UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K/AAmendment No. 1

|(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, 2003                 
|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 offices) |  | 06912-0061(Zip Code)                          
|(203) 973-6700(Registrant's telephone number, including area code)             
|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)                        

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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 ý    No o

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. o

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

The aggregate market value of the voting common stock held by non-affiliates of the registrant was $40,161,973, computed by reference to the last
sales price of $4.25 as reported by the Nasdaq National Market System, as of the last business day of the Registrant's most recently completed second fiscal quarter, June 30, 2003.

As
of June 30, 2003, 13,324,586 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 24, 2004, are incorporated by
reference into Part III hereof.



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EXPLANATORY NOTE

We are filing this Amendment No. 1 on Form 10-K/A to restate the footnote presentation of geographic segment data in Footnote No. 12 to
exclude intercompany royalty income and expense in all geographic regions. This is the method of presentation used in previously filed Forms 10-Q, and represents how the Company evaluates the
results of its geographic segments. We are not restating our consolidated balance sheets, consolidated statements of operations, consolidated statements of stockholder's equity, or consolidated
statements of cash flows. The Company is not restating Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations, as it is not impacted by these
changes. Accordingly, we are only filing amended Items 8 and 15 in their entirety with this amendment. Unless otherwise stated, all information contained in this amendment is as of
March 30, 2004, the filing date of our Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and financial statement schedule listed under Item 15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 13 to the consolidated financial statements.

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Financial Statements.

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

PageReport of Independent Registered Public Accounting Firm

F-1Consolidated Balance Sheets at December 31, 2003 and 2002

F-2Consolidated Statements of Operations for the years ended December 31, 2003, 2002, and 2001

F-3Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2003, 2002, and 2001

F-4Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002, and 2001

F-5Notes to Consolidated Financial Statements

F-6(a)(2) Financial Statement Schedule.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.

1

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(a)(3) List of Exhibits.

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

|Exhibit Number |          | Description                                                                                                          
|-------------- | -------- | ---------------------------------------------------------------------------------------------------------------------
|3.1            | (1)      | Amended and Restated Certificate of Incorporation of the Company                                                     
|3.2            | (1)      | Amended and Restated Bylaws of the Company                                                                           
|4.1            | (1)      | Specimen Certificate Representing the Common Stock                                                                   
|10.1           | (7)*     | Second Amended and Restated 1995 Stock Plan                                                                          
|10.2           | (7)*     | Form of Incentive Stock Option Agreement under the Second Amended and Restated 1995 Stock Plan                       
|10.3           | (7)*     | Form of Non-Qualified Stock Option Agreement under the Second Amended and Restated 1995 Stock Plan                   
|10.4           | (3)*     | Second Amended and Restated 1995 Employee Stock Purchase Plan Enrollment Authorization Form                          
|10.5           | (8)*     | Amended and Restated 1995 Non-Employee Director Stock Option Plan                                                    
|10.6           | (2)*     | Form of Non-Qualified Stock Option Agreement under the 1995 Non-Employee Director Stock Option Plan of the Registrant
|10.7           | (1)(12)* | Agreement between First Albany Corporation and the Company dated March 30, 1995                                      
|10.8           | (1)*     | Restated and Amended 1989 Stock Option Plan, as amended                                                              
|10.9           | (1)*     | Form of Incentive Stock Option Agreement under 1989 Stock Option Incentive Plan                                      
|10.10          | (1)*     | Form of Certificate and Agreement under Restated and Amended 1989 Stock Option Plan                                  
|10.11          | (1)*     | 1993 Stock Option and Incentive Plan, as amended                                                                     
|10.12          | (1)*     | Form of Certificate and Agreement under 1993 Stock Option and Incentive Plan                                         
|10.13          | (1)*     | Form of Warrant under the Restated and Amended 1989 Stock Option Plan and 1993 Stock Option and Incentive Plan       
|10.15          | (1)      | Office Lease between International Business Machines Corporation and the Company dated August 1, 1994                
|10.17          | (4)*     | Amended and Restated 1996 Equity Compensation Plan of The Sentry Group, Inc.                                         
|10.18          | (8)*     | Second Amended and Restated 1995 Employee Stock Purchase Plan                                                        
|10.19          | (5)*     | Asset Purchase Agreement among Rubin Systems Inc., Howard Rubin, and META Group, Inc. dated as of October 27, 2000   
|10.20          | (5)*     | Employment and Management Agreement between META Group, Inc. and Howard Rubin dated as of October 27, 2000           
|10.21          | (5)      | Office Lease between Harbor Vista Associates Limited Partnership and the Company dated March 31, 1999                
|10.23          | (6)      | Form of META Group, Inc./JMI Long Term Incentive Compensation Plan Waiver and Release Agreement                      
|10.25          | (9)*     | Employment agreement between Alfred J. Amoroso and META Group, Inc., dated as of July 31, 2002                       
|               |          |                                                                                                                      

2

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|10.26  | (9)*     | Incentive Stock Option Agreement between META Group, Inc. and Alfred J. Amoroso dated July 31, 2002                                                          
|------ | -------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.27  | (9)*     | Non-Qualified Stock Option Agreement between META Group, Inc. and Alfred J. Amoroso dated July 31, 2002                                                      
|10.28  | (9)*     | Employee Noncompetition, Nondisclosure and Developments Agreement between META Group, Inc. and Alfred J. Amoroso dated as of July 31, 2002                   
|10.29  | (9)*     | Severance Agreement between META Group, Inc. and Dale Kutnick dated as of July 31, 2002                                                                      
|10.30  | (9)(10)* | Amendment to Option Agreements between META Group, Inc. and Dale Kutnick dated as of July 31, 2002                                                           
|10.31  | (9)*     | Non-Qualified Stock Option Agreement between META Group, Inc. and Dale Kutnick dated August 14, 2002                                                         
|10.32  | (9)*     | Registration Rights Agreement between META Group, Inc. and Dale Kutnick dated as of July 31, 2002                                                            
|10.33  | (9)*     | Amendment No. 1 to Asset Purchase Agreement among Rubin Systems, Inc., Howard Rubin and META Group, Inc., dated as of July 31, 2002                          
|10.34  | (9)*     | Revised Exhibit A to the Amended Asset Purchase Agreement among Rubin Systems, Inc., Howard Rubin and META Group, Inc., dated as of July 31, 2002            
|10.35  | (9)*     | Amendment No. 1 to Employment and Management Agreement between META Group, Inc. and Howard Rubin dated as of July 31, 2002                                   
|10.36  | (9)*     | Amendment No. 1 to Non-competition Agreement between Howard Rubin and META Group, Inc. dated as of July 31, 2002                                             
|10.37  | (9)*     | Amendment No. 1 to Non-Qualified Stock Option Agreement between Howard Rubin and META Group, Inc., dated as of July 31, 2002                                 
|10.39  | (11)*    | Amendment No. 2 to Employment and Management Agreement between META Group, Inc. and Howard Rubin dated as of January 30, 2003                                
|10.40  | (11)     | Waiver No. 2 dated as of March 12, 2003 to the Amended and Restated Credit Agreement between META Group, Inc. and The Bank of New York dated November 5, 2001
|10.41  | (11)     | Amended and Restated Credit Agreement between META Group, Inc. and The Bank of New York dated March 12, 2003                                                 
|10.42  | (11)     | Revolving Credit Note of META Group, Inc. in favor of The Bank of New York in the principal amount of $6,000,000 dated March 12, 2003                        
|10.43  | (11)     | Amended and Restated Security Agreement between META Group, Inc. and The Bank of New York dated March 12, 2003                                               
|10.44  | (11)     | Amendment No. 2 to Asset Purchase Agreement among Rubin Systems, Inc., Howard Rubin and META Group, Inc. dated as of January 30, 2003                        
|21.1** |          | List of Subsidiaries                                                                                                                                         
|23.1  |          | Consent of Independent Registered Public Accounting Firm                                                                                                     
|       |          |                                                                                                                                                              

3

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|24.1** |  | Power of Attorney                                                                                                                          
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------
|31.1  |  | Certification of the Principal Executive Officer pursuant to Section 302(a) of the Sarbanes Oxley Act of 2002                              
|31.1  |  | Certification of the Principal Financial Officer pursuant to Section 302(a) of the Sarbanes Oxley Act of 2002                              
|32    |  | Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002

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(b)    Reports on Form 8-K

On
November 6, 2003, the Company filed a report on Form 8-K in connection with a release of the Company's results of operations for the quarter ended
September 30, 2003.

(c)    Exhibits.

The
Company hereby files as part of this Annual Report on Form 10-K/A the exhibits listed in Item 15(a)(3) set forth above.

4

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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: July 20, 2004 |  | By:             

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 and in the capacities and on
the dates indicated.

|Signature                               |  | Title                                                                                                                           |  | Date         
|--------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|                                        |  |                                                                                                                                 |  |              
|*Dale Kutnick                           |  | Chairman of the Board of Directors                                                                                              |  | July 20, 2004
|/s/HERBERT L. VANHOOKHerbert L. VanHook |  | President and Chief Operating Officer (Principal Executive Officer)                                                             |  | July 20, 2004
|/s/JOHN W. RILEYJohn W. Riley           |  | Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer) |  | July 20, 2004
|*Gayl W. Doster                         |  | Director                                                                                                                        |  | July 20, 2004
|*Francis J. Saldutti                    |  | Director                                                                                                                        |  | July 20, 2004
|*Harry S. Gruner                        |  | Director                                                                                                                        |  | July 20, 2004
|*Michael Simmons                        |  | Director                                                                                                                        |  | July 20, 2004
|*Monte Ford                             |  | Director                                                                                                                        |  | July 20, 2004

|* |  | /s/JOHN W. RILEYJohn W. Riley Attorney-in-Fact |  |  |  | 
|- |  | ---------------------------------------------- |  |  |  | 

5

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2003 and 2002 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, 2003. Our audits also included the financial statement schedule
listed at Item 15(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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of META Group, Inc. and subsidiaries as of
December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 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 4 to the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets".

As
discussed in Note 12 to the consolidated financial statements, the disclosures relating to the Company's reporting segments have been restated.

/s/
Deloitte & Touche LLP
Stamford, Connecticut
March 17, 2004
July 15, 2004 as to Note 12

F-1

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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
$1,026 and $2,313, respectively                       |                                            |       
|                                           | Deferred commissions                                                                                               |                                            |       
|                                           | Other current assets                                                                                               |                                            |       
|                                           |                                                                                                                    |                                            |       
|                                           |                                                                                                                    | Total current assets                       |       
|Restricted cash                            |                                                                                                                    |                                            | 6,000 
|Non-current portion of accounts receivable |                                                                                                                    |                                            | 184   
|Property and equipment, net                |                                                                                                                    |                                            | 5,392 
|Goodwill                                   |                                                                                                                    |                                            | 13,016
|Intangible assets, net                     |                                                                                                                    |                                            | 8,982 
|Investments and advances                   |                                                                                                                    |                                            | 1,146 
|Other non-current assets                   |                                                                                                                    |                                            | 344   
|                                           |                                                                                                                    |                                            |       
|                                           |                                                                                                                    | Total assets                               |       
|                                           |                                                                                                                    |                                            |       
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                    |                                            |       
|Current liabilities:                       |                                                                                                                    |                                            |       
|                                           | Accounts payable                                                                                                   |                                            | $     
|                                           | Deferred revenues                                                                                                  |                                            |       
|                                           | Borrowings under revolving credit agreement                                                                        |                                            |       
|                                           | Current portion of long-term debt                                                                                  |                                            |       
|                                           | Notes payable                                                                                                      |                                            |       
|                                           | Accrued compensation                                                                                               |                                            |       
|                                           | Accrued and other current liabilities                                                                              |                                            |       
|                                           |                                                                                                                    |                                            |       
|                                           |                                                                                                                    | Total current liabilities                  |       
|                                           |                                                                                                                    |                                            |       
|Long-term portion of notes payable         |                                                                                                                    |                                            | 389   
|Non-current deferred revenues              |                                                                                                                    |                                            | 549   
|Other non-current liabilities              |                                                                                                                    |                                            | 2,039 
|                                           |                                                                                                                    |                                            |       
|                                           |                                                                                                                    | Total non-current liabilities              |       
|                                           |                                                                                                                    |                                            |       
|                                           |                                                                                                                    | Total liabilities                          |       
|                                           |                                                                                                                    |                                            |       
|Minority interest                          |                                                                                                                    |                                            | 322   
|                                           |                                                                                                                    |                                            |       
|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
14,303,655 and 13,886,612 shares, respectively |                                            |       
|                                           | Paid-in capital                                                                                                    |                                            |       
|                                           | Accumulated deficit                                                                                                |                                            |       
|                                           | Accumulated other comprehensive loss                                                                               |                                            |       
|                                           | Treasury stock, at cost, 647,016 and 657,016 shares, respectively                                                  |                                            |       
|                                           |                                                                                                                    |                                            |       
|                                           | Total stockholders' equity                                                                                         |                                            |       
|                                           |                                                                                                                    |                                            |       
|                                           |                                                                                                                    | Total liabilities and stockholders' equity |       
|                                           |                                                                                                                    |                                            |       

See
notes to consolidated financial statements.

F-2

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

|                                                                                                                            |                                             | 2003                     |        | 2002   |         | 2001    |       
|--------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------ | ------ | ------ | ------- | ------- | ------
|Revenues:                                                                                                                   |                                             |                          |        |        |         |         |       
|                                                                                                                            | Advisory services                           |                          | $      | 78,257 |         | $       | 77,113
|                                                                                                                            | Strategic consulting                        |                          |        | 35,747 |         |         | 32,009
|                                                                                                                            | Published research products                 |                          |        | 5,980  |         |         | 4,940 
|                                                                                                                            | Reimbursable expenses                       |                          |        | 2,501  |         |         | 2,471 
|                                                                                                                            |                                             |                          |        |        |         |         |       
|                                                                                                                            |                                             | Total revenues           |        |        | 122,485 |         |       
|                                                                                                                            |                                             |                          |        |        |         |         |       
|Operating expenses:                                                                                                         |                                             |                          |        |        |         |         |       
|                                                                                                                            | Cost of services and fulfillment            |                          |        | 62,412 |         |         | 58,237
|                                                                                                                            | Reimbursable expenses                       |                          |        | 2,501  |         |         | 2,471 
|                                                                                                                            | Selling and marketing                       |                          |        | 31,982 |         |         | 30,147
|                                                                                                                            | General and administrative                  |                          |        | 22,753 |         |         | 19,142
|                                                                                                                            | Depreciation and amortization               |                          |        | 4,989  |         |         | 6,281 
|                                                                                                                            | Restructuring charge                        |                          |        | 1,642  |         |         | 362   
|                                                                                                                            | Loss on facilities leases                   |                          |        | 999    |         |         | 2,189 
|                                                                                                                            | Goodwill impairment loss                    |                          |        |       |         |         | 2,630 
|                                                                                                                            |                                             |                          |        |        |         |         |       
|                                                                                                                            |                                             | Total operating expenses |        |        | 127,278 |         |       
|                                                                                                                            |                                             |                          |        |        |         |         |       
|Operating loss                                                                                                              |                                             |                          | (4,793 | )      |         | (4,926  | )     
|Other income (expense):                                                                                                     |                                             |                          |        |        |         |         |       
|                                                                                                                            | Impairment loss on investments and advances |                          |        |       |         |         | (1,075
|                                                                                                                            | Other income (expense), net                 |                          |        | 784    |         |         | (144  
|                                                                                                                            |                                             |                          |        |        |         |         |       
|Loss before provision (benefit) for income taxes, minority interest and cumulative effect of change in accounting principle |                                             |                          | (4,009 | )      |         | (6,145  | )     
|Provision (benefit) for income taxes                                                                                        |                                             |                          | 173    |        |         | 13,096  |       
|Minority interest in income of consolidated subsidiaries                                                                    |                                             |                          | 123    |        |         | 33      |       
|                                                                                                                            |                                             |                          |        |        |         |         |       
|Loss before cumulative effect of change in accounting principle                                                             |                                             |                          | (4,305 | )      |         | (19,274 | )     
|Cumulative effect of change in accounting principle                                                                         |                                             |                          |       |        |         | (22,206 | )     
|                                                                                                                            |                                             |                          |        |        |         |         |       
|Net loss                                                                                                                    |                                             | $                        | (4,305 | )      | $       | (41,480 | )     
|                                                                                                                            |                                             |                          |        |        |         |         |       
|Loss before cumulative effect of change in accounting principlebasic and diluted common share                              |                                             | $                        | (0.32  | )      | $       | (1.47   | )     
|Cumulative effect of change in accounting principlebasic and diluted common share                                          |                                             |                          |       |        |         | (1.70   | )     
|                                                                                                                            |                                             |                          |        |        |         |         |       
|Net lossbasic and diluted common share                                                                                     |                                             | $                        | (0.32  | )      | $       | (3.17   | )     
|                                                                                                                            |                                             |                          |        |        |         |         |       
|Weighted average number of basic and diluted common shares outstanding                                                      |                                             |                          | 13,334 |        |         | 13,067  |       
|                                                                                                                            |                                             |                          |        |        |         |         |       

See
notes to consolidated financial statements.

F-3

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

|                                                           |                                                                    |   |         | Common Stock |        |  |   | Retained
Earnings
(Accumulated
Deficit) |  |   |        | Treasury Stock |  
|---------------------------------------------------------- | ------------------------------------------------------------------ | - | ------- | ------------ | ------ |  | - | --------------------------------------- |  | - | ------ | -------------- | -
|
|
|Balance, January 1, 2001                                   |                                                                    | $ | 65,708  |              | 11,619 |  | $ | 116                                     |  | $ | 52,874 |                | $
|Exercise of stock options                                  |                                                                    |   | 88      |              | 83     |  |   | 1                                       |  |   | 87     |                |  
|Issuance of shares under employee stock purchase plan      |                                                                    |   | 255     |              | 120    |  |   | 1                                       |  |   | 254    |                |  
|Repurchase of shares                                       |                                                                    |   | (339    | )            |        |  |   |                                         |  |   |        |                |  
|Equity based compensation                                  |                                                                    |   | 75      |              |        |  |   |                                         |  |   | 75     |                |  
|Income tax benefit from stock options exercised            |                                                                    |   | 7       |              |        |  |   |                                         |  |   | 7      |                |  
|Private placement of common stock                          |                                                                    |   | 4,573   |              | 1,727  |  |   | 17                                      |  |   | 4,556  |                |  
|Rubin Systems, Inc. earnout shares                         |                                                                    |   | 250     |              | 57     |  |   | 1                                       |  |   | 249    |                |  
|Comprehensive loss:                                        |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  
|                                                           | Unrealized gain on marketable securities, net of tax               |   |         | 191          |        |  |   |                                         |  |   |        |                |  
|                                                           | Less: reclassification adjustment for gains realized in net income |   |         | (27          | )      |  |   |                                         |  |   |        |                |  
|                                                           | Foreign currency translation adjustment                            |   |         | (385         | )      |  |   |                                         |  |   |        |                |  
|                                                           | Net loss                                                           |   |         | (17,610      | )      |  |   |                                         |  |   |        |                |  
|                                                           |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  
|Total comprehensive loss                                   |                                                                    |   | (17,831 | )            |        |  |   |                                         |  |   |        |                |  
|                                                           |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  
|Balance, December 31, 2001                                 |                                                                    |   | 52,786  |              | 13,606 |  |   | 136                                     |  |   | 58,102 |                |  
|Exercise of stock options                                  |                                                                    |   | 2       |              | 1      |  |   |                                         |  |   | 2      |                |  
|Issuance of shares under employee stock purchase plan      |                                                                    |   | 156     |              | 78     |  |   | 1                                       |  |   | 155    |                |  
|Repurchase of shares                                       |                                                                    |   | (22     | )            |        |  |   |                                         |  |   |        |                |  
|Private placement of common stock                          |                                                                    |   | 425     |              |        |  |   |                                         |  |   | 86     |                |  
|Equity-based compensation                                  |                                                                    |   | 39      |              |        |  |   |                                         |  |   | 39     |                |  
|Options issued for purchase of META Group AG               |                                                                    |   | 412     |              |        |  |   |                                         |  |   | 412    |                |  
|Rubin Systems, Inc. earnout shares                         |                                                                    |   | 912     |              | 202    |  |   | 2                                       |  |   | 910    |                |  
|Comprehensive loss:                                        |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  
|                                                           | Foreign currency translation adjustment                            |   |         | (14          | )      |  |   |                                         |  |   |        |                |  
|                                                           | Net loss                                                           |   |         | (41,480      | )      |  |   |                                         |  |   |        |                |  
|                                                           |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  
|Total comprehensive loss                                   |                                                                    |   | (41,494 | )            |        |  |   |                                         |  |   |        |                |  
|                                                           |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  
|Balance December 31, 2002                                  |                                                                    | $ | 13,216  |              | 13,887 |  | $ | 139                                     |  | $ | 59,706 |                | $
|Exercise of stock options                                  |                                                                    |   | 366     |              | 160    |  |   | 2                                       |  |   | 364    |                |  
|Issuance of shares under employee stock purchase plan      |                                                                    |   | 214     |              | 82     |  |   |                                         |  |   | 214    |                |  
|Sale of treasury stock                                     |                                                                    |   | 53      |              |        |  |   |                                         |  |   | 31     |                |  
|Stock issued for acquisition of Meta Group Northern Europe |                                                                    |   | 700     |              | 175    |  |   | 2                                       |  |   | 698    |                |  
|Comprehensive loss:                                        |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  
|Foreign currency translation adjustment                    |                                                                    |   | (170    | )            |        |  |   |                                         |  |   |        |                |  
|Net loss                                                   |                                                                    |   | (4,305  | )            |        |  |   |                                         |  |   |        |                |  
|                                                           |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  
|Total comprehensive loss                                   |                                                                    |   | (4,475  | )            |        |  |   |                                         |  |   |        |                |  
|                                                           |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  
|Balance December 31, 2003                                  |                                                                    | $ | 10,074  |              | 14,304 |  | $ | 143                                     |  | $ | 61,013 |                | $
|                                                           |                                                                    |   |         |              |        |  |   |                                         |  |   |        |                |  

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 loss                                                                        |                                                                        | $                       | (4,305                                                  
|Adjustments to reconcile net loss to net cash provided by operating activities: |                                                                        |                         |                                                         
|                                                                                |                                                                        |                         | Cumulative effect of change in accounting principle     
|                                                                                |                                                                        |                         | Depreciation and amortization                           
|                                                                                |                                                                        |                         | Provision for doubtful accounts                         
|                                                                                |                                                                        |                         | Impairment loss on investments and advances             
|                                                                                |                                                                        |                         | Goodwill impairment loss                                
|                                                                                |                                                                        |                         | Gain on sale of affiliate investments                   
|                                                                                |                                                                        |                         | Gain on sale of marketable securities                   
|                                                                                |                                                                        |                         | Minority interest                                       
|                                                                                |                                                                        |                         | Equity-based compensation and other non-cash charges    
|                                                                                |                                                                        |                         | Deferred income taxes                                   
|                                                                                |                                                                        |                         | Changes in assets and liabilities (net of acquisitions):
|                                                                                |                                                                        |                         |                                                         
|                                                                                |                                                                        |                         |                                                         
|                                                                                |                                                                        |                         |                                                         
|                                                                                |                                                                        |                         |                                                         
|                                                                                |                                                                        |                         |                                                         
|                                                                                |                                                                        |                         |                                                         
|                                                                                |                                                                        |                         |                                                         
|                                                                                |                                                                        |                         |                                                         
|Net cash provided by operating activities                                       |                                                                        |                         | 2,688                                                   
|                                                                                |                                                                        |                         |                                                         
|Investing activities:                                                           |                                                                        |                         |                                                         
|                                                                                | Capital expenditures                                                   |                         |                                                         
|                                                                                | Proceeds from sales/maturities of marketable securities                |                         |                                                         
|                                                                                | Proceeds from sale/liquidation of investments                          |                         |                                                         
|                                                                                | Payments made for acquisitions, net of cash acquired                   |                         |                                                         
|                                                                                |                                                                        |                         |                                                         
|Net cash (used in) provided by investing activities                             |                                                                        |                         | (3,000                                                  
|                                                                                |                                                                        |                         |                                                         
|Financing activities:                                                           |                                                                        |                         |                                                         
|                                                                                | Proceeds from private placement of common stock, net of offering costs |                         |                                                         
|                                                                                | Proceeds from bank borrowings                                          |                         |                                                         
|                                                                                | Repayment of term loan                                                 |                         |                                                         
|                                                                                | Repayment of line of credit                                            |                         |                                                         
|                                                                                | Repayment of notes payable                                             |                         |                                                         
|                                                                                | Proceeds from employee stock purchase plan                             |                         |                                                         
|                                                                                | Proceeds from exercise of stock options                                |                         |                                                         
|                                                                                | Proceeds from sale of treasury stock                                   |                         |                                                         
|                                                                                | Increase in restricted cash                                            |                         |                                                         
|                                                                                |                                                                        |                         |                                                         
|Net cash used in financing activities                                           |                                                                        |                         | (11,895                                                 
|                                                                                |                                                                        |                         |                                                         
|Effect of exchange rate changes on cash                                         |                                                                        |                         | (427                                                    
|                                                                                |                                                                        |                         |                                                         
|Net (decrease) increase in cash and cash equivalents                            |                                                                        |                         | (12,634                                                 
|Cash and cash equivalents at beginning of year                                  |                                                                        |                         | 21,448                                                  
|                                                                                |                                                                        |                         |                                                         
|Cash and cash equivalents at end of year                                        |                                                                        | $                       | 8,814                                                   
|                                                                                |                                                                        |                         |                                                         
|Supplemental cash flow information:                                             |                                                                        |                         |                                                         
|                                                                                | Cash paid during the year for income taxes                             |                         | $                                                       
|                                                                                |                                                                        |                         |                                                         
|                                                                                | Cash paid during the year for interest                                 |                         | $                                                       
|                                                                                |                                                                        |                         |                                                         

See notes to consolidated financial statements.

F-5

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies

Nature of the Business and Principles of Consolidation.META Group, Inc. and its subsidiaries (collectively the
"Company") is a leading provider of information technology ("IT") research, advisory services, and strategic consulting. 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 have been included in the
consolidated statements of operations commencing with the closing date of acquisition. Operations of the Company's international subsidiaries, other than Canada, are consolidated on a one month lag.

Reclassifications.Certain prior year balances have been reclassified to conform to the current year
presentation.

Foreign Currency Translation.All assets and liabilities of foreign subsidiaries are translated into
U.S. 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. The Company recognizes revenue on Strategic Consulting
engagements on a contract by contract basis, as the work is performed, utilizing the percentage of completion method for fixed fee projects, or as services are rendered for time and materials
projects. Revenues from Published Research Products are recognized at the time the applicable product is delivered. Reimbursable expenses billed to customers are treated as revenues with offsetting
costs.

Supplemental Disclosures of Non-Cash Activities.During 2003, the Company issued 175,000
shares of its Common Stock in connection with the purchase of META Group Northern Europe. The value of the shares ($700,000) was allocated to the assets acquired.

During
2002, in connection with contingent consideration earned by Rubin Systems, Inc. ("RSI"), the Company issued 202,499 shares of its Common Stock, to RSI. The value of the
shares ($366,725) was allocated to goodwill. Additionally during 2002, the Company issued 267,285 options to purchase Common Stock to the shareholders of META Group AG ("META Group Germany") in
connection with the purchase of the remaining interest of META Group Germany. The fair value of the options ($412,000) was allocated to goodwill.

During
2001, the Company issued 57,084 shares of its Common Stock to RSI in connection with contingent consideration earned. The value of the shares ($250,000) was allocated to the
assets acquired.

F-6

---



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. Leasehold improvements are
depreciated over the improvements' useful lives or the lease term, which ever is shorter.

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. A valuation allowance is recorded if it is more likely than not that
the Company cannot utilize its deferred tax assets.

Earnings Per Share.Basic earnings per share is computed by dividing net income (loss) 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. For, 2003, for the
purpose of calculating earnings per sharebasic and diluted, the weighted average number of shares of common stock outstanding was 13,334,225. Diluted earnings per share for 2003 excludes
1,416,134 common stock equivalents (options and warrants) because they are anti-dilutive. For 2002, for the purpose of calculating earnings per sharebasic and diluted, the
weighted average number of shares of common stock outstanding was 13,067,155. Diluted earnings per share for 2002 excludes 321,331 common stock equivalents (options and warrants) because they are
anti-dilutive. For 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 2001 excludes 326,937 common stock equivalents (options and warrants) because they are anti-dilutive.

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 and corporate guarantees. (See
Note 7). The Company has no other significant 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.

F-7

---



Long-Lived Assets.The Company follows Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). The Company reviews the recoverability of its long-lived assets and finite
lived intangible assets other than goodwill 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 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.

Management Estimates.The preparation of financial statements in conformity with generally accepted
accounting principles in the United States 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. In accordance with
Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142"), amortization of goodwill ceased on January 1, 2002. The Company performs
an impairment test of its recorded goodwill at least annually, or more frequently if certain indicators arise. Of the remaining intangible assets, 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 5 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 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.

F-8

---



The
following table illustrates the effect on net loss and net loss per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee
compensation for the years ended December 31, 2003, 2002 and 2001, respectively (in thousands, except per share data):

2003

2002

2001Reported net loss

$
(4,305
)
$
(41,480
)
$
(17,610
)Add: Stock-based employee compensation expense included in reported net income, net of tax





39


45Less: Total stock based employee compensation expense determined under fair value based methods for all awards, net of tax


(2,513
)

(2,451
)

(1,043
)Pro forma net loss

$
(6,818
)
$
(43,892
)
$
(18,608
)Net loss per shareReportedBasic and Diluted

$
(0.32
)
$
(3.17
)
$
(1.47
)Pro formaBasic and Diluted

$
(0.51
)
$
(3.36
)
$
(1.56
)


The
estimated fair value of options granted during the years ended December 31, 2003, 2002 and 2001 was $3.10, $1.70 and $1.87 per share, respectively. The fair value of options
granted under the Company's fixed stock option plans during the years ended December 31, 2003, 2002 and 2001 was estimated on the dates of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used:

2003

2002

2001Expected life from vest date (in years)

1.65.4

1.65.4

1.65.4Risk-free interest rates

0.94.1
%
0.94.3
%
1.85.3
%Volatility

87117
%
91126
%
90148
%Dividend yield








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.

Pro
forma compensation expense reflected for prior periods is not indicative of future compensation expense that would be recorded by the Company if it adopted the fair value based
recognition provisions of SFAS 123. Future pro forma expense may vary based upon factors such as the number of awards granted by the Company and the then-current fair market value
of such awards.

Detailed
information for activity in the Company's stock plans and the assumptions used in the fair value based method depicted above can be found in Note 9.



In May 2003, the FASB issued Statement of Financial Accounting Standards No.150, "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity" ("SFAS 150"). SFAS 150 changes the accounting for certain financial instruments that under previous guidance issuers could account for as equity. It requires that
those instruments be classified as liabilities on a company's

F-9

---



balance
sheets. The guidance in SFAS 150 is generally effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective on July 1,
2003. The Company adopted SFAS 150 on July 1, 2003, with no impact on its financial statements.

In
January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46") as amended by FIN 46R, (an interpretation of ARB
No. 51). FIN 46 clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other
parties. The Company currently does not have any interest in any unconsolidated entity for which variable interest entity accounting is required; therefore FIN 46 did not impact the Company's
consolidated financial statements.

In
December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based CompensationTransition and
Disclosurean amendment to SFAS 123" ("SFAS 148"). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. The transition guidance and annual disclosure provisions of SFAS 148 are effective for fiscal years ending after
December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The
Company currently does not intend to change its existing method of accounting for stock-based employee compensation unless required by the issuance of a new pronouncement. The Company has adopted the
disclosure requirements of SFAS 148 as of December 31, 2002.

In
November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 00-21 "Revenue Arrangements with Multiple Deliverables," ("EITF
00-21"). EITF 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and rights to use assets. The
provisions of EITF 00-21 apply to revenue arrangements entered into for fiscal periods beginning after June 15, 2003. The Company has examined its current Advisory Service
offerings and has determined that its present accounting policies are consistent with the guidance contained in EITF 00-21.

2.    Acquisitions

During 2003, the Company consummated three acquisitions of former distributors in Italy, the United Kingdom, and Northern Europe. The Company acquired these
distributors in order to have full ownership control of all operations in Europe, in order to better serve its customers in the region. A description of these transactions follows:

Acquisition of META Group Italy

In June 2003, the Company acquired 100% of META Group Italia S.R.L. ("META Group Italy") for $280,000 in cash. The purchase price has been allocated to the
assets acquired and the liabilities assumed, based on estimated fair values at the date of acquisition. The preliminary allocation resulted in goodwill of $203,000 recorded in the Advisory Services
segment, $60,000 recorded in the Consulting segment and $300,000 related to the customer list of the seller, which is being amortized over 7 years.

F-10

---



Acquisition of META Group UK

In August 2003, the Company acquired 100% of META Group UK Holdings Limited ("META Group UK") for $1.6 million in cash. The purchase price has been
allocated to the assets acquired and the liabilities assumed, based on estimated fair values at the date of acquisition. The preliminary allocation resulted in goodwill of $104,000 recorded in the
Advisory Services segment, $61,000 recorded in the Consulting segment, $4,000 recorded in the Publications segment and $1.3 million related to the customer list of the seller, which is being
amortized over 7 years.

Acquisition of META Group Northern Europe

In September 2003, the Company acquired 100% of META Group Norway A/S, META Group Sweden AB, META Group Finland OY, META Group Denmark A/S, META Group
Belgium SA and META Group Nederland BV (collectively "Northern Europe"). The purchase price consisted of $3.6 million in cash and 175,000 shares of the Company's common stock (valued at
$700,000), as well as forgiveness of $2.6 million in promissory notes and $1.5 million in trade receivables owed to the Company by the Northern European entities. The purchase price has
been allocated to the assets acquired and the liabilities assumed, based on estimated fair values at the date of acquisition. The preliminary allocation resulted in goodwill of approximately
$3.6 million recorded in the Advisory Services segment, $352,000 recorded in the Consulting segment, $117,000 recorded in the Publications segment and $3.9 million related to the
customer lists of the sellers, which are being amortized over 7 years.

The
results of operations of the acquired entities have been included in the Company's statement of operations since the dates of the respective acquisitions. The unaudited pro forma
results of operations for the years ended December 31, 2003 and 2002 have been set forth below as though the Italian, UK, and Northern European acquisitions had occurred as of January 1,
2002 (dollars in thousands except per share amounts):

December 31,2003

2002Revenues

$
129,403

$
126,367Loss before cumulative effect of change in accounting principle

$
(4,839
)
$
(20,531
)Net loss

$
(4,839
)
$
(42,737
)Net loss per share:Loss before cumulative effect of change in accounting principleBasic and Diluted

$
(0.36
)
$
(1.57
)Cumulative effect of change in accounting principleBasic and Diluted




$
(1.70
)Basic and Diluted

$
(0.36
)
$
(3.27
)


2002 Acquisitions

Acquisition of META Group Germany

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

F-11

---



$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 acquisition was accounted for under the purchase method.
Accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed, based on estimated fair values at the date of acquisition. The allocation resulted in
$2.0 million of goodwill recorded in the Research and Advisory Services Segment, $5.0 million of goodwill in the Strategic Consulting segment, $1.2 million of goodwill in the
Published Research Products segment, and approximately $1.7 million related to the customer list of META Group Germany, which will be amortized over 7 years. The allocation of goodwill
to each segment was based on the respective revenue contribution percentages of the acquired entity to each segment.

During
2002, the Company acquired the remaining 47% of META Group Germany (including the shares held by the stockholders of Stratis Kft.) in exchange for $590,000 in cash, $412,000 in
the form of 267,285 options to purchase the Company's common stock, and approximately $924,000 in notes payable to certain of the former META Group Germany shareholders, payable from
January 2003 through January 2006. The incremental consideration resulted in $300,000 of goodwill recorded in the Research and Advisory Services segment, $700,000 of goodwill in the
Strategic Consulting segment, and $200,000 of goodwill in the Published Research Products segment.

META Group Germany Acquisition of Stratis Kft.

Effective January 1, 2002, META Group Germany acquired a majority interest in the Company's distributor in Hungary, Stratis Kft., for approximately
$327,000 paid in META Group Germany's stock. The purchase price has been allocated to the assets acquired and the liabilities assumed, based on estimated fair values at the date of acquisition. The
consideration resulted in $61,000 of goodwill recorded in the Research and Advisory Services segment, $146,000 of goodwill in the Strategic Consulting segment, and $36,000 of goodwill in the Published
Research Products segment.

Acquisition of Assets of The Verity Group

In March 2002, the Company paid $400,000 of contingent consideration to The Verity Group ("Verity"), an IT consulting company, as additional contingent
consideration earned during the year ended December 31, 2001. The Company acquired certain assets of Verity in 1997 for an initial payment of $1,000 in cash and contingent consideration of up
to $1.1 million in the event certain financial targets were met in each of the four years ended December 31, 2001. The aggregate consideration paid by the Company amounted to
approximately $1 million. There are no future payments remaining under the earnout.

F-12

---





3.    Property and Equipment

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

December 31,2003

2002Leasehold improvements

$
1,734

$
1,665Computer equipment, software, and peripherals


21,124


19,171Web site development costs


2,865


2,865Furniture and fixtures


1,567


1,40927,290


25,110Less: accumulated depreciation


(21,898
)

(17,386
)$
5,392

$
7,724


Depreciation
expense was $3.5 million, $5.1 million and $5.3 million for 2003, 2002 and 2001, respectively.

4.    Goodwill and Intangible Assets

Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142"). Under SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to impairment tests on an annual basis, or
more frequently if certain indicators arise. Other finite lived intangible assets will continue to be amortized over their useful lives. During the quarter ended March 31, 2003, the remaining
useful lives of intangible assets being amortized were reviewed and deemed to be appropriate.

The
goodwill impairment test is a two-step process that requires goodwill to be allocated to the reporting units. In the first step, the fair value of the reporting unit is
compared to the carrying value of the reporting unit. If the fair value of the reporting unit is less than the carrying value of the reporting unit, goodwill impairment may exist, and the second step
of the test is performed. In the second step, the fair value of the goodwill is compared to the carrying value of the goodwill and an impairment loss will be recognized to the extent that the carrying
value of the goodwill exceeds the implied fair value of the goodwill.

The
Company completed the second step of the impairment test as of September 30, 2002. As a result of operating losses in recent history of the Company's Strategic Consulting and
Published Research Products segments and the overall decline in IT spending that began in the second half of 2000 and continued through 2002, the Company determined that the goodwill related to the
Strategic Consulting and Published Research Products segments was impaired. The respective fair values of the segments were determined based on a review of various valuation methods such as the
discounted cash flow methodology, the guideline company methodology and the merger and acquisition methodology. Accordingly, the Company recorded an impairment charge of $22.2 million relating
to the carrying value of the goodwill of these reporting units as of January 1, 2002. The impairment charge was recorded as the cumulative effect of a change in accounting principle and
recorded retroactive to January 1, 2002.

In
accordance with SFAS 142, the Company has selected a date by which the annual impairment test will be performed, such date being September 30. As of September 30,
2002 it was determined that goodwill resulting from the acquisition of an additional interest in META Group AG ("META Group Germany"), and contingent consideration earned by Rubin Systems Inc.
and the Verity Group, was

F-13

---



impaired
as it related to the Strategic Consulting and Published Research Products segments. Accordingly, the Company recorded a $2.6 million charge which was recorded as an impairment loss and
included as an element of operating expenses. The Company performed its annual impairment test in September 2003 which resulted in no goodwill impairment.

A
summary of the Company's intangible assets as of December 31, 2003 and 2002 is as follows (amounts in thousands):

December 31, 2003Gross
Carrying
Amount

Accumulated
Amortization

TotalAmortized intangible assets:Customer lists

$
10,124

$
(2,715
)
$
7,408Intellectual property


648


(334
)

314Non-compete agreement


375


(298
)

77Content databases & other


2,085


(902
)

1,183Total

$
13,232

$
(4,250
)
$
8,982Unamortized intangible assets:Goodwill







$
13,016Aggregate amortization expense:Twelve months ended December 31, 2003:







$
1,481


December 31, 2002Gross
Carrying
Amount

Accumulated
Amortization

TotalAmortized intangible assets:Customer lists

$
4,395

$
(1,750
)
$
2,645Intellectual property


561


(206
)

355Non-compete agreement


375


(202
)

173Content databases & other


2,068


(611
)

1,457Total

$
7,399

$
(2,769
)
$
4,630Unamortized intangible assets:Goodwill







$
7,483Aggregate amortization expense:Twelve months ended December 31, 2002:







$
1,335


F-14

---



As
of December 31, 2003, the estimated amortization expense the Company will incur by year is as follows (in thousands):

Estimated amortization expense:Year ending December 31, 2004

$
2,095Year ending December 31, 2005


1,936Year ending December 31, 2006


1,361Year ending December 31, 2007


1,268Year ending December 31, 2008


953Thereafter


1,369Total

$
8,982


The
changes in the carrying amount of goodwill by reportable segment for years ended December 31, 2002 and 2003 is as follows (in thousands):

Research and
Advisory Services

Strategic
Consulting

Published
Research
Products

TotalBalance as of January 1, 2002

$
6,644

$
17,636

$
3,813

$
28,093Goodwill acquired


839


2,814


573


4,226Impairment losses





(20,450
)

(4,386
)

(24,836
)Balance as of December 31, 2002


7,483








7,483Translation adjustments


984








984Goodwill acquired


3,955


473


121


4,549Balance as of December 31, 2003

$
12,422

$
473

$
121

$
13,016


The
Company ceased recording goodwill amortization effective January 1, 2002. If the Company had ceased recording goodwill as of January 1, 2001, its reported net loss of
$17.6 million would have been
reduced by $0.8 million to $16.8 million, and its reported net loss per share of $1.47 would have been reduced by $.07 to a net loss of $1.40 per share.

5.    Investments and Advances

At December 31, 2003 and 2002, the Company had investments in and advances to companies in parallel or synergistic industries. Such investments and
advances are summarized below (in thousands):

December 31,2003

2002Spikes Cavell

$


$
273Tescom


1,070


1,085META Group Northern Europe





2,563Other


76


76$
1,146

$
3,997


In
2003, the Company received proceeds of $588,000 on the liquidation of Spikes Cavell and recognized a gain of $315,000. Additionally, the Company sold another of its investments to a
third

F-15

---



party
for total proceeds of $300,000 and recognized a gain on the sale of $300,000. The Company completed the acquisition of META Group Northern Europe, which is reported on a fully consolidated basis
as of October 1, 2003.

In
2002, the Company received $2.3 million in cash from the wind-down and dissolution of its investments in certain affiliates. The cash proceeds were recorded as
reductions to the respective carrying values of such investments.

The
Company follows a practice of reviewing 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 operations of each company in which it has an investment, 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 $1.1 million and
$9.2 million for 2002 and 2001, respectively. The losses taken were determined on a specific identification method considering each company'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. There were no impairment losses on investments and advances recorded in 2003.

6.    Bank Debt

As of December 31, 2002, the Company had $6.2 million in borrowings outstanding ($5.2 million term loan and $1 million revolving
credit facility) under its $20 million credit facility (the "Old Facility"). The Company was in breach of covenants contained in the Old Facility, and, as a result, all outstanding borrowings
were classified as a current liability as of December 31, 2002. In January 2003, the Company repaid all amounts outstanding under the Old Facility.

In
March 2003, the lender waived all prior covenant defaults and the Company executed a new $6 million revolving credit agreement (the "Amended Facility") which replaced
the Old Facility. Under the Amended Facility, interest on any outstanding borrowings will be payable at the rate of LIBOR, as determined by the bank, plus 1.5%, or the higher of the Prime Rate or the
Federal Funds Rate plus 0.5%. The Amended Facility is fully collateralized by a $6 million cash deposit reflected as restricted cash as of December 31, 2003. The Amended Facility
contains no financial covenants, and matures in November 2004. As of December 31, 2003, there was $836,000 used under the Amended Facility in the form of standby letters of credit issued
on behalf of one of the Company's independent sales representative organizations and as collateral for a portion of the Company's U.S. premises leases. There were no borrowings outstanding as of
December 31, 2003.

F-16

---



7.    Commitments, Contingencies and Guarantees

Lease Commitments:The Company leases office facilities and equipment 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 31,2004

$
6,9472005


5,7392006


5,0832007


5,1532008


2,244Thereafter


1,224$
26,390


Total
rent expense was $5.9 million, $6.7 million and $4.7 million for 2003, 2002 and 2001, respectively. Included in rent expense for 2003, 2002 and 2001 were
charges of $1.0 million, $2.2 million and $600,000, respectively, for vacated space and losses on subleases at certain of the Company's domestic and German facilities. The fair value of
the losses was computed based on the aggregate remaining lease obligations of the vacant space reduced by estimated sublease rentals that the Company reasonably expects to obtain for the space.



The Company's purchase agreement for the October 2000 acquisition of the assets of RSI included certain earnout provisions. In the event certain financial
targets are met, additional contingent consideration of $2.7 million payable in cash and $1.4 million payable in the Company's common stock may be paid through March 2007. In the
event the aggregate number of shares issued in satisfaction of contingent consideration exceeds 147,027, the remaining consideration will be payable in cash. RSI is wholly owned by Dr. Howard
Rubin, a director and officer of the Company.



Other than ordinary routine litigation incidental to the Company's business, the Company is not a party, nor is any of its property subject to, any pending legal
proceedings.



See Note 6 for discussion of standby letters of credit.



In September 2000, the Company provided a guarantee in the amount of €62,000 (approximately $78,000) guaranteeing lease payments to the
landlord of one of the Company's former independent sales representative organizations. In January 2002, the landlord called the guarantee. The claim is currently being negotiated with the
landlord. The Company is uncertain as to when this issue will be resolved.

F-17

---



8.    Income Taxes

The components of the Company's income (loss) before provision (benefit) for income taxes, minority interest and cumulative effect of change in accounting
principle is as follows (in thousands):

Year Ended December 31,2003

2002

2001United States

$
3,598

$
(4,257
)
$
(18,633
)Foreign


(7,607
)

(1,888
)

(1,858
)Total

$
(4,009
)
$
(6,145
)
$
(20,491
)


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

Year Ended December 31,2003

2002

2001Currentfederal

$
64

$
8

$
253state and other


43


463


18foreign


66


52


173


523


271Deferredfederal





10,371


(2,799
)state





1,814


(353
)foreign





388





12,573


(3,152
)$
173

$
13,096

$
(2,881
)


During
2002 the Company recorded a valuation allowance of $12.2 million on deferred tax assets existing at January 1, 2002. Such amount is reflected in deferred taxes
above.

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

Year Ended December 31,2003

2002

2001Income tax at statutory rate

$
(1,403
)
$
(2,151
)
$
(7,172
)State and other taxes, net of federal benefit


168


252


(597
)Foreign taxes


77


93


(3
)Impact of valuation allowance


1,221


14,440


4,185Other


110


462


706$
173

$
13,096

$
(2,881
)


F-18

---



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

December 31,2003

2002Depreciation and amortization

$
142

$
(133
)Unrealized losses on securities


3,576


5,670Allowance for doubtful accounts


793


1,335Accrued expenses


1,669


1,068Net operating loss carryforwards


11,072


9,397Deferred revenues


233


1,492Other


3,822


1,257Deferred tax asset


21,307


20,086Valuation allowance


(21,307
)

(20,086
)Net deferred tax asset

$


$



During
2003, the Company increased the valuation allowance by $1.2 million on the basis that it is not more than likely that deferred tax assets will be realized. The
$1.2 million increase relates to valuation allowance against U.S. and foreign net operating losses and deferred tax assets.

During
2002, the Company increased the valuation allowance by $15.7 million on the basis that it is not more than likely that deferred tax assets will be realized. Of this amount,
$300,000 relates to the investment impairment charges. The remaining $15.4 million relates to valuation allowances against U.S. and foreign net operating losses and deferred tax assets.

At
December 31, 2003, the Company has net operating loss carryforwards for federal income tax purposes of $17.0 million expiring as follows:

Year Expiring

Amount (In thousands)2012

$
1,2042020


2,9502021


12,4632022


379Total

$
16,996


Additionally,
the Company has foreign net operating loss carryforwards of approximately $12.6 million; $9.4 million of which have no expiration period and the remainder of
$3.2 million expiring in 2006 through 2013.

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 during 2001. There were no benefits recognized during 2002 or 2003.

F-19

---





9.    Stockholders' Equity



In September 2002 five trusts affiliated with the Company's President and Chief Executive Officer, Alfred J. Amoroso, purchased 125,000 shares of the
Company's common stock. Additionally, two members of the Company's Board of Directors, Michael Simmons and Gayl W. Doster, purchased 20,000 and 10,000 shares of the Company's common stock,
respectively. All of the shares were purchased from META Group Germany for total proceeds of approximately $425,000.

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, 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. Total proceeds to the Company were $4.57 million, net of offering costs of approximately $227,000. The Company filed a registration statement with the Securities and Exchange
Commission to register the shares issued (other than those issued to Mr. Kutnick and the purchaser affiliated with Mr. McNamee). Such registration statement was declared effective on
January 26, 2004.



In September 2003, the Company acquired 100% of META Group Norway A/S, META Group Sweden AB, META Group Finland OY, META Group Denmark A/S, META
Belgium SA and, META
Nederland BV (collectively "Northern Europe"). As part of the purchase consideration, the Company issued 175,000 shares of its common stock valued at $700,000.



In November 2003, META Germany sold 10,000 shares of the Company's common stock held as treasury stock to a third party for proceeds of $53,000.



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.

F-20

---



Stock
option activity under the Plans from January 1, 2001 to December 31, 2003 was as follows:

Options

Weighted-Average
Exercise PriceOutstanding January 1, 2001

4,301,869

$
14.57Granted

1,287,012


2.53Exercised

(82,701
)

0.79Canceled

(1,936,314
)

17.01Outstanding December 31, 2001

3,569,866


9.26Granted

2,252,771


2.18Exercised

(1,001
)

2.17Canceled

(656,899
)

8.06Outstanding December 31, 2002

5,164,737


6.32Granted

589,969


4.09Exercised

(160,273
)

2.28Canceled

(513,122
)

7.02Outstanding December 31, 2003

5,081,311


6.12Exercisable:December 31, 2003

2,883,557

$
8.19December 31, 2002

2,151,203

$
10.00December 31, 2001

1,700,368

$
11.25


At
December 31, 2003, 2,120,381 shares were issuable upon the exercise of outstanding NQSOs, and 2,960,930 shares were issuable upon the exercise of outstanding ISOs.

The
following table summarizes information about stock options outstanding at December 31, 2003:

|                |  | Options Outstanding |  | Options Exercisable
|--------------- |  | ------------------- |  | -------------------
|
|$  1.56$  2.05 |  | 1,130,428           |  | 8.16               
|2.10    2.50   |  | 1,170,360           |  | 8.48               
|2.60    6.06   |  | 1,379,777           |  | 8.01               
|6.50  16.58    |  | 1,030,573           |  | 4.11               
|16.67  27.50   |  | 370,173             |  | 5.53               
|                |  |                     |  |                    
|$  1.56$27.50  |  | 5,081,311           |  | 7.18               
|                |  |                     |  |                    

The
weighted average remaining contractual life of options outstanding at December 31, 2003, 2002, and 2001 was 7.18, 7.88, and 7.80 years, respectively.

F-21

---





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 issued 697,770 options in April 2002 at the fair market value on the date of issuance to those eligible
employees still employed at the date of issuance.



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, 2003 and 2002, the Company issued 80,376 and 79,319 shares, respectively, under the Purchase Plan.

10.    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.

11.    Related Party Transactions

Private Placements of the Company's Common Stock

In September 2002 five trusts affiliated with the Company's President and Chief Executive Officer, Alfred J. Amoroso, purchased 125,000 shares of the
Company's common stock. Additionally, two members of the Company's Board of Directors, Michael Simmons and Gayl W. Doster, purchased 20,000 and 10,000 shares of the Company's common stock,
respectively. All of the shares were purchased from META Group Germany for total proceeds of approximately $425,000.

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, former Chief Executive Officer and former 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"). Total proceeds to the Company were $4.57 million, net of offering costs of approximately $227,000. The Company filed a registration statement with the Securities and
Exchange Commission to register the shares issued (other than those issued to Mr. Kutnick and the purchaser affiliated with Mr. McNamee). Such registration statement was effective on
January 26, 2004.

Rubin Systems, Inc. ("RSI") and Dr. Howard Rubin

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 one of the Company's Advisory Services. In
June 1998, the Company and RSI entered into

F-22

---



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 2002, the Company paid $569,000 in cash and $369,000 in the form of 202,499 shares of the Company's common stock as contingent consideration in
connection with the achievement of certain financial targets by RSI and $500,000 in additional consideration in connection with the fair value of options to purchase the Company's common stock granted
to Dr. Howard Rubin. During 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 $2.7 million payable in cash and $1.4 million payable in the Company's common stock may be paid through
March 2007. In the event the aggregate number of shares issued in satisfaction of contingent consideration exceeds 147,027, 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 Dr. Rubin's employment and management agreement, as amended, the Company remains obligated to pay a royalty to Dr. Rubin on certain products and
services sold by the Company. The Company recognized $3.6 million, $2.5 million, and $4.3 million in revenues from the sale of RSI derivative products during the years ended
December 31, 2003, 2002 and 2001, respectively. In exchange for the content provided by Dr. Rubin and RSI, the Company incurred $703,000, $763,000, and $958,000 in royalty and commission
expenses to Dr. Rubin and RSI during 2003, 2002 and 2001, respectively.

First Albany Corporation

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. This agreement is annually renewable by First Albany, subject to attainment of specified minimum
revenue targets. The Company recognized $1.8 million, $1.3 million and $1 million in revenues from this arrangement during 2003, 2002 and 2001 respectively. Accounts receivable
from First Albany were $493,000 and $342,000 as of December 31, 2003 and 2002, respectively. A director of the Company is also Chairman of First Albany Companies, Inc., the holding
company of First Albany Corporation, and the Chairman of the Company is also a director of First Albany Companies, Inc. On February 20, 2004, First Albany gave notice to the Company that
it was terminating the agreement effective August 20, 2004.

12.    Segment Reporting (As Restated)

Subsequent to the issuance of the Company's annual 2003 financial statements, the Company's management determined that its segment reporting by geographic area
for the years ended December 31, 2003 and 2002 was inconsistent with its prior reporting of this information in 2001 and in the Company's Forms 10-Q for the first three quarters of 2003, in
that the Company had included intercompany royalty income and expense in all geographic regions in its annual segment disclosures in 2003 and 2002. The Company evaluates the results of its geographic
segments excluding intercompany

F-23

---



royalty
income and expense. As a result, the Company has restated its 2003 and 2002 consolidated financial statements to reflect operating income (loss) by geographic region for both 2003 and 2002
excluding intercompany royalty income and expense in all geographic regions for all periods presented.

The
Company's chief operating decision-making group is comprised of the President and Chief Executive Officer and certain other executive officers. The Company's operating segments are
managed separately, as each operating segment represents a strategic business unit that 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 1 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. Selling, general and administrative expenses are allocated ratably based on each operating segments' revenues. Management does not
allocate corporate assets, non-operating income, or income taxes and excludes intercompany royalty income and expense when measuring segment results.

The
Company earns revenue from clients in many countries. In 2003, other than the United States and Germany, there was no individual country in which revenues from external clients
represent 10% or more of the Company's consolidated revenues. In 2002 and 2001, other than the United States, there was no individual country in which revenues from external clients represented 10% or
more of the Company's consolidated revenues. Additionally, no single client accounted for 10% or more of total revenue in the years 2003, 2002 and 2001, and the loss of a single client, in
management's opinion, would not have a material adverse effect on revenues.

F-24

---



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

|                             |  | Advisory
Services |        | Strategic
Consulting |   | Published
Research
Products |   | Unallocated |        | Consolidated
Total |  
|---------------------------- |  | ----------------- | ------ | -------------------- | - | --------------------------- | - | ----------- | ------ | ------------------ | -
|Year Ended December 31, 2003 |  |                   |        |                      |   |                             |   |             |        |                    |  
|Revenues                     |  | $                 | 78,257 |                      | $ | 35,747                      |   | $           | 5,980  |                    | $
|Depreciation & amortization  |  |                   | (3,254 | )                    |   | (1,486                      | ) |             | (249   | )                  |  
|Operating income (loss)      |  |                   | 7,162  |                      |   | (13,050                     | ) |             | 1,095  |                    |  
|Assets                       |  |                   |       |                      |   |                            |   |             |       |                    |  
|Year Ended December 31, 2002 |  |                   |        |                      |   |                             |   |             |        |                    |  
|Revenues                     |  | $                 | 77,113 |                      | $ | 32,009                      |   | $           | 4,940  |                    | $
|Depreciation & amortization  |  |                   | (4,208 | )                    |   | (1,759                      | ) |             | (314   | )                  |  
|Operating income (loss)      |  |                   | 5,651  |                      |   | (8,669                      | ) |             | (1,908 | )                  |  
|Assets                       |  |                   |       |                      |   |                            |   |             |       |                    |  
|Year Ended December 31, 2001 |  |                   |        |                      |   |                             |   |             |        |                    |  
|Revenues                     |  | $                 | 85,483 |                      | $ | 26,863                      |   | $           | 5,431  |                    | $
|Depreciation & amortization  |  |                   | (4,702 | )                    |   | (2,081                      | ) |             | (925   | )                  |  
|Operating loss               |  |                   | (8,146 | )                    |   | (2,289                      | ) |             | (2,945 | )                  |  
|Assets                       |  |                   |       |                      |   |                            |   |             |       |                    |  

The
Company sells its products in the United States, and internationally through its subsidiaries in Canada, the Asia Pacific region and Europe. The Company also utilizes a network of
independent sales representative organizations located in Africa, the Middle East, Japan and South America to distribute its products.

Information
by geographic region is set forth below as restated (in thousands):

|                             |  | Americas |         | Asia-Pacific |   | Europe,
Middle East,
Africa |   | Consolidated
Total |       
|---------------------------- |  | -------- | ------- | ------------ | - | --------------------------- | - | ------------------ | ------
|Year Ended December 31, 2003 |  |          |         |              |   |                             |   |                    |       
|Revenues                     |  | $        | 91,176  |              | $ | 5,829                       |   | $                  | 25,480
|Operating income (loss)      |  |          | (3,189  | )            |   | (918                        | ) |                    | (686  
|Long-lived assets            |  |          | 7,605   |              |   | 2,092                       |   |                    | 19,183
|Year Ended December 31, 2002 |  |          |         |              |   |                             |   |                    |       
|Revenues                     |  | $        | 95,063  |              | $ | 4,849                       |   | $                  | 16,621
|Operating income (loss)      |  |          | (5,983  | )            |   | 1,436                       |   |                    | (379  
|Long-lived assets            |  |          | 12,678  |              |   | 1,856                       |   |                    | 9,621 
|Year Ended December 31, 2001 |  |          |         |              |   |                             |   |                    |       
|Revenues                     |  | $        | 116,330 |              | $ | 3,013                       |   | $                  | 637   
|Operating income (loss)      |  |          | (13,039 | )            |   | (234                        | ) |                    | (116  
|Long-lived assets            |  |          | 42,150  |              |   | 1,838                       |   |                    | 10,567

F-25

---



Information
by geographic region is set forth below as originally reported (in thousands):

|                             |  | Americas |         | Asia-Pacific |   | Europe,
Middle East,
Africa |   | Consolidated
Total |       
|---------------------------- |  | -------- | ------- | ------------ | - | --------------------------- | - | ------------------ | ------
|Year Ended December 31, 2003 |  |          |         |              |   |                             |   |                    |       
|Revenues                     |  | $        | 91,176  |              | $ | 5,829                       |   | $                  | 25,480
|Operating income (loss)      |  |          | 2,230   |              |   | (2,120                      | ) |                    | (4,903
|Long-lived assets            |  |          | 7,605   |              |   | 2,092                       |   |                    | 19,183
|Year Ended December 31, 2002 |  |          |         |              |   |                             |   |                    |       
|Revenues                     |  | $        | 95,063  |              | $ | 4,849                       |   | $                  | 16,621
|Operating income (loss)      |  |          | (2,299  | )            |   | 147                         |   |                    | (2,774
|Long-lived assets            |  |          | 12,678  |              |   | 1,856                       |   |                    | 9,621 
|Year Ended December 31, 2001 |  |          |         |              |   |                             |   |                    |       
|Revenues                     |  | $        | 116,330 |              | $ | 3,013                       |   | $                  | 637   
|Operating income (loss)      |  |          | (13,039 | )            |   | (234                        | ) |                    | (116  
|Long-lived assets            |  |          | 42,150  |              |   | 1,838                       |   |                    | 10,567

13.    Selected Quarterly Financial Data (Unaudited)

The following table sets forth certain key interim financial information for the years ended December 31, 2003 and 2002.

|                                                     |  | First
Quarter |        | Second
Quarter |   | Third
Quarter |   | Fourth
Quarter |       
|---------------------------------------------------- |  | ------------- | ------ | -------------- | - | ------------- | - | -------------- | ------
|
|2003:                                                |  |               |        |                |   |               |   |                |       
|Total revenues                                       |  | $             | 28,173 |                | $ | 30,057        |   | $              | 29,394
|Gross profit                                         |  | $             | 13,424 |                | $ | 13,743        |   | $              | 12,892
|Net income (loss)                                    |  | $             | 111    |                | $ | (1,517        | ) | $              | (1,930
|Net income (loss) per basic and diluted common share |  | $             | 0.01   |                | $ | (0.11         | ) | $              | (0.14 

F-26

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|                                                                                                            |  | First
Quarter(1) |         | Second
Quarter |   | Third
Quarter(2) |  | Fourth
Quarter
|----------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | -------------- | - | ---------------- |  | --------------
|
|2002:                                                                                                       |  |                  |         |                |   |                  |  |               
|Total revenues                                                                                              |  | $                | 28,900  |                | $ | 30,723           |  | $             
|Gross profit                                                                                                |  | $                | 13,413  |                | $ | 15,239           |  | $             
|Income (loss) before cumulative effect of change in accounting principle                                    |  | $                | (1,353  | )              | $ | 169              |  | $             
|Cumulative effect of change in accounting principle(1)                                                      |  | $                | (22,206 | )              |   |                 |  |               
|                                                                                                            |  |                  |         |                |   |                  |  |               
|Net income (loss)                                                                                           |  | $                | (23,559 | )              | $ | 169              |  | $             
|                                                                                                            |  |                  |         |                |   |                  |  |               
|Income (loss) before cumulative effect of change in accounting principle per basic and diluted common share |  | $                | (0.11   | )              | $ | 0.01             |  | $             
|                                                                                                            |  |                  |         |                |   |                  |  |               
|Net income (loss) per basic and diluted common share                                                        |  | $                | (1.84   | )              | $ | 0.01             |  | $             
|                                                                                                            |  |                  |         |                |   |                  |  |               

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

14.    Restructuring Charges

During 2003, 2002, and 2001, the Company recorded restructuring charges totaling $1,642,000, $362,000 and $359,000, respectively. These charges were associated
with workforce reductions, which totaled 41 employees in 2003, 53 employees in 2002 and 100 employees in 2001 (from both domestic and foreign locations). Each year's reduction represented in excess of
5% of the Company's total workforce at the time. These workforce reduction plans were initiated in order to lower costs due to the reduced levels of IT spending by the Company's customers. The
liabilities incurred in the 2002 and 2001 restructuring actions were paid in the respective quarters that the effected employees were notified. With respect to
the 2003 workforce reductions, $1,196,000 was unpaid as of December 31, 2003 and is expected to be paid in 2004.

F-27

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SCHEDULE II

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

|                              |                                            |  |   | Additions |  |   |        |  
|----------------------------- | ------------------------------------------ |  | - | --------- |  | - | ------ | -
|
|Year Ended December 31, 2003: |                                            |  |   |           |  |   |        |  
|                              | Allowance for doubtful accounts            |  | $ | 2,313     |  | $ | (600   | )
|                              | Valuation allowance for deferred tax asset |  | $ | 20,086    |  | $ | 1,221  |  
|Year Ended December 31, 2002: |                                            |  |   |           |  |   |        |  
|                              | Allowance for doubtful accounts            |  | $ | 2,446     |  | $ | 940    |  
|                              | Valuation allowance for deferred tax asset |  | $ | 4,388     |  | $ | 15,698 |  
|Year ended December 31, 2001: |                                            |  |   |           |  |   |        |  
|                              | Allowance for doubtful accounts            |  | $ | 4,031     |  | $ | 6,430  |  
|                              | Valuation allowance for deferred tax asset |  | $ | 203       |  | $ | 4,185  |  

S-1

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