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

                                    FORM 10-K

                                   (MARK ONE)

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

                    FOR THE FISCAL YEAR ENDED JANUARY 1, 2005

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER: 000-27617

                       THE MANAGEMENT NETWORK GROUP, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          DELAWARE                                  48-1129619
(STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)               IDENTIFICATION NUMBER)

                             7300 COLLEGE BOULEVARD,
                     SUITE 302, OVERLAND PARK, KANSAS 66210
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (913) 345-9315

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

     TITLE OF EACH CLASS            NAME OF EACH EXCHANGE ON WHICH REGISTERED
     -------------------            -----------------------------------------
COMMON STOCK (.001 PAR VALUE)                  NASDAQ NATIONAL MARKET

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE.

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

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

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  as of July 3, 2004 was approximately  $42.8 million. As of April 1,
2005 the Registrant had 34,862,289  shares of common stock, par value $0.001 per
share (the Common Stock), issued and outstanding.


<PAGE>



                       DOCUMENTS INCORPORATED BY REFERENCE

The  information  required  to be provided in Part III (Items 10, 11, 12, 13 and
14) of this Annual Report on Form 10-K is hereby  incorporated by reference from
our definitive  2005 proxy statement which will be filed with the Securities and
Exchange Commission within 120 days of the end of our fiscal year.

                       THE MANAGEMENT NETWORK GROUP, INC.

                                    FORM 10-K



                                TABLE OF CONTENTS

                                                                        PAGE
                                                                        ----
                                     PART I

Item 1.   Business....................................................     3
Item 2.   Property....................................................    15
Item 3.   Legal Proceedings...........................................    15
Item 4.   Submission of Matters to a Vote of Security Holders.........    16

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................    16
Item 6.   Selected Consolidated Financial Data........................    18
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................    20
Item 7A.  Quantitative and Qualitative Disclosures About Market
          Risk........................................................    27
Item 8.   Consolidated Financial Statements...........................    28
Item 9.   Changes in and Disagreements With Accountants on Accounting
          and Financial Disclosure....................................    54
Item 9A.  Controls and Procedures ....................................    54
Item 9B.  Other Information ..........................................    54

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant..........    54
Item 11.  Executive Compensation......................................    54
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................    54
Item 13.  Certain Relationships and Related Transactions..............    54
Item 14.  Principal Accountant Fees and Services .....................    54

                                    PART IV

Item 15.  Exhibits and Financial Statement Schedules .................    54
SIGNATURES............................................................    55


<PAGE>


                                     PART I

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
With the exception of historical information,  this report on Form 10-K contains
forward-looking  statements  as defined  in the  Private  Securities  Litigation
Reform  Act of 1995  and  identified  by such  words  as  "will  be,"  "intend,"
"continue," "believe," "may," "expect," "hope," "anticipate," "goal," "forecast"
or other comparable terms. Our actual financial condition, results of operations
or business may vary materially from those  contemplated by such forward looking
statements  and  involve  various  risks and  uncertainties,  including  but not
limited to those  discussed in Item 1, "Business - Risk Factors."  Investors are
cautioned not to place undue reliance on any forward-looking statements.

WEBSITE ACCESS TO EXCHANGE ACTS REPORTS
Our internet website address is  www.tmng.com.  We make available free of charge
through  our  website  all of our  filings  with  the  Securities  and  Exchange
Commission ("SEC"), including our 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 as soon as
reasonably  practicable  after we  electronically  file such  material  with, or
furnish it to the SEC. The charters of our audit,  nominating  and  compensation
committees  and our Code of Business  Conduct are also  available on our website
and in print to any shareholder who requests them.


ITEM 1. BUSINESS

When used in this report,  the terms  "TMNG," "we," "us," "our" or the "Company"
refer to The Management Network Group, Inc. and its subsidiaries.

GENERAL

TMNG, a Delaware corporation,  founded in 1990, is a leader in consulting to the
communications  industry.  We have built a fully  integrated suite of consulting
offerings including strategy, management, marketing, operational, and technology
consulting  services primarily to communications  service providers,  technology
companies and financial services firms located  principally in North America and
Western Europe.  Historically,  in addition to North America and Western Europe,
we have  provided  consulting  services  to clients  in almost  all other  major
international  markets.  We believe  we are  unique in our  ability to provide a
comprehensive  business  solution  to  the  communications  industry,  including
strategy  consulting  and  business  planning,  product/service  definition  and
launch,  customer  acquisition  and retention,  business  model  transformation,
technical  support and process  modeling for business  support systems (BSS) and
operations support systems (OSS). We have consulting  experience with almost all
major  aspects of managing a global  communications  company.  In  addition,  we
provide marketing  consulting  services to clients outside of the communications
industry, primarily in the Eastern region of the United States (Mid-Atlantic).

From our  inception  to  mid-fiscal  year  2000,  we have been a  provider  of a
comprehensive  range of  services  to the global  communications  industry  with
significant  focus  and  emphasis  on  management  and  operational   consulting
services.  During fiscal year 2000 we identified early leading indicators of the
market downturn in the communications  industry (See "Market Overview" in Item 1
for an additional  discussion of market conditions).  We broadened our focus and
emphasis to include not only  management  and  operational  consulting  but also
strategy and marketing to enable us to deliver more  comprehensive  solutions to
our communications  service provider clients. To accomplish this transformation,
we looked to increase the breadth of our employee work base, hiring  consultants
of increasingly  diverse  backgrounds with various technical  competencies,  and
began an acquisition  strategy to acquire  consulting  companies whose offerings
complemented   or  expanded  the  offerings  we   historically   provided.   Key
acquisitions  completed  by us during  the last five  years  included  Cambridge
Strategic  Management Group,  Inc. (now "TMNG Strategy"),  The Weathersby Group,
Inc.  (now  "TMNG  Marketing")  and  Tri-Com  Computer  Services,   Inc.  ("TMNG
Technologies").  These acquired  businesses  focused primarily on strategy,  new
product launch initiatives,  customer acquisition and retention,  and technology
consulting to the global communications  industry. We believe these acquisitions
have  expanded key client  relationships,  have  uniquely  positioned  us in the
market to effectively serve today's needs of large global communication  service
providers,  and  provided an expansion  of our key direct  distribution  channel
elements.  We have  integrated  these  practices  and are now  bringing  a fully
integrated suite of offerings to the communications marketplace.

As we primarily focus on communications service providers,  during the course of
numerous  engagements  we have learned what the service  providers' key business
objectives  consist  of,  both near and long term.  In  addition,  we have built
product  offerings  targeting  software  and  technology  companies,  investment
banking and private equity firms,  which invest in and serve the  communications
industry.  Our services to software and technology firms have included  strategy
definition,   product  positioning,   application  development,   assistance  in
responding to requests for  proposals,  and  implementing  solutions  within the
service  provider  environment.  Services to the investment  banking and private
equity  community  have  included  prospect  validation,   due  diligence,   and
operational management outsourcing.

Recently, with the market dynamics changing (see "Market Overview" in Item 1) we
have been focusing on the opportunity to expand our offerings  through  indirect
channel  partners.  We believe  partnering  will better enable us to serve large
clients in what has become a shrinking and consolidating marketplace. We provide
our partners  with  contacts,  strategic  business  analysis,  business  process
outsourcing  (BPO)  solutions,  and depth of knowledge and experience in serving
the  industry.  The  partnerships  bring us  technology  solutions  and  systems
integration  capabilities  which  enable our  partners  and us to  provide  more
comprehensive  client offerings and solutions to effectively  compete with other
global consultancies.

<PAGE>

Our key strategic initiatives focus on supporting wireless and Internet Protocol
("IP")  initiatives  in the market  place.  We have been  evolving  our  service
offerings to support the growth and  transformation of  communications  over the
next generation of technologies,  including IP voice, data and content offerings
over both wireline and wireless networks. We have been providing  communications
consulting  expertise  to new and  growing  organizations.  In  2003,  we took a
leadership  position in the wireless  industry by providing a suite of offerings
to assist  wireless  carriers  with the impact of  wireless  number  portability
(WNP).  In 2004,  we have  continued  to expand our  presence in wireless and in
conjunction  with  Bear,  Stearns & Co.,  completed  an  in-depth  review of new
broadband wireless technologies from a business and economic perspective. We are
investing  in  intellectual  capital  to  assist  major  communications  service
providers  in dealing  with the voice over  internet  protocol  ("VoIP")  and IP
managed  offerings which we believe are transforming the industry.  We have also
established  a Mobile  Virtual  Network  Enablement  ("MVNE")  practice to offer
end-to-end  consulting  services  to the fast  growing  Mobile  Virtual  Network
Operator ("MVNO") market.  Finally, we have recruited  executives with expertise
and relationships serving the rural local exchange carrier (RLEC) market and are
building  presence and market share in that industry  segment of  communications
service providers.

We intend to continue  capitalizing  on our  industry  expertise  by  refreshing
existing  proprietary toolsets and building new toolsets to enable us to provide
strategic,  management,  marketing,  operational,  and technology support to our
clients.  Our toolsets  are  consulting  guidelines,  processes  and  benchmarks
created  and  updated by our  consultants  based on their  experience  over many
consulting  engagements.  These toolsets assist clients to improve productivity,
gain  competitive  advantage,  reduce time to market and market entry risk,  and
increase  revenues and profits.  Our services are provided by teams comprised of
senior professionals recruited from prestigious university campuses complemented
by teams of consultants from the  communications  industry averaging 15 years of
experience.

We maintain a unique  technology  agnostic and vendor  neutral  position to make
unbiased  evaluations and recommendations that are based on a thorough knowledge
of  each  solution  and  each  client's  situation.  Therefore,  we are  able to
capitalize   on   extensive    experience   across   complex    multi-technology
communications  systems  environments  to provide  the most sound and  practical
recommendations to our clients.

MARKET OVERVIEW

The demand for consulting  services increased  throughout the 1990's. This trend
was  especially   prevalent  for  consulting   services  of  communications  and
e-commerce  consulting  firms.  The key  contributor to this was the significant
projected  growth  of the  internet  and  e-commerce  which  stimulated  capital
investment into new and existing  wireline  communications  providers,  enabling
their  investment  in new network  technology  and the creation of new broadband
market offerings. Investment was further accelerated through global deregulation
of the  communications  industry  throughout the 1990's. The deregulation of the
communications   industry  resulted  in  increased  competition  by  new  market
entrants;  a massive influx of debt and equity capital to the sector to fund new
and  existing  carrier  entrants;  rapid  internet  growth,  spurring  broadband
internet  access  services,  digital  subscriber  line (DSL) internet access and
unbundled local loops that forged the way for wholesale DSL business models; and
technological innovations, allowing new service offerings in the areas of voice,
data, video and content.

In parallel to the wireline sector,  significant investment was made in wireless
communications.  There was tremendous  growth occurring as voice  communications
were  migrating  to wireless  networks and  devices.  In addition,  the personal
communications services (PCS) auctions in the United States and universal mobile
telecommunications  system (UMTS) broadband spectrum auctions in Europe resulted
in new  providers,  additional  services,  and  improved  technology.  Increased
customer penetration of wireless services occurred in both consumer and business
customers,  and  services  were  expanded  to include  wireless  data  offerings
primarily in Europe and Asia.

By  mid-2000,  following  the first  announcements  of  disappointing  financial
performance by wireline and wireless  communication  service providers and their
vendors,  it became  apparent that the rate of  investment  and adoption was far
exceeding  the  expected  rate  of   consumption  in  e-commerce  and  broadband
offerings.  The massive  inflow of capital in  communications  during the 1990's
resulted in an inflated market  scenario,  where once solid business models were
now  ill  equipped  to  function   and  adjust  to  the  adverse   macroeconomic
environment.  The cycle was further  perpetuated  by the over  saturation of new
market  entrants  where supply far exceeded  levels  sustainable  by the market,
creating pressure for consolidation and funding  contraction.  As a result,  the
industry  experienced a significant number of bankruptcies and layoffs in excess
of  one-half   million   individuals   in  the  United  States  alone.   Because
communications   companies  often  purchased  services  from  one  another,  the
bankruptcies led to a vicious cycle of industry-wide  destabilization  with each
successive bankruptcy jeopardizing another company's liquidity position.

The  industry  experienced  further  instability  during 2002 due to  government
investigations  into the  accounting  practices of several large  communications
providers that revealed the perpetuation of accounting improprieties,  including
the material overstatement of revenues and the understatement of expenses.  Such
inquiries have resulted in ongoing restatements of previously reported financial
statements,  resulting in additional  destabilization  within the industry,  and
eroding investors' confidence.

These  macroeconomic   forces  destabilized  the  communications   industry  and
depressed  the  market  for  outside   consulting   services,   including  ours.
Communications  companies  continued to reduce demand for external  consultants,
seeking  instead to utilize more  internal  resources,  or in some cases delayed
capital and  operating  expenditures  related to the launch of new  products and
services,  particularly in networks and technology. This resulted in a continued
substantial  decline in our revenue and profits  during fiscal years 2001,  2002
and 2003,  although the trend appeared to level off during fiscal year 2004 (see
Item 1,  "Business - Risk  Factors"  and Item 7,  "Management's  Discussion  and
Analysis").

Today, the global communications  industry is in the midst of what we believe is
to be revolutionary  change.  After  approximately four years of

<PAGE>

retrenching and restructuring,  the complements of regulatory  decisions and new
technologies  have begun to  stimulate  new  investment  in the sector.  What we
believe  the  future of the  global  communications  industry  will look like is
beginning to take shape. A convergence of voice, data and video or content based
communications is occurring. This is bringing both new competitors to the market
and  resulting  in  the  consolidation  of  existing  industry  competitors.  In
addition,   cable  communications  companies  that  historically  offered  video
services are now positioning themselves as providers of voice and other data and
content services.

As we enter  fiscal  year  2005,  we  believe  the large  global  communications
companies will be strategically  focused on the following key initiatives,  with
priority  depending upon present position and state of the company:  bundling of
services (i.e., wireline,  wireless,  high-speed data and video) to compete with
cable companies;  continued aggressive reduction of costs;  reassessment of core
competencies in order to leverage  strengths and exit weak areas;  and migration
to new technologies--next generation wireless and VoIP. It is also expected that
further market consolidation will occur over the next few years.

It is our belief that the  regulatory  environment  will also continue to play a
key factor in the strategy and operations of  communications  providers as these
decisions  impact   intercarrier  costs  and  pricing.   In  2004,  the  Federal
Communications Commission ("FCC") and State Public Utility Commissions ("PUC's")
continued to consider the  regulatory  treatment of  IP-enabled  services,  like
VoIP. While it is difficult to predict future  outcomes,  it seems apparent from
the  various  VoIP  orders  released  by the FCC that they are moving  towards a
national regulatory regime with limited  regulation,  rather than state-by-state
regulation.  These recent regulatory decisions surrounding  intercarrier pricing
of  certain   network   elements  played  a  role  in  the   consolidations   of
inter-exchange  carrier  ("IXC")  players  like AT&T and MCI as their  long-term
ability to compete was impaired. In addition to these developments,  several key
legislators wish to "re-open" the Telecommunications Act of 1996 during the 2005
legislative  session.  The FCC's  continued  promotion of  flexibility in use of
licensed  spectrum  and  easing of  spectrum  caps has led to  consolidation  of
wireless  carriers and the development of advanced wireless  technologies  which
now  make  wireless  a viable  "substitute"  for  wireline  rather  than  just a
complement to the bundle.

The convergence of content providers and wireless  distribution  channels (i.e.,
carriers)  has opened new segments of the market  through the MVNO model.  MVNOs
are mobile  operators  that do not own their own  wireless  spectrum  or network
infrastructure.  Instead,  MVNOs  contract  with existing  wireless  carriers to
purchase wholesale access to wireless  networks.  We believe the MVNO model will
move the market for wireless services from a voice-focused market to one focused
on value-added  non-voice services  extending into media and  entertainment.  As
MVNOs,  companies  traditionally  known for content,  aim to  transform  the way
consumers view their wireless  services.  We expect this  transformation  of the
wireless  market  to  occur  rapidly  and  present  numerous  challenges  to the
traditional carriers and MVNOs alike.

We expect these  regulatory,  competitive and  technological  developments  will
increase demand for consulting services, with increased focus on wireless and IP
based offerings, outsourced BPO service opportunities, and the need for existing
management  consultancies  to  provide  solutions  to these  new  communications
industry  challenges.  As  discussed  in Item 1,  "Business - General,"  we have
invested significantly to enable us to provide such services.

It has been our experience that because the expertise  needed by  communications
companies  to  address  the  market's  needs is  typically  outside  their  core
competencies,  they must ultimately  either recruit and employ experts or retain
outside  specialists.  We believe due to the range of expertise required and the
time  associated  with hiring and training  new  personnel,  bringing  expertise
in-house is often not a viable option.  Although demand for consulting  services
has been down in recent years, we believe  customers will need to outsource some
of the expertise  required to adapt to new  environments  and  capitalize on new
technologies  now  emerging.  When  retaining  outside  specialists,  we believe
communications  companies need experts that fully understand the  communications
industry and can provide  timely and  unbiased  advice and  recommendations.  We
continue to position ourselves to respond to that anticipated need.

BUSINESS STRATEGY

Our objective is to establish  ourselves as the consulting  company of choice to
the communications industry, which includes the service providers and technology
companies  that serve the industry,  and the financial  services and  investment
banking firms that invest in the sector.  The  following  are key  strategies we
have adopted to pursue this objective.

- Develop and evolve existing offerings/solutions and thought leadership

We plan to  continue  expanding  our  end-to-end  solutions  offerings,  both by
organic  expansion  and/or  through  acquisitions.  Organic  expansion  involves
assisting  clients in  further  defining  competitive  position,  launching  new
products and services  and  generating  revenues  through  integrated  offerings
jointly developed by us and our acquired companies.  Organic expansion will also
focus on offerings  geared towards  increasing  clients'  efficiencies.  We have
expanded our offerings  through the  acquisition of TMNG Marketing in late 2000.
TMNG  Marketing  provides a full  spectrum  of  marketing  consulting  services,
including product  development,  churn management and market research that takes
clients  from the  point of  product  definition  to  customer  acquisition  and
retention. Additionally, in March 2002, we acquired TMNG Strategy. TMNG Strategy
provides  a wide range of  business  strategy  services  including  analyses  of
industry and  competitive  environments;  product and  distribution  strategies;
finance,  including  business  case  development,  modeling,  cost  analysis and
benchmarking; and due diligence and risk assessment.

- Continue to build the TMNG brand

We  plan  to  continue  building  and  communicating  the  TMNG  brand,  further
positioning ourselves as the consultancy of choice for the global

<PAGE>

communications  industry.  Special  focus  will be placed on brand and  eminence
building in the wireless  consulting and VoIP arenas.  Direct marketing  efforts
and other marketing  initiatives are underway to continue building  awareness of
TMNG and  communicating  our key  strengths,  including our unique high level of
experienced  consultants,  our singular  focus on the global  telecommunications
industry,  our  integrated  end-to-end  solution and our  commitment to bringing
clients a positive return on their investment.

- Focused and effective retention and recruitment

We plan to further  enhance our business  model to accommodate  the  anticipated
types of consulting  services  resulting  from  revolutionary  change  occurring
within the  communications  sector. One key element of our business model is the
attraction  and  retention of high  quality,  experienced  consultants.  Our two
primary  challenges  in the  recruitment  of new  consulting  personnel  are the
ability  to  recruit  talented  personnel  with  the  skill  sets  necessary  to
capitalize  on an industry  undergoing  revolutionary  change and the ability to
execute such recruitment with an appropriate compensation arrangement.

We reinvigorate existing skill sets of our consultants with proprietary toolsets
that provide methodologies they use to augment their experience and help analyze
and solve  clients'  problems.  We  utilize  a  network  of eRooms to serve as a
knowledge base, enabling  consultant  collaboration on engagements and providing
support  information  and updates of TMNG current  toolsets and releases of next
generation  tools.  Finally,  we  continue  to manage  our  flexible  and unique
employee and  independent  subject  matter  expert  model to maximize  skill set
offerings, while minimizing the effect of unbillable consultant time.

- Maintaining a global presence

We plan to maintain  our  presence  globally to deliver  services  and  solution
capabilities  to client  companies  located  around  the world.  We believe  the
competitive  market  expertise of our U.S.  consultants  can be a key factor for
foreign  companies facing the business issues  associated with  deregulation and
competition, especially in Western Europe.

- Building  intellectual  capital and a comprehensive suite of wireless and VoIP
  consultative offerings

We have completed  engagements with wireless clients in the U.S., Europe,  Latin
America,  Asia and the Middle East.  Our  services  have  included  business and
strategic planning,  product  development,  customer  acquisition and retention,
business  and  operations  process  design and  reengineering,  revenue and cost
management  and  network  planning.  In 2003 we  continued  to  build a suite of
offerings to support WNP for the wireless industry.  During 2004, we co-authored
a study with Bear,  Stearns & Co. analyzing the impact of new broadband wireless
technologies on public and private companies in the telecommunications sector.

In 2005, our top two strategic focuses will be continued  development of service
offerings   supporting   wireless   communication   service  providers  and  the
transformation to IP technologies.

- Leveraging knowledge and skills through partner channels

We are also focusing on managed service  offerings and partnerships  with select
global  technology,  outsourcing and system integration firms as a complement to
our consultancy offerings. We believe this will be a fast growing market segment
which should allow us to leverage our  intellectual  capital  while teaming with
technology  partners  to bring  BPO and  managed  services  offerings  to select
clients.   We  believe  we  are  uniquely  positioned  to  capitalize  on  these
anticipated market opportunities,  particularly because of our vendor neutrality
and proprietary productivity toolsets.

SERVICES

We provide a full  range of  strategic,  marketing,  operations  and  technology
consulting services to the communications industry. Services provided include:

- Strategy and Business Case Development

We provide  comprehensive  strategic  analysis to service  providers,  equipment
manufacturers  and  financial  investors  in the  communications  industry.  Our
approach combines rigorous qualitative and quantitative analyses with a detailed
understanding of industry trends,  technologies,  and  developments.  We provide
clients with specific  solutions to their key strategic issues relating to their
existing business as well as new product and service opportunities. Our services
include  business  case  development,  data and  content  strategies,  marketing
spending optimization,  service and brand diversification,  enterprise and small
business strategies, technology commercialization and operational strategies.

<PAGE>

- Product Development and Management

We offer global  communications  service  providers  the benefit of our hands-on
experience  developing  and  launching  new  products  and  services for some of
today's  industry  leaders.  Our product  development  approach  includes market
assessments,   product/service  definition,  business  requirements  definition,
project management,  testing and release. We also help communications clients by
evaluating  the  profitability  of existing  product and  service  offerings  to
identify opportunities to consolidate, de-emphasize or decommission offerings to
improve clients' overall profitability.

- Customer Acquisition and Retention

We have  developed and  implemented  acquisition  and retention  strategies  for
clients in the communications industry. We have consultants skilled in the areas
of target market segmentation, campaign management and sales-process management.
Our strategies  take into account the needs and preferences of the target market
and include a mix of marketing  communications,  partner programs,  e-marketing,
direct sales, telemarketing, direct response and loyalty and retention programs.

- Revenue and Cost Management

We  are  dedicated  to  helping  clients  uncover  and  recover  missed  billing
opportunities  at every stage along the revenue  life cycle and reduce the costs
associated with managing  business  functions.  Our approach to revenue and cost
management  centers  around   operational   assessment,   process   improvement,
organizational  restructuring,   and  continuous  improvement.  Our  consultants
utilize  their  industry  expertise  and our  proprietary  TMNG QBC(R)  (Quality
Business Controls) toolset to deliver quantifiable benefits to clients.

- Business and Operations Process Redesign and Reengineering

We  provide  clients  with  efficient,   integrated   business  and  operational
processes,  supporting technology systems and web-centric  interfaces across all
OSS/BSS applications.  We take clients from the point of customer acquisition to
provisioning all the way through to billing,  accounts receivable management and
cash collections to profits in the bank.

- Corporate Investment Services

We provide a wide range of services  to  investment  banking and private  equity
firms in  connection  with  investments  and  mergers  and  acquisitions  in the
communications  industry.  Services  include  evaluation of management teams and
business  plans,  identification  of strengths and weakness of the company,  and
analyses of the company's  financial models,  systems,  products and operational
and  business  processes.  Post-investment  support  is  also  provided  to help
customers  in the  optimization  of their  investment  through  our  Operational
Performance   Appraisal  (OPA(TM))  tool.  OPA(TM)  features  an  assessment  of
communications   companies'  revenue  assurance,   network  inventory,   network
operations,  order management and  provisioning,  disaster recovery planning and
e-commerce operations and products. The OPA(TM) seeks to help companies optimize
asset utilization,  including network assets and inventory. In addition, OPA(TM)
seeks to maximize  revenue and minimize  associated  costs and  determine if the
provider's customers are being served effectively.

- TMNG Resources

TMNG Resources, a business unit of TMNG Marketing,  focuses on providing subject
matter experts  utilizing a staff  augmentation  model. As the telecom  industry
starts to rebound,  we believe  service  providers may, at least  initially,  be
hesitant to make  permanent  hiring  decisions  and will seek  temporary  expert
staff.  We believe TMNG Resources is uniquely  positioned to fill the recruiting
needs of our clients.

COMPETITION

The market for  communications  consulting  services  is highly  fragmented  and
changing  rapidly.   We  face  competition  from  major  business  and  strategy
consulting firms, large systems  integration and major global outsourcing firms,
offshore development firms from the Asian markets,  equipment and software firms
that have added service offerings, and customers' internal resources.  Recently,
there has been a  significant  increase  in demand for firms that can bundle BPO
with systems and  technical  integration.  Many of these  competitors  are large
organizations  that  provide a broad  range of  services  to  companies  in many
industries,  including the  communications  industry.  Many of these competitors
have  significantly  greater  financial,  technical and marketing  resources and
greater name recognition than us. With the communications  industry experiencing
significant  economic challenge,  contraction and consolidation,  we believe our
principal  competitive  factor  is our  continual  focus  on the  communications
industry and the ability to develop and deliver  solutions  that enhance  client
revenue and asset utilization and provide return on investment.  We also believe
the  complementary  experience and expertise of our  professionals  represents a
competitive advantage.  In a down economic environment our biggest competitor is
the customer's internal resources. As a result, the most significant competitive
advantage becomes long-lived  relationships with key client executives that have
developed over time from consistency in responsiveness  to their needs,  quality
and reliability of consultants and deliverables,  and an appropriate price/value
formula.

We have faced, and expect to continue to face,  additional  competition from new
entrants into the communications  consulting  markets.  We have also experienced
increased  price  competition,  particularly  from large Asian  firms  providing
technical  support and outsourcing and other large firms that have the financial
resources to aggressively price engagements that they have a particular interest
in obtaining.  Increased  competition  could result in further price reductions,
fewer  client  projects,  underutilization  of  consultants,  reduced  operating
margins, and loss of market share.

<PAGE>

EMPLOYEES

Our  ability to recruit  and retain  experienced,  highly  qualified  and highly
motivated  personnel  has  contributed  greatly to our  performance  and will be
critical in the future.  We offer a flexible  recruiting model that enhances our
ability  to attract  consultants  and to  effectively  manage  utilization.  Our
consultants  may  work  as  full  time  employees  or as  contingent  employees.
Contingent employees receive company-paid medical insurance,  vacation and other
employee benefits, but instead of receiving a regular salary, they are only paid
for time spent  working  on  consulting  projects  for  customers  or working on
internal projects.  Generally,  we will offer contingent employment to personnel
who  are  frequently  utilized  on  consulting   projects,   and  have  a  skill
set/offering  that is in high  demand.  We also  have  relationships  with  many
independent contracting firms to assist in delivery of consulting solutions. Our
current base of independent firms has specialized expertise in discrete areas of
communications,  and we  typically  deploy  these  firms only when their  unique
expertise/offering is required.

During fiscal year 2004, we utilized approximately 259 consultants, representing
a combination of employee  consultants  and  independent  contracting  firms. Of
these,  70 were  employee  consultants  and  approximately  189 were  working on
engagements  for us  primarily  through  independent  subcontracting  firms.  In
addition to the consultants, we have an administrative staff of approximately 27
employees in the  accounting  and finance,  marketing,  recruiting,  information
technology, human resources and administrative areas.

BUSINESS SEGMENTS

Based on an  analysis of the  criteria  in  Statement  of  Financial  Accounting
Standards  ("SFAS") No. 131  "Disclosure  about  Segments of an  Enterprise  and
Related  Information" we historically  concluded we had five operating segments,
of  which  four  were  aggregated  in one  reportable  segment,  the  Management
Consulting  Services segment,  and the remaining segment in All Other.  Services
provided by the Management Consulting Services segment include business strategy
and planning,  marketing and customer  relationship  management,  billing system
support,  operating  system support,  revenue  assurance,  corporate  investment
services,  and network  management.  All Other  consisted  of computer  hardware
commissions and rebates  received in connection with the procurement of hardware
for third parties.  Effective with the  discontinuation of the hardware business
in March 2004, we now have one  reportable  segment,  and  therefore  summarized
financial  information  concerning the Management Consulting Services segment is
not included in this report. For summarized financial  information regarding the
All  Other  segment,  see  Note  4  "Discontinued   Operations."  There  are  no
inter-segment sales.

MAJOR CUSTOMERS

We have provided  services to  approximately  1,000  domestic and  international
customers,  primarily  communication  service providers and large technology and
applications  firms serving the  communications  industry and investment banking
and private equity firms that invest in the sector.  We depend on a small number
of key customers for a significant portion of revenues. Revenues from two global
carriers each accounted for more than 10% of our revenues,  and in the aggregate
accounted  for 26.2% of  revenues  in fiscal  year 2004 and 25.3% of revenues in
fiscal year 2003. Also during fiscal year 2004, our top ten customers  accounted
for  approximately  67.0% of total  revenue.  We  generally  provide  discounted
pricing  for large  projects  on fixed  commitments  with  long-term  customers.
Because our clients  typically  engage services on a project basis,  their needs
for  services  vary   substantially  from  period  to  period.  We  continue  to
concentrate  on large  wireline and  wireless  global  communications  companies
headquartered  principally in North America and Western Europe and seek to offer
broad and diversified services to these customers.  We anticipate that operating
results will continue to depend on volume services to a relatively  small number
of  communication  service  providers  and  technology  vendors.  We  anticipate
increased market demand for bundled  business process and technical  outsourcing
which we and our partners have formalized agreements to provide.

INTELLECTUAL PROPERTY

Our success is dependent, in part, upon proprietary processes and methodologies.
We rely upon a  combination  of copyright,  trade  secret,  and trademark law to
protect our intellectual property. Additionally,  employees and consultants sign
non-disclosure agreements to assist us in protecting our intellectual property.

We have not applied for patent protection for the proprietary methodologies used
by  our  consultants.  We  do  not  currently  anticipate  applying  for  patent
protection for these toolsets and methodologies.

SEASONALITY

In the past, we have experienced seasonal  fluctuations in revenue in the fourth
quarter  due  primarily  to the fewer  number of  business  days  because of the
holiday  periods  occurring  in that  quarter.  We may  continue  to  experience
fluctuations  in revenue in the fourth  quarter.  As we expand  internationally,
third quarter revenue may fluctuate as a result of significant  vacation periods
taken in the summer months.

RISK FACTORS

Our business, operating results, financial condition and stock price are subject
to numerous risks,  uncertainties,  and contingencies,  many of which are beyond
our control.  The following important factors,  among others, could cause actual
results  to  differ  materially  from  those   contemplated  in  forward-looking
statements  made in this annual  report on Form 10-K or  presented  elsewhere by
management from time to
<PAGE>

time.  Investors  are urged to consider  these risk factors when  evaluating  an
investment in TMNG.

RISK THAT MAY IMPACT OUR FINANCIAL PERFORMANCE

OUR  BUSINESS  IS  COMPLETELY  DEPENDENT  ON  CONDITIONS  IN THE  COMMUNICATIONS
INDUSTRY

We focus almost  exclusively  on customers  in the  communications  industry and
investment  banking and private  equity  firms  investing in that  industry.  We
experienced significant growth in demand for our services throughout the 1990's.
Since 2000,  the  communications  industry has  experienced  a number of adverse
conditions,  including bankruptcies,  layoffs,  consolidation and contradiction,
declining  market  values,  and in some cases  financial  scandals.  These macro
economic conditions substantially reduced the demand for our services and caused
our revenues to decline, resulting in operating losses, negative cash flow and a
decline in our stock price. If the communications  industry does not recover and
demand for our services  does not  increase in the  foreseeable  future,  we may
continue to incur operating  losses and negative cash flow, which may eventually
adversely affect our liquidity.

ADVERSE CONDITIONS IN THE COMMUNICATIONS INDUSTRY MAY HURT OUR BUSINESS

Future client financial  difficulties  and/or  bankruptcies  could require us to
write-off receivables that are in excess of bad debt reserves,  which would harm
our results of operations in future fiscal periods.  Client  bankruptcies  could
also create an at-risk  situation on funds collected for  professional  services
within 90 days of the  bankruptcy  filing  date.  In  addition,  any  continuing
deterioration of conditions in the  communications  sector could cause companies
to  delay  new  product  and new  business  initiatives  and to seek to  control
expenses by reducing the use of outside consultants. The communications industry
is in a period of consolidation,  which could reduce our client base,  eliminate
future opportunities or create conflicts of interest among clients. As a result,
current  industry  conditions  may  continue  to harm  our  business,  financial
condition, results of operations, liquidity and ability to make acquisitions and
raise investment capital.

WE ARE DEPENDENT ON A LIMITED  NUMBER OF LARGE  CUSTOMERS FOR A MAJOR PORTION OF
OUR  REVENUES,  AND THE  LOSS OF A MAJOR  CUSTOMER  COULD  SUBSTANTIALLY  REDUCE
REVENUES AND HARM OUR BUSINESS AND LIQUIDITY

We derive a substantial portion of our revenues from a relatively limited number
of clients.  The services required by any one client may be affected by industry
consolidation  or  adverse  industry  conditions,   technological  developments,
economic  slowdown or internal budget  constraints.  As a result,  the volume of
work performed for specific  clients  varies from period to period,  and a major
client in one period may not use our services in a subsequent period.

OUR REVENUES AND OPERATING RESULTS MAY FLUCTUATE  SIGNIFICANTLY FROM QUARTER-TO-
QUARTER,  AND FLUCTUATIONS IN OUR OPERATING  RESULTS COULD CAUSE OUR STOCK PRICE
TO DECLINE

Our revenue and operating results may vary significantly from quarter-to-quarter
due to a number of factors.  In future  quarters,  our operating  results may be
below the expectations of public market analysts or investors,  and the price of
our common stock may decline.  This is especially  true under  present  economic
conditions  impacting the communications  industry, a typical result being fewer
opportunities  and  discounted  pricing.  Factors  that  could  cause  quarterly
fluctuations include:

-    the beginning and ending of significant contracts during a quarter;

-    the size and scope of assignments;

-    the form of customer  contracts  changing primarily from time and materials
     to fixed price or contingent fee, based on project results;

-    consultant turnover, utilization rates and billing rates;

-    the  loss of key  consultants,  which  could  cause  clients  to end  their
     relationships with us;

-    the ability of clients to terminate engagements without penalty;

-    fluctuations in demand for our services resulting from budget cuts, project
     delays, industry downturns or similar events;

-    clients'  decisions to divert resources to other projects,  which may limit
     clients'  resources that would  otherwise be allocated to services we could
     provide;

-    reductions in the prices of services offered by our competitors;

-    fluctuations in the communications market and economic conditions;

-    seasonality during the summer, vacation and holiday periods;

<PAGE>

-    fluctuations in the value of foreign currencies versus the U.S. dollar; and

-    global economic and political conditions and related risks,  including acts
     of terrorism.

Because a  significant  portion of our  non-consultant  expenses are  relatively
fixed,  a  variation  in the number of client  assignments  or the timing of the
initiation  or the  completion  of  client  assignments  may  cause  significant
variations  in  operating  results from  quarter-to-quarter  and could result in
continuing  losses.  To the extent the addition of  consultant  employees is not
followed by corresponding  increases in revenues,  additional  expenses would be
incurred  that  would  not be  matched  by  corresponding  revenues.  Therefore,
profitability  would decline and we could potentially  experience further losses
and our stock price would likely decline.

AN INCREASING  PERCENTAGE OF OUR BUSINESS IS  REPRESENTED  BY CONTINGENT  FEE OR
FIXED FEE CONTRACTS, WHICH EXPOSE US TO ADDITIONAL RISKS

Fixed and contingent  fee contracts  entail  subjective  judgments and estimates
about revenue  recognition and are subject to uncertainties  and  contingencies.
For a more complete  discussion of our accounting for revenue  recognition,  see
"Critical Accounting Policies" included in Item 7, "Management's  Discussion and
Analysis of Financial  Condition and Results of Operations." Fixed fee contracts
expose us to the risk that our cost of  performing  the  contract  may be higher
than expected,  reducing or eliminating our profit margin from the contract.  In
contingent fee contracts,  some or all of our  compensation  may be dependent on
the achievement of certain benefits or results. If those benefits or results are
not achieved, we could lose money on the contract.

WE HAVE MADE SEVERAL  ACQUISITIONS AND MAY CONTINUE TO MAKE ACQUISITIONS,  WHICH
ENTAIL RISKS THAT COULD HARM OUR FINANCIAL PERFORMANCE OR STOCK PRICE

As  part of our  business  strategy,  we have  made  and  may  continue  to make
acquisitions.  Any future acquisition would be accompanied by the risks commonly
encountered in acquisitions. These risks include:

-    the difficulty associated with assimilating the personnel and operations of
     acquired companies;

-    the potential disruption of our existing business;

-    further reductions in our cash reserves;

-    adverse effects on our financial  statements,  including  write-offs if the
     business  does not perform as expected and  assumption  of  liabilities  of
     acquired businesses; and

-    paying too much for an acquired company.

If  we  make  acquisitions  and  any  of  these  problems   materialize,   these
acquisitions could negatively affect our operations, profitability and financial
condition.

ANY  CONTINUING  DECREASE  IN  CURRENT  AND  PROJECTED  REVENUES  MAY  RESULT IN
ADDITIONAL  ASSET  IMPAIRMENTS  THAT  WOULD  CONTINUE  TO  ADVERSELY  AFFECT OUR
PROFITABLITY

We have made and may continue to make  acquisitions.  As a result,  goodwill and
intangible assets constitute a significant portion of the assets reported on our
balance  sheet.  We have, in the past,  been required to write down goodwill and
intangible assets on our financial  statements as a result of declining revenues
and  earnings of the  businesses  we acquire.  We may continue to be required to
take assets  impairment  charges in the future.  Our earnings and  profitability
would be adversely affected by any further asset impairments.

The  Financial  Accounting  Standards  Board  ("FASB")  has issued  SFAS No. 142
"Accounting for Goodwill and Intangible Assets." SFAS No. 142 requires an annual
evaluation  of goodwill to determine if an  impairment of goodwill has occurred.
The evaluation involves calculating enterprise fair value, which may be based on
a number of analyses,  including a  discounted  cash flow  projection  of future
financial results. Estimated fair values are then compared to the total recorded
book value to determine if an impairment of goodwill is deemed to have occurred.
If an impairment of goodwill is deemed to have occurred,  this would  negatively
affect our consolidated results of operations. We recorded impairment charges of
$27.1  million,  $15.8  million,  and $2.2 million  related to the impairment of
goodwill in 2002,  2003, and 2004,  respectively.  If we are not able to achieve
projected  future  operating  performance  and related cash flows,  goodwill may
become further impaired,  and the resulting asset impairment would be charged to
operating income.

In connection  with SFAS No. 144  "Accounting  for the Impairment or Disposal of
Long-Lived  Assets"  we are using our best  estimates  based on  reasonable  and
supportable  assumptions and  projections,  reviews for impairment of long-lived
assets and certain identifiable  intangibles to be held and used whenever events
or changes in  circumstances  indicate  that the  carrying  amount of our assets
might not be  recoverable.  During fiscal year 2003, we identified  such events,
including  significant  decreases in revenue from customers whose  relationships
were  valued  in  purchase  accounting.   We  performed  impairment  tests,  and
determined that the carrying value of customer relationships exceeded their fair
market value and recorded an impairment  loss of  approximately  $3.7 million in
2003. If we are not able to achieve  projected future operating  performance and
related  cash flows,  intangible  assets may become  further  impaired,  and the
resulting asset impairment would be charged to operating income.

<PAGE>

WE HAVE REDUCED CONSULTANT HEADCOUNT WHICH COULD ADVERSELY AFFECT OUR ABILITY TO
PERFORM CONSULTING ENGAGEMENTS AND OBTAIN NEW BUSINESS

We have undergone a series of  cost-cutting  measures since 2001 to better align
our  operating  costs  with the  reduced  demand for  communications  consulting
services.  As part of these cost-costing  measures, we have reduced our employee
consultant headcount. Because the talents and skills of those consultants are no
longer available to us, we may lose  opportunities  to obtain future  consulting
engagements or have difficulty performing engagements we do obtain, any of which
could harm our business.

THE MARKET IN WHICH WE COMPETE IS INTENSELY COMPETITIVE - ACTIONS BY COMPETITORS
COULD  RENDER OUR  SERVICES  LESS  COMPETITIVE,  CAUSING  REVENUES AND INCOME TO
DECLINE

The market for  consulting  services to  communications  companies  is intensely
competitive,  highly fragmented and subject to rapid change. Competitors include
strategy and management consulting firms and major global outsourcing firms like
IBM,   Electronic  Data  Systems   Corporation   (EDS)  and  Computer   Sciences
Corporation,  which have become more significant competitors recently due to the
outsourcing  of  business  support  systems  and  operating  support  systems by
communications  companies.  We  are  also  subject  to  competition  from  large
technical firms from the Asian markets, like Infosys Technologies, Ltd. that can
provide significant cost advantages.  Some of these competitors have also formed
strategic  alliances with  communications  and technology  companies serving the
industry.  We also compete  with  internal  resources  of our clients.  Although
non-exhaustive, a partial list of our competitors includes:

-    Accenture;

-    Booz-Allen & Hamilton;

-    Cap Gemini;

-    DiamondCluster International, Inc.;

-    IBM;

-    Infosys Technologies, Ltd.; and

-    McKinsey & Company

-    Computer Sciences Corporation

Many information  technology-consulting firms also maintain significant practice
groups devoted to the  communications  industry.  Many of these companies have a
national and international  presence and may have greater personnel,  financial,
technical and marketing  resources.  We may not be able to compete  successfully
with our existing competitors or with any new competitors.

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

-    the prices at which others offer competitive services, including aggressive
     price  competition  and  discounting  on individual  engagements  which may
     become increasingly prevalent in the current industry environment;

-    the  ability  and  willingness  of our  competitors  to finance  customers'
     projects on favorable terms;

-    the  ability of our  competitors  to  undertake  more  extensive  marketing
     campaigns than we can;

-    the extent, if any, to which our competitors develop proprietary tools that
     improve their ability to compete with us;

-    the ability of our customers to perform the services themselves; and

-    the extent of our competitors' responsiveness to customer needs.

We may not be able to compete  effectively on these or other factors.  If we are
unable to compete effectively,  our market position,  and therefore our revenues
and profitability, would decline.

WE MUST CONTINUALLY ENHANCE OUR SERVICES TO MEET THE CHANGING NEEDS OF CUSTOMERS
OR WE MAY LOSE FUTURE BUSINESS TO OUR COMPETITORS

Our future success will depend upon our ability to enhance existing services and
to  introduce  new services to meet the  requirements  of customers in a rapidly
developing  and  evolving   market,   particularly  in  the  areas  of  wireless
communications and next generation technologies.

<PAGE>

Present  or future  services  may not  satisfy  the needs of the  communications
market. If we are unable to anticipate or respond  adequately to customer needs,
we may lose business and our financial performance will suffer.

IF WE ARE NOT ABLE TO EFFECTIVELY  RECRUIT AND RETAIN  MANAGEMENT AND CONSULTING
PERSONNEL  THAT PROVIDE US WITH NEW TALENT SETS ENABLING THE  IMPLEMENTATION  OF
NEW STRATEGIC OFFERINGS IN A RAPIDLY CHANGING MARKET, OUR FINANCIAL  PERFORMANCE
MAY BE NEGATIVELY IMPACTED

Our ability to adapt to changing market conditions will depend on our ability to
recruit and retain talented personnel,  which cannot be assured. We may face two
critical challenges in the recruitment of new management personnel. The first is
the  ability  to  recruit  talented  management  personnel  with the skill  sets
necessary to capitalize on an industry undergoing  revolutionary change, and the
second  is  the  ability  to  execute  such   recruitment  with  an  appropriate
compensation  arrangement.  If we are unable to recruit and retain the people we
need to perform our consulting  engagements in a rapidly  changing  environment,
our business may suffer.

We must attract new consultants to implement our strategic  plans. The number of
potential  consultants  that meet our hiring criteria is relatively  small,  and
there is significant  competition for these consultants from direct  competitors
and others in the communications industry. Competition for these consultants may
result  in  significant  increases  in our  costs  to  attract  and  retain  the
consultants, which could reduce margins and profitability.  In addition, we will
need to attract consultants in international  locations,  principally Europe, to
support  our  international  strategic  plans.  We have  limited  experience  in
recruiting  internationally,  and may not be able  to do so.  Any  inability  to
recruit new consultants or retain existing  consultants could impair our ability
to service existing  engagements or undertake new engagements.  If we are unable
to attract and retain quality consultants,  our revenues and profitability would
decline.

OUR  ENGAGEMENTS  WITH CLIENTS MAY NOT BE PROFITABLE OR MAY BE TERMINATED BY OUR
CLIENTS ON SHORT NOTICE

Unexpected costs, delays or failure to achieve anticipated cost reductions could
make our contracts unprofitable. We have many types of contracts, including time
and materials  contracts,  fixed-price  contracts and  contingent fee contracts.
When making  proposals  for  engagements,  we estimate  the costs and timing for
completing the projects. These estimates reflect our best judgment regarding our
costs, as well as the efficiencies of our  methodologies and professionals as we
plan to deploy them on our projects.  Any increased or unexpected costs,  delays
or  failures to achieve  anticipated  cost  reductions  in  connection  with the
performance  of these  engagements,  including  delays by  factors  outside  our
control, could make these contracts less profitable or unprofitable, which would
have an adverse effect on our profit margin.

Under  many  of our  contracts,  the  payment  of  some  or all of our  fees  is
conditioned upon our performance. We are increasingly moving away from contracts
that are priced solely on a time and materials  basis and toward  contracts that
also include  incentives  related to factors such as benefits  produced.  During
fiscal year 2004, we estimate that approximately 40.5% of our contracts had some
fixed-price, incentive-based or other pricing terms that conditioned some or all
of our fees on our ability to deliver these defined goals.  The trend to include
greater incentives in our contracts may increase the variability in revenues and
margins earned on such contracts.

A majority of our  contracts  can be terminated by our clients with short notice
and  without  significant   penalty.  Our  clients  typically  retain  us  on  a
non-exclusive,  engagement-by-engagement  basis,  rather  than  under  exclusive
long-term contracts.  A majority of our consulting  engagements are less than 12
months in duration.  The advance notice of termination required for contracts of
shorter  duration and lower revenues is typically 30 days.  Longer-term,  larger
and more  complex  contracts  generally  require  a  longer  notice  period  for
termination  and may  include  an  early  termination  charge  to be paid to us.
Additionally,  large client projects involve multiple engagements or stages, and
there is a risk that a client may choose not to retain us for additional  stages
of a  project  or  that  a  client  will  cancel  or  delay  additional  planned
engagements.  These  terminations,  cancellations  or delays  could  result from
factors  unrelated  to our work  product or the  project,  such as  business  or
financial conditions of the client,  changes in client strategies or the economy
in general.  When contracts are terminated,  we lose the associated revenues and
we  may  not  be  able  to  eliminate  associated  costs  in  a  timely  manner.
Consequently,  our  profit  margins  in  subsequent  periods  may be lower  than
expected.

OUR  PROFITABLITY  WILL  SUFFER IF WE ARE NOT ABLE TO  MAINTAIN  OUR PRICING AND
UTILIZATION RATES AND CONTROL COSTS

Our  profitability  is largely a function of the rates we are able to obtain for
our services and the utilization rate, or chargeability,  of our  professionals.
If we do not maintain  pricing for our services and an  appropriate  utilization
rate  for  our  professionals   without   corresponding  cost  reductions,   our
profitability  will  suffer.  We are under  increasing  price  competition  from
competitors, which could adversely affect our profitability.

<PAGE>

IF  INTERNATIONAL  BUSINESS VOLUMES  INCREASE,  WE MAY BE EXPOSED TO A NUMBER OF
BUSINESS  AND  ECONOMIC  RISKS,  WHICH COULD  RESULT IN  INCREASED  EXPENSES AND
DECLINING PROFITABILITY

If our  international  business  volumes  increase,  we will  face a  number  of
business and economic risks, including:

-    unfavorable fluctuations in foreign currency exchange rates;

-    difficulties in staffing and managing foreign operations;

-    seasonal reductions in business activity;

-    competition from local and foreign-based consulting companies;

-    ability to protect our intellectual property;

-    unexpected changes in trading policies and regulatory requirements;

-    legal uncertainties  inherent in transnational  operations,  such as export
     and import regulations, tariffs and other trade barriers;

-    the impact of foreign laws, regulations and trade customs;

-    U.S. and foreign taxation issues;

-    operational  issues  such as longer  customer  payment  cycles and  greater
     difficulties in collecting accounts receivable;

-    language and cultural differences;

-    changes in foreign communications markets;

-    increased cost of marketing and servicing international clients;

-    general  political and economic  trends,  including the potential impact of
     terrorist attack or international hostilities; and

-    expropriations of assets,  including bank accounts,  intellectual  property
     and physical assets by foreign governments.

In addition,  we may not be able to  successfully  execute our business  plan in
foreign markets. If we are unable to achieve anticipated levels of revenues from
international operations, overall revenues and profitability may decline.

WE ARE  DEPENDENT ON A LIMITED  NUMBER OF KEY  PERSONNEL,  AND THE LOSS OF THESE
INDIVIDUALS COULD HARM OUR COMPETITIVE POSITION AND FINANCIAL PERFORMANCE

Our business  consists  primarily of the delivery of professional  services and,
accordingly,   our  success  depends  upon  the  efforts,  abilities,   business
generation  capabilities and project execution of our executive officers and key
consultants.  Our success is also  dependent upon the  managerial,  operational,
marketing,  and administrative  skills of our executive  officers,  particularly
Richard Nespola,  TMNG's Chairman,  President and Chief Executive  Officer.  The
loss of any executive officer or key consultant or group of consultants,  or the
failure of these  individuals  to generate  business or otherwise  perform at or
above historical levels, could result in a loss of customers or revenues,  which
could harm our financial performance.

IF WE FAIL TO PERFORM EFFECTIVELY ON PROJECT  ENGAGEMENTS,  OUR REPUTATION,  AND
THEREFORE OUR COMPETITIVE POSITION AND FINANCIAL PERFORMANCE, COULD BE HARMED

Many of our engagements come from existing clients or from referrals by existing
clients.  Therefore,  our growth is  dependent on our  reputation  and on client
satisfaction.  The failure to perform services that meet a client's expectations
may damage our reputation and harm our ability to attract new business.

IF WE FAIL TO DEVELOP AND MAINTAIN  LONG-TERM  RELATIONSHIPS WITH OUR CUSTOMERS,
OUR SUCCESS WOULD BE JEOPARDIZED

A substantial majority of our business is derived from repeat customers.  Future
success  depends to a  significant  extent on our  ability to develop  long-term
relationships with successful  communications providers who will give us new and
repeat  business.  Inability to build  long-term  customer  relationships  could
result in declining  revenues and  profitability.  This may  increasingly be the
case with any further consolidation or contraction in the industry.

<PAGE>

WE CLASSIFY A LARGE NUMBER OF SUBCONTRACTORS AS INDEPENDENT  CONTRACTORS FOR TAX
AND EMPLOYMENT LAW PURPOSES. IF THESE FIRMS OR PERSONNEL WERE TO BE RECLASSIFIED
AS EMPLOYEES,  WE COULD BE SUBJECT TO BACK TAXES, INTEREST,  PENALTIES AND OTHER
LEGAL CLAIMS

We provide a significant  percentage of consulting  services through independent
contractors  and,  therefore,  do not pay Federal or state  employment  taxes or
withhold  income  taxes for such  persons.  We  generally  do not include  these
independent  contractors in our benefit plans.  In the future,  the IRS or state
authorities may challenge the status of consultants as independent  contractors.
Independent  contractors may also initiate proceedings to seek  reclassification
as  employees  under  state law.  In either  case,  if persons  engaged by us as
independent  contractors  are determined to be employees by the IRS or any state
taxation  department,  we would be required to pay applicable  Federal and state
employment taxes and withhold income taxes with respect to such contractors, and
could become liable for amounts required to be paid or withheld in prior periods
along with interest and penalties.  In addition, we could be required to include
such contractors in benefit plans retroactively and going forward.

WE COULD BE SUBJECT TO CLAIMS FOR PROFESSIONAL  LIABILITY,  WHICH COULD HARM OUR
FINANCIAL PERFORMANCE

As a provider of professional  services, we face the risk of liability claims. A
liability  claim  brought  against  us could harm our  business.  We may also be
subject to claims by clients for the actions of our  consultants  and  employees
arising from damages to clients' business or otherwise,  or clients may demand a
reduction in fees because of dissatisfaction with our services.

In  particular,  we are  currently  a  defendant  in  litigation  brought by the
bankruptcy trustee of a former client. This litigation seeks to recover at least
$1.85 million for breach of contract, breach of fiduciary duties and negligence,
plus $320,000 in consulting  fees paid by the former client.  See Item 3, "Legal
Proceedings."

OUR INABILITY TO PROTECT OUR  INTELLECTUAL  PROPERTY COULD HARM OUR  COMPETITIVE
POSITION AND FINANCIAL PERFORMANCE

Despite  our efforts to protect  proprietary  rights  from  unauthorized  use or
disclosure,  parties, including former employees or consultants,  may attempt to
disclose,  obtain or use our solutions or technologies.  The steps we have taken
may not prevent  misappropriation of our intellectual property,  particularly in
foreign  countries  where  laws or law  enforcement  practices  may not  protect
proprietary rights as fully as in the United States.  Unauthorized disclosure of
our proprietary information could make our solutions and methodologies available
to others and harm our competitive position.

RISK THAT COULD AFFECT OUR STOCK PRICE

THE MARKET PRICE OF OUR COMMON STOCK IS VOLATILE,  AND INVESTORS MAY  EXPERIENCE
INVESTMENT LOSSES

The market price of our common stock is volatile and has declined  significantly
from its initial  public  offering  price.  Our stock  price  could  continue to
decline or fluctuate in response to a variety of factors, including:

-    variations in quarterly operating results;

-    announcements of technological innovations that render talent outdated;

-    future trends in the communications industry;

-    acquisitions or strategic alliances by us or others in the industry;

-    failure to achieve  financial  analysts'  or other  estimates of results of
     operations for any fiscal period;

-    the  relatively  small public float and  relatively low volume at which our
     stock trades;

-    changes  in  estimates  of  performance  or  recommendations  by  financial
     analysts;

-    any further  reduction in our revenues or continued  losses during 2005 and
     future years; and

-    continuing adverse market conditions in the communications industry and the
     economy as a whole.

In addition,  the stock market itself  experiences  significant price and volume
fluctuations.  These fluctuations  particularly  affect the market prices of the
securities of many  technology  and  communications  companies.  Our stock price
tends to track the stock price of communications companies,  which have declined
substantially and may continue to do so. These broad market  fluctuations  could
continue to harm the market  price of our common  stock.  If the market price of
our common  stock  continues  to decline,  we may risk being  delisted  from the
NASDAQ Stock Market on which our stock trades. The recent decline in our overall
market  capitalization may also discourage analysts and investors from

<PAGE>

following us. Additionally, due to the limited public float of our common stock,
investors may find their investment illiquid, and suffer losses.


PRINCIPAL  STOCKHOLDERS,  EXECUTIVE  OFFICERS  AND  DIRECTORS  HAVE  SUBSTANTIAL
CONTROL OVER OUR VOTING STOCK

Executive officers,  directors and stockholders owning more than five percent of
our  outstanding  common  stock (and  their  affiliates)  own a majority  of our
outstanding  common stock. If all such persons acted  together,  they would have
the ability to control all matters  submitted to the  stockholders  for approval
(including  the election and removal of directors and any merger,  consolidation
or sale of all or substantially all of our assets) and to control our management
and affairs.  Concentration of ownership of our common stock may have the effect
of  delaying,  deferring or  preventing a change in control,  impeding a merger,
consolidation,   takeover  or  other  business   combination   involving  us  or
discouraging  a  potential  acquirer  from  making a tender  offer or  otherwise
attempting  to obtain  control of us, any of which  could be  beneficial  to our
shareholders.

WE MAY SEEK TO RAISE ADDITIONAL FUNDS,  WHICH MAY BE DILUTIVE TO STOCKHOLDERS OR
IMPOSE OPERATIONAL RESTRICTIONS

Although  we have not been  required to obtain new debt or equity  financing  to
support our operations or complete acquisitions, we may decide or be required to
raise new  capital for these or other  purposes  in the future.  There can be no
assurances any such capital would be available to us on acceptable  terms.  Debt
financing, if available, may involve restrictive covenants,  which may limit our
operating  flexibility with respect to certain business matters.  Debt financing
would require  payments of principal and interest,  which could adversely affect
our cash  flow and  profitability.  Any debt  financing  may be  secured  by our
tangible  and  intangible  assets,  which  could  expose us to the loss of those
assets if we are unable to meet debt service  requirements.  If additional funds
are raised  through the  issuance of equity  securities,  our  stockholders  may
experience  dilution  in the  voting  power or net book  value  per share of our
stock,  and any additional  equity  securities may have rights,  preferences and
privileges senior to those of the holders of our common stock.

ANTI-TAKEOVER  PROVISIONS  AND OUR RIGHT TO ISSUE  PREFERRED  STOCK COULD MAKE A
THIRD PARTY ACQUISITION DIFFICULT

Our  certificate  of  incorporation,  bylaws,  and  anti-takeover  provisions of
Delaware law could make it more  difficult for a third party to acquire  control
of us. In  addition,  our bylaws  provide  for a  classified  board,  with board
members  serving  staggered   three-year   terms.  The  Delaware   anti-takeover
provisions  and  the  existence  of a  classified  board,  in  addition  to  our
relatively small public float, could make it more difficult for a third party to
acquire  us,  even  if  such  transactions  were  in the  best  interest  of our
shareholders.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS

For information about foreign and domestic operations, see Item 8, "Consolidated
Financial   Statements,"  Note  5  "Business   Segments,   Major  Customers  and
Significant Group Concentrations of Credit Risk."

ITEM 2. PROPERTY

Our  principal  executive  offices are located in 4,305  square feet of space in
Overland  Park,  Kansas.  This  facility  houses the  executive,  corporate  and
administrative  offices and is under a lease,  which  expires in August 2005. In
addition to the executive  offices,  we also lease 7,575 square feet of space in
McLean, Virginia for our TMNG Marketing subsidiary,  under a lease which expires
in June 2009, and 10,344 square feet of space in Boston, Massachusetts,  under a
lease  which  expires in 2011.  The Boston and McLean  locations  are  primarily
utilized by management and consulting personnel.

In the fourth  quarter of fiscal year 2004, we made the decision to  consolidate
office space. In connection with this decision,  a sublease agreement for 11,366
square feet of unutilized office space in Boston, Massachusetts was entered into
with a third  party  through  the end of the  original  lease term in 2011.  For
additional  discussion of this  sublease,  see Item 8,  "Consolidated  Financial
Statements," Note 8 "Real Estate Restructuring."

ITEM 3. LEGAL PROCEEDINGS

We are  involved in legal  proceedings  and  litigation  arising in the ordinary
course of business.  In addition,  customer bankruptcies could result in a claim
on collected balances for professional services near the bankruptcy filing date.
While resolution of legal proceedings,  claims and litigation may have an impact
on our financial  results for the period in which they are resolved,  we believe
that the ultimate  disposition of these matters will not have a material adverse
effect upon our  consolidated  results of  operations,  cash flows or  financial
position.

In June 1998, the bankruptcy trustee of a former client,  Communications Network
Corporation, sued us for a total of $320,000 in the U.S. Bankruptcy Court in New
York seeking  recovery of $160,000  alleging an improper  payment of  consulting
fees paid by the former  client  during the  period  from July 1, 1996,  when an
involuntary  bankruptcy  proceeding  was  initiated  against the former  client,
through August 6, 1996,  when the former client agreed to an order for relief in
the bankruptcy  proceeding,  and $160,000 in consulting  fees paid by the former
client  after  August  6,  1996.  Although  we deny  these  claims  and  plan to
vigorously  defend  ourselves,  we have reserves at January 1, 2005 of $160,000,

<PAGE>

which we  believe  are  adequate  in the  event of loss or  settlement  on those
claims.

The bankruptcy trustee has also sued us for at least $1.85 million for breach of
contract,  breach of fiduciary duties and negligence.  Although assurance cannot
be given as to the  ultimate  outcome  of this  proceeding,  we  believe we have
meritorious  defenses to the claims made by the  bankruptcy  trustee,  including
particularly  the claims for breach of contract,  breach of  fiduciary  duty and
negligence,  and we believe that the ultimate resolution of this matter will not
materially harm our business.

In 2002 and 2003, we received demands aggregating  approximately $1.2 million by
the bankruptcy  trustees of several former clients in connection  with collected
balances near the customers'  respective bankruptcy filing dates. Although we do
not believe we received any preferential  payments from these former clients and
plan to vigorously  defend those claims,  we have reserves at January 1, 2005 of
$727,000,  which we believe are adequate in the event of loss or  settlement  on
those claims.

On August 25, 2004,  we entered into a mediated  settlement  agreement to settle
pending  litigation  with a customer.  Pursuant  to the terms of the  settlement
agreement,  each party was  dismissed  from any  liability  for the claims  made
against it and the customer agreed to make a cash  settlement  payment to us, in
the amount of $2 million to settle  all claims and  disputes  arising  under the
consulting services agreement.  We have no obligation to render further services
to the customer. At October 11, 2004, we received the $2 million settlement from
the customer and the parties dismissed one another from liability.

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

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

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock is quoted on the NASDAQ Stock Market under the symbol TMNG. The
high and low closing  price per share for the Common  Stock for the fiscal years
ending January 1, 2005 and January 3, 2004 by quarter were as follows:


                                                    High           Low
        First quarter, fiscal year 2004            $ 5.50        $ 3.19
        Second quarter, fiscal year 2004           $ 3.75        $ 1.77
        Third quarter, fiscal year 2004            $ 2.45        $ 1.62
        Fourth quarter, fiscal year 2004           $ 2.40        $ 1.92



                                                    High           Low
        First quarter, fiscal year 2003            $ 1.90        $ 1.25
        Second quarter, fiscal year 2003           $ 2.02        $ 1.21
        Third quarter, fiscal year 2003            $ 2.82        $ 1.74
        Fourth quarter, fiscal year 2003           $ 3.53        $ 2.31



The above  information  reflects  inter-dealer  prices,  without retail mark-up,
markdown or commissions and may not necessarily represent actual transactions.

As of March 31, 2005 the closing  price of our Common Stock was $2.37 per share.
At such date, there were approximately 93 holders of record of our Common Stock.

Holders of Common Stock are entitled to receive ratably such dividends,  if any,
as may be declared by the Board of Directors out of funds legally available.  To
date, we have not paid any cash  dividends on our Common Stock and do not expect
to declare or pay any cash or other dividends in the foreseeable future.

EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
<S>                                           <C>                           <C>                         <C>

                                                        (a)                                                       (c)
                                                     NUMBER OF                                            NUMBER OF SECURITIES
                                              SECURITIES TO BE ISSUED                                     REMAINING AVAILABLE
                                                 UPON EXERCISE OF                  (b)                     FOR FUTURE ISSUANCE
                                               OUTSTANDING OPTIONS           WEIGHTED AVERAGE           UNDER EQUITY COMPENSATION
                                              OR VESTING OF RESTRICTED       EXERCISE PRICE OF          PLANS (EXCLUDING SECURITIES
                                                       STOCK                OUTSTANDING OPTIONS         REFLECTED IN COLUMN (a))

PLANS APPROVED BY SECURITY HOLDERS
- 1998 Equity Incentive Plan - Stock Options         4,455,385                 $    5.16                        2,279,419
- 1998 Equity Incentive Plan - Restricted Stock        658,000                      n/a                           542,000
PLANS NOT APPROVED BY SECURITY HOLDERS
- 2000 Supplemental Stock Plan                       1,053,564                 $    4.71                        2,744,478
</TABLE>


<PAGE>

For an  additional  discussion  of our equity  compensation  plans,  see Item 8,
"Consolidated  Financial Statements," Note 10 "Stock Option Plan and Stock Based
Compensation."

<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated  financial data presented below have been derived from
our consolidated  financial statements.  The data presented below should be read
in conjunction with Item 7,  "Management's  Discussion and Analysis of Financial
Condition  and  Results  of  Operations,"   Item  8,   "Consolidated   Financial
Statements"  and  Notes  thereto  and  other  financial   information  appearing
elsewhere in this annual report on Form 10-K.



<TABLE>
<CAPTION>
<S>                                                        <C>             <C>           <C>            <C>            <C>

                                                                                      FISCAL YEAR ENDED
                                                           -------------------------------------------------------------------------
                                                           December 30,     December 29,   December 28,  January 3,    January 1,
                                                              2000             2001          2002           2004          2005
                                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:

Revenues ............................................       $ 77,727       $ 54,236      $ 33,057       $ 23,245       $  23,704
Cost of services:
  Direct cost of services ...........................         40,396         27,338        16,111         11,927          12,319
  Equity related charges (benefits)..................          5,519          2,322           721            (57)            205
                                                            --------       --------      --------       --------        --------
          Total cost of services ....................         45,915         29,660        16,832         11,870          12,524
                                                            --------       --------      --------       --------        --------
Gross profit ........................................         31,812         24,576        16,225         11,375          11,180

Operating expenses:
  Selling, general and administrative.................        16,024         16,727        23,811         19,359          16,037
  Legal settlement ..................................                                                                     (1,294)
  Real estate restructuring .........................                                                                      1,545
  Goodwill and intangible asset impairment ..........                                      25,165         19,484
  Goodwill and intangibles amortization .............            621          1,996         2,887          2,343             992
  Equity related charges ............................          1,564            843           353            142             958
                                                            --------       --------      --------       --------        --------
          Total operating expenses ..................         18,209         19,566        52,216         41,328          18,238
                                                            --------       --------      --------       --------        --------
Income (loss) from operations .......................         13,603          5,010       (35,991)       (29,953)         (7,058)

Other income (expense):
  Interest income ...................................          3,327          2,433           996            624             718
  Interest expense ..................................                           (14)          (63)           (51)            (30)
  Other, net ........................................           (152)            (8)           26
                                                            --------       --------      --------       --------        --------
          Total other income (expense) ..............          3,175          2,411           959            573             688
Income (loss) from continuing operations before income
 tax (provision) benefit and cumulative effect of a
 change in accounting principle ....................          16,778          7,421       (35,032)       (29,380)         (6,370)
Income tax (provision) benefit ......................         (6,711)        (2,141)       12,389        (12,978)            (49)
                                                            --------       --------      --------       --------        --------
Income (loss) from continuing operations before
 cumulative effect of a change in accounting principle       10,067           5,280       (22,643)       (42,358)         (6,419)
Cumulative effect of a change in accounting principle,
  net of taxes                                                                             (1,140)
                                                            --------       --------      --------       --------        --------
Income (loss)from continuing operations..............         10,067          5,280       (23,783)       (42,358)         (6,419)

Discontinued operations:
 net income (loss) from discontinued operations.....                            328           380             34          (2,276)
                                                            --------       --------      --------       --------        --------
Net income (loss) ...................................       $ 10,067       $  5,608      $(23,403)      $(42,324)         (8,695)
                                                            ========       ========      ========       ========        ========
Income (loss) from continuing operations before
 cumulative effect of a change in accounting principle
 per common share
  Basic .............................................       $   0.36       $   0.18      $(  0.69)      $(  1.26)       $  (0.18)
                                                            ========       ========      ========       ========        ========
  Diluted ...........................................       $   0.34       $   0.17      $(  0.69)      $(  1.26)       $  (0.18)
                                                            ========       ========      ========       ========        ========
Net income (loss) from discontinued operations per
 common share
  Basic and Diluted .................................                      $   0.01      $   0.01                       $  (0.07)
                                                            ========       ========      ========       ========        ========
Net income (loss) per common share
  Basic .............................................       $   0.36       $   0.19      $(  0.71)      $(  1.26)       $  (0.25)
                                                            ========       ========      ========       ========        ========
  Diluted ...........................................       $   0.34       $   0.18      $(  0.71)      $(  1.26)       $  (0.25)
                                                            ========       ========      ========       ========        ========
Weighted average common shares outstanding
  Basic .............................................         28,110         29,736        32,734         33,545          34,619
                                                            ========       ========      ========       ========        ========
  Diluted ...........................................         29,208         30,774        32,734         33,545          34,619
                                                            ========       ========      ========       ========        ========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>                                          <C>          <C>          <C>          <C>           <C>

                                                                    FISCAL YEAR ENDED
                                             ---------------------------------------------------------------
                                             December 30, December 29, December 28, January 3,    January 1,
                                               2000        2001         2002          2004          2005
                                             ----------   ----------   -----------  -----------   -----------
CONSOLIDATED BALANCE SHEET DATA:

Net working capital .....................     $ 89,148     $ 94,569     $ 63,478     $57,231       $55,121
Total assets ............................     $119,429     $129,042     $125,459     $81,582       $75,353
Total debt (including current debt) .....                  $    338     $    885     $   493       $   200
Total stockholders' equity  .............     $111,472     $123,992     $115,726     $73,369       $66,747

</TABLE>

On August 2, 2000, the SEC declared our Registration Statement on Form S-1 (File
No.  333-40864)  effective.  On August 2,  2000,  we closed our  offering  of an
aggregate of 3,000,000 shares of our Common Stock at an aggregate offering price
of $68.6 million.  Net proceeds to us, after deducting  proceeds to shareholders
of $45.9  million,  underwriting  discounts and  commissions of $1.1 million and
offering expenses of $728,000 were $20.9 million. Proceeds were used for working
capital,   general  corporate   purposes  and  as  possible   consideration  for
acquisitions.

On September 5, 2000, we completed our  acquisition of The  Weathersby  Group, a
Maryland  corporation.  The  acquisition  resulted in a total  purchase price of
approximately $19.2 million consisting of $11.2 million cash and $8.0 million in
common stock. Additionally,  we incurred direct costs of $1.5 million related to
the acquisition.

On  September 5, 2001,  we  completed  our  acquisition  of Tri-Com,  a Maryland
corporation. The acquisition,  recorded under the purchase method of accounting,
included the purchase of all outstanding shares of Tri-Com,  which resulted in a
total purchase price of approximately $5.2 million for the equity and assumption
of liabilities.  Consideration consisted of $1.8 million cash and 490,417 shares
of our  common  stock  valued  at $3.0  million.  We  incurred  direct  costs of
approximately $180,000 related to the acquisition and recorded this amount as an
increase  to  purchase  price.  In addition  to the  above-mentioned  costs,  we
recorded  approximately  $216,000 as an increase to purchase price in connection
with the exchange of our stock options for vested stock appreciation rights held
by Tri-Com employees at the time of acquisition.

On March 6, 2002, we completed our acquisition of CSMG, a Delaware  corporation.
The  acquisition  resulted  in a total  purchase  price of  approximately  $46.5
million  consisting  of $33.0  million cash and $13.5  million in common  stock.
Additionally,   we  incurred  direct  costs  of  $2.3  million  related  to  the
acquisition and recorded this amount as an increase to purchase price.

<PAGE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following  discussion  should be read in conjunction  with our  Consolidated
Financial  Statements  and Notes thereto  included in this annual report on Form
10-K. The  forward-looking  statements included in this discussion and elsewhere
in this  Form  10-K  involve  risks  and  uncertainties,  including  anticipated
financial performance,  business prospects, industry trends, shareholder returns
and other  matters,  which reflect  management's  best judgment based on factors
currently known.  Actual results and experience could differ materially from the
anticipated  results and other  expectations  expressed  in our  forward-looking
statements  and  should  be  read  in  conjunction   with  the  disclosures  and
information  contained  in the  sections  of this report  entitled  "Disclosures
Regarding Forward Looking Statements" and in Item 1, "Business - Risk Factors."

EXECUTIVE FINANCIAL OVERVIEW

Included in Item 1, "Business", is a discussion that includes a general overview
of our  Business,  Market  Overview,  Business  Strategy,  Competition  and Risk
Factors. The purpose of this executive overview is to complement the qualitative
discussion of the Business from Item 1, with an analysis of the financial impact
on us.

As previously noted, the  communications  industry has experienced a significant
economic recession from 2001 through 2004. We are a consultancy to the industry,
and as a result  experienced  a  significant  reduction in  consulting  business
primarily due to the recession. We have experienced significant revenue declines
and/or net loss from 2001 to 2004 (see Item 6, "Selected  Consolidated Financial
Data"). While our revenues have declined  significantly in recent years, we have
maintained  relatively  consistent gross margins through  innovative pricing and
high consultant  utilization levels.  Additionally,  our ability to manage costs
and leverage  our flexible  staffing  model  further  allowed us to maintain our
gross margins.

As a result  of a  combination  of  significantly  lower  operating  results  of
reporting  units during fiscal years 2002 and 2003,  the  resignation of certain
key  personnel  and revised and reduced  financial  projections,  our  operating
expenses include goodwill and intangible  impairment losses of $27.1 million and
$19.5 million in fiscal years 2002 and 2003, respectively.  In fiscal year 2004,
we recorded a goodwill  impairment  loss of $2.2 million in connection  with the
discontinuation of our hardware business. In fiscal years 2003 and 2004, we also
recorded valuation reserves of $24.0 million and $2.6 million,  respectively, in
connection  with deferred income tax assets,  which were generated  primarily by
goodwill impairment and current operating losses.

We have implemented many programs to size the business consistent with our lower
revenue base.  Such steps included staff  reductions and other selling,  general
and  administrative  cost cutting measures to maintain  appropriate  pricing and
utilization  metrics which are critical to a management  consultancy.  Such cost
reductions  also  assisted  us in  reducing  cash used in  operations.  Selling,
general and  administrative  costs were $23.8  million,  $19.4 million and $16.0
million in fiscal years 2002, 2003 and 2004,  respectively,  reflective of these
cost cutting  initiatives.  We have also focused our marketing  efforts on large
and sustainable  clients to maintain a portfolio of business that is high credit
quality and thus reduce bad debt risks.

OPERATIONAL OVERVIEW

We report our financial data on a 52/53-week fiscal year for reporting purposes.
Fiscal year 2003 was a 53 week fiscal  year.  Fiscal  years 2002 and 2004 had 52
weeks. For further  discussion of our fiscal year end see Item 8,  "Consolidated
Financial   Statements,"   Note  1  "Organization  and  Summary  of  Significant
Accounting Policies," contained herein.

Revenues  typically  consist of consulting  fees for  professional  services and
related expense reimbursements. Our consulting services are typically contracted
on a time and materials basis, a time and materials basis not to exceed contract
price,  a fixed fee  basis,  or  contingent  fee  basis.  Contract  revenues  on
contracts  with a not to exceed  contract  price or a fixed  price are  recorded
under the  percentage  of  completion  method,  utilizing  estimates  of project
completion under both of these types of contracts.  Larger fixed price contracts
have  recently  begun to represent a more  significant  component of our revenue
mix.  Contract  revenues on  contingent  fee  contracts  are deferred  until the
revenue is realizable and earned.

Generally a client relationship begins with a short-term  engagement utilizing a
few consultants.  Our sales strategy focuses on building long-term relationships
with  both  new and  existing  clients  to gain  additional  engagements  within
existing accounts and referrals for new clients.  Strategic alliances with other
companies are also used to sell services. We anticipate that we will continue to
do so in  the  future.  Because  we  are a  consulting  company,  we  experience
fluctuations  in revenues  derived from  clients  during the course of a project
lifecycle. As a result, the volume of work performed for specific clients varies
from  period  to  period  and a major  client  from one  period  may not use our
services  in  another  period.  In  addition,  clients  generally  may end their
engagements  with little or no penalty or notice.  If a client  engagement  ends
earlier than expected,  we must re-deploy  professional service personnel as any
resulting unbillable time could harm margins.

Cost  of  services  consists   primarily  of  client-related   compensation  for
consultants  who are  employees  and  amortization  of equity  related  non-cash
charges incurred in connection with pre-initial public offering grants of equity
securities and restricted stock awards primarily to consultants, as well as fees
paid to independent contractor organizations and related expense reimbursements.
Employee compensation includes certain unbillable time, training, vacation time,
benefits  and payroll  taxes.  Annual  gross  margins  have ranged from 40.9% to
49.40% during the period from 1999 to 2004.  Margins are  primarily  impacted by
the type of  consulting  services  provided,  the size of service  contracts and
negotiated  volume  discounts,  changes  in our  pricing  policies  and those of
competitors,  utilization  rates  of  consultants  and  independent  SME's;

<PAGE>

and employee and independent  contractor  organization  costs  associated with a
competitive labor market.

Operating expenses include selling,  general and administrative,  equity related
charges,  intangible  asset  amortization,  and  goodwill and  intangible  asset
impairments.  Operating  expenses for fiscal year 2004 also include a litigation
settlement and real estate  restructuring  charge.  Sales and marketing expenses
consist primarily of personnel salaries,  bonuses,  and related costs for direct
client sales efforts and marketing staff. We primarily use a relationship  sales
model in which partners, principals and senior consultants generate revenues. In
addition,  sales and marketing  expenses include costs associated with marketing
collateral,  product  development,  trade  shows and  advertising.  General  and
administrative  expenses consist mainly of costs for accounting,  recruiting and
staffing,  information  technology,  personnel,  insurance,  rent,  and  outside
professional  services  incurred in the normal  course of  business.  The equity
related charges consist of non-cash  amortization charges incurred in connection
with  pre-initial  public  offering  grants of equity  securities and restricted
stock awards, primarily to principals and certain senior executives.  Impairment
relates  to the  write  down of  goodwill  calculated  in  accordance  with  the
provisions of SFAS No. 142 "Accounting  for Goodwill and Intangible  Assets" and
write down of other intangibles  calculated in accordance with the provisions of
SFAS No. 144  "Accounting  for the Impairment on Disposal of Long Lived Assets."
Such  impairments  occur when the carrying  amount of a long-lived  asset (asset
group) is not recoverable  and exceeds its fair value.  That assessment is based
on the carrying  amount of the asset (asset  group) at the date it is tested for
recoverability, whether in use or under development.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are summarized in Note 1 to the consolidated
financial statements included in Item 8 "Consolidated  Financial  Statements" of
this report.

While the selection and  application of any  accounting  policy may involve some
level of subjective judgments and estimates, we believe the following accounting
policies  are  the  most  critical  to our  consolidated  financial  statements,
potentially  involve  the  most  subjective  judgments  in their  selection  and
application,  and  are  the  most  susceptible  to  uncertainties  and  changing
conditions:

-    Allowance for Doubtful Accounts;

-    Impairment of Goodwill and Long-lived Intangible Assets;

-    Revenue Recognition; and

-    Deferred Income Tax Assets.

Allowances for Doubtful Accounts - Substantially all of our receivables are owed
by companies in the  communications  industry.  We typically  bill customers for
services  after all or a portion of the services have been performed and require
customers  to pay within 30 days.  We attempt  to control  credit  risk by being
diligent  in  credit  approvals,  limiting  the  amount of  credit  extended  to
customers and monitoring  customers' payment record and credit status as work is
being performed for them.

We recorded bad debt expense in the amounts of $1,207,000, $575,000 and $399,000
for fiscal  years  2002,  2003 and 2004,  respectively,  and our  allowance  for
doubtful accounts totaled  $471,000,  $652,000 and $396,000 at the end of fiscal
years 2002,  2003 and 2004,  respectively.  The  calculation of these amounts is
based on judgment about the anticipated  default rate on receivables  owed to us
as of the end of the reporting  period.  That judgment was based on  uncollected
account  experience  in prior  years and our  ongoing  evaluation  of the credit
status of our customers and the communications industry in general.

We have attempted to mitigate credit risk by concentrating our marketing efforts
on the largest and most stable companies in the  communications  industry and by
tightly  controlling  the  amount of credit  provided  to  customers.  If we are
unsuccessful  in these efforts,  or if more of our customers file for bankruptcy
or  experience  financial  difficulties,  it is possible  that the allowance for
doubtful  accounts will be insufficient and we will have a greater bad debt loss
than the  amount  reserved,  which  would  adversely  affect  our cash  flow and
financial performance.

Impairment  of Goodwill and  Long-lived  Intangible  Assets - Goodwill and other
long-lived  intangible  assets  arising from our  acquisitions  are subjected to
periodic  review for impairment.  SFAS No. 142 requires an annual  evaluation at
the  reporting  unit  level  of the fair  value of  goodwill  and  compares  the
calculated  fair  value of the  reporting  unit to its book  value to  determine
whether an impairment has been deemed to occur.  Any impairment  charge would be
based  on the  most  recent  estimates  of the  recoverability  of the  recorded
goodwill and  intangibles  balances.  If the  remaining  book value  assigned to
goodwill and other  intangible  assets acquired in an acquisition is higher than
the amounts we would currently expect to realize based on updated  financial and
cash flow  projections  from the reporting unit, there is a requirement to write
down these assets.

Effective  March 4,  2004,  management  and the Board of  Directors  elected  to
discontinue our hardware business. We concluded this segment of the business did
not align well with our strategic focus. We incurred goodwill impairment charges
of $2.2  million  in the first  quarter  of fiscal  year  2004,  related  to the
discontinuation of the hardware  business,  in accordance with the provisions of
SFAS No. 142.

Due to a combination of significantly lower operating results of reporting units
during fiscal years 2002 and 2003, the resignation of key personnel, and revised
and reduced financial  projections,  we recorded  goodwill  impairment losses of
$27.1  million and $15.8 million in 2002

<PAGE>

and 2003,  respectively,  in accordance with the provisions of SFAS No. 142. For
an additional discussion see Item 8, "Consolidated Financial Statements," Note 3
"Goodwill and Other Intangible Assets."

In accordance with SFAS No. 144, we use our best estimates based upon reasonable
and  supportable   assumptions  and  projections,   reviews  for  impairment  of
long-lived  assets  and  certain  identifiable  intangibles  to be held and used
whenever events or changes in circumstances indicate that the carrying amount of
our assets  might not be  recoverable.  During  fiscal  year 2003 we  identified
certain events, including a significant decrease in revenue from customers whose
relationships  were valued in purchase  accounting.  We performed an  impairment
test, and determined that the carrying value of customer  relationships exceeded
its fair market value and recorded an aggregate impairment loss of $3.7 million.
Fair  value was  based on an  analysis  of  projected  future  cash  flows.  The
impairment loss has been reflected as a component of Loss from Operations in the
Statement of Operations and Comprehensive Income (Loss).

Revenue  Recognition - Historically,  most of our consulting  practice contracts
have been on a time and materials  basis, in which customers are billed for time
and materials  expended in performing their  engagements.  We recognize  revenue
from those types of customer  contracts  in the period in which our services are
performed.  In  addition  to time and  materials  contracts,  our other types of
contracts  include time and materials  contracts not to exceed  contract  price,
fixed fee contracts,  managed services or outsourcing contracts,  and contingent
fee contracts.  Managed services or outsourcing  contracts typically have longer
terms than consulting contracts (e.g., longer than one year).

We recognize  revenues on time and materials  contracts  not to exceed  contract
price  and fixed  fee  contracts  using the  percentage  of  completion  method.
Percentage of  completion  accounting  involves  calculating  the  percentage of
services  provided during the reporting period compared with the total estimated
services to be provided  over the duration of the contract.  For all  contracts,
estimates of total contract revenues and costs are continuously monitored during
the term of the  contract,  and  recorded  revenues  and  costs are  subject  to
revisions as the contract  progresses.  Such revisions may result in an increase
or decrease to revenues and income and are reflected in the financial statements
in the periods in which they are first identified.

As we continue to adapt to changes in the communications consulting industry, we
have elected to enter into more fixed fee  contracts  in which  revenue is based
upon delivery of services or solutions,  and contingent fee contracts,  in which
revenue is subject to  achievement  of  savings or other  agreed  upon  results,
rather than time spent.  Both of these types of  contracts  are  typically  more
results-oriented  and are  subject  to  greater  risk  associated  with  revenue
recognition  and  overall  project   profitability  than  traditional  time  and
materials  contracts.  Due to the nature of these  contingent fee contracts,  we
recognize  costs  as  they  are  incurred  on  the  project  and  defer  revenue
recognition  until the  revenue  is  realizable  and  earned as agreed to by our
clients.  Additional costs and effort as compared to what was originally planned
may need to be  expended to fulfill  delivery  requirements  on such  contracts,
which could adversely affect our  consolidated  financial  position,  results of
operations and liquidity.

Deferred Income Tax Assets - We have generated  substantial  deferred income tax
assets primarily from the accelerated financial statement write-off of goodwill,
the charge to  compensation  expense  taken for stock  options and net operating
loss carry  forwards.  For us to realize the income tax benefit of these assets,
we  must  generate  sufficient  taxable  income  in  future  periods  when  such
deductions are allowed for income tax purposes. In assessing whether a valuation
allowance is needed in connection with our deferred  income tax assets,  we have
evaluated  our  ability to carry back tax  losses to prior  years that  reported
taxable income, and our ability to generate  sufficient taxable income in future
periods  to  utilize  the  benefit  of the  deferred  income  tax  assets.  Such
projections of future taxable income require  significant  subjective  judgments
and estimates by us. As of January 1, 2005,  cumulative  valuation allowances in
the amount of $26.2 million were recorded in connection with the deferred income
tax assets. We continue to evaluate the  recoverability of the recorded deferred
income tax asset  balances.  If we continue to report net  operating  losses for
financial  reporting,  no additional  tax benefit would be recognized  for those
losses,  since we may be required to increase our valuation  allowance to offset
such amounts.

RESULTS OF OPERATIONS

On March 4, 2004,  management and the Board of Directors  elected to discontinue
our  hardware   business.   The   Consolidated   Statements  of  Operations  and
Comprehensive  Income (Loss) have been adjusted for fiscal years 2004, 2003, and
2002 to report the income (loss) from discontinued operations, net of tax. For a
further  discussion  see Item 1,  "Notes  to  Consolidated  Condensed  Financial
Statements," Note 4, "Discontinued Operations."

FISCAL 2004 COMPARED TO FISCAL 2003

                                    REVENUES

Revenues increased 2.0% to $23.7 million for fiscal year 2004 from $23.2 million
for fiscal year 2003  Included in revenues for fiscal year 2003 was $0.7 million
related  to a customer  take or pay  contract,  representing  the  shortfall  in
consulting  services  utilized by a customer in connection  with annual  minimum
usage  requirements.  The  increase  in  revenue in 2004 is  attributable  to an
increase in engagements in the wireless segment of the telecom  industry,  along
with a slight increase in the average size of projects. During fiscal year 2004,
we  provided  services  on 197  customer  projects,  compared  to  196  projects
performed  in fiscal year 2003.  Average  revenue  per  project was  $120,000 in
fiscal year 2004 compared to $119,000 in fiscal year 2003. International revenue
base  increased to 22.3% of our  revenues  for fiscal year 2004,  from 10.0% for
fiscal year 2003,  due primarily to a significant  increase in project  activity
with select large  global  wireline  and  wireless  carriers  located in Western
Europe and  Australia.  Revenues  recognized  in  connection  with  fixed  price
engagements  totaled $9.6 million and $6.4 million in fiscal year 2004 and 2003,
respectively,  representing 40.5% and 27.4% of total revenue in fiscal year 2004
and 2003, respectively.

<PAGE>

Effective  March 4,  2004,  management  and the Board of  Directors  elected  to
discontinue our hardware business  (previously reported as the separate business
segment "All  Other").  Operating  results of the  hardware  business for fiscal
years 2004 and 2003 have been included as a component of discontinued operations
in the  Consolidated  Statements of Operations and  Comprehensive  Income (Loss)
contained herein.

                                COST OF SERVICES

Direct  costs of  services  increased  to $12.3  million  for  fiscal  year 2004
compared to $11.9 million for fiscal year 2003. As a percentage of revenues, our
gross  margin  based on direct cost of  services  was 48.0% for fiscal year 2004
compared  to 48.7% for fiscal  year  2003.  Included  in fiscal  year 2003 gross
margin is the $0.7 million of revenue  from the take or pay  contract  discussed
above.  Gross margin percentage is attributable to the mix of services,  pricing
of our projects and efficiency of delivery.

Non-cash  equity related charges were $205,000 for fiscal year 2004. The charges
relate to the award of  restricted  stock  issued to select  executives  and key
employees  during  the  fourth  quarter  of fiscal  year  2003,  which are being
amortized on a graded vesting  schedule over a period of two years from the date
of grant.  The non-cash  equity related benefit of $57,000 for fiscal year 2003,
was primarily  related to the  cancellation  and  forfeiture  of unvested  stock
options by employees.

                               OPERATING EXPENSES

In total, operating expenses decreased by 55.9% to $18.2 million for fiscal year
2004,  from $41.3  million  for fiscal  year 2003.  Operating  expenses  include
selling,  general  and  administrative  costs,  legal  settlement,  real  estate
restructuring, equity related charges, goodwill and intangible asset impairment,
and  intangible  asset  amortization.  The major  components of the decrease are
discussed by category in the following paragraphs.

We recorded a goodwill and intangible asset  impairment  charge of $19.5 million
in fiscal  year  2003.  The  goodwill  impairment  charge is  attributable  to a
combination  of the  resignation of key executive  personnel  during fiscal year
2003 and lower than expected  operating results of reporting units during fiscal
year 2003,  both of which  adversely  affected  future  projections of operating
results  utilized in the  impairment  analysis.  The write down of goodwill  and
customer  relationships was calculated in accordance with the provisions of SFAS
No. 142 and SFAS No. 144, respectively.

The decrease in operating  expenses  includes  $3.3 million  related to selling,
general and  administrative  expense  reductions in fiscal year 2004 compared to
fiscal year 2003.  Approximately  $1.5 million of the reductions were associated
with reductions in personnel levels and improvement in our utilization rates, as
part of our ongoing  effort to  properly  size the  business to a lower  revenue
base. In fiscal year 2004 we incurred severance charges of $0.1 million compared
to $0.4 million in fiscal year 2003 related to involuntary employee turnover. We
also reduced  outside  professional  service fees by $0.6 million in fiscal year
2004 from  fiscal  year 2003.  Additionally,  throughout  fiscal  year 2004,  we
implemented   a  number  of  cost   reductions   within  sales  and   marketing,
communications,  insurance,  and other  administrative  costs.  We  continue  to
examine  cost-reduction   measures  to  enhance  our  profitability  and  manage
operating expenses to better align them with the size of the business.

In fiscal year 2004 we entered  into a mediated  settlement  agreement to settle
pending  litigation with a customer regarding the take or pay contract discussed
in "Revenues"  above. As part of the  settlement,  we received a $2 million cash
payment to settle all claims and  disputes in the  litigation.  This payment was
recorded as a $1.3  million  reduction  of  operating  expenses and $0.7 million
reduction of existing  receivables.  Also during  fiscal year 2004,  we made the
decision to consolidate  office space  resulting in a charge to earnings of $1.5
million.

Non-cash stock based compensation  charges were $1.0 million in fiscal year 2004
compared  to $0.1  million for fiscal  year 2003.  The fiscal year 2004  charges
relate to the award of  restricted  stock  issued to select  executives  and key
employees  during  the  fourth  quarter  of fiscal  year  2003,  which are being
amortized on a graded vesting  schedule over a period of two years from the date
of grant.

                            OTHER INCOME AND EXPENSES

Interest  income was $0.7  million and $0.6  million  for fiscal  years 2004 and
2003,  respectively,  and represented  interest earned on invested cash and cash
equivalent balances and short-term investments. Interest income increased during
fiscal year 2004 due to investing cash reserves at slightly higher interest rate
returns in 2004 compared to 2003. We primarily  invest in money market funds and
investment-grade  auction  rate  securities  as part of our  overall  investment
policy.

                                  INCOME TAXES

For fiscal year 2004 we have fully  reserved  our  deferred  income tax benefits
generated by our pre-tax losses of $6.4 million from continuing operations.  The
fiscal year 2004 income tax provision of $49,000  relates to state income taxes.
In fiscal year 2003,  we recorded a valuation  allowance  in the amount of $24.0
million against  deferred  income tax assets,  offsetting the income tax benefit
from current year  operating  losses and resulting in a net income tax provision
of $13.0 million.  The valuation allowance was calculated utilizing the guidance
of SFAS No. 109  "Accounting  for Income Taxes" which  requires an estimation of
the recoverability of the recorded deferred income tax asset balances.

<PAGE>

FISCAL 2003 COMPARED TO FISCAL 2002

                                    REVENUES

Revenues  decreased  29.7% to $23.2  million  for  fiscal  year 2003 from  $33.1
million for fiscal year 2002. Included in revenues for fiscal year 2003 was $0.7
million related to a customer take or pay contract,  representing  the shortfall
in consulting  services utilized by a customer in connection with annual minimum
usage requirements.  The decrease in revenues was primarily  associated with the
decline in  utilization  of  management  consulting  services  by  communication
service  providers,  which  correlated  with  significant  layoffs of management
personnel  by  such  clients,   and   continuing   adverse   conditions  in  the
communication and technology industry. In addition, there was continued deferral
of key  management  consulting  pipeline  opportunities,  increases  in  managed
services   outsourcing  by  clients,   which   partially   displaced  what  were
historically management consulting  opportunities for us, and the resignation of
certain key  executives  during fiscal year 2003,  which resulted in the loss of
revenue  opportunities  for us. During fiscal year 2003, we provided services on
196 customer  projects,  compared to 239 projects performed in fiscal year 2002.
Average  revenue  per  project  was  $119,000  in fiscal  year 2003  compared to
$138,000 in fiscal year 2002.  International  revenue base increased to 10.0% of
our revenues for fiscal year 2003, from 8.0% for fiscal year 2002, due primarily
to our decrease in domestic revenue.

Revenues  recognized by us in connection  with fixed price  engagements  totaled
$6.4 million,  and represented 27.4% of consolidated  revenue during fiscal year
2003.

Effective  March 4,  2004,  management  and the Board of  Directors  elected  to
discontinue our hardware business  (previously reported as the separate business
segment "All Other"). Operating results of the hardware business for fiscal year
2003 and 2002 have been  included as a component of  discontinued  operations in
the  Consolidated  Statements  of  Operations  and  Comprehensive  Income (Loss)
contained herein.

                                COST OF SERVICES

Direct  costs of  services  decreased  to $11.9  million  for  fiscal  year 2003
compared to $16.1  million  for fiscal year 2002.  The  decrease  was  primarily
attributable to fewer consulting  engagements and corresponding  reductions made
in  personnel  costs.  As a percentage  of  revenues,  our gross margin based on
direct  cost of services  was 48.7% for fiscal  year 2003  compared to 51.3% for
fiscal year 2002.  However,  excluding  the $0.7 million  revenue in fiscal year
2003 from the take or pay contract  discussed  above,  the gross margin based on
direct cost of services would have been 47.1%.  The decrease in gross margin was
primarily  attributable  to  the  impact  of  lower  utilization  of  full  time
personnel.

Non-cash  stock based  compensation  charges or benefits  related to pre-initial
offering grants of stock options were fully amortized during fiscal year 2003.

                               OPERATING EXPENSES

In total, operating expenses decreased by 20.9% to $41.3 million for fiscal year
2003,  from $52.2  million  for fiscal  year 2002.  Operating  expenses  include
selling,  general and administrative  costs, equity related charges,  intangible
amortization  and goodwill and intangible asset  impairment  charges.  The major
components   of  the  decrease  are  discussed  by  category  in  the  following
paragraphs.

Selling,  general and  administrative  expense  decreased $4.4 million in fiscal
year 2003  compared to fiscal year 2002. Of these  reductions,  $1.3 million was
associated with  reductions of personnel  required to properly size the business
to lower revenue volumes.  Total selling and administrative  headcount was 34 at
January 3, 2004,  compared to 45 at December 28, 2002,  which represents a 24.4%
reduction in our selling and administrative personnel.  Additionally,  in fiscal
year 2003 we incurred severance charges of $0.4 million compared to $1.9 million
in fiscal year 2002 related to involuntary employee turnover.  Throughout fiscal
year  2003,  we  implemented  a  number  of cost  reductions  within  sales  and
marketing, recruitment,  accounting, and systems as well as other administrative
cost reductions.

We have recorded a goodwill and intangible impairment charge of $25.2 million in
fiscal year 2002 and $19.5 million in fiscal year 2003. The goodwill  impairment
charge is  attributable  to a combination  of the  resignation  of key executive
personnel during fiscal year 2003 and lower than expected  operating  results of
reporting  units  during  fiscal  years 2003 and 2002,  both of which  adversely
affected  future  projections  of operating  results  utilized in the impairment
analysis.  The write down of goodwill and customer  relationships was calculated
in  accordance   with  the  provisions  of  SFAS  No.  142  and  SFAS  No.  144,
respectively.

Non-cash stock based compensation  charges were $0.1 million in fiscal year 2003
compared to $0.4 million for fiscal year 2002. Non-cash stock based compensation
charges in fiscal  year 2003  related to  pre-initial  offering  grants of stock
options which were fully amortized during fiscal year 2003.  Additionally in the
fourth  quarter of fiscal  year  2003,  we  granted  restricted  stock to select
executives.  The charge in fiscal  year 2003  related  to these  grants was $0.1
million.

                            OTHER INCOME AND EXPENSES

Interest  income was $0.6  million and $1.0  million  for fiscal  years 2003 and
2002,  respectively,  and  represented  interest  earned on  invested  balances.
Interest income decreased during fiscal year 2003 due to lower invested balances
resulting from a reduction in cash reserves and lower interest rate returns from
fiscal year 2002 to fiscal year 2003. We primarily  invest in money market funds
and  investment-grade  auction rate securities as part of our overall investment
policy.

<PAGE>

                                  INCOME TAXES

In fiscal year 2002, we recorded an income tax provision  (benefit) at a blended
Federal and state  statutory  income tax rate of 40.2%.  In fiscal year 2003, we
recorded a  valuation  allowance  in the  amount of $24.0  million  against  the
deferred income tax assets,  offsetting the income tax benefit from current year
operating  losses and resulting in a net income tax provision of $13.0  million.
The valuation  allowance was  calculated  utilizing the guidance of SFAS No. 109
which  requires an estimation  of the  recoverability  of the recorded  deferred
income tax asset  balances.  The income tax  benefit  for fiscal  year 2002 as a
percentage of pretax loss was 35.3%. The primary reason for the variance between
the effective and statutory income tax rates in 2002 related to a portion of the
reported goodwill impairment losses not deductible for income tax purposes.

              CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE

A cumulative  effect of a change in  accounting  principle in the amount of $1.9
million was recorded  during fiscal year 2002 in connection with our estimate of
goodwill  impairment.  The  impairment  was  calculated in  accordance  with the
provisions  of SFAS No. 142 and has been reported on our Statement of Operations
and  Comprehensive  Income  (Loss),  net of tax  benefit,  in the amount of $1.1
million.

SUMMARY OF QUARTERLY RESULTS OF OPERATIONS -- UNAUDITED

<TABLE>
<CAPTION>
<S>                                                   <C>           <C>         <C>            <C>

                                                             (In thousands, except per share data)

                                                                          QUARTER ENDED
                                                      ----------------------------------------------------
                                                      MARCH 29,      JUNE 28,   SEPTEMBER 27,  January 3,
                                                        2003          2003          2003           2004
                                                      --------      --------      --------       --------
Revenues .......................................      $  7,240      $  4,963      $  4,691       $  6,351
                                                      ========      ========      ========       ========
Gross profit ...................................      $  3,587      $  2,323      $  2,195       $  3,270
                                                      ========      ========      ========       ========
Net income (loss) from discontinued operation...      $     71      $      8      $    (30)      $    (15)
                                                      ========      ========      ========       ========
Net loss........................................      $ (1,231)     $(18,737)     $ (2,651)      $(19,704)
                                                      ========      ========      ========       ========
Basic and diluted income (loss) from
 Discontinued operation per common share .......
                                                      ========      ========      ========       ========
Basic and diluted net loss per common share ....      $  (0.04)     $  (0.56)     $  (0.08)      $  (0.58)
                                                      ========      ========      ========       ========


                                                                          QUARTER ENDED
                                                      ----------------------------------------------------
                                                      APRIL 3,       JULY 3,    OCTOBER 27,    January 1,
                                                        2004          2004          2004           2005
                                                      --------      --------      --------       --------
Revenues .......................................      $  5,779      $  5,184      $  6,546       $  6,195
                                                      ========      ========      ========       ========
Gross profit ...................................      $  2,812      $  2,393      $  3,054       $  2,921
                                                      ========      ========      ========       ========
Net income (loss) from discontinued operation...      $ (2,276)
                                                      ========      ========      ========       ========

Net loss........................................      $ (4,251)     $ (2,117)     $ (1,119)      $ (1,208)
                                                      ========      ========      ========       ========

Basic and diluted income (loss) from
 Discontinued operation per common share .......      $  (0.07)
                                                      ========      ========      ========       ========


Basic and diluted net loss per common share ....      $  (0.13)     $  (0.06)     $  (0.03)      $  (0.03)
                                                      ========      ========      ========       ========
</TABLE>


We report our  operating  activities  on a  52/53-week  fiscal  year and for the
fourth  quarter ended January 1, 2005,  our financial  results  include 13 weeks
compared to the 14 weeks  reported for the fourth quarter ended January 3, 2004.
The operating  results for fiscal year 2004 report 52 weeks of activity compared
to the 53 weeks of activity reported in fiscal year 2003.

LIQUIDITY AND CAPITAL RESOURCES

In fiscal year 2004, through additional  clarifying guidance, we determined that
our investments in auction rate securities are more appropriately

<PAGE>

classified  as  available-for-sale   short-term  investments  rather  than  cash
equivalents  and we have  reflected such change  retroactively  in our financial
statements and in our liquidity  discussions.  Auction rate securities generally
have long-term stated maturities;  however,  for the investor,  these securities
have certain economic characteristics of short-term investments because of their
rate  setting  mechanism.  The return on these  securities  is designed to track
short-term  interest  rates due to a "Dutch"  auction  process  which resets the
coupon rate (or  dividend  rate).  Auction  rate  securities  are designed to be
highly liquid. Unless an auction fails, an investor can, by electing not to bid,
recoup the principal  amount of its  investment at each auction date. To date we
have experienced no failed auctions.

Net cash used in  operating  activities  was $0.7  million and $0.9  million for
fiscal  years 2004 and 2003,  respectively,  compared  to net cash  provided  by
operating  activities of $7,000 in fiscal year 2002.  We incurred  negative cash
flow from our operating  activities for fiscal years 2004 and 2003 primarily due
to  operating  losses.  These  losses  were  substantially  offset by  effective
management of working capital and operating assets and liabilities,  tax refunds
and a favorable legal settlement during fiscal year 2004.

Net cash provided by (used in)  investing  activities  was $2.6  million,  ($2.0
million) and ($4.3 million) for fiscal year 2004, 2003, and 2002,  respectively.
Net cash  provided by (used in) investing  activities  includes  maturities  and
sales of auction  rate  securities  of $9.6  million,  $7.3  million  and $108.3
million in fiscal years 2004, 2003 and 2002, respectively.  Net cash provided by
(used in) investing  activities includes purchases of auction rate securities of
$6.9 million, $9.2 million and $79.8 million in fiscal year 2004, 2003 and 2002,
respectively. Purchases and sales of auction rate securities in fiscal year 2002
included a complete  roll-over  of  investments  from tax exempt  securities  to
taxable securities.  Cash used for acquisitions was $32.5 million in fiscal year
2002, and related to the CSMG acquisition. Capital expenditures of $0.2 million,
$0.1  million,  and $0.3  million,  relate to the  capitalization  of  leasehold
improvements,  computer  equipment and software for fiscal years 2004, 2003, and
2002, respectively.

Net cash provided by financing activities was $22,000, $94,000, and $123,000 for
fiscal years 2004,  2003,  and 2002,  respectively.  Net cash provided in fiscal
years 2004,  2003,  and 2002  related to proceeds  from the exercise of employee
stock options as well as common stock issued by us as part of our employee stock
purchase program, partially offset by payments made on long-term obligations.

FINANCIAL COMMITMENTS

As of  January  1,  2005,  we have the  following  contractual  obligations  and
commercial commitments by year (amounts in millions):

<TABLE>
<CAPTION>
<S>                        <C>     <C>      <C>      <C>      <C>      <C>         <C>

                                                                        Later
                                                                        Years
                                                                       Through
                           2005    2006     2007     2008     2009       2011      Total
                           ----    ----     ----     ----     ----     -------     -----
Capital leases             $0.2                                                    $ 0.2
Operating leases           $1.8    $1.7     $1.7     $1.8     $1.7       $1.7      $10.4
                           ----    ----     ----     ----     ----       ----      -----
Total                      $2.0    $1.7     $1.7     $1.8     $1.7       $1.7      $10.6
                           ====    ====     ====     ====     ====       ====      =====
</TABLE>


We have met our cash requirements  with a combination of operating  revenues and
the use of our cash reserves.

At January 1, 2005, we had approximately $52.2 million in cash, cash equivalents
and auction rate  securities.  We have almost no long-term  debt.  We believe we
have  sufficient  cash  to  meet   anticipated  cash   requirements,   including
anticipated capital expenditures,  consideration for possible acquisitions,  and
any  continuing  operating  losses,  for at least  the next 12  months.  We have
established  a flexible  model that provides a lower fixed cost  structure  than
most  consulting  firms,  enabling us to scale  operating cost  structures  more
quickly based on market  conditions.  Although we are well positioned because of
our cash reserves to weather continuing adverse conditions in the communications
industry  for a period  of time,  if the  industry  and  demand  for  consulting
services do not rebound in the foreseeable  future and we continue to experience
negative cash flow, we could experience liquidity challenges.

TRANSACTIONS WITH RELATED PARTIES

During fiscal year 2002,  one member of our Board of Directors was also director
of a customer  with which we did  business.  Revenues  earned from the  customer
during fiscal year 2002 totaled  approximately  $308,000.  No  receivables  were
outstanding from this customer as of December 28, 2002.

During fiscal year 2002, we made payments of approximately $190,000 to two legal
firms in which two members of our Board of Directors own equity interests.  Such
payments  were for  legal  services  rendered  in  connection  with  our  equity
offerings  and for other matters  arising in the normal course of business.  The
costs  associated  with the equity  offerings were  classified as a component of
additional  paid-in  capital,  and the costs  associated  with business  matters
arising in the normal course of business were classified as selling, general and
administrative in the consolidated statements of income and comprehensive income
(loss).  During fiscal year 2004, we made payments of $55,000 to a legal firm in
which a member of our Board of Directors owns an equity interest.  Such payments
were made in connection  with matters  arising in the normal course of business.
Our Board of Directors has  affirmatively  determined  that such payments do not
constitute  a material  relationship  between the  director  and the Company and
concluded  the  director  is  independent  as defined  by the  NASDAQ  corporate
governance rules.

<PAGE>

As of January 1, 2005, there is one remaining line of credit between the Company
and our Chief Executive Officer,  Richard P. Nespola, which originated in fiscal
year 2001.  Aggregate  borrowings  available and outstanding against the line of
credit at January 3, 2004 and January 1, 2005  totaled  $300,000  and are due in
2011.  These  amounts are  included in other  assets in the  non-current  assets
section of the  balance  sheet.  In  accordance  with the loan  provisions,  the
interest  rate  charged  on the loans is equal to the  Applicable  Federal  Rate
(AFR), as announced by the Internal Revenue Service, for short-term  obligations
(with annual  compounding) in effect for the month in which the advance is made,
until fully paid. Pursuant to the Sarbanes-Oxley Act, no further loan agreements
or draws  against  the line may be made by the  Company  to, or  arranged by the
Company for its executive officers.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not invest  excess  funds in  derivative  financial  instruments  or other
market  rate  sensitive  instruments  for the  purpose of  managing  our foreign
currency  exchange rate risk. We invest excess funds in short-term  investments,
including  auction  rate  securities,  the yield of which is exposed to interest
rate market risk.  Auction rate securities are classified as  available-for-sale
and reported on the balance sheet at fair value,  which equals market value,  as
the rate on such securities resets generally every 28 to 35 days.  Consequently,
interest rate movements do not materially  affect the balance sheet valuation of
the fixed income  investments.  Changes in the overall  level of interest  rates
affect our interest income generated from investments.

We do not have  material  exposure to market  related  risks.  Foreign  currency
exchange rate risk may become  material  given U.S.  dollar to foreign  currency
exchange rate changes and  significant  increases in  international  engagements
denominated in the local currency of our clients.

<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS OF

The Management Network Group, Inc.
Overland Park, Kansas

We have audited the accompanying  consolidated  balance sheets of The Management
Network Group,  Inc. and subsidiaries  (the "Company") as of January 1, 2005 and
January  3, 2004 and the  related  consolidated  statements  of  operations  and
comprehensive income (loss),  stockholders' equity and cash flows for the fiscal
years ended January 1, 2005,  January 3, 2004 and December 28, 2002 (52, 53, and
52 weeks,  respectively).  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audits included consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances  but not for the  purpose  of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  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 consolidated  financial  statements present fairly, in all
material  respects,  the financial position of the Company as of January 1, 2005
and January 3, 2004,  and the results of its  operations  and its cash flows for
the fiscal years ended January 1, 2005, January 3, 2004 and December 28, 2002 in
conformity with accounting principles generally accepted in the United States of
America.

As discussed in Note 3 to the  consolidated  financial  statements,  the Company
changed its method of accounting for goodwill and other  intangible  assets with
the adoption of Statement of Financial  Accounting  Standards No. 142, "Goodwill
and Other Intangible Assets", in 2002.



                           /S/ DELOITTE & TOUCHE LLP

                              KANSAS CITY, MISSOURI


                                 March 31, 2005


<PAGE>



                       THE MANAGEMENT NETWORK GROUP, INC.

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS



<TABLE>
<CAPTION>
<S>                                                                         <C>              <C>


                                                                             January 3,       January 1,
                                                                                2004             2005
                                                                            ------------     ------------
CURRENT ASSETS:
 Cash and cash equivalents ..........................................        $   8,825        $  10,882
 Short-term investments .............................................           44,050           41,300
 Receivables:
    Accounts receivable .............................................            5,376            4,663
    Accounts receivable -- unbilled .................................            2,140            1,911
                                                                             ---------        ---------
                                                                                 7,516            6,574
    Less: Allowance for doubtful accounts ...........................             (652)            (396)
                                                                             ---------        ---------
                                                                                 6,864            6,178
    Refundable income taxes  ........................................            2,167              769
    Prepaid and other assets ........................................              710            1,176
                                                                             ---------        ---------
         Total current assets .......................................           62,616           60,305
                                                                             ---------        ---------
Property and equipment, net .........................................            1,558              896
Goodwill.............................................................           15,528           13,365
Identifiable intangible assets, net..................................            1,478              487
Other assets ........................................................              402              300
                                                                             ---------        ---------
Total Assets ........................................................        $  81,582        $  75,353
                                                                             =========        =========
CURRENT LIABILITIES:
 Trade accounts payable .............................................        $     635        $     845
 Accrued payroll, bonuses and related expenses ......................            1,251            1,040
 Other accrued liabilities ..........................................            2,714            2,574
 Unfavorable and capital lease obligations ..........................              785              725
                                                                             ---------        ---------
         Total current liabilities ..................................            5,385            5,184
                                                                             ---------        ---------
Unfavorable and capital lease obligations ...........................            2,828            3,422

STOCKHOLDERS' EQUITY;
 Common stock:
    Voting -- $.001 par value, 100,000,000 shares authorized;
    34,371,068 shares issued and outstanding on
    January 3, 2004, 34,750,562 shares issued and
    outstanding on January 1, 2005 ..................................               34               35
 Preferred stock -- $.001 par value, 10,000,000 shares
    authorized; no shares issued or outstanding
 Additional paid-in capital .........................................          157,292          157,857
Accumulated deficit.................................................           (82,190)         (90,885)
 Accumulated other comprehensive income --
  Foreign currency translation adjustment ...........................              176              352
 Unearned compensation ..............................................           (1,943)            (612)
                                                                             ---------        ---------
         Total stockholders' equity .................................           73,369           66,747
                                                                             ---------        ---------
Total Liabilities and Stockholders' Equity ..........................        $  81,582        $  75,353
                                                                             =========        =========
</TABLE>


See notes to consolidated financial statements.

<PAGE>

                       THE MANAGEMENT NETWORK GROUP, INC.

      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
<S>                                                          <C>           <C>             <C>


                                                                         FISCAL YEAR ENDED
                                                             ------------------------------------------
                                                             DECEMBER 28,   January 3,      January 1,
                                                                 2002          2004            2005
                                                             -----------   -----------     -----------
Revenues.................................................      $ 33,057       $ 23,245       $ 23,704
Cost of services:
 Direct cost of services.................................        16,111         11,927         12,319
 Equity related charges (benefits).......................           721            (57)           205
                                                               --------       --------       --------
         Total cost of services .........................        16,832         11,870         12,524
                                                               --------       --------       --------
Gross profit.............................................        16,225         11,375         11,180
Operating expenses:
 Selling, general and administrative.....................        23,811         19,359         16,037
 Legal settlement .......................................                                      (1,294)
 Real estate restructuring ..............................                                       1,545
 Goodwill and intangible asset impairment ...............        25,165         19,484
 Intangible asset amortization ..................                 2,887          2,343            992
 Equity related charges .................................           353            142            958
                                                               --------       --------       --------
         Total operating expenses .......................        52,216         41,328         18,238
                                                               --------       --------       --------
Loss from operations ....................................       (35,991)       (29,953)        (7,058)
Other income:
 Interest income ........................................           996            624            718
 Interest expense .......................................           (63)           (51)           (30)
 Other, net .............................................            26
                                                               --------       --------       --------
         Total other income..............................           959            573            688
                                                               --------       --------       --------
Loss from continuing operations before income tax
 (provision) benefit and cumulative effect of a
 change in accounting principle .........................       (35,032)       (29,380)        (6,370)
Income tax (provision) benefit ..........................        12,389        (12,978)           (49)
                                                               --------       --------       --------
Loss from continuing operations before cumulative effect
 of a change in accounting principle.....................       (22,643)       (42,358)        (6,419)
Cumulative effect of a change in accounting principle -
 goodwill impairment, net of tax benefit ................        (1,140)
                                                               --------       --------       --------
Loss from continuing operations .........................       (23,783)       (42,358)        (6,419)

Discontinued operations:
 Net income (loss) from discontinued operations (net of
 income tax provision of $254 and $53 for fiscal 2002 and
 2003, respectively, and including a charge for impairment
 of goodwill of $2,163 in fiscal year 2004)..............           380             34         (2,276)
                                                               --------       --------       --------
Net loss ................................................       (23,403)       (42,324)        (8,695)

Other comprehensive income-
 Foreign currency translation adjustment.................            96             63            176
                                                               --------       --------       --------
Comprehensive loss ......................................      $(23,307)      $(42,261)        (8,519)
                                                               ========       ========       ========
Loss from continuing operations before cumulative effect
 of a change in accounting principle per common share
 Basic and diluted ......................................      $  (0.69)      $  (1.26)      $  (0.18)
                                                               ========       ========       ========
Cumulative effect of a change in accounting principle
 per common share
 Basic and diluted.......................................      $  (0.03)


<PAGE>

                                                               ========       ========       ========
Net income (loss) from discontinued operations per
 common share
 Basic and Diluted ......................................      $   0.01                      $  (0.07)
                                                               ========       ========       ========
Net loss per common share
 Basic and Diluted.......................................      $  (0.71)      $  (1.26)      $  (0.25)
                                                               ========       ========       ========
 Shares used in calculation of loss from continuing
 operations before cumulative effect of a change in
 accounting principle, net income (loss) from
 discontinued operations, and net loss per common
 share
 Basic and Diluted ......................................        32,734         33,545         34,619
                                                               ========       ========       ========
</TABLE>

See notes to consolidated financial statements.


<PAGE>



                       THE MANAGEMENT NETWORK GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
<S>                                                               <C>           <C>            <C>

                                                                              FISCAL YEAR ENDED
                                                                  -----------------------------------------
                                                                  DECEMBER 28,   January 3,     January 1,
                                                                      2002           2004           2005
                                                                  ------------  ------------   ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss .................................................      $ (23,403)    $  (42,324)    $   (8,695)
  Adjust for
     (Income) loss from discontinued operations (includes
     non-cash goodwill impairment charge of $2,163 in fiscal
     year 2004)                                                        (380)           (34)         2,276
                                                                   --------       --------       --------
  Loss from continuing operations                                   (23,783)       (42,358)        (6,419)
Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
    Cumulative change in accounting principle ..............          1,900
    Goodwill and intangible asset impairment ...............         25,165         19,484
    Real estate restructuring charge .......................                                        1,545
    Depreciation and amortization ..........................          3,835          3,197          1,672
    Equity related charges .................................          1,074             85          1,163
    Deferred income taxes ..................................         (8,820)        14,066
    Bad debt expense ......................................           1,207            575            399
    Loss on retirement of assets ...........................            205                            39
    Income tax benefit realized upon exercise/
     forfeiture of stock options ...........................             22             45
    Other changes in operating assets and liabilities, net
      of business acquisitions:
      Accounts receivable ..................................          3,354           (173)            61
      Accounts receivable -- unbilled ......................           (367)         2,092            229
      Accrued (refundable) income taxes ....................         (4,583)         2,720          1,437
      Prepaid and other assets .............................            202          1,113           (364)
      Trade accounts payable ...............................            936           (535)           211
      Accrued liabilities ..................................           (720)        (1,286)          (563)
                                                                   --------       --------       --------
         Net cash used in operating activities from
         continuing operations .............................           (373)          (975)          (590)
                                                                   --------       --------       --------
         Net cash provided by (used in) operating activities              7           (941)          (703)
                                                                   --------       --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments........................       (79,775)        (9,150)        (6,850)
  Proceeds from maturities and sales of short-term investment       108,300          7,300          9,600
  Acquisition of business, net of cash acquired .............       (32,456)
  Acquisition of property and equipment, net.................          (280)          (127)          (188)
  Loans to officers, net.....................................          (100)
                                                                   --------       --------       --------
         Net cash provided by (used in) investing activities.        (4,311)        (1,977)         2,562
                                                                   --------       --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of common stock ................ .................           164             70            131
  Payments made on long-term obligations ....................          (342)          (392)          (710)
  Exercise of stock options..................................           301            416            601
                                                                   --------       --------       --------
         Net cash provided by financing activities                      123             94             22
                                                                   --------       --------       --------
Effect of exchange rate on cash and cash equivalents ........            96             63            176
                                                                   --------       --------       --------
Net increase (decrease) in cash and cash equivalents ........        (4,085)        (2,761)         2,057
Cash and cash equivalents, beginning of period ..............        15,671         11,586          8,825
                                                                   --------       --------       --------
Cash and cash equivalents, end of period ....................      $ 11,586       $  8,825       $ 10,882
                                                                   ========       ========       ========
Supplemental disclosure of cash flow information:
  Cash paid during period for interest ......................      $     63       $     51       $     30
                                                                   ========       ========       ========
  Cash paid during period for taxes .........................      $    583       $    493       $     49
                                                                   ========       ========       ========
Supplemental disclosure of non-cash investing and financing
  transactions-

  Acquisition of business:
    Fair value of assets acquired ...........................      $ 53,840
    Liabilities incurred or assumed .........................      $ (7,377)
    Common stock issued .....................................      $ 13,480
</TABLE>


See notes to consolidated financial statements.

<PAGE>

                       THE MANAGEMENT NETWORK GROUP, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        (In thousands, except share data)

<TABLE>
<CAPTION>
<S>                                                            <C>          <C>       <C>         <C>


                                                                 COMMON STOCK
                                                                  $.001 PAR
                                                                    VOTING            ADDITIONAL
                                                             ---------------------     PAID-IN    ACCUMULATED
                                                                SHARES      AMOUNT     CAPITAL      DEFICIT
                                                             ------------   ------    ----------   ---------
Balance, December 29, 2001                                     30,204,919   $   30    $  141,451   $ (16,463)
Exercise of options                                               174,058                    301
Cancellation of options                                                                     (526)
Amortization of warrant cost                                                                 623
Employee stock purchase plan                                       75,451                    164
Stock compensation                                                                            (4)
Other comprehensive income -
    Foreign currency translation adjustment
Tax benefit due to exercise of stock options                                                  22
Acquisition of subsidiary                                       2,892,800        3        13,478
Net loss                                                                                             (23,403)
                                                             ------------   ------    ----------   ---------
Balance, December 28, 2002                                     33,347,228       33       155,509     (39,866)
Option grants                                                                                189
Exercise of options                                               245,304                    416
Cancellation of options                                                                     (294)
Stock surrender                                                    (8,702)                   (12)
Employee stock purchase plan                                       67,238                     70
Stock compensation
Restricted stock grant                                            720,000        1         2,069
Other comprehensive income -
    Foreign currency translation adjustment
Reduction of tax benefit due to exercise/forfeiture
 of stock options                                                                           (655)
Net loss                                                                                             (42,324)
                                                             ------------   ------    ----------   ---------
Balance, January 3, 2004                                       34,371,068       34       157,292     (82,190)
Exercise of options                                               338,165        1           601
Restricted stock cancellation                                     (77,000)                  (212)
Employee stock purchase plan                                       98,529                    131
Stock compensation
Restricted stock grant                                             15,000                     30
Stock bonus                                                         4,800                     15
Other comprehensive income -
    Foreign currency translation adjustment
Net loss                                                                                              (8,695)
                                                             ------------   ------    ----------   ---------
Balance, January 1, 2005                                       34,750,562   $   35    $  157,857   $ (90,885)
                                                             ============   ======    ==========   =========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>                                                              <C>                 <C>                <C>

                                                                  ACCUMULATED
                                                                     OTHER
                                                                 COMPREHENSIVE          UNEARNED
                                                                     INCOME           COMPENSATION        TOTAL
                                                                 -------------       --------------     ---------
Balance, December 29, 2001                                       $          17       $       (1,043)    $ 123,992
Exercise of options                                                                                           301
Cancellation of options                                                                         526
Amortization of warrant cost                                                                                  623
Employee stock purchase plan                                                                                  164
Stock compensation                                                                              454           450
Other comprehensive income -
    Foreign currency translation adjustment                                 96                                 96
Tax benefit due to exercise of stock options                                                                   22
Acquisition of subsidiary                                                                                  13,481
Net loss                                                                                                  (23,403)
                                                                 -------------       --------------     ---------
Balance, December 28, 2002                                                 113                  (63)      115,726
Option grants                                                                                  (189)
Exercise of options                                                                                           416
Cancellation of options                                                                         294
Stock surrender                                                                                               (12)
Employee stock purchase plan                                                                                   70
Stock compensation                                                                               85            85
Restricted stock grant                                                                       (2,070)
Other comprehensive income -
    Foreign currency translation adjustment                                 63                                 63
Reduction of tax benefit due to exercise/forfeiture                                                          (655)
Net loss                                                                                                  (42,324)
                                                                 -------------       --------------     ---------
Balance, January 3, 2004                                                   176               (1,943)       73,369
Exercise of options                                                                                           602
Restricted stock grant cancellation                                                             212
Employee stock purchase plan                                                                                  131
Stock compensation                                                                            1,149         1,149
Restricted stock grant                                                                          (30)
Stock bonus                                                                                                    15
Other comprehensive income -
    Foreign currency translation adjustment                                176                                176
Net loss                                                                                                   (8,695)
                                                                 -------------       --------------     ---------
Balance, January 1, 2005                                         $         352       $         (612)    $  66,747
                                                                 =============       ==============     =========
</TABLE>


See notes to consolidated financial statements.

<PAGE>

                       THE MANAGEMENT NETWORK GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of  Operations  - The  Management  Network  Group,  Inc.  ("TMNG"  or the
"Company") was founded in 1990 as a management  consulting firm  specializing in
global competitive communications. Primary services include providing management
consulting services to wireless and wireline  communications  carriers,  and the
technology  and investment  firms that support the  communications  industry.  A
majority of the  Company's  revenues are from  customers  in the United  States,
however the Company  also  provides  services to  customers  in Europe and other
foreign  countries.  TMNG's  corporate  offices are  located in  Overland  Park,
Kansas.

Principles of Consolidation - The consolidated  statements  include the accounts
of TMNG and its wholly-owned  subsidiaries,  The Management Network Group Europe
Ltd. ("TMNG-Europe"), formed on March 19, 1997, based in the United Kingdom; The
Management  Network Group Canada Ltd.  ("TMNG-Canada"),  formed on May 14, 1998,
based in Toronto,  Canada;  TMNG.com, Inc., formed in June 1999; TMNG Marketing,
Inc.,  acquired on  September  5, 2000;  TMNG  Technologies,  Inc.,  acquired on
September  5, 2001;  and TMNG  Strategy,  Inc.,  acquired on March 6, 2002.  All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

Fiscal Year - The Company reports its operating  results on a 52/53-week  fiscal
year basis.  The fiscal year end is  determined as the Saturday  ending  nearest
December  31.  The  fiscal  year  ended  January  1, 2005  reported  52 weeks of
operating results and consisted of four equal 13 week quarters.  The fiscal year
ended  January 3, 2004  reported 53 weeks of operating  results and consisted of
three 13 week quarters and one 14 week quarter compared to the fiscal year ended
December 28, 2002, which reported 52 weeks of operating results and consisted of
4 equal 13 week  quarters.  The fiscal years ended  January 1, 2005,  January 3,
2004 and December 28, 2002 are referred to herein as fiscal year 2004,  2003 and
2002,  respectively.  TMNG Europe and TMNG  Canada  maintain  year-end  dates of
December 31.

Revenue  Recognition - The Company  accounts for revenue and costs in connection
with  client  service  engagements  under a time and  materials  contract in the
period in which the service is performed.  The Company generally records revenue
in connection with fixed price contracts under a percentage of completion method
when it is possible to make  reasonably  dependable  estimates  towards  project
completion.  This method of  accounting  results in the ratable  recognition  of
revenue in proportion to the related costs over the client  service  engagement.
Estimates  are  prepared  to  monitor  and assess the  Company  progress  on the
engagement  from the  initial  phase of the  project  to  completion,  and these
estimates  are  utilized  in  recognizing  revenue  in the  Company's  financial
statements.  If the current  estimates of total  contract  revenues and contract
costs  indicate a loss,  the Company  records a provision for the entire loss on
the contract.  The Company had no such loss  contracts as of January 3, 2004 and
January 1, 2005. Revenues and related costs of smaller fixed price contracts are
generally  recognized  upon contract  completion  under the  completed  contract
method, and generally involve immaterial amounts and are of a short duration.

On a more limited  basis,  the Company also enters into gain-sharing  contracts,
where the  Company's  revenue is determined on a  success-based  revenue  model.
Revenues generated on such contracts result from financial success recognized by
the client  utilizing agreed upon contract  measures and milestones  between the
two parties.  Due to the contingent nature of these gain-sharing  projects,  the
Company  recognizes  costs as they are  incurred  on the  project and defers the
revenue recognition until the revenue is realizable and earned.

Changes in  Presentation  - TMNG's  Consolidated  Statements of  Operations  and
Comprehensive Income (Loss) for the years ended January 3, 2004 and December 28,
2002 reflect the reclassification of discontinued  operations during fiscal year
2004 (see Note 4 "Discontinued  Operations").  In addition,  through  additional
clarifying guidance, the Company determined that its investments in auction rate
securities are more appropriately  classified as  available-for-sale  short-term
investments rather than cash equivalents. Auction rate securities generally have
long-term stated maturities;  however,  for the investor,  these securities have
certain economic characteristics of short-term investments because of their rate
setting  mechanism.  The  return  on  these  securities  is  designed  to  track
short-term  interest  rates due to a "Dutch"  auction  process  which resets the
coupon rate (or  dividend  rate).  Auction  rate  securities  are designed to be
highly liquid. Unless an auction fails, an investor can, by electing not to bid,
recoup the principal amount of its investment at each auction date. To date, the
Company has experienced no failed auctions.

Auction  rate  securities  of $44.1  million  at  January  3,  2004,  which were
previously  recorded in cash and cash  equivalents  due to their  liquidity  and
pricing  reset  feature,  have been included as  short-term  investments  in the
accompanying  balance  sheet  and  purchases,  sales  and  maturities  of  these
securities have been reflected as investing activities in the statements of cash
flows. The  reclassification of prior period balances had no impact on net loss,
cash flow used in operations or debt covenants.

Cash and Cash Equivalents - Cash and cash  equivalents  include cash on hand and
short-term  investments  with  original  maturities of three months or less when
purchased.

Short-Term   Investments   -   Short-term   investments,    which   consist   of
investment-grade auction rate securities, are classified as "available-for-sale"
under the  provisions of SFAS No. 115,  "Accounting  for Certain  Investments in
Debt  and  Equity  Securities."  Accordingly,  the  short-term  investments  are
reported at fair value, with any related unrealized gains and losses included as
a separate  component of stockholders'  equity,  net of applicable  taxes,  when
applicable. Realized gains and losses and interest and dividends are included in
interest   income  within  the   Consolidated   Statements  of  Operations   and
Comprehensive Income (Loss). Auction rate securities generally reset every 28 to
35 days; consequently, interest rate movements do not materially affect the fair
value of these investments. At January 3, 2004 and January 1, 2005

<PAGE>

there  were no  unrealized  gains  or  losses  on  short-term  investments.  The
contractual maturity for all auction rate securities at January 1, 2005 exceeded
10 years.

Fair  Value of  Financial  Instruments  - The fair  value of  current  financial
instruments  approximates  the carrying  value because of the short  maturity of
these instruments.

Property  and  Equipment  -  Property  and  equipment  are  stated  at cost less
accumulated  depreciation and amortization.  Maintenance and repairs are charged
to expense as incurred.  Depreciation is based on the estimated  useful lives of
the assets and is computed using the  straight-line  method,  and capital leases
are amortized on a straight-line  basis over the life of the lease.  Asset lives
range  from  three  to  seven  years  for  computers  and  equipment.  Leasehold
improvements are capitalized and amortized over the life of the lease.

Goodwill - The Company  accounts for goodwill in accordance  with the provisions
of Statement of Financial  Accounting Standards ("SFAS") No. 142 "Accounting for
Goodwill and  Intangible  Assets."  Goodwill  represents  the excess of purchase
price  over the fair  value of net  assets  acquired  in  business  combinations
accounted for as purchases.  The Company evaluates goodwill for impairment on an
annual basis and whenever events or circumstances indicate that these assets may
be impaired.  The Company  determines  impairment by comparing the net assets of
each  reporting  unit to its  respective  fair  value.  In the event a reporting
unit's  carrying  value exceeds its fair value,  an  indication  exists that the
reporting  unit goodwill may be impaired.  In this  situation,  the Company must
determine the implied fair value of goodwill by assigning  the reporting  unit's
fair value to each asset and liability of the reporting  unit. The excess of the
fair value of the  reporting  unit over the  amounts  assigned to its assets and
liabilities  is the  implied  fair  value of  goodwill.  An  impairment  loss is
measured by the difference  between the goodwill  carrying value and the implied
fair value

Identifiable  Intangibles -  Identifiable  intangible  assets are stated at cost
less accumulated amortization, and represent customer relationships,  employment
agreements  and trade names acquired in the  acquisition of Cambridge  Strategic
Management Group ("CSMG").  Amortization is based on estimated useful lives of 3
to 60 months, depending on the nature of the intangible asset, and is recognized
on a straight-line basis.

In connection  with SFAS No. 144  "Accounting  for the Impairment or Disposal of
Long-lived  Assets" the Company uses its best estimate,  based on reasonable and
supportable assumptions and projections, to review certain long-lived assets and
identifiable   intangibles   for  impairment   whenever  events  or  changes  in
circumstances  indicate  that the  carrying  amount of these assets might not be
recoverable.

Income Taxes - The Company  recognizes a liability or asset for the deferred tax
consequences  of  temporary  differences  between  the tax  basis of  assets  or
liabilities and their reported amounts in the financial statements.  A valuation
allowance is provided when, in the opinion of management, it is more likely than
not that some portion or all of a deferred tax asset will not be realized.

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
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

Foreign Currency Transactions and Translation - TMNG-Europe and TMNG-Canada both
conduct  business  primarily  denominated in their  respective  local  currency.
Assets and liabilities  have been  translated to U.S.  dollars at the period-end
exchange rate. Revenue and expenses have been translated at exchange rates which
approximate the average of the rates prevailing during each period.  Translation
adjustments are reported as a separate component of other  comprehensive  income
in the consolidated  statements of stockholders' equity. Realized and unrealized
exchange gains and losses included in results of operations  were  insignificant
for all periods presented.

Stock-Based  Compensation - The Company utilizes an intrinsic value  methodology
in  accounting   for  stock  based   compensation   for  employees  and  certain
non-employee   directors  in  accordance   with  the  provisions  of  Accounting
Principles  Board  Opinion  ("APB")  No.  25,  "Accounting  for Stock  Issued to
Employees"   and  related   Interpretations,   and  accounts   for   stock-based
compensation for non-employees  utilizing a fair value methodology in accordance
with SFAS No. 123, "Accounting for Stock-Based  Compensation" as amended by SFAS
No. 148 "Accounting for Stock Based  Compensation - Transition and  Disclosure."
For an additional discussion of the Company's stock-based  compensation see Note
10 "Stock Option Plan and Stock Based  Compensation."  If compensation  cost for
the Company's APB No. 25 grants, restricted stock grants, and the employee stock
purchase plan had been determined  under SFAS No. 123, based upon the fair value
at the grant date,  consistent with the Black-Scholes  pricing methodology,  the
Company's  net loss for fiscal  year  2002,  2003 and 2004 would have would have
increased by $3.3  million,  $1.1 million and $2.8  million,  respectively.  For
purposes of pro forma disclosures required under the provisions of SFAS No. 123,
as amended by SFAS No. 148, the estimated  fair value of options and  restricted
stock are amortized to pro forma expense over the vesting period.  The following
table contains pro forma  information  for fiscal years 2002,  2003 and 2004 (in
thousands, except per share amounts):

<PAGE>

<TABLE>
<CAPTION>
<S>                                                <C>           <C>           <C>

                                                    FISCAL        FISCAL        FISCAL
                                                     YEAR          YEAR          YEAR
                                                     2002          2003          2004
                                                   --------      --------      --------
Net loss, as reported:                             $(23,403)     $(42,324)     $ (8,695)
  Add: Stock-based employee compensation
   expense included in reported net loss,
   net of related tax effects                           273            85         1,163

  Deduct:  Total stock-based compensation
   expense determined under fair value
   based method for all awards, net of related       (3,536)       (1,213)       (3,988)
   tax effects
                                                   --------      --------      --------
Pro forma net loss                                 $(26,666)     $(43,452)     $(11,520)
                                                   ========      ========      ========

Loss per share
  Basic and diluted, as reported                   $  (0.71)     $  (1.26)     $  (0.25)
                                                   ========      ========      ========
  Basic and diluted, pro forma                     $  (0.81)     $  (1.30)     $  (0.33)
                                                   ========      ========      ========
</TABLE>


Warrant Grant - On October 29, 1999, the Company issued a significant customer a
warrant to purchase 500,000 shares of common stock at an exercise price of $2.00
per share.  The  estimated  fair value of this  warrant was  approximately  $5.2
million,  all of which had been recognized in the Company's financial statements
by December 28, 2002. Expense recognized in connection with the warrant was $0.7
million for fiscal year 2002.

Earnings (Loss) Per Share - The Company  calculates and presents earnings (loss)
per share using a dual  presentation  of basic and diluted  earnings  (loss) per
share. Basic earnings (loss) per share is computed by dividing net income (loss)
by the weighted  average  number of common  shares  outstanding  for the period.
Diluted  earnings per share  reflects the  potential  dilution of  securities by
adding  common stock  options in the weighted  average  number of common  shares
outstanding for a period, if dilutive. In accordance with the provisions of SFAS
No. 128 "Earnings Per Share",  the Company has not included the effect of common
stock  options for fiscal  years 2002,  2003 and 2004 as the Company  reported a
loss from continuing  operations for those periods. Had the Company reported net
income  in fiscal  years  2002,  2003 and 2004,  the  treasury  stock  method of
calculating  common  stock  equivalents  would have  resulted  in  approximately
791,000, 772,000 and 822,000 additional dilutive shares, respectively.

New Accounting  Standards - In December 2004, the Financial Accounting Standards
Board  (FASB)  issued  Statement  of Financial  Accounting  Standard  (SFAS) No.
123(R), "Share-Based Payment," replacing SFAS No. 123 and superseding Accounting
Principles Board (APB) Opinion No. 25. SFAS No. 123(R) requires public companies
to recognize  compensation expense for the cost of awards of equity compensation
effective for periods beginning after June 15, 2005. This compensation cost will
be measured  as the fair value of the award  estimated  using an  option-pricing
model on the grant  date.  The  Company  is  currently  evaluating  the  various
transition  provisions  under SFAS No.  123(R)  and will  adopt SFAS No.  123(R)
effective  July 1, 2005,  which is expected to result in increased  compensation
expense in future periods.

2.   BUSINESS COMBINATIONS

On March 6, 2002,  TMNG  purchased  the business  and primary  assets of CSMG, a
Delaware  corporation,  of Boston,  Massachusetts  (now "TMNG  Strategy").  TMNG
Strategy provides high-end advisory services to global communication service and
equipment  providers and investment  firms that provide capital to the industry.
TMNG Strategy's range of business strategy services include analyses of industry
and competitive  environments;  product and  distribution  strategies;  finance,
including business case development,  modeling,  cost analysis and benchmarking;
and due diligence and risk assessment.

The acquisition, recorded under the purchase method of accounting, resulted in a
total purchase price of approximately $46.5 million.  Consideration consisted of
$33.0  million  cash  and  2,892,800  shares  of TMNG  Common  Stock  valued  at
approximately  $13.5 million.  Share  consideration was calculated in accordance
with  the  Asset  Purchase  Agreement  at a fixed  price  of  $4.66  per  share.
Additionally,  the Company incurred direct costs of  approximately  $2.3 million
related to the  acquisition  and recorded this amount as an increase to purchase
price.

An escrow was  established  as part of the  transaction,  consisting  of 566,502
shares and $4.0 million of cash  (collectively,  the "Escrowed  Property").  The
Escrowed  Property  was  subject  to  certain  claims  as set forth in the Asset
Purchase  Agreement  and  was  distributed  to  the  Seller  pro  rata  in  four
installments  over a 24-month period.  In accordance with the Escrow  Agreement,
the Company  made the first three pro rata  installment  payments to the Seller,
with the final payment released in the first quarter of fiscal year 2004.

<PAGE>

The transaction  was structured as a taxable  transaction for Federal income tax
purposes,  and  included  $5.4  million  in  cash  consideration  to the  Seller
representing  a sharing of tax  benefits  and  costs.  The  purchase  price also
included $5.2 million representing the working capital purchased from CSMG.

The operating  results of CSMG have been included in the Consolidated  Condensed
Statements of Operations  and  Comprehensive  Income (Loss) from the date of the
purchase.

The  following  table  summarizes  the final  purchase  price  allocation of the
estimated fair value of the assets  acquired and  liabilities  assumed as of the
date of  acquisition.  The  allocation  of the  purchase  price to  identifiable
intangible assets was determined by an independent valuation.

                               AS OF MARCH 6, 2002
                             (AMOUNTS IN THOUSANDS)



        Current assets                              $ 5,621
        Property, plant and equipment                 1,472
        Employment agreements                         3,200
        Customer relationships                        5,490
        Company tradename                               350
        Deferred taxes (non-current)                  1,501
        Goodwill                                     36,206
                                                    -------
        Total assets acquired                        53,840

        Current liabilities                           3,428
        Noncurrent liabilities                        3,949
                                                    -------
        Total liabilities assumed                     7,377
                                                    -------
        Net assets acquired                         $46,463
                                                    =======



Of the $5,490,000 assigned to customer relationships, $420,000 was identified as
customer backlog,  with the remaining value based on the Company's  expectations
of future revenue  generated from the acquired customer base. As of December 28,
2002,  customer  backlog was fully amortized.  The Company's  estimate of future
revenue  generated  from the  acquired  customer  base  resulted  in a  customer
relationship  value of $5,070,000 to be amortized on a straight-line  basis over
an estimated useful life of 60 months.

CSMG's  tradename  was valued at  $350,000.  CSMG's  tradename  has an estimated
useful  life of 24 months and was  amortized  on a  straight-line  basis.  As of
January 1, 2005, CSMG's tradename was fully amortized.

CSMG's  employment   agreements  were  valued  at  $3,200,000.   The  employment
agreements have a weighted  average useful life of  approximately  32 months and
are amortized on a straight-line basis.

As  part  of the  acquisition  of  CSMG,  the  Company  assumed  liabilities  of
approximately $889,000 related to capital leases.

The following  unaudited  pro forma result of  operations  assumes that the CSMG
acquisition occurred at the beginning of fiscal year 2002. The pro forma results
of operations require various assumptions  including an assumption that the same
amount of goodwill would have been  recognized had the  transaction  occurred at
the beginning of fiscal year 2002 without  regard to the then current  levels of
business  activity of CSMG and without regard to any operating  efficiencies  or
other  synergies.  Consequently,  the pro forma  results of  operations  are not
necessarily indicative of the operating results which would have occurred if the
business  combination  had been in effect on the  dates  indicated  or which may
result in the future.

<PAGE>

                                   (unaudited)


                                                        Fiscal Year Ended
          (in thousands, except per share amounts)         December 28,
                                                               2002
                                                            ---------
        Total revenues                                      $  36,822
        Loss before cumulative effect of a change in
          accounting principle                              $ (22,494)
        Net loss                                            $ (23,634)
        Loss from continuing operations before
          cumulative effect of a change in accounting
          principle per common share:
            Basic and diluted                               $   (0.68)
        Net loss per common share:
            Basic and diluted                               $   (0.71)


3.   GOODWILL AND OTHER INTANGIBLE ASSETS

Upon the  adoption of SFAS No. 142 in fiscal year 2002,  the Company  recorded a
goodwill  impairment  loss  related  to the  Management  Consulting  Segment  of
approximately  $1.9 million and has reflected this amount as a cumulative change
in accounting principle,  net of tax benefit, in the Statement of Operations and
Comprehensive  Income  (Loss).  Subsequent to the initial  transition  test, the
Company  performed  its annual  impairment  test during  fiscal  year 2002,  and
established  the last day of the first fiscal month in the fourth quarter as the
annual  impairment  test date.  Based on the analysis of  projected  future cash
flows and utilizing the  assistance of an outside  valuation  firm,  the Company
determined in connection  with the annual  impairment  test  performed in fiscal
year 2002 that the carrying value of goodwill exceeded its fair market value and
recorded an  impairment  loss related to the  Management  Consulting  Segment of
approximately  $24.4  million,  and an impairment  loss related to the All Other
Segment of approximately $0.8 million.

During the second quarter of fiscal year 2003, the Company  performed an interim
test to  determine  whether  an  impairment  of  goodwill  had  occurred  at the
reporting   unit  level.   The  Company   performed  the  interim  test  due  to
significantly  lower operating  results of the CSMG reporting unit,  compared to
the projected  financial results that were utilized in determining the reporting
unit's fair value in the previous annual goodwill impairment test. Additionally,
during the second quarter of 2003 an executive of CSMG tendered his  resignation
to the Company,  which also had the effect of lowering the financial projections
of CSMG.  Based on an analysis of projected  future cash flows and utilizing the
assistance  of an  outside  valuation  firm,  the  Company  determined  that the
carrying value of goodwill  acquired in the CSMG  acquisition  exceeded the fair
market  value  and  recorded  an  impairment  loss  related  to  the  Management
Consulting  Segment of  approximately  $15.8  million  in the second  quarter of
fiscal year 2003. The Company subsequently  performed its annual impairment test
in October 2003 and concluded there was no additional goodwill impairment as the
calculated fair values of its reporting units were higher than their  respective
carrying  values.  The goodwill  impairment loss related to fiscal year 2003 has
been  reflected  as a component  of Loss from  Operations  in the  Statement  of
Operations and  Comprehensive  Income (Loss) for that year. In the first quarter
of fiscal year 2004 the Company recorded a $2.2 million goodwill impairment loss
related to the  discontinuation  of the hardware  segment and has reflected this
amount in the  Statement of  Operations  and  Comprehensive  Income  (Loss) as a
component of  discontinued  operations.  The changes in the  carrying  amount of
goodwill  as of January 3, 2004 and  January 1, 2005 are as follows  (amounts in
thousands):


<TABLE>
<CAPTION>
<S>                                         <C>                      <C>           <C>


                                            Management Consulting    All Other
                                                   Segment            Segment       Total
                                            ---------------------    ---------     --------
Balance as of December 28, 2002                   $ 29,145           $   2,163     $ 31,308

Impairment Loss                                    (15,780)                         (15,780)
                                                  --------           ---------     --------
Balance as of January 3, 2004                       13,365               2,163       15,528

Impairment loss on discontinued operations                              (2,163)      (2,163)
                                                  --------           ---------     --------
Balance as of January 1, 2005                     $ 13,365                         $ 13,365
                                                  ========           =========     ========
</TABLE>

<PAGE>

Included in identifiable  intangible  assets,  net are the following (amounts in
thousands):



                              January 3, 2004          January 1, 2005
                            -------------------     ---------------------
                                   Accumulated                Accumulated
                            Cost   Amortization      Cost     Amortization
                            ----   ------------     -------   ------------
Customer relationships    $ 3,086    $(2,545)       $ 1,908     $(1,538)
Employment agreements       3,200     (2,292)         3,200      (3,083)
Tradename                     350       (321)
Covenant not to compete       203       (203)
                          -------    -------        -------     -------
Total                     $ 6,839    $(5,361)       $ 5,108     $(4,621)
                          =======    =======        =======     =======


During fiscal year 2003, in accordance  with the  provisions of SFAS No. 144 and
as a result of the factors  discussed  above,  the Company  determined  that the
carrying  value of customer  relationships  exceeded  its fair market  value and
recorded an impairment loss related to the Management Consulting Segment and All
Other Segment of approximately $3.4 million and $0.3 million,  respectively. The
impairment  losses have been reflected as a component of Loss from Operations in
the  Statement of  Operations  and  Comprehensive  Income (Loss) for fiscal year
2003. During fiscal year 2004,  components of the customer  relationships assets
became fully  amortized and the associated  costs and  accumulated  amortization
were eliminated.

Intangible assets amortization  expense for fiscal years 2002, 2003 and 2004 was
$2.9  million,   $2.3  million  and  $1.0  million,   respectively.   Intangible
amortization  expense is  estimated to be  approximately  $0.3 million in fiscal
year 2005 and $0.2 million in fiscal year 2006.

4.   DISCONTINUED OPERATIONS

On March 4, 2004,  management and the Board of Directors  elected to discontinue
the hardware segment of the Company.  The Company concluded that this segment of
the business did not align well with the strategic focus of the Company. Charges
related to the  discontinuation  of the hardware  business  were $2.2 million in
fiscal year 2004 and relate  primarily  to  goodwill  impairment  and  severance
charges.  These charges are reported as a component of discontinued  operations.
The  hardware   segment's   results  of  operations   have  been  classified  as
discontinued  operations  and prior  periods  have been  restated.  For business
segment reporting purposes,  the hardware segment was previously recorded as the
"All Other" segment.

Revenue and income (loss) from  discontinued  operations are as follows (amounts
in thousands):


                                     Fiscal           Fiscal          Fiscal
                                      Year             Year            Year
                                      2002             2003            2004
                                    --------         --------        --------
    Revenue                         $  1,538         $    231        $     13

    Goodwill impairment
     and severance charge                                            $ (2,213)
    Operating income (loss)         $    634         $     87             (63)
    Income tax provision                 254               53
                                    --------         --------        --------
    Income (loss) from
      discontinued operations       $    380         $     34        $ (2,276)
                                    ========         ========        ========


5.   BUSINESS SEGMENTS,  MAJOR CUSTOMERS AND SIGNIFICANT GROUP CONCENTRATIONS OF
     CREDIT RISK

The Company  identifies its segments  based on the way management  organizes the
Company  to  assess  performance  and make  operating  decisions  regarding  the
allocation of resources.

In accordance with the criteria in SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related  Information," the Company historically  concluded it had
five  operating  segments,  of which  four  were  aggregated  in one  reportable
segment,  the Management  Consulting Services segment, and the remaining segment
in All Other.  Services provided by the Management  Consulting  Services include
business strategy and planning,  marketing and customer relationship management,
billing system support,  operating system support, revenue assurance,  corporate
investment  services,  and network  management.  All Other consisted of computer
hardware  commissions and rebates received in connection with the procurement of
hardware for third parties.  Effective with the  discontinuation of the hardware
business  in March  2004,  the

<PAGE>

Company has only one  reportable  segment,  and therefore  summarized  financial
information  concerning  the  Management  Consulting  Services  segment  is  not
included.  For summarized financial information regarding the All Other segment,
see Note 4 "Discontinued Operations."

Major  customers in terms of  significance to TMNG's revenues (i.e. in excess of
10% of revenues) for fiscal years 2002,  2003 and 2004, and accounts  receivable
as of  January  3,  2004  and  January  1,  2005  were as  follows  (amounts  in
thousands):



<TABLE>
<CAPTION>
<S>                       <C>           <C>            <C>         <C>            <C>

                                        REVENUES                       ACCOUNTS RECEIVABLE
                          ------------------------------------     ---------------------------
                           FISCAL        FISCAL        FISCAL
                            YEAR          YEAR          YEAR       January 3,     January 1,
                            2002          2003          2004          2004           2005
                          --------       ------        ------      ------------   ------------
Customer A .........        $5,850
Customer B .........        $4,392      $ 3,238        $2,894          $1,743        $  438
Customer C .........                    $ 2,692        $3,305          $1,177        $  906

</TABLE>

Revenues  from  the  Company's  ten most  significant  customers  accounted  for
approximately 70%, 67% and 67% of revenues for fiscal years 2002, 2003 and 2004,
respectively.

Substantially  all of TMNG's  receivables  are  obligations  of companies in the
communications  industry.  The Company generally does not require  collateral or
other security on its accounts receivable.  The credit risk on these accounts is
controlled  through  credit  approvals,  limits and monitoring  procedures.  The
Company records bad debt expense based on judgment about the anticipated default
rate on  receivables  owed to TMNG  at the  end of the  reporting  period.  That
judgment is based on the Company's uncollected account experience in prior years
and the ongoing  evaluation  of the credit  status of TMNG's  customers  and the
communications  industry in general.  The changes in the Company's allowance for
doubtful accounts are as follows (amounts in thousands):



                           FISCAL          FISCAL        FISCAL
                            YEAR            YEAR          YEAR
                            2002            2003          2004
                          -------         --------      --------
Beginning balance         $   517         $    471           652
Bad debt expense            1,207              575           399
Account write-offs         (1,253)            (394)         (655)
                          -------         --------      --------
Ending balance            $   471         $    652      $    396
                          =======         ========      ========


Revenues earned in the United States and  internationally  based on the location
where the services are performed are as follows (amounts in thousands):

<PAGE>

<TABLE>
<CAPTION>
<S>                             <C>           <C>           <C>             <C>           <C>           <C>

                                                                         LOSS FROM CONTINUING OPERATIONS BEFORE
                                                                           INCOME TAX (PROVISION) BENEFIT AND
                                                                           CUMMULATIVE EFFECT OF A CHANGE IN
                                             REVENUE                              ACCOUNTING PRINCIPLE
                                ------------------------------------        ------------------------------------
                                  FY            FY            FY              FY            FY            FY
                                 2002          2003          2004            2002          2003          2004
                                --------      --------      --------        --------      --------      --------
    United States ........      $ 30,397      $ 20,915      $ 18,427        $(32,387)     $(26,473)     $ (4,952)
    International:
      The Netherlands ....         1,990           964           891          (1,979)       (1,203)         (239)
      Ireland ............           496            32                          (493)          (39)
      Canada .............            11            95           245             (11)         (119)          (66)
      Belize .............                         704           173                          (879)          (46)
      Portugal  ..........                         451         1,124                          (562)         (302)
      Great Britain ......                                     2,296                                        (617)
      Australia ..........                                       386                                        (104)
    Other ..............             163            84           162            (162)         (105)          (44)
                                --------      --------      --------        --------      --------       --------
            Total ......        $ 33,057      $ 23,245      $ 23,704        $(35,032)     $(29,380)     $ (6,370)
                                ========      ========      ========        ========      ========       ========
</TABLE>

No significant long-lived assets are deployed outside the United States.

6.   PROPERTY AND EQUIPMENT



                                                       JANUARY 3,    January 1,
                                                          2004         2005
                                                      ------------  ------------
                                                                (000'S)
Furniture and fixtures..............................     $  908        $  823
Software and computer equipment.....................      2,661         2,777
Leasehold improvements..............................        711           479
                                                         ------        ------
                                                          4,280         4,079
Less: Accumulated depreciation and amortization.....      2,722         3,183
                                                         ------        ------
                                                         $1,558        $  896
                                                         ======        ======

Depreciation   and   amortization   expense  on  property  and   equipment   was
approximately  $948,000,  $854,000 and $680,000 for fiscal years 2002,  2003 and
2004, respectively.

<PAGE>

7.   INCOME TAXES

For fiscal  years  2002,  2003 and 2004,  the income  tax  provision  (benefit),
exclusive of the tax associated with discontinued  operations and the cumulative
effect of the change in accounting  principle consists of the following (amounts
in thousands):

<TABLE>
<CAPTION>
<S>                                      <C>            <C>            <C>

                                          FISCAL         FISCAL         FISCAL
                                           YEAR           YEAR           YEAR
                                           2002           2003           2004
                                         --------       --------       --------
Federal
  Current ............................    $(2,817)      $ (  992)
  Deferred tax (benefit) expense .....     (7,717)        (8,698)      $ (1,992)
  Change in valuation allowance.......                    20,999          1,992
                                         --------       --------       --------
                                          (10,534)        11,309              0
State
  Current ............................       (849)                     $     49
  Deferred tax (benefit) expense .....     (1,103)        (1,244)          (700)
  Change in valuation allowance.......                     3,000            700
                                         --------       --------       --------
                                           (1,952)         1,756             49
Foreign
  Current ............................         97            (87)
  Deferred tax (benefit) expense .....                                       99
  Change in valuation allowance.......                                      (99)
                                         --------       --------       --------
                                               97            (87)             0
                                         --------       --------       --------
Total ................................   $(12,389)      $ 12,978       $    (49)
                                         ========       ========       ========
</TABLE>


The  Company  has fully  reserved  its  deferred  tax  assets  with a  valuation
allowance  as of January 3, 2004 and  January 1, 2005,  in  accordance  with the
provisions of SFAS No. 109  "Accounting  for Income  Taxes."  Realization of the
deferred  tax  asset is  dependent  on  generating  sufficient  income in future
periods.  In  evaluating  the ability to recover its  deferred  tax assets,  the
Company  considers  all positive and negative  evidence  including the Company's
past operating  results,  the existence of cumulative  losses in the most recent
fiscal year and the Company's  forecast of future income. In determining  future
income, the Company is responsible for assumptions utilized including the amount
of state, federal and international  operating income, the reversal of temporary
differences  and  the  implementation  of  feasible  and  prudent  tax  planning
strategies.  These assumptions require significant  judgment about the forecasts
of future income and are consistent  with the plans and estimates the Company is
using to manage the underlying business.

In  the  fourth  quarter  of  fiscal  year  2003,  the  Company  reassessed  all
significant  estimates  and judgments  made in connection  with its SFAS No. 109
analysis.  In  performing  the  updated  analysis  of the  realizability  of its
deferred tax assets, the Company considered  continuing market uncertainties and
concluded  that an increase to the  valuation  allowance for deferred tax assets
was required.  Accordingly,  based upon the Company's best estimate, the Company
recorded a non-cash  charge in the fourth  quarter of fiscal  year 2003 of $18.0
million to increase the valuation  allowance and fully reserved for all deferred
tax assets.

The following is a  reconciliation  between the  provision  (benefit) for income
taxes and the amounts  computed based on loss from continuing  operations at the
statutory federal income tax rate (amounts in thousands):


<TABLE>
<CAPTION>
<S>                                          <C>         <C>       <C>         <C>       <C>         <C>

                                                FISCAL YEAR          FISCAL YEAR            FISCAL YEAR
                                                    2002                 2003                   2004
                                             -----------------     -----------------     -----------------
                                              AMOUNT       %        AMOUNT       %        AMOUNT       %
                                             --------     ----     --------     ----     --------     ----
Computed expected federal income
 tax benefit ..........................      $(12,261)   (35.0)    $(10,282)   (35.0)    $ (2,229)   (35.0)
State income tax expense, net of
 federal benefit ......................        (1,611)    (4.6)      (1,252)    (4.3)        (298)    (4.7)
Goodwill impairment....................         1,536      4.4          217      0.7
Other .................................           (53)    (0.2)         316      1.1          (17)    (0.2)
Valuation allowance ...................                              23,979     82.0        2,593     40.7
                                             --------     ----     --------     ----     --------     ----
          Total .......................      $(12,389)   (35.4)    $ 12,978     44.5     $     49      0.8
                                             ========     ====     ========     ====     ========     ====
</TABLE>

<PAGE>


Items giving rise to the  provision for deferred  income taxes  (benefit) are as
follows (amounts in thousands):


<TABLE>
<CAPTION>
<S>                                                   <C>            <C>            <C>

                                                       FISCAL         FISCAL         FISCAL
                                                        YEAR           YEAR           YEAR
                                                        2002           2003           2004
                                                      --------       --------       --------
Goodwill .......................................      $ (7,988)      $ (4,961)      $ 1,402
Bad debt reserve ...............................            13            (97)          100
Stock option compensation expense ..............             5             45          (196)
Intangible assets ..............................          (655)        (1,831)         (156)
Valuation allowance ............................                       23,999         2,593
Net operating loss carryforward ................                       (3,212)       (3,318)
Unfavorable lease liability.....................           151            166          (359)
Other ..........................................          (346)             2           (66)
                                                      --------       --------       --------
          Total ................................      $ (8,820)      $ 14,111       $     0
                                                      ========       ========       ========
</TABLE>


The significant components of deferred income tax assets and the related balance
sheet  classifications,  as of December 28, 2002, January 3, 2004 and January 1,
2005 are as follows (amounts in thousands):


<TABLE>
<CAPTION>
<S>                                              <C>            <C>          <C>


                                                 DECEMBER 28,   JANUARY 3,   JANUARY 1,
                                                    2002          2004          2005
                                                 ------------  -----------  -----------
Current deferred tax assets:
  Accounts receivable .......................    $      143     $     240    $    140
  Accrued expenses ..........................           351           296         147
  Unfavorable lease liability................                                     212
  Valuation allowance........................                        (536)       (499)
                                                 ----------     ---------    ---------
          Current deferred tax asset ........    $      494     $       0    $      0
                                                 ==========     =========    =========


Non-current deferred tax assets:
  Goodwill ..................................    $    8,320     $  13,281    $ 11,879
  Stock option compensation expense .........         2,893         2,193       2,335
  Unfavorable lease liability........... ....         1,180         1,017       1,329
  Net operating loss carryover ..............           732         3,944       7,308
  Intangible assets..........................           709         2,540       2,696
  Reserves ..................................           419           415         365
  Other .....................................            19            73         173
  Valuation allowance .......................                     (23,463)    (26,085)
                                                 ----------     ---------    ---------
          Non-current deferred tax asset ....    $   14,272     $       0    $      0
                                                 ==========     =========    =========
</TABLE>

The net operating loss carryover as of January 1, 2005 is scheduled to expire as
follows (amounts in thousands):



                 Amount            Year
                $ 1,830            2016
                  5,602            2023
                 10,576            2024
                 ------
Total           $18,008
                 ======

<PAGE>

The Company establishes reserves for potential tax liabilities when, despite the
belief that tax return  positions  are fully  supported,  certain  positions are
likely  to be  challenged  and not be fully  sustained.  Such tax  reserves  are
analyzed  on a  quarterly  basis and  adjusted  based upon  changes in facts and
circumstances,  such as the progress of federal and state  audits,  case law and
emerging  legislation.  The Company's  effective tax rate includes the impact of
such tax reserves and changes to these  reserves as  considered  appropriate  by
management.  The Company  establishes  the reserves based upon its assessment of
exposure  associated with possible future  assessments  that may result from the
examination of federal,  state, or international tax returns. These tax reserves
did not change  materially  during  fiscal year 2004,  2003 or 2002.  Management
believes  that it has  established  adequate  reserves  in the  event of loss or
settlement of any potential tax liabilities.

8.   REAL ESTATE RESTRUCTURING

In the fourth  quarter of fiscal  year 2004,  the Company  made the  decision to
consolidate office space. In connection with this decision, a sublease agreement
for  unutilized  space was entered into with a third party for the  remainder of
the original  lease term.  Due to current  market  conditions,  the terms of the
sublease  require payments by the sublessee which are less than the payments the
Company  must make to the  original  lessor.  In  accordance  with SFAS No.  146
"Accounting for Costs  Associated with Exit or Disposal  Activities" the Company
recognized a charge of $1.3 million for the present value of the total remaining
lease payments less amounts to be received  under the sublease.  The decision to
consolidate space also resulted in charges of $163,000 relating to impairment of
fixed  assets/leasehold  improvements and $122,000 for brokerage  commissions in
connection with the sublease.  The restructuring charge of $1.5 million has been
reflected as a component of Loss from  Operations in the Statement of Operations
and Comprehensive Income (Loss).

9.   LEASE COMMITMENTS

The Company leases office facilities,  computer equipment, office furniture, and
an automobile  under various  operating and capital  leases  expiring at various
dates through May 2011.

Following is a summary of future minimum payments under capitalized leases as of
January 1, 2005 (amounts in thousands):



                                                    CAPITALIZED
          FISCAL YEAR                                 LEASES
          ---------------------------------------   -----------

          2005                                       $     191
          2006                                              20
                                                     ---------
          Total minimum lease payments               $     211
          Less amount representing interest                (11)
                                                     ---------
          Present value of minimum capitalized
           lease payments                                  200
          Current portion                                 (184)
                                                     ---------
          Long-term capitalized lease obligations     $     16
                                                     =========

Following is a summary of future minimum  payments under  operating  leases that
have  initial or remaining  noncancellable  lease terms in excess of one year at
January 1, 2005 (amounts in thousands):



                                                     OPERATING
          FISCAL YEAR                                 LEASES
          ---------------------------------------   -----------

          2005                                       $   1,770
          2006                                           1,745
          2007                                           1,751
          2008                                           1,753
          2009                                           1,662
          Thereafter                                     1,698
                                                     ---------
          Total minimum lease payments                  10,379
          Future minimum rentals to be received
           under noncancellable subleases               (1,704)
                                                     ---------
          Minimum lease payments net of amounts
           to be received under subleases            $   8,675
                                                     =========

<PAGE>

Operating  lease  minimum  payments  include  the  off-market  portion  of lease
payments  recorded through purchase  accounting in connection with the Company's
acquisition  of CSMG  and  continuing  lease  commitments  associated  with  the
consolidation  of office space.  As of January 3, 2004 and January 1, 2005,  the
unamortized  balance of these unfavorable lease liabilities was $3.0 million and
$3.9 million, respectively.

Assets  recorded  under capital leases are included in property and equipment as
follows (amounts in thousands):


                                             January 3,    January 1,
                                                2004          2005
                                             ----------    ----------
     Furniture and fixtures                   $     220    $   156
     Software and computer equipment                505        505
                                             ----------    ----------
                                                    725        661
     Less: Accumulated depreciation                (395)      (534)
                                             ----------    ----------
                                              $     330    $   127
                                             ==========    ==========


Total rental expense was approximately $2,084,000, $1,911,000 and $1,852,000 for
fiscal years 2002, 2003 and 2004, respectively.

10.  STOCK OPTION PLAN AND STOCK BASED COMPENSATION

The Company has 9,294,000  shares of the Company's  common stock  authorized for
issuance  under the Company's 1998 Equity  Incentive  Plan (the 1998 Plan).  The
1998 Plan, a shareholder  approved plan, provides the Company's common stock for
the  granting of  incentive  stock  options and  nonqualified  stock  options to
employees,  and nonqualified  stock options and restricted  shares to employees,
directors and  consultants.  Incentive  stock options are granted at an exercise
price of not less than fair value per share of the  common  stock on the date of
grant as determined by the Board of Directors.  Vesting and exercise  provisions
are  determined  by the board of directors.  As of January 1, 2005,  all options
granted under the 1998 Plan were  non-qualified  stock options.  Options granted
under  the 1998  Plan  generally  become  exercisable  over a three to four year
period beginning on the date of grant.  Options granted under the 1998 Plan have
a maximum term of ten years.

A summary of the status of the  Company's  1998 Plan as of  December  28,  2002,
January 3, 2004 and January 1, 2005 and changes during the years ending on those
dates is presented below:

EXERCISE PRICE EQUALS FAIR MARKET VALUE AT GRANT DATE:


<TABLE>
<CAPTION>
<S>                                 <C>           <C>               <C>         <C>                 <C>           <C>

                                            DECEMBER 28,                     January 3,                       JANUARY 1,
                                                2002                            2004                             2005
                                   -------------------------------  ----------------------------    ------------------------------
                                                  WEIGHTED AVERAGE              WEIGHTED AVERAGE                  WEIGHTED AVERAGE
                                     SHARES        EXERCISE PRICE     SHARES     EXERCISE PRICE       SHARES       EXERCISE PRICE
                                    ----------    ----------------  ----------  ----------------    ----------    ----------------

Outstanding at beginning of year    3,075,228       $   9.95        3,143,459          $  8.72      4,233,696          $5.57
Granted                               592,100       $   2.05        1,967,500          $  2.07        405,500          $2.38
Exercised                            (100,377)      $   1.52         (116,221)         $  1.43       (258,831)         $1.57
Forfeited/cancelled                  (423,492)      $  10.09         (761,042)         $ 10.17       (478,169)         $5.27
                                    ---------                       ---------                       ---------
Outstanding at end of year          3,143,459       $   8.72        4,233,696          $  5.57      3,902,196          $5.54
                                    =========                       =========                       =========

Options exercisable at year-end     1,612,091       $   9.41        1,661,916          $  9.15      2,331,710          $7.66
                                    =========                       =========                       =========
Weighted average fair value of
 options granted during the year                     $  1.65                           $  1.60                         $1.76

</TABLE>

<PAGE>

The  following  table  summarizes  information  about market value stock options
outstanding as of January 1, 2005:

<TABLE>
<CAPTION>
<S>                   <C>                  <C>                <C>                    <C>                <C>


                                                              WEIGHTED AVERAGE
                          NUMBER              WEIGHTED            REMAINING              NUMBER            WEIGHTED
    RANGE OF          OUTSTANDING AT          AVERAGE            CONTRACTUAL         EXERCISABLE AT        AVERAGE
EXERCISE PRICES       JANUARY 1, 2005      EXERCISE PRICE          LIFE              JANUARY 1, 2005    EXERCISE PRICE
----------------     -----------------     --------------     ----------------      -----------------   --------------
$ 0.00 to $ 2.00         1,119,435             $ 1.58               7.85                550,846           $ 1.51
$ 2.01 to $ 3.00         1,208,832             $ 2.31               8.84                420,488           $ 2.31
$ 3.01 to $ 4.00           288,279             $ 3.85               6.92                209,226           $ 3.94
$ 4.01 to $ 5.00           465,000             $ 4.76               6.68                388,250           $ 4.81
$ 5.01 to $10.00           270,000             $ 6.73               6.37                213,625           $ 6.77
$10.01 to $20.00           163,250             $14.44               5.61                161,875           $14.46
$20.01 to $35.00           387,400             $24.72               5.25                387,400           $24.72
                         ---------             ------                                 ---------           ------
   TOTAL                 3,902,196             $ 5.54                                 2,331,710           $ 7.66
                         =========             ======                                 =========           ======
</TABLE>

EXERCISE PRICE LESS THAN FAIR MARKET VALUE AT GRANT DATE:



<TABLE>
<CAPTION>
<S>                                   <C>        <C>                 <C>           <C>                 <C>       <C>

                                             DECEMBER 28,                      JANUARY 3,                     JANUARY 1,
                                                2002                              2004                           2005
                                    -----------------------------    ------------------------------    --------------------------
                                                 WEIGHTED AVERAGE                  WEIGHTED AVERAGE              WEIGHTED AVERAGE
                                      SHARES      EXERCISE PRICE       SHARES      EXERCISE PRICE      SHARES     EXERCISE PRICE
                                      --------   ----------------    ---------     ----------------    --------  ----------------

Outstanding at beginning of year      897,758        $  2.32          768,336        $  2.38           629,919        $2.51
Granted                                                                50,000        $  2.31
Exercised                             (54,088)       $  1.85          (84,667)       $  1.90           (34,167)       $1.94
Forfeited/cancelled                   (75,334)       $  2.00         (103,750)       $  2.00           (42,563)       $3.90
                                     ---------                       ---------                         -------
Outstanding at end of year            768,336        $  2.38          629,919        $  2.51           553,189        $2.44
                                     =========                       =========                         =======

Options exercisable at year-end       606,084        $  2.32          579,919        $  2.52           519,855        $2.45
                                     =========                       =========                         =======
Weighted average fair value of
 options granted during the year                                                     $  2.69

</TABLE>

The  following  table  summarizes  information  about below  market  value stock
options outstanding at January 1, 2005:




<TABLE>
<CAPTION>
<S>                 <C>               <C>               <C>                 <C>               <C>          <C>

                                                       WEIGHTED AVERAGE
                         NUMBER           WEIGHTED          REMAINING            NUMBER          WEIGHTED
    RANGE OF         OUTSTANDING AT       AVERAGE          CONTRACTUAL       EXERCISABLE AT       AVERAGE
 EXERCISE PRICES    JANUARY 1, 2005   EXERCISE PRICE         LIFE           JANUARY 1, 2005   EXERCISE PRICE
 ---------------   ----------------   --------------   ----------------     ---------------   --------------
$ 0.00 to $ 2.00        423,189            $1.88             4.43                423,189           $1.88
$ 2.01 to $ 3.00         50,000            $2.31             8.96                 16,666           $2.31
$ 3.01 to $ 4.00         50,000            $4.00             4.87                 50,000           $4.00
$ 5.01 to $10.00         30,000            $8.00             4.81                 30,000           $8.00
                       ---------           ------                               ---------          ------
   TOTAL                553,189            $2.44                                 519,855           $2.45
                       =========           ======                               =========          ======
</TABLE>


During fiscal year 2003 the Board of Directors of TMNG  authorized  for issuance
1,200,000  shares  of the  Company's  common  stock  under the 1998 Plan for key
management  personnel.  The shares are subject to  restriction  based upon a two
year vesting  schedule where 30% of the shares vest on the first  anniversary of
the  grant  date  and  the  remaining  70%  of the  shares  vest  on the  second
anniversary.

A summary of the status of the restricted shares granted under the 1998 Plan and
changes during fiscal year 2003 is presented below.

<PAGE>

RESTRICTED STOCK:


<TABLE>
<CAPTION>
<S>                                            <C>                              <C>                              <C>

                                               DECEMBER 28,                     JANUARY 3,                       JANUARY 1,
                                                   2002                            2004                             2005
                                   -------------------------------  ----------------------------    ------------------------------
                                                 SHARES                          SHARES                           SHARES
                                   -------------------------------  ----------------------------    ------------------------------

Outstanding at beginning of year                                                                                  720,000
Granted                                                                         720,000                            15,000
Forfeited/cancelled                                                                                               (77,000)
                                                ---------                     ---------                          ---------
Outstanding at end of year                                                      720,000                           658,000
                                                =========                     =========                          =========

Weighted average fair value of
 Shares granted during the year                                                  $ 2.87                            $2.01
</TABLE>


The Company has 3,900,000  shares of the Company's  common stock  authorized for
issuance  under the 2000  Supplemental  Stock  Plan (the  2000  Plan).  The plan
provides  the  Company's  common stock for the  granting of  nonqualified  stock
options to employees  and is not subject to  shareholder  approval.  Vesting and
exercise  provisions are determined by the Board of Directors.  Options  granted
under the plan become exercisable over a period of up to four years beginning on
the date of grant and have a maximum term of ten years.

A summary of the status of the  Company's  2000 Plan as of  December  28,  2002,
January 3, 2004 and  January 1, 2005,  and  changes  during the years  ending on
those dates is presented below:

EXERCISE PRICE EQUALS FAIR MARKET VALUE AT GRANT DATE:


<TABLE>
<CAPTION>
<S>                                 <C>          <C>                <C>         <C>                 <C>         <C>

                                              DECEMBER 28,                    JANUARY 3,                     JANUARY 1,
                                                  2002                           2004                           2005
                                     ----------------------------   ----------------------------   -----------------------------
                                                 WEIGHTED AVERAGE               WEIGHTED AVERAGE                WEIGHTED AVERAGE
                                       SHARES     EXERCISE PRICE      SHARES     EXERCISE PRICE      SHARES      EXERCISE PRICE
                                     ----------  ----------------   ----------- ----------------   -----------  ----------------

Outstanding at beginning of year     2 165,114      $   6.39         2,212,226       $   4.62       1,175,160        $4.78
Granted                              1,316,750      $   2.97            10,000       $   1.77         117,500        $2.54
Exercised                              (12,375)     $   4.00           (44,416)      $   1.85         (45,167)       $3.04
Forfeited/cancelled                 (1,257,263)     $   5.95        (1,002,650)      $   4.53        (193,929)       $4.23
                                     ---------                       ---------                      ---------
Outstanding at end of year           2,212,226      $   4.62         1,175,160       $   4.78       1,053,564        $4.71
                                     =========                       =========                      =========

Options exercisable at year-end        458,433      $   6.29           527,545       $   5.62         635,630        $5.60
                                     =========                       =========                      =========
Weighted average fair value of
 options granted during the year                    $   2.39                         $   1.37                        $2.38

</TABLE>

The following table summarizes  information  about stock options  outstanding at
January 1, 2005:



<TABLE>
<CAPTION>
<S>                    <C>                  <C>                <C>                    <C>                 <C>

                                                               WEIGHTED AVERAGE
                            NUMBER             WEIGHTED            REMAINING              NUMBER             WEIGHTED
    RANGE OF             OUTSTANDING AT        AVERAGE           CONTRACTUAL           EXERCISABLE AT        AVERAGE
 EXERCISE PRICES       JANUARY 1, 2005      EXERCISE PRICE          LIFE              JANUARY 1, 2005     EXERCISE PRICE
----------------       -----------------    --------------     ----------------       -----------------   --------------
$ 0.00 to $ 2.00           74,750              $ 1.85              8.35                   17,749              $ 1.77
$ 2.01 to $ 3.00           64,500              $ 2.29              9.64
$ 3.01 to $ 4.00          660,314              $ 3.66              6.74                  413,711              $ 3.77
$ 4.01 to $ 5.00           15,500              $ 4.89              7.32                    9,000              $ 4.85
$ 5.01 to $10.00          185,000              $ 5.85              6.81                  141,670              $ 5.83
$10.01 to $20.00            3,500              $13.68              5.82                    3,500              $13.68
$20.01 to $35.00           50,000              $21.00              5.67                   50,000              $21.00
                        ---------              ------                                  ---------              ------
   TOTAL                1,053,564              $ 4.71                                    635,630              $ 5.60
                        =========              ======                                  =========              ======
</TABLE>

<PAGE>


EXERCISE PRICE LESS THAN FAIR MARKET VALUE AT GRANT DATE:



<TABLE>
<CAPTION>
<S>                                  <C>        <C>                <C>        <C>                <C>       <C>

                                             DECEMBER 28,                    JANUARY 3,                   JANUARY 1,
                                                 2002                           2004                         2005
                                      --------------------------    --------------------------    -------------------------
                                                WEIGHTED AVERAGE              WEIGHTED AVERAGE             WEIGHTED AVERAGE
                                      SHARES     EXERCISE PRICE     SHARES     EXERCISE PRICE     SHARES    EXERCISE PRICE
Outstanding at beginning of year      53,200        $  5.50         23,537       $ 5.50           8,125          $5.50
Granted
Exercised
Forfeited/cancelled                  (29,663)       $  5.50        (15,412)      $ 5.50          (8,125)         $5.50
                                      ------                        ------                       -------
Outstanding at end of year            23,537        $  5.50          8,125       $ 5.50
                                      ======                        ======                       =======

Options exercisable at year-end        5,884        $  5.50          8,125       $ 5.50
                                      ======                        ======                       =======
</TABLE>

At January 1, 2005, the Company had a total of 5,508,949  outstanding options to
acquire  shares with a weighted  average  exercise price of $5.07 and a weighted
average  remaining  contractual  life of 7.14 years. Of these options  3,487,195
were  exercisable at January 1, 2005 with a weighted  average  exercise price of
$6.51.

The Company  follows APB No. 25 to account for the employee  stock purchase plan
and  for  employee  and  certain  non-employee   directors'  stock  options.  In
connection with APB No. 25 grants made in fiscal year 2003, the Company recorded
unearned  compensation of  approximately  $58,000,  representing  the difference
between the  exercise  price and the fair value of the common stock on the dates
such stock options were granted.  Such amounts are being amortized by charges to
operations on a graded vesting method over the  corresponding  vesting period of
each respective option, generally three to four years. All option grants in 2002
and 2004 were issued with the  exercise  price of the option equal to the market
price of the Company's stock as of the grant date.

The Company also follows APB No. 25 to account for restricted  stock grants made
to key management personnel.  In connection with restricted stock granted during
fiscal  years  2003 and 2004  the  Company  recorded  unearned  compensation  of
approximately $2,070,000 and $30,150, respectively,  representing the fair value
of the common  stock on the date such  restricted  stock  grants were made.  The
compensation cost associated with restricted stock is being amortized by charges
to operations on a graded  vesting  schedule over a period of two years from the
date of grant.

The Company recognizes compensation cost over the vesting periods. These options
and restricted  shares have resulted in equity related  charges to operations of
approximately  $0.5  million,  $0.1  million,  and $1.2 million for fiscal years
2002,  2003 and 2004,  respectively.  These expenses have been  allocated  among
various expense categories.

During fiscal year 2000,  the Company  initiated an employee stock purchase plan
for all eligible employees. Under the plan, shares of the Company's common stock
may be purchased  at six-month  intervals at 85% of the lower of the fair market
value  on the  first  day of the  enrollment  period  or on the last day of each
six-month  period.  Employees may purchase  shares  through a payroll  deduction
program having a value not exceeding 15% of their gross  compensation  during an
offering period.  During fiscal years 2002, 2003 and 2004,  75,451,  67,238, and
98,529 shares were purchased under the plan,  respectively.  At January 1, 2005,
5,558,897 shares were reserved for future issuance.  The employee stock purchase
plan is classified as a non-compensatory plan under APB No. 25.

The Company  accounts for its stock option awards to independent  subject matter
experts and other  non-employees  in accordance with the fair value  measurement
provision of SFAS No. 123. Under SFAS No. 123, stock options are valued at grant
date  using  the  Black-Scholes  option  pricing  model,  and  this  expense  is
recognized ratably over the vesting period.  Consequently,  the expense of these
options is recognized in the current and future  reporting  periods based on the
fair value at the end of each period. The fair value of each option grant during
fiscal  years 2002,  2003 and 2004 was  estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:




<TABLE>
<CAPTION>
<S>                                <C>                 <C>                      <C>

                                   FISCAL YEAR 2002    FISCAL YEAR 2003         FISCAL YEAR 2004
                                   ----------------    -----------------      ---------------------
Expected volatility factor.....          111%                104%                      91%
Risk-free interest rate........      1.34% - 5.00%       1.037% - 3.435%          3.00% - 4.10%
Expected life of options.......         5 years             5 years                  5 years
Expected life of stock issued
 under employee stock purchase
 plan..........................     0.5 - 2.0 years     0.5 - 2.0 years          0.5 - 2.0 years
Expected dividend rate.........            0%                  0%                       0%
</TABLE>

<PAGE>

11.  LOANS TO OFFICERS

As of January 1, 2005, there is one remaining line of credit between the Company
and its Chief Executive Officer,  Richard P. Nespola, which originated in fiscal
year 2001.  Aggregate  borrowings  available and outstanding against the line of
credit at January 3, 2004 and January 1, 2005  totaled  $300,000  and are due in
2011.  These  amounts are  included in other  assets in the  non-current  assets
section of the  balance  sheet.  In  accordance  with the loan  provisions,  the
interest  rate  charged  on the loans is equal to the  Applicable  Federal  Rate
(AFR), as announced by the Internal Revenue Service, for short-term  obligations
(with annual  compounding) in effect for the month in which the advance is made,
until fully paid. Pursuant to the Sarbanes-Oxley Act, no further loan agreements
or draws  against  the line may be made by the  Company  to, or  arranged by the
Company for its executive officers.

12.  LETTER OF CREDIT

In March 2002, the Company  entered into a $1.0 million standby letter of credit
("LOC")  facility  with a  financial  institution  in  connection  with the CSMG
acquisition. The LOC was required as part of the assignment of the leased office
space from CSMG to the Company.  The Company  originally  collateralized the LOC
with a $1.0 million cash deposit.  The LOC provides for reductions of the amount
deposited with the financial institution during the LOC term as follows (amounts
in thousands):



                                                   LOC
                         Reduction Date           Amount
                        -----------------        -------
                        5/15/03 - 5/15/04        $   633
                        5/15/04 - 5/15/05        $   380
                        5/15/05 - 2/28/11        $   273


The Company would be required to perform under the agreement in the event it was
to default on balances due and owing the landlord on the leased office space.

The collateral deposited for this LOC is included in "Cash and Cash Equivalents"
on the Company's  consolidated condensed balance sheet as of January 3, 2004 and
January 1, 2005. An obligation has not been recorded in connection  with the LOC
on the Company's  consolidated condensed balance sheet as of January 3, 2004 and
January 1, 2005.

13.  RELATED PARTY TRANSACTIONS

During  fiscal  year 2002,  one member of the TMNG board of  directors  was also
director of a customer  with which TMNG did business.  Revenues  earned from the
customer  during  2002  totaled  approximately  $308,000.  No  receivables  were
outstanding  from this customer as of January 3, 2004 and January 1, 2005.  Such
relationship did not exist with the Company during fiscal years 2003 and 2004.

During  fiscal year 2002,  TMNG made payments of  approximately  $190,000 to two
legal firms in which two members of the Board of Directors own equity interests.
Such payments were for legal services  rendered in connection with the Company's
equity offerings and for other matters arising in the normal course of business.
The costs associated with the equity offerings were classified as a component of
additional  paid-in  capital,  and the costs  associated  with business  matters
arising in the normal course of business were classified as selling, general and
administrative  in the consolidated  statements of operations and  comprehensive
income  (loss).  During fiscal year 2004, we made payments of $55,000 to a legal
firm in which a member of the Board of Directors owns an equity  interest.  Such
payments  were made in connection  with matters  arising in the normal course of
business and were within the limitations set forth by NASDAQ rules.

14.  SIGNIFICANT CUSTOMER CONTRACT SETTLEMENT

On December 10, 1999, the Company entered into a consulting  services  agreement
with a significant customer under which the customer committed to $22 million of
consulting  fees over a three-year  period  commencing  January 1, 2000.  During
fiscal year 2002 the agreement was extended for two additional  years beyond the
original term of the agreement, in exchange for an expanded preferred contractor
relationship and immediate commitment to a significant  consulting  arrangement.
The agreement  provided for minimum annual usage requirements in connection with
consulting  services performed under the agreement,  and as of January 3, 2004 a
shortfall in minimum annual usage requirements of consulting  services under the
agreement  was deemed to have  occurred.  The  shortfall was not remedied by the
customer during the first quarter of 2004,  resulting in the customer's  default
on the contract.

On March 4, 2004,  the Company filed suit against the customer for breach of the
consulting agreement,  seeking damages of approximately $5.7 million against the
customer.  The customer  responded to the suit on March 26, 2004 with its answer
and two  counterclaims,  neither of which  sought  money  damages.  The customer
requested a declaration  that the Company first  breached the agreement and that
the customer was therefore not liable for any damages. Additionally,  during the
first  quarter of fiscal  year 2004 the  customer  informed  the  Company of its
decision to cancel the consulting agreement.

On August 25, 2004 the Company entered into a mediated  settlement  agreement to
settle the pending  litigation  with the customer.  Pursuant to

<PAGE>

the  terms of the  settlement  agreement,  each  party  was  dismissed  from any
liability for the claims made against it and the customer  agreed to make a cash
settlement  payment  to the  Company  in the  amount of $2 million to settle all
claims and disputes arising under the consulting services agreement. The Company
has no obligation  to render  further  services to the customer.  At October 11,
2004, the Company  received the $2 million  settlement from the customer and the
parties  dismissed one another from liability.  This payment was recorded in the
fourth  quarter of fiscal year 2004 as a $1.3  million  reduction  of  operating
expenses,  in the consolidated  statement of operations and comprehensive income
(loss) and $0.7 million reduction of existing receivables.

15.  CONTINGENCIES

In June 1998, the bankruptcy trustee of a former client,  Communications Network
Corporation,  sued TMNG for a total of $320,000 in the U.S.  Bankruptcy Court in
New York seeking recovery of $160,000 alleging an improper payment of consulting
fees paid by the former  client  during the  period  from July 1, 1996,  when an
involuntary  bankruptcy  proceeding  was  initiated  against the former  client,
through August 6, 1996,  when the former client agreed to an order for relief in
the bankruptcy  proceeding,  and $160,000 in consulting  fees paid by the former
client after August 6, 1996.  Although the Company denies these claims and plans
to vigorously defend itself,  management has established reserves of $160,000 as
of January 3, 2004 and January 1, 2005, which  management  believes are adequate
in the event of loss or settlement on those claims.

The bankruptcy  trustee has also sued TMNG for at least $1.85 million for breach
of  contract,  breach of fiduciary  duties and  negligence.  Although  assurance
cannot be given as to the ultimate outcome of this proceeding, TMNG believes the
Company has meritorious  defenses to the claims made by the bankruptcy  trustee,
including  particularly  the claims for breach of contract,  breach of fiduciary
duty and  negligence,  and that the ultimate  resolution of this matter will not
materially harm the Company's business.

As  of  January  1,  2005  the  Company  had  outstanding   demands  aggregating
approximately $1.0 million by the bankruptcy  trustees of several former clients
in connection with collected balances near the customers'  respective bankruptcy
filing dates.  Although the Company does not believe it received any  preference
payments from these former clients and plans to vigorously  defend its position,
the Company has established reserves of $727,000, which it believes are adequate
in the event of loss or settlement on remaining outstanding claims.

The Company  may become  involved in various  legal and  administrative  actions
arising in the normal course of business. These could include actions brought by
taxing authorities  challenging the employment status of consultants utilized by
the  Company.  In addition,  customer  bankruptcies  could result in  additional
claims on  collected  balances for  professional  services  near the  bankruptcy
filing date. While the resolution of any of such actions, claims, or the matters
described  above may have an impact on the  financial  results for the period in
which they occur,  the Company  believes that the ultimate  disposition of these
matters will not have a material adverse effect upon its consolidated results of
operations, cash flows or financial position.

<PAGE>

17.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

In  management's   opinion,   the  interim  financial  data  below  reflect  all
adjustments  necessary  to  fairly  state the  results  of the  interim  periods
presented.  Adjustments are of a normal  recurring  nature  necessary for a fair
presentation of the information for the periods presented. Results of any one or
more quarters are not  necessarily  indicative  of annual  results or continuing
trends.


<TABLE>
<CAPTION>
<S>                                               <C>            <C>          <C>             <C>

                                                               (AMOUNTS IN THOUSANDS)
                                                                 2004 QUARTERS ENDED
                                                  --------------------------------------------------------
                                                  April 3,       July 3,      October 2,      January 1,
                                                  --------       --------     ----------      ----------
Revenues ...................................      $  5,779       $  5,184     $    6,546      $    6,195
Cost of Services:
  Direct cost of services...................         2,913          2,739          3,441           3,226
  Equity related charges....................            54             52             51              48
                                                  --------       --------       --------        --------
          Total cost of services............         2,967          2,791          3,492           3,274
                                                  --------       --------       --------        --------
Gross Profit ...............................         2,812          2,393          3,054           2,921
Operating Expenses:
  Selling, general and administrative.......         4,278          4,179          3,860           3,720
  Legal settlement..........................                                                      (1,294)
  Real estate restructuring.................                                                       1,545
  Goodwill and intangible asset impairment.
  Intangible asset amortization ............           339            218            218             217
  Equity related charges....................           283            232            261             182
                                                  --------       --------       --------        --------
          Total operating expenses..........         4,900          4,629          4,339           4,370
                                                  --------       --------       --------        --------

Loss from operations........................        (2,088)        (2,236)        (1,285)         (1,449)
Other Income:

  Interest income...........................           136            145            189             248
  Other, net................................            (9)            (6)           (10)             (5)
                                                  --------       --------       --------        --------
          Total other income................           127            139            179             243
                                                  --------       --------       --------        --------
Loss from continuing operations before
  income tax (provision) benefit ...........        (1,961)        (2,097)        (1,106)         (1,206)

Income tax (provision) benefit .............           (14)           (20)           (13)             (2)
                                                  --------       --------       --------        --------
Loss from continuing operations  ...........        (1,975)        (2,117)        (1,119)         (1,208)

Discontinued operations:
 Net income (loss) from discontinued operations
    including charge for impairment of goodwill
    of $2,163 for the first quarter ended
    April 3, 2004)                                  (2,276)
                                                  --------       --------       --------        --------
Net loss ...................................        (4,251)        (2,117)        (1,119)         (1,208)

Other comprehensive item -
  Foreign currency translation adjustment...           (15)            11             (1)            181
                                                  --------       --------       --------        --------
Comprehensive Loss .........................      $ (4,266)      $ (2,106)      $ (1,120)       $ (1,027)
                                                  ========       ========       ========        ========
Loss from continuing operations
 per common share
 Basic and Diluted ........................       $  (0.06)      $  (0.06)      $  (0.03)       $  (0.03)
                                                  ========       ========       ========        ========

Loss from discontinued operations
 per common share
 Basic and Diluted.........................       $  (0.07)
                                                  ========       ========       ========        ========
Loss per common share
 per common share
 Basic and diluted                                $  (0.13)      $  (0.06)      $  (0.03)       $  (0.03)
                                                  ========       ========       ========        ========
Basic and diluted weighted average shares
  outstanding..............................         34,503         34,625         34,631          34,716
                                                  ========       ========       ========        ========

<PAGE>

                                                               (AMOUNTS IN THOUSANDS)
                                                                 2003 QUARTERS ENDED
                                                  --------------------------------------------------------
                                                  March 29,      June 28,     September 27,    January 3,
                                                  --------       --------     -------------   ------------
Revenues ....................................     $  7,240       $  4,963     $    4,691      $    6,351
Cost of Services:
  Direct cost of services....................        3,673          2,724          2,506           3,024
  Equity related charges.....................          (20)           (84)           (10)             57
                                                  --------       --------       --------        --------
          Total cost of services.............        3,653          2,640          2,496           3,081
                                                  --------       --------       --------        --------
Gross Profit ................................        3,587          2,323          2,195           3,270
Operating Expenses:
  Selling, general and administrative........        5,071          5,255          4,432           4,601
  Goodwill and intangible asset impairment...                      18,942                            542
  Intangible asset amortization .............          715            644            504             480
  Equity related charges.....................           11             (8)             7             132
                                                  --------       --------       --------        --------
          Total operating expenses...........        5,797         24,833          4,943           5,755
                                                  --------       --------       --------        --------

Loss from operations.........................       (2,210)       (22,510)        (2,748)         (2,485)
Other Income:

  Interest income............................          177            161            136             150
  Other, net.................................          (17)           (15)            (9)            (10)
                                                  --------       --------       --------        --------
          Total other income.................          160            146            127             140
                                                  --------       --------       --------        --------
Loss from continuing operations before income
 tax (provision) benefit.....................       (2,050)       (22,364)        (2,621)         (2,345)

Income tax (provision) benefit ..............          748          3,619                        (17,345)
                                                  --------       --------       --------        --------
Loss from continuing operations..............       (1,302)       (18,745)        (2,621)        (19,690)

Discontinued operations:
 Net income (loss) from discontinued operations
  (net of income tax provision of $53 for fiscal
   year 2003)................................           71              8            (30)            (15)
                                                  --------       --------       --------        --------
Net Loss.....................................       (1,231)       (18,737)        (2,651)        (19,705)

Other comprehensive item -
  Foreign currency translation adjustment....          (14)            23             12              42
                                                  --------       --------       --------        --------
Comprehensive Loss ..........................     $ (1,245)     $ (18,714)    $   (2,639)    $   (19,663)
                                                  ========       ========       ========        ========
Loss from continuing operations
 per common share
  Basic and Diluted..........................     $  (0.04)      $  (0.56)      $  (0.08)       $  (0.58)
                                                  ========       ========       ========        ========
Net income (loss) from discontinued
 operations per common share
  Basic and Diluted..........................
                                                  ========       ========       ========        ========
Loss per common share
  Basic and Diluted..........................     $  (0.04)      $  (0.56)      $  (0.08)       $  (0.58)
                                                  ========       ========       ========        ========
Shares Used in Calculation of Net Loss Per
 Common Share
  Basic .....................................       33,347         33,372         33,458          33,972
                                                  ========       ========       ========        ========
  Diluted ...................................       33,347         33,372         33,458          33,972
                                                  ========       ========       ========        ========
</TABLE>

For the fourth  quarter ended January 1, 2005, the Company's  financial  results
include 13 weeks  compared to the 14 weeks reported for the fourth quarter ended
January 3, 2004.  The operating  results for fiscal year 2004 report 52 weeks of
activity compared to the 53 weeks of activity reported in fiscal year 2003.

See Note 14  "Significant  Customer  Contract" for  discussion of fourth quarter
2004 legal settlement.

See Note 8 "Real Estate  Restructuring"  for  discussion of fourth  quarter 2004
real estate restructuring charge.

See Note 7 "Income  Taxes" for  discussion  of fourth  quarter 2003 deferred tax
charge.

<PAGE>

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

A review and evaluation was performed by the Company's management, including the
Company's Chief Executive  Officer (the "CEO") and Chief Financial  Officer (the
"CFO"),  of the  effectiveness  of the design  and  operation  of the  Company's
disclosure  controls and  procedures as of the end of the period covered by this
annual  report.  Based  upon that  review and  evaluation,  the CEO and CFO have
concluded that the Company's disclosure controls and procedures, as designed and
implemented,  were  effective.  There  have been no  significant  changes in the
Company's internal controls or in other factors that could significantly  affect
the Company's  internal  controls  subsequent  to the date of their  evaluation.
There were no significant  material weaknesses  identified in the course of such
review and evaluation  and  accordingly,  the Company  implemented no corrective
measures.

ITEM 9B. OTHER INFORMATION

None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company's  definitive Proxy Statement for its Annual Meeting of Shareholders
to be held on June 9, 2005 (the "Proxy Statement") contains,  under the captions
"Election of  Directors,"  "Officers" and "Section  16(a)  Beneficial  Ownership
Reporting  Compliance"  the  information  required by Item 10 of this Form 10-K,
which information is incorporated herein by this reference.

ITEM 11. EXECUTIVE COMPENSATION

The Proxy  Statement  contains  under the captions  "Election of Directors"  and
"Executive  Compensation"  and the information  required by Item 11 of this Form
10-K, which information is incorporated herein by this reference.

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

The Proxy Statement contains under the captions  "Security  Ownership of Certain
Beneficial  Owners and Management and Related  Stockholder  Matters" and "Equity
Compensation Plan Information" the information  required by Item 12 of this Form
10-K, which information is incorporated herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Proxy  Statement  contains  under the  caption  "Certain  Relationships  and
Transactions  with Related Persons" the information  required by Item 13 of this
Form 10-K, which information is incorporated herein by this reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Proxy Statement  contains under the caption  "Ratification of Appointment of
Independent  Registered Public Accounting Firm" the information required by Item
14 of this Form 10-K which information is incorporated herein by this reference.

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)  The  following  documents  are filed as part of this Annual  Report on Form
     10-K:

(1)  The  response to this  portion of Item 15 is set forth in Item 8 of Part II
     hereof.

(2)  Schedules  for  which  provision  is  made  in  the  applicable  accounting
     regulations  of the  Securities  and Exchange  Commission  are not required
     under the related  instructions or are inapplicable and therefore have been
     omitted.

(3)  Exhibits

See accompanying Index to Exhibits. The Company will furnish to any stockholder,
upon written request,  any exhibit listed in the accompanying  Index to Exhibits
upon  payment  by such  stockholder  of the  Company's  reasonable  expenses  in
furnishing any such exhibit.

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this  Report on Form 10-K to be
signed on its behalf by the undersigned,  thereunto duly authorized, in the City
of Overland Park, State of Kansas, on the 1st day of April, 2005.

                       THE MANAGEMENT NETWORK GROUP, INC.


                           BY: /S/ RICHARD P. NESPOLA
                      ------------------------------------
                               RICHARD P. NESPOLA
                             CHAIRMAN OF THE BOARD,
                               PRESIDENT AND CHIEF
                                EXECUTIVE OFFICER

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature  appears
below   hereby   constitutes   and   appoints   Richard   P.   Nespola   as  his
attorney-in-fact,  each with full power of  substitution,  for him or her in any
and all capacities,  to sign any and all amendments to this Report on Form 10-K,
and to file the same,  with exhibits  thereto and other  documents in connection
therewith,  with the Securities and Exchange  Commission,  hereby  ratifying and
confirming  our signatures as they may be signed by our said attorney to any and
all amendments to said Report.

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


            SIGNATURE                        TITLE                   DATE
            ---------                        -----                   ----
    /S/ RICHARD P. NESPOLA          CHAIRMAN OF THE BOARD,      APRIL 1, 2005
-------------------------------      PRESIDENT AND CHIEF
        RICHARD P. NESPOLA            EXECUTIVE OFFICER
                                    (PRINCIPAL EXECUTIVE
                                            OFFICER)

    /S/ DONALD E. KLUMB          CHIEF FINANCIAL OFFICER AND    APRIL 1, 2005
-------------------------------       TREASURER (PRINCIPAL
        DONALD E. KLUMB               FINANCIAL OFFICER AND
                                      PRINCIPAL ACCOUNTING
                                            OFFICER)

    /S/ MICKY K. WOO                       DIRECTOR             APRIL 1, 2005
-------------------------------
        MICKY K. WOO

    /S/ GRANT G. BEHRMAN                   DIRECTOR             APRIL 1, 2005
-------------------------------
        GRANT G. BEHRMAN

    /S/ WILLIAM M. MATTHES                 DIRECTOR             APRIL 1, 2005
-------------------------------
        WILLIAM M. MATTHES

   /S/  ROBERT J. CURREY                   DIRECTOR             APRIL 1, 2005
-------------------------------
        ROBERT J. CURREY

    /S/ ANDREW LIPMAN                      DIRECTOR             APRIL 1, 2005
-------------------------------
        ANDREW LIPMAN

    /S/ ROY A. WILKENS                     DIRECTOR             APRIL 1, 2005
-------------------------------
        ROY A. WILKENS

    /S/ FRANK SISKOWSKI                    DIRECTOR             APRIL 1, 2005
-------------------------------
        FRANK SISKOWSKI

<PAGE>

                                INDEX TO EXHIBITS

The following is a list of exhibits filed as part of this report.

EXHIBIT
NUMBER                  DESCRIPTION OF DOCUMENT
-------                 -----------------------

  3.1*     Certificate of Incorporation of the registrant

  4.1*     Specimen Common Stock Certificate

 10.1*     Registration Rights Agreement dated January 7, 1998 among
            the registrant and certain investors

 10.2*     Form of Indemnification Agreement between the registrant and
            each of its Directors and Officers


 10.3*     1998 Equity Incentive Plan and form of agreements thereunder

 10.4*     1999 Employee Stock Purchase Plan and form of agreements
           thereunder

 10.5*     Consulting Services Agreement between the registrant and
           Williams Communications Group, Inc. dated November 5, 1997

 10.6*     Credit Agreement, including revolving credit notes and term notes,
           dated February 12, 1998 among the registrant and certain guarantors,
           lenders and agents

 10.7*     Lease between Lighton Plaza L.L.C. and the registrant dated April 23,
           1998

 10.8*     Noncompetition Agreement between the registrant and certain parties
           dated February 12, 1998

 10.9*     Employment Agreement between the registrant and Richard Nespola dated
           February 12, 1998

10.10*     Employment Agreement between the registrant and Micky Woo dated
           February 12, 1998

10.12*     Employment Agreement between the registrant and Donald Klumb dated
           September 9, 1999

10.13*     Amended Lease Agreement between Lighton Plaza L.L.C. and the
           registrant dated December 21, 2000

10.16*     2000 Supplemental Stock Plan and form of agreements thereunder

10.19*     Employment Agreement between the registrant and Richard Nespola dated
           January 5, 2004

10.20*     Employment  Agreement  between the  registrant and Donald Klumb dated
           December 19, 2003

10.21      Sublease between Best Doctors and the registrant dated December 30,
           2004

 21.1      List of subsidiaries of TMNG, Inc.

<PAGE>

 23.1      Consent of Independent Registered Public Accounting Firm.

 24.1      Power of attorney (see page 55)

 31.1      Certification of Chief Executive Officer pursuant to Section 302 of
           the Sarbanes - Oxley Act

 31.2      Certification of Chief Financial Officer pursuant to Section 302 of
           the Sarbanes - Oxley Act


 32.1      Certifications furnished pursuant to Section 906 of the Sarbanes
           - Oxley Act



* Previously filed