##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-50698
 GREENFIELD ONLINE, INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    06-1440369
(I.R.S. Employer Identification No.)
 21 River Road, Wilton, CT 06897
 : (203) 834-8585
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
  o þ o
 o þ




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##### 



GREENFIELD ONLINE, INC.
 FORM 10-Q
TABLE OF CONTENTS
  
 PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets at September 30, 2007 (unaudited) and December 31, 2006
    
    
    1Unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2007 and 2006
    
    
    2Unaudited Consolidated Statement of Changes in Stockholders Equity for the nine months ended September 30, 2007
    
    
    3Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    29Part II. Other InformationItem 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32Item 5. Other Information
    
    
    32Item 6. Exhibits
    
    
    33Signatures
    
    
    34Exhibit Index
    
    
    35EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  i




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##### Table of Contents



GREENFIELD ONLINE, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data
  September 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    29,619
    
    
    $
    20,873Investments in marketable securities
    
    
    24,066
    
    
    
    16,167Accounts receivable trade, net (net of
allowances of $2,018 and $1,875 at September
30, 2007 and December 31, 2006, respectively)
    
    
    23,551
    
    
    
    23,485Prepaid expenses and other current assets
    
    
    2,815
    
    
    
    1,550Deferred tax assets, current
    
    
    2,527
    
    
    
    4,905Total current assets
    
    
    82,578
    
    
    
    66,980Property and equipment, net
    
    
    7,117
    
    
    
    6,447Other intangible assets, net
    
    
    16,099
    
    
    
    17,644Goodwill
    
    
    73,245
    
    
    
    70,149Deferred tax assets, long-term
    
    
    20,891
    
    
    
    17,740Security deposits and other long-term assets
    
    
    819
    
    
    
    884Total assets
    
    $
    200,749
    
    
    $
    179,844LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,460
    
    
    $
    4,283Accrued expenses and other current liabilities
    
    
    15,831
    
    
    
    15,141Income taxes payable
    
    
    4,722
    
    
    
    6,765Current portion of capital lease obligations
    
    
    13
    
    
    
    25Deferred revenue
    
    
    608
    
    
    
    440Total current liabilities
    
    
    25,634
    
    
    
    26,654Capital lease obligations, long-term
    
    
    11
    
    
    
    22Deferred tax liabilities, long-term
    
    
    4,510
    
    
    
    3,457Income taxes payable, long-term
    
    
    1,721
    
    
    
    Other long-term liabilities
    
    
    85
    
    
    
    90Total liabilities
    
    
    31,961
    
    
    
    30,223Commitments and contingencies (Note 12)Stockholders equity:Common stock; par value $0.0001 per share;
100,000,000 shares authorized; 26,114,976 and
25,490,221 shares issued and outstanding at
September 30, 2007 and December 31, 2006,
respectively
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    297,239
    
    
    
    290,459Accumulated deficit
    
    
    (128,024
    )
    
    
    (136,176
    )Accumulated other comprehensive loss
    
    
    (299
    )
    
    
    (4,534
    )Treasury stock, at cost  9,643 shares
    
    
    (131
    )
    
    
    (131
    )Total stockholders equity
    
    
    168,788
    
    
    
    149,621Total liabilities and stockholders equity
    
    $
    200,749
    
    
    $
    179,844
  1




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##### Table of Contents



GREENFIELD ONLINE, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (In thousands, except per share data)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenues
    
    $
    32,325
    
    
    $
    24,875
    
    
    $
    90,620
    
    
    $
    70,860Cost of revenues
    
    
    8,624
    
    
    
    5,974
    
    
    
    24,021
    
    
    
    17,082Gross profit
    
    
    23,701
    
    
    
    18,901
    
    
    
    66,599
    
    
    
    53,778Operating expenses:Selling, general and administrative
    
    
    14,737
    
    
    
    11,602
    
    
    
    41,925
    
    
    
    31,854Panel acquisition
    
    
    859
    
    
    
    1,351
    
    
    
    2,685
    
    
    
    4,288Depreciation and amortization
    
    
    2,242
    
    
    
    2,427
    
    
    
    6,563
    
    
    
    7,144Research and development
    
    
    1,175
    
    
    
    973
    
    
    
    3,311
    
    
    
    2,735Restructuring charges
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    243Total operating expenses
    
    
    19,013
    
    
    
    16,408
    
    
    
    54,484
    
    
    
    46,264Operating income
    
    
    4,688
    
    
    
    2,493
    
    
    
    12,115
    
    
    
    7,514Other income (expense):Interest income (expense), net
    
    
    355
    
    
    
    60
    
    
    
    906
    
    
    
    (22
    )Other expense, net
    
    
    (241
    )
    
    
    (16
    )
    
    
    (270
    )
    
    
    (170
    )Total other income (expense), net
    
    
    114
    
    
    
    44
    
    
    
    636
    
    
    
    (192
    )Income before income taxes
    
    
    4,802
    
    
    
    2,537
    
    
    
    12,751
    
    
    
    7,322Provision for income taxes
    
    
    1,479
    
    
    
    694
    
    
    
    4,369
    
    
    
    2,384Net income
    
    $
    3,323
    
    
    $
    1,843
    
    
    $
    8,382
    
    
    $
    4,938Net income per share available to common stockholders:Basic
    
    $
    0.13
    
    
    $
    0.07
    
    
    $
    0.33
    
    
    $
    0.19Diluted
    
    $
    0.12
    
    
    $
    0.07
    
    
    $
    0.31
    
    
    $
    0.19Weighted average shares outstanding:Basic
    
    
    25,978
    
    
    
    25,413
    
    
    
    25,737
    
    
    
    25,359Diluted
    
    
    27,088
    
    
    
    25,986
    
    
    
    26,960
    
    
    
    25,562
  2




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##### Table of Contents



GREENFIELD ONLINE, INC.
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 (In thousands)
  AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Treasury Stock
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    Amount
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity
    
    
    IncomeBalance at December 31, 2006
    
    
    25,490
    
    
    $
    3
    
    
    $
    290,459
    
    
    
    9
    
    
    $
    (131
    )
    
    $
    (136,176
    )
    
    $
    (4,534
    )
    
    $
    149,621Nine months ended September 30, 2007:Net income for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,382
    
    
    
    
    
    
    
    8,382
    
    
    $
    8,382Impact of the adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (230
    )
    
    
    
    
    
    
    (230
    )
    
    
    Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    Issuance of shares related to the Employee Stock Purchase Plan
    
    
    17
    
    
    
    
    
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142
    
    
    
    Exercise of stock options
    
    
    608
    
    
    
    
    
    
    
    3,999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,999
    
    
    
    Unrealized gain on available-for-sale securities, net of related
income tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    131
    
    
    
    131Translation adjustments, net of related income tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,104
    
    
    
    4,104
    
    
    
    4,104Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,617Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,551
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,551Balance at September 30, 2007
    
    
    26,115
    
    
    $
    3
    
    
    $
    297,239
    
    
    
    9
    
    
    $
    (131
    )
    
    $
    (128,024
    )
    
    $
    (299
    )
    
    $
    168,788
  3




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##### Table of Contents



GREENFIELD ONLINE, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
  Nine Months EndedSeptember 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    8,382
    
    
    $
    4,938Adjustments to reconcile net income to net cash provided by operating activities:Deferred income tax benefit
    
    
    (1,313
    )
    
    
    (439
    )Depreciation and amortization
    
    
    9,085
    
    
    
    9,349Stock based compensation
    
    
    2,551
    
    
    
    1,872Restructuring charges
    
    
    
    
    
    
    243(Gain) loss on disposal of property and equipment
    
    
    (16
    )
    
    
    3Provision for doubtful accounts
    
    
    505
    
    
    
    290Changes in assets and liabilities, net:Accounts receivable
    
    
    201
    
    
    
    (407
    )Deferred project costs
    
    
    (145
    )
    
    
    192Other current assets
    
    
    (858
    )
    
    
    (382
    )Security deposits
    
    
    153
    
    
    
    516Other long-term assets
    
    
    (99
    )
    
    
    (57
    )Accounts payable
    
    
    135
    
    
    
    410Accrued expenses and other current liabilities
    
    
    727
    
    
    
    (864
    )Payments of management change accrual
    
    
    (314
    )
    
    
    (325
    )Payments of restructuring charges
    
    
    
    
    
    
    (557
    )Income taxes payable
    
    
    (1,861
    )
    
    
    1,071Deferred project revenues
    
    
    163
    
    
    
    (23
    )Net cash provided by operating activities
    
    
    17,296
    
    
    
    15,830Cash flows from investing activities:Purchases of marketable securities
    
    
    (17,605
    )
    
    
    (17,388
    )Sales of marketable securities
    
    
    10,391
    
    
    
    5,316Proceeds from sale of property and equipment
    
    
    23
    
    
    
    30Additions to property and equipment and intangibles
    
    
    (7,248
    )
    
    
    (3,201
    )Net cash used in investing activities
    
    
    (14,439
    )
    
    
    (15,243
    )Cash flows from financing activities:Decrease in other long-term liabilities
    
    
    (12
    )
    
    
    (49
    )Proceeds of options exercised
    
    
    3,985
    
    
    
    152Proceeds of employee stock purchase plan
    
    
    115
    
    
    
    94Excess tax deduction on stock option exercises
    
    
    88
    
    
    
    Principal payments under capital lease obligations
    
    
    (22
    )
    
    
    (4,300
    )Net cash provided by (used in) financing activities
    
    
    4,154
    
    
    
    (4,103
    )Effect of exchange rate changes
    
    
    1,735
    
    
    
    275Net increase in cash and cash equivalents
    
    
    8,746
    
    
    
    (3,241
    )Cash and cash equivalents at beginning of the period
    
    
    20,873
    
    
    
    20,623Cash and cash equivalents at end of the period
    
    $
    29,619
    
    
    $
    17,382Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    36
    
    
    $
    424Income taxes
    
    
    7,451
    
    
    
    1,752Supplemental Schedule of Non-cash Investing and Financing Activities:Purchase of equipment and internal use software financed through capital lease
obligations
    
    $
    
    
    
    $
    263
  4




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##### Table of Contents



GREENFIELD ONLINE, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 1 Basis of Presentation:
  Segment information.
 Basis of consolidation.
 Note 2  Summary of Significant Accounting Policies:
  Concentration of Credit Risk.
 5




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##### Table of Contents



Use of Estimates.
 Recently Issued Accounting Pronouncements
 Fair Value Measurements.
 Fair Value Option for Financial Assets and Financial Liabilities.
 Accounting for Uncertainty in Income Taxes.
 Note 3  Earnings Per Share:
 Net Income per Share.
 6




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##### Table of Contents



Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Weighted average number of common and potential
common shares outstanding:Basic number of common shares outstanding
    
    
    25,978
    
    
    
    25,413
    
    
    
    25,737
    
    
    
    25,359Dilutive effect of stock option grants and the
employee stock purchase plan
    
    
    1,110
    
    
    
    573
    
    
    
    1,223
    
    
    
    203Diluted number of common and potential common
shares outstanding
    
    
    27,088
    
    
    
    25,986
    
    
    
    26,960
    
    
    
    25,562
 Note 4  Accumulated Other Comprehensive Income (Loss):
  September 30,
    
    
    December 31,2007
    
    
    2006Cumulative translation adjustment
    
    $
    (595
    )
    
    $
    (4,699
    )Unrealized gain on available-for-sale
securities, net of deferred taxes of $146
and $114 at September 30, 2007 and
December 31, 2006, respectively
    
    
    296
    
    
    
    165Total accumulated other comprehensive loss
    
    $
    (299
    )
    
    $
    (4,534
    )
 Note 5  Prepaid Expenses and Other Current Assets:
  September 30,
    
    
    December 31,2007
    
    
    2006Prepaid maintenance and license contracts
    
    $
    497
    
    
    $
    273Prepaid expenses
    
    
    777
    
    
    
    422Prepaid insurance
    
    
    683
    
    
    
    461Deferred project costs
    
    
    245
    
    
    
    97Prepaid and refundable taxes
    
    
    389
    
    
    
    168Other
    
    
    224
    
    
    
    129Total prepaid expenses and other current assets
    
    $
    2,815
    
    
    $
    1,550
 7




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##### Table of Contents



Note 6  Property and Equipment, net:
  EstimatedUseful
    
    September 30,
    
    
    December 31,Life-Years
    
    2007
    
    
    2006Computer and data processing equipment
    
    2  4
    
    $
    14,309
    
    
    $
    14,070Leasehold improvements
    
    2  5*
    
    
    2,220
    
    
    
    1,872Furniture and fixtures
    
    7-8
    
    
    2,716
    
    
    
    2,595Telephone systems
    
    4-5
    
    
    1,121
    
    
    
    1,121Automobile(s)
    
    4
    
    
    14
    
    
    
    4320,380
    
    
    
    19,701Less: Accumulated depreciation
    
    
    
    
    (13,263
    )
    
    
    (13,254
    )Property and equipment, net
    
    
    
    $
    7,117
    
    
    $
    6,447
 
 *
    
    Lesser of the estimated life of the asset or the life of the underlying lease.  Note 7  Goodwill and Other Intangible Assets:
 Goodwill
   EuropeCiaoInternet
    
    
    CiaoSurvey
    
    
    ComparisonGoodwill
    
    North America
    
    
    Solutions
    
    
    Shopping
    
    
    TotalBalance as of December 31, 2006
    
    $
    31,153
    
    
    $
    9,450
    
    
    $
    29,546
    
    
    $
    70,149Goodwill adjustment*
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    (59
    )Foreign currency translation adjustment
    
    
    
    
    
    
    761
    
    
    
    2,394
    
    
    
    3,155Balance as of September 30, 2007
    
    $
    31,153
    
    
    $
    10,152
    
    
    $
    31,940
    
    
    $
    73,245
 
 *
    
    Goodwill associated with the Ciao acquisition has been adjusted by
$59,000 to reflect an increase in our foreign deferred tax assets
associated with NOLs acquired as a result of our Ciao acquisition. 8




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##### Table of Contents



Other Intangible Assets
  As of September 30, 2007
    
    
    As of December 31, 2006Estimated
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossUseful
    
    
    Carrying
    
    
    Accumulated
    
    
    Net
    
    
    Carrying
    
    
    Accumulated
    
    
    NetLife-Years
    
    
    Cost
    
    
    Amortization
    
    
    Amount
    
    
    Cost
    
    
    Amortization
    
    
    AmountInternal use software
    
    
    2-3
    
    
    $
    9,800
    
    
    $
    4,247
    
    
    $
    5,553
    
    
    $
    5,521
    
    
    $
    2,117
    
    
    $
    3,404Other software acquired
    
    
    0.42
    
    
    
    159
    
    
    
    159
    
    
    
    
    
    
    
    159
    
    
    
    159
    
    
    
    Panel members
    
    
    3-4
    
    
    
    6,936
    
    
    
    4,807
    
    
    
    2,129
    
    
    
    6,819
    
    
    
    3,399
    
    
    
    3,420Backlog
    
    
    0.25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    447
    
    
    
    447
    
    
    
    Affiliate network
    
    
    3
    
    
    
    347
    
    
    
    304
    
    
    
    43
    
    
    
    347
    
    
    
    217
    
    
    
    130Customer relationships
    
    
    5
    
    
    
    8,228
    
    
    
    4,172
    
    
    
    4,056
    
    
    
    7,694
    
    
    
    2,761
    
    
    
    4,933Non-competition agreements
    
    
    2.75-3
    
    
    
    2,737
    
    
    
    2,475
    
    
    
    262
    
    
    
    2,578
    
    
    
    1,652
    
    
    
    926Domain names and service marks
    
    
    5-10
    
    
    
    7,791
    
    
    
    3,735
    
    
    
    4,056
    
    
    
    7,242
    
    
    
    2,411
    
    
    
    4,831Other intangible assets, net
    
    
    
    
    
    $
    35,998
    
    
    $
    19,899
    
    
    $
    16,099
    
    
    $
    30,807
    
    
    $
    13,163
    
    
    $
    17,644
     AmountFor the
remaining three months ending December 31, 2007
    
    $
    2,4152008
    
    $
    7,9322009
    
    $
    4,7572010
    
    $
    7942011
    
    $
    532012
    
    $
    52
 9




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##### Table of Contents



Note 8  Accrued Expenses and Other Current Liabilities:
  September 30,
    
    
    December 31,2007
    
    
    2006Accrued payroll, bonus and commissions
    
    $
    4,645
    
    
    $
    4,710Panelist incentives
    
    
    5,975
    
    
    
    4,905Accrued panel costs
    
    
    117
    
    
    
    212Accrued management change costs
    
    
    5
    
    
    
    319Non-income tax accruals
    
    
    1,263
    
    
    
    1,387Software license liability
    
    
    93
    
    
    
    332Accrued audit and tax costs
    
    
    379
    
    
    
    717Outside sample accruals
    
    
    749
    
    
    
    643Real-Time Sampling accruals
    
    
    323
    
    
    
    187Other
    
    
    2,282
    
    
    
    1,729Total accrued expenses and other current liabilities
    
    $
    15,831
    
    
    $
    15,141
  Note 9  Stock-Based Compensation:
   10




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##### Table of Contents



Note 10  Segment Reporting:
  11




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Gross segment revenues:North American Internet survey solutionsThird-party revenues
    
    $
    18,219
    
    
    $
    15,368
    
    
    $
    50,781
    
    
    $
    43,771Inter-segment revenues
    
    
    254
    
    
    
    157
    
    
    
    607
    
    
    
    679Gross segment revenues
    
    $
    18,473
    
    
    $
    15,525
    
    
    $
    51,388
    
    
    $
    44,450Ciao Internet survey solutionsThird-party revenues
    
    $
    5,927
    
    
    $
    4,417
    
    
    $
    17,405
    
    
    $
    14,361Inter-segment revenues
    
    
    2,281
    
    
    
    2,590
    
    
    
    5,766
    
    
    
    6,084Gross segment revenues
    
    $
    8,208
    
    
    $
    7,007
    
    
    $
    23,171
    
    
    $
    20,445Ciao comparison shopping *Third-party revenues
    
    $
    8,179
    
    
    $
    5,090
    
    
    $
    22,434
    
    
    $
    12,728Inter-segment revenues
    
    
    150
    
    
    
    
    
    
    
    293
    
    
    
    Gross segment revenues
    
    $
    8,329
    
    
    $
    5,090
    
    
    $
    22,727
    
    
    $
    12,728Net revenues:North American Internet survey solutions
    
    $
    18,473
    
    
    $
    15,525
    
    
    $
    51,388
    
    
    $
    44,450Ciao Internet survey solutions
    
    
    8,208
    
    
    
    7,007
    
    
    
    23,171
    
    
    
    20,445Ciao comparison shopping
    
    
    8,329
    
    
    
    5,090
    
    
    
    22,727
    
    
    
    12,728Elimination of inter-segment revenues
    
    
    (2,685
    )
    
    
    (2,747
    )
    
    
    (6,666
    )
    
    
    (6,763
    )Total net revenues
    
    $
    32,325
    
    
    $
    24,875
    
    
    $
    90,620
    
    
    $
    70,860Segment operating income (as defined above):North American Internet survey solutions
    
    $
    4,403
    
    
    $
    2,965
    
    
    $
    10,690
    
    
    $
    9,167Ciao Internet survey solutions
    
    
    1,888
    
    
    
    2,363
    
    
    
    5,817
    
    
    
    7,480Ciao comparison shopping
    
    
    4,165
    
    
    
    3,126
    
    
    
    12,353
    
    
    
    7,418Segment operating income
    
    
    10,456
    
    
    
    8,454
    
    
    
    28,860
    
    
    
    24,065Depreciation and amortization
    
    
    (3,154
    )
    
    
    (3,159
    )
    
    
    (9,085
    )
    
    
    (9,349
    )Stock-based compensation
    
    
    (908
    )
    
    
    (654
    )
    
    
    (2,551
    )
    
    
    (1,872
    )Restructuring charges
    
    
    
    
    
    
    (55
    )
    
    
    
    
    
    
    (243
    )Management change severance charges
    
    
    
    
    
    
    (396
    )
    
    
    
    
    
    
    (396
    )Corporate
    
    
    (1,706
    )
    
    
    (1,697
    )
    
    
    (5,109
    )
    
    
    (4,691
    )Total operating income
    
    
    4,688
    
    
    
    2,493
    
    
    
    12,115
    
    
    
    7,514Interest income (expense), net
    
    
    355
    
    
    
    60
    
    
    
    906
    
    
    
    (22
    )Other expense, net
    
    
    (241
    )
    
    
    (16
    )
    
    
    (270
    )
    
    
    (170
    )Income before income taxes
    
    $
    4,802
    
    
    $
    2,537
    
    
    $
    12,751
    
    
    $
    7,322
 
 *
    
    Prior to the separation of the Ciao Internet survey solutions and the Ciao comparison shopping
businesses, the Ciao comparison shopping segment did not have any inter-segment revenues. The legal
separation was completed, and effective May 1, 2007, the Ciao comparison shopping segment began
recording inter-segment revenues from the sale of panelists to the Ciao Internet survey solutions
segment, which panelists are sourced from the Ciao comparison shopping portals. 12




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##### Table of Contents



Note 11  Income Taxes:
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Income (loss) before income taxes:Domestic
    
    $
    838
    
    
    $
    (218
    )
    
    $
    1,149
    
    
    $
    (680
    )Foreign
    
    
    3,964
    
    
    
    2,755
    
    
    
    11,602
    
    
    
    8,002$
    4,802
    
    
    $
    2,537
    
    
    $
    12,751
    
    
    $
    7,322Provision (benefit) for income taxes:Currently payable (refundable):Federal
    
    $
    164
    
    
    $
    (308
    )
    
    $
    208
    
    
    $
    76State
    
    
    11
    
    
    
    (82
    )
    
    
    90
    
    
    
    64Foreign
    
    
    1,436
    
    
    
    904
    
    
    
    5,384
    
    
    
    2,683Total current income tax provision
    
    
    1,611
    
    
    
    514
    
    
    
    5,682
    
    
    
    2,823Deferred income tax provision (benefit):Federal
    
    
    (242
    )
    
    
    (138
    )
    
    
    (1,048
    )
    
    
    (1,070
    )State
    
    
    (26
    )
    
    
    (45
    )
    
    
    (31
    )
    
    
    (64
    )Foreign
    
    
    136
    
    
    
    363
    
    
    
    (234
    )
    
    
    695Total
deferred income tax provision (benefit)
    
    
    (132
    )
    
    
    180
    
    
    
    (1,313
    )
    
    
    (439
    )Total income tax provision
    
    $
    1,479
    
    
    $
    694
    
    
    $
    4,369
    
    
    $
    2,384
  September 30,
    
    
    December 31,2007
    
    
    2006Deferred tax assets (liabilities):Net operating loss carryforwards
    
    $
    16,116
    
    
    $
    16,265Stock-based compensation
    
    
    4,408
    
    
    
    4,581Capitalized panel costs
    
    
    622
    
    
    
    449Intangible assets acquired
    
    
    (3,533
    )
    
    
    (5,157
    )Foreign exchange
    
    
    (3,213
    )
    
    
    (875
    )Fixed assets
    
    
    1,295
    
    
    
    1,281Federal and state tax credits
    
    
    2,331
    
    
    
    2,256Other deferred tax assets
    
    
    1,019
    
    
    
    589Net deferred tax assets
    
    
    19,045
    
    
    
    19,389Valuation allowance
    
    
    (137
    )
    
    
    (201
    )Total net deferred tax assets
    
    $
    18,908
    
    
    $
    19,188
  13




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Note 12  Commitments and Contingencies:
 Legal Contingencies:
   14




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##### Table of Contents



Note 13  Management Change:
  15




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##### Table of Contents



Item 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our consolidated financial statements and related notes included
elsewhere in this Quarterly Report. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including those discussed in
the section entitled Risk Factors in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2006 and in this Quarterly Report on Form 10-Q . Also see the section entitled
Cautionary Note Regarding Forward-Looking Statements contained in this Quarterly Report on Form
10-Q.
 Segment Information
   Critical Accounting Policies and Estimates
   Recently Issued Accounting Pronouncements .
 16




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Results of Operations
 Three Months Ended September 30, 2007 compared to Three Months Ended September 30, 2006
 Consolidated Results
  Three Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %($ in thousands)Net revenues
    
    $
    32,325
    
    
    
    100.0
    %
    
    $
    24,875
    
    
    
    100.0
    %Cost of revenues
    
    
    8,624
    
    
    
    26.7
    
    
    
    5,974
    
    
    
    24.0Gross profit
    
    
    23,701
    
    
    
    73.3
    
    
    
    18,901
    
    
    
    76.0Operating expenses:Selling, general and administrative
    
    
    14,737
    
    
    
    45.6
    
    
    
    11,602
    
    
    
    46.7Panel acquisition
    
    
    859
    
    
    
    2.7
    
    
    
    1,351
    
    
    
    5.4Depreciation and amortization
    
    
    2,242
    
    
    
    6.9
    
    
    
    2,427
    
    
    
    9.8Research and development
    
    
    1,175
    
    
    
    3.6
    
    
    
    973
    
    
    
    3.9Restructuring charges
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    0.2Total operating expenses
    
    
    19,013
    
    
    
    58.8
    
    
    
    16,408
    
    
    
    66.0Operating income
    
    
    4,688
    
    
    
    14.5
    
    
    
    2,493
    
    
    
    10.0Other income (expense):Interest income, net
    
    
    355
    
    
    
    1.1
    
    
    
    60
    
    
    
    0.2Other expense, net
    
    
    (241
    )
    
    
    (0.7
    )
    
    
    (16
    )
    
    
    (0.0
    )Total other income (expense), net
    
    
    114
    
    
    
    0.4
    
    
    
    44
    
    
    
    0.2Income before income taxes
    
    
    4,802
    
    
    
    14.9
    
    
    
    2,537
    
    
    
    10.2Provision for income taxes
    
    
    1,479
    
    
    
    4.6
    
    
    
    694
    
    
    
    2.8Net income
    
    $
    3,323
    
    
    
    10.3
    %
    
    $
    1,843
    
    
    
    7.4
    %
 Net Revenues.
   Gross Profit.
 17




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Selling, General and Administrative.
      Panel Acquisition.
  18




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##### Table of Contents



Depreciation and Amortization.
 i)
    
    the continuing development of our Unified Panel System, our Survey Management
System, and other Internet survey solutions operating systems in North America;ii)
    
    the expansion of our North American Internet survey solutions operating systems
to a worldwide enterprise system; andiii)
    
    ongoing enhancements and software re-engineering in our comparison shopping
segments operating systems.
  Research and Development.
 Interest Income, Net.
 Other Expense, Net.
 Provision for Income Taxes.
 Net Income.
 19




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North American Segment Results
  Three Months Ended September 30,2007
    
    %
    
    2006
    
    %($ in thousands)Gross segment revenues
    
    $
    18,473
    
    
    
    100.0
    %
    
    $
    15,525
    
    
    
    100.0
    %Segment operating income
    
    
    4,403
    
    
    
    23.8
    
    
    
    2,965
    
    
    
    19.1
 Gross Segment revenues.
 i)
    
    the improvement in survey respondent supply via our panel, our Real-Time Sampling
capability and our outside sample suppliers;ii)
    
    a significant investment in the selling, marketing and business development team in North
America; andiii)
    
    improved product quality.
 Segment Operating Income.
 Ciao Internet Survey Solutions Segment Results
  Three Months Ended September 30,2007
    
    %
    
    2006
    
    %($ in thousands)Gross segment revenues
    
    $
    8,208
    
    
    
    100.0
    %
    
    $
    7,007
    
    
    
    100.0
    %Segment operating income
    
    
    1,888
    
    
    
    23.0
    
    
    
    2,363
    
    
    
    33.7
 Gross Segment Revenues.
 Segment Operating Income.
 20




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##### Table of Contents



Ciao Comparison Shopping Segment Results
  Three Months Ended September 30,2007
    
    %
    
    2006
    
    %($ in thousands)Gross segment revenues
    
    $
    8,329
    
    
    
    100.0
    %
    
    $
    5,090
    
    
    
    100.0
    %Segment operating income
    
    
    4,165
    
    
    
    50.0
    
    
    
    3,126
    
    
    
    61.4
 Gross Segment Revenues.
 Segment Operating Income.
 21




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##### Table of Contents



Nine Months Ended September 30, 2007 compared to Nine Months Ended September 30, 2006
 Consolidated Results
  Nine Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %($ in thousands)Net revenues
    
    $
    90,620
    
    
    
    100.0
    %
    
    $
    70,860
    
    
    
    100.0
    %Cost of revenues
    
    
    24,021
    
    
    
    26.5
    
    
    
    17,082
    
    
    
    24.1Gross profit
    
    
    66,599
    
    
    
    73.5
    
    
    
    53,778
    
    
    
    75.9Operating expenses:Selling, general and administrative
    
    
    41,925
    
    
    
    46.3
    
    
    
    31,854
    
    
    
    44.9Panel acquisition
    
    
    2,685
    
    
    
    3.0
    
    
    
    4,288
    
    
    
    6.1Depreciation and amortization
    
    
    6,563
    
    
    
    7.2
    
    
    
    7,144
    
    
    
    10.1Research and development
    
    
    3,311
    
    
    
    3.6
    
    
    
    2,735
    
    
    
    3.9Restructuring charges
    
    
    
    
    
    
    0.0
    
    
    
    243
    
    
    
    0.3Total operating expenses
    
    
    54,484
    
    
    
    60.1
    
    
    
    46,264
    
    
    
    65.3Operating income
    
    
    12,115
    
    
    
    13.4
    
    
    
    7,514
    
    
    
    10.6Other expense:Interest income (expense), net
    
    
    906
    
    
    
    1.0
    
    
    
    (22
    )
    
    
    (0.0
    )Other expense, net
    
    
    (270
    )
    
    
    (0.3
    )
    
    
    (170
    )
    
    
    (0.3
    )Total other income (expense), net
    
    
    636
    
    
    
    0.7
    
    
    
    (192
    )
    
    
    (0.3
    )Income before income taxes
    
    
    12,751
    
    
    
    14.1
    
    
    
    7,322
    
    
    
    10.3Provision for income taxes
    
    
    4,369
    
    
    
    4.8
    
    
    
    2,384
    
    
    
    3.3Net income
    
    $
    8,382
    
    
    
    9.3
    %
    
    $
    4,938
    
    
    
    7.0
    %
 Net Revenues.
   Gross Profit.
 22




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Selling, General and Administrative.
      Panel Acquisition.
  23




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##### Table of Contents



Depreciation and Amortization.
 i)
    
    the continuing development of our Unified Panel System, our Survey Management
System, and other Internet survey solutions operating systems in North America;ii)
    
    the expansion of our North American Internet survey solutions operating systems
to a worldwide enterprise system; andiii)
    
    ongoing enhancements and software re-engineering in our comparison shopping
segments operating systems.
  Research and Development.
 Restructuring Charges.
 Interest Income (Expense), Net.
 24




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##### Table of Contents



Other Expense, Net.
 Provision for Income Taxes.
   Net Income.
 North American Segment Results
  Nine Months Ended September 30,2007
    
    %
    
    2006
    
    %($ in thousands)Gross segment revenues
    
    $
    51,388
    
    
    
    100.0
    %
    
    $
    44,450
    
    
    
    100.0
    %Segment operating income
    
    
    10,690
    
    
    
    20.8
    
    
    
    9,167
    
    
    
    20.6
 Gross Segment revenues.
 i)
    
    the improvement in survey respondent supply via our panel, our Real-Time Sampling
capability and our outside sample suppliers;ii)
    
    a significant investment in the selling, marketing and business development team in North
America; andiii)
    
    improved product quality.
 Segment Operating Income.
 25




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##### Table of Contents



Ciao Internet Survey Solutions Segment Results
  Nine Months Ended September 30,2007
    
    %
    
    2006
    
    %($ in thousands)Gross segment revenues
    
    $
    23,171
    
    
    
    100.0
    %
    
    $
    20,445
    
    
    
    100.0
    %Segment operating income
    
    
    5,817
    
    
    
    25.1
    
    
    
    7,480
    
    
    
    36.6
 Gross Segment Revenues.
 Segment Operating Income.
 Ciao Comparison Shopping Segment Results
  Nine Months Ended September 30,2007
    
    %
    
    2006
    
    %($ in thousands)Gross segment revenues
    
    $
    22,727
    
    
    
    100.0
    %
    
    $
    12,728
    
    
    
    100.0
    %Segment operating income
    
    
    12,353
    
    
    
    54.4
    
    
    
    7,418
    
    
    
    58.3
 Gross Segment Revenues.
 Segment Operating Income.
 26




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Liquidity and Capital Resources
  Nine Months Ended September 30,2007
    
    
    2006
    
    
    Change($ in thousands)Net cash provided by operating activities
    
    $
    17,296
    
    
    $
    15,830
    
    
    $
    1,466Net cash used in investing activities
    
    
    (14,439
    )
    
    
    (15,243
    )
    
    
    804Net cash provided by (used in) financing activities
    
    
    4,154
    
    
    
    (4,103
    )
    
    
    8,257Effect of exchange rate changes on cash and cash equivalents
    
    
    1,735
    
    
    
    275
    
    
    
    1,460Increase in cash and cash equivalents
    
    
    8,746
    
    
    
    (3,241
    )
    
    
    11,987Cash and cash equivalents at beginning of period
    
    
    20,873
    
    
    
    20,623
    
    
    
    250Cash and cash equivalents at end of period
    
    
    29,619
    
    
    
    17,382
    
    
    
    12,237Short-term investments in marketable securities
    
    
    24,066
    
    
    
    12,608
    
    
    
    11,458Total cash, cash equivalents and short-term investments
    
    $
    53,685
    
    
    $
    29,990
    
    
    $
    23,695
       27




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Contractual Cash Obligations and Other Commercial Commitments and Contingencies
  Total at
    
    
    Years Ended December 31,September 30,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012 and2007
    
    
    2007 (1)
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterContractual obligations:Capital lease obligations
    
    $
    24
    
    
    $
    3
    
    
    $
    14
    
    
    $
    7
    
    
    $
    
    
    
    $
    
    
    
    $
    Non-cancelable operating lease
obligations
    
    
    11,923
    
    
    
    1,349
    
    
    
    4,171
    
    
    
    3,591
    
    
    
    1,560
    
    
    
    776
    
    
    
    476Management change commitments*
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    11,952
    
    
    $
    1,357
    
    
    $
    4,185
    
    
    $
    3,598
    
    
    $
    1,560
    
    
    $
    776
    
    
    $
    476
 
 (1)
    
    Includes only the remaining three months of the year ending December 31, 2007.*
    
    These management change commitments are a result of our management change announced in the
third quarter of 2005 as described in Note 13 to the consolidated financial statements
included in this Quarterly Report on Form 10-Q.  28




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Item 3: Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4: Controls and Procedures
     29




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PART II   OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  Cautionary Note Regarding Forward-Looking Statements
  
    
    risks related to the separation of our Ciao Internet survey solutions and comparison
shopping businesses;
    
    risks related to the success of new business initiatives, including the expansion of our
Ciao comparison shopping business to the United States;
    
    our ability to attract traffic and merchants in the United States could fail;
    
    the growing competitiveness of our marketplace and our ability to compete therein;
    
    our ability to develop and deploy new technologies;
 30




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##### Table of Contents




    
    risks related to our reliance on search engine algorithm optimization to generate
internet traffic;
    
    our client satisfaction levels;
    
    our ability to build and maintain the size and demographic composition of the Greenfield
Online panel;
    
    our panelists responsiveness to our surveys;
    
    issues related to the development, success and client acceptance of our real-time
sampling methodology for recruiting survey takers on the Internet;
    
    our ability to accurately predict future revenue levels and our ability to manage
expense commensurate with such revenue levels;
    
    our ability to manage pricing pressure in North America and Europe;
    
    our reliance on our largest customers;
    
    our ability to manage or accelerate our growth and international expansion;
    
    our ability to restore and sustain sales growth in our European survey business;
    
    our ability to manage or accelerate our growth and international expansion;
    
    risks related to foreign currency rate fluctuations;
    
    our ability to integrate successfully the businesses we have recently acquired or may
acquire in the future;
    
    risks related to the pending class action lawsuits;
    
    the seasonality of demand for Internet survey solutions and comparison shopping
services; and
    
    the strength of our brand.
   We and some of our current and former officers are the subject of securities class action
lawsuits that could require us to pay substantial damages or otherwise have a material adverse
effect on us.
  31




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We may not be able to successfully launch a Ciao comparison shopping business in the United
States and the diversion of financial resources and management attention to this undertaking may
cause our results of operations and our financial condition to suffer.
  
    
    the diversion of management attention from the core Ciao comparison shopping business in
Europe;
    
    our ability to translate the technical and industry skills and knowledge gained in the
European comparison shopping marketplace to the United States;
    
    exposing our comparison shopping business to increased US-based competition;
    
    our ability to develop a community of Ciao members in the United States of sufficient
size to generate meaningful product review content;
    
    Our ability to develop economically feasible internet traffic to our U.S. based
comparison shopping sites; and
    
    our ability to attract and retain sufficient skilled staff in the United States to build
the U.S.-based comparison shopping business.
  Currency exchange rate fluctuations could lower our revenue and net income.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  32




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Item 6. Exhibits
  ExhibitNo.
    
    Description of Exhibits31.1
    
    
    Certification of the Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Filed herewith).31.2
    
    
    Certification of the Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Filed herewith).32.1
    
    
    Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350 (Filed herewith).32.2
    
    
    Certifications of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350 (Filed herewith).
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SIGNATURE
  GREENFIELD ONLINE, INC.By:
    /s/ Robert E. BiesRobert E. BiesExecutive Vice President and

Chief Financial Officer  34




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EXHIBIT INDEX
 ExhibitNo.
    
    Description of Exhibits31.1
    
    
    Certification of the Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Filed herewith).31.2
    
    
    Certification of the Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Filed herewith).32.1
    
    
    Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350 (Filed herewith).32.2
    
    
    Certifications of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350 (Filed herewith).
 35