10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2002

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-22125

DIAMONDCLUSTER INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of
incorporation or organization) 36-4069408 (I.R.S. Employer
Identification No.)

875 N. Michigan Avenue, Suite 3000, Chicago, Illinois (Address of principal executive offices) 60611 (Zip Code)

(312) 255-5000

Registrant’s Telephone Number, Including Area Code

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of October 31, 2002, there were 24,975,943 shares of Class A Common Stock and 6,478,207 shares of Class B Common Stock of the Registrant outstanding.

DIAMONDCLUSTER INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2002

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION:

Item 1:	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2002 and September 30, 2002	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended September 30, 2001 and 2002	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2001 and 2002	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3:	Quantitative and Qualitative Disclosure about Market Risk	21
Item 4:	Controls and Procedures	22
PART II—OTHER INFORMATION:

Item 6:	Exhibits and Reports on Form 8-K	23
SIGNATURES		24

DIAMONDCLUSTER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS	March 31, 2002			September 30, 2002
				(Unaudited)
Current assets:
Cash and cash equivalents	$	96,773		$	92,186
Accounts receivable, net of allowance of $1,089 and $1,224 as of March 31, 2002 and September 30, 2002, respectively		22,131			21,805
Income taxes receivable		1,321			—
Prepaid expenses and short-term deferred taxes		9,417			7,578
Total current assets		129,642			121,569
Computers, equipment, leasehold improvements and software, net		15,789			13,016
Long-term deferred taxes		16,817			25,944
Other assets		3,749			3,100
Goodwill, net		235,179			94,315
Total assets	$	401,176		$	257,944
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,277		$	6,628
Income taxes payable		—			1,909
Restructuring accrual, current portion		3,963			9,089
Other accrued liabilities		15,838			15,048
Total current liabilities		26,078			32,674
Restructuring accrual, less current portion		—			9,315
Total liabilities		26,078			41,989
Stockholders’ equity:
Preferred stock, $1.00 par value, 2,000 shares authorized, no shares issued		—			—
Class A common stock, $.001 par value, 200,000 shares authorized, 27,497 issued as of March 31, 2002 and 28,027 issued as of September 30, 2002		27			28
Class B common stock, $.001 par value, 100,000 shares authorized, 6,562 issued as of March 31, 2002 and 6,622 issued as of September 30, 2002		7			7
Additional paid-in capital		659,844			653,261
Unearned compensation		(121,340	)		(86,180	)
Notes receivable from sale of common stock		(80	)		(80	)
Accumulated other comprehensive loss		(2,810	)		(464	)
Accumulated deficit		(113,860	)		(298,740	)
		421,788			267,832
Less: Common stock in treasury, at cost, 2,424 shares held at March 31, 2002 and 3,392 shares held at September 30, 2002		46,690			51,877
Total stockholders’ equity		375,098			215,955
Total liabilities and stockholders’ equity	$	401,176		$	257,944

See accompanying notes to condensed consolidated financial statements.

3

DIAMONDCLUSTER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data)

	For the Three Months ended September 30,						For the Six Months ended September 30,
	2001			2002			2001			2002
	(Unaudited)						(Unaudited)
Revenue:
Revenue before out-of-pocket expense reimbursements (net revenue)	$	50,756		$	38,107		$	108,941		$	76,434
Out-of-pocket expense reimbursements		6,009			6,585			13,532			12,051
Total revenue		56,765			44,692			122,473			88,485
Operating expenses:
Project personnel and related expenses before out-of-pocket reimbursable expenses		34,295			28,916			72,325			58,393
Out-of-pocket reimbursable expenses		6,009			6,585			13,532			12,051
Total project personnel and related expenses		40,304			35,501			85,857			70,444
Professional development and recruiting		3,564			962			7,226			2,152
Marketing and sales		1,871			1,125			4,512			2,840
Management and administrative support		11,934			9,828			25,681			20,301
Goodwill amortization		15,453			—			30,883			—
Noncash compensation*		13,159			11,475			26,976			24,824
Restructuring charge		—			20,857			—			20,857
Total operating expenses		86,285			79,748			181,135			141,418
Loss from operations		(29,520	)		(35,056	)		(58,662	)		(52,933	)
Other expense, net		(365	)		(76	)		(786	)		(375	)
Loss before income taxes and cumulative effect of change in accounting principle		(29,885	)		(35,132	)		(59,448	)		(53,308	)
Income tax expense (benefit)		(1,698	)		(7,377	)		(813	)		(9,292	)
Loss before cumulative effect of change in accounting principle		(28,187	)		(27,755	)		(58,635	)		(44,016	)
Cumulative effect of change in accounting principle, net of income tax benefit of zero		—			—			—			(140,864	)
Net loss		(28,187	)		(27,755	)		(58,635	)		(184,880	)
Unrealized gain from securities, net of income tax benefit of $150 for the three months ended September 30, 2001, and $57 for the six months ended September 30, 2001		(236	)		—			(91	)		—
Foreign currency translation adjustments		2,274			(337	)		(857	)		2,346
Comprehensive loss	$	(26,149	)	$	(28,092	)	$	(59,583	)	$	(182,534	)
Basic and diluted loss per share of common stock:
Loss before cumulative effect of change in accounting principle	$	(0.92	)	$	(0.89	)	$	(1.92	)	$	(1.40	)
Cumulative effect of change in accounting principle		—			—			—			(4.47	)
Net loss	$	(0.92	)	$	(0.89	)	$	(1.92	)	$	(5.86	)
Shares used in computing basic and diluted net loss per share of common stock		30,775			31,227			30,553			31,525
*Noncashcompensation
Project personnel and related expenses	$	12,924		$	11,306		$	26,580		$	24,156
Professional development and recruiting		34			19			48			92
Marketing and sales		29			20			38			164
Management and administrative support		172			130			310			412
Total noncash compensation	$	13,159		$	11,475		$	26,976		$	24,824

See accompanying notes to condensed consolidated financial statements.

4

DIAMONDCLUSTER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For the Six Months Ended September 30,
	2001			2002
	(Unaudited)
Cash flows from operating activities:
Loss before cumulative effect of change in accounting principle	$	(58,635	)	$	(44,016	)
Adjustments to reconcile loss before cumulative effect of change in accounting principle to net cash used in operating activities:
Restructuring charge		—			20,857
Depreciation and amortization		4,113			3,145
Write-down of net book value of computers, equipment, leasehold improvements and software, net		—			1,334
Goodwill amortization		30,883			—
Noncash compensation		26,976			24,824
Deferred income taxes		2,058			(9,121	)
Tax benefits from employee stock plans		739			282
Write-down of equity investments		3,564			—
Other		(1,846	)		—
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable		2,883			1,721
Prepaid expenses and other		2,853			2,293
Accounts payable		(350	)		137
Restructuring accrual		—			(6,416	)
Other assets and liabilities		(33,745	)		819
Net cash used in operating activities		(20,507	)		(4,141	)
Cash flows from investing activities:
Capital expenditures, net		(5,171	)		(1,090	)
Acquisitions, net of cash acquired		(1,468	)		—
Other assets		(3,353	)		501
Net cash used in investing activities		(9,992	)		(589	)
Cash flows from financing activities:
Repayment of note		(500	)		—
Common stock issued		4,301			3,471
Purchase of treasury stock		(6,171	)		(5,187	)
Net cash used in financing activities		(2,370	)		(1,716	)
Effect of exchange rate changes on cash		3,679			1,859
Net decrease in cash and cash equivalents		(29,190	)		(4,587	)
Cash and cash equivalents at beginning of period		151,358			96,773
Cash and cash equivalents at end of period	$	122,168		$	92,186
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	51		$	219
Cash paid during the period for income taxes		2,681			1,900

See accompanying notes to condensed consolidated financial statements.

5

DIAMONDCLUSTER INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A.    Basis of Reporting

The accompanying consolidated financial statements of DiamondCluster International, Inc., formerly Diamond Technology Partners Incorporated (the “Company”), include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with the current period presentation. In the opinion of management, the consolidated financial statements reflect all adjustments that are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of the dates and for the periods presented. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Consequently, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States of America for annual financial statements nor those normally made in the Company’s Annual Report on Form 10-K. Accordingly, reference should be made to the Company’s Annual Report on Form 10-K for additional disclosures, including a summary of the Company’s accounting policies, which have not changed, except as indicated in Note C in these Notes to Condensed Consolidated Financial Statements. The consolidated results of operations for the quarter ended September 30, 2002, are not necessarily indicative of results for the full year.

B.    Business Combinations

On November 28, 2000, the Company acquired Cluster Telecom B.V. (“Cluster”), a pan-European management consulting firm specializing in wireless technology, internet and digital strategies. Under the terms of the agreement, the Company paid $494.2 million, consisting of $44 million in cash and an aggregate of 6.3 million shares of the Company’s Class B Common Stock and 7.5 million options to purchase shares of the Company’s Class B Common Stock. In connection with the acquisition, the Company changed its name from Diamond Technology Partners Incorporated to DiamondCluster International, Inc. The excess of net assets acquired (“Goodwill”) recorded for the Cluster acquisition was approximately $301.4 million. Additionally, the Company recorded unearned compensation in connection with this acquisition.

In May 2000, the Company acquired Momentus Group Limited (“Momentus”), a London-based e-business consulting company. Under the terms of the acquisition agreement, the Company paid $5.7 million, consisting of approximately $2.9 million in cash and 44,252 shares of the Company’s Class A Common Stock. Additionally, Momentus shareholders were paid 35,985 shares of the Company’s Class A Common Stock during fiscal 2002 related to the achievement of certain performance measures. Goodwill recorded for the Momentus acquisition was approximately $5.7 million.

In October 1999, the Company acquired Leverage Information Systems, Inc. (“Leverage”), a San Francisco-based systems architecture and development company specializing in the building of complex web sites and intranets. Under the terms of the acquisition, the Company paid $3.4 million, consisting of $1.0 million in cash and 97,500 shares of the Company’s Class A Common Stock. Goodwill recorded for the Leverage acquisition was approximately $3.3 million.

In April 1999, the Company acquired OmniTech Consulting Group, Inc. (“Omnitech”), a Chicago-based change management firm specializing in web-based and other multimedia corporate learning. Under the terms of the acquisition agreement, the Company paid $9.0 million, consisting of $4.0 million in cash, a $1.0 million note (which has been fully paid), and 173,461 shares of the Company’s Class A Common Stock. Goodwill recorded for the Omnitech acquisition was approximately $8.8 million.

6

DIAMONDCLUSTER INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The acquisitions were accounted for under the purchase method of accounting and, accordingly, the operating results of OmniTech, Leverage, Momentus and Cluster have been included in the Company’s consolidated financial statements since the dates of the acquisitions. The amount of goodwill recorded for OmniTech, Leverage, Momentus and Cluster approximated $319.2 million.

C.    Recently Adopted Accounting Pronouncements

Goodwill and Other Intangible Assets

On April 1, 2002 the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” With the adoption of SFAS No. 142, goodwill and other indefinite life intangible assets (“intangibles”) are no longer subject to amortization, rather they are subject to an assessment for impairment whenever events or circumstances indicate that impairment may have occurred, but at least annually, by applying a fair value based test. Prior to April 1, 2002 the Company amortized goodwill and identifiable intangible assets on a straight-line basis over their estimated useful lives, which did not exceed 40 years, and periodically reviewed the recoverability of these assets based on the expected future undiscounted cash flows.

The Company completed its initial impairment test on goodwill using the methodology described in SFAS No. 142 in the first quarter of fiscal 2003, and will conduct an assessment of impairment based on fair value in accordance with the requirements of SFAS No. 142 on an annual basis in the future. In connection with the adoption of SFAS No. 142 on April 1, 2002, the Company recognized an impairment loss of $140.9 million as the cumulative effect of the change in accounting principle.

Goodwill amortization was $61.9 million in fiscal 2002, or $2.01 per share on both a pre-tax and after-tax basis. Goodwill amortization for the three and six months ended September 30, 2001 was $15.5 million and $30.9 million, respectively. No goodwill amortization was recorded for the three and six months ended September 30, 2002. Goodwill, net, as of March 31, 2002 and September 30, 2002 was $235.2 million and $94.3 million, respectively. There were no indefinite life intangibles, other than goodwill, at September 30, 2002.

The following table sets forth an analysis of the changes in the total carrying amount of goodwill for the year ended March 31, 2002 and for the six months ended September 30, 2002 (in thousands):

Balance as of April 1, 2001	$	295,600
Goodwill acquired during the year		1,429
Goodwill amortized during the year		(61,850	)
Balance as of March 31, 2002		235,179
Impairment loss recognized during the six months ended September 30, 2002		(140,864	)
Goodwill amortized during the six months ended September 30, 2002		—
Balance as of September 30, 2002	$	94,315

The Company has two geographic operating segments—North America and Europe and Latin America. The majority of goodwill reflected in the Company’s consolidated financial statements was recognized in connection with the November 2000 acquisition of Cluster. The acquired Cluster business comprises the majority of the activities of the Europe and Latin America operating segment. The carrying value of goodwill allocated to each of these operating segments was tested for impairment as of April 1, 2002, in connection with the initial adoption of SFAS No. 142. The goodwill impairment loss of $140.9 million recognized in the first quarter of fiscal 2003 was necessary to write down the carrying amount of goodwill to its implied fair value. The fair value was estimated based on the income approach, using the present value of future estimated cash flows.

7

DIAMONDCLUSTER INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table sets forth a reconciliation of reported net income (loss) to adjusted net income (loss) for fiscal 2000, 2001 and 2002 (in thousands):

	Fiscal Year Ended March 31,
	2000		2001			2002
Reported net income (loss)	$	16,228	$	(12,867	)	$	(133,672	)
Add back: Goodwill amortization		493		21,928			61,850
Adjusted net income (loss)	$	16,721	$	9,061		$	(71,822	)
Basic earnings per share:
Reported net income (loss)	$	0.78	$	(0.49	)	$	(4.34	)
Goodwill amortization		0.02		0.83			2.01
Adjusted net income (loss)	$	0.80	$	0.34		$	(2.33	)
Diluted earnings per share:
Reported net income (loss)	$	0.62	$	(0.49	)	$	(4.34	)
Goodwill amortization		0.02		0.77			2.01
Adjusted net income (loss)	$	0.64	$	0.28		$	(2.33	)

Long-Lived Assets

On April 1, 2002 the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This Statement supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” This Statement establishes a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. The Statement retains most of the requirements of SFAS No. 121 related to the recognition of the impairment of long-lived assets to be held and used. There was no impact on the financial condition or operating results of the Company from adopting SFAS No. 144 in the six-months ended September 30, 2002.

D.    Net Loss Per Share

The following is a reconciliation of the shares used in computing basic and diluted net loss per share for the three and six-month periods ended September 30, 2001 and 2002 (in thousands):

	Three Months Ended September 30,		Six Months Ended September 30,
	2001	2002	2001	2002
Shares used in computing basic net income (loss) per share	30,775	31,227	30,553	31,525
Dilutive effect of stock options and warrants	—	—	—	—
Shares used in computing diluted net income (loss) per share	30,775	31,227	30,553	31,525
Antidilutive securities not included in dilutive net income (loss) per share calculation	23,366	20,014	23,366	20,014

The dilutive earnings per share calculation for the three months ended September 30, 2001 and 2002 and the six months ended September 30, 2001 and 2002 excludes 1.4 million, 0.1 million, 2.0 million and 0.5 million common stock equivalents, respectively, related to stock options due to their anti-dilutive effect as a result of the

8

DIAMONDCLUSTER INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Company’s reported net loss during these periods. For the three months ended September 30, 2001 and 2002 and the six months ended September 30, 2001 and 2002, respectively, an additional 12.7 million, 19.6 million, 11.4 million and 19.4 million stock options are excluded due to their anti-dilutive effect as a result of the options’ exercise prices being greater than the average market price of the common shares for these periods.

E.    Foreign Exchange Risk Management

Objectives and Context

The Company operates internationally; therefore its earnings, cash flows and financial positions are exposed to foreign currency risk from foreign currency-denominated receivables and payables, forecasted service transactions, and net investments in certain foreign operations. These items are denominated in various foreign currencies, including the euro, the pound sterling, the brazilian real and the swedish krone.

Management believes it is prudent to minimize the variability caused by foreign currency risk. Management attempts to minimize foreign currency risk by pricing contracts in the respective local country’s functional currency and by using derivative instruments when necessary. The Company’s financial management continually monitors foreign currency risk and the use of derivative instruments. The Company does not use derivative instruments for purposes other than hedging net investments in foreign subsidiaries.

Strategies

International revenues are generated primarily from sales of services in various countries and are typically denominated in the local currency of each country, most of which now use the euro. The Company’s foreign subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency. As a result, management does not believe that its financial position is significantly exposed to foreign currency risk from foreign currency-denominated receivables and payables or forecasted service transactions.

DiamondCluster has net investments in foreign operations located throughout Europe and Latin America. In order to mitigate the impact of foreign currency movements on the Company’s financial position, in some cases the Company hedges its euro exposures through the use of euro/U.S. dollar forward contracts. These contracts have been designated and have qualified as hedging instruments for hedges of the foreign currency exposure related to the Company’s net investment in its foreign operations. Accordingly, the net amount of gains or losses on these forward foreign exchange contracts offset losses and gains on the Company’s exposure to foreign currency movements related to is net investments in its foreign operations and are reflected in the cumulative translation adjustment account and included as a component of other comprehensive income. At March 31, 2002, the Company had one euro/U.S. dollar forward contract outstanding in the notional principal amount of EUR 62.8 million. On June 28, 2002, the Company settled its euro/U.S. dollar forward contract for EUR 62.8 million. As noted above, the Company entered into this contract to mitigate the effect of an adverse movement of foreign exchange rates. As a result of the weakening of the U.S. dollar against the euro in the first quarter of fiscal 2003, the Company recorded a net loss on the forward exchange contract of $7.4 million in the cumulative translation adjustments account which was offset by the related gain on the net investment in the foreign operations during the period. As of September 30, 2002, there were no open euro/U.S. dollar contracts outstanding.

F.    Restructuring Charge

As a result of management’s plan to better align the Company’s operating infrastructure with anticipated levels of business in fiscal 2003, the Company restructured its workforce and operations in December 2001 and September 2002.

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DIAMONDCLUSTER INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

In connection with the restructuring plan implemented in September 2002, the Company recorded a restructuring charge of $20.5 million ($12.8 million on an after-tax basis) or $0.41 per share. The $20.5 million charge consisted of $12.1 million for contractual commitments related to office space reductions, $5.7 million for severance and related expenses and $2.7 million for the write-off of various depreciable assets and the termination of certain equipment leases. The principal actions in the September 2002 restructuring plan involved office space reductions, which included futher consolidation of office space in multiple offices globally. Estimated costs for the reduction in physical office space are comprised of contractual rental commitments for office space vacated, attorney fees and related costs to sublet the office space, offset by estimated sub-lease rental income. The restructuring plan also included workforce reductions, resulting in the termination of approximately 90 employees, of whom 29 employees were still employed by the Company as of September 30, 2002, and whom the Company expects to terminate in the third quarter upon the completion of project assignments. Of the total employees severed, 60% were project personnel and 40% were operational personnel. Also included in the restructuring plan were the costs associated with the termination of certain equipment leases and costs related to the write-down of other assets to their estimated net realizable value.

In connection with the restructuring plan announced in December 2001, the Company recorded a restructuring charge of $15.5 million ($9.5 million on an after-tax basis), or $0.31 per share. In September 2002, the Company adjusted this charge and recognized $0.4 million of additional expense due primarily to a change in estimate related to the cost of terminating an equipment lease, bringing the total restructuring charge to $15.9 million ($9.7 million on an after-tax basis). The $15.9 million charge consisted of $10.8 million for severance and related expenses, $3.1 million for contractual commitments and leasehold improvements related to office space reductions, and $2.0 million for other depreciable assets and certain equipment leases. The principal actions in the December 2001 restructuring plan involved workforce reductions, including the discontinuation of certain business activities within the Diamond Marketspace Solutions group. The restructuring plan included the termination of approximately 300 employees, none of whom remained employed by the Company as of September 30, 2002. Of the total employees severed, 90% were project personnel and 10% were operational personnel. In addition, the restructuring plan included office space reductions in San Francisco, New York and Chicago. Estimated costs related to the reduction of office space comprise contractual rental commitments for office space being vacated and certain equipment leases, as well as costs associated with the write-off of leasehold improvements and write-down of other assets to their estimated net realizable value.

The total cash outlay for the restructuring announced in September 2002 is expected to approximate $18.0 million. The remaining $2.5 million of restructuring costs consist of non-cash charges primarily for the write-down of certain assets to their estimated net realizable value, as well as the write-off of sign-on bonuses previously paid to terminated employees. As of September 30, 2002, $2.0 million of cash had been expended for this initiative, primarily related to severance and related costs.

The total cash outlay for the restructuring announced in December 2001 is expected to approximate $13.2 million. The remaining $2.7 million of restructuring costs consist of non-cash charges primarily for the write-off of leasehold improvements and other related costs for the facilities being downsized, as well as the write-off of sign-on bonuses previously paid to terminated employees. As of September 30, 2002, $11.2 million of cash had been expended for this initiative, primarily related to severance and related costs.

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DIAMONDCLUSTER INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The major components of the restructuring charges are as follows (amounts in thousands):

	FY02 Q3 Charge
Description	FY02 Q3 Charge		FY03 Q2 Adjustment			FY03 Q2 Charge		Utilized				Balance 9/30/2002
								Cash		Non-Cash
Severance and related costs	$	10,847	$	53		$	5,638	$	10,650	$	1,665	$	4,223
Contractual commitments and leasehold improvements related to office space reductions		3,089		(28	)		12,105		1,414		1,306		12,446
Write-off of property, plant, equipment and equipment leases		1,606		375			2,714		1,130		1,830		1,735
	$	15,542	$	400		$	20,457	$	13,194	$	4,801	$	18,404

These restructuring charges and accruals required certain significant estimates and assumptions, including estimates of sub-lease rental income to be realized in the future. These estimates and assumptions are monitored on at least a quarterly basis for changes in circumstances. It is reasonably possible that such estimates could change in the near term resulting in additional adjustments to the amounts recorded, and the effect could be material.

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DIAMONDCLUSTER INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the information contained in the Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements” below.

Overview

We are a premier global management-consulting firm. We help leading organizations worldwide develop and implement growth strategies, improve operations, and capitalize on technology. We work collaboratively with our clients, utilizing teams of consultants with skills in strategy, technology and program management. During the quarter ended September 30, 2002 we generated net revenues (before reimbursements of out-of-pocket expenses) of $38.1 million from 79 clients. We employed 674 client-serving professionals and had eleven offices in North America, Europe and Latin America as of September 30, 2002.

Our revenues are comprised of professional fees for services rendered to our clients which are billed either monthly or semi-monthly in accordance with the terms of the client engagement. Prior to the commencement of a client engagement, we and our client agree on fees for services based upon the scope of the project, our staffing requirements and the level of client involvement. We recognize revenue as services are performed in accordance with the terms of the client engagement. Provisions are made based on our experience for estimated uncollectible amounts. These provisions, net of write-offs of accounts receivable, are reflected in the allowance for doubtful accounts. If it becomes evident that costs are likely to be incurred subsequent to targeted project completion, a portion of the project revenue is reflected in deferred revenue. Although from time to time we have been required to make revisions to our clients’ estimated deliverables, to date none of such revisions have had a material adverse effect on our operating results.

The largest portion of our costs is comprised of employee-related expenses for our client-serving professionals and other direct costs, such as third-party vendor costs and unbillable costs associated with the delivery of services to our clients. The remainder of our costs are comprised of the expenses associated with the development of our business and the support of our client-serving professionals, such as professional development and recruiting, marketing and sales, and management and administrative support. Professional development and recruiting expenses consist primarily of recruiting and training content development and delivery costs. Marketing and sales expenses consist primarily of the costs associated with the development and maintenance of our marketing materials and programs. Management and administrative support expenses consist primarily of the costs associated with operations, finance, information systems, facilities (including the rent of office space) and other administrative support for project personnel.

We regularly review our fees for services, professional compensation and overhead costs to ensure that our services and compensation are competitive within the industry, and that our overhead costs are balanced with our revenue level. In addition, we monitor the progress of client projects with client senior management. We manage the activities of our professionals by closely monitoring engagement schedules and staffing requirements for new engagements. However, a rapid decline in the demand for the professional services we provide could result in a lower utilization of our professionals than we planned. In addition, because most of our client engagements are, and may be in the future, terminable by our clients without penalty, an unanticipated termination of a client project could require us to retain underutilized employees. While the number of client serving professionals must be adjusted to reflect active engagements, we must also retain a sufficient number of senior professionals to oversee existing client engagements and participate in our sales efforts to secure new client assignments.

Forward Looking Statements

Statements contained anywhere in this report that are not historical facts contain forward-looking statements including such statements identified by the words “anticipate,” “believe,” “estimate,” “expect” and similar

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

terminology used with respect to the Company and its management. These forward looking statements are subject to risks and uncertainties which could cause the Company’s actual results, performance and prospects to differ materially from those expressed in, or implied by, the forward-looking statements. The forward-looking statements speak only as of the date hereof and the Company undertakes no obligation to revise or update them to reflect events or circumstances that arise in the future. Readers are cautioned not to place undue reliance on forward-looking statements. For a statement of the Risk Factors that might adversely affect the Company’s operating or financial results, see Exhibit 99.1 to this Quarterly Report on Form 10-Q.

Recently Adopted Accounting Pronouncements

Goodwill and Other Intangible Assets

On April 1, 2002 the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” With the adoption of SFAS No. 142, goodwill and other indefinite life intangible assets (“intangibles”) are no longer subject to amortization, rather they are subject to an assessment for impairment whenever events or circumstances indicate that impairment may have occurred, but at least annually, by applying a fair value based test. Prior to April 1, 2002 the Company amortized goodwill and identifiable intangible assets on a straight-line basis over their estimated useful life not to exceed 40 years, and periodically reviewed the recoverability of these assets based on the expected future undiscounted cash flows.

The Company completed its initial impairment test on goodwill using the methodology described in SFAS No. 142 in the first quarter of fiscal 2003, and will conduct an assessment of impairment based on fair value in accordance with the requirements of SFAS No. 142 on an annual basis in the future. In connection with the adoption of SFAS No. 142 on April 1, 2002, the Company recognized an impairment loss of $140.9 million as the cumulative effect of a change in accounting principle.

Goodwill amortization was $61.9 million in fiscal 2002, or $2.01 per share on both a pre-tax and after-tax basis. Goodwill amortization for the three and six months ended September 30, 2001 was $15.5 million and $30.9 million, respectively. No goodwill amortization was recorded for the three and six months ended September 30, 2002. Goodwill, net, as of March 31, 2002 and September 30, 2002 was $235.2 million and $94.3 million, respectively. There were no indefinite life intangibles other than goodwill at September 30, 2002.

The Company has two geographic operating segments—North America and Europe and Latin America. The majority of goodwill reflected in the Company’s consolidated financial statements was recognized in connection with the November 2000 acquisition of Cluster. The acquired Cluster business comprises the majority of the activities of the Europe and Latin America operating segment. The carrying value of goodwill allocated to each of these operating segments was tested for impairment as of April 1, 2002, in connection with the initial adoption of SFAS No.142. The goodwill impairment loss of $140.9 million recognized in the first quarter of fiscal 2003 was necessary to write down the carrying amount of goodwill to its implied fair value. The fair value was estimated based on the income approach, using the present value of future estimated cash flows.

Long-Lived Assets

On April 1, 2002 the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This Statement supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” This Statement establishes a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. The Statement retains most of the requirements of SFAS No. 121 related to the recognition of the impairment of long-lived assets to be held and used. There was no impact on the financial condition or operating results of the Company from adopting SFAS No. 144 in the six months ended September 30, 2002.

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DIAMONDCLUSTER INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

Results of Operations

The following table sets forth for the periods indicated, selected statements of operations data as a percentage of net revenues:

	For the Three Months Ended September 30,				For the Six Months Ended September 30,
	2001		2002		2001		2002
Revenues:
Revenue before out-of-pocket reimbursements (net revenue)	100.0	%	100.0	%	100.0	%	100.0	%
Out-of-pocket reimbursements	11.8		17.3		12.4		15.8
Total revenue	111.8		117.3		112.4		115.8
Operating expenses:
Project personnel and related expenses before out-of-pocket reimbursable expenses	67.6		75.9		66.4		76.4
Out-of-pocket reimbursable expenses	11.8		17.3		12.4		15.8
Total project personnel and related expenses	79.4		93.2		78.8		92.2
Professional development and recruiting	7.0		2.5		6.6		2.8
Marketing and sales	3.7		3.0		4.2		3.7
Management and administrative support	23.5		25.8		23.6		26.6
Goodwill amortization	30.5		—		28.3		—
Noncash compensation	25.9		30.1		24.8		32.5
Restructuring charge	—		54.7		—		27.3
Total operating expenses	170.0		209.3		166.3		185.1
Loss from operations	(58.2	)	(92.0	)	(53.9	)	(69.3	)
Other expense, net	(0.7	)	(0.2	)	(0.7	)	(0.5	)
Loss before taxes and cumulative effect of change in accounting principle	(58.9	)	(92.2	)	(54.6	)	(69.8	)
Income tax benefit	(3.4	)	(19.4	)	(0.8	)	(12.2	)
Loss before cumulative effect of change in accounting principle	(55.5	)	(72.8	)	(53.8	)	(57.6	)
Cumulative effect of change in accounting principle	—		—		—		(184.3	)
Net loss	(55.5	)%	(72.8	)%	(53.8	)%	(241.9	)%

Quarter Ended September 30, 2002 Compared to Quarter Ended September 30, 2001

Our net loss for the quarter ended September 30, 2002 was $27.8 million compared to a net loss of $28.2 million during the quarter ended September 30, 2001. The decrease in the loss of $0.4 million is primarily due to the decrease in operating expenses as a result of the cost reduction programs implemented throughout fiscal years 2002 and 2003, and the decrease in goodwill amortization upon the adoption of SFAS No. 142 effective April 1, 2002. These expense decreases were partially offset by the restructuring charge taken in the second quarter of fiscal year 2003 and a decrease in revenue before out-of-pocket reimbursements.

The Company applies Accounting Principles Board (APB) Opinion 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for stock issued to employees. Effective April 1, 2003, the Company will apply Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock Based Compensation,” in accounting for stock issued to employees for grants awarded subsequent to that date. Had compensation expense on options issued to employees during the quarter ended September 30, 2002 been

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DIAMONDCLUSTER INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

determined based on the fair value at the grant date consistent with the methodology prescribed in SFAS No. 123, the Company’s net loss and diluted earnings per share would have increased by $0.6 million to a net loss of $28.4 million for the three months ended September 30, 2002, or $(0.91) per share.

Our revenues before out-of-pocket expense reimbursements decreased 24.9% to $38.1 million during the quarter ended September 30, 2002 as compared to the same period in the prior year. Total revenue including out-of-pocket expense reimbursements decreased 21.3% to $44.7 million for the quarter ended September 30, 2002 compared with $56.8 million reported for the same period of the prior year. The decrease in revenue can be principally attributed to the weakness in the global economy, resulting in a decline in current demand for the Company’s services. The unstable economic conditions have also led to pricing pressures, a lengthening of the Company’s sales cycle and reduction and/or deferrals of client expenditures for consulting services. Revenue from new clients accounted for 9% of the revenue during the three-month period ended September 30, 2002 compared to 13% during the same period in the prior year. We served 79 clients during the quarter ended September 30, 2002 as compared to 77 clients during the same period in the prior year.

Project personnel and related expenses before out-of-pocket reimbursable expenses decreased $5.4 million to $28.9 million during the quarter ended September 30, 2002 as compared to the same period in the prior year. The decrease in project personnel and related expenses reflects savings resulting from cost reduction programs implemented throughout fiscal 2002 and 2003. Beginning June 2001, we reduced salaries between 10% and 15% for most employees, and in August 2001, we reduced salaries 65% for approximately 200 furloughed employees. During the quarters ended December 31, 2001 and September 30, 2002 we further reduced personnel as part of the Company’s restructuring plan. We reduced our client-serving professional staff from 1,095 at September 30, 2001 to 674 at September 30, 2002. As a percentage of net revenues, project personnel and related expenses before out-of-pocket expense reimbursements increased from 67.6% to 75.9% during the quarter ended September 30, 2002, as compared to the same period in the prior year, due primarily to increased client prospecting costs. Similarly, project personnel and related expenses including out-of-pocket reimbursable expenses decreased $4.8 million to $35.5 million during the quarter ended September 30, 2002 as compared to the same period of the prior year.

Professional development and recruiting expenses decreased $2.6 million to $1.0 million during the quarter ended September 30, 2002 as compared to the same period in the prior year. This decrease primarily reflects decreases in our level of recruiting and decreased training conduct expenditures. As a percentage of net revenues, these expenses decreased to 2.5% as compared to 7.0% during the same period in the prior year.

Marketing and sales expenses decreased from $1.9 million to $1.1 million during the quarter ended September 30, 2002 as compared to the same period in the prior year as a result of decreased marketing activities. As a percentage of net revenues, these expenses decreased to 3.0% as compared to 3.7% during the same period in the prior year.

Management and administrative support expenses decreased from $11.9 million to $9.8 million, or 17.7%, during the quarter ended September 30, 2002 as compared to the same period in the prior year, principally as a result of our cost reduction programs, including the closing of the New York office and the downsizing of other offices globally. As a percentage of net revenues, these expenses increased from 23.5% to 25.8% during the quarter ended September 30, 2002 as compared to the same period in the prior year.

Goodwill amortization decreased from $15.5 million to zero during the quarter ended September 30, 2002, as compared to the same period in the prior year, as a result of the Company’s adoption of SFAS No. 142 on April 1, 2002. As a percentage of net revenues, these expenses decreased from 30.5% to 0.0% as compared to the same period in the prior year.

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DIAMONDCLUSTER INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

Noncash compensation decreased from $13.2 million during the quarter ended September 30, 2001 to $11.5 million during the quarter ended September 30, 2002. This is primarily the amortization of unearned compensation resulting from the issuance of stock options at prices below fair market value to Cluster employees in connection with the Cluster acquisition. The unearned compensation will be earned over time contingent on the continued employment of these employees. As a percentage of net revenues, noncash compensation was 30.1% during the quarter ended September 30, 2002 as compared to 25.9% in the same period of the prior year.

In the third quarter of fiscal 2003, the Company recorded a restructuring charge of $20.9 million as a result of management’s plan to better align the Company’s operating infrastructure with anticipated levels of business in fiscal 2003. The Company completed an assessment of the infrastructure needed to support anticipated levels of business in fiscal 2003 and beyond, and developed and implemented a restructuring plan designed to better align its cost structure and areas of operation with current business requirements. The restructuring charge consists of $12.1 million for contractual commitments related to office space reductions, $5.7 million for severance and related expenses, $2.7 million for the write-off of various depreciable assets and the termination of certain equipment leases and $0.4 million of additional expense recorded in connection with the restructuring plan implemented in December 2001 due primarily to a change in estimate related to the cost of terminating an equipment lease. The principal actions in the September 2002 restructuring plan involved office space reductions, which included further consolidation of office space in multiple offices globally. Estimated costs for the reduction in physical office space are comprised of contractual rental commitments for office space vacated, attorney fees and related costs to sublet the office space, offset by estimated sub-lease rental income. The restructuring plan also included workforce reductions, resulting in the termination of approximately 90 employees. Of the total employees severed, 60% were project personnel and 40% were operational personnel. The client-serving personnel consist of partners, principals, managers, associates and analysts. Also included in the restructuring plan were the costs associated with the termination of certain equipment leases and costs related to the write-down of other assets to their estimated net realizable value. The Company expects savings from the September 2002 restructuring plan to be about $15–$17 million on an annualized basis.

The loss from operations increased from a loss of $29.5 million to a loss of $35.1 million during the quarter ended September 30, 2002 as compared to the same period in the prior year. This increase was due primarily to the decline in revenue and the restructuring charge taken in the second quarter of fiscal year 2003, partially offset by the decrease in operating expenses and goodwill amortization. EBITA, which consists of earnings from operations before amortization of goodwill, noncash compensation and restructuring charge increased from a loss of $0.9 million to a loss of $2.7 million during the quarter ended September 30, 2002 as compared to the same period in the prior year. EBITA is not a measure of financial performance under U.S. generally accepted accounting principles. You should not consider it in isolation from, or as a substitute for, net income or cash flow measures prepared in accordance with U.S. generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, our EBITA calculation may not be comparable to other similarly titled measures of other companies. We have included EBITA as a supplemental disclosure because it may provide useful information regarding our ability to generate cash for operating and other corporate purposes.

Other expense, net decreased from $0.4 million to $0.1 million during the quarter ended September 30, 2002 as compared to the same period in the prior year. As a percentage of net revenues, these expenses decreased to 0.2% as compared to 0.7% during the same period in the prior year.

The Company has deferred tax assets which have arisen primarily as a result of operating losses incurred in fiscal year 2002 and the the first six months of fiscal year 2003, as well as other temporary differences between

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DIAMONDCLUSTER INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

book and tax accounting. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Management judgment is required in determining the Company’s provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against the gross deferred tax assets. The income tax benefit increased from a benefit of $1.7 million to a benefit of $7.4 million during the quarter ended September 30, 2002 as compared to the same period in the prior year, due principally to the increase in the pre-tax loss before nondeductible goodwill amortization incurred in the current quarter, partially offset by the additional income tax expense recorded during the second fiscal quarter of 2003 to provide a valuation allowance for deferred tax assets related to certain state net operating loss and credit carryforwards and certain foreign net operating loss carryforwards. The Company believes that the ultimate realization of the deferred tax assets for federal, state, and foreign income tax purposes is considered more likely than not, due to anticipated sufficient future taxable income.

Six Months Ended September 30, 2002 Compared to Six Months Ended September 30, 2001

Our net loss for the six months ended September 30, 2002 of $184.9 million increased $126.3 million from $58.6 million during the six months ended September 30, 2001. This increase is due primarily to the noncash loss related to the impairment in the value of goodwill, partially offset by a reduction in goodwill amortization upon the adoption of SFAS No. 142 on April 1, 2002, and the decrease in operating expenses resulting from the implementation of cost reduction programs throughout fiscal 2002 and 2003.

The Company applies Accounting Principles Board (APB) Opinion 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for stock issued to employees. Effective April 1, 2003, the Company will apply Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock Based Compensation,” in accounting for stock issued to employees for grants awarded subsequent to that date. Had compensation expense on options issued to employees during the six months ended September 30, 2002 been determined based on the fair value at the grant date consistent with the methodology prescribed in SFAS No. 123, the Company’s net loss and diluted earnings per share would have been increased by $0.8 million to a net loss of $185.7 million for the six months ended September 30, 2002, or a loss of $(5.89) per share.

Net revenue for the six months ended September 30, 2002 was $76.4 million, down 29.8% compared with $108.9 million reported for the same period in the prior year. The decrease in revenue can be principally attributed to the weakness in the global economy, resulting in a decline in current demand for the Company’s services. The unstable economic conditions have also led to pricing pressures, a lengthening of the Company’s sales cycle and reduction and/or deferrals of client expenditures for consulting services. Revenue from new clients accounted for 12% of the revenue during the six month period ended September 30, 2002, while revenue from existing clients accounted for 88% of revenue during the same period. We served 103 clients during the six months ended September 30, 2002, a decrease from the 111 clients served in the same period in the prior year.

Project personnel and related expenses before out-of-pocket reimbursable expenses decreased $13.9 million to $58.4 million during the six months ended September 30, 2002 as compared to the same period in the prior year. The decrease in project personnel and related expenses reflects savings resulting from cost reduction programs implemented throughout fiscal 2002 and 2003. Beginning in June 2001, we reduced salaries between 10% and 15% for most employees, and in August 2001, we reduced salaries 65% for approximately 200 furloughed employees. During the quarters ended December 31, 2001, March 31, 2002, and September 30, 2002 we further reduced personnel as part of the Company’s restructuring plan. We reduced our client-serving professional staff from 1,095 at September 30, 2001 to 674 at September 30, 2002. As a percentage of net

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DIAMONDCLUSTER INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

revenues, project personnel and related expenses before out-of-pocket expense reimbursements increased from 66.4% to 76.4% during the six months ended September 30, 2002, as compared to the same period in the prior year, due primarily to increased client prospecting costs. Similarly, project personnel and related expenses including out-of-pocket reimbursable expenses decreased $15.4 million to $70.4 million during the six-month period ended September 30, 2002 as compared to the same period of the prior year.

Professional development and recruiting expenses decreased $5.1 million to $2.2 million during the six months ended September 30, 2002 as compared to the same period in the prior year. This decrease primarily reflects decreases in our level of recruiting, a reduction in firmwide meetings, and decreased training conduct expenditures. As a percentage of net revenues, these expenses decreased to 2.8% as compared to 6.6% during the same period in the prior year.

Marketing and sales expenses decreased from $4.5 million to $2.8 million during the six months ended September 30, 2002 as compared to the same period in the prior year as a result of decreased marketing activities and personnel reductions. As a percentage of net revenues, these expenses decreased to 3.7% as compared to 4.2% during the same period in the prior year.

Management and administrative support expenses decreased from $25.7 million to $20.3 million, or 20.9%, during the six months ended September 30, 2002 as compared to the same period in the prior year, principally as a result of our cost reduction programs, including the closing of the New York office and the downsizing of other offices globally. As a percentage of net revenues, these expenses increased from 23.6% to 26.6% during the six-month period ended September 30, 2002 as compared to the same period in the prior year.

Goodwill amortization decreased from $30.9 million to zero during the six months ended September 30, 2002 as compared to the same period in the prior year as a result of the Company’s adoption of SFAS No. 142 on April 1, 2002. As a percentage of net revenues, these expenses decreased from 28.3% to 0% as compared to the same period in the prior year.

Noncash compensation decreased from $27.0 million during the six months ended September 30, 2001 to $24.8 million during the six months ended September 30, 2002. This is primarily the amortization of unearned compensation resulting from the issuance of stock options at prices below fair market value to Cluster employees in connection with the Cluster acquisition. The unearned compensation will be earned over time contingent on the continued employment of these employees. As a percentage of net revenues, noncash compensation was 32.5% during the six months ended September 30, 2002.

In the third quarter of fiscal 2003, the Company recorded a restructuring charge of $20.9 million as a result of management’s plan to better align the Company’s operating infrastructure with anticipated levels of business in fiscal 2003. The Company completed an assessment of the infrastructure needed to support anticipated levels of business in fiscal 2003 and beyond, and developed and implemented a restructuring plan designed to better align its cost structure and areas of operation with current business requirements. The restructuring charge consists of $12.1 million for contractual commitments related to office space reductions, $5.7 million for severance and related expenses, $2.7 million for the write-off of various depreciable assets and the termination of certain equipment leases and $0.4 million of additional expense recorded in connection with the restructuring plan implemented in December 2001 due primarily to a change in estimate related to the cost of terminating an equipment lease. The principal actions in the September 2002 restructuring plan involved office space reductions, which included further consolidation of office space in Barcelona, Boston, Chicago, Madrid, Munich, New York and Sao Paulo. Estimated costs for the reduction in physical office space are comprised of contractual rental

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DIAMONDCLUSTER INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

commitments for office space vacated, attorney fees and related costs to sublet the office space, offset by estimated sub-lease rental income. The restructuring plan also included workforce reductions, resulting in the termination of approximately 90 employees. Of the total employees severed, 60% were project personnel and 40% were operational personnel. The client-serving personnel consist of partners, principals, managers, associates and analysts. Also included in the restructuring plan were the costs associated with the termination of certain equipment leases and costs related to the write-down of other assets to their estimated net realizable value. The Company expects savings from the September 2002 restructuring plan to be about $15–$17 million on an annualized basis.

The loss from operations decreased from a loss of $58.7 million to a loss of $52.9 million during the six months ended September 30, 2002 as compared to the same period in the prior year. This decrease was due primarily to the reduction in goodwill amortization and a decrease in other operating expenses, partially offset by the decline in revenue and the restructuring charge implemented during fiscal 2003. EBITA, which consists of earnings from operations before amortization of goodwill, noncash compensation and restructuring charge, increased from a loss of $0.8 million to a loss of $7.3 million during the six months ended September 30, 2002 as compared to the same period in the prior year. EBITA is not a measure of financial performance under U.S. generally accepted accounting principles. You should not consider it in isolation from, or as a substitute for, net income or cash flow measures prepared in accordance with U.S. generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, our EBITA calculation may not be comparable to other similarly titled measures of other companies. We have included EBITA as a supplemental disclosure because it may provide useful information regarding our ability to generate cash for operating and other corporate purposes.

Other expense, net decreased from $0.8 million to $0.4 million during the six months ended September 30, 2002 as compared to the same period in the prior year. As a percentage of net revenues, these expenses remained approximately the same at 0.7% compared to the same period in the prior year.

The Company has deferred tax assets which have arisen primarily as a result of operating losses incurred in fiscal year 2002 and the the first six months of fiscal year 2003, as well as other temporary differences between book and tax accounting. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Management judgment is required in determining the Company’s provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against the gross deferred tax assets. For the six months ended September 30, 2002, the income tax benefit increased from $0.8 million to $9.3 million as compared to the same period in the prior year, due principally to the increase in the pre-tax loss before nondeductible goodwill amortization incurred in the period, partially offset by the additional income tax expense recorded during the second fiscal quarter of 2003 to provide a valuation allowance for deferred tax assets related to certain state net operating loss and credit carryforwards and certain foreign net operating loss carryforwards. The Company believes that the ultimate realization of the deferred tax assets for federal, state and foreign income tax purposes is considered more likely than not, due to anticipated sufficient future taxable income.

Liquidity and Capital Resources

We maintain a revolving line of credit pursuant to the terms of a secured credit agreement with a commercial bank under which we may borrow up to $10.0 million at an annual interest rate based on the prime rate or based on LIBOR plus 1.50%, at our discretion. The line of credit is secured by cash and certain accounts receivable of the Company’s wholly-owned subsidiary DiamondCluster International North America, Inc. This line of credit is reduced, as necessary, to account for letters of credit outstanding. As of September 30, 2002, we had approximately $8.8 million available under this line of credit.

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DIAMONDCLUSTER INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

During the six-month period ended September 30, 2002, net cash used in operating activities was $4.1 million, and included a net loss of $2.9 million after certain non-cash items and the restructuring charge (calculated by adding back the $20.9 million restructuring charge and $20.2 million of the following non-cash items to the loss before the cumulative effect of change in accounting principle of $44.0 million: depreciation and amortization, non-cash compensation, deferred income taxes and the write-down of the net book value of property, plant, and equipment), and $1.2 million used by working capital and other operating activities. Our billings for the three and six months ended September 30, 2002 totaled $46.4 million and $92.8 million, respectively. These amounts include VAT (which are not included in recognized revenue) and billings to clients for reimbursable expenses. Our gross accounts receivable balance of $23.0 million at September 30, 2002 represented 45 days of billings for the quarter ended September 30, 2002.

Cash used in investing activities was $0.6 million for the six-month period ended September 30, 2002. Cash used in investing activities resulted primarily from capital expenditures, partially offset by an increase in other assets.

Cash used in financing activities was $1.7 million for the six-month period ended September 30, 2002. Cash used in financing activities resulted primarily from the repurchase of DiamondCluster’s Class A Common Stock totaling $5.2 million, which was offset by common stock issued during the quarter totaling $3.5 million. On June 24, 2002, the Company’s Board of Directors increased the number of shares authorized to be repurchased under its existing stock repurchase program by three million shares. This authorization brought the total authorized shares for the stock repurchase program to six million shares. These repurchases were authorized to be made in the open market or in privately negotiated transactions with the timing and volume dependent upon market conditions. Through September 30, 2002, the number of shares purchased under this authorization was 3.4 million shares at an aggregate cost of $51.9 million.

On May 2, 2002, the Company offered employees (other than senior officers) a plan, approved by the Board of Directors, which gave employees a choice to cancel certain stock options previously granted to them in exchange for a future grant of a smaller number of new options to purchase the same class of shares, a majority of which would vest over a three-year period. The original options were granted under DiamondCluster’s 2000 Plan and under DiamondCluster’s 1998 Equity Incentive Plan. Employees who accepted this offer were required to make an election with respect to all covered options by May 14, 2002. In order to receive the new options, the employees are required to remain employed by DiamondCluster until November 15, 2002. The exchange offer was not available to the members of the Board of Directors or senior officers of DiamondCluster. A total of 4.3 million stock options were cancelled as a part of this plan. On November 15, 2002, approximately 1.0 million new options are expected to be granted to employees who remain employed by DiamondCluster. The exercise price for a majority of the options to be granted on November 15, 2002 will be at 25% of fair market value on that date.

As a result of various personnel and other expense management actions the Company plans to take in the third fiscal quarter, it expects to take a charge of approximately $8–10 million in the December 2002 quarter. The charge will consist of severance and related expenses, and other expenses related to operational restructuring, including the discontinuance of Context^®, a quarterly publication of the Company. The Company expects expense savings from these actions to be approximately $15–$17 million on an annualized basis.

We believe that our current cash balances, existing lines of credit, and cash flow from existing and future operations will be sufficient to fund our operating requirements at least through fiscal 2004. If necessary, we believe that additional bank credit would be available to fund any additional operating and capital requirements. In addition, we could consider seeking additional public or private debt or equity financing to fund future growth opportunities. However, there is no assurance that such financing would be available to us on acceptable terms.

20

DIAMONDCLUSTER INTERNATIONAL, INC.

Item 3.    Quantitative and Qualitative Disclosure About Market Risk

Foreign Currency Risk

International revenues are generated primarily from our services in the respective countries by our foreign subsidiaries and are typically denominated in the local currency of each country, most of which are tied to the euro. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency. Our international business is subject to risks typical of an international business, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility. Our future results could be materially adversely impacted by changes in these or other factors.

The financial statements of our non-U.S. businesses are typically denominated in the local currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. As a result, we are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into U.S. dollars in consolidation. As exchange rates fluctuate, these results, when translated, may vary from expectations and adversely impact overall expected results and profitability.

The Company has entered into transactions to reduce the effect of foreign exchange transaction gains and losses on recorded foreign currency denominated assets and liabilities, and to reduce the effect of foreign exchange translation gains and losses on the parent company’s net investment in its foreign subsidiaries. These transactions involve the use of forward foreign exchange contacts in certain European currencies. A forward foreign exchange contract obligates the Company to exchange predetermined amounts of specified foreign currencies at specified exchange rates on specified dates or to make an equivalent U.S. dollar payment equal to the value of such exchange. As a result, increases or decreases in the U.S. dollar value of the Company’s foreign currency transactions and investments in foreign subsidiaries are partially offset by gains and losses on the forward contracts, so as to mitigate the possibility of significant foreign currency transaction and translation gains and losses. The Company does not use foreign currency contracts for trading purposes. The Company does not currently hedge anticipated foreign currency-denominated revenues and expenses. All foreign currency transactions and outstanding forward contracts are marked-to-market on a monthly basis.

DiamondCluster has net investments in foreign operations located throughout Europe and Latin America. In order to mitigate the impact of foreign currency movements on the Company’s financial position, in some cases the Company hedges its euro exposures through the use of euro/U.S. dollar forward contracts. These contracts have been designated and have qualified as hedging instruments for hedges of the foreign currency exposure related to the Company’s net investment in its foreign operations. Accordingly, the net amount of gains or losses on these forward foreign exchange contracts offset losses and gains on the Company’s exposure to foreign currency movements related to is net investments in its foreign operations and are reflected in the cumulative translation adjustment account and included as a component of other comprehensive income. At March 31, 2002, the Company had one euro/U.S. dollar forward contract outstanding in the notional principal amount of EUR 62.8 million. On June 28, 2002, the Company settled its euro/U.S. dollar forward contract for EUR 62.8 million. As noted above, the Company entered into this contract to mitigate the effect of an adverse movement of foreign exchange rates. As a result of the weakening of the U.S. dollar against the euro in the first quarter of fiscal 2003, the Company recorded a net loss on the forward exchange contract of $7.4 million in the cumulative translation adjustments account which was offset by the related gain on the net investment in the foreign operations during the period. As of September 30, 2002, there were no open euro/U.S. dollar or other forward contracts outstanding.

Interest Rate Risk

The Company invests its cash in highly liquid investments with original maturities of three months or less. The interest rate risk associated with our investing activities at September 30, 2002 is not material in relation to

21

our consolidated financial position, results of operations or cash flows. We have not used derivative financial instruments to alter the interest rate characteristics of our investments holdings.

Item 4.    Controls and Procedures

The Chairman and Chief Executive Officer, the Senior Vice President, Finance and Administration and the Chief Financial Officer of DiamondCluster International, Inc. (its principal executive officer and principal financial officers, respectively) have concluded, based on their evaluations as of a date within 90 days prior to the date of the filing of this Report, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation.

22

DIAMONDCLUSTER INTERNATIONAL, INC.

PART II.    OTHER INFORMATION

Items 1—3.

None

Item 4. Submission of Matters to a Vote of Security Shareholders

On August 13, 2002, the Company held its annual meeting of shareholders at the Westin Hotel in Chicago, Illinois. Edward R. Anderson, Adam J. Gutstein, Pedro Nueno and Arnold R. Weber were elected by the shareholders to serve as Class III members of the Board of Directors for three-year terms expiring at the 2005 annual meeting of shareholders. The vote on this matter is set forth below. There were no broker non-votes for this matter voted upon by the shareholders.

1. Election of Directors

Name	For	Withheld
Edward R. Anderson	60,582,342	6,112,938
Adam J. Gutstein	63,858,012	2,837,268
Pedro Nueno	66,600,154	95,126
Arnold R. Weber	66,554,490	140,790

Item 5.

None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1 (a)**	Restated Certificate of Incorporation
3.2*	Amended and restated By-Laws
99.1**	Risk Factors
99.2**	CEO Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to sections 302 and 906 of the Sarbanes-Oxley Act of 2002
99.3**	CFO Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to sections 302 and 906 of the Sarbanes-Oxley Act of 2002
99.4**	Senior Vice President, Finance and Administration Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to sections 302 and 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

None

* Incorporated by reference to the corresponding exhibits filed with the Company’s Registration Statement on Form S-1 (File No. 333-17785)

** filed herewith

23

DIAMONDCLUSTER INTERNATIONAL, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DIAMONDCLUSTER INTERNATIONAL, INC.
Date: November 13, 2002	By: /S/     MELVYN E. BERGSTEIN Melvyn E. Bergstein Chairman, Chief Executive Officer and Director
Date: November 13, 2002	By: /S/     KARL E. BUPP Karl E. Bupp Vice President, Chief Financial Officer and Treasurer

24

EX-3.1(A)

Exhibit 3.1 (a)

RESTATED CERTIFICATE OF INCORPORATION

OF

DIAMONDCLUSTER INTERNATIONAL, INC.

DiamondCluster International, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify:

FIRST: That the present name of the Corporation is DiamondCluster International, Inc., f/k/a Diamond Technology Partners Incorporated, and its original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on March 1, 1996 (the “Original Certificate of Incorporation”).

SECOND: That, by written consent in lieu of a meeting of the Board of Directors of said Corporation pursuant to Section 141(f) of the General Corporation Law of the State of Delaware (the “Delaware General Corporation Law”), resolutions were duly adopted in accordance with Section 245 of the Delaware General Corporation Law, setting forth a proposed restated certificate of incorporation of said Corporation (the “Restated Certificate of Incorporation”).

THIRD: That the text of the Restated Certificate of Incorporation restates and integrates, but does not further amend, the provisions of the Corporation’s Certificate of Incorporation as heretofore amended or supplemented, and then is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation to read in its entirety as follows:

ARTICLE 1

NAME

The name of the corporation is DIAMONDCLUSTER INTERNATIONAL, INC. (the “Corporation”).

ARTICLE 2

REGISTERED OFFICE AND AGENT

The address of the Corporation’s registered office in the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle, State of Delaware 19805. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc.

ARTICLE 3

PURPOSE AND POWERS

The purpose of the Corporation is to engage in any and all lawful acts or activities for which corporations may be organized under the General Corporation Law of the State of Delaware (the “Delaware General Corporation”). The Corporation shall have all power necessary or convenient to the conduct, promotion or attainment of such acts and activities.

ARTICLE 4

CAPITAL STOCK

4.1    AUTHORIZED SHARES.

The total number of shares of all classes of capital stock that the Corporation shall have authority to issue is Three Hundred Two Million (302,000,000) of which (i) Two Hundred Million (200,000,000) shall be Class A

1

Exhibit 3.1 (a), continued

Common Stock, par value $0.001 per share (the “Class A Common Stock”), (ii) One Hundred Million (100,000,000) shall be Class B Common Stock, par value $0.001 per share (the “Class B Common Stock”) (the Class A Common Stock and the Class B Common Stock are collectively referred to herein as the “Common Stock”), and Two Million (2,000,000) shall be Preferred Stock, par value $1.00 per share (the “Preferred Stock”).

4.2    COMMON STOCK.

4.2.1    Relative Rights. The Common Stock shall be subject to all of the rights, privileges, preferences and priorities of the Preferred Stock as set forth in the certificate(s) of designations filed to establish the respective classes or series of Preferred Stock.

4.2.2    Voting Rights. Holders of Class A Common Stock are entitled to one (1) vote for each share of such stock held, and holders of Class B Common Stock are entitled to five (5) votes for each share of such stock held, with respect to all matters properly submitted for the vote of holders of Common Stock. Except as otherwise provided by law, the holders of Common Stock will vote together as a single class on all matters properly submitted for their vote, including, without limitation, any amendment to this Restated Certificate of Incorporation which would increase or decrease the number of authorized shares of Class A Common Stock or Class B Common Stock.

4.2.3    Dividends and Other Distributions.

(a)    Except as otherwise provided herein, each share of Common Stock issued and outstanding shall be identical in all respects, and no dividend shall be paid on any share of Common Stock unless the same dividend is paid on all shares of Common Stock outstanding at the time of such payment. Except for and subject to those special voting rights expressly granted herein to the holders of the Class B Common Stock and subject to the powers, rights, privileges, preferences and priorities of the Preferred Stock, the holders of Common Stock shall have exclusively all other rights of stockholders, including, without limitation, (i) the right to receive dividends, when, as and if declared by the Board of Directors out of funds legally available therefor, and (ii) in the event of any distribution of assets upon liquidation, dissolution or winding up of the Corporation or otherwise, the right to receive ratably all of the assets and funds of the Corporation remaining after the payment to the creditors of the Corporation.

(b)    Dividends and distributions payable in shares of Class A Common Stock may not be made on or to shares of Class B Common Stock and dividends and distributions payable in shares of Class B Common Stock may not be made on or to shares of any class of the Corporation’s capital stock other than the Class B Common Stock. If a dividend or distribution payable in shares of Class A Common Stock shall be made on the shares of Class A Common Stock, a dividend or distribution payable in shares of Class B Common Stock shall be made simultaneously on the shares of Class B Common Stock, and the number of shares of Class B Common Stock payable on each share of Class B Common Stock pursuant to such dividend or distribution shall be equal to the number of shares of Class A Common Stock payable on each share of Class A Common Stock pursuant to such dividend or distribution. If a dividend or distribution payable in shares of Class B Common Stock shall be made on the shares of Class B Common Stock, a dividend or distribution payable in shares of Class A Common Stock shall be made simultaneously on the shares of Class A Common Stock, and the number of shares of Class A Common Stock pursuant to such dividend or distribution shall be equal to the number of shares of Crass B Common Stock payable on each share of Class B Common Stock pursuant to such dividend or distribution.

(c)    If the Corporation shall in any manner subdivide (by stock split, reclassification, stock dividend, recapitalization, or otherwise) or combine (by reverse stock split or otherwise) the

2

Exhibit 3.1 (a), continued

outstanding shares of Class A Common Stock or Class B Common Stock, then the outstanding shares of each other class of Common Stock shall be subdivided or combined, as the case may be, to the same extent, on an equal share basis.

4.2.4    Conversion of Class B Common Stock

(a)    In the event that (i) a share of Class B Common Stock is neither owned beneficially nor owned of record by a Permitted Holder (as defined below) or (ii) if a beneficial or record owner of a share of Class B Common Stock ceases to be a Permitted Holder, each such Share of Class B Common Stock shall at that time be automatically and immediately converted to one (1) fully paid and non-assessable share of Class A Common Stock.

(b)    Upon a conversion of a share or shares of Class B Common Stock into a share or shares of Class A Common Stock as provided in paragraph (a) above, the certificate representing such former share or shares of Class B Common Stock shall immediately and thereafter represent the right to receive a certificate representing the share or shares of Class A Common Stock into which such share or shares of Class B Common Stock have been converted. Such certificate shall be surrendered at the office of the Corporation or of any transfer agent for the Common Stock, and a new certificate representing the number of share or shares of Class A Common Stock into which the former share or shares of Class B Common Stock have been converted shall be issued to the holder of such share or shares. The Corporation or the transfer agent may require such proof of transfer or conversion as may be satisfactory to them in connection with the issuance of such new certificate.

(c)    A “Permitted Holder” is:

(i)    a person who is an employee of the Corporation or any of its majority-owned subsidiaries; or

(ii)    a corporation, company, limited liability company, partnership or limited partnership controlled by an employee or a group of employees of the Corporation or any of its majority-owned subsidiaries (“control” means the possession, direct or indirect, of the power to direct or to cause the direction of the management and policies of the entity through the ownership of voting securities, by contract, or otherwise); or

(iii)    a trust for the primary benefit of an employee of the Corporation or any of its majority-owned subsidiaries, or for the primary benefit of such an employee’s spouse, lineal ancestors or lineal descendants; or

(iv)    the Corporation; provided, however, that a person or entity described in (i), (ii), or (iii) above may not be a Permitted Holder unless such person or entity shall have become bound by and become a party to that certain Second Amended and Restated Voting and Stock Restriction Agreement dated August 4, 1997, or any amendment or restatement thereof in effect from time to time; provided further, that a person or entity described in (i), (ii), or (iii) above shall cease to be a Permitted Holder on the date that the employee, or, in the case of a group, a majority of the group, referred to therein ceases to be an employee of the Corporation or any of its majority-owned subsidiaries; provided further, that the Corporation shall not be entitled to vote any shares of Class B Common Stock held by it.

(d)    Beneficial ownership of shares of Class B Common Stock shall be determined as set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, or any successor thereto.

(e)    Shares of Class A Common Stock may not be converted into shares of Class B Common Stock.

3

Exhibit 3.1 (a), continued

(f)    The Corporation hereby reserves and shall at all times reserve and keep available, out of its authorized and unissued Class A Common Stock, for the purpose of effecting the conversions provided for herein, a sufficient number of shares of Class A Common Stock to effect the conversion of all outstanding shares of Class B Common Stock. All of the Class A Common Stock so issuable shall, when issued, be duly and validly issued, fully paid and non-assessable, and free from liens and charges with respect to the issue. The Corporation will take such action as may be necessary to ensure that all such Class A Common Stock may be so issued without violation of any applicable law or regulation, or of any requirements of any stock exchange or market on which any shares of the Class A Common Stock are listed or quoted.

(g)    In any merger, consolidation or business combination, the consideration to be received per share by the holders of Class A Common Stock and Class B Common Stock shall be identical for each class of stock, except that in any such transaction in which shares of Common Stock are to be distributed, such shares may differ as to voting rights to the extent that voting rights differ among Class A Common Stock and Class B Common Stock as provided herein.

4.2.5    Reissuance of Class B Common Stock.

In the event that the Corporation reacquires any issued and outstanding shares of Common Stock, the Corporation may only reissue shares of Class B Common Stock to Permitted holders.

4.3    PREFERRED STOCK.

The Board of Directors is authorized, subject to limitations prescribed by the Delaware General Corporation Law and the provisions of this Restated Certificate of Incorporation, to provide, by resolution or resolutions from time to time and by filing a certificate(s) pursuant to the Delaware General Corporation Law, for the issuance of the shares of Preferred Stock in one or more classes or series, to establish from time to time the number of shares to be included in each such class or series, to fix the voting powers, designations, preferences and relative, participating, optional, or other special rights of the shares of each such class or series and to fix the qualifications, limitations, or restrictions thereof. Each share of each such class or series of Preferred Stock shall have the same relative rights as and be identical in all respects to all other shares of the same class or series.

ARTICLE 5

BOARD OF DIRECTORS

5.1    NUMBER; ELECTION; AND CLASSIFICATION

The number of directors of the Corporation shall be not less than five nor more than fifteen, the exact number of directors to be fixed from time to time by or in the manner provided in the By-laws of the Corporation. The Board of Directors of the Corporation shall be divided into three classes, each class consisting of approximately one-third of the total number of directors. The term of office of each class shall be three years and shall expire in successive years at the time of the annual meeting of stockholders. The initial classes of directors are as follows:

Class I (terms of office expiring at the 1997 annual meeting of stockholders)—Michael E. Mikolajczyk, Donald R. Caldwell and Alan Kay;

Class II (terms of office expiring at the 1998 annual meeting of stockholders)—Melvyn E. Bergstein and John D. Loewenberg; and

4

Exhibit 3.1 (a), continued

Class III (terms of office expiring at the 1999 annual meeting of stockholders)—Christopher J. Moffitt, James C. Spira and Edward R. Anderson.

At each annual meeting of stockholders, the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting and until their successors shall be elected and qualified. Unless and except to the extent that the By-laws of the Corporation shall otherwise require, the election of directors of the Corporation need not be by written ballot.

Any vacancy occurring in the Board of Directors, including any vacancy created by an increase in the number of directors, shall be filled for the unexpired term by the vote of a majority of the directors then in office, whether or not a quorum, or by a sole remaining director, and any director so chosen shall hold office for the remainder of the full term of the class in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified. No director may be removed except for cause and then only by an affirmative vote of the holders of at least a majority of the outstanding shares of stock of the Corporation entitled to vote thereon at a duly constituted meeting of stockho1ders called for such purpose. At least thirty days prior to such meeting of stockholders, written notice shall be sent to the director or directors whose removal shall be considered at such meeting.

5.2    MANAGEMENT OF BUSINESS AND AFFAIRS OF THE CORPORATION.

The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

5.3    LIMITATION OF LIABILITY.

No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this provision shall not eliminate or limit the liability of a director, (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article 5.3 shall be prospective only and shall not adversely affect any right or protection of, or any limitation on the liability of, a director of the Corporation existing at, or arising out of facts or incidents occurring prior to, the effective date of such repeal or modification.

ARTICLE 6

COMPROMISE OR ARRANGEMENT

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the

5

Exhibit 3.1 (a), continued

said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

ARTICLE 7

AMENDMENT OF BY-LAWS

The Board of Directors or the stockholders may from time to time adopt, amend or repeal the By-laws of the Corporation. Such action by the Board of Directors shall require the affirmative vote of a majority of the directors then in office at a duly constituted meeting of the Board of Directors called for such purpose. Such action by the stockholders shall require the affirmative vote of the holders of at least a majority of the outstanding shares of stock of the Corporation entitled to vote thereon at a duly constituted meeting of stockholders called for such purpose.

ARTICLE 8

RESERVATION OF RIGHT TO AMEND

RESTATED CERTIFICATE OF INCORPORATION

The Corporation reserves the right at any time, and from time to time, to amend, alter, change, or repeal any provision contained in this Restated Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences, and privileges of any nature conferred upon stockholders, directors, or any other persons by and pursuant to this Restated Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Article 8.

ARTICLE 9

STOCKHOLDER MATTERS

9.1    CONSENT IN LIEU OF MEETING.

Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders, unless such consent is signed by the holders of at least a majority of the outstanding shares of stock of the Corporation entitled to vote on such action at a duly constituted meeting of stockholders called for such purpose.

9.2    CALL OF SPECIAL MEETINGS.

Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board, or the Secretary at the request of the Board of Directors, and shall be called by the Chairman of the Board or the Secretary at the request in writing of stockholders possessing at least 30% of the voting power of the issued and outstanding voting stock of the Corporation entitled to vote generally for the election of directors. Such request shall include a statement of the purpose or purposes of the proposed meeting.

ARTICLE 10

EXEMPTION FROM DELAWARE BUSSINESS COMBINATION STATUTE

Unless this Restated Certificate of Incorporation is amended or repealed with respect to this Article 10 or unless the By-laws of the Corporation designate otherwise, the Corporation expressly elects not to be governed by Section 203 of the Delaware General Corporation Law.

6

Exhibit 3.1 (a), continued

ARTICLE 11

AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION

Except as set forth in this Article 11 or as otherwise specifically required by law, no amendment of any provision of this Restated Certificate of Incorporation shall be made unless such amendment has been first proposed by the Board of Directors of the Corporation upon the affirmative vote of at least a majority of the directors then in office at a duly constituted meeting of the Board of Directors called for such purpose and thereafter approved by stockholders of the Corporation by the affirmative vote of the holders of at least a majority of the outstanding shares of stock of the Corporation entitled to vote thereon.

[SIGNATURE PAGE TO FOLLOW]

7

Exhibit 3.1 (a), continued

IN WITNESS WHEREOF, DiamondCluster International, Inc. has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer, as of the 13th day of August, 2002.

DIAMONDCLUSTER INTERNATIONAL, INC.
By:	/S/    NANCY K. BELLIS
	Nancy K. Bellis   Its:    Vice President, General Counsel, Secretary

8

EX-99.1

Exhibit 99.1

RISK FACTORS

You should carefully consider the risks described below. The risks described are not the only ones we face. Any of the following risks could have a material adverse effect on our business, financial condition and operating results. You should also refer to the other information contained in this report, including our financial statements and the related notes.

A Significant or Prolonged Economic Downturn Could Have a Material Adverse Effect on Our Results of Operations.

Our results of operations are affected by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. A decline in the level of business activity of our clients could have a material adverse effect on our revenues and profit margin. Current economic conditions have caused some clients to reduce or defer their expenditures for consulting services. This has caused a reduction in our revenue level in the quarter ended September 30, 2002 as compared with the quarter ended September 30, 2001. Net revenues (before out-of-pocket expense reimbursements) for the quarter ended September 30, 2002 decreased by 25% from the quarter ended September 30, 2001. We have implemented and will continue to implement cost-savings initiatives to manage our expenses as a percentage of revenues. However, current and future cost-management initiatives may not be sufficient to maintain our margins if the current challenging economic environment continues for several quarters.

Our Quarterly Operating Results Will Vary From Quarter to Quarter, Which May Result in Increased Volatility of Our Share Price.

We have experienced, and may in the future continue to experience, fluctuations in our quarterly operating results. These fluctuations could reduce the market price of our Common Stock.

Factors that may cause our quarterly operating results to vary include:

Ÿ the business decisions of our clients regarding the use of our services;

Ÿ the timing of projects and their termination;

Ÿ the timing of revenue or income;

Ÿ our ability to transition employees quickly from completed projects to new engagements;

Ÿ the introduction of new products or services by us or our competitors;

Ÿ changes in our pricing policies or those of our competitors;

Ÿ our ability to manage costs, including personnel costs and support services costs; and

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

The timing of revenues is difficult to forecast because our sales cycle is relatively long and our services are affected by both the financial condition and management decisions of our clients and general economic conditions. A high percentage of our expenses are relatively fixed at the beginning of any period. Because our general policy is not to adjust our staffing levels based upon what we view as short-term circumstances, a variation in the timing, initiation or completion of client assignments, particularly at or near the end of any quarter, can cause significant variations in operating results from quarter to quarter and could result in losses for any particular period.

Our Profitability Will Suffer If We Are Not Able to Maintain Our Pricing and Utilization Rates and Control Our Costs.

Our profit margin, and therefore our profitability, is largely a function of the rates we are able to recover for our services and the utilization rate, or chargeability, of our professionals. Accordingly, if we are not able to maintain the pricing for our services or an appropriate utilization rate for our professionals and correspondingly reduce our costs, we will not be able to sustain our profit margin and our profitability will suffer. We are currently experiencing pressure on our pricing as a result of the challenging economic environment. The rates we are able to recover for our services are affected by a number of factors, including:

Ÿ our clients’ perception of our ability to add value through our services;

Ÿ competition;

Ÿ introduction of new services or products by us or our competitors;

Ÿ pricing policies of our competitors; and

Ÿ general economic conditions.

Our utilization rates are also affected by a number of factors, including:

Ÿ seasonal trends, primarily as a result of our hiring cycle and holiday and summer vacations (particularly in Europe);

Ÿ our ability to transition employees from completed projects to new engagements; and

Ÿ our ability to forecast demand for our services and thereby maintain an appropriate headcount in the appropriate areas of our workforce.

Our profitability is also a function of our ability to control our costs and improve our efficiency. Current and future cost reduction initiatives may not be sufficient to maintain our margins if the current challenging economic environment continues for several quarters.

Our Global Operations Pose Complex Management, Foreign Currency, Legal, Tax and Economic Risks, Which We May Not Adequately Address.

We conduct business in a number of countries around the world. In the quarter ended September 30, 2002, approximately 61% of our revenues were attributable to activities in North America, 28% of our revenues were attributable to our activities in Europe, and 11% of our revenues were attributable to our activities in the Latin America, Asia/Pacific and Africa. As a result, we are subject to a number of risks, including:

Ÿ the burdens of complying with a wide variety of national and local laws;

Ÿ multiple and possibly overlapping and conflicting tax laws;

Ÿ successful conversion to global operating and financial systems;

Ÿ coordinating geographically separated organizations;

Ÿ restrictions on the movement of cash;

Ÿ the absence in some jurisdictions of effective laws to protect our intellectual property rights;

Ÿ political instability;

Ÿ currency fluctuations;

Ÿ longer payment cycles;

Ÿ restrictions on the import and export of certain technologies;

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Ÿ price controls or restrictions on exchange of foreign currencies; and

Ÿ trade barriers.

Our Revenues Could Be Adversely Affected by the Loss of a Significant Client or the Failure to Collect a Large Account Receivable.

We have in the past derived, and may in the future derive, a significant portion of our revenues from a relatively limited number of major clients. From quarter to quarter, revenues from one or more individual clients may exceed 10% of our revenues for the quarter. During the quarter ended September 30, 2002, we had no clients that individually accounted for greater than 10% of our net revenues. If we lose any major clients or any of our clients cancel or significantly reduce a large project’s scope, we would lose a significant amount of revenue. In addition, if we fail to collect a large account receivable, we could be subject to significant financial exposure.

The Absence of Long-Term Contracts With Our Clients Reduces the Predictability of Our Revenues.

Our clients are generally able to reduce or cancel their use of our professional services without penalty and, in some circumstances, with little notice. As a result, we believe that the number of clients or the number and size of our existing projects are not reliable indicators or measures of future revenue. We have in the past provided, and are likely in the future to provide, services to clients without long-term agreements. When a client defers, modifies or cancels a project, there is no assurance that we will be able to rapidly redeploy our professionals to other projects in order to minimize the underutilization of employees and the resulting adverse impact on operating results. We may not be able to replace cancelled or reduced contracts with new business with the result that our revenues and profits may decline.

Failure to Meet Client Expectations Could Result in Losses and Negative Publicity.

A failure or inability by us or one of our subcontractors to meet a client’s expectations could damage our reputation and adversely affect our ability to attract new business and result in delayed or lost revenues. Our client engagements involve the creation, implementation and maintenance of business systems and other applications that can be critical to our clients’ businesses. We may be sued or unable to collect accounts receivable if a client is not satisfied with our service.

Our client contracts may not protect us from liability for damages in the event that we are sued. In addition, our general liability insurance coverage may not continue to be available on reasonable terms or in sufficient amounts. The successful assertion of any large claim against us or the failure by us to collect a large account receivable could result in significant financial exposure to us.

An Inability to Keep Pace with Rapidly Changing Technology May Impair Our Ability to Remain Competitive.

Our failure to develop business and technology consulting services that keep pace with continuing changes in technology, evolving industry standards, information technology and client preferences will result in decreased demand for our services. Among our challenges in this area are the need to:

Ÿ continue to develop our strategic and technical experience;

Ÿ develop new services that meet changing client needs; and

Ÿ effectively use leading technologies.

We may not be able to meet these objectives on a timely or successful basis.

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Competition in Our Industry is Intense and Could Harm Our Business.

Increased competition in our industry could result in price reductions, reduced gross margins or loss of market share, any of which could seriously harm our business. The business and technology consulting services market, which includes a large number of participants, is subject to rapid technological changes and is highly competitive. We compete with a number of companies that have significantly greater financial, technical and marketing resources, greater name recognition, and greater revenues than ours. We believe that the principal competitive factors in our industry include:

Ÿ diagnostic capabilities;

Ÿ effectiveness of strategic business models;

Ÿ scope of services;

Ÿ service delivery approach;

Ÿ technical and industry expertise;

Ÿ perceived value; and

Ÿ results orientation.

We believe that our ability to compete also depends in part on a number of competitive factors outside of our control, including the ability of our competitors to hire, retain and motivate senior consultants, the price at which others offer comparable services, and the extent of our competitors’ responsiveness to client needs. We may not be able to compete successfully with our competitors in the future.

In addition, there are relatively low barriers to entry in our industry. We do not own any patented technology that inhibits competitors from entering that market or providing services similar to ours. As a result, new and unknown market entrants could pose a threat to our business.

If We Are Unable to Protect Our Intellectual Property Rights or If We Infringe Upon the Intellectual Property Rights of Others Our Business May Be Harmed.

Failure to secure or maintain protection of our intellectual property could adversely affect our ability to service our clients and generate revenue. We rely on a combination of non-disclosure and other contractual agreements and copyright and trademark laws to protect our proprietary rights. We enter into confidentiality agreements with our employees, require that our clients enter into such agreements, and limit access to and distribution of our proprietary information. However, these efforts may be insufficient to prevent misappropriation of our proprietary information or to detect unauthorized use of our intellectual property rights.

Ownership of intellectual property developed during our client engagements is the subject of negotiation and is frequently assigned to the client upon payment for our services. We generally retain the right to use any intellectual property that is developed during a client engagement that is of general applicability and is not specific to the client’s project. Issues relating to the ownership of and rights to use intellectual property developed during the course of a client engagement can be complicated. Clients may demand assignment of ownership or restrictions on our use of the work product. In addition, disputes may arise that affect our ability to resell or reuse intellectual property. We may have to pay economic damages in these disputes which could adversely affect our business.

Currency Exchange Rate Fluctuations Could Materially Adversely Affect Our Results of Operations.

Approximately 36% of DiamondCluster’s revenue for the six months ended September 30, 2002 was derived from operations outside North America. The results of operations for DiamondCluster in the future could be significantly affected by factors associated with international operations, such as changes in foreign currency

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exchange rates and uncertainties relative to regional economic or political circumstances, as well as by other risks sometimes associated with international operations. Since the revenue and expenses of DiamondCluster’s foreign operations will generally be denominated in local currencies, exchange rate fluctuations between such local currencies and the U.S. dollar subject us to currency translation risk with respect to the reported results of our foreign operations. As exchange rates fluctuate, these results, when translated, may vary from expectations and adversely impact overall expected results and profitability. Also, we may be subject to foreign currency translation risks when transactions are denominated in a currency other than the currency in which we incur expenses related to such transactions. There can be no assurance that we will not experience fluctuations in financial results from our operations outside the United States as a result of foreign currency fluctuations, and there can be no assurance that we will be able to reduce contractually or otherwise favorably affect the currency translation risk associated with our operations.

We Must Build Recognition and Client Acceptance of Our Name.

DiamondCluster has invested significant efforts in building recognition and client acceptance of its name. We believe that market acceptance of the name DiamondCluster International, Inc. is an important aspect of our efforts to retain and attract clients.

Promoting and maintaining name recognition depends largely on the success of our marketing efforts and the ability of DiamondCluster to provide high quality, reliable and cost-effective services. These efforts will require significant expenses, which will affect our results of operations. Client dissatisfaction with Company performance could diminish the value of our brand.

Our Chief Executive Officer Controls a Significant Portion of the Voting Rights Which Limits Your Ability to Influence Corporate Matters.

Our Chief Executive Officer controls a significant portion of our voting stock. All of the holders of our Class B Common Stock have granted proxies to our Chief Executive Officer to vote their shares. As of September 30, 2002, our current Chief Executive Officer controls, individually or by proxy, approximately 57% of the voting rights of our outstanding Common Stock. As a result, he will have the voting power to significantly influence the election of our board of directors and to affect all matters requiring stockholder approval. In addition, an agreement among DiamondCluster and our partners requires that our Chief Executive Officer be selected from our partners. This significantly limits the number of qualified persons that may be considered for that office. As a result, we may not be successful in attracting future persons who are qualified to serve as our Chief Executive Officer.

The Failure to Integrate or Negotiate Successfully Any Future Acquisitions Could Harm Our Business and Operating Results.

If we acquire businesses in the future and are unable to integrate successfully these businesses, it could harm our business and operating results. In order to remain competitive or to expand our business, we may find it necessary or desirable to acquire other businesses, products or technologies. We may be unable to identify appropriate acquisition candidates. If we identify an appropriate acquisition candidate, we may not be able to negotiate the terms of the acquisition successfully, to finance the acquisition or to integrate the acquired businesses, products or technologies into our existing business and operations. Further, completing a potential acquisition and integrating an acquired business may strain our resources and require significant management time. In addition, we may revalue or writedown the value of goodwill and other intangible assets in connection with past or future acquisitions which would harm our operating results.

The Price for Our Common Stock Has Been Volatile and Unpredictable.

The price for our Class A Common Stock has been volatile. Our Class A Common Stock has been listed on the NASDAQ National Market since February 1997. The closing market price of the Class A Common Stock has

5

experienced variations, and since January 1, 1999, our high and low sales price has ranged from a high of $106.00 to a low of $2.01 as of October 28, 2002. The market price of our Class A Common Stock may experience fluctuations in the future for a variety of reasons. These include:

Ÿ negative news about other publicly traded companies in our industry;

Ÿ general economic or stock market conditions unrelated to our operating performance;

Ÿ quarterly variations in our operating results;

Ÿ changes in earnings estimates by analysts;

Ÿ announcements of new contracts or service offerings by us or our competitors;

Ÿ financial performance of the Company; and

Ÿ other events or factors.

In addition, the stock market in recent years has experienced significant price and volume fluctuations which have affected the market prices of technology related companies. These fluctuations may continue to occur and disproportionately impact our stock price.

We May Need to Raise Additional Capital in the Future Which May Not Be Available.

We may not be able to raise capital in the future to meet our liquidity needs and finance our operations and future growth. We were not profitable in the last six quarters and we may not be profitable in the future. We believe that existing cash resources, the amounts available under our revolving line of credit and cash generated from operations will be sufficient to satisfy our operating cash needs at least through fiscal 2004. Any future decreases in our operating income, cash flow, or stockholders’ equity may impair our future ability to raise additional funds to finance operations. As a result, we may not be able to maintain adequate liquidity to support our operations.

Future Sales of Our Common Stock in the Public Market Could Cause the Price of Our Stock to Decline.

In the future, our stockholders could sell substantial amounts of our common stock in the public market which could cause our market price to decline. A substantial number of outstanding shares of common stock and shares of our common stock issuable upon exercise of outstanding stock options and warrants will become eligible for future sale in the public market at various times. An increase in the number of shares of our common stock in the public market could adversely affect prevailing market prices and could impair our future ability to raise capital through the sale of our equity securities.

Our Charter Documents and Delaware Law May Discourage an Acquisition of DiamondCluster.

Provisions of our certificate of incorporation, by-laws, and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. We may issue shares of preferred stock in the future without stockholder approval and upon such terms as our board of directors may determine. Our issuance of this preferred stock could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of our outstanding stock and potentially prevent the payment of a premium to stockholders in an acquisition. Our charter and by-laws also provide that special stockholders meetings may be called only by our Chairman of the board of directors, by our Secretary at the direction of our board of directors, or by stockholders holding at least 30% of the voting power of the issued and outstanding shares of outstanding common stock, with the result that any third-party takeover not supported by the board of directors could be subject to significant delays and difficulties. In addition, our board of directors is divided into three classes, each of which serves for a staggered three-year term, which may make it more difficult for a third party to gain control of our board of directors.

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We Do Not Intend to Pay Dividends.

We have never paid any cash dividends on our common stock and do not expect to declare or pay any cash or other dividends in the foreseeable future.

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EX-99.2

Exhibit 99.2

CERTIFICATION UNDER EXCHANGE ACT RULE 13A-14 AND 15D-14

I, Melvyn E. Bergstein, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DiamondCluster International, Inc;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002

/S/    MELVYN E. BERGSTEIN        

By: Melvyn E. Bergstein

Its: Chairman and Chief Executive Officer

Exhibit 99.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DiamondCluster International, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Melvyn E. Bergstein, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/S/    MELVYN E. BERGSTEIN

Melvyn E. Bergstein

Chief Executive Officer

November 13, 2002

EX-99.3

Exhibit 99.3

CERTIFICATION UNDER EXCHANGE ACT RULE 13A-14 AND 15D-14

I, Karl E. Bupp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DiamondCluster International, Inc;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002

/S/    KARL E. BUPP        

By: Karl E. Bupp

Its: Chief Financial Officer

Exhibit 99.3

CERTIFICATION PURSUANT TO 

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DiamondCluster International, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Karl E. Bupp, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/S/    KARL E. BUPP

Karl E. Bupp

Chief Financial Officer

November 13, 2002

EX-99.4

Exhibit 99.4

CERTIFICATION UNDER EXCHANGE ACT RULE 13A-14 AND 15D-14

I, William McClayton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DiamondCluster International, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002

By:	/S/    WILLIAM MCCLAYTON
	William McClayton
	Its: Senior Vice President, Finance and Administration

Exhibit 99.4

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DiamondCluster International, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William McClayton, Senior Vice President of Finance and Administration of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/S/    WILLIAM MCCLAYTON

William McClayton

Senior Vice President, Finance and Administration

November 13, 2002