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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

(Mark One)

|ý | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | -------------------------------------------------------------------------------------

For the Fiscal Year Ended: December 31, 2001

or

|o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | -----------------------------------------------------------------------------------------

For the transition period
from                        to

Commission File Number: 0-27280

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META Group, Inc.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation or organization)

06-0971675(I.R.S. Employer Identification No.)208 Harbor Drive, Stamford, Connecticut(Address of principal executive office)

06912-0061(Zip Code)


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Registrant's telephone number, including area code: (203) 973-6700

Securities registered pursuant to Section 12(b) of the Act: None

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

common stock, $0.01 par value per share(Title of class)

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

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

The
aggregate market value of the voting stock held by nonaffiliates of the registrant as of March 21, 2002 (based on the closing price as quoted by Nasdaq National Market as of
such date) was $20,103,536.

As
of March 21, 2002, 12,803,171 shares of the registrant's common stock, $0.01 par value per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement relating to the registrant's Annual Meeting of Stockholders to be held on May 20, 2002, are incorporated by reference into
Part III hereof.

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PART I

ITEM 1. BUSINESS

GENERAL

META Group, Inc., a Delaware corporation founded in 1989 ("META Group," together with its subsidiaries The Sentry Group, Inc.
["Sentry"], 1422722 Ontario Inc. ["META Canada"], META Group Australia Holdings PTY Limited ["META Group Australia"],
META Group Singapore PTE Limited ["META Group Singapore"], Abundant Strategy SDN. BHD ["META Group Malaysia"], META Group France, META Group AG
["META Group Germany"] and MG [Bermuda] Ltd.collectively the "Company"), is a leading independent research and consulting firm
focusing on information technology ("IT") and business transformation strategies. The Company's goal is to deliver objective, consistent, and actionable guidance to enable organizations to innovate
more rapidly and effectively.

IT
user organizations utilize the Company's research, analysis, and recommendations to develop and employ cost-effective and revenue-enhancing strategies for selecting and
implementing timely IT solutions, and for aligning these solutions with business priorities. IT vendors use the Company's services for help in product positioning, marketing, and market planning, as
well as for internal IT decision making.

The
Company offers clients annual subscriptions to 12 different research services ("Advisory Services") and five structured transformation programs ("Infusions"). These services are
focused on specific areas of IT, the special needs of those within the IT organization, or the distinct IT/business issues of specific vertical markets. Recommendations to clients are based on
projections and analyses of important industry trends, experiences of other companies, key technology and business best practices, and the impact of new technologies, products, and services.

The
Company also offers strategic consulting services through its consulting division, META Group Consulting ("Strategic Consulting"). A significant portion of Strategic Consulting
clients are also Advisory Services subscribers.

In
addition, the Company offers various targeted publications as part of its Published Research Products family, as well as various newsletters and research subscriptions on its Web
site, metagroup.com.

The
Company targets as its clients substantial commercial and governmental users of IT, as well as IT vendors. As of December 31, 2001, the Company had subscribers in
approximately 3,100 client organizations worldwide. The Company recognizes that it is not the exclusive provider of IT research and advisory services to its clients.

Specific
comparative financial information may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the notes to the consolidated
financial statements.

META
GROUP® is a registered trademark of the Company. The META GROUP logo, META, META DELTAS, META FAX, META
FLASH and META TRENDS are trademarks of the Company. METAspectrumsm is a servicemark of the Company.

INDUSTRY BACKGROUND

Businesses and other organizations remain dependent on IT for competitive success, which has led to historical growth in IT-related expenditures
(despite a recent decrease due to general economic conditions). The IT market is being driven by many factors, including intensified domestic and global competition, Internet technologies and
e-business, the accelerating pace of technological change,

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shortened product and business planning life cycles, outsourcing, and widespread business process re-engineering and corporate downsizing.

At
the same time, the decision-making process involved in the planning, selection, and implementation of IT solutions is growing more complex. IT decision makers must evaluate various
new and rapidly evolving products from multiple vendors and consider the interoperability of these products with one another and with existing legacy systems. In addition, as IT assumes a more
business-critical role, senior
executives of organizations are compelled to take a more active role in IT planning and decision makingoften being called on to be strategic drivers of business and technology innovation.

Because
of these trends, there is an increasing need for a level of IT guidance that often cannot be effectively supported by the internal resources of a single organization.
Organizations are more frequently turning to outside sources for help with strategic and tactical advice in planning, selecting, and implementing IT. Historically, however, available solutions have
had significant limitations. Software and equipment vendors generally offer advice biased toward their own products or services, while often understating interoperability issues. Many professional
services firms and implementation companies provide technical advice, but they have incentives to promote solutions that require their services and often have purchasing and cooperative relationships
with particular hardware and software vendors. Some independent market research firms provide vendor-neutral advice, but most target technology vendors rather than the user community. Those market
research firms that target users typically do not offer advice over a full range of technology offerings. Therefore, there is a need for objective, user-focused, and broad-based IT market
research, coupled with personalized advice within the specific context of an organization's business environment and IT requirements.

THE META GROUP SOLUTION

The Company addresses the demand for user-focused guidance by providing objective IT research, analysis and advice as well as measurement strategies
to help substantial commercial and governmental users of IT balance the risk and value of their IT portfolios. The Company's services are also used by IT vendors for help in product positioning,
marketing, and market planning as well as for internal IT decision making. The Company's Advisory Services assist clients in making more informed, timely, and cost-effective decisions in
the context of the client's business and technology environments. Each Advisory Service is highly focused on enhancing the client's ability to reduce and/or contain the cost of IT, reduce risk, assess
vendor business practices and strategies, evaluate products and technologies, negotiate with vendors, develop financial strategies, and formulate IT architectures and strategic plans.

The
Company differentiates itself by delivering IT industry coverage through more comprehensive and integrated service segments, a higher level of personal service, and a greater
emphasis on client/analyst interaction.

The
Company's research is designed to alert clients to the sometimes subtle and unforeseen opportunities and risks inherent in complex IT business decisions. Although the Company's
research contains concrete conclusions and recommendations, a client seeking to understand the complex IT issues addressed in written research often requires further explanation and analysis in the
context of the client's unique business environment and IT requirements. Accordingly, all of the Company's Advisory Services clients have direct access to the Company's analysts, who adapt the
Company's published conclusions and recommendations to the client's specific IT environment. The Company's analysts are available to clients through direct telephone consultations, customized
on-site briefings, annual conferences, and in-depth quarterly teleconferences addressing significant current IT developments.

The
Company believes its proactive involvement in clients' specific IT problem-solving situations enables it to provide actionable advice. The Company's analysts have
real-time access to a broad base

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of current user experiences spanning vertical industries and related technologies. This firsthand practical knowledge is disseminated throughout the Company at weekly meetings of the Company's entire
research staff. As a result of this interaction and broad knowledgebase, the Company's analysts deliver more informed conclusions and recommendations. The Company believes that its interactive
approach provides significant value to senior management and IT decision makers by enhancing their ability to make sound, practical, and cost-effective decisions.

The
Company's objective is to leverage its reputation, comprehensive research model, knowledgebase, customer relationships, and domestic and international sales network to expand the
range of clients it serves, further penetrate its existing client base, extend its product line, and broaden the scope of its services.

PRODUCTS AND SERVICES

The Company's services and products are designed to complement each other and provide flexible access to market assessment and analytical expertise in the
following categories:



Information
regarding Advisory Services, Strategic Consulting and Published Research Products revenues, operating profit (loss) and long-lived assets (both domestic and
international) may be found in Note 15 to the Company's consolidated financial statements.

Advisory Services

The Company's Advisory Services provide technology and business research spanning the full spectrum of IT. Advisory Services offer bottom-line advice
that clients need to help them make better and faster IT decisions. The Company's Advisory Services include one-on-one analyst interaction via on-site briefings and
telephone support, which complements the written deliverables described below. Advisory service offerings include industry-specific coverage (e.g., energy, insurance, government) as well as services
targeted toward executive IT management.

The
Company believes its Advisory Services cover all material IT-related issues faced by its clients. The Company applies a consistent approach to all Advisory Services by
offering a high level of personal service with an emphasis on client/analyst interaction. Proactively contacting clients on a regular basis, the Company's analysts apply their knowledgebase of product
information and user experience to respond to the unique IT situation of each client with in-context, definitive advice and recommendations.

The
following deliverables, which involve the direct participation of the Company's research analysts, typically are provided to subscribers to the Company's Advisory Services as an
integral part of such services:

Client/Analyst Interaction Deliverables:



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Research and Multimedia Deliverables:



Event Deliverables:



The
Company's research is delivered online via metagroup.com and is also available in non-standard delivery options via Lotus Notes, intranet, CD-ROM and paper.

Following
is a description of the Company's Advisory Services:



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6

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META Group Infusions

Supplementing the foregoing, during 1998 the Company introduced Infusionsstructured transformation programs that combine offerings across the
Company's Advisory Services. The Company's Infusions offer best practices that enable clients to accelerate and drive change across their organizations. Based on sound program and project management
disciplines, Infusions provide a method to break up challenges into manageable projects, phases, activities, and tasks.

To
help clients achieve their goals, the Company's Infusions offer resources and ongoing support that focus on accountability and communication to obtain buy-in, demonstrate
progress, and articulate value. Integral to the Infusion programs are tools, templates, and workshops that accelerate the creation of key deliverables and coaching to catalyze change, provide
guidance, and drive progress.

Following
is a description of the Company's various Infusion programs:



8

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Subscribers
to the Company's Infusion products receive the same deliverables as those accompanying the Company's core Advisory Services and one or more of the following additional
deliverables, depending on the program.

Client/Analyst Interaction Deliverables:



Research and Multimedia Deliverables:



Event Deliverables:



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Strategic Consulting

Strategic Consulting offers project consulting services that address clients' business and technology challenges. The Company's Strategic Consulting division
combines tools, methods, and project management skills with expertise to help mid to large-sized businesses measurably increase returns from technology investments. META Group's collaborative client
approach helps clients map out the required actions to achieve industry best practices through independent, unbiased analysis that leverages the Company's Advisory Services research and analysis.
Focusing on critical business imperatives, the Company's consultants use fully customized discovery, development, and delivery techniques and methods, as well as structured transformation programs, to
ensure clients maximize the performance of their business transformation efforts.

Strategic
Consulting targets executives at both large and medium sized end-user organizations and IT vendors that serve such organizations. Large and medium sized
end-user client organizations typically use the Strategic Consulting services when they need to transform elements of their businesses or reduce their business' costs through the use of
IT. Such transformation support includes selecting, planning, and integrating new application systems; rationalizing supplier networks while deploying electronic procurement systems; optimizing
strategic outsourcing support; planning adaptive infrastructure to effectively use Internet/intranet technology; revitalizing operations to support new business demands; maximizing benchmarking and
scorecards to enhance IT portfolio performance and accelerate business alignment; and using business intelligence to maximize the results of an enterprise's customer strategy.

IT
vendors also face significant challenges given the complexities in customer buying behavior, pressure from external forces (e.g., competition, regulation) and internal practices that
may not be optimized for a rapidly changing environment. Strategic Consulting services address such challenges as vendor market positioning relative to customer demands, competitive landscape
analysis, and partnering/channel strategies.

Strategic
Consulting projects utilize customizable assessment, strategy development and coaching/monitoring approaches to enable clients to maximize the performance of their IT/business
transformation efforts. In addition, Strategic Consulting offers several services to help client organizations implement recommendations of the Company's Advisory Services.

Domestically,
the Company's Strategic Consulting services are principally performed by the Company's consultants. Internationally, Strategic Consulting services are principally performed
by consultants of the Company's independent sales representative organizations and international subsidiaries.

Published Research Products

The Company's Published Research Products include research reports and interactive resources (online data access and decision support as well as multimedia
briefing programs). Based on hands-on research, extensive Web and phone surveys and accompanying META Group Advisory Services research, these research products offer thorough market
research, practical executive/operational guides and in-depth IT product evaluations. Certain of the Company's Published Research Products may be purchased either as part of an annual
service subscription contract or individually. When purchased as part of an annual subscription contract, the revenues are recognized ratably over the contract term and are included in Advisory
Services revenue. When the products are purchased individually, the revenue is recognized when the products are delivered and are reflected in Published Research Products revenue. The Company develops
its own Published Research Products and also resells products produced by third parties.

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The
successful assimilation, marketing, and sale of new products are subject to certain risks and uncertainties. See "Management's Discussion and Analysis of Financial Condition and
Results of OperationsCertain Factors That May Affect Future ResultsRisks Associated With New Product Development."

The
Company's Published Research Products are delivered online via metagroup.com and are also available in non-standard delivery options via Lotus Notes, intranet,
CD-ROM and paper.

RESEARCH AND ANALYSIS

The Company employs a consistent, disciplined research and analysis methodology across the Company's Advisory Services. Each Advisory Service has a Service
Director who is responsible for implementing the Company's research and analysis methodology in that service. The development methodology consists of an iterative process of research, analysis,
hypothesis, and testing. Analysts conduct extensive primary research, working with the Company's user client base, surveying vendors, and contacting other sources. These activities are supplemented
with searches of numerous trade, financial, and other third-party source materials compiled in the Company's resource center. A meeting of the entire META Group research staff is held weekly, at which
findings are presented and scrutinized. From this research, analysts identify significant patterns and trends, develop assumptions, test hypotheses, and arrive at concrete recommendations and
conclusions to provide to clients. Analyst
compensation is based in part on meeting monthly publishing deadlines as well as proactive client contact.

The
knowledge and experience of the Company's analysts is critical to the quality of the Company's products and services. To ensure consistency of positions and analysis across service
disciplines, all of the Company's research is reviewed by one of the Company's five Co-Research Directors. While varying opinions and philosophical contention among services and research
disciplines are encouraged, final positions and conclusions are consistent. This practice ensures that the analytical structure and recommendations presented in the Company's research better enable
the various elements of client organizations to formulate integrated strategies based on coherent information and analysis.

SALES AND MARKETING

The Company uses a direct sales force domestically and a network of local independent sales representative organizations and wholly owned subsidiaries
internationally to market and sell its Advisory Services, Strategic Consulting and Published Research Products. The Company's domestic direct sales force consists of approximately 74 sales people
located throughout the United States. They are supported by teams of inside sales people, relationship managers and administrative personnel located in the Company's regional offices and at its
headquarters. The inside sales department is an important source of Published Research Products sales, sales to vendors, and sales to emerging vendors and small to medium-sized enterprises. The direct
and inside sales channels are managed by the Company's Senior Vice President of Sales.

Internationally,
the Company utilizes both wholly owned subsidiaries and independent sales representative organizations to sell its Advisory Services, Strategic Consulting, and Published
Research Products throughout the Americas, Europe, the Middle East, the Far East, Asia Pacific, India, and South Africa. In the year ended December 31, 2000, the Company acquired substantially
all the assets of its independent sales representative organization in Canada. In January 2001, the Company acquired substantially all the assets of its independent sales representative
organizations in Australia and Singapore. On December 31, 2001, the Company acquired a majority ownership interest in META Group Germany. META Group Germany owns the exclusive distribution
rights to META Group, Inc. products and services in Spain, Portugal, Switzerland, Germany, Austria, and Central, Southern, and

11

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Eastern Europe. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Management's Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources" and notes to the consolidated financial statements. In the year ended December 31, 2000, all independent sales representative
organization offices in Asia, Europe, the Middle East, and Africa were placed under regional management.

Under
the terms of the Company's agreements with independent sales representative organizations, such organizations are assigned exclusive territories and annual quotas. These
organizations also perform selected client service functions, and bill and collect revenues attributable to clients within
their territories. The Company recognizes Advisory Services revenues from independent sales representative organizations at rates of 25% to 40% of amounts billed to those clients. See "Management's
Discussion and Analysis of Financial Condition and Results of OperationsCertain Factors That May Affect Future ResultsRisk Associated With International Operations" and
Note 1 to the consolidated financial statements.

The
Company also markets and sells certain of its products and services and provides additional content to its internet subscribers on its Website, metagroup.com.

CLIENT SUPPORT

The Company is committed to providing a high level of client service as defined by response time, clarity of advice, and quality of communication. The Company's
analysts respond to clients' inquiries and concerns as they arise, and analyst compensation is based in part on client inquiry response times. Analysts' regular contact with clients through telephone
consultations, briefings, and events also provides the Company with feedback that is used in the enhancement of its services. In addition, the Company's research library frequently performs
client-specific topical searches on particular IT issues. The Company maintains a key issues database that identifies areas of particular concern to clients and regularly uses customer satisfaction
surveys to refine and enhance the quality of the services it provides. As an integral part of the Company's commitment to customer service, the Company offers a dedicated Client Services team that
works to ensure each client receives targeted assistance and quick decision-oriented information.

COMPETITION

The Company targets as its clients substantial commercial and governmental users of IT, as well as IT vendors. The Company experiences competition in this market
for IT research/analysis products and services and strategic consulting services from other independent providers of similar services, as well as from the internal planning and marketing staffs of the
Company's current and prospective clients. The Company's principal direct competitor for Advisory Services, Gartner Group, Inc., has a substantially longer operating history, is significantly
larger, and has considerably greater financial resources and market share than the Company. The Company also competes indirectly against numerous other information and consulting service providers,
including electronic and print media companies and consulting firms. The Company's indirect competitors could choose to compete directly against the Company in the future. Many of the Company's direct
and indirect competitors have substantially greater financial, information gathering, and marketing resources than the Company. In addition, although the Company believes it has established a
significant market presence, there are few barriers to entry into the Company's marketand new competitors could readily seek to compete against the Company in one or more market segments
addressed by the Company's Advisory Services, Strategic Consulting services, and Published Research Products. Increased competition could adversely affect the Company's operating results through
pricing pressure and loss of market share. There can be no assurance that the Company will be able to continue to compete successfully against existing or new competitors. See "Management's Discussion
and Analysis of Financial Condition and Results of OperationsCertain Factors That May Affect Future ResultsCompetition."

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The
Company believes that, with respect to both IT research/analysis products and services and strategic consulting services, the principal competitive factors are quality of research
and analysis applied in the context of client IT environments, timely delivery of relevant information, client support and responsiveness, the ability to offer products and services that meet changing
market needs for information and analysis, and price. The Company believes it competes favorably with respect to each of these factors.

EMPLOYEES

As of December 31, 2001, the Company employed 740 people, including the people employed by its subsidiaries. In February 2002, the Company reduced
its workforce by 43 people. Immediately after the reduction in force, the total number of employees was 697, including 354 research analysis and fulfillment personnel (including 249 analysts and
consultants), 216 sales and marketing personnel, and 127 administrative personnel. None of the Company's employees is represented by a collective bargaining arrangement, and the Company has
experienced no work stoppages. The Company considers its relations with its employees to be good.

The
Company's future success depends in large part on the ability to continue to motivate and retain highly qualified employees, including management personnel, and to attract and retain
qualified personnel, including research analysts, consultants, sales personnel, and product development and operations staff. Competition for qualified personnel in the Company's industry continues to
be intense, and many of the companies with which the Company competes for qualified personnel, including Gartner Group, Inc., have substantially greater financial and other resources than the Company.
There can be no assurance that the Company will be able to recruit, retain, and motivate a sufficient number of qualified personnel to compete successfully. The loss of any of the Company's senior
management personnel, particularly Dale Kutnick, Chairman of the Board of Directors, Chief Executive Officer, and Co-Research Director of the Company, or any material failure to recruit,
retain, and motivate a sufficient number of qualified personnel could have a material adverse effect on the Company. See "Management's Discussion and Analysis of Financial Condition and Results of
OperationsCertain Factors That May Affect Future ResultsDependence on Ability to Attract and Retain Qualified Personnel" and "Dependence on Key Personnel."

ITEM 2. PROPERTIES

The Company's headquarters are located in approximately 104,000 square feet of leased office space in Stamford, Connecticut. This facility accommodates the
Company's Advisory Services, Strategic Consulting and Published Research Products segments. The Company also leases office space in other
U.S. locations, as well as locations in Canada, Australia, Singapore, France, Germany, Switzerland and Spain to support its three segments. The Company believes that its existing facilities are
adequate for its current needs and that additional facilities are available for lease to meet future needs.

ITEM 3. LEGAL PROCEEDINGS

Other than ordinary routine litigation incidental to the Company's business and that the Company believes is unlikely to have a material adverse effect on its
business, the Company is not a party, nor is any of its property subject to, any pending legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's stockholders during the fourth quarter of the year ended December 31, 2001.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock, par value $0.01 per share (the "Common Stock"), has been traded on the Nasdaq National Market under the symbol "METG" since its
initial public offering (the "Offering") at $12.00 per share on December 1, 1995. Prior to the Offering, there was no established public trading market for the Common Stock.

The
following table reflects the range of high and low bid quotations, as reported on the Nasdaq National Market, for the Common Stock in each quarter of the years ended
December 31, 2001 and 2000.

High

Low2001:Fourth Quarter

$
2.91

$
1.60Third Quarter

$
2.80

$
1.40Second Quarter

$
3.64

$
0.77First Quarter

$
7.00

$
1.252000:Fourth Quarter

$
10.88

$
4.50Third Quarter

$
26.00

$
12.38Second Quarter

$
26.44

$
17.00First Quarter

$
35.63

$
17.88


On
March 21, 2002, the closing price of the Common Stock was $2.20, as reported on the Nasdaq National Market. On that date, there were approximately 260 holders
of record of the Common Stock and approximately 1,100 beneficial holders, based on information obtained from the Company's transfer agent.

The
Company has never paid cash dividends on its Common Stock. Any future declaration and payment of dividends will be subject to the discretion of the Company's Board of Directors (the
"Board of Directors"), will be subject to applicable law, and will depend on the Company's results of operations, earnings, financial condition, contractual limitations, cash requirements, future
prospects, and other factors deemed relevant by the Board of Directors. In addition, the terms of the Company's credit facility with its bank prohibits the payment of cash dividends on its Common
Stock.

In
October 2000, the Company completed the acquisition of substantially all the assets of Rubin Systems, Inc. ("RSI"). Pursuant to the terms of the Asset Purchase Agreement
among RSI, Howard Rubin and the Company dated October 27, 2000 (the "Asset Purchase Agreement"), RSI received an initial payment of $750,000 in cash and $375,000 in Common Stock (36,874 shares;
the "Initial Shares"). During the year ended December 31, 2001, RSI earned contingent payments of $1.3 million, consisting of $250,000 paid in Common Stock (57,084 shares; the "Earnout
Shares") and the remainder paid in cash. In the event certain financial targets are met, additional contingent consideration of up to $3.1 million payable in cash and $1.9 million
payable in Common Stock may be paid through March 2004. In the event the aggregate number of shares issued in satisfaction of additional contingent consideration exceeds 349,526, the remaining
consideration will be payable in cash. RSI is wholly-owned by Dr. Howard Rubin, a director and officer of the Company.

In
June 2001 the Company completed a private placement of its Common Stock whereby the Company issued 1,726,617 shares of Common Stock (the "Private Placement Shares") for $2.78
per share to Dale Kutnick, the Company's Chairman of the Board of Directors, Chief Executive Officer and Co-Research Director, and additional purchasers affiliated with Francis J.
Saldutti, Harry Gruner and George McNamee, each of whom is a member of the Board of Directors. The Board of Directors approved the transaction after receiving the favorable recommendation of a Special
Committee of the

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Board of Directors consisting of three disinterested members of the Board of Directors. The Special Committee retained BNY Capital Markets, Inc. as its financial advisor to render a fairness
opinion on the transaction. Total proceeds to the Company were $4.57 million, net of offering costs of approximately $227,000.

The
Initial Shares, Earnout Shares and Private Placement Shares (collectively the "Shares") were issued in reliance upon an exemption from the registration provisions of the Securities
Act of 1933, as amended (the "Act"), set forth in Section 4(2) thereof and Rule 506 of Regulation D of the General Rules and Regulations under the Act promulgated by the
Securities and Exchange Commission ("Regulation D"). RSI and the purchasers of the Private Placement Shares made certain representations to the Company as to their investment intent, level of
sophistication, access to information and status as an accredited investor as defined in Rule 501(a) of Regulation D. The Shares are subject to restrictions on transfer absent
registration under the Act or exemption therefrom. In December 2001 the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission to
register the Shares (other than those issued to Mr. Kutnick), although such registration statement is not yet effective.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data presented below is derived from the consolidated financial statements of the Company and should be read in connection with those
statements, which are included herein.

|                              |                                                                | Year Ended December 31,         
|----------------------------- | -------------------------------------------------------------- | --------------------------------
|
|
|Statement of Operations Data: |                                                                |                                 
|                              | Revenues:                                                      |                                 
|                              |                                                                | Advisory services               
|                              |                                                                | Strategic consulting            
|                              |                                                                | Published research products     
|                              |                                                                |                                 
|                              |                                                                |                                 
|                              |                                                                |                                 
|                              | Operating expenses:                                            |                                 
|                              |                                                                | Cost of services and fulfillment
|                              |                                                                | Selling and marketing           
|                              |                                                                | General and administrative      
|                              |                                                                | Depreciation and amortization   
|                              |                                                                | Restructuring charge            
|                              |                                                                |                                 
|                              |                                                                |                                 
|                              |                                                                |                                 
|                              | Operating (loss) income                                        |                                 
|                              | Other income (expense):                                        |                                 
|                              | Impairment loss                                                |                                 
|                              | Other income, net                                              |                                 
|                              |                                                                |                                 
|                              | Income (loss) before provision (benefit) for income tax        |                                 
|                              | Provision (benefit) for income tax                             |                                 
|                              |                                                                |                                 
|                              | Income (loss) before cumulative effect of change in accounting |                                 
|                              | Cumulative effect of change in accounting(1)                   |                                 
|                              |                                                                |                                 
|                              | Net income (loss)                                              |                                 
|                              |                                                                |                                 

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| | Income (loss) before cumulative effect of change in accounting per diluted common share |  | $ | (1.47  | ) | $ | (.75   | ) | $ | .80    |  | $ | .70    |  | $ | .48   
| | --------------------------------------------------------------------------------------- |  | - | ------ | - | - | ------ | - | - | ------ |  | - | ------ |  | - | ------
| | Cumulative effect of change in accounting(1)                                            |  | $ |       |   | $ | (.22   | ) |   |       |  |   |       |  |   |      
| |                                                                                         |  |   |        |   |   |        |   |   |       
| | Net income (loss) per diluted common share                                              |  | $ | (1.47  | ) | $ | (.97   | ) | $ | .80    |  | $ | .70    |  | $ | .48   
| |                                                                                         |  |   |        |   |   |        |   |   |       
| | Weighted average number of diluted common shares outstanding                            |  |   | 11,960 |   |   | 10,763 |   |   | 11,501 |  |   | 12,596 |  |   | 11,937
| |                                                                                         |  |   |        |   |   |        |   |   |       
| | Income (loss) before cumulative effect of change in accounting per basic common share   |  | $ | (1.47  | ) | $ | (.75   | ) | $ | .86    |  | $ | .78    |  | $ | .53   
| | Cumulative effect of change in accounting(1)                                            |  | $ |       |   | $ | (.22   | ) |   |       |  |   |       |  |   |      
| |                                                                                         |  |   |        |   |   |        |   |   |       
| | Net income (loss) per basic common share                                                |  | $ | (1.47  | ) | $ | (.97   | ) | $ | .86    |  | $ | .78    |  | $ | .53   
| |                                                                                         |  |   |        |   |   |        |   |   |       
| | Weighted average number of basic common shares outstanding                              |  |   | 11,960 |   |   | 10,763 |   |   | 10,719 |  |   | 11,326 |  |   | 10,821
| |                                                                                         |  |   |        |   |   |        |   |   |       

|                    |                                             | December 31,
|------------------- | ------------------------------------------- | ------------
|
|
|Balance Sheet Data: |                                             |             
|                    | Cash and cash equivalents                   |             
|                    | Marketable securities                       |             
|                    | Working capital (deficit)                   |             
|                    | Total assets                                |             
|                    | Borrowings under revolving credit agreement |             
|                    | Current portion of long-term debt           |             
|                    | Deferred revenues                           |             
|                    | Non-current portion of deferred revenues    |             
|                    | Long-term debt                              |             
|                    | Total stockholders' equity                  |             

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company is a leading independent research and consulting firm focusing on IT and business transformation strategies. The Company's goal is to deliver
objective, consistent, and actionable guidance to enable organizations to innovate more rapidly and effectively.

IT
user organizations utilize the Company's research, analysis, and recommendations to develop and employ cost-effective and revenue-enhancing strategies for selecting and
implementing timely IT solutions, and for aligning these solutions with business priorities. IT vendors use the Company's services for help in product positioning, marketing, and market planning, as
well as for internal IT decision making.

The
Company has three operating business segments: Advisory Services, Strategic Consulting and Published Research Products. The Advisory Services segment provides annually renewable
subscription services (focused on specific areas of IT, IT issues related to a specific vertical market, or the specific needs of those within the IT organization), service analyst briefing
engagements, and conferences. Supplementing these services are the Company's Infusion programs, which build on the business-focused analysis of the Company's subscription services by offering
methodologies and skill-based training needed to successfully manage specific business-critical issues. The Strategic Consulting segment provides strategic consulting engagements addressing clients'
business and technology issues. A significant portion of Strategic Consulting clients are also Advisory Services subscribers. The Published Research Products segment provides reports, studies, and
surveys offering in-depth analysis of specific business or IT issues.

Advisory
Services subscriptions, which are annually renewable contracts and generally payable by clients in advance, constituted approximately 73% and 71% of the Company's total revenues
for the years ended December 31, 2001 and 2000, respectively. Billings attributable to the Company's Advisory
Services are initially recorded as deferred revenues and then recognized pro rata over the contract term.

During
the year ended December 31, 2001, Advisory Services revenues attributable to international clients were billed and collected by the Company's independent sales
representative organizations and its wholly owned subsidiaries in Canada, Australia, Singapore, Malaysia and France. The Company realized Advisory Services revenues from the independent sales
representative organizations at rates of 25%-40% of the amounts billed to their clients.

One
measure of the volume of the Company's Advisory Services business is its annualized "Contract Value," which the Company calculates as the aggregate annualized subscription revenue
recognized from all Advisory Services contracts in effect at a given point in time, without regard to the remaining duration of such contracts. Contract Value is not necessarily indicative of future
Advisory Services revenues. Contract Value decreased 8.5% to $80.6 million at December 31, 2001, from $88.1 million at December 31, 2000.

Revenues
from Strategic Consulting engagements constituted approximately 23% of the Company's total revenues for the years ended December 31, 2001 and 2000. The Company recognizes
revenues on Strategic Consulting engagements as the work is performed.

Revenues
from Published Research Products constituted approximately 5% and 6% of the Company's total revenues for the years ended December 31, 2001 and 2000, respectively. The
Company recognizes revenues from the sale of Published Research Products when the products are delivered.

The
Company's operating expenses consist of cost of services and fulfillment, selling and marketing expenses, and general and administrative expenses. Cost of services and fulfillment
represents the costs

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associated with production and delivery of the Company's products and services and includes the costs of research, development, and preparation of periodic reports, analyst telephone consultations,
executive briefings and conferences, research reports, consulting services, new product development, and all associated editorial and support services. Selling and marketing expenses include the costs
of salaries, commissions, and related benefits for selling and marketing personnel as well as travel and promotion, and bad debt expense associated with accounts and notes receivable from its
independent sales representative organizations. General and administrative expenses include the costs of the finance and accounting departments, in addition to the legal, human resources, corporate IT
and other administrative functions of the Company, as well as bad debt expense associated with accounts receivable from its domestic customers. See "Segment Reporting" in Note 15 to the
consolidated financial statements for information regarding the Company's operating segments.

In
the fourth quarter of 2000, the Company adopted the provisions of Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB 101"). The Company
identified certain newer Advisory Services product offerings containing multiple service elements where revenue was recognized as the services were performed. The Company has elected to record these
multiple-element contracts on the straight-line method over the contract term consistent with the treatment of the Company's other traditional Advisory Services product offerings, because
it is the Company's belief that the straight-line method is most appropriate given the increased sales volumes and the varying usage patterns by customers of the underlying services. As
required by SAB 101, the Company retroactively adopted the provisions effective January 1, 2000, and has reported this on the Consolidated Statement of Operations as a cumulative effect of a
change in accounting in the amount of $2,438,000, net of tax. See Note 2 to the consolidated financial statements.

Results of Operations

Years Ended December 31, 2001 and December 31, 2000

Total Revenues.Total revenues decreased 1% to $117.8 million in the year ended December 31, 2001, from
$119.3 million in the year ended December 31, 2000.

Revenues
from Advisory Services, which generally are derived from annually renewable contracts payable by clients in advance, increased 1% to $85.5 million in the year ended
December 31, 2001, from $84.6 million in the year ended December 31, 2000, and increased as a percentage of total revenues to 73% from 71%. The increase in revenues from Advisory
Services was principally due to incremental revenues from the acquisitions of the Company's independent sales representative organizations in Canada and Asia Pacific (the Company previously recognized
Advisory Services revenues of 50% and 40% of amounts billed by the distributors in Canada and Asia Pacific, respectively). Advisory Services revenues attributable to international clients increased
14% to $15.1 million in the year ended December 31, 2001, from $13.2 million in the year ended December 31, 2000, and increased as a percentage of Advisory Services
revenues to 18% from 16%. This increase was largely offset by a decrease in the Company's domestic subscription revenues due to the continued softening demand for the Company's Advisory Services and
the continued decrease in domestic IT spending as a result of general economic conditions that began in the second half of the year ended December 31, 2000.

Strategic
Consulting revenues, which result from Strategic Consulting engagements addressing clients' business and technology issues, decreased 3% to $26.9 million in the year
ended December 31, 2001, from $27.7 million in the year ended December 31, 2000, and remained constant as a percentage of total revenues at 23%. The decrease was principally due
to lower headcount in the Company's domestic
consulting practice. In the second half of the year ended December 31, 2000, Strategic Consulting experienced an imbalance between the skill sets of available consulting staff and the then
existing consulting projects that ultimately resulted in a reduction in staff within Strategic Consulting in

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early 2001. Also contributing to the decrease was a decrease in sales of the Company's security planning and operations services, as well as from market pricing pressures stemming from general
economic conditions. The decreases were partially offset by incremental revenues from the Company's subsidiaries in Canada and Asia Pacific, from the acquisition of RSI, increased productivity of its
existing staff and by growth in the Company's core consulting business due principally to the increased demand for the Company's consulting services that focus on cost reduction strategies.

Published
Research Products revenues decreased 22% to $5.4 million in the year ended December 31, 2001, from $7 million in the year ended December 31, 2000,
and decreased as a percentage of total revenues to 5% from 6%. The decrease was principally due to the overall decrease in IT spending as a result of general economic conditions and a change in the
mix of products sold by the Company's inside sales channel. Previously, these sales personnel sold only the Company's traditional publication products. Since the second half of the year ended
December 31, 2000 such personnel have also been selling bundled packages that combine traditional publications with service analyst inquiry, as well as Web-based subscription
products that consist primarily of content developed by the Company's Advisory Services personnel. Revenues from the sales of these bundled packages and Web-based subscription products are
recognized as Advisory Services revenues. The Company currently anticipates that its inside sales channel will continue to sell these bundled packages and Web-based subscription products
for the foreseeable future. In addition, revenues from the Company's Published Research Products have decreased as a result of a decrease in sales of products distributed under agreements with third
party content providers.

Cost of Services and Fulfillment.Cost of services and fulfillment decreased 10% to $62.4 million in the year ended
December 31, 2001, from $69.7 million in the year ended December 31, 2000, and decreased as a percentage of total revenues to 53% from 58%. The decrease was principally due to
decreases in royalties paid to third parties that assist in the fulfillment of certain products and services sold by the Company due to a decrease in the sales of such products and services, a
decrease in provisions for discretionary bonuses, a decrease in travel costs incurred by the Company's analysts, consultants and fulfillment personnel, and a decrease in costs of events due to an
overall decrease in the number of events held during the year ended December 31, 2001. These decreases were partially offset by increased salaries for the Company's analysts, consultants and
fulfillment personnel as a result of an increase in headcount in such positions that occurred during the first half of the year ended December 31, 2001, increased facility costs, incremental
costs from the Company's subsidiaries in Canada and Asia Pacific, and costs associated with the establishment of a subsidiary in France.

Selling and Marketing Expenses.Selling and marketing expenses increased 22% to $45.2 million in the year ended
December 31, 2001, from $37.2 million in the year ended December 31, 2000, and increased as a percentage of total revenues to 38% from 31%. The increase in selling and marketing
expenses was principally due to $6.1 million in bad debt expense recorded in 2001 relating to the Company's accounts and notes receivable from certain of its international distributors,
compared to $1.1 million recorded in the prior year. Included in bad debt expense was $2.4 million attributable to accounts and notes receivable owed from the Company's independent
distributor in the France/Belgium territory. In
the third quarter of the year ended December 31, 2001, the Company terminated the France/Belgium distribution agreement and in the fourth quarter of the year ended December 31, 2001, the
distributor commenced bankruptcy proceedings. The Company created a subsidiary in France that assumed the territory rights for France, and assigned the territory rights for Belgium to one of its
existing international distributors. The Company also recorded bad debt provisions on notes and accounts receivable from several of its other international distributors due to uncertainties
surrounding the ultimate collectability of such accounts. In addition, the Company incurred greater marketing expenses in connection with its subsidiaries in Canada and Asia Pacific, the establishment
of META Group France, and in connection with marketing support of its independent sales representative organizations. The Company also incurred greater commission expense in the year ended
December 31,

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2001. As the Company amortizes commission payments over the subscription period in which the related Advisory Services revenues are amortized to income, the Company experienced increased commission
expense in the year ended December 31, 2001 in connection with increased commissions paid under the Company's sales commission plan for the plan year ended January 31, 2001, a one time
thirteen month period. The increased payments were principally due to financial incentives contained in the Company's sales commission plan when it reorganized the previously separate sales forces in
2000. The Company has restructured its sales commission plan for the plan year ending January 31, 2002 in an attempt to reduce overall commissions paid. The increases were partially offset by
decreases in travel and salary expenses of the Company's selling and marketing personnel principally due to the reduction in force that occurred in April 2001.

General and Administrative Expenses.General and administrative expenses decreased 12% to $15.4 million in the year
ended December 31, 2001, from $17.5 million in the year ended December 31, 2000, and decreased as a percentage of total revenues to 13% from 15%. The decrease was principally due
to a decrease in bad debt expense on the Company's accounts receivable with its domestic customers resulting from a significant improvement in accounts receivable management during the year ended
December 31, 2001. Additionally, bonus expense decreased as a result of lower provisions for discretionary bonuses accrued during the year ended December 31, 2001. The decreases were
partially offset by incremental costs from the Company's subsidiaries in Canada and Asia Pacific and the establishment of META Group France, and increased salary and benefit expenses that occurred
during the first half of the year ended December 31, 2001.

Depreciation and Amortization.Depreciation and amortization expense increased 58% to $7.7 million in the year ended
December 31, 2001, from $4.9 million in the year ended December 31, 2000. The increase in depreciation and amortization expense was principally due to higher levels of property
and equipment on hand during the year ended December 31, 2001 and higher levels of goodwill and other intangible assets on hand during the same period due to the acquisitions consummated during
the years ended December 31, 2000 and 2001 and the payment of contingent consideration in the year ended December 31, 2001 for certain of the Company's acquisitions that were consummated
during the year ended December 31, 2000.

Restructuring Charge.In April 2001, the Company announced a restructuring whereby it reduced its workforce by 100
persons (representing 15% of the workforce at the time) in the quarter ended June 30, 2001. As a result of the restructuring, the Company incurred a $359,000 restructuring charge
during the quarter ended June 30, 2001 for severance payments made during the quarter ended June 30, 2001. There were no restructuring charges in the year ended December 31, 2000.

Impairment Loss.During the years ended December 31, 2001 and 2000, the Company determined that, based on estimates of
future cash flows and other available market data, several of its investments in and advances to companies in parallel industries were impaired. Accordingly, the Company recorded impairment losses of
$9.2 million and $2.6 million, respectively. The Company follows a practice to review its individual investments for impairment on a quarterly basis. This review includes the examination
of the estimated market value of each specific investment using peer group market comparables of public companies. Additionally, the Company reviews the business climate of each investee, its
historical financial results, its projected cash flow, its plans for the future and the likelihood of achieving such plans. Based on such review, a determination is made on a
case-by-case basis as to whether an investment is deemed to be permanently impaired and therefore requires an adjustment to the carrying value. The Company will continue to
evaluate its investments for impairment every quarter, and based on its review, may record additional impairment losses should the facts and circumstances in existence at that time merit such an
adjustment. As of December 31, 2001, the balance of the Company's Investments and Advances was $8.2 million. See "Certain Factors That May Affect Future ResultsRisks
Associated with Strategic Investments."

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Other Income, Net.Other income increased to $2.1 million in the year ended December 31, 2001, from $361,000 in
the year ended December 31, 2000. The increase was principally due to a $2.6 million gain recognized on the sale of its investment in Intermedia Group. Proceeds from the sale were
$2.94 million. The gain was partially offset by increased interest expense recorded on the Company's outstanding borrowings under its line of credit. See "Liquidity and Capital Resources" and
Note 9 to the consolidated financial statements.

Provision for Income Taxes.The Company recorded an income tax benefit of $2.9 million during the year ended
December 31, 2001 and a benefit of $4.2 million during the year ended December 31, 2000, reflecting an effective tax rate of 14% and 35% for the years ended December 31,
2001 and 2000, respectively. The lower effective rate in 2001 was principally due to the impact and tax nature of the impairment losses taken in 2001 for which the Company did not take a benefit and
are currently not deductible for tax purposes, as well as the impact of a full valuation allowance recorded for the net operating loss carryforwards generated by the Company's subsidiaries in Canada,
Asia Pacific and France due to the uncertainty of realizing the loss carry-forwards because of the start-up nature of these subsidiaries.

Included
in the Company's costs of services and fulfillment, selling and marketing and general and administrative expenses for the year ended December 31, 2001 is
$0.6 million associated with the write-down of idle facilities at the Company's Stamford, CT headquarters.

In
February 2002, the Company announced a strategic reorganization to align the Company's resources with market demand and to better position the Company for profitability. As
part of the reorganization, the Company reduced its workforce by 43 persons (representing 7% of the workforce at the time). The Company currently estimates that the reductions will result in cost
savings of approximately $4.2 million in 2002, including approximately $3.8 million in payroll and related benefits savings, and approximately $5.0 million per year thereafter.
These cost savings are anticipated to commence in the second quarter of 2002. The Company currently expects to take a one-time cash charge of approximately $250,000 in the first quarter of
2002 in connection with the reductions.

Years Ended December 31, 2000 and December 31, 1999

Total Revenues.Total revenues increased 20% to $119.3 million in the year ended December 31, 2000, from
$99.7 million in the year ended December 31, 1999.

Revenues
from Advisory Services, which generally are derived from annually renewable contracts payable by clients in advance, increased 21% to $84.6 million in the year ended
December 31, 2000, from $70 million in the year ended December 31, 1999, and increased as a percentage of total revenues to 71% from 70%. The increase in revenues from Advisory
Services was principally due to increased subscription revenues as a result of the Company's expanded domestic sales force, a reorganization under one manager of the Company's previously separate
sales channels intended to foster a more collaborative sales effort, an increased client subscriber base, further penetration into the small and medium-sized enterprise market, continued international
market acceptance of the Company's Advisory Services, an increase in analyst briefings to existing clients, and increased demand for the Company's Infusion products. During 2000, the Company
experienced a lower growth rate of its Advisory Services than anticipated primarily as a result of the continued shift in client demand toward more focused, client-specific services (such as strategic
consulting) and softened demand for its Advisory Services experienced in the second half of 2000. The Company currently expects continuing decreases in the growth rate of its Advisory Services.

Advisory
Services revenues attributable to international clients increased 13% to $13.2 million in the year ended December 31, 2000, from $11.7 million in the year
ended December 31, 1999, and decreased as a percentage of Advisory Services revenues to 16% from 17%. The increase in Advisory Services revenues attributable to international clients was
principally due to continued demand for the

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Company's Advisory Services, increased demand for the Company's infusion programs, and an increase in the number of analyst briefings to existing clients.

Strategic
Consulting revenues, which result from Strategic Consulting engagements addressing clients' business and technology issues, increased 24% to $27.7 million in the year
ended December 31, 2000,
from $22.4 million in the year ended December 31, 1999, and increased as a percentage of total revenues to 23% from 22%. The increase was principally due to the continued shift in client
demand from Advisory Services toward more focused consulting services and was partially offset by decreased revenues in a specific practice area of Strategic Consulting caused by the loss of key
personnel in the middle of the second quarter and a decrease in new business development within this practice area of Strategic Consulting. In addition, the increase was offset by an imbalance between
the skill sets of available consulting staff and the then existing consulting projects. In response to the imbalance in staffing, at the end of the third quarter, Strategic Consulting changed the
focus of its consulting resources to better align with increased client demand for comprehensive and thematic research and services. In addition, the Company experienced an increase in sales of its
security planning and operations services and recognized incremental revenues as a result of the acquisition of RSI in October 2000.

Published
Research Products revenues decreased 4% to $7 million in the year ended December 31, 2000, from $7.3 million in the year ended December 31, 1999,
and decreased as a percentage of total revenues to 6% from 7%. The decrease was principally due to a refocusing of the Company's inside sales channel (telephone professionals that sell the Company's
Published Research Products) that occurred during 2000 from selling traditional publication products to in addition selling Web-based subscription products that primarily consist of
content developed by the Company's Advisory Services personnel. Revenues generated from the sale of these Web-based subscription products are recognized as Advisory Services revenue. The
decrease in revenues from Published Research Products were partially offset by increases in traditional publication revenues as a result of expanded product offerings and an increase in the number of
inside sales personnel.

Cost of Services and Fulfillment.Cost of services and fulfillment increased 34% to $69.7 million in the year ended
December 31, 2000, from $52.2 million in the year ended December 31, 1999, and increased as a percentage of total revenues to 58% from 52%. The increase was principally due to
additional analyst and fulfillment costs as a result of the Company's increase in headcount undertaken to support the Company's clients, fulfill anticipated product demands, and broaden the Company's
product offerings. The costs consist of payroll and payroll-related expenses (payroll taxes and benefits), travel costs, and, to a lesser extent, bonus expense. Outside consulting and royalty expenses
increased as a result of the Company's increased sales of its security planning and operations service and multiclient studies, the fulfillment of which requires the assistance of third parties, and
as a result of an imbalance between the skill sets of available consulting staff and the existing consulting projects during the second half of 2000. Facilities costs increased due to the acquisition
of additional office space to support the Company's expanded employee base.

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Selling and Marketing Expenses.Selling and marketing expenses increased 60% to $37.2 million in
the year ended
December 31, 2000, from $23.2 million in the year ended December 31, 1999, and increased as a percentage of total revenues to 31% from 23%. This increase was principally due to
additional financial incentives contained in the Company's sales commission plan when it reorganized the previously separate sales forces to motivate and improve cooperation among the sales personnel.
In January 2000, the Company changed its sales commission plan year from a plan year ending on December 31 to a plan year ending on January 31. As a result, the commission plan
year ended January 31, 2000 covered January 1, 1999 through January 31, 2000, a one time 13-month period. Consequently, the number of sales representatives that
triggered a higher commission rate under the sales commission plan for the year ended January 31, 2000 increased, causing the Company to recognize higher than expected commission expense in
2000. In addition, salaries of the Company's selling and marketing personnel increased as a result of increased staffing levels.

General and Administrative Expenses.General and administrative expenses increased 110% to $17.5 million in the year
ended December 31, 2000, from $8.4 million in the year ended December 31, 1999, and increased as a percentage of total revenues to 15% in 2000 from 8% in 1999. Due to a continuing
slowdown in accounts receivable collections and increases in overdue accounts receivable, in the fourth quarter of 2000 the Company increased its estimate of uncollectable accounts receivable. This
resulted in a charge of $3.7 million. In addition, salary and bonus expense increased as a result of increased administrative personnel necessary to handle the Company's growth (both
domestically and internationally) and systems implementation efforts, and facilities costs increased due to the acquisition of additional lease space to accommodate increased staff levels.

Depreciation and Amortization.Depreciation and amortization expense increased 88% to $4.9 million in the year ended
December 31, 2000, from $2.6 million in the year ended December 31, 1999. The increase in depreciation and amortization expense was principally due to purchases of computer
equipment, office furniture, and leasehold improvements required to support business growth and increased amortization of goodwill from the payment of contingent consideration in 2000 and acquisitions
consummated in 2000. See Note 4 to the consolidated financial statements.

Impairment Loss.During the year ended December 31, 2000, the Company determined that, based on estimates of future
cash flows and other available market data, two of its strategic investments were permanently impaired. Accordingly, the Company recorded an impairment loss of $2.64 million for the full
carrying value of the investments. See "Certain Factors That May Affect Future ResultsRisks Associated with Strategic Investments."

Other Income, Net.Other income, net, decreased 80% to $361,000 in the year ended December 31, 2000, from
$1.8 million in the year ended December 31, 1999, due to a reduction in interest income during the year ended December 31, 2000 because of the decreased levels of cash and
marketable securities held by the Company in 2000 versus 1999. In addition, the Company recorded $518,000 in interest expense during the year ended December 31, 2000 on its outstanding
borrowing with its bank. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources" and Note 9 to the consolidated
financial statements.

Provision for Income Taxes.The Company recorded an income tax benefit of $4.2 million during the year ended
December 31, 2000, and a provision for income taxes of $5.8 million during the year ended December 31, 1999, reflecting an effective tax rate of 35% for 2000 and 39% for 1999. The
lower effective rate in 2000 was principally due to the impact of nondeductible expenses.

Liquidity and Capital Resources

The Company funds its operations primarily through cash generated from operations, borrowings under its credit facility, and, to a lesser extent, from the sale of
its Common Stock. The Company

23

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generated $18.2 million in cash from operations during the year ended December 31, 2001, used $10.6 million in cash in operations during the year ended December 31, 2000,
and generated $4.0 million in cash from operations during the year ended December 31, 1999. The significant increase in operating cash flow was principally due to the significant
increase in collections of the Company's accounts receivable and decreases in the levels of other current and non-current assets. Such increases were partially offset by decreases in
accounts payable and other current liabilities, including deferred revenues.

The
Company used $1.9 million, $11.7 million and $5.0 million of cash in the years ended December 31, 2001, 2000 and 1999, respectively, for the purchase of
furniture, equipment, computers and related software and Web site infrastructure. The purchases that occurred during the years ended December 31, 2000 and 1999 were made principally to support
the Company's growth in business and number of employees that occurred during the respective years. The purchases that occurred during the year ended December 31, 2001 were made principally to
support the Company's Web site and network infrastructure. The Company currently expects that additional purchases of equipment will be made during the year ending December 31, 2002 and
currently expects that such expenditures will remain approximately the same when compared to 2001 levels. As of December 31, 2001, the Company had no material commitments for capital
expenditures; however, the Company anticipates that it will continue to upgrade its internal systems to support its business, including in particular its international subsidiaries.

During
the year ended December 31, 2001, the Company expended $2.1 million of cash to fund acquisitions and settle contingent payouts (net of approximately
$1 million in cash acquired in
connection with the acquisitions of META Group Germany and META Group Australia). The specifics of the acquisitions are as follows:

In
October 2000, the Company completed the acquisition of substantially all the assets of RSI, a provider of IT trend-tracking, finance analysis and software engineering
measurement consulting, for an initial payment of $750,000 in cash, $375,000 in Common Stock (36,874 shares) and the assumption of certain liabilities. During the year ended December 31, 2001,
the Company paid $1 million in cash and issued $250,000 in Common Stock (57,084 shares) as contingent consideration to RSI as a result of the achievement of certain financial targets. In the
event certain financial targets are met, additional contingent consideration of up to $3.1 million payable in cash and $1.9 million payable in Common Stock may be paid through
March 2004. In the event the aggregate number of shares issued in satisfaction of additional contingent consideration exceeds 349,526, the remaining consideration will be payable in cash. RSI
is wholly owned by Dr. Howard Rubin, a director and officer of the Company. The Company has filed a registration statement on Form S-3 with the Securities and Exchange
Commission to register the shares issued to RSI, although such registration statement is not yet effective.

In
January 2001, the Company completed the acquisition of substantially all of the assets of two of its Asia Pacific distributors, one based in Sydney, Australia and the other
headquartered in Singapore. With these acquisitions, the distributors became wholly owned subsidiaries of the Company. The total purchase price amounted to approximately $3 million, consisting
of cash in the amount of $1.9 million, the conversion of accounts receivable from the distributors into equity in the amount of $470,000, and the assumption of certain liabilities.

On
December 31, 2001, the Company acquired an additional 44% of META Group Germany, increasing its ownership to 53% from 9%. META Group Germany owns the exclusive distribution
rights to the Company's products and services in Spain, Portugal, Switzerland, Germany, Austria, and Central, Southern and Eastern Europe. The consideration for the acquisition was the agreement of
the Company to subordinate approximately $4.0 million of accounts receivable owed to it by META Group Germany to all other debts of the distributor. The results of META Group Germany will be

24

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consolidated with the Company's results beginning in the first quarter of 2002. During the years ended December 31, 2000 and 2001, the Company generally realized revenues from this distributor
at rates of 10%-40% of amounts billed.

During
2002, the Company has advanced to META Group Germany approximately $630,000 in cash for working capital purposes. The Company also issued a letter of credit on META Group
Germany's behalf in the amount of €1 million (approximately $872,500) as collateral for META Group Germany's outstanding borrowings with its bank. Additional funding by the
Company of META Group Germany may be required in the future. The Company, however, cannot be certain when the funding will be needed or how much funding, if any, will be needed.

Exclusive
of its acquisitions, during the years ended December 31, 2000 and 1999, the Company continued to make investments and advances to several companies in parallel or
synergistic industries. Such activity totaled $1.4 million and $7.7 million during the years ended December 31, 2000 and 1999, respectively. The Company did not make any such
investments or advances in 2001. In March 2001, the Company closed on the sale of one of its investments and received cash proceeds of $2.9 million and recognized a gain on the sale of
$2.6 million. Additionally, in May 2001, the Company received approximately $440,000 in cash representing a repayment of a portion of the Company's investment in a convertible promissory
note (plus accrued interest thereon) of another of the companies in which the Company has an investment. The balance of the Company's investments and advances was $8.2 million,
$18.8 million and $19.3 million at December 31, 2001, 2000 and 1999, respectively. Each investment is accounted for under the cost method.

The
Company follows a practice to review its individual investments and advances for impairment on a quarterly basis. This review includes the examination of the estimated market value
of each specific investment using peer group market comparables of public companies. Additionally, the Company reviews the business climate of each investee, its historical financial results, its
projected cash flow, its plans for the future and the likelihood of achieving such plans. Based on such review, a determination is made on a case-by-case basis as to whether an
investment is deemed to be permanently impaired and therefore requires an adjustment to the carrying value. The Company recorded impairment losses of $9.2 million and $2.6 million for
the years ended December 31, 2001 and 2000, respectively. The losses taken were determined on a specific identification method considering each investee's particular facts and circumstances in
existence at that time. The Company will continue to evaluate its investments for impairment every quarter, and based on its review, may record additional impairment losses should the facts and
circumstances in existence at that time merit such an adjustment. See "Certain Factors That May Affect Future ResultsRisk Associated With Strategic Investments."

In
June 2001 the Company completed a private placement of its Common Stock whereby the Company issued 1,726,617 shares of its Common Stock for $2.78 per share to Dale Kutnick, the
Company's Chairman of the Board of Directors, Chief Executive Officer and Co-Research Director, and additional purchasers affiliated with Francis J. Saldutti, Harry Gruner and George
McNamee, each of whom is a member of the Board of Directors. The Board of Directors approved the transaction after receiving the favorable recommendation of a Special Committee of the Board of
Directors consisting of three disinterested members of the Board of Directors. The Special Committee retained BNY Capital Markets, Inc. as its financial advisor to render a fairness opinion on
the transaction. Total proceeds to the Company were $4.57 million, net of offering costs of approximately $227,000. The Common Stock offered in the private placement has not been registered
with the Securities and Exchange Commission and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Company has, however,
filed a Registration Statement on Form S-3 with the Securities and Exchange Commission to register the shares issued (other than those issued to Mr. Kutnick), although such
registration statement is not yet effective.

25

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At
December 31, 2000, the Company had marketable securities with a cost basis of $7 million. During the year ended December 31, 2001, $3 million of the
marketable securities were called by the issuer, and the remaining $4 million were sold by the Company. The Company recognized a gain of $46,600 on the
sale of the marketable securities which is included in the Company's statement of operations for the year ended December 31, 2001. All proceeds were used to pay down outstanding borrowings
under the Company's credit facility.

In
June 2001, the Company sold its limited partnership interest in the JMI Equity Side Fund, L.P. (the "JMI Fund") to affiliates of the JMI Fund and an unrelated third party for
total proceeds of $3.15 million. The Company recorded a loss on the sale of $26,000. The Company had subscribed for up to $4.0 million in limited partnership interests in the JMI Fund.
Distributions from the JMI Fund in excess of a return of capital and the Company's cost of capital were intended to fund payouts under the META Group, Inc./JMI Long Term Incentive Compensation
Plan (the "Long Term Incentive Plan"). Prior to the Company's sale of its limited partnership interest in the JMI Fund, each participant in the Long Term Incentive Plan waived his or her rights to
receive such payouts in consideration for stock options granted by the Company. A total of 502,000 stock options were granted to such participants in the year ended December 31, 2001.
Mr. Harry Gruner, a director of the Company, is a managing member of JMI Side Associates, L.L.C (the general partner of the JMI Fund), is affiliated with certain of the purchasers, and
purchased approximately three percent of the limited partnership interests sold by the Company.

During
the year ended December 31, 2001, $6.1 million was used in financing activities primarily as a result of the repayment of $12 million in outstanding
borrowings under the Company's credit facility. The repayments were partially offset by proceeds from the Company's private placement of its Common Stock discussed above, borrowings of
$1 million from its credit facility, and $343,000 in proceeds from the exercise of stock options and proceeds received under its employee stock purchase plan. During the year ended
December 31, 2000, the Company received $26.1 million in cash from financing activities primarily as a result of borrowings totaling $20.9 million from its credit facility with
its bank and $5.2 million in proceeds from the exercise of stock options and proceeds received under its employee stock purchase plan. Such proceeds were partially offset by repurchases of the
Company's common stock from a former shareholder.

In
September 2000, the Company entered into a $25 million one-year senior revolving credit facility (the "Old Facility") with its bank which in
September 2001 converted into a five year term loan payable in 60 consecutive monthly installments. In October 2001, the Company made a principal payment of $365,000 in accordance with
the terms of the Old Facility. Additionally in October 2001, $2 million of the Company's marketable securities were called by the issuer and the proceeds were used to pay down the Old
Facility. On November 5, 2001 the Company restructured the Old Facility with its bank by entering into a $20 million amended and restated credit agreement (the "New Facility"). The New
Facility replaced the Old Facility and consists of an $8 million term loan (the "Term Loan") payable in 36 monthly consecutive installments that commenced in December 2001, and a
$12 million revolving credit facility (the "Revolving Facility"). Both mature in November 2004. In November and December 2001, an additional $1 million of the Company's
marketable securities were called by the issuer, and the Company sold the remaining $4 million of its marketable securities. All proceeds were used to pay down the Revolving Facility. The
Company also paid down the Revolving Facility and Term Loan with an additional $4.6 million from its cash on hand. As of December 31, 2001 the amount used under the New Facility was
$10.7 million, consisting of $9.9 million in outstanding borrowings ($7.8 million outstanding under the Term Loan and $2.1 million outstanding under the Revolving Facility)
and $0.8 million in letters of credit issued on behalf of certain of the Company's independent sales representative organizations and as security for a portion of the Company's Stamford, CT
premises lease. During the year ended December 31, 2001, the Company paid $1.36 million in interest expense. In January 2002, the Company posted an additional letter of credit in
the amount of $480,000

26

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as additional security for a portion of its Stamford, CT premises lease. In March 2002, the Company posted a €1 million (approximately $872,500) letter of credit as
collateral for META Group Germany's outstanding borrowings with its bank. There is approximately $10 million currently available to the Company under the New Facility. Additionally in
March 2002, the Company paid down the Revolving Facility an additional $1 million from its cash on hand.

The
New Facility has a borrowing base equal to 80% of the Company's eligible accounts receivable. Interest is payable at the rate of (i) LIBOR plus 2.5% or (ii) the higher
of (a) the Prime Rate or (b) the Federal Funds Rate plus 0.5%. The New Facility is collateralized by the Company's accounts receivable, and requires payment of a commitment fee payable
quarterly, in arrears, of 0.25% based on the average, daily, unused portion of the Revolving Facility. The New Facility contains a number of covenants that, among other things, restrict the ability of
the Company to incur additional indebtedness, pay dividends or other distributions, dispose of certain assets, enter into sale and leaseback transactions, create liens, make certain investments,
acquisitions or mergers, and that otherwise restrict corporate activities. In addition, the Company is required to maintain certain financial covenants, including a leverage ratio covenant, a fixed
charge ratio covenant and a minimum EBITDA covenant. The Company was not in compliance with these covenants for the quarterly period ended December 31, 2001. On March 26, 2002, the
Company entered into an amendment to the New Facility, which among other things, waived prior covenant defaults, reset existing covenants, and added a new consolidated net income covenant.

At
December 31, 2001, META Group Germany had two lines of credit with its local bank totaling €1.4 million (approximately $1.2 million). The lines bear
interest at 8.5% and are secured by a personal guarantee of META Group Germany's managing director and are collateralized by certain of META Group Germany's accounts receivable as well as shares of
the Company held by META Group Germany. At December 31, 2001, META Group Germany had outstanding borrowings totaling $993,000 and was in default of certain financial covenants. Consequently,
the Company provided an irrevocable letter of credit for €1 million (approximately $872,500) as discussed above.

The
Company has a corporate guarantee in the amount of $375,000 guaranteeing the local bank borrowings of one of its independent sales representative organizations.

In
April 1999, the Company's Board of Directors unanimously authorized the repurchase of up to 1.2 million shares of its common stock in the open market and in privately
negotiated transactions from time to time, depending on market conditions and other factors, and in May 1999 expanded the repurchase program by an additional 1.2 million shares. During
1999, 1,989,993 shares were repurchased at an average price of $11.28 per share for a total cost of $22.5 million. All shares repurchased have been retired to the status of authorized but
unissued. The Company financed all repurchases with its cash and marketable securities balances.

Additionally,
in April 1999, the Company repurchased, for approximately $266,470 in cash, 2,389 shares of its common stock and warrants to purchase 2,449 shares of its common
stock from a minority stockholder pursuant to the terms of a Settlement Agreement, dated October 31, 1995, between the stockholder and Sentry. In May 2000, the Company repurchased, for
$659,000 in cash, an additional 15,558 shares of its common stock and warrants to purchase 4,899 shares of its common stock pursuant to the settlement agreement. Such repurchase obligation was assumed
by the Company upon the acquisition of Sentry in October 1998. With respect to the shares and warrants repurchased in April 1999 and May 2000, the fair market value of the
repurchased securities and all associated costs were recovered from a purchase consideration escrow established for the satisfaction of indemnification claims pursuant to the terms of the Agreement
and Plan of Merger between Sentry and the Company. Such recovery by the Company was in the form of a release of 24,937 shares of the Company's common stock in April 1999 and May 2000
from the Sentry purchase consideration escrow. Such released shares were retired to the status of authorized but unissued.

27

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In September 2001, the Company initiated a voluntary stock option exchange offer for stock options with an exercise price greater than $12 per share to certain eligible employee
option holders. The Company's senior executives and members of the Board of Directors were not eligible to participate in the offer. In October 2001, the offer period expired and 752,469 stock
options were accepted for exchange and cancelled. The Company currently intends to grant the same amount of options in April 2002 at the fair market value on the actual date of grant to those
eligible employees still employed at the date of grant.

As
of December 31, 2001, the Company had cash of $21.4 million and negative working capital of $4.3 million. The increase in cash from December 31, 2000 is
principally due to a significant increase in collections of the Company's accounts receivable, proceeds from the private placement of its common stock, proceeds from the liquidation of its limited
partnership interest in the JMI Equity Side Fund, L.P., cash received from the sale of its marketable securities and one of its investee companies and as a result of cost-containment
measures including, but not limited to, management of discretionary expenditures and employee expense policies. These increases were partially offset by repayments of outstanding borrowings under its
credit facility, increased payments on outstanding trade payables, increased commission payments, payments to fund its acquisitions and capital expenditures and a decrease in borrowings under its
credit facility. The Company recorded in 2001 $6.1 million in bad debt expense associated with its accounts receivable from its international distributors.

In
April 2001, the Company announced a restructuring in order to better align its resources with market demand and implemented substantial cost containment measures. As part of
the restructuring, the Company reduced its workforce by 100 persons (representing 15% of the workforce at the time). As a result of the restructuring, the Company currently anticipates an annual
estimated cost savings of approximately $10 million, including approximately $8 million in payroll and related benefits savings. Such savings began to materialize in the second half of
the second quarter. The Company recorded a one-time cash charge of $359,000 in the quarter ended June 30, 2001 for severance payments made during the quarter ended June 30,
2001.

In
February 2002, the Company announced a strategic reorganization to align the Company's resources with current market demand and to better position the Company for
profitability. As part of the reorganization, the Company reduced its workforce by 43 persons (representing 7% of the workforce at the time). The Company currently estimates that the reductions will
result in cost savings of approximately $4.2 million in the year ending December 31, 2002, including approximately $3.8 million in payroll and related benefits savings, and
approximately $5.0 million per year thereafter. These cost savings are anticipated to commence in the second quarter of the year ending December 31, 2002. The Company currently expects
to take a one-time cash charge of approximately $250,000 in the first quarter of the year ending December 31, 2002 in connection with the reductions.

The
Company experienced a net loss of $13 million for the quarter ended December 31, 2001, and $17.6 million for the year ended December 31, 2001. To return
to profitability, the Company will need to, among other things, achieve revenue growth and/or maintain expenses below revenue levels. The Company cannot be certain whether, or when, any of these will
occur. If the Company fails to either achieve sufficient revenue growth or maintain expenses below revenue levels, any such failure will likely result in continued losses that would have a material
adverse effect on the Company's financial results and condition.

The
Company currently believes existing cash balances, anticipated cash flows from operations and borrowings under its credit facility will be sufficient to meet its working capital,
capital expenditure and credit facility payment requirements for the next 12 months. The Company intends to continue its efforts to improve its accounts receivable collections and manage
expenses. The Company also currently believes that decreases in and delays of IT spending as a result of general economic conditions are likely to continue to negatively impact its business for the
foreseeable future.

28

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The
following summarizes the Company's contractual obligations and other commitments as of December 31, 2001 and the effect such obligations are currently expected to have on its
liquidity and cash flow in future periods (in thousands):

Amount of Commitment Expiring by Period2002

2003

2004

2005

2006

ThereafterOperating leases

$
5,154

$
5,101

$
4,941

$
3,962

$
3,523

$
5,918Term Loan


2,724


2,667


2,444








Borrowings under revolving credit agreements


993





2,049
*Total Commitment

$
8,871

$
7,768

$
9,434

$
3,962

$
3,523

$
5,918


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Critical Accounting Policies

Our significant accounting policies are described in Note 3 to our consolidated financial statements. However, certain of our accounting policies are
particularly important to the portrayal of our financial position and results of operations and may require the application of significant judgment by our management; as a result they are subject to
an inherent degree of uncertainty. In applying those policies, our management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those
estimates are based on our historical experience, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.
Our significant accounting policies include:



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Impact of Recently Issued Accounting Pronouncements

In June 2001, Statement of Financial Accounting Standards No. 141 ("SFAS 141") "Business Combinations" and Statement of Financial Accounting
Standards No. 142 ("SFAS 142") "Goodwill and Other Intangible Assets" were released. SFAS 141 requires all business combinations be accounted for using the purchase method of
accounting and that certain intangible assets acquired in a business combination be recognized as assets apart from goodwill. SFAS 141 was effective for all business combinations initiated
after June 30, 2001. SFAS No. 142 is effective for all fiscal years beginning after December 15, 2001. As required by SFAS 142, the Company will perform an impairment test
on goodwill and other intangible assets as of January 1, 2002. Thereafter, the Company will perform impairment tests annually and whenever events or circumstances occur indicating that goodwill
or other intangible assets might be impaired. All companies have six months subsequent to the date of adoption to complete the initial goodwill impairment test. Amortization of goodwill and certain
other intangible assets, including those recorded in past business combinations, will cease effective January 1, 2002. The annual reduction in expense due to the discontinuance of goodwill
amortization beginning in 2002 will
be approximately $1.1 million. The Company has not yet determined any further impact SFAS 142 will have on its existing goodwill.

In
August 2001, Statement of Financial Accounting Standards No. 143 ("SFAS 143") "Accounting for Asset Retirement Obligations" was released. This statement,
effective January 1, 2003, addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset
retirement costs. In October 2001, Statement of Financial Accounting Standards No. 144 ("SFAS 144") "Accounting for the Impairment or Disposal of Long-Lived Assets"
was released. SFAS 144 establishes a single accounting model, based on the framework established in SFAS 121, for long-lived assets to be disposed of by sale, and resolves
significant implementation issues related to SFAS 121. This statement also supercedes the accounting reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the
Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a
segment of a business. The provisions of SFAS 144 are effective for the fiscal years beginning after December 15, 2001. The Company believes SFAS 143 and SFAS 144 are not
expected to have any impact on its results of operations or financial position.

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Certain Factors That May Affect Future Results

From time to time, information provided by the Company or statements made by its employees may contain "forward-looking" information that
involves risks and uncertainties. In particular, statements contained in this Form 10-K (and in the documents incorporated by reference into this Form 10-K) that
are not historical facts (including, but not limited to: statements concerning IT spending; general economic conditions; the Company's objectives to expand the range of clients it serves, further
penetrate its existing client base, extend its product line and broaden the scope of its services; anticipated revenues from Advisory Services, Strategic Consulting and Published Research Products;
anticipated revenues from international operations; additional funding by the Company of META Group Germany; anticipated costs of services and fulfillment, selling and marketing, and general and
administrative; anticipated cost and expense levels relative to the Company's total revenues; anticipated cost savings as a result of cost controls and cost reduction efforts; anticipated working
capital; capital expenditures; capital requirements; cash flow and cash balances; credit facility borrowing capacity; credit facility payment requirements; potential debt or equity financings;
potential sales of the Company's strategic investments; acquisitions; goodwill; or other statements using words such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan",
"project", "should" or "will") constitute forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual results
of operations and financial condition have varied and may in the future vary significantly from those stated in any forward-looking statements. Factors that may cause such differences include, without
limitation, the risks, uncertainties, and other information discussed within this Form 10-K (and in the documents incorporated by reference into this Form 10-K),
as well as the accuracy of the Company's internal estimates of revenue, operating expense levels, growth rates, and other anticipated expenditures.

In addition, the following risk factors should be read in conjunction with the information in this Form 10-K (and the documents incorporated by
referenced into this Form 10-K). These risk factors could have a material adverse effect on the Company's business, results of operations and financial condition or otherwise cause
actual results to differ materially from those contained in the forward-looking statements.

Net Losses Experienced by the Company

The Company experienced a net loss of $13 million for the quarter ended December 31, 2001, and $17.6 million for the year ended
December 31, 2001. To return to profitability, the Company will need to, among other things, achieve revenue growth and/or maintain operating expenses below revenue levels. The Company cannot
be certain whether, or when, either will occur. If the Company fails to either achieve sufficient revenue growth or maintain operating expenses below revenue levels, such failure will
result in continued operating losses that would have a material adverse effect on the Company's financial results and condition.

Potential Harm to the Company Caused by Continued Decreases in and Delays of IT Spending

The Company's business depends on continued spending on IT by substantial commercial and governmental users of IT. If, as a result of general economic uncertainty
or otherwise, IT users continue to decrease IT spending levels or delay their purchases of IT products and services (as was experienced by the Company during the latter half of the year ended
December 31, 2000 and during the year ended December 31, 2001), then such decreases or delays could continue to reduce demand for the Company's products and services, substantially harm
the Company's business and have a material adverse effect on the Company's financial results and condition.

The Company's Dependence on Renewals of Subscription-Based Services

The Company derived approximately 73% and 71% of its total revenues during the years ended December 31, 2001 and 2000, respectively, from subscriptions to
its Advisory Services. Advisory Service subscriptions typically have a one-year term, and the Company may not be successful in maintaining its

31

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subscription renewal rates. The Company's ability to renew subscriptions is subject to a number of risks, including the following:



If
the Company is unable to successfully maintain its subscription renewal rates, such an inability could have a material adverse effect on the Company's business, results of operations and financial
results.

The Company's Dependence on Non-Recurring Strategic Consulting Engagements

The Company derived approximately 23% of its total revenues during the years ended December 31, 2001 and 2000 from Strategic Consulting engagements.
Strategic Consulting engagements vary in number, size, and scope, and typically are project-based and non-recurring. The Company's ability to replace completed Strategic Consulting
engagements with new engagements is subject to a number of risks, including the following:



If
the Company is not able to replace completed Strategic Consulting engagements with new engagements, such an inability could have a material adverse effect on the Company's business,
results of operations and financial condition.

The Company's Expectation of Fluctuations in Operating Results

The Company's operating results have varied significantly from quarter to quarter. The Company expects future operating results to fluctuate due to several
factors, many of which are not in the Company's control:



32

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Due
to these factors, the Company believes period-to-period comparisons of operating results are not necessarily meaningful and should not be relied on as an
indication of future operating results. The potential fluctuations in the Company's operating results make it likely that, in some future quarter, the Company's operating results will be below the
expectations of securities analysts and investors, which could have a material adverse effect on the price of the Company's Common Stock.

Risks Associated With International Operations

Net revenues attributable to international clients represented approximately 18% of the Company's total Advisory Services revenues for the year ended
December 31, 2001, and approximately 16% of the Company's total Advisory Services revenues for the year ended December 31, 2000. The Company sells its products internationally through a
network of independent sales representative organizations and foreign subsidiaries. The Company assumes significantly greater risk by selling through independent sales representative organizations
than through a direct employee sales force or through its foreign subsidiaries. Risks associated with the Company's international operations include:



33

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The
Company expects that international operations will continue to account for a significant portion of its revenues and intends to continue to expand its international operations.
Expansion into new geographic territories may require considerable management and financial resources, as was the case during the years ended December 31, 2000 and 2001, and may negatively
impact the Company's results of operations. If the Company is unable to successfully manage the risks associated with international operations, such an inability could have a material adverse effect
on the Company's business, results of operations, and financial results.

Risks of Failing to Anticipate Changing Market Needs

The Company's success depends in part on its ability to anticipate rapidly changing technologies and market trends and to adapt its products and services to meet
the changing information and analysis needs of IT users. Frequent and dramatic changes characterize the IT industry, including the following:



This
environment of rapid and continuous change presents significant challenges to the Company's ability to provide its clients with current and timely analysis and advice on issues of
importance to them. The Company commits substantial resources to meeting these challenges. If the Company fails to provide insightful timely analysis of developments and assessment of technologies and
trends in a manner that meets changing market needs, such a failure could have a material adverse effect on the Company's business, results of operations and financial condition.

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The Company's Dependence on Its Ability to Attract and Retain Qualified Personnel

The Company needs to hire, train, and retain qualified employees to execute its strategy and support growth. In particular, the Company needs trained research
analysts, consultants, sales representatives, product development staff, operations staff and management. The Company continues to experience intense competition in recruiting and retaining qualified
employees. The pool of experienced candidates is small, and the Company competes for qualified employees against many companies, including Gartner Group, that have substantially greater financial
resources than the Company. If the Company is unable to successfully hire, retain, and motivate a sufficient number of qualified employees, such an inability will have a material adverse effect on the
Company's business, results of operations and financial results.

Competition

The IT research, analysis, and consulting industry is extremely competitive. The Company competes directly with other independent providers of similar services
and indirectly with the internal staffs of current and prospective client organizations. The Company's principal direct competitor, Gartner Group, Inc., has a substantially longer operating
history and has considerably greater financial resources and market share than the Company. The Company also competes indirectly with larger electronic and print media companies and consulting firms.
These indirect competitors, many of which have substantially greater financial, information gathering, and marketing resources than the Company, could choose to compete directly against the Company in
the future.

The
Company's market has few barriers to entry. New competitors could easily compete against the Company in one or more market segments addressed by the Company's Advisory Services or
Strategic Consulting services. The Company's existing and future competitors may develop products and services that are more effective than the Company's products and services. Competitors may also
produce their products and services at less cost and market them more effectively. If the Company is unable to successfully compete against existing or new competitors, such an inability will have a
material adverse effect on the Company's results of operations and would likely result in pricing pressure and loss of market share.

Risks Associated With New Product and Services Development

The Company's future success depends on its ability to develop or acquire new products and services that address specific industry and business sectors, changes
in client requirements and technological changes in the IT industry. The process of internally researching, developing, launching, and gaining client acceptance of a new product or service is
inherently risky and costly. Assimilating and marketing an acquired product or service is also risky and costly. In addition, the Company has introduced few new products or services and has had
limited experience in acquiring and integrating new products or services into its business. If the Company is unable to develop or acquire new products and services, such an inability will have a
material adverse effect on its business, operating results and financial condition.

Risks Associated With Strategic Investments

In an effort to develop new products and services, from April 1996 to December 2000, the Company made investments in and advances to companies in
parallel or synergistic industries totaling approximately $21.5 million. Such strategic investments and advances are highly risky and illiquid. During the years ended December 31, 2001
and 2000, the Company made the determination that based on reviews of the business climate of each investee, its historical financial results, its projected cash flow, its plans for the future and the
likelihood of achieving such plans and other available market data, several of its investments and advances were impaired. Accordingly, the Company recorded a $9.2 and

35

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$2.6 million impairment loss, respectively, on the carrying value of these investments. There can be no assurance that such strategic investments will result in new product or service
offerings for the Company or otherwise be successful. Many factors outside the control of the Company, including general economic conditions, could impair the value of the Company's strategic
investments requiring the Company to record further, substantial losses related to such investments. Moreover, these strategic investments may disrupt the ongoing business of the Company and distract
management. Furthermore, there can be no assurances that the Company will be able to liquidate its strategic investments when needed or desirable. If the Company is unable to manage its remaining
strategic investments, such inabilities could have a material adverse effect on the Company's results of operations and financial condition.

The Company's Dependence on Key Personnel

The Company relies, and will continue to rely, in large part on its key management, research, consulting, sales, product development and operations personnel. The
Company's success partially depends on its ability to motivate and retain highly qualified employees. If Dale Kutnick (Chairman of the Board of Directors, Chief Executive Officer, and
Co-Research Director) or other senior officers leave the Company, such loss or losses could have a material adverse effect on the Company's business.

Risks of Product Pricing Limiting Potential Market and Market Pricing Pressures

The Company's pricing strategy may limit the potential market for the Company's Advisory Services and Strategic Consulting services to substantial commercial and
governmental users and vendors of IT. As a result, the Company may be required to reduce prices for its Advisory Services and Strategic Consulting services or to introduce new products and services
with lower prices to expand or maintain its market share. These actions could have a material adverse effect on the Company's business and results of operations.

Management of Growth

Since inception, the Company's operations have changed substantially due to the expansion and growth of the Company's business. Growth places significant demands
on the Company's management, administrative, operational and financial resources and systems. The Company's ability to manage growth, should it continue to occur, will require the Company to continue
to improve its systems and to motivate and effectively manage an evolving workforce. If the Company's management is unable to effectively manage a changing and growing business and continue to improve
its management information systems, the quality of the Company's products and services, its retention of key employees, its results of operations and its financial condition could be materially
adversely affected.

Risk of Failure to Integrate Recent Acquisitions and Risks Associated With Potential Acquisitions

As part of its business strategy, the Company buys, or makes investments in, complementary businesses, products, and services. If the Company finds a business it
wishes to acquire, the Company could have difficulty negotiating the terms of the purchase, financing the purchase, and assimilating the employees, products, and operations of the acquired business.
The acquisitions may disrupt the ongoing business of the Company and distract management. Furthermore, acquisitions of new businesses may not lead to the successful development of new products or
services, or if developed, such products may not achieve market acceptance or prove to be profitable. The Company may therefore pay more than the value the Company derives from the acquisition. A
given acquisition may also have a material adverse effect on the Company's financial condition or results of operations. In addition, the Company may be required to incur debt or issue equity to pay
for any future acquisitions or contingent payments in connection with previously consummated acquisitions, which may be dilutive to the Company's current stockholders and/or decrease it working
capital.

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Risks Associated With Restrictive Covenants

The Company's credit facility with its bank contains a number of covenants that, among other things, restrict the Company's ability to incur additional
indebtedness, pay dividends or other distributions, dispose of certain assets, enter into sale and leaseback transactions, create liens, make certain investments, acquisitions or mergers, and
otherwise restrict corporate activities. In addition, under the credit facility, the Company is required to maintain specified financial covenants, including minimum levels of EBITDA, consolidated net
income, leverage ratios and fixed charge coverage ratios. The Company's ability to comply with such provisions may be affected by events beyond the Company's control. The breach of any of these
covenants could result in a default under the credit facility. In the event of any such default, the lender could elect to declare all amounts borrowed under the credit facility, together with all
accrued interest, to be due and payable. Any such election would likely have a material adverse effect on the Company's financial condition.

The Volatility and Unpredictability of the Company's Stock Price

The market price of the Company's common stock has been volatile. During 2000, as reported on the Nasdaq National Market, the Company's common stock quotations
ranged from a high of $35.63 to a low of $4.50. In 2001, the market price of the Company's common stock reached a low of $0.77 and a high of $7.00. The market price of the Company's common stock could
be subject to wide fluctuations in response to:



In
the past, following periods of volatility in the market price of their securities, many companies have been the subject of securities class action litigation. If the Company were sued
in a securities class action, it would result in substantial costs as well as a diversion of management's attention and resources, and it would likely cause the market price of the Company's common
stock to fall.

Risks Associated With Political and Social Turmoil

Increasing political and social turmoil, such as terrorist and military actions, can be expected to put further pressure on economic conditions in the United
States and foreign jurisdictions. These conditions make it difficult for the Company and its customers to accurately forecast and plan future business activities and could have a material adverse
effect on the Company's business, financial condition and results of operations.

37

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's exposure to market risk for changes in interest rates relates primarily to borrowings under its $20 million credit facility, which consists
of a $12 million revolving credit line and an $8 million term loan. At December 31, 2001, there was $9.9 million in borrowings outstanding under this facility. Under the
facility, interest is computed on outstanding borrowings at the rate of (i) LIBOR plus 2.5% or (ii) the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus
0.5%. The Company believes that an increase or a decrease of ten percent in the effective interest rate on available borrowings on its facility, if fully utilized, would not have a material effect on
future results of operations.

The
Company is exposed to market risk as it relates to changes in the market value of its strategic investments. The Company made investments in and advances to companies in parallel or
synergistic industries to that of the Company's. During the years ended December 31, 2001 and 2000, the Company recorded $9.2 million and $2.6 million, respectively, in impairment
losses on its investments and advances. As of December 31, 2001, the Company had investments and advances totaling $8.2 million. These investments and advances are inherently risky
because the investee companies are private companies that are typically in the early development stages. Adverse changes in market conditions, like those experienced during the latter half of the year
ended December 31, 2000 and during the year ended December 31, 2001, and poor operating results of the underlying investments may result in the Company incurring additional losses or an
inability to recover the remaining value of its investments and advances.

The
Company is exposed to market risk as it relates to foreign currency exchange rates. Revenues and expenses in foreign currencies translate into higher or lower revenues and expenses
in U.S. dollars as the U.S. dollar weakens or strengthens against foreign currencies. Changes in foreign currency exchange rates may therefore negatively affect the Company's consolidated revenues and
expenses. Currency transaction gains or losses arising from transactions in currencies other than the functional currency of the Company's foreign subsidiaries are included in the results of
operations. Such gains and losses were not material to the Company's consolidated results of operations during the years ended December 31, 2000 and 2001. The Company has not entered into
foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and financial statement schedule listed under Item 14Exhibits, Financial Statement Schedules, and Reports on
Form 8-K are filed as a part of this Item 8. Supplementary financial information may be found in Note 16 to the consolidated financial statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

38

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item may be found under the sections captioned "Election of Directors," "Occupations of Directors and Executive Officers," and
"Section 16 (a) Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for the Company's Annual Meeting of Stockholders to be held on May 20, 2002 (the "2002
Proxy Statement"), which is incorporated herein by reference. The 2002 Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after the close of the
Company's fiscal year ended December 31, 2001.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item may be found under the section captioned "Compensation and Other Information Concerning Directors and Officers" in the 2002
Proxy Statement, which is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The information required by this item may be found under the section captioned "Management and Principal Holders of Voting Securities" in the 2002 Proxy
Statement, which is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item may be found under the section captioned "Certain Relationships and Related Transactions" in the 2002 Proxy Statement, which
is incorporated herein by reference, and in Note 14 to the consolidated financial statements.

39

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PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K



The
following consolidated financial statements are included in Item 8 of this report:

|                                                                                            |  | Page
|------------------------------------------------------------------------------------------- |  | ----
|Independent Auditors' Report                                                                |  | F-1 
|Consolidated Balance Sheets at December 31, 2001 and 2000                                   |  | F-2 
|Consolidated Statements of Operations for the years ended December 31, 2001, 2000, and 1999 |  | F-3 
|Consolidated Statements of Changes in Stockholders' Equity for the years ended              |  |     
|December 31, 2001, 2000, and 1999                                                           |  | F-4 
|Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999 |  | F-5 
|Notes to Consolidated Financial Statements                                                  |  | F-6 



The
following financial statement schedule for the Company is filed as part of this report:

|Schedule IIValuation and Qualifying Accounts |  | S-1
|--------------------------------------------- |  | ---

Schedules
not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the accompanying Consolidated Financial Statements
or notes thereto.



The
following exhibits are filed as part of and incorporated by reference into this Annual Report on Form 10-K:

|Exhibit Number |  | Description                                                                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1(1)(2)      |  | Agreement and Plan of Merger by and among META Group, Inc., MG Acquisition Corporation, and The Sentry Group, Inc. dated as of September 23, 1998 ("Agreement and Plan of Merger")                      
|2.2(1)         |  | Amendment No. 1 to Agreement and Plan of Merger dated as of October 20, 1998                                                                                                                            
|2.3(10)        |  | Amendment No. 2 to Agreement and Plan of Merger dated as of May 12, 2000                                                                                                                                
|2.4(13)        |  | Agreement of Purchase and Sale by and among META Group, Inc., JMI Equity Side Fund, L.P., JMI Side Associates, L.L.C. and the purchasers listed on the signature pages thereto dated as of June 15, 2001
|3.1(3)         |  | Amended and Restated Certificate of Incorporation of the Company                                                                                                                                        
|3.2(3)         |  | Amended and Restated Bylaws of the Company                                                                                                                                                              
|4.1(3)         |  | Specimen Certificate Representing the Common Stock                                                                                                                                                      
|4.2(6)         |  | Form of Common Stock Purchase Warrant (Immediate Vesting) issued to stockholders of The Sentry Group, Inc. on October 20, 1998                                                                          
|4.3(6)         |  | Form of Common Stock Purchase Warrant (Contingent Vesting) issued to stockholders of The Sentry Group, Inc. on October 20, 1998                                                                         
|4.4(13)        |  | Common Stock Purchase and Sale Agreement by and among META Group, Inc. and the purchasers listed on the signature pages thereto dated as of June 15, 2001                                               
|4.5(2)        |  | Amended and Restated Credit Agreement between META Group, Inc. and The Bank of New York dated November 5, 2001                                                                                          

40

---

|4.6         |  | Revolving Credit Note of META Group, Inc. in favor of The Bank of New York in the principal amount of $12,000,000 dated November 5, 2001                                                                                                                       
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.7         |  | Term Note of META Group, Inc. in favor of The Bank of New York in the principal amount of $8,000,000 dated November 5, 2001                                                                                                                                    
|4.8         |  | Amended and Restated Security Agreement between META Group, Inc. and The Bank of New York dated November 5, 2001                                                                                                                                               
|4.9         |  | Amended and Restated Subsidiary Guarantee among MG (Bermuda) LTD., META Group Australia Holdings, PTY., META Group Singapore PTE. Limited, 1422722 Ontario Inc., Abundant Strategy SDN. BHD., META Group, Inc., and The Bank
of New York dated November 5, 2001
|4.10(15)     |  | Offer to Exchange Outstanding Stock Options between META Group, Inc. and Certain Employee Option Holders, dated September 19, 2001                                                                                                                             
|4.11(2)     |  | Amendment No. 1 and Waiver No. 1 to the Credit Agreement dated as of March 26, 2002                                                                                                                                                                            
|10.1(15)*    |  | Second Amended and Restated 1995 Stock Plan                                                                                                                                                                                                                    
|10.2(15)*    |  | Form of Incentive Stock Option Agreement under the Second Amended and Restated 1995 Stock Plan                                                                                                                                                                 
|10.3(15)*    |  | Form of Non-Qualified Stock Option Agreement under the Second Amended and Restated 1995 Stock Plan                                                                                                                                                             
|10.4(5)*     |  | Second Amended and Restated 1995 Employee Stock Purchase Plan Enrollment Authorization Form                                                                                                                                                                    
|10.5*       |  | Amended and Restated 1995 Non-Employee Director Stock Option Plan                                                                                                                                                                                              
|10.6(4)*     |  | Form of Non-Qualified Stock Option Agreement under the 1995 Non-Employee Director Stock Option Plan of the Registrant                                                                                                                                          
|10.7(2)(3)*  |  | Agreement between First Albany Corporation and the Company dated March 30, 1995                                                                                                                                                                                
|10.8(3)*     |  | Restated and Amended 1989 Stock Option Plan, as amended                                                                                                                                                                                                        
|10.9(3)*     |  | Form of Incentive Stock Option Agreement under 1989 Stock Option Incentive Plan                                                                                                                                                                                
|10.10(3)*    |  | Form of Certificate and Agreement under Restated and Amended 1989 Stock Option Plan                                                                                                                                                                            
|10.11(3)*    |  | 1993 Stock Option and Incentive Plan, as amended                                                                                                                                                                                                               
|10.12(3)*    |  | Form of Certificate and Agreement under 1993 Stock Option and Incentive Plan                                                                                                                                                                                   
|10.13(3)*    |  | Form of Warrant under the Restated and Amended 1989 Stock Option Plan and 1993 Stock Option and Incentive Plan                                                                                                                                                 
|10.14(3)     |  | Form of International Sales Representative Agreement                                                                                                                                                                                                           
|10.15(3)     |  | Office Lease between International Business Machines Corporation and the Company dated August 1, 1994                                                                                                                                                          
|10.16(6)*    |  | Form of META Group, Inc./JMI Long Term Incentive Compensation Plan                                                                                                                                                                                             
|10.17(7)*    |  | Amended and Restated 1996 Equity Compensation Plan of The Sentry Group, Inc.                                                                                                                                                                                   
|10.18(8)*    |  | Employment agreement between META Group, Inc. and Larry R. DeBoever dated as of October 15, 1996                                                                                                                                                               
|10.19(8)*    |  | Promissory Note dated as of November 1, 1996 issued by Larry R. DeBoever to META Group, Inc. in an aggregate principal amount of $500,000                                                                                                                      
|10.20*      |  | Second Amended and Restated 1995 Employee Stock Purchase Plan                                                                                                                                                                                                  
|10.21(2)(9)* |  | Letter Agreement dated as of February 2, 2000 between META Group, Inc. and Larry R. DeBoever                                                                                                                                                                   
|10.22 (11)*  |  | Asset Purchase Agreement among Rubin Systems Inc., Howard Rubin, and META Group, Inc. dated as of October 27, 2000                                                                                                                                             
|10.23(11)*   |  | Employment and Management Agreement between META Group, Inc. and Howard Rubin dated as of October 27, 2000                                                                                                                                                     

41

---

|10.24(11)* |  | Office Lease between Harbor Vista Associates Limited Partnership and the Company dated March 31, 1999                                       
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|10.25(12)* |  | Employment agreement by and between John A. Piontkowski and META Group, Inc. dated March 1, 2001                                            
|10.26(12)  |  | Consulting Services Agreement by and between META Group, Inc. and Simmons Associates, dated July 26, 2000                                   
|10.27(13)  |  | Form of META Group, Inc./JMI Long Term Incentive Compensation Plan Waiver and Release Agreement                                             
|10.28(14)* |  | Employment Agreement between META Group, Inc. and Michael Levine dated September 11, 2001                                                   
|10.29(14)* |  | Employee Noncompetition, Nondisclosure and Developments Agreement between META Group, Inc. and Michael Levine dated as of September 11, 2001
|10.30(14)* |  | Incentive Stock Option Agreement between META Group, Inc. and Michael Levine dated as of September 11, 2001                                 
|21.1      |  | List of Subsidiaries                                                                                                                        
|23.1      |  | Consent of Deloitte & Touche LLP                                                                                                            
|24.1      |  | Power of Attorney (see page 44)                                                                                                             

---

42

---



There
were no reports on Form 8-K filed during the quarter ended December 31, 2001.



The
Company hereby files as part of this Annual Report on Form 10-K the exhibits listed in Item 14(a)(3) set forth above.

43

---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                    |  | META Group, Inc.                                                                                                      
|------------------- |  | ----------------------------------------------------------------------------------------------------------------------
|Date: April 1, 2002 |  | By: /s/DALE KUTNICKDale Kutnick
Chairman of the Board of Directors,
Chief Executive Officer, and Co-
Research Director

POWER OF ATTORNEY AND SIGNATURES

We, the undersigned officers and directors of META Group, Inc., hereby severally constitute and appoint Dale Kutnick and John A. Piontkowski and each of
them singly, our true and lawful attorneys, with the power to them and each of them singly, to sign for us and in our names in the capacities indicated below, any amendments to this Report on
Form 10-K, and generally to do all things in our names and on our behalf in such capacities to enable META Group, Inc. to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all the requirements of the Securities and Exchange Commission.

44

---

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, in the capacities indicated,
on the 1st day of April 2002.

|Signature                                 |  | Title(s)                                                                                                                                  
|----------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|/s/DALE KUTNICKDale Kutnick               |  | Chairman of the Board of Directors, Chief Executive Officer (Principal Executive Officer), and Co-Research Director                       
|/s/JOHN A. PIONTKOWSKIJohn A. Piontkowski |  | Executive Vice President, Chief Financial Officer, Treasurer, and Secretary (Principal Financial Officer and Principal Accounting Officer)
|/s/GAYL W. DOSTERGayl W. Doster           |  | Director                                                                                                                                  
|/s/FRANCIS J. SALDUTTIFrancis J. Saldutti |  | Director                                                                                                                                  
|/s/HARRY S. GRUNERHarry S. Gruner         |  | Director                                                                                                                                  
|/s/MICHAEL SIMMONSMichael Simmons         |  | Director                                                                                                                                  
|/s/GEORGE C. MCNAMEEGeorge C. McNamee     |  | Director                                                                                                                                  
|/s/HOWARD RUBINHoward Rubin               |  | Director                                                                                                                                  

45

---



INDEPENDENT AUDITORS' REPORT

To
the Board of Directors and Stockholders
META Group, Inc.
Stamford, Connecticut

We
have audited the accompanying consolidated balance sheets of META Group, Inc. and subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule
listed at Item 14(a)(2). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of META Group, Inc. and subsidiaries as of
December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth therein.

As
discussed in Note 2 to the consolidated financial statements, effective January 1, 2000 the Company adopted the provisions of Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" and consequently changed the method of revenue recognition for certain of the Company's Advisory Services.

Deloitte &
Touche LLP
Stamford, Connecticut
February 19, 2002
(March 26, 2002 as to Note 9)

F-1

---



META GROUP, INC.        CONSOLIDATED BALANCE SHEETS        (In thousands, except share data)

|                                           |                                                                                                      | December 31,                               |       
|------------------------------------------ | ---------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------
|
|ASSETS                                     |                                                                                                     
|Current assets:                            |                                                                                                      |                                            |       
|                                           | Cash and cash equivalents                                                                            |                                            | $     
|                                           | Accounts receivable, less allowance for doubtful accounts of $2,446 and $4,031, respectively         |                                            |       
|                                           | Deferred commissions                                                                                 |                                            |       
|                                           | Deferred tax asset                                                                                   |                                            |       
|                                           | Other current assets                                                                                 |                                            |       
|                                           |                                                                                                      |                                            |       
|                                           |                                                                                                      | Total current assets                       |       
|Non-current portion of accounts receivable |                                                                                                      |                                            | 2,572 
|Marketable securities                      |                                                                                                      |                                            |      
|Property and equipment, net                |                                                                                                      |                                            | 11,939
|Deferred tax asset                         |                                                                                                      |                                            | 9,866 
|Intangible assets, net                     |                                                                                                      |                                            | 33,872
|Investments and advances                   |                                                                                                      |                                            | 8,190 
|Other non-current assets                   |                                                                                                      |                                            | 554   
|                                           |                                                                                                      |                                            |       
|                                           |                                                                                                      | Total assets                               |       
|                                           |                                                                                                      |                                            |       
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                     
|Current liabilities:                       |                                                                                                      |                                            |       
|                                           | Accounts payable                                                                                     |                                            | $     
|                                           | Deferred revenues                                                                                    |                                            |       
|                                           | Borrowings under revolving credit agreement                                                          |                                            |       
|                                           | Current portion of long-term debt                                                                    |                                            |       
|                                           | Accrued compensation                                                                                 |                                            |       
|                                           | Accrued liabilities                                                                                  |                                            |       
|                                           | Income taxes payable                                                                                 |                                            |       
|                                           | Other current liabilities                                                                            |                                            |       
|                                           |                                                                                                      |                                            |       
|                                           |                                                                                                      | Total current liabilities                  |       
|Long-term debt                             |                                                                                                      |                                            | 5,111 
|Non-current deferred revenues              |                                                                                                      |                                            | 4,813 
|                                           |                                                                                                      |                                            |       
|                                           |                                                                                                      | Total liabilities                          |       
|Commitments and contingencies              |                                                                                                      |                                            |       
|Stockholders' equity:                      |                                                                                                      |                                            |       
|                                           | Preferred stock, $0.01 par value, authorized 2,000,000 shares; none issued                           |                                            |       
|                                           | Common stock, $0.01 par value, authorized 45,000,000 shares; issued 13,605,187 and 11,619,025 shares |                                            |       
|                                           | Paid-in capital                                                                                      |                                            |       
|                                           | Retained earnings (deficit)                                                                          |                                            |       
|                                           | Accumulated other comprehensive loss                                                                 |                                            |       
|                                           | Treasury stock, at cost, 802,016 and 647,016 shares, respectively                                    |                                            |       
|                                           |                                                                                                      |                                            |       
|                                           |                                                                                                      | Total stockholders' equity                 |       
|                                           |                                                                                                      |                                            |       
|                                           |                                                                                                      | Total liabilities and stockholders' equity |       
|                                           |                                                                                                      |                                            |       

See notes to consolidated financial statements.

F-2

---



META GROUP, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands, except per share data)

|                                                                                        |                                  | 2001                     |         | 2000   |         | 1999   
|--------------------------------------------------------------------------------------- | -------------------------------- | ------------------------ | ------- | ------ | ------- | -------
|Revenues:                                                                               |                                  |                          |         |        |         |        
|                                                                                        | Advisory services                |                          | $       | 85,483 |         | $      
|                                                                                        | Strategic consulting             |                          |         | 26,863 |         |        
|                                                                                        | Published research products      |                          |         | 5,439  |         |        
|                                                                                        |                                  |                          |         |        |         |        
|                                                                                        |                                  | Total revenues           |         |        | 117,785 |        
|                                                                                        |                                  |                          |         |        |         |        
|Operating expenses:                                                                     |                                  |                          |         |        |         |        
|                                                                                        | Cost of services and fulfillment |                          |         | 62,439 |         |        
|                                                                                        | Selling and marketing            |                          |         | 45,242 |         |        
|                                                                                        | General and administrative       |                          |         | 15,426 |         |        
|                                                                                        | Depreciation and amortization    |                          |         | 7,708  |         |        
|                                                                                        | Restructuring charge             |                          |         | 359    |         |        
|                                                                                        |                                  |                          |         |        |         |        
|                                                                                        |                                  | Total operating expenses |         |        | 131,174 |        
|                                                                                        |                                  |                          |         |        |         |        
|Operating income (loss):                                                                |                                  |                          | (13,389 | )      |         | (10,003
|Other income (expense):                                                                 |                                  |                          |         |        |         |        
|Impairment loss                                                                         |                                  |                          | (9,165  | )      |         | (2,640 
|Other income, net                                                                       |                                  |                          | 2,063   |        |         | 361    
|                                                                                        |                                  |                          |         |        |         |        
|Income (loss) before provision (benefit) for income taxes                               |                                  |                          | (20,491 | )      |         | (12,282
|Provision (benefit) for income taxes                                                    |                                  |                          | (2,881  | )      |         | (4,244 
|                                                                                        |                                  |                          |         |        |         |        
|Income (loss) before cumulative effect of change in accounting                          |                                  |                          | (17,610 | )      |         | (8,038 
|Cumulative effect of change in accounting (Note 2)                                      |                                  |                          |        |        |         | (2,438 
|                                                                                        |                                  |                          |         |        |         |        
|Net income (loss) (Note 2)                                                              |                                  | $                        | (17,610 | )      | $       | (10,476
|                                                                                        |                                  |                          |         |        |         |        
|Income (loss) before cumulative effect of change in accounting per diluted common share |                                  | $                        | (1.47   | )      | $       | (.75   
|Cumulative effect of change in accounting per diluted common share                      |                                  | $                        |        |        | $       | (.22   
|                                                                                        |                                  |                          |         |        |         |        
|Net income (loss) per diluted common share                                              |                                  | $                        | (1.47   | )      | $       | (.97   
|                                                                                        |                                  |                          |         |        |         |        
|Weighted average number of diluted common shares outstanding                            |                                  |                          | 11,960  |        |         | 10,763 
|                                                                                        |                                  |                          |         |        |         |        
|Income (loss) before cumulative effect of change in accounting per basic common share   |                                  | $                        | (1.47   | )      | $       | (.75   
|Cumulative effect of change in accounting per basic common share                        |                                  | $                        |        |        | $       | (.22   
|                                                                                        |                                  |                          |         |        |         |        
|Net income (loss) per basic common share                                                |                                  | $                        | (1.47   | )      | $       | (.97   
|                                                                                        |                                  |                          |         |        |         |        
|Weighted average number of basic common shares outstanding                              |                                  |                          | 11,960  |        |         | 10,763 
|                                                                                        |                                  |                          |         |        |         |        

See
notes to consolidated financial statements.

F-3

---



META GROUP, INC.        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY        (In thousands)

|                                                      |                                                                    |   |         | Accumulated
Other
Comprehensive
Loss |   | Common Stock |      |        |   |   |     | Treasury Stock |  
|----------------------------------------------------- | ------------------------------------------------------------------ | - | ------- | ------------------------------------ | - | ------------ | ---- | ------ | - | - | --- | -------------- | -
|
|
|Balance, January 1, 1999                              |                                                                    | $ | 72,690  |                                      |   |              |      | 12,319 |   | $ | 123 |                | $
|Exercise of stock options                             |                                                                    |   | 1,538   |                                      |   |              |      | 487    |   |   | 5   |                |  
|Issuance of shares under employee stock purchase plan |                                                                    |   | 734     |                                      |   |              |      | 57     |   |   | 1   |                |  
|Equity based compensation                             |                                                                    |   | 150     |                                      |   |              |      |        |   |   |     |                |  
|Income tax benefit from stock options exercised       |                                                                    |   | 563     |                                      |   |              |      |        |   |   |     |                |  
|Repurchase and retirement of shares                   |                                                                    |   | (22,751 | )                                    |   |              |      | (2,007 | ) |   | (20 | )              |  
|Comprehensive income:                                 |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  
|                                                      | Unrealized loss on marketable securities, net of tax               |   |         | (469                                 | ) | $            | (469 | )      |   |   |     |                |  
|                                                      | Net income                                                         |   |         | 9,230                                |   |              |      |        |   |   |     |                |  
|                                                      |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  
|Total comprehensive income                            |                                                                    |   | 8,761   |                                      |   |              |      |        |   |   |     |                |  
|                                                      |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  
|Balance, December 31, 1999                            |                                                                    |   | 61,685  |                                      |   | (469         | )    | 10,856 |   |   | 109 |                |  
|Exercise of stock options                             |                                                                    |   | 4,165   |                                      |   |              |      | 376    |   |   | 3   |                |  
|Issuance of shares under employee stock purchase plan |                                                                    |   | 1,026   |                                      |   |              |      | 101    |   |   | 1   |                |  
|Equity based compensation                             |                                                                    |   | 129     |                                      |   |              |      |        |   |   |     |                |  
|Income tax benefit from stock options exercised       |                                                                    |   | 1,425   |                                      |   |              |      |        |   |   |     |                |  
|Repurchase and retirement of shares                   |                                                                    |   | (662    | )                                    |   |              |      | (25    | ) |   |     |                |  
|Sentry earnout shares                                 |                                                                    |   | 6,793   |                                      |   |              |      | 274    |   |   | 3   |                |  
|Sentry earnout warrants                               |                                                                    |   | 939     |                                      |   |              |      |        |   |   |     |                |  
|Rubin Systems, Inc. acquisition                       |                                                                    |   | 375     |                                      |   |              |      | 37     |   |   |     |                |  
|Comprehensive income (loss):                          |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  
|                                                      | Unrealized gain on marketable securities, net of tax               |   |         | 305                                  |   |              | 305  |        |   |   |     |                |  
|                                                      | Foreign currency translation adjustment                            |   |         | 4                                    |   |              | 4    |        |   |   |     |                |  
|                                                      | Net income (loss)                                                  |   |         | (10,476                              | ) |              |      |        |   |   |     |                |  
|                                                      |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  
|Total comprehensive income (loss)                     |                                                                    |   | (10,167 | )                                    |   |              |      |        |   |   |     |                |  
|                                                      |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  
|Balance, December 31, 2000                            |                                                                    |   | 65,708  |                                      |   | (160         | )    | 11,619 |   |   | 116 |                |  
|Exercise of stock options                             |                                                                    |   | 88      |                                      |   |              |      | 83     |   |   | 1   |                |  
|Repurchase of shares                                  |                                                                    |   | (339    | )                                    |   |              |      |        |   |   |     |                |  
|Issuance of shares under employee stock purchase plan |                                                                    |   | 255     |                                      |   |              |      | 120    |   |   | 1   |                |  
|Equity-based compensation                             |                                                                    |   | 75      |                                      |   |              |      |        |   |   |     |                |  
|Income tax benefit from stock options exercised       |                                                                    |   | 7       |                                      |   |              |      |        |   |   |     |                |  
|Private placement of common stock                     |                                                                    |   | 4,573   |                                      |   |              |      | 1,727  |   |   | 17  |                |  
|Rubin Systems, Inc. earnout shares                    |                                                                    |   | 250     |                                      |   |              |      | 57     |   |   | 1   |                |  
|Comprehensive income (loss):                          |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  
|                                                      | Unrealized gain on marketable securities, net of tax               |   |         | 191                                  |   |              | 191  |        |   |   |     |                |  
|                                                      | Less: reclassification adjustment for gains realized in net income |   |         | (27                                  | ) |              | (27  | )      |   |   |     |                |  
|Foreign currency translation adjustment               |                                                                    |   | (385    | )                                    |   | (385         | )    |        |   |   |     |                |  
|Net income (loss)                                     |                                                                    |   | (17,610 | )                                    |   |              |      |        |   |   |     |                |  
|                                                      |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  
|Total comprehensive income (loss)                     |                                                                    |   | (17,831 | )                                    |   |              |      |        |   |   |     |                |  
|                                                      |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  
|Balance December 31, 2001                             |                                                                    | $ | 52,786  |                                      | $ | (381         | )    | 13,606 |   | $ | 136 |                | $
|                                                      |                                                                    |   |         |                                      |   |              |      |        |   |   |     |                |  

See notes to consolidated financial statements.

F-4

---



META GROUP, INC.    CONSOLIDATED STATEMENTS OF CASH FLOWS    (In thousands)

|                                                                                                   |                                                                        | Year Ended December 31,                 |        
|-------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | --------------------------------------- | -------
|
|Operating activities:                                                                              |                                                                        |                                         |        
|Net income (loss)                                                                                  |                                                                        | $                                       | (17,610
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |                                                                        |                                         |        
|                                                                                                   | Cumulative effect of change in accounting                              |                                         |        
|                                                                                                   | Depreciation and amortization                                          |                                         |        
|                                                                                                   | Provision (benefit) for doubtful accounts                              |                                         |        
|                                                                                                   | Impairment loss on investments and advances                            |                                         |        
|                                                                                                   | Gain on sale of investment                                             |                                         |        
|                                                                                                   | (Gain) loss on sale of marketable securities                           |                                         |        
|                                                                                                   | Equity-based compensation and other non-cash charges                   |                                         |        
|                                                                                                   | Deferred income taxes                                                  |                                         |        
|                                                                                                   | Tax benefit from exercise of stock options                             |                                         |        
|                                                                                                   | Changes in assets and liabilities (net of business acquisitions):      |                                         |        
|                                                                                                   |                                                                        | Accounts receivable                     |        
|                                                                                                   |                                                                        | Deferred commissions                    |        
|                                                                                                   |                                                                        | Other current assets                    |        
|                                                                                                   |                                                                        | Other assets                            |        
|                                                                                                   |                                                                        | Accounts payable                        |        
|                                                                                                   |                                                                        | Accrued compensation and other expenses |        
|                                                                                                   |                                                                        | Deferred revenues                       |        
|                                                                                                   |                                                                        |                                         |        
|Net cash (used in) provided by operating activities                                                |                                                                        |                                         | 18,199 
|                                                                                                   |                                                                        |                                         |        
|Investing activities:                                                                              |                                                                        |                                         |        
|                                                                                                   | Capital expenditures                                                   |                                         |        
|                                                                                                   | Proceeds from sales/maturities of marketable securities                |                                         |        
|                                                                                                   | Proceeds from sale of investment                                       |                                         |        
|                                                                                                   | Payments made for acquisitions, net of cash acquired                   |                                         |        
|                                                                                                   | Investments and advances                                               |                                         |        
|                                                                                                   |                                                                        |                                         |        
|Net cash (used in) provided by investing activities                                                |                                                                        |                                         | 5,974  
|                                                                                                   |                                                                        |                                         |        
|Financing activities:                                                                              |                                                                        |                                         |        
|                                                                                                   | Proceeds from private placement of common stock, net of offering costs |                                         |        
|                                                                                                   | Proceeds from bank borrowings                                          |                                         |        
|                                                                                                   | Repayment of bank borrowings                                           |                                         |        
|                                                                                                   | Repurchase of shares                                                   |                                         |        
|                                                                                                   | Proceeds from employee stock purchase plan                             |                                         |        
|                                                                                                   | Proceeds from exercise of stock options                                |                                         |        
|                                                                                                   |                                                                        |                                         |        
|Net cash provided by (used in) financing activities                                                |                                                                        |                                         | (6,100 
|                                                                                                   |                                                                        |                                         |        
|Effect of exchange rate changes on cash and cash equivalents                                       |                                                                        |                                         | (262   
|                                                                                                   |                                                                        |                                         |        
|Net (decrease) increase in cash and cash equivalents                                               |                                                                        |                                         | 17,811 
|Cash and cash equivalents at beginning of year                                                     |                                                                        |                                         | 3,622  
|                                                                                                   |                                                                        |                                         |        
|Cash and cash equivalents at end of year                                                           |                                                                        | $                                       | 21,433 
|                                                                                                   |                                                                        |                                         |        
|Supplemental cash flow information:                                                                |                                                                        |                                         |        
|Cash paid during the year for income taxes                                                         |                                                                        | $                                       | 0      
|                                                                                                   |                                                                        |                                         |        
|Cash paid during the year for interest                                                             |                                                                        | $                                       | 1,361  
|                                                                                                   |                                                                        |                                         |        

See notes to consolidated financial statements.

F-5

---



1. Business Description

META Group, Inc. and its subsidiaries, 1422722 Ontario Inc. ("META Group Canada"), The Sentry Group, Inc., META Group Australia Holdings PTY
Limited ("META Group Australia"), META Group Singapore PTE Limited ("META Group Singapore"), Abundant Strategy SDN.BHD ("META Group Malaysia"), META Group France, META Group AG ("META Group Germany")
and MG (Bermuda) Ltd. (collectively the "Company") is a leading independent research and consulting firm focusing on information technology ("IT") and business transformation strategies. The
Company's goal is to deliver objective, consistent, and actionable guidance to enable organizations to innovate more rapidly and effectively.

The
Company's domestic revenues are generated by a direct sales force calling on IT user and vendor clients. International marketing and sales are performed by independent sales
representative organizations, its subsidiaries in Canada, Australia, Singapore, Malaysia and France, and its majority owned subsidiary in Germany. Under the terms of the Company's agreements with
independent sales representative organizations, the Company realizes Advisory Services revenues from such organizations at rates of 25% to 40% of amounts billed to their clients.

Revenues
from independent sales representative organizations and the Company's subsidiaries in Canada, Australia, Singapore, Malaysia and France accounted for approximately 18%, 16%, and
17% of the Company's total Advisory Services revenues for the years ended December 31, 2001, 2000 and 1999, respectively.

2. Change in Accounting

In the fourth quarter of 2000, the Company adopted the provisions of Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB
101"). The Company identified certain newer Advisory Services product offerings containing multiple service elements where revenue was recognized as the services were performed. The Company has
elected to record these multiple element contracts
on the straight-line method over the contract term, consistent with the treatment of the Company's other traditional Advisory Services product offerings because it is the Company's belief
that the straight-line method is most appropriate given the increased sales volumes and the varying usage patterns by customers of the underlying services. As required by SAB 101, the
Company retroactively adopted the provisions effective January 1, 2000, and has reported this on the Consolidated Statement of Operations as a cumulative effect of a change in accounting in the
amount of $2.4 million, net of tax. The impact of this change in accounting on quarterly results for 2000 is reflected in Note 16.

The
pro-forma net income and earnings per share amounts for the year ended December 31, 1999, assuming an adoption date of January 1, 1998 was as follows:

Year Ended
December 31,
1999Net income (in thousands)

$
7,856Net income per basic common share

$
0.73Net income per diluted common share

$
0.68


F-6

---

3. Significant Accounting Policies

Principles of Consolidation.The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for acquisitions of companies accounted for using
the purchase method have been included in the consolidated statements of operations beginning on the closing date of acquisition. Operations of the Company's French and Asia Pacific subsidiaries are
consolidated on a one month lag and the operations of the German subsidiary will be consolidated on a two month lag.

Foreign Currency Translation.All assets and liabilities of foreign subsidiaries are translated into
US dollars at year-end exchange rates. Income and expense items are translated at average exchange rates
prevailing during the year. The resulting translation adjustments are recorded as a component of accumulated other comprehensive loss in stockholders' equity.

Revenue and Commission Expense Recognition.Advisory Services revenues are recognized on a
straight-line basis over the subscription contract period, generally one year. All subscription contracts are billable at signing, absent special terms granted on a limited basis from time
to time. As such, the Company's policy is to record at the time of signing of an Advisory Services subscription contract the fees receivable and related deferred revenues for the full amount of the
subscription contract. Accounts receivable and deferred revenues that extend beyond a 12-month period have been classified on the consolidated balance sheets as non-current.
The Company also records the related sales commission obligation upon the signing of the subscription contract and amortizes the corresponding deferred commission expense over the subscription period
in which the related Advisory Services revenues are earned and amortized to income. All subscription contracts are cancelable only for non-performance, except for certain government
contracts that have a 30-day cancellation clause. Historically, such cancellations have not been material. The Company records estimated reductions to revenue for customer cancellations.
Strategic Consulting and Published Research Products revenues are recognized at the time the applicable service is rendered or product is delivered.

Supplemental Statements of Cash Flow Data.During the year ended December 31, 2001, in
connection with the acquisition of substantially all the assets of Rubin Systems, Inc. ("RSI), the Company issued 57,084 shares of its common stock, $0.01 par value per share (the "Common
Stock"). The value of the shares ($250,000) was allocated to the assets acquired. During the year ended December 31, 2000, the Company issued 36,874 shares of Common Stock in connection with
the RSI acquisition. The value of the shares issued ($375,000) was allocated to the assets acquired. During the year ended December 31, 2000, the Company issued 274,470 shares in connection
with the payment of contingent consideration pursuant to the acquisition of the Sentry Group, Inc. In addition, 75,000 warrants to purchase Common Stock became exercisable when such contingent
consideration was earned. The value of the shares and warrants totaled $7.7 million and was recorded as goodwill.

Product Development.All costs incurred in the development of new products and services are expensed
as incurred.

Property and Equipment.Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, which range from three to seven
years.

F-7

---

Computer Software Costs.Internal and external direct and incremental costs incurred in developing or
obtaining computer software for internal use are capitalized in property and equipment and amortized under the straight-line method over the estimated useful life of the software,
generally three to five
years. General and administrative costs related to developing or obtaining such software are expensed as incurred.

Income Taxes.Deferred income taxes are provided for the temporary differences between the financial
reporting basis and the income tax basis of the Company's assets and liabilities as measured by the presently enacted tax rates.

Marketable Securities.Investments with original maturities of more than three months were classified
as marketable securities. Marketable securities at December 31, 2000 were considered "available-for-sale" and carried at fair market value. Unrealized gains and losses,
net of income tax effects, were reflected as "Accumulated other comprehensive loss" in Stockholders' Equity and had no effect on net income. During the year ended December 31, 2001, the Company
liquidated its marketable securities and recognized a gain of $46,600, which is included in the Company's consolidated statement of operations for the year ended December 31, 2001.

Earnings per Share.Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding and dilutive common equivalent
shares (options and warrants to purchase Common Stock) outstanding. Common shares outstanding includes issued shares less shares held in treasury for the respective year.

Concentration of Credit Risk.Financial instruments that potentially subject the Company to credit
risk consist primarily of cash and trade receivables. The Company maintains its cash with major financial institutions. Concentrations of credit risk with respect to accounts receivable are limited
due to the wide variety of customers and markets into which the Company's products and services are provided, as well as their dispersion across many different geographic areas. The Company is a party
to financial instruments with off-balance-sheet risk in the normal course of business. These financial instruments consist of irrevocable letters of credit guaranteeing certain local bank
borrowings and operating leases of its independent sales representative organizations and certain performance obligations by the Company. The Company has no other material
off-balance-sheet concentration of credit risk such as foreign exchange contracts, options contracts, or other foreign hedging arrangements.

Fair Value of Financial Instruments.Most of the Company's financial instruments, including cash,
trade receivables and payables, and accrued liabilities are short-term in nature. Accordingly, the carrying amount of these financial instruments approximates fair value. The carrying
amount of the Company's bank debt approximates fair value as the rate of interest on this facility approximates the current market rate of interest for similar instruments with comparable maturities.

Long-Lived Assets.The Company follows Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company reviews the recoverability of its
long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. Evaluation of possible
impairment is based on the Company's ability to recover the asset from the expected future cash flows (undiscounted and without interest charges) of the related operations. If the

F-8

---

expected undiscounted cash flows are less than the carrying value of such asset, an impairment loss would be recognized for the difference between estimated fair value and carrying value. As a result
of the Company's review, during the years ended December 31, 2001 and 2000, the Company provided for $9.2 million and $2.6 million, respectively, of impairment losses on several of its
investee companies (Note 8). The assessment of impairment requires management to make estimates of expected future cash flows along with other available market data, including peer group market
comparables of public companies, reviewing the business climate of each investee, its historical financial results, its projected cash flow, its plans for the future and the likelihood of achieving
such plans. Based on such review, a determination is made on a case-by-case basis as to whether an investment is deemed to be impaired and therefore requires an adjustment to
the carrying value. It is possible that future events or circumstances could cause these estimates to change.

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

Intangible Assets.Intangible assets include goodwill, customer lists, non-compete
agreement, intellectual property and content databases. Goodwill represents the excess of the purchase price of acquired businesses over the fair value of net assets acquired and is being amortized
using the straight-line method over a period ranging from 10 to 30 years. In accordance with Statement of Financial Accounting Standards No. 142 ("SFAS 142") "Goodwill
and Other Intangible Assets", amortization of goodwill will cease on January 1, 2002. The non-compete agreement is being amortized on a straight-line basis over the
period of the agreement (four years), the customer lists are being amortized over their estimated useful lives of 1 to 7 years, the intellectual property is being amortized over a period of
5 years, and the databases are being amortized over a period of 7 years.

Stock-Based Compensation.The Company follows the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 encourages, but does not require, companies to adopt a fair value based
method for determining expense related to stock-based compensation. The disclosures are set forth in Note 12. The Company continues to account for stock based compensation for employees using
the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations.

New Financial Accounting Standards.Effective January 1, 2001, the Company adopted Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly
considered derivatives may
now meet the definition of a derivative. The adoption of SFAS 133 did not have an impact on the consolidated financial position, results of operations, or cash flows of the Company.

F-9

---



3. Significant Accounting Policies (Continued)

In
June 2001, Statement of Financial Accounting Standards No. 141 ("SFAS 141") "Business Combinations" and Statement of Financial Accounting Standards No. 142
("SFAS 142") "Goodwill and Other Intangible Assets" were released. SFAS 141 requires all business combinations be accounted for using the purchase method of accounting and that certain
intangible assets acquired in a business combination be recognized as assets apart from goodwill. SFAS 141 was effective for all business combinations initiated after June 30, 2001. SFAS
No. 142 is effective for all fiscal years beginning after December 15, 2001, however early adoption is permitted. As required by SFAS 142, the Company will perform an impairment
test on goodwill and other intangible assets as of January 1, 2002. Thereafter, the Company will perform impairment tests annually and whenever events or circumstances occur indicating that
goodwill or other intangible assets might be impaired. All companies have six months subsequent to the date of adoption to complete the initial goodwill impairment test. Amortization of goodwill and
certain other intangible assets, including those recorded in past business combinations, will cease on January 1, 2002. The Company is required to adopt SFAS 142 on January 1,
2002. The annual reduction in expense due to the discontinuance of goodwill amortization beginning in 2002 will be approximately $1.1 million. The Company has not yet determined any further
impact SFAS 142 will have on its existing goodwill.

In
August 2001, Statement of Financial Accounting Standards No. 143 ("SFAS 143") "Accounting for Asset Retirement Obligations" was released. This statement,
effective January 1, 2003, addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset
retirement costs. In October 2001, Statement of Financial Accounting Standards No. 144 ("SFAS 144") "Accounting for the Impairment or Disposal of Long-Lived Assets"
was released. SFAS 144 establishes a single accounting model, based on the framework established in SFAS 121, for long-lived assets to be disposed of by sale, and resolves
significant implementation issues related to SFAS 121. This statement also supercedes the accounting reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the
Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a
segment of a business. The provisions of SFAS 144 are effective
for the fiscal years beginning after December 15, 2001. The Company believes SFAS 143 and SFAS 144 are not expected to have any impact on its results of operations or financial
position.

4. Acquisitions

In January 2001, the Company acquired substantially all of the assets of two of its Asia Pacific distributors, one based in Sydney, Australia and the other
headquartered in Singapore. With these acquisitions, the distributors became wholly owned subsidiaries of the Company. The total purchase price amounted to approximately $3 million, consisting
of cash in the amount of $1.9 million, the conversion into equity of accounts receivable from the distributors in the amount of $470,000, and the assumption of certain liabilities. The
acquisitions were accounted for under the purchase method. Accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed, based on estimated fair values at the
date of acquisition. Such allocation resulted in goodwill of $1.7 million, which was being amortized over 20 years. Amortization of the goodwill will cease on January 1, 2002 in
accordance with SFAS 142. Of the acquired assets, approximately $600,000 related to the customer list of the seller, which is being amortized over one year, and approximately $500,000 related
to intellectual property, which is being amortized over five years.

F-10

---

On
December 31, 2001, the Company acquired an additional 44% ownership interest in META Group Germany. The Company had previously acquired a 9% interest in META Group Germany in
1999 in exchange for the forgiveness of accounts receivable owed to the Company in the amount of $1 million. With the acquisition, META Group Germany became a majority-owned subsidiary of the
Company. META Group Germany owns the exclusive distribution rights to the Company's products and services in Spain, Portugal, Switzerland, Germany, Austria, and Central, Southern and Eastern Europe.
The consideration for the acquisition was the agreement of the Company to subordinate approximately $4.0 million of accounts receivable owed to it by META Group Germany to all other debts of
META Group Germany. The Company consolidated META Group Germany's balance sheet at December 31, 2001. The acquisition was accounted for under the purchase method. Accordingly, the purchase
price has been allocated to the assets acquired and the liabilities assumed, based on estimated fair values at the date of acquisition. Such preliminary allocation resulted in goodwill of
approximately $7.2 million and approximately $1.7 million related to the customer list of META Group Germany, which will be amortized over 7 years. The operational results of META
Group Germany will be consolidated with the Company's results beginning in the first quarter of 2002. During the years ended December 31, 2000 and 2001, the Company generally realized revenues
from META Group Germany at rates of 10%-40% of amounts billed.

In
November 2000, the Company completed the acquisition of substantially all the assets of META Group Canada, Inc., the Company's independent sales representative
organization in Canada, for $4.7 million in cash and the assumption of certain liabilities. The acquisition was accounted for under the purchase method. Accordingly, the purchase price has been
allocated to the assets acquired and the liabilities assumed, based on estimated fair values at the date of acquisition. Such allocation resulted in goodwill of $3.6 million, which was being
amortized over 20 years. Amortization of the goodwill will
cease on January 1, 2002 in accordance with SFAS 142. Of the acquired assets, $2.2 million related to the customer list of the seller, which is being amortized over five years.

In
October 2000, the Company completed the acquisition of substantially all the assets of RSI, a provider of IT trend-tracking, finance analysis, and software engineering
measurement consulting, for an initial payment of $750,000 in cash, $375,000 in Common Stock (36,874 shares), and the assumption of certain liabilities. During the year ended December 31, 2001,
the Company paid $1 million in cash and issued $250,000 in Common Stock (57,084 shares) as contingent consideration to RSI as a result of the achievement of certain financial targets. In the
event certain financial targets are met, additional contingent consideration of up to $3.1 million payable in cash and $1.9 million payable in Common Stock may be paid through
March 2004. In the event the aggregate number of shares issued in satisfaction of additional contingent consideration exceeds 349,526, the remaining consideration will be payable in cash. RSI
is wholly owned by Dr. Howard Rubin, a director and officer of the Company.

In
September 2000, the Company completed the acquisition of all the outstanding limited liability company interests of SPEX Research LLC ("SPEX"), an IT market research company
that conducts evaluations of enterprise software packages, for approximately $1.6 million in cash and the conversion of a $200,000 convertible promissory note. In addition, the Company assumed
$1.2 million in liabilities. The acquisition was accounted for under the purchase method and, accordingly, the operations of SPEX have been included in the consolidated financial statements
from the date of acquisition. The excess purchase price over the fair value of amounts assigned to the net assets acquired was $3.1 million and has been recorded as goodwill, which was being
amortized over 10 years. Amortization of the goodwill will cease on January 1, 2002 in accordance with SFAS 142.

F-11

---

In
October 1998, the Company completed the acquisition of all the outstanding capital stock of The Sentry Group, Inc. ("Sentry"), an IT consulting company, for an initial
payment of 195,066 shares of Common Stock and a contingent payment of up to $7 million in Common Stock or (at the Company's option) cash in the event certain financial targets were met by
Sentry for 1999. In addition, the Company issued to Sentry stockholders warrants to purchase up to 200,000 shares of Common Stock at $30.00 per share, 125,000 shares of which were immediately
exercisable and 75,000 shares of which were contingently exercisable upon Sentry achieving certain financial targets in 1999. As of December 31, 1999, the contingent payment of
$7 million had been earned. Accordingly, the contingent warrants were fully exercisable. The fair value of such warrants was approximately $940,000 and was recorded as additional goodwill
during the year ended December 31, 2000. The 125,000 warrants expire in October 2002, and the 75,000 warrants expire in May 2004. During the year ended December 31, 2000,
the Company issued 274,470 shares of Common Stock and paid approximately $470,000 in cash to certain of the former Sentry shareholders.

The
acquisition was accounted for under the purchase method and, accordingly, the operations of Sentry have been included in the consolidated financial statements from the date of
acquisition. The purchase price was allocated to the net assets acquired based upon their estimated fair values at the
date of acquisition. Such allocation resulted in goodwill of $13.9 million, which was being amortized over 30 years. Amortization of the goodwill will cease on January 1, 2002 in
accordance with SFAS 142.

The
unaudited pro forma results of operations for the years ended December 31, 2000 and 2001 have been set forth below as though the Canada, Australia, Singapore and German
acquisitions had occurred as of January 1, 2000 (in thousands, except per share data).

December 31,2001

2000Revenues

$
129,018

$
134,965Loss before benefit for income taxes

$
(25,253
)
$
(13,653
)Net loss

$
(22,372
)
$
(11,847
)Net loss per share:Diluted

$
(1.87
)
$
(1.10
)Basic

$
(1.87
)
$
(1.10
)


5. Marketable Securities

The Company held investments in marketable securities that were classified as available for sale on the consolidated balance sheet at December 31, 2000. At
December 31, 2000 such securities were marked-to-market, resulting in an unrealized loss of $164,000, net of $113,000 of income tax benefits, which was reflected as
"Accumulated other comprehensive loss" in Stockholders' Equity at December 31, 2000. During the year ended December 31, 2001, $3 million of the Company's marketable securities
were called by the issuer, and the remaining $4 million were sold by the Company. The Company recognized a gain of $46,600 on the sale of the marketable securities which is included in the
Company's statement of operations for the year ended December 31, 2001.

F-12

---



5. Marketable Securities (Continued)

Marketable securities at December 31, 2000 included the following (in thousands):

Cost

December 31, 2000
Gross
Unrealized
Holding
Gains (Losses)

Fair
ValueUS government issued mortgage backed bonds

$
6,996

$
(277
)
$
6,719


6. Property and Equipment

Property and equipment consists of the following (in thousands):

December 31,2001

2000Leasehold improvements

$
1,627

$
1,600Computer equipment, software, and peripherals


18,993


16,691Web site development costs


2,734


2,530Furniture and fixtures


1,367


1,30424,721


22,125Less: accumulated depreciation


(12,782
)

(7,413
)$
11,939

$
14,712


Depreciation
expense was $5.3 million, $4.1 million and $2.3 million for the years ended December 31, 2001, 2000 and 1999, respectively.

7. Intangible Assets

Intangible assets consist of the following (in thousands):

December 31,2001

2000Goodwill

$
29,988

$
21,148Customer list


4,325


2,167Content databases


2,000


971Non-compete agreement


375


182Other


512Total


37,200


24,468Less: accumulated amortization


(3,328
)

(936
)$
33,872

$
23,532


F-13

---

8. Investments and Advances

At December 31, 2001 and 2000, the Company had investments in and advances to companies in parallel or synergistic industries. Such investments and
advances are summarized below (in thousands):

December 31,2001

2000META Secur e-Com Solutions

$
100

$
2,799Spikes Cavell & Co.


2,346


2,765Computerwire


50


2,531enamics, Inc.


50


1,530Client/Server Labs-Tescom


1,385


1,385Syndicated Research Group


200


1,210META Group Northern Europe


1,649


META Group Belgium





1,247Other


2,410


5,351$
8,190

$
18,818


In
2001, through the acquisition of META Group Germany, the Company acquired an interest in META Group Northern Europe in the form of an equity investment and a 3 year promissory
note.

In
March 2001, the Company closed on the sale of its investment in Intermedia Group. Cash proceeds were $2.9 million, resulting in a pre-tax gain of
approximately $2.6 million, which is included in other income in the Company's consolidated statement of operations for the year ended December 31, 2001.

In
the above table, included in Other are several investments in and advances to investee companies, some of which include investments in and advances to certain of the Company's
independent international sales representative organizations. None of the investments and advances exceed more than $1 million individually. All of the Company's investments are accounted for
under the cost method.

The
Company follows a practice to review its individual investments for impairment on a quarterly basis. This review includes the examination of the estimated market value of each
specific investment using peer group market comparables of public companies. Additionally, the Company reviews the business climate of each investee, its historical financial results, its projected
cash flow, its plans for the future and the likelihood of achieving such plans. Based on such review, a determination is made on a case-by-case basis as to whether an
investment is deemed to be permanently impaired and therefore requires an adjustment to the carrying value. The Company recorded impairment losses of $9.2 million and $2.6 million for
the years ended December 31, 2001 and 2000, respectively. The losses taken were determined on a specific identification method considering each investee's particular facts and circumstances in
existence at that time.

The
Company will continue to evaluate its investments for impairment every quarter, and based on its review, may record additional impairment losses should the facts and circumstances in
existence at that time merit such an adjustment.

F-14

---

9. Bank Debt

In September 2000, the Company entered into a $25 million one-year senior revolving credit facility (the "Old Facility") with its bank
which in September 2001 converted into a five year term loan payable in 60 consecutive monthly installments. In October 2001, the Company made a principal payment of $365,000 in
accordance with the terms of the Old Facility. Additionally in October 2001, $2 million of the Company's marketable securities were called by the issuer and the proceeds were used to pay
down the Old Facility. On November 5, 2001 the Company restructured the Old Facility with its bank by entering into a $20 million amended and restated credit agreement (the "New
Facility"). The New Facility replaces the Old Facility and consists of an $8 million term loan (the "Term Loan") payable in 36 monthly consecutive installments that commenced in
December 2001, and a $12 million revolving credit facility (the "Revolving Facility"). Both mature in November 2004. In November and December 2001, an additional
$1 million of the Company's marketable securities were called by the issuer, and the Company sold the remaining $4 million of its marketable securities. All proceeds were used to pay
down the Revolving Facility. The Company also paid down the Revolving Facility and Term Loan an additional $4.6 million from its cash on hand. As of December 31, 2001 the total amount
used under the New Facility was $10.7 million, consisting of $9.9 million in outstanding borrowings ($7.8 million outstanding under the Term Loan and $2.1 million
outstanding under the Revolving Facility) and $0.8 million in letters of credit issued on behalf of certain of the Company's independent sales representative organizations and as security for a
portion of the Company's Stamford, CT premises lease. During the year ended December 31, 2001, the Company paid $1.36 million in interest expense.

The
New Facility has a borrowing base equal to 80% of the Company's eligible accounts receivable. Interest is payable at the rate of (i) LIBOR plus 2.5% or (ii) the higher
of (a) the Prime Rate or (b) the
Federal Funds Rate plus 0.5%. The New Facility is collateralized by the Company's accounts receivable, and requires payment of a commitment fee payable quarterly, in arrears, of 0.25% based on the
average, daily, unused portion of the Revolving Facility. The New Facility contains a number of covenants that, among other things, restrict the ability of the Company to incur additional
indebtedness, pay dividends or other distributions, dispose of certain assets, enter into sale and leaseback transactions, create liens, make certain investments, acquisitions or mergers, and that
otherwise restrict corporate activities. In addition, the Company is required to maintain certain financial covenants, including a leverage ratio covenant, a fixed charge ratio covenant and a minimum
EBITDA covenant. The Company was not in compliance with these covenants for the quarterly period ended December 31, 2001. On March 26, 2002, the Company entered into an amendment to the
New Facility, which among other things, waived prior covenant defaults, reset existing covenants, and added a new consolidated net income covenant.

At
December 31, 2001, META Group Germany had two lines of credit with its local bank totaling €1.4 million (approximately $1.2 million). The lines
bear interest at 8.5% and are secured by a personal guarantee of META Group Germany's managing director and are collateralized by certain of META Group Germany's accounts receivable as well as shares
of the Company held by META Group Germany. At December 31, 2001, META Group Germany had outstanding borrowings totaling $993,000 and was in default of certain financial covenants. Consequently,
in February 2002 the Company provided an irrevocable letter of credit for €1 million (approximately $872,500) as collateral to META Group Germany's outstanding borrowings
with its bank.

F-15

---



10. Commitments and Contingencies



The
Company leases office facilities under non-cancelable operating leases. Future minimum lease payments relative to these agreements that have initial or remaining
noncancelable terms in excess of one year are as follows (in thousands):

Year ending December 31,2002

$
5,1542003


5,1012004


4,9412005


3,9622006


3,523Thereafter


5,918$
28,599


Total rent expense was $4.7 million, $3.4 million and $2.5 million for the years ended December 31, 2001, 2000 and
1999, respectively.



Other
than ordinary routine litigation incidental to the Company's business and that the Company believes is unlikely to have a material adverse effect on its business, the Company is
not a party, nor is any of its property subject to, any pending legal proceedings.



At December 31, 2000, the Company had in place an irrevocable letter of credit guaranteeing bank borrowings of one of its international distributors with
the distributor's local bank. In the year ended December 31, 2001 the distributor entered into bankruptcy proceedings, and accordingly was in default on such borrowings. Subsequently, the
letter of credit was called by the bank and the Company recorded a loss of $225,000.

At
December 31, 2001, the Company had outstanding letters of credit totaling $834,000 as security for operating leases on behalf of certain of the Company's independent sales
representative organizations and a portion of the Company's Stamford, CT premises lease.



The Company has a corporate guarantee in the amount of $375,000 guaranteeing the local bank borrowings of one of its independent sales representative
organizations.

F-16

---

11. Income Taxes

The provision (benefit) for income taxes is as follows (in thousands):

Year Ended December 31,2001

2000

1999Currentfederal

$
253

$
962

$
1,890state and other


18


479


1,434foreign








271


1,441


3,324Deferredfederal


(2,799
)

(4,363
)

1,477state


(353
)

(934
)

1,082foreign





(388
)

(3,152
)

(5,685
)

2,559$
(2,881
)
$
(4,244
)
$
5,883


During the years ended December 31, 2001 and 2000, the Company generated a pre-tax loss of $18.6 million and
$11.3 million, respectively, in the US. During the year ended December 31, 2001 the Company generated a pre-tax loss of $1.9 million from its international
subsidiaries. During the year ended December 31, 2000, the Company generated a pre-tax loss of $1 million in Canada. During the year ended December 31, 1999, all
income was generated domestically.

A
reconciliation of the income tax (benefit) provision from the amount computed using the federal statutory rate is as follows (in thousands):

Year Ended December 31,2001

2000

1999Income tax at statutory rate

$
(7,172
)
$
(4,298
)
$
5,289State and other taxes, net of federal benefit


(597
)

(324
)

2,454Foreign taxes


(3
)

(48
)

Impact of valuation allowance


4,185





(1,939
)Other


706


426


79$
(2,881
)
$
(4,244
)
$
5,883


The
principal components of the Company's deferred tax assets and (liabilities) are as follows (in thousands):

December 31,2001

2000Depreciation and amortization

$
45

$
627Unrealized losses on investments


4,680


1,268Allowance for doubtful accounts


1,302


1,684Accrued expenses


39


2,248Net operating loss carryforwards


10,047


1,891Deferred revenues


323


1,874Other


507


150Deferred tax asset


16,943


9,742Valuation allowance


(4,388
)

(203
)Net deferred tax asset

$
12,555

$
9,539


F-17

---

During
the year ended December 31, 2001, the Company increased the valuation allowance by $4.2 million. Of this amount, $3.5 million relates to the
investment impairment charges recorded by the Company. The remaining $0.6 million increase relates to losses from the Company's foreign subsidiaries.

At
December 31, 2001, the Company has net operating loss carryforwards for federal income tax purposes of $22.8 million expiring in the years ending December 31,
2002 through 2021. In addition, the Company has foreign net operating loss carryforwards of approximately $2.7 million; $0.95 million of
which have no expiration period and the remainder expiring in 2006 through 2008. The Company believes that it is more likely than not that these deferred tax benefits will be realized.

The
exercise of non-qualified stock options and the disqualifying dispositions of incentive stock options under the Company's stock option plans gives rise to compensation
which is includable in the taxable income of the recipients and deductible by the Company for federal and state income tax purposes. The tax benefit recognized from the utilization of such deductions
increased paid-in capital by $7,000, $1.4 million and $563,000 during the years ended December 31, 2001, 2000 and 1999, respectively.

12. Stockholders' Equity



In June 2001 the Company completed a private placement of its Common Stock whereby the Company issued 1,726,617 shares of its Common Stock for $2.78 per
share to Dale Kutnick, the Company's Chairman of the Board of Directors, Chief Executive Officer and Co-Research Director, and additional purchasers affiliated with Francis J. Saldutti,
Harry Gruner and George McNamee, each of whom is a member of the Company's Board of Directors (the "Board of Directors"). The Board of Directors approved the transaction after receiving the favorable
recommendation of a Special Committee of the Board of Directors consisting of three disinterested members of the Board of Directors. The Special Committee retained BNY Capital Markets, Inc. as
its financial advisor to render a fairness opinion on the transaction. Total proceeds to the Company were $4.57 million, net of offering costs of approximately $227,000. The Common Stock
offered in the private placement has not been registered with the Securities and Exchange Commission and may not be offered or sold in the United States absent registration or an applicable exemption
from registration requirements. The Company has, however, filed a registration statement with the Securities and Exchange Commission to register the shares issued (other than those issued to
Mr. Kutnick), although such registration statement is not yet effective.

F-18

---



12. Stockholders' Equity (Continued)



In December 2001, pursuant to the acquisition of META Group Germany, the Company acquired 155,000 shares of its Common Stock held by META Group Germany.
The shares had a fair value on December 31, 2001 of $2.19 per share. The aggregate value of $339,450 is reflected in Treasury Stock at December 31, 2001. The Company repurchased and
retired other shares during the year ended December 31, 2000 in connection with a settlement agreement with a minority stockholder. Such settlement agreement was assumed pursuant to the Sentry
acquisition in 1998.



The Company's Amended and Restated 1995 Non-Employee Director Stock Option Plan, Second Amended and Restated 1995 Stock Plan, 1993 Stock Option and
Incentive Plan, Restated and Amended 1989 Stock Option Plan, and Amended and Restated 1996 Equity Compensation Plan of The Sentry Group, Inc. (the "Plans") provide for grants to employees,
directors, and consultants of incentive stock options ("ISOs") and non-qualified stock options ("NQSOs"), for the purchase of up to 350,000, 6,375,000, 2,400,000, 5,400,000, and 359,500
shares of Common Stock, respectively. All options granted under the plans are at an exercise price of not less than fair market value. The Compensation Committee of the Board of Directors determined
the dates at which options vest and become exercisable. Upon adoption of the Second Amended and Restated 1995 Stock Plan, the 1993 Stock Option and Incentive Plan and the Restated and Amended 1989
Stock Option Plan were terminated, except as to outstanding stock options.

Stock
option activity under the Plans from January 1, 1999 to December 31, 2001 was as follows:

|                              |                   | Options   |            | Option Price Range |     | Weighted-Average
Exercise Price
|----------------------------- | ----------------- | --------- | ---------- | ------------------ | --- | -------------------------------
|Outstanding January 1, 1999   |                   | 2,940,273 |            | $                  | .10 |                               
|                              | Granted           |           | 1,304,350  |                    |     | 8.25                           
|                              | Exercised         |           | (487,262   | )                  |     | .10                            
|                              | Canceled          |           | (340,979   | )                  |     | 8.25                           
|                              |                   |           |            |                    |     |                                
|Outstanding December 31, 1999 |                   | 3,416,382 |            |                    | .25 |                               
|                              | Granted           |           | 1,755,894  |                    |     | 5.29                           
|                              | Exercised         |           | (375,517   | )                  |     | .42                            
|                              | Canceled          |           | (494,890   | )                  |     | 8.25                           
|                              |                   |           |            |                    |     |                                
|Outstanding December 31, 2000 |                   | 4,301,869 |            |                    | .25 |                               
|                              | Granted           |           | 1,287,012  |                    |     | 1.90                           
|                              | Exercised         |           | (82,701    | )                  |     | 0.42                           
|                              | Canceled          |           | (1,936,314 | )                  |     | 1.90                           
|                              |                   |           |            |                    |     |                                
|Outstanding December 31, 2001 |                   | 3,569,866 |            |                    | .25 |                               
|                              |                   |           |            |                    |     |                                
|Exercisable:                  |                   |           |            |                    |     |                                
|                              | December 31, 2001 |           | 1,700,368  |                    |     |                                
|                              |                   |           |            |                    |     |                                
|                              | December 31, 2000 |           | 1,500,260  |                    |     |                                
|                              |                   |           |            |                    |     |                                
|                              | December 31, 1999 |           | 1,145,481  |                    |     |                                
|                              |                   |           |            |                    |     |                                

At
December 31, 2001, 660,994 shares were issuable upon the exercise of outstanding NQSOs. All other stock options outstanding were ISOs.

F-19

---

The
following table summarizes information about stock options outstanding at December 31, 2001:

OPTIONS OUTSTANDING

OPTIONS EXERCISABLERANGE OF
EXERCISE
PRICES

NUMBER
OUTSTANDING
AS OF 12/31/01

WEIGHTED
AVERAGE
REMAINING
LIFE

WEIGHTED
AVERAGE
EXERCISE
PRICE

NUMBER
EXERCISABLE
AS OF 12/31/01

WEIGHTED
AVERAGE
EXERCISE
PRICE$
0.25$  2.77

1,146,597

9.34

$
2.31

379,941

$
2.652.82    8.25

1,012,292

7.99


6.60

337,743


7.069.19  14.38

502,827

5.94


11.27

377,966


11.6314.50  21.79

517,922

5.78


16.59

433,789


16.6222.50  27.50

390,228

7.87


24.22

170,929


24.20$
0.25$27.50

3,569,866

7.80

$
9.26

1,700,368

$
11.25


The
weighted average remaining contractual life of options outstanding at December 31, 2001, 2000, and 1999 was 7.80, 7.64, and 7.24 years, respectively. The estimated fair
value of options granted during the years ended December 31, 2001, 2000, and 1999 was $1.87, $10.26, and $6.81 per share, respectively. The Company applies Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for its stock option and purchase plans. Had compensation cost for the Company's stock option plans and stock purchase plan been determined
based on fair value at the option grant dates for awards in accordance with the provisions of SFAS 123, the Company's net income (loss) and earnings (loss) per share for the years ended
December 31, 2001, 2000 and 1999 would have been reflective of the pro forma amounts indicated below:

|Net (loss) income (in thousands):           |             | 2001 |   | 2000    |   | 1999
|------------------------------------------- | ----------- | ---- | - | ------- | - | ----
|                                            | As reported |      | $ | (17,610 | ) | $   
|                                            | Pro forma   |      |   | (19,026 | ) |     
|Net (loss) income per diluted common share: |             |      |   |         |   |     
|                                            | As reported |      | $ | (1.47   | ) | $   
|                                            | Pro forma   |      |   | (1.59   | ) |     
|Net (loss) income per basic common share:   |             |      |   |         |   |     
|                                            | As reported |      | $ | (1.47   | ) | $   
|                                            | Pro forma   |      |   | (1.59   | ) |     

The
fair value of options granted under the Company's fixed stock option plans during the years ended December 31, 2001, 2000, and 1999 was estimated on the dates of grant using
the Black-Scholes option-pricing model with the following weighted-average assumptions used:

2001

2000

1999Expected life from vest date (in years)

1.65.4

1.65.4

1.55.5Risk-free interest rates

1.85.3
%
4.55.3
%
6.16.8
%Volatility

90148
%
7399
%
6682
%Dividend yield








F-20

---

Pro
forma compensation cost related to shares purchased under the Second Amended and Restated 1995 Employee Stock Purchase Plan (the "Purchase Plan") is measured based on the discount
from market value. The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future pro forma effects.



In September 2001, the Company initiated a voluntary stock option exchange offer for stock options with an exercise price greater than $12 per share to
certain eligible employee option holders. The Company's senior executives and members of the Board of Directors were not eligible to participate in the offer. In October 2001, the offer period
expired and 752,469 stock options were accepted for exchange and cancelled. The Company currently intends to grant the same amount of options in April 2002 at the fair market value on the
actual date of grant to those eligible employees still employed at the date of grant.



The Purchase Plan was adopted by the Board of Directors and approved by the Company's stockholders on October 2, 1995. The Purchase Plan provides for the
issuance of a maximum of 750,000 shares of Common Stock to employees at prices equal to 85% of the lesser of the market price of the Common Stock on the first or last day of the
semi-annual plan period. During the years ended December 31, 2001 and 2000, the Company issued 119,760 and 101,271 shares, respectively, under the Purchase Plan.



For the year ended December 31, 2001, for the purpose of calculating earnings per sharebasic and diluted, the weighted average number of
shares of Common Stock outstanding was 11,960,100. Diluted earnings per share for the year ended December 31, 2001 excludes 126,937 Common Stock equivalents (options and warrants) because they
are anti-dilutive. For the year ended December 31, 2000, for the purpose of calculating earnings per sharebasic and diluted, the weighted average number of shares of
Common Stock outstanding was 10,763,454. Diluted earnings per share for the year ended December 31, 2000 excludes 861,380 Common Stock equivalents (options and warrants) because they are
anti-dilutive. For the year ended December 31, 1999, for the purpose of calculating earnings per sharebasic, the weighted average number of shares of Common Stock
outstanding was 10,719,094; and for the purpose of calculating earnings per sharediluted, the weighted average number of shares of Common Stock outstanding was 11,500,692, which includes
781,598 shares representing the dilutive effect of outstanding options.



The META Group, Inc./JMI Long Term Incentive Compensation Plan (the "Long Term Incentive Plan") was adopted by the Company in July 1998. The purpose
of the Long Term Incentive Plan was to provide a significant retention incentive for key officers of the Company through the issuance of a maximum of 1,000 limited partnership units to such officers.
The selection of key officers for participation in the Long Term Incentive Plan, the number of units granted to each participant, vesting and the determination of the value of each participant's units
were generally determined by the

F-21

---

Compensation Committee. As of December 31, 2000, a total of 588 units had been granted to key officers. No compensation expense was recognized by the Company pursuant to the Long Term
Incentive Plan during the years ended December 31, 2001, 2000 and 1999.

In
June 2001, the Company sold its limited partnership interest in the JMI Equity Side Fund, L.P. (the "JMI Fund") to affiliates of the JMI Fund and an unrelated third party for
total proceeds of $3.15 million. The Company recorded a loss on the sale of $26,000. The Company had subscribed for up to $4.0 million in limited partnership interests in the JMI Fund.
Distributions from the JMI Fund in excess of a return of capital and the Company's cost of capital were intended to fund payouts under the Long Term Incentive Plan. Prior to the Company's sale of its
limited partnership interest in the JMI Fund, each participant in the Long Term Incentive Plan waived his or her rights to receive such payouts in consideration for stock options granted by the
Company. A total of 502,000 stock options were granted to such participants in the year ended December 31, 2001. The Board of Directors resolved on May 7, 2001 to terminate the Long Term
Incentive Plan and that no further units may be granted or issued under the Long Term Incentive Plan. Mr. Harry Gruner, a director of the Company, is a managing member of JMI Side Associates,
L.L.C (the general partner of the JMI Fund), is affiliated with certain of the purchasers, and purchased approximately three percent of the limited partnership interests sold by the Company.

13. Employee 401(k) Savings Plan

The Company has a tax-deferred employee 401(k) savings plan covering substantially all employees. Contributions by the Company are made at the
Company's discretion. No contributions have been made by the Company under this plan. On December 9, 1999, the Board of Directors authorized the merger of Sentry's 401(k) profit sharing plan
(the "Sentry Plan") into the Company's existing plan. The merger was effective as of January 1, 2000. Immediately prior to the effective date of the merger, all participants in the Sentry Plan
became 100% vested in their account balance under the Sentry Plan. In September 2000, the Company completed the acquisition of all the outstanding limited liability company interests of SPEX
Research LLC. Pursuant to the acquisition, the SPEX Research LLC 401(k) Plan was terminated. In 2001, all active participant account balances were transferred into the Company's existing plan.

14. Related Party Transactions

The Company had subscribed for up to $4.0 million in limited partnership interests in the JMI Fund (Note 12). Distributions from the JMI Fund in
excess of a return of capital and the Company's cost of capital were intended to fund payouts under the Long Term Incentive Plan. In June 2001, the Company sold its limited partnership interest
in the JMI Fund to affiliates of the JMI Fund and an unrelated third party for total proceeds of $3.15 million. The Company recorded a loss on the sale of $26,000. Contemporaneously with the
Company's subscription to the JMI Fund, JMI, Inc., the management company of the JMI Fund, became a full-service client of the Company. In the years ended December 31, 2001,
2000 and 1999, the Company received $115,000, $83,000 and $125,000 from JMI, Inc. in consideration of services and consulting. Mr. Harry Gruner, a director of the Company, is a managing
member of JMI Side Associates, L.L.C (the general partner of the JMI Fund), is affiliated with certain of the purchasers, purchased approximately three percent of the limited partnership interests
sold by the Company, and is a principal of JMI, Inc.

F-22

---

In
June 2001 the Company completed a private placement of its Common Stock whereby the Company issued 1,726,617 shares of its Common Stock for $2.78 per share to Dale Kutnick, the
Company's Chairman of the Board of Directors, Chief Executive Officer and Co-Research Director, and additional purchasers affiliated with Francis J. Saldutti, Harry Gruner and George
McNamee, each of whom is a member of the Company's Board of Directors (the "Board of Directors"). The Board of Directors approved the transaction after receiving the favorable recommendation of a
Special Committee of the Board of Directors consisting of three disinterested members of the Board of Directors. The Special Committee retained BNY Capital Markets, Inc. as its financial
advisor to render a fairness opinion on the transaction. Total proceeds to the Company were $4.57 million, net of offering costs of approximately $227,000. The Common Stock offered in the
private placement has not been registered with the Securities and Exchange Commission and may not be offered or sold in the United States absent registration or an applicable exemption from
registration requirements. The Company has, however, filed a registration statement with the Securities and Exchange Commission to register the shares issued (other than those issued to
Mr. Kutnick), although such registration statement is not yet effective.

In
October 1996, the Company entered into an agreement (the "Original Agreement") with RSI, a provider of IT trend tracking, finance analysis and software engineering measurement
consulting. Under the Original Agreement, RSI provided, on an exclusive basis, measurement research and analysis for use in the Company's PEMS service. In June 1998, the Company and RSI entered
into an addendum to the Original Agreement whereby the Company distributed for RSI certain published research products, primarily theWorldwide Benchmark
Report(a publication presenting facts and trend-line data concerning IT performance and productivity, budgets and spending, emerging technologies, and business
requirements compiled from a worldwide sample of IT organizations). In October 2000, the Company completed the acquisition of substantially all the assets of RSI for an initial payment of
$750,000 in cash, $375,000 in Common Stock (36,874 shares), and the assumption of certain liabilities. During the year ended December 31, 2001 RSI earned contingent payments of
$1.3 million, consisting of $250,000 paid in Common Stock (57,084 shares) and the remainder paid in cash. In the
event certain financial targets are met, additional contingent consideration of up to $3.1 million payable in cash and $1.9 million payable in Common Stock may be paid through
March 2004. In the event the aggregate number of shares issued in satisfaction of additional contingent consideration exceeds 349,526, the remaining consideration will be payable in cash. RSI
is wholly-owned by Dr. Howard Rubin, a director and officer of the Company. Pursuant to the terms of the asset purchase agreement, the Company is still obligated to pay a royalty and commission
to Dr. Rubin on certain products and services sold by the Company. The Company recognized $4.3 million, $4.3 million and $3.4 million in revenues from the sale of RSI
derivative products during the years ended December 31, 2001, 2000 and 1999 respectively. In exchange for the content provided by Dr. Howard Rubin and RSI, the Company paid $958,000,
$1.0 million and $825,500 in royalties and commissions to Dr. Rubin and RSI during the years ended December 31, 2001, 2000 and 1999 respectively.

In
March 1995, the Company entered into an exclusive strategic alliance agreement with First Albany Corporation ("First Albany"), a financial services firm. The agreement provides
for the distribution of the Company's written research and analysis, in its original form or as customized and expanded by First Albany, to First Albany's financial services customers, which include
many institutional investors who are large IT users. The agreement restricts the Company from marketing its services to any broker dealer or sell-side firm offering services similar to
those offered by First Albany.

F-23

---

The Company is permitted to market and sell Advisory Services directly to First Albany customers. This agreement is annually renewable by First Albany, subject to attainment of specified minimum
revenue targets. The Company recognized $1 million, $1.03 million and $875,000 in revenues from this arrangement during the years ended December 31, 2001, 2000 and 1999
respectively. First Albany owned 853,924 shares of Common Stock as of December 31, 2001. A director of the Company is also Chairman and Co-Chief Executive Officer of First Albany
Companies, Inc., the holding company of First Albany Corporation.

In
November 1996, the Company acquired all the assets of DeBoever Architectures, Inc., an IT architecture planning and implementation advisory services firm wholly owned
and managed by Larry DeBoever. The business of DeBoever Architectures, Inc. was merged into the Company's portfolio of Advisory Services. In connection with the acquisition, in
November 1996 the Company loaned $500,000 to Mr. DeBoever pursuant to a Promissory Note and Pledge and Security Agreement (the "Promissory Note"). Under the terms of the Promissory Note,
as amended, the principal balance of $500,000, plus 9% interest per annum, was extinguished over the three-year period ended December 31, 2001 as a result of the Company's
Enterprise Architecture Strategies service meeting certain financial performance criteria through December 31, 2001. During the years ended December 31, 2001 and 2000, the Company
recognized $213,000 and $426,000, respectively, in expense related to the forgiveness of the Promissory Note. In April 2001, Mr. DeBoever resigned from the Company.

15. Segment Reporting

The Company's chief operating decision-making group is the Executive Committee, which consists of the Chief Executive Officer, the President, the Chief Financial
Officer and other executive officers of the Company. The Company's operating segments are managed separately, because each operating
segment represents a strategic business unit that generally offers distinct products/services. The Company's operating segments consist of Advisory Services, Strategic Consulting, and Published
Research Products. Advisory Services provide comprehensive coverage of virtually all relevant IT- and business-related issues faced by its clients through client/analyst interaction and
published conclusions and recommendations to each client's specific IT requirements. Strategic Consulting provides custom consulting services tailored to meet individual client requirements. Published
Research Products offer various topic-specific reports designed to serve both as complements to the Company's core services and as standalone deliverables that meet specific assessment requirements.

The
accounting policies of the operating segments are the same as those described in Note 3 except that the disaggregated financial results for the Company's operating segments
have been prepared using a management approach, which is consistent with the basis and manner in which the Company's management internally disaggregates financial information for the purposes of
assistance in making internal operating decisions. The Company evaluates performance based on standalone segment operating income, defined by the Company as the segment revenues less segment cost of
sales and corporate selling, general and administrative allocations. General and administrative expenses are allocated ratably based on each operating segments' respective headcount. Selling and
marketing expenses are allocated ratably based on each operating segments' revenues. Management does not allocate corporate assets, non-operating income (interest income), or income taxes
when measuring segment results.

F-24

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15. Segment Reporting (Continued)

Information by operating segment is set forth below (in thousands):

Advisory
Services

Strategic
Consulting

Published
Research
Products

Consolidated
TotalYear Ended December 31, 2001Revenues

$
85,483

$
26,863

$
5,439

$
117,785Depreciation & amortization


(4,702
)

(2,081
)

(925
)

(7,708
)Operating income (loss)


(8,146
)

(2,289
)

(2,954
)

(13,389
)Assets











135,015Year Ended December 31, 2000Revenues

$
84,556

$
27,707

$
7,009

$
119,272Depreciation & amortization


(2,628
)

(1,752
)

(487
)

(4,867
)Operating income


(6,855
)

(870
)

(2,278
)

(10,003
)Assets











152,463Year Ended December 31, 1999Revenues

$
69,998

$
22,370

$
7,315

$
99,683Depreciation & amortization


(1,558
)

(934
)

(104
)

(2,596
)Operating income


9,003


4,745


(435
)

13,313Assets











113,450


International operations:

The Company sells its products internationally through its subsidiaries in Canada, Asia Pacific and France, through its majority owned subsidiary in Germany and a
network of independent sales representative organizations located primarily in Europe, Africa, the Middle East and South America. For each of the three years in the period ended December 31,
2000, net revenues from independent sales representative organizations were $12.4 million, $14.4 million and $11.7 million, respectively. Revenues for the years ended
December 31, 2001 and 2000 relating to the Company's international subsidiaries from the respective dates of acquisition were $7.8 million and $0.7 million, respectively. At
December 31, 2001 and 2000, the Company maintained long-lived assets domestically totaling $45.1 million and $60.1 million, respectively, and long-lived assets at its
international subsidiary locations totaling $9.1 million and $5.7 million, respectively.

F-25

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16. Selected Quarterly Financial Data (Unaudited)

The following table sets forth certain key interim financial information for the years ended December 31, 2001 and 2000. The 2000 quarterly information has
been restated to reflect the impact of the adoption of SAB 101 as of January 1, 2000.

|      |                                   | First
Quarter(1) |   | Second
Quarter |   | Third
Quarter(2) |        | Fourth Quarter(3) |  
|----- | --------------------------------- | ---------------- | - | -------------- | - | ---------------- | ------ | ----------------- | -
|
|2001: |                                   |                  |   |                |   |                  |        |                   |  
|      | Total revenues                    |                  | $ | 29,442         |   | $                | 30,725 |                   | $
|      | Gross profit                      |                  | $ | 13,126         |   | $                | 15,054 |                   | $
|      | Net loss                          |                  | $ | (273           | ) | $                | (649   | )                 | $
|      |                                   |                  |   |                |   |                  |        |                   |  
|      | Net loss per diluted common share |                  | $ | (0.02          | ) | $                | (0.06  | )                 | $
|      |                                   |                  |   |                |   |                  |        |                   |  
|      | Net loss per basic common share   |                  | $ | (0.02          | ) | $                | (0.06  | )                 | $
|      |                                   |                  |   |                |   |                  |        |                   |  

|      |                                                                                         | First
Quarter(4) |   | Second
Quarter |   | Third
Quarter(5) |        | Fourth
Quarter(6) |  
|----- | --------------------------------------------------------------------------------------- | ---------------- | - | -------------- | - | ---------------- | ------ | ----------------- | -
|
|2000: |                                                                                         |                  |   |                |   |                  |        |                   |  
|      | Total revenues                                                                          |                  | $ | 27,145         |   | $                | 32,108 |                   | $
|      | Gross profit                                                                            |                  | $ | 13,168         |   | $                | 16,259 |                   | $
|      | Income (loss) before cumulative effect of change in accounting                          |                  | $ | 1,582          |   | $                | 2,816  |                   | $
|      | Cumulative effect of change in accounting                                               |                  | $ | (2,438         | ) |                  |        |                   |  
|      | Net income (loss)                                                                       |                  | $ | (856           | ) | $                | 2,816  |                   | $
|      |                                                                                         |                  |   |                |   |                  |        |                   |  
|      | Income (loss) before cumulative effect of change in accounting per diluted common share |                  | $ | 0.13           |   | $                | 0.24   |                   | $
|      |                                                                                         |                  |   |                |   |                  |        |                   |  
|      | Net income (loss) per diluted common share                                              |                  | $ | (0.20          | ) | $                | 0.24   |                   | $
|      |                                                                                         |                  |   |                |   |                  |        |                   |  
|      | Income (loss) before cumulative effect of change in accounting per basic common share   |                  | $ | (0.07          | ) | $                | 0.26   |                   | $
|      |                                                                                         |                  |   |                |   |                  |        |                   |  
|      | Net income (loss) per basic common share                                                |                  | $ | (0.08          | ) | $                | 0.26   |                   | $
|      |                                                                                         |                  |   |                |   |                  |        |                   |  

The
total of quarterly earnings per share may not equal the annual amount, because earnings per share is calculated independently for each quarter.

---

F-26

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F-27

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SCHEDULE II

META GROUP, INC.    VALUATION AND QUALIFYING ACCOUNTS  (In thousands)

|                              |                                            |  |   | Additions |  |   |        |     
|----------------------------- | ------------------------------------------ |  | - | --------- |  | - | ------ | ----
|
|Year Ended December 31, 2001: |                                            |  |   |           |  |   |        |     
|                              | Allowance for doubtful accounts            |  | $ | 4,031     |  | $ | 6,430  |     
|                              | Valuation allowance for deferred tax asset |  | $ | 203       |  | $ | 4,185  |     
|Year ended December 31, 2000: |                                            |  |   |           |  |   |        |     
|                              | Allowance for doubtful accounts            |  | $ | 673       |  | $ | 4,723  |     
|                              | Valuation allowance for deferred tax asset |  | $ | 203       |  |   |        |     
|Year ended December 31, 1999: |                                            |  |   |           |  |   |        |     
|                              | Allowance for doubtful accounts            |  | $ | 1,088     |  | $ | (415   | )   
|                              | Valuation allowance for deferred tax asset |  | $ | 2,142     |  | $ | (1,939 | )(a)

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S-1

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META GROUP, INC.    INDEX TO EXHIBITS FILED WITH FORM 10-K  YEAR ENDED DECEMBER 31, 2001

|Exhibit Number |  | Description
|-------------- |  | -----------

|2.1(1)(2) |   | Agreement and Plan of Merger by and among META Group, Inc., MG Acquisition Corporation, and The Sentry Group, Inc. dated as of September 23, 1998 ("Agreement and Plan of Merger")                                                                             
|--------- | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.2(1)    |   | Amendment No. 1 to Agreement and Plan of Merger dated as of October 20, 1998                                                                                                                                                                                   
|2.3(10)   |   | Amendment No. 2 to Agreement and Plan of Merger dated as of May 12, 2000                                                                                                                                                                                       
|2.4(13)   |   | Agreement of Purchase and Sale by and among META Group, Inc., JMI Equity Side Fund, L.P., JMI Side Associates, L.L.C. and the purchasers listed on the signature pages thereto dated as of June 15,
2001                                                       
|3.1(3)    |   | Amended and Restated Certificate of Incorporation of the Company                                                                                                                                                                                               
|3.2(3)    |   | Amended and Restated Bylaws of the Company                                                                                                                                                                                                                     
|4.1(3)    |   | Specimen Certificate Representing the Common Stock                                                                                                                                                                                                             
|4.2(6)    |   | Form of Common Stock Purchase Warrant (Immediate Vesting) issued to stockholders of The Sentry Group, Inc. on October 20, 1998                                                                                                                                 
|4.3(6)    |   | Form of Common Stock Purchase Warrant (Contingent Vesting) issued to stockholders of The Sentry Group, Inc. on October 20, 1998                                                                                                                                
|4.4(13)   |   | Common Stock Purchase and Sale Agreement by and among META Group, Inc. and the purchasers listed on the signature pages thereto dated as of June 15, 2001                                                                                                      
|4.5(2)    |  | Amended and Restated Credit Agreement between META Group, Inc. and The Bank of New York dated November 5, 2001                                                                                                                                                 
|4.6       |  | Revolving Credit Note of META Group, Inc. in favor of The Bank of New York in the principal amount of $12,000,000 dated November 5, 2001                                                                                                                       
|4.7       |  | Term Note of META Group, Inc. in favor of The Bank of New York in the principal amount of $8,000,000 dated November 5, 2001                                                                                                                                    
|4.8       |  | Amended and Restated Security Agreement between META Group, Inc. and The Bank of New York dated November 5, 2001                                                                                                                                               
|4.9       |  | Amended and Restated Subsidiary Guarantee among MG (Bermuda) LTD., META Group Australia Holdings, PTY., META Group Singapore PTE. Limited, 1422722 Ontario Inc., Abundant Strategy SDN. BHD., META Group, Inc., and The
Bank of New York dated November 5, 2001
|4.10(15)  |   | Offer to Exchange Outstanding Stock Options between META Group, Inc. and Certain Employee Option Holders, dated September 19, 2001                                                                                                                             
|4.11(2)   |  | Amendment No. 1 and Waiver No. 1 to the Credit Agreement dated as of March 26, 2002                                                                                                                                                                            
|10.1(15)* |   | Second Amended and Restated 1995 Stock Plan                                                                                                                                                                                                                    
|10.2(15)* |   | Form of Incentive Stock Option Agreement under the Second Amended and Restated 1995 Stock Plan                                                                                                                                                                 
|10.3(15)* |   | Form of Non-Qualified Stock Option Agreement under the Second Amended and Restated 1995 Stock Plan                                                                                                                                                             

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|10.4(5)*     |    | Second Amended and Restated 1995 Employee Stock Purchase Plan Enrollment Authorization Form                                              
|------------ | -- | -----------------------------------------------------------------------------------------------------------------------------------------
|10.5         | * | Amended and Restated 1995 Non-Employee Director Stock Option Plan                                                                        
|10.6(4)*     |    | Form of Non-Qualified Stock Option Agreement under the 1995 Non-Employee Director Stock Option Plan of the Registrant                    
|10.7(2)(3)*  |    | Agreement between First Albany Corporation and the Company dated March 30, 1995                                                          
|10.8(3)*     |    | Restated and Amended 1989 Stock Option Plan, as amended                                                                                  
|10.9(3)*     |    | Form of Incentive Stock Option Agreement under 1989 Stock Option Incentive Plan                                                          
|10.10(3)*    |    | Form of Certificate and Agreement under Restated and Amended 1989 Stock Option Plan                                                      
|10.11(3)*    |    | 1993 Stock Option and Incentive Plan, as amended                                                                                         
|10.12(3)*    |    | Form of Certificate and Agreement under 1993 Stock Option and Incentive Plan                                                             
|10.13(3)*    |    | Form of Warrant under the Restated and Amended 1989 Stock Option Plan and 1993 Stock Option and Incentive Plan                           
|10.14(3)     |    | Form of International Sales Representative Agreement                                                                                     
|10.15(3)     |    | Office Lease between International Business Machines Corporation and the Company dated August 1, 1994                                    
|10.16(6)*    |    | Form of META Group, Inc./JMI Long Term Incentive Compensation Plan                                                                       
|10.17(7)*    |    | Amended and Restated 1996 Equity Compensation Plan of The Sentry Group, Inc.                                                             
|10.18(8)*    |    | Employment agreement between META Group, Inc. and Larry R. DeBoever dated as of October 15, 1996                                         
|10.19(8)*    |    | Promissory Note dated as of November 1, 1996 issued by Larry R. DeBoever to META Group, Inc. in an aggregate principal amount of $500,000
|10.20        | * | Second Amended and Restated 1995 Employee Stock Purchase Plan                                                                            
|10.21(2)(9)* |    | Letter Agreement dated as of February 2, 2000 between META Group, Inc. and Larry R. DeBoever                                             
|10.22(11)*   |    | Asset Purchase Agreement among Rubin Systems Inc., Howard Rubin, and META Group, Inc. dated as of October 27, 2000                       
|10.23(11)*   |    | Employment and Management Agreement between META Group, Inc. and Howard Rubin dated as of October 27, 2000                               
|10.24(11)*   |    | Office Lease between Harbor Vista Associates Limited Partnership and the Company dated March 31, 1999                                    
|10.25(12)*   |    | Employment agreement by and between John A. Piontkowski and META Group, Inc. dated March 1, 2001                                         
|10.26(12)    |    | Consulting Services Agreement by and between META Group, Inc. and Simmons Associates, dated July 26, 2000                                
|10.27(13)    |    | Form of META Group, Inc./JMI Long Term Incentive Compensation Plan Waiver and Release Agreement                                          
|10.28(14)*   |    | Employment Agreement between META Group, Inc. and Michael Levine dated September 11, 2001                                                

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|10.29(14)* |   | Employee Noncompetition, Nondisclosure and Developments Agreement between META Group, Inc. and Michael Levine dated as of September 11, 2001
|---------- | - | --------------------------------------------------------------------------------------------------------------------------------------------
|10.30(14)* |   | Incentive Stock Option Agreement between META Group, Inc. and Michael Levine dated as of September 11, 2001                                 
|21.1       |  | List of Subsidiaries                                                                                                                        
|23.1       |  | Consent of Deloitte & Touche LLP                                                                                                            
|24.1       |  | Power of Attorney (see page 44)                                                                                                             

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