**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-K**




**(X)
      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**


**For
      the fiscal year ended December 31, 2005**


OR


**TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**


**For
      the transition period from _____________to_______________**





**0-15152**Commission
                File Number





**GUIDELINE,
      INC.**


(formerly
      FIND/SVP, Inc.)


(Exact
      name of registrant as specified in its charter)


**New
                York**
            
            **13-2670985**(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification Number)





**625
      Avenue of the Americas**


**New
      York, NY 10011**


**(Address
      and zip code of principal executive offices)**





**Registrant's
      telephone number, including area code: (212) 645-4500**





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





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





**Title
                  of class:**
              
              **Name
                  of each exchange on which registered****:****Common
                  Stock, par value $.0001 per share**
              
              **None**


**Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.**  **Yes
      [ ] No [X]**





**Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.** **Yes
      [ ] No [X]**





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


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


****


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





**Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  Large accelerated
      filer [ ] Accelerated filer [ ] Non-accelerated filer [X]**





**Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes [ ] No
      [X]**





**As
      of June 30, 2005, the aggregate market value of the voting common stock held
      by
      non-affiliates of the registrant was $15,975,720 based on the average bid and
      ask price per share of the common stock on the OTC Bulletin Board on June 30,
      2005, which was $1.25 per share.**







**All
      (i) executive officers and directors of the registrant and (ii) all persons
      filing a Schedule 13D with the Securities and Exchange Commission in respect
      to
      registrant’s common stock who hold 10% or more of the registrant’s outstanding
      common stock, have been deemed, solely for the purpose of the foregoing
      calculation, to be “affiliates” of the registrant.**





**There
      were 20,456,254 shares outstanding of the registrant’s common stock, par value
      $.0001 per share, as of March 27, 2006.**






**DOCUMENTS
      INCORPORATED BY REFERENCE**





Portions
      of the Registrant’s Proxy Statement for the 2006 Annual Meeting of Shareholders,
      which is anticipated to be filed with the Securities and Exchange Commission
      pursuant to Regulation 14A not later than 120 days following the end of the
      Company’s fiscal year ended December 31, 2005, are incorporated by reference
      into Part III of this Annual Report on Form 10-K.






2


**GUIDELINE,
      INC.**


**INDEX
      TO FORM 10-K**





**Part
                  I**
              PAGEItem
                  1.
              Business
              4Item
                  1A.
              Risk
                  Factors
              12Item
                  1B.
              Unresolved
                  Staff Comments
              18Item
                  2.
              Properties
              18Item
                  3.
              Legal
                  Proceedings
              19Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              19**Part
                  II**Item
                  5.
              Market
                  for Registrant's Common Equity, Related Stockholder Matters and
                  Issuer
                  Purchases of Equity Securities
              19Item
                  6.
              Selected
                  Financial Data
              20Item
                  7.
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operation
              21Item
                  7A.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              38Item
                  8.
              Financial
                  Statements and Supplementary Data
              39Item
                  9.
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              39Item
                  9A.
              Controls
                  and Procedures
              39Item
                  9B.
              Other
                  Information
              39**Part
                  III**
              39Item
                  10.
              Directors
                  and Executive Officers of the Registrant
              39Item
                  11.
              Executive
                  Compensation
              39Item
                  12.
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              39Item
                  13.
              Certain
                  Relationships and Related Transactions
              39Item
                  14.
              Principal
                  Accountant Fees and Services
              39**Part
                  IV**Item
                  15.
              Exhibits
                  and Financial Statement Schedules
              40Signatures
              44Exhibit
                  Index
              E-1




3




**PART
      I**





**ITEM
      1. BUSINESS**





**BUSINESS
      OVERVIEW**





GUIDELINE,
      INC. (formerly known as FIND/SVP, Inc.) and its wholly-owned subsidiaries
      (collectively, "Guideline " or the "Company" which may be also referred to
      in
      this report as “we”, “us” or “our”) is a single-source provider of customized
      business research and analysis. Through our end-to-end continuum of On-Demand
      Business Research, Custom Market Research, Strategic Intelligence and Product
      Development Intelligence, our research analysts create integrated solutions
      that
      enable clients to make informed decisions to address their critical business
      needs. We specialize in nearly all major industries, including healthcare and
      pharmaceuticals, financial services, advertising and professional services,
      industrial, consumer and retail, food and beverage, media and entertainment
      and
      chemicals. In many cases, we function as our customers’ primary information and
      business intelligence resource on an outsourced basis, especially among the
      growing universe of companies that have downsized their internal research staffs
      and information resources. In other cases, we serve as a reliable supplemental
      resource to customers’ internal capabilities.





We
      were
      incorporated in the State of New York in 1969. In 1971, we became affiliated
      with SVP International S.A. ("SVP") through a currently existing licensing
      agreement which gives us the right to use the SVP name, provides us access
      to
      the resources of what are currently 11 additional SVP affiliated companies
      located around the world, and prohibits SVP or its affiliates from competing
      with us in the United States. On March 13, 2006, after obtaining shareholder
      approval, we changed our name from FIND/SVP, Inc. to Guideline, Inc. to better
      communicate our strategy of guiding customers through their strategic business
      research and consulting needs.





We
      sell
      research and consulting services to over 1,600 corporate customers annually,
      approximately 1,200 of which subscribe under recurring revenue contracts
      generally averaging twelve months in length. We currently perform over 40,000
      individual research assignments annually for our customers.





We
      are
      organized into four business segments:





·
            ON-DEMAND
                BUSINESS RESEARCH (formerly known as Quick Consulting Service or
                QCS)
                offers on-demand access to a dedicated research team that quickly
                provides
                the insights and knowledge customers need related to competitors,
                markets,
                technology and new opportunities. Customers pay a fixed monthly,
                quarterly, semi-annual or annual subscription fee for the right to
                access
                our in-house consulting staff on a continuous and as-needed basis
                to
                answer short custom research requests on virtually any business-related
                topic. This service enables customers to satisfy their day-to-day
                business
                information needs on an outsourced basis, which is generally more
                effective and less expensive than performing the work in-house.·
            STRATEGIC
                INTELLIGENCE (formerly known as Strategic Consulting and Research
                Group or
                SCRG) provides insightful primary intelligence, legally obtained
                from
                unpublished sources, industry experts, market watchers and market
                participants who know the companies you want to
                understand.·
            CUSTOM
                MARKET RESEARCH (formerly known as Quantitative Market Research)
                provides
                in-depth custom quantitative and qualitative research and analysis
                through
                advanced techniques including surveys, focus groups, in-depth interviewing
                and mystery shopping, both domestically and internationally.




4


·
            PRODUCT
                DEVELOPMENT INTELLIGENCE (“PDI”) (formerly known as Teltech) provides
                analysis and expert advice in conceiving, developing and commercializing
                new products and processes in a wide range of industries, including
                chemicals, consumer products, healthcare and industrial.





Together,
      these four business segments enable us to perform both primary and secondary
      research, handle small, medium or large research assignments, provide a full
      range of ancillary outsourced business information services and offer wide
      industry coverage. We therefore believe that one of our unique and compelling
      value propositions is that we can serve as an efficient single source,
      end-to-end solutions provider of a significant portion of our customers’
business information needs.





The
      research resources we use to service our customers’ needs include our in-house
      staff of 148 full time researchers and consultants, access to approximately
      1,500 computer databases and subscription-paid websites, 5,200 internal
      information files, 4,300 books and reference works, 800 periodicals and trade
      journals, and our internal database of over 500,000 previously completed
      research assignments. In addition, through our licensing agreement with SVP,
      we
      have access to approximately 1,000 additional SVP research personnel worldwide,
      and access to 9,935 outside consultants as part of our Expert Network.





Our
      growth strategy is to focus on retaining our base of subscription customers
      while growing our project businesses, leverage the untapped cross-selling
      opportunities from our acquisitions of Guideline Research, Teltech, Atlantic
      and
      Signia, develop new products and services to increase our revenues per customer,
      and make selective acquisitions that add strategic value and are accretive
      to
      earnings per share.





For
      further information, please see “Business and Growth Strategy”
below.





**MARKET
      OVERVIEW**





The
      market for our services covers a broad cross-section of corporate America,
      including both a wide range of industries and company sizes. The primary market
      for our On-Demand Business Research segment is small to medium sized companies,
      while Strategic Intelligence, Custom Market Research and Product Development
      Intelligence sell more to large companies. In terms of industry focus, we
      maintain nine industry specialties as follows: Healthcare and Pharmaceuticals,
      Financial Services, Advertising and Professional Services, Industrial, Consumer
      and Retail, Food and Beverage, Legal, Media and Entertainment and Chemicals.
      However, we have also been successful in selling to executives in various
      functional capacities, such as marketing professionals, R&D professionals,
      market research professionals, strategic planners, and information
      professionals, which cut across industry lines and provide us with corporate
      customers in virtually every major industry. Accordingly, we believe we are
      well
      diversified, and not dependent on any one industry or market segment.





However,
      we believe that there are certain macro trends which have positively impacted
      the market for our services, generally including





·
            Continued
                corporate emphasis on maintaining low internal cost structures, especially
                in non-core functions, enhances the attractiveness of our outsourced
                business model.




5


·
            Corporations
                are being bombarded by an overwhelming amount of raw, unfiltered,
                irrelevant and unreliable information emanating from the Internet
                and
                other public sources. They are increasingly turning to outside firms
                with
                expertise in particular industries or markets that can more efficiently
                synthesize this data into relevant and reliable business
                information.




·
            The
                increased pace of business today, and the growing operating and strategic
                complexity of business decisions, require corporations to have greater
                access to quality, real-time and usable business
                information.




·
            Fierce
                competitive environments, coupled with the increased availability
                of
                generic information products and resources, are increasing demand
                for
                unique business intelligence services that provide customers with
                a
                competitive advantage.




In
      terms
      of size, the total available market for our services is very large. The U.S.
      market for market research alone is approximately $7 billion  (as
      per
      Datamonitor Market Research Global Industry Guide), and the markets for our
      other research and intelligence services are also significant. While large
      overall, these markets are fragmented, with even the largest participants not
      maintaining dominant market shares. For example, we believe that our On-Demand
      Business Research segment is one of the largest on-demand research companies
      in
      the U.S., while our Custom Market Research segment is among the top fifty custom
      market research firms in the U.S.





**INFORMATION
      CONCERING BUSINESS SEGMENTS**




For
      information concerning our business segments, please refer to Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operation” and Note 15 to our Consolidated Financial Statements included
      elsewhere in this report.





**BUSINESS
      AND GROWTH STRATEGY**





Our
      goal
      is to fully leverage the assets of our four business segments through a
      comprehensive and client-centric sales strategy to offer more value to, and
      satisfy more of the business information needs of, our existing customer base,
      while adding products and services that further enhance our capabilities and
      allow us to expand our customer base.





*·*
            *Maintain
                and Enhance Subscription Model.*We
                believe that our subscription model, which accounted for approximately
                46%
                of our revenues in 2005, is one of the keys to our financial and
                operating
                success. It produces a predictable, recurring revenue stream, as
                well as a
                close, ongoing relationship with the customer. Through recent
                acquisitions, as well as through internal product development efforts,
                we
                now have additional products and services that can be incorporated
                into
                our subscription service offerings to make them more unique, enhance
                their
                value and increase their price
                point.




·
            *Cross-Sell
                Services to our Customer Base.*We
                believe that our recent acquisitions have created cross-selling
                opportunities. For example, approximately 300 individual users of
                our
                On-Demand Business Research service have the words “Market Research” in
                their titles, representing prime cross-selling candidates for our
                custom
                market research and strategic intelligence services. Also, our primary
                relationships within our 959****On-Demand
                Business Research clients are typically with sales and marketing
                departments, providing significant cross-selling opportunities for
                Teltech, which specializes in services for technical departments
                such as
                R&D, Product Development and
                Engineering.




6


·
            *Satisfy
                a Larger Share of Customer Business Information Needs*.
                While our customers include some very large companies, including
                many
                Fortune 100 and Fortune 1000 companies, we believe that our average
                revenue per customer is small relative to customers’ total business
                information expenditures. Accordingly, with our expanded line of
                service
                offerings, we believe we have opportunities to increase our average
                revenue per customer.




·
            *Leverage
                Existing Assets to Create New Products and Services*.
                We derive most of our revenues from custom research and consulting
                services provided for the one-time use of individual customers. We
                believe
                there are opportunities to leverage our database of over 500,000
                previously completed research assignments, our current volume of
                over
                40,000 research assignments annually, and our 148 in-house research
                and
                consulting staff to produce and sell products such as syndicated
                research
                and multi-client studies at very little incremental cost.




In
      addition, we have adopted an aggressive sales strategy of identifying the
      specific business intelligence and primary market research needs of prospective
      customers, and providing customized and/or pre-packaged solutions. As a result,
      we have materially expanded our internal product development efforts, indicating
      a broader potential suite of client-centric products and services.





*·*
            *Continue
                to Evaluate Prudent Acquisitions that Add Strategic Value and are
                Accretive to Earnings Per Share.*We
                may pursue additional strategic acquisitions that provide us with
                new
                clients, add new products and services to our product line, or enhance
                our
                expertise and thought leadership within specific vertical or functional
                markets. We intend to be prudent in our acquisition program, focusing
                on
                opportunities that are expected to be immediately accretive to earnings
                or
                within a reasonable time frame
                thereafter.







**PRODUCTS
      & SERVICES**





ON-DEMAND
      BUSINESS RESEARCH





On-Demand
      Business Research provides customers with access to the staff and resources
      of a
      large information center on an outsourced basis, providing customized answers,
      in rapid turnaround time, to day-to-day research requests and business questions
      on a wide variety of topics that require three hours or less of research time.
      On-Demand Business Research is offered only on a retainer subscription basis.
      Retainer clients pay a retainer fee in advance, monthly, quarterly,
      semi-annually or annually. In return, client organizations receive Membership
      Cards for the use of designated executives or employees. Each Membership Card
      entitles a specific individual to use the service, and also offers preferential
      use of, and/or discounts on, our other services and products. We have several
      fixed and adjustable fee retainer pricing programs in effect for our On-Demand
      Business Research service. Depending on the particular pricing program,
      out-of-pocket expenses incurred to answer questions may or may not be invoiced
      separately to the customer.





7


When
      an
      On-Demand Business Research customer has a business question or research
      request, they contact us via telephone or email, give us their card number,
      and
      explain their request. Based on the subject of the request, our customer service
      operators connect the customer with our most qualified available consultant,
      who
      speaks directly with the customer to better understand the customer’s need and
      help define a specific research request that best addresses that need. Our
      consultant then performs the necessary research and prepares a formal written
      research response, which answers the customer’s question and includes additional
      relevant attachments, articles and internet links. Our turnaround time is
      determined by the needs of each client request, and ranges from same-day to
      multi-day.





At
      December 31, 2005, we had 959 On-Demand Business Research subscription
      customers, a 16.5% decrease from December 31, 2004, and 7,692 holders of the
      Membership Card, a 4.7% decrease from December 31, 2004. In addition, the
      average annual On-Demand Business Research retainer subscription rate at
      December 31, 2005 was $13,900, a 6% increase from December 31, 2004. Revenues
      generated by On-Demand Business Research represented approximately 58%, 44%
      and
      37% of the Company's total revenues for the years ended December 31, 2003,
      2004
      and 2005, respectively. The dramatic change in On-Demand Business Research’s
      share of total revenues in 2005 and 2004 resulted from the acquisitions of
      Guideline Research, Teltech, Atlantic and Signia in addition to a decrease
      in
      the On-Demand Business Research subscription base.





STRATEGIC
      INTELLIGENCE




The
      Strategic Intelligence group provides customers with insightful primary
      intelligence on companies and competitors they want to understand, legally
      obtained from unpublished sources, industry experts, market watchers and other
      knowledgeable market participants. Common project requests include customized
      market and industry studies, executive interviews, competitive intelligence
      data-gathering and analysis assignments, acquisition studies and large
      information collection projects. Through Strategic Intelligence, the Company
      provides research as well as interpretation and analysis. All projects in this
      segment are quoted in advance and billed separately.





CUSTOM
      MARKET RESEARCH




Our
      Custom Market Research segment provides in-depth custom quantitative and
      qualitative research and analysis through advanced techniques including surveys,
      focus groups, in-depth interviewing and mystery shopping, both domestically
      and
      internationally. Custom market research studies have an average selling price
      of
      over $40,000, and are typically custom-designed for, and proprietary to, each
      individual client. All projects in this segment are quoted in advance and billed
      separately.





Market
      research is typically conducted by a customer to help refine a strategic need
      into a specific research design. A questionnaire or “script” is first designed
      by us, which is used to interview respondents. Next, outside field contractors
      are hired to conduct the actual interviews with respondents, which may take
      place in malls, in stores, via telephone, via mail, via the internet or a
      combination of the above. Then, the raw field responses are converted into
      usable market research data. Finally, a formal report is prepared for the
      customer which contains an analysis of the data and any strategic
      recommendations based on the data. Market applications for market research
      studies include concept and product testing, positioning research, tracking
      research, customer satisfaction surveys and legal claims
      substantiation.





8


PRODUCT
      DEVELOPMENT INTELLIGENCE





Product
      Development Intelligence provides analysis and expert advice in conceiving,
      developing and commercializing new products and processes in a wide range of
      industries, including chemicals, consumer products, healthcare and industrial.
      Customers apply our research, analysis and advisory services to improve the
      speed and quality of their decision-making and problem solving processes. We
      work with our corporate clients to define their technical information needs,
      identify the best sources for satisfying those needs, and implement the
      appropriate information-management strategies.





Product
      Development Intelligence directly addresses the growing demand for
      cost-effective, user-focused, broad-based scientific and technical research,
      as
      well as project and process consulting. Research results are obtained by
      accessing, synthesizing and analyzing published materials, technical expertise
      and primary research.





Product
      Development Intelligence classifies its services into five main categories:





*On-Demand
      Information Services* .
      Includes services specifically designed to provide an ongoing, proactive flow
      of
      critical information to the end user. Services include quick turn-around analyst
      research, monitoring services, document delivery, supplier research, and access
      to expert consulting. We also have a network of 10,000 leading experts in over
      30,000 technology and industry areas that clients can access
      on-demand.




*In-depth
      Research* .
      We
      conduct major custom research projects on a wide range of science, technology,
      and business topics to support strategic decision-making. Applications include
      market assessments for new products, product feasibility analyses, competitive
      intelligence studies, technology evaluations, M&A evaluations and
      intellectual property analyses.




*Litigation
      Support* .
      We
      provide a litigation support service which provides litigators with access
      to
      our proprietary network of experts who can be used as expert witnesses to assist
      in court cases and other legal actions.




*Information
      Management Consulting* .
      We
      provide comprehensive solutions designed to improve the effectiveness of
      information delivery, analysis, application, and use throughout organizations,
      including consulting for information center optimization, and custom virtual
      library solutions designed to improve an organization’s ability to access
      external information and expertise.




*Outsourced
      Information Centers and Information Portals* **.** We **** also
      have
      long term contracts with nine corporate customers pursuant to which we serve
      as
      the outsourced information center for those customers. In these arrangements,
      we
      typically build and operate an online information portal which serves as the
      virtual library for these customers. These portals are private labeled with
      the
      customers’ own names and logos, but typically contain the notation “Powered by
      Guideline”. These tend to be large contracts, averaging $232,000 per agreement
      in 2005.





Product
      Development Intelligence utilizes multiple contract forms and pricing
      arrangements to sell its services, including annual subscription contracts,
      long-term outsourcing contracts and per-transaction engagements. In 2005,
      approximately 45% of revenues resulted from annual subscription clients, 25%
      resulted from long-term outsourcing contracts and 30% resulted from transaction
      engagements.





9


**SALES
      AND MARKETING**




Our
      primary sales and marketing goals are to retain our subscription client bases,
      and to grow our project businesses through sales to new customers and
      cross-sales to existing customers at each of our business segments. Our sales
      and marketing techniques include direct sales through a four person direct
      sales
      force, telemarketing, public relations, direct mail, email, conference exhibits,
      sales promotion activities and our web site. We also maintain a sophisticated
      leads management system which captures new leads generated, forwards them to
      the
      appropriate people, tracks them during subsequent follow-up, and provides
      detailed reports. We also maintain a staff of account development managers,
      whose primary function is to interact regularly with our research professionals
      and clients to ensure customer satisfaction and promote our other products
      and
      services. The additional involvement of On-Demand Business Research
      professionals as relationship managers further enhances our client
      relationships, and provides us with an additional avenue to cross-sell our
      other
      products and services.





**COMPETITION**





We
      face
      significant competition in our individual business segments, but we believe
      there are few direct competitors who offer our full range of products and
      services. Our competition comes primarily from three sources: (1) other research
      and consulting companies who compete with us in particular products or
      industries; (2) in-house corporate research centers; and (3) content aggregators
      and information publishers that sell directly to individual end-users. Also,
      the
      internet, on-line databases and CD-ROM products have increased the ability
      of
      companies and individuals to perform information searches and basic research
      for
      themselves. Consequently we also compete with a “do-it-yourself” approach.
      However, we believe that our consultants deliver a value-added service based
      on
      their technical expertise and their ability as expert researchers to search
      more
      information sources more quickly than most end users, thereby delivering a
      faster, more thorough and more economical service. Also, our volume contracts
      with information providers typically enable us to access paid databases and
      published information sources less expensively than our clients can do
      themselves. In addition, many of our services, such as custom market research
      and in-depth consulting, cannot be performed in-house by a vast majority of
      our
      customers.





We
      believe that the principal competitive factors in our market include quality
      and
      timeliness of research and analysis, reliable delivery, depth and quality of
      our
      industry knowledge, ability to meet changing customer needs, customer service
      and perceived value. We believe we compete favorably with respect to each of
      these factors.





We
      believe that the principal competitive factors that differentiate us from our
      competitors are:




-
            quality,
                independence and objectivity of our research and analysis;




-
            a
                comprehensive range of service offerings, encompassing on-demand
                research,
                custom market research, strategic intelligence and product development
                intelligence, which allows us to satisfy a significant portion of
                both the
                primary and secondary business intelligence needs of our customers;




10


-
            experience
                providing a total outsourced information solution to some of the
                world’s
                largest companies; and




-
            one
                of the country’s largest private business libraries with access to
                approximately 1,500 computer databases and subscription-paid websites,
                8,000 internal information files, 5,000 books and reference works,
                900
                periodicals and trade journals, and our internal database of over
                500,000
                past completed research assignments.




While
      we
      believe these competitive factors position us well in the marketplace, many
      of
      our direct and indirect competitors are substantially larger than we are and
      have the resources necessary to develop many of the same capabilities. In
      addition, the barriers to entry for some of our products and services are low.
      As a result, new competitors may emerge and existing competitors may start
      to
      provide additional or complementary services which would result in increased
      competition for us.





**INTELLECTUAL
      PROPERTY**





We
      utilize various trade names, trademarks, service marks, copyrights and other
      intellectual property rights in each of our business segments. While we do
      not
      believe that we are reliant on any one intellectual property right overall,
      various intellectual property rights may be material to individual business
      segments. Accordingly, we vigorously identify, create and protect our
      intellectual property rights as we believe appropriate. We also enter into
      agreements with our employees regarding the confidentiality and ownership of
      our
      intellectual property.





**SEASONALITY**





Our
      business is somewhat seasonal both in terms of cash flow and revenues. Our
      cash
      flow has traditionally been strongest in the first and second quarters of the
      year due to the higher number of On-Demand Business Research and Product
      Development Intelligence customers who renew and prepay their annual
      subscriptions during this period. With regard to revenues, while our historical
      On-Demand Business Research segment is generally not seasonal, our Custom Market
      Research, Strategic Intelligence and Product Development Intelligence businesses
      have traditionally experienced stronger revenues in the third and fourth
      quarters of the year. We believe this results primarily from customers who
      seek
      to fully utilize their annual internal information budgets before the end of
      their fiscal years.





**EMPLOYEES**





As
      of
      December 31, 2005, we had 234 full-time employees, including 21 marketing and
      sales employees, 148 consultants and research analysts and 65 administrative
      and
      general personnel. Our ability to develop, market and sell our services and
      to
      establish and maintain our competitive position will depend, in part, on our
      ability to attract and retain qualified personnel. While we believe that we
      have
      been successful to date in attracting such personnel, there can be no assurance
      that we will continue to do so in the future. We are not a party to any
      collective bargaining agreements with our employees. We consider our relations
      with our employees to be good.





Our
      corporate headquarters are located at 625 Avenue of the Americas, New York,
      New
      York 10011, and the telephone number is (212) 645-4500. Our Code of Ethics
      for
      senior executives and financial officers is posted on our website *www.guideline.* com.
      We
      make available free of charge through our website, the annual report on Form
      10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all
      amendments to those reports, and the proxy statement for our annual meeting
      of
      shareholders, as soon as reasonably practicable after such material is
      electronically filed with or furnished to the Securities and Exchange
      Commission.





11


**ITEM
      1A. RISK FACTORS**





**Factors
      That Could Affect Our Future Results**





The
      ownership of our common stock involves a number of risks and uncertainties.
      Potential investors should carefully consider the risks and uncertainties
      described below and the other information contained in this Annual Report on
      Form 10-K before deciding whether to invest in the Company’s securities. The
      Company’s business, financial condition or results of operations could be
      materially adversely affected by any of these risks. The risks described below
      are not the only ones facing us. Additional risks that are currently unknown
      to
      us or that we currently consider to be immaterial may also impair our business
      or adversely affect our financial condition or results of
      operations.





**Risks
      Related to Our Operations**





***Our
      failure to maintain our client base or renewal rates for our subscription-based
      services could have a material adverse effect on our business and financial
      results.***





We
      may
      not be successful in maintaining retainer and deposit account renewal rates
      or
      the size of our retainer and deposit account client base. Our ability to renew
      retainer and deposit accounts is subject to a number of risks, including the
      following:




·
            We
                may be unsuccessful in delivering consistent, high quality and timely
                analysis and advice to our clients;





·
            We
                may not be able to hire and retain a sufficient number of qualified
                professionals in a competitive job
                market;




·
            We
                may be unsuccessful in understanding and anticipating market trends
                and
                the changing needs of our clients;
                and




·
            We
                may not be able to deliver products and services of the quality and
                timeliness to withstand
                competition.







***Our
      failure to consistently sell a sufficient number of new projects in our
      non-subscription based project businesses could have a material adverse effect
      on our business and financial results.***





Our
      ability to replace completed engagements in our project businesses with new
      engagements is subject to a number of risks, including the
      following:





·
            We
                may be unsuccessful in delivering consistent, high quality and timely
                research and consulting services to our
                clients;




·
            We
                may not be able to hire and retain a sufficient number of qualified
                professionals in a competitive job
                market;




12


·
            We
                may be unsuccessful in understanding and anticipating market trends
                and
                the changing needs of our clients;
                and




·
            We
                may not be able to deliver research and consulting services of the
                quality
                and timeliness to withstand
                competition.




***Our
      inability to timely respond to rapid changes in the market or the needs of
      our
      clients could have a material adverse effect on our future operating
      results.***





Our
      success depends in part upon our ability to anticipate rapidly changing market
      trends and to adapt our products and services to meet the changing needs of
      our
      clients. Frequent and sometimes dramatic changes, including the following,
      characterize our industry:





·
            Introduction
                of new products and obsolescence of others;
                and




·
            Changing
                client demands concerning the marketing and delivery of our products
                and
                services.




This
      environment of rapid and continuous change presents significant challenges
      to
      our ability to provide our clients with current and timely analysis and advice
      on issues of importance to them.





***Our*** ***senior credit facility contains various covenants which limit management’s
      discretion in the operation of our business, and our failure to comply with
      these covenants could have a material adverse effect on our business, results
      of
      operations and financial condition.***





On
      March
      31, 2005, we entered into a new senior secured credit facility pursuant to
      the
      Credit Agreement, dated as of March 31, 2005 (the “Credit Agreement”), between
      the Company and Fleet National Bank, a Bank of America company, as lender.
      The
      Credit Agreement establishes a commitment by the lender to provide us with
      up to
      $9,000,000 in the aggregate of loans and other financial accommodations
      consisting of a senior secured term loan facility in an aggregate principal
      amount of $4,500,000 and a senior secured revolving credit facility in an
      aggregate principal amount of up to $4,500,000. On April 1, 2005, the full
      amount of our term facility was drawn in a single drawing and applied, among
      other things, to consummate the acquisition of Atlantic Research &
Consulting, Inc., consummate the acquisition of Signia Partners Incorporated,
      and pay transaction-related costs and expenses. Furthermore, as of December
      31,
      2005, $2,000,000 has been drawn and remains outstanding under our senior secured
      revolving credit facility.





Subject
      to permitted exceptions, our senior credit facility contains various provisions
      that restrict our ability to, among other things:





·
            Incur
                additional indebtedness;




·
            Pay
                dividends or distributions on, or redeem or repurchase, capital
                stock;




·
            Make
                investments;




·
            Engage
                in transactions with affiliates;




·
            Incur
                liens;




13


·
            Transfer
                or sell assets; and




·
            Consolidate,
                merge or transfer all or substantially all of our
                assets.




In
      addition, our senior credit facility requires us to meet certain financial
      covenants. Any failure to comply with the terms of our senior credit facility
      may result in an event of default. Substantially all of our assets are pledged
      to secure our indebtedness under our senior credit facility. If we default
      on
      the financial or other covenants in our senior credit facility, our lenders
      could foreclose on their security interest in our assets, which would have
      a
      material adverse effect on our business, results of operations and financial
      condition. In addition, the lenders may be able to terminate any commitments
      with respect to future financing.





***Failure
      to*** ***attract
      and retain qualified personnel could have a material adverse effect on our
      business and financial results.***





We
      need
      to hire, train and retain a sufficient number of qualified employees to operate
      our business and support our growth. In particular, we need qualified
      consultants, project managers, researchers, relationship managers, sales and
      marketing professionals, and technology professionals. We experience competition
      in recruiting and retaining qualified employees. Our failure
      to attract
      and retain qualified personnel could have a material adverse effect on our
      business and financial results.





***Our*** ***business may be adversely affected if we lose any key members of
      management.***





We
      rely
      on various key management personnel in many areas of our business, and our
      success depends in part on our ability to motivate and retain such highly
      qualified management personnel. The loss of a sufficient number of management
      personnel could have a material adverse effect on the Company.





***Our
      pricing is subject to pressure from various market forces.***





The
      existence of significant competition in all of our business lines, as well
      as
      the emergence of various lower cost information resources such as the internet
      and foreign research firms, may force us to reduce our prices in order to
      compete and maintain our market share. Such price reductions could have a
      material adverse effect on our business and results of operations.





***We
      experience significant competition in each of our business
      lines.*** ******





Many
      of
      the companies with whom we compete are significantly larger than us, with
      substantially greater financial and operational resources. Such competitors
      may
      be able to provide competitive services less expensively or market them more
      effectively, or develop new products and services which are superior to our
      products and services. Our failure to compete successfully with such firms
      could
      have a material adverse effect on our business and operating results.





***We
      must be able to manage our growth effectively.***





We
      have
      grown, and our plan is to continue to grow, rapidly through prudent
      acquisitions. Growth places significant demands on our management,
      administrative, operational and financial resources. Our success in managing
      growth will require us to continue to improve our systems and to motivate and
      effectively manage an evolving workforce. Failure to successfully manage growth
      could have a material adverse effect on our business and operating
      results.





14


***Future
      acquisitions or investments may not be successful, and may have a material
      adverse effect on our business and operating results.***





We
      have
      made four acquisitions since April 1, 2003, and intend to make future
      acquisitions. There can be no guarantee that any future acquisitions will be
      successful due to factors such as difficulties negotiating the terms of the
      purchase, financing the purchase, or integrating and assimilating the employees,
      products and operations of the acquired business. Acquisitions may also disrupt
      our ongoing business and distract management. Furthermore, acquisitions may
      require that we expend significant sums of cash and other consideration which
      would then be unavailable for other business purposes, and which may require
      us
      to incur debt or issue equity.





***Our
      operating results*** ***can
      vary significantly from quarter to quarter based on factors which are not always
      in our control*** ***.***





Our
      operating results vary from quarter to quarter. We expect future operating
      results to fluctuate due to several factors, many of which are out of our
      control:





·
            The
                disproportionately large portion of our subscription accounts that
                expire
                in the fourth quarter of each year, and the level and timing of the
                renewals of such subscription
                accounts;




·
            The
                mix of subscription revenue versus project
                revenue;




·
            The
                number, size and scope of the projects in which we are engaged, the
                degree
                of completion of such engagements, and our ability to complete such
                engagements;




·
            The
                timing and amount of new business generated by
                us;




·
            The
                timing of the development, introduction, and marketing of new products
                and
                services and modes of delivery;




·
            The
                timing of hiring research and sales
                personnel;




·
            The
                accuracy of estimates of resources required to complete ongoing project
                engagements;




·
            Changes
                in the spending patterns of our
                clients;




·
            Our
                accounts receivable collection experience;
                and




·
            Competitive
                conditions in the industry.




Due
      to
      these factors, we believe period-to-period comparisons of results of operations
      are not necessarily meaningful and should not necessarily be relied upon as
      an
      indication of future results of operations.





15


***Recently
      enacted and proposed regulatory changes will increase our
      costs.***





Recently
      enacted and proposed changes in the laws and regulations affecting
      publicly-traded companies, including the provisions of the Sarbanes-Oxley Act
      of
      2002 (the “Sarbanes-Oxley Act”), will increase our expenses to comply with the
      new requirements. In particular, we expect to incur significant additional
      administrative expense as we implement Section 404 of the Sarbanes-Oxley Act,
      which requires management to report on, and our independent registered public
      accounting firm to attest to, our internal controls over financial reporting.
      Compliance with the Sarbanes-Oxley Act and other rules and regulations
      applicable to us could also result in continued diversion of management’s time
      and attention, which could prove to be disruptive to business operations.
      Further, we may lose or may experience difficulty in attracting qualified
      directors and officers.





There
      can
      be no assurance that we will timely complete the management certification and
      auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
      Possible consequences of failure to complete such actions include sanction
      or
      investigation by regulatory authorities, such as the Securities and Exchange
      Commission. Any such action could harm our stock price and also have a material
      adverse effect on our cash flow and financial position.





**Risks
      Related to our Stock**




***Our
      common stock has been delisted from the NASDAQ Stock Market and trades on the
      OTC Bulletin Board, which may negatively impact the trading activity and price
      of our common stock.***




In
      April
      2001, our common stock was delisted from the NASDAQ National Market as a result
      of our failure to comply with certain quantitative requirements for continued
      listing on NASDAQ. Our common stock trades on the OTC Bulletin Board. The OTC
      Bulletin Board is generally considered less liquid and efficient than NASDAQ,
      and although trading in our stock was relatively thin and sporadic before the
      delisting, the liquidity of our common stock has declined and price volatility
      increased because smaller quantities of shares are bought and sold, transactions
      may be delayed and securities analysts’ and news media coverage of us has
      diminished. These factors could result in lower prices and larger spreads in
      the
      bid and ask prices for our common stock. Reduced liquidity may reduce the value
      of our common stock and our ability to use our equity as consideration for
      an
      acquisition or other corporate opportunity.





***We
      do not expect to pay dividends on our common stock in the foreseeable future.***





We
      do not
      intend to pay dividends on our common stock in the foreseeable future. In
      addition, our senior credit facility contains restrictive covenants that may
      restrict our ability to pay dividends to our shareholders. Therefore, you should
      not purchase our common stock if you need or would like immediate or future
      income by way of dividends from your investment.





***Our
      Common Stock is subject to rules regarding “penny stocks” which may affect its
      liquidity.***





Because
      the trading price of our common stock is currently below $5.00 per share,
      trading is subject to certain other rules of the Securities Exchange Act of
      1934, as amended. Such rules require additional disclosure by broker-dealers
      in
      connection with any trades involving a stock defined as a "penny stock." "Penny
      stock" is defined as any non-NASDAQ equity security that has a market price
      of
      less than $5.00 per share, subject to certain exceptions. Such rules require
      the
      delivery of a disclosure schedule explaining the penny stock market and the
      risks associated with that market before entering into any penny stock
      transaction. Disclosure is also required to be made about compensation payable
      to both the broker-dealer and the registered representative and current
      quotations for the securities. The rules also impose various sales practice
      requirements on broker-dealers who sell penny stocks to persons other than
      established customers and accredited investors. For these types of transactions,
      the broker-dealer must make a special suitability determination for the
      purchaser and must receive the purchaser's written consent to the transaction
      prior to the sale. Finally, monthly statements are required to be sent
      disclosing recent price information for the penny stocks. The additional burdens
      imposed upon broker-dealers by such requirements could discourage broker-dealers
      from effecting transactions in our common stock. This could severely limit
      the
      market liquidity of our common stock and your ability to sell such common
      stock.





16


***The
      sale of a substantial amount of our common stock, including shares issued upon
      exercise of outstanding warrants or conversion of our convertible preferred
      stock, could adversely affect the prevailing market price of our common stock.***




The
      sale
      and issuance of a substantial amount of our common stock, including shares
      issued upon exercise of outstanding warrants or conversion of our convertible
      preferred stock, or the perception that such sales could occur could adversely
      affect the prevailing market price of our common stock.




***The
      ability of our Board of Directors to issue additional preferred stock could
      delay or impede a change of control of our company and may adversely affect
      the
      price an acquirer is willing to pay for our common stock.***




The
      Board
      of Directors has the authority to issue, without further action by the
      shareholders, up to an additional 1,667,000 shares of preferred stock in one
      or
      more series and to fix the price, rights, preferences, privileges and
      restrictions thereof, including dividend rights, dividend rates, conversion
      rights, voting rights, terms of redemption, redemption prices, liquidation
      preferences and the number of shares constituting a series or the designation
      of
      such series. The issuance of preferred stock, while providing desirable
      flexibility in connection with possible acquisitions, financings and other
      corporate purposes, could have the effect of delaying, deferring or preventing
      a
      change in control of the Company and may adversely affect the market price
      of,
      and the voting and other rights of, the holders of common stock. Additionally,
      the conversion of preferred stock into common stock may have a dilutive effect
      on the holders of common stock.





***Our
      stock price has fluctuated and may continue to fluctuate widely.***




The
      market price of our common stock has fluctuated substantially in the past.
      The
      market price of our common stock will continue to be subject to significant
      fluctuations in the future in response to a variety of factors, including:




·
            thebusiness environment, including the operating results and stock prices
                of
                companies in the industries we serve;




·
            ourliquidity needs and constraints;




·
            changesin
                management and other personnel;




·
            trading
                on the OTC Bulletin Board;




·
            fluctuations
                in operating results;




17


·
            future
                announcements concerning our business or that of our competitors
                or
                customers;




·
            the
                introduction of new products or changes in product pricing policies
                by us
                or our competitors;




·
            developments
                in the financial markets;




·
            general
                conditions in the consulting industry; and




·
            perceived
                dilution from stock issuances for acquisitions, our 2004 equity private
                placement financing and convertible preferred stock and other
                transactions.




Furthermore,
      stock prices for many companies fluctuate widely for reasons that may be
      unrelated to their operating results. Those fluctuations and general economic,
      political and market conditions, such as recessions, terrorist or other military
      actions, or international currency fluctuations, as well as public perception
      of
      equity values of publicly-traded companies may adversely affect the market
      price
      of our common stock.





**ITEM
      1B. UNRESOLVED STAFF COMMENTS**





None.





**ITEM
      2. PROPERTIES**





At
      December 31, 2005 we leased office space as follows:





·
            Approximately
                32,000 square feet of office space at 625 Avenue of the Americas,
                New
                York, New York, which has been our main corporate office since 1987.
                This
                office also serves as the principal office of our On-Demand Business
                Research business segment. The lease is subject to standard escalation
                clauses, and expires in June 2013. Basic annual rent expense, determined
                on the straight-line basis over the term of the lease, is approximately
                $926,000.





·
            Approximately
                11,400 square feet at 3 West 35th Street, New York, NY, which is
                the
                principal location of Guideline
                Research.




·
            Approximately
                8,800 square feet in Arlington, VA which is the principal location
                of
                Signia.




·
            Approximately
                8,900 square feet in Boston, MA which is the principal location of
                Atlantic.




·
            Approximately
                7,900 square feet in Bloomington, MN which is the principal location
                of
                Teltech.




·
            Approximately
                4,000 square feet in Chicago, IL which is a satellite office of Guideline
                Research.




The
      future minimum lease payments under non-cancellable operating leases related
      to
      the above properties as of December 31, 2005 were as follows:





18


Year
                ending December 31
            
            Operating
                Leases2006
            
            $
            1,596,0002007
            
            
            1,507,0002008
            
            
            1,488,0002009
            
            
            1,374,0002010
            
            
            1,266,000Thereafter
            
            
            2,669,000Total
                minimum lease payments
            
            $
            9,900,000





**ITEM
      3. LEGAL PROCEEDINGS**





From
      time
      to time, we are subject to ordinary routine litigation incidental to our normal
      business operations. We are not currently a party to, and our property is not
      subject to, any material legal proceedings. However, in the future, we or our
      property may become subject to litigation, which if decided adversely to us,
      may
      have a material adverse effect on us.





**ITEM
      4.**





**Submission
      of Matters to a Vote of Security Holders**





None





**PART
      II**





**Item
      5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities**





Our
      common stock, par value $.0001 per share (“Common Stock”) is traded on the Over
      The Counter Bulletin Board under the symbol “GDLN.OB”. There were approximately
      752 common shareholders of record on March 27, 2006. We currently do not, and
      do
      not intend in the future, to pay cash dividends on our common stock in the
      foreseeable future, and we are restricted from doing so under the terms of
      our
      debt agreements including, without limitation, our senior credit facility.
      For
      more information, please see Item 7 “Management’s Discussion and Analysis of
      Financial Condition and Results of Operation” of this Annual Report on Form 10-K
      and Note 9 “Notes Payable” to the financial statements contained elsewhere
      in this Annual Report on Form 10-K. **** Cash
      generated from operations will be used for general corporate purposes, including
      acquisitions and supporting organic growth.





The
      following table sets forth the range of high and low bids of our Common Stock
      for the calendar quarters indicated. The quotes listed below reflect
      inter-dealer prices or transactions solely between market-makers, without retail
      mark-up, mark-down or commission and may not necessarily represent actual
      transactions. In April 2001, due to its failure to comply with NASDAQ’s $1.00
      minimum bid price requirement, our shares of Common Stock were delisted. Trading
      has since continued to be conducted on the Over The Counter Bulletin Board.





19


Price
                  Range
              
              High
              
              Low20051st
                  Quarter
              
              
              1.85
              
              
              1.412nd
                  Quarter
              
              
              1.48
              
              
              1.223rd
                  Quarter
              
              
              1.55
              
              
              1.074th
                  Quarter
              
              
              1.29
              
              
              0.9720041st
                  Quarter
              
              
              2.70
              
              
              1.452nd
                  Quarter
              
              
              2.80
              
              
              2.253rd
                  Quarter
              
              
              2.40
              
              
              1.704th
                  Quarter
              
              
              1.90
              
              
              1.35


**Item
      6. Selected Financial Data**





The
      following table sets forth our selected financial data as of and for the years
      ended December 31, 2005, 2004, 2003, 2002 and 2001. The selected financial
      data
      set forth below has been derived from our audited consolidated financial
      statements and related notes for the respective fiscal years. The selected
      financial data should be read in conjunction with “Management's Discussion and
      Analysis of Financial Condition and Results of Operation” contained in Part II,
      Item 7 of this report as well as our consolidated financial statements and
      notes
      thereto included elsewhere in this report. These historical results are not
      necessarily indicative of the results to be expected in the future.





**Statements
      of Operations**




Years
                Ended December 31,(in
                thousands, except per share amounts)2005
            
            2004
            
            2003
            
            2002
            
            2001Revenues
            
            $
            43,034
            
            $
            38,437
            
            $
            31,569
            
            $
            20,828
            
            $
            22,215Operating
                income (loss)
            
            
            983
            
            
            (256
            )
            
            (169
            )
            
            (1,683
            )
            
            (1,198
            )Net
                income (loss)
            
            
            452
            
            
            (1,945
            )
            
            (947
            )
            
            (1,875
            )
            
            (995
            )Net
                income (loss) attributable to common shareholders1
            
            
            412
            
            
            (2,098
            )
            
            (1,227
            )
            
            (1,875
            )
            
            (995
            )Income
                (loss) per common share:Basic
                and Diluted
            
            
            0.02
            
            
            (0.12
            )
            
            (.10
            )
            
            (.18
            )
            
            (.13
            )Weighted
                average number of common shares:Basic
            
            
            20,046
            
            
            17,213
            
            
            11,766
            
            
            10,139
            
            
            7,880Diluted
            
            
            21,631
            
            
            17,213
            
            
            11,766
            
            
            10,139
            
            
            7,880Cash
                dividends paid per common share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —





20


**Balance
      Sheet Data**





As
                of December 31(in
                thousands)2005
            
            2004
            
            2003
            
            2002
            
            2001Working
                capital (current assetsless
                current liabilities)2
            
            $
            281
            
            $
            2,832
            
            $
            (2,066
            )
            $
            (43
            )
            $
            (401
            )Total
                assets
            
            
            38,207
            
            
            30,022
            
            
            22,968
            
            
            9,414
            
            
            10,692Long-term
                notes payable,excluding
                current amounts
            
            
            3,389
            
            
            —
            
            
            3,170
            
            
            1,200
            
            
            895Shareholders'
                equity1
            
            
            21,328
            
            
            18,120
            
            
            7,370
            
            
            3,589
            
            
            4,490





1 **** Net
      income (loss) attributable to common shareholders is the result of accretion
      on
      redeemable common stock and accrued preferred dividends for 2005, 2004 and
      2003
      only. Accretion on redeemable common stock exists when the fair value of
      redeemable common stock exceeds the original amount of $727,000 at the balance
      sheet date. As of December 31, 2005, 2004 and 2003, the fair value of the
      redeemable common stock was zero, $1,090,000 and $977,000, respectively,
      resulting in zero, $113,000 and $250,000 of accretion for the years then ended.
      The maximum fair value of the redeemable common stock was $1,090,000, as
      defined. Beginning at April 1, 2003, the Guideline Research acquisition date,
      preferred dividends are accrued at 8% per annum on the $500,000 preferred stock
      redemption value. At December 31, 2005, 2004 and 2003, accrued dividends
      amounted to $110,000, $70,000 and $30,000, respectively.





2 Working
      capital includes $4,311,000, $3,472,000, $3,612,000, $1,476,000 and $1,753,000
      of unearned income as of December 31, 2005, 2004, 2003, 2002 and 2001,
      respectively. Such amounts reflect amounts billed, but not yet earned.





**Item
      7. Management's Discussion and Analysis of Financial Condition and Results
      of
      Operation**





The
      following discussion and analysis should be read in conjunction with “Selected
      Financial Data” as well as our consolidated financial statements and notes
      thereto appearing elsewhere in this Annual Report on Form 10-K.





**General**





GUIDELINE,
      INC. (formerly known as FIND/SVP, Inc.) and its wholly-owned subsidiaries
      (collectively, "Guideline " or the "Company" which may be also referred to
      in
      this report as “we”, “us” or “our”) is a single-source provider of customized
      business research and analysis. Through our end-to-end continuum of On-Demand
      Business Research, Custom Market Research, Strategic Intelligence and Product
      Development Intelligence, our research analysts create integrated solutions
      that
      enable clients to make informed decisions to address their critical business
      needs. We specialize in nearly all major industries, including healthcare and
      pharmaceuticals, financial services, advertising and professional services,
      industrial, consumer and retail, food and beverage, media and entertainment
      and
      chemicals. In many cases, we function as our customers’ primary information and
      business intelligence resource on an outsourced basis, especially among the
      growing universe of companies that have downsized their internal research staffs
      and information resources. In other cases, we serve as a reliable supplemental
      resource to customers’ internal capabilities.




The
      Company manages its research and business advisory services in the following
      four business segments: On-Demand Business Research (previously known as Quick
      Consulting or QCS), Strategic Intelligence, Custom Market Research and Product
      Development Intelligence (previously known as Teltech). Upon the Company’s
      acquisition of Signia on April 1, 2005, the operations and financial results
      of
      Signia were integrated into the business segment previously known as the
      Strategic Research and Consulting Group (“SCRG”), and this segment was renamed
      Strategic Intelligence. Upon the Company’s acquisition of Atlantic on April 1,
      2005, the operations and financial results of Atlantic were integrated into
      the
      business segment previously known as Quantitative Market Research, and this
      segment was renamed Custom Market Research. References to “Corporate” and
“Other” in our financial statements refer to the portion of assets and
      activities that are not allocated to a segment.





21


On
      April
      1, 2005 we acquired each of Atlantic and Signia, and each of Atlantic’s and
      Signia’s results of operations are included in our results of operations from
      such date.




On
      July
      1, 2003, we acquired Teltech, and Teltech’s results of operations are included
      in our results of operations from such date.





On
      April
      1, 2003, we acquired Guideline Research, and Guideline Research’s results of
      operations are included in our results of operations from such
      date.






**Results
      of Operations - Calendar Year 2005 Compared to Calendar Year
      2004**





The
      following represents the Company’s analysis of its results of operations for the
      year ended December 31, 2005 as compared with the year ended December 31,
      2004:





**Years
                Ended December 31,**(in
                thousands)**2005****2**
            
            **2004****1**
            
            **$
                Change**
            
            **%
                Change**RevenuesOn-Demand
                Business Research (formerly known as QCS)
            
            $
            15,850
            
            $
            16,904
            
            $
            (1,054
            )
            
            (6.24
            )%Strategic
                Intelligence (formerly known as SCRG)
            
            
            4,157
            
            
            1,936
            
            
            2,221
            
            
            114.72
            %Custom
                Market Research (formerly known as Quantitative Market
                Research)
            
            
            14,410
            
            
            11,371
            
            
            3,039
            
            
            26.73
            %Product
                Development Intelligence (formerly known as Teltech)
            
            
            8,617
            
            
            8,226
            
            
            391
            
            
            4.75
            %Total
                revenues
            
            $
            43,034
            
            $
            38,437
            
            $
            4,597
            
            
            11.96
            %Direct
                costs
            
            $
            25,708
            
            $
            22,384
            
            $
            3,324
            
            
            14.85
            %Selling,
                general and administrative expenses
            
            $
            16,343
            
            $
            16,309
            
            $
            34
            
            
            0.21
            %Interest
                expense
            
            $
            401
            
            $
            1,609
            
            $
            (1,208
            )
            
            (75.08
            )%Income
                tax provision
            
            $
            211
            
            $
            —
            
            $
            211
            
            
            100
            %Net
                income (loss) attributable to common shareholders
            
            $
            412
            
            $
            (2,098
            )
            $
            2,510
            
            
            119.64
            %1On
                April 21, 2004, the Company sold its Information Advisor newsletter
                business, which was part of the Company’s On-Demand Business Research
                segment, to Information Today. This business represented a de minimis
                portion of the Company’s overall business. The sale proceeds to the
                Company consisted of $52,500 in cash, $15,000 of free advertising,
                and the
                buyer’s assumption of an unearned income liability, less modest
                transaction expenses. The Company recorded a gain on sale of assets
                of
                $92,000.
              
              2On
                November 28, 2005, the Company sold its investment in FIND.COM LLC
                to
                Scientigo, Inc. The sale proceeds to the Company consisted of $250,000
                in
                cash, $150,000 in Scientigo common stock at $1.3325 per share, a
                secured
                promissory note for $100,000 and a 49% interest in Tigo Search, Inc.
                The
                Company recorded a gain on sale of assets of $226,000.




*Revenues*





Revenues
      increased from $38,437,000 in 2004 to $43,034,000 in 2005, which represents
      a
      12.0% increase. This increase was primarily due to the acquisitions of Signia
      Partners and Atlantic Research and Consulting on April 1, 2005. See below for
      more details regarding this increase.





*On-Demand
      Business Research*




On-Demand
      Business Research revenues, which result from annual retainer contracts paid
      by
      clients on a monthly, quarterly, semi-annual or annual basis, decreased by
      $1,054,000, or 6.2%, from $16,904,000 in
      2004 to
      $15,850,000 in
      2005 .
      The
      decrease from 2004 to 2005 was a result of 260 cancellations that were not
      sufficiently offset by an increase in new client business despite increased
      retainer rates. We believe that our failure to generate sufficient new sales
      to
      offset client cancellations resulted primarily from our replacement in 2005
      of
      the direct sales force that had previously been responsible for selling new
      subscriptions with a two person telesales staff, as well as from the perception
      among certain
      customers and prospects that they can satisfy their day-to-day research needs
      internally through the use of the internet.





22


*Strategic
      Intelligence*





Strategic
      Intelligence revenues, which result from more in-depth research and consulting
      engagements, increased by $2,221,000, or 114.7%, from $1,936,000 in
      2004 to
      $4,157,000 in
      2005 .
      The
      increase from 2004 to 2005 was a result of the acquisition of Signia on April
      1,
      2005 and the subsequent integration of Signia’s operations and financial results
      into this business segment.





*Custom
      Market Research*





Custom
      Market Research revenues, which result from custom market research consulting
      engagements, such as surveys and focus groups, increased by $3,039,000, or
      26.7%, from $11,371,000 in
      2004 to
      $14,410,000 in
      2005 .
      This
      increase was due to the acquisition of Atlantic on April 1, 2005 and the
      inclusion from that date of $4,882,000 of revenues from Atlantic partially
      offset by a revenue decrease of $1,843,000 at the Company’s Guideline Research
      business. The revenue decrease at Guideline Research resulted from the
      combination of delays on the part of certain customers in commencing new
      projects, as well as reduced demand within certain customers and markets.





*Product
      Development Intelligence*





Product
      Development Intelligence revenues, which result from on-demand research,
      outsourced information services and in-depth projects, increased by $391,000,
      or
      4.8%, from $8,226,000 in
      2004 to
      $8,617,000 in
      2005 .
      This
      was primarily the result of the introduction in January 2005 of a new Litigation
      Support business, which provides customers with access to subject-matter experts
      to support customer litigation activities, as well as an increase in in-depth
      consulting engagements, partially offset by a decrease in deposit and outsourced
      revenues due to lower usage.





*Direct
      Costs*





Direct
      costs, which are those
      costs directly related to generating revenue, such as direct labor, expenses
      incurred on behalf of clients and the costs of electronic resources and
      databases, increased by $3,324,000, or 14.9%, from $22,384,000 in 2004 to
      $25,708,000 in 2005 .
      Direct
      costs represented 59.7% and 58.2% of revenues in
      2005
      and 2004, respectively .
      The
      increase in total direct costs was primarily the result of the acquisitions
      of
      Atlantic and Signia (total direct costs since the date of acquisition of both
      Atlantic and Signia were $5,272,000, which are included in the year ended
      December 31, 2005.) Exclusive of Atlantic and Signia, direct costs decreased
      by
      $1,948,000, from $22,384,000 in 2004 to $20,436,000 in 2005. This decrease
      was
      primarily due to the decreases in revenue in the Company’s On-Demand Business
      Research segment as well as the Guideline Research portion of the Company’s
      Custom Market Research segment, a decrease in purchases made on behalf of
      clients, including the cost paid to content providers, of $1,584,000, and
      decreases in royalties, photocopy charges and direct labor, including stock
      compensation expense, totaling $364,000.




23


*Selling,
      general and administrative expenses*





Selling,
      general and administrative expenses increased by $34,000, or less than 1.0%,
      from $16,309,000, or 42.4% of revenue, in
      2004 to
      $16,343,000, or 38.0% of revenue, in
      2005 .
      The
      increase in total selling, general and administrative expenses was partially
      a
      result of the acquisitions of Atlantic and Signia (total selling, general and
      administrative expenses since the date of acquisition of both Atlantic and
      Signia were $2,128,000, which are included in the year ended December 31, 2005).
      Exclusive of Atlantic and Signia, selling, general and administrative expenses
      decreased by $2,094,000, or 12.8%, to $14,215,000 in 2005. This decrease was
      due
      primarily to a decrease in indirect labor costs, including stock compensation
      expense, of $1,769,000, a decrease in rent expense of $501,000 due to the
      abandonment of one of the Company’s leases in 2004, a decrease in business taxes
      of $89,000 and decreases in moving expenses and maintenance costs totaling
      $139,000, partially offset by an increase in severance and related charges
      of
      $91,000 primarily related to the Company’s restructuring of its sales force, an
      increase in depreciation and amortization of $350,000, and an increase in
      professional fees of $143,000.





*Interest
      expense*




Interest
      expense decreased by $1,208,000 from $1,609,000 in 2004 to $401,000 in 2005.
      The
      decrease was due to the repayment of all then outstanding debt in May 2004,
      offset by interest related to borrowing on our new credit facility with Fleet
      National Bank, a Bank of America company, entered into in March 2005. (See
      Note 9 to the Consolidated Financial Statements included elsewhere in this
      Annual Report on Form 10-K for more information regarding this credit facility.)





*Income
      Taxes*





The
      $211,000 income tax provision for the year ended December 31, 2005 represents
      31.8% of the income before provision for income taxes. The difference between
      this rate and the statutory rate primarily relates to expenses that are not
      deductible for income tax purposes and reflects the utilization of net operating
      loss carryforwards.





Given
      the
      Company’s previous history of recurring taxable losses, there was no income tax
      benefit recognized for the year ended December 31, 2004. Instead, the Company
      recorded a $721,000 tax valuation allowance in 2004, equal to what the income
      tax benefit would have been for the year. This valuation allowance was recorded
      as the Company determined, based on its past history of limited taxable income,
      that it was more likely than not that a portion of its deferred tax assets
      would
      not be realized during the carryforward period.





*Net
      Income (Loss) Attributable to Common Shareholders*





Net
      income attributable to common shareholders for 2005 was $412,000, as compared
      with a net loss attributable to common shareholders of ($2,098,000) for 2004.
      Included in net income for 2005 is a gain on sale of assets of $226,000 related
      to the sale of find.com




24


**Results
      of Operations - Calendar Year 2004 Compared to Calendar Year
      2003**





The
      following represents the Company’s analysis of its results of operations for the
      year ended December 31, 2004 as compared with the year ended December 31,
      2003.





**Years
                Ended December 31,**(in
                thousands)**2004****1**
            
            **2003**
            
            **$
                Change**
            
            **%
                Change**RevenuesOn-Demand
                Business Research (formerly known as QCS)
            
            $
            16,904
            
            $
            18,391
            
            $
            (1,487
            )
            
            (8.09
            )%Strategic
                Intelligence (formerly known as SCRG)
            
            
            1,936
            
            
            1,415
            
            
            521
            
            
            36.80
            %Custom
                Market Research (formerly known as Quantitative Market
                Research)
            
            
            11,371
            
            
            7,669
            
            
            3,702
            
            
            48.27
            %Product
                Development Intelligence (formerly known as Teltech)
            
            
            8,226
            
            
            4,094
            
            
            4,132
            
            
            100.93
            %Total
                revenues
            
            $
            38,437
            
            $
            31,569
            
            $
            6,868
            
            
            21.76
            %Direct
                costs
            
            $
            22,384
            
            $
            17,243
            
            $
            5,141
            
            
            29.81
            %Selling,
                general and administrative expenses
            
            $
            16,309
            
            $
            14,495
            
            $
            1,814
            
            
            12.51
            %Interest
                expense
            
            $
            1,609
            
            $
            687
            
            $
            922
            
            
            134.21
            %Income
                tax provision
            
            $
            —
            
            $
            210
            
            $
            (210
            )
            
            (100
            )%Net
                loss attributable to common shareholders
            
            $
            (2,098
            )
            $
            (1,227
            )
            $
            (871
            )
            
            (70.99
            )%1On
                April 21, 2004, the Company sold its Information Advisor newsletter
                business, which was part of the Company’s On-Demand Business Research
                segment, to Information Today. This business represented a de minimis
                portion of the Company’s overall business. The sale proceeds to the
                Company consisted of $52,500 in cash, $15,000 of free advertising,
                and the
                buyer’s assumption of an unearned income liability, less modest
                transaction expenses. The Company recorded a gain on sale of assets
                of
                $92,000.





*Revenues*





Revenues
      increased from $31,569,000 in 2003 to $38,437,000 in 2004, which represents
      an
      increase of 21.8% for the same period. See below for more details regarding
      this
      increase.





*On-Demand
      Business Research*




On-Demand
      Business Research revenues, which result from annual retainer contracts paid
      by
      clients on a monthly, quarterly, semi-annual or annual basis, decreased by
      $1,487,000, or 8.1%, from $18,391,000 in
      2003 to
      $16,904,000 in
      2004 .
      The
      decrease from 2003 to 2004 was a result of 366 cancellations that were not
      sufficiently offset by an increase in new client business despite increased
      retainer rates. We believe that cancellations
      were primarily a result of continued general uncertain economic conditions,
      as
      well as the perception among certain customers that they can satisfy their
      day-to-day research needs internally through the use of the
      internet.





*Strategic
      Intelligence*





Strategic
      Intelligence revenues, which result from more in-depth research and consulting
      engagements, increased by $521,000, or 36.8%, from $1,415,000 in
      2003 to
      $1,936,000 in
      2004 .
      The
      increase from 2003 to 2004 was due to an increase in demand in several strategic
      markets and incremental revenue from an initiative to develop major accounts,
      which resulted in three projects with a total revenue of $483,000.





*Custom
      Market Research*





Custom
      Market Research revenues, which result from custom market research consulting
      engagements, such as conducting surveys and focus groups, increased by
      $3,702,000, or 48.3%, from $7,669,000 in
      2003 to
      $11,371,000 in
      2004 .
      This is
      primarily the result of a strong overall market research market, increased
      demand from certain customers in the healthcare industry and the addition of
      ten
      new customers as a result of cross-selling activities into the Company’s
      On-Demand Business Research customer base. We acquired this line of business
      on
      April 1, 2003.





25


*Product
      Development Intelligence*





Product
      Development Intelligence revenues, which result from on-demand research,
      outsourced information services and in-depth projects, increased by $4,132,000,
      or 100.9%, from $4,094,000 in
      2003 to
      $8,226,000 in
      2004 .
      We
      acquired this line of business on July 1, 2003.





*Direct
      Costs*





Direct
      costs, which are those
      costs directly related to generating revenue, such as direct labor, expenses
      incurred on behalf of clients and the costs of electronic resources and
      databases, increased by $5,141,000, or 29.8%, from $17,243,000 in 2003 to
      $22,384,000 in 2004 .
      Direct
      costs represented 58.2% and 54.6% of revenues in
      2004
      and 2003, respectively .
      The
      increase in total direct costs was primarily the result of the acquisition
      of
      Guideline Research during the fiscal quarter ended June 30, 2003 and the
      acquisition of Teltech during the fiscal quarter ended September 30, 2003.
      The
      increase as a percentage of revenue was due to an increase in stock compensation
      expense and increased variable compensation expense related to one of the
      Guideline Research executives, partially offset by a decrease in labor related
      to attrition. Guideline Research’s and Teltech’s direct costs consist of both
      direct labor and direct costs, such as subcontractors who perform fieldwork
      for
      many of their projects, annual costs related to the use of external content
      providers, and other necessary costs incurred in order to fulfill client
      requests. Exclusive of Guideline Research and Teltech, direct costs decreased
      by
      approximately $548,000 from 2003 to 2004 primarily as a result of decreased
      direct labor costs, inclusive of decreased stock compensation expense.





*Selling,
      general and administrative expenses*





Selling,
      general and administrative expenses increased by $1,814,000, or 12.5%, from
      $14,495,000, or 45.9% of revenue, in
      2003 to
      $16,309,000, or 42.4% of revenue, in
      2004 .
      The
      increase in selling, general and administrative was due primarily to the
      acquisitions of Guideline Research, which took place during the fiscal quarter
      ended June 30, 2003 (total Guideline Research selling, general and
      administrative expenses were $1,676,000 in 2004), and Teltech, which took place
      during the fiscal quarter ended September 30, 2003 (total Teltech selling,
      general and administrative expenses were $2,210,000 in 2004), while the decrease
      as a percentage of revenue was due to the lower overall selling, general and
      administrative percentages of Guideline Research and Teltech. Exclusive of
      Guideline Research and Teltech, selling, general and administrative expenses
      increased by $352,000, or 2.9%, from 2003 to 2004, resulting primarily from
      an
      increase in labor costs as well as a $629,000
      charge recorded for severance during 2004 and a $530,000 charge recorded as
      a
      result of the abandonment of a lease during the second quarter of 2004, offset
      by decreased stock compensation expense of approximately $705,000.





*Interest
      expense*




Interest
      expense increased by $922,000 from $687,000 in 2003 to $1,609,000 in 2004.
      The
      increase was primarily the result of non-cash interest expense of $1,130,000,
      representing the accretion of the difference between the initial relative fair
      value and the stated value of the notes that the Company issued to Petra
      Mezzanine Fund, L.P. in connection with the Guideline Research and Teltech
      acquisitions (See “Liquidity and Capital Resources”). Furthermore, the Petra
      debt was repaid in May 2004, and the remaining unamortized difference between
      the initial relative fair value and the stated value of $1,039,000 was fully
      accreted as additional interest expense at that time. (See Note 9 to the
      Consolidated Financial Statements included elsewhere in this Annual Report
      on
      Form 10-K for more information.)





26


*Income
      Taxes*





Given
      the
      Company’s previous history of recurring taxable losses, there was no income tax
      benefit recognized for the fiscal year ended December 31, 2004. Instead, the
      Company recorded a $721,000 tax valuation allowance in 2004, equal to what
      the
      income tax benefit would have been for the year. This valuation allowance was
      recorded as the Company determined, based on its past history of limited taxable
      income, that it was more likely than not that a portion of its deferred tax
      assets would not be realized during the carryforward period.





The
      $210,000 income tax provision for the year ended December 31, 2003 represents
      28% of pre-tax income. The income tax provision was different than the statutory
      rate because expenses, such as certain stock compensation expense, meals and
      entertainment and key-man life insurance premiums, which are not deductible
      for
      tax purposes, resulted in a different effective tax rate than the statutory
      rate.





*Net
      Loss Attributable to Common Shareholders*





Net
      loss
      attributable to common shareholders for 2004 was $2,098,000, as compared with
      a
      net loss attributable to common shareholders of $1,227,000 for
      2003.





**Segment
      Data**





The
      Company manages its research and business advisory services in the following
      four business segments: On-Demand Business Research (previously known as Quick
      Consulting or QCS), Strategic Intelligence, Custom Market Research and Product
      Development Intelligence (previously known as Teltech). Upon the Company’s
      acquisition of Signia on April 1, 2005, the operations and financial results
      of
      Signia were integrated into the business segment previously known as the
      Strategic Research and Consulting Group (“SCRG”), and this segment was renamed
      Strategic Intelligence. Upon the Company’s acquisition of Atlantic on April 1,
      2005, the operations and financial results of Atlantic were integrated into
      the
      business segment previously known as Quantitative Market Research, and this
      segment was renamed Custom Market Research. References to “Corporate” and
“Other” in our financial statements refer to the portion of assets and
      activities that are not allocated to a segment.




**Years
                  Ended December 31,**(in
                  thousands)**2005**
              
              **2004**
              
              **2003****Revenues**On-Demand
                  Business Research
              
              $
              15,850
              
              $
              16,904
              
              $
              18,391Strategic
                  Intelligence
              
              
              4,157
              
              
              1,936
              
              
              1,415Custom
                  Market Research
              
              
              14,410
              
              
              11,371
              
              
              7,669Product
                  Development Intelligence
              
              
              8,617
              
              
              8,226
              
              
              4,094Total
                  revenues
              
              $
              43,034
              
              $
              38,437
              
              $
              31,569**Depreciation
                  and amortization**On-Demand
                  Business Research
              
              $
              963
              
              $
              577
              
              $
              762Strategic
                  Intelligence
              
              
              33
              
              
              79
              
              
              120Custom
                  Market Research
              
              
              75
              
              
              36
              
              
              41Product
                  Development Intelligence
              
              
              93
              
              
              98
              
              
              47Total
                  segment depreciation and amortization
              
              
              1,164
              
              
              790
              
              
              970Corporate
                  and other
              
              
              186
              
              
              141
              
              
              173Total
                  depreciation and amortization
              
              $
              1,350
              
              $
              931
              
              $
              1,143**Operating
                  income (loss)**On-Demand
                  Business Research
              
              $
              1,267
              
              $
              1,357
              
              $
              2,281Strategic
                  Intelligence
              
              
              586
              
              
              164
              
              
              (526
              )Custom
                  Market Research
              
              
              1,380
              
              
              1,160
              
              
              828Product
                  Development Intelligence
              
              
              762
              
              
              922
              
              
              408Segment
                  operating income
              
              
              3,995
              
              
              3,603
              
              
              2,991Corporate
                  and other1
              
              
              (3,012
              )
              
              (3,859
              )
              
              (3,160
              )Operating
                  income (loss)
              
              $
              983
              
              $
              (256
              )
              $
              (169
              )**Income
                  (loss) before taxes**On-Demand
                  Business Research
              
              $
              1,267
              
              $
              1,357
              
              $
              2,281Strategic
                  Intelligence
              
              
              594
              
              
              164
              
              
              (526
              )Custom
                  Market Research
              
              
              1,378
              
              
              1,023
              
              
              408Product
                  Development Intelligence
              
              
              760
              
              
              782
              
              
              286Segment
                  income before taxes
              
              
              3,999
              
              
              3,326
              
              
              2,449Corporate
                  and other1
              
              
              (3,336
              )
              
              (5,271
              )
              
              (3,186
              )Income
                  (loss) before taxes
              
              $
              663
              
              $
              (1,945
              )
              $
              (737
              )**Total
                  Assets**On-Demand
                  Business Research
              
              $
              2,731
              
              $
              2,741Strategic
                  Intelligence
              
              
              2,203
              
              
              597Custom
                  Market Research
              
              
              4,262
              
              
              3,996Product
                  Development Intelligence
              
              
              3,519
              
              
              3,062Total
                  segment assets
              
              
              12,715
              
              
              10,396Corporate
                  and other
              
              
              25,492
              
              
              19,626Total
                  assets
              
              $
              38,207
              
              $
              30,022**Capital
                  Expenditures**On-Demand
                  Business Research
              
              $
              133
              
              $
              186
              
              $
              133Strategic
                  Intelligence
              
              
              45
              
              
              8
              
              
              5Custom
                  Market Research
              
              
              114
              
              
              23
              
              
              —Product
                  Development Intelligence
              
              
              —
              
              
              62
              
              
              —Total
                  segment capital expenditures
              
              
              292
              
              
              279
              
              
              138Corporate
                  and other
              
              
              139
              
              
              253
              
              
              319Total
                  capital expenditures
              
              $
              431
              
              $
              532
              
              $
              4571Represents the effect of direct costs and selling, general and
                  administrative expenses not attributable to a single segment.





27


**Quarterly
      Financial Data**





The
      following table sets forth selected quarterly data for the years ended December
      31, 2005 and 2004 (in thousands, except per share data). The operating results
      are not indicative of results for any future period.





Quarter
                ended
            
            Revenues
            
            Operating
              income
              (loss)
            
            Income
                (loss)
              before
                provision (benefit)
              forincome
                taxes
            
            Net
                income (loss) attributable to common
              shareholders
            
            Income
                (loss)
              per
                share:
              basic1
            
            Income
                (loss)
              per
                share:
              diluted1March
                31, 2005
            
            $
            8,786
            
            $
            213
            
            $
            176
            
            $
            41
            
            $
            0.00
            
            $
            0.00June
                30, 2005
            
            
            11,329
            
            
            (482
            )
            
            (624
            )
            
            (577
            )
            
            (0.03
            )
            
            (0.03
            )September
                30, 2005
            
            
            11,433
            
            
            800
            
            
            651
            
            
            435
            
            
            0.02
            
            
            0.02December
                31, 2005
            
            
            11,486
            
            
            452
            
            
            460
            
            
            513
            
            
            0.03
            
            
            0.02March
                31, 20042
            
            $
            9,606
            
            $
            239
            
            $
            (82
            )
            $
            (201
            )
            $
            (0.02
            )
            $
            (0.02
            )June
                30, 20042
            
            
            9,711
            
            
            (745
            )
            
            (2,028
            )
            
            (1,472
            )
            
            (0.09
            )
            
            (0.09
            )September
                30, 20042
            
            
            9,915
            
            
            623
            
            
            560
            
            
            296
            
            
            0.02
            
            
            0.01December
                31, 20042
            
            
            9,205
            
            
            (373
            )
            
            (395
            )
            
            (721
            )
            
            (0.04
            )
            
            (0.04
            )1Quarterly data is rounded and totals may or may not equal year end
                basic
                and diluted earnings per share.
              2Quarterly
                data for 2004 has been restated for the adoption of SFAS No.
                123.




As
      discussed in Note 8 to the Consolidated Financial Statements, during 2005
      and 2004, the Company recorded a charge to operations of $778,000 and $604,000,
      respectively, related to severance payments to be made to former employees.
      Approximately $1,339,000 and $75,000 was recorded related to bonus and
      commission arrangements in the quarter ended December 31, 2005 and 2004,
      respectively.




28


**Financial
      Condition, Liquidity and Capital Resources**




Historically,
      our primary sources of liquidity and capital resources have been cash flow
      from
      retainer accounts (including prepaid retainer fees from clients) and borrowings.
      Cash balances were $2,697,000 and $4,519,000 at December 31, 2005 and 2004,
      respectively. Our working capital position (current assets less current
      liabilities) at December 31, 2005 was $281,000 as compared to $2,832,000 at
      December 31, 2004. Included in current liabilities is unearned retainer income
      of $4,311,000 and $3,472,000 as of December 31, 2005 and 2004, respectively.
      Such amounts reflect amounts billed, but not yet earned.





Cash
      provided by (used in) operating activities was $2,715,000, $(1,078,000) and
      $835,000 in the years ended December 31, 2005, 2004 and 2003, respectively.
      In
      2005, the most significant operating activities were: net income of $452,000,
      depreciation and amortization of $1,350,000, compensation from option grants
      of
      $631,000, deferred income taxes of $211,000, a decrease in prepaid expenses
      and
      other current assets of $612,000, an increase in unearned retainer income of
      $418,000 and an unrealized loss on investment of $177,000, offset by an increase
      in accounts receivable of $1,031,000, a decrease in accounts payable and accrued
      expenses of $159,000, and a gain on sale of assets of $226,000. Adjustments
      to
      reconcile net income to net cash provided by operating activities in 2005 and
      2003 were also impacted by the acquisitions of Atlantic and Signia, and
      Guideline Research and Teltech, respectively. In 2004, the most significant
      operating activities were: a net loss of $1,945,000, a decrease in accounts
      payable and accrued expenses of $1,349,000, an increase in prepaid expense
      of
      $320,000, an increase in other assets of $155,000, an increase in accounts
      receivable of $154,000, a decrease in unearned revenue of $140,000 and a
      decrease in deferred compensation of $126,000, partially offset by non-cash
      interest of $1,357,000, depreciation and amortization of $931,000 and
      compensation from option grants of $596,000. In 2003, the most significant
      operating activities were: Compensation from option grants of $1,224,000,
      depreciation and amortization of $1,143,000, a decrease in other assets of
      $191,000 and an increase in accounts payable and accrued expenses of $535,000,
      partially offset by a net loss of $947,000 and an increase in accounts
      receivable of $1,625,000.





Cash
      used
      in investing activities was $9,932,000, $2,033,000 and $7,427,000 in the years
      ended December 31, 2005, 2004 and 2003, respectively. The primary use of cash
      in
      2005 was related to the acquisition of Atlantic of $3,696,000, the acquisition
      of Signia of $3,645,000 and the payment of deferred consideration related to
      the
      acquisition of Guideline Research of $2,160,000. The primary use of cash in
      2004
      was the payment of deferred consideration related to the acquisition of
      Guideline Research of $1,127,000, and Teltech of $441,000. Capital expenditures
      during 2005, 2004 and 2003 were mainly for computer hardware upgrades and
      leasehold improvements. Total capital expenditures were $431,000, $532,000
      and
      $457,000 in the years ended December 31, 2005, 2004 and 2003, respectively.
      During the year ending December 31, 2006, we expect to spend approximately
      $875,000 for capital items, the major portions of which will be used for
      computer hardware and software upgrades and for leasehold improvements.





29


Cash
      provided by financing activities was $5,395,000, $6,809,000 and $6,445,000
      in
      the years ended December 31, 2005, 2004 and 2003, respectively. In 2005, the
      most significant financing activities were: the proceeds from borrowings under
      notes payable of $8,500,000, offset by repayments under notes payable of
      $2,450,000 and increased deferred financing fees of $759,000. In 2004, the
      most
      significant financing activities were: the net proceeds obtained through the
      private placement of common stock in the aggregate amount of $12,168,000,
      proceeds from the exercise of stock options of $45,000 and proceeds obtained
      from borrowings under notes payable of $200,000, offset by principal payments
      under notes payable of $5,576,000 and payments under capital leases of $28,000.
      In 2003, the most significant items were: the net proceeds obtained from the
      borrowings under notes payable of $2,688,000 related to the acquisitions of
      Guideline Research and Teltech, offset by repayments of $435,000; the issuance
      of preferred stock for $693,000; the issuance of warrants for $1,507,000; the
      proceeds from the issuance of common stock in the aggregate amount of
      $1,663,000; and, the proceeds from exercise of stock options of
      $329,000.





On
      March
      31, 2005, the Company entered into a new senior secured credit facility pursuant
      to the Credit Agreement, dated as of March 31, 2005 (the “Credit Agreement”),
      between the Company and Fleet National Bank, a Bank of America company (the
      “Lender”). Funds under this facility were available to the Company as of April
      1, 2005.





The
      Credit Agreement establishes a commitment to the Company to provide up to
      $9,000,000 in the aggregate of loans and other financial accommodations
      consisting of a senior secured term loan facility in an aggregate principal
      amount of $4,500,000 (the “Term Facility”) and a senior secured revolving credit
      facility in an aggregate principal amount of up to $4,500,000 (the “Revolving
      Facility” and, together with the Term Facility, the “Senior Secured
      Facilities”). The Revolving Facility includes a sublimit of up to an aggregate
      amount of $500,000 in letters of credit.





On
      April
      1, 2005, the full amount of the Term Facility was drawn in a single drawing
      and
      applied, among other things, to (i) consummate the acquisition of Atlantic
      Research & Consulting, Inc. ,
      (ii)
      consummate the acquisition of Signia Partners Incorporated ,
      and
      (iii) pay transaction-related costs and expenses with respect to such
      acquisitions.





The
      aggregate principal amount of the Term Facility is payable in twenty (20)
      consecutive quarterly principal installments, the first nineteen (19) of which
      are each in the amount of $225,000 and payable on the first day of each January,
      April, July and October, commencing July 1, 2005 through and including April
      1,
      2010, and the final and twentieth (20th) such principal installment is payable
      on April 1, 2010 and is in an amount equal to the entire then remaining
      outstanding principal balance, together with all accrued and unpaid
      interest.





As
      of
      December 31, 2005, $4,050,000 remains outstanding under the Term Facility,
      and
      $2,000,000 is outstanding under the Revolving Facility. Accrued but unpaid
      interest related to the Term Facility and the Revolving Facility is
      approximately $73,000 as of December 31, 2005. The Term Facility bears interest
      at LIBOR plus 3%, which was 7.05% at December 31, 2005 based on the 3-month
      LIBOR contract in effect at that time. The Revolving Facility bears interest
      at
      LIBOR plus 2.75%, which was 7.17% at December 31, 2005 based on a separate
      3-month LIBOR contract in effect at that time. Interest expense related to
      the
      Term Facility was $186,000 for the year ended December 31, 2005. Interest
      expense related to the Revolving Facility was $88,000 for the year ended
      December 31, 2005. During 2005, the Company incurred $760,000 in closing and
      other transaction costs related to the Senior Secured Facilities, which are
      amortized to interest expense over the duration of the Term Facility.
      Amortization of deferred financing fees was $113,000 for the year ended December
      31, 2005, and is included in interest expense.




Loans
      under the Revolving Facility will be made available after April 1, 2005 and
      until the earlier of (i) April 1, 2008, and (ii) the date of termination of
      the
      commitment of the Lender to make revolving credit loans and of the obligation
      of
      the Lender to make letter of credit extensions.




30


The
      Credit Agreement contains certain restrictions on the conduct of the Company’s
      business, including, without limitation, restrictions on incurring debt, making
      certain restricted payments (any dividend or other distribution, whether in
      cash, securities or other property, with respect to any stock or stock
      equivalents of the Company or any subsidiary), disposing of certain assets,
      making investments; exceeding certain agreed upon capital expenditures; creating
      or suffering liens; completing certain mergers, consolidations and sales of
      assets, redeeming or prepaying other debt; and certain transactions with
      affiliates, subject in each case to any applicable exceptions or thresholds
      contained in the Credit Agreement. The Credit Agreement also contains financial
      covenants that require the Company to maintain certain leverage and fixed charge
      ratios and a minimum net worth.





All
      obligations under the Senior Secured Facilities are secured by a security
      interest in substantially all of the personal property of the Company.





We
      are in
      compliance with all of our loan covenants as of December 31, 2005.





In
      November 2005, the Company entered into a loan agreement with a vendor for
      the
      purchase of a customer relationship management system. The loan agreement is
      for
      $343,957 plus interest at a rate of 9% per annum, to be paid over a 36-month
      period, in monthly installments of $10,938, with the first payment due in
      January 2006.





During
      May 2004, the Company repaid the $1,100,000 then outstanding balance on a term
      note with JP Morgan Chase Bank (the “Term Note”), of which $400,000 was
      previously classified as current. During the first quarter of 2004, the Company
      also paid its then scheduled principal payment of $100,000. Interest expense
      related to the Term Note amounted to $24,000 for the nine months ended September
      30, 2004. The Term Note was terminated effective March 31, 2005.




Prior
      to
      the Senior Secured Facilities, the Company maintained a $1,000,000 line of
      credit with JP Morgan Chase Bank (the “Line of Credit”). During May 2004, the
      Company repaid the $876,000 then outstanding balance. Interest expense related
      to the Line of Credit amounted to $13,000 for the nine months ended September
      30, 2004. The Line of Credit was terminated effective March 31, 2005, and all
      liens and encumbrances related to the Term Note and the Line of Credit were
      released.





On
      April
      1, 2003, the Company issued a Promissory Note (the “Note”) with a face value of
      $3,000,000 and a stated interest rate of 13.5%, as a part of the financing
      for
      the acquisition of Guideline Research. The Note was recorded at its initial
      relative fair value of $1,868,000. The difference between the initial relative
      fair value and the stated value was accreted as additional interest expense
      over
      the term of the Note, and the resulting effective interest rate is approximately
      25%. During May 2004, the Company repaid the then outstanding principal balance
      of $3,000,000. Related interest expense was $1,112,000 for the fiscal year
      ended
      December 31, 2004, of which $955,000 related to the non-cash accretion of the
      carrying value of the Note to the stated value of the Note for the fiscal year
      ended December 31, 2004. The Note was terminated effective May 20, 2004.





On
      July
      1, 2003, the Company issued a Second Promissory Note (the “Second Note”) with a
      face value of $500,000 and a stated interest rate of 13.5%, as a part of the
      financing for the acquisition of Teltech (“Teltech”). The Second Note was
      recorded at its initial relative fair value of $320,000. The difference between
      the initial relative fair value and the stated value was accreted as additional
      interest expense over the term of the Second Note, and the resulting effective
      interest rate is approximately 25%. During May 2004, the Company repaid the
      then
      outstanding principal balance of $500,000. Related interest expense was $202,000
      for the fiscal year ended December 31, 2004, of which $175,000 related to the
      non-cash accretion of the carrying value of the Second Note to the stated value
      of the Second Note for the fiscal year ended December 31, 2004. The Second
      Note
      was terminated effective May 20, 2004.





31


As
      a
      result of the repayment of outstanding debt during May 2004, the Company
      recorded additional non-cash interest expense of $223,000 during the fiscal
      year
      ended December 31, 2004 to fully amortize the balance of any remaining
      unamortized deferred financing fees associated with the Term Note, the Note
      and
      the Second Note.





On
      May
      10, 2004 (the “Closing Date”), the Company raised $13,500,000 through a private
      placement of (i) 6,000,000 shares of the Company’s Common Stock, and
      (ii) warrants to purchase an aggregate of 3,000,000 shares of Common Stock.
      For more information regarding the Company’s private placement of Common Stock
      and warrants to purchase Common Stock, please see Note 10 “Shareholders’ Equity”
to the financial statements contained elsewhere in this Annual Report on Form
      10-K.





We
      believe that our cash and cash equivalents on hand, cash generated from
      operations and collections of our accounts receivable, and the availability
      of
      the Revolving Facility with the Lender is adequate to satisfy our working
      capital requirements for the foreseeable future.





**Contractual
      Obligations**





The
      following table includes aggregate information about our contractual obligations
      as of December 31, 2005 and the periods in which payments are due:





As
                of December 31, 2005Total
                (A)
            
            Less
                than 1 year
            
            1
                -
                3 years
            
            3
                -
                5 years
            
            After
                5 yearsNon-cancelable
                operating lease commitments
            
            $
            9,900,000
            
            $
            1,596,000
            
            $
            2,995,000
            
            $
            2,640,000
            
            $
            2,669,000Long-term
                capital lease commitments
            
            
            124,000
            
            
            79,000
            
            
            45,000
            
            
            —
            
            
            —Notes
                payable
            
            
            6,394,000
            
            
            3,005,000
            
            
            2,039,000
            
            
            1,350,000
            
            
            —Employment
                contracts
            
            
            1,381,000
            
            
            754,000
            
            
            627,000
            
            
            —
            
            
            —Deferred
                compensation and other
            
            
            216,000
            
            
            47,000
            
            
            27,000
            
            
            36,000
            
            
            106,000$
            18,015,000
            
            $
            5,481,000
            
            $
            5,733,000
            
            $
            4,026,000
            
            $
            2,775,000(A).
                See Note 3 to the Consolidated Financial Statements for information
                regarding contingent payments related to the acquisitions of Atlantic
                and
                Signia.





**Inflation**





We
      have
      in the past been able to increase the price of our products and services
      sufficiently to offset the effects of inflation on direct costs, and anticipate
      that we will be able to do so in the future.





**Off-Balance-Sheet
      Arrangements**





As
      of
      December 31, 2005, we did not have any off-balance-sheet
      arrangements.





32


**Critical
      Accounting Policies**





Our
      management’s discussion and analysis of financial condition and results of
      operation are based on our consolidated financial statements, which have been
      prepared in accordance with generally accepted accounting principles in the
      United States. Our preparation of our financial statements requires us to make
      estimates and judgments that affect reported amounts of assets, liabilities
      and
      revenues and expenses. On an ongoing basis, we evaluate our estimates, including
      those related to revenue recognition, allowances for doubtful accounts, useful
      lives of property, plant and equipment and intangible assets, goodwill, deferred
      tax asset valuation allowances, valuation of non-marketable equity securities
      and other accrued expenses. We base our estimates on historical experience
      and
      on various other assumptions, which we believe to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying value of assets and liabilities that may not be readily apparent
      from other sources. Actual results may differ from these estimates under
      different assumptions and conditions. We have identified the accounting policies
      below as critical to our business operations and the understanding of our
      results of operations.





*Revenue
      Recognition*





Approximately
      46% of the Company’s 2005 revenues were derived from subscription contracts with
      customers, including all of the revenues of the On-Demand Business Research
      business segment and approximately 45% of the revenues of the Product
      Development Intelligence business segment. The remaining 54% of the Company’s
      2005 revenues consisted of market research projects, in-depth consulting
      projects and outsourced information services.





The
      Company’s subscription services are provided under two different types of
      subscription contracts - retainer contracts and deposit contracts. Retainer
      contracts, which are used primarily by On-Demand Business Research, charge
      customers fixed monthly subscription fees to access On-Demand Business Research
      services, and revenues are recognized ratably over the term of each
      subscription. Retainer fees are required to be paid in advance by customers
      on
      either a monthly, quarterly, semi-annual or annual basis, and all billed amounts
      relating to future periods are recorded as an unearned retainer income liability
      on the Company’s balance sheet. In the case of deposit contracts, which are used
      primarily by the Product Development Intelligence business segment, a customer
      pays a fixed annual fee, which entitles it to access any of the Company’s
      service offerings throughout the contract period, up to the total amount of
      the
      annual deposit fee. Since deposit account customers can “spend” their contract
      fee at any time within the annual contract period, deposit account revenues
      are
      only recognized within the contract period as services are actually provided
      to
      customers, with any unused deposit amounts recognized as revenue in the final
      month of the contract. As with retainer fees, deposit contract fees are required
      to be paid in advance, primarily annually, and any billed amounts relating
      to
      future periods are recorded as unearned retainer income, a current liability
      on
      the Company’s balance sheet.





With
      regard to the Company’s non-subscription based services, including custom market
      research, in-depth consulting and outsourced information services, revenues
      are
      recognized primarily on a percentage-of-completion basis. The Company typically
      enters into discrete contracts with customers for these services on a
      project-by-project basis. Payment milestones differ from contract to contract
      based on the client and the type of work performed. Generally, the Company
      invoices a client for a portion of a project in advance of work performed,
      with
      the balance invoiced throughout the fulfillment period and/or after the work
      is
      completed. However, revenue and costs are only recognized to the extent of
      each
      contract’s percentage-of-completion. Any revenue earned in excess of billings is
      recorded as a current asset on the Company’s balance sheet, while any billings
      in excess of revenue earned, which represent billed amounts relating to future
      periods, are recorded as unearned revenue, a current liability on the Company’s
      balance sheet.





33


*Goodwill
      and Intangibles*




Goodwill
      consists of the excess of the purchase price over the fair value of identifiable
      net assets of businesses acquired. Effective January 1, 2002 we adopted
      Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and
      Other Intangible Assets,” under which goodwill is no longer amortized. Instead,
      goodwill is evaluated for impairment using a two-step process that is performed
      at least annually and whenever events or circumstances indicate impairment
      may
      have occurred. The first step is a comparison of the fair value of an internal
      reporting unit with its carrying amount including goodwill. If the fair value
      of
      the reporting unit exceeds its carrying value, goodwill of the reporting unit
      is
      not considered impaired and the second step is unnecessary. If the carrying
      value of the reporting unit exceeds its fair value, a second test is performed
      to measure the amount of impairment by comparing the carrying amount of the
      goodwill to a determination of the implied value of the goodwill. If the
      carrying amount of the goodwill is greater than the implied value, an impairment
      loss is recognized for the difference. The implied value of the goodwill is
      determined as of the test date by performing a purchase price allocation as
      if
      the reporting unit had just been acquired, using currently estimated fair values
      of the individual assets and liabilities of the reporting unit, together with
      an
      estimate of the fair value of the reporting unit taken as a whole. The estimate
      of the fair value of the reporting unit is based upon information available
      regarding prices of similar groups of assets, or other valuation techniques
      including present value techniques based upon estimates of future cash
      flow.





Intangible
      Assets, including customer relationships, trademarks and other intangible assets
      are amortized over their estimated useful lives unless they are deemed to have
      indefinite useful lives. Upon the adoption of SFAS 142, intangible assets deemed
      to have indefinite useful lives, such as trade names, are not amortized and
      are
      subject to annual impairment tests. An impairment exists if the carrying value
      of the indefinite-lived intangible asset exceeds its fair value. For other
      intangible assets subject to amortization, an impairment is recognized if the
      carrying amount is not recoverable and the carrying amount exceeds the fair
      value of the intangible asset. Amortizable intangibles are tested for impairment
      if a triggering event occurs.





*Income
      Taxes*





Income
      taxes are accounted for under the asset and liability method. Deferred tax
      assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax basis and operating
      losses and tax credit carryforwards. Deferred tax assets and liabilities are
      measured using currently enacted tax rates. The effect on deferred tax assets
      and liabilities of a change in tax rates is recognized in income in the period
      that includes the enactment date. We have tax loss carryforwards that have
      been
      recognized as assets on our balance sheet. These assets are subject to
      expiration from 2013 to 2023. Realization of the net deferred tax assets is
      dependent on future reversals of existing taxable temporary differences and
      adequate future taxable income, exclusive of reversing temporary differences
      and
      carryforwards. In 2004 and 2003, after we performed an analysis of our deferred
      tax assets and projected future taxable income, valuation allowances were
      provided for various carryforward tax operating loss assets, as we determined
      that it was more likely than not that these assets may not be fully realized
      during the carryforward period.





34


Non-Marketable
      Equity Securities





The
      Company’s investment in Scientigo, Inc. is valued at $58,000 as of December 31,
      2005. This security is accounted for under the fair value method, where
      unrealized gains or losses are recoded as comprehensive income or loss in equity
      as the above securities are considered to be available for sale securities.




The
      preferred share securities in idealab! is an investment in a start-up
      enterprise. As of December 31, 2005, the carrying value of these preferred
      share
      securities is $22,500. It is reasonably possible in the near term that our
      estimate of the net realizable value of the preferred shares will be less than
      the carrying value of the preferred shares.





**New
      Accounting Pronouncements**





In
      June
      2005, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues
      Task Force (“EITF”) Issue No. 05-06, “Determining the Amortization Period for
      Leasehold Improvements.” The consensus reached is that leasehold improvements
      acquired in a business combination or purchased subsequent to the inception
      of
      the lease should be amortized over the lesser of the useful life of the asset
      or
      the lease term that includes reasonably assured lease renewals as determined
      on
      the date of the acquisition of the leasehold improvement. We have adopted the
      provisions of EITF No. 05-06, but this did not have a material effect on our
      financial statements.





In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”
which replaces APB Opinion No. 20, “Accounting Changes” and SFAS No. 3
“Reporting Accounting Changes in Interim Financial Statements.” SFAS No. 154
      requires all direct financial statement effects caused by a voluntary change
      in
      accounting principle to be applied retrospectively to prior period financial
      statements as if the new principle had always been applied, unless it is
      impracticable to determine either the period-specific effects or the cumulative
      effect of the change in principle. APB Opinion No. 20 and SFAS No. 3 previously
      required that a voluntary change in an accounting principle be recognized
      through a cumulative effect in net income in the period of change. SFAS No.
      154
      is effective for reporting periods beginning after December 15, 2005. We do
      not
      expect SFAS No. 154 to have a material effect on our financial
      statements.





In
      December 2004, the FASB issued the revised Statement of Financial Accounting
      Standards No. 123, “Share-Based Payments” (“SFAS 123 (R)”). SFAS 123 (R)
      requires compensation costs related to share-based payment transactions to
      be
      recognized in the financial statements. Generally, compensation cost will be
      measured based on the grant-date fair value of the equity or liability
      instruments issued. In addition, liability awards will be remeasured each
      reporting period. Compensation cost will be recognized over the requisite
      service period, generally as the award vests. As amended, SFAS No. 123 (R)
      requires the Company to implement the standard at the beginning of their next
      fiscal year that begins after September 15, 2005. The Company is currently
      evaluating the effect of SFAS 123 (R) on its financial statements and related
      disclosures.





**Acquisitions**





***Atlantic
      Research & Consulting***





On
      April
      1, 2005, the Company acquired all of the capital stock of Atlantic Research
      & Consulting, Inc. as described in the Stock Purchase Agreement (the
“Atlantic Purchase Agreement”) between the Company and Peter Hooper (“Hooper”),
      as the sole stockholder of Atlantic. The consideration for this acquisition
      consisted of $3,600,000 in cash paid at closing, 312,598 shares of common stock,
      and an aggregate of up to $2,250,000 in deferred consideration payable in cash
      over three years, which deferred payments are contingent upon Atlantic achieving
      certain prescribed amounts of EBITDA (as defined in the Atlantic Purchase
      Agreement). If EBITDA for the three-year period beginning on March 1, 2005
      exceeds $3,300,000, Hooper will also receive additional deferred consideration
      equal to the amount of such excess multiplied by 0.50.





35


Atlantic,
      headquartered in Boston, Massachusetts, provides quantitative and qualitative
      custom market research, focusing on financial services, management consulting,
      health care, and public sectors.





Simultaneously
      with the Company’s acquisition of Atlantic ,
      Atlantic entered into new employment agreements with Hooper and two other senior
      executives of Atlantic.





The
      consideration paid to date for this acquisition consisted of the
      following:





·  Approximately
      $3,696,000 paid in cash (including $147,000 of transaction costs paid and net
      of
      cash acquired of $51,000); and





·  312,598
      unregistered shares of the Company’s Common Stock, valued at $502,000. In
      accordance with EITF 99-12, “Determination of the Measurement Date for the
      Market Price of Acquirer Securities Issued in a Purchase Business Combination”
(“EITF 99-12”), the market prices used in the valuation of these unregistered
      shares covered two days before, the day of, and two days after the date the
      terms of the acquisition were announced publicly.





The
      Company’s acquisition of Atlantic was financed at closing with the combination
      of (i) funds borrowed upon the closing of a Senior Secured Credit Facility
      with
      the Lender, and (ii) cash on hand.





***Signia
      Partners***





On
      April
      1, 2005, the Company acquired all of the capital stock of Signia Partners
      Incorporated as described in the Stock Purchase Agreement (the “Signia Purchase
      Agreement”) between the Company and Charles Douglas House (“House”), as the sole
      stockholder of Signia. The consideration for this acquisition consisted of
      approximately $3,400,000 in cash paid at closing (after taking into account
      certain closing adjustments), 187,559 shares of common stock, and an aggregate
      of up to $1,400,000 in deferred consideration payable in cash over three years,
      which deferred payments are contingent upon Signia achieving certain prescribed
      amounts of Adjusted EBITDA (as defined in the Signia Purchase Agreement). If
      aggregate Adjusted EBITDA for the three-year period beginning on February 1,
      2005 exceeds $2,550,000, House will also receive additional deferred
      consideration equal to the amount of such excess multiplied by
      0.25.





Signia,
      headquartered just outside of Washington, D.C., is a provider of in-depth
      business research and fact-based decision support, focusing on the financial
      services, health care and consumer sectors.





Simultaneously
      with the Company’s acquisition of Signia ,
      Signia
      entered into new employment agreements with House and two other senior
      executives of Signia.





36


The
      consideration paid to date for this acquisition consisted of the
      following:





·  Approximately
      $3,645,000 paid in cash (including $256,000 of transaction costs paid and net
      of
      cash acquired of $11,000); and





·  187,559
      unregistered shares of the Company’s Common Stock, valued at $301,000. In
      accordance with EITF 99-12, the market prices used in the valuation of these
      unregistered shares covered two days before, the day of, and two days after
      the
      date the terms of the acquisition were announced publicly.




The
      Company’s acquisition of Signia was financed at closing with the combination of
      (i) funds borrowed upon the closing of a Senior Secured Credit Facility with
      the
      Lender, and (ii) cash on hand.





The
      following table sets forth the components of the purchase price for the Atlantic
      and Signia acquisitions:





**Atlantic**
            
            **Signia**
            
            **Total**Cash
                paid (including transaction costs, net of cash acquired)
            
            $
            3,696,000
            
            $
            3,645,000
            
            $
            7,341,000Accrued
                transaction costs
            
            
            17,000
            
            
            17,000
            
            
            34,000Common
                stock issued to sellers
            
            
            502,000
            
            
            301,000
            
            
            803,000Total
                purchase consideration
            
            $
            4,215,000
            
            $
            3,963,000
            
            $
            8,178,000





The
      following table summarizes the amounts allocated to the acquired assets and
      assumed liabilities. The excess of the purchase price over the fair values
      of
      assets acquired and liabilities assumed was allocated to goodwill. The value
      reflected in these elements of the purchase price do not meet the definition
      of
      an intangible asset under FAS 141 and is reflected in goodwill. The
      valuation of acquired intangible assets was prepared by an independent appraisal
      firm. The purchase price allocations have been finalized in this Annual Report
      on Form 10-K for the fiscal year ended December 31, 2005, with the
      exception of deferred consideration for Atlantic and Signia which will be
      determined for the periods ending March 31, 2006, 2007 and 2008. The significant
      assumptions used in the valuations included factors affecting the duration,
      growth rates and amounts of future cash flows for each income stream,
      specifically: the future economic outlook for the industry, risks involved
      in
      the business, and the impact of competition changes.





**Atlantic**
            
            **Signia**
            
            **Total**Current
                assets
            
            $
            741,000
            
            $
            823,000
            
            $
            1,564,000Property
                and equipment
            
            
            230,000
            
            
            52,000
            
            
            282,000Other
                assets
            
            
            —
            
            
            9,000
            
            
            9,000Liabilities
                assumed, current
            
            
            (580,000
            )
            
            (418,000
            )
            
            (998,000
            )Liabilities
                assumed, non-current
            
            
            (20,000
            )
            
            (377,000
            )
            
            (397,000
            )Fair
                value of net assets acquired
            
            
            371,000
            
            
            89,000
            
            
            460,000Goodwill
            
            
            2,749,000
            
            
            3,152,000
            
            
            5,901,000Amortizable
                intangible assets
            
            
            695,000
            
            
            529,000
            
            
            1,224,000Indefinite-lived
                intangible assets
            
            
            400,000
            
            
            193,000
            
            
            593,000Total
                purchase consideration
            
            $
            4,215,000
            
            $
            3,963,000
            
            $
            8,178,000





37


Amortizable
      intangible assets, which generally include customer lists, are amortized over
      a
      period of 7 years. Amortization of intangible assets was $297,000, $135,000
      and
      $83,000 for the fiscal years ended December 31, 2005, 2004 and
      2003.





The
      unaudited pro forma information below represents consolidated results of
      operations as if the acquisitions of Atlantic and Signia occurred on January
      1,
      2005. The unaudited pro forma information has been included for comparative
      purposes and is not indicative of results of operations of the consolidated
      Company had the acquisitions occurred as of January 1, 2005, nor is it
      necessarily indicative of future results.





*Pro
      Forma Results of Operations (unaudited)*





**Pro
                forma**
              **Twelve
                months**
              **ended**
              **December
                31,**
              **2005****(unaudited)**Total
                revenue
            
            $
            45,519,000Net
                income
            
            $
            402,000Income
                per share attributable to common shareholders:
              Basic
                and diluted
            
            $
            0.02





**Forward-Looking
      Statements**





In
      this
      report, and from time to time, we may make or publish forward-looking statements
      relating to such matters as anticipated financial performance, business
      prospects, technological developments, new products, and similar matters. Such
      statements are necessarily estimates reflecting management’s best judgment based
      on current information. The Private Securities Litigation Reform Act of 1995
      provides a safe harbor for forward-looking statements. Such statements are
      usually identified by the use of words or phrases such as “believes,”
“anticipates,” “expects,” “estimates,” “planned,” “outlook,” and “goal.” Because
      forward-looking statements involve risks and uncertainties, our actual results
      could differ materially. In order to comply with the terms of the safe harbor,
      we note that a variety of factors could cause our actual results and experience
      to differ materially from the anticipated results or other expectations
      expressed in forward-looking statements. While it is impossible to identify
      all
      such factors, the risks and uncertainties that may affect the operations,
      performance and results of our business include the risks identified in Item
      1A
      of this Annual Report on Form 10-K.




**Item
      7A. Quantitative and Qualitative Disclosures About Market
      Risk**





The
      Company maintains the Term Facility and Revolving Facility, which are for
      non-trading purposes, and any future borrowings thereunder would increase our
      exposure to market risk. An immediate change of one percent in the interest
      rate
      would cause a change in interest expense of approximately $45,000 for the fiscal
      year ended December 31, 2005. The Term Facility bears interest at LIBOR plus
      3%
      (7.05% at December 31, 2005 based on the contract in effect at that time).
      The
      Revolving Facility bears interest at LIBOR plus 2.75%, which was
      7.17%
      at December 31, 2005 based on a separate 3-month LIBOR contract in effect at
      that time. Our objective in maintaining the Revolving Facility is the ability
      to
      obtain funding that provides flexibility regarding early repayment without
      penalties, and that has a lower overall cost as compared with fixed-rate
      borrowings. Management does not believe that the risk inherent in the
      variable-rate nature of the Term and Revolving Facilities would have a material
      adverse effect on the Company if interest rates accrued on such borrowings
      were
      to increase. However, no assurance can be given that such a risk will not have
      a
      material adverse effect on the Company.





38


We
      do not
      invest or trade in any derivative financial or commodity instruments, nor do
      we
      invest in any foreign financial instruments.





**Item
      8. Financial Statements and Supplementary Data**





The
      response to this item is incorporated by reference from our Consolidated
      Financial Statements and notes thereto which are included in this report
      beginning on page F-1. Certain selected quarterly financial data is included
      under Item 7. Management’s Discussion and Analysis of Financial Condition and
      Results of Operation contained elsewhere in this report.





**Item
      9. Changes in and Disagreements With Accountants on Accounting and Financial
      Disclosure**





None.





**Item
      9A.**  **Controls
      and Procedures**





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, has evaluated the effectiveness of our disclosure controls
      and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the
      Exchange Act) as of the end of the period covered by this report. Based on
      such
      evaluation, our Chief Executive Officer and Chief Financial Officer have
      concluded that, as of the end of the period covered by this report, the
      Company's disclosure controls and procedures were effective.





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, has evaluated the Company’s internal control over financial
      reporting to determine whether any changes occurred during the fiscal quarter
      ended December 31, 2005 that have materially affected, or are reasonably likely
      to materially affect, our internal control over financial reporting. Based
      on
      that evaluation, there have been no such changes during the fiscal quarter
      ended
      December 31, 2005, with the exception of the acquisitions of Atlantic and
      Signia, whose internal control over financial reporting continued to be
      integrated by the Company into its internal control over financial reporting
      structure during the fiscal quarter ended December 31, 2005.





**ITEM
      9B. OTHER INFORMATION**





None.





**PART
      III**





The
      information called for pursuant to this Part III, Items 10, 11,12,13 and 14
      is
      incorporated by reference from our definitive proxy statement, which we intend
      to file with the Securities and Exchange Commission no later than April 30,
      2006.





39


**PART
      IV**





**Item
      15. Exhibits and Financial Statement Schedules**





(a)
            The
                following documents are filed as part of this
                report:





(1)
            Financial
                Statements:






Location
                In
                  10-KIndex
                  to Consolidated Financial Statements and Schedule
              
              F-1Report
                  of Independent Registered Public Accounting Firm
              
              F-2Consolidated
                  balance sheets - December 31, 2005 and 2004
              
              F-3Consolidated
                  statements of operations - Years ended December 31, 2005, 2004
                  and 2003
              
              F-4Consolidated
                  statements of shareholders’ equity - Years ended December 31, 2005, 2004
                  and 2003
              
              F-5Consolidated
                  statements of cash flows - Years ended December 31, 2005, 2004
                  and
                  2003
              
              F-6Notes
                  to consolidated financial statements
              
              F-7





(2)
            Financial
                Statement Schedule:




Valuation and Qualifying Accounts on
              Schedule
              II
            
            F-35




(3)
            Exhibits:




Exhibit
                      Number
                  Description
                      of Exhibit2.1
                  Stock
                      Purchase Agreement, dated as of March 14, 2005, by and between
                      Find/SVP,
                      INC. and Peter Hooper (incorporated by reference to the Company’s Form 8-K
                      filed on March 15, 2005)2.2
                  Stock
                      Purchase Agreement, dated as of March 14, 2005, by and
                      among Find/SVP, Inc. and Charles Douglas House (incorporated by
                      reference to the Company’s Form 8-K filed on March 15, 2005)3.1
                  Certificate
                      of Incorporation of the Company(incorporated
                      by reference to the Company’s Registration Statement on Form S-18 (Reg.
                      No. 33-8634-NY) which became effective with the Securities
                      and Exchange
                      Commission on October 31, 1986)3.2
                  Certificate
                      of Amendment of Certificate of Incorporation of the Company(incorporated
                      by reference to the Company’s Registration Statement on Form S-18 (Reg.
                      No. 33-8634-NY) which became effective with the Securities
                      and Exchange
                      Commission on October 31, 1986)3.3
                  Certificate
                      of Amendment of Certificate of Incorporation of the Company(incorporated
                      by reference to the Company’s Registration Statement on Form S-18 (Reg.
                      No. 33-8634-NY) which became effective with the Securities
                      and Exchange
                      Commission on October 31, 1986)
  40
  3.4
                  Certificate
                      of Amendment of Certificate of Incorporation of the Company
                      (incorporated
                      by reference to the Company’s Definitive Proxy Statement, filed on May 2,
                      1995)3.5
                  Certificate
                      of Amendment of Certificate of Incorporation of the Company
                      (incorporated
                      by reference to the Company’s Definitive Proxy Statement, filed on May 13,
                      1998)3.6
                  Certificate
                      of Amendment of Certificate of Incorporation of the Company(incorporated
                      by reference to the Company’s Definitive Proxy Statement, filed on May 27,
                      1998)3.7
                  Certificate
                      of Amendment of Certificate of Incorporation of the Company(incorporated
                      by reference to the Company’s Definitive Proxy Statement, filed on May 10,
                      2002)3.8
                  Certificate
                      of Amendment of Certificate of Incorporation of the Company
                      (incorporated
                      by reference to the Company’s Form 8-K filed on April 16,
                      2003).3.9
                  By-laws
                      of the Company (incorporated by reference to the Company’s Form 10-K filed
                      for the year ended December 31, 1987)3.10
                  Amendment
                      to the By-laws of the Company****(incorporated
                      by reference to the Company’s Form 10-K filed for the year ended December
                      31, 2002)3.11
                  Certificate
                      of Amendment to the Certificate of Incorporation, as amended,
                      of the
                      Company (incorporated by reference to the Company’s Form 8-K filed on
                      March 16, 2006).4.1
                  Specimen
                      of the Company’s Common Stock Certificate (incorporated by reference to
                      the Company’s Registration Statement on Form S-18 (Reg. No. 33-8634-NY)
                      which became effective with the Securities and Exchange Commission
                      on
                      October 31, 1986)10.1
                  License
                      Agreement, dated October 11, 1971, between the Company and
                      SVP
                      International (incorporated by reference to the Company’s Registration
                      Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective
                      with
                      the Securities and Exchange Commission on October 31, 1986)10.2
                  Amendment
                      to License Agreement, datedMarch
                      23,1981,between
                      the Company and SVP International (incorporated by reference
                      to the
                      Company’s Registration Statement on Form S-18 (Reg. No. 33-8634-NY)
                      which
                      became effective with the Securities and Exchange Commission
                      on October
                      31, 1986)10.3
                  Amendment
                      to License Agreement, dated November 21, 2001, between the
                      Company and SVP
                      International (incorporated
                      by reference to the Company’s Form 10-K filed for the year ended December
                      31, 2002)10.4
                  Lease,
                      dated December 15, 1986, between Chelsea Green Associates and
                      the Company,
                      related to premises at 625 Avenue of the Americas, New York,
                      NY
                      (incorporated by reference to the Company’s Form 10-K filed for the year
                      ended December 31, 1992)#10.5
                  The
                      Company’s 401(k) and Profit Sharing Plan (incorporated by reference
                      to the
                      Company’s Form S-8, filed on March 29, 1996)#10.6
                  The
                      Company’s 1996 Stock Option Plan (incorporated by reference to the
                      Company’s Definitive Proxy Statement, filed on May 10, 2002)
  41
  #10.7
                  Employment
                      Agreement, dated November 21, 2001, between the Company and
                      David Walke
                      (incorporated by reference to the Company’s Form 10-K filed for the year
                      ended December 31, 2001)#10.8
                  Employment
                      Agreement, dated May 13, 2002, between the Company and Peter
                      M. Stone
                      (incorporated by reference to the Company’s Form 10-Q filed for the
                      quarter ended June 30, 2002)#10.9
                  Separation
                      Agreement, dated December 31, 2003, between the Company and
                      Andrew P.
                      Garvin (incorporated by reference to the Company’s Form 10-K filed on
                      March 26, 2004)10.10
                  Stock
                      Purchase Agreement, dated as of April 1, 2003, by and among
                      Jay L.
                      Friedland, Robert La Terra, Guideline Research Corp. and the
                      Company
                      (incorporated by reference to the Company’s Form 8-K filed on April 16,
                      2003)10.11
                  Series
                      A Preferred Stock Purchase Agreement, dated as of April 1,
                      2003, by and
                      between Petra Mezzanine Fund, L.P. and the Company (incorporated
                      by
                      reference to the Company’s Form 8-K filed on April 16, 2003)10.12
                  Stock
                      Purchase Warrant issued as of April 1, 2003, by the Company
                      to Petra
                      Mezzanine Fund, L.P. (incorporated by reference to the Company’s Form 8-K
                      filed on April 16, 2003)10.13
                  Investor
                      Rights Agreement, dated as of April 1, 2003, by and among the
                      Company,
                      Petra Mezzanine Fund, L.P., Martin E. Franklin and David Walke
                      (incorporated by reference to the Company’s Form 8-K filed on April 16,
                      2003)10.14
                  Amended
                      and Restated Asset Purchase Agreement, dated as of June 25,
                      2003, by and
                      between TTech Acquisition Corp., the Company, Sopheon Corporation,
                      and
                      Sopheon PLC (incorporated by reference to the Company’s Form 8-K filed on
                      July 16, 2003)10.15
                  Stock
                      Purchase Warrant issued as of July 1, 2003, by the Company
                      to Petra
                      Mezzanine Fund, L.P. (incorporated by reference to the Company’s Form 8-K
                      filed on July 16, 2003)10.16
                  Amendment
                      No. 1 to Investor Rights Agreement, dated as of July 1, 2003,
                      by and among
                      the Company, Petra Mezzanine Fund, L.P., Martin E. Franklin
                      and David
                      Walke (incorporated by reference to the Company’s Form 8-K filed on July
                      16, 2003)#10.17
                  2003
                      Stock Incentive Plan (incorporated by reference to the Company’s
                      Definitive Proxy Statement filed on April 30, 2003)#10.18
                  Employment
                      Agreement, dated April 28, 2004, between the Company and Marc
                      Litvinoff
                      (incorporated by reference to the Company’s Form 10-Q filed on May 14,
                      2004)10.19
                  Operating
                      Agreement of Find.com LLC, dated September 29, 2004, by and
                      among the
                      Company, Empire Media, LLC and TripleHop Technologies, Inc.
                      (incorporated
                      by reference to the Company’s Form 8-K filed on October 5,
                      2004)#10.20
                  Amendment
                      No. 1 to Separation Agreement, dated September 30, 2004, by
                      and among the
                      Company and Andrew P. Garvin (incorporated by reference to
                      the Company’s
                      Form 8-K filed on October 5, 2004)#10.21
                  First
                      Amendment to Employment Agreement, dated January 1, 2005, by
                      and between
                      Find/SVP, Inc. and David Walke (incorporated by reference to
                      the Company’s
                      Form 8-K filed on January 6, 2005)
  42
  #10.22
                  Restricted
                      Stock Award Agreement, dated January 1, 2005, by and between
                      Find/SVP,
                      Inc. and David Walke (incorporated by reference to the Company’s Form 8-K
                      filed on January 6, 2005)#10.23
                  First
                      Amendment to Employment Agreement, dated January 1, 2005, by
                      and between
                      Find/SVP, Inc. and Peter Stone (incorporated by reference to
                      the Company’s
                      Form 8-K filed on January 6, 2005)#10.24
                  Restricted
                      Stock Award Agreement, dated January 1, 2005, by and between
                      Find/SVP,
                      Inc. and Peter Stone (incorporated by reference to the Company’s Form 8-K
                      filed on January 6, 2005)10.25
                  Purchase
                      Agreement, dated May 10, 2004, by and among the Company and
                      the investors
                      named on the signature pages thereto (incorporated by reference
                      to the
                      Company’s Form 8-K filed on May 13, 2004)10.26
                  Registration
                      Rights Agreement, dated May 10, 2004, by and among the Company
                      and the
                      investors named on the signature pages thereto (incorporated
                      by reference
                      to the Company’s Form 8-K filed on May 13, 2004)*10.27
                  Transaction
                      Agreement, dated as of November 28, 2005, by and among Scientigo,
                      Inc.,
                      TIGO Search, Inc., and FIND/SVP, Inc.*10.28
                  Promissory
                      Note, dated as of November 28, 2005, made by Scientigo, Inc.
                      in favor of
                      FIND/SVP, Inc.10.29
                  Form
                      of Warrant (incorporated by reference to the Company’s Form 8-K filed on
                      May 13, 2004).10.30
                  Credit
                      Agreement, dated as of March 31, 2005, between the Company,
                      as the
                      borrower, and Fleet National Bank, a Bank of America company,
                      as the
                      lender (incorporated by reference to the Company’s Form 8-K filed on April
                      6, 2005)10.31
                  Security
                      Agreement, dated as of April 1, 2005, by and among the Company
                      and the
                      several subsidiary guarantors signatories thereto (incorporated
                      by
                      reference to the Company’s Form 8-K filed on April 6, 2005)10.32
                  Guaranty
                      Agreement, dated as of April 1, 2005, between Fleet National
                      Bank, a Bank
                      of America company, and the several subsidiary guarantors signatories
                      thereto (incorporated by reference to the Company’s Form 8-K filed on
                      April 6, 2005)#10.33
                  Employment
                      Agreement, dated April 1, 2005, between Peter Hooper and Atlantic
                      Research
                      & Consulting, Inc. (incorporated by reference to the Company’s Form
                      8-K filed on April 6, 2005)#10.34
                  Employment
                      Agreement, dated April 1, 2005, between Charles Douglas House
                      and Signia
                      Partners Incorporated (incorporated by reference to the Company’s Form 8-K
                      filed on April 6, 2005)#10.35
                  First
                      Amendment to Employment Agreement, dated July 21, 2005, by
                      and between the
                      Company and Marc Litvinoff (incorporated by reference to the
                      Company’s
                      Form 10-Q filed on August 12, 2005)#10.36
                  Amendment
                      No. 1 to Restricted Stock Agreement, dated July 21, 2005, by
                      and between
                      the Company and Marc Litvinoff (incorporated by reference to
                      the Company’s
                      Form 10-Q filed on August 12, 2005)#10.37
                  Restricted
                      Stock Award, dated July 21, 2005, by and between the Company
                      and Marc
                      Litvinoff (incorporated by reference to the Company’s Form 10-Q filed on
                      August 12, 2005)10.38
                  Amendment
                      and Waiver, dated August 11, 2005, between the Company, as
                      borrower, and
                      Bank of America, successor by merger to Fleet National Bank,
                      as the lender
                      (incorporated by reference to the Company’s Form 10-Q filed on August 12,
                      2005)*21.1
                  List
                      of Subsidiaries*23.1
                  Consent
                      of Independent Registered Public Accounting Firm*31.1
                  Certification
                      of Principal Executive Officer, as required by Rule 13a-14(a)
                      of the
                      Securities Exchange Act of 1934*31.2
                  Certification
                      of Principal Financial Officer, as required by Rule 13a-14(a)
                      of the
                      Securities Exchange Act of 1934*32.1
                  Certification
                      of Principal Executive Officer, as required by Rule 13a-14(b)
                      of the
                      Securities Exchange Act of 1934*32.2
                  Certification
                      of Principal Financial Officer, as required by Rule 13a-14(b)
                      of the
                      Securities Exchange Act of 1934


*
      Filed
      herewith.


#
      This
      exhibit represents a management contract or a compensatory plan.






43


**SIGNATURES**





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





GUIDELINE,
                INC.
              (Registrant)By:
            **/s/
                David Walke**David
                Walke,
              Chief
                  Executive Officer
                March
                    30, 2006




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.





(1)
            Principal
                Executive Officer:**/s/
                David Walke**David
                WalkeChief
                Executive OfficerMarch
                30, 2006(2)
            Principal
                Financial Officer and Principal Accounting Officer:**/s/
                Peter Stone**Peter
                StoneChief
                Financial OfficerMarch
                30, 2006(3)
            Board
                of Directors:**/s/
                Andrew P. Garvin**Andrew
                P. GarvinFounder
                and DirectorMarch
                30, 2006**/s/
                David Walke**David
                WalkeChairman
                of Board of DirectorsMarch
                30, 2006**/s/
                Regina Paolillo**Regina
                PaolilloDirectorMarch
                30, 2006**/s/
                Denise L. Shapiro**Denise
                L. ShapiroDirectorMarch
                30, 2006**/s/
                Brian Ruder**Brian
                RuderDirectorMarch
                30, 2006**/s/
                Warren Struhl**Warren
                StruhlDirectorMarch
                30, 2006







44


EXHIBIT
      INDEX




Exhibit
                        Number
                    Description
                        of Exhibit2.1
                    Stock
                        Purchase Agreement, dated as of March 14, 2005, by and between
                        Find/SVP,
                        INC. and Peter Hooper (incorporated by reference to the Company’s Form 8-K
                        filed on March 15, 2005)2.2
                    Stock
                        Purchase Agreement, dated as of March 14, 2005, by and
                        among Find/SVP, Inc. and Charles Douglas House (incorporated by
                        reference to the Company’s Form 8-K filed on March 15, 2005)3.1
                    Certificate
                        of Incorporation of the Company(incorporated
                        by reference to the Company’s Registration Statement on Form S-18 (Reg.
                        No. 33-8634-NY) which became effective with the Securities
                        and Exchange
                        Commission on October 31, 1986)3.2
                    Certificate
                        of Amendment of Certificate of Incorporation of the Company(incorporated
                        by reference to the Company’s Registration Statement on Form S-18 (Reg.
                        No. 33-8634-NY) which became effective with the Securities
                        and Exchange
                        Commission on October 31, 1986)3.3
                    Certificate
                        of Amendment of Certificate of Incorporation of the Company(incorporated
                        by reference to the Company’s Registration Statement on Form S-18 (Reg.
                        No. 33-8634-NY) which became effective with the Securities
                        and Exchange
                        Commission on October 31, 1986)
 3.4
                    Certificate
                        of Amendment of Certificate of Incorporation of the Company
                        (incorporated
                        by reference to the Company’s Definitive Proxy Statement, filed on May 2,
                        1995)3.5
                    Certificate
                        of Amendment of Certificate of Incorporation of the Company
                        (incorporated
                        by reference to the Company’s Definitive Proxy Statement, filed on May 13,
                        1998)3.6
                    Certificate
                        of Amendment of Certificate of Incorporation of the Company(incorporated
                        by reference to the Company’s Definitive Proxy Statement, filed on May 27,
                        1998)3.7
                    Certificate
                        of Amendment of Certificate of Incorporation of the Company(incorporated
                        by reference to the Company’s Definitive Proxy Statement, filed on May 10,
                        2002)3.8
                    Certificate
                        of Amendment of Certificate of Incorporation of the Company
                        (incorporated
                        by reference to the Company’s Form 8-K filed on April 16,
                        2003).3.9
                    By-laws
                        of the Company (incorporated by reference to the Company’s Form 10-K filed
                        for the year ended December 31, 1987)3.10
                    Amendment
                        to the By-laws of the Company****(incorporated
                        by reference to the Company’s Form 10-K filed for the year ended December
                        31, 2002)3.11
                    Certificate
                        of Amendment to the Certificate of Incorporation, as amended,
                        of the
                        Company (incorporated by reference to the Company’s Form 8-K filed on
                        March 16, 2006).4.1
                    Specimen
                        of the Company’s Common Stock Certificate (incorporated by reference to
                        the Company’s Registration Statement on Form S-18 (Reg. No. 33-8634-NY)
                        which became effective with the Securities and Exchange Commission
                        on
                        October 31, 1986)
  E-1
  10.1
                    License
                        Agreement, dated October 11, 1971, between the Company and
                        SVP
                        International (incorporated by reference to the Company’s Registration
                        Statement on Form S-18 (Reg. No. 33-8634-NY) which became
                        effective with
                        the Securities and Exchange Commission on October 31, 1986)10.2
                    Amendment
                        to License Agreement, datedMarch
                        23,1981,between
                        the Company and SVP International (incorporated by reference
                        to the
                        Company’s Registration Statement on Form S-18 (Reg. No. 33-8634-NY)
                        which
                        became effective with the Securities and Exchange Commission
                        on October
                        31, 1986)10.3
                    Amendment
                        to License Agreement, dated November 21, 2001, between the
                        Company and SVP
                        International (incorporated
                        by reference to the Company’s Form 10-K filed for the year ended December
                        31, 2002)10.4
                    Lease,
                        dated December 15, 1986, between Chelsea Green Associates
                        and the Company,
                        related to premises at 625 Avenue of the Americas, New York,
                        NY
                        (incorporated by reference to the Company’s Form 10-K filed for the year
                        ended December 31, 1992)#10.5
                    The
                        Company’s 401(k) and Profit Sharing Plan (incorporated by reference
                        to the
                        Company’s Form S-8, filed on March 29, 1996)#10.6
                    The
                        Company’s 1996 Stock Option Plan (incorporated by reference to the
                        Company’s Definitive Proxy Statement, filed on May 10, 2002)
 #10.7
                    Employment
                        Agreement, dated November 21, 2001, between the Company and
                        David Walke
                        (incorporated by reference to the Company’s Form 10-K filed for the year
                        ended December 31, 2001)#10.8
                    Employment
                        Agreement, dated May 13, 2002, between the Company and Peter
                        M. Stone
                        (incorporated by reference to the Company’s Form 10-Q filed for the
                        quarter ended June 30, 2002)#10.9
                    Separation
                        Agreement, dated December 31, 2003, between the Company and
                        Andrew P.
                        Garvin (incorporated by reference to the Company’s Form 10-K filed on
                        March 26, 2004)10.10
                    Stock
                        Purchase Agreement, dated as of April 1, 2003, by and among
                        Jay L.
                        Friedland, Robert La Terra, Guideline Research Corp. and
                        the Company
                        (incorporated by reference to the Company’s Form 8-K filed on April 16,
                        2003)10.11
                    Series
                        A Preferred Stock Purchase Agreement, dated as of April 1,
                        2003, by and
                        between Petra Mezzanine Fund, L.P. and the Company (incorporated
                        by
                        reference to the Company’s Form 8-K filed on April 16, 2003)10.12
                    Stock
                        Purchase Warrant issued as of April 1, 2003, by the Company
                        to Petra
                        Mezzanine Fund, L.P. (incorporated by reference to the Company’s Form 8-K
                        filed on April 16, 2003)10.13
                    Investor
                        Rights Agreement, dated as of April 1, 2003, by and among
                        the Company,
                        Petra Mezzanine Fund, L.P., Martin E. Franklin and David
                        Walke
                        (incorporated by reference to the Company’s Form 8-K filed on April 16,
                        2003)10.14
                    Amended
                        and Restated Asset Purchase Agreement, dated as of June 25,
                        2003, by and
                        between TTech Acquisition Corp., the Company, Sopheon Corporation,
                        and
                        Sopheon PLC (incorporated by reference to the Company’s Form 8-K filed on
                        July 16, 2003)
  E-2
  10.15
                    Stock
                        Purchase Warrant issued as of July 1, 2003, by the Company
                        to Petra
                        Mezzanine Fund, L.P. (incorporated by reference to the Company’s Form 8-K
                        filed on July 16, 2003)10.16
                    Amendment
                        No. 1 to Investor Rights Agreement, dated as of July 1, 2003,
                        by and among
                        the Company, Petra Mezzanine Fund, L.P., Martin E. Franklin
                        and David
                        Walke (incorporated by reference to the Company’s Form 8-K filed on July
                        16, 2003)#10.17
                    2003
                        Stock Incentive Plan (incorporated by reference to the Company’s
                        Definitive Proxy Statement filed on April 30, 2003)#10.18
                    Employment
                        Agreement, dated April 28, 2004, between the Company and
                        Marc Litvinoff
                        (incorporated by reference to the Company’s Form 10-Q filed on May 14,
                        2004)10.19
                    Operating
                        Agreement of Find.com LLC, dated September 29, 2004, by and
                        among the
                        Company, Empire Media, LLC and TripleHop Technologies, Inc.
                        (incorporated
                        by reference to the Company’s Form 8-K filed on October 5,
                        2004)#10.20
                    Amendment
                        No. 1 to Separation Agreement, dated September 30, 2004,
                        by and among the
                        Company and Andrew P. Garvin (incorporated by reference to
                        the Company’s
                        Form 8-K filed on October 5, 2004)#10.21
                    First
                        Amendment to Employment Agreement, dated January 1, 2005,
                        by and between
                        Find/SVP, Inc. and David Walke (incorporated by reference
                        to the Company’s
                        Form 8-K filed on January 6, 2005)
 #10.22
                    Restricted
                        Stock Award Agreement, dated January 1, 2005, by and between
                        Find/SVP,
                        Inc. and David Walke (incorporated by reference to the Company’s Form 8-K
                        filed on January 6, 2005)#10.23
                    First
                        Amendment to Employment Agreement, dated January 1, 2005,
                        by and between
                        Find/SVP, Inc. and Peter Stone (incorporated by reference
                        to the Company’s
                        Form 8-K filed on January 6, 2005)#10.24
                    Restricted
                        Stock Award Agreement, dated January 1, 2005, by and between
                        Find/SVP,
                        Inc. and Peter Stone (incorporated by reference to the Company’s Form 8-K
                        filed on January 6, 2005)10.25
                    Purchase
                        Agreement, dated May 10, 2004, by and among the Company and
                        the investors
                        named on the signature pages thereto (incorporated by reference
                        to the
                        Company’s Form 8-K filed on May 13, 2004)10.26
                    Registration
                        Rights Agreement, dated May 10, 2004, by and among the Company
                        and the
                        investors named on the signature pages thereto (incorporated
                        by reference
                        to the Company’s Form 8-K filed on May 13, 2004)*10.27
                    Transaction
                        Agreement, dated as of November 28, 2005, by and among Scientigo,
                        Inc.,
                        TIGO Search, Inc., and FIND/SVP, Inc.*10.28
                    Promissory
                        Note, dated as of November 28, 2005, made by Scientigo, Inc.
                        in favor of
                        FIND/SVP, Inc.10.29
                    Form
                        of Warrant (incorporated by reference to the Company’s Form 8-K filed on
                        May 13, 2004).
  E-3
  10.30
                    Credit
                        Agreement, dated as of March 31, 2005, between the Company,
                        as the
                        borrower, and Fleet National Bank, a Bank of America company,
                        as the
                        lender (incorporated by reference to the Company’s Form 8-K filed on April
                        6, 2005)10.31
                    Security
                        Agreement, dated as of April 1, 2005, by and among the Company
                        and the
                        several subsidiary guarantors signatories thereto (incorporated
                        by
                        reference to the Company’s Form 8-K filed on April 6, 2005)10.32
                    Guaranty
                        Agreement, dated as of April 1, 2005, between Fleet National
                        Bank, a Bank
                        of America company, and the several subsidiary guarantors
                        signatories
                        thereto (incorporated by reference to the Company’s Form 8-K filed on
                        April 6, 2005)#10.33
                    Employment
                        Agreement, dated April 1, 2005, between Peter Hooper and
                        Atlantic Research
                        & Consulting, Inc. (incorporated by reference to the Company’s Form
                        8-K filed on April 6, 2005)#10.34
                    Employment
                        Agreement, dated April 1, 2005, between Charles Douglas House
                        and Signia
                        Partners Incorporated (incorporated by reference to the Company’s Form 8-K
                        filed on April 6, 2005)#10.35
                    First
                        Amendment to Employment Agreement, dated July 21, 2005, by
                        and between the
                        Company and Marc Litvinoff (incorporated by reference to
                        the Company’s
                        Form 10-Q filed on August 12, 2005)#10.36
                    Amendment
                        No. 1 to Restricted Stock Agreement, dated July 21, 2005,
                        by and between
                        the Company and Marc Litvinoff (incorporated by reference
                        to the Company’s
                        Form 10-Q filed on August 12, 2005)#10.37
                    Restricted
                        Stock Award, dated July 21, 2005, by and between the Company
                        and Marc
                        Litvinoff (incorporated by reference to the Company’s Form 10-Q filed on
                        August 12, 2005)10.38
                    Amendment
                        and Waiver, dated August 11, 2005, between the Company, as
                        borrower, and
                        Bank of America, successor by merger to Fleet National Bank,
                        as the lender
                        (incorporated by reference to the Company’s Form 10-Q filed on August 12,
                        2005)*21.1
                    List
                        of Subsidiaries*23.1
                    Consent
                        of Independent Registered Public Accounting Firm*31.1
                    Certification
                        of Principal Executive Officer, as required by Rule 13a-14(a)
                        of the
                        Securities Exchange Act of 1934*31.2
                    Certification
                        of Principal Financial Officer, as required by Rule 13a-14(a)
                        of the
                        Securities Exchange Act of 1934*32.1
                    Certification
                        of Principal Executive Officer, as required by Rule 13a-14(b)
                        of the
                        Securities Exchange Act of 1934*32.2
                    Certification
                        of Principal Financial Officer, as required by Rule 13a-14(b)
                        of the
                        Securities Exchange Act of 1934


*
      Filed
      herewith.


#
      This
      exhibit represents a management contract or a compensatory plan.








E-4


**FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**





**Guideline,
      INC. AND SUBSIDIARIES**


Index
      to
      Consolidated Financial Statements and Schedule




PageReport
                of Independent Registered Public Accounting Firm
            F-2Consolidated
                Balance Sheets as of December 31, 2005 and 2004
            F-3Consolidated
                Statements of Operationsfor
                the years ended December 31, 2005, 2004 and 2003
            F-4Consolidated
                Statements of Shareholders’ Equityfor
                the years ended December 31, 2005, 2004 and 2003
            F-5Consolidated
                Statements of Cash Flowsfor
                the years ended December 31, 2005, 2004 and 2003
            F-6Notes
                to Consolidated Financial Statements
            F-7Schedule:Valuation
                and Qualifying Accounts on Schedule II
            F-35







F-1


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors and Stockholders of


Guideline,
      Inc. (formerly FIND/SVP, Inc.)


New
      York,
      New York





We
      have
      audited the accompanying consolidated balance sheets of Guideline, Inc. and
      subsidiaries (formerly FIND/SVP, Inc.) (collectively, the “Company”) as of
      December 31, 2005 and 2004, and the related consolidated statements of
      operations, shareholders’ equity, and cash flows for each of the three years in
      the period ended December 31, 2005. Our audits also included the financial
      statement schedule listed in the Index at Item 15. These financial statements
      and the financial statement schedule are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on the financial
      statements and the financial statement schedule based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, such consolidated financial statements present fairly, in all material
      respects, the financial position of Guideline, Inc. and subsidiaries as of
      December 31, 2005 and 2004, and the results of their operations and their cash
      flows for each of the three years in the period ended December 31, 2005, in
      conformity with accounting principles generally accepted in the United States
      of
      America. Also, in our opinion, such financial statement schedule, when
      considered in relation to the basic consolidated financial statements taken
      as a
      whole, presents fairly in all material respects the information set forth
      therein.





As
      discussed in Note 2 to the consolidated financial statements, the Company
      changed its method of accounting for stock-based compensation on January 1,
      2004
      to conform with SFAS No. 123, “Accounting for Stock-Based
      Compensation”.





/s/
      Deloitte & Touche LLP


New
      York,
      New York


March  30,
      2006




F-2


**GUIDELINE,
        INC. AND SUBSIDIARIES**
 Consolidated
        Balance Sheets
 December
        31
 (in
        thousands, except share and per share data)




**Assets**
              
              **2005**
              
              **2004**Current
                  assets:Cash
                  and cash equivalents
              
              $
              2,697
              
              $
              4,519Accounts
                  receivable, less allowance for doubtful accounts of$112
                  and $164 in 2005 and 2004, respectively
              
              
              8,646
              
              
              6,215Deferred
                  tax assets
              
              
              386
              
              
              696Prepaid
                  expenses and other current assets
              
              
              671
              
              
              1,240Total
                  current assets
              
              
              12,400
              
              
              12,670Equipment,
                  software development and leasehold improvements, at cost,less
                  accumulated depreciation and amortization
              
              
              2,572
              
              
              2,336Goodwill,
                  net
              
              
              18,245
              
              
              12,214Intangibles,
                  net
              
              
              2,522
              
              
              1,002Deferred
                  tax assets
              
              
              987
              
              
              783Deferred
                financing fees, net
              
              
              647
              
              
              —Other
                  assets
              
              
              834
              
              
              1,017$
              38,207
              
              $
              30,022**Liabilities
                  and Shareholders’ Equity**Current
                  liabilities:Trade
                  accounts payable
              
              $
              2,425
              
              $
              1,267Accrued
                  expenses and other
              
              
              2,378
              
              
              5,099Current
                  maturities of notes payable
              
              
              3,005
              
              
              —Unearned
                  retainer income
              
              
              4,311
              
              
              3,472Total
                  current liabilities
              
              
              12,119
              
              
              9,838Notes
                  payable
              
              
              3,389
              
              
              —Deferred
                  compensation and other liabilities
              
              
              761
              
              
              404Total
                  liabilities
              
              
              16,269
              
              
              10,242Redeemable
                  convertible preferred stock, $.0001 par value per share.Authorized
                  2,000,000 shares; issued and outstanding333,333
                  shares in 2005 and 2004
              
              
              610
              
              
              570Redeemable
                  common stock, $.0001 par value per share, issued andoutstanding,
                  none in 2005 and 571,237 shares in 2004
              
              
              —
              
              
              1,090Commitments
                  and contingenciesShareholders’
                  equity:Common
                  stock, $.0001 par value per share. Authorized 100,000,000 shares;issued
                  and outstanding 20,305,060 shares in 2005and
                  18,828,416 shares in 2004
              
              
              2
              
              
              2Capital
                  in excess of par value
              
              
              28,367
              
              
              25,636Loan
                  receivable for stock purchase
              
              
              —
              
              
              (50
              )Comprehensive
                  loss
              
              
              (25
              )
              
              —Accumulated
                  deficit
              
              
              (7,016
              )
              
              (7,468
              )Total
                  shareholders’ equity
              
              
              21,328
              
              
              18,120$
              38,207
              
              $
              30,022
  See
        accompanying notes to consolidated financial statements.
   F-3


**GUIDELINE,
      INC. AND SUBSIDIARIES**


Consolidated
      Statements of Operations


Years
      ended December 31


(in
      thousands, except share and per share data)


**2005**
              
              **2004**
              
              **2003**Revenues
              
              $
              43,034
              
              $
              38,437
              
              $
              31,569Operating
                  expenses:Direct
                  costs
              
              
              25,708
              
              
              22,384
              
              
              17,243Selling,
                  general and administrative expenses
              
              
              16,343
              
              
              16,309
              
              
              14,495Total
                  operating expenses
              
              
              42,051
              
              
              38,693
              
              
              31,738Operating
                  income (loss)
              
              
              983
              
              
              (256
              )
              
              (169
              )Interest
                  income
              
              
              16
              
              
              14
              
              
              2Other
                  income
              
              
              16
              
              
              4
              
              
              117Gain
                  on sale of assets
              
              
              226
              
              
              92
              
              
              —Interest
                  expense
              
              
              (401
              )
              
              (1,609
              )
              
              (687
              )Equity
                  loss on investment
              
              
              (177
              )
              
              (94
              )
              
              —Impairment
                  on investment
              
              
              —
              
              
              (96
              )
              
              —Income
                  (loss) before provision for income taxes
              
              
              663
              
              
              (1,945
              )
              
              (737
              )Provision
                  for income taxes
              
              
              211
              
              
              —
              
              
              210Net
                  income (loss)
              
              
              452
              
              
              (1,945
              )
              
              (947
              )Less:
                  Preferred dividends
              
              
              (40
              )
              
              (40
              )
              
              (30
              )Less:
                  Accretion on redeemable common shares
              
              
              —
              
              
              (113
              )
              
              (250
              )Net
                  income (loss) attributable to commonshareholders
              
              $
              412
              
              $
              (2,098
              )
              $
              (1,227
              )Income
                  (loss) per common share:Basic
                  and diluted
              
              $
              0.02
              
              $
              (0.12
              )
              $
              (0.10
              )Weighted
                  average number of common sharesoutstanding:Basic
              
              
              20,045,754
              
              
              17,212,834
              
              
              11,765,619Diluted
              
              
              21,631,472
              
              
              17,212,834
              
              
              11,765,619




See
      accompanying notes to consolidated financial statements.







F-4


**GUIDELINE,
      INC. AND SUBSIDIARIES**


Consolidated
      Statements of Shareholders’ Equity


Years
      ended December 31


(in
      thousands, except share amounts )


Common
                Stock
            
            Capital
                in excess of
            
            Loan
                receivable for stock
            
            Comprehensive
            
            Accumulated
            
            Shareholders’Shares
            
            Amount
            
            par
                value
            
            purchase
            
            loss
            
            deficit
            
            equityBALANCE
                AT JANUARY 1, 2003
            
            
            10,214,102
            
            $
            1
            
            $
            8,214
            
            $
            (50
            )
            $
            —
            
            $
            (4,576
            )
            $
            3,589Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (947
            )
            
            (947
            )Exercise
                of stock options and warrants
            
            
            742,809
            
            
            —
            
            
            329
            
            
            —
            
            
            —
            
            
            —
            
            
            329Common
                stock issued in connectionwith
                the Teltech acquisition
            
            
            1,649,384
            
            
            —
            
            
            1,713
            
            
            —
            
            
            —
            
            
            —
            
            
            1,713Common
                stock issued to a vendor
            
            
            35,000
            
            
            —
            
            
            44
            
            
            —
            
            
            —
            
            
            —
            
            
            44Preferred
                stock issued
            
            
            —
            
            
            —
            
            
            193
            
            
            —
            
            
            —
            
            
            —
            
            
            193Warrants
                issued in connection with theGuideline
                Research acquisition
            
            
            —
            
            
            —
            
            
            742
            
            
            —
            
            
            —
            
            
            —
            
            
            742Warrants
                issued in connection with theTeltech
                acquisition
            
            
            —
            
            
            —
            
            
            763
            
            
            —
            
            
            —
            
            
            —
            
            
            763Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            1,224
            
            
            —
            
            
            —
            
            
            —
            
            
            1,224Preferred
                stock dividends
            
            
            —
            
            
            —
            
            
            (30
            )
            
            —
            
            
            —
            
            
            —
            
            
            (30
            )Accretion
                on redeemable common stock
            
            
            —
            
            
            —
            
            
            (250
            )
            
            —
            
            
            —
            
            
            —
            
            
            (250
            )BALANCE
                AT DECEMBER 31, 2003
            
            
            12,641,295
            
            
            1
            
            
            12,942
            
            
            (50
            )
            
            —
            
            
            (5,523
            )
            
            7,370Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,945
            )
            
            (1,945
            )Exercise
                of stock options and warrants
            
            
            187,121
            
            
            —
            
            
            45
            
            
            —
            
            
            —
            
            
            —
            
            
            45Common
                stock issued
            
            
            6,000,000
            
            
            1
            
            
            12,167
            
            
            —
            
            
            —
            
            
            —
            
            
            12,168Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            596
            
            
            —
            
            
            —
            
            
            —
            
            
            596Transition
                adjustment upon adoption of SFAS No.123
            
            
            —
            
            
            —
            
            
            13
            
            
            —
            
            
            —
            
            
            —
            
            
            13Preferred
                stock dividends
            
            
            —
            
            
            —
            
            
            (40
            )
            
            —
            
            
            —
            
            
            —
            
            
            (40
            )Accretion
                on redeemable common stock
            
            
            —
            
            
            —
            
            
            (113
            )
            
            —
            
            
            —
            
            
            —
            
            
            (113
            )Deferred
                stock-based compensation
            
            
            —
            
            
            —
            
            
            26
            
            
            —
            
            
            —
            
            
            —
            
            
            26BALANCE
                AT DECEMBER 31, 2004
            
            
            18,828,416
            
            
            2
            
            
            25,636
            
            
            (50
            )
            
            —
            
            
            (7,468
            )
            
            18,120Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            452
            
            
            452Comprehensive
                loss
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            (25
            )
            
            —
            
            
            (25
            )Exercise
                of stock options and warrants
            
            
            405,250
            
            
            —
            
            
            172
            
            
            —
            
            
            —
            
            
            —
            
            
            172Common
                stock issued
            
            
            500,157
            
            
            —
            
            
            803
            
            
            —
            
            
            —
            
            
            —
            
            
            803Redemption
                of common stock
            
            
            571,237
            
            
            —
            
            
            1,090
            
            
            —
            
            
            —
            
            
            —
            
            
            1,090Costs
                related to issuance of common stock
            
            
            —
            
            
            —
            
            
            (33
            )
            
            —
            
            
            —
            
            
            —
            
            
            (33
            )Satisfaction
                of loan receivable for stock purchase
            
            
            —
            
            
            —
            
            
            —
            
            
            50
            
            
            —
            
            
            —
            
            
            50Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            631
            
            
            —
            
            
            —
            
            
            —
            
            
            631Preferred
                stock dividends
            
            
            —
            
            
            —
            
            
            (40
            )
            
            —
            
            
            —
            
            
            —
            
            
            (40
            )Tax deduction
                from stock option exercise
            
            
            —
            
            
            —
            
            
            108
            
            
            —
            
            
            —
            
            
            —
            
            
            108BALANCE
                AT DECEMBER 31, 2005
            
            
            20,305,060
            
            $
            2
            
            $
            28,367
            
            $
            —
            
            $
            (25
            )
            $
            (7,016
            )
            $
            21,328





See
      accompanying notes to consolidated financial statements.




F-5


**GUIDELINE,
      INC. AND SUBSIDIARIES**


Consolidated
      Statements of Cash Flows


Years
      ended December 31


(in
      thousands)


**2005**
              
              **2004**
              
              **2003**Cash
                  flows from operating activities:Net
                  income (loss)
              
              $
              452
              
              $
              (1,945
              )
              $
              (947
              )Adjustments
                  to reconcile net income (loss) to net cashProvided
                  by (used in) operating activitiesDepreciation
                  and amortization
              
              
              1,350
              
              
              931
              
              
              1,143Provision
                  for doubtful accounts
              
              
              85
              
              
              129
              
              
              110Deferred
                  income taxes
              
              
              211
              
              
              —
              
              
              160Stock-based
                  compensation from option grants
              
              
              631
              
              
              596
              
              
              1,224Impairment
                  on investment
              
              
              —
              
              
              96
              
              
              —Deferred
                  compensation
              
              
              (44
              )
              
              (126
              )
              
              (114
              )Non-cash
                  interest
              
              
              117
              
              
              1,357
              
              
              224Equity
                  loss on investment
              
              
              177
              
              
              94
              
              
              —Gain
                  on sale of asset
              
              
              (226
              )
              
              (92
              )
              
              —Changes
                  in assets and liabilities:Increase
                  in accounts receivable
              
              
              (1,031
              )
              
              (154
              )
              
              (1,625
              )Decrease
                  (increase) in prepaid expensesand
                  other current assets
              
              
              612
              
              
              (320
              )
              
              167Decrease
                  (increase) in other assets
              
              
              136
              
              
              (155
              )
              
              191Increase
                  (decrease) in unearned retainer income
              
              
              418
              
              
              (140
              )
              
              (233
              )Decrease
                  in other liabilities
              
              
              (14
              )
              
              —
              
              
              —(Decrease)
                  increase in accounts payable and accrued expenses
              
              
              (159
              )
              
              (1,349
              )
              
              535Net
                  cash provided by (used in) operating activities
              
              
              2,715
              
              
              (1,078
              )
              
              835Cash
                  flows from investing activities:Purchase
                  of Guideline Research, including related transaction costs
                  paid
              
              
              (2,160
              )
              
              (1,127
              )
              
              (3,895
              )Purchase
                  of Teltech, including related transaction costs paid
              
              
              —
              
              
              (441
              )
              
              (3,075
              )Purchase
                  of Atlantic, including related transaction costs paid
              
              
              (3,696
              )
              
              —
              
              
              —Purchase
                  of Signia, including related transaction costs paid
              
              
              (3,645
              )
              
              —
              
              
              —Capital
                  expenditures
              
              
              (431
              )
              
              (532
              )
              
              (457
              )Sale
                  of non-marketable securities
              
              
              —
              
              
              67
              
              
              —Net
                  cash used in investing activities
              
              
              (9,932
              )
              
              (2,033
              )
              
              (7,427
              )Cash
                  flows from financing activities:Principal
                  borrowings under notes payable, net of closing costs
              
              
              8,500
              
              
              200
              
              
              2,688Principal
                  payments under notes payable
              
              
              (2,450
              )
              
              (5,576
              )
              
              (435
              )Proceeds
                  from exercise of stock options and warrants
              
              
              172
              
              
              45
              
              
              329Issuance
                  of preferred stock
              
              
              —
              
              
              —
              
              
              693Issuance
                  of warrant
              
              
              —
              
              
              —
              
              
              1,507Issuance
                  of common stock
              
              
              —
              
              
              12,168
              
              
              1,663Costs
                  related to issuance of common stock
              
              
              (22
              )
              
              —
              
              
              —Payments
                  under capital leases
              
              
              (96
              )
              
              (28
              )
              
              —Proceeds
                  from satisfaction of employee loan
              
              
              50
              
              
              —
              
              
              —Increase
                  in deferred financing fees
              
              
              (759
              )
              
              —
              
              
              —Net
                  cash provided by financing activities
              
              
              5,395
              
              
              6,809
              
              
              6,445Net
                  increase (decrease) in cash and cash equivalents
              
              
              (1,822
              )
              
              3,698
              
              
              (147
              )Cash
                  and cash equivalents at beginning of year
              
              
              4,519
              
              
              821
              
              
              968Cash
                  and cash equivalents at end of year
              
              $
              2,697
              
              $
              4,519
              
              $
              821




See
      accompanying notes to consolidated financial statements.






F-6


**GUIDELINE,
      INC. AND SUBSIDIARIES**


Notes
      to
      Consolidated Financial Statements


December
      31, 2005, 2004 and 2003





**(1)**  **ORGANIZATION
      AND NATURE OF OPERATIONS**





GUIDELINE,
      INC. (formerly known as FIND/SVP, Inc.) and its wholly-owned subsidiaries
      (collectively, "Guideline " or the "Company" which may be also referred to
      in
      this report as “we”, “us” or “our”) is a single-source provider of customized
      business research and analysis. Through our end-to-end continuum of On-Demand
      Business Research, Custom Market Research, Strategic Intelligence and Product
      Development Intelligence, our research analysts create integrated solutions
      that
      enable clients to make informed decisions to address their critical business
      needs. We specialize in nearly all major industries, including healthcare and
      pharmaceuticals, financial services, advertising and professional services,
      industrial, consumer and retail, food and beverage, media and entertainment
      and
      chemicals. In many cases, we function as our customers’ primary information and
      business intelligence resource on an outsourced basis, especially among the
      growing universe of companies that have downsized their internal research staffs
      and information resources. In other cases, we serve as a reliable supplemental
      resource to customers’ internal capabilities.





On
      March
      13, 2006, by majority shareholder approval, we changed our name from FIND/SVP,
      Inc. to Guideline, Inc. to better communicate our strategy of guiding customers
      through their strategic business research and consulting needs.





The
      Company is organized into four business segments: Quick Consulting Service
      (“On-Demand Business Research,” formerly known as Quick Consulting Service or
      QCS), which is a subscription-based service that functions like an in-house
      corporate research center for its customers; Strategic Intelligence, which
      provides in-depth custom research and competitive intelligence services for
      larger projects; Custom Market Research, which provides full service custom
      market research services, such as large-scale consumer surveys; and Product
      Development Intelligence (formerly known as Teltech), which provides a full
      range of outsourced information and consulting services to customers in R&D
      and related technical sectors. Upon its acquisition in 2005, Signia’s operations
      and financial results were integrated into the business segment previously
      known
      as the Strategic Consulting and Research Group (“SCRG”), which was renamed
      Strategic Intelligence. Upon its acquisition in 2005, Atlantic’s operations and
      financial results were integrated into the business segment previously known
      as
      Quantitative Market Research, which was renamed Custom Market Research.





**(2)**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**BASIS
      OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION**





The
      consolidated financial statements include the accounts of Guideline, Inc. and
      its wholly-owned subsidiaries. All significant intercompany balances and
      transactions have been eliminated in consolidation.





On
      April
      1, 2005, the Company acquired Atlantic Research & Consulting, Inc.
      (“Atlantic”), and Atlantic’s results of operations are included in results of
      operations from the date of acquisition.





F-7


On
      April
      1, 2005, the Company acquired Signia Partners, Inc. (“Signia”), and Signia’s
      results of operations are included in results of operations from the date of
      acquisition.





On
      July
      1, 2003, the Company acquired Teltech, and Teltech’s results of operations are
      included in results of operations from the date of acquisition.





On
      April
      1, 2003, the Company acquired Guideline Research, and Guideline Research’s
      results of operations are included in results of operations from the date of
      acquisition.





**USE
                OF ESTIMATES**





The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosures of contingent assets and liabilities
      at
      the date of the financial statements, and the reported amounts of revenue and
      expenses during the reporting period. Significant accounting estimates used
      relate principally to revenue recognition, allowances for doubtful accounts,
      useful lives of property, plant and equipment and intangible assets, goodwill,
      deferred tax asset valuation allowances, valuation of non-marketable equity
      securities and other accrued expenses. Actual results could differ from those
      estimates.





**EQUIPMENT,
                SOFTWARE DEVELOPMENT AND LEASEHOLD
                IMPROVEMENTS**





Equipment,
      software development and leasehold improvements are stated at cost.





Depreciation
      is computed using the straight-line method over the estimated useful lives
      of
      the assets. Electronic equipment and computer software are primarily depreciated
      over three years, and a proprietary management information software system
      is
      depreciated over ten years. Leasehold improvements are amortized by the
      straight-line method over the shorter of the term of the lease or the estimated
      life of the asset.





The
      Company recognizes software development costs on its website development and
      cost tracking systems in accordance with EITF 00-02, “Accounting for Website
      Development Costs” and Statement of Position 98-1, “Accounting for the Costs of
      Computer Software Developed or Obtained for Internal Uses”, respectively.
      Accordingly, the Company expenses all costs incurred that relate to the planning
      and post implementation phases of development. Costs incurred in the development
      phase are capitalized and recognized over the product’s estimated useful life if
      the product is expected to have a useful life beyond one year. Costs associated
      with repair or maintenance of the existing site is expensed as incurred. The
      Company capitalized approximately $146,000 and $151,000 of internal development
      and internal use software costs during the years ended December 31, 2005 and
      2004, respectively.





**GOODWILL
      AND INTANGIBLES**





Goodwill
      consists of the excess of the purchase price over the fair value of identifiable
      net assets of businesses acquired. Effective January 1, 2002 the Company adopted
      Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and
      Other Intangible Assets,” under which goodwill is no longer amortized. Instead,
      goodwill is evaluated for impairment using a two-step process that is performed
      at least annually and whenever events or circumstances indicate impairment
      may
      have occurred. The first step is a comparison of the fair value of an internal
      reporting unit with its carrying amount including goodwill. If the fair value
      of
      the reporting unit exceeds its carrying value, goodwill of the reporting unit
      is
      not considered impaired and the second step is unnecessary. If the carrying
      value of the reporting unit exceeds its fair value, a second test is performed
      to measure the amount of impairment by comparing the carrying amount of the
      goodwill to a determination of the implied value of the goodwill. If the
      carrying amount of the goodwill is greater than the implied value, an impairment
      loss is recognized for the difference. The implied value of the goodwill is
      determined as of the test date by performing a purchase price allocation as
      if
      the reporting unit had just been acquired, using currently estimated fair values
      of the individual assets and liabilities of the reporting unit, together with
      an
      estimate of the fair value of the reporting unit taken as a whole. The estimate
      of the fair value of the reporting unit is based upon information available
      regarding prices of similar groups of assets, or other valuation techniques
      including present value techniques based upon estimates of future cash
      flow.





F-8


At
      December 31, 2005, there is $18,245,000 of goodwill on the balance sheet, for
      which no impairment has been identified.





Intangible
      Assets, including customer relationships, trademarks and other intangible assets
      are amortized over their estimated useful lives unless they are deemed to have
      indefinite useful lives. Upon the adoption of SFAS 142, intangible assets deemed
      to have indefinite useful lives, such as trade names, are not amortized and
      are
      subject to annual impairment tests. An impairment exists if the carrying value
      of the indefinite-lived intangible asset exceeds its fair value. For other
      intangible assets subject to amortization, an impairment is recognized if the
      carrying amount is not recoverable and the carrying amount exceeds the fair
      value of the intangible asset (see “Impairment of Long-Lived Assets and
      Long-Lived Assets to be Disposed Of”, below). These assets are tested for
      impairment if a triggering event occurs. As of December 31, 2005, there are
      intangible assets of $2,522,000 on the balance sheet. Amortization of intangible
      assets for the years ended December 31, 2005, 2004 and 2003 amounted to $
      297,000, $135,000 and $83,000, respectively.





**DEFERRED
                CHARGES**





Deferred
      charges, included in other assets on the balance sheet, primarily are comprised
      of the cost of acquired library information files and electronic databases,
      which are amortized to expense over the estimated period of benefit of three
      years using the straight-line method, and deferred financing fees, which are
      amortized to interest expense over the term of the related debt.





**INCOME
                TAXES**





Income
      taxes are accounted for under the asset and liability method. Deferred tax
      assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax basis and operating
      losses and tax credit carryforwards. Deferred tax assets and liabilities are
      measured using currently enacted tax rates. The effect on deferred tax assets
      and liabilities of a change in tax rates is recognized in income in the period
      that includes the enactment date. Realization of the net deferred tax assets
      is
      dependent on future reversals of existing taxable temporary differences and
      adequate future taxable income, exclusive of reversing temporary differences
      and
      carryforwards.








F-9


**EARNINGS
      (LOSS) PER SHARE** **





Basic
      earnings (loss) per common share is computed by dividing net income (loss)
      attributable to common shareholders by the weighted average number of common
      shares outstanding. Diluted earnings (loss) per common share is computed by
      dividing net income (loss) attributable to common shareholders by a diluted
      weighted average number of common shares outstanding. Diluted earnings (loss)
      per common share reflects the potential dilution that would occur if securities
      or other contracts to issue common stock were exercised or converted into common
      stock, unless they are anti-dilutive.





In
      computing basic earnings per share for the years ended December 31, 2005, 2004
      and 2003, the Company used a weighted average number of common shares
      outstanding of 20,045,754, 17,212,834 and 11,765,619, respectively. In computing
      diluted earnings per share for the year ended December 31, 2005, the Company
      used a weighted average number of common shares outstanding of 21,631,472.
      In
      the years ended December 31, 2004 and 2003 there was no dilutive effect as
      a
      result of the net loss incurred.





Year
                ended December 31,2005
            
            2004
            
            2003Basic
                number of common shares
            
            
            20,045,754
            
            
            17,212,834
            
            
            11,765,619Effect
                of dilutive securities:Warrants
            
            
            909,589
            
            
            —
            
            
            —Convertible
                preferred shares
            
            
            —
            
            
            —
            
            
            —Restricted
                common shares
            
            
            240,897
            
            
            —
            
            
            —Stock
                options
            
            
            435,232
            
            
            —
            
            
            —Diluted
                number of common shares
            
            
            21,631,472
            
            
            17,212,834
            
            
            11,765,619





Options,
      warrants and redeemable convertible preferred shares, including accrued
      preferred dividends, to purchase 6,331,445, 8,449,240 and 5,117,248 common
      shares during the years ended December 31, 2005, 2004 and 2003, respectively,
      were anti-dilutive and were therefore excluded from the computation of diluted
      earnings per share.





**REVENUE
                RECOGNITION**





The
      Company’s subscription services are provided under two different types of
      subscription contracts - retainer contracts and deposit contracts. Retainer
      contracts, which are used primarily by On-Demand Business Research, charge
      customers fixed monthly subscription fees to access On-Demand Business Research
      services, and revenues are recognized ratably over the term of each
      subscription. Retainer fees are required to be paid in advance by customers
      on
      either a monthly, quarterly or annual basis, and all billed amounts relating
      to
      future periods are recorded as an unearned retainer income liability on the
      Company’s balance sheet. In the case of deposit contracts, which are used
      primarily by the Product Development Intelligence segment, a customer pays
      a
      fixed annual fee, which entitles it to access any of the Company’s service
      offerings throughout the contract period, up to the total amount of the annual
      deposit fee. Since deposit account customers can “spend” their contract fee at
      any time within the annual contract period, deposit account revenues are only
      recognized within the contract period as services are actually provided to
      customers, with any unused deposit amounts recognized as revenue in the final
      month of the contract. As with retainer fees, deposit contract fees are required
      to be paid in advance, primarily annually, and any billed amounts relating
      to
      future periods are recorded as unearned retainer income, a current liability
      on
      the Company’s balance sheet.





F-10


With
      regard to the Company’s non-subscription based services, including custom market
      research, in-depth consulting and outsourced information services, revenues
      are
      recognized primarily on a percentage-of-completion basis. The Company typically
      enters into discrete contracts with customers for these services on a
      project-by-project basis. Payment milestones differ from contract to contract
      based on the client and the type of work performed. Generally, the Company
      invoices a client for a portion of a project in advance of work performed,
      with
      the balance invoiced throughout the fulfillment period and/or after the work
      is
      completed. However, revenue and costs are only recognized to the extent of
      each
      contract’s percentage-of-completion. Any revenue earned in excess of billings is
      recorded as a current asset on the Company’s balance sheet, while any billings
      in excess of revenue earned, which represent billed amounts relating to future
      periods, are recorded as unearned revenue, a current liability on the Company’s
      balance sheet.




**CASH
      AND CASH EQUIVALENTS**





Cash
      and
      cash equivalents includes all highly liquid investments with original maturities
      of three months or less.





**FAIR
                VALUE OF FINANCIAL
                INSTRUMENTS**





The
      following methods and assumptions were used in estimating the fair value of
      financial instruments:





The
      carrying values reported in the balance sheets for cash, accounts receivable,
      prepaid expenses, other current assets, non-marketable equity securities,
      accounts payable and accrued expenses approximate fair values.





The
      fair
      value of notes payable considered to be senior debt, which approximates its
      carrying value, is estimated based on the current rates offered to us for debt
      of the same remaining maturities.





**IMPAIRMENT
                OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
                OF**





In
      accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of
      Long-Lived Assets,” the long-lived assets of the Company (other than goodwill,
      indefinite-lived intangibles, deferred tax assets and financial instruments)
      including equipment, software development and leasehold improvements,
      finite-lived intangibles, rental asset, and deferred charges, are reviewed
      for
      impairment whenever events or changes in circumstances indicate that the net
      carrying amount may not be recoverable. Recoverability of assets to be held
      and
      used is measured by a comparison of the carrying amount of an asset to
      undiscounted future net cash flows expected to be generated by the asset. If
      such assets are considered to be impaired, the impairment to be recognized
      is
      measured by the amount by which the carrying amount of the assets exceeds the
      fair value of the assets. Assets to be disposed of are reported at the lower
      of
      the carrying amount or fair value less costs to sell.





F-11


**STOCK-BASED
      EMPLOYEE COMPENSATION COSTS**





In
      2004,
      the Company adopted the fair value method of accounting for stock based
      compensation prescribed by SFAS No. 123 “Accounting for Stock-Based
      Compensation”, as amended by SFAS No. 148, under the modified prospective
      method. The
      Company currently records compensation expense based upon the fair value of
      stock-based awards (both restricted stock and stock options).  The
      Company recognized compensation cost of approximately $631,000, $596,000 and
      $1,224,000 for the years ended December 31, 2005, 2004, and 2003,
      respectively . In
      2004,
      the Company recorded a transition adjustment upon adoption of SFAS No. 123
      of
      $13,000 related to long-term deferred tax assets. Prior to adopting SFAS No.
      123, as amended, the Company accounted for its stock option grants under APB
      No.
      25, “Accounting for Stock Issued to Employees” utilizing the intrinsic value
      method for variable awards. Had the Company determined compensation cost in
      2003
      based on the fair value at the grant date for its stock options under SFAS
      No.
      123, net loss would have decreased to the pro forma amount indicated
      below:


**2003**Net
                loss attributable to common shareholders, as reported
            
            $
            (1,227,000
            )Add:
                Stock-based employee compensation expense included in reported net
                loss,
                net of tax related effects
            
            
            1,224,000Deduct:
                Total stock-based employee compensation expense determined under
                fair
                value based method for all awards, net of related tax
                effects
            
            
            (409,000
            )Pro
                forma net loss
            
            $
            (412,000
            )Loss
                per share:Basic and
              DilutedAs
                reported
            
            $
            (0.10
            )Pro
                forma
            
            $
            (0.04
            )





The
      per
      share weighted-average fair value of stock options granted during 2005, 2004
      and
      2003 was $0.87, $1.52 and $1.05, respectively. Such amounts were determined
      using the Black-Scholes option pricing model with the following weighted-average
      assumptions:


**2005**
            
            **2004**
            
            **2003**Expected
                dividend yield
            
            
            0
            %
            
            0
            %
            
            0
            %Risk-free
                interest rate
            
            
            3.12%
                to 3.24
            %
            
            3.24%
                to 3.81
            %
            
            3.24
            %Volatility
            
            
            76.8%
                to 77.39
            %
            
            88.60%
                to 96.4
            %
            
            107
            %Expected
                life
            
            
            5
                years
            
            
            5
                years
            
            
            5
                years





**NEW
      ACCOUNTING PRINCIPLES**





In
      June
      2005, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues
      Task Force (“EITF”) Issue No. 05-06, “Determining the Amortization Period for
      Leasehold Improvements.” The consensus reached is that leasehold improvements
      acquired in a business combination or purchased subsequent to the inception
      of
      the lease should be amortized over the lesser of the useful life of the asset
      or
      the lease term that includes reasonably assured lease renewals as determined
      on
      the date of the acquisition of the leasehold improvement. We have adopted the
      provisions of EITF No. 05-06, but this did not have a material effect on our
      financial statements.





In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”
which replaces APB Opinion No. 20, “Accounting Changes” and SFAS No. 3
“Reporting Accounting Changes in Interim Financial Statements.” SFAS No. 154
      requires all direct financial statement effects caused by a voluntary change
      in
      accounting principle to be applied retrospectively to prior period financial
      statements as if the new principle had always been applied, unless it is
      impracticable to determine either the period-specific effects or the cumulative
      effect of the change in principle. APB Opinion No. 20 and SFAS No. 3 previously
      required that a voluntary change in an accounting principle be recognized
      through a cumulative effect in net income in the period of change. SFAS No.
      154
      is effective for reporting periods beginning after December 15, 2005. We do
      not
      expect SFAS No. 154 to have a material effect on our financial
      statements.


F-12





In
      December 2004, the FASB issued the revised Statement of Financial Accounting
      Standards No. 123, “Share-Based Payment” (“SFAS 123 (R)”). SFAS 123 (R) requires
      compensation costs related to share-based payment transactions to be recognized
      in the financial statements. Generally, compensation cost will be measured
      based
      on the grant-date fair value of the equity or liability instruments issued.
      In
      addition, liability awards will be remeasured each reporting period.
      Compensation cost will be recognized over the requisite service period,
      generally as the award vests. As amended, SFAS No. 123 (R) requires the Company
      to implement the standard at the beginning of their next fiscal year that begins
      after September 15, 2005. The Company is currently evaluating the effect of
      SFAS
      123 (R) on its financial statements and related disclosures.




**(3)**  **ACQUISITIONS**





***Atlantic
      Research & Consulting***





On
      April
      1, 2005, the Company acquired all of the capital stock of Atlantic Research
      & Consulting, Inc. (“Atlantic”) as described in the Stock Purchase Agreement
      (the “Atlantic Purchase Agreement”) between the Company and Peter Hooper
      (“Hooper”), as the sole stockholder of Atlantic. The consideration for this
      acquisition consisted of $3,600,000 in cash paid at closing, 312,598 shares
      of
      common stock, and an aggregate of up to $2,250,000 in deferred consideration
      payable in cash over three years, which deferred payments are contingent upon
      Atlantic achieving certain prescribed amounts of EBITDA (as defined in the
      Atlantic Purchase Agreement). If EBITDA for the three-year period beginning
      on
      March 1, 2005 exceeds $3,300,000, Hooper will also receive additional deferred
      consideration equal to the amount of such excess multiplied by
      0.50.





Atlantic,
      headquartered in Boston, Massachusetts, provides quantitative and qualitative
      custom market research, focusing on financial services, management consulting,
      health care, and public sectors.





Simultaneously
      with the Company’s acquisition of Atlantic ,
      Atlantic entered into new employment agreements with Hooper and two other senior
      executives of Atlantic.





The
      consideration paid to date for this acquisition consisted of the
      following:







F-13






·
            Approximately
                $3,696,000 paid in cash (including $147,000 of transaction costs
                paid and
                net of cash acquired of $51,000); and





·
            312,598
                unregistered shares of the Company’s Common Stock, valued at $502,000. In
                accordance with EITF 99-12, “Determination of the Measurement Date for the
                Market Price of Acquirer Securities Issued in a Purchase Business
                Combination” (“EITF 99-123”), the market prices used in the valuation of
                these unregistered shares covered two days before, the day of, and
                two
                days after the date the terms of the acquisition were announced
                publicly.





The
      Company’s acquisition of Atlantic was financed at closing with the combination
      of (i) funds borrowed upon the closing of a Senior Secured Credit Facility
      with
      the Lender, and (ii) cash on hand.




***Signia
      Partners***





On
      April
      1, 2005, the Company acquired all of the capital stock of Signia Partners
      Incorporated as described in the Stock Purchase Agreement (the “Signia Purchase
      Agreement”) between the Company and Charles Douglas House (“House”), as the sole
      stockholder of Signia. The consideration for this acquisition consisted of
      approximately $3,400,000 in cash paid at closing (after taking into account
      certain closing adjustments), 187,559 shares of common stock, and an aggregate
      of up to $1,400,000 in deferred consideration payable in cash over three years,
      which deferred payments are contingent upon Signia achieving certain prescribed
      amounts of Adjusted EBITDA (as defined in the Signia Purchase Agreement). If
      aggregate Adjusted EBITDA for the three-year period beginning on February 1,
      2005 exceeds $2,550,000, House will also receive additional deferred
      consideration equal to the amount of such excess multiplied by
      0.25.





Signia,
      headquartered just outside of Washington, D.C., is a provider of in-depth
      business research and fact-based decision support, focusing on the financial
      services, health care and consumer sectors.





Simultaneously
      with the Company’s acquisition of Signia ,
      Signia
      entered into new employment agreements with House and two other senior
      executives of Signia.





The
      consideration paid to date for this acquisition consisted of the
      following:





·
            Approximately
                $3,645,000 paid in cash (including $256,000 of transaction costs
                paid and
                net of cash acquired of $11,000); and





·
            187,559
                unregistered shares of the Company’s Common Stock, valued at $301,000. In
                accordance with EITF 99-12, the market prices used in the valuation
                of these unregistered shares covered two days before, the day of,
                and two
                days after the date the terms of the acquisition were announced
                publicly.




The
      Company’s acquisition of Signia was financed at closing with the combination of
      (i) funds borrowed upon the closing of a Senior Secured Credit Facility with
      the
      Lender, and (ii) cash on hand.





F-14


The
      following table sets forth the components of the purchase price for the Atlantic
      and Signia acquisitions:


**Atlantic**
            
            **Signia**
            
            **Total**Cash
                paid (including paid transaction costs, net of cash
                acquired)
            
            $
            3,696,000
            
            $
            3,645,000
            
            $
            7,341,000Accrued
                transaction costs
            
            
            17,000
            
            
            17,000
            
            
            34,000Common
                stock issued to sellers
            
            
            502,000
            
            
            301,000
            
            
            803,000Total
                purchase consideration
            
            $
            4,215,000
            
            $
            3,963,000
            
            $
            8,178,000





The
      following table summarizes the amounts allocated to the acquired assets and
      assumed liabilities. The excess of the purchase price over the fair values
      of
      assets acquired and liabilities assumed was allocated to goodwill. The value
      reflected in these elements of the purchase price do not meet the definition
      of
      an intangible asset under FAS 141 and is reflected in goodwill. The
      valuation of acquired intangible assets was prepared by an independent appraisal
      firm. The purchase price allocations have been finalized in this Annual Report
      on Form 10-K for the fiscal year ended December 31, 2005, with the
      exception of deferred consideration for Atlantic and Signia which will be
      determined for the periods ending March 31, 2006, 2007 and 2008. The significant
      assumptions used in the valuations included factors affecting the duration,
      growth rates and amounts of future cash flows for each income stream,
      specifically: the future economic outlook for the industry, risks involved
      in
      the business, and the impact of competition changes.


**Atlantic**
            
            **Signia**
            
            **Total**Current
                assets
            
            $
            741,000
            
            $
            823,000
            
            $
            1,564,000Property
                and equipment
            
            
            230,000
            
            
            52,000
            
            
            282,000Other
                assets
            
            
            —
            
            
            9,000
            
            
            9,000Liabilities
                assumed, current
            
            
            (580,000
            )
            
            (418,000
            )
            
            (998,000
            )Liabilities
                assumed, non-current
            
            
            (20,000
            )
            
            (377,000
            )
            
            (397,000
            )Fair
                value of net assets acquired
            
            
            371,000
            
            
            89,000
            
            
            460,000Goodwill
            
            
            2,749,000
            
            
            3,152,000
            
            
            5,901,000Amortizable
                intangible assets
            
            
            695,000
            
            
            529,000
            
            
            1,224,000Indefinite-lived
                intangible assets
            
            
            400,000
            
            
            193,000
            
            
            593,000Total
                purchase consideration
            
            $
            4,215,000
            
            $
            3,963,000
            
            $
            8,178,000





Amortizable
      intangible assets, which generally include customer lists, are amortized over
      a
      period of 7 years. Amortization of intangible assets was $297,000, $135,000
      and
      $83,000 for the fiscal years ended December 31, 2005, 2004 and
      2003.





The
      unaudited pro forma information below represents consolidated results of
      operations as if the acquisitions of Atlantic and Signia occurred on January
      1,
      2005. The unaudited pro forma information has been included for comparative
      purposes and is not indicative of results of operations of the consolidated
      Company had the acquisitions occurred as of January 1, 2005, nor is it
      necessarily indicative of future results.





F-15


*Pro
      Forma Results of Operations (unaudited)*





**Pro
                forma**
              **Twelve
                months ended**
              **December
                31, 2005****(unaudited)**Total
                revenue
            
            $
            45,519,000Net
                income
            
            $
            402,000Income
                per share attributable to common shareholders:
              Basic
                and diluted
            
            $
            0.02








F-16


In
      June
      2004, 75% (or 3,750 shares) of the preferred shares held by the Company in
      idealab! were redeemed for $66,806. As of December 31, 2005, the carrying value
      of these preferred share securities is $22,500.




**(4)**  **EQUIPMENT,
      SOFTWARE DEVELOPMENT AND LEASEHOLD IMPROVEMENTS, NET**





At
      December 31, 2005 and 2004, equipment, software development and leasehold
      improvements consist of the following:


**2005**
            
            **2004**Furniture,
                fixtures and equipment
            
            $
            8,624,000
            
            $
            7,817,000Software
                development
            
            
            3,432,000
            
            
            3,223,000Leasehold
                improvements
            
            
            2,367,000
            
            
            2,161,00014,423,000
            
            
            13,201,000Less:
                accumulated depreciation and amortization
            
            
            11,851,000
            
            
            10,865,000$
            2,572,000
            
            $
            2,336,000





The
      increase in equipment, software development and leasehold improvements, net
      of
      accumulated depreciation, from 2004 to 2005, resulted primarily from the fixed
      assets acquired in the purchases of Atlantic and Signia in 2005 of $282,000,
      and
      the $344,000 purchase of a new customer relationship management
      system.





Depreciation
      expense amounted to approximately $1,009,000, $740,000 and $1,016,000 for the
      years ended December 31, 2005, 2004 and 2003, respectively.






F-17




**(5)** **GOODWILL
        AND INTANGIBLES**





**Goodwill:**





The
      changes in the carrying amount of goodwill for the year ended December 31,
      2005
      and 2004 are as follows:





**On-Demand
                Business Research**
            
            **Strategic**
              **Intelligence**
            
            **Custom
                Market Research**
            
            **Product
                Development Intelligence****Segment**
            
            **Segment**
            
            **Segment**
            
            **Segment**
            
            **Total**Balance
                as of January 1, 2004
            
            $
            24,000
            
            $
            51,000
            
            $
            4,234,000
            
            $
            4,456,000
            
            $
            8,765,000Contractual
                earnout adjustment
            
            
            —
            
            
            **—**
            
            
            3,080,000
            
            
            200,000
            
            
            3,280,000Transaction
                costs adjustment
            
            
            —
            
            
            **—**
            
            
            82,000
            
            
            99,000
            
            
            181,000Other
            
            
            —
            
            
            (1,000
            )
            
            13,000
            
            
            —
            
            
            12,000Goodwill
                written off related to saleof
                Information Advisor business
            
            
            (24,000
            )
            
            —
            
            
            —
            
            
            —
            
            
            (24,000
            )Balance
                as of December 31, 2004
            
            
            —
            
            
            50,000
            
            
            7,409,000
            
            
            4,755,000
            
            
            12,214,000Goodwill
                related to acquisition of Atlantic
            
            
            —
            
            
            —
            
            
            2,749,000
            
            
            —
            
            
            2,749,000Goodwill
                related to acquisition of Signia
            
            
            —
            
            
            3,152,000
            
            
            —
            
            
            —
            
            
            3,152,000Contractual
                earnout adjustment
            
            
            —
            
            
            —
            
            
            130,000
            
            
            —
            
            
            130,000Balance
                as of December 31, 2005
            
            $
            —
            
            $
            3,202,000
            
            $
            10,288,000
            
            $
            4,755,000
            
            $
            18,245,000





**Intangibles:**





The
      table
      below represents the gross carrying amount, accumulated amortization, and
      amortization expense related to the Company’s intangible assets:




**Gross
                      CarryingAmount**
                  
                  **AccumulatedAmortization****Amortized
                      intangible assets as of December 31, 2004**Customer
                      relationships
                  
                  $
                  948,000
                  
                  $
                  (218,000
                  )**Unamortized
                      intangible assets as of December 31, 2004**Trade
                      names
                  
                  $
                  272,000**Amortized
                      intangible assets as of December 31, 2005**Customer
                      relationships and non-compete agreements
                  
                  $
                  2,172,000
                  
                  $
                  (515,000
                  )**Unamortized
                      intangible assets as of December 31, 2005**Trade
                      names
                  
                  $
                  865,000**Aggregate
                      Amortization Expense:**For
                      the year ended December 31, 2003
                  
                  $
                  83,000For
                      the year ended December 31, 2004
                  
                  $
                  135,000For
                      the year ended December 31, 2005
                  
                  $
                  297,000**Estimated
                      Amortization Expense:**For
                      the year ending December 31, 2006
                  
                  $
                  297,000For
                      the year ending December 31, 2007
                  
                  $
                  297,000For
                      the year ending December 31, 2008
                  
                  $
                  297,000For
                      the year ending December 31, 2009
                  
                  $
                  297,000
 F-18
 **(6)** **OTHER
          ASSETS**
 At
            December 31, 2005 and 2004, other assets consist of the following:
 
 **2005**
                  
                  
                  **2004**Deferred
                      charges, net
                  
                  $
                  63,000
                  
                  $
                  67,000Security
                      deposits
                  
                  
                  196,000
                  
                  
                  196,000Equity
                      investment
                  
                  
                  268,000
                  
                  
                  167,000Domain
                      name
                  
                  
                  26,000
                  
                  
                  --Non-marketable
                      equity securities
                  
                  
                  81,000
                  
                  
                  23,000Deferred
                      rent
                  
                  
                  31,000
                  
                  
                  335,000Cash
                      surrender value of life insurance
                  
                  
                  127,000
                  
                  
                  127,000Other
                  
                  
                  42,000
                  
                  
                  102,000$
                  834,000
                  
                  $
                  1,017,
                      000
  In
            1999,
            the Company entered into an agreement with idealab! and Find.com, Inc.
            whereby
            it assigned the domain name “find.com” and licensed the use of certain rights to
            the trademarks “find.com” and “find” to Find.com, Inc. idealab! and Find.com,
            Inc. are not otherwise related to the Company. Under terms of the agreement,
            the
            Company received cash and non-marketable preferred shares in idealab!,
            and is
            entitled to certain future royalties. The preferred shares received were
            initially valued at $500,000, and carried various rights including the
            ability
            to convert them into common shares of Find.com, Inc., and a put option
            to resell
            the shares to idealab! The put option became exercisable in December
            2002. Under
            the terms of the put option, idealab! could either repurchase the preferred
            shares for $1,500,000 in cash, or elect to return the find.com domain
            name to
            us. In the latter case, the Company would retain the preferred
            shares.
 
 In
            January 2003, the Company exercised its put option and idealab! declined
            to
            repurchase the preferred shares. This information was considered in the
            recurring evaluation of the carrying value of the preferred shares at
            the lower
            of historical cost or estimated net realizable value. Using this information
            together with other publicly available information about idealab!, the
            Company
            concluded the net realizable value of its idealab! preferred shares had
            declined
            to an estimated $185,000 at December 31, 2003.
 
 Subsequent
            to the quarter ended March 31, 2004 in a letter dated April 23, 2004
            from
            idealab! to its shareholders, idealab! announced that it had reached
            a
            settlement with certain holders of its Series D Preferred Stock, which
            does not
            include the Company (the “plaintiffs”), whereby the plaintiffs agreed to vote
            their shares in favor of an amendment to idealab!’s charter that would reduce
            the liquidation preference of idealab!’s Series D Preferred Stock from $100.00
            per share to $19.00 per share. Furthermore, upon completion of the above
            settlement, idealab! also stated in its April 23, 2004 letter that it
            plans to
            commence a tender offer for its Series D shares, including those held
            by the
            Company, for $19.00 per share. The settlement agreement requires that
            the
            purchase price be reduced by the tendering holders’ pro rata share of the
            plaintiffs’ litigation expenses. These expenses will range from $1.00 to $1.50
            per share. As a result of this pending settlement, the Company concluded
            the net
            realizable value of its idealab! preferred shares had declined to an
            estimated
            $89,000 at March 31, 2004, and took a charge to operations of $96,000
            during the
            quarter then ended. Since the idealab! preferred shares continue to be
            an
            investment in a start-up enterprise, it is reasonably possible in the
            near term
            that our estimate of the net realizable value of the preferred shares
            could be
            further reduced.
 
 In
            June
            2004, 75% (or 3,750 shares) of the preferred shares held by the Company
            in
            idealab! were redeemed for $66,806. As of December 31, 2005, the carrying
            value
            of these preferred share securities is $22,500.
 
 On
            September 29, 2004, the Company, Empire Media, LLC (“Empire”), and TripleHop
            Technologies, Inc. (“TripleHop”) (the Company, Empire, and TripleHop are
            hereinafter referred to individually as a "Member" and collectively as
            "Members"), entered into an Operating Agreement (the “Agreement”) in order to
            formally establish the Find.com joint venture. Find.com has been organized
            as a
            Delaware limited liability company, with the Company and Empire owning
            47.5%
            each, and TripleHop owning the balance. In exchange for its 47.5% voting
            interest, the Company initially contributed $50,000 cash in March 2004
            and will
            enter into a license agreement with Find.com related to Find.com’s use of the
“find.com” URL. In exchange for its 47.5% voting interest, Empire contributed
            $100,000 cash and will enter into a license agreement with Find.com related
            to
            Find.com’s rights to publish Empire produced content. In exchange for its 5.0%
            non-voting interest, TripleHop entered into a license agreement with
            Find.com
            related to Find.com’s use of the underlying software which serves as the core
            search functionality powering the “find.com” website.
 
 Find.com
            was formed for the purpose of developing, launching, owning and operating
            a
            business-focused Internet search portal utilizing the "find.com" URL,
            to provide
            search-initiated access to proprietary content and generic World Wide
            Web-based
            search results; the site is intended to be advertising supported in whole
            or in
            part, and content shall be free and/or sold on a pay-per-view basis,
            or on such
            basis as Find.com shall determine from time to time.
 
 Subsequent
            to its initial investment, the Company contributed an additional $211,000
            during
            2004. During the year ended December 31, 2004, the Company recorded an
            unrealized loss of $94,000 on its investment in Find.com. This represents
            the
            Company’s share of the net loss of Find.com as of and for the year ended
            December 31, 2004. As of December 31, 2004, the Company’s investment in Find.com
            was $167,000. The Company accounts for its investment in Find.com under
            the
            equity method of accounting for investments.
 
 On
            November 28, 2005, the Company sold the find.com URL and licensed certain
            related intellectual property assets, to Tigo Search, Inc., (“Tigo Search”), a
            majority-owned subsidiary of Scientigo Inc. (“Scientigo”), a publicly traded
            company. The total consideration for the sale included i) $250,000 in
            cash, ii)
            $150,000 in Scientigo common stock, iii) a secured promissory note for
            $100,000,
            and iv) a 49% interest in Tigo Search. The Company retained 58.7% of
            the net
            proceeds of the sale, with the rest being passed through to the other
            members of
            FIND.COM, LLC. In accordance with EITF 01-2 "Interpretations of APB Opinion
            No.
            29", the Company recorded a partial gain as a result of its sale of Find.com.
            The Company determined that its investment in Tigo Search was the result
            of a
            monetary exchange where the Company transferred ownership of its former
            interest
            in Find.com for a non-controlling interest in Tigo Search, plus cash,
            a note
            receivable and stock of Scientigo.
  The
            Company’s initial investment in Scientigo common stock was valued at $83,000
            in
            accordance with EITF 99-12. For the year ended December 31, 2005, the
            Company
            recorded a comprehensive loss of $25,000 which was recorded in equity
            as these
            securities are classified as available-for-sale securities. As a result,
            the
            Company’s investment in Scientigo was $58,000 as of December 31, 2005. The
            Company has recorded the note receivable from Scientigo at $24,000 which
            represents its best estimate of its net realizable value. Given its due
            date of
            May 28, 2006, the Company has recorded the note receivable within prepaid
            expenses and other current assets on the accompanying balance sheet.
 
 Scientigo
            has the option until May 28, 2006 to acquire the Company’s interest in Tigo
            Search for $700,000, payable $350,000 in cash and $350,000 in Scientigo
            Stock.
            In valuing the written option, the Company applied paragraph 8.d of EITF
            00-6,
“Accounting for Freestanding Derivative Financial Instruments Indexed
            to, and
            Potentially Settled in, Stock of a Subsidiary”. The Company’s carrying value of
            its interest in Tigo Search was reduced by the fair value of the written
            option of approximately $21,000. Furthermore, the Company's carrying
            value of
            Tigo Search was reduced by $50,000, which represents expenses that the
            Company
            paid in connection with the transaction. The Company’s investment in Tigo Search
            is valued at $268,000 at December 31, 2005.
 
 The
            Company has a 9.1% interest in Strategic Research Institute, L.P. (“SRI”), and
            in March 2003, received an $87,000 distribution in respect of that interest.
            The
            Company shares in profits of SRI, but does not share in losses. This
            is the only
            distribution that the Company received from this partnership interest,
            and the
            distribution was recognized as other income. SRI is a business conference
            and
            event company. The value of this investment is zero.
 
 Amortization
            of deferred charges was $44,000 and $47,000 for the years ended December
            31,
            2005 and 2004, respectively.




F-19





**(7)** **COMMITMENTS
          AND CONTINGENCIES**





The
      Company has an operating lease agreement for its principal offices, which
      expires in 2013, under which rental payments decline over the term of the lease.
      As a result, rental expense under this lease is recorded on a straight-line
      basis. Rental payments through December 31, 2005 and 2004 exceeded rental
      expense recorded on this lease through such dates by $31,000 and $335,000,
      respectively.





The
      Company has an operating lease agreement for the principal offices of Signia,
      which expires in 2011, under which rental payments increase over the term of
      the
      lease. As a result, rental expense under this lease is recorded on a
      straight-line basis. Rent expense through December 31, 2005 exceeded rental
      payments recorded on this lease through such date by $132,000.





The
      Company had an operating lease for additional office space that expired in
      2005,
      under which rental payments increased over the term of the lease. Rental expense
      on this lease was recorded on a straight-line basis. This lease was formally
      abandoned during 2004 (see Note 8).




The
      Company’s leases of office space include standard escalation clauses. Rental
      expense under leases for office space was $1,791,000, $2,105,000 and $1,854,000
      in 2005, 2004 and 2003, respectively.





The
      future minimum lease payments under non-cancellable operating leases as of
      December 31, 2005 were as follows:


Year
                ending December 31
            
            
            Operating
                Leases2006
            
            
            $
            1,596,0002007
            
            
            
            1,507,0002008
            
            
            
            1,488,0002009
            
            
            
            1,374,0002010
            
            
            
            1,266,000Thereafter
            
            
            
            2,669,000Total
                minimum lease payments
            
            
            $
            9,900,000






F-20


The
      following table includes aggregate information about our contractual obligations
      as of December 31, 2005 and the periods in which payments are due.


As
                of December 31, 2005Total
                (A)
            
            Less
                than 1 year
            
            1
                -
                3 years
            
            3
                -
                5 years
            
            After
                5 yearsNon-cancelable
                operating lease commitments
            
            $
            9,900,000
            
            $
            1,596,000
            
            $
            2,995,000
            
            $
            2,640,000
            
            $
            2,669,000Long-term
                capital lease commitments
            
            
            124,000
            
            
            79,000
            
            
            45,000
            
            
            —
            
            
            —Notes
                payable
            
            
            6,394,000
            
            
            3,005,000
            
            
            2,039,000
            
            
            1,350,000
            
            
            —Employment
                contracts
            
            
            1,381,000
            
            
            754,000
            
            
            627,000
            
            
            —
            
            
            —Deferred
                compensation and other
            
            
            216,000
            
            
            47,000
            
            
            27,000
            
            
            36,000
            
            
            106,000$
            18,015,000
            
            $
            5,481,000
            
            $
            5,733,000
            
            $
            4,026,000
            
            $
            2,775,000A.
                See Note 3 to the Consolidated Financial Statements for information
                regarding contingent payments related to the acquisitions of Atlantic
                and
                Signia.





See
      Note 8 for information related to accrued severance and retirement amounts
      and see Note 13 for information related to Deferred Compensation.





**(8)**  **ACCRUED
      EXPENSES**





Accrued
      expenses at December 31, 2005 and 2004 consisted of the
      following:





**2005**
            
            **2004**Accrued
                bonuses and employee benefits
            
            $
            1,707,000
            
            $
            1,049,000Accrued
                expenses incurred on behalf of clients
            
            
            229,000
            
            
            281,000Accrued
                SVP royalty
            
            
            17,000
            
            
            654,000Accrued
                severance
            
            
            154,000
            
            
            478,000Accrued
                earnout
            
            
            —
            
            
            2,030,000Accrued
                rent
            
            
            —
            
            
            232,000Accrued
                interest
            
            
            73,000
            
            
            —Other
                accrued expenses
            
            
            198,000
            
            
            375,000$
            2,378,000
            
            $
            5,099,000





During
      2005 and 2004, the Company recorded additional accruals of $778,000 and
      $604,000, respectively, under a severance plan approved by the Board of
      Directors and communicated to employees. In 2005 and 2004, the Company paid
      $1,102,000 and $584,000 related to both severance plans. As of December 31,
      2005, a balance of $154,000 remains accrued. Payments related to the remaining
      severance accrual at December 31, 2005 will be completed by the end of June
      2006.





During
      2004, the Company formally abandoned its lease for one of its three New York
      City locations. This lease had been substantially unutilized by the Company
      during 2004. As a result, the Company recorded a charge to earnings of $530,000
      during the second quarter of 2004, representing the total value of all remaining
      rent and commercial rent tax obligations, and the amortization of remaining
      leasehold improvements which was included in selling, general and administrative
      expenses. As of March 31, 2005, the Company was released from its lease of
      the
      space, and the remaining accrual of $37,000 was reversed and recorded as a
      reduction of rent expense at that time.




F-21


On
      November 12, 2003, the Company’s President and Founder, Andrew Garvin, announced
      he would be retiring as of December 31, 2003. Mr. Garvin continues to serve
      his
      term on the Board of Directors, and was a consultant to the Company in 2005.
      In
      the fourth quarter of 2003, the Company recorded a charge of approximately
      $309,000 triggered by Mr. Garvin’s retirement, and consisting of certain
      early-retirement benefits provided for in his employment agreement as well
      as
      certain other negotiated benefits. Payments were completed by the end of
      September 2004.





**(9)**  **NOTES
      PAYABLE**





Notes
      payable as of December 31, 2005 and 2004 consist of the following:





**2005**
            
            **2004**Bank
                borrowings under Term Note
            
            $
            4,050,000
            
            $
            —Bank
                borrowings under Line of Credit
            
            
            2,000,000
            
            
            —Borrowings
                under financing agreements:$344,000
                Note Payable with vendor, at 9% interest, dueDecember
                31, 2008
            
            
            344,000
            
            
            —Total
                notes payable
            
            
            6,394,000
            
            
            —Less
                current installments
            
            
            3,005,000
            
            
            —Notes
                payable, excluding currentinstallments
            
            $
            3,389,000
            
            $
            —




**DEBT
      AGREEMENTS WITH BANK**





On
      March
      31, 2005, the Company entered into a new senior secured credit facility pursuant
      to the Credit Agreement, dated as of March 31, 2005 (the “Credit Agreement”),
      between the Company and Fleet National Bank, a Bank of America company (the
      “Lender”). Funds under this facility were available to the Company as of April
      1, 2005.





The
      Credit Agreement establishes a commitment to the Company to provide up to
      $9,000,000 in the aggregate of loans and other financial accommodations
      consisting of a senior secured term loan facility in an aggregate principal
      amount of $4,500,000 (the “Term Facility”) and a senior secured revolving credit
      facility in an aggregate principal amount of up to $4,500,000 (the “Revolving
      Facility” and, together with the Term Facility, the “Senior Secured
      Facilities”). The Revolving Facility includes a sublimit of up to an aggregate
      amount of $500,000 in letters of credit.





On
      April
      1, 2005, the full amount of the Term Facility was drawn in a single drawing
      and
      applied, among other things, to (i) consummate the acquisition of Atlantic ,
      (ii)
      consummate the acquisition of Signia, and (iii) pay transaction-related costs
      and expenses with respect to such acquisitions.





The
      aggregate principal amount of the Term Facility is payable in twenty (20)
      consecutive quarterly principal installments, the first nineteen (19) of which
      are each in the amount of $225,000 and payable on the first day of each January,
      April, July and October, commencing July 1, 2005 through and including April
      1,
      2010, and the final and twentieth (20th) such principal installment is payable
      on April 1, 2010 and is in an amount equal to the entire then remaining
      outstanding principal balance, together with all accrued and unpaid
      interest.





F-22


As
      of
      December 31, 2005, $4,050,000 remains outstanding under the Term Facility,
      and
      $2,000,000 remains outstanding under the Revolving Facility. Accrued but unpaid
      interest related to the Term Facility and Revolving Facility was approximately
      $73,000 as of December 31, 2005. The Term Facility bears interest at LIBOR
      plus
      3%, which was 7.05% at December 31, 2005 based on the 3-month LIBOR contract
      in
      effect at that time. The Revolving Facility bears interest at LIBOR plus 2.75%,
      which was 7.17% at December 31, 2005 based on a separate 3-month LIBOR contract
      that was in effect at that time. Interest expense related to the Term Facility
      was $186,000 for the year ended December 31, 2005. Interest expense related
      to
      the Revolving Facility was $88,000 for the year ended December 31, 2005. During
      2005, the Company incurred $760,000 in closing and other transaction costs
      related to the Senior Secured Facilities, which are amortized to interest
      expense over the duration of the Term Facility. Amortization of deferred
      financing fees was $113,000 for the year ended December 31, 2005.





Loans
      under the Revolving Facility will be made available after April 1, 2005 and
      until the earlier of (i) April 1, 2008, and (ii) the date of termination of
      the
      commitment of the Lender to make revolving credit loans and of the obligation
      of
      the Lender to make letter of credit extensions.





The
      Credit Agreement contains certain restrictions on the conduct of the Company’s
      business, including, without limitation, restrictions on incurring debt, making
      certain restricted payments (any dividend or other distribution, whether in
      cash, securities or other property, with respect to any stock or stock
      equivalents of the Company or any subsidiary), disposing of certain assets,
      making investments; exceeding certain agreed upon capital expenditures; creating
      or suffering liens; completing certain mergers, consolidations and sales of
      assets, redeeming or prepaying other debt; and certain transactions with
      affiliates, subject in each case to any applicable exceptions or thresholds
      contained in the Credit Agreement. The Credit Agreement also contains financial
      covenants that require the Company to maintain certain leverage and fixed charge
      ratios and a minimum net worth.





All
      obligations under the Senior Secured Facilities are secured by a security
      interest in substantially all of the personal property of the
      Company.





The
      Company is in compliance with all of its loan covenants as of December 31,
      2005.





During
      May 2004, the Company repaid the $1,100,000 then outstanding balance on a term
      note with JP Morgan Chase Bank (the “Term Note”), of which $400,000 was
      previously classified as current. During the first quarter of 2004, the Company
      also paid its then scheduled principal payment of $100,000. Interest expense
      related to the Term Note amounted to $24,000 for the nine months ended September
      30, 2004. The Term Note was terminated effective March 31, 2005.




Prior
      to
      the Senior Secured Facilities, the Company maintained a $1,000,000 line of
      credit with JP Morgan Chase Bank (the “Line of Credit”). During May 2004, the
      Company repaid the $876,000 then outstanding balance. Interest expense related
      to the Line of Credit amounted to $13,000 for the nine months ended September
      30, 2004. The Line of Credit was terminated effective March 31, 2005, and all
      liens and encumbrances related to the Term Note and the Line of Credit were
      released.





**DEBT
      AGREEMENT WITH VENDOR**





In
      November 2005, the Company entered into a loan agreement with a vendor for
      the
      purchase of a customer relationship management system. The loan agreement is
      for
      $343,957 plus interest at a rate of 9% per annum, to be paid over a 36-month
      period, in monthly installments of $10,938, with the first payment due in
      January 2006.





F-23


**DEBT
      AGREEMENTS WITH INVESTORS**





On
      April
      1, 2003, the Company issued a Promissory Note (the “Note”) with a face value of
      $3,000,000 and a stated interest rate of 13.5%, as a part of the financing
      for
      the acquisition of Guideline Research. The Note was recorded at its initial
      relative fair value of $1,868,000. The difference between the initial relative
      fair value and the stated value was accreted as additional interest expense
      over
      the term of the Note, and the resulting effective interest rate is approximately
      25%. During May 2004, the Company repaid the then outstanding principal balance
      of $3,000,000. Related interest expense was $1,112,000 for the fiscal year
      ended
      December 31, 2004, of which $955,000 related to the non-cash accretion of the
      carrying value of the Note to the stated value of the Note for the fiscal year
      ended December 31, 2004. The Note was terminated effective May 20, 2004.





On
      July
      1, 2003, the Company issued a Second Promissory Note (the “Second Note”) with a
      face value of $500,000 and a stated interest rate of 13.5%, as a part of the
      financing for the acquisition of Teltech, a former business unit of Sopheon
      Corporation (“Teltech”). The Second Note was recorded at its initial relative
      fair value of $320,000. The difference between the initial relative fair value
      and the stated value was accreted as additional interest expense over the term
      of the Second Note, and the resulting effective interest rate is approximately
      25%. During May 2004, the Company repaid the then outstanding principal balance
      of $500,000. Related interest expense was $202,000 for the fiscal year ended
      December 31, 2004, of which $175,000 related to the non-cash accretion of the
      carrying value of the Second Note to the stated value of the Second Note for
      the
      fiscal year ended December 31, 2004. The Second Note was terminated effective
      May 20, 2004.





As
      a
      result of the repayment of outstanding debt during May 2004, the Company
      recorded additional non-cash interest expense of $223,000 during the fiscal
      year
      ended December 31, 2004 to fully amortize the balance of any remaining
      unamortized deferred financing fees associated with the Term Note, the Note
      and
      the Second Note.




**(10)** **SHAREHOLDERS’
          EQUITY**





**SALE
      OF COMMON STOCK**





On
      May
      10, 2004 (the “Closing Date”), the Company raised $13,500,000 through a private
      placement of (i) 6,000,000 shares of the Company’s Common Stock, and
      (ii) warrants to purchase an aggregate of 3,000,000 shares of Common Stock.
      The Company sold these shares and warrants through 6,000,000 units at $2.25
      per
      unit, with each unit consisting of one share of Common Stock and one warrant
      to
      purchase one-half of one share of Common Stock at an exercise price of $3.00
      per
      full share. The warrants are exercisable at any time before May 10, 2009. The
      net proceeds of the sale of the Common Stock and the warrants were partially
      used by the Company to pay off its debt of approximately $5.6 million, and
      is
      also intended to be used for working capital and general corporate purposes,
      including the financing of potential acquisitions. Transaction costs related
      to
      the private placement were approximately $1,356,000, which were recorded in
      capital in excess of par value as a partial offset against gross proceeds
      received from the private placement. The fair value of the warrants as of the
      Closing Date of approximately $3,231,000 was determined using the Black-Scholes
      option pricing model with the following weighted-average assumptions: expected
      dividend yield of 0%, risk-free interest rate range of 3.95%, volatility of
      46%
      and an expected life of 5 years.




F-24


**COMMON
      STOCK WARRANTS**





During
      2004, warrants to purchase 3,000,000 of the Company’s common shares were issued
      at an exercise price of $3.00. The fair value of the warrants is approximately
      $3,231,000, which was determined using the Black-Scholes option pricing model
      with the following weighted-average assumptions: expected dividend yield of
      0%,
      risk-free interest rate range of 3.95%, volatility of 46% and an expected life
      of 5 years.





During
      2003, warrants to purchase 1,553,293 of the Company’s common shares were issued
      at exercise prices ranging from $0.01 to $1.47, with an aggregate recorded
      value
      of $1,507,000.





At
      December 31, 2005 and 2004, warrants to purchase 4,975,515 and 5,125,515,
      respectively, of the Company’s common shares remain outstanding at exercise
      prices ranging from $0.01 to $3.00.





**STOCK
      OPTION PLAN**





At
      the
      Annual Meeting of Shareholders held on June 12, 2003, shareholders ratified
      and
      approved the FIND/SVP, Inc. 2003 Stock Incentive Plan (the “2003 Incentive
      Plan”), which was adopted by the Company’s Board of Directors on April 30, 2003.
      The 2003 Incentive Plan authorizes the issuance of up to 1,500,000 shares of
      the
      Company’s Common Stock upon the exercise of stock options or in connection with
      the issuance of restricted stock and stock bonuses. Options granted under our
      other equity plans remain outstanding according to their terms.





The
      Company’s 1996 Stock Option Plan (the “1996 Plan”), as amended in 1998, 2000 and
      2001, authorized grants of options to purchase up to 3,500,000 shares of common
      stock, issuable to employees, directors and consultants of the Company. This
      plan expired in January 2006.





The
      options to be granted under the 2003 Incentive Plan will be designated as
      incentive stock options or non-incentive stock options by our Board of
      Directors’ Stock Option Committee. Options granted under the 2003 Incentive
      Plan are exercisable during a period of no more than ten years from the date
      of
      the grant (five years for options granted to holders of 10% or more of the
      outstanding shares of common stock). All options outstanding at December 31,
      2005 and 2004 expire within the next ten years if not exercised. Options that
      are cancelled or expire during the term of the 2003 Incentive Plan are eligible
      to be re-issued and, therefore, are considered available for grant.





Activity
      under the stock option plans is summarized as follows:




F-25





Available
              for
              grant
            
            Options
              Granted
            
            Weighted
              average
              exercise
                priceJanuary
                1, 2003
            
            
            543,800
            
            
            2,753,300
            
            $
            0.82Additional
                authorized
            
            
            1,500,000
            
            
            —
            
            
            —Granted
            
            
            (892,500
            )
            
            892,500
            
            
            1.32Exercised
            
            
            —
            
            
            (742,262
            )
            
            0.39Cancelled
            
            
            260,138
            
            
            (260,138
            )
            
            1.13December
                31, 2003
            
            
            1,411,438
            
            
            2,643,400
            
            
            1.06Granted
            
            
            (857,750
            )
            
            857,750
            
            
            2.13Exercised
            
            
            —
            
            
            (187,121
            )
            
            0.85Cancelled
            
            
            472,978
            
            
            (472,978
            )
            
            1.74December
                31, 2004
            
            
            1,026,666
            
            
            2,841,051
            
            
            0.99Granted
            
            
            (244,750
            )
            
            244,750
            
            
            1.33Exercised
            
            
            —
            
            
            (405,250
            )
            
            0.43Cancelled
            
            
            270,400
            
            
            (270,400
            )
            
            1.71December
                31, 2005
            
            
            1,052,316
            
            
            2,410,151
            
            $
            1.38Exercisable
                at December 31, 2005
            
            
            
            
            
            1,720,484
            
            $
            1.21Exercisable
                at December 31, 2004
            
            
            
            
            
            1,888,208
            
            $
            1.01Exercisable
                at December 31, 2003
            
            
            
            
            
            1,488,495
            
            $
            1.12




**Range**
              
              **Number
                  of Options Outstanding**
              
              **Remaining
                      Average****Contractual
                      Life in Years - Outstanding Options**
              
              **Number
                  of Options Exercisable**
              
              **Remaining
                      Average Contractual Life in Years - Options
                      Exercisable**$0.41
                  - $0.50
              
              
              364,600
              
              
              5.84
              
              
              364,600
              
              
              5.84$0.63
                  - $0.80
              
              
              227,450
              
              
              5.40
              
              
              227,450
              
              
              5.40$0.97
                  - $1.40
              
              
              825,875
              
              
              5.66
              
              
              670,408
              
              
              5.66$1.45
                  - $1.84
              
              
              519,750
              
              
              7.37
              
              
              236,193
              
              
              7.37$1.90
                  - $3.69
              
              
              472,476
              
              
              7.59
              
              
              221,833
              
              
              7.59**Totals**
              
              
              **2,410,151**
              
              
              
              
              
              **1,720,484**




During
      2005, options to purchase 244,750 shares of common stock were granted under
      the
      2003 Incentive Plan at prices ranging from $1.03 to $1.48. The options issued
      qualified as incentive and non-incentive stock options whereby the prices of
      the
      options were at fair market value at the time of grant.





During
      2004, options to purchase 857,750 shares of common stock were granted under
      the
      1996 Plan and the 2003 Incentive Plan at prices ranging from $1.40 to $2.60.
      The
      options issued qualified as incentive stock options whereby the prices of the
      options were at fair market value at the time of grant.





**LOAN
      RECEIVABLE FOR STOCK PURCHASE**





In
      2002,
      the Company made a $50,000 loan to a then employee for the purchase of shares
      of
      the Company’s stock in conjunction with a private equity offering. The loan was
      interest-free, and was repaid on April 15, 2005.





F-26


**RESTRICTED
      STOCK**





On
      January 1, 2005, 100,000 shares of restricted stock were granted to the
      Company’s Chief Executive Officer under the 2003 Incentive Plan. Deferred
      compensation expense related to these shares was calculated at fair value on
      the
      date of grant, and is being amortized over a vesting period of three years.
      Compensation expense related to these shares was $53,000 for the year ended
      December 31, 2005.





On
      January 1, 2005, 25,000 shares of restricted stock were granted to the Company’s
      Chief Financial Officer under the 2003 Incentive Plan. Deferred compensation
      expense related to these shares was calculated at fair value on the date of
      grant, and is being amortized over a vesting period of three years. Compensation
      expense related to these shares was $13,000 for the year ended December 31,
      2005.





During
      2004, 100,000 shares of restricted stock were granted to the Company’s Chief
      Operating Officer under the 2003 Incentive Plan. Deferred compensation expense
      related to these shares was calculated at fair value on the date of grant,
      and
      is being amortized over the vesting period of four years. In July 2005, 50,000
      shares of restricted stock were granted to the Company’s Chief Operating
      Officer. Deferred compensation expense related to these shares was calculated
      at
      fair value on the date of grant, and is being amortized over the vesting period
      of four years. Compensation expense related to these shares was $79,000 and
      $47,000 for the years ended December 31, 2005 and 2004, respectively.






**REDEEMABLE
          CONVERTIBLE PREFERRED STOCK**





The
      Company has authorized preferred stock consisting of 2,000,000 shares at $.0001
      par value per share. The Preferred Stock is convertible into shares of the
      Company’s common stock one-for-one, subject to adjustment for certain dilutive
      issuances, splits and combinations. The Preferred Stock is also redeemable
      at
      the option of the holders of the Preferred Stock beginning April 1, 2009, at
      a
      redemption price of $1.50 per share, or $500,000 in the aggregate, plus all
      accrued but unpaid dividends. The holders of the Preferred Stock are entitled
      to
      receive cumulative dividends, prior and in preference to any declaration or
      payment of any dividend on the common stock of the Company, at the rate of
      8% on
      the $500,000 redemption value, per annum, payable in cash or through the
      issuance of additional shares of Preferred Stock at the Company’s discretion.
      The holders of shares of Preferred Stock have the right to one vote for each
      share of common stock into which shares of the Preferred Stock could be
      converted into, and with respect to such vote, each holder of shares of
      Preferred Stock has full voting rights and powers equal to the voting rights
      and
      powers of the holders of the Company’s common stock. At December 31, 2005 and
      2004, there were 333,333 shares of redeemable convertible preferred stock
      outstanding.





**(11)** **SVP
          INTERNATIONAL**





The
      Company has an agreement with SVP International S.A. (“SVP International”), a
      subsidiary of Amalia S.A. Prior to November 2001, SVP International and its
      affiliates owned 37% of the common shares of the Company. The agreement provides
      that SVP International will aid and advise us in the operation of an information
      service and permit access to other global SVP information centers, and the
      use
      of the SVP trademark and logo. The agreement shall continue in perpetuity,
      unless amended by the parties. The Company pays royalties to SVP International
      computed using a formula based on percentages of service and product revenues,
      subject to certain limitations, as defined.





F-27


Royalty
      expense under the agreement, which in 2005 was a set amount and in 2004 and
      2003
      was based on a percentage of revenue as stipulated in the agreement, was
      $50,000, $118,000 and $117,000 for the years ended December 31, 2005, 2004
      and
      2003, respectively.





The
      Company receives and renders information services to other members of the SVP
      network. Charges for such services are made at rates similar to those used
      for
      other clients. As of December 31, 2005 and 2004, the Company’s liability, net of
      receivables recorded in other current assets, to SVP International was $17,000
      and $78,000, respectively.





**(12)** **INCOME
          TAXES**





The
      provision (benefit) for income taxes consists of the following:


**2005**
              
              **2004**
              
              **2003**Current:Federal
              
              $
              402,000
              
              $
              —
              
              $
              154,000State
                  and local
              
              
              138,000
              
              
              —
              
              
              56,000$
              540,000
              
              $
              —
              
              $
              210,000Deferred:Federal
              
              $
              —
              
              $
              (533,000
              )
              $
              —State
                  and local
              
              
              —
              
              
              (188,000
              )
              
              ——
              
              
              (721,000
              )
              
              —Change
                  in valuation allowance
              
              
              (329,000
              )
              
              721,000
              
              
              —
 $
              211,000
              
              $
              —
              
              $
              210,000




In
      2004 a
      valuation allowance was provided for carryforward net operating losses, as
      the
      Company determined that it was more likely than not that such assets would
      not
      be realized during the carryforward period. During 2005, net operating loss
      carryforwards of $211,000 were utilized. Income tax provision (benefit) differs
      from the amount computed by multiplying the statutory rate of 34% to income
      before income taxes due to the following:


**2005**
            
            **2004**
            
            **2003**Income
                tax provision (benefit) at statutory rate
            
            $
            225,000
            
            $
            (681,000
            )
            $
            (251,000
            )Increase
                (reduction) in income taxes resulting from:Change
                in valuation allowance
            
            
            (329,000
            )
            
            721,000
            
            
            —State
                and local taxes (benefit), net of federal income tax
                benefit
            
            
            92,000
            
            
            (122,000
            )
            
            26,000Taxable
                (nontaxable) income resulting from decrease (increase) in cash surrender
                value of life insurance
            
            
            —
            
            
            —
            
            
            (17,000
            )Stock
                compensation expense
            
            
            199,000
            
            
            61,000
            
            
            432,000Nondeductible
                expenses
            
            
            21,000
            
            
            22,000
            
            
            20,000Other
            
            
            3,000
            
            
            (1,000
            )
            
            —$
            211,000
            
            $
            —
            
            $
            210,000






F-28


The
      tax
      effects of temporary differences that give rise to significant portions of
      the
      deferred tax assets, net of deferred tax liabilities at December 31, 2005 and
      2004 are presented below:


**2005**
            
            **2004**Deferred
                tax assets:Federal
                net operating loss carryforwards
            
            $
            467,000
            
            $
            747,000State
                and local net operating loss carryforwards
            
            
            337,000
            
            
            435,000Deferred
                compensation
            
            
            66,000
            
            
            84,000Royalty
                expenses
            
            
            7,000
            
            
            273,000Depreciation
                and amortization
            
            
            838,000
            
            
            588,000Stock
                compensation expense
            
            
            (117,000
            )
            
            55,000Write-down
                of non-marketable equity securities
            
            
            78,000
            
            
            131,000Severance
                and separation charges
            
            
            72,000
            
            
            57,000Accrued
                bonus
            
            
            210,000
            
            
            211,000Deferred
                tax assets acquired from Guideline Research
            
            
            50,000
            
            
            50,000Other,
                net
            
            
            —
            
            
            (188,000
            )Deferred
                tax asset
            
            
            2,008,000
            
            
            2,443,000Valuation
                allowance
            
            
            (635,000
            )
            
            (964,000
            )Net
                deferred tax asset
            
            
            1,373,000
            
            
            1,479,000Less
                current portion
            
            
            386,000
            
            
            696,000Net
                deferred tax asset, excluding current portion
            
            $
            987,000
            
            $
            783,000





Of
      the
      net deferred tax asset, $386,000 and $696,000 as of December 31, 2005 and 2004,
      respectively, are classified as current.





As
      of
      December 31, 2005, the short term deferred tax liability was $60,000, which
      was
      assumed upon the acquisition of Signia.





Long-term
      deferred tax liabilities were $305,000 and $67,000 as of December 31, 2005
      and
      2004, respectively. Of the $305,000 as of December 31, 2005, $236,000 was
      assumed upon the acquisition of Signia.





Federal
      net operating loss carryforwards of $467,000 expire from 2020 to 2023. Of the
      state and local tax loss carryforward assets of $336,000, approximately $215,000
      expire in 2013, with the remainder expiring from 2020 to 2023.





**(13)**
            **EMPLOYEE
                BENEFITS AND DEFERRED
                COMPENSATION**





**EMPLOYEE
                BENEFIT PLANS**





The
      Company sponsors several 401(k) and profit sharing plans under which eligible
      participants may elect to defer eligible compensation up to governmental
      limitations. Under the plan for Atlantic employees, the Company contributes
      50%
      of employees’ contributions up to 4% of compensation. Under the plan for Signia
      employees, the Company contributes 100% of employees’ contributions on the first
      3% of compensation and 50% on the next 2% of compensation. For all other
      employees, the Company contributes 20% of the employees’ contributions up to 1%
      of their annual compensation and may contribute additional profit sharing
      amounts at its discretion. Expense relating to the 401(k) and profit sharing
      plans was $109,000, $116,000 and $104,000 for the years ended December 31,
      2005,
      2004 and 2003, respectively.




F-29





**DEFERRED
                COMPENSATION**





The
      Company has a deferred compensation arrangement with Andrew Garvin, the founder
      and former President of the Company. In November 2003, Mr. Garvin announced
      his
      early retirement as of December 31, 2003. The Company revised the calculation
      of
      Mr. Garvin’s accrued deferred compensation to reflect his announced date of
      retirement. Accordingly, the present value of the obligation as of December
      31,
      2003 was approximately $243,000. This will be paid over the contractual term
      of
      10 years, which began in January 2004. On September 29, 2004, the Company and
      Mr. Garvin executed Amendment No. 1 to the Separation Agreement dated as of
      December 31, 2003 in order to restructure the timing and reduced amount of
      certain deferred compensation payments. During the year ended December 31,
      2005,
      payments totaling approximately $13,000 were made. The remaining liability
      at
      December 31, 2005 is approximately $125,000.





**EMPLOYMENT
                AGREEMENTS**





On
      January 1, 2005, the Company amended its employment agreement with David Walke,
      the Chief Executive Officer of the Company, which expires in December 2007.
      The
      employment agreement provides for the issuance of a total of 450,000 shares
      of
      restricted stock of the Company during 2005, 2006 and 2007, as earned in each
      respective period. The restricted stock will vest according to the respective
      restricted stock award agreements. The employment agreement also contains
      certain severance provisions entitling Mr. Walke to receive compensation and
      certain benefits for various lengths of time upon termination without cause,
      or
      voluntary termination upon certain conditions, which includes the acquisition
      by
      a party of 30% or more of the outstanding shares of common stock of the Company
      or a change in the majority of incumbent Board members, and certain other
      occurrences.





On
      January 1, 2005, the Company amended its employment agreement with Peter Stone,
      the Chief Financial Officer of the Company, which expires in December 2007.
      The
      employment agreement provides for the issuance of a total of 150,000 shares
      of
      restricted stock of the Company during 2005, 2006 and 2007, as earned in each
      respective period. The restricted stock will vest according to the respective
      restricted stock award agreements. The employment agreement also contains
      certain severance provisions entitling Mr. Stone to receive compensation and
      certain benefits for various lengths of time upon termination without cause,
      or
      voluntary termination upon certain conditions, which includes the acquisition
      by
      a party of 30% or more of the outstanding shares of common stock of the Company
      and certain other occurrences.




On
      July
      21, 2005, the Company amended its employment agreement with Marc Litvinoff,
      the
      Chief Operating Officer of the Company, which expires in June 2007. The
      employment agreement provides for the issuance of 100,000 shares of restricted
      stock of the Company during 2005 and 2006. The restricted stock will vest
      according to the respective restricted stock award agreements. The employment
      agreement also contains certain severance provisions entitling Mr. Litvinoff
      to
      receive compensation and certain benefits for twelve months upon termination
      without cause or non-renewal of the employment agreement.





Pursuant
      to the employment agreements described above, salary commitments for the next
      five years are as follows:




F-30





Year
                ending December 31,2006
            
            $
            754,0002007
            
            
            627,0002008
            
            
            —2009
            
            
            —2010
            
            
            —Total
                salary commitments
            
            $
            1,381,000





**(14)** **SUPPLEMENTAL
          CASH FLOW INFORMATION**





Cash
      paid
      for interest and income taxes during the years ended December 31, 2005,
      2004 and 2003 was as follows:


**2005**
            
            **2004**
            
            **2003**Interest
            
            $
            207,000
            
            $
            64,000
            
            $
            447,000Income
                taxes
            
            $
            14,000
            
            $
            —
            
            $
            49,000





Non-cash
      operating activities:




In
        November 2005, as part of the consideration received on the sale of assets,
        the
        Company recorded a note receivable of $24,000.





In
      December 2004, the Company recorded a transition adjustment upon adoption of
      SFAS No. 123 of $13,000 related to long-term deferred tax assets.





In
      January 2003, the Company issued 35,000 shares of the Company’s common stock to
      a vendor, valued at approximately $44,000.




Non-cash
      investing activities:





In
      December 2005, the Company recorded a $344,000 addition to fixed assets for
      a
      new client relationship management tool, which is being financed over a 36-month
      period, with monthly payments commencing January 1, 2006.





In
      November 2005, as part of the consideration received on the sale of assets,
      the
      Company recorded an investment in Tigo Search of $268,000 and an investment
      in
      Scientigo of $58,000.





In
      September 2005, the Company recorded a $168,000 addition to leasehold
      improvements for new carpet at one of its locations, which was paid for directly
      by its landlord. This was included as a component of deferred rent, and will
      be
      amortized to expense over the life of the lease.





As
      of
      December 31, 2005, the Company has accrued approximately $34 ,000 ,
      which
      represents unpaid transaction costs related to the acquisitions of Atlantic
      and
      Signia.





F-31


As
      of
      December 31, 2005, the Company has accrued approximately $11 ,000 ,
      which
      represents unpaid transaction costs related to the private placement of the
      Company’s Common Stock.





On
      April
      1, 2005, the Company issued 500,157 shares of its Common Stock valued at
      approximately $803,000 to the former owners of Atlantic and Signia as part
      of
      these acquisitions.





As
      of
      December 31, 2004, the Company has accrued approximately $2,030,000, which
      represents the estimated portion of the Two Year Deferred Consideration earned
      as of that date in connection with the Guideline Research
      acquisition.





Non-cash
      financing activities:





During
      the year ended December 31, 2005, the Company recorded the exercise of 23,100
      options at prices ranging from $0.50 to $1.062, in exchange for 9,750 shares
      of
      common stock at prices ranging from $1.15 to $1.54.





During
      2005, 2004 and 2003, the Company recorded preferred dividends of $40,000,
      $40,000 and $30,000, respectively.





During
      2004 and 2003, the Company recorded additional non-cash interest expense related
      to the accretion on redeemable common shares, issued in connection with the
      Guideline Research acquisition, of $113,000 and $250,000, respectively. These
      shares, valued at $1,090,000, were sold in private transactions during
      2005.





During
      2004, the Company recorded the cashless exercise of 216,225 options, of which
      79,227 options were cancelled, at prices ranging from $0.50 to $2.40, in
      exchange for 136,998 shares of common stock at prices ranging from $1.60 to
      $2.75.





In
      August
      2004, the Company purchased certain equipment under a capital lease arrangement
      for approximately $185,000, with payments on a monthly basis over a 36-month
      period commencing September 1, 2004.





In
      connection with the Guideline Research acquisition in 2003, the Company issued
      571,237 unregistered shares of the Company’s common stock that were fair valued
      at $760,000 and redeemable at the option of the holder during a specified period
      of time.





In
      connection with the Teltech acquisition in 2003, the Company issued 32,700
      unregistered shares of the Company’s common stock that were fair valued at
      $50,000.





In
      September 2003, the Company purchased certain equipment under a capital lease
      arrangement for approximately $48,000, with payments on a monthly basis over
      a
      48-month period commencing October 1, 2003.





During
      2003, the Company recorded the cashless exercise of 83,663 options, of which
      39,351 options were cancelled, at prices ranging from $0.62 to $1.062, in
      exchange for 44,312 shares of common stock at prices ranging from $1.25 to
      $1.90.





F-32








**(15)**  **SEGMENT
      REPORTING**





The
      Company manages its research and business advisory services in the following
      four business segments: Quick Consulting (“On-Demand Business Research”,
      previously known as QCS), Strategic Intelligence, Custom Market Research and
      Product Development Intelligence (previously known as Teltech). Upon the
      Company’s acquisition of Signia on April 1, 2005, the operations and financial
      results of Signia were integrated into the business segment previously known
      as
      the Strategic Research and Consulting Group (“SCRG”), and this segment was
      renamed Strategic Intelligence. Upon the Company’s acquisition of Atlantic on
      April 1, 2005, the operations and financial results of Atlantic were integrated
      into the business segment previously known as Quantitative Market Research,
      and
      this segment was renamed Custom Market Research. References to “Corporate” and
“Other” in our financial statements refer to the portion of assets and
      activities that are not allocated to a segment.





**Years
                Ended December 31,**(in
                thousands)**2005**
            
            **2004**
            
            **2003****Revenues**On-Demand
                Business Research
            
            $
            15,850
            
            $
            16,904
            
            $
            18,391Strategic
                Intelligence
            
            
            4,157
            
            
            1,936
            
            
            1,415Custom
                Market Research
            
            
            14,410
            
            
            11,371
            
            
            7,669Product
                Development Intelligence
            
            
            8,617
            
            
            8,226
            
            
            4,094Total
                revenues
            
            $
            43,034
            
            $
            38,437
            
            $
            31,569**Depreciation
                and amortization**On-Demand
                Business Research
            
            $
            963
            
            $
            577
            
            $
            762Strategic
                Intelligence
            
            
            33
            
            
            79
            
            
            120Custom
                Market Research
            
            
            75
            
            
            36
            
            
            41Product
                Development Intelligence
            
            
            93
            
            
            98
            
            
            47Total
                segment depreciation and amortization
            
            
            1,164
            
            
            790
            
            
            970Corporate
                and other
            
            
            186
            
            
            141
            
            
            173Total
                depreciation and amortization
            
            $
            1,350
            
            $
            931
            
            $
            1,143**Operating
                income (loss)**On-Demand
                Business Research
            
            $
            1,267
            
            $
            1,357
            
            $
            2,281Strategic
                Intelligence
            
            
            586
            
            
            164
            
            
            (526
            )Custom
                Market Research
            
            
            1,380
            
            
            1,160
            
            
            828Product
                Development Intelligence
            
            
            762
            
            
            922
            
            
            408Segment
                operating income
            
            
            3,995
            
            
            3,603
            
            
            2,991Corporate
                and other 1
            
            
            (3,012
            )
            
            (3,859
            )
            
            (3,160
            )Operating
                income (loss)
            
            $
            983
            
            $
            (256
            )
            $
            (169
            )**Income
                (loss) before taxes**On-Demand
                Business Research
            
            $
            1,267
            
            $
            1,357
            
            $
            2,281Strategic
                Intelligence
            
            
            594
            
            
            164
            
            
            (526
            )Custom
                Market Research
            
            
            1,378
            
            
            1,023
            
            
            408Product
                Development Intelligence
            
            
            760
            
            
            782
            
            
            286Segment
                income before
                taxes
            
            
            3,999
            
            
            3,326
            
            
            2,449Corporate
                and other
                1
            
            
            (3,336
            )
            
            (5,271
            )
            
            (3,186
            )Income
                (loss) before
                taxes
            
            $
            663
            
            $
            (1,945
            )
            $
            (737
            )**Total
                Assets**On-Demand
                Business Research
            
            $
            2,731
            
            $
            2,741Strategic
                Intelligence
            
            
            2,203
            
            
            597Custom
                Market Research
            
            
            4,262
            
            
            3,996Product
                Development Intelligence
            
            
            3,519
            
            
            3,062Total
                segment assets
            
            
            12,715
            
            
            10,396Corporate
                and other
            
            
            25,492
            
            
            19,626Total
                assets
            
            $
            38,207
            
            $
            30,022**Capital
                Expenditures**On-Demand
                Business Research
            
            $
            133
            
            $
            186
            
            $
            133Strategic
                Intelligence
            
            
            45
            
            
            8
            
            
            5Custom
                Market Research
            
            
            114
            
            
            23
            
            
            —Product
                Development Intelligence
            
            
            —
            
            
            62
            
            
            —Total
                segment capital expenditures
            
            
            292
            
            
            279
            
            
            138Corporate
                and other
            
            
            139
            
            
            253
            
            
            319Total
                capital expenditures
            
            $
            431
            
            $
            532
            
            $
            4571
                Represents the effect of direct costs and selling, general and
                administrative expenses not attributable to a single segment.







F-33




**(16)** **UNAUDITED
      QUARTERLY DATA**





The
      following table sets forth selected quarterly data for the years ended December
      31, 2005 and 2004 (in thousands, except per share data). The operating results
      are not indicative of results for any future period.


Quarter
                  ended
              
              Revenues
              
              Operating
                  income
                (loss)
              
              Income
                  (loss) before provision (benefit) forincome
                  taxes
              
              Net
                  income (loss) attributable to commonshareholders
              
              Income
                  (loss) per share:
                basic1
              
              Income
                  (loss) per share:
                diluted1March
                  31, 2005
              
              $
              8,786
              
              $
              213
              
              $
              176
              
              $
              41
              
              $
              0.00
              
              $
              0.00June
                  30, 2005
              
              
              11,329
              
              
              (482
              )
              
              (624
              )
              
              (577
              )
              
              (0.03
              )
              
              (0.03
              )September
                  30, 2005
              
              
              11,433
              
              
              800
              
              
              651
              
              
              435
              
              
              0.02
              
              
              0.02December
                  31, 2005
              
              
              11,486
              
              
              452
              
              
              460
              
              
              513
              
              
              0.03
              
              
              0.02March
                  31, 20042
              
              $
              9,606
              
              $
              239
              
              $
              (82
              )
              $
              (201
              )
              $
              (0.02
              )
              $
              (0.02
              )June
                  30, 20042
              
              
              9,711
              
              
              (745
              )
              
              (2,028
              )
              
              (1,472
              )
              
              (0.09
              )
              
              (0.09
              )September
                  30, 20042
              
              
              9,915
              
              
              623
              
              
              560
              
              
              296
              
              
              0.02
              
              
              0.01December
                  31, 20042
              
              
              9,205
              
              
              (373
              )
              
              (395
              )
              
              (721
              )
              
              (0.04
              )
              
              (0.04
              )




1
        Quarterly data is rounded and totals may or may not equal year end basic
        and
        diluted earnings per share.
 2
        Quarterly data for 2004 has been restated for the adoption of SFAS No.
        123.





As
      discussed in Note 8, during 2005 and 2004, the Company recorded a charge to
      operations of $778,000 and $604,000, respectively, related to severance payments
      to be made to former employees. Approximately $1,339,000 and $75,000 were
      recorded related to bonus and commission arrangements in the quarter ended
      December 31, 2005 and 2004, respectively.




F-34


Schedule
      II





**GUIDELINE,
      INC. AND SUBSIDIARIES**





Valuation
      and Qualifying Accounts





Years
      ended December 31, 2005, 2004 and 2003


(in
      thousands of dollars)




**Classification**
              
              Balance
                      atbeginningof year
              
              Additionscharged
                      toearnings
              
              Write
                    offs(recoveries)
              
              Balance
                    atend of yearYear
                  ended December 31, 2005:Allowance
                  for doubtful accounts
              
              $
              164
              
              $
              85
              
              $
              137
              
              $
              112Year
                  ended December 31, 2004:Allowance
                  for doubtful accounts
              
              $
              271
              
              $
              129
              
              $
              236
              
              $
              164Year
                  ended December 31, 2003:Allowance
                  for doubtful accounts
              
              $
              150
              
              $
              110
              
              $
              (11
              )
              $
              271
 
  F-35