**EXHIBIT      13**

**Analysts      International**

**Annual      Report**

**2006**

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**Inside      Front Cover**

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**Financial      Highlights**

|  ***(Dollars                in thousands except per share amounts)***                             |   | **Year                Ended****December                30, 2006** |    | **Year                Ended****December                31, 2005** |   |
|--------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|---------|-------------------------------------------------------------------|--------|
|                                                                                                   |   |                                                              |    |                                                              |   |
| Revenue:                                                                                               |   |                                                              |    |                                                              |   |   |   |
| Professional                services provided directly                                                 |   | $                                                                 | 261,489 |                                                              | $      | 263,121 |   |
| Professional                services provided through subsuppliers                                     |   |                                                              | 54,902  |                                                              |   | 34,431 |   |
| Product                sales                                                                           |   |                                                              | 30,596  |                                                              |   | 24,746 |   |
| Total                revenue                                                                           |   |                                                              | 346,987 |                                                              |   | 322,298 |   |
|                                                                                                   |   |                                                              |    |                                                              |   |   |   |
| Loss                before income taxes                                                                |   |                                                              | (1,019  | )                                                                 |   | (17,649 | ) |
| Net                loss                                                                                |   |                                                              | (1,060  | )                                                                 |   | (17,699 | ) |
|                                                                                                   |   |                                                              |    |                                                              |   |   |   |
| Per                share of common stock:                                                              |   |                                                              |    |                                                              |   |   |   |
| Net                loss *(basic                and diluted)*                                           |   |                                                              | (.04    | )                                                                 |   | (.72 | ) |
| Shareholders’                equity                                                              |   |                                                              | 2.26    |                                                              |   | 2.29 |   |
| Dividends                declared                                                                      |   |                                                              | .00     |                                                              |   | .00 |   |
|                                                                                                   |   |                                                              |    |                                                              |   |   |   |
| Average                common and common equivalent shares outstanding *(in                thousands)* |   |                                                              | 24,645  |                                                              |   | 24,495 |   |
|                                                                                                   |   |                                                              |    |                                                              |   |   |   |
| Number                of technical consultants                                                         |   |                                                              | 2,277   |                                                              |   | 2,449 |   |
|                                                                                                   |   |                                                              |    |                                                              |   |   |   |
| Working                capital                                                                         |   | $                                                                 | 28,841  |                                                              | $      | 26,182 |   |
| Current                ratio                                                                           |   |                                                              | 1.76    |                                                              |   | 1.61 |   |

----

**Management’s      Discussion and Analysis of Financial Condition and Results of      Operations**

*Introduction      and Overview of 2006 Events*

*Market      Conditions and Economics of Our Business*

----

*Strategy*

|   | - | IP                Communications which includes Wireless, IP Telecommunictions, Call                Center                and Security Services |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | Storage                Solutions which includes storage product support and VMware                services |
|--------|---|------------------------------------------------------------------------------------------------------------|

|   | - | Lawson                Services which includes integration, customization, and administration                of                Lawson Software applications |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | IT                Outsourcing which includes Application Outsourcing, Help Desk, Hosting,                and Field Engineering services |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------|

*Other      Factors*

*Overview      of Results of 2006 Operations*

----

*Estimates      of Future Operating Results*

*Allowance      for Doubtful Accounts*

*Accrual      of Unreported Medical Claims*

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*Revenue      Recognition*

*Subsupplier      Revenue*

*Goodwill      and Other Intangible Impairment*

----

*Deferred      Taxes*

*Restructuring      and other severance related costs*

*Sales      Taxes*

*Income      Taxes*

*Accounting      for Uncertainty in Income Taxes*

----

**RESULTS      OF OPERATIONS, YEAR ENDED DECEMBER 30, 2006 VS. YEAR ENDED DECEMBER 31,      2005**

|                                                                 |   | Year                EndedDecember                30, 2006 |     | Year                EndedDecember                31, 2005 |   | Increase                (Decrease) |   |
|----------------------------------------------------------------------|--------|-----------------------------------------------------------|----------|-----------------------------------------------------------|--------|------------------------------------|--------|
| *(Dollars                in thousands)*                              |   | Amount                                                    |     | %                ofRevenue                                |   | Amount                             |   | %                ofRevenue |   | Amount |   | %Inc                (Dec) |   | As                %of                Revenue |   |
| Revenue:                                                             |   |                                                      |     |                                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Professional                services provided directly               |   | $                                                         | 261,489  |                                                      |   | 75.4                               | %      | $ | 263,121 |   |   | 81.6 | % | $ | (1,632 | ) |   | (0.6 | %) |   | (6.2 | %) |
| Professional                services provided through subsuppliers   |   |                                                      | 54,902   |                                                      |   | 15.8                               |   |   | 34,431 |   |   | 10.7 |   |   | 20,471 |   |   | 59.5 |   |   | 5.1 |   |
| Product                sales                                         |   |                                                      | 30,596   |                                                      |   | 8.8                                |   |   | 24,746 |   |   | 7.7 |   |   | 5,850 |   |   | 23.6 |   |   | 1.1 |   |
| Total                revenue                                         |   |                                                      | 346,987  |                                                      |   | 100.0                              |   |   | 322,298 |   |   | 100.0 |   |   | 24,689 |   |   | 7.7 |   |   | 0.0 |   |
|                                                                 |   |                                                      |     |                                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries,                contracted services and direct charges      |   |                                                      | 260,619  |                                                      |   | 75.1                               |   |   | 240,100 |   |   | 74.5 |   |   | 20,519 |   |   | 8.5 |   |   | 0.6 |   |
| Cost                of product sales                                 |   |                                                      | 27,149   |                                                      |   | 7.8                                |   |   | 22,550 |   |   | 7.0 |   |   | 4,599 |   |   | 20.4 |   |   | 0.8 |   |
| Selling,                administrative and other operating costs     |   |                                                      | 58,847   |                                                      |   | 17.0                               |   |   | 61,053 |   |   | 18.9 |   |   | (2,206 | ) |   | (3.6 | ) |   | (1.9 | ) |
| Amortization                of intangible assets                     |   |                                                      | 1,053    |                                                      |   | 0.3                                |   |   | 982 |   |   | 0.3 |   |   | 71 |   |   | 7.2 |   |   | 0.0 |   |
| Restructuring                costs and other severance related costs |   |                                                      | (51      | )                                                         |   | 0.0                                |   |   | 3,914 |   |   | 1.2 |   |   | (3,965 | ) |   | (101.3 | ) |   | (1.2 | ) |
| Loss                on asset disposal                                |   |                                                      | --  |                                                      |   | 0.0                                |   |   | 1,825 |   |   | 0.6 |   |   | (1,825 | ) |   | (100.0 | ) |   | (0.6 | ) |
| Goodwill                Impairment                                   |   |                                                      | --  |                                                      |   | 0.0                                |   |   | 7,050 |   |   | 2.2 |   |   | (7,050 | ) |   | (100.0 | ) |   | (2.2 | ) |
| Expenses                related to attempted merger                  |   |                                                      | (327     | )                                                         |   | (0.1                               | )      |   | 2,129 |   |   | 0.7 |   |   | (2,456 | ) |   | (115.4 | ) |   | (0.8 | ) |
| Non-operating                income                                  |   |                                                      | (20      | )                                                         |   | 0.0                                |   |   | (50 | ) |   | 0.0 |   |   | (30 | ) |   | (60.0 | ) |   | 0.0 |   |
| Interest                expense                                      |   |                                                      | 736      |                                                      |   | 0.2                                |   |   | 394 |   |   | 0.1 |   |   | 342 |   |   | 86.8 |   |   | 0.1 |   |
| Loss                before taxes                                     |   |                                                      | (1,019   | )                                                         |   | (0.3                               | )      |   | (17,649 | ) |   | (5.5 | ) |   | 16,630 |   |   | (94.2 | ) |   | 5.2 |   |
|                                                                 |   |                                                      |     |                                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                taxes                                          |   |                                                      | 41       |                                                      |   | 0.0                                |   |   | 50 |   |   | -- |   |   | (9 | ) |   | (18.0 | ) |   | 0.0 |   |
| Net                loss                                              |   | $                                                         | (1,060   | )                                                         |   | (0.3                               | %)     | $ | (17,699 | ) |   | (5.5 | %) | $ | 16,639 |   |   | (94.0 | %) |   | 5.2 | % |
|                                                                 |   |                                                      |     |                                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Personnel:                                                           |   |                                                      |     |                                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Management                and Administrative                         |   |                                                      | 403      |                                                      |   |                               |   |   | 400 |   |   |   |   |   | 3 |   |   | .8 | % |   |   |   |
| Technical                Consultants                                 |   |                                                      | 2,277    |                                                      |   |                               |   |   | 2,449 |   |   |   |   |   | (172 | ) |   | (7.0 | %) |   |   |   |

----

*Revenue*

*Salaries,      Contracted Services and Direct Charges*

*Cost      of Product Sales*

*Selling,      Administrative and Other Operating Costs*

*Amortization      of Intangible Assets*

----

*Restructuring      Costs and Other Severance Related Costs*

*Loss      on Asset Disposal*

*Goodwill      Impairment*

*Expenses      Related to Attempted Merger*

*Non-Operating      Income*

*Interest      Expense*

*Income      Taxes*

*Personnel*

----

**RESULTS      OF OPERATIONS, YEAR ENDED DECEMBER 31, 2005 VS. YEAR ENDED JANUARY 1,      2005**

|                                                                 |   | Year                EndedDecember                31, 2005 |    | Year                EndedJanuary                1, 2005 |   |  Increase                (Decrease) |   |
|----------------------------------------------------------------------|--------|-----------------------------------------------------------|---------|---------------------------------------------------------|--------|------------------------------------------|--------|
| *(Dollars                in thousands)*                              |   | Amount                                                    |    | %                ofRevenue                              |   | Amount                                   |   | %                ofRevenue |   | Amount |   | %Inc                (Dec) |   | As                % ofRevenue |   |
| Revenue:                                                             |   |                                                      |    |                                                    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Professional                services provided directly               |   | $                                                         | 263,121 |                                                    |   | 81.6                                     | %      | $ | 269,610 |   |   | 78.9 | % | $ | (6,489 | ) |   | (2.4 | %) |   | 2.7 | % |
| Professional                services provided through subsuppliers   |   |                                                      | 34,431  |                                                    |   | 10.7                                     |   |   | 55,806 |   |   | 16.3 |   |   | (21,375 | ) |   | (38.3 | ) |   | (5.6 | ) |
| Product                sales                                         |   |                                                      | 24,746  |                                                    |   | 7.7                                      |   |   | 16,196 |   |   | 4.8 |   |   | 8,550 |   |   | 52.8 |   |   | 2.9 |   |
| Total                revenue                                         |   |                                                      | 322,298 |                                                    |   | 100.0                                    |   |   | 341,612 |   |   | 100.0 |   |   | (19,314 | ) |   | (5.7 | ) |   | 0.0 |   |
|                                                                 |   |                                                      |    |                                                    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries,                contracted services and direct charges      |   |                                                      | 240,100 |                                                    |   | 74.5                                     |   |   | 261,005 |   |   | 76.4 |   |   | (20,905 | ) |   | (8.0 | ) |   | (1.9 | ) |
| Cost                of product sales                                 |   |                                                      | 22,550  |                                                    |   | 7.0                                      |   |   | 14,964 |   |   | 4.4 |   |   | 7,586 |   |   | 50.7 |   |   | 2.6 |   |
| Selling,                administrative and other operating costs     |   |                                                      | 61,053  |                                                    |   | 18.9                                     |   |   | 61,015 |   |   | 17.9 |   |   | 38 |   |   | 0.1 |   |   | 1.0 |   |
| Amortization                of intangible assets                     |   |                                                      | 982     |                                                    |   | 0.3                                      |   |   | 774 |   |   | 0.2 |   |   | 208 |   |   | 26.9 |   |   | 0.1 |   |
| Restructuring                costs and other severance related costs |   |                                                      | 3,914   |                                                    |   | 1.2                                      |   |   | -- |   |   | -- |   |   | 3,914 |   |   | 100.0 |   |   | 1.1 |   |
| Loss                on asset disposal                                |   |                                                      | 1,825   |                                                    |   | 0.6                                      |   |   | -- |   |   | -- |   |   | 1,825 |   |   | 100.0 |   |   | 0.6 |   |
| Goodwill                Impairment                                   |   |                                                      | 7,050   |                                                    |   | 2.2                                      |   |   | -- |   |   | -- |   |   | 7,050 |   |   | 100.0 |   |   | 2.2 |   |
| Expenses                related to attempted merger                  |   |                                                      | 2,129   |                                                    |   | 0.7                                      |   |   | -- |   |   | -- |   |   | 2,129 |   |   | 100.0 |   |   | 0.6 |   |
| Non-operating                income                                  |   |                                                      | (50     | )                                                       |   | 0.0                                      |   |   | (39 | ) |   | (0.0 | ) |   | 11 |   |   | 28.2 |   |   | 0.0 |   |
| Interest                expense                                      |   |                                                      | 394     |                                                    |   | 0.1                                      |   |   | 41 |   |   | 0.0 |   |   | 353 |   |   | 861.0 |   |   | 0.1 |   |
| Net                (loss) income before taxes                        |   |                                                      | (17,649 | )                                                       |   | (5.5                                     | )      |   | 3,852 |   |   | 1.1 |   |   | (21,501 | ) |   | (558.2 | ) |   | (6.6 | ) |
|                                                                 |   |                                                      |    |                                                    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                taxes                                          |   |                                                      | 50      |                                                    |   | --                                       |   |   | -- |   |   | -- |   |   | 50 |   |   | 100.0 |   |   | 0.0 |   |
| Net                (loss) income                                     |   | $                                                         | (17,699 | )                                                       |   | (5.5                                     | %)     | $ | 3,852 |   |   | 1.1 | % | $ | (21,551 | ) |   | (559.5 | %) |   | (6.6 | %) |
|                                                                 |   |                                                      |    |                                                    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Personnel:                                                           |   |                                                      |    |                                                    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Management                and Administrative                         |   |                                                      | 400     |                                                    |   |                                     |   |   | 430 |   |   |   |   |   | (30 | ) |   | (7.0 | %) |   |   |   |
| Technical                Consultants                                 |   |                                                      | 2,449   |                                                    |   |                                     |   |   | 2,448 |   |   |   |   |   | 1 |   |   | 0.0 | % |   |   |   |

----

*Revenue*

*Salaries,      Contracted Services and Direct Charges*

*Cost      of Product Sales*

*Selling,      Administrative and Other Operating Costs*

----

*Amortization      of Intangible Assets*

*Non-Operating      Income*

*Interest      Expense*

*Expenses      Related to Attempted Merger*

*Restructuring      Costs and Other Severance Related Costs*

*Loss      on Asset Disposal*

*Goodwill      Impairment*

*Income      Taxes*

*Personnel*

----

**Liquidity      and Capital Resources**

| ***(Dollars                in thousands)***     |   | **December                30,****2006** |   | **December                31,****2005** |   | **Increase****(Decrease)** |   | **Percentage****Increase****(Decrease)** |   |
|-------------------------------------------------|--------|-----------------------------------------|--------|-----------------------------------------|--------|----------------------------|--------|------------------------------------------|--------|
|                                            |   |                                    |   |                                    |   |                       |   |                                     |   |
| Cash                and cash equivalents        |   | $                                       | 179    |                                    | $      | 64                         |   | $                                        | 115    |   |   | 179.7 | % |
| Accounts                receivable              |   |                                    | 64,196 |                                    |   | 66,968                     |   |                                     | (2,772 | ) |   | (4.1 | ) |
| Other                current assets             |   |                                    | 2,484  |                                    |   | 2,383                      |   |                                     | 101    |   |   | 4.2 |   |
| Total                current assets             |   |                                    | 66,859 |                                    |   | 69,415                     |   |                                     | (2,556 | ) |   | (3.7 | ) |
|                                            |   |                                    |   |                                    |   |                       |   |                                     |   |   |   |   |   |
| Accounts                payable                 |   |                                    | 24,411 |                                    |   | 24,581                     |   |                                     | (170   | ) |   | (0.7 | ) |
| Salaries                and vacations           |   |                                    | 7,416  |                                    |   | 8,260                      |   |                                     | (844   | ) |   | (10.2 | ) |
| Line                of credit                   |   |                                    | 2,661  |                                    |   | 5,000                      |   |                                     | (2,339 | ) |   | (46.8 | ) |
| Restructuring                accruals - current |   |                                    | 385    |                                    |   | 971                        |   |                                     | (586   | ) |   | (60.4 | ) |
| Other                current liabilities        |   |                                    | 3,145  |                                    |   | 4,421                      |   |                                     | (1,276 | ) |   | (28.9 | ) |
|                                            |   |                                    |   |                                    |   |                       |   |                                     |   |   |   |   |   |
| Total                current liabilities        |   |                                    | 38,018 |                                    |   | 43,233                     |   |                                     | (5,215 | ) |   | (12.1 | ) |
|                                            |   |                                    |   |                                    |   |                       |   |                                     |   |   |   |   |   |
| Working                capital                  |   | $                                       | 28,841 |                                    | $      | 26,182                     |   | $                                        | 2,659  |   |   | 10.2 | % |
| Current                ratio                    |   |                                    | 1.76   |                                    |   | 1.61                       |   |                                     | .15    |   |   | 9.3 |   |
|                                            |   |                                    |   |                                    |   |                       |   |                                     |   |   |   |   |   |
| Total                shareholders’ equity |   | $                                       | 55,734 |                                    | $      | 56,312                     |   | $                                        | (578   | ) |   | (1.0 | %) |

*Cash      Requirements*

*Sources      and Uses of Cash/Credit Facility*

----

| ***(In                thousands)***  |   | **1                Year** |                             | **2-3                Years** |   | **4-5                Years** |   | **Over                5 Years** |   | **Total** |   |
|--------------------------------------|--------|---------------------------|----------------------------------|------------------------------|--------|------------------------------|--------|---------------------------------|--------|-----------|--------|
|                                 |   |                      |                             |                         |   |                         |   |                            |   |      |   |
| Line                of Credit:       |   |                      |     --  |                         |   | --                      |   | $                               | 2,661  |      |   | --  |   | $ | 2,661 |   |
|                                 |   |                      |                             |                         |   |                         |   |                            |   |      |   |   |   |   |   |   |
| Operating                Leases      |   | $                         | 4,188                            |                         | $      | 5,476                        |   |                            | 3,982  |      | $      | 795 |   |   | 14,441 |   |
|                                 |   |                      |                             |                         |   |                         |   |                            |   |      |   |   |   |   |   |   |
| Deferred                Compensation |   |                      | 208                              |                         |   | 1,174                        |   |                            | 280    |      |   | 865 |   |   | 2,527 |   |
|                                 |   |                      |                             |                         |   |                         |   |                            |   |      |   |   |   |   |   |   |
| Total                                |   | $                         | 4,396                            |                         | $      | 6,650                        |   | $                               | 6,923  |      | $      | 1,660 |   | $ | 19,629 |   |

* *

*      Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement      No. 109,*
*      Accounting for Income Taxes.*

*Fair      Value Measurements.*

----

**Consolidated      Balance Sheets**

| ***(Dollars                in thousands except per share amounts)***                                                                                                                    |   | **December                30,****2006** |   | **December                31,****2005** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                    |   |                                    |   |                                    |   |
| **ASSETS**                                                                                                                                                                              |   |                                    |   |                                    |   |   |   |
|                                                                                                                                                                                    |   |                                    |   |                                    |   |   |   |
| Current                assets:                                                                                                                                                          |   |                                    |   |                                    |   |   |   |
| Cash                and cash equivalents                                                                                                                                                |   | $                                       | 179    |                                    | $      | 64 |   |
| Accounts                receivable, less allowance for doubtful accounts of $1,423 and $2,106,                respectively                                                              |   |                                    | 64,196 |                                    |   | 66,968 |   |
| Prepaid                expenses and other current assets                                                                                                                                |   |                                    | 2,484  |                                    |   | 2,383 |   |
| Total                current assets                                                                                                                                                     |   |                                    | 66,859 |                                    |   | 69,415 |   |
|                                                                                                                                                                                    |   |                                    |   |                                    |   |   |   |
| Property                and equipment, net                                                                                                                                              |   |                                    | 2,925  |                                    |   | 4,056 |   |
| Intangible                assets other than goodwill, net of accumulated amortization of $5,550                and                $4,497, respectively                                  |   |                                    | 11,245 |                                    |   | 12,298 |   |
| Goodwill                                                                                                                                                                                |   |                                    | 11,799 |                                    |   | 11,799 |   |
| Other                assets                                                                                                                                                             |   |                                    | 3,403  |                                    |   | 4,436 |   |
|                                                                                                                                                                                    |   | $                                       | 96,231 |                                    | $      | 102,004 |   |
|                                                                                                                                                                                    |   |                                    |   |                                    |   |   |   |
|                                                                                                                                                                                    |   |                                    |   |                                    |   |   |   |
| **LIABILITIES                AND SHAREHOLDERS' EQUITY**                                                                                                                                 |   |                                    |   |                                    |   |   |   |
|                                                                                                                                                                                    |   |                                    |   |                                    |   |   |   |
| Current                liabilities:                                                                                                                                                     |   |                                    |   |                                    |   |   |   |
| Accounts                payable                                                                                                                                                         |   | $                                       | 24,411 |                                    | $      | 24,581 |   |
| Salaries                and vacations                                                                                                                                                   |   |                                    | 7,416  |                                    |   | 8,260 |   |
| Line                of credit                                                                                                                                                           |   |                                    | 2,661  |                                    |   | 5,000 |   |
| Deferred                revenue                                                                                                                                                         |   |                                    | 1,267  |                                    |   | 1,645 |   |
| Restructuring                accrual                                                                                                                                                    |   |                                    | 385    |                                    |   | 971 |   |
| Health                care reserves and other                                                                                                                                           |   |                                    | 1,670  |                                    |   | 2,242 |   |
| Deferred                compensation                                                                                                                                                    |   |                                    | 208    |                                    |   | 534 |   |
| Total                current liabilities                                                                                                                                                |   |                                    | 38,018 |                                    |   | 43,233 |   |
|                                                                                                                                                                                    |   |                                    |   |                                    |   |   |   |
| Non-current                liabilities                                                                                                                                                  |   |                                    |   |                                    |   |   |   |
| Deferred                compensation                                                                                                                                                    |   |                                    | 2,319  |                                    |   | 1,878 |   |
| Restructuring                accrual                                                                                                                                                    |   |                                    | 160    |                                    |   | 581 |   |
| Total                non-current liabilities                                                                                                                                            |   |                                    | 2,479  |                                    |   | 2,459 |   |
| Commitments                (Note H)                                                                                                                                                     |   |                                    |   |                                    |   |   |   |
| Shareholders'                equity:                                                                                                                                                    |   |                                    |   |                                    |   |   |   |
| Common                stock, par value $.10 a share; authorized 120,000,000 shares; issued                and                outstanding 24,695,396 and 24,604,063 shares, respectively |   |                                    | 2,469  |                                    |   | 2,460 |   |
| Additional                capital                                                                                                                                                       |   |                                    | 22,079 |                                    |   | 21,606 |   |
| Retained                earnings                                                                                                                                                        |   |                                    | 31,186 |                                    |   | 32,246 |   |
| Total                shareholders' equity                                                                                                                                               |   |                                    | 55,734 |                                    |   | 56,312 |   |
|                                                                                                                                                                                    |   | $                                       | 96,231 |                                    | $      | 102,004 |   |

----

**Consolidated      Statements of Operations**

|                                                                   |   | **Fiscal                Year** |    |
|------------------------------------------------------------------------|--------|--------------------------------|---------|
| ***(In                thousands except per share amounts)***           |   | **2006**                       |    | **2005** |   | **2004** |   |
|                                                                   |   |                           |    |   |   |   |   |
| Revenue:                                                               |   |                           |    |   |   |   |   |   |   |   |
| Professional                services provided directly                 |   | $                              | 261,489 |   | $ | 263,121 |   | $ | 269,610 |   |
| Professional                services provided through subsuppliers     |   |                           | 54,902  |   |   | 34,431 |   |   | 55,806 |   |
| Product                sales                                           |   |                           | 30,596  |   |   | 24,746 |   |   | 16,196 |   |
| Total                revenue                                           |   |                           | 346,987 |   |   | 322,298 |   |   | 341,612 |   |
|                                                                   |   |                           |    |   |   |   |   |   |   |   |
| Operating                expenses:                                     |   |                           |    |   |   |   |   |   |   |   |
| Salaries,                contracted services and direct charges        |   |                           | 260,619 |   |   | 240,100 |   |   | 261,005 |   |
| Cost                of product sales                                   |   |                           | 27,149  |   |   | 22,550 |   |   | 14,964 |   |
| Selling,                administrative and other operating costs       |   |                           | 58,847  |   |   | 61,053 |   |   | 61,015 |   |
| Amortization                of intangible assets                       |   |                           | 1,053   |   |   | 982 |   |   | 774 |   |
| Restructuring                and other severance related costs         |   |                           | (51     | ) |   | 3,914 |   |   | -- |   |
| Loss                on asset disposal                                  |   |                           | --      |   |   | 1,825 |   |   | -- |   |
| Goodwill                impairment                                     |   |                           | --      |   |   | 7,050 |   |   | -- |   |
| Expenses                related to attempted merger                    |   |                           | (327    | ) |   | 2,129 |   |   | -- |   |
|                                                                   |   |                           |    |   |   |   |   |   |   |   |
| Operating                (loss) income                                 |   |                           | (303    | ) |   | (17,305 | ) |   | 3,854 |   |
|                                                                   |   |                           |    |   |   |   |   |   |   |   |
| Non-operating                income                                    |   |                           | 20      |   |   | 50 |   |   | 39 |   |
| Interest                expense                                        |   |                           | 736     |   |   | 394 |   |   | 41 |   |
|                                                                   |   |                           |    |   |   |   |   |   |   |   |
| (Loss)                income before income taxes                       |   |                           | (1,019  | ) |   | (17,649 | ) |   | 3,852 |   |
|                                                                   |   |                           |    |   |   |   |   |   |   |   |
| Income                taxes                                            |   |                           | 41      |   |   | 50 |   |   | -- |   |
|                                                                   |   |                           |    |   |   |   |   |   |   |   |
| Net                (loss) income                                       |   | $                              | (1,060  | ) | $ | (17,699 | ) | $ | 3,852 |   |
|                                                                   |   |                           |    |   |   |   |   |   |   |   |
| Per                common share (basic):                               |   |                           |    |   |   |   |   |   |   |   |
| Net                (loss) income:                                      |   | $                              | (.04    | ) | $ | (.72 | ) | $ | .16 |   |
|                                                                   |   |                           |    |   |   |   |   |   |   |   |
| Per                common share (diluted):                             |   |                           |    |   |   |   |   |   |   |   |
| Net                (loss) income:                                      |   | $                              | (.04    | ) | $ | (.72 | ) | $ | .16 |   |
|                                                                   |   |                           |    |   |   |   |   |   |   |   |
| Average                common shares outstanding                       |   |                           | 24,645  |   |   | 24,495 |   |   | 24,212 |   |
| Average                common and common equivalent shares outstanding |   |                           | 24,645  |   |   | 24,495 |   |   | 24,398 |   |

----

**Consolidated      Statements of Cash Flows**

|                                                                                                                                            |   | **Fiscal                Year** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
| ***(In                thousands)***                                                                                                             |   | **2006**                       |   | **2005** |   | **2004** |   |
|                                                                                                                                            |   |                           |   |   |   |   |   |
| Cash                flows from operating activities:                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Net                (loss) income                                                                                                                |   | $                              | (1,060 | ) | $ | (17,699 | ) | $ | 3,852 |   |
|                                                                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Adjustments                to reconcile net (loss) income to net cash provided by (used in)                operating                activities: |   |                           |   |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                    |   |                           | 2,411  |   |   | 2,763 |   |   | 2,918 |   |
| Amortization                of intangible assets                                                                                                |   |                           | 1,053  |   |   | 982 |   |   | 774 |   |
| Goodwill                impairment                                                                                                              |   |                           | --     |   |   | 7,050 |   |   | -- |   |
| Loss                on asset disposal                                                                                                           |   |                           | 42     |   |   | 1,867 |   |   | 211 |   |
|                        Stock based compensation                                                              |   |                           | 482    |   |   | 267 |   |   | 101 |   |
|                                                                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Change                in:                                                                                                                       |   |                           |   |   |   |   |   |   |   |   |
| Accounts                receivable                                                                                                              |   |                           | 2,772  |   |   | (8,012 | ) |   | (2,141 | ) |
| Prepaid                expenses                                                                                                                 |   |                           | 265    |   |   | 604 |   |   | 451 |   |
| Other                assets                                                                                                                     |   |                           | 667    |   |   | 290 |   |   | (115 | ) |
| Accounts                payable                                                                                                                 |   |                           | (174   | ) |   | 7,424 |   |   | 541 |   |
| Salaries                and vacations                                                                                                           |   |                           | (844   | ) |   | (580 | ) |   | 1,054 |   |
| Other                accrued expenses                                                                                                           |   |                           | (572   | ) |   | 483 |   |   | (781 | ) |
| Deferred                revenue                                                                                                                 |   |                           | (378   | ) |   | (13 | ) |   | (1,108 | ) |
| Restructuring                accrual                                                                                                            |   |                           | (1,007 | ) |   | 1,234 |   |   | (293 | ) |
| Deferred                compensation                                                                                                            |   |                           | 115    |   |   | (1,718 | ) |   | 414 |   |
| Net                cash provided by (used in) operating activities                                                                              |   |                           | 3,772  |   |   | (5,058 | ) |   | 5,878 |   |
|                                                                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Cash                flows from investing activities:                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Property                and equipment additions                                                                                                 |   |                           | (1,335 | ) |   | (2,873 | ) |   | (2,508 | ) |
| Payments                for acquisitions, net of cash acquired                                                                                  |   |                           | --     |   |   | (5,010 | ) |   | -- |   |
| Proceeds                from property and equipment sales                                                                                       |   |                           | 17     |   |   | 18 |   |   | 18 |   |
| Net                cash used in investing activities                                                                                            |   |                           | (1,318 | ) |   | (7,865 | ) |   | (2,490 | ) |
|                                                                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Net                change in line of credit                                                                                                     |   |                           | (2,339 | ) |   | 5,000 |   |   | -- |   |
| Proceeds                from exercise of stock options                                                                                          |   |                           | --     |   |   | 98 |   |   | 2 |   |
| Net                cash (used in) provided by financing activities                                                                              |   |                           | (2,339 | ) |   | 5,098 |   |   | 2 |   |
|                                                                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Net                increase (decrease) in cash and equivalents                                                                                  |   |                           | 115    |   |   | (7,825 | ) |   | 3,390 |   |
|                                                                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Cash                and equivalents at beginning of year                                                                                        |   |                           | 64     |   |   | 7,889 |   |   | 4,499 |   |
|                                                                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Cash                and equivalents at end of year                                                                                              |   | $                              | 179    |   | $ | 64 |   | $ | 7,889 |   |
|                                                                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Supplemental                cash flow information:                                                                                              |   |                           |   |   |   |   |   |   |   |   |
| Cash                paid during the year for:                                                                                                   |   |                           |   |   |   |   |   |   |   |   |
| Income                taxes                                                                                                                     |   | $                              | 22     |   | $ | 181 |   | $ | 35 |   |
| Interest                                                                                                                                        |   | $                              | 795    |   | $ | 528 |   | $ | 41 |   |
|                                                                                                                                            |   |                           |   |   |   |   |   |   |   |   |
| Non-cash                Activities:                                                                                                             |   |                           |   |   |   |   |   |   |   |   |
| Value                of common stock issued for acquisitions                                                                                    |   | $                              | --     |   | $ | 1,000 |   |  $ | -- |   |
| Value                of common stock issued for stock awards                                                                                    |   | $                              | 20     |   | $ | 28 |   |  $ | -- |   |

----

**Consolidated      Statements of Shareholders' Equity**

| ***(Dollars                in thousands)***                                                      |   | **Common****Stock** |     | **Additional****Capital** |   | **Deferred****Compensation** |   | **Retained****Earnings** |     | **Total****Shareholders’****Equity** |   |
|--------------------------------------------------------------------------------------------------|--------|---------------------|----------|---------------------------|--------|------------------------------|--------|--------------------------|----------|--------------------------------------------|--------|
|                                                                                             |   |                |     |                      |   |                         |   |                     |     |                                       |   |
| Balances                at January 3, 2004                                                       |   | $                   | 2,421    |                      | $      | 20,149                       |   |                     | --  |                                       | $      | 46,093 |   | $ | 68,663 |   |
|                                                                                             |   |                |     |                      |   |                         |   |                     |     |                                       |   |   |   |   |   |   |
| Common                stock issued - 650 shares upon exercise of stock options                   |   |                | --  |                      |   | 2                            |   |                     | --  |                                       |   | --  |   |   | 2 |   |
| Issuance                of restricted stock - 300,000 shares                                     |   |                | --  |                      |   | 944                          |   | $                        | (944     | )                                          |   | --  |   |   | -- |   |
| Amortization                of deferred compensation                                             |   |                | --  |                      |   | --                      |   |                     | 101      |                                       |   | --  |   |   | 101 |   |
| Net                income                                                                        |   |                |     |                      |   |                         |   |                     |     |                                       |   |   |   |   |   |   |
| (Comprehensive                income)                                                            |   |                | --  |                      |   | --                      |   |                     | --  |                                       |   | 3,852 |   |   | 3,852 |   |
| Balances                at January 1, 2005                                                       |   |                | 2,421    |                      |   | 21,095                       |   |                     | (843     | )                                          |   | 49,945 |   |   | 72,618 |   |
|                                                                                             |   |                |     |                      |   |                         |   |                     |     |                                       |   |   |   |   |   |   |
| Common                stock issued - 31,975 shares upon exercise of stock                options |   |                | 3        |                      |   | 95                           |   |                     | --  |                                       |   | --  |   |   | 98 |   |
| Common                stock issued - 269,298 shares for acquisitions                             |   |                | 27       |                      |   | 973                          |   |                     | --  |                                       |   | --  |   |   | 1,000 |   |
| Common                stock issued - 7,000 shares as stock grants                                |   |                | 1        |                      |   | 27                           |   |                     | --  |                                       |   | --  |   |   | 28 |   |
| Amortization                of deferred compensation                                             |   |                | 8        |                      |   | (8                           | )      |                     | 267      |                                       |   |   |   |   | 267 |   |
| Net                loss (Comprehensive loss)                                                     |   |                |     |                      |   |                         |   |                     |     |                                       |   | (17,699 | ) |   | (17,699 | ) |
| Balance                at December 31, 2005                                                      |   |                | 2,460    |                      |   | 22,182                       |   |                     | (576     | )                                          |   | 32,246 |   |   | 56,312 |   |
|                                                                                             |   |                |     |                      |   |                         |   |                     |     |                                       |   |   |   |   |   |   |
| Effect                of accounting change (SFAS 123R)                                           |   |                | --  |                      |   | (576                         | )      |                     | 576      |                                       |   | --  |   |   | --  |   |
| Common                stock issued - 8,000 shares as stock grants                                |   |                | 1        |                      |   | 19                           |   |                     | --       |                                       |   | -- |   |   | 20 |   |
| Stock                compensation expense                                                        |   |                | --       |                      |   | 134                          |   |                     | --       |                                       |   | -- |   |   | 134 |   |
| Restricted                shares amortization                                                    |   |                | 8        |                      |   | 320                          |   |                     | --  |                                       |   | -- |   |   | 328 |   |
| Net                loss (Comprehensive loss)                                                     |   |                | --       |                      |   | --                           |   |                     | --       |                                       |   | (1,060 | ) |   | (1,060 | ) |
| Balance                at December 30, 2006                                                      |   | $                   | 2,469    |                      | $      | 22,079                       |   | $                        | 0        |                                       | $      | 31,186 |   | $ | 55,734 |   |

----

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

| **A.** | **Summary                of Significant Accounting                Policies** |
|--------|------------------------------------------------------------------------------|

*Description      of business - *

*Basis      of presentation - *

*Fiscal      year -*

*Depreciation      - *

*Financial      instruments - *
* *

*Revenue      recognition *
* *

*Net      (loss) income per share - *

*Cash      equivalents - *

----

**Notes      to Consolidated Financial Statements (continued)**

*Allowance      for doubtful accounts - *
* *

*Shares      reserve - *

*Estimates      - *
* *

*Other      intangible assets*

*Goodwill      assets - *

*Derivatives      - *

*Taxes      - *

*Accounting      Pronouncements*

*      Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement      No. 109,*
*      Accounting for Income Taxes.*

*Fair      Value Measurements.*

----

**Notes      to Consolidated Financial Statements (continued)**

***Equity      Compensation Plans***

*Accounting      for Stock Issued to *

|   | a) | Compensation                expense for all stock-based compensation awards granted prior to                December                31, 2005, which were not fully vested as of December 31, 2005, based                on                the grant date fair value estimated in accordance with the original                provisions of SFAS No. 123, *Accounting                for Stock-Based Compensation;*                and |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | Compensation                expense for all stock-based compensation awards granted subsequent                to                December 31, 2005, based on the grant-date fair value estimated in                accordance with the provisions of SFAS No.                123R. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Notes      to Consolidated Financial Statements (continued)**

*(in      thousands)*

|                                                                                                                                       |   | **Year                Ended****December                31, 2005** |    | **Year                Ended****January                1, 2005** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|---------|-----------------------------------------------------------------|--------|
|                                                                                                                                       |   |                                                              |    |                                                            |   |
| Net                (loss) gain, as reported                                                                                                |   | $                                                                 | (17,699 | )                                                               | $      | 3,852 |   |
| Deduct:                Stock-based compensation expense determined under fair value method                for                all awards(1) |   |                                                              | (1,055  | )                                                               |   | (567 | ) |
|                                                                                                                                       |   |                                                              |    |                                                            |   |   |   |
| Net                (loss) gain, pro forma                                                                                                  |   | $                                                                 | (18,754 | )                                                               | $      | 3,285 |   |
|                                                                                                                                       |   |                                                              |    |                                                            |   |   |   |
| Earnings                per share:                                                                                                         |   |                                                              |    |                                                            |   |   |   |
| Basic                - as reported                                                                                                         |   | $                                                                 | (.72    | )                                                               | $      | .16 |   |
| Basic                - pro forma                                                                                                           |   |                                                              | (.77    | )                                                               |   | .14 |   |
|                                                                                                                                       |   |                                                              |    |                                                            |   |   |   |
| Diluted                - as reported                                                                                                       |   | $                                                                 | (.72    | )                                                               | $      | .16 |   |
| Diluted                - pro forma                                                                                                         |   |                                                              | (.77    | )                                                               |   | .13 |   |

|                                                           |   | Options |      | WeightedAverageExercisePricePer                Share |   | WeightedAverageRemainingContractualTerm(in                years) |   | AggregateIntrinsicValue |   |
|----------------------------------------------------------------|--------|---------|-----------|------------------------------------------------------|--------|------------------------------------------------------------------|--------|-------------------------|--------|
|                                                           |   |    |      |                                                 |   |                                                             |   |                    |   |
| Outstanding                on December 31, 2005                |   |    | 2,348,781 |                                                 | $      | 6.36                                                             |   |                    | 6.38   |   | $ | 18,550 |   |
| Granted                                                        |   |    | 164,000   |                                                 |   | 2.44                                                             |   |                    |   |   |   |   |   |
| Exercised                                                      |   |    | 0         |                                                 |   | 0                                                                |   |                    |   |   |   |   |   |
| Forfeited/Canceled                                             |   |    | 397,892   |                                                 |   | 7.01                                                             |   |                    |   |   |   |   |   |
|                                                           |   |    |      |                                                 |   |                                                             |   |                    |   |   |   |   |   |
| Outstanding                on December 30, 2006                |   |    | 2,114,889 |                                                 |   | 5.94                                                             |   |                    | 5.75   |   |   | 0 |   |
| Vested                or expected to vest at December 30, 2006 |   |    | 1,614,889 |                                                 |   | 6.84                                                             |   |                    | 5.06   |   |   | 0 |   |
| Exercisable                on December 30, 2006                |   |    | 1,566,889 |                                                 | $      | 6.97                                                             |   |                    | 4.94   |   | $ | 0 |   |

----

**Notes      to Consolidated Financial Statements (continued)**

|                                                             |   | **The                Twelve-Month Period Ended** |                       |
|------------------------------------------------------------------|--------|--------------------------------------------------|----------------------------|
| **Black-Scholes                Option Valuation Assumptions(1)** |   | **December                30,****2006**          |                       | **December                31,****2005** |   |
|                                                             |   |                                             |                       |   |   |
| Risk-free                interest rate(2)                        |   |                                             | 4.7                - 5.0   | % |   | 3.9                - 4.5 | % |
| Expected                dividend yield                           |   |                                             | 0                          |   |   | 0 |   |
| Expected                stock price volatility(3)                |   |                                             | 43.0                - 74.3 |   |   | 45.1                - 76.0 |   |
| Expected                life of stock options (in years)(4)      |   |                                             | 5.8                        |   |   | 6.4 |   |

|   | (1) | Forfeitures                are estimated and based on historical                experience. |
|--------|-----|---------------------------------------------------------------------------------------------|

|   | (2) | Based                on the U.S. Treasury zero-coupon bond with a term consistent with                the                expected life of the options. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Expected                stock price volatility is based on historical                experience. |
|--------|-----|--------------------------------------------------------------------------------------------------|

|   | (4) | Expected                life of stock options is based upon historical                experience. |
|--------|-----|---------------------------------------------------------------------------------------------------|

----

**Notes      to Consolidated Financial Statements (continued)**

|                                           |   | **Shares** |    | **Weighted****Average****Grant                Date****Fair                Value** |   |
|------------------------------------------------|--------|------------|---------|-----------------------------------------------------------------------------------|--------|
| Non-vested                December 31, 2005    |   |       | 216,667 |                                                                              | $      | 3.12 |   |
| Granted                                        |   |       | 258,000 |                                                                              |   | 2.43 |   |
| Vested                                         |   |       | 91,333  |                                                                              |   | 2.47 |   |
| Forfeited                                      |   |       | 0       |                                                                              |   |   |   |
| Non-vested                at December 30, 2006 |   |       | 383,334 |                                                                              |   | 2.49 |   |

| **B.** | **Property                and Equipment** |
|--------|-------------------------------------------|

| ***(In                thousands)***             |   | **December                30,****2006** |    | **December                31,****2005** |   |
|-------------------------------------------------|--------|-----------------------------------------|---------|-----------------------------------------|--------|
|                                            |   |                                    |    |                                    |   |
| Leasehold                improvements           |   | $                                       | 2,293   |                                    | $      | 2,846 |   |
| Office                furniture & equipment |   |                                    | 15,571  |                                    |   | 27,789 |   |
|                                            |   |                                    | 17,864  |                                    |   | 30,635 |   |
| Accumulated                depreciation         |   |                                    | (14,939 | )                                       |   | (26,579 | ) |
|                                            |   | $                                       | 2,925   |                                    | $      | 4,056 |   |

| **C.** | **Other                Intangible Assets** |
|--------|--------------------------------------------|

|                                |   | **December                30, 2006** |   | **December                31, 2005** |   |
|-------------------------------------|--------|--------------------------------------|--------|--------------------------------------|--------|
| ***(In                thousands)*** |   | **Gross****Carrying****Amount**      |   | **Accumulated****Amortization**      |   | **Other****Intangibles,****Net** |   | **Gross                Carrying****Amount** |   | **Accumulated****Amortization** |   | **Other****Intangibles,****Net** |   |
|                                |   |                                 |   |                                 |   |   |   |   |   |   |   |   |   |
| Customer                list        |   | $                                    | 15,075 |                                 | $      | (5,417 | ) | $ | 9,658 |   | $ | 15,075 |   | $ | (4,364 | ) | $ | 10,711 |   |
| Trade                name           |   |                                 | 1,720  |                                 |   | (133 | ) |   | 1,587 |   |   | 1,720 |   |   | (133 | ) |   | 1,587 |   |
|                                |   |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   | $                                    | 16,795 |                                 | $      | (5,550 | ) | $ | 11,245 |   | $ | 16,795 |   | $ | (4,497 | ) | $ | 12,298 |   |

----

**Notes      to Consolidated Financial Statements (continued)**

| **D.** | **Deferred                Compensation** |
|--------|------------------------------------------|

** **

| **E.** | **Line                of Credit** |
|--------|-----------------------------------|

----

**Notes      to Consolidated Financial Statements (continued)**

| **F.** | **Shareholders'                Rights Plan** |
|--------|----------------------------------------------|

| **G.** | **Income                Taxes** |
|--------|---------------------------------|

|                                                      |   | Fiscal                Year |   |
|-----------------------------------------------------------|--------|----------------------------|--------|
| (In                thousands)                             |   | 2006                       |   | 2005 |   | 2004 |   |
|                                                      |   |                       |   |   |   |   |   |
| Currently                payable:                         |   |                       |   |   |   |   |   |   |   |   |
| Federal                                                   |   | $                          | --     |   | $ | -- |   | $ | -- |   |
| State                                                     |   |                       | 41     |   |   | 50 |   |   | -- |   |
|                                                      |   |                       | 41     |   |   | 50 |   |   | 0 |   |
|                                                      |   |                       |   |   |   |   |   |   |   |   |
| Deferred:                                                 |   |                       |   |   |   |   |   |   |   |   |
| Federal                                                   |   |                       | (169   | ) |   | (5,360 | ) |   | 1,581 |   |
| State                                                     |   |                       | (25    | ) |   | (788 | ) |   | 233 |   |
|                                                      |   |                       | (194   | ) |   | (6,148 | ) |   | 1,814 |   |
| Valuation                allowance for deferred tax asset |   |                       | 194    |   |   | 6,148 |   |   | (1,814 | ) |
|                                                      |   |                       | 0      |   |   | 0 |   |   | 0 |   |
|                                                      |   |                       |   |   |   |   |   |   |   |   |
| Total:                                                    |   | $                          | 41     |   | $ | 50 |   | $ | 0 |   |

----

**Notes      to Consolidated Financial Statements (continued)**

| ***(In                thousands)***                     |   | **December                30,****2006** |    | **December                31,****2005** |   |
|---------------------------------------------------------|--------|-----------------------------------------|---------|-----------------------------------------|--------|
|                                                    |   |                                    |    |                                    |   |
| Deferred                compensation                    |   | $                                       | 986     |                                    | $      | 941 |   |
| Accrued                vacation and compensatory time   |   |                                    | 388     |                                    |   | 465 |   |
| Accrued                reorganization costs             |   |                                    | 212     |                                    |   | 605 |   |
| Self                insured healthcare reserves         |   |                                    | 101     |                                    |   | (89 | ) |
| Allowance                for doubtful accounts          |   |                                    | 622     |                                    |   | 889 |   |
| Depreciation                                            |   |                                    | 1,105   |                                    |   | 625 |   |
| Capital                loss carry-forward               |   |                                    | 1,148   |                                    |   | 1,148 |   |
| Goodwill                and other intangibles           |   |                                    | 3,822   |                                    |   | 4,904 |   |
| State                net operating loss carry forwards  |   |                                    | 767     |                                    |   | 767 |   |
| Federal                net operating loss carry forward |   |                                    | 5,712   |                                    |   | 4,614 |   |
| Non-income                tax accrual                   |   |                                    | 248     |                                    |   | 0 |   |
| A/P                accruals                             |   |                                    | 224     |                                    |   | 0 |   |
| Prepaid                insurance                        |   |                                    | (103    | )                                       |   | (98 | ) |
| Charitable                contributions                 |   |                                    | 540     |                                    |   | 531 |   |
| Gain/loss                on disposal                    |   |                                    | (420    | )                                       |   | 63 |   |
| Other                                                   |   |                                    | 64      |                                    |   | (143 | ) |
| Valuation                allowance                      |   |                                    | (12,820 | )                                       |   | (12,626 | ) |
|                                                    |   |                                    |    |                                    |   |   |   |
| Net                deferred tax assets                  |   | $                                       | 2,596   |                                    | $      | 2,596 |   |
|                                                    |   |                                    |    |                                    |   |   |   |
| Whereof:                                                |   |                                    |    |                                    |   |   |   |
| Current                                                 |   |                                    | 347     |                                    | $      | 261 |   |
| Non-current                                             |   |                                    | 2,249   |                                    |   | 2,335 |   |
|                                                    |   | $                                       | 2,596   |                                    | $      | 2,596 |   |

|                                                          |   | **Fiscal                Year** |   |
|---------------------------------------------------------------|--------|--------------------------------|--------|
| ***(In                thousands)***                           |   | **2006**                       |   | **2005** |   | **2004** |   |
|                                                          |   |                           |   |   |   |   |   |
| Income                (benefit) tax at statutory federal rate |   | $                              | (346   | ) | $ | (6,177 | ) | $ | 1,349 |   |
| State                and local taxes, net of federal benefit  |   |                           | (34    | ) |   | (459 | ) |   | 100 |   |
| Valuation                allowance for deferred tax asset     |   |                           | 194    |   |   | 6,148 |   |   | (1,814 | ) |
| Meals                and Entertainment                        |   |                           | 176    |   |   | 192 |   |   | 215 |   |
| Goodwill                                                      |   |                           | (22    | ) |   | (23 | ) |   | (23 | ) |
| Cash                surrender value of life insurance         |   |                           | (19    | ) |   | 26 |   |   | (15 | ) |
| Other                                                         |   |                           | 92     |   |   | 343 |   |   | 188 |   |
|                                                          |   |                           |   |   |   |   |   |   |   |   |
| Total                tax provision                            |   | $                              | 41     |   | $ | 50 |   | $ | 0 |   |

----

**Notes      to Consolidated Financial Statements (continued)**

| **H.** | **Commitments** |
|--------|-----------------|

| ***(In                thousands)***     |   |   |        |   |   |
|-----------------------------------------|--------|--------|-------------|--------|--------|
|                                    |   |   |        |   |   |
| Year                ending December     |   |   | 2007        |   | $      | 4,679 |   |
|                                    |   |   | 2008        |   |   | 3,390 |   |
|                                    |   |   | 2009        |   |   | 2,140 |   |
|                                    |   |   | 2010        |   |   | 2,074 |   |
|                                    |   |   | Later  |   |   | 2,702 |   |
|                                    |   |   |        |   |   | 14,985 |   |
|                                    |   |   |        |   |   |   |   |
| Less:                sublease contracts |   |   |        |   |   | 544 |   |
|                                    |   |   |        |   |   |   |   |
| Total                minimum obligation |   |   |        |   | $      | 14,441 |   |

| **I.** | **Restructuring                and Other Severance Related                Costs** |
|--------|-----------------------------------------------------------------------------------|

| ***(In                thousands)***                  |   | **Workforce****Reduction** |     | **Office                Closure/****Consolidation** |   | **Total** |   |
|------------------------------------------------------|--------|----------------------------|----------|-----------------------------------------------------|--------|-----------|--------|
|                                                 |   |                       |     |                                                |   |      |   |
| Balance                at January 3, 2004            |   | $                          | --       |                                                | $      | 611       |   | $ | 611 |   |
| Cash                expenditures                     |   |                       | --       |                                                |   | (293      | )      |   | (293 | ) |
| Non-cash                charges                      |   |                       | --       |                                                |   | --        |   |   | -- |   |
|                                                 |   |                       |     |                                                |   |      |   |   |   |   |
| Balance                at January 1, 2005            |   | $                          | --       |                                                | $      | 318       |   | $ | 318 |   |
| Additional                restructuring charge       |   |                       | 1,656    |                                                |   | 2,258     |   |   | 3,914 |   |
| Cash                expenditures                     |   |                       | (1,612   | )                                                   |   | (429      | )      |   | (2,041 | ) |
| Write-off                of deferred leasehold costs |   |                       | --  |                                                |   | (578      | )      |   | (578 | ) |
| Non-cash                charges                      |   |                       | --  |                                                |   | (61       | )      |   | (61 | ) |
|                                                 |   |                       |     |                                                |   |      |   |   |   |   |
| Balance                at December 31, 2005          |   | $                          | 44       |                                                | $      | 1,508     |   | $ | 1,552 |   |
| Cash                expenditures                     |   |                       | (44      | )                                                   |   | (896      | )      |   | (940 | ) |
| Non-cash                charges                      |   |                       | --  |                                                |   | (67       | )      |   | (67 | ) |
| Balance                at December 30, 2006          |   | $                          | 0        |                                                | $      | 545       |   | $ | 545 |   |

----

**Notes      to Consolidated Financial Statements (continued)**

**J.**
**Goodwill**

| **K.** | **Business                Acquisitions** |
|--------|------------------------------------------|

*WireSpeed      Networks, LLC*

*Redwood      Solutions Corporation *
* *

----

**Notes      to Consolidated Financial Statements (continued)**

| **L.  ** | **Subsequent                Events** |
|--------------------|--------------------------------------|

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

*Internal      Control—Integrated Framework*

| /s/                Deloitte & Touche LLP |   |
|----------------------------------------------|--------|
| Minneapolis,                Minnesota        |   |
| March                15, 2007                |   |

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

*Internal      Control—Integrated Framework*

*Internal      Control—Integrated Framework*
*Internal      Control—Integrated Framework*

| /s/                Deloitte & Touche LLP |   |
|----------------------------------------------|--------|
| Minneapolis,                Minnesota        |   |
| March                15, 2007                |   |

----

**Report      of Management**

| Dated:                March 15, 2007 | By:    | /s/                Michael J. LaVelle                        |   |
|--------------------------------------|--------|--------------------------------------------------------------|--------|
|                                 |   | Michael                J. LaVelle                            |   |
|                                 |   | Interim                President and Chief Executive Officer |   |
|                                 |   |                                                         |   |
| Dated:                March 15, 2007 | By:    | /s/                David J. Steichen                         |   |
|                                 |   | David                J. Steichen                             |   |
|                                 |   | Chief                Financial Officer                       |   |

**Management’s      Report on Internal Control Over Financial Reporting**

*Internal      Control - Integrated Framework*
*Internal      Control - Integrated Framework*

| Dated:                March 15, 2007 | By:    | /s/                Michael J.LaVelle                         |   |
|--------------------------------------|--------|--------------------------------------------------------------|--------|
|                                 |   | Michael                J. LaVelle                            |   |
|                                 |   | Interim                President and Chief Executive Officer |   |
|                                 |   |                                                         |   |
| Dated:                March 15, 2007 | By:    | /s/                David J. Steichen                         |   |
|                                 |   | David                J. Steichen                             |   |
|                                 |   | Chief                Financial Officer                       |   |

----

**Stock      Data**

|                                                   |   | Market                Range |   |
|--------------------------------------------------------|--------|-----------------------------|--------|
| **Fiscal                Year Ended December 30, 2006** |   | High                        |   | Low |   | Close |   |
|                                                   |   |                        |   |   |   |   |   |
| Fourth                Quarter                          |   | $                           | 2.26   |   | $ | 1.69 |   | $ | 1.87 |   |
| Third                Quarter                           |   |                        | 2.47   |   |   | 1.79 |   |   | 2.11 |   |
| Second                Quarter                          |   |                        | 2.87   |   |   | 1.99 |   |   | 2.00 |   |
| First                Quarter                           |   |                        | 3.00   |   |   | 2.37 |   |   | 2.79 |   |
|                                                   |   |                        |   |   |   |   |   |   |   |   |
| **Fiscal                Year Ended December 31, 2005** |   |                        |   |   |   |   |   |   |   |   |
|                                                   |   |                        |   |   |   |   |   |   |   |   |
| Fourth                Quarter                          |   | $                           | 2.74   |   | $ | 2.24 |   | $ | 2.40 |   |
| Third                Quarter                           |   |                        | 4.00   |   |   | 2.56 |   |   | 2.65 |   |
| Second                Quarter                          |   |                        | 3.91   |   |   | 2.75 |   |   | 3.41 |   |
| First                Quarter                           |   |                        | 4.10   |   |   | 3.33 |   |   | 3.75 |   |

*Sales      of Unregistered Securities*

----

**Five      Year Financial Summary**

| ***(In                thousands except per share amounts***                                                             |   | **Fiscal                Year** |    |
|-------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|---------|
| ***and                number of personnel)***                                                                           |   | **2006**                       |    | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                                                                                    |   |                           |    |   |   |   |   |   |   |   |   |
| Revenue:                                                                                                                |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Professional                services provided directly                                                                  |   | $                              | 261,489 |   | $ | 263,121 |   | $ | 269,610 |   | $ | 266,175 |   | $ | 312,085 |   |
| Professional                services provided through subsuppliers                                                      |   |                           | 54,902  |   |   | 34,431 |   |   | 55,806 |   |   | 50,543 |   |   | 98,578 |   |
| Product                sales                                                                                            |   |                           | 30,596  |   |   | 24,746 |   |   | 16,196 |   |   | 15,181 |   |   | 15,497 |   |
| Total                revenue                                                                                            |   |                           | 346,987 |   |   | 322,298 |   |   | 341,612 |   |   | 331,899 |   |   | 426,160 |   |
|                                                                                                                    |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries,                contracted services and direct charges                                                         |   |                           | 260,619 |   |   | 240,100 |   |   | 261,005 |   |   | 256,643 |   |   | 339,016 |   |
| Cost                of product sales                                                                                    |   |                           | 27,149  |   |   | 22,550 |   |   | 14,964 |   |   | 14,562 |   |   | 14,699 |   |
| Selling,                administrative and other operating costs                                                        |   |                           | 58,847  |   |   | 61,053 |   |   | 61,015 |   |   | 61,511 |   |   | 73,694 |   |
| Amortization                of goodwill and other intangible assets                                                     |   |                           | 1,053   |   |   | 982 |   |   | 774 |   |   | 773 |   |   | 785 |   |
| Loss                on sale of corporate headquarters(1)                                                                |   |                           | --      |   |   | -- |   |   | -- |   |   | -- |   |   | 1,860 |   |
| Restructuring                and other severance related costs(4)                                                       |   |                           | (51     | ) |   | 3,914 |   |   | -- |   |   | -- |   |   | -- |   |
| Loss                on Disposal(5)                                                                                      |   |                           | --      |   |   | 1,825 |   |   | -- |   |   | -- |   |   | -- |   |
| Goodwill                Impairment(6)                                                                                   |   |                           | --      |   |   | 7,050 |   |   | -- |   |   | -- |   |   | -- |   |
| Merger                Related Expenses                                                                                  |   |                           | (327    | ) |   | 2,129 |   |   | -- |   |   | -- |   |   | -- |   |
| Non-operating                income                                                                                     |   |                           | 20      |   |   | 50 |   |   | 39 |   |   | 79 |   |   | 122 |   |
| Loss                on investment                                                                                       |   |                           | --      |   |   | -- |   |   | -- |   |   | -- |   |   | 190 |   |
| Interest                expense                                                                                         |   |                           | 736     |   |   | 394 |   |   | 41 |   |   | 13 |   |   | 1,042 |   |
| Loss                on debt extinguishment(2)                                                                      |   |                           | --      |   |   | -- |   |   | -- |   |   | -- |   |   | 744 |   |
| Income                taxes (benefit) and minority interest                                                             |   |                           | 41      |   |   | 50 |   |   | -- |   |   | -- |   |   | (1,106 | ) |
| Net                (loss) income before cumulative effect of change in accounting for                goodwill           |   | $                              | (1,060  | ) | $ | (17,699 | ) | $ | 3,852 |   | $ | (1,524 | ) | $ | (4,642 | ) |
|                                                                                                                    |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative                effect of change in accounting for goodwill(3)                                                |   |                           | --      |   |   | -- |   |   | -- |   |   | -- |   |   | 16,389 |   |
|                                                                                                                    |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                                                                                             |   | $                              | 96,231  |   | $ | 102,004 |   | $ | 105,677 |   | $ | 101,895 |   | $ | 106,744 |   |
| Long-term                liabilities                                                                                    |   |                           | 2,479   |   |   | 2,459 |   |   | 3,637 |   |   | 4,038 |   |   | 3,605 |   |
| Shareholders’                equity                                                                               |   | $                              | 55,734  |   | $ | 56,312 |   | $ | 72,618 |   | $ | 68,663 |   | $ | 70,166 |   |
|                                                                                                                    |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per                share data:                                                                                          |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                (loss) income before cumulative effect of change in accounting for                goodwill (basic)   |   |                           | (.04    | ) |   | (.72 | ) |   | .16 |   |   | (.06 | ) |   | (.19 | ) |
| Net                (loss) income before cumulative effect of change in accounting for                goodwill (diluted) |   |                           | (.04    | ) |   | (.72 | ) |   | .16 |   |   | (.06 | ) |   | (.19 | ) |
| Cash                dividends                                                                                           |   |                           | .00     |   |   | .00 |   |   | .00 |   |   | .00 |   |   | .00 |   |
| Shareholders’                equity                                                                               |   |                           | 2.26    |   |   | 2.29 |   |   | 3.00 |   |   | 2.84 |   |   | 2.90 |   |
|                                                                                                                    |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                common shares outstanding                                                                        |   |                           | 24,645  |   |   | 24,495 |   |   | 24,212 |   |   | 24,201 |   |   | 24,198 |   |
| Average                common and common equivalent shares outstanding                                                  |   |                           | 24,645  |   |   | 24,495 |   |   | 24,398 |   |   | 24,201 |   |   | 24,198 |   |
|                                                                                                                    |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Number                of Personnel                                                                                      |   |                           | 2,984   |   |   | 3,095 |   |   | 3,015 |   |   | 3,000 |   |   | 3,075 |   |
|                                                                                                                    |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**Quarterly      Revenues and Income**

|                                                           |   | **Quarter                Ended****(unaudited)** |   |                      |   |
|----------------------------------------------------------------|--------|-------------------------------------------------|--------|---------------------------|--------|
| ***(In                thousands except per share amounts)***   |   | **April                1**                      |   | **July                1** |   | **September                30** |   | **December                30** |   | **Total** |   |
|                                                           |   |                                            |   |                      |   |   |   |   |   |   |   |
| **Fiscal                2006**                                 |   |                                            |   |                      |   |   |   |   |   |   |   |
|                                                           |   |                                            |   |                      |   |   |   |   |   |   |   |
| Total                revenue                                   |   | $                                               | 86,841 |                      | $      | 87,906 |   | $ | 85,480 |   | $ | 86,760 |   | $ | 346,987 |   |
| Gross                margin                                    |   |                                            | 15,201 |                      |   | 14,683 |   |   | 14,697 |   |   | 14,637 |   |   | 59,218 |   |
| (Loss)                Income before income taxes               |   |                                            | 267    |                      |   | (250 | ) |   | (512 | ) |   | (524 | ) |   | (1,019 | ) |
| Income                taxes (benefit)                          |   |                                            | 13     |                      |   | 8 |   |   | 10 |   |   | 10 |   |   | 41 |   |
| Net                (loss) income                               |   |                                            | 254    |                      |   | (258 | ) |   | (522 | ) |   | (534 | ) |   | (1,060 | ) |
| Net                (loss) income per share (basic and diluted) |   |                                            | .01    |                      |   | (.01 | ) |   | (.02 | ) |   | (.02 | ) |   | (.04 | ) |

|                                                           |   | **Quarter                Ended****(unaudited)** |   |                      |   |
|----------------------------------------------------------------|--------|-------------------------------------------------|--------|---------------------------|--------|
| ***(In                thousands except per share amounts)***   |   | **April                2**                      |   | **July                2** |   | **October                1** |   | **December                31** |   | **Total** |   |
|                                                           |   |                                            |   |                      |   |   |   |   |   |   |   |
| **Fiscal                2005**                                 |   |                                            |   |                      |   |   |   |   |   |   |   |
|                                                           |   |                                            |   |                      |   |   |   |   |   |   |   |
| Total                revenue                                   |   | $                                               | 79,099 |                      | $      | 79,104 |   | $ | 78,244 |   | $ | 85,851 |   | $ | 322,298 |   |
| Gross                margin                                    |   |                                            | 14,925 |                      |   | 15,408 |   |   | 14,163 |   |   | 15,152 |   |   | 59,648 |   |
| (Loss)                income before income taxes               |   |                                            | (706   | )                         |   | (2,375 | ) |   | (15,584 | ) |   | 1,016 |   |   | (17,649 | ) |
| Income                taxes (benefit)                          |   |                                            | --     |                      |   | -- |   |   | -- |   |   | 50 |   |   | 50 |   |
| Net                (loss) income                               |   |                                            | (706   | )                         |   | (2,375 | ) |   | (15,584 | ) |   | 966 |   |   | (17,699 | ) |
| Net                (loss) income per share (basic and diluted) |   |                                            | (.03   | )                         |   | (.10 | ) |   | (.63 | ) |   | .04 |   |   | (.72 | ) |

----

**Corporate      Information**

| **Board                of Directors**                                                                                                                                                                                          |   | **Officers**                                                                                                                                                                                                  |   | **10-K                and Other Reports Available**                                                                                                                                                                                                                         |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                           |   |                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                        |
| ***Inside                Directors*** Michael                J. LaVelleChairman                of the Board                                                                                                               |   | Michael                J. LaVelleInterim                President and Chief Executive Officer David                J. SteichenChief                Financial Officer and Treasurer                       |   | A                copy of the Company's 2006 Annual Report on Form 10-K and other reports,                filed with the Securities and Exchange Commission, is available to                security holders without charge upon request to the Treasurer                at: |
| ***Outside                Directors***                                                                                                                                                                                         |   |                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                        |
|  Brigid                A. BonnerSenior                Vice PresidentUnited                Health Group                                                                                                                    |   | Colleen                M. DavenportSecretary                and General Counsel  John                D. BambergerSenior                Vice President, Solutions                                         |   | Analysts                International Corporation3601                West 76th StreetMinneapolis,                Minnesota 55435-3000or                the Investor Relations page of the Company’s website                                                           |
|                                                                                                                                                                                                                           |   |                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                        |
| Willard                A. BrittainChairman                and Chief Executive Officer,Professional                Resources on Demand Krzysztof                K. BurhardtPartner,                Clotho & Associates |   | Paulette                M. QuistSenior                Vice President, Business                Development and Strategy Angelia                Smith-BrekkeSenior                Vice President, Staffing |   | **Stock                Transfer Agent** Computershare                Trust Company, N. A.P.O.                Box 43078Providence,                Rhode Island 02940-3023                                                                                               |
|                                                                                                                                                                                                                           |   |                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                        |
| Michael                B. EsstmanGeneral                Partner,Esstman                Investments, Ltd. andRetired                Senior Vice President,GTE                Corporation                                        |   | David                H. JenkinsChief                Information Officer Michael                SoudersSenior                Vice President, Solutions                                                    |   | Shareholder                Inquiries:800-254-5196http://www.Computershare.com                                                                                                                                                                                               |
|                                                                                                                                                                                                                           |   |                                                                                                                                                                                                          |   |  **Independent              Auditors**                                                                                                                                                                                                                                 |
| Margaret                A. LoftusPrincipal,                Loftus Brown-Wescott, Inc. Robb                L PrinceRetired                Vice President and Treasurer,Jostens,                Inc.                        |   |                                                                                                                                                                                                          |   |  Deloitte                    & Touche LLPMinneapolis,                    Minnesota                                                                                                                                                                       |
|                                                                                                                                                                                                                           |   |                                                                                                                                                                                                          |   |  **World              Wide Web Address**                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                |   |                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                           |   |                                                                                                                                                                                                          |   | http://www.analysts.com                                                                                                                                                                                                                                                     |
| ***Founder***Frederick                W. LangFounder                of Analysts International                                                                                                                                  |   |                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                   |

----