##### 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 March 31, 2006
 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
    
    06-1440369(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 21 River Road, Wilton, CT 06897
 : (203) 834-8585
  
  þ o
  o þ o
 o þ




---



##### 



GREENFIELD ONLINE, INC.
 FORM 10-Q
TABLE OF CONTENTS
 PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets at March 31, 2006 (unaudited)
and December 31, 2005
    
    
    1Unaudited Consolidated Statements of Operations for the
three months ended March 31, 2006 and 2005
    
    
    2Unaudited Consolidated Statements of Changes in
Stockholders Equity for the three months ended March 31,
2006
    
    
    3Unaudited Consolidated Statements of Cash Flows for the
three months ended March 31, 2006 and 2005
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    37Part II. Other InformationItem 1. Legal Proceedings
    
    
    38Item 1A. Risk Factors
    
    
    38Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    48Item 3. Defaults Upon Senior Securities
    
    
    48Item 4. Submission of Matters to a Vote of Security Holders
    
    
    48Item 5. Other Information
    
    
    48Item 6. Exhibits
    
    
    48Signatures
    
    
    49Exhibit Index
    
    
    50EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




---



##### Table of Contents



GREENFIELD ONLINE, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data
  March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    20,767
    
    
    $
    20,623Accounts receivable trade, net (net of
allowances of $1,415 and $1,448 at March 31,
2006 and December 31, 2005, respectively)
    
    
    15,329
    
    
    
    18,197Prepaid expenses and other current assets
    
    
    1,651
    
    
    
    1,613Deferred taxes, current
    
    
    1,279
    
    
    
    1,932Total current assets
    
    
    39,026
    
    
    
    42,365Property and equipment, net
    
    
    8,905
    
    
    
    9,660Other intangible assets, net
    
    
    19,041
    
    
    
    20,077Goodwill
    
    
    68,183
    
    
    
    67,442Deferred taxes, long-term
    
    
    20,300
    
    
    
    20,068Security deposits and other long-term assets
    
    
    815
    
    
    
    1,248Total assets
    
    $
    156,270
    
    
    $
    160,860LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,743
    
    
    $
    3,264Accrued expenses and other current liabilities
    
    
    13,176
    
    
    
    14,576Income taxes payable
    
    
    3,633
    
    
    
    3,990Current portion of capital lease obligations
    
    
    36
    
    
    
    2,061Deferred revenue
    
    
    188
    
    
    
    388Total current liabilities
    
    
    19,776
    
    
    
    24,279Capital lease obligations
    
    
    37
    
    
    
    2,032Other long-term liabilities
    
    
    30
    
    
    
    56Total liabilities
    
    
    19,843
    
    
    
    26,367Commitments and contingencies (Note 13)Stockholders equity:Common stock; par value $0.0001 per share;
100,000,000 shares authorized; 25,329,097 and
25,303,088 shares issued and outstanding at
March 31, 2006 and December 31, 2005,
respectively
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    288,104
    
    
    
    288,707Accumulated deficit
    
    
    (143,789
    )
    
    
    (144,630
    )Unearned stock-based compensation
    
    
    
    
    
    
    (1,284
    )Accumulated other comprehensive loss
    
    
    (7,760
    )
    
    
    (8,172
    )Treasury stock, at costCommon stock  9,643 shares
    
    
    (131
    )
    
    
    (131
    )Total stockholders equity
    
    
    136,427
    
    
    
    134,493Total liabilities and stockholders equity
    
    $
    156,270
    
    
    $
    160,860
  1




---



##### Table of Contents



GREENFIELD ONLINE, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
  Three Months EndedMarch 31,2006
    
    
    2005Net revenues
    
    $
    21,532
    
    
    $
    15,251Cost of revenues
    
    
    5,548
    
    
    
    4,425Gross profit
    
    
    15,984
    
    
    
    10,826Operating expenses:Selling, general and administrative
    
    
    9,535
    
    
    
    6,698Panel acquisition expenses
    
    
    1,706
    
    
    
    454Depreciation and amortization
    
    
    2,316
    
    
    
    783Research and development
    
    
    941
    
    
    
    346Restructuring charges
    
    
    168
    
    
    
    Total operating expenses
    
    
    14,666
    
    
    
    8,281Operating income
    
    
    1,318
    
    
    
    2,545Other income (expense):Interest income (expense), net
    
    
    (167
    )
    
    
    454Other income (expense), net
    
    
    52
    
    
    
    (41
    )Total other income (expense)
    
    
    (115
    )
    
    
    413Income before income taxes
    
    
    1,203
    
    
    
    2,958Provision for income taxes
    
    
    362
    
    
    
    492Net income
    
    $
    841
    
    
    $
    2,466Net income per share available to common stockholdersBasic
    
    $
    0.03
    
    
    $
    0.12Diluted
    
    $
    0.03
    
    
    $
    0.11Weighted average shares outstanding:Basic
    
    
    25,310
    
    
    
    21,174Diluted
    
    
    25,505
    
    
    
    21,972
  2




---



##### Table of Contents



GREENFIELD ONLINE, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (In thousands)
  AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Treasury Stock
    
    
    Stock Based
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    Amount
    
    
    Compensation
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity
    
    
    IncomeBalance at December 31, 2005
    
    
    25,303
    
    
    $
    3
    
    
    $
    288,707
    
    
    
    
    
    
    
    9
    
    
    $
    (131
    )
    
    $
    (1,284
    )
    
    $
    (144,630
    )
    
    $
    (8,172
    )
    
    $
    134,493Three months ended March 31, 2006:Net income for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    841
    
    
    
    
    
    
    
    841
    
    
    $
    841Issuance of shares related to the Employee Stock Purchase Plan
    
    
    13
    
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    Exercise of stock options
    
    
    13
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    Adoption of
SFAS 123(R)
    
    
    
    
    
    
    
    
    
    
    (1,284
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,284
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Translation adjustments, net of related income tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    412
    
    
    
    412Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,253Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    582
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    582Balance at
March 31, 2006
    
    
    25,329
    
    
    $
    3
    
    
    $
    288,104
    
    
    
    
    
    
    
    9
    
    
    $
    (131
    )
    
    $
    (
    )
    
    $
    (143,789
    )
    
    $
    (7,760
    )
    
    $
    136,427
  3




---



##### Table of Contents



GREENFIELD ONLINE, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
  Three Months EndedMarch 31,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    841
    
    
    $
    2,466Adjustments to reconcile net income to net cash provided by operating activities:Deferred income tax benefit
    
    
    (237
    )
    
    
    Depreciation and amortization
    
    
    3,066
    
    
    
    1,220Stock based compensation
    
    
    582
    
    
    
    253Restructuring charges
    
    
    168
    
    
    
    Loss on disposal of property and equipment
    
    
    24
    
    
    
    15Provision for doubtful accounts
    
    
    44
    
    
    
    50Changes in assets and liabilities, net:Accounts receivable
    
    
    2,968
    
    
    
    (1,537
    )Deferred project costs
    
    
    194
    
    
    
    (1
    )Other current assets
    
    
    (223
    )
    
    
    73Security deposits
    
    
    477
    
    
    
    68Other long-term assets
    
    
    (39
    )
    
    
    (319
    )Accounts payable
    
    
    (536
    )
    
    
    (107
    )Accrued expenses and other current liabilities
    
    
    (1,337
    )
    
    
    124Payments for
management change
    
    
    (103
    )
    
    
    Payments for restructuring charges
    
    
    (243
    )
    
    
    Income taxes payable
    
    
    (435
    )
    
    
    Deferred project revenues
    
    
    (201
    )
    
    
    (42
    )Net cash provided by operating activities
    
    
    5,010
    
    
    
    2,263Cash flows from investing activities:Purchases of marketable securities
    
    
    
    
    
    
    (8,250
    )Sales of marketable securities
    
    
    
    
    
    
    24,900Proceeds from sale of property and equipment
    
    
    2
    
    
    
    Purchases of businesses, net of cash acquired
    
    
    
    
    
    
    (37,053
    )Additions to property and equipment and intangibles
    
    
    (762
    )
    
    
    (704
    )Net cash used in investing activities
    
    
    (760
    )
    
    
    (21,107
    )Cash flows from financing activities:Decrease in other long-term liabilities
    
    
    (26
    )
    
    
    (22
    )Proceeds of options exercised
    
    
    35
    
    
    
    96Proceeds of employee stock purchase plan
    
    
    31
    
    
    
    Net proceeds from issuance of common stock in connection with business acquisitions
    
    
    
    
    
    
    4,200Principal payments under capital lease obligations
    
    
    (4,283
    )
    
    
    (320
    )Net cash (used in) provided by financing activities
    
    
    (4,243
    )
    
    
    3,954Effect of exchange rate changes
    
    
    137
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    144
    
    
    
    (14,890
    )Cash and cash equivalents at beginning of the period
    
    
    20,623
    
    
    
    96,082Cash and cash equivalents at end of the period
    
    $
    20,767
    
    
    $
    81,192Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    372
    
    
    $
    90Income taxes
    
    
    1,034
    
    
    
    111Supplemental Schedule of Non-cash Investing and Financing Activities:Purchase of equipment and internal use software financed through capital lease
obligations
    
    $
    263
    
    
    $
    423
  4




---



##### Table of Contents



GREENFIELD ONLINE, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 1
 Basis of Presentation:
   Reclassifications.
 Note 2  Summary of Significant Accounting Policies:
  Stock-based Compensation. Share-Based Payment, 25 Accounting for Stock Issued to Employees
 Accounting for Stock-Based
Compensation
  5




---



##### Table of Contents



Transition Election Related to Accounting for Tax Effects of
Share-Based Payment Awards,
 Panelist Incentives.
 Concentration of Credit Risk.
 Accounts Receivable Allowances.
 6




---



##### Table of Contents



Goodwill.
 Use of Estimates.
 Recently Issued Accounting Pronouncements
   Note 3  Prepaid Expenses and Other Current Assets:
  March 31,
    
    
    December 31,2006
    
    
    2005Prepaid maintenance and license contracts
    
    $
    286
    
    
    $
    316Prepaid expenses
    
    
    524
    
    
    
    254Prepaid insurance
    
    
    307
    
    
    
    488Deferred project costs
    
    
    187
    
    
    
    378Prepaid taxes
    
    
    233
    
    
    
    136Other
    
    
    114
    
    
    
    41$
    1,651
    
    
    $
    1,613
 7




---



##### Table of Contents



Note 4  Property and Equipment, net:
 Property and equipment, net, consisted of the following at March 31, 2006 and December 31,
2005
(in thousands):
 EstimatedUseful
    
    
    March 31,
    
    
    December 31,Life-Years
    
    
    2006
    
    
    2005Computer and data processing equipment
    
    
    2  4
    
    
    $
    15,182
    
    
    $
    14,730Leasehold improvements
    
    
    2  5
    *
    
    
    1,827
    
    
    
    1,838Furniture and fixtures
    
    
    7-8
    
    
    
    2,512
    
    
    
    2,382Telephone systems
    
    
    4-5
    
    
    
    1,169
    
    
    
    1,121Automobile(s)
    
    
    4
    
    
    
    42
    
    
    
    9920,732
    
    
    
    20,170Less: Accumulated depreciation
    
    
    
    
    
    
    (11,827
    )
    
    
    (10,510
    )Property and equipment, net
    
    
    
    
    
    $
    8,905
    
    
    $
    9,660
 
 *
    
    Lesser of the estimated life of the asset or the term of the underlying lease.   March 31,
    
    
    December 31,2006
    
    
    2005Computer and data processing equipment
    
    $
    50
    
    
    $
    4,717Leasehold improvements
    
    
    
    
    
    
    28Furniture and fixtures
    
    
    
    
    
    
    1,374Telephone system
    
    
    50
    
    
    
    975Automobile
    
    
    
    
    
    
    58100
    
    
    
    7,152Accumulated depreciation
    
    
    (35
    )
    
    
    (3,112
    )Assets under capital leases, net
    
    $
    65
    
    
    $
    4,040
 8




---



##### Table of Contents



Note 5  Other Intangible Assets:
  As of March 31, 2006
    
    

As
of December 31, 2005Estimated
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossUseful
    
    
    Carrying
    
    
    Accumulated
    
    
    Net
    
    
    Carrying
    
    
    Accumulated
    
    
    NetLife-Years
    
    
    Cost
    
    
    Amortization
    
    
    Amount
    
    
    Cost
    
    
    Amortization
    
    
    AmountInternal use software
    
    
    2-3
    
    
    $
    3,738
    
    
    $
    2,085
    
    
    $
    1,653
    
    
    $
    3,321
    
    
    $
    1,777
    
    
    $
    1,544Other software acquired
    
    
    0.42
    
    
    
    159
    
    
    
    159
    
    
    
    
    
    
    
    159
    
    
    
    159
    
    
    
    Panel members*
    
    
    3-4
    
    
    
    6,695
    
    
    
    2,021
    
    
    
    4,674
    
    
    
    6,674
    
    
    
    1,558
    
    
    
    5,116Backlog
    
    
    0.25
    
    
    
    424
    
    
    
    424
    
    
    
    
    
    
    
    419
    
    
    
    419
    
    
    
    Affiliate network
    
    
    3
    
    
    
    347
    
    
    
    130
    
    
    
    217
    
    
    
    347
    
    
    
    87
    
    
    
    260Customer relationships
    
    
    5
    
    
    
    7,131
    
    
    
    1,510
    
    
    
    5,621
    
    
    
    7,015
    
    
    
    1,142
    
    
    
    5,873Non-competition agreements
    
    
    2.75-3
    
    
    
    2,410
    
    
    
    928
    
    
    
    1,482
    
    
    
    2,371
    
    
    
    712
    
    
    
    1,659Domain names and service
marks
    
    
    5-10
    
    
    
    6,665
    
    
    
    1,271
    
    
    
    5,394
    
    
    
    6,545
    
    
    
    920
    
    
    
    5,625Other intangible assets, net
    
    
    
    
    
    $
    27,569
    
    
    $
    8,528
    
    
    $
    19,041
    
    
    $
    26,851
    
    
    $
    6,774
    
    
    $
    20,077
 
 *
    
    During the fourth quarter of 2005, we reduced the estimated useful lives of our acquired
panelists from 4-8 years to 3-4 years. We reduced the useful lives based on the accumulation
of additional experience with regard to the duration that, on average, a panel member will
continue to participate in surveys.     AmountFor the remaining nine months ending December 31, 2006
    
    $
    4,8522007
    
    
    6,1232008
    
    
    4,3182009
    
    
    2,7772010
    
    
    7732011
    
    
    52
  March 31,
    
    
    December 31,2006
    
    
    2005Internal use software
    
    $
    
    
    
    $
    69Accumulated amortization
    
    
    
    
    
    
    (39
    )Assets under capital leases, net
    
    $
    
    
    
    $
    30
 9




---



##### Table of Contents



Note 6  Goodwill:
   GoodwillBalance as of December 31, 2005
    
    $
    67,442Foreign currency translation adjustment
    

    741Balance as of March 31, 2006

    $
    68,183
 Note 7  Acquisition of Businesses:
 Rapidata.net Acquisition
  10




---



##### Table of Contents



Zing Wireless Acquisition
  Ciao Acquisition
    
 11




---



##### Table of Contents





North America
    
    
    EuropegoZing
    
    
    CiaoFebruary 8,
    
    
    April 6,2005
    
    
    2005Cash
    
    $
    833
    
    
    $
    1,775Trade receivables
    
    
    2,330
    
    
    
    5,602Other current assets
    
    
    91
    
    
    
    647Property and equipment
    
    
    276
    
    
    
    1,561Other intangible assets
    
    
    4,549
    
    
    
    18,194Deferred tax asset
    
    
    
    
    
    
    6,060Goodwill *
    
    
    25,749
    
    
    
    135,811Total assets acquired
    
    
    33,828
    
    
    
    169,650Accounts payable
    
    
    (712
    )
    
    
    (535
    )Accrued expenses
    
    
    (1,024
    )
    
    
    (1,844
    )Current taxes payable
    
    
    
    
    
    
    (2,032
    )Other current liabilities
    
    
    (31
    )
    
    
    (1,041
    )Deferred tax liability
    
    
    
    
    
    
    (6,103
    )Long term liabilities
    
    
    (78
    )
    
    
    Net assets acquired
    
    $
    31,983
    
    
    $
    158,095
 
 *
    
    Goodwill is not deductible for income tax purposes.  Estimated
    
    
    goZing
    
    
    Estimated
    
    
    CiaoUseful
    
    
    February 8,
    
    
    Useful
    
    
    April 6,Life-Years
    
    
    2005
    
    
    Life-Years
    
    
    2005Acquired software
    
    
    0.42
    
    
    $
    159
    
    
    
    
    
    
    $
    Panel members
    
    
    5.0
    
    
    
    2,369
    
    
    
    4.0
    
    
    
    1,565Domain names and service marks
    
    
    10.0
    
    
    
    116
    
    
    
    5.0
    
    
    
    6,542Customer relationships
    
    
    5.0
    
    
    
    975
    
    
    
    5.0
    
    
    
    7,483Non-competition agreements
    
    
    3.0
    
    
    
    459
    
    
    
    2.75
    
    
    
    2,340Affiliate network
    
    
    3.0
    
    
    
    347
    
    
    
    
    
    
    
    Backlog
    
    
    0.25
    
    
    
    124
    
    
    
    0.25
    
    
    
    264Total other intangible assets
    
    
    
    
    
    $
    4,549
    
    
    
    
    
    
    $
    18,194
  12




---



##### Table of Contents



Pro Forma(Unaudited)Three MonthsEndedMarch 31,(In thousands, except per share data)
    
    2005Net revenues
    
    $
    23,045Operating income*
    
    $
    2,330Net income
    
    $
    1,078Net income per share:Basic
    
    $
    0.04Diluted
    
    $
    0.04Weighted average shares outstanding:Basic
    
    
    25,206Diluted
    
    
    26,004
 
 *
    
    Included in pro forma operating income for the three months ended March 31, 2005 is
additional amortization of approximately $1.6 million, related to the increase in fair value
of the identifiable intangible assets associated with the acquisitions. Additionally, pro
forma operating income was negatively impacted in the three months ended March 31, 2005 by
approximately $308,000 or $0.01 per share basic and diluted for legal and consulting fees associated
with goZings sale of their business.  Note 8  Accrued Expenses and Other Current Liabilities:
  March 31,
    
    
    December 31,2006
    
    
    2005Accrued payroll, bonus and commissions
    
    $
    2,893
    
    
    $
    2,567Panelist incentives
    
    
    4,446
    
    
    
    4,419Accrued panel costs
    
    
    720
    
    
    
    550Accrued restructuring costs
    
    
    271
    
    
    
    347Accrued management change costs
    
    
    650
    
    
    
    754Non-income tax accruals
    
    
    1,231
    
    
    
    1,472Fees associated with the acquisition of Ciao
    
    
    116
    
    
    
    126Software license liability
    
    
    213
    
    
    
    274Accrued audit and tax costs
    
    
    332
    
    
    
    1,175Outside sample accruals
    
    
    752
    
    
    
    949Other
    
    
    1,552
    
    
    
    1,943$
    13,176
    
    
    $
    14,576
  13




---



##### Table of Contents



Note 9  Earnings Per Share:
 Net Income per Share.
  Three Months EndedMarch 31,2006
    
    
    2005Weighted average number of common and potential common shares outstanding:Basic number of common shares outstanding
    
    
    25,310
    
    
    
    21,174Dilutive effect of stock option grants
    
    
    195
    
    
    
    798Diluted number of common and potential common shares outstanding
    
    
    25,505
    
    
    
    21,972
 Note 10  Stock-Based Compensation:
  Unearned Stock-Based Compensation
  14




---



##### Table of Contents



2004 Employee Stock Purchase Plan
     Stock Options
 1999 Stock Option Plan
   15




---



##### Table of Contents



2004 Equity Incentive Plan
   2005 Inducement Options
  Stock-Based Compensation and adoption of SFAS 123(R)
   16




---



##### Table of Contents



Under
    
    
    Effect ofPrevious
    
    
    SFAS 123(R)
    
    
    As ReportedAccounting
    
    
    Adjustments
    
    
    SFAS 123(R)Income from operations
    
    $
    1,728
    
    
    $
    (410
    )
    
    $
    1,318Income before income tax provision
    
    
    1,613
    
    
    
    (410
    )
    
    
    1,203Net income
    
    
    1,097
    
    
    
    (256
    )
    
    
    841Earnings per share:Basic
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    0.03Diluted
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    0.03Cash flow from operating activities
    
    $
    5,010
    
    
    $
    
    
    
    $
    5,010Cash flow from financing activities
    
    
    (4,243
    )
    
    
    
    
    
    
    (4,243
    )
  Three Months EndedMarch 31,2006
    
    
    2005 *Cost of revenues
    
    $
    57
    
    
    $
    45Research and development expenses
    
    
    6
    
    
    
    Selling, general and administrative expenses
    
    
    519
    
    
    
    208Pre-tax stock-based compensation expense
    
    
    582
    
    
    
    253Income tax benefit
    
    
    (206
    )
    
    
    Net stock based compensation expense
    
    $
    376
    
    
    $
    253
 
 *
    
    Amounts recorded in the prior year period were recorded under APB 25. 17




---



##### Table of Contents



1999 Plan
    
    
    2004 Equity PlanWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageNumber of
    
    
    Option Price
    
    
    Price Per
    
    
    Number of
    
    
    Option Price
    
    
    Price PerShares
    
    
    Range
    
    
    Share
    
    
    Shares
    
    
    Range
    
    
    ShareOutstanding at
December 31, 2005
    
    
    568,918
    
    
    $
    0.14-$168.84
    
    
    $
    5.40
    
    
    
    2,266,455
    
    
    $
    4.92-$20.71
    
    
    $
    12.42Granted
    
    
    
    
    
    $
    0.00-$0.00
    
    
    $
    0.00
    
    
    
    1,035,000
    
    
    $
    6.66-$7.04
    
    
    $
    7.04Canceled, expired
    
    
    (52
    )
    
    $
    0.42-$168.84
    
    
    $
    97.59
    
    
    
    (28,641
    )
    
 $
    13.00-$16.10
    
    
    $
    13.54Forfeited
    
    
    (32,144
    )
    
    $
    2.66-$2.66
    
    
    $
    2.66
    
    
    
    (2,500
    )
    
    $
    9.35-$9.35
    
    
    $
    9.35Exercised *
    
    
    (15,160
    )
    
    $
    0.42-$2.66
    
    
    $
    2.65
    
    
    
    
    
    
    $
    -$ 
    
    
    $
    Outstanding at
March 31, 2006
    
    
    521,562
    
    
    $
    0.14-$168.84
    
    
    $
    5.64
    
    
    
    3,270,314
    
    
    $
    4.92-$20.71
    
    
    $
    10.71Exercisable at
March 31, 2006
    
    
    375,107
    
    
    $
    0.14-$168.84
    
    
    $
    6.99
    
    
    
    1,673,147
    
    
    $
    7.44-$20.25
    
    
    $
    13.93Available for
future option
grants at March 31,
2006
    
    
    23,054
    
    
    
    
    
    
    
    
    
    
    
    252,788
 
 *
    
    The total intrinsic value of options exercised during the three months ended March 31, 2006 was
approximately $60,000. 2005 Inducement OptionsWeightedAverageNumber of
    
    
    Option Price
    
    
    Price PerShares
    
    
    Range
    
    
    ShareOutstanding at December 31, 2005
    
    
    487,500
    
    
    $
    5.02-$5.07
    
    
    $
    5.04Granted
    
    
    187,500
    
    
    $
    5.93-$5.93
    
    
    $
    5.93Canceled, expired
    
    
    
    
    
    $
    -$ 
    
    
    $
    Forfeited
    
    
    
    
    
    $
    -$ 
    
    
    $
    Exercised
    
    
    
    
    
    $
    -$ 
    
    
    $
    Outstanding at March 31, 2006
    
    
    675,000
    
    
    $
    5.02-$5.93
    
    
    $
    5.29Exercisable at March 31, 2006
    
    
    81,958
    
    
    $
    5.02-$5.93
    
    
    $
    5.22Available for future option grants at March 31, 2006
    
    
    
   18




---



##### Table of Contents



Weighted
    
    WeightedAverage
    
    AverageExercise
    
    Fair ValueNumber of
    
    
    
    
    
    Price Per
    
    at DateThree months ended March 31, 2006:
    
    Shares
    
    Option Price Range
    
    Share
    
    of Grant2004 Equity Incentive PlanOptions granted with an exercise price equal to market
    
    
    1,035,000
    
    
    $
    6.66-$7.04
    
    
    $
    7.04
    
    
    $
    3.432005 Inducement OptionsOptions granted with an exercise price equal to market
    
    
    187,500
    
    
    $
    5.93-$5.93
    
    
    $
    5.93
    
    
    $
    2.68CombinedOptions granted with an exercise price equal to market
    
    
    1,222,500
    
    
    $
    5.93-$7.04
    
    
    $
    6.87
    
    
    $
    3.32
  Options Outstanding
    
    
    
    
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    (000s)
    
    
    
    
    
    
    Weighted
    
    
    (000s)Number of
    
    
    Remaining
    
    
    Average
    
    
    Aggregate
    
    
    Number of
    
    
    Average
    
    
    AggregateRange of
    
    Outstanding
    
    
    Contractual
    
    
    Exercise
    
    
    Intrinsic
    
    
    Exercisable
    
    
    Exercise
    
    
    IntrinsicExercise Prices
    
    Options
    
    
    Life
    
    
    Price
    
    
    Value
    
    
    Options
    
    
    Price
    
    
    ValueCombined$0.00-$0.70
    
    
    203,382
    
    
    4.2 years
    
    $
    0.31
    
    
    
    
    
    
    
    174,790
    
    
    $
    0.34$0.71-$2.80
    
    
    223,726
    
    
    7.3 years
    
    $
    2.66
    
    
    
    
    
    
    
    105,863
    
    
    $
    2.66$2.81-$7.04
    
    
    1,716,000
    
    
    6.8 years
    
    $
    6.34
    
    
    
    
    
    
    
    81,958
    
    
    $
    5.22$7.05-$7.44
    
    
    582,500
    
    
    6.5 years
    
    $
    7.44
    
    
    
    
    
    
    
    95,833
    
    
    $
    7.44$7.45-$13.00
    
    
    506,373
    
    
    7.9 years
    
    $
    12.69
    
    
    
    
    
    
    
    446,873
    
    
    $
    12.94$13.01-$14.99
    
    
    1,071,116
    
    
    5.4 years
    
    $
    14.68
    
    
    
    
    
    
    
    1,061,116
    
    
    $
    14.68$15.00-$20.00
    
    
    151,119
    
    
    8.1 years
    
    $
    17.10
    
    
    
    
    
    
    
    151,119
    
    
    $
    17.10$20.01-$42.00
    
    
    8,165
    
    
    6.7 years
    
    $
    23.79
    
    
    
    
    
    
    
    8,165
    
    
    $
    23.79$42.01-$168.84
    
    
    4,495
    
    
    3.9 years
    
    $
    162.41
    
    
    
    
    
    
    
    4,495
    
    
    $
    162.414,466,876
    
    
    
    
    
    
    
    
    
    
    $
    2,831
    
    
    
    2,130,212
    
    
    
    
    
    
    $
    1,4031999 Plan$0.00-$0.70
    
    
    203,382
    
    
    4.2 years
    
    $
    0.31
    
    
    
    
    
    
    
    174,790
    
    
    $
    0.34$0.71-$2.80
    
    
    223,726
    
    
    7.3 years
    
    $
    2.66
    
    
    
    
    
    
    
    105,863
    
    
    $
    2.66$7.45-$13.00
    
    
    8,675
    
    
    4.7 years
    
    $
    9.84
    
    
    
    
    
    
    
    8,675
    
    
    $
    9.84$15.00-$20.00
    
    
    78,119
    
    
    7.6 years
    
    $
    17.59
    
    
    
    
    
    
    
    78,119
    
    
    $
    17.59$20.01-$42.00
    
    
    3,165
    
    
    3.9 years
    
    $
    29.39
    
    
    
    
    
    
    
    3,165
    
    
    $
    29.39$42.01-$168.84
    
    
    4,495
    
    
    3.9 years
    
    $
    162.41
    
    
    
    
    
    
    
    4,495
    
    
    $
    162.41521,562
    
    
    
    
    
    
    
    
    
    
    $
    1,900
    
    
    
    375,107
    
    
    
    
    
    
    $
    1,3402004 Equity Plan$2.81-$7.04
    
    
    1,041,000
    
    
    6.9 years
    
    $
    7.02
    
    
    
    
    
    
    
    
    
    
    $
    0.00$7.05-$7.44
    
    
    582,500
    
    
    6.5 years
    
    $
    7.44
    
    
    
    
    
    
    
    95,833
    
    
    $
    7.44$7.45-$13.00
    
    
    497,698
    
    
    7.9 years
    
    $
    12.74
    
    
    
    
    
    
    
    438,198
    
    
    $
    13.00$13.01-$14.99
    
    
    1,071,116
    
    
    5.4 years
    
    $
    14.68
    
    
    
    
    
    
    
    1,061,116
    
    
    $
    14.68$15.00-$20.00
    
    
    73,000
    
    
    8.6 years
    
    $
    16.58
    
    
    
    
    
    
    
    73,000
    
    
    $
    16.58$20.01-$42.00
    
    
    5,000
    
    
    8.4 years
    
    $
    20.25
    
    
    
    
    
    
    
    5,000
    
    
    $
    20.253,270,314
    
    
    
    
    
    
    
    
    
    
    $
    6
    
    
    
    1,673,147
    
    
    
    
    
    
    $
    2005 Inducement Options$2.81-$7.04
    
    
    675,000
    
    
    6.7 years
    
    $
    5.29
    
    
    
    
    
    
    
    81,958
    
    
    $
    5.22675,000
    
    
    
    
    
    
    
    
    
    
    $
    475
    
    
    
    81,958
    
    
    
    
    
    
    $
    63
  19




---



##### Table of Contents



Three Months Ended March 31, 200620052004 Equity
    
    InducementCombined
    
    Plan
    
    OptionsRisk-free interest rate
    
    
    4.61
    %
    
    
    4.66
    %
    
    
    4.30
    %Weighted average expected life (years)
    
    
    4.60
    
    
    
    4.66
    
    
    
    4.21Volatility factor
    
    
    51.81
    %
    
    
    52.00
    %
    
    
    50.60
    %Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
 Volatility
 Risk-free interest rate
 Expected term
 Dividend yield
  Fair Value Disclosures  Prior to SFAS 123(R) Adoption.
   20




---



##### Table of Contents



Three MonthsEndedMarch 31, 2005Net income as reported
    
    $
    2,466Add: Stock-based employee compensation expense included in net income as recorded
    
    
    253Deduct: Total stock-based employee compensation expense determined under the
fair value method for all awards, net of related tax effects
    
    
    (606
    )Pro forma net income
    
    $
    2,113Net income per share as reported:Basic
    
    $
    0.12Diluted
    
    $
    0.11Pro forma income per share:Basic
    
    $
    0.10Diluted
    
    $
    0.10
  Three MonthsEndedMarch 31, 2005Risk-free interest rate
    
    
    3.77
    %Weighted average expected life (years)
    
    
    4.0Volatility factor
    
    
    52.34
    %Expected dividend yield
    
    
    
 Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods and Services
 Note 11  Segment Reporting:
  21




---



##### Table of Contents



For the Three Months EndedMarch 31,2006
    
    
    2005Net revenues:North American Internet survey solutions *
    
    $
    13,815
    
    
    $
    15,251Ciao Internet survey solutions
    
    
    5,745
    
    
    
    Ciao comparison shopping
    
    
    3,407
    
    
    
    Elimination of inter-segment revenues
    
    
    (1,435
    )
    
    
    Total net revenues
    
    $
    21,532
    
    
    $
    15,251Operating income:North American Internet survey solutions
    
    $
    266
    
    
    $
    3,838Ciao Internet survey solutions
    
    
    1,217
    
    
    
    Ciao comparison shopping
    
    
    1,133
    
    
    
    Segment operating income
    
    
    2,616
    
    
    
    3,838Corporate
    
    
    (1,298
    )
    
    
    (1,293
    )Total operating income
    
    
    1,318
    
    
    
    2,545Interest income (expense), net
    
    
    (167
    )
    
    
    454Currency exchange (loss) gain, net
    
    
    52
    
    
    
    (41
    )Income before income taxes
    
    $
    1,203
    
    
    $
    2,958
 
 *
    
    Revenues recorded in our North American Internet survey solutions segment for the three months
ended March 31, 2005 include approximately $1.0 million of revenues generated from data sold to our
European customers prior to our acquisition of Ciao. CiaoInternet
    
    
    CiaoNorth
    
    
    Survey
    
    
    ComparisonAmerica
    
    
    Solutions
    
    
    Shopping
    
    
    TotalThree Months Ended March 31, 2006:Revenues from external customers
    
    $
    13,571
    
    
    $
    4,554
    
    
    $
    3,407
    
    
    $
    21,532Inter-segment revenues
    
    
    244
    
    
    
    1,191
    
    
    
    
    
    
    
    1,435Gross segment revenues
    
    $
    13,815
    
    
    $
    5,745
    
    
    $
    3,407
    
    
    $
    22,967
 22




---



##### Table of Contents



For the Three MonthsEnded March 31,2006
    
    
    2005Included in Segment Operating Profit:North American Internet survey solutions:Depreciation and amortization
    
    $
    2,024
    
    
    $
    1,220Stock-based compensation
    
    
    558
    
    
    
    253Restructuring charge
    
    
    168
    
    
    
    $
    2,750
    
    
    $
    1,473Ciao Internet survey solutions :Depreciation and amortization
    
    $
    530
    
    
    $
    Stock-based compensation
    
    
    19
    
    
    
    $
    549
    
    
    $
    Ciao comparison shopping:Depreciation and amortization
    
    $
    512
    
    
    $
    Stock-based compensation
    
    
    5
    
    
    
    $
    517
    
    
    $
    
  Note 12  Income Taxes:
  For the Three MonthsEnded March 31,2006
    
    
    2005Income (loss) before income taxes:Domestic
    
    $
    (228
    )
    
    $
    2,801Foreign
    
    
    1,431
    
    
    
    157$
    1,203
    
    
    $
    2,958Provision for income taxes:Currently payable:Federal
    
    $
    77
    
    
    $
    63State
    
    
    87
    
    
    
    419Foreign
    
    
    435
    
    
    
    10Total current income tax provision
    
    
    599
    
    
    
    492Deferred income tax provision (benefit):Federal
    
    
    (349
    )
    
    
    State
    
    
    67
    
    
    
    Foreign
    
    
    45
    
    
    
    Total deferred income tax benefit
    
    
    (237
    )
    
    
    Total income tax provision
    
    $
    362
    
    
    $
    492
 23




---



##### Table of Contents



March 31,
    
    
    December 31,2006
    
    
    2005Deferred tax assets (liabilities):Net operating loss carryforwards
    
    $
    18,858
    
    
    $
    19,053Stock-based compensation
    
    
    3,842
    
    
    
    3,657Capitalized panel costs
    
    
    445
    
    
    
    391Intangible assets acquired
    
    
    (5,830
    )
    
    
    (6,064
    )Foreign exchange
    
    
    2,273
    
    
    
    2,942Fixed assets
    
    
    553
    
    
    
    289Federal and state tax credits
    
    
    2,138
    
    
    
    2,281Other deferred tax assets
    
    
    784
    
    
    
    932Net deferred tax asset
    
    
    23,063
    
    
    
    23,481Valuation allowance
    
    
    (1,484
    )
    
    
    (1,481
    )Total net deferred tax assets
    
    $
    21,579
    
    
    $
    22,000
      24




---



##### Table of Contents



Note 13  Commitments and Contingencies:
 Legal Contingencies:
  Note 14  Management Change:
   Note 15  Restructuring Program:
  25




---



##### Table of Contents



Severance
    
    
    Leaseand
    
    
    Cancellation
    
    
    NorthRelated
    
    
    and
    
    
    AmericanCosts
    
    
    Other Costs
    
    
    TotalRestructuring activity:Balance at December 31, 2005
    
    $
    347
    
    
    $
    
    
    
    $
    347Provision
    
    
    64
    
    
    
    104
    
    
    
    168Charges against reserve
    
    
    (241
    )
    
    
    (2
    )
    
    
    (243
    )Balance at March 31, 2006
    
    $
    170
    
    
    $
    102
    
    
    $
    272Additional information:Cumulative amount incurred as of March 31, 2006
    
    $
    443
    
    
    $
    104
    
    
    $
    547Total expected amounts to be incurred*
    
    $
    458
    
    
    $
    422
    
    
    $
    880
 
 *
    
    The total expected amounts of $880,000 represents the cumulative amount incurred through
March 31, 2006 plus additional expected restructuring charges of $333,000, primarily related
to the lease terminations that we have identified to date that have not yet been recognized in
the consolidated financial statements, excluding interest accretion on the reserve. We have
currently estimated a sub-lease rental component in our lease cancellations and other costs.
Both the timing and amount of these estimates are dependent on external factors and may
materially differ once such contracts are finalized.  26




---



##### 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, 2005 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 .
 Stock-Based Compensation . Share-Based Payment Accounting for Stock-Based Compensation,
 27




---



##### Table of Contents



28




---



##### Table of Contents



Results of Operations
 Three Months Ended March 31, 2006 Versus Three Months Ended March 31, 2005
 Consolidated Results
  2006
    
    
    %
    
    
    2005
    
    
    %Net revenues
    
    $
    21,532
    
    
    
    100.0
    %
    
    $
    15,251
    
    
    
    100.0
    %Cost of revenues
    
    
    5,548
    
    
    
    25.8
    
    
    
    4,425
    
    
    
    29.0Gross profit
    
    
    15,984
    
    
    
    74.2
    
    
    
    10,826
    
    
    
    71.0Operating expenses:Selling, general and administrative
    
    
    9,535
    
    
    
    44.3
    
    
    
    6,698
    
    
    
    43.9Panel acquisition expenses
    
    
    1,706
    
    
    
    7.9
    
    
    
    454
    
    
    
    3.0Depreciation and amortization
    
    
    2,316
    
    
    
    10.7
    
    
    
    783
    
    
    
    5.1Research and development
    
    
    941
    
    
    
    4.4
    
    
    
    346
    
    
    
    2.3Impairment and restructuring charges
    
    
    168
    
    
    
    0.8
    
    
    
    
    
    
    
    Total operating expenses
    
    
    14,666
    
    
    
    68.1
    
    
    
    8,281
    
    
    
    54.3Operating income
    
    
    1,318
    
    
    
    6.1
    
    
    
    2,545
    
    
    
    16.7Other (expense) income:Interest (expense) income, net
    
    
    (167
    )
    
    
    (0.8
    )
    
    
    454
    
    
    
    3.0Other (expense) income, net
    
    
    52
    
    
    
    0.2
    
    
    
    (41
    )
    
    
    (0.3
    )Total other (expense) income, net
    
    
    (115
    )
    
    
    (0.6
    )
    
    
    413
    
    
    
    2.7Income before income taxes
    
    
    1,203
    
    
    
    5.6
    
    
    
    2,958
    
    
    
    19.4Provision for income taxes
    
    
    362
    
    
    
    1.7
    
    
    
    492
    
    
    
    3.2Net income
    
    $
    841
    
    
    
    3.9
    %
    
    $
    2,466
    
    
    
    16.2
    %
 Net Revenues.
 Gross Profit.
  
    
    direct project labor of 2.5%;
    
    outside sample purchases of 0.5%;
    
    amortization of internal use software of 0.5%; and
    
    stock-based compensation expense of 0.1%.
 29




---



##### Table of Contents




    
    incentives of 2.3%; and
    
    other of 0.1%.
      i)
    
    savings on incentives borne by the newly acquired Ciao
business on behalf of North America for European survey solutions
projects sold in North America;ii)
    
    we have changed our definition of an active panelist reducing the activity timeframe
from 1 year to 6 months. This has in turn increased the
expirations of incentives related to inactive
panelists during the quarter; andiii)
    
    the cost of survey production supplied by random internet sampling paid to our Web
affiliates includes respondent incentives and as such reduces the amount of incentives we
pay to our panelists.
   Selling, General and Administrative Expenses.
 30




---



##### Table of Contents



Panel Acquisition Expenses.
  Depreciation and Amortization Expenses.
 31




---



##### Table of Contents



Restructuring Charges.
 Research and Development Expenses.
 Interest (Expense) Income, Net.
 
    
    The increase in net interest expense associated with capital lease obligations; and
    
    The decrease in net interest income resulting from lower cash balances in interest
bearing instruments in 2006 versus 2005 due to our use of the proceeds of our 2004 public
offerings in order to acquire Rapidata, goZing and Ciao.
 Other Income (Expense), Net.
 Provision for Income Taxes.
   32




---



##### Table of Contents



Net Income.
 North American Internet Survey Solutions Segment Results
  Three Months Ended March 31,2006
    
    %
    
    2005
    
    %Net revenues
    
    $
    13,815
    
    
    
    100.0
    %
    
    $
    15,251
    
    
    
    100.0
    %Operating income
    
    
    266
    
    
    
    1.9
    
    
    
    3,838
    
    
    
    25.2
 Net Revenues.
 i)
    
    In 2005, the North American Internet survey solutions segment included revenues of
approximately $428,000 associated with the goZing Online Marketing business, which we wound
down later in 2005, and, as a result, no revenues are recorded for this business in 2006;
andii)
    
    During the latter half of 2005, we experienced an increased competitive environment in
North America in the form of new entrants in the market and pricing pressure, resulting in
a decline in net revenues year over year.
 Operating Income.
 i)
    
    increased depreciation and amortization of approximately $804,000 as a result of the
acquisitions of goZing and Rapidata as well as a ramped up capital spending during 2005;ii)
    
    increased stock-based compensation expense of approximately $305,000 associated
primarily with the implementation of SFAS123(R);iii)
    
    lower gross profit of approximately $1.2 million as a
result of increased demand for higher-cost European
sourced data, which was supplied by Ciao; andiv)
    
    lower revenues associated with the increased competitive
environment in North America in the form of new entrants in the
market and pricing pressure.
 33




---



##### Table of Contents



Ciao Internet Survey Solutions Segment Results
  Three Months EndedMarch 31, 2006Amount
    
    %Net revenues
    
    $
    5,745
    
    
    
    100.0
    %Operating income
    
    
    1,217
    
    
    
    21.2
 Net Revenues.
  Ciao
Comparison Shopping Segment Results
  Three Months EndedMarch 31, 2006Amount
    
    %Net revenues
    
    $
    3,407
    
    
    
    100.0
    %Operating income
    
    
    1,133
    
    
    
    33.3
  Liquidity and Capital Resources
   34




---



##### Table of Contents



35




---



##### Table of Contents



Contractual Cash Obligations and Other Commercial Commitments and Contingencies
  Total at
    
    
    Years Ended December 31,March 31,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2011 and2006
    
    
    2006 (1)
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    ThereafterContractual obligations:Capital
lease obligations*
    
    $
    73
    
    
    $
    26
    
    
    $
    25
    
    
    $
    14
    
    
    $
    8
    
    
    $
    
    
    
    $
    Non-cancelable operating lease
obligations
    
    
    9,305
    
    
    
    1,973
    
    
    
    2,387
    
    
    
    2,249
    
    
    
    1,808
    
    
    
    598
    
    
    
    290Management
change commitments**
    
    
    649
    
    
    
    331
    
    
    
    318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring commitments***
    
    
    272
    
    
    
    272
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities
    
    
    16
    
    
    
    4
    
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    10,315
    
    
    $
    2,606
    
    
    $
    2,736
    
    
    $
    2,269
    
    
    $
    1,816
    
    
    $
    598
    
    
    $
    290
 
 (1)
    
    Includes only the remaining nine months of the year ending December 31, 2006.*
    
    As of March 31, 2006, our capital lease obligations were
significantly reduced due to the repayment of our capital lease
obligations with Somerset Capital. These capital lease obligations had a
remaining principal balance of approximately $3.8 million at the time
of repayment in March 2006.**
    
    These management change commitments are a result of our recent management change as described
in Note 14 to the consolidated financial statements included in this Quarterly Report on Form
10-Q.***
    
    The restructuring charge commitments are a result of our recently announced rightsizing plan
in North America as described in Note 15 to the consolidated financial statements included in
this Quarterly Report on Form 10-Q.  36




---



##### Table of Contents



Item 3: Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4: Controls and Procedures
      37




---



##### Table of Contents



PART II   OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  We may not be successful at implementing important new business initiatives and key strategies,
which may have a material negative impact on our financial condition and results of operations.
  
    
    rightsizing of the North American business to bring expenses in line with current revenue levels;
    
    shifting to a relationship-based management sales strategy;
    
    targeting new client relationships and increasing our market share in North America;
    
    implementing a new pricing strategy;
    
    reinvigorating our North American sales efforts;
    
    continuing to build our panel to support revenue growth and improving panel management techniques;
    
    improving quality control and client satisfaction;
    
    accelerating the integration of our Ciao subsidiary; and
    
    developing and implementing new internal use software such as our new Unified Panel
System for panel and project management, and our new GoQuote system, an online quotation
ordering system.
  If we are unable to maintain the size or demographic composition of our Internet panels, our
clients may stop using our products and services.
  38




---



##### Table of Contents



If the rate at which our panelists respond to our surveys decreases, we may not be able to meet
our clients needs.
  
    
    our email-based survey invitations are not received by our panelists due to the use of
spam-filtering and blocking software by individuals, corporations and Internet service
providers;
    
    our panelists become dissatisfied with the forms of participation incentives we offer;
or
    
    our panelists respond less frequently to our surveys, or stop responding altogether due
to excessive requests for participation from us or other researchers.
  If the rate at which our panelists respond to our surveys decreases, we may be required to expend
additional funds to retain our panelists or provide additional incentives to encourage panelist
participation.
  We derived approximately 37% of our total net revenue from ten clients in the three months ended
March 31, 2006. In our reportable segments of North American Internet survey solutions, Ciao
Internet survey solutions and Ciao comparison shopping, we derived approximately 42%, 44% and 66%
of net revenue from ten clients for the three months ended March 31, 2006, respectively. If we
were to lose, or if there were a material reduction in business from, these clients, our net
revenue might decline substantially.
  39




---



##### Table of Contents



We may not be able to successfully compete with other Internet survey solutions providers,
marketing research firms and other potential competitors, which may cause us to lose sales or
experience lower margins on sales.
    Consolidation in the marketing research industry may result in fewer potential clients for us and
a smaller market in general if companies with existing Internet-based panels combine with
companies without such panels.
  If our clients develop their own Internet-based panels, we may lose some or all of their business.
  If the marketplace significantly slows its migration from traditional data collection methods to
Internet-based marketing research data collection, our growth may slow or cease altogether.
  40




---



##### Table of Contents



If we do not keep pace with technological change, we may be unable to implement our business
strategy successfully.
  A substantial portion of our comparison shopping portal traffic is derived through optimization of
search engine results and changes in these algorithms may cause our comparison shopping revenue to
decline.
  If we are unable to manage and support our growth effectively, we may not be able to execute our
business strategy successfully.
    41




---



##### Table of Contents



If we are unable to achieve international growth of our Internet panels or to overcome other risks
of international operations, we may be unable to conduct business on a global level.
  
    
    more restrictive privacy and data protection laws;
    
    difficulty in recruiting and managing employees in foreign countries;
    
    aversion to U.S. companies or non-domestic companies in the regions where we plan to expand;
    
    unexpected changes in regulatory requirements;
    
    export controls relating to encryption technology;
    
    currency exchange rate fluctuations;
    
    problems collecting accounts receivable and longer collection periods;
    
    potentially adverse tax consequences;
    
    political instability; and
    
    Internet access restrictions.
  Currency exchange rate fluctuations could lower our revenue and net income.
  We have significant operations in India that could be limited or prohibited by changes in the
political or economic stability of India or government policies in India or the United States.
  42




---



##### Table of Contents



Acquisitions or investments in other companies may have a negative impact on our business and our
stock price.
  
    
    difficulties with the integration and assimilation of the acquired business, including
maintaining the frequency of survey participation of panelists who join our panel through
acquisitions, and operational inefficiencies resulting from operating with multiple and
potentially incompatible systems until integration is complete;
    
    diversion of our management teams attention from other business concerns;
    
    availability of favorable acquisition or investment financing;
    
    potential undisclosed liabilities associated with acquisitions;
    
    loss of clients resulting from their desire to diversify their online sample data
sources as we increase our market share by acquiring or investing in complementary
businesses;
    
    loss of key employees of any acquired business; and
    
    our ability to successfully operate and grow business units within the acquired
companies that provide products and services other than Internet survey solutions.
  Our success depends on our ability to retain the current members of our senior management team and
other key personnel.
  If we fail to continue to attract and retain project management professionals and other
highly-skilled personnel, we may be unable to successfully execute our business strategy.
  43




---



##### Table of Contents



We do not have adequate plans or procedures in place to allow us to rapidly rebuild our
operational and technical infrastructure in case of a catastrophic event.
  We may be at a competitive disadvantage if we are unable to protect our proprietary rights or if
we infringe on the proprietary rights of others, and related litigation could be time consuming
and costly.
   We may be subject to costly litigation arising out of information presented on or collected in
connection with our service, and the litigation could have a material adverse effect on our
business if decided adversely .
  44




---



##### Table of Contents



Fluctuations in our quarterly operating results may cause our stock price to decline and limit our
stockholders ability to sell our common stock in the public market.
  
    
    fluctuations in general economic conditions;
    
    demand for marketing research products and services generally;
    
    fluctuations in the marketing research budgets of the end-users serviced by our
marketing research clients;
    
    the failure of our large clients to win Internet-based marketing research projects;
    
    fluctuations in foreign currency exchange rates;
    
    lower than expected project win-rates;
    
    the development of products and services by our competitors;
    
    project cancellations by our clients or changes in project completion dates by our
clients, effecting the timing of our recognition of revenue; and
    
    changes in search engine algorithms.
   We might have difficulty obtaining additional capital, which could prevent us from achieving our
business objectives. If we are successful in raising additional capital, it may have a dilutive
effect on our stockholders.
  45




---



##### Table of Contents



Government regulations could limit our Internet activities or result in additional costs of doing
business and conducting marketing research on the Internet.
      
    
    user privacy and expression;
    
    the rights and safety of children;
    
    intellectual property;
 46




---



##### Table of Contents




    
    information security;
    
    anti-competitive practices;
    
    the convergence of offline channels with Internet commerce; and
    
    taxation and pricing.
  Cautionary Note Regarding Forward-Looking Statements
  
    
    risks related to the success of new business initiatives;
    
    our ability to bring expenses in line with current revenue levels;
    
    our ability to develop and deploy new technologies;
    
    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;
    
    our ability to accurately predict future revenue;
    
    our ability to manage pricing pressure in North America and Europe;
    
    our reliance on our largest customers;
    
    our ability to reaccelerate North American sales growth;
    
    the growing competitiveness of our marketplace and our ability to compete therein;
    
    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;
    
    our online business model;
    
    demand for our products and services;
    
    the seasonality of demand for Internet survey solutions and comparison shopping services; and
    
    the strength of our brand.
 47




---



##### Table of Contents



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
  
 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)
 48




---



##### Table of Contents



SIGNATURE
  GREENFIELD ONLINE, INC.By:
    
    /s/ Robert E. BiesRobert
E. BiesExecutive Vice President andChief Financial OfficerDated: May 10, 2006
 49




---



##### Table of Contents



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)
 50