SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                     -------
                                   FORM 10-KSB

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

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

For the fiscal year ended December 31, 2004        Commission File Number 025449

                         SAGIENT RESEARCH SYSTEMS, INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

              Delaware                                    33-0856651
   ---------------------------------                 -------------------
     (State or other jurisdiction                     (I.R.S. employer
   of incorporation or organization)                 identification no.)

     3655 Nobel Drive, Suite 540, San Diego, California             92122
     --------------------------------------------------           ----------
          (Address of principal executive offices)                (Zip Code)

Issuer's telephone number:                                    (858) 623-1600
Securities registered under Section 12(b) of the Act:         None

Securities registered pursuant to Section 12(g) of the Act:
         Common Stock, par value $.0001 per share

         Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X]  No [ ]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         The issuer's revenues for its most recent fiscal year were $2,774,830.

         The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 14, 2005 was approximately $546,713.

         The number of outstanding shares of the issuer's common stock as of
March 14, 2005 was 23,510,796 shares.
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                                TABLE OF CONTENTS
                                -----------------

PART I........................................................................2

DESCRIPTION OF BUSINESS.......................................................2

DESCRIPTION OF PROPERTY......................................................19

LEGAL PROCEEDINGS............................................................19

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........................19

PART II .....................................................................20

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....................20

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION....................21

FINANCIAL STATEMENTS.........................................................30

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE..............................................30

CONTROLS AND PROCEDURES  ....................................................30

OTHER INFORMATION............................................................30

PART III ....................................................................31

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.................31

EXECUTIVE COMPENSATION.......................................................31

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
           RELATED STOCKHOLDER MATTERS.......................................31

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................31

EXHIBITS ....................................................................31

PRINCIPAL ACCOUNTANT FEES AND SERVICES.......................................32

This Annual Report on Form 10-KSB contains forward-looking statements concerning
future events and performance of our company. You should not rely excessively on
these forward-looking statements, because they are only predictions based on our
current expectations and assumptions. Forward-looking statements often contain
words like "estimate," "anticipate," "believe," "plan," or "expect." Many known
and unknown risks and uncertainties may cause our actual results to differ
materially from those indicated in these forward-looking statements. You should
review carefully the risks and uncertainties identified in this report. We have
no obligation to update or announce revisions to any forward-looking statements
to reflect actual events or developments.

                                       1
<PAGE>

                                     PART I
                                     ------

Item 1.  DESCRIPTION OF BUSINESS.

Company Overview
----------------

         Sagient Research Systems, Inc. ("Sagient Research" or "Parent" or
"Company") is based in San Diego, California and was incorporated in Delaware in
1999. Sagient Research is a publisher of independent investment research. We
operate our business activities through Sagient Research and through our wholly
owned subsidiary, DP Securities, Inc. d/b/a Sagient Securities ("DPS" or
"Sagient Securities"), a broker-dealer incorporated in the State of California.
We develop, produce and sell proprietary research products to mutual funds,
hedge funds and investment banks. Our business strategy is to leverage our
development technology and marketing expertise to be a leading provider of
independent research to the financial services and institutional investment
communities.

         We believe there is a growing demand in the institutional investment
community for unbiased independent research, and that the market for such
research is currently underserved. Efficient production and widespread
distribution of most independent research products is currently limited by a
number of factors, including the lack of interactivity and real-time
distribution. In addition, the independent research universe is largely made up
of small, under-capitalized research providers that lack the technological and
marketing expertise to maximize sales.

         We believe our competitive advantage is our ability to develop unique
research services for the institutional markets and to effectively market those
research services to mutual funds, hedge funds, and investment banks. We provide
applications that transform traditional printed research, static data, and fixed
assumptions into a technology-empowered, interactive format. By manipulating
assumptions and conclusions, users receive real-time feedback, resulting in an
improved experience and enhanced productivity. Our marketing strategy is based
on a proprietary multi-step direct sales approach to introduce and sell our
products to potential clients. Our sales team maintains strong relationships
with many of the major mutual funds, hedge funds, and investment banks and is
constantly building new relationships with smaller tier and newer firms.

         In May 2004, the Company changed its name from PCS Research Technology,
Inc. to Sagient Research Systems, Inc.

Business Components
-------------------

Research Production and Distribution

           Our competitive advantages include our ability to produce, deliver,
and integrate independent research products onto our established technology
platforms and to effectively market our research services to the institutional
investment community. We maintain a highly trained staff of technology and
research professionals who are responsible for the production and distribution
of proprietary research products, the creation of new technology and
applications, and the evaluation of prospective independent research products
that could be delivered on our platforms. In addition, we maintain a highly
focused research marketing team that is fully specialized in marketing our
various research services to mutual fund complexes, private equity groups, hedge
funds, and investment banks.

                                       2
<PAGE>

Research Subscription Sales

         The sale of institutional research is typically done on an annual
subscription basis. Subscriptions are paid for by cash payments either directly
from our customers, or through a third-party broker dealer that pays on behalf
of our customers. We maintain an internal sales staff for the marketing of our
proprietary research products.

         Our current portfolio of proprietary independent research products
includes:

PlacementTracker

         PlacementTracker is a dynamic, customizable research product that
provides customers with market data, research, and analysis on the PIPE (Private
Investment in Public Entity) market. Launched in 1999, PlacementTracker has
become nationally recognized for its coverage of the PIPE market. Featured
extensively in media, academic, and government publications, PlacementTracker's
subscription service is used by numerous sell-side firms and buy-side firms
looking for up-to-date, comprehensive, and interactive research on the PIPE
market. PlacementTracker was developed by and is owned exclusively by the
Company.

BioMedTracker

         BioMedTracker provides clients easy customizable display and search
capabilities to develop investment decisions regarding companies that develop
pharmaceutical products. The service includes analysis of events that influence
the development of a drug, including clinical and pre-clinical trial data,
partnership agreements, marketing and distribution agreements, related drug
information, and regulatory events. This qualitative analysis is coupled with a
proprietary model that uses historical results to estimate the probability that
the FDA will approve developmental drugs. The model, along with projections of
approval date, market size, market penetration, and other factors, is used to
calculate the value of a company's clinical pipeline. BioMedTracker was
developed by and is owned exclusively by the Company.

In addition, we serve as a non-exclusive sales agent for the following
third-party independent research services:

ChangeWave Insight

         ChangeWave Insight provides forward-looking sentiment of business
activity in four broad industry segments: Information Technology, Telecom,
Biomedical, and Consumer Electronics & Entertainment. Using a series of
sophisticated polling and survey techniques, ChangeWave Insight measures
sentiment of front-line industry professionals and decision-makers. By filtering
and analyzing its survey data, ChangeWave Insight identifies and evaluates
emerging business trends and formulates specific investment recommendations. The
Company maintains a non-exclusive marketing agreement to market, sell, and
distribute ChangeWave Insight to investment firms, hedge funds, and mutual
funds.

La Jolla Economics

         La Jolla Economics employs a top down, macro economic approach to
analyze and identify changing trends in the world's economies. Its service
provides professional investors with insights and interpretations necessary to
understand how the geopolitical events of today will impact their portfolios
tomorrow. Focusing on the impact of fiscal and monetary policy changes on the
economics and financial variables such as real GDP growth rates, inflation, the
P/E ratio and the rates of returns on various asset classes, La Jolla Economics'

                                       3
<PAGE>

work determines the impact on stock prices in the aggregate. In addition, it
combines a macro view of political and economic research with a dynamic view of
industry research to serve the full range of institutional clients' needs. The
Company maintains a non-exclusive marketing agreement to market, sell, and
distribute La Jolla Economics to investment firms, hedge funds, and mutual funds
and maintains La Jolla Economics' website.

Earnings Quality Analytics

         Earnings Quality Analytics provides forensic accounting analysis of
large, mid, and small capitalization U.S. equity securities. Launched to counter
the loss of confidence in traditional earnings analysis, Earnings Quality
Analytics applies a combination of quantitative and qualitative analysis to
uncover forward-looking indicators of deteriorating earnings quality. The team
of Earnings Quality analysts, world renowned academicians, forensic accounting
experts, and financial engineers identifies those companies with both the
strongest and weakest earnings quality outlooks and produces detailed research
reports identifying specific points of concern, including sustainability of
earnings, customer concentration, inventory turnover, off-balance sheet
obligations, option expensing, corporate governance, and pending legal matters.
The Company previously maintained an exclusive marketing agreement to market,
sell, and distribute Earnings Quality Analytics to investment firms, hedge
funds, and mutual funds. In 2004, we mutually agreed to terminate our exclusive
marketing agreement and we no longer market, sell, and distribute Earnings
Quality Analytics. We currently serve as a collection agent for the clients we
had previously introduced to Earnings Quality Analytics.

Joint Venture

         During 2002, the Company entered into a Joint Venture agreement with
Btech Investor, Inc. Pursuant to this agreement, both the Company and Btech
Investor formed DPBT, LLC through which it jointly developed a web-based
independent healthcare research service, BiotechTracker. This product was
introduced in October 2002 and, during 2002 and 2003, was marketed exclusively
by the Company. The joint development effort combined the Company's expertise
and proprietary web-based technology platform with Btech's expertise in
providing analysis of scientific, clinical and medical data to produce an
interactive research and analytical product focused on biotechnology and
pharmaceutical drug development.

         Effective October 31, 2003 the Company and Btech Investor agreed to
dissolve the Joint Venture and to phase out the BiotechTracker research service.
Subsequent to the dissolution agreement, the Company utilized the intellectual
property it had developed under the Joint Venture to launch BioMedTracker in
January 2004 as a replacement for BiotechTracker.

Strategic Development

         We are focusing our product development efforts on improving our
existing products, increasing distribution outlets for our research services,
and developing new products. We believe higher profit margins are attained
through the sale and marketing of research products developed in-house.

Broker-Dealer

Our DP Securities, Inc. d/b/a Sagient Securities ("DPS" or "Sagient Securities")
subsidiary is a broker-dealer registered with the National Association of
Securities Dealers ("NASD"). DPS is in good standing with the NASD, but was
inactive during 2004 and 2003.

                                       4
<PAGE>

Competition
-----------

         The independent research and financial services industries are
characterized by intense competition. We face competition in all aspects of our
business and compete directly with, among others, traditional Wall Street
research providers, independent research providers, brokerage firms of all
sizes, and larger financial data providers. Specifically, we estimate there are
as many as 500 independent research providers who compete with us to provide
information, data, and investment recommendations to institutional investors.
Many of these competitors, such as Argus Research, Sidoti & Co. and Vista
Research have longer operating histories, have significantly greater financial,
personnel, marketing, research and other resources, have greater operating
efficiencies, and have established reputations relating to product offerings and
customer service. In addition, many of our competitors offer a wider range of
services and financial products than we do. Over the past several years, the
securities industry has become increasingly competitive. Numerous securities
firms have either ceased operations or have been acquired by other firms and
certain corporations with substantial financial resources, expertise and access
to capital markets have entered the securities industry by acquiring leading
securities firms.

Financial Data and Research
---------------------------

         The market for independently produced financial data and research is
highly competitive. Current general distrust of research produced by large
investment banks has led to the creation of numerous small independent financial
data and research providers that report on any number of niche industries or
market spaces.

         Our ability to maintain our competitive advantage in the financial data
and research markets is centered on:

               (i)  our ability to create innovative financial data and research
                    products that are readily marketable to our target client
                    base;
               (ii) our focus on a defined, yet very extensive, market niche;
                    and our ability to continue to effectively market these
                    services to our target client base.

         Each financial data and research product that the Company creates or
acquires will be subject to its own unique set of competitive hurdles. For
example the Company's flagship product, PlacementTracker, which focuses
exclusively on the growing market for Private Investment in Public Equities, has
three competing online PIPE information providers - CapitalIQ, PrivateRaise.com,
and Knobias. Likewise, the Company's BioMedTracker has a number of competitors
for independent biotech research, including Leerink Swan, Mehta Partners, and
Gerson Lehrman. The Company believes that its services provide subscription
members with a number of value-added services that are not available through any
of the competitive products. The Company continually strives to maintain that
competitive advantage through new service offerings and developments.
Nevertheless, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties or
may consolidate to enhance their services and products. We expect that new
competitors or alliances among competitors will emerge and may acquire
significant market share. We can provide no assurance that we will be able to
compete effectively with current or future competitors for our current or future
financial data and research products or that the competitive pressures we face
will not harm our business.

Research Products
-----------------

         We market and distribute research and analytical products on a wide
range of investment alternatives, including quantitative research, economic and
sector analysis, contrarian and short selling research. Our products are either

                                       5
<PAGE>

developed internally or obtained through marketing agreements with third party
independent research providers. Those agreements provide for a fixed payment
amount to the research provider for each research product sold and collected by
the Company. The amounts charged vary by research product, but are generally
dictated by the overall market rates of similar products. The Company is the
sole marketer of its internally developed products. For third-party research
products we market, the Company may be in competition with the provider's
internal marketing staff or other third party marketers.

Sales and Marketing
-------------------

         We use our internal sales staff and marketing resources for our
research products. Our internal marketing resources include directed marketing
of our research product portfolio through our proprietary web-based technology
platform.

         Research products marketed by the Company are generally sold on a
subscription basis, with subscription periods ranging from three months to one
year, and some contain automatic renewal provisions. Our relationship with our
subscription customers is good. We have no client that represents more than five
percent of our subscription revenue and we maintain a low cancellation rate for
our proprietary products. As we continue to grow, the ability to manage the
marketing process in-house through highly skilled and educated institutional
salespeople will continue to play a large role in the success of our Company.

Government Regulation
---------------------

Regulation of the Securities Industry and Broker-Dealers

         Our broker-dealer subsidiary, Sagient Securities, is subject to
extensive regulation applicable to the securities industry in the United States
and elsewhere. As a matter of public policy, regulatory bodies in the United
States and the rest of the world are charged with safeguarding the integrity of
the securities and other financial markets and with protecting the interests of
customers participating in those markets. In the U.S., the Securities and
Exchange Commission ("SEC") is the federal agency responsible for the
administration of the federal securities laws. In general, broker-dealers are
required to register with the SEC under the Securities Exchange Act of 1934, as
amended ("Exchange Act"). Under the Exchange Act, every registered broker-dealer
that does business with the public is required to be a member of and is subject
to the rules of the National Association of Security Dealers ("NASD"). The NASD
administers qualification testing for all securities principals and registered
representatives for its own account and on behalf of the state securities
authorities. Sagient Securities is registered with the SEC and is a member of
the NASD.

         The SEC, self-regulatory organizations such as the NASD, and state
securities commissions may conduct administrative proceedings which can result
in censure, fine, the issuance of cease-and-desist orders, or the suspension or
expulsion of a broker-dealer, its officers, or its employees. The SEC and
self-regulatory organization rules cover many aspects of a broker-dealer's
business, including capital structure and withdrawals, sales methods, trade
practices among broker-dealers, use, and safekeeping of customers' funds and
securities, record-keeping, the financing of customers' purchases, broker-dealer
and employee registration, and the conduct of directors, officers, and
employees. Additional legislation, changes in rules promulgated by the
Commission and self-regulatory organizations, or changes in the interpretation
or enforcement of existing laws and rules, may directly affect the mode of
operation and profitability of broker-dealers.

                                       6
<PAGE>

Effect of Net Capital Requirements

         As a registered broker-dealer and member of the NASD, Sagient
Securities is subject to the Uniform Net Capital Rule under the Exchange Act.
The Uniform Net Capital Rule, which specifies minimum net capital requirements
for registered brokers-dealers, is designed to measure the general financial
integrity and liquidity of a broker-dealer and requires that at least a minimum
part of its assets be kept in relatively liquid form. In general, net capital is
defined as net worth (assets minus liabilities), plus qualifying subordinated
borrowings and certain discretionary liabilities, and less certain mandatory
deductions that result from excluding assets that are not readily convertible
into cash and from valuing conservatively certain other assets. Among these
deductions are adjustments (called haircuts), which reflect the possibility of a
decline in the market value of an asset prior to disposition.

         Failure to maintain the required net capital may subject a firm to
suspension or revocation of registration by the SEC and suspension or expulsion
by the NASD and other regulatory bodies and ultimately could require the firm's
liquidation. The Uniform Net Capital Rule prohibits payments of dividends,
redemption of stock, the prepayment of subordinated indebtedness and the making
of any unsecured advance or loan to a shareholder, employee or affiliate, if the
payment would reduce the firm's net capital below a certain level. If a
broker-dealer engages in underwriting, their net capital requirements will
significantly increase. The SEC and the NASD impose rules that require
notification when net capital falls below certain predefined criteria, dictate
the ratio of debt to equity in the regulatory capital composition of a
broker-dealer, and constrain the ability of a broker-dealer to expand its
business under certain circumstances.

         The Uniform Net Capital Rule and NASD rules require prior notice to the
SEC and the NASD for certain withdrawals of capital and also provide that the
SEC may restrict for up to 20 business days any withdrawal of equity capital, or
unsecured loans or advances to shareholders, employees or affiliates if the
capital withdrawal, together with all other net capital withdrawals during a
30-day period, exceeds 30% of excess net capital and the SEC concludes that the
capital withdrawal may be detrimental to the financial integrity of the
broker-dealer.

         In addition, the Uniform Net Capital Rule provides that the total
outstanding principal amount of a broker-dealer's indebtedness under certain
subordination agreements, the proceeds of which are included in its net capital,
may not exceed 70% of the sum of the outstanding principal amount of all
subordinated indebtedness included in net capital, par or stated value of
capital stock, paid in capital in excess of par, retained earnings and other
capital accounts for a period in excess of 90 days. A change in the Uniform Net
Capital Rule, the imposition of new rules or any unusually large charge against
net capital could limit those parts of our operations that require the intensive
use of capital and also could restrict our ability to pay dividends, repay debt
and repurchase shares of our outstanding stock. As of December 31, 2004, the
minimum amount of net capital required to be maintained by Sagient Securities
was $5,000.

Application of Laws and Rules to Internet Business and Other Online Services

         Due to the increasing popularity and use of the Internet and other
online services, various regulatory authorities are considering laws and/or
regulations with respect to the Internet or other online services covering
issues such as user privacy, pricing, content copyrights, and quality of
services. In addition, the growth and development of the market for online
commerce may prompt more stringent consumer protection laws that may impose
additional burdens on those companies conducting business online. When the
Securities Act of 1933, as amended ("Securities Act"), which governs the offer
and sale of securities, and the Securities Exchange Act of 1934, which governs,
among other things, the operation of the securities markets and broker-dealers,
were enacted, such acts did not contemplate the conduct of a securities business

                                       7
<PAGE>

through the Internet and other online services. The recent increase in the
number of complaints by online traders could lead to more stringent regulations
of online trading firms and their practices by the SEC, NASD and other
regulatory agencies. Although the SEC, in releases and no-action letters, has
provided guidance on various issues related to the offer and sale of securities
and the conduct of a securities business through the Internet, the application
of the laws to the conduct of a securities business through the Internet
continues to evolve. Furthermore, the applicability to the Internet and other
online services of existing laws in various jurisdictions governing issues such
as property ownership, sales and other taxes and personal privacy is uncertain
and may take years to resolve. Uncertainty regarding these issues may adversely
affect the viability and profitability of our business. As our research services
are available over the Internet in multiple jurisdictions, and as we have
numerous clients residing in these jurisdictions, these jurisdictions may claim
that the Company is required to qualify to do business as a foreign corporation
in each such jurisdiction. Failure to qualify as an out-of-state or foreign
corporation in a jurisdiction where it is required to do so could subject us to
taxes and penalties for the failure to qualify.

Intellectual Property
---------------------

         We use a combination of trademark, copyright and trade secret laws to
protect our proprietary intellectual property.

         In January 2004, we filed trademark applications with the United States
Patent and Trademark Office ("USPTO") under International Classes 35, 36 and 42
for SAGIENT RESEARCH (TM).

         There can be no assurance, however, that the Company will be able to
effectively obtain rights to the trademarks or inventions covered by its
trademark and patent applications. Moreover, no assurance can be given that
others will not assert rights in, or ownership of, in the intellectual property
rights of the Company or that the Company will be able to successfully resolve
such conflicts. The failure of the Company to protect such rights from unlawful
and improper appropriation may have a material adverse effect on the Company's
business and financial condition.

Credit Facilities
-----------------

         On June 12, 2003 the Company entered into a promissory note agreement
with Bank of America, providing a $100,000 revolving credit line made available
to the Company through June 10, 2006. During this initial period, the Company is
obligated to pay interest only, based on the outstanding principal balance, on a
monthly basis. The interest rate on the note is variable and is calculated based
on the published Wall Street Journal prime rate listing plus 4.5%. As of
December 31, 2004 the interest rate on the note was 9.75% and the outstanding
principal balance under the credit line was $100,000.

Convertible Debentures
----------------------

         On December 17, 2001, the Company issued convertible debentures in the
aggregate principal amount of $1,600,000 and warrants to purchase 160,000 shares
of the Company's common stock. These debentures had a maturity date of December
17, 2003, and bore interest at a rate of 10% per annum, which was due and
payable on the last day of each calendar quarter until they were paid in full or
converted into shares of the Company's common stock.

         At issuance, proceeds from the debentures were allocated to the
warrants based on the fair value of the warrants using a Black Scholes valuation
model totaling $259,182. In addition, a discount of $541,536 was applied to
account for the beneficial conversion feature at the closing date of December
17, 2001.

                                       8
<PAGE>

         In February 2003, the Company and the debenture holders restructured
certain terms and provisions of the convertible debentures. In connection with
the debt restructuring, the Company was relieved of $137,844 in liquidated
damages previously accrued. The restructuring of the convertible debt has been
accounted for as a troubled debt restructuring and, accordingly, no gain was
recognized. At December 31, 2004, the restructured convertible debt principal
totaled $1,363,736, all of which is due within one year and is classified as a
current liability. Following is a summary of primary terms of the restructured
agreements:

$1,250,000 Original Principal Amount Note

         The original debenture was amended pursuant to which the principal
balance was changed to $1,425,000. The amended principal balance includes the
original principal amount plus accrued and unpaid liquidated damages and
interest of $150,000 and $25,000, respectively. The remaining balance of accrued
interest at February 28, 2003, totaling $26,736, was paid by the Company and
$125,000 of accrued liquidated damages were waived by the debenture holder.

         The debenture matures on December 28, 2005 and bears interest at an
annual rate of 14%. The debenture requires fixed monthly payments of principal
and interest beginning on March 28, 2003 of $25,000 for the first five (5)
months, $50,000 thereafter through November 28, 2005 and a final payment due
December 28, 2005 in the amount of $271,100. The outstanding principal balance
may be converted into shares of the Company's common stock at the option of the
holder based on a fixed conversion price of $0.20 per share, and the warrant to
purchase 125,000 shares of the Company's common stock that were included in the
original debenture at a fixed exercise price of $0.086 for the term of the
warrants, which expire December 17, 2006. In addition, the debenture holder
agreed to waive all registration requirements with respect to the convertible
debenture, warrants and shares underlying the warrants.

         In February 2003, the debenture holder agreed to defer scheduled
monthly principal and interest payments for the period October 28, 2003 through
December 28, 2003, and to add the deferred payments to the amount due with the
final payment on December 28, 2005. In 2004 the debenture holder agreed to defer
scheduled monthly principal and interest payments for the period April 28, 2004
through December 28, 2004, and to add the deferred payments to the amount due at
maturity. As of March 21, 2005, all payments due have been paid.

$350,000 Original Principal Amount Note

         In February 2003 the original debenture was amended so that the
principal balance was reduced to $155,000. The amended principal balance
includes the original principal amount, less the partial principal payment in
November 2002, of $215,686 plus accrued and unpaid liquidated damages and
interest of $16,656 and $4,030, respectively. The debenture holder waived
accrued liquidated damages in the amount of $12,844. The debenture was scheduled
to mature on February 28, 2005 and bears interest at an annual rate of 14%. On
March 1, 2005 the debenture holder extended the maturity date to August 31,
2005. Payment of interest is required quarterly, beginning March 30, 2003 and
the principal balance is payable upon the maturity date.

         The outstanding principal balance can be converted into shares of the
Company's common stock at the option of the holder based on a fixed conversion
price of $0.20 per share, and the warrant to purchase 35,000 shares of the
Company's common stock that were included in the original debenture have a fixed
exercise price of $0.086 for the term of the warrants. In addition, the
debenture holder agreed to waive all registration requirements with respect to
the convertible debenture, warrants and shares underlying the warrants. In July
2004, the debenture holder exercised 35,000 warrants via the cashless exercise

                                       9
<PAGE>

provision provided in the warrant. The net effect is the exchange of 35,000
warrants for 22,960 shares of common stock.

Employees
---------

As of March 14, 2005 we currently employ 17 persons full-time, and 1 part-time.
Of these employees, 4 are in corporate management and administration, 4 are in
technology operations, 3 are in sales and marketing and 7 are research analysts.
Our staff includes 5 licensed brokers with the NASD. Our NASD registered
representatives are required to take examinations administered by the NASD and
state authorities to be qualified to transact business, and are required to
enter into agreements with us obligating them, among other things, to adhere to
industry rules and regulations, our supervisory procedures and not to solicit
customers in the event of termination of employment. None of our employees are
covered by collective bargaining agreements and we believe that our relationship
with our employees is good. Any future increase in the number of employees will
depend upon growth of our business.

Risk Factors
------------

         In addition to other information in this Annual Report on Form 10-KSB,
the following important factors should be carefully considered in evaluating the
Company and its business because such factors currently have a significant
impact on the Company's business, prospects, financial condition and results of
operations.

Our Financial Statements Include A Going Concern Opinion From Our Outside
Auditors.

         The Company received a going concern opinion on its financial
statements for fiscal years ended December 31, 2004, and 2003. Our current
liabilities exceed our current assets, and our auditors have stated that due to
our lack of profitability and our negative working capital, there is
"substantial doubt" about our ability to continue as a going concern. The going
concern opinion from our auditors may limit our ability to access certain types
of financing, or may prevent us from obtaining financing on acceptable terms.

We Have Incurred Net Losses and Accumulated Deficit to Date.

         We were formed in 1999 for the purpose of developing a technology
oriented financial services firm that is focused on serving middle market public
companies and institutional investors. Since we commenced our business
operations in 2000, we have a very limited operating history. For the years
ended December 31, 2004 and 2003, the Company had net losses of $871,232 and
$1,459,736, respectively. As of December 31, 2004, our accumulated deficit
totaled $32,013,656. Like any relatively new business enterprise operating in a
specialized and intensely competitive market, we are subject to many business
risks. There can be no assurance that we will successfully implement our
business plan in a timely or effective manner. There can be no assurance that
the Company will not continue to incur net losses in the future or that it will
be able to operate profitably.

         To achieve and sustain profitability, we must accomplish numerous
objectives, including:

               o   substantially increase the number of paying customers;
               o   improve operating margins; and
               o   diversify and expand product offerings.

         We cannot assure you that we will be able to achieve these objectives.

                                       10
<PAGE>

We May Need Additional Capital, and We Cannot Be Sure That Additional Financing
Will Be Available.

         Historically, we have funded our operating losses and capital
expenditures through proceeds from private equity and debt financings. Although
we currently anticipate that our available funds and cash flow from operations
will be sufficient to meet our cash needs for the foreseeable future, we may
require additional financing. Our ability to obtain financing will depend, among
other things, on our development efforts, business plans, operating performance
and condition of the capital markets at the time we seek financing. We cannot
assure you that additional financing will be available to us on favorable terms
when required, or at all. If we raise additional funds through the issuance of
equity, equity-linked or debt securities, those securities may have rights,
preferences or privileges senior to the rights of our common stock, and our
stockholders may experience dilution.

Our Revenues May be Insufficient to Fund Our Operations and We May Need
Additional Financing

         We believe that our anticipated cash flow from operations could be
adequate to fund our operations for the next fiscal year. There can be no
assurance, however, that we will not require additional financing prior to or
after such time. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. If adequate funds are
not available, the Company may be required to delay, scale back or eliminate its
operational plans. Our inability to obtain additional financing could have a
material adverse effect on the Company's business, financial condition and
results of operations.

The Market For Research Services Is Dependent on Stock Market Conditions and
Other Factors Outside of Our Control.

         The market for research services has fluctuated significantly over the
last several years, and in large part is tied to stock market performance and
overall economic conditions. Subscriptions for our products are generally paid
for out of research budgets of the mutual fund, hedge fund or other financial
services clients. These budgets can be negatively impacted by several factors
including stock market performance, performance of specfic funds under
management, economic conditions and uncertainties related to world events such
as military actions or terrorist threats/attacks. As a result, fund managers may
delay their purchasing of new independent research or cancel existing
subscriptions in which case our business, financial condition and results of
operations may be materially and adversely affected.

We Have Significant Fixed Operating Costs, Which May Be Difficult To Adjust In
Response To Unanticipated Fluctuations In Revenues.

         A high percentage of our operating expenses, particularly personnel,
rent and depreciation, are generally fixed. As a result, an unanticipated
decrease in subscriptions sales or an increase in subscription cancellations may
cause significant variations in operating results and could have a material
adverse effect on our business, financial condition and results of operations.

We Have A Limited Number Of Products And We May Not Be Able To Develop New
Products Or Enhance Existing Products On A Timely Basis.

         We market and distribute a small number of research products. We expect
that revenues from these products will continue to account for the majority of
our total revenues. To be competitive, we must develop and introduce on a timely
basis new products and product enhancements which meet the needs of our
customers. Declines in demand for these products, whether as a result of
competition, technological change or otherwise, or price reductions would have a
material adverse effect on the Company's operating results.

                                       11
<PAGE>

Our Business Could Be Adversely Affected If Our Products Fail To Perform
Properly.

         Our advanced technology platforms and our research products are complex
and may contain undetected errors, or bugs, which result in product failures, or
otherwise fail to perform in accordance with customer expectations. Our products
may be particularly susceptible to bugs or performance degradation because of
the emerging nature of our technology. Platform and/or product performance
problems could result in loss of or delay in revenue, failure to achieve market
acceptance, or injury to our reputation, any of which could have a material
adverse effect on our business, operating results and financial condition.

We Have A Limited Operating History.  As A Result, You May Have Difficulty
Evaluating Our Business And Prospects.

         We have a limited operating history. We began our development
activities in March 1999, and only commenced our financial data services in
December 1999. Furthermore, since inception in 1999, our business model and
strategy has gone through a series of significant changes. Our business and
prospects must be considered in light of the risks, expenses, and difficulties
frequently encountered by companies in the early stages of development. These
risks are particularly severe among companies in new and rapidly evolving
markets such as online business development services and those in regulated
industries such as the securities industry. It may be difficult or impossible to
accurately forecast our operating results and evaluate our business and
prospects based on our historical results.

Our Business May Be Adversely Affected By Changes In Regulations Governing
Investment Research Products.

         In 2002, federal and state regulators agreed to a settlement with major
Wall Street investment banks that required them to, among other things, pay $1.4
billion in settlement costs and to restructure their research departments to
avoid conflicts of interest between research and investment banking personnel.
While there is no indication that any further action may be taken by federal
and/or state authorities, any regulatory changes in the method that
institutional investment research is prepared, formulated, marketed, or
delivered may adversely affect our business.

Our Business May Be Adversely Affected By Changes In Regulations Governing Soft
Dollar Payments For Research Products.

         Recent proposals by the SEC and certain industry trade groups have
proposed a change or outright ban to the use of "soft-dollars" by mutual funds
and hedge funds to pay for third party independent research. These funds use
"soft-dollars" by enabling their primary brokerage firms to pay research and
research-related invoices on their behalf in exchange for directing trading
commissions to those brokerage firms. While the extent of future regulatory
changes, if any, with respect to "soft dollar" arrangements is uncertain, should
the regulations governing the use of "soft dollars" be dramatically changed or
completely banned, the Company's ability to market and receive payment for its
research services may be adversely impacted. As a result, the Company business,
results of operations, and prospects could be materially and adversely affected.

                                       12
<PAGE>

If Our Efforts To Attract Customers Are Not Successful, Our Revenue Growth Will
Be Adversely Affected.

         We must continue to attract and retain customers. To succeed, we must
continue to attract a large number of customers who have traditionally used
alternative suppliers of research products and/or brokerage services. Our
ability to attract and retain customers will depend in part on our ability to
consistently provide our customers with unique and proprietary research
services. If customers do not perceive our services to be of high quality, or if
we introduce new services or products that are not favorably received by them,
we may not be able to attract or retain customers. If our efforts to satisfy our
existing customers are not successful, we may not be able to attract new
customers, and as a result, our revenue growth will be adversely affected.

Increases In The Cost Of Delivering Research Products Would Adversely Affect Our
Gross Margins And Marketing Expenses.

         We maintain marketing relationships with a number of independent
research providers. Those relationships provide for a fixed payment amount to
the research provider for each research product sold and collected by the
Company. The payment amounts vary by research product and provider, but are
generally dictated by the overall market rates of similar products. Increases in
our cost of acquiring and customizing research products will adversely affect
our gross margins if we are unable to raise the prices charged to our customers
to offset the increase.

If We Do Not Correctly Anticipate Our Short And Long-Term Needs For Research
Products, Our Customer Satisfaction And Results Of Operations May Be Affected
Adversely.

         We may not develop or acquire the type, manner and form of research
products to meet the demands of our customers. If we do not accurately forecast
customer demand for new research products, our customer satisfaction and
operating results will be harmed. If we underestimate the need for particular
research products, our customers may become dissatisfied and terminate their
subscriptions with us.

The Competition We Face From Both Established And Recently Formed Firms May
Adversely Affect Our Revenue And Profitability. We Also Face Competition From
Firms That Are Not Currently In Our Market But Could Quickly And Easily Enter
Our Market.

         We encounter intense competition in all aspects of our business, and we
expect this competition to increase. For example, we face competition from
financial service firms of all sizes. We have experienced intense price
competition in all areas of our business. We believe that we may experience
pricing pressures in these areas in the future as some of our competitors seek
to obtain market share by reducing prices. Established professional service and
financial firms could leverage their existing and future relationships with
startups, expertise, and established reputations to quickly enter our market,
thereby reducing the demand for, or the prices of, our services. If we are
unable to compete effectively, the quality of the companies applying to us for
assistance may be reduced. Many of our competitors have longer operating
histories and significantly greater financial, technical, and marketing
resources than us. In addition, many of these competitors offer a wider range of
services and financial products than we do. Many current and potential
competitors also have greater name recognition and more extensive customer bases
that could be used to accelerate their competitive activity. Moreover, current
and potential competitors have established and may establish future cooperative
relationships among themselves and with third parties to enhance their products
and services in this space. Consequently, new competitors or alliances may
emerge and rapidly acquire significant market share. We cannot assure you that

                                       13
<PAGE>

we will be able to compete effectively with current or future competitors or
that the competitive pressures faced by us will not harm our business.

Variations In Our Quarterly Operating Results Could Cause Our Stock Price To
Fluctuate.

         The timing of our revenue depends on a number of factors that are
outside of our control. To the extent that revenues are delayed, we may fail to
meet the quarterly expectations of stock market analysts or investors.

If We Become Subject To Liability For The Research Products That We Deliver, Our
Results Of Operations Would Be Affected Adversely.

         As a seller of research products, we face potential liability for
libel, negligence, securities fraud, copyright, patent or trademark infringement
or other claims based on the nature and content of materials that we publish or
distribute. If we become liable for claims, our business may suffer as a result
of costs associated with litigation to defend these claims and possible damage
awards. Costs associated with defending any such action, or any potential damage
awards related to such claims, will have an adverse affect on our financial
condition and results of operations.

Our Directors And Executive Officers Control Approximately 70% Of Our Common
Stock And May Have Interests Differing From Those Of Other Stockholders.

         As of March 14, 2005, our directors and executive officers own
approximately 70% of our outstanding common stock. These directors and executive
officers, if acting together, would be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions, including mergers,
consolidations and the sale of substantially all of our assets. This control
could have the effect of delaying or preventing a third party from acquiring or
merging with us, which could hinder your ability to receive a premium for your
shares.

If We Do Not Continue To Develop And Enhance Our Products And Services In A
Timely Manner, Our Business May Be Harmed.

         Our future success will depend on our ability to develop and enhance
our products and services. We operate in a very competitive industry in which
the ability to develop and deliver advanced services through the Internet and
other channels is a key competitive factor. There are significant risks in the
development of new or enhanced services, including the risks that we will be
unable to:

      o   effectively use new technologies;
      o   adapt our services to emerging industry or regulatory standards; or
      o   market new or enhanced services.

         If we are unable to develop and introduce new or enhanced products and
services quickly enough to respond to market or customer requirements or to
comply with emerging industry standards, or if these services do not achieve
market acceptance, our business could be seriously harmed.

                                       14
<PAGE>

Internet And Internal Computer System Failures Or Compromises Of Our Systems Or
Security Could Damage Our Reputation And Harm Our Business.

         A significant portion of our business is conducted through the
Internet. We could experience future system failures and degradations. We cannot
assure you that we will be able to prevent an extended systems failure if any of
the following events occurs:

      o   human error;
      o   subsystem, component, or software failure;
      o   a power or telecommunications failure;
      o   an earthquake, fire, or other natural disaster;
      o   hacker attacks or other intentional acts of vandalism; or
      o   an act of God or war.

         Any such systems failure that interrupts our operations could seriously
harm our business. The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic. Our
future success will depend upon the development and maintenance of the
Internet's infrastructure to cope with this increased traffic. This will require
a reliable network backbone with the necessary speed, data capacity, and
security, and the timely development of complementary products, such as
high-speed modems, for providing reliable Internet access and services. The
secure transmission of confidential information over public networks is a
critical element of our operations. We rely on encryption and authentication
technology to provide the security and authentication necessary to effect secure
transmission of confidential information over the Internet. To the best of our
knowledge, to date, we have not experienced any security breaches in the
transmission of confidential information. Moreover, we continually evaluate
advanced encryption technology to ensure the continued integrity of our systems.
However, we cannot assure you that advances in computer capabilities, new
discoveries in the field of cryptography or other events or developments will
not result in a compromise of the technology or other algorithms used by us and
our vendors to protect client transactions and other data. Any compromise of our
systems or security could harm our business.

There Are Risks Associated With Our Stock Trading On The NASD OTC Bulletin Board
Rather Than A National Exchange.

         There are significant consequences associated with our stock trading on
the NASD OTC Bulletin Board rather than on a national exchange. The effects of
not being able to list our securities on a national exchange include:

      o   Limited release of the market prices of our securities;
      o   Limited news coverage of us;
      o   Limited interest by investors in our securities;
      o   Volatility of our stock price due to low trading volume;
      o   Increased difficulty in selling our securities in certain states due
          to "blue sky" restrictions; and
      o   Limited ability to issue additional securities or to secure additional
          financing.

We Depend On A Limited Number Of Key Personnel Who Would Be Difficult To
Replace.

           Our success depends significantly on the continued services of our
senior management, especially Brian M. Overstreet, our company's founder, Chief
Executive Officer and President. Losing Mr. Overstreet or any of our Company's
other key executives, including Robert Kyle, our company's co-founder, Executive

                                       15
<PAGE>

Vice President, General Counsel and Secretary, or Henry Duong, our Company's
Chief Operating Officer could seriously harm our business. We cannot assure you
that we will be able to retain our key executives or that we would be able to
replace any of our key executives if we were to lose their services for any
reason. Competition for these executives is intense. We have employed many of
our key executives for a long period of time. If we had to replace any of these
key executives, we would not be able to replace the significant amount of
knowledge that these key executives have about our operations.

Our Growth Will Be Limited If We Are Unable To Attract And Retain Qualified
Personnel.

         Our future success depends in significant part on our ability to retain
our key technical staff, business development managers, and management and
marketing personnel. In addition, we must continue to attract and retain
qualified professionals to perform services for our existing and future clients.
Competition for highly qualified technical, business development, and management
and marketing personnel is intense. We have in the past experienced difficulty
attracting new personnel. We may not be able to hire the necessary personnel to
implement our business strategy, or we may need to pay higher compensation for
employees than we currently expect. We cannot assure you that we will succeed in
attracting and retaining the personnel we need to grow.

If We Cannot Adequately Protect Our Intellectual Property, Our Competitiveness
May Be Harmed.

         Our success and ability to compete depends to a significant degree on
our intellectual property. We rely on copyright and trademark law, as well as
trade secrets and confidentiality arrangements, to protect our intellectual
property. Our competitors or others may adopt product or service names similar
to our trademarks thereby impeding our ability to build brand identity and
possibly leading to client confusion. Our inability to adequately protect our
intellectual property could seriously harm our business. Policing unauthorized
use of our intellectual property is made especially difficult by the global
nature of the Internet and difficulty in controlling the ultimate destination or
security of software or other data transmitted on it. The laws of other
countries may afford us little or no effective protection for our intellectual
property. We cannot assure you that the steps we take will prevent
misappropriation of our intellectual property or that agreements entered into
for that purpose will be enforceable. In addition, litigation may be necessary
in the future to:

      o   enforce our intellectual property rights;
      o   determine the validity and scope of the proprietary rights of others;
          or
      o   defend against claims of infringement or invalidity.

         Such litigation, whether successful or unsuccessful, could result in
substantial costs and diversions of resources, either of which could seriously
harm our business.

We, Through Our Broker-Dealer Subsidiary, Are Subject To Regulation By The SEC,
State Regulators, And The NASD.

         The securities industry in the United States is subject to regulation
under both federal and state laws. The SEC, the NASD, other self-regulatory
organizations and state securities commissions can censure, fine, issue
cease-and-desist orders, or suspend or expel a broker-dealer or any of its
officers or employees. If any of these events occur to our broker-dealer
subsidiary, our business and reputation could be seriously harmed.
Broker-dealers are subject to regulations covering many aspects of the
securities business, including:

                                       16
<PAGE>

      o   sales methods;
      o   trade practices among broker-dealers; - use and safekeeping of
          customers' funds and securities;
      o   capital structure; - record keeping;
      o   conduct of directors, officers, and employees; and
      o   supervision of employees, particularly those in branch offices.

         Our mode of operation and profitability may be directly affected by:

      o   additional legislation;
      o   net capital requirements;
      o   changes in rules promulgated by the SEC, state regulators, the NASD,
          and other self-regulatory organizations; and
      o   changes in the interpretation or enforcement of existing laws and
          rules.

         Our ability to comply with applicable laws and rules will depend on our
establishment and maintenance of an effective compliance system, as well as our
ability to attract and retain qualified compliance personnel. The principal
purpose of regulation and discipline of broker-dealers is the protection of
customers and the securities markets, rather than protection of creditors and
stockholders of broker-dealers. If we are unable to comply with applicable laws
and rules, our business could be seriously harmed.

We May Be Liable For Information Retrieved From Our Website.

         Users of our website may access content on our website and they may
download content and subsequently transmit this content to others over the
Internet or other means. This could result in claims against us based on a
variety of theories, including defamation, obscenity, negligence, copyright,
trademark infringement, or the wrongful actions of third parties. Other actions
may be brought based on the nature, publication, and distribution of our content
or based on errors or false or misleading information provided on our website.
Claims have been brought against online services in the past, sometimes
successfully, based on the content of material contained on their websites. We
are not aware of any such claims threatened against us. However, claims brought
by users of our website could be material. Even if these claims do not result in
liability, we could incur significant costs in investigating and defending
against these claims. The imposition of potential liability for information
carried on or disseminated through our systems could require us to implement
measures to reduce our exposure to liability. Those measures may require the
expenditure of substantial resources and limit the attractiveness of our
services. Additionally, we have limited insurance coverage, which may not cover
all such claims to which we are exposed.

Substantial Dilution May Occur From The Exercise of Outstanding Options and
Warrants or the Conversion of Convertible Debentures.

As of December 31, 2004 the Company had outstanding (i) options to purchase an
aggregate of 2,795,000 shares of Common Stock at exercise prices ranging from
$0.055 to $2.60 and (ii) 628,906 warrants outstanding exercisable for shares of
Common Stock of exercise prices ranging from $0.086 to $2.30. In addition, the
Company has 570,000 performance warrants outstanding, each of which is
exercisable at $.001 per share, upon the satisfaction of certain performance
targets. Holders of such options and warrants are likely to exercise them when,
in all likelihood, the Company could obtain additional capital on terms more
favorable than those provided by the options and warrants. Further, while its
options and warrants are outstanding, they may adversely affect the terms on
which the Company could obtain additional capital. Moreover, the Company

                                       17
<PAGE>

borrowed $1.6 million in December 2001 from certain institutional investors and
issued convertible debentures and warrants in connection therewith. Based on the
restructuring of these debentures completed in February 2003, the outstanding
principal balance of these debentures of $1,363,763 at December 31, 2004 was
convertible in to 6,818,813 shares of the Company's common stock. See "Business
- Convertible Debentures."

There is No Assurance That An Active Public Trading Market Will Develop.

         There has been an extremely limited public trading market for the
Company's Common Stock. There can be no assurances that a public trading market
for the Common Stock will develop or that a public trading market, if developed,
will be sustained. If for any reason a public trading market does not develop,
purchasers of the shares of Common Stock may have difficulty in selling their
securities should they desire to do so.

"Penny Stock" Regulations May Impose Certain Restrictions On The Marketability
of Our Securities.

         The Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share, subject to certain
exceptions. The Company's Common Stock is presently subject to these regulations
which impose additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
investors (generally those with assets in excess of $1,000,000 or annual income
exceeding $200,000, or $300,000 together with their spouse). For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchase of such securities and have received the
purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the Commission relating to the penny stock market. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell the Company's securities and may
negatively affect the ability of purchasers of the Company's shares of Common
Stock to sell such securities.

We May Not Be Able To Comply In A Timely Manner With All Of The Recently Enacted
Or Proposed Corporate Governance Provisions.

         Beginning with the enactment of the Sarbanes-Oxley Act of 2002 in July
2002, a significant number of new corporate governance requirements have been
adopted or proposed. Each publicly traded company is required to disclose
whether a member of their Audit Committee satisfies certain criteria as a
"financial expert." We currently do not have an Audit Committee member that
satisfies this requirement and, we may not be able to satisfy this, or other,
corporate governance requirements at all times in the future, and our failure to
do so could cause the Securities and Exchange Commission or The Nasdaq stock
market to take disciplinary actions against us, including an action to delist
our stock from the OTC Bulletin Board or any other exchange or electronic
trading system where our shares of common stock trade. Should this occur, the
price of our shares of common stock could most likely decline and stockholders
may have difficulty selling shares of the Company's common stock.

                                       18
<PAGE>

Item 2.  DESCRIPTION OF PROPERTY.

         Our corporate headquarters and only office is located at 3655 Nobel
Drive, Suite 540, San Diego, CA, 92122, where we lease approximately 4,400
square feet of office space at a rental of $133,437 per annum, under a lease
which expires in December 2007. We consider the facilities of our Company to be
reasonably insured and adequate for the foreseeable needs of our Company.

Item 3.  LEGAL PROCEEDINGS.

         There are no material legal proceedings pending or, to the Company's
knowledge, threatened against the Company.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

         No matters were submitted to a vote of the holders of the Company's
common stock during the last fiscal quarter of our fiscal year ended December
31, 2004.

                                       19
<PAGE>

                                     PART II
                                     -------

Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's shares of common stock trade on the OTC Bulletin Board.
The following table sets forth the range of high and low closing prices for the
Company's Common Stock for the two-year period ended December 31, 2004 as
reported by the OTC Bulletin Board. The quotes represent inter-dealer prices
without adjustment or mark-ups, markdowns or commissions and may not necessarily
represent actual transactions. The trading volume of the Company's securities
fluctuates and may be limited during certain periods. As a result, the liquidity
of an investment in the Company's securities may be adversely affected.

                                  COMMON STOCK

                       High       Low                             High      Low
                       ----       ---                             ----      ---
2004                                       2003
----                                       ----
Quarter ended                              Quarter ended
March 31, 2004         $0.38     $0.13     March 31, 2003         $0.11    $0.07

Quarter ended                              Quarter ended
June 30, 2004          $0.40     $0.27     June 30, 2003          $0.08    $0.05

Quarter ended                              Quarter ended
September 30, 2004     $0.30     $0.06     September 30, 2003     $0.16    $0.06

Quarter ended                              Quarter ended
December 31, 2004      $0.09     $0.05     December 31, 2003      $0.19    $0.08

         On March 14, 2005, the closing price as reported by the OTC Bulletin
Board was $0.07 for each share of common stock. As of March 14, 2005, there were
23,510,796 shares of Common Stock outstanding, held of record by 508 record
holders and approximately 702 beneficial owners.

Equity Compensation Plan Information

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Plan category            Number of Securities to     Weighted-average        Number of securities remaining
                         be issued upon exercise     exercise price of       available for future issuance under
                         of outstanding options,     outstanding options,    equity compensation plans (excluding
                         warrants and rights         warrants and rights     securities reflected in column (a)
                         -------------------         -------------------     ----------------------------------
-----------------------------------------------------------------------------------------------------------------
                                  (a)                        (b)                             (c)
-----------------------------------------------------------------------------------------------------------------
<S>                             <C>                         <C>                            <C>
Equity compensation
plans approved by
security holders.........       2,795,000                   0.49                           1,205,000
-----------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by
security holders.........              --                     --                                  --
-----------------------------------------------------------------------------------------------------------------
Total....................       2,795,000                   0.49                           1,205,000
-----------------------------------------------------------------------------------------------------------------
</TABLE>

                                       20
<PAGE>

Recent Sales of Unregistered Securities

         During the year ended December 31, 2004, the Company issued the
following equity securities that were not registered under the Securities Act of
1933, as amended (the "Act").

         During the three months ended March 31, 2004, an aggregate of 285,000
shares of the Company's common stock valued at $85,850 were issued in connection
with services provided to the Company.

         In May 2004, 12,500 shares of common stock were issued in connection
with the exercise of stock options by a former employee.

         In July 2004, 22,960 shares of common stock were issued in connection
with the exercise of 35,000 warrants by a debenture holder.

         In December 2004, 400,000 shares of common stock were issued to an
officer of the Company as compensation for his outstanding performance.

         Each of the foregoing shares was issued pursuant to Section 4(2) of the
Act. See Note "K" to the Company's Financial Statements.


Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The following discussion should be read in conjunction with the
financial statements and notes thereto of the Company. Such financial statements
and information have been prepared to reflect the Company's financial position
as of December 31, 2004 and 2003.

         Historical results and trends should not be taken as indicative of
future operations, especially in light of the Company's recent restructuring.
Management's statements contained in this report that are not historical facts
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Actual results may differ materially from those
included in the forward-looking statements. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of complying with
those safe harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Company, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project," "prospects" or similar
expressions. The Company's ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Information concerning the
Company and its business, including the risk factors faced by us described in
the "Business" section starting on page 18 could materially affect the Company's
financial results.

GENERAL OVERVIEW

         Sagient Research Systems, Inc. ("Sagient Research" or "Parent" or
"Company") is based in San Diego, California and was incorporated in Delaware in
1999. Sagient Research is a publisher of independent investment research. We
operate our business activities through Sagient Research and through our wholly
owned subsidiary, DP Securities, Inc. d/b/a Sagient Securities ("DPS" or
"Sagient Securities"), a broker-dealer incorporated in the State of California.
We develop, produce and sell proprietary research products to mutual funds,
hedge funds and investment banks. Our business strategy is to leverage our

                                       21
<PAGE>

development technology and marketing expertise to be a leading provider of
independent research to the financial services and institutional investment
communities.

         During 2003 we also operated through our wholly owned subsidiary PCS
Securities, Inc. ("PCS Securities" or "PCS"), a broker-dealer incorporated in
the State of Washington. PCS Securities was closed in 2003, and accordingly, all
activities related to PCS Securities have been accounted for as discontinued
operations.

Critical Accounting Policies

         Our discussion and analysis of our financial condition and results of
operations is based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these consolidated financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent liabilities.

         On an on-going basis, we evaluate our estimates, including those
related to credit risk on receivables, recoverability of long lived assets,
identified intangibles, goodwill and the valuation of deferred income taxes. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

Revenue Recognition
-------------------

         Research services revenue represents revenue from providing individual
custom reports or reports on a monthly or annual subscription basis. Revenue
from custom reports is recognized when the report is provided, and revenue from
subscriptions is recognized ratably over the contractual period. Research
services revenue also includes revenue from a licensing agreement to distribute
data, which is recognized ratably over the term of the contract. Deferred
revenue on the consolidated balance sheets consists of subscription and
licensing revenues that will be recognized in future periods.

         Consulting services revenue represents fees from consulting services
performed by DPBT, LLC, a joint venture formed in September 2002 between the
Company and Btech Investor, Inc. Through the joint venture, DPBT, LLC developed
and introduced BiotechTracker, a proprietary web-based research service, focused
on research, analysis and valuation of the drug development pipelines of
biotechnology and pharmaceutical companies. Effective October 31, 2003 the
Company and Btech Investor agreed to dissolve the joint venture and to phase out
the BiotechTracker research service. Subsequent to the dissolution of the joint
venture, the Company used the intellectual property it had developed as part of
the joint venture to launch the BioMedTracker service in January 2004 as a
replacement for BiotechTracker. Consulting fees related to services performed by
DPBT, LLC are based on customer-determined points awarded at the end of each
quarter, and were recognized in the period in which the determination is made
and communicated to DPBT, LLC.

         Other revenue includes computer programming services performed by the
Company. Computer programming services are recognized during the period that
such services are provided.

Identifiable Intangible Assets and Goodwill
-------------------------------------------

         Identifiable intangible assets and goodwill recorded in connection with
acquisitions were accounted for in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 141, Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets.

                                       22
<PAGE>

         In accordance with SFAS No. 142, identifiable intangible assets were
amortized over their estimated useful lives and were evaluated at each balance
sheet date, or earlier if required, for impairment. In accordance with SFAS No.
142, goodwill was not amortized and was evaluated annually for impairment.

         As of December 31, 2002 all goodwill previously recorded in connection
with the acquisitions in 2001 had been written off, and as of March 31, 2003 the
remaining identifiable intangible asset balance of $4,127,702, previously
capitalized in connection with PCS Securities merger, was realized through
discontinued operations in 2003.

RESULTS OF OPERATIONS

         Based on the closing of our PCS Securities subsidiary in 2003, the
consolidated statements of operations presented for 2004 and 2003 has been
segregated to reflect continuing and discontinued operations. As a result, all
revenue and expense activity related to PCS Securities' operations have been
excluded from the results of continuing operations presented herein.

 Year Ended December 31, 2004 compared to the Year Ended December 31, 2003.
 --------------------------------------------------------------------------

Loss From Continuing Operations
                                                     2004           2003
                                                  ----------     ----------
Revenues
  Research services                               $2,769,219     $2,015,848
  Consulting services                                     --         99,000
  Interest and other                                   5,611         11,250
                                                  ----------     ----------
                                                  $2,744,830     $2,126,098
                                                  ==========     ==========

         Research services revenues for 2004 increased by 37% to $2,769,219
compared to $2,015,848 for 2003. The increase in research services revenues is
primarily due to increased sales and marketing efforts. Research services
revenue in 2004 includes $37,500 of revenue recorded in connection with a
licensing agreement to distribute databases entered into during 2004. The
initial term of the agreement runs through September 30, 2007 and according to
the terms of the agreement, the Company anticipates licensing revenues of
$162,500 during 2005, and $200,000 during 2006.

         In 2003 DPBT, LLC generated $99,000 in consulting fees for which there
was no comparable activity in the 2004.

         In 2004 Sagient Research generated computer-programming revenues of
$5,611 compared to $11,250 in 2003.

                                                       2004           2003
                                                    ----------     ----------
Operating Expenses
   Compensation and benefits                        $1,318,787     $1,369,965
   General and administrative                          783,606        767,618
   Product research expenses                           980,546        584,467
   Depreciation                                        247,314        279,038
   Minority interest expense                                --        115,976
                                                    ----------     ----------
                                                    $3,330,253     $3,117,064
                                                    ==========     ==========

                                       23
<PAGE>

Compensation and Benefits

         Compensation and benefits decreased by 4% in 2004 to $1,318,787
compared to $1,369,965 in 2003. This decrease is due primarily to reductions in
salaries and wages resulting in a net cost savings during 2004 of $92,417, and a
decrease in sales commissions of $56,958. Beginning in 2004, commissions were
expensed ratably over the life of the subscription, lowering the overall
expense. Partially offsetting these decreases were increases in bonuses of
$52,015, employee benefits of $20,046 and employer payroll taxes of $15,041
during 2004.

General and Administrative Expenses

         General and administrative expenses decreased by 2% to $783,606 in 2004
compared to $767,618 in 2003. Contributing to the decrease in general and
administrative expenses in 2004 were decreases in legal fees of $69,363,
accounting fees of $33,843, and the cancellation of directors and officer's
liability insurance in March 2003 that resulted in a decrease of $22,171 for
2004. Offsetting these decreases were increases in travel and entertainment
expenses of $29,369, and public/investor relations expenses of $117,683.

Product Research Expenses

         Product research expenses represent costs associated with generating
research services revenues. During 2004 such costs increased by 68% to $980,546
compared to $584,467 in 2003. This increase resulted from a combination of
higher research services revenues in 2004 and a higher percentage of research
products sold from third-party research providers in 2004, which have a higher
cost than research products produced in-house.

Depreciation

         Depreciation expense decreased by 11% to $247,314 in 2004, from
$279,038 in 2003. The decrease is due to certain capitalized computer equipment,
software, and software development assets that became fully depreciated in 2004.

Minority Interest in Subsidiary Net Income

         Minority interest was $115,976 during 2003 and represented income
attributable to minority member's interest in DPBT, LLC. Effective October 31,
2003 the Company and Btech Investor agreed to dissolve the joint venture.

Other Expenses

Interest Expense

         Total interest expense for 2004 decreased by 64% to $230,070 compared
to $642,887 in 2003. All of the 2004 interest expense relates to notes payable,
outstanding credit line balances and finance charges. The comparable interest
expense was $226,486 related to notes payable. Interest expense in 2003 also
included $417,189 of non-cash interest charges related to the amortization of
discounts recorded in connection with the Company's convertible debt (issued
together with warrants) entered into during the fourth quarter of 2001. The
decrease in 2004 interest expense is primarily due to the inclusion in the 2003
total of the non-cash interest charges related to the debt discount that became
fully amortized during 2003.

                                       24
<PAGE>

Loss on Joint Venture

         Net loss for 2004 includes a non-cash expense of $60,739 related to the
write off during the period of the negative capital account balance of the
minority partner in the DPBT, LLC joint venture. There was no comparable
activity in the 2003 period.

Discount on Note Receivable

         Net loss for 2004 includes an expense of $25,000 related to the write
off during the period of a portion of the receivable from related party in
exchange for early payment of the final two installment payments due. There was
no comparable activity in the 2003 period.

Loss From Continuing Operations

         As a result of the revenue and expense items mentioned above, the
Company's net loss from continuing operations decreased 47% to $871,232 in 2004
from $1,633,853 in 2003.

Income (Loss) from Discontinued Operations

         Income from discontinued operations represents the net revenue and
expense activity from PCS Securities and includes the following:

<TABLE>
<CAPTION>
                                                            2004            2003
                                                        ------------    ------------
<S>                                                     <C>             <C>
Revenues
   Commission and other fees                            $         --    $  1,115,463

Expenses
   Independent research expense                                   --         775,817
   Execution and clearing costs                                   --         146,856
   General and administrative expense                             --             420
                                                        ------------    ------------
     Total expenses                                               --         923,093
                                                        ------------    ------------


                                                                  --         192,370

Loss on transfer of assets of discontinued operations             --         (18,253)
                                                        ------------    ------------

Income (loss) from discontinued operations              $         --    $    174,117
                                                        ============    ============
</TABLE>

Revenues - Discontinued Operations

         PCS Securities did not write any new business in 2003, and as such,
revenues recognized for the year ended December 31, 2003 were limited to the
recognition of deferred revenue associated with research subscriptions sold in
2002.

Expenses - Discontinued Operations

         In 2003 PCS Securities generated $775,817 in independent research
expense, $146,856 in execution and clearing costs, and $420 of general and
administrative expenses for which there was no comparable activity in the 2004
as a result of the discontinued operations of PCS Securities.

                                       25
<PAGE>

Loss on Transfer of Assets - Discontinued Operations

         In connection with the Company's agreement to transfer the PCS
trademark and customer list to the former owners of PCS, in exchange for cash,
the relief of liabilities and the surrendering of 10.3 million shares of the
Company's common stock held by these individuals, the Company recorded a loss of
$18,253 on the transfer of assets during 2003. The components of the loss are
summarized below:

Consideration received:
    Cash                                                        $    250,000(a)
    Credit line repayments                                         1,076,556(b)
    Accrued liabilities relieved:
       Accrued compensation payable to related parties             1,271,281(c)
       Accrued research services - net                               398,723(d)
    Surrender and cancellation of common stock                       721,000(e)
    Other                                                            391,889(f)
                                                                ------------
 Total consideration                                               4,109,449

Carrying amount of intangibles transferred                        (4,127,702)(g)
                                                                ------------

Net loss on transfer                                            $    (18,253)
                                                                ============

     (a)  Represents a $250,000 receivable from the former owners of PCS
          Securities over 2 years pursuant to the asset transfer agreement
          ($225,000 of which was received and $25,000 of which was written off
          by the Company during 2004 based on a discount for early payment of
          the final two installments due).
     (b)  Represents funds paid directly to Bear Stearns from the soft dollar
          brokerage firm that is controlled by the former owners.
     (c)  Accrued compensation payable as of December 31, 2002 pursuant to
          respective employment and consulting agreements with the former owners
          of PCS Securities forgiven in connection with the wind-down.
     (d)  Net customer credit balances of the PCS Securities subsidiary assumed
          by the former owners.
     (e)  10.3 million shares of the Company's common stock surrendered by the
          former owners of PCS Securities at fair market value. The fair market
          value of the Company's common stock at the date of the transaction was
          $0.07.
     (f)  Additional net assets and collections realized in connection with
          transaction.
     (g)  Carrying amount of PCS Securities trademark and customer list
          intangibles at date of transaction.

Net Income - Discontinued Operations

         As a result of the revenue and expense items mentioned above, the
Company's net income from discontinued operations was $174,117 for 2003.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

         The Report of Independent Certified Public Accountants and Notes to
Consolidated Financial Statements for the Company's December 31, 2004 audited
financial statements include a "going concern" qualification that states there
is "substantial doubt" about our ability to continue as a going concern due to
the Company's lack of profitability, negative working capital and loss of
revenue associated with the closure, during 2003, of our PCS Securities
subsidiary.

                                       26
<PAGE>

         At December 31, 2004, our current liabilities exceeded our current
assets by $3,333,216, and we had $54,106 of cash and cash equivalents to meet
our immediate short-term liquidity requirements. Management believes that based
on expected increases in research services revenues and expected continued
improvement in operating results, our anticipated cash flow from operations
could be adequate to fund operations for 2005. However, there can be no
assurance that the Company will not require additional financing during 2005, or
if additional financing is required, any such financing will be available to the
Company on acceptable terms, or at all. If adequate funds are not available, the
Company may be required to delay, scale back or eliminate its operational plans,
and it may not be able to stay in business.

FINANCING ACTIVITIES

Credit Facility

         On June 12, 2003 the Company entered into a promissory note agreement
with Bank of America, pursuant to which a $100,000 revolving credit line was
made available to the Company through June 10, 2006. During this period, the
Company is obligated to pay interest only on a monthly basis, based on the
outstanding principal balance. The interest rate on the note is variable and is
calculated based on the published Wall Street Journal prime rate listing plus
4.5%. As of December 31, 2004 the interest rate on the note was 9.75%.

Following this initial period, the outstanding principal balance, together with
interest based on the applicable interest rate, shall be repaid monthly, on a
fully amortized basis, over the remaining term of the note that runs through
June 12, 2010. As of December 31, 2004, the outstanding principal balance under
the credit line was $100,000. The credit line is guaranteed by the United States
Small Business Administration, as well as by the Company's President and CEO.

Convertible Debt

         On December 17, 2001, the Company issued convertible debentures in the
aggregate principal amount of $1,600,000 and warrants to purchase 160,000 shares
of the Company's common stock. These debentures had a maturity date of December
17, 2003, and bore interest at a rate of 10% per annum, which was due and
payable on the last day of each calendar quarter until they were paid in full or
converted into shares of the Company's common stock.

         At issuance, proceeds from the debentures were allocated to the
warrants based on the fair value of the warrants using a Black Scholes valuation
model totaling $259,182. In addition, a discount of $541,536 was applied to
account for the beneficial conversion feature at the closing date of December
17, 2001.

         In February 2003 the Company and the debenture holders restructured
certain terms and provisions of the convertible debentures. In connection with
the debt restructuring, the Company was relieved of $137,844 in liquidated
damages previously accrued. The restructuring of the convertible debt has been
accounted for as a troubled debt restructuring and accordingly, no gain or loss
was recognized. At December 31, 2004 the restructured convertible debt principal
totaled $1,363,736, all of which is due within one year and is classified as a
current liability.

         Following is a summary of primary terms of the restructured agreements:

                                       27
<PAGE>

$1,250,000 Original Principal Amount Note

         The original debenture was amended pursuant to which the principal
balance was changed to $1,425,000. The amended principal balance includes the
original principal amount plus accrued and unpaid liquidated damages and
interest of $150,000 and $25,000, respectively. The remaining balance of accrued
interest at February 28, 2003, totaling $26,736, was paid by the Company and
$125,000 of accrued liquidated damages were waived by the debenture holder.

         The debenture matures on December 28, 2005 and bears interest at an
annual rate of 14%. The debenture requires fixed monthly payments of principal
and interest beginning on March 28, 2003 of $25,000 for the first five (5)
months, $50,000 per month thereafter through November 28, 2005 and a final
payment due December 28, 2005 in the amount of $271,100. The outstanding
principal balance may be converted into shares of the Company's common stock at
the option of the holder based on a fixed conversion price of $0.20 per share,
and the warrant to purchase 125,000 shares of the Company's common stock that
were included in the original debenture at a fixed exercise price of $0.086 for
the term of the warrants, which expire December 17, 2006. In addition, the
debenture holder agreed to waive all registration requirements with respect to
the convertible debenture, warrants and shares underlying the warrants.

         In February 2003, the debenture holder agreed to defer scheduled
monthly principal and interest payments for the period October 28, 2003 through
December 28, 2003, and to add the deferred payments to the amount due with the
final payment on December 28, 2005. In 2004 the debenture holder agreed to defer
scheduled monthly principal and interest payments for the period April 28, 2004
through December 28, 2004, and to add the deferred payments to the amount due at
maturity. As of December 31, 2004 the outstanding principal balance was
$1,208,763 all of which was a current liability. As of March 21, 2005, all
payments due have been paid.

$350,000 Original Principal Amount Note

         In February 2003 the original debenture was amended so that the
principal balance was reduced to $155,000. The amended principal balance
includes the original principal amount, less the partial principal payment that
was $215,686 in November 2002, plus accrued and unpaid liquidated damages and
interest of $16,656 and $4,030, respectively. The debenture holder waived
accrued liquidated damages in the amount of $12,844. The debenture was scheduled
to mature on February 28, 2005 and bears interest at an annual rate of 14%. On
March 1, 2005 the debenture holder extended the maturity date to August 31,
2005. Payment of interest is required quarterly, beginning March 30, 2003 and
the principal balance is payable upon the maturity date.

         The outstanding principal balance may be converted in shares of the
Company's common stock at the option of the holder based on a fixed conversion
price of $0.20 per share, and the warrant to purchase 35,000 shares of the
Company's common stock that were included in the original debenture have a fixed
exercise price of $0.086 for the term of the warrants. In addition, the
debenture holder agreed to waive all registration requirements with respect to
the convertible debenture, warrants and shares underlying the warrants. In July
2004, the debenture holder exercised 35,000 warrants via the cashless exercise
provision provided in the warrant. The net effect is the exchange of 35,000
warrants for 22,960 shares of common stock.

         As of December 31, 2004 the outstanding principal balance was $155,000,
all of which was reflected as a current liability.

                                       28
<PAGE>

Notes Payable - Unrelated Parties

         On November 22, 2001 the Company borrowed $300,000 from an unrelated
party. In connection with the loan, the Company issued a note to the lender,
which is unsecured, bears interest at 15% per annum and was originally due in
April 2002. In addition, the Company issued 150,000 detachable warrants to the
lender for 150,000 shares of the Company's common stock at an exercise price of
$2.30 per share. The warrants are exercisable at the option of the holder and
expire in November 2006. During 2004 the maturity date was extended to July 1,
2005. During 2004 the Company recorded interest expense in connection with this
note totaling $45,000, and as of December 31, 2004 the outstanding principal
balance was $300,000 and total interest payable in connection with these loans
was $97,625.

Notes Payable - Related Parties

Between May 2001 and January 2002 the Company borrowed an aggregate of $187,500
from a company controlled by an officer/stockholder pursuant to unsecured
promissory notes. The Company borrowed an additional $35,000 in June 2004 and
$65,000 in July 2004 from the same company and the Company issued an additional
promissory note to the lender. All of the promissory notes bear interest at an
annual rate of 12% and are due and payable on January 1, 2006. During 2004 the
Company recorded interest expense in connection with these notes totaling
$28,421 and paid interest due of $50,003. As of December 31, 2004, the
outstanding principal balance was $287,500 and total interest payable in
connection with these loans was $4,679.

Contractual Obligations, Commercial Commitments and Off-Balance Sheet
Arrangements

The following summarizes our contractual obligations, commercial commitments and
off-balance sheet arrangements at December 31, 2003, and the effect such
obligations could have on our liquidity and cash flow in future periods:

<TABLE>
<CAPTION>
                                         Amount of Commitment Expiring by Period
                       ------------------------------------------------------------------------
                        Less Than        3-Jan          5-Mar          Over 5
                          1 Year         Years          Years           Years         Total
                       ------------   ------------   ------------   ------------   ------------
<S>                    <C>            <C>            <C>            <C>            <C>
Notes payable          $    587,500   $         --   $         --   $         --   $    587,500
Convertible debt (a)      1,363,763                                                   1,363,763
Lease commitments           140,075        289,041             --             --        429,116
                       ------------   ------------   ------------   ------------   ------------
Total                  $  2,091,338   $    289,041   $         --   $         --   $  2,380,379
                       ============   ============   ============   ============   ============
</TABLE>

(a) Based on restructuring of convertible debt effective February 28, 2003



Recent Accounting Pronouncements

                   In December 2004, the Financial Accounting Standards Board
("FASB") issued SFAS No. 123 (revised 2004) "Share-Based Payment," which
requires companies to recognize in the income statement fair value of stock
options and other equity-based compensation issued to employees.

                                       29
<PAGE>

That cost will be recognized over the period during which an employee is
required to provide services in exchange for the award--the requisite service
period (usually the vesting period). SFAS No. 123R requires the Company to adopt
the new accounting provisions beginning in the first annual reporting period
that begins after December 15, 2005, or for our fiscal year 2006. The Company
has not yet determined the impact of applying the provisions of SFAS No. 123R.
The Company does not believe SFAS No. 123R is likely to have a material effect
on the Company's financial position or results of operations.


Item 7.  FINANCIAL STATEMENTS.

         See Financial Statements following Item 15 of this Annual Report on
Form 10-KSB.


Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

           None

ITEM 8A. Controls and Procedures.

         An evaluation of the Company's disclosure controls and procedures (as
defined in Section 13(a)-14(c) of the Exchange Act) as of December 31, 2004 was
carried out under the supervision and with the participation of the Company's
Chief Executive Officer and Principal Accounting Officer and several other
members of the Company's senior management. The Company's Chief Executive
Officer and Principal Accounting Officer concluded that the Company's disclosure
controls and procedures as currently in effect are effective in ensuring that
the information required to be disclosed by the Company in the reports it files
or submits under the Exchange Act is (i) accumulated and communicated to the
Company's management (including the Chief Executive Officer and Principal
Accounting Officer) in a timely manner, and (ii) recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms. There have been no changes in the Company's
internal control over financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act) that occurred during the quarter ended December 31, 2004, that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

         The Company intends to continually review and evaluate the design and
effectiveness of its disclosure controls and procedures and to improve its
controls and procedures over time and to correct any deficiencies that it may
discover in the future. The goal is to ensure that senior management has timely
access to all material financial and non-financial information concerning the
Company's business. While the Company believes the present design of its
disclosure controls and procedures is effective to achieve its goal, future
events affecting its business may cause the Company to modify its disclosure
controls and procedures.

ITEM 8B. Other Information.

         None

                                       30
<PAGE>

                                    PART III
                                    --------

Item 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

         Incorporated herein by reference to the Company's definitive proxy
statement to be filed pursuant to Regulation 14A under the Securities Exchange
Act of 1934.


Item 10. EXECUTIVE COMPENSATION.

         Incorporated herein by reference to the Company's definitive proxy
statement to be filed pursuant to Regulation 14A under the Securities Exchange
Act of 1934.


Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

         Incorporated herein by reference to the Company's definitive proxy
statement to be filed pursuant to Regulation 14A under the Securities Exchange
Act of 1934.


Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Incorporated herein by reference to the Company's definitive proxy
statement to be filed pursuant to Regulation 14A under the Securities Exchange
Act of 1934.


Item 13. EXHIBITS.

     3.01*     Certificate of Incorporation of the Company.

     3.02*     By-Laws of the Company.

     4.01*     Specimen Certificate for shares of Common Stock.

    10.01*     Employment Agreement between the Company and Brian M. Overstreet,
               as amended.

    10.02*     Employment Agreement between the Company and Robert Kyle.

    10.03*     Securities Purchase Agreement, dated as of December 17, 2001, by
               and between the Company and Global Capital Funding Group, L.P.

    10.04*     Registration Rights Agreement, dated as of December 17, 2001,
               between the Company and Global Capital Funding Group, L.P.

    10.05*     Securities Purchase Agreement, dated as of December 17, 2001, by
               and between the Company and GCA Strategic Investment Fund
               Limited.

                                       31
<PAGE>

    10.06*     Registration Rights Agreement, dated as of December 17, 2001,
               between the Company and GCA Strategic Investment Fund Limited.

    10.07*     Securities Purchase Agreement, dated as of March 6, 2002, by and
               between the Company, and GCA Strategic Investment Fund Limited.

    10.08*     Registration Rights Agreement, dated as of March 6, 2002, by and
               between the Company and GCA Strategic Investment Fund Limited.

    10.09*     2001 Stock Option Plan, as amended.

    10.10*     Agreement, dated as of January 31, 2003, by and among the
               Company, PCS Securities, Inc., Susanne S. Pruitt, Raymond A.
               Hill, III, Brian M. Overstreet, and Institutional Research
               Services, Inc.

    10.11*     Amended convertible debenture agreement dated February 28, 2003
               with GCA Strategic Investment Fund Limited

    10.12*     Amended warrant agreement dated February 28, 2003 with GCA
               Strategic Investment Fund Limited

    10.13*     Amended convertible debenture agreement dated February 28, 2003
               with Global Capital Funding Group, LP

    10.14*     Amended warrant agreement dated February 28, 2003 with Global
               Capital Funding Group, LP

    10.15*     Security Agreement dated February 28, 2003 with Global Capital
               Funding Group, LP

    21.01*     Subsidiaries of Registrant.

    31         Certification pursuant to Section 302 of the Sarbanes-Oxley Act
               of 2002, as amended.

    32         Certification pursuant to Section 906 of the Sarbanes-Oxley Act
               of 2002, as amended.

* Previously filed with the Securities and Exchange Commission.


Item 14. Principal Accountant Fees and Services.

         Incorporated herein by reference to the Company's definitive proxy
statement to be filed pursuant to Regulation 14A under the Securities Exchange
Act of 1934.

                                       32
<PAGE>

                         SAGIENT RESEARCH SYSTEMS, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Certified Public Accountants...........................F-1

Consolidated Balance Sheets..................................................F-2

Consolidated Statements of Operations........................................F-3

Consolidated Statement of Stockholders' Equity (Deficit).....................F-4

Consolidated Statements of Cash Flows........................................F-5

Notes to Consolidated Financial Statements...................................F-6

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors and Stockholders
Sagient Research Systems, Inc.

We have audited the accompanying balance sheets of Sagient Research Systems,
Inc. as of December 31, 2004 and 2003, and the related statements of income,
retained earnings, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sagient Research Systems, Inc.
as of December 31, 2004 and 2003, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note C to the
financial statements, the Company has suffered recurring losses from continuing
operations and has a net capital deficiency that raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note C. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

                                               PETERSON & CO., LLP
                                               San Diego, California


February 3, 2005

                                      F-1
<PAGE>

                 SAGIENT RESEARCH SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                  December 31,

<TABLE>
<CAPTION>
                                                                         2004            2003
                                                                     ------------    ------------
                                     ASSETS
<S>                                                                  <C>             <C>
CURRENT ASSETS
Cash and cash equivalents                                            $     54,106    $     54,348
Accounts receivable                                                       133,245          20,206
Receivable from related parties                                                --         125,000
Prepaid research                                                          233,974         242,885
Prepaid commissions                                                        48,581              --
Other current assets                                                        8,276          10,472
                                                                     ------------    ------------
   Total current assets                                                   478,182         452,911

Property and equipment, net                                               301,374         493,493
Receivable from related parties                                                --          62,500
Other assets                                                                3,027           2,835
                                                                     ------------    ------------
   Total assets                                                      $    782,583    $  1,011,739
                                                                     ============    ============

     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable                                                     $    245,047    $    213,128
Accrued interest expense                                                  280,638         129,082
Revolving credit facility                                                 100,000         100,000
Current portion of convertible debt                                     1,363,763         564,747
Notes payable                                                             300,000         300,000
Notes payable - related parties                                           287,500         187,500
Deferred revenue                                                        1,019,674         752,797
Prepaid subscription receipts                                              79,119          24,435
Other current liabilities                                                 135,657         169,228
                                                                     ------------    ------------
   Total current liabilities                                            3,811,398       2,440,917

Convertible debt, less current portion                                         --         904,244
Minority interest in subsidiary                                                --         (60,739)
                                                                     ------------    ------------
   Total liabilities                                                    3,811,398       3,284,422

STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.0001 par value; 10,000,000 authorized
   shares; no shares outstanding                                               --              --
Common stock; $.0001 par value, 80,000,000 authorized,
    35,277,512 issued; 23,510,796 outstanding at December 31, 2004
    and 34,557,052 issued and 22,790,336 outstanding
    at December 31, 2003                                                    2,394           2,321
Additional paid-in capital                                             29,040,948      28,925,921
Treasury stock, 417,866 common shares at cost                             (58,501)        (58,501)
Accumulated deficit                                                   (32,013,656)    (31,142,424)
                                                                     ------------    ------------
   Total stockholders' equity (deficit)                                (3,028,815)     (2,272,683)
                                                                     ------------    ------------

   Total liabilities and stockholders' equity (deficit)              $    782,583    $  1,011,739
                                                                     ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>

                 SAGIENT RESEARCH SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            Years Ended December 31,

                                                      2004            2003
                                                  ------------    ------------
REVENUES
Research services                                 $  2,769,219    $  2,015,848
Consulting services                                         --          99,000
Other revenue                                            5,611          11,250
                                                  ------------    ------------
   Total revenue                                     2,774,830       2,126,098
                                                  ------------    ------------

EXPENSES
Compensation and benefits                            1,318,787       1,369,965
General and administrative                             783,606         767,618
Product research expenses                              980,546         584,467
Depreciation and amortization                          247,314         279,038
Minority interest expense                                   --         115,976
                                                  ------------    ------------
   Total expenses                                    3,330,253       3,117,064
                                                  ------------    ------------

Operating loss                                        (555,423)       (990,966)

OTHER EXPENSE
Interest and other                                     230,070         642,887
Loss on joint venture                                   60,739              --
Discount on note receivable                             25,000              --
                                                  ------------    ------------
   Total other expense                                 315,809         642,887
                                                  ------------    ------------

Net loss from continuing operations                   (871,232)     (1,633,853)

Discontinued operations
Income from discontinued operations                         --         174,117
                                                  ------------    ------------

Net loss                                          $   (871,232)   $ (1,459,736)
                                                  ============    ============

Earnings (loss) per share - basic and diluted
   Loss per share - continuing operations                (0.04)          (0.07)
   Earnings per share - discontinued operations             --            0.01
                                                  ------------    ------------

       Total loss per share - basic and diluted   $      (0.04)   $      (0.06)
                                                  ============    ============

Weighted average number of shares                   23,088,511      23,229,494
                                                  ============    ============

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-3
<PAGE>

                         SAGIENT RESEARCH SYSTEMS, INC.
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                     Years Ended December 31, 2004 and 2003

<TABLE>
<CAPTION>
                                                         Common Stock          Additional
                                                   ------------------------     Paid-in      Treasury     Accumulated
                                                      Shares      Amount        capital        Stock        Deficit        Total
                                                   -----------  -----------    -----------  -----------   -----------   -----------
<S>                                                 <C>              <C>       <C>          <C>          <C>            <C>
 Balance at December 31, 2002                       28,300,436  $     2,872    $29,630,220  $   (58,501) $(29,682,688)  $  (108,097)


   Issuance of options for services                                                 16,000                                   16,000
   Cancellation of shares - PCS settlement         (10,300,000)      (1,030)      (719,970)                                (721,000)
   agreement
   Cancellation of shares - litigation settlement   (1,048,750)        (105)           105                                       --
   agreements/judgments
   Cancellation of shares - voluntary surrender           (100)          (0)             0                                       --
   Issuance of common shares                         5,838,750          584           (434)                                     150
   Net loss                                                                                                (1,459,736)   (1,459,736)
                                                   -----------  -----------    -----------  -----------   -----------   -----------

 Balance at December 31, 2003                       22,790,336        2,321    $28,925,921      (58,501)  (31,142,424)   (2,272,683)

   Issuance of shares for services                     285,000           29         85,821                                   85,850
   Stock options exercised                              12,500            1          1,249                                    1,250
   Warrants exercised                                   22,960            3             (3)                                      --
   Issuance of common shares                           400,000           40         27,960                                   28,000
   Net loss                                                                                                  (871,232)     (871,232)
                                                   -----------  -----------    -----------  -----------   -----------   -----------

Balance at December 31, 2004                        23,510,796  $     2,394    $29,040,948  $   (58,501) $(32,013,656)  $(3,028,815)
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>

                         SAGIENT RESEARCH SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            Years Ended December 31,
<TABLE>
<CAPTION>
                                                                                 2004            2003
                                                                             ------------    ------------
<S>                                                                          <C>             <C>
Cash flows from operating activities
   Net loss                                                                  $   (871,232)   $ (1,459,736)
   Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities
     Depreciation and amortization                                                247,314         279,038
     Amortization of discounts on indebtedness                                         --         417,189
     Stock and stock options issued for services rendered                         113,851          16,000
     Minority interest expense                                                         --         115,976
     Discount on note receivable                                                   25,000              --
     Income from discontinued operations                                               --        (174,117)
     Loss on joint venture                                                         60,739              --
   Net changes in assets and liabilities
     (Increase) decrease in accounts receivable                                  (113,039)         24,430
     (Increase) decrease in prepaid research                                        8,911        (242,885)
     Increase in prepaid commissions                                              (48,581)             --
     Decrease in other current assets                                               2,196          39,625
     (Increase) decrease in other assets                                             (192)         45,467
     Increase in accounts payable                                                  31,919          50,185
     Increase in deferred revenue                                                 266,877         557,905
     Increase (decrease) in accrued expenses and other current liabilities        117,984         (72,399)
     Increase in prepaid subscription receipts                                     54,684          24,435
                                                                             ------------    ------------
   Net cash used in operating activities                                         (103,569)       (378,887)
Cash flows from investing activities
   Additions to property and equipment                                            (55,195)        (47,614)
   Proceeds from note receivable from related parties                             162,500              --
   Change in net assets of discontinued operations                                     --       2,476,988
                                                                             ------------    ------------
   Net cash provided by investing activities                                      107,305       2,429,374
Cash flows from financing activities
   Payments on revolving credit facility                                               --      (2,391,975)
   Proceeds from issuance of note payable to related party                        100,000              --
   Net proceeds from revolving credit facility                                         --         100,000
   Net proceeds from notes payable                                                     --         195,686
   Proceeds from exercise of stock options                                          1,250              --
   Repayment of convertible debt                                                 (105,228)       (111,009)
   Distributions to minority members                                                   --        (179,070)
   Proceeds from exercise of common stock warrants                                     --             150
                                                                             ------------    ------------
   Net cash used in financing activities                                           (3,978)     (2,386,218)
                                                                             ------------    ------------

   Net decrease in cash and cash equivalents                                         (242)       (335,731)

Cash and cash equivalents, beginning of period                                     54,348         390,079
                                                                             ------------    ------------

Cash and cash equivalents, end of period                                     $     54,106    $     54,348
                                                                             ============    ============

Supplemental disclosures of cash flow information
   Interest paid                                                             $    116,474    $    155,444
                                                                             ============    ============
   Taxes paid                                                                $      4,061    $      2,400
                                                                             ============    ============
</TABLE>

Supplemental disclosures of non-cash information (see Note P).

The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>

                         SAGIENT RESEARCH SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

NOTE A - ORGANIZATION

Sagient Research Systems, Inc. ("Sagient Research" or "Parent" or "Company") is
based in San Diego, California and was incorporated in Delaware in 1999. Sagient
Research is a publisher of independent investment research. We operate our
business activities through Sagient Research and through our wholly owned
subsidiary, DP Securities, Inc. d/b/a Sagient Securities ("DPS" or "Sagient
Securities"), a broker-dealer incorporated in the State of California. We
develop, produce and sell proprietary research products to mutual funds, hedge
funds and investment banks. Our business strategy is to leverage our development
technology and marketing expertise to be a leading provider of independent
research to the financial services and institutional investment communities.


NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

The consolidated financial statements include the accounts of the Company, its
wholly owned broker-dealer subsidiaries, Sagient Securities and previously owned
PCS Securities, Inc. and its previously owned majority-owned joint venture,
DPBT, LLC. All material inter-company accounts and transactions have been
eliminated in consolidation.

As discussed more fully in Note D - Discontinued Operations, the Company
discontinued the operations of PCS Securities, a wholly owned subsidiary, in the
first quarter of 2003 and all revenue and expense activity and related balance
sheet accounts of PCS Securities for the periods presented have been
reclassified and presented as discontinued operations as of December 31, 2003.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the periods presented. Actual results could differ materially
from those estimates.

Cash and Cash Equivalents
-------------------------

The Company considers all money market funds and demand deposits with original
maturities of three months or less when purchased to be cash equivalents. The
cash equivalents are readily redeemable and their fair value approximates cost.

Property and Equipment
----------------------

Property and equipment is stated at cost and includes software costs, computer
equipment and furniture and equipment. Depreciation is computed using the
straight-line method over the estimated useful life of the asset or the life of
the lease, whichever is shorter, which ranges from three to five years.

In accordance with Statement of Position 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use, the Company
capitalizes third party and direct payroll costs incurred to acquire or develop
its internally used proprietary software. Upgrades and enhancements that add
additional functionalities and features on an ongoing basis are capitalized when
incurred.

                                      F-6
<PAGE>

NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Amortization is computed using the straight-line method over the estimated
useful life of five years. Cost associated with creating new or additional
content for databases are expensed as incurred and are classified as product
research expenses in the consolidated statements of operations.

Revenue Recognition
-------------------

Research services revenue represents revenue from providing individual custom
reports or reports on a monthly or annual subscription basis. Revenue from
custom reports is recognized when the report is provided, and revenue from
subscriptions is recognized ratably over the contractual period. Research
services revenue also includes revenue from a licensing agreement to distribute
data, which is recognized ratably over the term of the contract.

Deferred revenue on the consolidated balance sheets consists of subscription and
licensing revenues that have been received but not yet earned.

Consulting services revenue represents fees from consulting services performed
by DPBT, LLC, and computer programming services performed by Sagient Research.
Consulting fees related to services performed by DPBT, LLC are based on
customer-determined points awarded at the end of each quarter, and are
recognized in the period in which the determination is made and communicated to
DPBT, LLC. Consulting fees related to computer programming services are
recognized during the period that such services are provided.

Placement fees include gains, losses and fees, net of syndicate expenses,
arising from private equity and debt offerings in which the Company participates
as an agent. The fees are recorded when the offering is completed and the income
is reasonably determinable. Referral fees related to placement transactions are
expensed when the revenue is recognized.

Concentration of Credit Risk
----------------------------

The Company's customers are concentrated in the financial services industry and
include investment banks, institutional investors and private equity funds. The
Company derives most of its revenue from customers located within the United
States. No one customer accounts for more than 5% of consolidated total revenue.
The Company does not require collateral, and evaluates credit worthiness on a
customer-by-customer basis based on reputation of customer within the industry,
historical trends and other information. To date, losses related to bad debts
have not been significant.

Risks and Uncertainties
-----------------------

The financial statements contain disclosures about significant estimates and
material concentrations known to management that are required to be disclosed in
accordance with the AICPA Statement of Position 94-6, Disclosure of Certain
Significant Risks and Uncertainties.

The Company has experienced losses from inception and has an accumulated
deficit. The ability of the Company to realize its assets is contingent upon
generating revenues exceeding continuing costs (see Note C - Going Concern and
Liquidity).

Derivatives and Hedging Activities
----------------------------------

The Company does not engage in derivatives or hedging transactions.

                                      F-7
<PAGE>

NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial Instruments
---------------------

The Company does not hold financial instruments for trading purposes as part of
its business operations. Substantially all of the Company's financial
instruments, which include cash and cash equivalents, and indebtedness, are
carried at amounts that approximate their fair value.

Net Capital and Reserve Requirements
------------------------------------

The Company's subsidiary, Sagient Securities, is subject to the Uniform Net
Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934. This rule
requires that they maintain minimum net capital (as defined) and requires that
the ratio of aggregate indebtedness (as defined) to net capital may not exceed
15 to 1. The Uniform Net Capital Rules also provides that equity capital may not
be withdrawn or cash dividends paid if the resulting ratio of aggregate
indebtedness to net capital would exceed 10 to 1. At December 31, 2004, Sagient
Securities had defined net capital exceeding the minimum required net capital of
$5,000.

Income Taxes
------------

Under SFAS No. 109, Accounting for Income Taxes, the liability method is used in
accounting for income taxes. Under this method, deferred income tax assets and
liabilities result from temporary differences between the income tax basis of
assets and liabilities and their reported amounts in the financial statements
that will result in taxable income and deductions in future years. A valuation
allowance is recognized against deferred tax assets when it is more likely than
not that the assets will not be realized.

Earnings (Loss) Per Share
-------------------------

The Company calculates earning per share in accordance with SFAS No. 128,
Earnings Per Share, and SEC Staff Accounting Bulletin No. 98. Accordingly, basic
loss per share is computed using the weighted average number of common shares
and diluted loss per share are computed based on the weighted average number of
common shares and all common equivalent shares outstanding during the period in
which they are dilutive. Common equivalent shares consist of shares issuable
upon the exercise of stock options (using the treasury stock method) or
warrants; common equivalent shares are excluded from the calculation if their
effect is anti-dilutive.

Stock-Based Compensation
------------------------

The Company measures compensation expense related to the grant of stock options
and stock-based awards to employees in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, under which compensation
expense, if any, is generally based on the difference between the exercise price
of an option, or the amount paid for the award and the market price or fair
value of the underlying common stock at the date of the award. Stock-based
compensation arrangements involving non-employees are accounted for under SFAS
No. 123, "Accounting for Stock-Based Compensation," under which such
arrangements are accounted for based on the fair value of the option or award.
The Company adopted the disclosure requirements of SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," an amendment of SFAS No.
123 as of January 1, 2003, which require certain disclosures about stock-based
employee compensation plans in an entity's accounting policy note.

Those disclosures include a tabular format of pro forma net income and, if
applicable, earnings per share under the fair value method if the intrinsic
value method is used in any period presented. Pro forma information in a tabular
format is also required in the notes to interim financial information if the

                                      F-8
<PAGE>

NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

intrinsic value method is used in any period presented. The adoption of SFAS No.
148 did not have a material impact to these consolidated financial statements
and the disclosure requirements are included below.

As of May 15, 2001, the Board of Directors of the Company adopted the 2001 Stock
Plan ("2001 Plan"), which was approved by the Company's shareholders in November
2001. The 2001 Plan provides for accelerated vesting provisions in the event of
a change in control and other events, as defined.

Options granted during 2003 include 200,000 stock options to purchase the
Company's common stock in exchange for services rendered. Fifty percent (50%) of
the options vested at the date of the grant and the remaining fifty percent
(50%) vest on the first anniversary of the date of grant. The Company has
accounted for these issuances in accordance with SFAS No. 123 and has recorded
an expense of $16,000 representing the fair value of the options using a
Black-Scholes option-pricing model. The options are exercisable at price of
$0.08 per share and have a term of 10 years

During 2004, the Company issued options to employees to purchase 1,200,000
shares of its common stock, at exercise prices ranging from $0.055 - $0.38, and
options to purchase 1,432,500 shares were forfeited and cancelled. All options
granted during the period have a term of ten years and were issued at an
exercise price equal to the market value of the underlying stock at the date of
grant. Of these options, 330,000 were scheduled to vest over three years and
870,000 were 100% vested at the date of grant. In December 2004, the Company
accelerated the vesting of 133,750 employee options with an exercise price
greater than the market value of the underlying stock. As of December 31, 2004,
2,795,000 options to purchase shares of the Company's common stock were
outstanding pursuant to the 2001 Plan, of which 22,500 have not yet vested.

A summary of changes in common stock options during 2004 and 2003 follows:

                                       Number     Weighted Average  Exercisable
                                      of Shares    Exercise Price      Shares
                                    ------------    ------------    -----------

 Outstanding at December 31, 2002      2,356,093    $       1.06      1,596,094
                                    ------------    ------------    -----------

    Granted                            1,430,000    $       0.09
    Forfeited                           (746,093)   $       0.64
    Exercised                                 --
                                    ------------
 Outstanding at December 31, 2003      3,040,000    $       0.61      2,022,188
                                    ------------    ------------    -----------

    Granted                            1,200,000    $       0.13
    Forfeited                         (1,432,500)   $       0.45
    Exercised                            (12,500)   $       0.10
                                    ------------
 Outstanding at December 31, 2004      2,795,000    $       0.49      2,772,500
                                    ============    ============    ===========

SFAS No. 123 requires the Company to provide pro forma information regarding net
income (loss) and income (loss) per share as if compensation cost for the
Company's stock option issuances had been determined in accordance with the fair
value based method prescribed in SFAS No. 123. The Company estimates the fair
value of each stock option at the grant date by using the Black-Scholes
option-pricing model with the following assumptions used for grants in fiscal
2004: dividend yield of zero percent, risk-free interest rates ranging from
2.79% to 3.85%, expected life of five years, and expected volatility ranging
from 138% to 141%. For grants in fiscal 2003, the following assumptions were
used: dividend yield of zero percent, risk-free interest rates ranging from
2.87% to 3.29%, expected lives of five years, and expected volatility of 129%.

                                      F-9
<PAGE>

NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Under the accounting provisions of SFAS No. 123, as amended by SFAS No. 148, the
Company's pro forma net loss and loss per share for the years ended December 31,
2004 and 2003 would have been as follows:

                                                    2004               2003
                                                ------------       ------------

Net loss as reported                            $   (871,232)      $ (1,459,736)
SFAS No. 123 effect                               (1,102,697)          (592,083)
                                                ------------       ------------

Pro forma net loss                              $ (1,973,929)      $ (2,051,819)
                                                ============       ============

Loss per share, basic and diluted
as reported                                     $      (0.04)      $      (0.06)
Pro forma                                       $      (0.09)      $      (0.09)

Basic and diluted weighted
average common shares outstanding                 23,088,511         23,229,494


The following table summarizes information about stock options outstanding at
December 31, 2004:

<TABLE>
<CAPTION>
                              Options Outstanding                          Options Exercisable
                              -------------------                          -------------------

                                            Weighted        Weighted                      Weighted
                                             Average         Average                       Average
       Range of            Number           Remaining       Exercise       Number         Exercise
    Exercise Prices      Outstanding      Life in Years       Price      Exercisable       Price
<S>                       <C>                 <C>             <C>         <C>              <C>
    $0.055 - $0.12        1,662,500           9.53            $0.08       1,640,000        $0.08
     $0.30 - $0.80          635,000           7.00            $0.55         635,000        $0.55
     $1.20 - $1.90          392,500           7.00            $1.61         392,500        $1.61
     $2.05 - $2.60          105,000           7.00            $2.49         105,000        $2.49
</TABLE>

Segment Information
-------------------

The Company complies with SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information that requires public business enterprises to
report information regarding reportable operating segments. SFAS No. 131
superseded SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise.

After the closing during the second quarter of 2003 of its PCS Securities
subsidiary (See Note D - Discontinued Operations), and due to the inactive
status of Sagient Securities, the Company currently has no reportable segments.
Accordingly, disclosure of segment information is not applicable.

New Accounting Pronouncements
-----------------------------

In December 2004, FASB issued SFAS No. 123 (revised 2004) "Share-Based Payment,"
which requires companies to recognize in the income statement grant date fair
value of stock options and other equity-based compensation issued to employees.
That cost will be recognized over the period during which an employee is
required to provide services in exchange for the award--the requisite service
period (usually the vesting period). SFAS No. 123R requires the Company to adopt
the new accounting provisions beginning in the first annual reporting period

                                      F-10
<PAGE>

NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

that begins after December 15, 2005, or for our fiscal year 2006. The Company
has not yet determined the impact of applying the provisions of SFAS No. 123R /
The Company does not believe SFAS No. 123R is likely to have a material effect
on the Company's financial position or results of operations.

Reclassifications
-----------------

Certain reclassifications have been made to prior years' balances to conform to
the 2004 presentation.


NOTE C - GOING CONCERN AND LIQUIDITY

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully discussed
below, the Company incurred a net loss of $871,232 during the year ended
December 31, 2004, and, as of that date, the Company's current liabilities
exceeded its current assets by $3,333,216.

The Company and its management recommitted to pursuing its long-term objective
of becoming a leading provider of independent research to the institutional
community. In association with this commitment, the Company has increased its
research sales staff, has re-directed all of the remaining Company assets
towards the production, distribution, and marketing of independent institutional
research, and has made certain operating expense reductions to redundant and
unnecessary overhead. The Company and its management firmly believe that the
independent institutional research market is a viable area in which the Company
can compete. However, no assurances can be provided that the Company will be
successful.

Whereas management believes its anticipated cash flow from operations could be
adequate to fund operations for the next fiscal year, there can be no assurance,
however, that the Company will not require additional financing prior to or
after such time. Further, there can be no assurance that any additional
financing will be available to the Company on acceptable terms, or at all. If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate its operational plans. Our inability to obtain additional
financing could have a material adverse effect on the Company's business,
financial condition and results of operations.

The accompanying consolidated financial statements do not include any
adjustments that might result from the resolution of these matters.


NOTE D - DISCONTINUED OPERATIONS

Shut down of PCS Securities Subsidiary and Asset Transfer
---------------------------------------------------------

In January 2003, the Board of Directors of the Company decided to wind down the
activities of PCS Securities, Inc. and to close this subsidiary during the first
quarter of 2003. Based on the subsequent activities of PCS Securities, the wind
down was completed, and PCS Securities was closed effective April 30, 2003.

In connection with the decision to close the PCS Securities subsidiary, the
Company entered into an agreement with the two former owners of PCS Securities
pursuant to which the Company agreed to transfer ownership of two intangible
assets, the name "PCS" and trademarks related to such name ("Trademarks") as
well as a list of PCS customers to the former owners of PCS Securities (or their
designee) in exchange for consideration including cash, the relief of certain
liabilities and the surrender by them of an aggregate of 10.3 million shares of
the Company's common stock for cancellation. Pursuant to the agreement, each

                                      F-11
<PAGE>

NOTE D - DISCONTINUED OPERATIONS (Continued)

of the former owners of PCS Securities agreed to terminate their rights under
employment and/or consulting agreements between them and the Company.
Furthermore, the former owners of PCS Securities agreed to pay to the Company an
aggregate of $250,000 over a period of two years assuming that certain
conditions are satisfied, to repay the Company's revolving line of credit with
Bear Stearns by June 30, 2003 in the event that there is an outstanding balance
as of such date and to repay or assume all obligations to customers (i.e. credit
balances) existing as of June 30, 2003.

In connection with this agreement, the Company granted a non-exclusive two year
license to use the Company's customer relationship management software to the
former owners of PCS Securities and agreed to use a new soft dollar brokerage
firm to be formed by the former owners of PCS Securities as the Company's
preferred brokerage firm for soft dollar transactions.

Furthermore, the parties agreed that the Company would transfer the remaining
$500,000 restricted cash balance to pay down the outstanding credit facility
balance, and that all commissions generated by the PCS Securities subsidiary
subsequent to January 1, 2003 that clear through Bear Stearns, would be
automatically applied against the outstanding balance of the credit facility.

As a result of the transfer of the restricted cash balance, commissions
collected by the Company during the first and second quarters and funds paid
directly to Bear Stearns by the former owners from commissions generated by a
new soft dollar brokerage firm controlled by these individuals, all of which was
applied against the credit line balance, the outstanding credit line balance was
fully paid as of April 30, 2003. As of March 31, 2003, PCS Securities was not in
compliance with minimum net capital requirements required by the National
Association of Securities Dealers ("NASD"). In connection with the closing of
the PCS Securities subsidiary, the Company filed with the NASD to withdraw the
PCS Securities broker-dealer license, effective April 30, 2003, and, effective
April 30, 2003, all business activities related to PCS were terminated.

Results of Discontinued Operations
----------------------------------

Based on the Board of Directors' decision to shut down the PCS Securities
subsidiary in January 2003 together with the execution of the asset transfer
agreement and the full repayment of the line of credit in connection with such
agreement, the Company has accounted for the activities of the subsidiary as
discontinued operations in all periods presented.

Revenues and expenses from PCS Securities for the years ended December 31, 2004
and 2003 are summarized below:

<TABLE>
<CAPTION>
                                                                2004           2003
                                                            ------------   ------------
<S>                                                         <C>            <C>
Revenues
  Commission and other fees                                 $         --   $  1,115,462
Expenses
  Independent research expense                                        --        775,817
  Execution and clearing costs                                        --        146,855
  General and administrative expense                                  --            420
                                                            ------------   ------------
    Total expenses                                                    --        923,092
                                                            ------------   ------------

                                                                      --        192,370
    Loss on transfer of assets of discontinued operations             --        (18,253)
                                                            ------------   ------------
    Income (loss) from discontinued operations              $         --   $    174,117
                                                            ============   ============
</TABLE>
                                      F-12
<PAGE>

NOTE D - DISCONTINUED OPERATIONS (Continued)

Loss on Transfer of Assets
--------------------------

In connection with the Company's agreement to transfer the PCS trademark and
customer list intangibles to the former owners of PCS Securities, in exchange
for cash, the relief of liabilities and the surrendering of 10.3 million shares
of the Company's common stock held by these individual, the Company recorded a
loss on the transfer, in the first quarter of 2003, totaling $18,253.

The components of the loss are summarized below:

Consideration received:
    Cash                                                        $    250,000(a)
    Credit line repayments                                         1,076,556(b)
    Accrued liabilities relieved:
       Accrued compensation payable to related parties             1,271,281(c)
       Accrued research services - net                               398,723(d)
    Surrender and cancellation of common stock                       721,000(e)
    Other                                                            391,889(f)
                                                                ------------
 Total consideration                                               4,109,449

Carrying amount of intangibles transferred                        (4,127,702)(g)
                                                                ------------

Net loss on transfer                                            $    (18,253)
                                                                ============

     (a)  Represents a $250,000 receivable from the former owners of PCS
          Securities over 2 years pursuant to the asset transfer agreement
          ($225,000 of which was received and $25,000 of which was written off
          by the Company during 2004 based on a discount for early payment of
          the final two installments due.
     (b)  Represents funds paid directly to Bear Stearns from the soft dollar
          brokerage firm that is controlled by the former owners.
     (c)  Accrued compensation payable as of December 31, 2002 pursuant to
          respective employment and consulting agreements with the former owners
          of PCS Securities forgiven in connection with the wind-down.
     (d)  Net customer credit balances of the PCS Securities subsidiary assumed
          by the former owners.
     (e)  10.3 million shares of the Company's common stock surrendered by the
          former owners of PCS Securities at fair market value. The fair market
          value of the Company's common stock at the date of the transaction was
          $0.07.
     (f)  Additional net assets and collections realized in connection with
          transaction. (g) Carrying amount of PCS Securities trademark and
          customer list intangibles at date of transaction.

Net Assets and Liabilities of Discontinued Operations
-----------------------------------------------------

As of March 31, 2003 the remaining identifiable intangible asset balance of
$4,127,702, previously capitalized in connection with PCS Securities merger, was
realized through discontinued operations in 2003.

                                      F-13
<PAGE>

NOTE E - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31:

                                                      2004             2003
                                                  ------------     ------------
Computer equipment and software                   $  1,372,476     $  1,317,281
Furniture and fixtures                                  37,797           37,797
Office equipment                                        76,248           76,248
                                                  ------------     ------------
                                                     1,486,521        1,431,326
Less accumulated depreciation                       (1,185,147)        (937,833)
                                                  ------------     ------------
                                                  $    301,374     $    493,493
                                                  ============     ============

During the years ended December 31, 2004 and 2003, the Company capitalized
$48,233 and $47,832, respectively of payroll costs directly associated with
upgrades and enhancements that have added functionalities and new features to
its software. Depreciation expense was $247,314 and $279,038 during the years
ended December 31, 2004 and 2003, respectively.


NOTE F- REVOLVING LINE OF CREDIT

On June 12, 2003, the Company entered into a promissory note agreement with Bank
of America, pursuant to which a $100,000 revolving credit line was made
available to the Company through June 10, 2006. During this period, the Company
is obligated to pay interest only, based on the outstanding principal balance,
on a monthly basis. The interest rate on the note is variable and is calculated
based on the published Wall Street Journal prime rate listing plus 4.5%. As of
December 31, 2004 the interest rate on the note was 9.75%.

Following this initial period, the outstanding principal balance, together with
interest based on the applicable interest rate, shall be repaid monthly, on a
fully amortized basis, over the remaining term of the note that runs through
June 12, 2010. As of December 31, 2004, the outstanding principal balance under
the credit line was $100,000. The credit line is guaranteed by the United States
Small Business Administration, as well as by the Company's President and CEO.


NOTE G- NOTES PAYABLE

On November 22, 2001, the Company borrowed $300,000 under a promissory note
payable to an investor. The note is unsecured, bears interest at 15%, and had an
original maturity date in April 2002 which has subsequently been extended to
July 1, 2005. In connection with the promissory note, the Company issued 150,000
detachable warrants to the note holder exercisable for 150,000 shares of the
Company's common stock at a price of $2.30 per share. The warrants are
exercisable at the option of the holder and expire in five years. Proceeds from
the issuance of this promissory note have been allocated to the warrants based
on their fair value of $281,200. During each of the years ended December 31,
2004 and 2003 the Company recorded interest expense associated with this note of
$45,000. As of December 31, 2004 the outstanding principal balance was $300,000
and total interest payable in connection with these loans was $97,625.


NOTE H -CONVERTIBLE DEBT

On December 17, 2001, the Company issued convertible debentures in the aggregate
principal amount of $1,600,000 and warrants to purchase 160,000 shares of the
Company's common stock. These debentures had a maturity date of December 17,

                                      F-14
<PAGE>

NOTE H -CONVERTIBLE DEBT (Continued)

2003, and bore interest at a rate of 10% per annum, which was due and payable on
the last day of each calendar quarter until they were paid in full or converted
into shares of the Company's common stock.

At issuance, proceeds from the debentures were allocated to the warrants based
on the fair value of the warrants using a Black Scholes valuation model totaling
$259,182. In addition, a discount of $541,536 was applied to account for the
beneficial conversion feature at the closing date of December 17, 2001.

In February 2003, the Company and the debenture holders restructured certain
terms and provisions of the convertible debentures. In connection with the debt
restructuring, the Company was relieved of $137,844 in liquidated damages
previously accrued. The restructuring of the convertible debt has been accounted
for as a troubled debt restructuring and, accordingly, no gain was recognized.
At December 31, 2004 the restructured convertible debt principal totaled
$1,363,736, all of which is due within one year and is classified as a current
liability. Following is a summary of primary terms of the restructured
agreements:

$1,250,000 Original Principal Amount Note

The original debenture was amended pursuant to which the principal balance was
changed to $1,425,000. The amended principal balance includes the original
principal amount plus accrued and unpaid liquidated damages and interest of
$150,000 and $25,000, respectively. The remaining balance of accrued interest at
February 28, 2003, totaling $26,736, was paid by the Company and $125,000 of
accrued liquidated damages were waived by the debenture holder.

The debenture matures on December 28, 2005 and bears interest at an annual rate
of 14%. The debenture requires fixed monthly payments of principal and interest
beginning on March 28, 2003 of $25,000 for the first five (5) months, $50,000
thereafter through November 28, 2005 and a final payment due December 28, 2005
in the amount of $271,100. The outstanding principal balance may be converted
into shares of the Company's common stock at the option of the holder based on a
fixed conversion price of $0.20 per share, and the warrant to purchase 125,000
shares of the Company's common stock that were included in the original
debenture have a fixed exercise price of $0.086 for the term of the warrants,
which expire December 17, 2006. In addition, the debenture holder agreed to
waive all registration requirements with respect to the convertible debenture,
warrants and shares underlying the warrants.

In February 2003, the debenture holder agreed to defer scheduled monthly
principal and interest payments for the period October 28, 2003 through December
28, 2003, and to add the deferred payments to the amount due with the final
payment on December 28, 2005. In 2004 the debenture holder agreed to defer
scheduled monthly principal and interest payments for the period April 28, 2004
through December 28, 2004, and to add the deferred payments to the amount due at
maturity. As of December 31, 2004 the outstanding principal balance was
$1,208,763 all of which was a current liability.

$350,000 Original Principal Amount Note

In February 2003, the original debenture was amended so that the principal
balance was reduced to $155,000. The amended principal balance includes the
original principal amount, less the partial principal payment in November 2002,
of $215,686 plus accrued and unpaid liquidated damages and interest of $16,656
and $4,030, respectively. The debenture holder waived accrued liquidated damages
in the amount of $12,844. The debenture was originally scheduled to mature on
February 28, 2005 and bears interest at an annual rate of 14%. On March 1, 2005
the debenture holder extended the maturity date to August 31, 2005. Payment of
interest is required quarterly, beginning March 30, 2003 and the principal
balance is payable upon the maturity date.

                                      F-15
<PAGE>

NOTE H -CONVERTIBLE DEBT (Continued)

The outstanding principal balance may be converted into shares of the Company's
common stock at the option of the holder based on a fixed conversion price of
$0.20 per share, and the warrant to purchase 35,000 shares of the Company's
common stock that were included in the original debenture have a fixed exercise
price of $0.086 for the term of the warrants. In addition, the debenture holder
agreed to waive all registration requirements with respect to the convertible
debenture, warrants and shares underlying the warrants. In July 2004, the
debenture holder exercised 35,000 warrants via the cashless exercise provision
provided in the warrant. The net effect is the exchange of 35,000 warrants for
22,960 shares of common stock.

As of December 31, 2004 the outstanding principal balance was $155,000, all of
which was reflected as a current liability.

The Company recorded interest expense totaling $546,345 related to the two
debentures in 2003, including 176,846 related to the restructured note agreement
and $369,499 related to the original notes and amortization of discounts. At
December 31, 2003 interest of $50,197 was payable in connection with the
restructured note agreement. In 2004, the company recorded interest expense
related to the debentures totaling $193,392. During 2004, an aggregate of
$66,472 of interest due was paid and as of December 31, 2004 interest of
$178,335 was payable in connection with the debentures.


NOTE I - DEFERRED REVENUE

Research products are generally sold by the Company on a subscription basis for
periods ranging from three (3) to twelve (12) months. Revenue on such
subscriptions is recognized on a pro-rata basis over the applicable subscription
period. Deferred revenue at December 31, 2004 totaled $1,019,674 and represents
revenues from research product subscriptions that will be recognized in future
periods.


NOTE J - STOCKHOLDERS' EQUITY (DEFICIT)

Authorized and Outstanding Common Stock
---------------------------------------

The Company is authorized to issue 80,000,000 shares of common stock, par value
$0.0001 per share. As of December 31, 2004, there were 35,277,512 shares of
common stock issued and 23,510,796 shares of common stock outstanding.

Common Stock Reserved for Issuance
----------------------------------

At December 31, 2004 the Company has reserved 10,812,719 shares of its common
stock for issuance in connection with shares issuable under the Company's 2001
stock option plan, convertible debentures and warrant commitments.

Preferred Stock
---------------

In March 1999 the Company authorized the issuance of 10,000,000 shares of
preferred stock par value $.0001. At December 31, 2004 and
2003, no preferred shares are outstanding.

Common Stock
------------

During the three months ended March 31, 2004 an aggregate of 285,000 shares of
the Company's common stock valued at $85,850 were issued in connection with
services provided to the Company.

                                      F-16
<PAGE>

NOTE J - STOCKHOLDERS' EQUITY (DEFICIT) (Continued)

In July 2004, 22,960 shares of common stock were issued in connection with the
exercise of 35,000 warrants by a debenture holder.

In December 2004, 400,000 shares of the Company's common stock were issued to an
officer of the Company as compensation for his outstanding performance.

In February 2003, 10,300,000 shares of the Company's common stock were cancelled
in connection with an agreement between the Company and the two former owners of
PCS Securities at fair market value, $0.07, and totaling $721,000.

In April 2003, an aggregate of 5,688,750 shares of common stock were issued in
connection with the exercise of 5,765,626 performance warrants by officers of
the Company.

In April 2003, an aggregate of 293,750 shares of common stock were cancelled as
a result of a legal settlement. In September 2003, an aggregate of 755,000
shares of the common stock were cancelled in connection with default judgments
obtained by the Company against four defendants in the case.

In September 2003 150,000 shares were issued in connection with the exercise of
150,000 performance warrants.


NOTE K - WARRANTS AND PERFORMANCE WARRANTS

Common Stock Warrants
---------------------

The following tables summarize the number of outstanding common stock warrants
as of December 31, 2004 and 2003:

                                                              Weighted Average
                                                 Number        Exercise Price
                                             --------------    --------------
Outstanding at December 31, 2002                    663,906    $         1.41
   Granted                                               --                --
   Forfeited                                             --                --
   Exercised                                             --                --
                                             --------------    --------------
Outstanding at December 31, 2003                    663,906    $         0.97
   Granted                                               --                --
   Forfeited                                             --                --
  Exercised                                         (35,000)               --
                                             --------------    --------------
Outstanding at December 31, 2004                    628,906    $         1.02
                                             ==============    ==============

Performance Warrants
--------------------

Performance warrants were issued to all Company shareholders concurrent with and
in connection with the reverse merger in 2001. Performance warrants are
exercisable for shares of common stock, on a one-for-one basis, upon the
satisfaction of certain performance targets.

During 2003, a total of 5,915,626 performance warrants were exercised, of which
5,765,626 were exercised by two officers of the Company and an entity owned by
one of these officers, and a total of 5,925,000 performance warrants were
forfeited and cancelled by twelve (12) individuals or entities in

                                      F-17
<PAGE>

NOTE K - WARRANTS AND PERFORMANCE WARRANTS (Continued)

connection with litigation settlements and judgments. During 2004, a total of
105,000 performance warrants were forfeited and cancelled in connection with a
legal settlement.

As of December 31, 2004 all outstanding performance warrants are fully vested
and exercisable.

The following tables summarize the number of outstanding performance warrants in
2004 and 2003:

                                                               Weighted Average
                                                  Number        Exercise Price
                                              --------------    --------------
Outstanding at December 31, 2002                                $        0.001
   Granted                                                --                --
   Forfeited                                      (5,925,000)            0.001
   Exercised                                      (5,915,626)            0.001
                                              --------------    --------------
Outstanding at December 31, 2003                     675,000    $        0.001
   Granted                                                --                --
   Forfeited                                        (105,000)            0.001
   Exercised                                              --                --
                                              --------------    --------------
Outstanding at December 31, 2004                     570,000    $        0.001
                                              ==============    ==============


The following table summarizes additional information about the Company's
outstanding common stock warrants and performance warrants at December 31, 2004:

                                     Number
   Exercise                         Remaining           Number
    Prices      Outstanding      Life in Months       Exercisable
--------------------------------------------------------------------
     $0.001       570,000              77               570,000
     $0.086       125,000              23               125,000
     $0.80        114,843              18               114,843
     $0.80        239,063               3               239,063
     $2.30        150,000              22               150,000
              -----------                           -----------
                1,198,906                             1,198,906
              ===========                           ===========

NOTE L- INCOME TAXES

Under SFAS No. 109, Accounting for Income Taxes, the liability method is used in
accounting for income taxes. Under this method, deferred income tax assets and
liabilities result from temporary differences between the income tax basis of
assets and liabilities and their reported amounts in the financial statements
that will result in taxable income and deductions in future years.

In assessing the realization of deferred tax assets, management considers
whether it is more likely than not that such benefit will be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income. For the year ended December 31, 2004, management
increased the deferred tax asset valuation allowance by $282,061 due to taxable
losses incurred for the year ended December 31, 2004.

At December 31, 2004, the Company had net operating loss carry-forwards of
approximately $7.9 million and $5.4 million for federal income tax and state tax
purposes, respectively. The federal net operating loss carryforwards expire 2019

                                      F-18
<PAGE>

NOTE L- INCOME TAXES (Continued)

through 2024 and the state net operating loss carryforwards expire 2007 through
2014. Internal Revenue Code Section 382 and similar state rules place a
limitation on the amount of taxable income that can be offset by carryforwards
after a change in control (generally greater than 50% change in ownership). The
utilization with regard to timing and amount of the Company's net operating loss
carryforwards may be limited due to changes in the Company's ownership pursuant
to Section 382 of the Internal Revenue Code.

Significant components of the Company's deferred tax assets at December 31, 2004
and 2003 are as follows:

                                                      2004             2003
                                                  ------------     ------------
Deferred tax assets
   Net operating losses                           $  3,152,326     $  3,224,536
   Deferred revenues                                   529,653          328,669
   Other                                                38,185          131,600
                                                  ------------     ------------
                                                     3,720,163        3,684,805
Deferred tax liabilities
   State taxes                                        (185,594)        (190,703)
   Section 481 adjustment                                   --         (171,057)
   Depreciation                                        (79,512)        (150,049)
                                                  ------------     ------------
                                                      (265,106)        (511,809)

Net deferred tax assets                              3,455,057        3,172,996
Valuation allowance                                 (3,455,057)      (3,172,996)
                                                  ------------     ------------
Total                                             $         --     $         --
                                                  ============     ============

The reconciliation of income taxes computed at the U.S. Federal statutory rate
to income tax expense is as follows:

                                                       ----------------------
                                                          2004         2003
                                                       ----------------------
Federal income tax at statutory rate                        34.0%       34.0%

State taxes, net of federal income tax benefit              (0.2)       (0.1)
Permanent Differences                                       (0.3)       (0.2)
Changes in valuation allowance                             (33.8)      (27.6)
Other                                                        0.0        (6.2)
                                                       ----------------------
Total                                                       (0.3)%      (0.2)%
                                                       ======================


NOTE M- LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per
share:

                                                      2004             2003
                                                  ------------     ------------
Numerator
   Net Loss                                       $   (871,232)    $ (1,459,736)
Denominator
   Denominator for basic and diluted
   loss per share-weighted average shares           23,088,511       23,229,494

Basic and Diluted loss per share                  $      (0.04)    $      (0.06)

                                      F-19
<PAGE>

NOTE M- LOSS PER SHARE (Continued)

Shares issuable upon conversion of debt, stock options, warrants and performance
warrants disclosed in notes B and I-K have not been included in the above
calculation since their inclusion in 2004 and 2003 would be anti-dilutive.


NOTE N - RELATED PARTY TRANSACTIONS

Loans and Advances
------------------

Between May 2001 and January 2002 the Company borrowed an aggregate of $187,500
from a company controlled by an officer/stockholder pursuant to unsecured
promissory note agreements. The Company borrowed an additional $35,000 in June
2004 and $65,000 in July 2004 from the same company and the Company issued an
additional promissory note to the lender. All of the promissory notes bear
interest at an annual rate of 12% and are due and payable on January 1, 2006. At
December 31, 2003 and 2004, the aggregate outstanding balance of these notes was
$187,500 and $287,500, respectively. During the year ended December 31, 2003 the
Company recorded interest expense related to these notes of $22,500, and made no
payments. During the year ended December 31, 2004 the Company recorded interest
expense in connection with these notes totaling $28,421, and paid $50,003,
including interest accrued in prior year.

In October 2004, the Company borrowed $39,000 from Kleega Corp., a company owned
by a stockholder, and repaid the loan in full during November 2004.

Consulting Services
-------------------

In April 2001, the Company entered into advisory agreement with Kleega Corp., a
company owned by a stockholder. Pursuant to the advisory agreement, Kleega Corp.
agreed to serve as management consultant and deal finder and technology
consultant to the Company from May 1, 2001 to April 30, 2002. During 2002, the
agreement was extended to December 31, 2003. In December 2004 the Company
renewed the agreement through December 31, 2005. Pursuant to the agreement, the
Company issued options to purchase 250,000 shares of its common stock, and will
pay a monthly retainer of $15,000 during the term of the agreement

For the years ended December 31, 2003 and 2004, the Company paid Kleega Corp.
consulting fees and related expenses of $183,394 and $185,987, respectively.


NOTE O  - COMMITMENTS AND CONTINGENCIES

Litigation
----------

The Company's commitment and contingencies include claims and litigation in the
normal course of business. In the opinion of management, there are no matters
pending or threatened that are expected to have a material adverse effect on the
Company's results of operations or financial position.

Operating Leases
----------------

The Company leases approximately 4,400 square feet of office space in San Diego,
California under a lease, which expires December 31, 2007. The Company also

                                      F-20
<PAGE>

NOTE O  - COMMITMENTS AND CONTINGENCIES (Continued)

leases certain office equipment under operating leases. The approximate future
minimum annual rental payments under operating leases are as follows:

                             2005               $    139,351
                             2006                    141,890
                             2007                    146,125
                                                ------------
                            Total               $    427,366
                                                ============

Total rental expense for the years ended December 31, 2004 and 2003 was
approximately $139,127 and $136,600, respectively.


NOTE P - NONCASH INVESTING AND FINANCING ACTIVITY

Supplemental disclosure of non-cash investing and financing activity is
presented below:

In February 2003, 10,300,000 shares of the Company's common stock were cancelled
in connection with an agreement between the Company and the two former owners of
PCS Securities.

In April 2003, an aggregate of 5,688,750 shares of common stock were issued in
connection with the exercise of 5,765,626 performance warrants.

In April 2003, 293,750 shares of the Company's common stock were cancelled in
connection with a litigation settlement agreement.

During the three months ended March 31, 2004 an aggregate of 285,000 shares of
the Company's common stock valued at $85,850 were issued in connection with
services provided to the Company.

In July 2004, 22,960 shares of common stock were issued in connection with the
exercise of 35,000 warrants by a debenture holder.

In December 2004, 400,000 shares of common stock were issued to an officer of
the Company as compensation for his outstanding performance.

                                      F-21
<PAGE>

NOTE Q - SELECTED QUARTERLY DATA

Summarized quarterly information for the Company for December 31, 2004 and 2003
follows:

<TABLE>
<CAPTION>
                2004                            Quarter         Quarter        Quarter         Quarter
                ----                            Ended           Ended           Ended           Ended
                                                31-Mar          30-Jun          30-Sep          31-Dec          Total
                                             ------------    ------------    ------------    ------------    ------------
<S>                                          <C>             <C>             <C>             <C>             <C>
Continuing Operations:
Revenues                                     $    647,719    $    660,623    $    689,569    $    776,919    $  2,774,830
Expenses                                          885,577         861,560         784,577         798,539       3,330,253
                                             ------------    ------------    ------------    ------------    ------------

Operating Loss                                   (237,858)       (200,937)        (95,008)        (21,620)       (555,423)

Other income (expense), primarily interest       (118,922)        (75,681)        (62,554)        (58,652)       (315,809)
                                             ------------    ------------    ------------    ------------    ------------

Net Loss Continuing Operations                   (356,780)       (276,618)       (157,562)        (80,272)       (871,232)

Income from Discontinued Operations                    --              --              --              --              --
                                             ------------    ------------    ------------    ------------    ------------

Net Loss                                     $   (356,780)   $   (276,618)   $   (157,562)   $    (80,272)   $   (871,232)
                                             ============    ============    ============    ============    ============

Loss per share                               $      (0.02)   $      (0.01)   $      (0.01)   $      (0.00)   $      (0.04)

Weighted Average # of shares                   22,940,058      23,083,303      23,103,559      23,223,839      23,088,511

<CAPTION>

                2003                            Quarter         Quarter        Quarter         Quarter
                ----                            Ended           Ended           Ended           Ended
                                                31-Mar          30-Jun          30-Sep          31-Dec          Total
                                             ------------    ------------    ------------    ------------    ------------
<S>                                          <C>             <C>             <C>             <C>             <C>
Continuing Operations:
Revenues                                     $    375,525    $    540,685    $    586,939    $    622,949    $  2,126,098
Expenses                                          869,559         755,512         728,615         763,378       3,117,064
                                             ------------    ------------    ------------    ------------    ------------

Operating Loss                                   (494,034)       (214,827)       (141,676)       (140,429)       (990,966)

Other income (expense), primarily interest       (467,315)        (51,373)        (65,081)        (59,118)       (642,887)
                                             ------------    ------------    ------------    ------------    ------------

Net Loss Continuing Operations                   (961,349)       (266,200)       (206,757)       (199,547)     (1,633,853)

Income from Discontinued Operations               174,117              --              --              --         174,117
                                             ------------    ------------    ------------    ------------    ------------

Net Loss                                     $   (787,232)   $   (266,200)   $   (206,757)   $   (199,547)   $ (1,459,736)
                                             ============    ============    ============    ============    ============

Loss per share                               $      (0.03)   $      (0.01)   $      (0.01)   $      (0.01)   $      (0.06)

Weighted Average # of shares                   24,523,769      22,471,329      23,152,438      22,790,336      23,229,494
</TABLE>

                                      F-22
<PAGE>

                                    SIGNATURE

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                      Sagient Research Systems, Inc.

                                      By: /s/ BRIAN M. OVERSTREET
                                      ------------------------------------------
                                      Brian M. Overstreet
                                      Title:  President & CEO
                                      Date:  March 21, 2005

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.


                                      /s/ BRIAN M. OVERSTREET
                                      ------------------------------------------
                                      Brian M. Overstreet
                                      Title:  President, CEO and Director
                                      Date:  March 21, 2005

                                      /s/ ROBERT F. KYLE
                                      ------------------------------------------
                                      Robert F. Kyle
                                      Title:  Vice President, Secretary, General
                                      Counsel, and Director
                                      Date:  March 21, 2005

                                      /s/ WILLIAM J. JACKSON
                                      ------------------------------------------
                                      William J. Jackson
                                      Title:  Director
                                      Date:  March 21, 2005