**Table
            of Contents**





**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, 2006**


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.**


(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****:
                None****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 o
      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
      o 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 o**





**Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of 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. o**





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





**Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.**


**Large
      accelerated filer o Accelerated
      filer o 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 o No
x**





**As
      of June 30, 2006, the aggregate market value of the voting common stock held
      by
      non-affiliates of the registrant was $17,637,345 based on the average bid and
      ask price per share of the common stock on the OTC Bulletin Board on June 30,
      2006, which was $1.38 per share.**


**Table
          of Contents**





**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 20,954,034 shares outstanding of the registrant’s common stock, par value
      $.0001 per share, as of April 9, 2007.**





**DOCUMENTS
      INCORPORATED BY REFERENCE**





Portions
      of the Registrant’s Proxy Statement for the 2007 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, 2006, are incorporated by reference
      into Part III of this Annual Report on Form 10-K.


-2-
 **Table
          of Contents**


**GUIDELINE,
      INC.**


**INDEX
      TO FORM 10-K**




PAGE**Part
                    I**Item
                    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
                39Item
                    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**
                
                40Item
                    10.
                Directors
                    and Executive Officers of the Registrant
                40Item
                    11.
                Executive
                    Compensation
                40Item
                    12.
                Security
                    Ownership of Certain Beneficial Owners and Management and Related
                    Stockholder Matters
                40Item
                    13.
                Certain
                    Relationships and Related Transactions
                40Item
                    14.
                Principal
                    Accountant Fees and Services
                40**Part
                    IV**Item
                    15.
                Exhibits
                    and Financial Statement
                    Schedule
                40Signatures
                
                45Exhibit
                    Index
                
                E-1
  -3-
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            of Contents**




**PART
      I**





**Item
      1. Business**





**BUSINESS
      OVERVIEW**





GUIDELINE,
      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 approximately 1,500 corporate customers
      annually, approximately 1,000 of which subscribe under recurring revenue
      contracts generally averaging twelve months in length. We currently perform
      approximately 30,000 individual research assignments annually for our
      customers.





We
      are
      organized into four business segments:


·
                      ON-DEMAND
                          BUSINESS RESEARCH 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 provides insightful primary intelligence,
                          legally obtained
                          from unpublished sources, industry experts, market watchers
                          and market
                          participants who know the companies you want to understand.
                          Customers are
                          billed according to the agreed upon terms of each
                          project.
  -4-
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                    of Contents**
  ·
                      CUSTOM
                          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. Customers are billed according to the
                          agreed upon terms
                          of each project.
  ·
                      PRODUCT
                            DEVELOPMENT INTELLIGENCE (“PDI”) 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. For subscription customers,
                            billing is similar
                            to ON-DEMAND above, and for projects, billing is similar
                            to STRATEGIC
                            INTELLIGENCE and CUSTOM MARKET RESEARCH above.




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 151 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 approximately 10,000 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.
 
 -5-
 **Table
            of Contents**
  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.
  ·
              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 over $7 billion  (as
        per
        Euromonitor International, *Market
        Research in the USA* ),
        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
                  44%
                  of our revenues in 2006, 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 369 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 782****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-
 **Table
            of Contents**
 ·
              *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
                  approximately 30,000 research assignments annually, and our 151
                  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-
 **Table
            of Contents**
  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, 2006, we had 844 On-Demand Business Research subscription
        customers, a 13.2% decrease from December 31, 2005, and 6,722 holders of
        the
        Membership Card, a 12.6% decrease from December 31, 2005. In addition, the
        average annual On-Demand Business Research retainer subscription rate at
        December 31, 2006 was $15,048, a 15.0% increase from December 31, 2005. The
        dramatic change in On-Demand Business Research’s share of total revenues
        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 $30,000, 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-
 **Table
            of Contents**
  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 over $300,000 per
        agreement in 2006.
  -9-
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            of Contents**
 
 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 2006,
        approximately 47% of revenues resulted from annual subscription clients,
        6%
        resulted from long-term outsourcing contracts and 47% resulted from transaction
        engagements.
 
 **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
        lead 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-
 **Table
            of Contents**
  -
              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,
                  5,200 internal information files, 4,300 books and reference works,
                  800
                  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, 2006, we had 239 full-time employees, including 22 marketing
        and
        sales employees, 151 consultants and research analysts and 66 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. Information on our website does not constitute part of this filing
        on Form 10-K.
 -11-
 **Table
            of Contents**
 
 Materials
        we file with the Securities and Exchange Commission may be read and copied
        at
        the Securities and Exchange Commission’s Public Reference Room at 100 F Street,
        N.E., Washington, D.C. 20549. You may obtain information on the operation
        of the
        Securities and Exchange Commission's Public Reference Room by calling the
        Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
        Exchange Commission also maintains an Internet website that contains reports,
        proxy and information statements, and other information regarding issuers
        that
        file electronically with the Securities and Exchange Commission at
        www.sec.gov.
  **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.
  -12-
 **Table
            of Contents**
  ***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;
  ·
              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. As of December 31, 2006,
        $3,150,000 remains outstanding under our senior secured term loan facility
        and
        $1,000,000 has been drawn and remains outstanding under our senior secured
        revolving credit facility.
 -13-
 **Table
            of Contents**
 
 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;
  ·
              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. From time to time we have had to seek waivers from compliance
        with
        certain of these financial covenants. However, there can be no assurances
        that
        we will be able to obtain such waivers in the future. Any failure to comply
        with
        the terms of our senior credit facility or to obtain waivers from such
        compliance 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.
 -14-
 **Table
            of Contents**
  ***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.
 
 ***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;
  -15-
 **Table
            of Contents**
  ·
              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.
 
 ***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.
  -16-
 **Table
            of Contents**
  ***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.
 
 ***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.
 -17-
 **Table
            of Contents**
  ***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;
  ·
              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, 2006 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
                  8,800 square feet in Arlington, VA which is the principal location
                  of
                  Signia which represents our Strategic Intelligence segment. The
                  lease is
                  subject to standard escalation clauses, and expires in September
                  2011.
                  Basic annual rent expense, determined on the straight-line basis
                  over the
                  term of the lease, is approximately
                  $256,000.
  -18-
 **Table
            of Contents**
 ·
              Approximately
                  8,900 square feet in Boston, MA which is the principal location
                  of
                  Atlantic which is part of our Custom Market Research segment. The
                  lease is
                  subject to standard escalation clauses, and expires in November
                  2007.
                  Basic annual rent expense, determined on the straight-line basis
                  over the
                  term of the lease, is approximately
                  $78,000.
  ·
              Approximately
                  7,900 square feet in Bloomington, MN which is the principal location
                  of
                  Teltech which represents our Product Development Intelligence segment.
                  The
                  lease is subject to standard escalation clauses, and expires in
                  November
                  2009. Basic annual rent expense, determined on the straight-line
                  basis
                  over the term of the lease, is approximately
                  $139,000.
  ·
              Approximately
                  4,000 square feet in Chicago, IL which is a satellite office of
                  Guideline
                  Research which is part of our Custom Market Research segment. The
                  lease is
                  subject to standard escalation clauses, and expires in January
                  2009. Basic
                  annual rent expense, determined on the straight-line basis over
                  the term
                  of the lease, is approximately
                  $81,000.
  **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
        715 common shareholders of record on April 9, 2007. 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-
 **Table
            of Contents**
 Price
                    Range
                
                High
                
                Low20061st
                    Quarter
                
                
                1.35
                
                
                1.132nd
                    Quarter
                
                
                1.75
                
                
                1.063rd
                    Quarter
                
                
                1.60
                
                
                1.154th
                    Quarter
                
                
                1.80
                
                
                1.2520051st
                    Quarter
                
                
                1.85
                
                
                1.412nd
                    Quarter
                
                
                1.48
                
                
                1.223rd
                    Quarter
                
                
                1.55
                
                
                1.074th
                    Quarter
                
                
                1.29
                
                
                0.97
   **Performance
          Graph**
  
 
 We
        did
        not purchase any shares of our common stock during the Company’s fourth quarter
        of 2006.
  **Item
        6. Selected Financial Data**
 
 The
        following table sets forth our selected financial data as of and for the
        years
        ended December 31, 2006, 2005, 2004, 2003 and 2002. 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)2006
              
              2005
              
              2004
              
              2003
              
              2002Revenues
              
              $
              46,285
              
              $
              43,034
              
              $
              38,437
              
              $
              31,569
              
              $
              20,828Operating
                  income (loss)
              
              
              917
              
              
              983
              
              
              (256
              )
              
              (169
              )
              
              (1,683
              )Income
                  (loss) before cumulative effect of accounting change
              
              
              938
              
              
              452
              
              
              (1,945
              )
              
              (947
              )
              
              (1,875
              )Cumulative
                  effect of accounting change1
              
              
              96
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  income (loss)
              
              
              1,034
              
              
              452
              
              
              (1,945
              )
              
              (947
              )
              
              (1,875
              )Net
                  income (loss) attributable to common shareholders2
              
              
              970
              
              
              412
              
              
              (2,098
              )
              
              (1,227
              )
              
              (1,875
              )Income
                  (loss) per common share:Basic
                  and Diluted
              
              
              0.05
              
              
              0.02
              
              
              (0.12
              )
              
              (0.10
              )
              
              (0.18
              )Weighted
                  average number of common shares:Basic
              
              
              20,678
              
              
              20,046
              
              
              17,213
              
              
              11,766
              
              
              10,139Diluted
              
              
              20,678
              
              
              21,631
              
              
              17,213
              
              
              11,766
              
              
              10,139Cash
                  dividends paid per common share
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
  -20-
 **Table
            of Contents**
  **Balance
        Sheet Data**
 
 As
                  of December 31(in
                  thousands)2006
              
              2005
              
              2004
              
              2003
              
              2002Working
                  capital (current assetsless
                  current liabilities)3
              
              $
              (211
              )
              $
              281
              
              $
              2,832
              
              $
              (2,066
              )
              $
              (43
              )Total
                  assets
              
              
              40,166
              
              
              37,842
              
              
              30,022
              
              
              22,968
              
              
              9,414Long-term
                  notes payable,excluding
                  current amounts
              
              
              2,384
              
              
              3,389
              
              
              -
              
              
              3,170
              
              
              1,200Shareholders'
                  equity1
              
              
              23,209
              
              
              21,328
              
              
              18,120
              
              
              7,370
              
              
              3,589
 1 Included
          in net income for 2006 is the cumulative effect of accounting change of
          $96,000
          recorded in conjunction with the adoption of SFAS 123(R)
  **2** **** 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, 2006, 2005, 2004 and 2003, accrued dividends
          amounted to $174,000, $110,000, $70,000 and $30,000, respectively.
  3 Working
          capital includes $4,351,000, $4,311,000, $3,472,000, $3,612,000 and $1,476,000
          of unearned income as of December 31, 2006, 2005, 2004, 2003 and 2002,
          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
        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, Strategic Intelligence,
        Custom Market Research and Product Development Intelligence. Upon the Company’s
        acquisition of Signia on April 1, 2005, the operations and financial results
        of
        Signia were integrated into the business segment known as 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 known as 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-
 **Table
            of Contents**
 
 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.
  **Results
        of Operations - Calendar Year 2006 Compared to Calendar Year
        2005**
 
 The
        following represents the Company’s analysis of its results of operations for the
        year ended December 31, 2006 as compared with the year ended December 31,
        2005:
 
 **Years
                  Ended December 31,**(in
                  thousands)**2006**
              
              **2005**
              
              **$
                  Change**
              
              **%
                  Change****Revenues**On-Demand
                  Business Research
              
              $
              14,387
              
              $
              15,850
              
              $
              (1,463
              )
              
              (9.23
              )%Strategic
                  Intelligence
              
              
              4,584
              
              
              4,157
              
              
              427
              
              
              10.27
              %Custom
                  Market Research
              
              
              17,530
              
              
              14,410
              
              
              3,120
              
              
              21.65
              %Product
                  Development Intelligence
              
              
              9,784
              
              
              8,617
              
              
              1,167
              
              
              13.54
              %Total
                  revenues
              
              $
              46,285
              
              $
              43,034
              
              $
              3,251
              
              
              7.55
              %Direct
                  costs
              
              $
              27,960
              
              $
              25,708
              
              $
              2,252
              
              
              8.76
              %Selling,
                  general and administrative expenses
              
              $
              17,408
              
              $
              16,343
              
              $
              1,065
              
              
              6.52
              %Operating
                  income
              
              $
              917
              
              $
              983
              
              $
              (66
              )
              
              (6.71
              )%Gain
                  on sale of investments
              
              $
              772
              
              $
              226
              
              $
              546
              
              
              241.59
              %Interest
                  expense
              
              $
              601
              
              $
              401
              
              $
              200
              
              
              49.88
              %Income
                  tax provision
              
              $
              161
              
              $
              211
              
              $
              (50
              )
              
              (23.7)
              %Net
                  income attributable to common shareholders
              
              $
              970
              
              $
              412
              
              $
              558
              
              
              135.441
              %
  *Revenues*
 
 Revenues
        increased from $43,034,000 in 2005 to $46,285,000 in 2006, which represents
        a
        7.6% increase. 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
        $1,463,000, or 9.23%, from $15,850,000 in
        2005 to
        $14,387,000 in
        2006 .
        The
        decrease from 2005 to 2006 was a result of 172 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 four 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.
 
 *Strategic
        Intelligence*
 
 Strategic
        Intelligence revenues, which result from more in-depth research and consulting
        engagements, increased by $427,000, or 10.27%, from $4,157,000 in
        2005 to
        $4,584,000 in
        2006 .
        The
        increase from 2005 to 2006 was a result of Signia which was not acquired
        until
        April 1, 2005 and the subsequent integration of Signia’s operations and
        financial results into this business segment.
 -22-
 **Table
            of Contents**
 *Custom
        Market Research*
 
 Custom
        Market Research revenues, which result from custom market research consulting
        engagements, such as market surveys and focus groups, increased by $3,120,000,
        or 21.65%, from $14,410,000 in
        2005 to
        $17,530,000 in
        2006 .
        Approximately $1,601,000 of the increase in revenue was because our Atlantic
        Research subsidiary was not acquired until April 1, 2005. The balance of
        the
        increase was primarily due to an increase of approximately $1,015,000 in
        revenue
        from the Company’s Custom Market Research business in Boston due to a greater
        volume of projects across all sectors. In addition, another $504,000 revenue
        increase resulted from an increase in business volume from existing clients
        primarily in the pharmaceutical and legal sectors.
 
 *Product
        Development Intelligence*
 
 Product
        Development Intelligence revenues, which result from on-demand research,
        outsourced information services and in-depth projects, increased by $1,167,000,
        or 13.54%, from $8,617,000 in
        2005 to
        $9,784,000 in
        2006 .
        This
        was primarily the result of significant growth in its Litigation Support
        business, which was launched in January 2005, as well as an increase in the
        volume of 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 $2,252,000, or 8.76%, from $25,708,000 in 2005 to
        $27,960,000 in 2006 .
        Direct
        costs represented 60.41% and 59.74% of revenues in
        2006
        and 2005, respectively . The
        increase in total direct costs was primarily the result of the acquisitions
        of
        Atlantic and Signia (total direct costs of both Atlantic and Signia were
        $5,272,000 for the year ended December 31, 2005 and $7,503,000 for the year
        ended December 31, 2006.) Exclusive of Atlantic and Signia, direct costs
        increased by $21,000, from $20,436,000 in 2005 to $20,457,000 in 2006. This
        increase was primarily due to an increase in direct labor, including stock
        compensation expense, of $212,000 and an increase in depreciation of $45,000,
        partially offset by a decrease in purchases made on behalf of clients, including
        the cost paid to content providers, of $167,000 and decreases in rent and
        photocopy charges totaling $70,000.
  *Selling,
        general and administrative expenses*
 
 Selling,
        general and administrative expenses increased by $1,065,000, or 6.52%, from
        $16,343,000, or 37.98% of revenue, in
        2005 to
        $17,408,000, or 37.61% of revenue, in
        2006 .  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 of both Atlantic and Signia were $2,128,000 for the
        year
        ended December 31, 2005 and $2,392,000 for the year ended December 31, 2006).
        Exclusive of Atlantic and Signia, selling, general and administrative expenses
        increased by $801,000, or 5.63%, from $14,215,000 in 2005 to $15,016,000
        in
        2006. This increase was due primarily to an increase in indirect labor costs,
        including stock compensation expense, of $682,000, an increase in depreciation
        and amortization of $131,000, an increase in M&A related expenses of
        $400,000 and a general increase in operating expenses, partially offset by
        a
        decrease in severance and related charges of $746,000.
 -23-
 **Table
            of Contents**
  *Operating
        income*
 
 Operating
        income for 2006 was $917,000, as compared with operating income of $983,000
        for
        2005, a decline of $66,000. This decline in operating income was a result
        of
        increases in direct costs and selling, general and administrative expenses,
        partially offset by increases in revenues. See discussion above for further
        details.
 
 *Gain
        on sale of investments*
 
 In
        August
        2006, the Company received approximately $626,000, representing its share
        of the
        initial distribution of proceeds from the sale of Strategic Research Institute
        LLC (“SRI”). There is the possibility that future proceeds may be received from
        funds held in escrow reserved for possible claims against the seller’s
        representations and warranties. The Company cannot determine at this time
        whether such proceeds will be received or what amount they could be. The
        Company
        had a 9.1% interest in SRI, and it shared in profits of SRI, but did not
        share
        in losses. SRI is a business conference and event company.
 
 On
        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 investments of $226,000. During 2006, the Company recorded a further
        gain on sale of investments related to the sale of FIND.COM LLC of
        $146,000.
 
 *Interest
        expense*
  Interest
        expense increased by $200,000 from $401,000 in 2005 to $601,000 in 2006.
        The
        increase was due to a higher balance outstanding under the Revolving Facility,
        offset by a reduction in the balance outstanding under the Term Facility.
        Furthermore, the Term and Revolving Facilities were only in effect for a
        portion
        of 2005. Also, the variable nature of the LIBOR interest agreements also
        served
        to increase interest expense. For the Term Note and Revolving Facility, LIBOR
        rates ranged from 7.47% to 8.36% and 6.12% to 7.11% for 2006 and 2005,
        respectively.
 
 *Income
        Taxes*
 
 The
        $161,000 income tax provision for the year ended December 31, 2006 represents
        14.65% of the income before provision for income taxes. The difference between
        this rates and the statutory rate primarily relates to the benefit taken
        and
        release of valuation allowance of $635,000 related to federal, state and
        local
        income taxes, as a result of available net operating loss carryforwards
        partially offset by expenses that are not deductible for income tax purposes.
 
 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.
 
 *Net
        Income Attributable to Common Shareholders*
 
 Net
        income attributable to common shareholders for 2006 was $970,000, as compared
        with net income attributable to common shareholders of $412,000 for 2005.
        Included in net income for 2006 is the cumulative effect of accounting change
        of
        $96,000 in conjunction with the adoption of SFAS 123(R), the $626,000 of
        proceeds received from SRI and the gain related to the sale of FIND.COM LLC
        of
        $146,000.
 -24-
 **Table
            of Contents**
 
 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 LLC.
  **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**
              
              **2004**
              
              **$
                  Change**
              
              **%
                  Change****Revenues**On-Demand
                  Business Research
              
              $
              15,850
              
              $
              16,904
              
              $
              (1,054
              )
              
              (6.24
              )%Strategic
                  Intelligence
              
              
              4,157
              
              
              1,936
              
              
              2,221
              
              
              114.72
              %Custom
                  Market Research
              
              
              14,410
              
              
              11,371
              
              
              3,039
              
              
              26.73
              %Product
                  Development Intelligence
              
              
              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
              %Operating
                  income (loss)
              
              $
              983
              
              $
              (256
              )
              $
              1,239
              
              
              483.98
              %Gain
                  on sale of assets
              
              $
              226
              
              $
              92
              
              $
              164
              
              
              145.65
              %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
              %
 
 *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.
 -25-
 **Table
            of Contents**
 
 *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 market 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.
  *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.
 -26-
 **Table
            of Contents**
  *Operating
        income*
 
 Operating
        income for 2005 was $983,000, as compared with operating loss of $256,000
        for
        2004, an improvement of $1,239,000. This improvement in operating income
        was a
        result of increases in revenue, partially offset by increases in direct costs
        and selling, general and administrative expenses. See discussion above for
        further details.
 
 *Gain
        on sale of assets*
 
 On
        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.
 
 On
        April
        21, 2004, the Company sold its Information Advisor newsletter business, which
        was part of the Company’s QCS segment, to Information Today. The decision to
        sell this business was based on the fact that it was a small, non-core,
        breakeven business that did not fit our growth model or strategy.  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.
 
 *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.
 -27-
 **Table
            of Contents**
  *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 LLC. Included in net loss for 2004 was an impairment
        on
        investment related to the Company’s investment in idealab! of $96,000, an equity
        loss on investment related to the Company’s investment in FIND.COM LLC of
        $94,000, offset by the gain on sale of the Information Advisor newsletter
        of
        $92,000.
 
 **Segment
        Data**
 
 The
        Company manages its research and business advisory services in the following
        four business segments: On-Demand Business Research, Strategic Intelligence,
        Custom Market Research and Product Development Intelligence. Upon the Company’s
        acquisition of Signia on April 1, 2005, the operations and financial results
        of
        Signia were integrated into the business segment known as 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 known as 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)**2006**
              
              **2005**
              
              **2004****Revenues**On-Demand
                  Business Research
              
              $
              14,387
              
              $
              15,850
              
              $
              16,904Strategic
                  Intelligence
              
              
              4,584
              
              
              4,157
              
              
              1,936Custom
                  Market Research
              
              
              17,530
              
              
              14,410
              
              
              11,371Product
                  Development Intelligence
              
              
              9,784
              
              
              8,617
              
              
              8,226Total
                  revenues
              
              $
              46,285
              
              $
              43,034
              
              $
              38,437**Depreciation
                  and amortization**On-Demand
                  Business Research
              
              $
              685
              
              $
              963
              
              $
              577Strategic
                  Intelligence
              
              
              25
              
              
              33
              
              
              79Custom
                  Market Research
              
              
              66
              
              
              75
              
              
              36Product
                  Development Intelligence
              
              
              66
              
              
              93
              
              
              98Total
                  segment depreciation and amortization
              
              
              842
              
              
              1,164
              
              
              790Corporate
                  and other2
              
              
              708
              
              
              186
              
              
              141Total
                  depreciation and amortization
              
              $
              1,550
              
              $
              1,350
              
              $
              931**Operating
                  income (loss)**On-Demand
                  Business Research
              
              $
              1,124
              
              $
              1,267
              
              $
              1,357Strategic
                  Intelligence
              
              
              818
              
              
              586
              
              
              164Custom
                  Market Research
              
              
              2,832
              
              
              1,380
              
              
              1,160Product
                  Development Intelligence
              
              
              1,236
              
              
              762
              
              
              922Segment
                  operating income
              
              
              6,010
              
              
              3,995
              
              
              3,603Corporate
                  and other1,2
              
              
              (5,093
              )
              
              (3,012
              )
              
              (3,859
              )Operating
                  income (loss)
              
              $
              917
              
              $
              983
              
              $
              (256
              )**Income
                  (loss) before taxes****1**On-Demand
                  Business Research
              
              $
              1,124
              
              $
              1,267
              
              $
              1,357Strategic
                  Intelligence
              
              
              825
              
              
              594
              
              
              164Custom
                  Market Research
              
              
              2,845
              
              
              1,378
              
              
              1,023Product
                  Development Intelligence
              
              
              1,233
              
              
              760
              
              
              782Segment
                  income before taxes
              
              
              6,027
              
              
              3,999
              
              
              3,326Corporate
                  and other2
              
              
              (4,928
              )
              
              (3,336
              )
              
              (5,271
              )Income
                  (loss) before taxes
              
              $
              1,099
              
              $
              663
              
              $
              (1,945
              )
  -28-
 **Table
            of Contents**
  **Total
                  Assets**On-Demand
                  Business Research
              
              $
              1,653
              
              $
              2,731Strategic
                  Intelligence
              
              
              1,794
              
              
              2,203Custom
                  Market Research
              
              
              4,788
              
              
              4,262Product
                  Development Intelligence
              
              
              4,303
              
              
              3,519Total
                  segment assets
              
              
              12,538
              
              
              12,715Corporate
                  and other2
              
              
              27,628
              
              
              25,127Total
                  assets
              
              $
              40,166
              
              $
              37,842**Capital
                  Expenditures**On-Demand
                  Business Research
              
              $
              89
              
              $
              133
              
              $
              186Strategic
                  Intelligence
              
              
              2
              
              
              45
              
              
              8Custom
                  Market Research
              
              
              126
              
              
              114
              
              
              23Product
                  Development Intelligence
              
              
              53
              
              
              —
              
              
              62Total
                  segment capital expenditures
              
              
              270
              
              
              292
              
              
              279Corporate
                  and other2
              
              
              504
              
              
              139
              
              
              253Total
                  capital expenditures
              
              $
              774
              
              $
              431
              
              $
              5321Before
                  the impact of cumulative effect from change in accounting
                  principle.
                2Represents
                  assets and the effect of direct costs and selling, general and
                  administrative expenses not attributable to a single
                  segment.
 
 **Quarterly
        Financial Data (unaudited)**
 
 The
        following table sets forth selected quarterly data for the years ended December
        31, 2006 and 2005 (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
                  taxes1
              
              Net
                  income (loss) attributable to commonshareholders
              
              Income
                  (loss) per share:
                basic2
              
              Income
                  (loss) per share:
                diluted2March
                  31, 20063
              
              $
              11,256
              
              $
              334
              
              $
              201
              
              $
              269
              
              $
              0.01
              
              $
              0.01June
                  30, 20063
              
              
              11,962
              
              
              586
              
              
              411
              
              
              365
              
              
              0.02
              
              
              0.02September
                  30, 20063
              
              
              11,453
              
              
              423
              
              
              908
              
              
              481
              
              
              0.02
              
              
              0.02December
                  31, 2006
              
              
              11,614
              
              
              (426
              )
              
              (397
              )
              
              (145
              )
              
              (0.00
              )
              
              (0.00
              )March
                  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
              
              
              0.02
 1Before
                  the impact of cumulative effect from change in accounting
                  principle.
                2Quarterly data is rounded and totals may or may not equal year
                  end basic
                  and diluted earnings per share.
                3Results for the Company for the first three quarters of 2006 were
                  adjusted. (See "Application of SAB No. 108" within Management's
                  Discussion
                  and Analysis of Financial Condition and Results of
                  Operation).
 
 As
        discussed in Note 8 to the Consolidated Financial Statements, during 2006
        and
        2005, the Company recorded a charge to operations of $52,000 and $778,000,
        respectively, related to severance payments to be made to former employees.
        Approximately $1,247,000 and $1,339,000 was recorded related to discretionary
        bonus arrangements in the quarter ended December 31, 2006 and 2005,
        respectively.
  **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 $2,939,000 and $2,697,000 at December 31, 2006 and 2005,
        respectively. Our working capital deficit position (current assets less current
        liabilities) at December 31, 2006 was $(211,000) as compared to our working
        capital position of $281,000 at December 31, 2005. Included in current
        liabilities is unearned retainer income of $4,351,000 and $4,311,000 as of
        December 31, 2006 and 2005, respectively. Such amounts reflect amounts billed,
        but not yet earned.
 -29-
 **Table
            of Contents**
 
 Cash
        provided by (used in) operating activities was $3,542,000, $2,715,000 and
        $(1,078,000) in the years ended December 31, 2006, 2005 and 2004, respectively. In
        2006, the most
        significant operating activities were: net income of $1,034,000, depreciation
        and amortization of $1,550,000, an increase in accounts payable and accrued
        expenses of $1,688,000, compensation from option grants of $792,000, deferred
        income taxes of $161,000 and an increase in unearned revenue of $40,000,
        offset
        by an increase in accounts receivable of $976,000, application of SAB No.
        108 of
        $447,000, a gain on sale of investments of $146,000 and a decrease in other
        liabilities of $352,000 and cash used for other general operating purposes.
        Receivables and unearned revenue are increasing as a result of increased
        profitability and the volume of projects that have commenced, driving cash
        provided by operations. 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 were also impacted by the acquisitions of Atlantic
        and Signia. 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.
 
 Cash
        used
        in investing activities was $1,587,000, $9,932,000 and $2,033,000 in the
        years
        ended December 31, 2006, 2005 and 2004, respectively. In
        2006
        the primary use of cash was related to the payment of deferred consideration
        related to the acquisitions of Atlantic and Signia of $500,000 and $280,000,
        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 2006, 2005 and 2004 were mainly for
        computer hardware upgrades, software purchases and related implementation
        and
        development, and leasehold improvements. Total capital expenditures were
        $779,000, $431,000 and $532,000 in the years ended December 31, 2006, 2005
        and
        2004, respectively. During the year ending December 31, 2007, we expect to
        spend
        approximately $780,000 for capital items, the major portions of which will
        be
        used for computer hardware and software upgrades and for leasehold improvements.
 
 Cash
        (used in) provided by financing activities was $(1,713,000), $5,395,000 and
        $6,809,000 in the years ended December 31, 2006, 2005 and 2004, respectively. In
        2006 the
        most
        significant financing activities were: the proceeds from borrowings under
        notes
        payable of $1,500,000 related to the drawing down of funds from and proceeds
        from the exercise of options and warrants of $425,000, offset by repayments
        under notes payable of $3,505,000 primarily related to payments on our revolving
        credit facility. I n
        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.
 -30-
 **Table
            of Contents**
 
 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, 2006, $3,150,000 remains outstanding under the Term Facility,
        and
        $1,000,000 is outstanding under the Revolving Facility. Accrued but unpaid
        interest related to the Term Facility and the Revolving Facility is
        approximately $32,000 as of December 31, 2006. The Term Facility bears interest
        at LIBOR plus 3%, which was 8.35% at December 31, 2006 based on the LIBOR
        contract in effect at that time. The Revolving Facility bears interest at
        LIBOR
        plus 2.75%, which was 8.10% at December 31, 2006 based on separate LIBOR
        contracts in effect at that time. Interest expense related to the Term Facility
        was $292,000 for the year ended December 31, 2006. Interest expense related
        to
        the Revolving Facility was $109,000 for the year ended December 31, 2006.
        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 $152,000 for the year ended December 31, 2006, and is
        included in interest expense.
 
 Loans
        under the Revolving Facility will be made available 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.
 -31-
 **Table
            of Contents**
 
 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 received a waiver from Fleet National Bank as of December 31, 2006
        with
        respect to the Net Income covenant of the Credit Agreement, but was in
        compliance with all other covenants. The Company expects to be in compliance
        with all covenants in 2007.
 
 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. As of December 31, 2006, $239,000 remains outstanding under
        this
        agreement.
 
 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.
 
 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, 2006 and the periods in which payments are due:
 
 As
                  of December 31, 2006Total
              
              Less
                  than 1 year
              
              1
                  -
                  3 years
              
              3
                  -
                  5 years
              
              After
                  5 yearsNon-cancelable
                  operating lease commitments
              
              $
              8,057,000
              
              $
              1,452,000
              
              $
              2,671,000
              
              $
              2,409,000
              
              $
              1,525,000Long-term
                  capital lease commitments
              
              
              48,000
              
              
              48,000
              
              
              —
              
              
              —
              
              
              —Notes
                  payable1
              
              
              4,388,000
              
              
              2,014,000
              
              
              1,924,000
              
              
              450,000
              
              
              —Employment
                  contracts
              
              
              653,000
              
              
              653,000
              
              
              —
              
              
              —
              
              
              —$
              13,146,000
              
              $
              4,167,000
              
              $
              4,595,000
              
              $
              2,859,000
              
              $
              1,525,0001Does
                  not include interest. Under the terms of the Credit Facility, interest
                  is
                  based on LIBOR contracts, and is therefore variable. At December
                  31, 2006
                  there was $3,150,000 under the Term Facility at an interest rate
                  of 8.349%
                  and $1,000,000 outstanding under the Revolving Facility at an interest
                  rate of 8.1%.
  -32-
 **Table
            of Contents**
  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, however,
        there
        are no guarantees that we will be able to do so in the future.
 
 **Off-Balance-Sheet
        Arrangements**
 
 As
        of
        December 31, 2006, we did not have any off-balance-sheet
        arrangements.
 
 **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
        44% of the Company’s 2006 revenues were derived from subscription contracts with
        customers, including approximately 96% of the revenues of the On-Demand Business
        Research business segment and approximately 46% of the revenues of the Product
        Development Intelligence business segment. The remaining 61% of the Company’s
        2006 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.
 -33-
 **Table
            of Contents**
 
 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 using the costs
        to
        total estimated costs method. 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. Losses on such contracts are recognized when probable.
 
 *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 (July 1st for goodwill related to our Guideline
        Research, Teltech, Atlantic and Signia businesses) 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 (July 1 st for
        intangibles related to our Guideline Research, Teltech, Atlantic and Signia
        businesses). 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.
 -34-
 **Table
            of Contents**
  *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
        then that it was more likely than not that these assets may not be fully
        realized during the carryforward period. In 2006, after performing analyses
        on
        our deferred tax assets, we released these valuation allowances as we determined
        then that it was more likely than not that these assets will be fully realized
        during the carryforward period.
 
 *Non-Marketable
        Equity Securities*
 
 The
        Company’s investment in Scientigo, Inc. is valued at $49,000 as of December 31,
        2006. This security is accounted for under the fair value method, where
        unrealized gains or losses are recorded 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, 2006, 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.
 
 **Application
        of SAB No. 108**
 
 In
        September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB No.
        108”), “Considering the Effects of Prior Year Misstatements when Quantifying
        Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how
        the effects of prior year uncorrected misstatements should be considered
        when
        quantifying misstatements in current year financial statements. SAB No. 108
        requires companies to quantify misstatements using a Rollover and Iron Curtain
        approach and to evaluate whether either approach results in quantifying an
        error
        that is material in light of relevant quantitative and qualitative factors.
        When
        the effect of initial adoption is material, companies will record the effect
        as
        a cumulative effect adjustment to beginning of year retained earnings. The
        Company has historically used the Rollover Method. The provisions of SAB
        No. 108
        are effective for the Company for the year ended December 31, 2006. In
        connection with the application of SAB No. 108, the Company has recorded
        a
        $447,000 charge to retained earnings which relates to (i) a $300,000
        overstatement of deferred tax assets that accumulated over several previous
        years and, (ii) a $147,000 understatement of accrued expenses related to
        travel
        costs as of December 31, 2005.
  The
          nature of the adjustments and the impact on the Company’s consolidated balance
          sheet as of January 1, 2006 are presented below:
 
 Increase
                    (Decrease)Accrued
                    expenses
                  and
                    other
                
                Deferred
                    taxassets
                
                RetainedearningsOverstatement
                    of deferred tax assets(1)
                
                $
                --
                
                $
                (300,000
                )
                $
                (300,000
                )Understatement
                    of accrued expenses(2)
                
                
                147,000
                
                
                --
                
                
                (147,000
                )$
                147,000
                
                $
                (300,000
                )
                $
                (447,000
                )(1)The Company adjusted the tax basis of property, plant and equipment
                    by
                    reducing deferred tax assets as a result of an overstatement
                    of these
                    deferred tax assets that accumulated over several previous
                    years.
                  (2)The Company recorded travel expenses incurred in 2005 as an expense
                    in
                    2006 when these expenses were paid. If the criteria in SAB No.
                    108 were
                    applied, these expenses should have been recorded in
                    2005.
 
 -35-
 **Table
            of Contents**
  **Adoption
        of SFAS No. 123R**
 
 In
        December 2004, the FASB issued the revised Statement of Financial Accounting
        Standards (“SFAS”) No. 123, “Share-Based Payment” (“SFAS 123 (R)”), which the
        Company adopted on January 1, 2006. 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 a result of adopting SFAS 123(R), the Company
        recognized an after-tax gain of $96,000 ($96,000 pre-tax), with an impact
        on
        basic and diluted earnings per share of $0.00, as the cumulative effect of
        a
        change in accounting principle attributable to the requirement to estimate
        forfeitures at the grant date instead of recognizing them as incurred. The
        adoption of SFAS 123(R) did not otherwise have a material effect on the 2006
        consolidated financial statements.
 
 **New
        Accounting Pronouncements**
 
 The
        FASB
        issued SFAS Statement No. 157 (“SFAS No. 157”), “Fair Value Measurements” in
        September 2006. This standard provides guidance on how to measure fair value
        where it is permitted or required under other accounting pronouncements.
        SFAS
        No. 157 also requires additional disclosures about fair value measurements.
        The
        Company will adopt SFAS No. 157 on January 1, 2008, and is currently assessing
        the impact of this standard.
 
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes  - an
        interpretation of FASB Statement No. 109” (“FIN 48 ”),
        which
        will become effective for the Company on January 1, 2007. The Interpretation
        prescribes a recognition threshold and a measurement attribute for the financial
        statement recognition and measurement of tax positions taken or expected
        to be
        taken in a tax return. For those benefits to be recognized, a tax position
        must
        be more-likely-than-not to be sustained upon examination by taxing authorities.
        The amount recognized is measured as the largest amount of benefit that is
        greater than 50 percent likely of being realized upon ultimate settlement.
        The
        Company is currently evaluating the impact, if any, of the adoption of FIN
        48 on
        its financial statements.
 
 In
        February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), *The
        Fair Value Option for Financial Assets and Financial
        Liabilities* ,
        providing companies with an option to report selected financial assets and
        liabilities at fair value. SFAS 159’s objective is to reduce both complexity in
        accounting for financial instruments and the volatility in earnings caused
        by
        measuring related assets and liabilities differently. Accounting principles
        generally accepted within the United States has required different measurement
        attributes for different assets and liabilities that can create artificial
        volatility in earnings. SFAS 159 helps to mitigate this type of
        accounting-induced volatility by enabling companies to report related assets
        and
        liabilities at fair value, which would likely reduce the need for companies
        to
        comply with detailed rules for hedge accounting. SFAS 159 also establishes
        presentation and disclosure requirements designed to facilitate comparisons
        between companies that choose different measurement attributes for similar
        types
        of asset and liabilities. SFAS 159 requires companies to provide additional
        information that will help investors and other users of financial statements
        to
        more easily understand the effect of the Company’s choice to use fair value on
        its earnings. It also requires entities to display the fair value of those
        assets and liabilities for which the Company has chosen to use fair value
        on the
        face of the balance sheet. SFAS 159 is effective for fiscal years beginning
        after November 15, 2007. The Company is currently evaluating the impact of
        the
        adoption of SFAS 159 on its financial statements.
 -36-
 **Table
            of Contents**
  **Acquisitions**
 
 ***Atlantic
        Research & Consulting***
 
 On
        April
        1, 2005, the Company acquired all of the capital stock of Atlantic Research
        & Consulting, Inc. as per 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. As of Decem ber
        31,
        2006, the Company paid $500,000 in cash and issued 179,971 shares of
        unregistered Common Stock valued at $250,000, which represents the Year One
        Deferred Consideration (as defined in the Atlantic Purchase Agreement) earned,
        the payment of which is not contingent upon Hooper’s continued employment with
        the Company, and therefore, was recorded as additional goodwill. During 2006,
        the Company also paid $10,000 in cash related to previously accrued transaction
        fees. As of December 31, 2006, the Company has accrued approximately $750,000,
        which represents the estimated Year Two Deferred Consideration earned as
        of that
        date.
 
 For
        more
        information regarding the acquisition of Atlantic, please see Note 3
“Acquisitions” to the financial statements included elsewhere in this Form
        10-K.
 
 ***Signia
        Partners***
 
 On
        April
        1, 2005, the Company acquired all of the capital stock of Signia Partners
        Incorporated as per 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. As of
        December 31, 2006, the Company paid $280,000 in cash, which represents the
        One
        Year Deferred
        Consideration (as defined in the Signia Purchase Agreement) earned, the payment
        of which is not contingent upon House’s continued employment with the Company,
        and therefore, was recorded as additional goodwill. During 2006, the Company
        also paid $10,000 in cash related to previously accrued transaction fees.
        As of
        December 31, 2006, the Company has accrued approximately $280,000, which
        represents the estimated Two Year Deferred Consideration earned as of that
        date.
 
 For
        more
        information regarding the acquisition of Signia, please see Note 3
“Acquisitions” to the financial statements included elsewhere in this Form
        10-K.
 -37-
 **Table
            of Contents**
 
 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)
              
              $
              4,223,000
              
              $
              3,952,000
              
              $
              8,175,000Accrued
                  estimate of deferred consideration and transaction costs
              
              
              750,000
              
              
              280,000
              
              
              1,030,000Deferred
                  tax liability
              
              
              458,000
              
              
              302,000
              
              
              760,000Common
                  stock issued to sellers
              
              
              752,000
              
              
              301,000
              
              
              1,053,000Total
                  purchase consideration
              
              $
              6,183,000
              
              $
              4,835,000
              
              $
              11,018,000
 
 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 determined by management with
        the
        assistance of an independent appraisal firm. The purchase price allocations
        have
        been finalized with the exception of deferred consideration for Atlantic
        and
        Signia which will be determined for the periods ending March 31, 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
              
              
              4,717,000
              
              
              4,024,000
              
              
              8,741,000Amortizable
                  intangible assets
              
              
              830,000
              
              
              529,000
              
              
              1,359,000Indefinite-lived
                  intangible assets
              
              
              265,000
              
              
              193,000
              
              
              458,000Total
                  purchase consideration
              
              $
              6,183,000
              
              $
              4,835,000
              
              $
              11,018,000
  Amortizable
        intangible assets include customer relationships and non-compete agreements.
        Indefinite-lived intangible assets represent trade name intangible
        assets.
  **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.
 -38-
 **Table
            of Contents**
  **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 $41,500 for the
        fiscal
        year ended December 31, 2006. The Term Facility bears interest at LIBOR plus
        3%
        (8.34938% at December 31, 2006 based on the contract in effect at that time).
        The Revolving Facility bears interest at LIBOR plus 2.75%, which was 8.10%
        at
        December 31, 2006 based on separate LIBOR contracts 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.
 
 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 to 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, 2006 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, 2006.
 
 **Item
        9B. Other Information**
 
 None.
 -39-
 **Table
            of Contents**
  **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 120 days following
        the end of the Company’s fiscal year ended December 31, 2006.
 
 **PART
        IV**
 
 **Item
        15. Exhibits and Financial Statement
        Schedules**
 
 (a)
              The
                  following documents are filed as part of this
                  report:
 
 (1)
              Financial
                  Statements:
  LocationIn
                  10-KIndex
                  to Consolidated Financial Statements and Schedule
              
              
              F-1Report
                  of Independent Registered Public Accounting Firm
              
              
              F-2Consolidated
                  balance sheets - December 31, 2006 and 2005
              
              
              F-3Consolidated
                  statements of operations - Years ended December 31, 2006, 2005
                  and 2004
              
              
              F-4Consolidated
                  statements of shareholders’ equity - Years ended December 31, 2006, 2005
                  and 2004
              
              
              F-5Consolidated
                  statements of cash flows - Years ended December 31, 2006, 2005
                  and
                  2004
              
              
              F-6Notes
                  to consolidated financial statements
              
              
              F-7
  (2)
              Financial
                  Statement Schedule:
  Valuation
                    and Qualifying Accounts on Schedule II
                
                
                F-34
  (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)
  -40-
 **Table
            of Contents**
  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 Form 10-Q for the quarterly period ended March 31, 2006,
                  filed on May 15, 2006.)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)
  -41-
 **Table
            of Contents**
  #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)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)
  -42-
 **Table
            of Contents**
  #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. (incorporated
                  by reference to the Company’s Form 10-K filed for the year ended December
                  31, 2005)10.28
              
              Promissory
                  Note, dated as of November 28, 2005, made by Scientigo, Inc. in
                  favor of
                  FIND/SVP, Inc..
                  (incorporated
                  by reference to the Company’s Form 10-K filed for the year ended December
                  31, 2005)10.29
              
              Allonge
                  dated July 10, 2006, to Promissory Note dated as of November 28,
                  2005,
                  made by Scientigo, Inc., to the Registrant (incorporated by reference
                  to
                  the Company’s Form 8-K filed July 14, 2006)10.30
              
              Amendment
                  No. 1 to Stock Repurchase Agreement dated July 10, 2006 by and
                  among
                  Scientigo, Inc., TIGO Search, Inc., and the Registrant. (incorporated
                  by reference to the Company’s Form 8-K filed December 5, 2006)10.31
              
              Amendment
                  No. 2 to Stock Repurchase Agreement dated December 1, 2006 by and
                  among
                  Scientigo, Inc., TIGO Search, Inc., and the Registrant. (incorporated
                  by reference to the Company’s Form 8-K filed December 5,
                  2006)10.32
              
              Form
                  of Warrant (incorporated by reference to the Company’s Form 8-K filed on
                  May 13, 2004).10.33
              
              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)
  -43-
 **Table
            of Contents**
  10.34
              
              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)10.35
              
              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)#10.36
              
              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)#10.37
              
              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)#10.38
              
              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)#10.39
              
              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)#10.40
              
              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)10.41
              
              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)#10.42
              
              Amendment
                  to 2003 Stock Incentive Plan (incorporated by reference to the
                  Company’s
                  Definitive Proxy Statement filed on April 28, 2006)*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.
  -44-
 **Table
            of Contents**
  **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 OfficerApril
                  17, 2007
 
 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 OfficerApril
                  17, 2007(2)
              Principal
                  Financial Officer and Principal Accounting Officer:**/s/
                  Peter Stone**Peter
                  StoneChief
                  Financial OfficerApril
                  17, 2007(3)
              Board
                  of Directors:**/s/
                  Andrew P. Garvin**Andrew
                  P. GarvinFounder
                  and DirectorApril
                  17, 2007**/s/
                  David Walke**David
                  WalkeChairman
                  of Board of DirectorsApril
                  17, 2007**/s/
                  Regina Paolillo**Regina
                  PaolilloDirectorApril
                  17, 2007**/s/
                  Denise L. Shapiro**Denise
                  L. ShapiroDirectorApril
                  17, 2007**/s/
                  Brian Ruder**Brian
                  RuderDirectorApril
                  17, 2007**/s/
                  Warren Struhl**Warren
                  StruhlDirectorApril
                  17, 2007
  -45-
 **Table
              of Contents**
  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 Form 10-Q for the quarterly period ended March 31, 2006,
                  filed on May 15, 2006.)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)
  E-1
 **Table
            of Contents**
  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
 **Table
            of Contents**
  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. (incorporated
                  by reference to the Company’s Form 10-K filed for the year ended December
                  31, 2005)10.28
              
              Promissory
                  Note, dated as of November 28, 2005, made by Scientigo, Inc. in
                  favor of
                  FIND/SVP, Inc.(incorporated
                  by reference to the Company’s Form 10-K filed for the year ended December
                  31, 2005)10.29
              
              Allonge
                  dated July 10, 2006, to Promissory Note dated as of November 28,
                  2005,
                  made by Scientigo, Inc., to the Registrant (incorporated by reference
                  to
                  the Company’s Form 8-K filed July 14,
                  2006)
  E-3
 **Table
            of Contents**
  10.30
              
              Amendment
                  No. 1 to Stock Repurchase Agreement dated July 10, 2006 by and
                  among
                  Scientigo, Inc., TIGO Search, Inc., and the Registrant. (incorporated
                  by reference to the Company’s Form 8-K filed December 5, 2006)10.31
              
              Amendment
                  No. 2 to Stock Repurchase Agreement dated December 1, 2006 by and
                  among
                  Scientigo, Inc., TIGO Search, Inc., and the Registrant. (incorporated
                  by reference to the Company’s Form 8-K filed December 5,
                  2006)10.32
              
              Form
                  of Warrant (incorporated by reference to the Company’s Form 8-K filed on
                  May 13, 2004).10.33
              
              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)10.34
              
              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)10.35
              
              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)#10.36
              
              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)#10.37
              
              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)#10.38
              
              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)#10.39
              
              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)#10.40
              
              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)10.41
              
              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)#10.42
              
              Amendment
                  to 2003 Stock Incentive Plan (incorporated by reference to the
                  Company’s
                  Definitive Proxy Statement filed on April 28, 2006)*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
 **Table
            of Contents**
  **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 - December 31, 2006 and 2005
                
                
                F-3Consolidated
                    statements of operations - Years ended December 31, 2006, 2005
                    and 2004
                
                
                F-4Consolidated
                    statements of shareholders’ equity - Years ended December 31, 2006, 2005
                    and 2004
                
                
                F-5Consolidated
                    statements of cash flows - Years ended December 31, 2006, 2005
                    and
                    2004
                
                
                F-6Notes
                    to consolidated financial statements
                
                
                F-7Schedule:Valuation
                    and Qualifying Accounts on Schedule II
                
                
                F-34
  F-1
 **Table
              of Contents**
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Stockholders of
 Guideline,
        Inc. and Subsidiaries
 New
        York,
        New York
 We
          have
          audited the accompanying consolidated balance sheets of Guideline, Inc.
          and
          subsidiaries (collectively, the “Company”) as of December 31, 2006 and 2005, and
          the related consolidated statements of operations, shareholders’ equity, and
          cash flows for each of the three years in the period ended December 31,
          2006.
          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 the Company as of December 31, 2006
          and
          2005, and the results of its operations and its cash flows for each of
          the three
          years in the period ended December 31, 2006, 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 to adopt
          the
          provisions of Statement of Financial Accounting Standards No. 123(R), *Share-Based
          Payment,* effective
          January 1, 2006. In addition, as also discussed in Note 2, effective
          December 31, 2006, the Company elected application of Staff Accounting
          Bulletin
          No. 108, *Considering
          the Effects of Prior Year Misstatements when Quantifying Misstatements
          in
          Current Year Financial Statements* .
 
 
 /s/
          Deloitte & Touche LLP
 New
          York,
          New York
 April 16,
          2007
 F-2
 **Table
              of Contents**
 **** **GUIDELINE,
        INC. AND SUBSIDIARIES**
 Consolidated
        Balance Sheets
 (in
        thousands, except share and per share data)
  **December
                    31,****Assets**
                
                **2006**
                
                **2005**Current
                    assets:Cash
                    and cash equivalents
                
                $
                2,939
                
                $
                2,697Accounts
                    receivable, less allowance for doubtful accounts of $99 and $112
                    in 2006
                    and 2005, respectively
                
                
                9,483
                
                
                8,646Deferred
                    tax assets
                
                
                311
                
                
                326Prepaid
                    expenses and other current assets
                
                
                657
                
                
                671Total
                    current assets
                
                
                13,390
                
                
                12,340Equipment,
                    software development and leasehold improvements, net
                
                
                2,228
                
                
                2,572Goodwill
                
                
                21,322
                
                
                18,245Intangibles,
                    net
                
                
                2,137
                
                
                2,522Deferred
                    tax assets
                
                
                —
                
                
                682Deferred
                    financing fees, net
                
                
                504
                
                
                647Other
                    assets
                
                
                585
                
                
                834$
                40,166
                
                $
                37,842**Liabilities
                    and Shareholders’ Equity**Current
                    liabilities:Trade
                    accounts payable
                
                $
                2,820
                
                $
                2,425Accrued
                    expenses and other
                
                
                4,425
                
                
                2,318Current
                    maturities of notes payable
                
                
                2,005
                
                
                3,005Unearned
                    retainer income
                
                
                4,351
                
                
                4,311Total
                    current liabilities
                
                
                13,601
                
                
                12,059Notes
                    payable
                
                
                2,384
                
                
                3,389Deferred
                    compensation and other liabilities
                
                
                298
                
                
                456Total
                    liabilities
                
                
                16,283
                
                
                15,904Redeemable
                    convertible preferred stock, $.0001 par value per share.Authorized
                    2,000,000 shares; issued and outstanding 333,333 shares in 2006
                    and
                    2005
                
                
                674
                
                
                610Commitments
                    and contingenciesShareholders’
                    equity:Common
                    stock, $.0001 par value per share. Authorized 100,000,000 shares;
                    issued
                    and outstanding 20,925,134 shares in 2006 and 20,305,060 shares in
                    2005
                
                
                2
                
                
                2Capital
                    in excess of par value
                
                
                29,747
                
                
                28,367Accumulated
                    other comprehensive loss
                
                
                (111
                )
                
                (25
                )Accumulated
                    deficit
                
                
                (6,429
                )
                
                (7,016
                )Total
                    shareholders’ equity
                
                
                23,209
                
                
                21,328$
                40,166
                
                $
                37,842
 See
        accompanying notes to consolidated financial statements.
 F-3
 **Table
            of Contents**
  **GUIDELINE,
        INC. AND SUBSIDIARIES**
 Consolidated
        Statements of Operations
 Years
        ended December 31
 (in
        thousands, except share and per share data)
  **2006**
                
                **2005**
                
                **2004**Revenues
                
                $
                46,285
                
                $
                43,034
                
                $
                38,437Operating
                    expenses:Direct
                    costs
                
                
                27,960
                
                
                25,708
                
                
                22,384Selling,
                    general and administrative expenses
                
                
                17,408
                
                
                16,343
                
                
                16,309Total
                    operating expenses
                
                
                45,368
                
                
                42,051
                
                
                38,693Operating
                    income (loss)
                
                
                917
                
                
                983
                
                
                (256
                )Interest
                    income
                
                
                9
                
                
                16
                
                
                14Other
                    income
                
                
                36
                
                
                16
                
                
                4Gain
                    on sale of investments
                
                
                772
                
                
                226
                
                
                92Interest
                    expense
                
                
                (601
                )
                
                (401
                )
                
                (1,609
                )Equity
                    loss on investment
                
                
                (34
                )
                
                (177
                )
                
                (94
                )Impairment
                    on investment
                
                
                —
                
                
                —
                
                
                (96
                )Income
                    (loss) before provision for income taxes and cumulative effect
                    of change
                    in accounting
                
                
                1,099
                
                
                663
                
                
                (1,945
                )Provision
                    for income taxes
                
                
                161
                
                
                211
                
                
                —Income
                    (loss) before cumulative effect of change in accounting
                
                
                938
                
                
                452
                
                
                (1,945
                )Cumulative
                    effect of change in accounting
                
                
                96
                
                
                —
                
                
                —Net
                    income (loss)
                
                
                1,034
                
                
                452
                
                
                (1,945
                )Less:
                    Preferred dividends
                
                
                (64
                )
                
                (40
                )
                
                (40
                )Less:
                    Accretion on redeemable common shares
                
                
                —
                
                
                —
                
                
                (113
                )Net
                    income (loss) attributable to common shareholders
                
                $
                970
                
                $
                412
                
                $
                (2,098
                )Income
                    (loss) per common share - basic and diluted:Income
                    (loss) before cumulative effect of change in accounting
                
                $
                0.05
                
                $
                0.02
                
                $
                (0.12
                )Cumulative
                    effect of change in accounting
                
                
                0.00
                
                
                0.00
                
                
                0.00Income
                    (loss) per share
                
                $
                0.05
                
                $
                0.02
                
                $
                (0.12
                )Weighted
                    average number of common shares outstanding:Basic
                
                
                20,677,503
                
                
                20,045,754
                
                
                17,212,834Diluted
                
                
                20,677,503
                
                
                21,631,472
                
                
                17,212,834Share-based
                    compensation included above:Direct
                    costs
                
                $
                159
                
                $
                176
                
                $
                201Selling,
                    general and administrative expenses
                
                
                633
                
                
                455
                
                
                395Total
                
                $
                792
                
                $
                631
                
                $
                596
 See
        accompanying notes to consolidated financial statements.
 F-4
 **Table
            of Contents**
  **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
              
              
              Accumulated
                  other
                comprehensive
              
              
              Accumulated
              
              
              Shareholders’Shares
              
              
              Amount
              
              
              par
                  value
              
              
              purchase
              
              
              loss
              
              
              deficit
              
              
              equityBALANCE
                  AT JANUARY 1, 2004
              
              
              12,641,295
              
              $
              1
              
              $
              12,942
              
              $
              (50
              )
              $
              —
              
              $
              (5,523
              )
              $
              7,370Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,945
              )
              
              (1,945
              )Exercise
                  of stock optionsand 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:Unrealized
                  loss on investment
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (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
              )
              
              21,328Application
                  of SAB No. 108
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (447
              )
              
              (447
              )Cumulative
                  effect of change in accounting
              
              
              —
              
              
              —
              
              
              (96
              )
              
              —
              
              
              —
              
              
              —
              
              
              (96
              )BALANCE
                  AS ADJUSTED AT JANUARY 1, 2006
              
              
              20,305,060
              
              
              2
              
              
              28,271
              
              
              —
              
              
              (25
              )
              
              (7,463
              )
              
              20,785Net
                  income
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,034
              
              
              1,034Comprehensive
                  loss:Unrealized
                  loss on investment, net of tax effect
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (86
              )
              
              —
              
              
              (86
              )Exercise
                  of stock options and warrants
              
              
              290,283
              
              
              —
              
              
              425
              
              
              —
              
              
              —
              
              
              —
              
              
              425Common
                  stock issued
              
              
              329,791
              
              
              —
              
              
              250
              
              
              —
              
              
              —
              
              
              —
              
              
              250Costs
                  related to issuance of common stock
              
              
              —
              
              
              —
              
              
              (57
              )
              
              —
              
              
              —
              
              
              —
              
              
              (57
              )Stock-based
                  compensation
              
              
              —
              
              
              —
              
              
              792
              
              
              —
              
              
              —
              
              
              —
              
              
              792Tax
                  deduction from stock option exercise
              
              
              —
              
              
              —
              
              
              130
              
              
              —
              
              
              —
              
              
              —
              
              
              130Preferred
                  stock dividends
              
              
              —
              
              
              —
              
              
              (64
              )
              
              —
              
              
              —
              
              
              —
              
              
              (64
              )BALANCE
                  AT DECEMBER 31, 2006
              
              
              20,925,134
              
              $
              2
              
              $
              29,747
              
              $
              —
              
              $
              (111
              )
              $
              (6,429
              )
              $
              23,209
  See
        accompanying notes to consolidated financial statements.
 F-5
 **Table
            of Contents**
  **GUIDELINE,
        INC. AND SUBSIDIARIES**
 Consolidated
        Statements of Cash Flows
 Years
        ended December 31
 (in
        thousands)
  **2006**
                
                **2005**
                
                **2004**Cash
                    flows from operating activities:Net
                    income (loss)
                
                $
                1,034
                
                $
                452
                
                $
                (1,945
                )Adjustments
                    to reconcile net income (loss) to net cash provided by (used
                    in) operating
                    activities:Depreciation
                    and amortization
                
                
                1,550
                
                
                1,350
                
                
                931Provision
                    for doubtful accounts
                
                
                135
                
                
                85
                
                
                129Deferred
                    income taxes
                
                
                161
                
                
                211
                
                
                —Stock-based
                    compensation from option grants
                
                
                792
                
                
                631
                
                
                596Impairment
                    on investment
                
                
                —
                
                
                —
                
                
                96Non-cash
                    interest
                
                
                152
                
                
                117
                
                
                1,357Equity
                    loss on investment
                
                
                34
                
                
                177
                
                
                94Gain
                    on elimination of repurchase option
                
                
                (21
                )
                
                —
                
                
                —Gain
                    on sale of investment
                
                
                (146
                )
                
                (226
                )
                
                (92
                )Cumulative
                    effect of accounting change
                
                
                (96
                )
                
                —
                
                
                —Application
                    of SAB No. 108
                
                
                (447
                )
                
                —
                
                
                —Changes
                    in assets and liabilities:Increase
                    in accounts receivable
                
                
                (976
                )
                
                (1,031
                )
                
                (154
                )Decrease
                    (increase) in prepaid expenses and other current assets
                
                
                76
                
                
                612
                
                
                (320
                )Decrease
                    (increase) in other assets
                
                
                (82
                )
                
                136
                
                
                (155
                )Increase
                    (decrease) in unearned retainer income
                
                
                40
                
                
                418
                
                
                (140
                )Decrease
                    in other liabilities
                
                
                (352
                )
                
                (58
                )
                
                (126
                )Increase
                    (decrease) in accounts payable and accrued expenses
                
                
                1,688
                
                
                (159
                )
                
                (1,349
                )Net
                    cash provided by (used in) operating activities
                
                
                3,542
                
                
                2,715
                
                
                (1,078
                )Cash
                    flows from investing activities:Purchase
                    of Guideline Research
                
                
                —
                
                
                —
                
                
                (1,127
                )Purchase
                    of Teltech
                
                
                —
                
                
                —
                
                
                (441
                )Purchase
                    of Atlantic
                
                
                (10
                )
                
                (3,696
                )
                
                —Purchase
                    of Signia
                
                
                (10
                )
                
                (3,645
                )
                
                —Deferred
                    consideration related to purchase of Guideline Research
                
                
                —
                
                
                (2,160
                )
                
                —Deferred
                    consideration related to purchase of Atlantic
                
                
                (500
                )
                
                —
                
                
                —Deferred
                    consideration related to purchase of Signia
                
                
                (280
                )
                
                —
                
                
                —Capital
                    expenditures
                
                
                (774
                )
                
                (431
                )
                
                (532
                )Purchase
                    of minority interest
                
                
                (100
                )
                
                —
                
                
                —Sale
                    of securities
                
                
                (87
                )
                
                —
                
                
                67Net
                    cash used in investing activities
                
                
                (1,587
                )
                
                (9,932
                )
                
                (2,033
                )Cash
                    flows from financing activities:Principal
                    borrowings under notes payable, net of closing costs
                
                
                1,500
                
                
                8,500
                
                
                200Principal
                    payments under notes payable
                
                
                (3,505
                )
                
                (2,450
                )
                
                (5,576
                )Proceeds
                    from exercise of stock options and warrants
                
                
                425
                
                
                172
                
                
                45Issuance
                    of common stock
                
                
                —
                
                
                —
                
                
                13,500Costs
                    related to issuance of common stock
                
                
                (57
                )
                
                (22
                )
                
                (1,332
                )Payments
                    under capital leases
                
                
                (66
                )
                
                (96
                )
                
                (28
                )Proceeds
                    from satisfaction of employee loan
                
                
                —
                
                
                50
                
                
                —Increase
                    in deferred financing fees
                
                
                (10
                )
                
                (759
                )
                
                —Net
                    cash (used in) provided by financing activities
                
                
                (1,713
                )
                
                5,395
                
                
                6,809Net
                    increase (decrease) in cash and cash equivalents
                
                
                242
                
                
                (1,822
                )
                
                3,698Cash
                    and cash equivalents at beginning of year
                
                
                2,697
                
                
                4,519
                
                
                821Cash
                    and cash equivalents at end of year
                
                $
                2,939
                
                $
                2,697
                
                $
                4,519
 See
        accompanying notes to consolidated financial statements.
 F-6
 **Table
              of Contents**
  **GUIDELINE,
        INC. AND SUBSIDIARIES**
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2006, 2005 and 2004
 
 **(1)**
              **ORGANIZATION
                  AND NATURE OF OPERATIONS**
 
 GUIDELINE,
        INC. and its wholly-owned subsidiaries (collectively, "Guideline" or the
        "Company") is a single-source provider of customized business research and
        analysis. Through its end-to-end continuum of On-Demand Business Research,
        Custom Market Research, Strategic Intelligence and Product Development
        Intelligence, its research analysts create integrated solutions that enable
        clients to make informed decisions to address their critical business needs.
        The
        Company serves 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, the Company functions as its 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, the Company
        serves as a reliable supplemental resource to customers’ internal capabilities.
 
 On
        March
        13, 2006, by majority shareholder approval, the Company changed its name
        from
        FIND/SVP, Inc. to Guideline, Inc. to better communicate its strategy of guiding
        customers through their strategic business research and consulting needs.
 
 The
        Company is organized into four business segments: On-Demand Business Research,
        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, 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 known as Strategic Intelligence. Upon
        its
        acquisition in 2005, Atlantic’s operations and financial results were integrated
        into the business segment known as 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 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.
 
 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.
 F-7
 **Table
            of Contents**
  **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 Use”, 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 $229,000 and $146,000 of internal development
        and internal use software costs during the years ended December 31, 2006
        and
        2005, 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.
        The
        Company performs this test annually during its fiscal third
        quarter.
 F-8
 **Table
            of Contents**
 
 At
        December 31, 2006, there is $21,322,000 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, as defined, occurs. No such events occurred
        in
        2006 or 2005. As of December 31, 2006, there are intangible assets of $2,137,000
        on the balance sheet. Amortization of intangible assets for the years ended
        December 31, 2006, 2005 and 2004 amounted to $385,000, $297,000 and $135,000,
        respectively.
 
 **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.
 
 **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
 **Table
            of Contents**
 
 **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, 2006,
        2005
        and 2004, the difference between basic and diluted number of shares outstanding
        is as follows:
 
 Year
                  ended December 31,2006
              
              2005
              
              2004Basic
                  number of common shares
              
              
              20,677,503
              
              
              20,045,754
              
              
              17,212,834Effect
                  of dilutive securities:Warrants
              
              
              —
              
              
              909,589
              
              
              —Restricted
                  common shares
              
              
              —
              
              
              240,897
              
              
              —Stock
                  options
              
              
              —
              
              
              435,232
              
              
              —Diluted
                  number of common shares
              
              
              20,677,503
              
              
              21,631,472
              
              
              17,212,834
 
 Options,
        warrants and redeemable convertible preferred shares, including accrued
        preferred dividends, to purchase 7,789,908, 6,331,445 and 8,449,240 common
        shares during the years ended December 31, 2006, 2005 and 2004, 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, a 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, as a current liability
        on the Company’s balance sheet.
 F-10
 **Table
            of Contents**
 
 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 using the costs
        to
        total estimated costs method. 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. Losses on such contracts are recognized when probable.
  **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 due to the
        short
        term nature of these items.
 
 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.
 
 **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 “Accounting for Stock-Based
        Compensation - Transition and Disclosure”, 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).  In
        2004,
        the Company recorded a transition adjustment upon adoption of SFAS No. 123
        of
        $13,000 related to long-term deferred tax assets.
 
 In
        December 2004, the FASB issued the revised Statement of Financial Accounting
        Standards (“SFAS”) No. 123, “Share-Based Payment” (“SFAS 123 (R)”), which the
        Company adopted on January 1, 2006. 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 a result of adopting SFAS 123(R), the Company
        recognized an after-tax gain of $96,000 ($96,000 pre-tax), with an impact
        on
        basic and diluted earnings per share of $0.00, as the cumulative effect of
        a
        change in accounting principle attributable to the requirement to estimate
        forfeitures at the grant date instead of recognizing them as incurred. The
        adoption of SFAS 123(R) did not otherwise have a material effect on the
        consolidated financial statements for the year ended December 31,
        2006.
 F-11
 **Table
            of Contents**
 
 **APPLICATION
        OF SAB NO. 108**
 
 In
        September 2006, the Securities and Exchange Commission issued Staff Accounting
        Bulletin No. 108 (“SAB No. 108”), “ *Considering
        the Effects of Prior Year Misstatements when Quantifying Misstatements in
        Current Year Financial Statements* .”
SAB
        No. 108 addresses how the effects of prior year uncorrected misstatements
        should
        be considered when quantifying misstatements in current year financial
        statements. SAB No. 108 requires companies to quantify misstatements using
        a
        Rollover and Iron Curtain approach and to evaluate whether either approach
        results in quantifying an error that is material in light of relevant
        quantitative and qualitative factors. When the effect of initial adoption
        is
        material, companies will record the effect as a cumulative effect adjustment
        to
        beginning of year retained earnings. The Company has historically used the
        Rollover Method. The provisions of SAB No. 108 are effective for the Company
        for
        the year ended December 31, 2006. In connection with the application of SAB
        No.
        108, the Company has recorded a $447,000 charge to retained earnings which
        relates to (i) a $300,000 overstatement of deferred tax assets for miscellaneous
        adjustments that accumulated over several previous years and, (ii) a $147,000
        understatement of accrued expenses related to travel costs as of December
        31,
        2005. (See Note 10).
 
 **NEW
        ACCOUNTING PRINCIPLES**
 
 The
        FASB
        issued SFAS Statement No. 157 (“SFAS No. 157”), “ *Fair
        Value Measurements,* ”
in
        September 2006. This standard provides guidance on how to measure fair value
        where it is permitted or required under other accounting pronouncements.
        SFAS
        No. 157 also requires additional disclosures about fair value measurements.
        The
        Company will adopt SFAS No. 157 on January 1, 2008, and is currently assessing
        the impact of this standard.
 
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, “ *Accounting
        for Uncertainty in Income Taxes* ** *-* *an
        interpretation of FASB Statement No. 109* ”
(“
FIN
        48 ”),
        which
        will become effective for the Company on January 1, 2007. The Interpretation
        prescribes a recognition threshold and a measurement attribute for the financial
        statement recognition and measurement of tax positions taken or expected
        to be
        taken in a tax return. For those benefits to be recognized, a tax position
        must
        be more-likely-than-not to be sustained upon examination by taxing authorities.
        The amount recognized is measured as the largest amount of benefit that is
        greater than 50 percent likely of being realized upon ultimate settlement.
        The
        Company is currently evaluating the impact, if any, of the adoption of FIN
        48 on
        its financial statements.
 
 In
        February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), *The
        Fair Value Option for Financial Assets and Financial
        Liabilities* ,
        providing companies with an option to report selected financial assets and
        liabilities at fair value. SFAS 159’s objective is to reduce both complexity in
        accounting for financial instruments and the volatility in earnings caused
        by
        measuring related assets and liabilities differently. Accounting principles
        generally accepted in the United States has required different measurement
        attributes for different assets and liabilities that can create artificial
        volatility in earnings. SFAS 159 helps to mitigate this type of
        accounting-induced volatility by enabling companies to report related assets
        and
        liabilities at fair value, which would likely reduce the need for companies
        to
        comply with detailed rules for hedge accounting. SFAS 159 also establishes
        presentation and disclosure requirements designed to facilitate comparisons
        between companies that choose different measurement attributes for similar
        types
        of asset and liabilities. SFAS 159 requires companies to provide additional
        information that will help investors and other users of financial statements
        to
        more easily understand the effect of the Company’s choice to use fair value on
        its earnings. It also requires entities to display the fair value of those
        assets and liabilities for which the Company has chosen to use fair value
        on the
        face of the balance sheet. SFAS 159 is effective for fiscal years beginning
        after November 15, 2007. The Company is currently evaluating the impact of
        the
        adoption of SFAS 159 on its financial statements.
 F-12
 **Table
            of Contents**
 
 **RECLASSIFICATIONS**
 
 Certain
        prior year deferred tax asset and liability balances have been reclassified
        to
        conform to current year presentation.
 
 **(3)**
              **ACQUISITIONS**
 
 ***Atlantic
        Research & Consulting***
 
 On
        April
        1, 2005, the Company acquired all of the capital stock of Atlantic Research
        & Consulting, Inc. as per 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. As of Decem ber
        31,
        2006, the Company paid $500,000 in cash and issued 179,791 shares of
        unregistered Common Stock valued at $250,000, which represents the Year One
        Deferred Consideration (as defined in the Atlantic Purchase Agreement) earned,
        the payment of which is not contingent upon Hooper’s continued employment with
        the Company, and therefore, was recorded as additional goodwill. During 2006,
        the Company also paid $10,000 in cash related to previously accrued transaction
        fees. As of December 31, 2006, the Company has accrued approximately $750,000,
        which represents the estimated Year Two Deferred Consideration earned as
        of that
        date.
 
 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
                  $4,223,000 paid in cash (including $500,000 of deferred consideration
                  paid, $174,000 of transaction costs paid and net of cash acquired
                  of
                  $51,000); and
  F-13
 **Table
            of Contents**
  ·
              492,389
                  unregistered shares of the Company’s Common Stock, valued at $752,000. 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 per 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. As of
        December 31, 2006, the Company paid $280,000 in cash, which represents the
        One
        Year Deferred
        Consideration (as defined in the Signia Purchase Agreement) earned, the payment
        of which is not contingent upon House’s continued employment with the Company,
        and therefore, was recorded as additional goodwill. During 2006, the Company
        also paid $10,000 in cash related to previously accrued transaction fees. As of
        December 31, 2006, the Company has accrued approximately $280,000, which
        represents the estimated Two Year Deferred Consideration earned as of that
        date.
 
 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
                  $3,952,000 paid in cash (including $280,000 of deferred consideration
                  paid, $283,000 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
 **Table
            of Contents**
 
 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)
              
              $
              4,223,000
              
              $
              3,952,000
              
              $
              8,175,000Accrued
                  estimate of deferred consideration and transaction costs
              
              
              750,000
              
              
              280,000
              
              
              1,030,000Deferred
                  tax liability
              
              
              458,000
              
              
              302,000
              
              
              760,000Common
                  stock issued to sellers
              
              
              752,000
              
              
              301,000
              
              
              1,053,000Total
                  purchase consideration
              
              $
              6,183,000
              
              $
              4,835,000
              
              $
              11,018,000
 
 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 determined by management with
        the
        assistance of an independent appraisal firm. The purchase price allocations
        have
        been finalized with the exception of deferred consideration for Atlantic
        and
        Signia which will be determined for the periods ending March 31, 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 competitive
        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
              
              
              4,717,000
              
              
              4,024,000
              
              
              8,741,000Amortizable
                  intangible assets
              
              
              830,000
              
              
              529,000
              
              
              1,359,000Indefinite-lived
                  intangible assets
              
              
              265,000
              
              
              193,000
              
              
              458,000Total
                  purchase consideration
              
              $
              6,183,000
              
              $
              4,835,000
              
              $
              11,018,000
 
 Amortizable
        intangible assets, which generally include customer lists and non-compete
        agreements, are amortized over a period of 7 and 5 years,
        respectively.  Indefinite-lived intangible assets represent trade name
        intanible assets.
 
 The
        pro
        forma information below represents consolidated results of operations as
        if the
        acquisitions of Atlantic and Signia occurred on January 1, 2005. The 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
 **Table
            of Contents**
  *Pro
        Forma Results of Operations*
 
 **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
  **(4)**
              **EQUIPMENT,
                  SOFTWARE DEVELOPMENT AND LEASEHOLD IMPROVEMENTS,
                  NET**
 
 At
        December 31, 2006 and 2005, equipment, software development and leasehold
        improvements consist of the following:
 
 **2006**
              
              **2005**Furniture,
                  fixtures and equipment
              
              $
              9,255,000
              
              $
              8,624,000Software
                  development
              
              
              3,150,000
              
              
              3,432,000Leasehold
                  improvements
              
              
              2,430,000
              
              
              2,367,00014,835,000
              
              
              14,423,000Less:
                  accumulated depreciation and amortization
              
              
              12,607,000
              
              
              11,851,000$
              2,228,000
              
              $
              2,572,000
 
 The
        decrease in software development from 2005 to 2006 resulted from a $324,000
        write-off of the Company’s old website (www.findsvp.com), partially offset by
        the costs of developing the new website ( www.guideline.com ).
  Depreciation
        expense amounted to approximately $1,122,000, $1,009,000 and $740,000 for
        the
        years ended December 31, 2006, 2005 and 2004, respectively.
 
 **(5)**
              **GOODWILL
                  AND INTANGIBLES**
 
 **Goodwill:**
 
 The
        changes in the carrying amount of goodwill for the year ended December 31,
        2006
        and 2005 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, 2005
              
              $
              —
              
              $
              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
              
              
              18,245,000Additional
                  transaction costs related to acquisition of Atlantic
              
              
              —
              
              
              —
              
              
              10,000
              
              
              —
              
              
              10,000Additional
                  transaction costs related to acquisition of Signia
              
              
              —
              
              
              10,000
              
              
              —
              
              
              —
              
              
              10,000Adjustment
                  related to deferred taxes
              
              
              —
              
              
              302,000
              
              
              695,000
              
              
              —
              
              
              997,000Contractual
                  earnout adjustment
              
              
              —
              
              
              560,000
              
              
              1,500,000
              
              
              —
              
              
              2,060,000Balance
                  as of December 31, 2006
              
              $
              —
              
              $
              4,074,000
              
              $
              12,493,000
              
              $
              4,755,000
              
              $
              21,322,000
  F-16
 **Table
            of Contents**
  **Intangibles:**
 
 The
        table
        below represents the gross carrying amount, accumulated amortization, and
        amortization expense related to the Company’s intangible assets:
  **Gross
                    Carrying**
                
                **Accumulated****Amount**
                
                **Amortization****Amortized
                    intangible assets as of December 31, 2005**Customer
                    relationships and non-compete agreements
                
                $
                2,307,000
                
                $
                (515,000
                )**Amortized
                    intangible assets as of December 31, 2006**Customer
                    relationships and non-compete agreements
                
                $
                2,307,000
                
                $
                (900,000
                )**Aggregate
                    Amortization Expense:**For
                    the year ended December 31, 2004
                
                $
                135,000For
                    the year ended December 31, 2005
                
                $
                297,000For
                    the year ended December 31, 2006
                
                $
                385,000**Estimated
                    Amortization Expense:**For
                    the year ending December 31, 2007
                
                $
                385,000For
                    the year ending December 31, 2008
                
                $
                385,000For
                    the year ending December 31, 2009
                
                $
                385,000For
                    the year ending December 31, 2010
                
                $
                385,000
  **(6)**
                  **OTHER
                      ASSETS**
 At
        December 31, 2006 and 2005, other assets consist of the following:
 
 **2006**
              
              **2005**Deferred
                  charges, net
              
              $
              97,000
              
              $
              63,000Security
                  deposits
              
              
              145,000
              
              
              196,000Minority
                  interest investment
              
              
              123,000
              
              
              292,000Domain
                  name
              
              
              26,000
              
              
              26,000Marketable
                  equity securities
              
              
              61,000
              
              
              59,000Deferred
                  rent
              
              
              —
              
              
              30,000Cash
                  surrender value of life insurance
              
              
              127,000
              
              
              127,000Other
              
              
              6,000
              
              
              41,000$
              585,000
              
              $
              834,000
 
 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.
 F-17
 **Table
            of Contents**
 
 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.
 
 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, 2006 and 2005, the
        carrying value of these remaining preferred share securities is $23,000 which
        is
        included in Minority interest investment in the table above. 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.
 
 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 LLC joint venture. FIND.COM LLC 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 LLC related to
        FIND.COM LLC’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 LLC related to FIND.COM LLC’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 LLC related to FIND.COM LLC’s use
        of the underlying software which serves as the core search functionality
        powering the “find.com” website.
 F-18
 **Table
            of Contents**
 
 FIND.COM
        LLC 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 LLC 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 LLC. This represented
        the Company’s share of the net loss of FIND.COM LLC as of and for the year ended
        December 31, 2004. As of December 31, 2004, the Company’s investment in FIND.COM
        LLC was $167,000. The Company accounts for its investment in FIND.COM LLC 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. In accordance with the
        terms
        of the Operating Agreement of FIND.COM, LLC dated September 24, 2004, and
        a
        written consent executed by the members of FIND.COM, LLC, the Company expects
        to
        retain approximately 59% of the net proceeds (after payment of certain
        obligations and transaction costs related to FIND.COM, LLC) realized from
        this
        transaction, with the remainder being passed through to the remaining members
        of
        FIND.COM, LLC.
  During
        the years ended December 31, 2006 and 2005, the Company recorded a comprehensive
        loss of $86,000 (net of tax effect of $81,000) and $25,000,
        respectively, related to the change in the market value of its investment
        in
        Scientigo common stock. As a result, the Company’s investment in Scientigo was
        $49,000 as of December 31, 2006.
  Scientigo
        had 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.
        On July 10, 2006, the Company and Scientigo entered into Amendment No. 1
        to the
        Stock Repurchase Agreement (“Amendment No. 1”) and an allonge to a secured
        promissory note (“Amended Note”), whereby Scientigo was obligated to purchase
        the Company’s investment in Tigo Search by the earlier of (i) the date by
        which Scientigo raises $2,000,000 from certain debt and equity financing
        transactions, or (ii) October 10, 2006. The find.com URL and trademark
        license serve as collateral to secure obligations of Scientigo and Tigo Search
        under Amendment No. 1 and the Amended Note . The
        Company’s carrying value of its interest in Tigo Search was $269,000 as of
        December 31, 2005. The Company’s carry value was initially reduced by the fair
        value of a written option of approximately $21,000. As of December 31, 2006
        the
        fair value of the written option was $0 because Scientigo is obligated to
        purchase the Company’s investment in Tigo Search. The
        Company recorded the adjustment to the fair value of the option as a component
        of other income. Furthermore, the Company recorded an equity loss on investment
        of $34,000, representing its share of Tigo Search’s loss for the year ended
        December 31, 2006. During 2006, the Company received $87,000 in cash and
        shares
        of Scientigo stock valued at $205,000, representing the Company’s portion of the
        net proceeds from the Stock Repurchase Agreement, and recorded a net gain
        of
        $146,000 on its investment in Tigo.
 
 In
        December 2006, the Company received 290 shares of common stock from Armstrong
        World Industries as payment on outstanding invoices. As of December 31, 2006,
        these shares are recorded at their market value of $12,000, and are included
        within marketable equity securities in other assets.
 F-19
 **Table
            of Contents**
 
 In
        August
        2006, the Company made a $100,000 investment for a minority interest of 5.3%
        in
        DataBanq LLC (“Databanq”), a provider of search engine optimization strategies.
        The Company accounts for its investment in Databanq under the cost method.
        This
        investment is included in minority interest investment in the table
        above.
 
 In
        August
        2006, the Company received approximately $626,000, representing its share
        of the
        initial distribution of proceeds from the sale of Strategic Research Institute
        LLC (“SRI”). There is the possibility that future proceeds may be received from
        funds held in escrow reserved for possible claims against the seller’s
        representations and warranties. The Company cannot determine at this time
        whether such proceeds will be received or what amount they could be. This
        distribution was recorded as a gain on sale of investments during the year
        ended
        December 31, 2006.
 
 Amortization
        of deferred charges, relating to purchases of information databases, was
        $43,000
        and $44,000 for the years ended December 31, 2006 and 2005, respectively.
 
 **(7)**
                  **COMMITMENTS
                      AND
                      CONTINGENCIES**
 
 From
        time
        to time, the Company is subject to ordinary routine litigation incidental
        to its
        normal business operations. The Company is not currently a party to, and
        its
        property is not subject to, any material legal proceedings. However, in the
        future, the Company or its property may become subject to litigation, which
        if
        decided adversely to the Company, may have a material adverse effect on the
        Company.
 
 The
        Company’s leases of office space include standard escalation clauses. Rental
        expense under leases for office space was $1,901,000, $1,791,000 and $2,105,000
        in 2006, 2005 and 2004, respectively.
 
 The
        future minimum lease payments under non-cancellable operating leases as of
        December 31, 2006 were as follows:
 
 Year
                  ending December 312007
              
              $
              1,452,0002008
              
              
              1,304,0002009
              
              
              1,367,0002010
              
              
              1,266,0002011
              
              
              1,143,000Thereafter
              
              
              1,525,000Total
                  minimum lease payments
              
              $
              8,057,000
  F-20
 **Table
            of Contents**
  **(8)**
              **ACCRUED
                  EXPENSES**
 
 Accrued
        expenses at December 31, 2006 and 2005 consisted of the
        following:
 **2006**
              
              **2005**Accrued
                  bonuses and employee benefits
              
              $
              2,196,000
              
              $
              1,707,000Accrued
                  earnout
              
              
              1,030,000
              
              
              —Accrued
                  expenses incurred on behalf of clients
              
              
              414,000
              
              
              229,000Current
                  income taxes payable
              
              
              202,000
              
              
              —Accrued
                  electronic content costs
              
              
              201,000
              
              
              150,000Accrued
                  rent
              
              
              70,000
              
              
              —Accrued
                  severance
              
              
              53,000
              
              
              154,000Accrued
                  interest
              
              
              32,000
              
              
              73,000Accrued
                  SVP royalty
              
              
              14,000
              
              
              17,000Other
                  accrued expenses
              
              
              214,000
              
              
              (12,000
              )$
              4,426,000
              
              $
              2,318,000
 
 During
        2006 and 2005, the Company recorded additional accruals of $52,000 and $778,000,
        respectively, under a severance plan approved by the Board of Directors and
        communicated to employees. In 2006 and 2005, the Company paid $153,000 and
        $1,102,000 related to both severance plans. As of December 31, 2006, a balance
        of $53,000 remains accrued.
 
 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. In 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.
 
 **(9)**
              **NOTES
                  PAYABLE**
 
 Notes
        payable as of December 31, 2006 and 2005 consist of the following:
 
 **2006**
              
              **2005**Bank
                  borrowings under Term Facility
              
              $
              3,150,000
              
              $
              4,050,000Bank
                  borrowings under Revolving Facility
              
              
              1,000,000
              
              
              2,000,000Borrowings
                  under financing agreements:$344,000
                  Note Payable with vendor, at 9% interest, due December 31,
                  2008
              
              
              239,000
              
              
              344,000Total
                  notes payable
              
              
              4,389,000
              
              
              6,394,000Less
                  current installments
              
              
              2,005,000
              
              
              3,005,000Notes
                  payable, excluding current installments
              
              $
              2,384,000
              
              $
              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.
 F-21
 **Table
            of Contents**
 
 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.
 
 As
        of
        December 31, 2006, $3,150,000 remains outstanding under the Term Facility,
        and
        $1,000,000 remains outstanding under the Revolving Facility. Accrued but
        unpaid
        interest related to the Term Facility and Revolving Facility was approximately
        $32,000 and $73,000 as of December 31, 2006 and 2005, respectively. The Term
        Facility bears interest at LIBOR plus 3%, which was 8.35% and 7.05% at December
        31, 2006 and 2005, respectively, based on the LIBOR contracts in effect at
        that
        time. The Revolving Facility bears interest at LIBOR plus 2.75%, which was
        8.10%
        and 7.17% at December 31, 2006 and 2005, respectively, based on the LIBOR
        contracts that were in effect at that time. Interest expense related to the
        Term
        Facility was $292,000 and $186,000 for the years ended December 31, 2006
        and
        2005, respectively. Interest expense related to the Revolving Facility was
        $109,000 and $88,000 for the years ended December 31, 2006 and 2005,
        respectively. 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 $152,000 and $113,000 for the years ended December
        31, 2006 and 2005, respectively, and is included in interest expense.
 
 Loans
        under the Revolving Facility will be made available 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.
 F-22
 **Table
            of Contents**
 
 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 received a waiver from Fleet National Bank as of December 31, 2006
        with
        respect to the Net Income covenant of the Credit Agreement, but was in
        compliance with all other covenants. The Company expects to be in compliance
        with all covenants in 2007.
 
 **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. As of December 31, 2006, $239,000 remains outstanding under
        this
        agreement.
  **(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 $1,411,000, 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.
  **COMMON
        STOCK WARRANTS**
 
 During
        July 2006, 289,089 warrants, previously issued during a private placement
        in
        2003, were exercised at an exercise price of $1.47 per share. The Company
        received approximately $425,000 in proceeds from these exercises. Also in
        July
        2006, 519,204 warrants expired without being exercised.
 
 At
        December 31, 2006 and 2005, warrants to purchase 4,167,222 and 4,975,515,
        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 Guideline, Inc. 2003 Stock Incentive Plan, which was adopted
        by the
        Company’s Board of Directors on April 30, 2003. On April 27, 2006, the Board of
        Directors approved an amendment to the Guideline, Inc. 2003 Stock Incentive
        Plan
        (as amended, the “2003 Incentive Plan”), which was approved by the shareholders
        at the annual meeting of shareholders held on June 9, 2006, to increase the
        number of authorized shares of Common Stock that may be issued under the
        plan by
        1,250,000 shares to a total of 2,750,000 shares. Upon exercise of stock options,
        new common shares are issued from the Company’s authorized shares. Options
        granted under our other equity plans remain outstanding according to their
        terms.
 F-23
 **Table
            of Contents**
 
 The
        Company’s 1996 Stock Option Plan (the “1996 Plan” and together with the 2003
        Incentive Plan, the “Stock Option Plans”), 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
        Company utilizes the Black-Scholes option-pricing model to measure the fair
        value of stock options granted to employees. Stock options granted have exercise
        prices equal to the market price of the Company’s common stock on the date of
        grant. The principal assumptions utilized in valuing options and our methodology
        for estimating such model inputs include: 1) risk-free interest rate - estimate
        is based on the yield of U.S. zero coupon securities with a maturity equal
        to
        the expected life of the options, 2) expected volatility - estimate is based
        on
        the historical volatility of the Company’s common stock for the five years
        preceding the award date and 3) expected option life - estimate is based
        on
        internal studies of historical experience and projected exercise behavior
        of
        employees and specific option characteristics, including the effect of employee
        terminations.
 
 The
        per
        share weighted-average fair value of stock options granted during 2006, 2005
        and
        2004 was $0.73, $0.85 and $1.53, respectively. Such amounts were determined
        using the Black-Scholes option pricing model with the following weighted-average
        assumptions:
 
 **2006**
              
              **2005**
              
              **2004**Expected
                  dividend yield
              
              
              0
              %
              
              0
              %
              
              0
              %Risk-free
                  interest rate
              
              
              4.30%
                  to 4.88
              %
              
              3.12%
                  to 3.24
              %
              
              3.24%
                  to 3.81
              %Volatility
              
              
              67.09%
                  to 70.00
              %
              
              76.80%
                  to 77.39
              %
              
              88.60%
                  to 96.40
              %Expected
                  life
              
              
              5
                  years
              
              
              5
                  years
              
              
              5
                  years
 
 Stock
        based compensation expense was $792,000, $631,000 and $596,000 for the years
        ended December 31, 2006, 2005 and 2004, respectively.
 
 As
        of
        December 31, 2006, there was approximately $634,000 of total unrecognized
        compensation cost related to the nonvested share-based compensation awards
        granted under the stock option plans. That cost is expected to be recognized
        over a period of 4 years.
 F-24
 **Table
            of Contents**
 Activity
        under the stock option plans is summarized as follows:
 
 Available
                for
                grant
              
              Options
                Granted
              
              Weighted
                average
                exercise
                  price
              
              Weighted
                  average grant date fair valueJanuary
                  1, 2004
              
              
              1,411,438
              
              
              2,643,400
              
              $
              1.06
              
              $
              0.72Granted
              
              
              (857,750
              )
              
              857,750
              
              
              2.13
              
              
              1.53Exercised
              
              
              —
              
              
              (187,121
              )
              
              0.85
              
              
              0.42Cancelled
              
              
              472,978
              
              
              (472,978
              )
              
              1.74
              
              
              1.09December
                  31, 2004
              
              
              1,026,666
              
              
              2,841,051
              
              
              0.99
              
              
              0.92Granted
              
              
              (219,750
              )
              
              219,750
              
              
              1.33
              
              
              0.85Exercised
              
              
              —
              
              
              (405,250
              )
              
              0.43
              
              
              0.26Cancelled
              
              
              270,400
              
              
              (270,400
              )
              
              1.71
              
              
              1.23December
                  31, 2005
              
              
              1,077,316
              
              
              2,385,151
              
              
              1.38
              
              
              0.98Additional
                  shares authorized under the Plan
              
              
              1,250,000
              
              
              —
              
              
              —
              
              
              —Granted
              
              
              (78,750
              )
              
              78,750
              
              
              1.50
              
              
              0.73Exercised
              
              
              —
              
              
              (1,194
              )
              
              0.87
              
              
              0.50Cancelled
              
              
              79,110
              
              
              (79,110
              )
              
              2.05
              
              
              1.46No
                  longer available under the 1996 Plan
              
              
              (576,090
              )
              
              —
              
              
              —
              
              
              —December
                  31, 2006
              
              
              1,751,586
              
              
              2,383,597
              
              $
              1.36
              
              $
              0.96Exercisable
                  at December 31, 2006
              
              
              
              
              
              1,964,538
              
              $
              1.27
              
              $
              0.91Exercisable
                  at December 31, 2005
              
              
              
              
              
              1,722,734
              
              $
              1.21
              
              $
              0.86Exercisable
                  at December 31, 2004
              
              
              
              
              
              1,888,208
              
              $
              1.01
              
              $
              0.70
 
 **Outstanding**
              
              **Exercisable****Range**
              
              **Number
                  of****options**
              
              **Weighted
                  average exercise****price**
              
              **Aggregate
                  intrinsic value at**
                **December****31,
                  2006**
              
              **Remaining
                  average contractual****life
                  in years**
              
              **Number
                  of****options**
              
              **Weighted
                  average exercise****price**
              
              **Aggregate
                  intrinsic value at**
                **December****31,
                  2006**
              
              **Remaining
                  average contractual****life
                  in years**$0.41
                  - $0.50
              
              
              364,200
              
              $
              0.41
              
              $
              443,046
              
              
              4.84
              
              
              364,200
              
              $
              0.41
              
              $
              443,046
              
              
              4.84$0.63
                  - $0.83
              
              
              224,950
              
              $
              0.79
              
              
              188,607
              
              
              4.37
              
              
              224,950
              
              $
              0.79
              
              
              188,607
              
              
              4.37$0.97
                  - $1.40
              
              
              816,475
              
              $
              1.18
              
              
              366,531
              
              
              4.41
              
              
              756,942
              
              $
              1.19
              
              
              336,565
              
              
              4.41$1.42
                  - $1.84
              
              
              555,000
              
              $
              1.58
              
              
              40,315
              
              
              6.39
              
              
              336,230
              
              $
              1.60
              
              
              20,280
              
              
              6.39$1.90
                  - $3.69
              
              
              422,976
              
              $
              2.54
              
              
              —
              
              
              5.95
              
              
              282,216
              
              $
              2.60
              
              
              —
              
              
              5.952,383,601
              
              
              
              
              $
              1,038,499
              
              
              
              
              
              1,964,538
              
              
              
              
              $
              988,498
 
 During
        2006, options to purchase 78,750 shares of common stock were granted under
        the
        2003 Incentive Plan at an exercise price of $1.50. The options issued qualified
        as incentive stock options whereby the prices of the options were at fair
        market
        value at the time of grant.
 
 During
        2005, options to purchase 219,750 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 stock options whereby the prices of the options were
        at
        fair market value at the time of grant.
 F-25
 **Table
            of Contents**
 
 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.
 
 **RESTRICTED
        STOCK**
 
 In
        January 2005, 100,000 shares of restricted stock, with a grant-date fair
        value
        of $1.12 per share, were granted to the Company’s Chief Executive Officer under
        the 2003 Incentive Plan. In January 2006, an additional 150,000 shares of
        restricted stock, with a grant-date fair value of $0.70 per share, were granted
        under the 2003 Incentive Plan. In July 2006, an additional 48,528 shares
        of
        restricted stock, with a grant-date fair value of $1.49 per share, were granted
        under the 2003 Incentive Plan. These shares were calculated at fair value
        on the
        date of grant, and are being amortized over a vesting period of three years.
        Compensation expense related to these shares was $106,000 and $53,000 for
        the
        years ended December 31, 2006 and 2005, respectively. As of December 31,
        2006,
        there was $130,000 of total unrecognized compensation cost related to the
        nonvested portion of these awards. The above shares are only issued upon
        the
        request of the recipient. As of December 31, 2006, none of the above shares
        have
        been issued.
 
 In
        January 2005, 25,000 shares of restricted stock, with a grant-date fair value
        of
        $1.12 per share, were granted to the Company’s Chief Financial Officer under the
        2003 Incentive Plan. In January 2006, an additional 50,000 shares of restricted
        stock, with a grant-date fair value of $0.70 per share, were granted under
        the
        2003 Incentive Plan. In July 2006, an additional 16,415 shares of restricted
        stock, with a grant-date fair value of $1.49 per share, were granted under
        the
        2003 Incentive Plan. These shares were calculated at fair value on the date
        of
        grant, and are being amortized over a vesting period of three years.
        Compensation expense related to these shares was $33,000 and $13,000 for
        the
        years ended December 31, 2006 and 2005, respectively. As of December 31,
        2006,
        there was $41,000 of total unrecognized compensation cost related to the
        nonvested portion of these awards. The above shares are only issued upon
        the
        request of the recipient. As of December 31, 2006, none of the above shares
        have
        been issued.
 
 During
        2004, 100,000 shares of restricted stock, with a grant-date fair value of
        $2.55
        per share, were granted to the Company’s Chief Operating Officer under the 2003
        Incentive Plan. In July 2005, an additional 50,000 shares of restricted stock,
        with a grant-date fair value of $0.50 per share, were granted. In July 2006,
        an
        additional 206,203 shares of restricted stock, with a grant-date fair value
        of
        $1.49 per share, were granted under the 2003 Incentive Plan. These shares
        were
        calculated at fair value on the date of grant, and are being amortized over
        the
        vesting period of four years. Compensation expense related to these shares
        was
        $179,000, $79,000 and $47,000 for the years ended December 31, 2006, 2005
        and
        2004, respectively. As of December 31, 2006, there was $239,000 of total
        unrecognized compensation cost related to the nonvested portion of these
        awards.
        The above shares are only issued upon the request of the recipient. As of
        December 31, 2006, 150,000 shares have been issued.
 
 In
        July
        2006, a total of 142,008 shares of restricted stock, with a grant-date fair
        value of $1.49 per share, were granted to the members of the Company’s Board of
        Directors and to two of the Company’s Senior Managing Directors under the 2003
        Incentive Plan. These shares were calculated at fair value on the date of
        grant.
        The shares granted to the members of the Company’s Board of Directors are being
        amortized over the service period of one year. The shares granted to two
        of the
        Company’s Senior Managing Directors are being amortized over the vesting period
        of three years. Compensation expense related to these shares was $97,000
        for the
        year ended December 31, 2006. As of December 31, 2006, there was $115,000
        of
        total unrecognized compensation cost related to the nonvested portion of
        these
        awards. The above shares are only issued upon the request of the recipient.
        As
        of December 31, 2006, none of the above shares have been issued.
 F-26
 **Table
            of Contents**
 
 In
        August
        2006, 10,000 shares of restricted stock, with a grant-date fair value of
        $1.45
        per share, were granted to a member of the Company’s Board of Directors under
        the 2003 Incentive Plan. These shares were calculated at fair value on the
        date
        of grant, and are being amortized over the service period of one year.
        Compensation expense related to these shares was $7,000 for the year ended
        December 31, 2006. As of December 31, 2006, there was $8,000 of total
        unrecognized compensation cost related to the nonvested portion of these
        awards.
        The above shares are only issued upon the request of the recipient. As of
        December 31, 2006, none of the above shares have been issued.
 
 **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, 2006 and
        2005, there were 333,333 shares of redeemable convertible preferred stock
        outstanding.
  **ADJUSTMENT
            TO BEGINNING RETAINED EARNINGS**
 
 As
            discussed in Note 2, the Securities and Exchange Commission issued SAB No.
            108 which the Company adopted as of December 31, 2006. Prior to adopting
            SAB No.
            108, the Company used the Rollover method to quantify unrecorded adjustments
            and
            considered all unrecorded adjustments to be immaterial in accordance
            with the
            Rollover method. However, when quantifying unrecorded adjustments under
            the Iron
            Curtain method, the Company has concluded that the unrecorded adjustment
            related
            to deferred tax assets was material and the unrecorded adjustment related
            to an
            under accrual of travel expenses should be recorded. The Company has
            recorded the cumulative effect of these unrecorded adjustments as an
            adjustment
            to retained earnings as of the beginning of 2006, as permitted under
            the
            transition provisions of SAB No. 108.
 
 The
            nature of the adjustments and the impact on the Company’s consolidated balance
            sheet as of January 1, 2006 are presented below:
 Accrued
                      expensesand
                      other
                  
                  Deferred
                      taxassets
                  
                  RetainedearningsOverstatement
                      of deferred tax assets(1)
                  
                  $
                  --
                  
                  $
                  (300,000
                  )
                  $
                  (300,000
                  )Understatement
                      of accrued expenses(2)
                  
                  
                  147,000
                  
                  
                  --
                  
                  
                  (147,000
                  )$
                  147,000
                  
                  $
                  (300,000
                  )
                  $
                  (447,000
                  )(1)The Company adjusted the tax basis of property, plant and equipment
                      by
                      reducing deferred tax assets as a result of an overstatement
                      of these
                      deferred tax assets that accumulated over several previous
                      years.
                    (2)The Company recorded travel expenses incurred in 2005 as an
                      expense in
                      2006 when these expenses were paid. If the criteria in SAB
                      No. 108 were
                      applied, these expenses should have been recorded in 2005.
  The
              impact of these adjustments is summarized below:
 
 **Previously
                        Reported**
                    
                    **Adjustment**
                    
                    **As
                        Adjusted****For
                        the quarter ended March 31, 2006**
 Deferred
                          tax assets
                      
                      $
                      1,057,000
                      
                      $
                      (300,000
                      )
                      $
                      757,000
 Accrued
                        expenses
                    
                    
                    3,100,000
                    
                    
                    (61,000
                    )
                    
                    3,039,000Shareholders’
                        equity
                    
                    
                    21,606,000
                    
                    
                    (245,000
                    )
                    
                    21,361,000Selling,
                        general & administrative expenses
                    
                    
                    4,035,000
                    
                    
                    (61,000
                    )
                    
                    3,974,000Net
                        income attributable to shareholders
                    
                    
                    214,000
                    
                    
                    55,000
                    
                    
                    269,000Earnings
                        per share
                    
                    
                    0.01
                    
                    
                    0.00
                    
                    
                    0.01**For
                        the quarter ended June 30, 2006**
 Deferred
                          tax assets
                      
                      $
                      1,057,000
                      
                      $
                      (300,000
                      )
                      $
                      757,000
 Accrued
                        expenses
                    
                    
                    2,148,000
                    
                    
                    (11,000
                    )
                    
                    2,137,000Shareholders’
                        equity
                    
                    
                    22,095,000
                    
                    
                    (290,000
                    )
                    
                    21,805,000Selling,
                        general & administrative expenses
                    
                    
                    4,337,000
                    
                    
                    (11,000
                    )
                    
                    4,326,000Net
                        income attributable to shareholders
                    
                    
                    354,000
                    
                    
                    10,000
                    
                    
                    365,000Earnings
                        per share
                    
                    
                    0.02
                    
                    
                    0.00
                    
                    
                    0.02**For
                        the quarter ended September 30, 2006**
 Deferred
                          tax assets
                      
                      $
                      1,057,000
                      
                      $
                      (300,000
                      )
                      $
                      757,000
 Accrued
                        expenses
                    
                    
                    2,181,000
                    
                    
                    14,000
                    
                    
                    2,195,000Shareholders’
                        equity
                    
                    
                    23,555,000
                    
                    
                    (308,000
                    )
                    
                    23,247,000Selling,
                        general & administrative expenses
                    
                    
                    4,225,000
                    
                    
                    14,000
                    
                    
                    4,239,000Net
                        income attributable to shareholders
                    
                    
                    489,000
                    
                    
                    (8,000
                    )
                    
                    481,000Earnings
                        per share
                    
                    
                    0.02
                    
                    
                    0.00
                    
                    
                    0.02
 **(11)**
                  **INCOME
                      TAXES**
 
 The
        provision (benefit) for income taxes consists of the following:
 
 **2006**
              
              **2005**
              
              **2004**Current:Federal
              
              $
              400,000
              
              $
              402,000
              
              $
              —State
                  and local
              
              
              414,000
              
              
              138,000
              
              
              —$
              814,000
              
              $
              540,000
              
              $
              —Deferred:Federal
              
              $
              (116,000
              )
              $
              —
              
              $
              (533,000
              )State
                  and local
              
              
              98,000
              
              
              —
              
              
              (188,000
              )Change
                  in valuation allowance
              
              $
              (18,000
              )
              $
              —
              
              $
              (721,000
              )$
              (635,000
              )
              $
              (329,000
              )
              $
              721,000$
              161,000
              
              $
              211,000
              
              $
              —
  F-27
 **Table
            of Contents**
  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 2006 and 2005, there were
        releases of valuation allowance of $635,000 and $329,000, respectively, related
        to federal, state and local income taxes, as it was determined then that
        it was
        more likely than not that deferred tax assets will be fully realized during
        the
        carryforward period related to available net operating losses. Income tax
        provision (benefit) differs from the amount computed by multiplying the
        statutory rate to income before income taxes due to the following:
 
 **2006**
              
              **2005**
              
              **2004**Income
                  tax provision (benefit) at statutory rate
              
              $
              385,000
              
              $
              225,000
              
              $
              (681,000
              )Increase
                  (reduction) in income taxes resulting from:Change
                  in valuation allowance
              
              
              (635,000
              )
              
              (329,000
              )
              
              721,000State
                  and local taxes (benefit), net of federal income tax
                  benefit
              
              
              366,000
              
              
              92,000
              
              
              (122,000
              )Stock
                  compensation expense
              
              
              132,000
              
              
              199,000
              
              
              61,000Nondeductible
                  expenses
              
              
              28,000
              
              
              21,000
              
              
              22,000Other
              
              
              (115,000
              )
              
              3,000
              
              
              (1,000
              )$
              161,000
              
              $
              211,000
              
              $
              —
  The
        tax
        effects of temporary differences that give rise to significant portions of
        the
        deferred tax assets and liabilities at December 31, 2006 and 2005 are presented
        below:
 
 **2006**
              
              **2005**Current
                  deferred tax assets:Allowance
                  for doubtful accounts
              
              $
              41,000
              
              $
              47,000Severance
                  and separation charges
              
              
              42,000
              
              
              72,000Accrued
                  bonus
              
              
              287,000
              
              
              210,000Accrued
                  royalty
              
              
              —
              
              
              7,000Deferred
                  tax assets acquired from Guideline Research
              
              
              —
              
              
              150,000Other
              
              
              1,000
              
              
              —Current
                  deferred tax asset
              
              
              371,000
              
              
              486,000
 
 Current
                  deferred tax liabilities:Deferred
                  compensation
              
              
              —
              
              
              (100,000
              )Cash
                  to accrual liability assumed from Signia acquisition
              
              
              (60,000
              )
              
              (60,000
              )Current
                  deferred tax liability
              
              
              (60,000
              )
              
              (160,000
              )Net
                  current deferred tax asset
              
              $
              311,000
              
              $
              326,000
 
 Long-term
                  deferred tax assets:Federal
                  net operating loss carryforwards
              
              $
              126,000
              
              $
              467,000State
                  and local net operating loss carryforwards
              
              
              —
              
              
              337,000Deferred
                  compensation
              
              
              —
              
              
              66,000Depreciation
                  and amortization
              
              
              369,000
              
              
              838,000Stock
                  compensation expense
              
              
              250,000
              
              
              —Investments
              
              
              123,000
              
              
              78,000Other,
                  net
              
              
              (4,000
              )
              
              25,000Long-term
                  deferred tax asset before valuation allowance
              
              
              864,000
              
              
              1,811,000Valuation
                  allowance
              
              
              —
              
              
              (635,000
              )Long-term
                  deferred tax asset after valuation allowance
              
              
              864,000
              
              
              1,176,000
  F-28
 **Table
            of Contents**
 
 Long-term
                  deferred tax liabilities:Stock
                  compensation expense
              
              
              —
              
              
              (117,000
              )Cash
                  to accrual liability assumed from Signia acquisition
              
              
              (236,000
              )
              
              (236,000
              )Non-deductible
                  intangibles
              
              
              (731,000
              )
              
              —Other,
                  net
              
              
              —
              
              
              (141,000
              )Total
                  long-term deferred tax liabilities
              
              
              (967,000
              )
              
              (494,000
              )Net
                  long-term deferred tax (liability) asset
              
              $
              (103,000
              )
              $
              682,000
 
 Long-term
        deferred tax liabilities of $103,000 as of December 31, 2006 are included
        in
        deferred compensation and other liabilities on the accompanying balance
        sheet.
  Federal
        net operating loss carryforwards of $126,000 expire from 2020 to 2023.
 
 **(12)**
                  **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 $132,000, $109,000 and $116,000 for the years ended December 31,
        2006,
        2005 and 2004, respectively.
 
 **DEFERRED
                  COMPENSATION**
 
 The
        Company had 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 present value of the obligation
        as
        of December 31, 2003 was approximately $243,000. This was to 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. The remaining balance
        of $125,000 was paid during 2006.
 
 **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.
 F-29
 **Table
            of Contents**
 
 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, the Company has a salary
        commitment of $653,000 in the year ending December 31, 2007.
 
 **(13)**
              **SUPPLEMENTAL
                  CASH FLOW INFORMATION**
 
 Cash
        paid
        for interest and income taxes during the years ended December 31, 2006,
        2005 and 2004 was as follows:
 
 **2006**
              
              **2005**
              
              **2004**Interest
              
              $
              472,000
              
              $
              207,000
              
              $
              64,000Income
                  taxes
              
              $
              195,000
              
              $
              14,000
              
              $
              —
 
 Non-cash
        operating activities:
 
 In
        December 2006, the Company recorded taxes payable of $81,000 related to
        intangible tax amortization deductions.
 
 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.
 
 Non-cash
        investing activities:
  As
        of
        December 31, 2006, the Company has accrued $1,030,000 of deferred purchase
        price
        consideration.
 F-30
 **Table
            of Contents**
 
 In
        September 2006, the Company issued 179,791 shares of its Common Stock, valued
        at
        $250,000, representing the portion of One Year Deferred Consideration to
        be paid
        in shares of unregistered Common Stock to the former owner of
        Atlantic.
 
 As
        of
        December 31, 2006 and 2005, the Company has accrued approximately
        $34 ,000 ,
        which
        represents unpaid transaction costs related to the acquisitions of Atlantic
        and
        Signia.
 
 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 $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, 2006, the Company recorded the cashless exercise
        of
        5,250 options at prices ranging from $0.625 to $1.062, in exchange for 1,194
        shares of common stock at prices ranging from $1.20 to $1.29.
 
 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
        the years ended December 31, 2006, 2005 and 2004, the Company recorded preferred
        dividends of $64,000, $40,000 and $40,000, respectively.
 
 During
        the years ended December 31, 2006, 2005 and 2004, the Company recorded non-cash
        interest expense related to the amortization of deferred financing fees of
        $152,000, $113,000 and $223,000, respectively.
 
 During
        2004, the Company recorded additional accretion on redeemable common shares,
        issued in connection with the Guideline Research acquisition, of $113,000.
        These
        shares, valued at $1,090,000, were sold in private transactions during
        2005.
 F-31
 **Table
            of Contents**
 
 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.
 
 **(14)**
              **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)**2006**
              
              **2005**
              
              **2004****Revenues**On-Demand
                  Business Research
              
              $
              14,387
              
              $
              15,850
              
              $
              16,904Strategic
                  Intelligence
              
              
              4,584
              
              
              4,157
              
              
              1,936Custom
                  Market Research
              
              
              17,530
              
              
              14,410
              
              
              11,371Product
                  Development Intelligence
              
              
              9,784
              
              
              8,617
              
              
              8,226Total
                  revenues
              
              $
              46,285
              
              $
              43,034
              
              $
              38,437**Depreciation
                  and amortization**On-Demand
                  Business Research
              
              $
              685
              
              $
              963
              
              $
              577Strategic
                  Intelligence
              
              
              25
              
              
              33
              
              
              79Custom
                  Market Research
              
              
              66
              
              
              75
              
              
              36Product
                  Development Intelligence
              
              
              66
              
              
              93
              
              
              98Total
                  segment depreciation and amortization
              
              
              842
              
              
              1,164
              
              
              790Corporate
                  and other 2
              
              
              708
              
              
              186
              
              
              141Total
                  depreciation and amortization
              
              $
              1,550
              
              $
              1,350
              
              $
              931**Operating
                  income (loss)**On-Demand
                  Business Research
              
              $
              1,124
              
              $
              1,267
              
              $
              1,357Strategic
                  Intelligence
              
              
              818
              
              
              586
              
              
              164Custom
                  Market Research
              
              
              2,832
              
              
              1,380
              
              
              1,160Product
                  Development Intelligence
              
              
              1,236
              
              
              762
              
              
              922Segment
                  operating income
              
              
              6,010
              
              
              3,995
              
              
              3,603Corporate
                  and other1,2
              
              
              (5,093
              )
              
              (3,012
              )
              
              (3,859
              )Operating
                  income (loss)
              
              $
              917
              
              $
              983
              
              $
              (256
              )**Income
                  (loss) before taxes****1**On-Demand
                  Business Research
              
              $
              1,124
              
              $
              1,267
              
              $
              1,357Strategic
                  Intelligence
              
              
              825
              
              
              594
              
              
              164Custom
                  Market Research
              
              
              2,845
              
              
              1,378
              
              
              1,023Product
                  Development Intelligence
              
              
              1,233
              
              
              760
              
              
              782Segment
                  income before taxes
              
              
              6,027
              
              
              3,999
              
              
              3,326Corporate
                  and other2
              
              
              (4,928
              )
              
              (3,336
              )
              
              (5,271
              )Income
                  (loss) before taxes
              
              $
              1,099
              
              $
              663
              
              $
              (1,945
              )
  F-32
 **Table
            of Contents**
  
 **Total
                  Assets**On-Demand
                  Business Research
              
              $
              1,653
              
              $
              2,731Strategic
                  Intelligence
              
              
              1,794
              
              
              2,203Custom
                  Market Research
              
              
              4,788
              
              
              4,262Product
                  Development Intelligence
              
              
              4,303
              
              
              3,519Total
                  segment assets
              
              
              12,538
              
              
              12,715Corporate
                  and other 2
              
              
              27,328
              
              
              25,127Total
                  assets
              
              $
              40,166
              
              $
              37,842**Capital
                  Expenditures**On-Demand
                  Business Research
              
              $
              89
              
              $
              133
              
              $
              186Strategic
                  Intelligence
              
              
              2
              
              
              45
              
              
              8Custom
                  Market Research
              
              
              126
              
              
              114
              
              
              23Product
                  Development Intelligence
              
              
              53
              
              
              —
              
              
              62Total
                  segment capital expenditures
              
              
              270
              
              
              292
              
              
              279Corporate
                  and other 2
              
              
              504
              
              
              139
              
              
              253Total
                  capital expenditures
              
              $
              774
              
              $
              431
              
              $
              5321Before
                  the impact of cumulative effect from change in accounting
                  principle.
                2Represents
                  assets and the effect of direct costs and selling, general and
                  administrative expenses not attributable to a single segment.
 
 **(15)**
              **UNAUDITED
                  QUARTERLY DATA (unaudited)**
 
 The
        following table sets forth selected quarterly data for the years ended December
        31, 2006 and 2005 (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
                  taxes1
              
              Net
                  income (loss) attributable to commonshareholders
              
              Income
                  (loss) per share:
                basic2
              
              Income
                  (loss) per share:
                diluted2March
                  31, 20063
              
              $
              11,256
              
              $
              334
              
              $
              201
              
              $
              269
              
              $
              0.01
              
              $
              0.01June
                  30, 20063
              
              
              11,962
              
              
              586
              
              
              411
              
              
              365
              
              
              0.02
              
              
              0.02September
                  30, 20063
              
              
              11,453
              
              
              423
              
              
              908
              
              
              481
              
              
              0.02
              
              
              0.02December
                  31, 2006
              
              
              11,614
              
              
              (426
              )
              
              (397
              )
              
              (145
              )
              
              (0.00
              )
              
              (0.00
              )March
                  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
              
              
              0.02
  1Before
                  the impact of cumulative effect from change in accounting
                  principle.
                2Quarterly data is rounded and totals may or may not equal year
                  end basic
                  and diluted earnings per share.
                3Results for the Company for the first three quarters of 2006
                    were
                    adjusted. (See Note 10).
 
 As
        discussed in Note 8 to the Consolidated Financial Statements, during 2006
        and
        2005, the Company recorded a charge to operations of $52,000 and $778,000,
        respectively, related to severance payments to be made to former employees.
        Approximately $1,247,000 and $1,339,000 was recorded related to discretionary
        bonus arrangements in the quarter ended December 31, 2006 and 2005,
        respectively.
 F-33
 **Table
            of Contents**
  Schedule
        II
 
 **GUIDELINE,
        INC. AND SUBSIDIARIES**
 
 Valuation
        and Qualifying Accounts
 
 Years
        ended December 31, 2006, 2005 and 2004
 (in
        thousands of dollars)
  Balance
                    at
                
                Additionsbeginning
                
                charged
                    to
                
                Write
                    offs
                
                Balance
                    at**Classification**
                
                of
                    year
                
                earnings
                
                (recoveries)
                
                end
                    of yearYear
                    ended December 31, 2006:Allowance
                    for doubtful accounts
                
                $
                112
                
                $
                135
                
                $
                148
                
                $
                99Year
                    ended December 31, 2005:Allowance
                    for doubtful accounts
                
                $
                164
                
                $
                85
                
                $
                137
                
                $
                112Year
                    ended December 31, 2004:Allowance
                    for doubtful accounts
                
                $
                271
                
                $
                129
                
                $
                236
                
                $
                164




F-34