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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission file number 0-28121

RETEK INC.

(Exact name of Registrant as Specified in its Charter)

(Address, including zip code, and telephone number, including area code,

of Registrant’s Principal Executive Offices)

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

None

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

Common Stock, par value $0.01 per share

(Title of Class)

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

      Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).     Yes x     No

      The aggregate market value of common stock held by non-affiliates of the Registrant was approximately $343,237,635 as of June 30, 2004, based upon the closing price of $6.14 on the Nasdaq National Market reported on such date. Shares of common stock held by each executive officer and director and by each person who beneficially owns more than 10% of the outstanding common stock have been excluded in that such persons may under certain circumstances be deemed to be affiliates. This determination of executive officer and affiliate status is not necessarily a conclusive determination for other purposes.

      As of February 25, 2005, the number of shares of common stock outstanding was 56,117,640.

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RETEK INC.

FORM 10-K

For the Fiscal Year Ended December 31, 2004

INDEX

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

      This Annual Report on Form 10-K contains forward-looking statements in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Item 7A — Quantitative and Qualitative Disclosures About Market Risk,” and elsewhere. These statements relate to future events or our future financial performance. In some cases, forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Such risks, uncertainties and other factors include, among other things, the matters described in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors that May Impact Future Results of Operations.” There are a number of factors that could cause our results to differ materially from those indicated by such forward looking statements. These factors include those set forth in the section titled “Factors That May Impact Future Results of Operations.”

      Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this Annual Report on Form 10-K to conform these statements to actual future results.

PART I

Item 1:     Business

General

      Retek (the “Company,” “we,” or “us”) is a leading provider of software solutions and services to the retail industry. We provide innovative technology solutions that help retailers create, manage and fulfill consumer demand. Our solutions and services have been developed specifically to meet the needs of the retail industry. We believe the processes and methodologies embedded in our solutions reflect the best retail practices of our customers and partners. By supporting core retail business processes, our solutions help retailers improve the efficiency of their operations and build stronger relationships with their customers.

      We market our software solutions through our direct and indirect sales channels primarily to retailers who sell to their customers through traditional retail stores, catalogs and/or Internet-enabled storefronts.

      We were originally incorporated in Ohio in 1985 as Practical Control Solutions, Inc., which was renamed Retek Logistics, Inc. in April 1999. In September 1999, Retek Logistics, Inc. was reincorporated as a Delaware corporation and renamed Retek Inc. On November 23, 1999, we completed our initial public offering. Prior to the completion of our initial public offering, we were a wholly-owned subsidiary of HNC Software, Inc. (“HNC”), a business-to-business software company that developed and marketed predictive software solutions. On October 2, 2000, HNC announced that it had completed the separation of Retek from HNC effective September 29, 2000 through the pro rata distribution to HNC’s stockholders, as a dividend, of all of the shares of Retek common stock owned by HNC.

      Our principal executive offices are located at 950 Nicollet Mall, 4th floor, Minneapolis, Minnesota 55403 and our telephone number is (612) 587-5000. Our common stock is listed on the Nasdaq National Market under the symbol “RETK.” We are a reporting company and file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”). You may read and copy our SEC filings at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site located at http://www.sec.gov that contains reports, proxy statements and information statements of public reporting issuers, including us. Our web site is http://www.retek.com. All of our SEC filings are available free of charge on or through our web site as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information on our web site is not part of this Annual Report on Form 10-K.

      “Retek” is a trademark of Retek. All other trademarks or service marks appearing in this Annual Report on Form 10-K are trademarks or service marks of the respective companies that use them. Unless otherwise stated, the terms “Retek”, “we,” “our” or “us” used in this Annual Report on Form 10-K refer to Retek Inc. and its consolidated subsidiaries.

Retek’s Solutions

      Retailers face many challenges to be successful in today’s retailing environment. We have observed several trends as retailers seek to better serve their customers. Significant trends we have observed in retailers’ operations are their desire to:

      The information technology (IT) organizations within these retailers are being called upon to:

      We have developed and deployed software solutions that enable retailers to manage virtually all of their operations. These solutions provide the scalable infrastructure to support high volume execution as well as independently deployable smart solutions that allow our clients to decipher their abundant data into information that renders high value business decisions. Key factors that we believe differentiate our software include:

      Retek delivers solutions for today’s demanding retail environments by connecting every process from customer to supplier. Our comprehensive suite of end-to-end integrated retail solutions provides visibility across the entire enterprise, helping retailers offer customers appealing assortments, merchandise in-stock, compelling pricing and promotions, a convenient shopping experience and excellent service.

Strategy

      Our goal is to help our customers be the most successful retailers in the world. In pursuing this goal, we intend to maintain and expand our status as a leading provider of fully scalable, web-based software solutions for the retail industry. Key elements of our strategy include:

Products

      Retek’s primary software solutions consist of eight integrated, but independently deployable groups of products:

      This set of solutions enables coordination of operations to maintain a single, comprehensive source of consistent and accurate data. We provide retailers with the tools necessary to offer consumers the right product, at the right place and time, in the right quantities and for the right price.

      Key business functions covered within the area of Retek Merchandise Operations Management include merchandise management, sales audit, rules based pricing, invoice matching, management of imports, and collaborative design and source.

      Solutions supporting these business processes include:

      This solution set leverages a common Java-based, scalable and open architecture that is operating system and hardware independent to allow retailers to reduce store operation costs and improve customer service across selling channels.

      Key business functions covered within the area of Retek Store and Multi-Channel Retailing include point-of-sale, store labor management, store inventory management and multi-channel customer order management.

      Solutions supporting these business processes include:

      This solution set unites planning functions with execution systems using optimization techniques to drive improvements in inventory turns and profitability. We provide sophisticated systems for accurately matching supply with demand specifically designed for large product assortments, multiple store and warehouse locations, complex vendor networks and high sales volume operating environments

      Key business functions covered within the area of Retek Supply Chain Planning and Optimization include replenishment planning, replenishment optimization, collaborative planning, forecasting and replenishment and collaborative inventory management.

      Solutions supporting these business processes include:

      This solution set provides greater control over global supply chain management, including more efficient movement of goods, seamless coordination of multiple distribution centers and better utilization of labor. We provide real-time monitoring and analysis of inventory movement to eliminate “bottlenecks” and improve service levels, while lowering inventories and operating costs.

      Key business functions covered within the area of Retek Supply Chain Execution are warehouse and labor management.

      Solutions supporting these business processes include:

      This group of solutions utilizes advanced technology to generate accurate forecasts of consumer demand, connect those forecasts to execution, and drive better in-season item management. Our approach creates a more planning-driven enterprise with sophisticated mathematical models and optimization routines that determine the best assortments, replenishment and markdown strategies and implements those strategies across multiple business functions.

      Key business functions covered within the area of Retek Merchandise Planning and Optimization include merchandise financial planning, assortment planning, item planning, promotion planning, markdown optimization, price optimization and assortment to space optimization.

      Solutions supporting these business processes include:

      This solution generates accurate forecast of consumer demand in order to improve virtually all planning and operational areas of the business. Forecast models help optimize the demand levers of assortment, price and promotion as well as manage the supply processes of allocation, replenishment and inventory flow.

      Key business functions included in Retek Demand Forecasting are statistical and causal demand forecasting.

      Solutions supporting these business processes include:

      These solutions support execution of business activities by bringing together significant data about demand levers and customer interactions.

      Key business functions included in Retek Enterprise Drivers are a single customer data repository across multiple touch points, as well as intelligent demand analysis.

      Solutions supporting these business processes include:

      Supports a retail enterprise with robust and scalable IT systems to quickly respond to changing consumer demands and to effectively plan and manage supply chains.

      Key applications and characteristics of Retek Enterprise Infrastructure include data warehousing, alerts and workflow, intuitive application usability, collaboration and integration.

      Solutions supporting these business processes include:

      The Retek In-a-Box is a solution set created for mid-market retailers, or retailers with annual revenues between $200 million and $3.0 billion. In comparison to larger retailers, many mid-market retailers operate with less employee and financial resources as well as higher product costs. To address this market, Retek In-a-Box offers a complete infrastructure for a retailer including software, hardware and implementation services from Retek and key partners. Retek In-a-Box includes applications that support the following functions:

      The Retek In-the-Box solution set is meant to be an all inclusive offering that offers many of the same features of our regular Retek products, but bundled together for further simplified implementation, lower total cost of ownership and lower integration risks.

Retek Professional Services

      Retek Professional Services helps retailers and their integration partners implement Retek solutions rapidly and cost effectively. We offer a comprehensive range of services designed to address a retailer’s business and technical objectives, including consulting, training and custom modification and configuration services. Our services range from technical and implementation support to business benefit realization consulting, which assists retailers in utilizing our software solutions to optimize their potential benefits. Our professional services have the following attributes:

Customers

      We market our software solutions primarily to retailers who sell to their customers through traditional retail stores, catalogs and/or internet storefronts. Historically, we have focused on organizations with gross sales in excess of $200 million a year. We market across all sectors of retailing, including fashion,

department stores, catalog and consumer direct, specialty retailers, mass merchandise retailers and food, drug and convenience stores. During fiscal year 2004, we had one customer, Tesco PLC, who accounted for greater than 10% of total revenues.

Government Contracts

      No material portion of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the United States government.

Sales, Marketing and Distribution

      We market and sell our software solutions worldwide primarily through our direct sales force, and also through resellers and distributors. Our sales, marketing and distribution approaches are designed to help customers understand both the business and technical benefits of our software solutions. We conduct a variety of marketing programs worldwide to educate our target market, create awareness and generate leads for our solutions. To achieve these goals, we have engaged in marketing activities including direct mailings, print and online advertising campaigns and trade shows. These programs are targeted at key information technology executives and business users, as well as chief information officers and other senior executives. Revenue generated from our direct sales channel accounted for approximately 99%, 99% and 98% of our total revenue in 2004, 2003 and 2002, respectively.

      To date, we have not experienced difficulties in obtaining raw materials for the manufacture of our products. We had no material backlog of orders as of December 31, 2004. Revenues derived from and expenses associated with our business operations are not generally subject to seasonal fluctuations.

      Financial information concerning us for each of the three fiscal years ended December 31, 2004, 2003 and 2002, including the amount of total revenue contributed by classes of similar products or services that accounted for 10% or more of our consolidated revenue in any one of those periods and information with respect to our operations by geographic area, is set forth in the consolidated financial statements and the notes included in Item 15 of this Annual Report on Form 10-K beginning on page 55.

Research and Development

      Our research and development group has been a critical component of our overall success. As of December 31, 2004, our research and development group was comprised of 195 individuals in Minneapolis, Minnesota and Atlanta, Georgia. In addition, we continue to have close alliances with a number of consulting companies to provide additional staffing if required and to enhance our offshore capabilities. These relationships allow us to increase our development capacity as quickly as necessary to address new market and product demand.

      Our research and development group is centrally organized. The group is responsible for product development, implementation of product strategy, delivery of product releases and support of our software applications.

      The research and development group is also responsible for overall quality assurance and testing processes, documentation, application architecture and methodology.

      The research and development group operates with a well-defined development methodology. This methodology enables the delivery of high-quality products in a timely and predictable manner. It involves the traditional checkpoints of development processes such as business requirements, functional and technical specifications, unit, string and integration test plans and regression analysis. In addition, we use a highly interactive review process to engage future users of the product in the product release cycle through iterative prototypes to ensure the application design goal is met.

      Speed to market is critical to our success. We believe that we have effectively used build, buy and partner strategies to expand our solution offerings. The key in using each of these strategies is the

consistency in the underlying technologies and an overall application architecture that allows modular design and development.

      Research and development expenses were $34.2 million, $44.5 million and $47.2 million in the fiscal years 2004, 2003 and 2002, respectively. We believe that significant investments in research and development will be required in the future to remain competitive.

Competition

      The markets for our software solutions are intensely competitive, constantly evolving and subject to rapid technological change. We encounter competition in our products and services from a number of different sources, including retailer’s in-house technical staffs, traditional enterprise resource planning vendors and other vendors of retail specific solutions. Of these vendors, our principal competitors include JDA Software, SAP, Manhattan Associates, Manugistics and i2 Technologies. We compete with a substantial number of other companies focused on providing point solution software applications for specific segments of the retail application market. In addition, there are new market entrants that may offer competitive products in the future. We believe that our ability to compete depends on many factors both within and beyond our control, including:

      We believe that our product solution suite is better than those of our competitors in its performance, features and reliability. In addition, we have in the past introduced new solutions and enhancements to our existing solutions in a more timely manner. Our prices are generally higher than our competitors’ reflecting, we believe, the added value of our software solutions. Because the market for our software solutions is intensely competitive and rapidly evolving, we cannot be assured that we will maintain our competitive position against current and potential competitors, especially those with greater name recognition and greater financial, marketing and other resources.

      We expect competition to increase as a result of software industry consolidation. For example, a number of enterprise software companies have acquired point solution providers to expand their product offerings. Our competitors may also package their products in ways that may discourage users from purchasing our products. Current and potential competitors may establish alliances among themselves or with third parties or adopt aggressive pricing policies to gain market share. In addition, new competitors could emerge and rapidly capture market share.

Proprietary Rights and Licensing

      Our success and ability to compete are in part dependent upon our ability to develop and maintain the proprietary aspects of our technology. We rely on a combination of trademark, trade secret, copyright law and contractual restrictions to protect the proprietary aspects of our technology. We seek to protect the source code for our software, documentation and other written materials under trade secret and copyright laws. We license our software under signed license agreements, which impose restrictions on the licensee’s ability to utilize the software. Finally, we seek to avoid disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements with us and by restricting access to our source code.

      We rely on technology that we license from third parties, including software that is integrated with internally developed software and used in our line of products to perform key functions. For example, we license the e*Gate enterprise application integration software from SeeBeyond Corporation, business

intelligence software from MicroStrategy, Inc., operating reporting software from Business Objects, the Acumate component from Lucent Technologies and Wavelink Studio from Wavelink Corporation. These licenses are non-exclusive, worldwide and royalty-based. The royalties we paid SeeBeyond, MicroStrategy, Lucent and Wavelink under these licenses were, in each case, less than 5% of our total revenue in each of the 2004, 2003 and 2002 fiscal years. We also license and will continue to license certain products integral to our products and services from other third parties, including Accenture, IBM, Oracle Corp. and Sun Microsystems, Inc. If we are unable to continue any of theses licenses, we will face delays in releases of our software until equivalent technology can be identified, licensed or developed and integrated into our current products. These delays, if they occur, could seriously harm our business.

      There has been a substantial amount of litigation in the software and Internet industries regarding intellectual property rights. It is possible that in the future third parties may claim that we or our current or potential future software solutions infringe on their intellectual property. We expect that software product developers and providers of electronic commerce products will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlap. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously harm our business.

Environmental Matters

      We are in substantial compliance with federal, state and local provisions that have been enacted or adopted relating to the protection of the environment. We do not expect that continued compliance with these provisions would have any material effect upon our capital expenditures, earnings or cash flows.

Employees

      At December 31, 2004, we had 531 employees based in North America, Europe, Asia and Australia. None of our employees are subject to a collective bargaining agreement, except that certain of our French employees are represented by a personal delegate. We believe we have good relations with our employees.

Item 2:     Property

      Our principal administrative, sales, marketing and research and development facility is in Minneapolis, Minnesota.

      We also have leased regional offices located in Atlanta, Georgia; Australia, France and the United Kingdom. Properties leased by us are leased on terms and for durations that are reflective of commercial standards in the communities where these properties are located. We believe that our existing facilities are adequate for our current needs and future requirements.

Item 3:     Legal Proceedings

      Between June 11 and June 26, 2001, three class action complaints alleging violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) were filed in the Southern District of New York against us, certain of our current and former officers and directors (the “Individual Defendants”), and certain underwriters of our initial public offering (the “IPO”). On August 9, 2001, these actions were consolidated for pre-trial purposes before a single judge along with similar actions involving IPOs of numerous other issuers.

      On February 14, 2002, the parties signed and filed a stipulation dismissing the consolidated action without prejudice against us and the Individual Defendants, which the Court approved and entered as an order on March 1, 2002. On April 20, 2002, the plaintiffs filed an amended complaint in which they

elected to proceed with their claims against us and the Individual Defendants only under Sections 10(b) and 20(a) of the Exchange Act. The amended complaint alleges that the prospectus filed in connection with the IPO was false or misleading in that it failed to disclose: (i) that the underwriters allegedly were paid excessive commissions by certain of the underwriters’ customers in return for receiving shares in the IPO and (ii) that certain of the underwriters’ customers allegedly agreed to purchase additional shares of our common stock in the aftermarket in return for an allocation of shares in the IPO. The complaint further alleges that the underwriters offered to provide positive market analyst coverage for the Company after the IPO, which had the effect of manipulating the market for our stock. Plaintiffs contend that, as a result of the omissions from the prospectus and alleged market manipulation through the use of analysts, the price of our common stock was artificially inflated between November 18, 1999 and December 6, 2000, and that the defendants are liable for unspecified damages to those persons who purchased our common stock during that period.

      On July 15, 2002, the Company and the Individual Defendants, along with the rest of the issuers and related officer and director defendants, filed a joint motion to dismiss based on common issues. Opposition and reply papers were filed. The Court rendered its decision on February 19, 2003, which granted dismissal in part of a claim against one of the Individual Defendants and denied dismissal in all other respects.

      On June 30, 2003, a Special Litigation Committee of the Board of Directors of the Company approved a Memorandum of Understanding (the “MOU”) reflecting a tentative settlement in which the plaintiffs agreed to dismiss the case against the Company with prejudice in return for the assignment by the Company of certain claims that we might have against our underwriters. The same offer of settlement was made to all issuer defendants involved in the litigation. No payment to the plaintiffs by the Company was required under the MOU. After further negotiations, the essential terms of the MOU were formalized in a Stipulation and Agreement of Settlement (“Settlement”), which has been executed on our behalf and on behalf of the Individual Defendants. The settling parties presented the proposed Settlement to the Court on June 15, 2004 and filed formal motions seeking preliminary approval on June 25, 2004. The underwriter defendants, who are not parties to the proposed Settlement, filed a brief objecting to the Settlement’s terms on July 14, 2004. On February 15, 2005, the Court granted preliminary approval of the settlement conditioned on the agreement by the parties to narrow one of a number of the provisions intended to protect the issuers against possible future claims by the underwriters. A final hearing on the approval of the settlement is scheduled for mid March 2005.

      In the meantime, the plaintiffs and underwriters have continued to litigate the consolidated action. The litigation is proceeding through the class certification phase by focusing on six cases chosen by the plaintiffs and underwriters (“Focus Cases”). Retek is not a Focus Case. On October 13, 2004, the Court certified classes in each of the six Focus Cases. The underwriter defendants have sought review of the Court’s decision. The Company, along with the other non-Focus Case issuer defendants, has not participated in the class certification phase. There can be no assurance that the Court will grant final approval of the proposed Settlement.

      We believe that the Company and the Individual Defendants have meritorious defenses to the claims made in the complaint and, if the Settlement is not approved by the Court, we intend to contest the lawsuit vigorously. Securities class action litigation can result in substantial costs and divert our management’s attention and resources, which may have a material adverse effect on our business and results of operations, including our cash flows.

      Between October 30, 2002 and December 12, 2002, Retek was named in six substantially similar federal securities class action complaints filed in the United States District Court for the District of Minnesota.

      Thereafter, the plaintiffs voluntarily dismissed one of the complaints without prejudice, and the Court consolidated the other five actions into a single proceeding before Judge John R. Tunheim. The consolidated action is styled In re Retek Inc. Securities Litigation, Case No. CV 02-4209 JRT/ SRN. On

February 20, 2003, the Court appointed as co-lead plaintiff in the consolidated proceedings: (1) the Louisiana Municipal Police Employees’ Retirement System (“LMPERS”); and (2) Mr. Steven B. Paradis. The appointed lead plaintiffs served a consolidated complaint on or about April 15, 2003. On May 30, 2003, Retek and the individual defendants served a motion to dismiss the consolidated complaint. The Court heard oral argument on this motion on January 27, 2004. On March 30, 2004, the Court granted defendants’ motion to dismiss the consolidated complaint, with leave to file an amended consolidated complaint. Thereafter, plaintiffs filed an amended consolidated complaint and defendants filed a motion to dismiss the amended consolidated complaint. On September 28, 2004, the Court heard oral arguments on the motion to dismiss. On March 7, 2005, the Court issued an order granting in part and denying in part defendants’ motion to dismiss the amended consolidated complaint. As a result of the Court’s Order, co-lead plaintiffs may pursue some of their allegations, while others have been dismissed.

      We believe that the Company and the Individual Defendants have meritorious defenses to the remaining claims made in the complaint and we intend to contest the lawsuit vigorously. Securities class action litigation can result in substantial costs and divert our management’s attention and resources, which may have a material adverse effect on our business and results of operations, including our cash flows.

      In addition to the above federal litigation, On December 20, 2002, Retek was served as nominal defendant with two similar state derivative complaints filed in the Minnesota District Court for the County of Hennepin. These derivative actions are: Gregory Steffen, Derivatively on Behalf of Retek Inc. v. John Buchanan, et al. (Minn. Fourth Dist. Ct., Dec. 2002) and Barbara McGraw, Derivatively on Behalf of Retek Inc. v. John Buchanan, et al. (Minn. Fourth Dist. Ct. Dec. 2002). On March 18, 2003, the Hennepin County District Court consolidated the derivative actions into a single proceeding under case number 02-21394 before Judge Steven Z. Lange. On December 1, 2003, the derivative proceedings were transferred to the docket of Judge Isabel Gomez. To date, the derivative plaintiffs have not yet filed a consolidated complaint, and the derivative plaintiffs have consented to the placing of the consolidated lawsuit on the Court’s formal “inactive” docket. The case remains on the Court’s “inactive” docket as of the date of this filing.

      On or about March 1, 2005, a stockholder initiated a purported class action lawsuit against our directors in state court in Hennepin County, Minnesota, titled Braverman v. Leestma et al. The action is brought by an individual stockholder named Ira Braverman purportedly on behalf of all of our stockholders. We are not named as a defendant in this action. The complaint alleges that the defendants breached their fiduciary duties to our stockholders in connection with the negotiation and approval of the merger agreement we entered into with SAP America, Inc. The plaintiff seeks, among other relief, an injunction preventing the consummation of the merger, rescission of the merger to the extent already implemented, and an award of attorneys’ fees. The plaintiff in this matter is not at this time seeking money damages.

      On or about March 2, 2005, a second purported class action was initiated against our company and our directors also in state court in Hennepin County, Minnesota, entitled Blakstad v. Retek, Inc. et al. The action is brought by an individual stockholder named Don Blakstad purportedly on behalf of our stockholders. The complaint alleges that the defendants breached their fiduciary duties to our stockholders in connection with the negotiation and approval of the merger agreement with SAP America, Inc. The plaintiff seeks among other relief, an injunction preventing the consummation of the merger, rescission of the merger to the extent already implemented, and an award of attorneys’ fees. The plaintiff in this matter is not at this time seeking money damages.

      In addition to the matters discussed above, we are subject to various legal proceedings and claims that arise in the ordinary course of business. We believe that the resolution of such matters will not have a material impact on our financial position, results of operations or cash flows.

      No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2004.

PART II

      Shares of our common stock are traded on the Nasdaq National Market under the symbol “RETK”.

      The following table shows the high and low sales price for shares of our common stock for the periods indicated:

      On February 25, 2005, the last reported sale price for shares of our common stock on the Nasdaq National Market was $6.00 per share.

      There were approximately 174 holders of record of our common stock as of February 25, 2005.

      We did not make any purchases of our equity securities during the fourth quarter of the fiscal year ended December 31, 2004.

Equity Compensation Plan Information

      We have not paid or declared any dividends on our common stock since inception and we anticipate that our future earnings will be retained to finance the continuing development of our business. The payment of any future dividends will be at the discretion of our Board of Directors and will depend upon, among other things, future earnings, the success of our business activities, regulatory and capital requirements, our general financial condition and general business conditions. Our line of credit agreement prohibits the payment of dividends without the bank’s prior written consent.

      The following selected consolidated financial data is qualified by reference to and should be read in conjunction with our consolidated financial statements and notes thereto included in Item 15 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7.