<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                    FORM 10-K

                            ------------------------

(MARK ONE)

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 30, 2000

                                       OR

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

          FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .

                             COMMISSION FILE NUMBER

                       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:


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     TITLE OF EACH CLASS               NAME OF EACH EXCHANGE ON WHICH REGISTERED
     -------------------               -----------------------------------------
<S>                                    <C>
COMMON STOCK (.001 PAR VALUE)                   NASDAQ NATIONAL MARKET
</TABLE>

       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.

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant, as of March 9, 2001 was approximately $121.5 million. Shares of
Common Stock held by each executive officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may under certain circumstances be deemed to be affiliates. This
determination of executive officer or affiliate status is not necessarily a
conclusive determination for other purposes. As of March 9, 2001, the registrant
had 29,506,078 shares of common stock, par value $0.001 per share (the "Common
Stock"), issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     The information required to be provided in Part III (Items 10, 11, 12, and
13) of this Annual Report on Form 10-K is hereby incorporated by reference from
the Company's Definitive 2001 Proxy Statement which will be filed with the
Securities and Exchange Commission within 120 days of the end of the Company's
fiscal year.

================================================================================

<PAGE>   2


                       THE MANAGEMENT NETWORK GROUP, INC.

                                    FORM 10-K

                                TABLE OF CONTENTS



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                                   PART I

Item 1.   Business....................................................    3
Item 2.   Property....................................................   14
Item 3.   Legal Proceedings...........................................   14
Item 4.   Submission of Matters to a Vote of Security Holders.........   15

                                  PART II

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................   15
Item 6.   Selected Consolidated Financial Data........................   16
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   17
Item 7A.  Quantitative and Qualitative Disclosures About Market
          Risk........................................................   22
Item 8.   Consolidated Financial Statements...........................   22

                                  PART III

Item 9.   Changes in and Disagreements With Accountants on Accounting
          and Financial Disclosure....................................   39
Item 10.  Directors and Executive Officers of the Registrant..........   39
Item 11.  Executive Compensation......................................   41
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................   42
Item 13.  Certain Relationships and Related Transactions..............   42

                                  PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form
          8-K.........................................................   42
SIGNATURES............................................................   42
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                                     PART I

ITEM 1. BUSINESS

GENERAL

     Founded in 1990, The Management Network Group, Inc. ("TMNG" or the
"Company") provides management consulting services to the global
telecommunications and e-business industries, including communications service
providers, technology companies and financial services firms in the United
States, Canada, Europe, Latin America and other major international markets.
TMNG provides comprehensive business solutions from initial, strategic client
needs assessments through improvements in operations. TMNG has consulting
experience with all major aspects of managing a telecommunications company, from
strategy to product concept and launch through order entry, service
provisioning, billing, customer care and retention. The Company offers a
complete solution that addresses the business, information technology and
operational needs associated with all aspects of our clients' requirements. TMNG
works with telecommunications providers by delivering business planning,
management support, process development and operations and e-business support,
systems requirements, selection and implementation. TMNG also utilizes knowledge
of service providers' needs to help the software and technology companies that
serve the telecommunications industry to define strategies, position product
offerings, develop applications, respond to requests for proposals and implement
their solutions within the service provider environment. Finally, TMNG
facilitates the evaluation of proposed investments in telecommunications
companies and related technology companies by investment banking and private
equity firms by providing prospect validation, due diligence and post investment
support services.

     The Company capitalizes on industry expertise and proprietary toolsets to
provide strategic, management and operational support to clients. TMNG's
toolsets are consulting guidelines and processes created and updated by TMNG
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.
TMNG's services are provided by highly experienced consultants who average over
twelve years of industry experience. The Company has worked with numerous global
clients, focusing primarily on North America, Europe and Latin America.

     The Company maintains a unique technology 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, TMNG is able
to capitalize on extensive experience across complex multi-technology
telecommunications systems environments (front and back office) to provide the
most sound and practical recommendations to clients.

MARKET OVERVIEW

     The demand for consulting services has been increasing in the last decade,
a trend that is expected to continue. The growth of the use of the Internet is
further spurring this demand as companies are seeking to improve their business
practices through internet-based communications solutions. As with other
businesses, telecommunications companies are increasingly turning to external
consulting firms to help them improve their business processes, introduce new
products and services and enter new markets as rapidly as possible. Factors such
as deregulation and privatization, mergers and acquisitions within the industry,
and the pace of technological change are driving these companies to seek the
advice of outside experts to supplement their own staff to implement their
strategies.



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<PAGE>   4

     The multiple forces affecting the telecommunications industry, including
global deregulation, have led to increased competition and complexity in the
market for all types of communications services. To gain or maintain a
competitive advantage, communications service providers and the technology and
financial firms that focus on the telecommunications industry must understand
the growing complexities and how to best take advantage of the market's
opportunities and challenges, including those driven by the rapid growth of
e-business. With this understanding, these companies must develop sound
strategic plans and implement effective solutions that best exploit the market's
dynamics. To compete effectively, companies must fully understand the
enterprise-wide implications of a proposed solution and must implement these
solutions swiftly with the most cost effective technologies, systems and
processes.

     Because the expertise needed by communications companies to address the
market's needs is typically outside their core competencies, they must either
recruit and employ experts or retain outside specialists. 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. When
retaining outside specialists, communications companies need experts that fully
understand the telecommunications industry and can provide timely and unbiased
advice and recommendations.

BUSINESS STRATEGY

     The Company's objective is to establish itself as the telecommunications
consulting company of choice to communications service providers, technology
companies and financial services and investment banking firms. The following are
key strategies the company has adopted to pursue this objective.

     -    Expand geographic reach to serve clients' global needs. The Company
          plans to continue expansion geographically to deliver services and
          solution capabilities to client companies located around the world. By
          offering a full range of professional services on a global basis, the
          company can broaden market awareness about TMNG services and solutions
          to create new revenue opportunities. In Europe, the competitive market
          expertise of TMNG's U.S. consultants is a key factor for European
          companies facing the business issues associated with deregulation and
          increased competition. TMNG's expertise in Europe can also play a key
          role for U.S. companies expanding their European business.

     -    Expand distribution channels and product offering. The Company has
          expanded its offerings to include OSS (Operating Support System) to
          clients, with a customer-focused info-structure, ensuring an
          integrated end-to-end OSS solution. The Company's OSS solution
          includes an Internet based OSS platform that provides art-order
          management, zero-touch provisioning, real-time billing, self-learning
          customer-focused networks management, and other next generation OSS
          functions. Additionally, in fiscal year 2000 the Company acquired The
          Weathersby Group to create a new wholly owned TMNG subsidiary, TWG
          Marketing. TWG Marketing provides a full spectrum of marketing
          consulting services from strategic planning to product delivery and
          customer acquisition. The Company plans to continue extending its
          product offerings to the telecommunications industry.

     -    Focus on supporting current target market's e-business needs through
          TMNG.com business. Because communications service providers represent
          the infrastructure of the Internet, the ability of these service
          providers to build an infrastructure to meet the demand for increased
          Internet traffic will be critical to their businesses. More
          specifically, the growth of the Internet has also led to a greater
          demand for internet-based business support services and the seamless
          integration of electronic services with traditional means of
          interacting with customers. Through TMNG.com, the Company combines
          telecommunications knowledge with developing e-business expertise to
          help telecommunications service providers build the infrastructure,
          systems, processes and services to address these opportunities. As
          communications service providers begin to deploy their application
          hosting strategies, TMNG.com will also address their back-office
          requirements to support their application-based initiatives.

     -    Further develop and enhance the expandable business model for
          continued growth.



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          TMNG plans to further enhance the expandable business model to
          accommodate the anticipated need for consulting services generated by
          industry growth. The key elements of the business model include
          attracting and retaining high quality, experienced consultants and
          creating business processes that can be duplicated worldwide. The
          Company attracts high quality consultants with a broad range of
          experience and knowledge within the telecommunications industry
          through aggressive recruitment efforts, including focused external
          recruiting, in-house recruiting specialists and consultant referral
          incentive programs. TMNG retains consultants through a variety of
          programs, including a stock option plan, competitive compensation
          packages, flexible employment model and dynamic, challenging
          assignments at the forefront of the telecommunications industry. TMNG
          has implemented a flexible employee model to enable the Company to
          hire and retain consultants and provide them with a robust employee
          benefits package. The model allows the Company to better manage
          utilization and to minimize unbilled consultant time. To support
          anticipated growth, TMNG creates business processes that can be used
          worldwide in any consulting engagement. Toolsets provide TMNG
          consultants with methodologies that they use to augment their
          experience and help analyze and solve clients' problems. TMNG utilizes
          a network of eRooms to serve as a knowledge base, enable consultant
          collaboration on engagements and provide support information and
          updates of TMNG current toolsets and releases of next generation
          tools. TMNG intends to leverage Internet communication capabilities to
          retain a flexible, "virtual" structure.

     -    Extending market leadership position and building the TMNG brand. TMNG
          plans to expand the Company's leadership position in the
          telecommunications consulting industry and to establish TMNG as the
          consulting firm of choice for communications service providers and the
          technology and banking companies that serve them. TMNG plans to
          capitalize on extensive industry knowledge, strong client base, and
          highly qualified and experienced professionals to help clients provide
          more value-added services to their customer base. The Company has
          aggressive marketing initiatives underway to continue building
          corporate brand.

SERVICES

     -    Service Provider Consulting. The Company provides all types of
          carriers and service providers with services ranging from high-level
          strategy definition, product introduction and launch, through process
          improvements to operations to help extend their worldwide reach. TMNG
          analyzes market trends and dynamics for telecommunications service
          providers and advises them on market evolution and development. The
          Company enables service providers to define, refine and implement
          strategies through business case development and market launch
          planning. In addition, TMNG will analyze acquisition opportunities to
          determine if they are complementary to strategies clients are
          implementing.

     -    Product development strategic consulting. TMNG assists technology and
          software companies analyze and focus their product and development
          strategies and efforts to meet the needs of telecommunications service
          providers. TMNG's knowledge of service provider requirements, along
          with the Company's toolsets, provides significant benefit to
          technology companies as they develop new products and applications.

     -    Market research and analysis. TMNG assists technology and software
          companies analyze market trends and dynamics to improve their ability
          to respond to the requirements of changing and evolving markets.

     -    Responses to requests for proposals. TMNG assists technology, software
          and consulting companies in responding to requests for proposals that
          they receive from service providers and others. TMNG's expertise
          enables the Company to ascertain the most critical elements of a
          request for proposal and to help clients prepare responses.



                                      -5-
<PAGE>   6

     -    Implementation support. For global consulting firms that have
          engagements which require specialized telecommunications expertise,
          TMNG serves as the telecommunications experts. In addition, TMNG
          supports software clients by assisting with program management for
          software implementation.

     -    Evaluation. TMNG assists investment banking and financial services
          firms with prospect validation and due diligence in connection with
          planned investments and other transactions. TMNG's broad knowledge of
          the industry and subject matter expertise speed up the evaluation
          process. TMNG's prospect validation services include candidate
          validation, business plan development, financial modeling and contract
          development and negotiation. TMNG's consultants and toolsets also
          facilitate rapid development and execution when conducting due
          diligence. TMNG's services in this area include business plan
          evaluation and validation, financial model analysis, product and
          evaluation, benchmarking, organization and business process
          validation, systems evaluation, and network plan reviews.

     -    Post-Investment Support. TMNG provides to its banking and financial
          service clients that have made investments in the telecommunications
          industry a broad range of post-investment support services, including
          project and program management, system selection and implementation,
          process development and reengineering, communications services product
          development, financial operations management for carrier billing and
          operations, call center management, and billing and collections
          management.

COMPETITION

     The market for telecommunications consulting services is highly fragmented
and changing rapidly. TMNG faces competition from major business consulting
firms, the consulting arms of accounting and other professional services
organizations and customers' internal resources. These competitors are major
consulting firms that provide a broad range of services to companies in many
industries, including the telecommunications industry. Many of these competitors
have significantly greater financial, technical and marketing resources and
greater name recognition than TMNG.

     The Company has faced, and expects to continue to face, additional
competition from new entrants into the communications markets. The Company has
also experienced increased price competition, particularly from larger firms
that have the financial resources to aggressively price engagements that they
have a particular interest in obtaining. Increased competition could result in
price reductions, fewer client projects, underutilization of consultants,
reduced operating margins, and loss of market share.

     The principal competitive factors in the market include responsiveness to
the needs of customers, quality and reliability of consultants, price, project
management capability and technical expertise. The Company's ability to compete
depends in part on performance, a focused service offering formula, the
price/value formula of TMNG service offerings, responsiveness to customer needs
and the ability to hire, retain, and motivate key personnel.

EMPLOYEES

     TMNG's ability to recruit and retain experienced, highly-qualified and
highly-motivated personnel has contributed greatly to the Company's success and
will be critical in the future. The Company offers a flexible recruiting model
that enhances the ability to attract consultants and to effectively manage
utilization. TMNG's consultants may work as employees, independent subject
matter experts or as contingent employees. Contingent employees will, unlike
independent subject matter experts, receive company-paid medical insurance,
vacation and other employee benefits. Instead of receiving a regular salary,
however, contingent employees will only be paid for time spent working on
consulting projects for customers or working on internal projects. Generally,
TMNG will offer contingent employment to independent subject matter experts that
are regularly involved in consulting projects, have a broad range of expertise
and are highly utilized by the Company. TMNG's current independent subject
matter expert base also includes individuals with specialized expertise in
discrete areas, and TMNG typically deploys these individuals only when their
unique expertise is necessary.



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<PAGE>   7

     As of December 30, 2000, TMNG utilized approximately 526 consultants. Of
these, 129 were employee consultants and approximately 397 were working on
engagements for TMNG as independent subject matter experts. In addition to the
consultants, TMNG has an administrative staff of approximately 41 employees in
the accounting and finance, marketing, recruiting, information technology, human
resources and administrative areas.

MAJOR CUSTOMERS

     As of December 30, 2000 TMNG has provided services to approximately 400
customers. The Company depends on a few key customers for a significant portion
of revenues. For fiscal year 2000, revenues from Williams Communications
accounted for more than ten percent of revenues. In fiscal year 1999, revenues
from Williams Communications Group and diAx each accounted for more than ten
percent of revenues. TMNG generally negotiates discounted pricing for large
projects with long-term customers. Because TMNG's clients typically engage
services on a project basis, their needs for services vary substantially from
period to period. TMNG continues to diversify the Company's customer base and
expand the portion of revenues, however, the Company anticipates that operating
results will continue to depend on volume services to a relatively small number
of communication service providers and technology vendors.

INTELLECTUAL PROPERTY

     TMNG's success is dependent, in part, upon proprietary processes and
methodologies, and the Company relies upon a combination of copyright, trade
secret, and trademark law to protect intellectual property. The Company has
obtained federal registration for nine trademarks in the United States and has
filed applications to register five other marks in the United States. It is
possible that third parties may challenge TMNG trademark applications.

     The Company does not have any patent protection for the proprietary
methodologies used by TMNG consultants. TMNG does not currently anticipate
applying for patent protection for these toolsets and methodologies.

SEASONALITY

     In the past, the Company has 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. The Company may in the future
experience fluctuations in revenue in the fourth quarter as well as summer and
other vacation periods as the Company expands internationally.

RISK FACTORS

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

WE FOCUS EXCLUSIVELY ON SERVING THE TELECOMMUNICATIONS INDUSTRY AND THEREFORE
CHANGES IN THIS INDUSTRY COULD REDUCE OUR CUSTOMER BASE OR CAUSE CUSTOMERS TO
USE INTERNAL RESOURCES

     We derive a significant amount of our revenues from consulting engagements
within the telecommunications industry. Much of our recent growth has arisen
from business opportunities presented by industry trends that include
deregulation, increased competition, technological advances, the growth of
e-business and the convergence of service offerings.

     If these trends change, the demand for telecommunications consulting work
will likely decrease. In addition, the telecommunications industry is in a
period of consolidation, which could reduce the client base, eliminate future
opportunities or create conflicts of interest among clients. Additionally,
current and future economic pressures in the industry may cause
telecommunications companies to use internal resources in lieu of outside
consultants. As a result, our customer base and revenues may decline.

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 REDUCE REVENUES AND HARM
OUR BUSINESS



                                      -7-
<PAGE>   8

     A significant portion of our revenues are derived from a relatively limited
number of clients. For example, during fiscal year 2000, Williams Communications
Group accounted for more than ten percent of revenues and revenues from our ten
most significant clients accounted for approximately 68% of revenues. The
services required by any one client may be affected by industry consolidation,
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 services are often sold under short-term engagements and most clients
can reduce or cancel their contracts with little or no penalty or notice. Our
operating results may suffer if we are unable to rapidly deploy consultants if a
client defers, modifies or cancels a project. Consequently, you should not
predict or anticipate our future revenue based on the number of clients we have
or the number and scope of our existing engagements.

OUR REVENUES AND OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY FROM QUARTER TO
QUARTER, AND FLUCTUATIONS IN 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. Factors that could cause
quarterly fluctuations include:

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

     -    the size and scope of the assignments;

     -    consultant turnover, utilization rates and billing rates;

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

     -    the ability of clients to terminate engagements without penalty;

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

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

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

     -    fluctuations in the telecommunications market and economic conditions;

     -    seasonality during the summer, vacation and holiday periods; and

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

     Because a significant portion of our 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 our
operating results from quarter-to-quarter and could result in 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 losses. In addition, our stock price would likely
decline.

THE TELECOMMUNICATIONS INDUSTRY HAS RECENTLY EXPERIENCED DECLINING RESULTS OF
OPERATIONS AND A REDUCTION IN THE AVAILABILITY OF INVESTMENT CAPITAL, AND
INDUSTRY CONDITIONS COULD HARM OUR BUSINESS.

     Our future operating results could be affected by declining results of
operations among telecommunications companies as well as client financial
difficulties. Beginning in late 2000 and continuing into 2001, many
telecommunications companies, including carriers, equipment manufacturers and
other industry participants have begun reporting declining results of
operations. For example, during the third quarter, one of our clients declared
bankruptcy. Our accounts receivable reserves are sufficient to cover the
potential exposure with this client.



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<PAGE>   9

However, future client financial difficulties that result in write-offs that are
in excess of our bad debt reserves could harm our results of operations in
future fiscal periods.

     In addition, the worsening conditions in the telecommunications sector
could cause companies to delay new product and new business initiatives and to
seek to control expenses by reducing use of outside consultants. As a result,
current industry conditions could harm our business, financial condition and
results of operations.

WE MUST CONTINUE TO ATTRACT AND RETAIN QUALITY CONSULTANTS, AND OUR INABILITY TO
DO SO WOULD IMPAIR OUR ABILITY TO SERVICE EXISTING ENGAGEMENTS OR UNDERTAKE NEW
ENGAGEMENTS, RESULTING IN A DECLINE IN OUR REVENUES AND INCOME.

     We must attract a significant number of new consultants to implement growth
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 telecommunications industry.
Competition for these consultants may result in significant increases in costs
to retain the consultants, which could reduce our margins and profitability. In
addition, we will need to attract consultants in international locations,
principally Europe, to support our international growth plans. We have limited
experience in recruiting internationally, and we may not be able to do so. Our
inability to recruit new consultants and retain existing consultants could
impair our ability to service existing engagements or undertake new engagements.
If we are unable to attract and retain consultants, revenues and profitability
would decline.

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

     The market for consulting services to telecommunications companies is
intensely competitive, highly fragmented and subject to rapid change.
Competitors include general management consulting firms, the consulting
practices of "Big Five" accounting firms, most of which have practice groups
focused on the telecommunications industry and local or regional firms
specializing in telecommunications services. Some of these competitors have also
formed strategic alliances with telecommunications and technology companies
serving the industry. We also compete with internal resources of our clients.
Our competitors include:

        -   American Management Systems;

        -   Accenture;

        -   Booz-Allen & Hamilton;

        -   The Boston Consulting Group;

        -   Cap Gemini Ernst & Young;

        -   KPMG; and

        -   PricewaterhouseCoopers.

     Many information technology consulting firms also maintain significant
practice groups devoted to the telecommunications 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 due to worsening
            economic conditions;

        -   the ability and willingness of our competitors to finance



                                      -9-
<PAGE>   10

            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 HAVE EXPERIENCED SIGNIFICANT GROWTH IN THE BUSINESS IN RECENT PERIODS, AND IF
WE ARE UNABLE TO MANAGE THIS GROWTH, OUR OPERATIONAL INFRASTRUCTURE MAY NOT BE
ABLE TO SUPPORT GROWTH

     We are currently experiencing a period of rapid growth that may strain
managerial and operational resources. To support growth, our organizational
infrastructure must grow accordingly.

     To manage the expected growth of our operations and personnel, we must:

        -   improve existing and implement new operational, financial and
            management controls, reporting systems and procedures; and

        -   maintain and expand our financial management information systems.

     If we fail to address these issues, our operational infrastructure may be
insufficient to support our levels of business activity. In this event, we could
experience disruptions in our business and declining revenues or profitability.

IF WE DO NOT EFFECTIVELY MANAGE THE CONVERSION OF OUR INDEPENDENT SUBJECT MATTER
EXPERTS TO EMPLOYEES, WE COULD INCUR UNANTICIPATED COSTS WHICH WOULD HARM OUR
FINANCIAL PERFORMANCE

     We offer contingent employee or full-time employee status to certain of our
independent subject matter experts. As independent subject matter experts are
converted to consultant employees, we will incur additional fixed costs for each
such employee that we do not incur when retained as an independent subject
matter expert. To effectively manage these additional fixed costs, we will need
to continuously improve utilization management and minimize unbilled employee
time. In addition, this change may cause other disruptions to our business. If
we fail to effectively manage this transition, we could incur additional costs
due to underutilization of full-time employees as well as other unanticipated
costs.

WE MUST CONTINUALLY ENHANCE OUR SERVICES TO MEET THE CHANGING NEEDS OF OUR
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 our customers
in a rapidly developing and evolving market. Present or future services may not
satisfy the needs of the telecommunications market. If we are unable to
anticipate or respond adequately to our customers' needs, lost business may
result and our financial performance will suffer.

PLANS FOR INTERNATIONAL EXPANSION MAY NOT SUCCEED, WHICH WOULD HARM OUR REVENUES
AND PROFITABILITY

     Future revenues depend to a large extent on expansion into international
markets. International operations might not succeed for a number of reasons,
including:

        -   difficulties in staffing and managing foreign operations;

        -   seasonal reductions in business activity;



                                      -10-
<PAGE>   11

        -   fluctuations in currency exchange rates or imposition of currency
            exchange controls;

        -   competition from local and foreign-based consulting companies;

        -   issues relating to uncertainties of laws and enforcement relating to
            the protection of 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;

        -   taxation issues;

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

        -   language and cultural differences;

        -   general political and economic trends; and

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

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

IF INTERNATIONAL BUSINESS VOLUMES INCREASE, WE WILL BE EXPOSED TO GREATER
FOREIGN CURRENCY EXCHANGE RISKS, WHICH COULD RESULT IN INCREASED EXPENSES AND
DECLINING PROFITABILITY

     Revenues derived from our international engagements continued to increase
in fiscal year 2000 and may continue to increase. Some international engagements
are denominated in the local currency of the clients. Expenses incurred in
delivering these services, consisting primarily of consultant compensation, are
typically denominated in U.S. dollars. To the extent that the value of a
currency in which billings are denominated decreases in relation to the U.S.
dollar or another currency in which expenses are denominated, our operating
results and financial condition could be harmed. We may hedge our foreign
currency exposure from time to time, but hedging may not be effective.


OUR TMNG.COM BUSINESS IS DEPENDENT ON CONTINUED GROWTH, USE AND ACCEPTANCE OF
THE INTERNET AND E-BUSINESS

     Our success in providing e-business related consulting services depends in
part on widespread acceptance and use of the Internet as a way to conduct
business. The Internet and e-business may not become a viable long-term
commercial marketplace due to potentially inadequate development of the
necessary network infrastructure or delayed development of enabling technologies
and performance improvements. Our business would be harmed if:

        -   use of the Internet and other online services does not increase or
            increases at a slower pace than expected or on-line services do not
            become viable marketplaces;

        -   the infrastructure for the Internet and other online services does
            not effectively support future expansion of e-business; or

        -   concerns over security and privacy inhibit the growth of the
            internet.

The failure of the Internet to continue to grow would inhibit the demand for our
TMNG.com consulting services and our revenues and financial performance.



                                      -11-
<PAGE>   12

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 and
administrative skills of our executive officers, particularly Richard Nespola,
our 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, and could therefore 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. Damage to our reputation arising from client dissatisfaction could
therefore harm our financial performance.

IF WE FAIL TO DEVELOP 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 telecommunications providers who will
give new and repeat business. Inability to build long-term customer relations
would result in declines in our revenues and profitability.

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

     We provide approximately half of our consulting services through
independent contractors and, therefore, do not pay federal or state employment
taxes or withhold income taxes for such persons. Further, we generally do not
include these independent subject matter experts in our benefit plans. In the
future, the IRS and state authorities may challenge the status of consultants as
independent contractors. Independent subject matter experts may also initiate
proceedings to seek reclassification as employees under state law. In either
case, if persons engaged by us as independent subject matter experts 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 persons and could become liable for amounts
required to be paid or withheld in prior periods along with penalties. In
addition, we could be required to include such persons in our benefit plans
retroactively and going forward. Any challenge by the IRS or state authorities
or individuals resulting in a determination that a substantial number of persons
we have classified as independent subject matter experts are actually employees
could subject us to liability for back taxes, interest and penalties, which
would harm our profitability.

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.

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

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



                                      -12-
<PAGE>   13

     The market price of our common stock is volatile. Our stock price could
decline or fluctuate in response to a variety of factors, including:

     - variations in quarterly operating results;

     - announcements of technological innovations that render talent outdated;

     - trends in the telecommunications industry;

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

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

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

     - market conditions in the telecommunications industry and the economy as a
       whole.

     In addition, the stock market experiences significant price and volume
fluctuations. These fluctuations particularly affect the market prices of the
securities of many high technology companies. These broad market fluctuations
could harm the market price of our common stock.

WE MAY MAKE ACQUISITIONS, WHICH ENTAIL RISKS THAT COULD HARM OUR FINANCIAL
PERFORMANCE OR STOCK PRICE

     As part of our business strategy, we have made and will likely 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 existing business; and

     - adverse effects on the financial statements, including one-time
       write-offs, ongoing charges for amortization of goodwill and assumption
       of liabilities of acquired businesses.

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

OUR INABILITY TO PROTECT 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 solutions or technologies, 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
proprietary information could make our solutions and methodologies available to
others and harm the our competitive position.

PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS WILL RETAIN SUBSTANTIAL
CONTROL OVER US AND MAY MAKE DECISIONS THAT ARE NOT IN THE BEST INTEREST OF OUR
OTHER STOCKHOLDERS

     Executive officers, directors and stockholders owning more than five
percent of outstanding common stock (and their affiliates) own over a majority
of our outstanding common stock. As a result, such persons, acting together,
have the ability to substantially influence 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 assets) and to



                                      -13-
<PAGE>   14

control management and affairs. Accordingly, 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, even if such a
transaction would be beneficial to other stockholders.

WE USED TO BE TAXED UNDER SUBCHAPTER "S" OF THE INTERNAL REVENUE CODE AND CLAIMS
OF TAXING AUTHORITIES RELATED TO PRIOR SUBCHAPTER "S" CORPORATION STATUS COULD
HARM US

     From 1993 through 1998, we were taxed as a "pass-through" entity under
subchapter "S" of the Internal Revenue Code. Since February 1998, we have been
taxed under subchapter "C" of the Internal Revenue Code, which is applicable to
most corporations and treats the corporation as an entity that is separate and
distinct from its stockholders. If our tax returns for the years in which we
were a subchapter "S" corporation were to be audited by the Internal Revenue
Service or another taxing authority and an adverse determination was made during
the audit, we could be obligated to pay back taxes, interest and penalties. The
stockholders of our predecessor entity agreed, at the time we acquired our
predecessor, to indemnify us against negative tax consequences arising from our
prior "S" corporation status. However, this indemnity may not be sufficient to
cover claims made by the IRS or other taxing authorities, and any such claims
could result in additional costs and harm our financial performance.

WE MAY SEEK TO RAISE ADDITIONAL FUNDS, AND ADDITIONAL FUNDING MAY BE DILUTIVE TO
OUR STOCKHOLDERS OR IMPOSE OPERATIONAL RESTRICTIONS

     Any additional equity financing may be dilutive to our stockholders and
debt financing, if available, may involve restrictive covenants, which may limit
our operating flexibility with respect to certain business matters. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of stockholders will be reduced. These stockholders may
experience additional dilution in net book value per share 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 and bylaws and anti-takeover provisions of
Delaware law could make it more difficult for a third party to acquire control,
even if a change in control would be beneficial to stockholders. In addition,
the 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 could make it more difficult for a third party to acquire the
Company.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS

     For information about foreign and domestic operations, see Note 3 of Notes
to Consolidated Financial Statements.

ITEM 2. PROPERTY

     The Company's principal executive offices are located in a 4,305 square
foot facility in Overland Park, Kansas. This facility houses the executive,
corporate and administrative offices and is under a lease which expires in
August 2005. The Company also leases a 8,175 square foot facility in Bethesda,
Maryland for its TWG Marketing subsidiary.

ITEM 3. LEGAL PROCEEDINGS

     The Company is involved in legal proceedings and litigation arising in the
ordinary course of business. The Company believes the outcome of all current
proceedings, claims and litigation will not have a material adverse effect on
the Company's financial position or results of operations when resolved in a
future period.

     In June 1998, the bankruptcy trustee of a former client, Communications
Network Corporation, sued TMNG in the U.S. Bankruptcy Court in New York seeking
recovery of $160,000 in 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.



                                      -14-
<PAGE>   15

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 business.

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 2000.


                                     PART II

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

     On November 22, 1999, the Securities and Exchange Commission declared
TMNG's Registration Statement on Form S-1 (File No. 333-87383) for its initial
public offering effective. On November 23, 1999, TMNG closed its offering of an
aggregate of 4,615,000 shares of TMNG Common Stock at an aggregate offering
price of $78.5 million. The managing underwriters for the offering were JP
Morgan H & Q (formerly known as Hambrecht & Quist), Robertson Stephens, Salomon
Smith Barney and Jefferies & Company, Inc. Net proceeds to TMNG, after deducting
underwriting discounts and commissions of $5.5 million and offering expenses of
$1.6 million, were $71.4 million. On November 29, 1999 TMNG used $22.3 million
of the proceeds from its initial public offering to repay all indebtedness. The
remainder of the proceeds will be used for working capital, general corporate
purposes and as possible consideration for acquisitions.

     On September 5, 2000 the Company acquired The Weathersby Group, Inc., and
issued 348,157 shares of TMNG's unregistered Common stock to the sole
shareholder of The Weathersby Group, Inc. The share calculation was made in
accordance with Section 3.2.1 of the purchase agreement dated August 30, 2000,
in which the shareholder was to received $8,000,000 in share consideration at a
purchase price as determined to be the average of the closing bid and ask prices
for TMNG's common stock as reported on the NASDAQ National Market, over the 10
trading days immediately preceding the second day prior to the closing date.
This amount was calculated as $22.98 per share.

     TMNG's Common Stock is quoted on the Nasdaq National Market under the
symbol "TMNG". The high and low closing price per share for the Common Stock for
the fiscal year ending December 30, 2000 by quarter was as follows:

<TABLE>
<CAPTION>
                                                 High           Low
     <S>                                        <C>           <C>
     First quarter, fiscal year 2000            $40.38        $22.00
     Second quarter, fiscal year 2000           $39.50        $12.00
     Third quarter, fiscal year 2000            $38.00        $19.44
     Fourth quarter, fiscal year 2000           $21.00        $ 7.00

     Fourth quarter, fiscal year 1999
     (November 23, 1999 to January 1, 2000)     $33.75        $26.31
</TABLE>

As TMNG's Common Stock is traded on the Nasdaq National Market, the above
information concerning over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.

As of March 9, 2001, the closing price of Common Stock was $11.312 per share. At
such date, there were approximately 165 holders of record of the Company's
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
therefore, subject to any preferential dividend rights of outstanding Preferred
Stock. To date, TMNG has not paid any cash dividends on its Common Stock and
does not expect to declare or pay any cash or other dividends in the foreseeable
future.



                                      -15-
<PAGE>   16

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated financial data presented below has been derived
from the Company's 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 the notes thereto and other financial
information appearing elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                                           FISCAL YEAR ENDED
                                                   -----------------------------------------------------------------
                                                   December 31,  December 31,  January 2,   January 1,  December 30,
                                                       1996          1997         1999         2000         2000
                                                   ------------  ------------  ----------   ----------  ------------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>           <C>           <C>          <C>         <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues ........................................    $ 17,279      $ 20,184     $ 32,103     $ 50,322     $ 77,727
Cost of services:
  Direct cost of services .......................       9,648        11,384       17,411       26,109       40,396
  Equity related charges ........................                                    239        2,780        5,519
                                                     --------      --------     --------     --------     --------
          Total cost of services ................       9,648        11,384       17,650       28,889       45,915
                                                     --------      --------     --------     --------     --------
Gross profit ....................................       7,631         8,800       14,453       21,433       31,812
Operating expenses:
  Selling, general and administrative expenses ..       2.798         3,280        6,158        9,777       16,645
  Equity related charges ........................                                     22        1,998        1,564
                                                     --------      --------     --------     --------     --------
          Total operating expenses ..............       2,798         3,280        6,180       11,775       18,209
                                                     --------      --------     --------     --------     --------
Income from operations ..........................       4,833         5,520        8,273        9,658       13,603
Other income (expense):
  Interest income ...............................          16             6           18          277        3,327
  Interest expense ..............................        (136)          (30)      (2,054)      (1,998)
  Other, net ....................................                         8           88          (68)        (152)
                                                     --------      --------     --------     --------     --------
          Total other income (expense) ..........        (120)          (16)      (1,948)      (1,789)       3,175
Income before provision for income taxes and
  extraordinary item ............................       4,713         5,504        6,325        7,869       16,778
Provision for income taxes ......................                                 (3,282)      (3,208)      (6,711)
                                                     --------      --------     --------     --------     --------
Income before extraordinary item ................       4,713         5,504        3,043        4,661       10,067
Extraordinary item ..............................                                                (200)
                                                     --------      --------     --------     --------     --------
Net income ......................................    $  4,713      $  5,504     $  3,043     $  4,461     $ 10,067
                                                     ========      ========     ========     ========     ========
Net income before extraordinary item per common
  share
  Basic .........................................    $   0.21      $   0.24     $   0.14     $   0.20     $   0.36
                                                     ========      ========     ========     ========     ========
  Diluted .......................................    $   0.21      $   0.24     $   0.13     $   0.20     $   0.34
                                                     ========      ========     ========     ========     ========
Net income per common share
  Basic .........................................    $   0.21      $   0.24     $   0.14     $   0.19     $   0.36
                                                     ========      ========     ========     ========     ========
  Diluted .......................................    $   0.21      $   0.24     $   0.13     $   0.19     $   0.34
                                                     ========      ========     ========     ========     ========
Weighted average common shares outstanding
  Basic .........................................      22,500        22,500       22,500       23,056       28,110
                                                     ========      ========     ========     ========     ========
  Diluted .......................................      22,500        22,500       22,944       23,807       29,208
                                                     ========      ========     ========     ========     ========
Pro forma provision for income taxes ............    $ (1,885)     $ (2,202)    $ (2,530)
                                                     ========      ========     ========
Pro forma net income ............................    $  2,828      $  3,302     $  3,795
                                                     ========      ========     ========
"S" corporation distributions ...................    $  6,095      $  2,600     $  4,664
                                                     ========      ========     ========
</TABLE>



                                      -16-
<PAGE>   17

<TABLE>
<CAPTION>
                                                                             FISCAL YEAR ENDED
                                                   ---------------------------------------------------------------------
                                                   December 31,  December 31,   January 2,     January 1,   December 30,
                                                       1996          1997          1999           2000          2000
                                                   ------------  ------------   ----------     ----------   ------------
<S>                                                <C>           <C>            <C>            <C>          <C>
CONSOLIDATED BALANCE SHEET DATA:
Net working capital ...........................      $  1,744      $  4,689      $  6,025       $ 61,419      $ 89,148
Total assets ..................................         4,121         5,483        11,006         67,382       119,429
Total debt (including current debt) ...........                                    26,017
Total Stockholders' Equity (deficiency in
  assets) .....................................      $  1,743      $  4,709      $(18,271)      $ 63,437      $111,472
</TABLE>

     Before February 12, 1998, the Company was a subchapter "S" corporation and,
accordingly, federal and state income taxes were paid at the stockholder level
only. Upon consummation of the February 1998 leveraged recapitalization, the
Company terminated its subchapter "S" corporation status and, accordingly became
subject to federal and state income taxes. The pro forma income statement
information reflects adjustments to historical net income as if the Company had
not elected subchapter "S" corporation status for federal and state income tax
purposes.

     On November 22, 1999, the Securities and Exchange Commission declared
TMNG's Registration Statement on Form S-1 (File No. 333-87383) effective. On
November 23, 1999, TMNG closed its offering of an aggregate of 4,615,000 shares
of TMNG Common Stock at an aggregate offering price of $78.5 million. Net
proceeds to TMNG, after deducting underwriting discounts and commissions of $5.5
million and offering expenses of $1.6 million, were $71.4 million.

     On November 29, 1999 TMNG used $22.3 million of the proceeds from its
initial public offering to repay all indebtedness.

     On August 2, 2000, the Securities and Exchange Commission declared TMNG's
Registration Statement on Form S-1 (File No. 333-40864) effective. On August 2,
2000, TMNG closed its offering of an aggregate of 3,000,000 shares of TMNG
Common Stock at an aggregate offering price of $68.6 million. Net proceeds to
TMNG, after deducting underwriting discounts and commissions of $1.1 million and
offering expenses of $728,000 were $21.0 million. Proceeds will be used for
working capital, general corporate purposes and as possible consideration for
acquisitions.

     On September 5, 2000, the Company completed its acquisition of The
Weathersby Group, Inc. ("TWG"), 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 TMNG stock. Additionally, TMNG incurred direct
costs of $1.5 million related to the acquisition.


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

     Certain statements contained herein may be deemed to be forward-looking
statements as defined in the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties, which may cause the Company's actual results in
future periods or plans for future periods to differ materially from what is
currently anticipated. Those risks include, among others, general competitive
factors, the Company's ability to successful complete and integrate its
acquisitions and to implement operational improvements in its acquired
businesses, the seasonality and episodic nature of the Company's business and
other risks and uncertainties detailed from time to time in the Company's
filings with the Securities and Exchange Commission. Other factors and
assumptions not identified above were also involved in the derivation of these
forward-looking statements, and the failure of such other assumptions to be
realized, as well as other factors, may also cause actual results to differ
materially from those projected. The Company assumes no obligation to update
these forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
statements.

     The following information should be read in connection with the information
contained in the Consolidated Financial Statements and notes thereto appearing
elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in the



                                      -17-
<PAGE>   18

forward-looking statements (See Item 1. Business).

OVERVIEW

     TMNG reports it financial data where each quarter is 13 weeks and ends on a
Saturday. As a result, the fiscal year end is the Saturday which is 13 weeks
from the end of the third fiscal quarter. Fiscal years 2000 and 1999 therefore
ended on December 30, 2000 and January 1, 2000, respectively. The words "fiscal
year" refer to the fiscal year most closely coinciding with the related calendar
year.

     Revenues consist of consulting fees for professional services and related
expense reimbursements. Substantially all consulting services are contracted on
a time and materials basis not to exceed a negotiated contract price.
Substantially all revenues are recognized in the period in which the service is
performed. Generally a client relationship begins with a short-term engagement
utilizing a few consultants. TMNG's 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. TMNG anticipates that the
Company will continue to do so in the future. Because TMNG is a consulting
company, the Company experiences 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 TMNG 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, the Company 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 equity related non-cash charges incurred in
connection with the grants of equity securities primarily to consultants, as
well as fees paid to independent subject matter experts. Employee compensation
includes certain unbillable time, training, vacation time, benefits and payroll
taxes. Annual gross margins have ranged from 40.9% to 45.0% during the period
from 1996 to 2000. Margins are primarily impacted by the type of consulting
services provided, the size of service contracts and negotiated volume
discounts, changes in TMNG pricing policies and those of competitors,
utilization rates of consultants and independent subject matter experts; and
employee and independent subject matter expert costs associated with a
competitive labor market.

     Operating expenses include selling, general and administrative expenses as
well as equity related non-cash charges incurred in connection with the grants
of equity securities primarily to principals and certain senior executives.
Sales and marketing expenses consist primarily of personnel and related costs
for direct client marketing efforts and marketing staff. The Company primarily
uses a relationship sales model in which partners, principals and senior
consultants generate revenues. TMNG takes these revenue generating activities
into account when determining these individuals' quarterly bonus compensation,
which is generally recorded as sales and marketing expense. Other operating
expenditures include costs associated with marketing materials, trade shows and
advertising. To increase market awareness of the Company, TMNG intends to
continue to expand the direct and indirect marketing and advertising efforts
substantially, both domestically and internationally. General and administrative
expenses consist mainly of accounting, recruiting, and professional services
incurred in the normal course of business.

RESULTS OF OPERATIONS

FISCAL 2000 COMPARED TO FISCAL 1999

  Revenues

     Revenues increased 54.5% to $77.7 million for fiscal year 2000 from $50.3
million for fiscal year 1999. The increase in revenues was due primarily to an
increase in consulting services performed for our new and existing clients
during the period, and increased billing rates of our consultants. Additionally,
international revenue increased 30.9% to $18.2 million for fiscal year 2000 from
$13.9 million for fiscal year 1999, primarily due to an increase in European
business. Additionally, revenues increased due to the purchase of The Weathersby
Group, Inc., an acquisition that closed on September 5, 2000. This acquisition
was accounted for as a purchase, so TWG's revenues for the period from the
closing through the end of the year are included in TMNG's consolidated
revenues.



                                      -18-
<PAGE>   19

  Cost of Services

     Direct costs of services increased to $40.4 million for fiscal year 2000
from $26.1 million for fiscal year 1999. As a percentage of revenues, our gross
margin on services was 48.0% for fiscal year 2000 compared to 48.1% for fiscal
year 1999.

     Non-cash stock based compensation charges were $5.5 million and $2.8
million for fiscal year 2000 and fiscal year 1999, respectively. These equity
charges relate to stock options and warrants granted in 1999 and previously. Of
the $5.5 million compensation charges related to fiscal year 2000, $2.7 million
was recorded in connection with the issuance of stock options to employees and
non-employee consultants and $2.8 million was recorded in connection with
warrants issued during the fourth quarter of 1999. These charges represented
7.1% of revenues for fiscal year 2000 compared to 5.5% for fiscal year 1999.

  Operating Expenses

     Selling, general and administrative expenses increased to $16.6 million for
fiscal year 2000, or 69.4% from $9.8 million for fiscal year 1999. Selling,
general and administrative expenses increased to 21.4% of revenues for fiscal
year 2000, from 19.4% of revenues for fiscal year 1999. We incurred an increase
in selling, general and administrative expenses primarily due to the personnel
and technology costs associated with the increased administrative staffing
required to manage and support the growth of the organization, as well as the
amortization of goodwill recorded in connection with The Weathersby Group, Inc.
acquisition.

     Non-cash stock based compensation charges of $1.6 million and $2.0 million
for fiscal year 2000 and fiscal year 1999, respectively, were recorded primarily
in connection with the issuance of stock options in fiscal year 1999 and
previously to our senior executives, principals, administration and non-employee
directors. These charges represented 2.0% of revenues for fiscal year 2000,
compared to 4.0% of revenues for fiscal year 1999.

  Other Income and Expenses

     Interest income increased to $3.3 million for the fiscal year 2000,
compared to $277,000 for the fiscal year 1999. Interest income increased
primarily due to the interest received on the net proceeds of the initial public
and secondary offerings. We invest in short-term, high-grade investment
instruments.

     Interest expense decreased to $0 for fiscal year 2000, compared to $2.0
million for fiscal year 1999. Interest expense decreased primarily due to the
extinguishment of debt in the fourth quarter of 1999. On November 29, 1999, all
outstanding indebtedness was repaid with $22.3 million of the proceeds from our
November 23, 1999 initial public offering.

     Other, net totaled losses of $152,000 and $68,000 for fiscal year 2000 and
fiscal year 1999, respectively, and increased primarily due to losses incurred
on projects performed during fiscal year 2000 in foreign locations resulting in
foreign currency transaction losses.

  Income Taxes

     Provision for income taxes remained consistent for fiscal year 2000 and
fiscal year 1999 at 40.0% and 40.8%, respectively.

FISCAL 1999 COMPARED TO FISCAL 1998

  Revenues

     Revenues increased 56.7% to $50.3 million for fiscal year 1999 from $32.1
million for fiscal year 1998. The increase was primarily attributable to a net
increase in consulting services. The increase in consulting services was due
primarily to a significant increase in services provided to a major customer,
which was offset in part by negotiated volume discounts. Fiscal year 1999
revenues included revenues from services provided to one large customer, which
accounted for 39.6% of revenues during that period. International revenue
expanded to 27.7% of revenues in fiscal year 1999 compared to 16.2% for fiscal
year 1998, primarily due to an increase in European business.



                                      -19-
<PAGE>   20

  Cost of Services

     Direct cost of services increased to $26.1 million for fiscal year 1999
from $17.4 million for fiscal year 1998. Direct cost of services as a percent of
revenue decreased from 54.2% for fiscal year 1998 to 51.9% for fiscal year 1999.
Direct gross margins improved because the consultant mix changed to include more
employees in fiscal year 1999 compared to fiscal year 1998. A greater portion of
full-time employees at a relatively constant utilization rate tends to improve
gross margins because of their overall lower fixed salary compared to the higher
variable costs paid to independent subject matter experts. The margin
improvement provided by increasing the full-time employee base was slightly
offset by discounted customer pricing associated with large engagements.

     Non-cash stock based compensation charges of $2.8 million and $239,000 for
fiscal year 1999 and fiscal year 1998, respectively, were recorded in connection
with the issuance of stock options to employees and non-employee consultants.
These charges reduced gross margin by 5.5% in fiscal year 1999.

  Operating Expenses

     Selling, general and administrative expenses increased to $9.8 million for
fiscal year 1999 from $6.2 million for fiscal year 1998. Selling, general and
administrative expense as a percentage of revenue increased to 19.4% for fiscal
year 1999 from 19.2% for fiscal year 1998. The Company incurred an increase in
marketing costs primarily as a result of an increase in sales bonuses associated
with implementation of a revised incentive program for consultants and increased
revenues for fiscal year 1999. TMNG incurred an increase in selling, general and
administrative expense primarily due to the personnel and facility costs
associated with opening a new corporate office in the third quarter of fiscal
year 1998 and increased administrative staffing to manage and support the growth
of the organization. TMNG also hired managing directors to lead the European and
Canadian subsidiaries at the beginning of fiscal year 1999. In addition, the
Company established reserves of $160,000 for a potential claim brought against
TMNG by a trustee in bankruptcy for a former client.

     Non-cash stock based compensation charges of $2.0 million and $22,000 for
fiscal year 1999 and fiscal year 1998, respectively, were recorded in connection
with the issuance of stock options to partners, principals and certain senior
executives and non-employee directors. These charges increased operating
expenses as a percentage of revenue by 4.0% in fiscal year 1999.

  Other Income and Expenses

     Interest expense decreased to $2.0 million for fiscal year 1999, compared
to $2.1 million for fiscal year 1998. Interest expense primarily related to
$24.0 million of borrowings under our term loans incurred in connection with the
recapitalization in February 1998 and borrowings on the revolving credit
facility. On November 29, 1999, all outstanding indebtedness was repaid with
$22.3 million of the proceeds from the November 23, 1999 initial public
offering. In conjunction with the early extinguishment of debt, deferred
financing charges of $200,000, net of tax, were written-off and recorded as an
extraordinary loss in the fourth quarter of fiscal year 1999.

  Income Taxes

     Provision for income taxes for fiscal year 1999 as a percentage of pretax
income was 40.8% compared to 51.9% for fiscal year 1998. The 51.9% effective tax
rate for fiscal year 1998 exceeded the statutory federal income tax rate
primarily due to the establishment of net deferred taxes upon conversion to a
"C" corporation on February 12, 1998 in connection with the leveraged
recapitalization and state income taxes. These increases in income tax expense
were partially reduced by the exclusion of net income prior to February 12,
1998, representing "S" corporation net income. Prior to the conversion to a "C"
corporation on February 12, 1998, TMNG did not report tax expense as an "S"
corporation.



                                      -20-
<PAGE>   21

SUMMARY OF QUARTERLY RESULTS OF OPERATIONS -- UNAUDITED

<TABLE>
<CAPTION>
                                                                          QUARTER ENDED
                                                      ---------------------------------------------------
                                                      APRIL 3,       JULY 3,     OCTOBER 2,    JANUARY 1,
                                                        1999          1999          1999          2000
                                                      --------      --------     ----------    ----------
<S>                                                   <C>           <C>          <C>           <C>
Revenues .......................................      $ 11,433      $ 12,423      $ 13,112      $ 13,354
                                                      ========      ========      ========      ========
Gross profit ...................................      $  4,989      $  5,534      $  5,489      $  5,421
                                                      ========      ========      ========      ========
Net income before extraordinary item ...........      $  1,067      $  1,195      $  1,172      $  1,227
                                                      ========      ========      ========      ========
Net income .....................................      $  1,067      $  1,195      $  1,172      $  1,027
                                                      ========      ========      ========      ========
Diluted net income before extraordinary item per
  common share .................................      $   .045      $   .051      $   .049      $   .050
                                                      ========      ========      ========      ========
Diluted net income per common share ............      $   .045      $   .051      $   .049      $   .040
                                                      ========      ========      ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                         QUARTER ENDED
                                                      -----------------------------------------------------
                                                      APRIL 1,       JULY 1,    SEPTEMBER 30,  DECEMBER 30,
                                                        2000          2000          2000           2000
                                                      --------      --------    -------------  ------------
<S>                                                   <C>           <C>         <C>            <C>
Revenues .......................................      $ 16,402      $ 19,464      $ 20,003      $ 21,858
                                                      ========      ========      ========      ========
Gross profit ...................................      $  5,957      $  7,354      $  8,462      $ 10,039
                                                      ========      ========      ========      ========
Net income .....................................      $  1,678      $  2,253      $  3,060      $  3,076
                                                      ========      ========      ========      ========
Basic net income per common share ..............      $   .061      $   .082      $   .108      $   .105
                                                      ========      ========      ========      ========
Diluted net income per common share ............      $   .059      $   .079      $   .104      $   .102
                                                      ========      ========      ========      ========
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     On August 2, 2000, TMNG completed its secondary public offering and
received net proceeds of approximately $21.0 million from the sale of 1,000,000
shares of common stock. The proceeds will be used for working capital, general
corporate purposes and possibly as consideration for acquisitions.

     Net cash provided by operating activities was $10.0 million, $5.0 million
and $2.0 million for fiscal year 2000, fiscal year 1999 and fiscal year 1998,
respectively. The Company's accompanying consolidated statements of cash flows
identify major differences between net income and net cash provided by operating
activities for each of those years. For additional information relating to the
operations of the Company, see Results of Operations.

     Net cash used in investing activities was $12.3 million, $443,000 and
$455,000 for fiscal year 2000, fiscal year 1999 and fiscal year 1998,
respectively. Cash used for acquisitions was $11.6 million in fiscal year 2000,
all of which relates to the TWG acquisition. Capital expenditures of $713,000,
$443,000 and $455,000 for fiscal years 2000, 1999 and 1998, respectively, relate
to the capitalization of leasehold improvements, computer equipment and software
by the Company.

     Net cash provided by financing activities was $21.4 million and $46.0
million for fiscal years 2000 and 1999, respectively. Net cash used in financing
activities was $823,000 in fiscal year 1998. Net proceeds from the Company's
secondary public offering was $20.9 million in fiscal year 2000. Net proceeds
from the Company's initial public offering was $71.5 million in fiscal year
1999. Approximately $22.3 million of the proceeds from the initial public
offering was used to repay outstanding debt. Cash used in fiscal year 1998
related primarily to the leveraged recapitalization of the Company.

     At December 30, 2000, TMNG had approximately $70.6 million in cash and cash
equivalents. TMNG believes the net proceeds of the initial public offering in
1999 and secondary public offering, in addition to cash generated from
operations, will be sufficient to meet anticipated cash requirements, including
anticipated capital expenditures and consideration for possible acquisitions,
for at least the next 12 months.


                                      -21-
<PAGE>   22

Should the Company's capital requirements increase more rapidly than expected,
the Company believes that bank credit would be available to fund such operating
and capital requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company does not invest excess funds in derivative financial
instruments or other market rate sensitive instruments for the purpose of
managing its foreign currency exchange rate risk.

     The Company does 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 the Company's
clients.


ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS


                          INDEPENDENT AUDITORS' REPORT


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 as of December 30, 2000 and
January 1, 2000 and the related consolidated statements of income and
comprehensive income, stockholders' equity and cash flows for the fiscal years
ended December 30, 2000, January 1, 2000 and January 2, 1999. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies as of December
30, 2000 and January 1, 2000, and the results of their operations and their cash
flows for the fiscal years ended December 30, 2000, January 1, 2000 and January
2, 1999 in conformity with accounting principles generally accepted in the
United States of America.

/s/  DELOITTE & TOUCHE LLP

Kansas City, Missouri
February 15, 2001



                                      -22-
<PAGE>   23

                       THE MANAGEMENT NETWORK GROUP, INC.

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS


<TABLE>
<CAPTION>
                                                                    JANUARY 1,     DECEMBER 30,
                                                                      2000            2000
                                                                    ----------     ------------
<S>                                                                 <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents ..................................      $  51,523       $  70,583
  Receivables:
     Accounts receivable .....................................          8,280          17,985
     Accounts receivable -- unbilled .........................          4,863           8,023
                                                                    ---------       ---------
                                                                       13,143          26,008
     Less: Allowance for doubtful accounts ...................           (350)           (766)
                                                                    ---------       ---------
                                                                       12,793          25,242
     Other assets ............................................          1,048           1,280
                                                                    ---------       ---------
          Total current assets ...............................         65,364          97,105
                                                                    ---------       ---------
Property and Equipment, net ..................................            706           1,298
Goodwill, net ................................................                         18,016

Deferred Tax Asset ...........................................          1,312           3,010
                                                                    ---------       ---------

          Total Assets .......................................      $  67,382       $ 119,429
                                                                    =========       =========
CURRENT LIABILITIES:
  Trade accounts payable .....................................      $     888       $   1,282
  Accrued payroll, bonuses and related expenses ..............          1,857           4,722
  Other accrued liabilities ..................................          1,200           1,953
                                                                    ---------       ---------
          Total current liabilities ..........................          3,945           7,957
                                                                    ---------       ---------
STOCKHOLDERS' EQUITY Common stock:
     Voting -- $.001 par value, 100,000,000 shares authorized;
      27,417,370 shares issued and outstanding on January 1,
      2000, 29,465,808 shares issued and outstanding on
      December 30, 2000 ......................................             27              29
  Preferred stock -- $.001 par value, 10,000,000 shares
     authorized; no shares issued or outstanding .............
  Additional paid-in capital .................................        104,137         136,917
  Accumulated deficit ........................................        (32,138)        (22,071)
  Accumulated other comprehensive income --
   Foreign currency translation adjustment ...................             (2)             35
  Unearned compensation ......................................         (8,587)         (3,438)
                                                                    ---------       ---------
          Total stockholders' equity .........................         63,437         111,472
                                                                    ---------       ---------
Total Liabilities and Stockholders' Equity ...................      $  67,382       $ 119,429
                                                                    =========       =========
</TABLE>


                 See notes to consolidated financial statements.



                                      -23-
<PAGE>   24

                       THE MANAGEMENT NETWORK GROUP, INC.

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


<TABLE>
<CAPTION>
                                                                             YEAR ENDED
                                                               -----------------------------------------
                                                               JANUARY 2,     JANUARY 1,    DECEMBER 30,
                                                                  1999           2000           2000
                                                               ----------     ----------    ------------
<S>                                                            <C>            <C>           <C>
Revenues .................................................      $ 32,103       $ 50,322       $ 77,727
Cost of Services:
  Direct cost of services ................................        17,411         26,109         40,396
  Equity related charges .................................           239          2,780          5,519
                                                                --------       --------       --------
          Total cost of services .........................        17,650         28,889         45,915
                                                                --------       --------       --------
Gross Profit .............................................        14,453         21,433         31,812
Operating Expenses:
  Selling, general and administrative ....................         6,158          9,777         16,645
  Equity related charges .................................            22          1,998          1,564
                                                                --------       --------       --------
          Total operating expenses .......................         6,180         11,775         18,209
                                                                --------       --------       --------
Income From Operations ...................................         8,273          9,658         13,603
Other Income (Expense):
  Interest income ........................................            18            277          3,327
  Interest expense .......................................        (2,054)        (1,998)
  Other, net .............................................            88            (68)          (152)
                                                                --------       --------       --------
          Total other income (expense) ...................        (1,948)        (1,789)         3,175
                                                                --------       --------       --------

Income Before Provision for Income Taxes and Extraordinary
  Item ...................................................         6,325          7,869         16,778
Provision for Income Taxes ...............................        (3,282)        (3,208)        (6,711)
                                                                --------       --------       --------
Income Before Extraordinary Item .........................         3,043          4,661         10,067
Extraordinary Item .......................................
  Loss on debt extinguishment, net of tax benefit of $133                          (200)
                                                                --------       --------       --------
Net Income ...............................................         3,043          4,461         10,067
Other Comprehensive Income --
  Foreign currency translation adjustment ................             3             (4)            37
                                                                --------       --------       --------
Comprehensive Income .....................................      $  3,046       $  4,457       $ 10,104
                                                                --------       --------       --------
Income Before Extraordinary Item Per Common Share
  Basic ..................................................      $   0.14       $   0.20       $   0.36
                                                                ========       ========       ========
  Diluted ................................................      $   0.13       $   0.20       $   0.34
                                                                ========       ========       ========
Net Income Per Common Share
  Basic ..................................................      $   0.14       $   0.19       $   0.36
                                                                ========       ========       ========
  Diluted ................................................      $   0.13       $   0.19       $   0.34
                                                                ========       ========       ========
Shares Used in Calculation of Income Before Extraordinary
  Item and Net Income Per Common Share
  Basic ..................................................        22,500         23,056         28,110
                                                                ========       ========       ========
  Diluted ................................................        22,944         23,807         29,208
                                                                ========       ========       ========
Pro Forma Information (Unaudited)
  Pro forma provision for income taxes ...................      $  2,530
                                                                ========
  Pro forma net income ...................................      $  3,795
                                                                ========
Pro Forma Net Income Per Common Share (Unaudited)
  Basic ..................................................      $   0.17
                                                                ========
  Diluted ................................................      $   0.17
                                                                ========
</TABLE>


                 See notes to consolidated financial statements.



                                      -24-
<PAGE>   25

                       THE MANAGEMENT NETWORK GROUP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                YEAR ENDED
                                                                 -----------------------------------------
                                                                 JANUARY 2,     JANUARY 1,    DECEMBER 30,
                                                                    1999           2000           2000
                                                                 ----------     ----------    ------------
<S>                                                              <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income ...............................................      $  3,043       $  4,461       $ 10,067
  Add-back: Extraordinary item .............................                          200
                                                                  --------       --------       --------

  Income before extraordinary item .........................         3,043          4,661         10,067
  Adjustments to reconcile income before extraordinary item
    to net cash provided by operating activities:
    Depreciation and amortization ..........................           136            275            910

    Stock option and bonus share compensation ..............           261          4,778          7,083
    Income tax benefit realized upon exercise of stock
     options ...............................................                          412          1,499
    Provision for deferred income taxes ....................           637         (1,952)        (1,847)
    Provision for uncollectible advances to related party ..          (181)
    Loss on disposition of assets ..........................                            2
    Other changes in operating assets and liabilities, net
      of business acquisitions:
      Accounts receivable ..................................        (1,735)        (2,057)        (6,279)
      Accounts receivable -- unbilled ......................        (2,148)        (1,612)        (3,160)
      Other assets .........................................           (51)          (995)          (127)
      Related party receivables ............................           201
      Trade accounts payable ...............................           825            (71)        (1,377)
      Trade accounts payable -- related party ..............          (233)          (332)
      Accrued liabilities ..................................         1,257          1,857          3,182
                                                                  --------       --------       --------
         Net cash provided by operating activities .........         2,012          4,966          9,951
                                                                  --------       --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of business, net of cash acquired ............                                     (11,555)
  Acquisition of property and equipment ....................          (455)          (443)          (713)
                                                                  --------       --------       --------
         Net cash used in investing activities .............          (455)          (443)       (12,268)
                                                                  --------       --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Distributions to shareholders ............................        (4,664)
  Proceeds from long-term debt .............................        24,000
  Net borrowings under revolving credit facility ...........         2,017         (2,017)
  Deferred financing costs .................................          (553)
  Issuance of common stock, net of expenses ................        16,939         71,618         20,875
  Payments received on stockholders' note receivable .......           171
  Payments made on long-term debt ..........................                      (24,000)
  Exercise of options ......................................                          444            475
  Purchase of treasury stock ...............................       (38,733)
                                                                  --------       --------       --------
         Net cash (used in) provided by financing activities          (823)        46,045         21,350
                                                                  --------       --------       --------
Effect of exchange rate on cash and cash equivalents .......             3             (4)            27
                                                                  --------       --------       --------
Net increase in cash and cash equivalents ..................           737         50,564         19,060
Cash and cash equivalents, beginning of period .............           222            959         51,523
                                                                  --------       --------       --------
Cash and cash equivalents, end of period ...................      $    959       $ 51,523       $ 70,583
                                                                  ========       ========       ========
Supplemental disclosure of cash flow information:
  Cash paid during period for interest .....................      $  1,517       $  2,324       $
                                                                  ========       ========       ========
  Cash paid during period for taxes ........................      $  2,581       $  5,140       $  6,357
                                                                  ========       ========       ========
Supplemental disclosure of non-cash investing and financing
  transactions:
  Reinvested constructive distribution resulting from
    conversion to subchapter C corporation .................      $    713       $              $
                                                                  ========       ========       ========
  Acquisition of business:
    Fair value of assets acquired ..........................                                    $  3,664
    Liabilities incurred or assumed ........................                                    $ (2,275)
    Common stock issued ....................................                                    $  8,000
</TABLE>


                See notes to consolidated financial statements.



                                      -25-
<PAGE>   26

                       THE MANAGEMENT NETWORK GROUP, INC.

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

<TABLE>
<CAPTION>
                                                              COMMON STOCK
                                                            $.0406 PAR 1997;
                                                            NO PAR COMMENCING                 COMMON STOCK
                                                            FEBRUARY 12, 1998                  $.0006 PAR
                                                                $.001 PAR                     1997; NO PAR
                                                               COMMENCING                       COMMENCING
                                                            AUGUST 27, 1999                 FEBRUARY 12, 1998
                                                                 VOTING                        NON-VOTING             ADDITIONAL
                                                      ---------------------------     ---------------------------       PAID-IN
                                                        SHARES          AMOUNT          SHARES          AMOUNT          CAPITAL
                                                      -----------     -----------     -----------     -----------     -----------
<S>                                                   <C>             <C>             <C>             <C>             <C>
Balance, January 1, 1998                                4,500,000     $         3      18,000,000     $        11     $       399
Distributions
Other comprehensive income --
 Foreign currency translation adjustment
Repayment on stockholder's notes receivable
Conversion of non-voting stock to voting stock         18,000,000              11     (18,000,000)            (11)
Issuance of common stock, net                          13,500,000                                                          16,939
Repurchase and cancellation of treasury stock         (13,500,000)
Constructive distribution assumed to be reinvested                                                                            713
Adjustment to reflect change in par value                                  18,051                                         (18,051)
Issuance of options                                                           305
Stock compensation                                                            261
Net income

                                                      -----------     -----------     -----------     -----------     -----------
Balance, January 2, 1999                               22,500,000          18,631              --              --              --
Issuance of options                                                                                                        11,203
Exercise of options                                       231,169                                                             444
Stock compensation                                                                                                          1,416
Other comprehensive income --
 Foreign currency translation adjustment
Issuance of common stock, net                           4,686,201               4                                          72,054
Tax benefit due to exercise of stock options                                                                                  412
Adjustment to reflect change in par value                                 (18,608)                                         18,608
Net income

                                                      -----------     -----------     -----------     -----------     -----------
Balance, January 1, 2000                               27,417,370              27              --              --         104,137
Issuance of options                                                                                                           144
Exercise of options                                       276,183                                                             475
Cancellation of options                                                                                                      (982)
Exercise of warrants                                      424,098               1                                           2,819
Stock compensation                                                                                                            (49)
Other comprehensive income --
 Foreign currency translation adjustment
Issuance of common stock, net                           1,000,000               1                                          20,874
Tax benefit due to exercise of stock options                                                                                1,499
Acquisition of subsidiary                                 348,157                                                           8,000
Net income

                                                      -----------     -----------     -----------     -----------     -----------
Balance, December 30, 2000                             29,465,808     $        29              --     $        --     $   136,917
                                                      ===========     ===========     ===========     ===========     ===========
</TABLE>


<TABLE>
<CAPTION>





                                                                      ACCUMULATED
                                                                        OTHER
                                                       RETAINED      COMPREHENSIVE                   STOCKHOLDERS'
                                                       EARNINGS         INCOME          UNEARNED        NOTES
                                                       (DEFICIT)       (LOSSES)       COMPENSATION    RECEIVABLE         TOTAL
                                                      -----------    -------------    ------------   -------------    -----------
<S>                                                   <C>            <C>              <C>            <C>              <C>
Balance, January 1, 1998                              $     4,468     $        (1)             --     $      (171)    $     4,709
Distributions                                              (4,664)                                                         (4,664)
Other comprehensive income --
 Foreign currency translation adjustment                                        3                                               3
Repayment on stockholder's notes receivable                                                                   171             171
Conversion of non-voting stock to voting stock
Issuance of common stock, net                                                                                              16,939
Repurchase and cancellation of treasury stock             (38,733)                                                        (38,733)
Constructive distribution assumed to be reinvested           (713)
Adjustment to reflect change in par value
Issuance of options                                                                   $      (305)
Stock compensation                                                                                                            261
Net income                                                  3,043                                                           3,043

                                                      -----------     -----------     -----------     -----------     -----------
Balance, January 2, 1999                                  (36,599)              2            (305)             --         (18,271)
Issuance of options                                                                       (11,203)
Exercise of options                                                                                                           444
Stock compensation                                                                          2,921                           4,337
Other comprehensive income --
 Foreign currency translation adjustment                                       (4)                                             (4)
Issuance of common stock, net                                                                                              72,058
Tax benefit due to exercise of stock options                                                                                  412
Adjustment to reflect change in par value
Net income                                                  4,461                                                           4,461

                                                      -----------     -----------     -----------     -----------     -----------
Balance, January 1, 2000                                  (32,138)             (2)         (8,587)             --          63,437
Issuance of options                                                                          (144)
Exercise of options                                                                                                           475
Cancellation of options                                                                       982
Exercise of warrants                                                                                                        2,820
Stock compensation                                                                          4,311                           4,262
Other comprehensive income --
 Foreign currency translation adjustment                                       37                                              37
Issuance of common stock, net                                                                                              20,875
Tax benefit due to exercise of stock options                                                                                1,499
Acquisition of subsidiary                                                                                                   8,000
Net income                                                 10,067                                                          10,067

                                                      -----------     -----------     -----------     -----------     -----------
Balance, December 30, 2000                            $   (22,071)    $        35     $    (3,438)    $        --     $   111,472
                                                      ===========     ===========     ===========     ===========     ===========
</TABLE>


                 See notes to consolidated financial statements



<PAGE>   27


                       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 formed on April 1, 1993 as a management consulting firm
specializing in global competitive telecommunications. Primary services include
serving wireless and wireline communications carriers in all industry segments,
and the technology and investment firms that support the telecommunications
industry. A majority of the Company's revenues are to customers in the United
States, however the Company also provides services to customers in Europe,
specifically the United Kingdom, and other foreign countries. The Company's
business is international in scope with corporate offices 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, and TWG
Marketing, Inc. acquired on September 5, 2000. All significant intercompany
accounts and transactions have been eliminated in consolidation.

     Fiscal Year -- Effective January 1, 1998, the Company adopted a 52/53 week
fiscal year, changing the year-end date from December 31, to the Saturday
nearest December 31. The fiscal years ended December 30, 2000, January 1, 2000
and January 2, 1999 each had 52 weeks and are referred to herein as fiscal year
2000, 1999 and 1998, respectively. TMNG-Europe and TMNG-Canada maintain year-end
dates of December 31.

     Revenue Recognition -- Time and materials service revenues and related time
and materials service costs are recorded in the period in which the service is
performed. Fixed price service contract revenues and related costs are
recognized upon contract completion under the completed contract method.

     The Company enters into both time and materials and fixed price contracts
with its customers. A substantial majority of TMNG's contracts are based upon
time and materials with a not to exceed total contract price. Under a time and
materials contract the customer pays a negotiated daily rate for all services
performed plus expenses incurred. Under a fixed price contract the customer pays
a predetermined fixed price for all services performed regardless of the
professional time required. Fixed price contracts generally involve immaterial
amounts and are of short duration.

     Prior to January 3, 1999 TMNG subcontracted with several companies (five of
which were related parties to TMNG through certain common ownership or are owned
by employees of TMNG) to provide consultants acting as independent subject
matter experts to render the services required under the customer contracts.
These subcontracts were on a time and materials basis, contained
confidentiality/noncompete provisions and could be terminated by either party on
30 days prior notice.

     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.

     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 and Goodwill -- 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. 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
is recorded at cost less accumulated amortization calculated using the
straight-line method over ten years. The Company, using its best estimates based
on reasonable and supportable assumptions and projections, reviews for
impairment long-lived assets and certain identifiable intangibles to be held and
used whenever events or changes in circumstances indicate that the carrying
amount of its assets might not be recoverable, and has concluded no financial
statement adjustment is required.



                                      -26-
<PAGE>   28

     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 accounts 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 for
stock-based compensation for non-employees in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation."

     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 expected fair value of this warrant is
approximately $5.2 million, of which $2.8 million was recognized in fiscal year
2000 as equity related charges in operations, with the remainder to be
recognized as future equity related charges in operations. Additionally on
December 10, 1999, the Company entered into a consulting services agreement with
this customer under which such customer will commit to $22 million of consulting
fees over a three-year period commencing January 1, 2000. On November 8, 2000,
the customer exercised all warrants under the grant.

     Net Income Per Share -- Basic net income per share was computed by dividing
net income by the weighted average number of common shares outstanding for the
period. Diluted net income per share reflects the potential dilution of
securities by adding other common stock equivalents, including stock options, in
the weighted average number of common shares outstanding for a period, if
dilutive.

     The reconciliation of the net income and weighted average common shares
outstanding included in the computation of basic and diluted net income per
common share for fiscal year 1998, fiscal year 1999 and fiscal year 2000 is as
follows (amounts in thousands except per share data).

<TABLE>
<CAPTION>
                                                                      FISCAL         FISCAL         FISCAL
                                                                       YEAR           YEAR           YEAR
                                                                       1998           1999           2000
                                                                     --------       --------       --------
<S>                                                                  <C>            <C>            <C>
Net income for basic and diluted earnings per share:
  Income before taxes and extraordinary item ..................      $  6,325       $  7,869       $ 16,778
  Income tax provision ........................................        (3,282)        (3,208)        (6,711)
                                                                     --------       --------       --------
  Income before extraordinary item ............................         3,043          4,661         10,067
  Extraordinary item ..........................................                         (200)
                                                                     --------       --------       --------
  Net income ..................................................      $  3,043       $  4,461       $ 10,067
                                                                     ========       ========       ========

Weighted average shares of common stock outstanding:
  Weighted average shares of common stock outstanding for
     basic earnings per share .................................        22,500         23,056         28,110
</TABLE>



                                      -27-
<PAGE>   29

<TABLE>
<S>                                                                  <C>            <C>            <C>
  Effect of stock options .....................................           444            659            946
  Effect of warrants ..........................................                           92            152
                                                                     --------       --------       --------
  Weighted average shares of common stock outstanding for
     diluted earnings per share ...............................        22,944         23,807         29,208
                                                                     ========       ========       ========
Basic earnings per share:
  Income before extraordinary item ............................      $   0.14       $   0.20       $   0.36
  Extraordinary item ..........................................                        (0.01)
                                                                     --------       --------       --------
  Net income ..................................................      $   0.14       $   0.19       $   0.36
                                                                     ========       ========       ========
Diluted earnings per share:
  Income before extraordinary item ............................      $   0.13       $   0.20       $   0.34
  Extraordinary item ..........................................                        (0.01)
                                                                     --------       --------       --------
  Net income ..................................................      $   0.13       $   0.19       $   0.34
                                                                     ========       ========       ========
</TABLE>

     New Accounting Standards -- The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS No. 133"). SFAS No. 133 was amended
by SFAS No. 137 and SFAS No. 138 which requires adoption of the SFAS
requirements for fiscal years beginning after June 15, 2000. This standard
establishes accounting and reporting requirements for derivative financial
instruments and hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The recognition of gains
or losses resulting from changes in the values of those derivative instruments
is based on the use of each derivative instrument and whether it qualifies for
hedge accounting. As of December 30, 2000, the Company had no derivative
instruments. As a result, adoption of SFAS No. 133, as amended by SFAS Nos. 137
and 138, by the Company on December 30, 2000 did not have a material effect to
the Company's consolidated financial statements.

     Reclassification -- In July, 2000, the Emerging Issues Task Force (the
"EITF") reached a consensus that the reduction of income tax paid as a result of
the deduction triggered by employee exercise of non-qualified stock options
should be classified as an operating cash flow. The Company has adopted this
presentation and has reclassified amounts in the prior years' consolidated
statements of cash flows. This reclassification has no effect on Net Income or
Stockholders' Equity as previously reported.

     Pro Forma Information -- Pro forma information included in the consolidated
statements of income and comprehensive income is unaudited and included to
reflect the pro forma effect of providing income taxes on previously untaxed
subchapter "S" net income. This effect is calculated as follows:

        Pro forma income tax expense -- assumed 40% effective tax rate.

        Pro forma basic and diluted common shares -- include the effect of
        common share issuance and stock option exercise in accordance with SFAS
        No. 128, "Earnings per Share."

2. CAPITAL STRUCTURE

     On September 5, 2000, the Company completed its acquisition of The
Weathersby Group, Inc. ("TWG"), a Maryland corporation, and issued 348,157
shares of the Company's voting common stock in connection with the purchase. The
fair market value of the issued stock was approximately $8.0 million.

     On August 2, 2000, the Company closed a secondary public offering of
3,000,000 shares of common stock, including 1,000,000 shares offered by the
Company. The net proceeds to the Company from the secondary public offering,
after deducting applicable underwriting discounts and offering expenses, was
approximately $21.0 million. Of the remaining shares, approximately 1,800,000
were offered by Behrman Capital II, LP ("Behrman") and the balance was offered
by certain other selling stockholders. The Company did not receive any of the
proceeds from the sales of the shares sold by the existing stockholders.



                                      -28-
<PAGE>   30

     On November 22, 1999, the Company completed an initial public offering of
5,307,250 shares of Common Stock at an initial offering price of $17.00 per
share. Of the 5,307,250 shares of Common Stock offered, 4,615,000 shares were
issued and sold by the Company and 692,250 shares were sold by existing
stockholders. Prior to the initial public offering, there was no public market
for the Company's capital stock.

     The Company did not receive any of the proceeds from the sales of the
shares sold by the existing stockholders. The net proceeds to the Company from
the initial public offering, after deducting applicable underwriting discounts
and offering expenses, was approximately $71.4 million. Approximately $22.3
million of the net proceeds to the Company was used to repay outstanding debt.

     Effective November 8, 1999 the Company amended its Certificate of
Incorporation to give effect for a 1-for-2 reverse stock split for all issued
and outstanding shares of voting and non-voting common stock. All issued and
outstanding share and per share data has been retroactively adjusted to reflect
this reverse split.

     Also in fiscal year 1999, the board of directors approved the amendment of
the Company's Certificate of Incorporation, which included, among other things,
reincorporation of the Company in the State of Delaware and a change in the par
values and total number of shares of common stock and preferred stock of which
the Company is authorized to issue.

     In February 1998, TMNG entered into a series of transactions that resulted
in a leveraged recapitalization (the "recapitalization") of the Company. Prior
to the recapitalization, the Company made distributions of approximately $4.7
million to its stockholders. In connection with the recapitalization, TMNG
entered into borrowing arrangements for $29 million from a syndicate of bankers.
Concurrently, Behrman organized a transitory corporation solely for the purpose
of effecting the recapitalization and capitalized it with $20 million. The
transitory corporation was then merged into TMNG for 13.5 million shares of TMNG
stock. TMNG then acquired 13.5 million shares from the original stockholders for
$38.7 million as treasury stock which were then retired. The Company accounted
for this series of transactions as a financial restructuring/recapitalization
requiring continuation of the historical cost basis.


 3. MAJOR CUSTOMERS AND SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

     TMNG currently operates in one segment, the Company has determined that it
has a single reportable operating segment, consulting to the global
telecommunications industry, based on the way management makes decisions,
allocates resources and assesses performance.

     Major customers in terms of significance to TMNG's revenues (i.e. in excess
of 10% of revenues) for fiscal years 1998, 1999 and 2000, and accounts
receivable as of January 1, 2000 and December 30, 2000 are as follows (amounts
in thousands):


<TABLE>
<CAPTION>
                                        REVENUES                      ACCOUNTS RECEIVABLE
                          ------------------------------------     -------------------------
                           FISCAL        FISCAL        FISCAL
                            YEAR          YEAR          YEAR       JANUARY 1,   DECEMBER 30,
                            1998          1999          2000          2000          2000
                          --------      --------      --------     ----------   ------------
<S>                       <C>           <C>           <C>          <C>          <C>
Customer A .........      $  4,138
Customer B .........         4,093
Customer C .........         5,412      $ 19,925      $ 13,929      $  4,598      $  1,469
Customer D .........                       7,322                       1,550
</TABLE>

     Substantially all of TMNG's receivables are obligations of companies in the
telecommunications industry. The Company generally does not require collateral
or other security on their accounts receivable. The credit risk on these
accounts is controlled through credit approvals, limits and monitoring
procedures.

     A non-executive member of the TMNG board of directors also serves as a
non-executive director of Customer C.



                                      -29-
<PAGE>   31

                       THE MANAGEMENT NETWORK GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     Revenues earned in the United States and internationally based on the
location where the services are performed for fiscal year 1998, fiscal year 1999
and fiscal year 2000 are as follows: (amounts in thousands):


<TABLE>
<CAPTION>
                               FISCAL YEAR 1998              FISCAL YEAR 1999         FISCAL YEAR 2000
                            ----------------------      -------------------------   ----------------------
                                                                       INCOME
                                           INCOME                   BEFORE INCOME                  INCOME
                                           BEFORE                    TAXES AND                     BEFORE
                                           INCOME                   EXTRAORDINARY                  INCOME
                            REVENUES       TAXES        REVENUES        ITEM        REVENUES       TAXES
                            --------      --------      --------    -------------   --------      --------
<S>                         <C>           <C>           <C>         <C>             <C>           <C>
United States ........      $ 26,914      $  5,336      $ 36,375      $  5,688      $ 59,519      $ 12,847
International:
  Switzerland ........           758           150         7,322         1,145         5,034         1,087
  Canada .............         3,541           697         2,211           346         2,078           448
  Ireland ............                                     1,826           286           965           208
  United Kingdom .....           448            88         1,567           245         7,585         1,638
  Argentina ..........                                                                 2,064           446
  Other ..............           442            54         1,021           159           482           104
                            --------      --------      --------      --------      --------      --------
          Total ......      $ 32,103      $  6,325      $ 50,322      $  7,869      $ 77,727      $ 16,778
                            ========      ========      ========      ========      ========      ========
</TABLE>

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

 4. PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                         JANUARY 1,   DECEMBER 31,
                                                            2000          2000
                                                         ----------   ------------
                                                                 (000'S)
<S>                                                      <C>          <C>
Furniture and fixtures.................................     $224        $  354
Software and computer equipment........................      514         1,260
Leasehold improvements.................................      159           164
                                                            ----         -----
                                                             897         1,778
Less: accumulated depreciation and amortization........      191           480
                                                            ----         -----
                                                            $706        $1,298
                                                            ====        ======
</TABLE>

     Depreciation and amortization expense was approximately $30,000, $161,000
and $289,000 for fiscal year 1998, fiscal year 1999 and fiscal year 2000,
respectively.

 5. BUSINESS COMBINATIONS

     On September 5, 2000, the Company completed its acquisition of The
Weathersby Group, Inc. ("TWG"), a Maryland corporation. TWG provides a full
range of marketing consulting services to various U.S. telecommunications
companies. Consulting services offered include product development and
positioning, strategy, CRM and loyalty programs, communications, and channel
management, among other services.


                                      -30-
<PAGE>   32

                       THE MANAGEMENT NETWORK GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


The acquisition, recorded under the purchase method of accounting, included the
purchase of all outstanding shares of TWG, which resulted in a total purchase
price of approximately $19.2 million consisting of $11.2 million cash and $8.0
million in TMNG stock. Additionally, TMNG incurred direct costs of $1.5 million
related to the acquisition. A portion of the purchase price has been allocated
to assets acquired and liabilities assumed based on estimated fair value at the
date of acquisition. The excess of the purchase price over the estimated fair
value of the net assets acquired has been recorded as goodwill of $18.6 million
and is being amortized over ten years on a straight-line basis. The acquisition
also provides for contingent consideration of up to an additional $9.0 million,
consisting of up to $2.5 million cash consideration and $6.5 million stock
consideration, contingent on TWG achieving certain performance targets in 2001.
Goodwill consists of the following as of December 30, 2000:


<TABLE>
<CAPTION>
                                                             DECEMBER 30,
                                                                 2000
                                                             ------------
                                                               (000'S)
<S>                                                          <C>
Goodwill..................................................     $18,637
Less:  accumulated amortization...........................        (621)
                                                               -------
                                                               $18,016
                                                               =======
</TABLE>

The following unaudited pro forma results of operations assumes that the TWG
acquisition occurred at the beginning of the respective periods. 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 the respective periods without regard to the then
current levels of business activity of TWG 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.

<TABLE>
<CAPTION>
                                                                                (unaudited)
                                                                       ---------------------------
                                                                            Fiscal Year Ended
(in thousands, except per share amounts)                               January 1,     December 30,
                                                                          2000            2000
                                                                       ----------     ------------
<S>                                                                    <C>            <C>
Total revenues                                                         $   61,443      $   87,716
Income before extraordinary item                                            4,021           9,692
Income before extraordinary item, excluding goodwill amortization           4,940          10,810
Net income                                                                  3,821           9,692
Basic income before extraordinary item per common share                $     0.17      $     0.34
Diluted income before extraordinary item per common share              $     0.17      $     0.33
Basic net income per common share                                      $     0.16      $     0.34
Diluted net income per common share                                    $     0.16      $     0.33
</TABLE>

 6. INCOME TAXES

     For the fiscal year 1998, fiscal year 1999 and fiscal year 2000, the income
tax provision consists of the following (amounts in thousands):



                                      -31-
<PAGE>   33

<TABLE>
<CAPTION>
                                             FISCAL         FISCAL         FISCAL
                                              YEAR           YEAR           YEAR
                                              1998           1999           2000
                                            --------       --------       --------
<S>                                         <C>            <C>            <C>
Federal
  Current ............................      $  2,090       $  3,602       $  5,270
  Deferred tax benefit ...............          (391)        (1,708)        (1,507)
                                            --------       --------       --------
                                               1,699          1,894          3,763
State
  Current ............................           491            990          1,523
  Deferred tax benefit ...............           (40)          (244)          (215)
                                            --------       --------       --------
                                                 451            746          1,308
Foreign
  Current ............................            64            568          1,765
  Deferred tax benefit ...............                                        (125)
                                            --------       --------       --------
                                                  64            568          1,640
                                            --------       --------       --------
                                               2,214          3,208          6,711

Deferred recorded on conversion to
 subchapter "C" corporation ..........         1,068
                                            --------       --------       --------
Total ................................      $  3,282       $  3,208       $  6,711
                                            ========       ========       ========
</TABLE>

     The following is a reconciliation between the provision for income taxes
and the amounts computed at the statutory federal income tax rate (amounts in
thousands):

<TABLE>
<CAPTION>
                                                  FISCAL YEAR              FISCAL YEAR             FISCAL YEAR
                                                      1998                     1999                    2000
                                             -------------------       ------------------      ------------------
                                              AMOUNT         %          AMOUNT        %         AMOUNT        %
                                             --------       ----       --------      ----      --------      ----
<S>                                          <C>            <C>        <C>           <C>       <C>           <C>
Computed expected federal income
 tax expense ..........................      $  2,214       35.0       $  2,754      35.0      $  5,872      35.0
State income tax expense, net of
 federal benefit ......................           285        4.5            437       5.6           839       5.0
Conversion to subchapter "C"
 corporation ..........................         1,068       16.9
Subchapter "S" corporation earnings
 (January 1, 1998 to February 11, 1998)          (318)      (5.0)
Other .................................            33        0.5             17       0.2
                                             --------       ----       --------      ----      --------      ----
          Total .......................      $  3,282       51.9       $  3,208      40.8      $  6,711      40.0
                                             ========       ====       ========      ====      ========      ====
</TABLE>

     Items giving rise to the provision for deferred income taxes (benefit)
excluding the deferred tax expense recorded on conversion to subchapter "C"
corporation in connection with the recapitalization (amounts in thousands):



                                      -32-
<PAGE>   34

<TABLE>
<CAPTION>
                                                       FISCAL         FISCAL         FISCAL
                                                        YEAR           YEAR           YEAR
                                                        1998           1999           2000
                                                      --------       --------       --------
<S>                                                   <C>            <C>            <C>
Bad debt reserve ...............................      $    (20)      $    (94)      $   (158)
Stock option compensation expense ..............          (104)        (1,492)        (1,168)
Change from cash to accrual tax basis accounting          (270)          (262)          (274)
Goodwill .......................................                                         (83)
Valuation allowance ............................                                        (125)
Other ..........................................           (37)          (104)           (39)
                                                      --------       --------       --------
          Total ................................      $   (431)      $ (1,952)      $ (1,847)
                                                      ========       ========       ========
</TABLE>

     The significant components of deferred income tax assets and liabilities
and the related balance sheet classifications, as of January 1, 2000 and
December 30, 2000 are as follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                        JANUARY 1,    DECEMBER 30,
                                                           2000           2000
                                                        ----------    ------------
<S>                                                     <C>           <C>
Current deferred tax assets (liabilities):
  Bad debt reserve ................................      $    140       $    299
  Accrued expenses ................................           137            127
  Change from cash to accrual tax basis
     accounting -- current portion ................          (274)          (274)
                                                         --------       --------
          Net current deferred tax asset ..........      $      3       $    152
                                                         ========       ========
Non-current deferred tax assets (liabilities):
  Change from cash to accrual tax basis accounting       $   (274)
  TMNG -- Europe -- cumulative net operating losses           125       $    125
  Stock option compensation expense ...............         1,596          2,765
  Goodwill ........................................                           83
  Reserves ........................................                           64
  Other ...........................................           (10)           (27)
                                                         --------       --------
                                                            1,437          3,010
  Valuation allowance .............................          (125)
                                                         --------       --------
          Net non-current deferred tax asset ......      $  1,312       $  3,010
                                                         ========       ========
</TABLE>

     The Company had a foreign net operating loss carryforward totaling
approximately $417,000 as of December 30, 2000 and January 1, 2000. The
utilization of such net operating loss carryforwards is restricted to the
earnings of specific foreign subsidiaries. As of January 1, 2000 a valuation
allowance of $125,000 had been established for the Company's deferred income tax
asset related to the future benefit of net operating losses related to TMNG --
Europe, as management could not assess the likelihood that the future tax
benefit would be realized in that tax jurisdiction. As foreign operations became
profitable in fiscal year 2000, management concluded that it was more likely
than not that the net operating loss carryforward could be utilized in the
foreign jurisdiction and, therefore, released the valuation allowance during the
year.

     The Company converted to a subchapter "C" corporation for income tax
reporting purposes effective February 12, 1998. Deferred tax liabilities of
approximately 1.1 million were recorded on February 12, 1998, in conjunction
with the conversion, for the cumulative temporary differences. Prior to February
12, 1998, the Company elected to be treated as a subchapter "S" corporation
under the Internal Revenue Code and thus was treated substantially as a
partnership for income tax purposes. Accordingly, until the time of conversion
to a subchapter "C" corporation, the individual stockholders were responsible
for their proportionate share of the corporate taxable income or loss for
federal and state income tax reporting purposes.


 7. OPERATING LEASES



                                      -33-
<PAGE>   35

     The Company leases office facilities and an automobile under non-cancelable
operating leases expiring at various dates through August 2005. Total rental
expense was approximately $40,000, $110,000 and $253,000 for fiscal year 1998,
fiscal year 1999 and fiscal year 2000, respectively. As of December 30, 2000,
the future minimum payments under operating leases are as follows (amounts in
thousands):



                        FISCAL YEAR
                        -----------

<TABLE>
<S>                                                              <C>
2001........................................................     $  358
2002........................................................        262
2003........................................................        254
2004........................................................        132
2005........................................................         70
                                                                 ------
                                                                 $1,076
                                                                 ======
</TABLE>

 8. STOCK OPTION PLAN AND STOCK BASED COMPENSATION

     The Company has 3,321,000 shares of the Company's Common Stock authorized
for issuance under the Company's 1998 Equity Incentive Plan (the "1998 Plan").
The 1998 Plan is the result of the combination of two plans during fiscal 1999.
The 1998 Plan provides the Company's Common Stock for the granting of incentive
stock options and nonqualified stock options to employees, and nonqualified
stock options 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.
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.

FISCAL YEAR 1998 OPTIONS GRANTED -- 1998 PLAN

<TABLE>
<CAPTION>
                                                                                          WEIGHTED
                                                             WEIGHTED     WEIGHTED        AVERAGE
                                                   NUMBER    AVERAGE    AVERAGE FAIR     REMAINING
                                                     OF      EXERCISE   VALUE AT DATE   CONTRACTUAL
                                                   SHARES     PRICE       OF GRANT      LIFE (YEARS)
                                                   -------   --------   -------------   ------------
<S>                                                <C>       <C>        <C>             <C>
Exercise price equals fair market value:
  Granted during fiscal year 1998............      889,750    $1.48         $1.48            --
  Outstanding at January 2, 1999.............      889,750    $1.48         $1.48            --
  Exercisable at January 2, 1999.............           --       --            --            --
  Outstanding at January 1, 2000.............      736,081    $1.48         $1.48          8.50
  Options forfeited during fiscal year
     1999....................................       22,500    $1.48         $1.48            --
  Exercisable at January 1, 2000.............      189,581    $1.48         $1.48            --
  Exercised during fiscal year 1999..........      131,169    $1.48         $1.48            --
  Outstanding at December 30, 2000...........      547,434    $1.48         $1.48          7.51
  Options forfeited during fiscal year
     2000....................................       32,501    $1.48         $1.48            --
  Exercisable at December 30, 2000...........      293,340    $1.48         $1.48            --
  Exercised during fiscal year 2000..........      156,146    $1.48         $1.48            --
Exercise price less than fair market value:
  Granted during fiscal year 1998............      210,000    $1.52         $3.50            --
  Outstanding at January 2, 1999.............      210,000    $1.52         $3.50            --
  Exercisable at January 2, 1999.............           --       --            --            --
  Outstanding at January 1, 2000.............      210,000    $1.52         $3.50          9.00

  Exercisable at January 1, 2000.............       70,000    $1.52         $3.50            --
  Outstanding at December 30, 2000...........      174,168    $1.52         $3.50          8.00
  Options forfeited during fiscal year
     2000....................................        3,334    $1.48         $3.50            --
  Exercisable at December 30, 2000...........       45,831    $1.53         $3.50            --
</TABLE>



                                      -34-
<PAGE>   36

<TABLE>
<S>                                                <C>       <C>        <C>             <C>
  Exercised during fiscal year 2000..........       32,498    $1.48         $3.50            --
</TABLE>

FISCAL YEAR 1999 OPTIONS GRANTED -- 1998 PLAN


<TABLE>
<CAPTION>
                                                                                            WEIGHTED
                                                              WEIGHTED     WEIGHTED         AVERAGE
                                                   NUMBER     AVERAGE    AVERAGE FAIR      REMAINING
                                                     OF       EXERCISE   VALUE AT DATE    CONTRACTUAL
                                                   SHARES      PRICE       OF GRANT      LIFE (YEARS)
                                                  ---------   --------   -------------   ------------
<S>                                               <C>         <C>        <C>             <C>
Exercise price equal to fair market value:
  Granted during fiscal year 1999..........          10,000   $32.63        $32.63             --
  Outstanding at January 1, 2000...........          10,000   $32.63        $32.63          10.00
  Exercisable at January 1, 2000...........              --       --            --             --
  Outstanding at December 30, 2000.........          10,000   $32.63        $32.63           9.00
  Exercisable at December 30, 2000.........              --       --            --             --
Exercise price less than fair market value:
  Granted during fiscal year 1999..........       1,174,625    $2.38        $10.62             --
  Outstanding at January 1, 2000...........       1,074,625    $2.37        $10.71           9.69
  Exercisable at January 1, 2000...........          37,500    $2.00        $ 8.90             --
  Exercised during fiscal year 1999........         100,000    $2.50        $ 9.68             --
  Outstanding at December 30, 2000.........         897,836    $2.35        $10.62           8.69
  Options forfeited during fiscal year
   2000....................................          89,250    $2.68        $11.91             --
  Exercisable at December 30, 2000.........         201,842    $2.37        $10.44             --
  Exercised during fiscal year 2000........          87,539    $2.23        $10.29             --
</TABLE>

 FISCAL YEAR 2000 OPTIONS GRANTED -- 1998 PLAN


<TABLE>
<CAPTION>
                                                                                      WEIGHTED
                                                         WEIGHTED     WEIGHTED        AVERAGE
                                               NUMBER    AVERAGE    AVERAGE FAIR      REMAINING
                                                 OF      EXERCISE   VALUE AT DATE    CONTRACTUAL
                                               SHARES     PRICE       OF GRANT      LIFE (YEARS)
                                               -------   --------   -------------   ------------
<S>                                          <C>         <C>        <C>             <C>
Exercise price equals fair market value:
  Granted during fiscal year 2000.........   1,173,500   $20.23        $20.23             --
  Outstanding at December 30, 2000........   1,160,000   $20.22        $20.22           9.43
  Exercisable at December 30, 2000........     200,000   $22.56        $22.56             --
  Options forfeited during fiscal year
     2000.................................      13,500   $21.42        $21.42             --
Exercise price less than fair market value:
  Granted during fiscal year 2000..........      2,500   $20.00        $22.56
  Outstanding at December 30, 2000...........    2,500   $20.00        $22.56           9.04
  Exercisable at December 30, 2000...........       --       --            --             --
</TABLE>

     During fiscal year 2000, the Company authorized 1,000,000 shares of the
Company's common stock 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. Vesting and exercise provisions are
determined by the board of directors. Options granted under the plan become
exercisable over a four year period beginning on the date of grant and have a
maximum term of ten years.

FISCAL YEAR 2000 OPTIONS GRANTED -- 2000 SUPPLEMENTAL STOCK PLAN

<TABLE>
<CAPTION>
                                                                                      WEIGHTED
                                                         WEIGHTED     WEIGHTED        AVERAGE
                                               NUMBER    AVERAGE    AVERAGE FAIR     REMAINING
                                                 OF      EXERCISE   VALUE AT DATE   CONTRACTUAL
                                               SHARES     PRICE       OF GRANT      LIFE (YEARS)
                                               -------   --------   -------------   ------------
<S>                                            <C>       <C>        <C>             <C>
Exercise price equals fair market value:
</TABLE>



                                      -35-
<PAGE>   37

<TABLE>
<S>                                            <C>       <C>        <C>             <C>
  Granted during fiscal year 2000.........     295,000   $18.70        $18.70             --
  Outstanding at December 30, 2000........     295,000   $18.70        $18.70           9.73
  Exercisable at December 30, 2000........          --       --            --             --
</TABLE>

     The Company follows APB No. 25 to account for the employee stock purchase
plan and for employee and certain non-employee director's stock options. Options
granted prior to December 8, 1998 were issued at fair value. Options granted
subsequent to December 7, 1998 were issued at less than fair value. One option
grant in fiscal year 2000 was issued at less than fair value, the remaining
grants were issued at fair value. In connection with APB 25 grants issued in
fiscal years 1998, 1999 and 2000, the Company recorded unearned compensation of
approximately $305,000, $11.2 million and $144,000, respectively, 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.
Compensation expense for fiscal year 1998 was insignificant due to the short
period the grants with unearned compensation were outstanding.

      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, Accounting for Stock Based Compensation.
Under SFAS 123, stock options are valued at grant date using the Black-Scholes
option pricing model, and this cost is recognized ratably over the vesting
period. Consequently, the cost of these options are 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 year 1998, fiscal year 1999
and fiscal year 2000 was estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                   FISCAL YEAR 1998    FISCAL YEAR 1999       FISCAL YEAR 2000
                                   ----------------    ----------------       ----------------
<S>                                <C>                 <C>                  <C>
Expected volatility factor.....           55%                 60%                    95%
Risk-free interest rate........      4.24% - 5.65%       4.56% - 5.60%          4.86% - 6.69%
Expected life of options.......         5 years             5 years                5 years
Expected life of stock issued
 under employee stock purchase
 plan..........................                                             0.5 years -- 2.0 years
Expected dividend rate.........            0%                  0%                     0%
</TABLE>

     The Company recognizes compensation cost over the vesting periods. These
options have resulted in equity related charges to operations of approximately
$261,000, $4.3 million and $4.3 million for fiscal year 1998, fiscal year 1999
and fiscal year 2000, respectively. These expenses have been allocated among
various expense categories.

     During fiscal year 2000, the Company initiated an employee stock purchase
program 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 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 year 2000 no shares were purchased under the
plan, as the first six month interval concludes on May 1, 2001. At December 30,
2000, 214,000 shares were reserved for future issuance. The employee stock
purchase plan is classified as a non-compensatory plan under APB 25.

     If compensation cost for the Company's APB 25 grants and the employee stock
purchase program had been determined under SFAS No. 123, based upon the fair
value at the grant date, consistent with the Black-Scholes option pricing
methodology using the assumptions above, the Company's net income for fiscal
year 1998, fiscal year 1999 and fiscal year 2000 would have decreased by
approximately $66,000, $280,000 and $4.2 million, respectively.

     For purposes of pro forma disclosures, the estimated fair value of options
is amortized to pro forma expense over the options' vesting period. Pro forma
information for fiscal year 1998, fiscal year 1999 and fiscal year 2000 (in
thousands, except per share amounts):



                                      -36-
<PAGE>   38

<TABLE>
<CAPTION>
                                                        FISCAL        FISCAL        FISCAL
                                                         YEAR          YEAR          YEAR
                                                         1998          1999          2000
                                                       --------      --------      --------
<S>                                                    <C>           <C>           <C>
Net Income before extraordinary item:
  As reported ...................................      $  3,043      $  4,661      $ 10,067
                                                       ========      ========      ========
  Pro forma .....................................      $  2,977      $  4,381      $  5,867
                                                       ========      ========      ========
Basic and diluted net income before extraordinary
  item per share:
  Basic .........................................      $   0.14      $   0.20      $   0.36
                                                       ========      ========      ========
  Diluted .......................................      $   0.13      $   0.20      $   0.34
                                                       ========      ========      ========
Basic and diluted pro forma net income before
  extraordinary item per share:
  Basic .........................................      $   0.13      $   0.19      $   0.21
                                                       ========      ========      ========
  Diluted .......................................      $   0.13      $   0.18      $   0.20
                                                       ========      ========      ========
</TABLE>

     During fiscal year 1999, the Company issued 71,201 shares of common stock
representing bonus compensation to certain employees. The Company calculated
expense related to these shares at the fair value of the shares at the date of
issuance. Accordingly, compensation expense of $441,000 was charged to
operations in 1999. There were no such issuances in fiscal year 2000.

10. RELATED PARTY TRANSACTIONS

     Four members of the TMNG board of directors are also directors of customers
with which TMNG does business. During fiscal year 1998, fiscal year 1999 and
fiscal year 2000, the Company earned revenues from these customers of
approximately $330,000, $2.6 million, and $16.1 million, respectively.
Receivables from these customers at January 1, 2000 and December 30, 2000 were
approximately $396,000 and $1.3 million, respectively. Additionally, venture
funds affiliated with TMNG's majority shareholder hold shares of preferred stock
of this customer that are convertible into approximately 25% of the customer's
outstanding common stock.

     Prior to January 3, 1999 TMNG subcontracted with five companies owned by
certain stockholders and employees of TMNG. These companies provided consultants
(acting as independent subject matter experts) to TMNG to render consulting
services to TMNG customers. Total services received from these companies was
approximately $14.9 million in fiscal 1998 and are included in cost of services
in the statements of income and comprehensive income representing the fair value
of the services provided.

     During fiscal year 1998 and fiscal year 1999, TMNG made payments of
approximately $77,000 and $105,000, respectively, to a company owned by a
significant stockholder of TMNG. Such payments were for services rendered under
consulting agreements between TMNG and the respective affiliated company and/or
shareholder. These expenses were classified as selling, general and
administrative in the accompanying statements of income and comprehensive
income.


11. CONTINGENCIES

     During 1997, one of the Company's customers entered Chapter 11 of the
bankruptcy code. According to the bankruptcy code, certain payments made within
a specified period of time prior to the date of the bankruptcy filing and
payments made subsequent to the date of the bankruptcy filing which are not
previously authorized, could be declared "preference payments". Under certain
conditions, preference payments could be required to be remitted to the
bankruptcy trustee for satisfaction of general creditor claims. During fiscal
year 1998, the bankruptcy trustee filed suit against the Company for
preferential payments received prior to and subsequent to the bankruptcy filing,
and related damages of approximately $1.85 million. The total amount of payments
received from this customer during the specified preference period aggregated
approximately $320,000 and which may be declared preference payments. In the



                                      -37-
<PAGE>   39

opinion of management, resolution of this legal action will not have a material
adverse effect on the Company's consolidated results of operations, cash flows
or financial position.

     The Company may become involved in various legal and administrative actions
arising in the normal course of business. These could include actions raised by
taxing authorities challenging the employment status of consultants utilized by
the Company. While the resolution of any of such actions or the matter described
above may have an impact on the financial results for the period in which it is
resolved, 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.

12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     In management's opinion, the interim financial data below reflects all
adjustments necessary to fairly state the results of the interim period
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>
                                                                   2000 QUARTERS ENDED
                                                  -------------------------------------------------------
                                                  April 1,        July 1,     September 30,  December 30,
                                                  --------       --------     -------------  ------------
<S>                                               <C>            <C>          <C>            <C>
Revenues ...................................      $ 16,402       $ 19,464       $ 20,003       $ 21,858
Cost of Services:
  Direct cost of services ..................         8,529         10,109         10,300         11,458
  Equity related charges ...................         1,916          2,001          1,241            361
                                                  --------       --------       --------       --------
          Total cost of services ...........        10,445         12,110         11,541         11,819
                                                  --------       --------       --------       --------
Gross Profit ...............................         5,957          7,354          8,462         10,039
Operating Expenses:
  Selling, general and administrative ......         3,471          3,977          4,344          4,853
  Equity related charges ...................           418            392            392            362
                                                  --------       --------       --------       --------
          Total operating expenses .........         3,889          4,369          4,736          5,215
                                                  --------       --------       --------       --------
Income From Operations .....................         2,068          2,985          3,726          4,824
Other Income (Expense):

  Interest income ..........................           849            777          1,279            422
  Other, net ...............................          (135)             8             95           (120)
                                                  --------       --------       --------       --------
          Total other income (expense) .....           714            785          1,374            302
                                                  --------       --------       --------       --------
Income Before Provision for Income Taxes and
 Extraordinary item ........................         2,782          3,770          5,100          5,126
Provision for Income Taxes .................        (1,104)        (1,517)        (2,040)        (2,050)
                                                  --------       --------       --------       --------
Net Income .................................         1,678          2,253          3,060          3,076
Other Comprehensive Income --
  Foreign currency translation adjustment ..           (16)           (29)            13             69
                                                  --------       --------       --------       --------
Comprehensive Income .......................      $  1,662       $  2,224       $  3,073       $  3,145
                                                  ========       ========       ========       ========
Net Income Per Common Share
  Basic ....................................      $   0.06       $   0.08       $   0.11       $   0.11
                                                  ========       ========       ========       ========
  Diluted ..................................      $   0.06       $   0.08       $   0.10       $   0.10
                                                  ========       ========       ========       ========
Shares Used in Calculation of Net Income Per
 Common Share
  Basic ....................................        27,425         27,460         28,305         29,253
                                                  ========       ========       ========       ========
  Diluted ..................................        28,651         28,690         29,572         30,036
                                                  ========       ========       ========       ========
</TABLE>

<TABLE>
<CAPTION>
                                                                   1999 QUARTERS ENDED
                                                  ------------------------------------------------------
                                                                                              January 1,
                                                  April 3,       July 3,       October 2,        2000
                                                  --------       -------       ----------     ----------
<S>                                               <C>            <C>           <C>            <C>
Revenues ...................................      $ 11,433       $ 12,423       $ 13,112       $ 13,354
</TABLE>



                                      -38-
<PAGE>   40

<TABLE>
<S>                                               <C>            <C>           <C>           <C>
Cost of Services:
  Direct cost of services ..................         5,937          6,440          6,801          6,931
  Equity related charges ...................           507            449            822          1,002
                                                  --------       --------       --------       --------
          Total cost of services ...........         6,444          6,889          7,623          7,933
                                                  --------       --------       --------       --------
Gross Profit ...............................         4,989          5,534          5,489          5,421
Operating Expenses:
  Selling, general and administrative ......         2,429          2,457          2,593          2,298
  Equity related charges ...................           169            401            376          1,052
                                                  --------       --------       --------       --------
          Total operating expenses .........         2,598          2,858          2,969          3,350
                                                  --------       --------       --------       --------
Income From Operations .....................         2,391          2,676          2,520          2,071
Other Income (Expense):
  Interest income ..........................                            2              1            274
  Interest expense .........................          (559)          (557)          (537)          (345)
  Other, net ...............................             1            (80)            17             (6)
                                                  --------       --------       --------       --------
          Total other income (expense) .....          (558)          (635)          (519)           (77)
                                                  --------       --------       --------       --------
Income Before Provision for Income Taxes and
 Extraordinary item ........................         1,833          2,041          2,001          1,994
Provision for Income Taxes .................          (767)          (845)          (829)          (767)
                                                  --------       --------       --------       --------
Income Before Extraordinary Item ...........         1,066          1,196          1,172          1,227
Extraordinary Item
 Loss on debt extinguishment, net of tax
  benefit of $133k .........................                                                       (200)
                                                  --------       --------       --------       --------
Net Income .................................         1,066          1,196          1,172          1,027
Other Comprehensive Income --
  Foreign currency translation adjustment ..           (11)             5             (4)             6
                                                  --------       --------       --------       --------
Comprehensive Income .......................      $  1,055       $  1,201       $  1,168       $  1,033
                                                  ========       ========       ========       ========
Net Income Per Common Share
  Basic ....................................      $   0.05       $   0.05       $   0.05       $   0.05
                                                  ========       ========       ========       ========
  Diluted ..................................      $   0.05       $   0.05       $   0.05       $   0.04
                                                  ========       ========       ========       ========
Shares Used in Calculation of Net Income Per

 Common Share
  Basic ....................................        22,500         22,514         22,567         24,639
                                                  ========       ========       ========       ========
  Diluted ..................................        22,936         23,044         23,162         25,736
                                                  ========       ========       ========       ========
</TABLE>


                                    PART III

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

     None.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


     "Election of Directors" and Section 16(a) Beneficial Ownership Reporting
Compliance" to be contained in the Proxy Statement are hereby incorporated by
reference.

     The following table sets forth certain information regarding executive
officers and directors as of December 30, 2000:



<TABLE>
<CAPTION>
                   NAME                      AGE                    POSITION
                   ----                      ---                    --------
<S>                                          <C>   <C>
Grant G. Behrman(1)........................  47    Chairman of the Board
Richard P. Nespola.........................  56    President, Chief Executive
</TABLE>



                                      -39-
<PAGE>   41

<TABLE>
<S>                                          <C>   <C>
                                                   Officer and Director
Ralph R. Peck..............................  50    Vice President
Micky K. Woo...............................  47    Vice President and Director
Amanda M. Weathersby.......................  46    Vice President
Donald E. Klumb............................  38    Vice President and Chief
                                                   Financial Officer
Christopher D. Mitchell....................  39    Secretary
William M. Matthes(1)......................  40    Director
Mario M. Rosati(2).........................  54    Director
Andrew D. Lipman(2)........................  49    Director
Roy A. Wilkens(1)(2).......................  58    Director
</TABLE>

---------------

(1) Member of the compensation committee

(2) Member of the audit committee

     Grant G. Behrman has served as the Chairman of the Board since February
1998. Mr. Behrman currently serves as Managing Partner of Behrman Capital, a
private equity firm, and was a founding partner of that firm. At Behrman
Capital, he has primary responsibility for investments made in the information
technology and outsourcing areas. Prior to founding Behrman Capital, Mr. Behrman
was a founding member of Morgan Stanley's Venture Capital Group where he worked
from 1981 to 1991, and a consultant with the Boston Consulting Group from 1977
to 1981. Mr. Behrman is a director of Visual Networks, Inc., a
telecommunications equipment manufacturer, and several private companies
including Groundswell, Inc., a web strategy, design and hosting firm. Mr.
Behrman received an M.B.A. with distinction from the Wharton Graduate School of
Business in 1977. Mr. Behrman received his undergraduate degree in Business from
the University of the Witwatersrand (South Africa).

     Richard P. Nespola has served as President and Chief Executive Officer and
founded TMNG in 1990. Prior to founding TMNG, from 1989 to 1990, Mr. Nespola
served as Senior Vice President and Chief Operating Officer of Telesphere
Communications, a communications service provider. From 1986 through 1989, he
held the positions of Vice President of Financial Operations and Senior Vice
President of Strategic Markets and Product Pricing at Sprint. He also served as
the Senior Director of Revenue and Treasury Operations at MCI from 1982 to 1986.
Mr. Nespola is a director of Groundswell, Inc., a web strategy, design and
hosting firm. Mr. Nespola is also a frequent chair of industry forums and noted
conference speaker. Mr. Nespola received his B.A. and his M.B.A. from Long
Island University.

     Ralph R. Peck has served as Vice President and has been a partner with TMNG
since August 1991. From 1986 to 1988, Mr. Peck was a Director of Revenue
Management at Sprint and the Senior Manager for both West Coast Financial
Operations Revenue and Treasure Systems Management at MCI from 1984 to 1986. In
these positions, Mr. Peck had responsibility for billing systems, billing center
management, revenue and treasury management, new product development, and
customer database conversions. Mr. Peck received his B.S.B.A. from American
University.

     Micky K. Woo has served as Vice President and as a director, and he has
been a partner with TMNG since December 1991. Prior to joining TMNG, Mr. Woo
served from June 1989 to November 1999 as Vice President of Information Systems
and Revenue Assurance at Telesphere Communications, a communications service
provider. From 1987 to 1989, Mr. Woo was the Director of Revenue and Treasury
Management at Sprint and from 1983 to 1987 he served in management at MCI,
including Senior Manager of Receivables Management, Senior Manager of the East
Coast Billing Center, and the Senior Manager of Revenue Reporting and Analysis.
Prior to entering the telecommunications industry, Mr. Woo was a consultant with
Price Waterhouse. Mr. Woo received his B.A. in Computer Science and an M.A. in
accounting from the University of Iowa.

     Amanda M. Weathersby has served as Vice President since joining TMNG in
September 2000. Ms. Weathersby is the founder of The Weathersby Group, Inc., a
marketing consulting firm, which she led over ten years prior to joining TMNG.
Prior the founding The Weathersby Group, Ms. Weathersby served as the Vice
President of Product Management and Product Development at Sprint, Inc. and
served in senior roles with MCI. Ms. Weathersby received her B.A. in English
from Lawrence University.



                                      -40-
<PAGE>   42

     Donald E. Klumb has served as Vice President and Chief Financial Officer
since July 1999. From June 1998 to July 1999, Mr. Klumb was a partner at
Deloitte & Touche LLP and headed the firm's Midwest telecommunications and high
technology practice. From 1992 to 1998, he was a senior manager with Deloitte &
Touche LLP. Mr. Klumb received his B.S. in accounting from the University of
Wisconsin-Milwaukee and is a certified public accountant.

     Christopher D. Mitchell has served as Secretary since September 1999. Since
February 1995, Mr. Mitchell has been a partner in the Palo Alto, California law
firm of Wilson Sonsini Goodrich & Rosati, one of the premier legal firms for
high technology companies. From April 1989 through January 1995, Mr. Mitchell
was an associate with the firm. Mr. Mitchell received his B.A. from Haverford
College and his J.D. from the University of Minnesota.

     William M. Matthes has served as a director since February 1998. Mr.
Matthes joined Behrman Capital, a private equity firm, in April 1996 and has
served as a Managing Partner of Behrman Capital since January 1999. Prior to
joining Behrman Capital, Mr. Matthes was Chief Operating Officer of Holsted
Marketing, Inc., a direct marketing company from July 1994 to April 1996. From
December 1989 to July 1994, Mr. Matthes was a General Partner at Brentwood
Associates, a private equity firm. Mr. Matthes currently serves on the board of
Starwood Financial Trust and several private companies, including Groundswell,
Inc., a web strategy, design, and hosting firm, where he serves as Chairman of
the Board. Mr. Matthes received his M.B.A. from Harvard Business School in 1986
where he was both a Baker Scholar and a Loeb Rhoades Fellow. Mr. Matthes also
received his A.B. in Economics from Stanford University, where he graduated with
honors and distinction.

     Mario M. Rosati has served as a director since June 1999. Mr. Rosati is a
member of the executive committee of Wilson, Sonsini, Goodrich & Rosati. He has
been with the law firm since 1971, first as an associate and then as a member
since 1975. He is a member of the board of directors of Aehr Test Systems, a
semiconductor equipment company, Genus, Inc., a semiconductor equipment company
Mypoints.com, Inc., an internet-based direct marketing company, Ross Systems,
Inc., a software company, Sanmina Corporation, an electronics contract
manufacturing company, Symyx Technologies, a combinatorial materials science
company, and Vivus, Inc., a medical device company. Mr. Rosati received his B.A.
from the University of California at Los Angeles and his J.D. from the
University of California at Berkeley, Boalt Hall School of Law.

     Andrew D. Lipman joined our board of directors in May, 2000. Mr. Lipman is
the senior partner of the Telecommunications Group and the Vice Chairman of the
law firm of Swidler Berlin Shereff Friedman LLP. For more than ten years, while
maintaining his partnership at Swidler Berlin Shereff Friedman LLP, Mr. Lipman
also served as Senior Vice President, Legal and Regulatory Affairs for MFS
Communications. Before joining Swidler Berlin Shereff Friedman LLP, Mr. Lipman
was a partner with Pepper, Hamilton & Scheetz where he represented
telecommunications equipment manufacturers and other telecommunications
companies in regulatory, judicial, and legislative matters. Prior to joining
Pepper, he participated in the legal honors program at the U.S. Department of
Transportation and served in the Office of the Secretary of Transportation. Mr.
Lipman also serves as General Counsel to the International Teleconferencing
Association and as Legislative/Regulatory Counsel to the International Satellite
Users Association. Mr. Lipman is a graduate of the University of Rochester and
the Stanford Law School.

     Roy A. Wilkens has served as a director since June 1999. In 1985, Mr.
Wilkens founded WilTel, Inc., a wholesale communications carrier, a subsidiary
of The Williams Companies, an oil and gas pipeline company. Mr. Wilkens was the
Chief Executive Officer of WilTel Inc. from 1985 to 1995. In 1995, Wiltel was
acquired by LDDS Communications, a predecessor company to MCI Worldcom, and Mr.
Wilkens remained as Chief Executive Officer of Wiltel until 1997. Prior to 1985,
Mr. Wilkens served as the President of Williams Pipeline Company, a subsidiary
of The Williams Companies. In 1992, President George Bush appointed Mr. Wilkens
to the National Security Telecommunications Advisory Council. He has also served
as chairman of both the Competitive Telecommunications Association and the
National Telecommunications Network. Mr. Wilkens is Chairman of Williams
Communications Group and is a member of the board of directors of McLeodUSA
Incorporated, a communications services provider, Splitrock Services, Inc., a
competitive local telephone company, and UniDial, Inc., a telecommunications
services provider.

ITEM 11. EXECUTIVE COMPENSATION



                                      -41-
<PAGE>   43

     "Executive Compensation" to be contained in the Proxy Statement is hereby
incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     "Security Ownership of Certain Beneficial Owners and Management" to be
contained in the Proxy Statement is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     "Certain Relationships and Transactions with Related Persons" to be
contained in the Proxy Statement is hereby incorporated by reference.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

          (1) The response to this portion of Item 14 is set forth in Item 8 of
              Part II hereof.

          (2) Financial Statement Schedules.

     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.

     (b) Reports on Form 8-K

     The Company filed form 8-K/A on November 13, 2000 with the Securities and
Exchange Commission as an amendment to the form 8-K filed on September 4, 2000
disclosing the acquisition of The Weathersby Group, Inc. The amendment included
the pro forma combined condensed balance sheet as of July 1, 2000 and the pro
forma combined condensed statement of income and comprehensive income for the
year ended January 1, 2000 and the six months ended July 1, 2000, giving effect
to the merger and assuming the acquisition transaction had occurred as of the
beginning of the reported period. Included in the amendment were the audited
financial statements for The Weathersby Group, Inc. for the year ended December
31, 1999, and the unaudited interim financial statements for The Weathersby
Group, Inc. for the period ended June 30, 2000.


                                   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 29th day of March 2001.

                                          THE MANAGEMENT NETWORK GROUP, INC.

                                          By:    /s/ RICHARD P. NESPOLA
                                            ------------------------------------
                                                     Richard P. Nespola
                                               President and Chief Executive
                                                           Officer



                                      -42-
<PAGE>   44

                                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:


<TABLE>
<CAPTION>
            SIGNATURE                         TITLE                  DATE
            ---------                         -----                  ----
<S>                               <C>                            <C>
    /s/ RICHARD P. NESPOLA        President, Chief Executive     March 29, 2001
------------------------------       Officer and Director
        Richard P. Nespola           (Principal executive
                                            officer)

    /s/ DONALD E. KLUMB*          Chief Financial Officer and    March 29, 2001
-------------------------------       Treasurer (Principal
        Donald E. Klumb               financial officer and
                                      principal accounting
                                            officer)

    /s/ MICKY K. WOO*                       Director             March 29, 2001
-------------------------------
        Micky K. Woo

    /s/ GRANT G. BEHRMAN*                   Director             March 29, 2001
-------------------------------
        Grant G. Behrman

    /s/ WILLIAM M. MATTHES*                 Director             March 29, 2001
-------------------------------
        William M. Matthes

    /s/ ANDREW LIPMAN*                      Director             March 29, 2001
-------------------------------
        Andrew Lipman

    /s/ ROY A. WILKENS*                     Director             March 29, 2001
-------------------------------
        Roy A. Wilkens

    /s/ MARIO M. ROSATI*                    Director             March 29, 2001
-------------------------------
        Mario M. Rosati

*By: /s/ RICHARD P. NESPOLA
     --------------------------
         Richard P. Nespola
         Attorney-in-Fact
</TABLE>



                                      -43-
<PAGE>   45

                               INDEX TO EXHIBITS

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


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF DOCUMENT
-------                      -----------------------
<S>        <C>

 INDEX TO EXHIBITS

 3.1*      Certificate of Incorporation of the registrant

 3.2*      Bylaws of the registrant

 4.1*      Specimen Common Stock Certificate

 4.2*      Warrant dated October 29, 1999 issued to Williams
           Communications Group

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.

10.11*     Employment Agreement between the registrant and Ralph Peck 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

10.14      Lease between The American Occupational Therapy Association, Inc. and
           The Weathersby Group, Inc. dated January 18, 1999

10.15      Amended Lease Agreement between The American Occupational Therapy
           Association, Inc. and TWG Marketing, Inc. dated December 5, 2000

10.16      2000 Supplemental Stock Plan and form of agreements thereunder

21.1       List of subsidiaries of TMNG, Inc.

23.1       Consent of Deloitte & Touche LLP

24.1       Power of attorney (see page 43)

27.1       Financial Data Schedule
</TABLE>


---------------

* Incorporated by reference to the corresponding exhibits filed with the
  Company's Registration Statement on Form S-1 (File No. 333-87383)