##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K


ANNUAL REPORT PURSUANT TO SECTIONS 13 OR


15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|   |  | For the fiscal year ended June 30, 2006                                                     
|or
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|   |  | For the transition period
    from          to                                              

COMMISSION FILE NUMBER: 000-27577





HARRIS INTERACTIVE INC.


(Exact Name of Registrant as Specified in its Charter)


|                                                                                     |  |                                         
|------------------------------------------------------------------------------------ |  | ----------------------------------------
|DELAWARE                                                                             |  | 16-1538028                              
|(State or Other Jurisdiction of
    Incorporation or Organization)                   |  | (I.R.S. Employer
    Identification No.)
|135 Corporate Woods,
    Rochester, New York(Address of principal executive offices) |  | 14623(zip code)                         

Registrants telephone number, including area code:




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






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




o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2


o þ o


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE












---



##### 










HARRIS INTERACTIVE INC.


FORM 10-K


FOR THE FISCAL YEAR ENDED JUNE 30, 2006


INDEX


|                                                                                       |  |                                                                                                                      |    |      |    | 
|-------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                                                       |  |                                                                                                                      |    | Page |   
|                                                                                       |  |                                                                                                                      |    |      |   
|Part I:                                                                               
|Safe Harbor Statement under the
    Private Securities Litigation Reform Act of 1995 |  |                                                                                                                      | 3  |     
|Item 1:                                                                                |  | Business                                                                                                             |    |      | 3  | 
|Item 1A:                                                                               |  | Risk Factors                                                                                                         |    |      | 12 | 
|Item 1B:                                                                               |  | Unresolved Staff Comments                                                                                            |    |      | 20 | 
|Item 2:                                                                                |  | Properties                                                                                                           |    |      | 21 | 
|Item 3:                                                                                |  | Legal Proceedings                                                                                                    |    |      | 21 | 
|Item 4:                                                                                |  | Submission of Matters to a Vote of Security
    Holders                                                              |    |      | 21 | 
|                                                                                      
|Part II:                                                                              
|Item 5:                                                                                |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |      | 22 | 
|Item 6:                                                                                |  | Selected Financial Data                                                                                              |    |      | 24 | 
|Item 7:                                                                                |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |    |      | 25 | 
|Item 7A:                                                                               |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |    |      | 45 | 
|Item 8:                                                                                |  | Financial Statements and Supplementary
    Data                                                                      |    |      | 47 | 
|Item 9:                                                                                |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |    |      | 85 | 
|Item 9A:                                                                               |  | Controls and Procedures                                                                                              |    |      | 85 | 
|Item 9B:                                                                               |  | Other Information                                                                                                    |    |      | 86 | 
|                                                                                      
|Part III:                                                                             
|Item 10:                                                                               |  | Directors and Executive Officers of the
    Registrant                                                               |    |      | 86 | 
|Item 11:                                                                               |  | Executive Compensation                                                                                               |    |      | 86 | 
|Item 12:                                                                               |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |    |      | 87 | 
|Item 13:                                                                               |  | Certain Relationships and Related
    Transactions                                                                   |    |      | 87 | 
|Item 14:                                                                               |  | Principal Accountant Fees and Services                                                                               |    |      | 87 | 
|                                                                                      
|Part IV:                                                                              
|Item 15:                                                                               |  | Exhibits and Financial Statement
    Schedules                                                                       |    |      | 87 | 
|Signatures                                                                             |  |                                                                                                                      | 89 |     
|EX-10.3.41                                                                            
|EX-10.3.42                                                                            
|EX-10.3.43                                                                            
|EX-10.3.44                                                                            
|EX-10.3.45                                                                            
|EX-10.5.15                                                                            
|EX-10.5.16                                                                            
|EX-10.5.17                                                                            
|EX-21                                                                                 
|EX-23.1                                                                               
|EX-31.1                                                                               
|EX-31.2                                                                               
|EX-32.1                                                                               
|EX-32.2                                                                               



2



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##### Table of Contents






PART I





Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995


10-K 10-K 10-K.







|        |         
|------- | --------
|Item 1. | Business

® The Harris
Poll® 10-K


Corporate Overview


The Harris Poll


Inside
Research Inside Research




Mergers, Acquisitions and Sale of Business




3



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##### Table of Contents







Business Overview








| |   |                                   
| | - | ----------------------------------
| |  | Automotive and Transportation,    
|
| |  | Consumer Packaged Goods,          
|
| |  | Emerging and General Markets,     
|
| |  | Financial Services,               
|
| |  | Government and Policy,            
|
| |  | Healthcare and Pharmaceutical, and
|
| |  | Technology and Telecom.           





| |   |                                                 
| | - | ------------------------------------------------
| |  | Brand & Strategy Research,                      
|
| |  | Customer Satisfaction and Loyalty Research, and 
|
| |  | Marketing Communications (Advertising) Research.









4



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##### Table of Contents



The Worldwide Market for Online Research


Inside Research






| |   |                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Speed  Internet surveys can be completed in as
    little as five days, as opposed to three weeks for an average
    mail survey and approximately two weeks for an average
    random-digit-dial telephone survey.                                                                                                                                                             
|
| |  | Value Internet-based market research can
    provide larger and more robust sample sizes than telephone-based
    research for the same cost, or the same sample size can be
    gathered online at a lower cost.                                                                                                                                                               
|
| |  | Versatility  Motion and still pictures,
    graphics, advertising copy, and websites can be securely viewed
    right on the desktop. Images and sound can be combined to
    maintain interest and enhance the respondent experience.
    Internet-based methodology allows surveys to be created on
    demand, with content and sequencing modified as panelists
    respond.
|
| |  | Innovation  Online research techniques, such
    as bulletin board style focus groups and rapid
    qualitative/quantitative ad concept testing, that were never
    possible before are now performed regularly. As our (and our
    clients) knowledge of online research grows, our
    repertoire of more powerful research tools will continue to
    expand.             
|
| |  | Accuracy  Our propensity weighting techniques
    have repeatedly produced results that are as accurate or more
    accurate than telephone-based research.                                                                                                                                                                                                                     
|
| |  | Honesty  Our experience indicates that
    respondents online answers to questions of a more personal
    nature such as income, health condition, sexual behavior and
    political affiliation/opinion tend to be answered more openly,
    honestly and in greater detail than those collected via
    telephone-based research.                                            
|
| |  | Convenience  Online research is conducted on
    the respondents schedule, not the telephone
    researchers schedule. Web-based questionnaires may be
    completed at home, at work, or anywhere a respondent has
    Internet access, 24/7/365.                                                                                                                            
|
| |  | Productivity  Because online panelists can
    read faster than they can listen, more questions can be asked
    (and answered) in the same amount of time. Participants in
    online qualitative sessions type their own transcripts, which
    can be immediately reviewed and analyzed.                                                                                     

Our Products and Services




| |                
| | ---------------
| | Custom Research





| |   |                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Survey Design. Initial meetings are conducted with the
    client to clearly define the objectives and reasons for the
    study, which ensures that the data collected will meet the
    clients needs. Based on the requirements, we then
    determine the proper research procedure (such as a mail,
    telephone or Internet survey, focus group meetings or

5



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| |   |                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | personal interviews), identify the population to be surveyed,
    and design the survey questionnaire or focus group protocol.                                                                                                                                                                                                                   
|
| |  | Data Collection. Field data collection is conducted
    through computer-aided Internet or telephone interviewing, by
    mail or in person, by holding focus group meetings or any
    combination of the above. Quality procedures are intended to
    ensure that surveys are returned and the correct number of
    interviews are completed.
|
| |  | Weighting, Analysis and Reporting. We review the
    collected data for sufficiency and completeness, weight the data
    accordingly, and then analyze by desired demographic, business
    or industry characteristics. A comprehensive report that
    typically includes recommendations is then prepared and
    delivered to the client.   



Service Bureau Research




Syndicated Research




Research and Development


Accounting for
Research and Development Costs.


Our Intellectual Property and Other Proprietary Rights






6



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##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | ConceptLoc® 
    a proprietary suite of online security products to protect
    non-animated graphic images, prevent printing of protected
    images, disable screen print capability, disable save, save as,
    drag and drop, and copy capabilities and defeat third-party
    capture applications,
|
| |  | Harris Interactive Configurator  a system to
    conduct build your own product configuration
    research over a network, and                                                                                                                                                                        
|
| |  | Shelf
    Impactsm 
    a system for evaluating the impact of package design and shelf
    placement for store shelf products using extremely short
    duration image exposure                                                                                                                         



The Harris Poll




Seasonality







7



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##### Table of Contents





Our Clients




|                              |  |          |       | 
|----------------------------- |  | -------- | ----- | 
|                              |  | % FY2006 |      
|                              |  | Revenue  |      
|                              |  |          |      
|Healthcare and Pharmaceutical |  |          | 29.9% | 
|Technology and Telecom        |  |          | 12.3% | 
|Emerging and General Markets  |  |          | 9.3%  | 
|Financial Services            |  |          | 6.4%  | 
|Government and Policy         |  |          | 6.4%  | 
|Consumer Packaged Goods       |  |          | 6.2%  | 
|Automotive and Transportation |  |          | 4.7%  | 
|Service Bureau                |  |          | 3.6%  | 





Our Competition




Inside Research th th Inside Research th th








8



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##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our Highly Skilled Employees  many of them are
    recognized by their peers as leaders in the field of market
    research, or in the particular vertical markets in which they
    specialize.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Our Dedication to Customer Satisfaction  which
    has helped us to retain our clients and continually improve the
    quality of services that we deliver. We evaluate all of our
    researchers and managers on customer satisfaction scores, and
    their bonus compensation is also tied to those customer
    satisfaction levels. At June 30, 2006, our worldwide
    overall satisfaction rating stood at 8.7 and our willingness to
    recommend rated 8.9, both on a ten point scale, consistent with
    our worldwide overall satisfaction rating of 8.7 and our
    willingness to recommend rating of 8.9 at June 30, 2005.
    Maintaining high levels of customer satisfaction helps us to:



| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | identify and rapidly respond to changing client needs,                                    
|
| |  | increase the loyalty of our clients and generate greater
    lifetime value from them, and
|
| |  | improve our margins by dampening price sensitivity.                                       



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our Strong Brand  synonymous with accuracy and
    truthfulness, we believe that Harris Interactive and The
    Harris Pollare two of the best known and most trusted names
    for U.S. market research and public opinion polling today.
    We have now expanded The Harris Pollinto the United
    Kingdom and the rest of Europe, and expect to leverage it to
    raise awareness of the Harris Interactive brand on a global
    scale. In fiscal 2006, Harris Interactive entered into a
    relationship with The Financial Timesin London to
    publish a series of co-branded public opinion polls throughout
    Western Europe and the United States.
|
| |  | Our Dedicated, Professional Sales Force  which
    is relatively unique in the market research industry. Their
    duties are to generate leads, expand existing client
    relationships and gain new business. At the end of fiscal 2006,
    we had over 50 full-time dedicated sales professionals, who
    work with over 50 market research professionals who also sell
    our services, supported by a team of inside business developers.                                                                                                                                                                                                                 
|
| |  | Our Internet Panel  believed to be the
    worlds largest for conducting online market research.
    Currently, our panel consists of over six million individuals
    from around the world who have voluntarily agreed to participate
    in our various online research studies. This large and diverse
    Internet panel enables us to:                                                                                                                                                                                                                                                                                                                      



| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | accurately project results to large segments of the population
    like all U.S. voters or all British
    adults,
|
| |  | conduct a broad range of studies across a wide set of industries,                                                     
|
| |  | rapidly survey very large numbers of the general population,                                                          
|
| |  | accurately survey certain low-incidence,
    hard-to-find
    subjects, and                                           

9



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| |   |                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | sell our online data collection services to other research firms
    through the HISB, enabling us to penetrate new markets and gain
    additional market share where we do not have relationships or
    specific expertise.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our Specialty
    Sub-Panels. Through
    the ongoing screening of our larger panel and development
    targeted specifically to certain audiences, we have developed
    numerous specialty sub-panels of
    hard-to-find
    respondents, including: Affluent, Chronic Illness, Mothers and
    Expectant Mothers, Physicians, Pet Companion and Technology
    Decision-Makers. Our clients value our ability to rapidly survey
    these low-incidence groups. Many of our clients have asked us to
    develop specialty panels exclusively for their use. Specialty
    sub-panel research has become a key driver of high profit
    revenue growth for us.
|
| |  | Our Technology. A significant amount of computer software
    and hardware is required to conduct Internet-based market
    research and polling. The key elements of our technology
    infrastructure include:                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A high speed customized email system,which enables us to
    rapidly format, target and send over one million customized
    email invitations per hour,                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | A sophisticated survey engine,which can support 180,000
    custom five-minute surveys per hour with a peak capacity of
    15,000 surveys processed simultaneously,                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Software systems with multi-lingual capabilities,which
    have the ability to collect data in any language supported by
    Microsoft, including double-byte character sets (such as the
    Asian languages) and right to left reading languages,                                                                                                                                                                                                                                                                                 
|
| |  | An advanced survey dispatcher system,which acts like an
    air traffic control system to monitor, control and balance all
    respondent activity across all of our servers, and to ensure
    that no respondent will get a sorry  the system
    is busy notice. In addition, our proprietary dispatcher
    system gathers real-time statistics on survey starts,
    suspensions and completions, shutting off the surveys when the
    contracted completion levels have been achieved, thereby
    reducing cost overruns,
|
| |  | A patented customizable multi-language registration and
    polling system,which allows new and existing panel members
    to add, delete or update their registration information online,
    and which recognizes each panelists language preference
    and delivers the survey in that language,                                                                                                                                                                                                                               
|
| |  | Flexible, automated real-time reporting toolsthat allow
    online access to survey data at any time and speed the process
    of data delivery to clients,                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Our integrated telephoneand Internet data collection
    process (ICW),which permits smooth, labor-free transition
    between telephone and Internet modes of interviewing, with
    real-time quota control and integration with the automated
    real-time reporting tools, and                                                                                                                                                                                                                                                 
|
| |  | A fully scalable infrastructurethat was designed to
    easily and inexpensively grow with the expansion of our business.                                                                                                                                                                                                                                                                                                                                                                                                           

Financial Information About Geographic Areas


Non-U.S. non-U.S.




10



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|                        |  |          |         |  |          |   |        |          |  |   |       |   |  |   |         | 
|----------------------- |  | -------- | ------- |  | -------- | - | ------ | -------- |  | - | ----- | - |  | - | ------- | 
|                        |  | U.S.     |         |  | Europe   |   |        | Asia     |  |   |      
|                        |  | Market   |         |  | Market   |   |        | Market   |  |   |      
|                        |  | Research |         |  | Research |   |        | Research |  |   | Total |  
|                        |  |          |         |  |          |   |        |          |  |   |       |  
|2006:                   |  |          |         |  |          |   |        |          |  |   |       |   |  |   |         | 
|Revenue from services   |  | $        | 170,055 |  |          | $ | 45,956 |          |  | $ |      |   |  | $ | 216,011 | 
|Operating income (loss) |  |          | 14,238  |  |          |   | 293    |          |  |   | (239  | ) |  |   | 14,292  | 
|Long-lived assets       |  |          | 7,753   |  |          |   | 2,005  |          |  |   | 1     |   |  |   | 9,759   | 
|Deferred tax assets     |  |          | 19,741  |  |          |   | (105   | )        |  |   | 162   |   |  |   | 19,798  | 
|2005:                   |  |          |         |  |          |   |        |          |  |   |       |   |  |   |         | 
|Revenue from services   |  | $        | 149,919 |  |          | $ | 46,523 |          |  | $ | 523   |   |  | $ | 196,965 | 
|Operating income (loss) |  |          | 9,829   |  |          |   | (636   | )        |  |   | (164  | ) |  |   | 9,029   | 
|Long-lived assets       |  |          | 9,385   |  |          |   | 2,399  |          |  |   | 4     |   |  |   | 11,788  | 
|Deferred tax assets     |  |          | 25,827  |  |          |   | (877   | )        |  |   | 66    |   |  |   | 25,016  | 
|2004:                   |  |          |         |  |          |   |        |          |  |   |       |   |  |   |         | 
|Revenue from services   |  | $        | 111,999 |  |          | $ | 26,483 |          |  | $ |      |   |  | $ | 138,482 | 
|Operating income        |  |          | 12,545  |  |          |   | 719    |          |  |   |      |   |  |   | 13,264  | 
|Long-lived assets       |  |          | 4,355   |  |          |   | 1,676  |          |  |   |      |   |  |   | 6,031   | 
|Deferred tax assets     |  |          | 30,515  |  |          |   | 318    |          |  |   |      |   |  |   | 30,833  | 

non-U.S.


Backlog




Employees






11



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Available Information


10-K, 10-Q, 8-K 10-K.


1-800-SEC-0330.







|         |             
|-------- | ------------
|Item 1A. | Risk Factors

Risks Related to Our Business




| |                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to maintain adequate size and demographic
    composition of our existing Internet panel, or if we are
    required to spend substantial funds to do so, our business,
    financial condition and results of operations will
    suffer.





| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a significant number of our current online panelists decide that
    they are no longer willing to participate in our surveys,                       
|
| |  | we lose a large number of online panelists from over-use, and
    then must rely on a limited number of online panelists for
    ongoing research, or
|
| |  | we are unable to attract an adequate number of replacement
    panelists and specialty sub-panel members.                                            





12



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| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our online panelists are not obligated to participate in
    our surveys and polls and there can be no assurance that they
    will continue to do so.





| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A breach of our Internet security measures, security
    concerns, or liability arising from the use of the personal
    information of our Internet panel, could adversely affect our
    business.









| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | We may be subject to liability for publishing or
    distributing content over the Internet.







| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | Failure to maintain our reputation and name recognition
    could impair our ability to remain competitive



13



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| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Any failure in the performance of our Internet-based
    technology infrastructure could harm our business.













| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | Failure or inability to protect our intellectual property
    could adversely affect our business.

The Harris
Poll.




14



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| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | Our international growth is dependent in part upon
    expansion of our international Internet panel in key
    regions.





| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our international growth will be adversely affected if the
    marketplace does not continue to convert to Internet-based
    market research and polling.





| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | We rely on services provided by off-shore providers, the
    disruption of which could adversely impact our business.



15



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##### Table of Contents







| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to overcome other risks associated with
    global operations, we will be unable to conduct business on a
    global level.







| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | inability to comply with or enactment of more restrictive
    privacy laws,         
|
| |  | changes in regulatory requirements,                                                 
|
| |  | currency exchange fluctuations,                                                     
|
| |  | problems in collecting accounts receivable and longer collection
    periods,       
|
| |  | potentially adverse tax consequences,                                               
|
| |  | political instability,                                                              
|
| |  | Internet access restrictions, and                                                   
|
| |  | anti-American sentiment or terrorist activity against American
    interests abroad.





| |                                                                     
| | --------------------------------------------------------------------
| | We must continue to attract and retain highly skilled
    employees.



16



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##### Table of Contents





| |                                                                                
| | -------------------------------------------------------------------------------
| | Variations in our operating results may cause our stock
    price to fluctuate.







| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | declines in general economic conditions or the budgets of our
    clients,                
|
| |  | a general decline in the demand for market research and polling
    products and services,
|
| |  | seasonal decreases in the demand for market research and polling
    services,            
|
| |  | development of equal or superior products and services by our
    competitors,            
|
| |  | technical difficulties that cause general and long-term failure
    of the Internet, and  
|
| |  | currency exchange fluctuations.                                                           





| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | effective management of the professional services aspects of our
    business, including utilization and realization rates,                                                
|
| |  | our relative mix of revenues from Internet-based and traditional
    market research,                                                                                      
|
| |  | our ability to maintain the proper size and scope of our
    Internet panel necessary to develop and sell new products and
    services and generate expected revenues, and
|
| |  | development of our own new, marketable products and services.                                                                                                              

quarter-to quarter-to




| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | The price of our common stock is likely to be volatile and
    subject to wide fluctuations.





| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | Anti-takeover provisions in our charter and applicable law
    could delay or prevent an acquisition of our company.



17



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| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | Potential acquisitions of, or investments in, other
    companies may not be available and/or have a negative impact on
    our business.







| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties in the integration and assimilation of the
    operations, technologies, products and personnel of the acquired
    business,
|
| |  | the diversion of managements attention from other business
    concerns,                                                                 
|
| |  | the availability of favorable acquisition financing, and                                                                                  
|
| |  | the potential loss of key employees and/or clients of any
    acquired business.                                                          



Risks Related to Our Industry




| |                                                                               
| | ------------------------------------------------------------------------------
| | The market research industry is vulnerable to general
    economic conditions.



18



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| |                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We face intense competitive pressures within the market
    research and polling industry and from others who have the
    ability to collect data over the Internet.









| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | Changes in government regulation could limit our Internet
    activities or result in additional costs of doing business on
    the Internet.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A significant majority of U.S. state legislatures have
    enacted laws regulating the distribution of unsolicited email.
    Such laws could force changes in the manner in which we are able
    to recruit and communicate with panelists.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Our business may be restricted by the development of various
    U.S. federal and state do not call lists and
    other privacy regulations that permit consumers to protect
    themselves from unsolicited telemarketing telephone calls. In
    2003, the Federal Trade Commission (FTC) amended its
    rules to establish a national do not call registry.
    Although do not call list regulations do not
    currently apply to market research phone calls, new legislation
    or regulation could eliminate the current market research
    exemption. If do not call list regulations become
    applicable to market research phone calls, our results of
    operations may be adversely affected by the loss of revenues
    from telephone-based market research.
|
| |  | The Controlling the Assault of Non-Solicited Pornography and
    Marketing Act of 2003 (CAN-SPAM) was enacted.
    CAN-SPAM imposes a number of restrictions and requirements
    related to commercial communications over the Internet. CAN-SPAM
    also gives more legal ammunition for ISPs to take spammers
    to court, allows the FTC to impose fines and gives state
    attorneys general the power to bring lawsuits. Any inability on
    our part to comply with CAN-SPAM and similar laws could add to
    our costs and force changes in the way in which we conduct
    business.                                                                                                                                                                                      
|
| |  | The U.S. Health Insurance Portability and Accountability
    Act of 1996 (HIPAA) was enacted. HIPAA imposes a
    number of restrictions and requirements designed to safeguard
    personal health information. As Healthcare is the largest line
    of business that we serve, from time to time, HIPAA could have
    the effect of increasing our costs and restricting our ability
    to gather and disseminate information, which could ultimately
    have a negative effect on our revenues.                                                                                                                                                                                                                                                                                   

19



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Certain foreign countries in which we do business, such as
    China, censor or control our communication with our online
    panelists. Such limitations may hinder our ability to
    effectively conduct market research in a way that meets the
    needs of our clients.





| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | email distribution,                                            
|
| |  | user privacy and expression,                                   
|
| |  | the rights and safety of children,                             
|
| |  | intellectual property,                                         
|
| |  | information security,                                          
|
| |  | anti-competitive practices,                                    
|
| |  | the convergence of traditional channels with Internet commerce,
|
| |  | taxation and pricing, and                                      
|
| |  | the characteristics and quality of products and services.      





| |                                                                       
| | ----------------------------------------------------------------------
| | Changes in industry practices could limit our Internet
    activities.





| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we do not continue to keep pace with rapid
    technological change within the market research and polling
    industry, we will not be able to successfully implement our
    business plan.








|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments



20



---



##### Table of Contents








|        |           
|------- | ----------
|Item 2. | Properties







|                           |  |          |                             |  |                  |                  |            |               |  |   |       | 
|-------------------------- |  | -------- | --------------------------- |  | ---------------- | ---------------- | ---------- | ------------- |  | - | ----- | 
|                           |  |          |                             |  |                  | Remaining        |           
|                           |  |          |                             |  |                  | Lease Obligation |           
|Address                    |  | Location |                             |  | Termination Date |                  |            | June 30, 2006 | 
|                           |  |          |                             |  |                  |                  |            |               | 
|101 Merritt 7              |  |          | Norwalk, Connecticut        |  |                  |                  | May 2008   |               |  | $ | 640   | 
|4665 Cornell Road          |  |          | Cincinnati, Ohio            |  |                  |                  | June 2008  |               |  |   | 743   | 
|40-52 Watermans Park       |  |          | Brentford, United Kingdom   |  |                  |                  | June 2008  |               |  |   | 990   | 
|70 Carlson Road            |  |          | Rochester, New York         |  |                  |                  | June 2008  |               |  |   | 571   | 
|1920 Association Drive     |  |          | Reston, Virginia            |  |                  |                  | March 2010 |               |  |   | 2,190 | 
|60 Corporate Woods         |  |          | Rochester, New York         |  |                  |                  | June 2010  |               |  |   | 3,193 | 
|135 Corporate Woods        |  |          | Rochester, New York         |  |                  |                  | June 2010  |               |  |   | 2,344 | 
|Pepper Road                |  |          | Hazel Grove, United Kingdom |  |                  |                  | July 2010  |               |  |   | 1,111 | 
|Vanwall Road               |  |          | Maidenhead, United Kingdom  |  |                  |                  | July 2010  |               |  |   | 755   | 
|5 Independence Way         |  |          | Princeton, New Jersey       |  |                  |                  | July 2011  |               |  |   | 3,554 | 
|161 Avenue of the Americas |  |          | New York, New York          |  |                  |                  | April 2012 |               |  |   | 3,813 | 






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



21



---



##### Table of Contents






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities

Market Information




|               |              |             |   |      |             |  |   |      |  |  |     |      |  |  |   |      | 
|-------------- | ------------ | ----------- | - | ---- | ----------- |  | - | ---- |  |  | --- | ---- |  |  | - | ---- | 
|               |              | Fiscal 2006 |   |      | Fiscal 2005 | 
|               |              |             |   |      |             | 
|               |              | High        |   |      | Low         |  |   | High |  |  | Low |     
|               |              |             |   |      |             |  |   |      |  |  |     |     
|Quarter Ended: |              |             |   |      |             |  |   |      |  |  |     |      |  |  |   |     
|               | June 30      |             | $ | 5.79 |             |  | $ | 4.62 |  |  | $   | 5.15 |  |  | $ | 3.43 | 
|               | March 31     |             |   | 5.98 |             |  |   | 4.25 |  |  |     | 8.02 |  |  |   | 4.29 | 
|               | December 31  |             |   | 4.55 |             |  |   | 3.51 |  |  |     | 8.19 |  |  |   | 6.28 | 
|               | September 30 |             |   | 5.05 |             |  |   | 3.77 |  |  |     | 7.13 |  |  |   | 5.70 | 

Holders




Dividends




Unregistered Sales of Equity Securities and Use of
Proceeds




Issuer Purchases of Equity Securities




10b5-1 10b-18


22



---



##### Table of Contents







|                                   |  |              |           |  |               |            |      |           |                 |  |           |  |  |   |            | 
|---------------------------------- |  | ------------ | --------- |  | ------------- | ---------- | ---- | --------- | --------------- |  | --------- |  |  | - | ---------- | 
|                                   |  |              |           |  |               | Total      |      |           |                
|                                   |  |              |           |  |               | Number of  |      |           | Approximate     | 
|                                   |  |              |           |  |               | Shares     |      |           | Dollar Value of | 
|                                   |  |              |           |  |               | Purchased  |      |           | Shares That     | 
|                                   |  |              |           |  |               | as Part of |      |           | May Yet Be      | 
|                                   |  | Total Number |           |  | Average Price |            |      | Publicly  |                 |  | Purchased | 
|                                   |  | of Shares    |           |  | Paid          |            |      | Announced |                 |  | Under the | 
|                                   |  | Purchased    |           |  | per Share     |            |      | Program   |                 |  | Program   | 
|                                   |  |              |           |  |               |            |      |           |                 |  |           | 
|May 17, 2006 through May 31, 2006  |  |              | 616,200   |  |               | $          | 4.99 |           |                 |  | 616,200   |  |  | $ | 21,926,221 | 
|June 1, 2006 through June 30, 2006 |  |              | 659,200   |  |               |            | 5.14 |           |                 |  | 659,200   |  |  |   | 18,540,226 | 
|                                   |  |              |           |  |               |            |      |           |                 |  |           | 
|Total                              |  |              | 1,275,400 |  |               | $          | 5.06 |           |                 |  | 1,275,400 |  |  |   | 18,540,226 | 
|                                   |  |              |           |  |               |            |      |           |                 |  |           | 

23



---



##### Table of Contents








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

10-K.


|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|--------------------------------------------------------------------------------------------- |  | -------------------------------------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                                              |  | For the Years Ended June 30,                       |           
|                                                                                              |  |                                                    |           
|                                                                                              |  | 2006                                               |            |   | 2005 |   |            | 2004 |  |   | 2003       |   |  | 2002 |           
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|                                                                                              |  | (In thousands, except share and per share amounts) |           
|Statement of Operations Data:                                                                 |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Revenue from services                                                                         |  | $                                                  | 216,011    |   |      | $ | 196,965    |      |  | $ | 138,482    |   |  | $    | 124,094    |   |  | $ | 94,906     |  
|Cost of services                                                                              |  |                                                    | 105,358    |   |      |   | 93,330     |      |  |   | 64,543     |   |  |      | 61,816     |   |  |   | 49,517     |  
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Gross profit                                                                                  |  |                                                    | 110,653    |   |      |   | 103,635    |      |  |   | 73,939     |   |  |      | 62,278     |   |  |   | 45,389     |  
|Operating expenses:                                                                           |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Sales and marketing                                                                           |  |                                                    | 20,336     |   |      |   | 20,366     |      |  |   | 11,915     |   |  |      | 9,438      |   |  |   | 9,627      |  
|General and administrative                                                                    |  |                                                    | 68,540     |   |      |   | 65,746     |      |  |   | 43,964     |   |  |      | 40,952     |   |  |   | 39,253     |  
|Depreciation and amortization                                                                 |  |                                                    | 7,235      |   |      |   | 7,362      |      |  |   | 4,796      |   |  |      | 5,620      |   |  |   | 6,458      |  
|Restructuring (credits) charges and asset write-downs                                         |  |                                                    | 250        |   |      |   | 1,132      |      |  |   |           |   |  |      | (997       | ) |  |   | 6,222      |  
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Total operating expenses                                                                      |  |                                                    | 96,361     |   |      |   | 94,606     |      |  |   | 60,675     |   |  |      | 55,013     |   |  |   | 61,560     |  
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Operating income (loss)                                                                       |  |                                                    | 14,292     |   |      |   | 9,029      |      |  |   | 13,264     |   |  |      | 7,265      |   |  |   | (16,171    | )
|Interest and other income                                                                     |  |                                                    | 1,534      |   |      |   | 742        |      |  |   | 637        |   |  |      | 587        |   |  |   | 1,388      |  
|Interest expense                                                                              |  |                                                    | (20        | ) |      |   | (150       | )    |  |   | (107       | ) |  |      | (17        | ) |  |   | (71        | )
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Income (loss) from continuing operations before income taxes                                  |  |                                                    | 15,806     |   |      |   | 9,621      |      |  |   | 13,794     |   |  |      | 7,835      |   |  |   | (14,854    | )
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Provision (benefit) for income taxes                                                          |  |                                                    | 6,346      |   |      |   | 5,083      |      |  |   | (16,009    | ) |  |      | (2,998     | ) |  |   |           |  
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Income (loss) from continuing operations                                                      |  |                                                    | 9,460      |   |      |   | 4,538      |      |  |   | 29,803     |   |  |      | 10,833     |   |  |   | (14,854    | )
|Income (loss) from discontinued operations (including loss on
    disposal of $2,684 in 2005) |  |                                                    |           |   |      |   | (2,955     | )    |  |   | 115        |   |  |      | 274        |   |  |   | 61         |  
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Net income (loss) available to holders of common stock                                        |  | $                                                  | 9,460      |   |      | $ | 1,583      |      |  | $ | 29,918     |   |  | $    | 11,107     |   |  | $ | (14,793    | )
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Basic net income (loss) per share(*):                                                         |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Continuing operations                                                                         |  | $                                                  | 0.15       |   |      | $ | 0.08       |      |  | $ | 0.53       |   |  | $    | 0.20       |   |  | $ | (0.32      | )
|Discontinued operations                                                                       |  |                                                    |           |   |      |   | (0.05      | )    |  |   | 0.00       |   |  |      | 0.01       |   |  |   | 0.00       |  
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Basic net income (loss) per share                                                             |  | $                                                  | 0.15       |   |      | $ | 0.03       |      |  | $ | 0.53       |   |  | $    | 0.21       |   |  | $ | (0.32      | )
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Diluted net income (loss) per share(*):                                                       |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Continuing operations                                                                         |  | $                                                  | 0.15       |   |      | $ | 0.07       |      |  | $ | 0.52       |   |  | $    | 0.20       |   |  | $ | (0.32      | )
|Discontinued operations                                                                       |  |                                                    |           |   |      |   | (0.05      | )    |  |   | 0.00       |   |  |      | 0.01       |   |  |   | 0.00       |  
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Diluted net income (loss) per share                                                           |  | $                                                  | 0.15       |   |      | $ | 0.03       |      |  | $ | 0.52       |   |  | $    | 0.20       |   |  | $ | (0.32      | )
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Weighted average shares outstanding  basic                                                   |  |                                                    | 61,511,031 |   |      |   | 60,264,152 |      |  |   | 56,099,330 |   |  |      | 52,983,689 |   |  |   | 46,136,445 |  
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           
|Weighted average shares outstanding  diluted                                                 |  |                                                    | 61,685,777 |   |      |   | 61,238,064 |      |  |   | 57,444,785 |   |  |      | 54,638,596 |   |  |   | 46,136,445 |  
|                                                                                              |  |                                                    |            |   |      |   |            |      |  |   |            |   |  |      |           

24



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##### Table of Contents



|                           |  |                                                    |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|-------------------------- |  | -------------------------------------------------- | ------- |  | ---- |  | ------- | ---- |  |  | ------- |  |  | ---- | ------- |  |  |  | ------- | 
|                           |  | For the Years Ended June 30,                       |        
|                           |  |                                                    |        
|                           |  | 2006                                               |         |  | 2005 |  |         | 2004 |  |  | 2003    |  |  | 2002 |        
|                           |  |                                                    |         |  |      |  |         |      |  |  |         |  |  |      |        
|                           |  | (In thousands, except share and per share amounts) |        
|Balance Sheet Data:        |  |                                                    |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Cash and cash equivalents  |  |                                                    | 11,465  |  |      |  | 13,118  |      |  |  | 12,511  |  |  |      | 15,728  |  |  |  | 8,210   | 
|Marketable securities      |  |                                                    | 45,145  |  |      |  | 23,392  |      |  |  | 42,603  |  |  |      | 22,963  |  |  |  | 18,570  | 
|Working capital            |  |                                                    | 61,509  |  |      |  | 46,274  |      |  |  | 70,416  |  |  |      | 44,920  |  |  |  | 31,028  | 
|Total assets               |  |                                                    | 254,557 |  |      |  | 240,158 |      |  |  | 198,071 |  |  |      | 145,242 |  |  |  | 135,463 | 
|Total stockholders equity |  |                                                    | 201,278 |  |      |  | 192,493 |      |  |  | 165,489 |  |  |      | 118,489 |  |  |  | 103,300 | 











|        |                                                                                                     
|------- | ----------------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Continuing Operations

Overview






| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Sales bookings for the fiscal year were up 19%, to nearly
    $220 million.                                                                                                 
|
| |  | Total revenue increased 9.7% compared with the prior fiscal year.                                                                                                           
|
| |  | U.S. revenue grew 13.4%.                                                                                                                                                    
|
| |  | Total Internet-based revenue grew 14.7% compared with fiscal
    2005, driven by increases in U.S. and European Internet-based
    revenue of 14.8% and 13.9%, respectively.
|
| |  | Operating income increased 58%, while operating margin improved
    from 4.6% for fiscal 2005 to 6.6% in fiscal 2006.                                                       



Inside
Research






| |   |                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Improve European operating margins  Since
    Europe accounts for approximately 20% of our total revenue,
    every five points of operating margin improvement in Europe
    translates

25



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##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | into approximately one point of total operating margin
    improvement. Even though we have been focused on controlling
    costs, streamlining processes and improving productivity
    throughout our European business, our performance in Europe
    remains erratic.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Improve sales productivity  More than 100 of
    our client-facing employees have now completed sales training
    which emphasizes strategic selling and provides effective tools
    to help target and win the most profitable projects and build
    lasting client relationships. These strategies are now taking
    hold and helped us achieve record-breaking sales bookings of
    over $66 million in fiscal Q3, which helped push revenue to
    over $60.0 million for the three months ended June 30,
    2006 and $216.0 million for the full fiscal year.                                                                                                                                                                                                                                                                                                                      
|
| |  | Improve utilization rates  As explained below
    in Significant Factors Affecting Company
    Performance, utilization rate improvement can
    significantly impact our operating margins, since every three
    points of utilization improvement generally translates into
    approximately one point of operating margin improvement,
    assuming stable realization and pricing. Specifically,
    utilization has improved from 56% for the three months ended
    September 30, 2005 to 64% for the three months ended
    June 30, 2006, and has remained stable at
    63%-64% for the last
    three fiscal quarters. Our long-term target is to achieve and
    sustain a 65% company-wide utilization rate.                                                                                                                                                                  
|
| |  | Increase prices to match value  For the first
    time in five years, we implemented a rate card price increase
    for both data collection and professional services in August
    2005. The blended price for a full-service research project rose
    by an average of 6-7%. To date, we have not experienced any
    significant negative reaction from our clients due to the
    increase.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Improve process efficiency  Over the last
    seven years, most of our research processes have had to grow
    rapidly in both power and scale in order to meet our
    clients requirements for increased effectiveness in
    decreased time. As a result, our research systems have become
    overly complex and a bit cumbersome. We are now engaged in a
    major improvement process designed to improve the velocity and
    efficiency of our global research process, which should result
    in faster throughput at lower costs. Also, during fiscal 2006 we
    established a single global research operations infrastructure
    to gain economies of scale, properly share resources and
    standardize our research process. As a result, we believe that
    we are currently the only global research firm with one
    integrated and unified data collection platform.

Business Combinations






26



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##### Table of Contents





Business Combinations, 10-K.


Restructuring




| |            
| | -----------
| | Fiscal 2006

Accounting
for the Impairment or Disposal of Long-Lived Assets.






|                                                    |                                  |           |     |       |             |   |    |       |  |   |     |      |  
|--------------------------------------------------- | -------------------------------- | --------- | --- | ----- | ----------- | - | -- | ----- |  | - | --- | ---- | -
|                                                    |                                  |           |     | Lease |             |   |   
|                                                    |                                  | Severance |     |       | Commitments |   |    | Total | 
|                                                    |                                  |           |     |       |             |   |    |       | 
|Net charge during the fourth quarter of fiscal 2006 |                                  | $         | 191 |       |             | $ | 59 |       |  | $ | 250 |     
|                                                    | Cash payments during fiscal 2006 |           |     | (101  | )           |   |    |      |  |   |     | (101 | )
|                                                    |                                  |           |     |       |             |   |    |       | 
|Remaining reserve at June 30, 2006                  |                                  | $         | 90  |       |             | $ | 59 |       |  | $ | 149 |     
|                                                    |                                  |           |     |       |             |   |    |       | 





| |            
| | -----------
| | Fiscal 2005



27



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##### Table of Contents







|                                   |                                  |           |     |       |             |   |     |       |   |   |       |      |  
|---------------------------------- | -------------------------------- | --------- | --- | ----- | ----------- | - | --- | ----- | - | - | ----- | ---- | -
|                                   |                                  |           |     | Lease |             |   |    
|                                   |                                  | Severance |     |       | Commitments |   |     | Total |  
|                                   |                                  |           |     |       |             |   |     |       |  
|Net charge during fiscal 2005      |                                  | $         | 841 |       |             | $ | 214 |       |   | $ | 1,055 |     
|                                   | Cash payments during fiscal 2005 |           |     | (608  | )           |   |     | (35   | ) |   |       | (643 | )
|                                   | Fiscal 2005 adjustments          |           |     | 77    |             |   |     |      |   |   |       | 77   |  
|                                   |                                  |           |     |       |             |   |     |       |  
|Remaining reserve at June 30, 2005 |                                  | $         | 310 |       |             | $ | 179 |       |   | $ | 489   |     
|                                   |                                  |           |     |       |             |   |     |       |  
|                                   | Cash payments during fiscal 2006 |           |     | (310  | )           |   |     | (179  | ) |   |       | (489 | )
|                                   |                                  |           |     |       |             |   |     |       |  
|Remaining reserve at June 30, 2006 |                                  | $         |    |       |             | $ |    |       |   | $ |      |     
|                                   |                                  |           |     |       |             |   |     |       |  



10-K.


Discontinued Operations




10-K.




28



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##### Table of Contents



10-K 10-K.


Critical Accounting Policies and Estimates






| |   |                                                         
| | - | --------------------------------------------------------
| |  | Revenue recognition,                                    
|
| |  | Allowance for doubtful accounts,                        
|
| |  | Goodwill, intangible assets and other long-lived assets,
|
| |  | Income taxes and tax contingencies,                     
|
| |  | HIpoints loyalty program,                               
|
| |  | Restructuring charges,                                  
|
| |  | Stock-based compensation,                               
|
| |  | Post-employment obligations, and                        
|
| |  | Discontinued operations.                                





| |                    
| | -------------------
| | Revenue Recognition

cost-to out-of




| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts





| |                                                            
| | -----------------------------------------------------------
| | Goodwill, Intangible Assets and Other Long-Lived
    Assets



29



---



##### Table of Contents





Goodwill and Other Intangible
Assets






| |                                   
| | ----------------------------------
| | Income Taxes and Tax Contingencies

Accounting for
Income Taxes.




30



---



##### Table of Contents









| |                         
| | ------------------------
| | HIpoints Loyalty Program





| |                      
| | ---------------------
| | Restructuring Charges





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

Share-Based Payment Accounting for Stock-Based
Compensation.




31



---



##### Table of Contents







| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Expected volatility  based on historical
    volatilities from daily share price observations for our stock
    covering a period commensurate with the expected term of the
    options granted.                          
|
| |  | Expected life of the option  based on the
    vesting terms of the respective option and a contractual life of
    ten years, calculated using the simplified method as
    allowed by Staff Accounting Bulletin No. 107.
|
| |  | Risk-free rate  based on the implied yield
    available at the time the options were granted on
    U.S. Treasury zero coupon issues with a remaining term
    equal to the expected life of the option when granted.     
|
| |  | Dividend yield  based on our historical
    practice of electing not to pay dividends to our shareholders.                                                                                                                 

10-K.






| |                            
| | ---------------------------
| | Post-Employment Obligations

Employers Accounting for
Post-employment Benefits, an Amendment of FASB Statements
No. 5 and




| |                        
| | -----------------------
| | Discontinued Operations



32



---



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Explanation of Key Financial Statement Captions




| |                      
| | ---------------------
| | Revenue from Services

cost-to




| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Custom Research  including, but not limited
    to, customer satisfaction surveys, market share studies, new
    product introduction studies, brand recognition studies,
    reputation studies and ad concept testing.
|
| |  | Service-Bureau Research  HISB provides
    Internet-based data collection services for other market
    research firms.                                                                                                 



| |                 
| | ----------------
| | Cost of Services





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Project Personnel  Project personnel have four
    distinct roles: project management, survey design, data
    collection and analysis. We maintain project personnel in the
    United States, Europe, and Asia. Labor costs are
    specifically allocated to the projects they relate to. We
    utilize an automated timekeeping system, which tracks the time
    of project personnel as incurred for each specific
    revenue-generating project.                                                                                                                                                                                                                                                                            
|
| |  | Panelist Incentives  Our panelists receive
    both cash and non-cash incentives (through programs such as our
    HIpoints loyalty program) for participating in our surveys. We
    award cash incentives to our panelists for participating in
    surveys, which are earned when we receive a timely survey
    response. Non-cash incentives in the form of points are awarded
    to market survey respondents who register for our online panel,
    complete online surveys and refer others to join our online
    panel. The earned points are non-transferable and may be
    redeemed for gifts from a specific product folio at any time
    prior to expiration, which occurs after one year of account
    inactivity.
|
| |  | Data Processing  We manage the processing of
    survey data using our own employees. We also engage third-party
    suppliers to perform data processing on an as needed basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Other Direct Costs  Other direct costs include
    direct purchases, principally labor and materials, related to
    data collection and analysis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



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



33



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##### Table of Contents





| |                           
| | --------------------------
| | General and Administrative





| |                           
| | --------------------------
| | Provision for Income Taxes



Results of Operations




|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |   |         |   |  |  |       |  
|--------------------------------------------------------------------------------------------- |  | ---- | ------- |  | - |  | ----- | ---- |  | - | ------- | - |  | ---- | ----- | - | - | - | ------- | - |  |  | ----- | -
|                                                                                              |  | 2006 |         |  | % |  |       | 2005 |  |   | %       |   |  | 2004 |       |   | % |  
|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |  
|Revenue from services                                                                         |  | $    | 216,011 |  |   |  | 100.0 | %    |  | $ | 196,965 |   |  |      | 100.0 | % |   | $ | 138,482 |   |  |  | 100.0 | %
|Cost of services                                                                              |  |      | 105,358 |  |   |  | 48.8  |      |  |   | 93,330  |   |  |      | 47.4  |   |   |   | 64,543  |   |  |  | 46.6  |  
|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |  
|Gross profit                                                                                  |  |      | 110,653 |  |   |  | 51.2  |      |  |   | 103,635 |   |  |      | 52.6  |   |   |   | 73,939  |   |  |  | 53.4  |  
|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |  
|Operating expenses:                                                                           |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |   |         |   |  |  |       |  
|Sales and marketing                                                                           |  |      | 20,336  |  |   |  | 9.4   |      |  |   | 20,366  |   |  |      | 10.3  |   |   |   | 11,915  |   |  |  | 8.6   |  
|General and administrative                                                                    |  |      | 68,540  |  |   |  | 31.7  |      |  |   | 65,746  |   |  |      | 33.4  |   |   |   | 43,964  |   |  |  | 31.7  |  
|Depreciation and amortization                                                                 |  |      | 7,235   |  |   |  | 3.3   |      |  |   | 7,362   |   |  |      | 3.7   |   |   |   | 4,796   |   |  |  | 3.5   |  
|Restructuring charges                                                                         |  |      | 250     |  |   |  | 0.1   |      |  |   | 1,132   |   |  |      | 0.6   |   |   |   |        |   |  |  |      |  
|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |  
|Operating income                                                                              |  |      | 14,292  |  |   |  | 6.6   |      |  |   | 9,029   |   |  |      | 4.6   |   |   |   | 13,264  |   |  |  | 9.6   |  
|Interest and other income, net                                                                |  |      | 1,514   |  |   |  | 0.7   |      |  |   | 592     |   |  |      | 0.3   |   |   |   | 530     |   |  |  | 0.4   |  
|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |  
|Income from continuing operations before taxes                                                |  |      | 15,806  |  |   |  | 7.3   |      |  |   | 9,621   |   |  |      | 4.9   |   |   |   | 13,794  |   |  |  | 10.0  |  
|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |  
|Provision (benefit) for income taxes                                                          |  |      | 6,346   |  |   |  | 2.9   |      |  |   | 5,083   |   |  |      | 2.7   |   |   |   | (16,009 | ) |  |  | (11.6 | )
|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |  
|Income from continuing operations                                                             |  |      | 9,460   |  |   |  | 4.4   |      |  |   | 4,538   |   |  |      | 2.2   |   |   |   | 29,803  |   |  |  | 21.6  |  
|Income (loss) from discontinued operations (including loss on
    disposal of $2,684 in 2005) |  |      |        |  |   |  |      |      |  |   | (2,955  | ) |  |      | (1.5  | ) |   |   | 115     |   |  |  | 0.1   |  
|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |  
|Net income                                                                                    |  | $    | 9,460   |  |   |  | 4.4   |      |  | $ | 1,583   |   |  |      | 0.7   |   |   | $ | 29,918  |   |  |  | 21.7  |  
|                                                                                              |  |      |         |  |   |  |       |      |  |   |         |   |  |      |       |   |   |  



34



---



##### Table of Contents





| |                                                             
| | ------------------------------------------------------------
| | Year Ended June 30, 2006 Versus Year Ended
    June 30, 2005

Revenue from services.






| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Healthcare, as a result of our focus on improving the
    productivity of selling efforts in these markets through deep
    account penetration, as well as from the continued maturation of
    existing client relationships,
|
| |  | Technology and Telecom, as a result of a strategic increase in
    our focus in these markets throughout the current fiscal year,                                                                                              
|
| |  | Automotive, as a result of expanding our revenue base with
    several key clients in this market through deep account
    penetration, and                                                                                    
|
| |  | Product Solutions, as a result of greater collaboration between
    this group and our researchers that work with clients across the
    various industries that we serve.                                                     







| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Government, as a result of reconstituting the internal
    organizational structure of the group and redefinition of its
    approach within this market during fiscal 2006,
|
| |  | HISB, as a result of continued pricing pressures, and                                                                                                                       
|
| |  | Consumer Packaged Goods, as a result of turnover within its
    project and dedicated sales resource staffs.                                                                





| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | unfavorable impact of $1.8 million as a result of foreign
    exchange rate differences and the appreciation of the
    U.S. Dollar against the British Pound and the Euro,
|
| |  | challenges of post-Wirthlin acquisition integration, and                                                                                                                   
|
| |  | difficulty recruiting sales personnel.                                                                                                                                     





| |   |                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | U.S Internet-based revenue increased to $112.2 million or
    66.0% of total U.S. revenue for fiscal 2006, compared with
    $97.7 million or 65.2% of total U.S. revenue for
    fiscal 2005.            
|
| |  | European Internet-based revenue increased to $13.2 million
    or 28.7% of total European revenue for fiscal 2006, compared
    with $11.6 million or 24.9% of total European revenue for
    fiscal 2005.



35



---



##### Table of Contents



Gross profit.




Sales and marketing.




| |   |                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our strategic focus on improving the productivity of our selling
    efforts as discussed earlier, offset in part by a slight
    increase in the unbillable project personnel time in support of
    sales and marketing efforts from approximately $7.6 million
    for fiscal 2005 to $8.0 million for fiscal 2006.

General and administrative.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $3.1 million in stock-based compensation expense for fiscal
    2006 as a result of our adoption of SFAS No. 123(R) on
    July 1, 2005, while no such expense was recorded in fiscal
    2005,                                                                                                                                                                                                                                                                                           
|
| |  | $1.0 million increase in employee benefit costs,
    principally as a result of year-over-year rate increases,                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | $1.0 million increase in unbillable project personnel time
    included in general and administrative expense from
    $10.4 million for fiscal 2005 to $11.4 million for
    fiscal 2006,                                                                                                                                                                                                                                                                                                
|
| |  | $0.9 million increase in bonus expense, principally as a
    result of our improved financial performance, which is directly
    linked to our bonus plans,                                                                                                                                                                                                                                                                                                                               
|
| |  | $1.5 million decrease in post-employment obligations to
    former executives from $1.8 million for such obligations to
    Dr. Gordon S. Black, former Executive Chairman, Robert E.
    Knapp, former Chairman and Chief Executive Officer, and Theresa
    A. Flanagan, former Group President, Customer Loyalty
    Management, during fiscal 2005 to $0.3 million for such
    obligations to our former Chief Financial Officer, Frank J.
    Connolly, Jr., during fiscal 2006, and
|
| |  | $0.8 million decrease in salary expense, due to ongoing
    efforts to ensure that headcount levels are appropriately
    aligned with business needs.                                                                                                                                                                                                                                                                                                                                    

Depreciation and amortization.


Restructuring charges.


36



---



##### Table of Contents



Interest and other income, net.




| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in cash, cash equivalents and marketable securities
    from $36.5 million at June 30, 2005 to
    $56.6 million at June 30, 2006, and
|
| |  | improved rates of return compared with those of fiscal 2005.                                                                                      

Income taxes.




| |                                                             
| | ------------------------------------------------------------
| | Year Ended June 30, 2005 Versus Year Ended
    June 30, 2004

Revenue from services.










| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | U.S. Internet-based revenue was $97.7 million or 65.2%
    of total U.S. revenue for fiscal 2005, compared with
    $81.9 million or 73.2% of total U.S. revenue for
    fiscal 2004.                                                                                                                                                                                                                                                                           
|
| |  | European Internet-based revenue increased to $11.6 million
    or 24.9% of total European revenue for fiscal 2005, compared
    with $4.2 million or 15.7% of total European revenue for
    fiscal 2004. This increase was the result of our continued
    efforts to build our European panel, as well as our acquisition
    of Novatris in March 2004. Novatris contributed
    $4.4 million in revenue from Internet-based services during
    fiscal 2005.



Gross profit.


37



---



##### Table of Contents



Sales and marketing.




| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | managements plan to increase sales in part by increasing
    our sales force throughout fiscal 2005, and                                                                      
|
| |  | $4.9 million increase in unbillable project personnel time
    in support of sales and marketing efforts from $2.7 million
    for fiscal 2004 to $7.6 million for fiscal 2005.

General and administrative.




| |   |                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $10.0 million increase in payroll and benefit expenses,
    principally driven by the addition of staff as a result of our
    September 2004 acquisition of Wirthlin,                                                                                                                                                                                
|
| |  | $1.9 million increase in rent expense, principally
    attributable to the relocation of our New York City office
    and the assumption of leases in connection with the Wirthlin
    acquisition for offices located in Reston, Virginia, Cincinnati,
    Ohio, Orem, Utah, Grand Rapids, Michigan, Chicago, Illinois, and
    Salt Lake City, Utah,
|
| |  | $1.8 million in post-employment obligations to
    Dr. Gordon S. Black, former Executive Chairman, Robert E.
    Knapp, former Chairman and Chief Executive Officer, and Theresa
    A. Flanagan, former Group President, Customer Loyalty Management,                                                                                                
|
| |  | $1.6 million increase in professional services fees,
    including fees related to compliance with the Sarbanes-Oxley Act
    of 2002,                                                                                                                                                                                                                
|
| |  | $1.4 million increase in travel expense, due principally to
    domestic and international travel required in connection with
    the integration of the Wirthlin acquisition, and                                                                                                                                                                    
|
| |  | $5.1 million increase in unbillable project personnel time
    included in general and administrative expense from
    $5.3 million for fiscal 2004 to $10.4 million for
    fiscal 2005.                                                                                                                                                             

Depreciation and amortization.


Restructuring charges.


Interest and other income, net.


Income taxes.


38



---



##### Table of Contents



Significant Factors Affecting Company Performance




| |                                        
| | ---------------------------------------
| | Our Revenue Mix and Gross Profitability














| |                                       
| | --------------------------------------
| | Our Ability to Measure Our Performance



39



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##### Table of Contents





|                                                  |  |        |         |   |        |   |         |        |  |   |         |   |  |        |         |   |        |   |         |        |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------------------- |  | ------ | ------- | - | ------ | - | ------- | ------ |  | - | ------- | - |  | ------ | ------- | - | ------ | - | ------- | ------ |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                  |  | Q1     |         |   | Q2     |   |         | Q3     |  |   | Q4      |   |  | Q1     |         |   | Q2     |   |         | Q3     |  |   | Q4      |  
|                                                  |  | FY2005 |         |   | FY2005 |   |         | FY2005 |  |   | FY2005  |   |  | FY2006 |         |   | FY2006 |   |         | FY2006 |  |   | FY2006  |  
|                                                  |  |        |         |   |        |   |         |        |  |   |         |   |  |        |         |   |        |   |         |        |  |   |         |  
|Internet Revenue (% of total revenue)             |  |        | 61      | % |        |   | 49      | %      |  |   | 57      | % |  |        | 56      | % |        |   | 57      | %      |  |   | 59      | % |  |   | 60      | % |  |   | 56      | %
|US Internet Revenue (% of US revenue)             |  |        | 73      | % |        |   | 59      | %      |  |   | 66      | % |  |        | 64      | % |        |   | 67      | %      |  |   | 67      | % |  |   | 66      | % |  |   | 64      | %
|European Internet Revenue (% of European revenue) |  |        | 25      | % |        |   | 20      | %      |  |   | 26      | % |  |        | 29      | % |        |   | 27      | %      |  |   | 28      | % |  |   | 32      | % |  |   | 28      | %
|Cash & Marketable Securities                      |  | $      | 37.9    |   |        | $ | 39.7    |        |  | $ | 34.6    |   |  | $      | 36.5    |   |        | $ | 37.4    |        |  | $ | 48.0    |   |  | $ | 57.9    |   |  | $ | 56.6    |  
|Sales Bookings(1)                                 |  | $      | 32.0    |   |        | $ | 44.3    |        |  | $ | 59.9    |   |  | $      | 47.8    |   |        | $ | 44.9    |        |  | $ | 59.5    |   |  | $ | 66.3    |   |  | $ | 47.9    |  
|Ending Sales Backlog(2)                           |  | $      | 38.7    |   |        | $ | 53.8    |        |  | $ | 62.9    |   |  | $      | 56.5    |   |        | $ | 52.5    |        |  | $ | 57.2    |   |  | $ | 71.2    |   |  | $ | 59.0    |  
|Billable Full Time Equivalents (FTEs)             |  |        | 609     |   |        |   | 763     |        |  |   | 755     |   |  |        | 729     |   |        |   | 749     |        |  |   | 734     |   |  |   | 721     |   |  |   | 727     |  
|Days Sales Outstanding (DSO)                      |  |        | 58 days |   |        |   | 40 days |        |  |   | 46 days |   |  |        | 52 days |   |        |   | 53 days |        |  |   | 44 days |   |  |   | 32 days |   |  |   | 43 days |  
|Utilization(1)                                    |  |        | 64      | % |        |   | 62      | %      |  |   | 60      | % |  |        | 61      | % |        |   | 56      | %      |  |   | 64      | % |  |   | 63      | % |  |   | 64      | %






|    |                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Q1 and Q2 FY2005 exclude Wirthlin                                                                                                                                                                                              
|   
|(2) | Q1 FY2005 excludes WirthlinWorldwide; Q2 includes the addition
    of $9.3 million of Wirthlin sales backlog for the periods
    prior to 12/31/04 which are not reflected in the reported Q1 and
    Q2 FY2005 sales bookings.



Sales Bookings






Ending Sales Backlog




40



---



##### Table of Contents





Billable Full-Time Equivalents (FTEs)






Days of Sales Outstanding (DSO)






Utilization






Liquidity and Capital Resources




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



|                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                    |  | 2006 |         |   | 2005 |   |         | 2004 | 
|                                                    |  |      |         |   |      |   |         |      | 
|Net cash provided by operating activities           |  | $    | 27,885  |   |      | $ | 17,528  |      |  | $ | 17,157  |  
|Net cash (used in) investing activities             |  |      | (24,346 | ) |      |   | (13,982 | )    |  |   | (24,494 | )
|Net cash (used in) provided by financing activities |  |      | (5,372  | ) |      |   | (3,794  | )    |  |   | 4,944   |  

41



---



##### Table of Contents



Net cash provided by operating activities.




| |   |                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increase in income from continuing operations, net of non-cash
    items such as depreciation and amortization, stock-based
    compensation and restructuring charges (net of cash
    payments), and                                                                                 
|
| |  | an improvement in the timeliness of collecting amounts due on
    outstanding invoices, as noted by a $6.2 million increase
    in cash collected on accounts receivable and a $2.1 million
    increase in cash collected on amounts billed in excess of costs
    (deferred revenue).





| |   |                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | decrease in income from continuing operations, net of non-cash
    items such as depreciation and amortization and restructuring
    charges (net of cash payments), and                               
|
| |  | increases in accounts payable and accrued expenses of
    $1.7 million and $2.3 million, respectively, both of
    which were principally the result of our September 2004
    acquisition of Wirthlin.

Net cash (used) in investing activities.




| |   |                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $20.8 million decrease in net cash paid in connection with
    acquisitions. There were no acquisitions in the current year,
    compared with $20.8 million in net cash paid for our
    September 2004 acquisition of Wirthlin,                                   
|
| |  | $21.9 million increase in cash used for the purchase of
    marketable securities from $27.3 million for fiscal 2005 to
    $49.2 million for fiscal 2006,                                                                                                          
|
| |  | $19.1 million decrease in proceeds from maturities and
    sales of marketable securities from $46.6 million for
    fiscal 2005 to $27.5 million for fiscal 2006,                                                                                                  
|
| |  | $7.3 million decrease in cash used for capital expenditures
    from $9.4 million for fiscal 2005 to $2.1 million for
    fiscal 2006, principally impacted by $4.6 million in
    leasehold improvements to our New York City office during the
    prior year, and
|
| |  | $0.5 million used for the acquisition of intangible assets
    during fiscal 2006, down from $4.0 million for fiscal 2005.                                                                                                                                          





| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $18.2 million increase in cash paid in connection with
    acquisitions from $2.6 million for our March 2004
    acquisition of Novatris to $20.8 million for our September
    2004 acquisition of Wirthlin,                                   
|
| |  | $14.9 million decrease in cash used for the purchase of
    marketable securities from $42.2 million for fiscal 2004 to
    $27.3 million for fiscal 2005,                                                                                      
|
| |  | $24.6 million increase in proceeds from maturities and
    sales of marketable securities from $22.0 million for
    fiscal 2004 to $46.6 million for fiscal 2005,
    $14.2 million of which were used to fund our acquisition of
    Wirthlin,

42



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $7.9 million increase in cash used for capital expenditures
    from $1.5 million for fiscal 2004 to $9.4 million for
    fiscal 2005, principally impacted by $4.6 million in
    leasehold improvements to our New York City office, and
|
| |  | $4.0 million used for the acquisition of certain trademarks
    during fiscal 2005, with no similar activity in fiscal 2004.                                                                                                              

Net cash (used in) provided by financing
activities.




| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $6.1 million decrease in cash used to repay outstanding
    notes, as all such notes were paid in full during fiscal 2005,                                                      
|
| |  | $1.2 million decrease in cash provided by the issuance of
    common stock and stock option exercises from $2.3 million
    for fiscal 2005 to $1.1 million for fiscal 2006, and
|
| |  | $6.5 million in cash used to repurchase shares of our
    common stock under the Repurchase Program, which commenced in
    May 2006.                                           





| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $2.6 million decrease in cash provided by the issuance of
    common stock and stock option exercises from $4.9 million
    for fiscal 2004 to $2.3 million for fiscal 2005, and           
|
| |  | Repayment of $6.1 million in outstanding notes acquired in
    connection with the September 2004 acquisition of Wirthlin,
    whereas no such note repayments occurred during fiscal 2004.



| |                
| | ---------------
| | Working Capital







43



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| |                         
| | ------------------------
| | Share Repurchase Program









| |                           
| | --------------------------
| | Line and Letters of Credit








44



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| |                                  
| | ---------------------------------
| | Off-Balance Sheet Risk Disclosure

S-K.


Contractual Cash Obligations (in thousands)




|                                   |  |                        |        |           |        |   |       |       |  |     |       |  |       |         |       |  |  |   |     | 
|---------------------------------- |  | ---------------------- | ------ | --------- | ------ | - | ----- | ----- |  | --- | ----- |  | ----- | ------- | ----- |  |  | - | --- | 
|                                   |  | Payments Due by Period |       
|                                   |  |                        |       
|                                   |  |                        |        | Less than |        |   | 1-3   |       |  | 3-5 |       |  | After |        
|                                   |  | Total                  |        |           | 1 Year |   |       | Years |  |     | Years |  |       | 5 Years |      
|                                   |  |                        |        |           |        |   |       |       |  |     |       |  |       |         |      
|Long-term debt                     |  | $                      |       |           |        | $ |      |       |  | $   |      |  |       | $       |      |  |  | $ |    | 
|Capital lease obligations          |  |                        |       |           |        |   |      |       |  |     |      |  |       |         |      |  |  |   |    | 
|Operating leases                   |  |                        | 20,539 |           |        |   | 5,527 |       |  |     | 9,420 |  |       |         | 5,025 |  |  |   | 567 | 
|Purchase obligations               |  |                        |       |           |        |   |      |       |  |     |      |  |       |         |      |  |  |   |    | 
|Other long-term obligations        |  |                        |       |           |        |   |      |       |  |     |      |  |       |         |      |  |  |   |    | 
|                                   |  |                        |        |           |        |   |       |       |  |     |       |  |       |         |      
|Total contractual cash obligations |  | $                      | 20,539 |           |        | $ | 5,527 |       |  | $   | 9,420 |  |       | $       | 5,025 |  |  | $ | 567 | 
|                                   |  |                        |        |           |        |   |       |       |  |     |       |  |       |         |      

Recent Accounting Pronouncements


10-K





Item 7A. Quantitative and Qualitative
Disclosures About Market Risk


Non-U.S.


45



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46



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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

Index to Consolidated Financial Statements


|                                                                                                                    |  |  |    | 
|------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
|Report of Independent Registered Public
    Accounting Firm                                                         |  |  | 48 | 
|Consolidated Balance Sheets at
    June 30, 2006 and 2005                                                           |  |  | 49 | 
|Consolidated Statements of Operations for
    the years ended June 30, 2006, 2005 and 2004                          |  |  | 50 | 
|Consolidated Statements of Cash Flows for
    the years ended June 30, 2006, 2005 and 2004                          |  |  | 51 | 
|Consolidated Statements of Changes in
    Stockholders Equity for the years ended June 30,
    2006, 2005 and 2004 |  |  | 52 | 
|Notes to Consolidated Financial Statements
    (including unaudited quarterly results of operations)                |  |  | 53 | 
|Index to Financial Statement Schedules                                                                              |  |  | 87 | 
|Schedule II  Valuation and
    Qualifying Accounts                                                                 |  |  | 88 | 



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of Harris
Interactive Inc.:




Consolidated Financial Statements and Financial Statement
Schedule






Internal Control over Financial Reporting


Internal Control  Integrated Framework Internal Control 
Integrated Framework








| |                           
| | --------------------------
| | PricewaterhouseCoopers LLP





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HARRIS INTERACTIVE INC.





CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share amounts)


|                                        |                                                                                                                                                                                                   |                                            |       |         |          |  |       |         |         | 
|--------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----- | ------- | -------- |  | ----- | ------- | ------- | 
|                                        |                                                                                                                                                                                                   | June 30,                                   |       |         | June 30, | 
|                                        |                                                                                                                                                                                                   | 2006                                       |       |         | 2005     | 
|                                        |                                                                                                                                                                                                   |                                            |       |         |          | 
|ASSETS                                 
|Current assets:                         |                                                                                                                                                                                                   |                                            |       |         |          |  |       |        
|                                        | Cash and cash equivalents                                                                                                                                                                         |                                            | $     | 11,465  |          |  | $     | 13,118  |        
|                                        | Marketable securities                                                                                                                                                                             |                                            |       | 45,145  |          |  |       | 23,392  |        
|                                        | Accounts receivable, less allowances of $70 and $205,
    respectively                                                                                                                            |                                            |       | 35,454  |          |  |       | 35,041  |        
|                                        | Unbilled receivables                                                                                                                                                                              |                                            |       | 9,502   |          |  |       | 9,949   |        
|                                        | Prepaid expenses and other current assets                                                                                                                                                         |                                            |       | 5,436   |          |  |       | 4,610   |        
|                                        | Deferred tax assets                                                                                                                                                                               |                                            |       | 3,534   |          |  |       | 4,339   |        
|                                        | Assets held for sale                                                                                                                                                                              |                                            |       | 761     |          |  |       | 740     |        
|                                        |                                                                                                                                                                                                   |                                            |       |         |          | 
|                                        |                                                                                                                                                                                                   | Total current assets                       |       |         | 111,297  |  |       |         | 91,189  | 
|                                        | Property, plant and equipment, net                                                                                                                                                                |                                            |       | 9,759   |          |  |       | 11,788  |        
|                                        | Goodwill                                                                                                                                                                                          |                                            |       | 103,454 |          |  |       | 101,287 |        
|                                        | Other intangibles, net                                                                                                                                                                            |                                            |       | 11,648  |          |  |       | 12,865  |        
|                                        | Deferred tax assets                                                                                                                                                                               |                                            |       | 16,827  |          |  |       | 21,644  |        
|                                        | Other assets                                                                                                                                                                                      |                                            |       | 1,572   |          |  |       | 1,385   |        
|                                        |                                                                                                                                                                                                   |                                            |       |         |          | 
|                                        |                                                                                                                                                                                                   | Total assets                               |       | $       | 254,557  |  |       | $       | 240,158 | 
|                                        |                                                                                                                                                                                                   |                                            |       |         |          | 
|                                       
|LIABILITIES AND STOCKHOLDERS EQUITY   
|Current liabilities:                    |                                                                                                                                                                                                   |                                            |       |         |          |  |       |        
|                                        | Accounts payable                                                                                                                                                                                  |                                            |       | 11,495  |          |  |       | 9,611   |        
|                                        | Accrued expenses                                                                                                                                                                                  |                                            |       | 21,573  |          |  |       | 21,519  |        
|                                        | Deferred revenue                                                                                                                                                                                  |                                            |       | 16,720  |          |  |       | 13,785  |        
|                                        |                                                                                                                                                                                                   |                                            |       |         |          | 
|                                        |                                                                                                                                                                                                   | Total current liabilities                  |       |         | 49,788   |  |       |         | 44,915  | 
|Deferred tax liabilities                |                                                                                                                                                                                                   |                                            | 563   |         |          |  | 967   |        
|Other long-term liabilities             |                                                                                                                                                                                                   |                                            | 2,928 |         |          |  | 1,783 |        
|Commitments and Contingencies (Note 19) |                                                                                                                                                                                                   |                                            |       |         |          |  |       |        
|Stockholders equity:                   |                                                                                                                                                                                                   |                                            |       |         |          |  |       |        
|                                        | Preferred stock, $.001 par value, 5,000,000 shares
    authorized; 0 shares issued and outstanding at
    June 30, 2006 and 2005                                                                  |                                            |       |        |          |  |       |        |        
|                                        | Common stock, $.001 par value, 100,000,000 shares
    authorized; 60,832,558 shares issued and outstanding at
    June 30, 2006 and 61,374,981 shares issued and
    outstanding at June 30, 2005 |                                            |       | 61      |          |  |       | 61      |        
|                                        | Additional paid-in capital                                                                                                                                                                        |                                            |       | 219,954 |          |  |       | 221,032 |        
|                                        | Accumulated other comprehensive income                                                                                                                                                            |                                            |       | 597     |          |  |       | 194     |        
|                                        | Accumulated deficit                                                                                                                                                                               |                                            |       | (19,334 | )        |  |       | (28,794 | )      
|                                        |                                                                                                                                                                                                   |                                            |       |         |          | 
|                                        |                                                                                                                                                                                                   | Total stockholders equity                 |       |         | 201,278  |  |       |         | 192,493 | 
|                                        |                                                                                                                                                                                                   |                                            |       |         |          | 
|                                        |                                                                                                                                                                                                   | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |       | $       | 254,557  |  |       | $       | 240,158 | 
|                                        |                                                                                                                                                                                                   |                                            |       |         |          | 



49



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HARRIS INTERACTIVE INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands, except share and per share amounts)


|                                              |                                                                                               |                              |            |         |        |   |            |         |       |   |            |        |        | 
|--------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------- | ---------- | ------- | ------ | - | ---------- | ------- | ----- | - | ---------- | ------ | ------ | 
|                                              |                                                                                               | For the Years Ended June 30, |           
|                                              |                                                                                               |                              |           
|                                              |                                                                                               | 2006                         |            |         | 2005   |   |            | 2004    |      
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|Revenue from services                         |                                                                                               | $                            | 216,011    |         |        | $ | 196,965    |         |       | $ | 138,482    |       
|Cost of services                              |                                                                                               |                              | 105,358    |         |        |   | 93,330     |         |       |   | 64,543     |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|                                              | Gross profit                                                                                  |                              |            | 110,653 |        |   |            | 103,635 |       |   |            | 73,939 |       
|Operating expenses:                           |                                                                                               |                              |            |         |        |   |            |         |       |   |            |       
|                                              | Sales and marketing                                                                           |                              |            | 20,336  |        |   |            | 20,366  |       |   |            | 11,915 |       
|                                              | General and administrative                                                                    |                              |            | 68,540  |        |   |            | 65,746  |       |   |            | 43,964 |       
|                                              | Depreciation and amortization                                                                 |                              |            | 7,235   |        |   |            | 7,362   |       |   |            | 4,796  |       
|                                              | Restructuring charges                                                                         |                              |            | 250     |        |   |            | 1,132   |       |   |            |       |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|                                              | Total operating expenses                                                                      |                              |            | 96,361  |        |   |            | 94,606  |       |   |            | 60,675 |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|                                              |                                                                                               | Operating income             |            |         | 14,292 |   |            |         | 9,029 |   |            |        | 13,264 | 
|Interest and other income                     |                                                                                               |                              | 1,534      |         |        |   | 742        |         |       |   | 637        |       
|Interest expense                              |                                                                                               |                              | (20        | )       |        |   | (150       | )       |       |   | (107       | )     
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|                                              | Income from continuing operations before income taxes                                         |                              |            | 15,806  |        |   |            | 9,621   |       |   |            | 13,794 |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|Provision (benefit) for income taxes          |                                                                                               |                              | 6,346      |         |        |   | 5,083      |         |       |   | (16,009    | )     
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|                                              | Income from continuing operations                                                             |                              |            | 9,460   |        |   |            | 4,538   |       |   |            | 29,803 |       
|                                              | Income (loss) from discontinued operations (including loss on
    disposal of $2,684 in 2005) |                              |            |        |        |   |            | (2,955  | )     |   |            | 115    |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|                                              | Net income                                                                                    |                              | $          | 9,460   |        |   | $          | 1,583   |       |   | $          | 29,918 |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|Basic net income (loss) per share(*):         |                                                                                               |                              |            |         |        |   |            |         |       |   |            |       
|                                              | Continuing operations                                                                         |                              | $          | 0.15    |        |   | $          | 0.08    |       |   | $          | 0.53   |       
|                                              | Discontinued operations                                                                       |                              |            |        |        |   |            | (0.05   | )     |   |            | 0.00   |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|                                              |                                                                                               | Basic net income per share   |            | $       | 0.15   |   |            | $       | 0.03  |   |            | $      | 0.53   | 
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|Diluted net income (loss) per share(*):       |                                                                                               |                              |            |         |        |   |            |         |       |   |            |       
|                                              | Continuing operations                                                                         |                              | $          | 0.15    |        |   | $          | 0.07    |       |   | $          | 0.52   |       
|                                              | Discontinued operations                                                                       |                              |            |        |        |   |            | (0.05   | )     |   |            | 0.00   |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|                                              |                                                                                               | Diluted net income per share |            | $       | 0.15   |   |            | $       | 0.03  |   |            | $      | 0.52   | 
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|Weighted average shares outstanding  basic   |                                                                                               |                              | 61,511,031 |         |        |   | 60,264,152 |         |       |   | 56,099,330 |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      
|Weighted average shares outstanding  diluted |                                                                                               |                              | 61,685,777 |         |        |   | 61,238,064 |         |       |   | 57,444,785 |       
|                                              |                                                                                               |                              |            |         |        |   |            |         |      








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HARRIS INTERACTIVE INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)


|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |         |         |        |        |         |         |  
|--------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ----- | ------- | ------- | ------ | ----- | ------- | ------- | ------ | ------ | ------- | ------- | -
|                                                                                  |                                                                                    | For the Years Ended June 30,                                                                                   |                                                                 
|                                                                                  |                                                                                    |                                                                                                                |                                                                 
|                                                                                  |                                                                                    | 2006                                                                                                           |                                                                  |       | 2005    |         |        | 2004  |        
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        
|Cash flows from operating activities:                                             |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |         |         |        |       
|                                                                                  | Net income                                                                         |                                                                                                                | $                                                                | 9,460 |         |         | $      | 1,583 |         |         | $      | 29,918 |        
|                                                                                  | Adjustments to reconcile net income to net cash used in
    operating activities  |                                                                                                                |                                                                  |       |         |         |        |       |         |         |        |        |        
|                                                                                  |                                                                                    | Depreciation and amortization                                                                                  |                                                                  |       | 7,235   |         |        |       | 7,362   |         |        |        | 4,796   |        
|                                                                                  |                                                                                    | Deferred taxes                                                                                                 |                                                                  |       | 5,218   |         |        |       | 3,759   |         |        |        | (24,994 | )      
|                                                                                  |                                                                                    | Stock-based compensation                                                                                       |                                                                  |       | 3,141   |         |        |       |        |         |        |        |        |        
|                                                                                  |                                                                                    | Impairment of goodwill attributable to discontinued operations                                                 |                                                                  |       |        |         |        |       | 2,954   |         |        |        |        |        
|                                                                                  |                                                                                    | Restructuring (credits) charges and asset write-offs                                                           |                                                                  |       | 250     |         |        |       | 1,132   |         |        |        | (150    | )      
|                                                                                  |                                                                                    | Less: Cash outflows related to restructuring charges                                                           |                                                                  |       | (590    | )       |        |       | (643    | )       |        |        |        |        
|                                                                                  |                                                                                    | Fair value of shares received as consideration in sale of
    discontinued operations and subsequently retired |                                                                  |       |        |         |        |       | (1,108  | )       |        |        |        |        
|                                                                                  |                                                                                    | 401(k) matching contribution                                                                                   |                                                                  |       | 1,166   |         |        |       | 1,032   |         |        |        | 728     |        
|                                                                                  |                                                                                    | Income tax benefit from exercise of stock options                                                              |                                                                  |       |        |         |        |       | 859     |         |        |        | 8,026   |        
|                                                                                  |                                                                                    | Amortization of premium and (discount) on marketable
    securities                                            |                                                                  |       | (40     | )       |        |       | 22      |         |        |        | 373     |        
|                                                                                  |                                                                                    | Amortization of deferred compensation                                                                          |                                                                  |       |        |         |        |       |        |         |        |        | 56      |        
|                                                                                  |                                                                                    | (Increase) decrease in assets, net of acquisition                                                             |                                                                  |       |         |         |        |       |         |         |        |        |         |        
|                                                                                  |                                                                                    |                                                                                                                | Accounts receivable                                              |       |         | (80     | )      |       |         | (6,239  | )      |        |         | (1,284  | )
|                                                                                  |                                                                                    |                                                                                                                | Unbilled receivables                                             |       |         | 551     |        |       |         | (1,258  | )      |        |         | (1,838  | )
|                                                                                  |                                                                                    |                                                                                                                | Other current assets                                             |       |         | (2,032  | )      |       |         | (472    | )      |        |         | (1,452  | )
|                                                                                  |                                                                                    |                                                                                                                | Other assets                                                     |       |         | (183    | )      |       |         | 1,566   |        |        |         | 460     |  
|                                                                                  |                                                                                    | (Decrease) increase in liabilities, net of
    acquisition                                                    |                                                                  |       |         |         |        |       |         |         |        |        |         |        
|                                                                                  |                                                                                    |                                                                                                                | Accounts payable                                                 |       |         | 1,812   |        |       |         | 1,689   |        |        |         | 170     |  
|                                                                                  |                                                                                    |                                                                                                                | Accrued expenses                                                 |       |         | (352    | )      |       |         | 2,298   |        |        |         | 2,320   |  
|                                                                                  |                                                                                    |                                                                                                                | Deferred revenue                                                 |       |         | 2,824   |        |       |         | 760     |        |        |         | (60     | )
|                                                                                  |                                                                                    |                                                                                                                | Other liabilities                                                |       |         | (495    | )      |       |         | 1,072   |        |        |         | 135     |  
|                                                                                  |                                                                                    |                                                                                                                | Cash provided by operating activities of discontinued operations |       |         |        |        |       |         | 1,160   |        |        |         | (47     | )
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        
|                                                                                  |                                                                                    |                                                                                                                | Net cash provided by operating activities                        |       |         | 27,885  |        |       |         | 17,528  |        |        |         | 17,157  |  
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        
|Cash flows from investing activities:                                             |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |         |         |        |       
|                                                                                  |                                                                                    | Cash paid in connection with acquisitions, net of cash acquired                                                |                                                                  |       |        |         |        |       | (20,767 | )       |        |        | (2,623  | )      
|                                                                                  |                                                                                    | Cash proceeds from sale of discontinued operations                                                             |                                                                  |       |        |         |        |       | 768     |         |        |        |        |        
|                                                                                  |                                                                                    | Purchase of marketable securities                                                                              |                                                                  |       | (49,223 | )       |        |       | (27,323 | )       |        |        | (42,229 | )      
|                                                                                  |                                                                                    | Proceeds from maturities and sales of marketable securities                                                    |                                                                  |       | 27,547  |         |        |       | 46,580  |         |        |        | 21,995  |        
|                                                                                  |                                                                                    | Capital expenditures                                                                                           |                                                                  |       | (2,145  | )       |        |       | (9,426  | )       |        |        | (1,545  | )      
|                                                                                  |                                                                                    | Acquisition of intangible assets                                                                               |                                                                  |       | (525    | )       |        |       | (4,000  | )       |        |        |        |        
|                                                                                  |                                                                                    | Cash provided by (used in) investing activities of discontinued
    operations                                 |                                                                  |       |        |         |        |       | 186     |         |        |        | (92     | )      
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        
|                                                                                  |                                                                                    |                                                                                                                | Net cash (used in) investing activities                          |       |         | (24,346 | )      |       |         | (13,982 | )      |        |         | (24,494 | )
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        
|Cash flows from financing activities:                                             |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |         |         |        |       
|                                                                                  |                                                                                    | Repayments of outstanding notes                                                                                |                                                                  |       |        |         |        |       | (6,076  | )       |        |        |        |        
|                                                                                  |                                                                                    | Repurchase of common stock                                                                                     |                                                                  |       | (6,459  | )       |        |       |        |         |        |        |        |        
|                                                                                  |                                                                                    | Issuance of common stock and stock options                                                                     |                                                                  |       | 1,087   |         |        |       | 2,282   |         |        |        | 4,944   |        
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        
|                                                                                  |                                                                                    |                                                                                                                | Net cash (used in) provided by financing activities              |       |         | (5,372  | )      |       |         | (3,794  | )      |        |         | 4,944   |  
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        
|Effect of exchange rate changes on cash and cash equivalents                      |                                                                                    |                                                                                                                | 180                                                              |       |         |         | 175    |       |         |         | 233    |       
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        
|Net (decrease) in cash and cash equivalents                                       |                                                                                    |                                                                                                                | (1,653                                                           | )     |         |         | (73    | )     |         |         | (2,160 | )     
|Decrease (increase) in cash and cash equivalents from
    discontinued operations |                                                                                    |                                                                                                                |                                                                 |       |         |         | 680    |       |         |         | (1,057 | )     
|Cash and cash equivalents at beginning of period                                  |                                                                                    |                                                                                                                | 13,118                                                           |       |         |         | 12,511 |       |         |         | 15,728 |       
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        
|Cash and cash equivalents at end of period                                        |                                                                                    | $                                                                                                              | 11,465                                                           |       |         | $       | 13,118 |       |         | $       | 12,511 |       
|                                                                                  |                                                                                    |                                                                                                                |                                                                  |       |         |         |        |       |        



51



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HARRIS INTERACTIVE INC.





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY


(In thousands)


|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  |         |        |  
|------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------ | ------ | - | ---------- |  | -- | ----------- | ----------- |  | ------------- | -------- |  | ------------- | --- | - | ------------- |  | ---- | ------ | - |  | ------- | ------ |  |  | ------- | ------ | -
|                                                                                            |                                            | Common Stock |        |   |            |  |    |             | Accumulated |  |               | Retained |  |               |    
|                                                                                            |                                            | Outstanding  |        |   | Additional |  |    | Unamortized |             |  | Other         |          |  | Earnings      |     |   | Total         | 
|                                                                                            |                                            |              |        |   | Paid-in    |  |    | Deferred    |             |  | Comprehensive |          |  | (Accumulated  |     |   | Stockholders | 
|                                                                                            |                                            | Shares       |        |   | Amount     |  |    | Capital     |             |  | Compensation  |          |  | Income (Loss) |     |   | Deficit)      |  |      | Equity |  
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Balance at June 30, 2003                                                                    |                                            |              | 54,501 |   |            |  | 55 |             |             |  | 179,108       |          |  |               | (56 | ) |               |  | (323 | )      |   |  | (60,295 | )      |  |  | 118,489 |       
|Comprehensive income:                                                                       |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  |         |       
|                                                                                            | Net income                                 |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         | 29,918 |  |  |         | 29,918 |  
|                                                                                            | Unrealized (loss) on marketable securities |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      | (188   | ) |  |         |        |  |  |         | (188   | )
|                                                                                            | Foreign currency translation               |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      | 503    |   |  |         |        |  |  |         | 503    |  
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Total comprehensive income                                                                  |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 30,233  |       
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Exercise of options                                                                         |                                            |              | 2,034  |   |            |  | 2  |             |             |  | 4,536         |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 4,538   |       
|Issuance of common stock under Employee Stock Purchase Plan                                 |                                            |              | 67     |   |            |  |    |             |             |  | 373           |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 373     |       
|Income tax benefit on exercise of stock options                                             |                                            |              |        |   |            |  |    |             |             |  | 8,026         |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 8,026   |       
|Amortization of deferred compensation                                                       |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               | 56  |   |               |  |      |        |   |  |         |        |  |  | 56      |       
|Issuance of common stock under 401(k) Plan                                                  |                                            |              | 96     |   |            |  |    |             |             |  | 728           |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 728     |       
|Issuance of common stock for acquisitions                                                   |                                            |              | 315    |   |            |  |    |             |             |  | 3,046         |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 3,046   |       
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Balance at June 30, 2004                                                                    |                                            |              | 57,013 |   |            |  | 57 |             |             |  | 195,817       |          |  |               |    |   |               |  | (8   | )      |   |  | (30,377 | )      |  |  | 165,489 |       
|Comprehensive income:                                                                       |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  |         |       
|                                                                                            | Net income                                 |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         | 1,583  |  |  |         | 1,583  |  
|                                                                                            | Unrealized gain on marketable securities   |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      | 76     |   |  |         |        |  |  |         | 76     |  
|                                                                                            | Foreign currency translation               |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      | 126    |   |  |         |        |  |  |         | 126    |  
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Total comprehensive income                                                                  |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 1,785   |       
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Exercise of options                                                                         |                                            |              | 776    |   |            |  |    |             |             |  | 1,792         |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 1,792   |       
|Issuance of common stock under Employee Stock Purchase Plan                                 |                                            |              | 109    |   |            |  |    |             |             |  | 515           |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 515     |       
|Issuance of common stock under 401(k) Plan                                                  |                                            |              | 196    |   |            |  |    |             |             |  | 1,032         |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 1,032   |       
|Income tax benefit on exercise of stock options                                             |                                            |              |        |   |            |  |    |             |             |  | 859           |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 859     |       
|Issuance of common stock for acquisitions                                                   |                                            |              | 3,525  |   |            |  | 4  |             |             |  | 22,125        |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 22,129  |       
|Retirement of common stock surrendered in connection with sale
    of Japanese subsidiaries |                                            |              | (244   | ) |            |  |    |             |             |  | (1,108        | )        |  |               |     |   |               |  |      |        |   |  |         |        |  |  | (1,108  | )     
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Balance at June 30, 2005                                                                    |                                            |              | 61,375 |   |            |  | 61 |             |             |  | 221,032       |          |  |               |    |   |               |  | 194  |        |   |  | (28,794 | )      |  |  | 192,493 |       
|Comprehensive income:                                                                       |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  |         |       
|                                                                                            | Net income                                 |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         | 9,460  |  |  |         | 9,460  |  
|                                                                                            | Unrealized gain on marketable securities   |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      | 47     |   |  |         |        |  |  |         | 47     |  
|                                                                                            | Foreign currency translation               |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      | 356    |   |  |         |        |  |  |         | 356    |  
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Total comprehensive income                                                                  |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 9,863   |       
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Issuance of restricted stock and exercise of options                                        |                                            |              | 356    |   |            |  |    |             |             |  | 542           |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 542     |       
|Issuance of common stock under Employee Stock Purchase Plan                                 |                                            |              | 142    |   |            |  |    |             |             |  | 532           |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 532     |       
|Issuance of common stock under 401(k) Plan                                                  |                                            |              | 235    |   |            |  |    |             |             |  | 1,166         |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 1,166   |       
|Stock-based compensation expense                                                            |                                            |              |        |   |            |  |    |             |             |  | 3,141         |          |  |               |     |   |               |  |      |        |   |  |         |        |  |  | 3,141   |       
|Retirement of common stock repurchased through Share Repurchase
    Program                 |                                            |              | (1,275 | ) |            |  |    |             |             |  | (6,459        | )        |  |               |     |   |               |  |      |        |   |  |         |        |  |  | (6,459  | )     
|                                                                                            |                                            |              |        |   |            |  |    |             |             |  |               |          |  |               |     |   |               |  |      |        |  
|Balance at June 30, 2006                                                                    |                                            |              | 60,833 |   |            |  | 61 |             |             |  | 219,954       |          |  |               |    |   |               |  | 597  |        |   |  | (19,334 | )      |  |  | 201,278 |       



52



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HARRIS INTERACTIVE INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Years Ended June 30, 2006, 2005 and 2004


(In thousands, except share and per share amounts)




|   |                        
|-- | -----------------------
|1. | Description of Business

The Harris Poll




|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                            
| | ---------------------------
| | Principles of Consolidation





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





| |                  
| | -----------------
| | Reclassifications





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





| |                      
| | ---------------------
| | Marketable Securities

Accounting for Certain Investments in Debt and
Equity


53



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                                             
|-- | ------------------------------------------------------------
|2. | Summary of Significant Accounting
    Policies  (Continued)

Securities.




| |                                                            
| | -----------------------------------------------------------
| | Accounts Receivable and Allowance for Doubtful
    Accounts





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





| |                              
| | -----------------------------
| | Property, Plant and Equipment



Accounting for Leases




| |         
| | --------
| | Goodwill

Business
Combinations.


Goodwill and Other Intangible
Assets,


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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                                             
|-- | ------------------------------------------------------------
|2. | Summary of Significant Accounting
    Policies  (Continued)







| |                                       
| | --------------------------------------
| | Intangible and Other Long-Lived Assets



|                             |  |  |               | 
|---------------------------- |  |  | ------------- | 
|Contract-based intangibles   |  |  | 2 to 4 years  | 
|Internet respondent database |  |  | 9 years       | 
|Client relationships         |  |  | 3 to 10 years | 
|Trade names                  |  |  | 2 to 20 years | 



| |                                                             
| | ------------------------------------------------------------
| | Computer Software Developed or Obtained for Internal
    Use

Accounting for Costs of Computer
Software Developed or Obtained for Internal Use




| |                  
| | -----------------
| | Long-Lived Assets

Accounting for the
Impairment or Disposal of Long-Lived Assets


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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                                             
|-- | ------------------------------------------------------------
|2. | Summary of Significant Accounting
    Policies  (Continued)





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments

Disclosures about
Fair Value of Financial Instruments




| |                         
| | ------------------------
| | Post-employment Payments

Employers Accounting for Postemployment Benefits, an
Amendment of FASB Statements No. 5 and 43.




| |                    
| | -------------------
| | Revenue Recognition

cost-to




Reporting Revenue Gross as a Principal
versus Net as an Agent out-of Income Statement
Characterization of Reimbursements Received for
Out-of-Pocket
Expenses Incurred.


56



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                                             
|-- | ------------------------------------------------------------
|2. | Summary of Significant Accounting
    Policies  (Continued)

00-21, Revenue Arrangements with Multiple Deliverables. 00-21 00-21 00-21




| |                 
| | ----------------
| | Cost of Services





| |                    
| | -------------------
| | Panelist Incentives







| |                     
| | --------------------
| | Advertising Expenses





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

Share-Based Payment. Accounting for Stock-Based
Compensation Accounting for Stock
Issued to Employees.


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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                                             
|-- | ------------------------------------------------------------
|2. | Summary of Significant Accounting
    Policies  (Continued)



catch-up






| |             
| | ------------
| | Income Taxes

Accounting for Income Taxes




| |                     
| | --------------------
| | Net Income Per Share

Earnings Per
Share




| |                             
| | ----------------------------
| | Foreign Currency Translation

Foreign Currency
Translation


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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                                             
|-- | ------------------------------------------------------------
|2. | Summary of Significant Accounting
    Policies  (Continued)



| |                     
| | --------------------
| | Comprehensive Income

Reporting Comprehensive Income.




| |                  
| | -----------------
| | Segment Reporting

Disclosures about Segments of an
Enterprise and Related Information.


Recent Accounting Pronouncements




| |                     
| | --------------------
| | FSP No. FAS 123(R)-1

Classification
and Measurement of Freestanding Financial Instruments Originally
Issued In Exchange for Employee Services Under FASB Statement
No. 123(R).




| |                     
| | --------------------
| | FSP No. FAS 123(R)-2

Practical Accommodation to the
Application of Grant Date as Defined in FASB Statement
No. 123(R).


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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                                             
|-- | ------------------------------------------------------------
|2. | Summary of Significant Accounting
    Policies  (Continued)





| |                     
| | --------------------
| | FSP No. FAS 123(R)-3





| |             
| | ------------
| | SFAS No. 155

Accounting for Certain Hybrid Financial Instruments Accounting for
Derivative Instruments and Hedging Activities Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities




| |                     
| | --------------------
| | FSP No. FAS 123(R)-4

Classification of Options and
Similar Instruments Issued as Employee Compensation That Allow
for Cash Settlement Upon the Occurrence of a Contingent
Event.


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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                                             
|-- | ------------------------------------------------------------
|2. | Summary of Significant Accounting
    Policies  (Continued)





| |             
| | ------------
| | SFAS No. 156

Accounting for Servicing of Financial Assets  an
amendment of FASB Statement No. 140.




| |       
| | ------
| | FIN 48

Accounting for Uncertainty in Income




|   |                      
|-- | ---------------------
|3. | Business Combinations



| |                   
| | ------------------
| | Wirthlin Worldwide





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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                    
|-- | -----------------------------------
|3. | Business Combinations  (Continued)









|                                                |                       |                           |         |        |         |  
|----------------------------------------------- | --------------------- | ------------------------- | ------- | ------ | ------- | -
|Current assets                                  |                       | $                         | 11,827  |       
|Property, plant and equipment, net              |                       |                           | 1,687   |       
|Goodwill, including $3,926 of acquired goodwill |                       |                           | 39,782  |       
|Intangible assets                               |                       |                           | 7,780   |       
|Other long-term assets                          |                       |                           | 2,280   |       
|                                                |                       |                           |        
|                                                | Total assets acquired |                           |         | 63,356 |        
|                                                |                       |                           |        
|Current liabilities                             |                       |                           | (10,363 | )     
|Deferred tax liability                          |                       |                           | (2,742  | )     
|Notes payable, current                          |                       |                           | (2,828  | )     
|Notes payable, long-term                        |                       |                           | (3,248  | )     
|                                                |                       |                           |        
|                                                |                       | Total liabilities assumed |         |        | (19,181 | )
|                                                |                       |                           |        
|                                                | Net assets acquired   |                           | $       | 44,175 |        
|                                                |                       |                           |        

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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                    
|-- | -----------------------------------
|3. | Business Combinations  (Continued)





|                             |  |                              |         |             |      |   |             |      |  |   |         | 
|---------------------------- |  | ---------------------------- | ------- | ----------- | ---- | - | ----------- | ---- |  | - | ------- | 
|                             |  | Twelve Months Ended June 30, |        
|                             |  |                              |        
|                             |  |                              |         | (Pro-forma) |      |   | (Pro-forma) |     
|                             |  |                              |         | (Unaudited) |      |   | (Unaudited) |     
|                             |  | 2006                         |         |             | 2005 |   |             | 2004 | 
|                             |  |                              |         |             |      |   |             |      | 
|Revenue from services        |  | $                            | 216,011 |             |      | $ | 210,702     |      |  | $ | 193,498 | 
|Net income                   |  |                              | 9,460   |             |      |   | 1,887       |      |  |   | 33,867  | 
|Basic net income per share   |  | $                            | 0.15    |             |      | $ | 0.03        |      |  | $ | 0.60    | 
|Diluted net income per share |  | $                            | 0.15    |             |      | $ | 0.03        |      |  | $ | 0.59    | 



| |         
| | --------
| | Novatris







63



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                    
|-- | -----------------------------------
|3. | Business Combinations  (Continued)





|                                   |                       |                           |        |        |        |  
|---------------------------------- | --------------------- | ------------------------- | ------ | ------ | ------ | -
|Current assets                     |                       | $                         | 1,651  |       
|Property, plant and equipment, net |                       |                           | 138    |       
|Goodwill                           |                       |                           | 5,682  |       
|Intangible assets                  |                       |                           | 2,440  |       
|Other long-term assets             |                       |                           | 511    |       
|                                   |                       |                           |       
|                                   | Total assets acquired |                           |        | 10,422 |       
|                                   |                       |                           |       
|Current liabilities                |                       |                           | (2,348 | )     
|Non-current liabilities            |                       |                           | (1,417 | )     
|Deferred tax liability             |                       |                           | (830   | )     
|                                   |                       |                           |       
|                                   |                       | Total liabilities assumed |        |        | (4,595 | )
|                                   |                       |                           |       
|                                   | Net assets acquired   |                           | $      | 5,827  |       
|                                   |                       |                           |       

 





 


64



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                    
|-- | -----------------------------------
|3. | Business Combinations  (Continued)







|   |                      
|-- | ---------------------
|4. | Restructuring Charges



| |            
| | -----------
| | Fiscal 2006







|                                                    |                                  |           |     |       |             |   |    |       |  |   |     |      |  
|--------------------------------------------------- | -------------------------------- | --------- | --- | ----- | ----------- | - | -- | ----- |  | - | --- | ---- | -
|                                                    |                                  |           |     | Lease |             |   |   
|                                                    |                                  | Severance |     |       | Commitments |   |    | Total | 
|                                                    |                                  |           |     |       |             |   |    |       | 
|Net charge during the fourth quarter of fiscal 2006 |                                  | $         | 191 |       |             | $ | 59 |       |  | $ | 250 |     
|                                                    | Cash payments during fiscal 2006 |           |     | (101  | )           |   |    |      |  |   |     | (101 | )
|                                                    |                                  |           |     |       |             |   |    |       | 
|Remaining reserve at June 30, 2006                  |                                  | $         | 90  |       |             | $ | 59 |       |  | $ | 149 |     
|                                                    |                                  |           |     |       |             |   |    |       | 



65



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                    
|-- | -----------------------------------
|4. | Restructuring Charges  (Continued)



| |            
| | -----------
| | Fiscal 2005





|                                   |                                  |           |     |       |             |   |     |       |   |   |       |      |  
|---------------------------------- | -------------------------------- | --------- | --- | ----- | ----------- | - | --- | ----- | - | - | ----- | ---- | -
|                                   |                                  |           |     | Lease |             |   |    
|                                   |                                  | Severance |     |       | Commitments |   |     | Total |  
|                                   |                                  |           |     |       |             |   |     |       |  
|Net charge during fiscal 2005      |                                  | $         | 841 |       |             | $ | 214 |       |   | $ | 1,055 |     
|                                   | Cash payments during fiscal 2005 |           |     | (608  | )           |   |     | (35   | ) |   |       | (643 | )
|                                   | Fiscal 2005 adjustments          |           |     | 77    |             |   |     |      |   |   |       | 77   |  
|                                   |                                  |           |     |       |             |   |     |       |  
|Remaining reserve at June 30, 2005 |                                  | $         | 310 |       |             | $ | 179 |       |   | $ | 489   |     
|                                   |                                  |           |     |       |             |   |     |       |  
|                                   | Cash payments during fiscal 2006 |           |     | (310  | )           |   |     | (179  | ) |   |       | (489 | )
|                                   |                                  |           |     |       |             |   |     |       |  
|Remaining reserve at June 30, 2006 |                                  | $         |    |       |             | $ |    |       |   | $ |      |     
|                                   |                                  |           |     |       |             |   |     |       |  







|   |                        
|-- | -----------------------
|5. | Discontinued Operations



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HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                      
|-- | -------------------------------------
|5. | Discontinued Operations  (Continued)









|                                                                                              |  |      |       |   |      |   |       | 
|--------------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | 
|                                                                                              |  | 2005 |       |   | 2004 |  
|                                                                                              |  |      |       |   |      |  
|Revenues                                                                                      |  | $    | 4,938 |   |      | $ | 7,550 | 
|Income (loss) from discontinued operations (excluding loss on
    disposal of $2,684 in 2005) |  |      | (271  | ) |      |   | 115   | 



|   |                      
|-- | ---------------------
|6. | Marketable Securities



|                                    |                         |      |        |        |            |   |        |        |  |   |            |       |  |   |        |       | 
|----------------------------------- | ----------------------- | ---- | ------ | ------ | ---------- | - | ------ | ------ |  | - | ---------- | ----- |  | - | ------ | ----- | 
|                                    |                         | 2006 |        |        | 2005       |  
|                                    |                         |      |        |        |            |  
|                                    |                         | Cost |        |        | Fair Value |   |        | Cost   |  |   | Fair Value |      
|                                    |                         |      |        |        |            |   |        |        |  |   |            |      
|Type of issue:                      |                         |      |        |        |            |   |        |        |  |   |            |       |  |   |        |      
|                                    | Auction rate securities |      | $      | 28,800 |            |   | $      | 28,800 |  |   | $          | 7,050 |  |   | $      | 7,050 | 
|                                    | Corporate bonds         |      |        | 11,269 |            |   |        | 11,219 |  |   |            | 6,462 |  |   |        | 6,426 | 
|                                    | Government securities   |      |        | 5,156  |            |   |        | 5,126  |  |   |            | 9,996 |  |   |        | 9,916 | 
|                                    |                         |      |        |        |            |   |        |        |  |   |            |      
|Total available-for-sale securities |                         | $    | 45,225 |        |            | $ | 45,145 |        |  | $ | 23,508     |       |  | $ | 23,392 |      
|                                    |                         |      |        |        |            |   |        |        |  |   |            |      



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HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                    
|-- | -----------------------------------
|6. | Marketable Securities  (Continued)



|                                    |                                        |      |        |        |            |   |        |        |  |   |            |        |  |   |        |        | 
|----------------------------------- | -------------------------------------- | ---- | ------ | ------ | ---------- | - | ------ | ------ |  | - | ---------- | ------ |  | - | ------ | ------ | 
|                                    |                                        | 2006 |        |        | 2005       |  
|                                    |                                        |      |        |        |            |  
|                                    |                                        | Cost |        |        | Fair Value |   |        | Cost   |  |   | Fair Value |       
|                                    |                                        |      |        |        |            |   |        |        |  |   |            |       
|Maturity date:                      |                                        |      |        |        |            |   |        |        |  |   |            |        |  |   |        |       
|                                    | Due in one year or less                |      | $      | 42,313 |            |   | $      | 42,263 |  |   | $          | 19,210 |  |   | $      | 19,135 | 
|                                    | Due after one year through three years |      |        | 2,912  |            |   |        | 2,882  |  |   |            | 4,298  |  |   |        | 4,257  | 
|                                    |                                        |      |        |        |            |   |        |        |  |   |            |       
|Total available-for-sale securities |                                        | $    | 45,225 |        |            | $ | 45,145 |        |  | $ | 23,508     |        |  | $ | 23,392 |       
|                                    |                                        |      |        |        |            |   |        |        |  |   |            |       





|   |                                                     
|-- | ----------------------------------------------------
|7. | Revision in the Classification of Certain Securities







|   |                              
|-- | -----------------------------
|8. | Property, Plant and Equipment



|                       |                          |      |        |         |      |   |        |         |  
|---------------------- | ------------------------ | ---- | ------ | ------- | ---- | - | ------ | ------- | -
|                       |                          | 2006 |        |         | 2005 |  
|                       |                          |      |        |         |      |  
|Furniture and fixtures |                          | $    | 4,994  |         |      | $ | 5,198  |        
|Equipment              |                          |      | 26,371 |         |      |   | 25,287 |        
|Leasehold improvements |                          |      | 8,232  |         |      |   | 7,999  |        
|                       |                          |      |        |         |      |  
|                       |                          |      | 39,597 |         |      |   | 38,484 |        
|                       | Accumulated depreciation |      |        | (29,838 | )    |   |        | (26,696 | )
|                       |                          |      |        |         |      |  
|                       |                          | $    | 9,759  |         |      | $ | 11,788 |        
|                       |                          |      |        |         |      |  

68



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|   |                                            
|-- | -------------------------------------------
|8. | Property, Plant and Equipment  (Continued)





|   |         
|-- | --------
|9. | Goodwill



|                            |                                                                                                        |   |         |        |  
|--------------------------- | ------------------------------------------------------------------------------------------------------ | - | ------- | ------ | -
|Balance as of June 30, 2003 |                                                                                                        | $ | 63,259  |       
|                            | Acquisition of Novatris during the quarter ended March 31,
    2004 (Note 3)                           |   |         | 2,962  |  
|                            | Goodwill written off related to the reversal of deferred tax
    asset valuation allowance (Note 16)   |   |         | (2,315 | )
|                            |                                                                                                        |   |        
|Balance as of June 30, 2004 |                                                                                                        | $ | 63,906  |       
|                            |                                                                                                        |   |        
|                            | Acquisition of Wirthlin Worldwide, Inc. during the quarter ended
    September 30, 2004 (Note 3)       |   |         | 37,164 |  
|                            | Cumulative purchase accounting adjustments in connection with
    the acquisition of Wirthlin (Note 3) |   |         | 2,625  |  
|                            | Impairment of goodwill attributable to Japanese subsidiaries
    (Note 5)                              |   |         | (2,954 | )
|                            | First installment of Novatris contingent
    consideration  net profit target (Note 3)                |   |         | 546    |  
|                            |                                                                                                        |   |        
|Balance as of June 30, 2005 |                                                                                                        | $ | 101,287 |       
|                            |                                                                                                        |   |        
|                            | First quarter Wirthlin goodwill adjustment                                                             |   |         | (47    | )
|                            | Second installment of Novatris contingent
    consideration  net profit target (Note 3)               |   |         | 534    |  
|                            | Novatris contingent consideration  panel growth
    target (Note 3)                                   |   |         | 1,640  |  
|                            | Second installment of Wirthlin contingent consideration
    (Note 3)                                   |   |         | 40     |  
|                            |                                                                                                        |   |        
|Balance as of June 30, 2006 |                                                                                                        | $ | 103,454 |       
|                            |                                                                                                        |   |        



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004




|    |                                                   
|--- | --------------------------------------------------
|10. | Acquired Intangible Assets Subject to Amortization



|                                                       |                              |          |       |       |              |   |       |       |       |       |          |       |        |              |       |       |        |   |       |     |       |   |     |       |        | 
|------------------------------------------------------ | ---------------------------- | -------- | ----- | ----- | ------------ | - | ----- | ----- | ----- | ----- | -------- | ----- | ------ | ------------ | ----- | ----- | ------ | - | ----- | --- | ----- | - | --- | ----- | ------ | 
|                                                       |                              | 2006     |       |       | 2005         |  
|                                                       |                              |          |       |       |              |  
|                                                       |                              | Gross    |       |       |              |   | Net   |       |       | Gross |          |       |        |              | Net   |      
|                                                       |                              | Carrying |       |       | Accumulated  |   |       | Book  |       |       | Carrying |       |        | Accumulated  |       |       | Book   |  
|                                                       |                              | Amount   |       |       | Amortization |   |       | Value |       |       | Amount   |       |        | Amortization |       |       | Value  |  
|                                                       |                              |          |       |       |              |   |       |       |       |       |          |       |        |              |       |       |        |  
|Amortized intangible assets Contract-based intangibles |                              | $        | 1,750 |       |              | $ | 1,708 |       |       | $     | 42       |       |        | $            | 1,750 |       |        | $ | 1,354 |     |       | $ | 396 |      
|                                                       | Internet respondent database |          |       | 2,000 |              |   |       | 519   |       |       |          | 1,481 |        |              |       | 2,000 |        |   |       | 296 |       |   |     | 1,704 |       
|                                                       | Customer relationships       |          |       | 7,230 |              |   |       | 1,468 |       |       |          | 5,762 |        |              |       | 7,230 |        |   |       | 689 |       |   |     | 6,541 |       
|                                                       | Trade names                  |          |       | 5,015 |              |   |       | 652   |       |       |          | 4,363 |        |              |       | 4,490 |        |   |       | 266 |       |   |     | 4,224 |       
|                                                       |                              |          |       |       |              |   |       |       |       |       |          |       |        |              |       |       |        |  
|                                                       |                              | Total    |       | $     | 15,995       |   |       | $     | 4,347 |       |          | $     | 11,648 |              |       | $     | 15,470 |   |       | $   | 2,605 |   |     | $     | 12,865 | 
|                                                       |                              |          |       |       |              |   |       |       |       |       |          |       |        |              |       |       |        |  

|                                |                                   |                     |   |       |      |  |   |       |  |  |   |     | 
|------------------------------- | --------------------------------- | ------------------- | - | ----- | ---- |  | - | ----- |  |  | - | --- | 
|                                |                                   | For the Years Ended |  
|                                |                                   | June 30,            |  
|                                |                                   |                     |  
|                                |                                   | 2006                |   |       | 2005 |  |   | 2004  | 
|                                |                                   |                     |   |       |      |  |   |       | 
|Aggregate amortization expense: |                                   |                     |   |       |      |  |   |       |  |  |   |    
|                                | For the year ended                |                     | $ | 1,742 |      |  | $ | 1,660 |  |  | $ | 425 | 
|                                |                                   |                     |   |       |      |  |   |       | 
|Estimated amortization expense: |                                   |                     |   |       |      |  |   |       |  |  |   |    
|                                | For the year ending June 30, 2007 |                     | $ | 1,326 |      |  |   |       |  |  |   |     | 
|                                |                                   |                     |   |       |      |  |   |       | 
|                                | For the year ending June 30, 2008 |                     | $ | 1,207 |      |  |   |       |  |  |   |     | 
|                                |                                   |                     |   |       |      |  |   |       | 
|                                | For the year ending June 30, 2009 |                     | $ | 1,207 |      |  |   |       |  |  |   |     | 
|                                |                                   |                     |   |       |      |  |   |       | 
|                                | For the year ending June 30, 2010 |                     | $ | 1,196 |      |  |   |       |  |  |   |     | 
|                                |                                   |                     |   |       |      |  |   |       | 
|                                | For the year ending June 30, 2011 |                     | $ | 1,174 |      |  |   |       |  |  |   |     | 
|                                |                                   |                     |   |       |      |  |   |       | 



|    |                 
|--- | ----------------
|11. | Accrued Expenses



|                                 |  |      |        |  |      |   |        | 
|-------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                 |  | 2006 |        |  | 2005 |  
|                                 |  |      |        |  |      |  
|Payroll and withholding expenses |  | $    | 3,098  |  |      | $ | 2,738  | 
|Bonuses                          |  |      | 4,761  |  |      |   | 2,168  | 
|HIpoints accrual                 |  |      | 3,470  |  |      |   | 2,718  | 
|Other                            |  |      | 10,244 |  |      |   | 13,895 | 
|                                 |  |      |        |  |      |  
|                                 |  |      | 21,573 |  |      |   | 21,519 | 
|                                 |  |      |        |  |      |  



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HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004




|    |                           
|--- | --------------------------
|12. | Line and Letters of Credit














|    |                     
|--- | --------------------
|13. | Stockholders Equity



| |             
| | ------------
| | Common Stock



71



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                                   
|--- | ----------------------------------
|13. | Stockholders Equity  (Continued)



| |                         
| | ------------------------
| | Share Repurchase Program







| |                        
| | -----------------------
| | Stockholder Rights Plan



72



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                                   
|--- | ----------------------------------
|13. | Stockholders Equity  (Continued)







|    |                         
|--- | ------------------------
|14. | Stock-Based Compensation





Accounting for Stock-Based Compensation 
Transition and Disclosure


|                              |                                                                                                                                |      |       |       |      |   |        |       | 
|----------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ---- | ----- | ----- | ---- | - | ------ | ----- | 
|                              |                                                                                                                                | 2005 |       |       | 2004 |  
|                              |                                                                                                                                |      |       |       |      |  
|Net income, as reported       |                                                                                                                                | $    | 1,583 |       |      | $ | 29,918 |      
|                              | Deduct: Total stock-based compensation expense determined under
    fair value method of all awards, net of related tax effect |      |       | 1,490 |      |   |        | 1,101 | 
|                              |                                                                                                                                |      |       |       |      |  
|Pro-forma net income          |                                                                                                                                | $    | 93    |       |      | $ | 28,817 |      
|                              |                                                                                                                                |      |       |       |      |  
|Basic net income per share:   |                                                                                                                                |      |       |       |      |   |        |      
|                              | As reported                                                                                                                    |      | $     | 0.03  |      |   | $      | 0.53  | 
|                              |                                                                                                                                |      |       |       |      |  
|                              | Pro-forma                                                                                                                      |      | $     | 0.00  |      |   | $      | 0.51  | 
|                              |                                                                                                                                |      |       |       |      |  
|Diluted net income per share: |                                                                                                                                |      |       |       |      |   |        |      
|                              | As reported                                                                                                                    |      | $     | 0.03  |      |   | $      | 0.52  | 
|                              |                                                                                                                                |      |       |       |      |  
|                              | Pro-forma                                                                                                                      |      | $     | 0.00  |      |   | $      | 0.50  | 
|                              |                                                                                                                                |      |       |       |      |  

73



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                                       
|--- | --------------------------------------
|14. | Stock-Based Compensation  (Continued)





| |                         
| | ------------------------
| | Long-Term Incentive Plan





| |                                          
| | -----------------------------------------
| | Options Issued Outside the Incentive Plan









| |                       
| | ----------------------
| | Investor Stock Options



74



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004




|    |                                       
|--- | --------------------------------------
|14. | Stock-Based Compensation  (Continued)



| |                                               
| | ----------------------------------------------
| | Summary of Options and Restricted Stock Status



|                               |  |        |           |          |       |   |      |        |          |  |           |   |  |          |      |  |       |  |            |   |  |   |      | 
|------------------------------ |  | ------ | --------- | -------- | ----- | - | ---- | ------ | -------- |  | --------- | - |  | -------- | ---- |  | ----- |  | ---------- | - |  | - | ---- | 
|                               |  | 2006   |           |          | 2005  |   |      | 2004   |         
|                               |  |        |           |          |       |   |      |        |         
|                               |  |        |           | Weighted |       |   |      |        | Weighted |  |           |   |  | Weighted |     
|                               |  |        |           | Average  |       |   |      |        | Average  |  |           |   |  | Average  |     
|                               |  |        |           | Exercise |       |   |      |        | Exercise |  |           |   |  | Exercise |     
|                               |  | Shares |           |          | Price |   |      | Shares |          |  | Price     |   |  | Shares   |      |  | Price | 
|                               |  |        |           |          |       |   |      |        |          |  |           |   |  |          |      |  |       | 
|Options outstanding at July 1  |  |        | 5,928,222 |          |       |   | 6.14 |        |          |  | 4,128,702 |   |  |          | 5.38 |  |       |  | 4,689,145  |   |  | $ | 2.95 | 
|Options granted                |  |        | 851,333   |          |       |   | 4.99 |        |          |  | 3,565,300 |   |  |          | 5.68 |  |       |  | 1,569,500  |   |  |   | 8.55 | 
|Options expired                |  |        |          |          |       |   |     |        |          |  |          |   |  |          |     |  |       |  |           |   |  |   |     | 
|Options forfeited              |  |        | (414,200  | )        |       |   | 6.73 |        |          |  | (989,790  | ) |  |          | 8.36 |  |       |  | (96,007    | ) |  |   | 5.05 | 
|Options exercised              |  |        | (215,321  | )        |       |   | 2.53 |        |          |  | (775,990  | ) |  |          | 2.31 |  |       |  | (2,033,936 | ) |  |   | 2.23 | 
|                               |  |        |           |          |       |   |      |        |          |  |           |   |  |          |      |  |       | 
|Options outstanding at June 30 |  |        | 6,150,034 |          |       | $ | 5.41 |        |          |  | 5,928,222 |   |  | $        | 6.14 |  |       |  | 4,128,702  |   |  | $ | 5.38 | 
|                               |  |        |           |          |       |   |      |        |          |  |           |   |  |          |      |  |       | 





|                                          |  |      |      |   |      |   |      |      |  |   |      |  
|----------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                          |  | 2006 |      |   | 2005 |   |      | 2004 | 
|                                          |  |      |      |   |      |   |      |      | 
|Risk-free interest rate                   |  |      | 4.62 | % |      |   | 3.43 | %    |  |   | 2.29 | %
|Weighted average expected life (in years) |  |      | 6.3  |   |      |   | 4.0  |      |  |   | 4.0  |  
|Volatility factor                         |  |      | 80   | % |      |   | 48   | %    |  |   | 64   | %
|Dividend yield                            |  |      |     |   |      |   |     |      |  |   |     |  
|Weighted average fair value               |  | $    | 3.63 |   |      | $ | 2.32 |      |  | $ | 4.28 |  



75



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004




|    |                                       
|--- | --------------------------------------
|14. | Stock-Based Compensation  (Continued)



|                |  |                     |           |           |                     |  |     |           |  |   |           |  |  |           |         |           |                 |          |           |          |  |           |           |  |  |   |       |  |  |   |        |  
|--------------- |  | ------------------- | --------- | --------- | ------------------- |  | --- | --------- |  | - | --------- |  |  | --------- | ------- | --------- | --------------- | -------- | --------- | -------- |  | --------- | --------- |  |  | - | ----- |  |  | - | ------ | -
|                |  | Options Outstanding |           |           | Options Exercisable | 
|                |  |                     |           |           |                     | 
|                |  |                     |           | Weighted- |                     |  |     |           |  |   | Weighted- |  |  |          
|                |  | Number              |           |           | Average             |  |     | Weighted- |  |   |           |  |  |           | Average |           |                 | Weighted |           |          | 
|                |  | Outstanding         |           |           | Remaining           |  |     | Average   |  |   | Aggregate |  |  |           |         | Remaining |                 |          | Average   |          |  | Aggregate |          
|Range of        |  | at June 30,         |           |           | Contractual         |  |     | Exercise  |  |   | Intrinsic |  |  | Number of |         |           | Contractual     |          |           | Exercise |  |           | Intrinsic | 
|Exercise Prices |  | 2006                |           |           | Life (In Years)     |  |     | Price     |  |   | Value     |  |  | Options   |         |           | Life (In Years) |          |           | Price    |  |           | Value     | 
|                |  |                     |           |           |                     |  |     |           |  |   |           |  |  |           |         |           |                 |          |           |          |  |           |           | 
|$ 0.47  0.47   |  |                     | 164,000   |           |                     |  | 1.3 |           |  | $ | 0.47      |  |  |           |         |           |                 |          | 164,000   |          |  |           | 1.3       |  |  | $ | 0.47  |  |  |   |        |  
|1.26  2.42     |  |                     | 602,592   |           |                     |  | 5.6 |           |  |   | 2.23      |  |  |           |         |           |                 |          | 564,727   |          |  |           | 5.6       |  |  |   | 2.22  |  |  |   |        |  
|3.00  4.98     |  |                     | 1,991,891 |           |                     |  | 7.8 |           |  |   | 4.29      |  |  |           |         |           |                 |          | 740,995   |          |  |           | 5.8       |  |  |   | 4.08  |  |  |   |        |  
|5.00  6.38     |  |                     | 1,524,300 |           |                     |  | 8.9 |           |  |   | 5.56      |  |  |           |         |           |                 |          | 435,696   |          |  |           | 8.3       |  |  |   | 5.80  |  |  |   |        |  
|6.56  8.96     |  |                     | 1,697,251 |           |                     |  | 7.8 |           |  |   | 7.65      |  |  |           |         |           |                 |          | 1,181,869 |          |  |           | 7.7       |  |  |   | 7.80  |  |  |   |        |  
|11.00           |  |                     | 170,000   |           |                     |  | 3.7 |           |  |   | 11.00     |  |  |           |         |           |                 |          | 170,000   |          |  |           | 3.7       |  |  |   | 11.00 |  |  |   |        |  
|                |  |                     |           |           |                     |  |     |           |  |   |           |  |  |           |         |           |                 |          |           |          |  |           |           | 
|                |  |                     | 6,150,034 |           |                     |  | 7.6 |           |  | $ | 5.41      |  |  | $         | (4,397  | )         |                 |          | 3,257,287 |          |  |           | 6.4       |  |  | $ | 5.52  |  |  | $ | (2,663 | )
|                |  |                     |           |           |                     |  |     |           |  |   |           |  |  |           |         |           |                 |          |           |          |  |           |           | 





|                                         |  |        |         |               |               |   |      | 
|---------------------------------------- |  | ------ | ------- | ------------- | ------------- | - | ---- | 
|                                         |  |        |         | Weighted      |              
|                                         |  |        |         | Average       |              
|                                         |  |        |         | Fair Value at |              
|                                         |  | Shares |         |               | Date of Grant |  
|                                         |  |        |         |               |               |  
|Restricted shares outstanding at July 1  |  |        |        |               |               |   |     | 
|Granted                                  |  |        | 140,500 |               |               | $ | 5.07 | 
|Vested                                   |  |        | (24,167 | )             |               | $ | 5.15 | 
|                                         |  |        |         |               |               |  
|Restricted shares outstanding at June 30 |  |        | 116,333 |               |               |   |      | 
|                                         |  |        |         |               |               |  



|                                           |  |         |       |            |        |   |     |       |  |   |       | 
|------------------------------------------ |  | ------- | ----- | ---------- | ------ | - | --- | ----- |  | - | ----- | 
|                                           |  |         |       | Restricted |        |   |    
|                                           |  | Stock   |       |            | Stock  |   |     |      
|                                           |  | Options |       |            | Awards |   |     | Total | 
|                                           |  |         |       |            |        |   |     |       | 
|2007                                       |  | $       | 2,874 |            |        | $ | 357 |       |  | $ | 3,231 | 
|2008                                       |  |         | 2,420 |            |        |   | 76  |       |  |   | 2,496 | 
|2009                                       |  |         | 1,660 |            |        |   | 76  |       |  |   | 1,736 | 
|2010                                       |  |         | 486   |            |        |   | 69  |       |  |   | 555   | 
|                                           |  |         |       |            |        |   |     |       | 
|Total                                      |  | $       | 7,440 |            |        | $ | 578 |       |  | $ | 8,018 | 
|                                           |  |         |       |            |        |   |     |       | 
|Weighted-average vesting period (in years) |  |         | 3.1   |            |        |   | 3.6 |       |  |   | 3.1   | 

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HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                                       
|--- | --------------------------------------
|14. | Stock-Based Compensation  (Continued)



| |                             
| | ----------------------------
| | Employee Stock Purchase Plan









|                            |  |   |      |  
|--------------------------- |  | - | ---- | -
|Risk-free interest rate     |  |   | 3.9  | %
|Expected life (in months)   |  |   | 6    |  
|Volatility factor           |  |   | 50.9 | %
|Dividend yield              |  |   |     |  
|Weighted average fair value |  | $ | 1.32 |  



|    |            
|--- | -----------
|15. | 401(k) Plan





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HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004




|    |             
|--- | ------------
|16. | Income Taxes



|        |  |      |        |  |      |   |        |      |  |   |        | 
|------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|        |  | 2006 |        |  | 2005 |   |        | 2004 | 
|        |  |      |        |  |      |   |        |      | 
|U.S.    |  | $    | 15,466 |  |      | $ | 10,239 |      |  | $ | 13,252 | 
|Foreign |  |      | 340    |  |      |   | (618   | )    |  |   | 542    | 
|        |  |      |        |  |      |   |        |      | 
|        |  | $    | 15,806 |  |      | $ | 9,621  |      |  | $ | 13,794 | 
|        |  |      |        |  |      |   |        |      | 



|          |         |      |       |       |      |   |       |       |   |   |         |         |  
|--------- | ------- | ---- | ----- | ----- | ---- | - | ----- | ----- | - | - | ------- | ------- | -
|          |         | 2006 |       |       | 2005 |   |       | 2004  |  
|          |         |      |       |       |      |   |       |       |  
|Current:  |         |      |       |       |      |   |       |       |   |   |         |        
|          | Federal |      | $     | 419   |      |   | $     | 231   |   |   | $       | 160     |  
|          | State   |      |       | 403   |      |   |       | 290   |   |   |         | 165     |  
|          | Foreign |      |       | 306   |      |   |       |      |   |   |         | 619     |  
|          |         |      |       |       |      |   |       |       |  
|          |         | $    | 1,128 |       |      | $ | 521   |       |   | $ | 944     |        
|Deferred: |         |      |       |       |      |   |       |       |   |   |         |        
|          | Federal |      | $     | 5,336 |      |   | $     | 3,381 |   |   | $       | (14,742 | )
|          | State   |      |       | 654   |      |   |       | 1,291 |   |   |         | (2,371  | )
|          | Foreign |      |       | (772  | )    |   |       | (110  | ) |   |         | 160     |  
|          |         |      |       |       |      |   |       |       |  
|          |         | $    | 5,218 |       |      | $ | 4,562 |       |   | $ | (16,953 | )      
|          |         |      |       |       |      |   |       |       |  
|          |         | $    | 6,346 |       |      | $ | 5,083 |       |   | $ | (16,009 | )      
|          |         |      |       |       |      |   |       |       |  



|                                                                  |  |      |        |   |      |   |       |      |  |   |         |  
|----------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ---- |  | - | ------- | -
|                                                                  |  | 2006 |        |   | 2005 |   |       | 2004 | 
|                                                                  |  |      |        |   |      |   |       |      | 
|Provision at federal statutory rate                               |  | $    | 5,532  |   |      | $ | 3,367 |      |  | $ | 4,690   |  
|State income tax provision (benefit), net of federal effect       |  |      | 922    |   |      |   | 1,479 |      |  |   | (1,437  | )
|Unremitted earnings and rate differential of foreign subsidiaries |  |      | 221    |   |      |   | 106   |      |  |   | 594     |  
|Stock-based compensation                                          |  |      | 539    |   |      |   |      |      |  |   |        |  
|Valuation allowance reversal                                      |  |      | (1,036 | ) |      |   |      |      |  |   | (19,750 | )
|Other                                                             |  |      | 168    |   |      |   | 131   |      |  |   | (106    | )
|                                                                  |  |      |        |   |      |   |       |      | 
|                                                                  |  | $    | 6,346  |   |      | $ | 5,083 |      |  | $ | (16,009 | )
|                                                                  |  |      |        |   |      |   |       |      | 



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HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                           
|--- | --------------------------
|16. | Income Taxes  (Continued)



|                                       |  |      |        |   |      |   |        |  
|-------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                       |  | 2006 |        |   | 2005 |  
|                                       |  |      |        |   |      |  
|Operating loss carryforwards           |  | $    | 17,877 |   |      | $ | 26,110 |  
|Internet database development expenses |  |      | 1,243  |   |      |   | 1,105  |  
|Stock-based compensation               |  |      | 784    |   |      |   | 142    |  
|HIpoints accrual                       |  |      | 1,392  |   |      |   | 1,086  |  
|Capital loss carryforward              |  |      | 1,326  |   |      |   | 1,321  |  
|Minimum tax credits                    |  |      | 771    |   |      |   | 500    |  
|Property, plant and equipment          |  |      | 422    |   |      |   | 53     |  
|Accrued expenses                       |  |      | 354    |   |      |   | 1,157  |  
|Other                                  |  |      | 500    |   |      |   | (457   | )
|                                       |  |      |        |   |      |  
|Gross deferred tax assets              |  |      | 24,669 |   |      |   | 31,017 |  
|Valuation allowance                    |  |      | (1,794 | ) |      |   | (2,830 | )
|                                       |  |      |        |   |      |  
|                                       |  |      | 22,875 |   |      |   | 28,187 |  
|Goodwill                               |  |      | (1,304 | ) |      |   | (1,039 | )
|Other intangibles                      |  |      | (1,773 | ) |      |   | (2,132 | )
|                                       |  |      |        |   |      |  
|Gross deferred tax liabilities         |  |      | (3,077 | ) |      |   | (3,171 | )
|                                       |  |      |        |   |      |  
|Net deferred tax assets                |  | $    | 19,798 |   |      | $ | 25,016 |  
|                                       |  |      |        |   |      |  









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HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                           
|--- | --------------------------
|16. | Income Taxes  (Continued)











|    |                     
|--- | --------------------
|17. | Net Income Per Share



|                                                                              |  |                              |            |  |      |  |            |      |  |  |            | 
|----------------------------------------------------------------------------- |  | ---------------------------- | ---------- |  | ---- |  | ---------- | ---- |  |  | ---------- | 
|                                                                              |  | For the Years Ended June 30, |           
|                                                                              |  |                              |           
|                                                                              |  | 2006                         |            |  | 2005 |  |            | 2004 | 
|                                                                              |  |                              |            |  |      |  |            |      | 
|Weighted average outstanding common shares for basic net income
    per share |  |                              | 61,511,031 |  |      |  | 60,264,152 |      |  |  | 56,099,330 | 
|Dilutive effect of outstanding stock options and restricted stock             |  |                              | 174,746    |  |      |  | 973,912    |      |  |  | 1,345,455  | 
|                                                                              |  |                              |            |  |      |  |            |      | 
|Shares for diluted net income per share                                       |  |                              | 61,685,777 |  |      |  | 61,238,064 |      |  |  | 57,444,785 | 
|                                                                              |  |                              |            |  |      |  |            |      | 

80



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                                   
|--- | ----------------------------------
|17. | Net Income Per Share  (Continued)



|                                                                           |            |      |            |       |      |   |            |       |  |   |            |        | 
|-------------------------------------------------------------------------- | ---------- | ---- | ---------- | ----- | ---- | - | ---------- | ----- |  | - | ---------- | ------ | 
|                                                                           |            | 2006 |            |       | 2005 |   |            | 2004  | 
|                                                                           |            |      |            |       |      |   |            |       | 
|Numerator:                                                                 |            |      |            |       |      |   |            |       |  |   |            |       
|                                                                           | Net income |      | $          | 9,460 |      |   | $          | 1,583 |  |   | $          | 29,918 | 
|                                                                           |            |      |            |       |      |   |            |       | 
|Denominator for basic net income per share  weighted
    average shares   |            |      | 61,511,031 |       |      |   | 60,264,152 |       |  |   | 56,099,330 |       
|                                                                           |            |      |            |       |      |   |            |       | 
|Basic net income per share                                                 |            | $    | 0.15       |       |      | $ | 0.03       |       |  | $ | 0.53       |       
|                                                                           |            |      |            |       |      |   |            |       | 
|Denominator for diluted net income per share 
    weighted average shares |            |      | 61,685,777 |       |      |   | 61,238,064 |       |  |   | 57,444,785 |       
|                                                                           |            |      |            |       |      |   |            |       | 
|Diluted net income per share                                               |            | $    | 0.15       |       |      | $ | 0.03       |       |  | $ | 0.52       |       
|                                                                           |            |      |            |       |      |   |            |       | 



|    |                            
|--- | ---------------------------
|18. | Enterprise-Wide Disclosures

Non-U.S.




81



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                                          
|--- | -----------------------------------------
|18. | Enterprise-Wide Disclosures  (Continued)



|                        |  |      |         |  |        |   |        |      |  |   |       |   |  |   |         | 
|----------------------- |  | ---- | ------- |  | ------ | - | ------ | ---- |  | - | ----- | - |  | - | ------- | 
|                        |  | U.S. |         |  | Europe |   |        | Asia |  |   | Total |  
|                        |  |      |         |  |        |   |        |      |  |   |       |  
|2006:                   |  |      |         |  |        |   |        |      |  |   |       |   |  |   |         | 
|Revenue from services   |  | $    | 170,055 |  |        | $ | 45,956 |      |  | $ |      |   |  | $ | 216,011 | 
|Operating income (loss) |  |      | 14,238  |  |        |   | 293    |      |  |   | (239  | ) |  |   | 14,292  | 
|Long-lived assets       |  |      | 7,753   |  |        |   | 2,005  |      |  |   | 1     |   |  |   | 9,759   | 
|Deferred tax assets     |  |      | 19,741  |  |        |   | (105   | )    |  |   | 162   |   |  |   | 19,798  | 
|2005:                   |  |      |         |  |        |   |        |      |  |   |       |   |  |   |         | 
|Revenue from services   |  | $    | 149,919 |  |        | $ | 46,523 |      |  | $ | 523   |   |  | $ | 196,965 | 
|Operating income (loss) |  |      | 9,829   |  |        |   | (636   | )    |  |   | (164  | ) |  |   | 9,029   | 
|Long-lived assets       |  |      | 9,385   |  |        |   | 2,399  |      |  |   | 4     |   |  |   | 11,788  | 
|Deferred tax assets     |  |      | 25,827  |  |        |   | (877   | )    |  |   | 66    |   |  |   | 25,016  | 
|2004:                   |  |      |         |  |        |   |        |      |  |   |       |   |  |   |         | 
|Revenue from services   |  | $    | 111,999 |  |        | $ | 26,483 |      |  | $ |      |   |  | $ | 138,482 | 
|Operating income        |  |      | 12,545  |  |        |   | 719    |      |  |   |      |   |  |   | 13,264  | 
|Long-lived assets       |  |      | 4,355   |  |        |   | 1,676  |      |  |   |      |   |  |   | 6,031   | 
|Deferred tax assets     |  |      | 30,515  |  |        |   | 318    |      |  |   |      |   |  |   | 30,833  | 



|    |                              
|--- | -----------------------------
|19. | Commitments and Contingencies



|                      |  |  |       | 
|--------------------- |  |  | ----- | 
|Years Ending June 30: |  | 
|                      |  | 
|2007                  |  |  | 5,527 | 
|2008                  |  |  | 5,194 | 
|2009                  |  |  | 4,226 | 
|2010                  |  |  | 3,783 | 
|2011                  |  |  | 1,242 | 
|2012                  |  |  | 567   | 





|    |                  
|--- | -----------------
|20. | Legal Proceedings



82



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##### Table of Contents



HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                                
|--- | -------------------------------
|20. | Legal Proceedings  (Continued)

10-K,




|    |                           
|--- | --------------------------
|21. | Related Party Transactions







|    |                                   
|--- | ----------------------------------
|22. | Supplemental Cash Flow Information



|         |  |      |        |   |      |   |      |      |  |   |      |  
|-------- |  | ---- | ------ | - | ---- | - | ---- | ---- |  | - | ---- | -
|         |  | 2006 |        |   | 2005 |   |      | 2004 | 
|         |  |      |        |   |      |   |      |      | 
|Interest |  | $    | (1,571 | ) |      | $ | (423 | )    |  | $ | (513 | )
|         |  |      |        |   |      |   |      |      | 
|Taxes    |  | $    | 1,229  |   |      | $ | 389  |      |  | $ | 548  |  
|         |  |      |        |   |      |   |      |      | 



|    |                                          
|--- | -----------------------------------------
|23. | Unaudited Quarterly Results of Operations



83



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HARRIS INTERACTIVE INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Years Ended June 30, 2006, 2005 and 2004






|    |                                                            
|--- | -----------------------------------------------------------
|23. | Unaudited Quarterly Results of
    Operations  (Continued)

10-K.


|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |        |  |   |        |        |  |   |        |        | 
|--------------------------------------------------------------------------------------------- | ----------------------------- | ------------------------------------- | ------ | ------ | -------- | - | ------ | -------- |  | - | -------- | ------ |  | --------- | ------ | ------ | -------- | - | ------ | -------- |  | - | -------- | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                                              |                               | Three Months Ended                    |       
|                                                                                              |                               |                                       |       
|                                                                                              |                               | Sept. 30,                             |        |        | Dec. 31, |   |        | Mar. 31, |  |   | June 30, |        |  | Sept. 30, |        |        | Dec. 31, |   |        | Mar. 31, |  |   | June 30, |       
|                                                                                              |                               | 2004                                  |        |        | 2004     |   |        | 2005     |  |   | 2005     |        |  | 2005      |        |        | 2005     |   |        | 2006     |  |   | 2006     |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|                                                                                              |                               | (In thousands, except per share data) |       
|Revenue from services                                                                         |                               | $                                     | 39,325 |        |          | $ | 52,588 |          |  | $ | 50,858   |        |  | $         | 54,193 |        |          | $ | 48,930 |          |  | $ | 54,821   |        |  | $ | 52,248 |        |  | $ | 60,011 |       
|Cost of services                                                                              |                               |                                       | 18,148 |        |          |   | 24,525 |          |  |   | 24,469   |        |  |           | 26,188 |        |          |   | 23,572 |          |  |   | 27,332   |        |  |   | 24,501 |        |  |   | 29,952 |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Gross profit                                                                                  |                               |                                       | 21,177 |        |          |   | 28,063 |          |  |   | 26,389   |        |  |           | 28,005 |        |          |   | 25,358 |          |  |   | 27,489   |        |  |   | 27,747 |        |  |   | 30,059 |       
|Operating expenses:                                                                           |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |        |  |   |        |        |  |   |        |       
|                                                                                              | Sales and marketing           |                                       |        | 3,953  |          |   |        | 5,620    |  |   |          | 5,287  |  |           |        | 5,506  |          |   |        | 4,913    |  |   |          | 4,920  |  |   |        | 5,124  |  |   |        | 5,379  | 
|                                                                                              | General and administrative    |                                       |        | 12,920 |          |   |        | 18,272   |  |   |          | 16,995 |  |           |        | 17,560 |          |   |        | 16,505   |  |   |          | 16,812 |  |   |        | 16,790 |  |   |        | 18,434 | 
|                                                                                              | Depreciation and amortization |                                       |        | 1,596  |          |   |        | 1,812    |  |   |          | 1,954  |  |           |        | 2,000  |          |   |        | 1,916    |  |   |          | 1,805  |  |   |        | 1,726  |  |   |        | 1,788  | 
|                                                                                              | Restructuring charges         |                                       |        |       |          |   |        |         |  |   |          | 1,055  |  |           |        | 77     |          |   |        |         |  |   |          |       |  |   |        |       |  |   |        | 250    | 
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Total operating expenses                                                                      |                               |                                       | 18,469 |        |          |   | 25,704 |          |  |   | 25,291   |        |  |           | 25,143 |        |          |   | 23,334 |          |  |   | 23,537   |        |  |   | 23,640 |        |  |   | 25,851 |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Operating income                                                                              |                               |                                       | 2,708  |        |          |   | 2,359  |          |  |   | 1,098    |        |  |           | 2,862  |        |          |   | 2,024  |          |  |   | 3,952    |        |  |   | 4,107  |        |  |   | 4,208  |       
|Interest and other income                                                                     |                               |                                       | 208    |        |          |   | 161    |          |  |   | 176      |        |  |           | 196    |        |          |   | 202    |          |  |   | 266      |        |  |   | 396    |        |  |   | 669    |       
|Interest expense                                                                              |                               |                                       | (20    | )      |          |   | (70    | )        |  |   | (24      | )      |  |           | (34    | )      |          |   | (5     | )        |  |   | (6       | )      |  |   | (6     | )      |  |   | (3     | )     
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Income from continuing operations before income taxes                                         |                               |                                       | 2,896  |        |          |   | 2,450  |          |  |   | 1,250    |        |  |           | 3,024  |        |          |   | 2,221  |          |  |   | 4,212    |        |  |   | 4,497  |        |  |   | 4,874  |       
|Provision for income taxes                                                                    |                               |                                       | 1,077  |        |          |   | 994    |          |  |   | 651      |        |  |           | 2,360  |        |          |   | 981    |          |  |   | 1,862    |        |  |   | 1,962  |        |  |   | 1,541  |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Income from continuing operations                                                             |                               |                                       | 1,819  |        |          |   | 1,456  |          |  |   | 599      |        |  |           | 664    |        |          |   | 1,240  |          |  |   | 2,350    |        |  |   | 2,535  |        |  |   | 3,333  |       
|Income (loss) from discontinued operations (including loss on
    disposal of $2,684 in 2005) |                               |                                       | (130   | )      |          |   | (36    | )        |  |   | (3,277   | )      |  |           | 488    |        |          |   |       |          |  |   |         |        |  |   |       |        |  |   |       |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Net income (loss)                                                                             |                               | $                                     | 1,689  |        |          | $ | 1,420  |          |  | $ | (2,678   | )      |  | $         | 1,152  |        |          | $ | 1,240  |          |  | $ | 2,350    |        |  | $ | 2,535  |        |  | $ | 3,333  |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Basic net income (loss) per share(*):                                                         |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |        |  |   |        |        |  |   |        |       
|Continuing operations                                                                         |                               | $                                     | 0.03   |        |          | $ | 0.02   |          |  | $ | 0.01     |        |  | $         | 0.01   |        |          | $ | 0.02   |          |  | $ | 0.04     |        |  | $ | 0.04   |        |  | $ | 0.05   |       
|Discontinued operations                                                                       |                               |                                       | (0.00  | )      |          |   | (0.00  | )        |  |   | (0.05    | )      |  |           | 0.01   |        |          |   |       |          |  |   |         |        |  |   |       |        |  |   |       |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Basic net income (loss) per share                                                             |                               | $                                     | 0.03   |        |          | $ | 0.02   |          |  | $ | (0.04    | )      |  | $         | 0.02   |        |          | $ | 0.02   |          |  | $ | 0.04     |        |  | $ | 0.04   |        |  | $ | 0.05   |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Diluted net income (loss) per share(*):                                                       |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |        |  |   |        |        |  |   |        |       
|Continuing operations                                                                         |                               | $                                     | 0.03   |        |          | $ | 0.02   |          |  | $ | 0.01     |        |  | $         | 0.01   |        |          | $ | 0.02   |          |  | $ | 0.04     |        |  | $ | 0.04   |        |  | $ | 0.05   |       
|Discontinued operations                                                                       |                               |                                       | (0.00  | )      |          |   | (0.00  | )        |  |   | (0.05    | )      |  |           | 0.01   |        |          |   |       |          |  |   |         |        |  |   |       |        |  |   |       |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       
|Diluted net income (loss) per share                                                           |                               | $                                     | 0.03   |        |          | $ | 0.02   |          |  | $ | (0.04    | )      |  | $         | 0.02   |        |          | $ | 0.02   |          |  | $ | 0.04     |        |  | $ | 0.04   |        |  | $ | 0.05   |       
|                                                                                              |                               |                                       |        |        |          |   |        |          |  |   |          |        |  |           |        |        |          |   |        |          |  |   |          |       






84



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures


13a-15(e)


10-K,


Managements Report on Internal Control Over Financial
Reporting


13a-15(f)






Internal Control  Integrated Framework


85



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##### Table of Contents



10-K.


Changes in Internal Control Over Financial Reporting









|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

10-K


10-K


10-K


8-K







|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

10-K


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##### Table of Contents








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters

10-K







|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

10-K







|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services

10-K





PART IV







|        |                                           
|------- | ------------------------------------------
|Item 15 | Exhibit and Financial Statements Schedules




Financial Statements


10-K.


Exhibits


10-K


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##### Table of Contents






Schedule II


Valuation and Qualifying Accounts


(In thousands)


|                         |                                             |                                                            |  |  |            |  |  |             |       |  |           |  |        |  |  |  |       | 
|------------------------ | ------------------------------------------- | ---------------------------------------------------------- |  |  | ---------- |  |  | ----------- | ----- |  | --------- |  | ------ |  |  |  | ----- | 
|                         |                                             | Balance at                                                 |  |  | Additions  |  |  | Deductions  |       |  | Balance   | 
|                         |                                             | Beginning                                                  |  |  | Charged to |  |  | Amounts     |       |  | at End    | 
|                         |                                             | of Period                                                  |  |  | Earnings   |  |  | Written Off |       |  | of Period | 
|                         |                                             |                                                            |  |  |            |  |  |             |       |  |           | 
|Year ended June 30, 2004 |                                             |                                                            |  |  |            |  |  |             |       |  |           |  |        |  |  | 
|                         | Deducted in the consolidated balance sheet: |                                                            |  |  |            |  |  |             |       |  |           |  |        |  |  |  |      
|                         |                                             | Trade accounts receivable, allowance for doubtful accounts |  |  | 313        |  |  |             | 43    |  |           |  | 46     |  |  |  | 224   | 
|                         |                                             |                                                            |  |  |            |  |  |             |       |  |           | 
|                         |                                             | Deferred tax valuation allowance                           |  |  | 28,718     |  |  |             | 0     |  |           |  | 27,301 |  |  |  | 1,417 | 
|                         |                                             |                                                            |  |  |            |  |  |             |       |  |           | 
|Year ended June 30, 2005 |                                             |                                                            |  |  |            |  |  |             |       |  |           |  |        |  |  | 
|                         | Deducted in the consolidated balance sheet: |                                                            |  |  |            |  |  |             |       |  |           |  |        |  |  |  |      
|                         |                                             | Trade accounts receivable, allowance for doubtful accounts |  |  | 224        |  |  |             | 225   |  |           |  | 244    |  |  |  | 205   | 
|                         |                                             |                                                            |  |  |            |  |  |             |       |  |           | 
|                         |                                             | Deferred tax valuation allowance                           |  |  | 1,417      |  |  |             | 1,536 |  |           |  | 123    |  |  |  | 2,830 | 
|                         |                                             |                                                            |  |  |            |  |  |             |       |  |           | 
|Year ended June 30, 2006 |                                             |                                                            |  |  |            |  |  |             |       |  |           |  |        |  |  | 
|                         | Deducted in the consolidated balance sheet: |                                                            |  |  |            |  |  |             |       |  |           |  |        |  |  |  |      
|                         |                                             | Trade accounts receivable, allowance for doubtful accounts |  |  | 205        |  |  |             | 25    |  |           |  | 160    |  |  |  | 70    | 
|                         |                                             |                                                            |  |  |            |  |  |             |       |  |           | 
|                         |                                             | Deferred tax valuation allowance                           |  |  | 2,830      |  |  |             | 0     |  |           |  | 1,036  |  |  |  | 1,794 | 
|                         |                                             |                                                            |  |  |            |  |  |             |       |  |           | 

88



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SIGNATURES






| |                        
| | -----------------------
| | HARRIS INTERACTIVE INC.





| |     |                       
| | --- | ----------------------
| | By: | /s/ Ronald E. Salluzzo

| |                                                                               
| | ------------------------------------------------------------------------------
| |                                                                               
| | Ronald E. Salluzzo                                                            
| | Executive Vice President, Chief Financial Officer, Treasurer
    and Secretary
| | (On Behalf of the Registrant and as                                           
| | Principal Financial Officer)                                                  

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POWER OF ATTORNEY


attorneys-in 10-K, attorneys-in attorneys-in




|                                             |  |                                                                                                              |  |                    |  | 
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ------------------ |  | 
|Name                                         |  | Capacity                                                                                                     |  | Date              
|                                             |  |                                                                                                              |  |                   
|                                            
|/s/ Gregory T. NovakGregory
    T. Novak     |  | President and Chief Executive Officer (Principal Executive
    Officer) and Director                         |  | September 13, 2006
|                                            
|/s/ Ronald E. SalluzzoRonald
    E. Salluzzo |  | Executive Vice President, Chief Financial Officer, Treasurer and
    Secretary (Principal Financial Officer) |  | September 13, 2006
|                                            
|/s/ Eric W. NarowskiEric
    W. Narowski     |  | Vice President and Corporate Controller (Principal Accounting
    Officer)                                   |  | September 13, 2006
|                                            
|/s/ Leonard R. BayerLeonard
    R. Bayer     |  | Director                                                                                                     |  | September 13, 2006
|                                            
|/s/ George BellGeorge
    Bell               |  | Director                                                                                                     |  | September 13, 2006
|                                            
|/s/ David BrodskyDavid
    Brodsky           |  | Director                                                                                                     |  | September 13, 2006
|                                            
|/s/ Stephen D. HarlanStephen
    D. Harlan   |  | Director                                                                                                     |  | September 13, 2006
|                                            
|/s/ James R. RiedmanJames
    R. Riedman     |  | Director                                                                                                     |  | September 13, 2006
|                                            
|/s/ Subrata K. SenSubrata
    K. Sen         |  | Director                                                                                                     |  | September 13, 2006
|                                            
|/s/ Howard L. ShecterHoward
    L. Shecter   |  | Director                                                                                                     |  | September 13, 2006

90



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|                                               |  |          |  |                    |  | 
|---------------------------------------------- |  | -------- |  | ------------------ |  | 
|Name                                           |  | Capacity |  | Date              
|                                               |  |          |  |                   
|                                              
|/s/ Antoine G. TreuilleAntoine
    G. Treuille |  | Director |  | September 13, 2006
|                                              
|/s/ Richard B. WirthlinRichard
    B. Wirthlin |  | Director |  | September 13, 2006

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##### Table of Contents



INDEX OF EXHIBITS


|        |    |               |  |                                                                                                                                                                                                                                                                                                                                            
|------- | -- | ------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |              
|Number  |    | Exhibit Title
|        |    |              
|        | 2  | .1            |  | Agreement and Plan of Merger, dated August 5, 2001, among
    Harris Interactive Inc. (the Company), Total Merger
    Sub Inc., and Total Research Corporation (filed as
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K filed August 14, 2001 and incorporated herein
    by reference).                               
|       
|        | 2  | .2            |  | Share Purchase Agreement dated March 2, 2004 among Harris
    Interactive International Inc. and the Shareholders of Novatris,
    S.A. (filed as Exhibit 10.1 to the Companys
    Registration Statement on Form S-3 filed March 8, 2004
    (Registration No. 333-113389) and incorporated herein by
    reference).                    
|       
|        | 2  | .3            |  | Agreement and Plan of Merger, dated as of September 8,
    2004, by and among the Company, Wirthlin Worldwide, Inc.
    (Wirthlin), Capitol Merger Sub, LLC and the
    Stockholders of Wirthlin (filed as Exhibit 2.1 to the
    Companys Current Report on Form 8-K filed
    September 9, 2004 and incorporated herein by reference).
|       
|        | 3  | .1            |  | Amended and Restated Certificate of Incorporation of the Company
    (filed as Exhibit 3.1 to the Companys Annual Report
    on Form 10-K for the fiscal year ended June 30, 2000
    and incorporated herein by reference).                                                                                                              
|       
|        | 3  | .2            |  | By-laws of the Company (filed as Exhibit 3.2 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended June 30, 2001 and incorporated herein by
    reference).                                                                                                                                                        
|       
|        | 3  | .3            |  | Certificate of Designation, Preferences and Rights of
    Series A Preferred Stock of the Company (filed as
    Exhibit 3.1 to the Companys Current Report on
    Form 8-K filed March 14, 2005 and incorporated herein
    by reference).                                                                                                
|       
|        | 4  | .1            |  | Rights Agreement, dated as of March 11, 2005, by and
    between the Company and American Stock Transfer & Trust
    Company, as Rights Agent (filed as Exhibit 4.1 to the
    Companys Current Report on Form 8-K filed
    March 14, 2005 and incorporated herein by reference).                                                        
|       
|        | 10 | .1.1*         |  | Long-Term Incentive Plan of the Company (included as
    Appendix B to the Companys Definitive Proxy Statement
    on Schedule 14A filed October 8, 2004 and incorporated
    herein by reference).                                                                                                                                       
|       
|        | 10 | .1.2*         |  | Form of Non-Qualified Stock Option Agreement (filed as
    Exhibit 10.3 to the Companys Registration Statement
    on Form S-8 filed December 14, 2004 (Registration
    No. 333-121250) and incorporated herein by reference).                                                                                                           
|       
|        | 10 | .1.3*         |  | Form of Incentive Stock Option Agreement (filed as
    Exhibit 10.4 to the Companys Registration Statement
    on Form S-8 filed December 14, 2004 (Registration
    No. 333-121250) and incorporated herein by reference).                                                                                                               
|       
|        | 10 | .1.4*         |  | Form of Restricted Stock Agreement for Non-Employee Directors
    (filed as Exhibit 10.2 to the Companys Current Report
    on Form 8-K filed on May 9, 2006 and incorporated
    herein by reference).                                                                                                                                   
|       
|        | 10 | .1.5*         |  | Form of Restricted Stock Agreement for Employees (filed as
    Exhibit 10.8 to the Companys Current Report on
    Form 10-Q filed on May 10, 2006 and incorporated
    herein by reference).                                                                                                                                              
|       
|        | 10 | .2.1*         |  | 1999 Employee Stock Purchase Plan of the Company (included as
    Appendix C to the Companys Definitive Proxy Statement
    on Schedule 14A filed October 8, 2004 and incorporated
    herein by reference).                                                                                                                              
|       
|        | 10 | .2.2*         |  | Form of Subscription Agreement under 1999 Employee Stock
    Purchase Plan of the Company (included as Exhibit A to
    Exhibit 10.2 to the Companys Registration Statement
    on Form S-1 filed September 17, 1999 (Registration
    No. 333-87311) and incorporated herein by reference).                                              

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|        |    |               |  |                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |              
|Number  |    | Exhibit Title
|        |    |              
|       
|        | 10 | .2.3*         |  | Share Repurchase Program 10b5-1 Plan Document, dated as of
    June 9, 2006 (filed as Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    June 12, 2006 and incorporated herein by reference).                                                                                                                                            
|       
|        | 10 | .3.1*         |  | Employment Agreement by and between the Company and Albert A.
    Angrisani, dated as of August 5, 2001 (filed as
    Exhibit 10.23 to the Companys Registration Statement
    on Form S-4 filed September 6, 2001 (Registration
    No. 333-69056) and incorporated herein by reference).                                                                  
|       
|        | 10 | .3.2*         |  | Letter Agreement of Albert A. Angrisani, dated as of
    August 5, 2001 (filed as Exhibit 10.24 to the
    Companys Registration Statement on Form S-4 filed
    September 6, 2001 (Registration No. 333-69056) and
    incorporated herein by reference).                                                                                                  
|       
|        | 10 | .3.3*         |  | Amendment No. 1 to the Employment Agreement by and between
    the Company and Albert A. Angrisani, dated as of June 28,
    2002 (filed as Exhibit 10.26 to the Companys Annual
    Report on Form 10-K for the fiscal year ended June 30,
    2002 and incorporated herein by reference).                                                                 
|       
|        | 10 | .3.4*         |  | Amendment No. 1 to the Letter Agreement of Albert A.
    Angrisani, dated as of June 28, 2002 (filed as
    Exhibit 10.27 to the Companys Annual Report on
    Form 10-K for the fiscal year ended June 30, 2002 and
    incorporated herein by reference).                                                                                                 
|       
|        | 10 | .3.5*         |  | Employment Agreement by and between the Company and George
    Terhanian, dated September 26, 2002 (filed as
    Exhibit 10.32 to the Companys Annual Report on
    Form 10-K for the fiscal year ended June 30, 2003 and
    incorporated herein by reference).                                                                                            
|       
|        | 10 | .3.6*         |  | Employment Agreement between the Company and Gordon S. Black,
    dated as of December 16, 2002 (filed as Exhibit 10.1
    to the Companys Quarterly Report on Form 10-Q for the
    fiscal quarter ended December 31, 2002 (erroneously
    referenced therein as Confidentiality and Non-Competition
    Agreement) and incorporated herein by reference).
|       
|        | 10 | .3.7*         |  | Form of Change in Control Agreement entered into by Company with
    each of the following individuals (filed as Exhibit 10.1 to
    the Companys Quarterly Report on Form 10-Q for the
    fiscal quarter ended March 31, 2003 and incorporated herein
    by reference):                                                                                  

| |  |                  |  |                     
| |  | ---------------- |  | --------------------
| |  | Dennis K. Bhame  |  | Arthur E. Coles     
| |  | Gareth Davies    |  | James E. Fredrickson
| |  | Ronald B. Knight |  | Peter J. Milla      
| |  | Gregory T. Novak |  | George B. Terhanian 
| |  | David B. Vaden   |  |                     

| |    |        |  |                                                                                                                                                                                                                                                                              
| | -- | ------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .3.8*  |  | Amendment to Employment Agreement by and between the Company and
    Gordon S. Black, dated July 1, 2003 (filed as
    Exhibit 10.30 to the Companys Annual Report on
    Form 10-K for the fiscal year ended June 30, 2003 and
    incorporated herein by reference).      
|
| | 10 | .3.9*  |  | Employment Agreement by and between the Company and Leonard R.
    Bayer, dated July 1, 2003 (filed as Exhibit 10.31 to
    the Companys Annual Report on Form 10-K for the
    fiscal year ended June 30, 2003 and incorporated herein by
    reference).                  
|
| | 10 | .3.10* |  | Letter Agreement of Albert A. Angrisani, effective as of
    July 1, 2003 (filed as Exhibit 10.33 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended June 30, 2003 and incorporated herein by
    reference).                                     
| | 10 | .3.11* |  | Employment Agreement by and between Total Research Corporation
    and Theresa Flanagan, dated January 1, 1999 (filed as
    Exhibit 10.34 to the Companys Annual Report on
    Form 10-K for the fiscal year ended June 30, 2003 and
    incorporated herein by reference).
|
| | 10 | .3.12* |  | Employment Agreement between the Company and Gregory T. Novak,
    dated November 7, 2003 (filed as Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the fiscal
    quarter ended December 31, 2003 and incorporated herein by
    reference).            

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|        |    |               |  |                                                                                                                                                                                                                                                                                                                          
|------- | -- | ------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |              
|Number  |    | Exhibit Title
|        |    |              
|        | 10 | .3.13*        |  | Employment Agreement between the Company and Robert E. Knapp,
    dated as of December 31, 2003 and effective as of
    January 26, 2004 (filed as Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    January 6, 2004 and incorporated herein by reference).                                         
|       
|        | 10 | .3.14*        |  | Employment Agreement between the Company and David Vaden, dated
    January 1, 2004 (filed as Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the fiscal
    quarter ended March 31, 2004 and incorporated herein by
    reference).                                                                 
|       
|        | 10 | .3.15*        |  | Form of Non-Qualified Stock Option Agreement between the Company
    and certain employees of Novatris, S.A. dated as of
    March 2, 2004 (filed as Exhibit 4.2 to the
    Companys Registration Statement on Form S-8 filed
    March 8, 2004 (Registration No. 333-113392) and
    incorporated herein by reference).
|       
|        | 10 | .3.16*        |  | Employment Agreement between the Company and Gregory T. Novak,
    dated April 1, 2004 (filed as Exhibit 10.2 to the
    Companys Quarterly Report on Form 10-Q for the fiscal
    quarter ended March 31, 2004 and incorporated herein by
    reference).                                                              
|       
|        | 10 | .3.17*        |  | Amended and Restated Employment Agreement between the Company
    and Albert Angrisani, effective as of April 1, 2004 (filed
    as Exhibit 99.2 to the Companys Current Report on
    Form 8-K filed on April 2, 2004 and incorporated
    herein by reference).                                                       
|       
|        | 10 | .3.18*        |  | Letter Agreement between the Company and Dee Allsop, dated
    September 9, 2004 (filed as Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the fiscal
    quarter ended September 30, 2004 and incorporated herein by
    reference).                                                                
|       
|        | 10 | .3.19*        |  | Letter Agreement between the Company and David Richardson, dated
    September 9, 2004 (filed as Exhibit 10.2 to the
    Companys Quarterly Report on Form 10-Q for the fiscal
    quarter ended September 30, 2004 and incorporated herein by
    reference).                                                          
|       
|        | 10 | .3.20*        |  | Letter Agreement between the Company and Richard B. Wirthlin,
    dated September 9, 2004 (filed as Exhibit 10.3 to the
    Companys Quarterly Report on Form 10-Q for the fiscal
    quarter ended September 30, 2004 and incorporated herein by
    reference).                                                       
|       
|        | 10 | .3.21*        |  | Employment Agreement between the Company and Frank J.
    Connolly, Jr., dated as of January 1, 2005 (filed as
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed January 4, 2005 and incorporated herein
    by reference).                                                                         
|       
|        | 10 | .3.22*        |  | Non-Qualified Stock Option Agreement between the Company and
    Frank J. Connolly, Jr., dated as of January 3, 2005
    (filed as Exhibit 10.2 to the Companys Current Report
    on Form 8-K filed January 4, 2005 and incorporated
    herein by reference).                                                         
|       
|        | 10 | .3.23*        |  | Amendment to Employment Agreement between the Company and Robert
    E. Knapp, dated as of January 1, 2005 (filed as
    Exhibit 10.3 to the Companys Current Report on
    Form 8-K filed January 4, 2005 and incorporated herein
    by reference).                                                                   
|       
|        | 10 | .3.24*        |  | Amendment to Employment Agreement between the Company and
    Leonard R. Bayer, dated as of January 1, 2005 (filed as
    Exhibit 10.4 to the Companys Current Report on
    Form 8-K filed January 4, 2005 and incorporated herein
    by reference).                                                                  
|       
|        | 10 | .3.25*        |  | Amendment to Employment Agreement between the Company and
    Gregory T. Novak, dated as of January 1, 2005 (filed as
    Exhibit 10.5 to the Companys Current Report on
    Form 8-K filed January 4, 2005 and incorporated herein
    by reference).                                                                  
|       
|        | 10 | .3.26*        |  | Letter agreement between the Company and Theresa A. Flanagan,
    dated as of April 26, 2005 (filed as Exhibit 10.1 to
    the Companys Current Report on Form 8-K filed
    April 29, 2005 and incorporated herein by reference).                                                                                      
|       
|        | 10 | .3.27*        |  | Form of Change in Control Agreement between the Company and each
    of Dee Allsop, Aled Morris, David Richardson and Stephan Sigaud
    (filed as Exhibit 10.1 to the Companys Current Report
    on Form 8-K filed May 31, 2005 and incorporated herein
    by reference).                                            
|       
|        | 10 | .3.28*        |  | Summary of Compensation Arrangements for Non-Employee Directors
    of Harris Interactive Inc. (filed as Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    June 13, 2005 and incorporated herein by reference).                                                                                     

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|        |    |               |  |                                                                                                                                                                                                                                                                                                  
|------- | -- | ------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |              
|Number  |    | Exhibit Title
|        |    |              
|       
|        | 10 | .3.29*        |  | Separation Agreement and Mutual Release of Claims effective as
    of June 30, 2005 between the Company and Robert E. Knapp
    (filed as Exhibit 10.1 to the Companys Current Report
    on Form 8-K filed July 6, 2005 and incorporated herein
    by reference).                             
|       
|        | 10 | .3.30*        |  | Amendment to Employment Agreement by and between the Company and
    Gregory T. Novak, dated as of May 24, 2005 and effective as
    of May 23, 2005 (filed as Exhibit 10.3.30 to the
    Companys Annual Report on Form 10K filed
    September 13, 2005 and incorporated herein by reference).
|       
|        | 10 | .3.31*        |  | Amended and Restated Employment Agreement between the Company
    and Gregory T. Novak, dated as of September 28, 2005 (filed
    as Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed October 3, 2005 and incorporated herein
    by reference).                               
|       
|        | 10 | .3.32*        |  | Description of Amended Executive Cash Bonus Plan as amended
    September 7, 2005 and September 8, 2005 (filed as
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K filed October 3, 2005 and incorporated herein
    by reference).                                              
|       
|        | 10 | .3.33*        |  | Description of Executive Officer Compensation Arrangements
    (filed as Exhibit 10.1 to the Companys Current Report
    on Form 8-K filed October 12, 2005 and incorporated
    herein by reference).                                                                                          
|       
|        | 10 | .3.34*        |  | Employment Agreement between the Company and Ronald E. Salluzzo,
    dated as of February 16, 2006 and effective as of
    March 6, 2006 (filed as Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    February 17, 2006 and incorporated herein by reference).               
|       
|        | 10 | .3.35*        |  | Form of Non-Qualified Stock Option Agreement between the Company
    and Ronald E. Salluzzo, dated as of March 6, 2006 (filed as
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K filed February 17, 2006 and incorporated
    herein by reference).                             
|       
|        | 10 | .3.36*        |  | Employment Agreement between the Company and David B. Vaden,
    dated as of April 3, 2006 and effective as of
    February 20, 2006 (filed as Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    April 7, 2006 and incorporated herein by reference).                       
|       
|        | 10 | .3.37*        |  | Amendment to Employment Agreement between the Company and Frank
    J. Connolly, Jr. dated as of April 28, 2006 (filed as
    Exhibit 10.4 to the Companys Quarterly Report on
    Form 10-Q filed May 10, 2006 and incorporated herein
    by reference).                                      
|       
|        | 10 | .3.38*        |  | Summary of Compensation Arrangements for Non-Employee Directors
    of Harris Interactive Inc. (filed as Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed May 9,
    2006 and incorporated herein by reference).                                                               
|       
|        | 10 | .3.39*        |  | Amendment Number 2 to Employment Agreement between the Company
    and Leonard R. Bayer, dated as of June 15, 2006 and
    effective as of July 1, 2006 (filed as Exhibit 10.1 to
    the Companys Current Report on Form 8-K filed
    June 20, 2006 and incorporated herein by reference).    
|       
|        | 10 | .3.40*        |  | Description of Cash Bonus Plan as amended August 31, 2006
    (filed under Item 1.01 of the Companys Current Report
    on Form 8-K filed August 25, 2006 and incorporated
    herein by reference).                                                                                            
|       
|        | 10 | .3.41*        |  | Modification of Salary Arrangement between the Company and
    Ronald E. Salluzzo.                                                                                                                                                                                                               
|       
|        | 10 | .3.42*        |  | Modification of Salary Arrangement between the Company and
    Gregory T. Novak.                                                                                                                                                                                                                 
|       
|        | 10 | .3.43*        |  | Summary of Compensation Agreements for Non-Employee Directors of
    Harris Interactive, effective as of November 1, 2006.                                                                                                                                                                       
|       
|        | 10 | .3.44*        |  | Summary of Salary Arrangements for Executive Officers.                                                                                                                                                                                                                                           
|       
|        | 10 | .3.45*        |  | Modification of Salary Arrangement between the Company and
    George B. Terhanian.                                                                                                                                                                                                              
|       
|        | 10 | .4            |  | Form of Option Agreement between the Company and certain of the
    Shareholders of Novatris, S.A. (filed as Exhibit 10.2 to
    the Companys Registration Statement on Form S-3 filed
    March 8, 2004 (Registration No. 333-113389) and
    incorporated herein by reference).               

95



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##### Table of Contents



|        |    |               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | ------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |              
|Number  |    | Exhibit Title
|        |    |              
|       
|        | 10 | .5.1          |  | Leases for 135, 155 & 60 Corporate Woods, Rochester,
    New York dated April 12, 1991 between Gordon S. Black
    Corporation and Corporate Woods Associates, together with all
    amendments thereto (filed as Exhibit 10.6.1 to the
    Companys Registration Statement on Form S-1 filed
    September 17, 1999 and incorporated herein by reference);
    amendments dated February 11, 2000, March 14, 2000 and
    October 1, 2000 (filed as Exhibit 10.6.1 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended June 30, 2001 and incorporated herein by
    reference).
|       
|        | 10 | .5.2          |  | Lease for 70 Carlson Road, Rochester, New York dated
    July 1, 1998 between Gordon S. Black Corporation and
    Carlson Park Associates, together with all amendments thereto
    (filed as Exhibit 10.6.2 to the Companys Registration
    Statement on Form S-1 filed September 17, 1999
    (Registration No. 333-87311) and incorporated herein by
    reference).                                                                                                                                                                                                                                  
|       
|        | 10 | .5.3          |  | Agreement of Sublease between the Company and The McCall Pattern
    Company, Inc., as successor-in-interest by merger to Butterick
    Company, Inc., dated as of June 8, 2004 (filed as
    Exhibit 10.5.4 to the Companys Current Report on
    Form 8-K filed March 18, 2005 and incorporated herein
    by reference).                                                                                                                                                                                                                                                                               
|       
|        | 10 | .5.4          |  | Lease Agreement between Wirthlin (formerly known as Decima
    Research) and WB&H Investments, dated September 15,
    1985 (filed as Exhibit 10.4 to the Companys Quarterly
    Report on Form 10-Q for the fiscal quarter ended
    September 30, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                           
|       
|        | 10 | .5.5          |  | Lease Agreement between Wirthlin (formerly known as Decima
    Research) and Richard B. Wirthlin Family LLC, dated
    April 23, 2002 (filed as Exhibit 10.5 to the
    Companys Quarterly Report on Form 10-Q for the fiscal
    quarter ended September 30, 2004 and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                             
|       
|        | 10 | .5.6          |  | Lease Agreement Amendment Number 1 between Wirthlin
    Worldwide, LLC and WB&H Investments, dated as of
    August 23, 2005 (filed as Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    August 26, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                       
|       
|        | 10 | .5.7          |  | Lease between Silk Developments Limited and Business Market
    Research Limited, dated July 15, 1997 (filed as
    Exhibit 10.5.8 to the Companys Annual Report on
    Form 10-K filed September 13, 2005 and incorporated
    herein by reference).                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .5.8          |  | Rent Review Memorandum between Silk Developments Limited and
    Business Market Research Limited dated August 30, 2002
    (filed as Exhibit 10.5.9 to the Companys Annual
    Report on Form 10-K filed September 13, 2005 and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .5.9          |  | Lease among Procter & Gamble (LLCP Limited),
    Procter & Gamble (Health & Beauty Care
    Limited, HI Europe Limited and Harris Interactive Inc, dated
    May 9, 2005 (filed as Exhibit 10.5.10 to the
    Companys Annual Report on Form 10-K filed
    September 13, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .5.10         |  | Agreement for Surrender among Procter & Gamble (LLCP
    Limited), Procter & Gamble (Health & Beauty
    Care Limited, HI Europe Limited and Harris Interactive Inc.,
    dated April 4, 2005 (filed as Exhibit 10.5.11 to the
    Companys Annual Report on Form 10-K filed
    September 13, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                
|       
|        | 10 | .5.11         |  | Lease between Merritt 7 Venture LLC and Harris Interactive,
    Inc., dated March 27, 2001 (filed as Exhibit 10.5.12
    to the Companys Annual Report on Form 10-K filed
    September 13, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .5.12         |  | Lease amendment Number 1 between Merritt 7 Venture LLC, and
    Harris Interactive Inc., dated as of January 21, 2005
    (filed as Exhibit 10.5.13 to the Companys Annual
    Report on Form 10-K filed September 13, 2005 and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10 | .5.13         |  | Lease Agreement Amendment Number 2 for 4665 Cornell Rd, Blue
    Ash, Ohio dated April 9, 2003 between Wirthlin Worldwide
    LLC and CR Blue Ash LLC. (filed as Exhibit 10.5.15 to the
    Companys Annual Report on Form 10-K filed
    September 13, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                       

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##### Table of Contents



|        |    |               |  |                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |              
|Number  |    | Exhibit Title
|        |    |              
|       
|        | 10 | .5.14         |  | Lease Agreement Amendment Number 8 between Harris Interactive
    Inc, and 5 Independence Associates Limited Partnership for 5
    Independence Way, Princeton, New Jersey dated February 24,
    2004 (filed as Exhibit 10.5.16 to the Companys Annual
    Report on Form 10-K filed September 13, 2005 and
    incorporated herein by reference).
|       
|        | 10 | .5.15         |  | Lease between Meggitt Properties plc and Business Market
    Research Limited, dated July 31, 2000.                                                                                                                                                                                                                                                 
|       
|        | 10 | .5.16         |  | Rent Review Memorandum between Meggitt Properties plc and
    Business Market Research Limited dated May 9, 2006.                                                                                                                                                                                                                                   
|       
|        | 10 | .5.17         |  | Lease between Seiko UK Limited and HI Europe Limited, dated
    July 29, 2005.                                                                                                                                                                                                                                                                      
|       
|        | 10 | .6.1          |  | Revolving Credit Facility between Gordon S. Black Corporation
    and Manufacturers and Traders Trust Company dated
    August 18, 1999 (filed as Exhibit 10.9 to the
    Companys Registration Statement on Form S-1/ A filed
    October 26, 1999 (Registration No. 333-87311) and
    incorporated herein by reference).                        
|       
|        | 10 | .6.2          |  | Amendment to Revolving Credit Facility between the Company and
    Manufacturers and Traders Trust Company dated March 2, 2004
    (filed as Exhibit 10.6.2 to the Companys Annual
    Report on Form 10-K for the fiscal year ended June 30,
    2004 and incorporated herein by reference).                                                      
|       
|        | 10 | .7            |  | Amended and Restated Investment Agreement between Riedman
    Corporation and the Company dated October 15, 1991 (filed
    as Exhibit 10.12 to the Companys Registration
    Statement on Form S-1/ A filed October 26, 1999
    (Registration No. 333-87311) and incorporated herein by
    reference).                                          
|       
|        | 10 | .8            |  | Registration Agreement between the Company and Riedman
    Corporation dated as of October 15, 1999 (filed as
    Exhibit 10.17 to the Companys Registration Statement
    on Form S-1/ A filed October 26,1999 (Registration
    No. 333-87311) and incorporated herein by reference).                                                            
|       
|        | 10 | .9            |  | Escrow Agreement by and among the Company, Manufacturers and
    Traders Trust Company, and the Stockholders of Wirthlin, dated
    as of September 8, 2004 (filed as Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    September 9, 2004 and incorporated herein by reference).                                               
|       
|        | 10 | .10           |  | Form of Noncompetition, Nondisclosure and Nonsolicitation
    Agreement by and among the Company and certain of the
    Stockholders of Wirthlin, dated as of September 8, 2004
    (filed as Exhibit 10.3 to the Companys Current Report
    on Form 8-K filed September 9, 2004 and incorporated
    herein by reference).                       
|       
|        | 10 | .11           |  | Form of Release given by each of the Stockholders of Wirthlin,
    dated as of September 8, 2004 (filed as Exhibit 10.4
    to the Companys Current Report on Form 8-K filed
    September 9, 2004 and incorporated herein by reference).                                                                                                          
|       
|        | 10 | .12           |  | Consent, Waiver and Amendment to Loan Agreement by and between
    Wirthlin and SunTrust Bank, dated as of September 7, 2004
    (filed as Exhibit 10.5 to the Companys Current Report
    on Form 8-K filed September 9, 2004 and incorporated
    herein by reference).                                                                          
|       
|        | 10 | .13           |  | Letter agreement by and among Wirthlin, SunTrust Bank and the
    guarantors party thereto dated as of February 6, 2002
    (filed as Exhibit 10.6 to the Companys Current Report
    on Form 8-K filed September 9, 2004 and incorporated
    herein by reference).                                                                               
|       
|        | 10 | .14           |  | Commercial Note by Wirthlin in favor of SunTrust Bank, dated as
    of September 7, 2004 (filed as Exhibit 10.7 to the
    Companys Current Report on Form 8-K filed
    September 9, 2004 and incorporated herein by reference).                                                                                                                  
|       
|        | 10 | .15           |  | Commercial Note by Wirthlin in favor of SunTrust Bank, dated as
    of February 6, 2002 (filed as Exhibit 10.8 to the
    Companys Current Report on Form 8-K filed
    September 9, 2004 and incorporated herein by reference).                                                                                                                   

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##### Table of Contents



|        |    |               |  |                                                                                                                                                                                                                                                                                                
|------- | -- | ------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |              
|Number  |    | Exhibit Title
|        |    |              
|       
|        | 10 | .16           |  | Promissory Note issued by Wirthlin to James Granger, dated
    April 29, 2004 (filed as Exhibit 10.14 to the
    Companys Quarterly Report on Form 10-Q for the fiscal
    quarter ended September 30, 2004 and incorporated herein by
    reference).                                        
|       
|        | 10 | .17           |  | Exclusive License Agreement by and between the Company and
    Taylor Nelson Sofres Plc, dated as of December 31, 2004
    (filed as Exhibit 10.10 to the Companys Quarterly
    Report on Form 10-Q for the fiscal quarter ended
    December 31, 2004 and incorporated herein by reference).
|       
|        | 10 | .18           |  | Stock Purchase Agreement dated May 19, 2005, by and among
    Minoru Aoo, M&A Create Co., Ltd., and Harris Interactive
    International Inc. (filed as Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    May 23, 2005 and incorporated herein by reference).             
|       
|        | 10 | .19           |  | Trade Mark Assignment Agreement by and between the Company and
    Taylor-Nelson Sofres Plc, dated as of January 31, 2006
    (filed as Exhibit 10.1 to the Companys Current Report
    on Form 8-K filed February 2, 2006 and incorporated
    herein by reference).                         
|       
|        | 10 | .20           |  | Purchase/ Sale Agreement between the Company, Charles J. Fombrun
    and Reputation Institute, Inc., dated as of May 15, 2006
    (filed as Exhibit 10.1 to the Companys Current Report
    on Form 8-K filed May 19, 2006 and incorporated herein
    by reference).                         
|       
|        | 10 | .21           |  | Credit Agreement between JPMorgan Chase Bank, N.A. and the
    Company, dated as of August 15, 2006 (filed as
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed August 21, 2006 and incorporated herein
    by reference).                                                
|       
|        | 10 | .22           |  | Line of Credit Note between JPMorgan Chase Bank, N.A. and the
    Company, dated as of August 15, 2006 (filed as
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K filed August 21, 2006 and incorporated herein
    by reference).                                             
|       
|        | 21 |               |  | List of Subsidiaries.                                                                                                                                                                                                                                                                          
|       
|        | 23 | .1            |  | Consent of Independent Registered Public Accounting Firm (filed
    herewith).                                                                                                                                                                                                                 
|       
|        | 24 |               |  | Power of Attorney (included on page 90 of this Report).                                                                                                                                                                                                                                        
|       
|        | 31 | .1            |  | Certificate of the Chief Executive Officer pursuant to
    18 U.S.C. §1350 (Section 302 of the
    Sarbanes-Oxley Act of 2002) (filed herewith).                                                                                                                                               
|       
|        | 31 | .2            |  | Certificate of the Chief Financial Officer pursuant to
    18 U.S.C. §1350 (Section 302 of the
    Sarbanes-Oxley Act of 2002) (filed herewith).                                                                                                                                               
|       
|        | 32 | .1            |  | Certificate of the Chief Executive Officer pursuant to
    18 U.S.C. §1350 (Section 906 of the
    Sarbanes-Oxley Act of 2002) (filed herewith).                                                                                                                                               
|       
|        | 32 | .2            |  | Certificate of the Chief Financial Officer pursuant to
    18 U.S.C. §1350 (Section 906 of the
    Sarbanes-Oxley Act of 2002) (filed herewith).                                                                                                                                               






|  |                                                                 
|- | ----------------------------------------------------------------
|* | Denotes management contract or compensatory plan or arrangement.

98