes paid ($600), straight-line rent adjustments for 2002 ($325), and rent expense associated with leases that terminated during 2002 ($183). Rent expense was reduced
by sublease proceeds received for office space in both Chicago, New York and St. Louis in the amount of $445.

Braun
Consulting and Steven Braun, Thomas Duvall, and John Burke, as officers of Braun Consulting, have been named as 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. Messrs. Duvall and Burke are former officers of Braun Consulting. The
complaint 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 plaintiffs are seeking unspecified damages. The Company believes it and its officers have meritorious defenses to the claims and intends to vigorously defend the
lawsuit.

The
Company is a defendant in an adversary proceeding filed on September 23, 2002, in the United States District Bankruptcy Court for the District of Columbia(the "Bankruptcy
Court"), styledWendell W. Webster, Trustee v. Braun Consulting, Inc.,Adversary No. 02-0108, arising out of the Chapter 7
bankruptcy cases NETtel Corporation and NETtel Communications, Inc. (collectively, "NETtel"), wherein the Chapter 7 bankruptcy trustee has sought to avoid and recover payments made by NETtel to
the Company within 90 days prior to the filing of NETtel's bankruptcy cases in the amount of $350,000, pursuant to Section 547 of the United States Bankruptcy Code. The Company has
reached a compromise and entered into a settlement agreement with the bankruptcy trustee to settle this

42

---

litigation. Under the terms of the settlement agreement, the Company will pay the sum of $205,000 to the bankruptcy trustee, all claims of the Company and the bankruptcy trustee will be released, and
the adversary proceeding will be dismissed with prejudice to any refiling thereof. Consummation of the compromise is subject to approval of the Bankruptcy Court. The Company anticipates that the
compromise will be approved by the Bankruptcy Court and consummated in the near future.

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

8. RESTRUCTURING CHARGES

Throughout 2002, the Company enacted several cost cutting measures, in addition to the measures taken in 2001 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.

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.

During
2001, 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 $6,358, consisting of $3,152 for closure and consolidation of facilities, $874 related to the abandonment of associated fixed assets and leasehold improvements, $2,242 for headcount reductions and
$90 for other charges. The $3,152 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 120 employees, consisting of 95 billable consultants and 25 internal services staff.

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 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, $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 and estimated
severance and benefits expenses of $29 that were accrued in prior quarters were reversed as a reduction of general and administrative expenses.

43

---

Remaining
severance and benefits are expected to be paid during 2003. Facilities costs of $2,299 are expected to be paid during 2003 with the remaining costs of $2,800 expected to be
paid during 2004 through 2008, based on the required lease payments under the subject operating leases.

The
Company anticipates that office consolidations and headcount reductions in 2002 will provide cost savings of approximately $11,600 in 2003.

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 in 2001, $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 of 2001, but
reversed as a reduction of general and administrative expenses during the fourth quarter of 2001.

Cost
cutting measures undertaken in 2001 were anticipated to result in cost savings of approximately $11,300 in 2002. The Company realized actual cost savings of approximately $11,300 in
2002 as a result of the 2001 cost cutting measures.

9. INCOME TAXES

The components of the provision (benefit) for income taxes at December 31, 2000, 2001 and 2002 consisted of:

2000

2001

2002Current:Federal

$
(436
)
$


$
State


107


474


76Foreign








101Total current


(329
)

474


177Deferred:Federal


(168
)

(3,875
)

(6,010
)State


(143
)

(1,143
)

(1,604
)Valuation allowance





97


15,650Total deferred


(311
)

(4,921
)

8,036Total provision (benefit)

$
(640
)
$
(4,447
)
$
8,213


The
tax benefit associated with disqualifying dispositions of incentive stock options increased the deferred tax asset by $476 and $0 in 2001 and 2002, respectively. Such benefit was
recorded as an increase to additional paid-in capital.

At
December 31, 2002, Braun Consulting had approximately $33,400 of federal and $29,600 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 tax asset as a result of uncertainties regarding the realization of the asset including: growing net operating losses
in 2002;

44

---

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 structure, the current revenue base is not expected to generate substantial taxable income in the near
term.

A
valuation allowance of $97 was recorded in 2001. The allowance relates to capital loss carryforwards of $70 generated in 2000 that expire December 31, 2005, and net foreign tax
credits of $68 generated in 2001 for taxes paid in Singapore.

Income
tax expense (benefit) for the years ended December 31, 2000, 2001 and 2002 differed from the amounts computed by applying the U.S. statutory income tax rate to
pre-tax income (loss) as a result of the following:

2000

2001

2002Income tax benefit computed at statutory rate

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

21.5

19.0

Stock compensation

7.3

0.5

0.0State income taxes, net of federal benefit

(0.8
)
(1.2
)
(3.6
)Valuation allowance



0.4

78.6Other, net

1.8

0.2

0.2Effective income tax rate

(4.2
)%
(15.1
)%
41.2
%


At
December 31, 2001 and 2002, 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:

2001

2002Deferred tax assets:Net operating loss carryforward

$
6,657

$
12,855Restructuring reserve


1,672


2,733Accrued expenses


324


443Foreign tax credit carryforward


98


Depreciation and amortization


82


18Capital loss carryforwards


70


69Other accruals


289


216Total gross deferred tax assets


9,192


16,334Deferred tax liabilities:Internally developed software, net


(665
)

(568
)Deferred taxes relating to the use of cash method of accounting for tax purposes prior to July 28, 1999


(304
)

Other accruals


(45
)

Total gross deferred tax liabilities


(1,014
)

(568
)Net deferred tax assets before valuation allowance


8,178


15,766Valuation allowance


(97
)

(15,766
)Net deferred tax asset

$
8,081

$



45

---

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, 2000, 2001 and 2002, the Company expensed $347, $396 and $314, respectively, related to the RSP's
employer contributions.

During
2002, the Company reduced its workforce by 96 employees through a series of involuntary terminations. These terminations represented approximately a 22% reduction in the number of
the Company's RSP participants. The Company is continuing to evaluate whether these terminations constitute a partial plan termination as defined under Treasury
Regulation 1.411(d)-2 and, therefore, whether all unvested employer contributions should become 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.

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, 2000, 2001 and 2002, $4,020, $92 and $1, 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. The
number of shares available for future grants at December 31, 2002 was 130,574.

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 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

46

---

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, 2000, 2001 and 2002, $286, $98 and $22, respectively, were charged to operations. The number of shares available for future grants at December 31, 2002 was 232,238.

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, 2002 was 36,000.

Braun
Consulting 2002 PlanThe Company adopted the 2002 Employee Long Term Stock Investment Plan (the "2002 Plan") in 2002. Under the 2002 Plan, certain employees and
executives were given the right to acquire shares of common stock. Options generally vest over 1 to 5 years 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, 2002 was 602,900.

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, 2000, 2001 and 2002, $168, $96 and $7, respectively, were charged to operations. No further
grants will be made under the ETCI Plan.

The
following summarizes changes in stock options under the plans for the years ended December 31, 2000, 2001 and 2002:

|                                                               |  | 2000 |           | 2001 |   | 2002 
|-------------------------------------------------------------- |  | ---- | --------- | ---- | - | -----
|
|Options outstanding, beginning of year                         |  |      | 2,662,260 |      | $ | 5.75 
|Options granted                                                |  |      | 1,413,669 |      |   | 8.58 
|Options exercised                                              |  |      | (659,223  | )    |   | 2.74 
|Options forfeited                                              |  |      | (189,310  | )    |   | 16.83
|                                                               |  |      |           |      |   |      
|Options outstanding, end of year                               |  |      | 3,227,396 |      |   | 6.94 
|                                                               |  |      |           |      |   |      
|Options exercisable, end of year                               |  |      | 789,813   |      |   | 8.45 
|                                                               |  |      |           |      |   |      
|Weighted average fair value of options granted during the year |  | $    | 9.77      |      |   |      
|                                                               |  |      |           |      |   |      

47

---

Additional
information for options outstanding and options exercisable under the plans at December 31, 2002 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$  0.05 - $  2.37

468,750

$
0.93

3.0

47,950

$
1.013.00 -    3.23

597,965


3.13

1.5

381,514


3.113.39 -    3.46

991,100


3.39

3.1

197,620


3.393.68 -    7.13

686,069


4.84

0.3

582,063


4.707.38 -  52.75

136,972


22.41

0.8

96,950


21.312,880,856


4.19



1,306,097


5.13


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:

2000

2001

2002Net loss as reported

$
(14,589
)
$
(25,044
)
$
(28,138
)Add: Stock based employee compensation expense included in reported net loss, net of related tax effects


4,474


286


30Deduct: Total stock based employee compensation expense determined under fair value based method for all awards,-net of related tax effects


(5,631
)

(4,892
)

(3,748
)Pro forma net loss


(15,746
)

(29,650
)

(31,856
)Loss per sharebasic (Unaudited):As reported


(0.75
)

(1.22
)

(1.39
)Pro forma


(0.81
)

(1.45
)

(1.57
)Loss per sharediluted (Unaudited):As reported


(0.75
)

(1.22
)

(1.39
)Pro forma


(0.81
)

(1.45
)

(1.57
)


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.

48

---

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 31,2000

2001

20021995, 1998, 2002 and ETCI Plans:Expected future dividend yield





Risk-free interest rate

5.4
%
4.6
%
3.9
%Expected life (months)

43

34

461999 Plan:Expected future dividend yield





Risk-free interest rate



4.4
%
2.4
%Expected life (months)



9

12


Expected
volatility was 145%, 108% and 97% for options granted in 2000, 2001 and 2002, 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. No work was performed in 2000 or 2002 for clients with foreign operations.

One
client, Pharmacia, accounted for 16.5%, 29.9% and 26.0% of revenue before expense reimbursements in 2000, 2001 and 2002, respectively. During the fourth quarter 2002, this client
generated only $15 of the Company's revenue before expense reimbursements. Our ten largest clients generated approximately 42.0%, 65.4% and 72.0% of our revenue before expense reimbursements in 2000,
2001 and 2002, respectively. Loss of any significant client can seriously harm our business.

49

---

13. QUARTERLY FINANCIAL INFORMATION (Unaudited)

|                                                 |                                     | Three Months Ended       |       
|------------------------------------------------ | ----------------------------------- | ------------------------ | ------
|
|Revenue:                                         |                                     |                          |       
|Revenue before expense reimbursements            |                                     | $                        | 21,632
|Expense reimbursements                           |                                     |                          | 1,962 
|                                                 |                                     |                          |       
|                                                 |                                     | 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                  |                          |       
|                                                 |                                     |                          |       
|                                                 |                                     | Total costs and expenses |       
|                                                 |                                     |                          |       
|Operating loss                                   |                                     |                          | (3,055
|Interest income                                  |                                     |                          | 706   
|Interest expense                                 |                                     |                          | 15    
|                                                 |                                     |                          |       
|Loss before provision (benefit) for income taxes |                                     |                          | (2,364
|Provision (benefit) for income taxes             |                                     |                          | (79   
|                                                 |                                     |                          |       
|Net loss                                         |                                     | $                        | (2,285
|                                                 |                                     |                          |       
|Basic loss per share                             |                                     | $                        | (0.11 
|Diluted loss per share                           |                                     | $                        | (0.11 

50

---



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, 2000      |  | $                            | $100 |              | $ | 2,165         |  | $                     
|Year ended December 31, 2001      |  |                              | 400  |              |   | 2,921         |  |                       
|Year ended December 31, 2002      |  |                              | 500  |              |   | 45            |  |                       

|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, 2000                 |  |                              |   |           |   |           |  |                      
|Year ended December 31, 2001                 |  | $                            |   |           | $ | 97         |  |                      
|Year ended December 31, 2002                 |  |                              | 97 |           |   | 15,669     |  |                      

---

ITEM 14. Controls and Procedures



The
term "disclosure controls and procedures" is defined in Rules 13a-14(c) and 15d-14(c) 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. Our Chief Executive Officer and our Principal Financial Officer have evaluated the effectiveness of our disclosure controls
and procedures as of a date within 90 days before the filing of this annual report (the "Evaluation Date"), and they have concluded that, 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. Since the Evaluation Date, there have been no significant changes to our internal controls or in other factors that could significantly affect our
internal controls.

51

---



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 Deloitte & Touche LLP                                                                                                                                              
|****99.1     |  | Certification of Chief Executive Officer                                                                                                                                      
|****99.2     |  | Certification of Principal Financial Officer                                                                                                                                  

52

---

---

|(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.   

53

---



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 11th day of March, 2003.

| |  | 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 11, 2003.

|Signature              |  | Title                                                                                              
|---------------------- |  | ---------------------------------------------------------------------------------------------------
|                       |  |                                                                                                    
|/s/STEVEN J. BRAUN     |  | Chairman of the Board and Chief Executive Officer (Principal Executive Officer)                    
|/s/THOMAS A. SCHULER   |  | Senior Vice President of Corporate Development and Investor Relations (Principal Financial Officer)
|/s/KEVIN J. SPARS      |  | Vice President and Controller (Principal Accounting Officer)                                       
|/s/MICHAEL J. EVANISKO |  | Director                                                                                           
|/s/JAMES M. KALUSTIAN  |  | Director                                                                                           
|/s/NORMAN R. BOBINS    |  | Director                                                                                           
|/s/WILLIAM M. CONROY   |  | Director                                                                                           
|/s/WILLIAM H. INMON    |  | Director                                                                                           
|/s/ERIC V. SCHULTZ     |  | Director                                                                                           

54

---

Braun Consulting, Inc.
a Delaware corporation

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Section 302 Certification

I,
Steven J. Braun, certify that:





Date:
March 11, 2003

|/s/STEVEN J. BRAUNSteven J. Braun Chairman of the Board and
Chief Executive Officer |  | 
|----------------------------------------------------------------------------------- |  | 

55

---

Braun Consulting, Inc.
a Delaware corporation

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Section 302 Certification

I,
Thomas A. Schuler, certify that:





Date:
March 11, 2003

|/s/THOMAS A. SCHULERThomas A. Schuler Senior Vice President of
Corporate
Development and Investor Relations
(Principal Financial Officer) |  | 
|----------------------------------------------------------------------------------------------------------------------------------------- |  | 

56

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