**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, 2004**o
    **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**FIND/SVP,
      INC.**(Exact name of
      registrant as specified in its charter)
 
 
 **New
      York**
    
    **13-2670985**(State
      or other jurisdiction of incorporation or organization)
    
    (IRS
      Employer Identification Number)
 
 **625
Avenue of the Americas**
 **New
York, NY 10011**
 **(Address
and zip code of principal executive offices)**
 
 **Registrant's
telephone number, including area code: (212) 645-4500**
 
 **Securities
registered pursuant to Section 12(b) of the Act: None**
 
 **Securities
registered pursuant to Section 12(g) of the Act: Common Stock, par value $.0001
per share**
 
 **Title of each
      class:**
    
    **Name of each exchange on which
      registered:             
      None****Common Stock, $.0001 par
      value**
 **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 oNo x**
  **As
of June 30, 2004, the aggregate market value of the voting common stock held by
non-affiliates of the registrant was $27,005,396 based on the average bid and
ask price per share of the common stock on the OTC Bulletin Board on June 30,
2004, which was $2.38 per share.**
  **All
(i) executive officers and directors of the registrant and (ii) all persons
filing a Schedule 13D with the Securities and Exchange Commission in respect to
registrant’s common stock who hold 10% or more of the registrant’s outstanding
common stock, have been deemed, solely for the purpose of the foregoing
calculation, to be “affiliates” of the registrant.**
  **There
were 19,402,491 shares outstanding of the registrant’s common stock, par
value $.0001 per share, as of March 14, 2005.**
  **DOCUMENTS
INCORPORATED BY REFERENCE**
  Portions
of the Registrant’s Proxy Statement for the 2005 Annual Meeting of Stockholders,
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, 2004, are incorporated by reference
into Part III.
  1
  **FIND/SVP,
INC.**
 **INDEX
TO FORM 10-K**
 
 **Part
      I**
    
    PAGEItem
      1.
    Business
    3Item
      2.
    Properties
    10Item
      3.
    Legal
      Proceedings
    11Item
      4.
    Submission
      of Matters to a Vote of Security Holders
    11**Part
      II**Item
      5.
    Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
    12Item
      6.
    Selected
      Financial Data
    13Item
      7.
    Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
    14Item
      7A.
    Quantitative
      and Qualitative Disclosures About Market Risk
    37Item
      8.
    Financial
      Statements and Supplementary Data
    38Item
      9.
    Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
    38Item
      9A.
    Controls
      and Procedures
    38**Part
      III**
    
    38Item 10.
    Directors
      and officers of the Registrant
    38Item 11.
    Executive
      Compensation
    38Item 12.
    Security
      Ownership of Certain Beneficial Owners and Management
    38Item
      13.
    Certain
      Relationships and Related Transactions
    38Item 14.
    Principal
      Accountant Fees and Sevices
    38**Part
      IV**Item
      15.
    Exhibits
      and Financial Statement Schedules
    38Signatures
    
    45Exhibit
      Index
    
    E-1
 
   2
 
 **PART
I**
  **ITEM
1. BUSINESS**
  **BUSINESS
OVERVIEW**
  FIND/SVP,
Inc. and its wholly-owned subsidiaries (collectively, "FIND/SVP" or the
"Company" which may be also referred to in this report as “we”, “us” or
“our”)  provide a
full range of custom research, consulting, quantitative market research and
outsourced information services that address our customers’ critical business
information needs. 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. In
addition, with our acquisitions in 2003 of Guideline Research Corp.
(“Guideline”) and Teltech, as well as our internal development of new service
offerings, we also provide a range of specialized higher priced  research
and consulting services, such as quantitative custom market research and due
diligence research services, that address a particular strategic business
information need within specific markets such as R&D, Healthcare, Marketing
and Private Equity/Money Management.
  We were
incorporated in the State of New York in 1969. In 1971, we became affiliated
with SVP International S.A. ("SVP") through a licensing agreement (still in
effect today) 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.
  We sell
research and consulting services to over 1,750 corporate customers annually,
approximately 1,450 of which subscribe under recurring revenue contracts
generally averaging twelve months in length. Our customer base includes nearly
50% of the Fortune 100 companies, 25% of the Fortune 1000 companies and 500
customers with estimated annual revenues of $400 million or more. We perform
over 60,000 individual research assignments annually for our
customers.
  We are
organized into four business segments:
 
 ·
    QUICK
      CONSULTING SERVICE (“QCS”) is an on-demand subscription-based service that
      functions like a corporate research center for our customers. Customers
      pay a fixed monthly or annual fee for the right to access our in-house
      consulting staff on a continuous, 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
      CONSULTING AND RESEARCH GROUP (“SCRG”) provides in-depth custom research
      and competitive intelligence services which result in larger projects
      beyond the typical scope of our QCS service.·
    QUANTITATIVE
      MARKET RESEARCH, which commenced as a business segment upon our
      acquisition of Guideline in 2003, provides full service quantitative
      custom market research services, such as large-scale consumer surveys,
      both domestically and internationally. While Guideline has performed
      projects in virtually every industry, it maintains specialties in
      healthcare, consumer, legal, financial services and
    apparel.·
    TELTECH
      (“TELTECH”), also acquired in 2003, provides a full range of outsourced
      information and consulting services to customers in R&D and related
      technical sectors. Teltech’s services include subscription-based
      information and research services, in-depth strategic consulting services
      and outsourced management of corporate information
  centers.
   3
 
 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 95 full time researchers and consultants, access to approximately 1,500
computer databases and subscription-paid websites, 8,000 internal information
files, 5,000 books and reference works, 900 periodicals and trade journals, and
our internal database of over 500,000 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
1,700 outside consultants as part of our Expert Network.
  Our
growth strategy is to grow our base of customers, leverage the untapped
cross-selling opportunities from our acquisitions of Guideline and Teltech,
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.
 **RECENT
DEVELOPMENTS**
 
 On March
14, 2005, we entered into two separate Stock Purchase Agreements pursuant to
which we intend to acquire, subject to the terms of such Stock Purchase
Agreements, each of Atlantic Research & Consulting, Inc. and Signia
Partners, Inc. in April 2005. We intend to finance the acquisition with a
combination of our cash resources and/or funds obtained in connection with a
proposed senior credit facility with Bank of America. For more information
regarding the acquisitions of Atlantic Consulting & Research and Signia
Partners, please refer to Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations and Note 18 to our consolidated
financial statements included elsewhere in this Annual Report on Form 10-K for
the fiscal year ended December 31, 2004.
 **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 QCS division is small to medium sized companies, while Quantitative
Market Research and Teltech sell more to large companies. In terms of industry
focus, we maintain seven industry specialties as follows: Healthcare,
R&D/Engineering, Consumer Products, Industrial, Financial Services,
Technology and Business Management. However, we have also been successful in
selling to executives in various functional capacities, such as marketing
professionals, R&D professionals, market research professionals, strategic
planners, and information professionals, which cut across industry lines and
provide us with corporate customers in virtually every major industry.
Accordingly, we believe we are well diversified, and not dependent on any one
industry or market segment.
  However,
we do believe that there are certain macro trends which are positively impacting
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, 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, 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.
   4
 
 
 In terms
of size, the total available market for our services is very large. The U.S.
market for market research alone was over $6.7 billion in 2004 (as per
Datamonitor Market Research Global Industry Guide), while the markets for both
custom research/consulting and published information are also significant. While
large overall, these markets are fragmented, with even the largest participants
not maintaining dominant market shares. For example, we believe our Guideline
subsidiary was one of the top fifty custom market research firms in the U.S. in
2004.
  **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
Operations” 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 additional 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 60%
      of our revenues in 2004, 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 our acquisitions of
      Guideline and Teltech, 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 acquisitions of Guideline and Teltech have created
      cross-selling opportunities. For example, approximately 1,000 individual
      cardholders of our QCS service have the words “Market Research” in their
      title, representing prime cross-selling candidates for Guideline’s market
      research services, which we did not offer prior to 2003. Also, our
      1,148****QCS
      client companies include very few R&D departments, providing
      cross-selling opportunities for Teltech, which specializes and has a
      leading market position in the R&D
market.
  ·
    *Satisfy
      a Larger Share of Customer Business Information Needs*.
      While our customers include some very large companies, including nearly
      50% of the Fortune 100, 25% of the Fortune 1000, and 500 with revenues of
      $400 million or more, 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.
   5
   ·
    *Leverage
      Existing Assets to Create New Products and Services*.
      We derive most of our revenues from custom research and consulting
      services provided for the one-time use of individual customers. We believe
      there are opportunities to leverage our database of over 500,000
      previously completed research assignments, our current volume of over
      60,000 research assignments annually, and our 95 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, the Company has adopted an aggressive sales
      strategy of identifying the specific business intelligence and research
      needs of prospective customers, and providing customized and/or
      pre-packaged solutions. As a result, the Company has materially expanded
      its internal product development efforts, yielding a far broader suite of
      client-centric products and services.
  *·*
    *Continue
      to evaluate making prudent acquisitions that Add Strategic Value and are
      Accretive to Earnings Per Share.*The
      Company may pursue strategic acquisitions that can cost-effectively add
      new clients, specific research and consulting knowledge or technological
      expertise to accelerate the Company’s access to existing or new markets.
      FIND/SVP plans to be very selective in its acquisition program and will
      focus on those businesses that broaden and complement its existing
      expertise, and are accretive to earnings.
 **PRODUCTS
& SERVICES**
  QUICK
CONSULTING AND RESEARCH SERVICE
  QCS
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. QCS 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 QCS, 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 QCS 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.
  When a
QCS 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.
   6
  While the
number of QCS subscription customers decreased in 2004, the average subscription
rate increased, reflecting our emphasis on generating more revenues per client.
At December 31, 2004, there were 1,148 QCS subscription customers, a 13.7%
decrease from December 31, 2003, and 8,071 holders of the Membership Card, a
9.7% decrease from December 31, 2003. However, the average annual QCS retainer
subscription rate at December 31, 2004 was $15,400, a 14.1% increase from
December 31, 2003. Revenues generated by QCS represented approximately 44%, 58%
and 88% of the Company's total revenues for the years ended December 31, 2004,
2003 and 2002, respectively. The dramatic change in QCS’s share of total
revenues in 2004 and 2003 resulted from the acquisitions of Guideline and
Teltech in addition to a decrease in the QCS subscription base.
 
 STRATEGIC
CONSULTING AND RESEARCH GROUP
  SCRG is
designed to handle more in-depth custom market research and competitive
intelligence assignments. The service is often used by the Company's QCS
retainer clients as a supplement to that service. 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 SCRG, the Company
provides research as well as interpretation and analysis. All projects are
quoted in advance and billed separately.
  QUANTITATIVE
MARKET RESEARCH
  Our
Guideline subsidiary provides quantitative custom market research (e.g., primary
surveys of large numbers of consumers or groups of respondents). Our studies,
which have an average selling price of over $40,000, typically involve
interviewing large numbers of respondents, ranging from 100 to over 1,000, to
obtain primary market data that cannot be obtained through secondary research
sources. They are custom-designed for, and proprietary to, each individual
client.
  Guideline
is typically brought in by a customer to help refine a strategic need into a
specific research design. Then Guideline designs the questionnaire or “script”,
which is used to interview respondents. Next Guideline hires outside field
contractors 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 Guideline converts the raw field responses into
usable market research data. Finally, Guideline prepares a formal report for the
customer which contains Guideline’s analysis of the data and any strategic
recommendations based on the data. Market applications for Guideline studies
include concept and product testing, positioning research, tracking research,
customer satisfaction surveys and legal claims substantiation.
  Guideline
studies are quoted and billed on a project-by-project basis.
  TELTECH
  Through
our Teltech subsidiary, we provide scientific and technical research,
information and management consulting to corporate R&D professionals and
information centers. Customers apply Teltech’s research, analysis and advisory
services to improve the speed and quality of their decision-making and problem
solving processes. Teltech partners with its corporate clients to define their
technical information needs, identify the best sources for satisfying those
needs, and implement the appropriate information-management
strategies.
   7
 
 Teltech
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.
  Teltech
classifies its services in four main categories:
 
 *On-Demand
      Information Services*.
      Teltech’s product offering 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. Teltech has a network of 10,000 leading experts in over 30,000
      technology and industry areas that clients can access
      on-demand.
 
 *In-depth Research*.
      Teltech conducts major custom research projects on a wide range of
      science, technology, and business topics to support strategic
      decision-making. Applications for Teltech’s in-depth research include
      market assessments for new products, product feasibility analyses,
      competitive intelligence studies, technology evaluations, M&A
      evaluations and intellectual property analyses.
 
 *Information Management Consulting*.
      Teltech provides comprehensive solutions designed to improve the
      effectiveness of information delivery, analysis, application, and use
      throughout organizations. Teltech provides consulting for information
      center optimization and provides custom virtual library solutions designed
      to improve an organization’s ability to access external information and
      expertise.
 
 *Outsourced Information Centers and Information
      Portals***.**Teltech
      has long term contracts with nine corporate customers pursuant to which
      Teltech actually serves as the complete outsourced information center for
      those customers. In these arrangements, Teltech typically builds and
      operates an online information portal which serves as the official virtual
      library for these customers. These portals are private labeled with the
      customers’ own names and logos, but typically contain the notation
      “Powered by Teltech”. These tend to be large contracts, resulting in an
      average of $310,000 of revenues each in
2004.
 Teltech
utilizes multiple contract forms and pricing arrangements to sell its services,
including annual subscription contracts, long-term outsourcing contracts and
per-transaction engagements. In 2004, approximately 50% of its revenues resulted
from annual subscription clients, 33% resulted from nine long-term outsourcing
contracts and 17% resulted from transaction engagements.
  **SALES
AND MARKETING**
  Our
primary sales and marketing goals are to expand our QCS and Teltech retainer
client bases, and to cross sell services among the respective customers of our
four business segments. Growth in our retainer base provides us increased
opportunities to sell other products and services. Our sales and marketing
techniques include advertising, direct mail, email, conference exhibits, sales
promotion activities and our web site. The direct costs of the Company's
advertising and public relations efforts are modest. Qualified leads are
followed up by our direct sales force, and are supplemented by referrals and
telemarketing efforts. Neither Guideline nor Teltech maintained direct sales
forces before we acquired them, so we intend to continue to increase their sales
and marketing efforts by applying our resources to sell their products. We also
maintain a staff of account development managers, whose primary function is to
interact regularly with our clients to ensure customer satisfaction and promote
our other products and services. Furthermore, within our QCS segment, several
consultants are relationship managers and further enhance our client
relationships. This provides us with an additional avenue to cross-sell
Guideline, Teltech and new internally-developed services to our existing
retainer clients.
   8
 ****
 ****
 **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 products 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 quantitative 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; an efficient
      range of service offerings, encompassing research, consulting and
      quantitative custom market research, which allows us to satisfy both the
      primary and secondary business intelligence needs of our customers;
  -
    a
      unique operating structure that allows us to offer custom research
      services in almost any size range, from $300 to $1 million, which enables
      us to satisfy a wide spectrum of our customers’ business information
      needs;
  -
    experience
      providing a total outsourced information solution to some of the world’s
      largest companies; and
  -
    one
      of the country’s largest private business libraries with access to
      approximately 1,500 computer databases and subscription-paid websites,
      8,000 internal information files, 5,000 books and reference works, 900
      periodicals and trade journals, and our internal database of over 500,000
      past completed research assignments.
  While we
believe these competitive factors position us well in the marketplace, many of
our direct and indirect competitors are substantially larger than we are and
have the resources necessary to develop many of the same capabilities. In
addition, the barriers to entry for some of our products and services are low.
As a result, new competitors may emerge and existing competitors may start to
provide additional or complementary services which would result in increased
competition for us.
   9
 ****
 ****
 **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 QCS and Teltech customers who renew and prepay
their annual subscriptions during this period. With regard to revenues, while
our historical QCS and SCRG segments are generally not seasonal, the acquired
Guideline and Teltech businesses have traditionally experienced stronger
revenues in the third and fourth quarters of the year. We believe this results
from customers who seek to fully utilize their annual internal information
budgets before the end of their fiscal years.
  **EMPLOYEES**
  As of
December 31, 2004, we had 204 full-time employees, including 38 marketing and
sales employees, 95 consultants and research analysts and 71 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.findsvp.* 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 the annual meeting of
shareholders, as soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and Exchange
Commission.
  **ITEM
2. PROPERTIES**
  At
December 31, 2004 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 offices of our QCS and SCRG business
      segments. 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
    $545,000.
   10
   ·
    Approximately
      20,000 square feet at 641 Avenue of the Americas, New York, New York. This
      lease is subject to standard escalation clauses, and expires in June 2005.
      Basic annual rent expense, determined on the straight-line basis over the
      term of the lease, is approximately $497,000. We will not be renewing or
      replacing this lease when it expires as we have sufficient capacity at our
      offices at 625 Avenue of the Americas to house all personnel and property
      currently residing there. Accordingly, we expect to save approximately
      $497,000 of basic rent expense annually beginning in July 2005, less
      approximately $210,000 of net-sublease
income.
  ·
    Approximately
      11,400 square feet at 3 West 35th Street, New York, NY, which is the
      principal location of our Quantitative Market Research business
      segment.
  ·
    Approximately
      7,900 square feet in Bloomington, MN which is the principal location of
      our Teltech business segment.
  ·
    Approximately
      4,000 square feet in Chicago, IL which is a satellite office of our
      Quantitative Market Research business
segment.
  The
future minimum lease payments under noncancellable operating leases related to
the above properties as of December 31, 2004 were as follows:
 
 Year
      ending December 31
    
    Operating
      Leases2005
    
    $
    1,160,0002006
    
    
    1,159,0002007
    
    
    1,150,0002008
    
    
    1,026,0002009
    
    
    1,082,000Thereafter
    
    
    3,493,000Total
      minimum lease payments
    
    $
    9,070,000
 ****
 ****
 **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
 
 11
 
 **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 “FSVP.OB”. There were
approximately 800 common shareholders of record on March 14, 2005. We
currently do not, and do not intend in the future, to pay cash dividends on our
common stock, and we are restricted from doing so under the terms of our debt
agreements. **** 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 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.
 
 Price
      Range
    
    High
    
    Low20041st
      Quarter
    
    
    2.70
    
    
    1.452nd
      Quarter
    
    
    2.80
    
    
    2.253rd
      Quarter
    
    
    2.40
    
    
    1.704th
      Quarter
    
    
    1.90
    
    
    1.3520031st
      Quarter
    
    
    1.38
    
    
    1.032nd
      Quarter
    
    
    1.60
    
    
    1.103rd
      Quarter
    
    
    1.90
    
    
    1.304th
      Quarter
    
    
    1.85
    
    
    1.28
 ****
 12
 ****
 ****
 **Item
6. Selected Financial Data**
 
 The
following table sets forth our selected financial data as of and for the years
ended December 31, 2004, 2003, 2002, 2001 and 2000. 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 Operations” of Part II of this
report as well as our consolidated financial statements and notes thereto. 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)2004
    
    2003
    
    2002
    
    2001
    
    2000Revenues
    
    $
    38,437
    
    $
    31,569
    
    $
    20,828
    
    $
    22,215
    
    $
    23,800Operating
      loss
    
    
    (256
    )
    
    (169
    )
    
    (1,683
    )
    
    (1,198
    )
    
    (632
    )Net
      loss
    
    
    (1,945
    )
    
    (947
    )
    
    (1,875
    )
    
    (995
    )
    
    (414
    )Net
      loss attributable to common shareholders1
    
    
    (2,098
    )
    
    (1,227
    )
    
    (1,875
    )
    
    (995
    )
    
    (414
    )Loss
      per common share:Basic
      and Diluted
    
    
    (0.12
    )
    
    (.10
    )
    
    (.18
    )
    
    (.13
    )
    
    (.06
    )Weighted
      average number of common shares:Basic
      and Diluted
    
    
    17,213
    
    
    11,766
    
    
    10,139
    
    
    7,880
    
    
    7,450Cash
      dividends paid per common share
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
 
 **Balance
Sheet Data**
 
 As
      of December 31(in
      thousands)2004
    
    2003
    
    2002
    
    2001
    
    2000Working
      capital (current assetsless
      current liabilities)2
    
    $
    2,832
    
    $
    (2,066
    )
    $
    (43
    )
    $
    (401
    )
    $
    (484
    )Total
      assets
    
    
    30,022
    
    
    22,968
    
    
    9,414
    
    
    10,692
    
    
    11,012Long-term
      notes payable,
      excluding
      current amounts
    
    
    —
    
    
    3,170
    
    
    1,200
    
    
    895
    
    
    1,685Shareholders'
      equity1
    
    
    18,120
    
    
    7,370
    
    
    3,589
    
    
    4,490
    
    
    3,992
 
 **1** **** Net
income (loss) attributable to common shareholders is the result of accretion on
redeemable common stock and accrued preferred dividends for 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, 2004 and 2003, the fair value of the redeemable common stock
was $1,090,000 and $977,000, respectively, resulting in $113,000 and $250,000 of
accretion for the years then ended. The maximum fair value of the redeemable
common is $1,090,000, as defined. Beginning at April 1, 2003, the Guideline
acquisition date, preferred dividends are accrued at 8% per annum on the
$500,000 preferred stock redemption value. At December 31, 2004 and 2003,
accrued dividends amounted to $70,000 and $30,000, respectively.
 
 2 Working
Capital includes $3,472,000, $3,612,000, $1,476,000, $1,753,000 and $2,071,000
of unearned income as of December 31, 2004, 2003, 2002, 2001 and 2000,
respectively. Such amounts reflect amounts billed, but not yet earned.
   13
  ****
 **Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations**
  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 Form 10-K.
  **General**
  FIND/SVP,
Inc. and our wholly-owned subsidiaries provide a full range of custom research,
consulting, quantitative market research and outsourced information services
that are designed to address our customers’ critical business information needs.
We function as many of our customers’ primary information and business
intelligence resource on an outsourced basis, especially among companies that
have downsized their internal research staffs and information resources. We also
serve as a reliable supplemental resource to customers’ internal capabilities.
As a result of our acquisitions in 2003 of each of Guideline and Teltech,
combined with further internal development of new service offerings, we provide
a range of specialized higher priced research and consulting services. For
example, we currently provide quantitative custom market research and due
diligence research services which serve to address particular strategic business
information needs within specific markets such as R&D, healthcare, marketing
and private equity/money management.
  We are
organized into four business segments: Quick Consulting Service, which is a
subscription-based service that functions like an in-house corporate research
center for our customers; Strategic Consulting and Research Group, which
provides in-depth custom research and competitive intelligence services for
larger projects; Quantitative Market Research, which provides full service
quantitative custom market research services, such as large-scale consumer
surveys; and Teltech, which provides a full range of outsourced information and
consulting services to customers in R&D and related technical sectors.
  On April
1, 2003, we acquired Guideline, and Guideline’s results of operations are
included in our results of operations as of such date.
  On July
1, 2003, we acquired Teltech, and Teltech’s results of operations are included
in our results of operations as of such date.
  **Results
of Operations - Calendar Year 2004 Compared to Calendar Year
2003**
  The
Company manages its consulting and business advisory services in the following
four business segments: Quick Consulting Service, Strategic Consulting and
Research Group, Quantitative Market Research and Teltech. The Company operates
primarily in the United States. Quantitative Market Research was added as a
segment as a result of the acquisition of Guideline on April 1, 2003. Teltech
was added as a segment as a result of its acquisition by the Company on July 1,
2003. See Note 3. “Acquisitions” to the financial statements for a more detailed
description of these acquisitions. References to "Corporate" and "Other" in our
financial statements refer to the portion of assets and activities that are not
allocated to a segment.
 
 14
  
 **Years
      Ended December 31,**(in
      thousands)**2004**
    
    **2003**
    
    **$
      Change**
    
    **%
      Change****Revenues**QCS
    
    $
    16,904
    
    $
    18,391
    
    $
    (1,487
    )
    
    (8.09
    )%SCRG
    
    
    1,936
    
    
    1,415
    
    
    521
    
    
    36.80
    %Quantitative
      Market Research
    
    
    11,371
    
    
    7,669
    
    
    3,702
    
    
    48.27
    %Teltech
    
    
    8,226
    
    
    4,094
    
    
    4,132
    
    
    100.93
    %Total
      revenues
    
    $
    38,437
    
    $
    31,569
    
    $
    6,868
    
    
    21.76
    %
 
 *Revenues*
  Revenues
increased from $31,569,000 in 2003 to $38,437,000 in 2004, which represents an
increase of 21.8% for the same period. The increase in revenue was due to the
acquisitions of Guideline on April 1, 2003, and Teltech on July 1, 2003, which
are described in “Acquisitions” below, and an increase in our SCRG segment,
offset by a decline in our QCS segment. Specifically, QCS was affected by
cancellations of retainer accounts during the year ended December 31, 2004 in
excess of new sales during the same period. We believe that cancellations
primarily resulted from continued uncertain general economic conditions, as well
as the perception among certain customers that they can satisfy their day-to-day
research needs internally, by using the internet. At the same time, we believe
that our current clients’ recognition of the importance of timely, competitive
market research was the primary factor contributing to the increase in SCRG
revenue.
  *QCS*
  QCS
revenues, which result from annual retainer contracts paid by clients on a
monthly, quarterly, semi-annual or annual basis, decreased by $1,487,000, or
8.1%, from $18,391,000 in
2003 to
$16,904,000 in
2004 . The
decrease from 2003 to 2004 was a result of 366 cancellations that were not
sufficiently offset by an increase in new client business despite increased
retainer rates. We believe that cancellations
were primarily a result of continued general uncertain economic conditions, as
well as the perception among certain customers that they can satisfy their
day-to-day research needs internally through the use of the
internet.
  *SCRG*
  SCRG
revenues, which result from more in-depth research and consulting engagements,
increased by $521,000, or 36.8%, from $1,415,000 in
2003 to
$1,936,000 in
2004 . The
increase from 2003 to 2004 was due to an increase in demand in several strategic
markets and incremental revenue from an initiative to develop major accounts,
which resulted in three projects with revenue of $483,000.
  *Quantitative
Market Research*
  Quantitative
Market Research revenues, which result from custom market research consulting
engagements, such as conducting surveys and focus groups, increased by
$3,702,000, or 48.3%, from $7,669,000 in
2003 to
$11,371,000 in
2004 . This is
primarily the result of a strong overall market research market, increased
demand from certain customers within its healthcare division and the addition of
ten new customers as a result of cross selling activities into the Company’s QCS
customer base. We acquired this line of business on April 1, 2003.
   15
 
 *Teltech*
  Teltech
revenues, which result from on-demand research, outsourced information services
and in-depth projects, increased by $4,132,000, or 100.9%, from $4,094,000 in
2003 to
$8,226,000 in
2004 . We
acquired this line of business on July 1, 2003.
 
 **Years
      Ended December 31,**(in
      thousands)**2004**
    
    **2003**
    
    **$
      Change**
    
    **%
      Change****Operating
      income (loss)**QCS
    
    $
    1,357
    
    $
    2,281
    
    $
    (924
    )
    
    (40.51
    )%SCRG
    
    
    164
    
    
    (526
    )
    
    690
    
    
    131.18
    %Quantitative
      Market Research
    
    
    1,160
    
    
    828
    
    
    332
    
    
    40.10
    %Teltech
    
    
    922
    
    
    408
    
    
    514
    
    
    143.14
    %Segment
      operating income
    
    
    3,603
    
    
    2,991
    
    
    612
    
    
    20.46
    %Corporate
      and other1
    
    
    (3,859
    )
    
    (3,160
    )
    
    (699
    )
    
    (22.12
    )%Operating
      income (loss)
    
    $
    (256
    )
    $
    (169
    )
    $
    (87
    )
    
    (51.48
    )%1Represents the effect of direct costs and selling, general and
      administrative expenses not attributable to a single segment.
 
 *Costs
of products and services sold*
  Direct
costs, which are those
costs directly related to generating revenue, such as direct labor, expenses
incurred on behalf of clients and the costs of electronic resources and
databases, increased by $5,141,000, or 29.8%, from $17,243,000 in 2003 to
$22,384,000 in 2004 . Direct
costs represented 58.2% and 54.6% of revenues in 2004
and 2003, respectively . The
increase in total direct costs was primarily the result of the acquisition of
Guideline during the quarter ended June 30, 2003 and the acquisition of Teltech
during the quarter ended September 30, 2003. The increase as a percentage of
revenue was due to an increase in stock compensation expense and increased
variable compensation expense related to one of the Guideline executives,
partially offset by a decrease in labor related to attrition. Guideline’s and
Teltech’s direct costs consist of both direct labor and direct costs, such as
subcontractors who perform fieldwork for many of their projects, annual costs
related to the use of external content providers, and other necessary costs
incurred in order to fulfill client requests. Exclusive of Guideline and
Teltech, direct costs decreased by approximately $548,000 from 2003 to 2004
primarily as a result of decreased
direct labor costs, inclusive of decreased stock compensation expense.
  *Selling,
general and administrative expenses*
  Selling,
general and administrative expenses increased by $1,814,000, or 12.5%, from
$14,495,000, or 45.9% of revenue, in
2003 to
$16,309,000, or 42.4% of revenue, in
2004 . The
increase in selling, general and administrative was due primarily to the
acquisitions of Guideline, which took place during the quarter ended June 30,
2003 (total Guideline selling, general and administrative expenses were
$1,676,000 in 2004), and Teltech, which took place during the quarter ended
September 30, 2003 (total Teltech selling, general and administrative expenses
were $2,210,000 in 2004), while the decrease as a percentage of revenue was due
to the lower overall selling, general and administrative percentages of
Guideline and Teltech. Exclusive of Guideline and Teltech, selling, general and
administrative expenses increased by $352,000, or 2.9%, from 2003 to 2004,
resulting primarily from an increase in labor costs as well as a $629,000
charge recorded for severance during 2004 and a $530,000 charge recorded as a
result of the abandonment of a lease during the second quarter of 2004, offset
by decreased stock compensation expense of approximately $705,000.
   16
 **
 **
 *Interest
income and expense*
  Interest
income increased by $12,000 from $2,000 in 2003 to $14,000 in 2004. The increase
in 2004 was a result of higher cash balances in interest bearing accounts
throughout 2004.
  Interest
expense increased by $922,000 from $687,000 in 2003 to $1,609,000 in 2004. The
increase was primarily the result of non-cash interest expense of $1,130,000,
representing the accretion of the difference between the initial relative fair
value and the stated value of the notes that the Company issued to Petra
Mezzanine Fund, L.P. in connection with the Guideline and Teltech acquisitions
(See “Liquidity and Capital Resources”). Furthermore, the Petra debt was repaid
in May 2004, and the remaining unamortized difference between the initial
relative fair value and the stated value of $1,039,000 was accreted at that
time. Total non-cash interest expense related to the Petra notes was $1,130,000
and $182,000 in 2004 and 2003, respectively.
  As a
result of the repayment of outstanding debt during May 2004, the Company
recorded additional non-cash interest expense of $223,000 relating to the
balance of any unamortized deferred financing fees associated with the Term
Note, the Note and the Second Note. Total non-cash interest related to the
amortization of deferred financing fees was $223,000 and $36,000 in 2004 and
2003, respectively.
  *Impairment
of investment*
  In March
2004, the Company reduced the value of its investment in idealab! to $90,000,
representing the value of the shares based on a repurchase offer by idealab!.
Accordingly, the Company recorded a $96,000 pre-tax charge during the quarter
ended March 31, 2004.
  In June
2004, 75% (or 3,750 shares) of the preferred shares held by the Company in
idealab! were redeemed for $66,806.
  *Unrealized
loss on investment*
  During
the year ended December 31, 2004, the Company recorded an unrealized loss of
$94,000 on its investment in Find.com, a joint venture in which the Company has
a 47.5% interest. This represents the Company’s share of the net loss of
Find.com as of and for the year ended December 31, 2004.
  *Other
income*
  We have a
9.1% interest in Strategic Research Institute, L.P. (“SRI”), and in March 2003,
received an $87,000 distribution in respect of that interest. We share in
profits of SRI, but do not share in losses. This is the only distribution that
we received from this partnership interest, and the distribution was recognized
as other income. SRI is a business conference and event company.
  We
received dividends of $30,000 related to our cash surrender value of life
insurance policies. This was reported as part of other income for the year ended
December 31, 2003.
  *Gain
on Sale of Assets*
  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.
   17
  **
 *Operating
Income (Loss)*
  Our
results of operations declined by $87,000 from a loss of ($169,000) in 2003 to a
loss of ($256,000) in 2004. This is primarily the result of the decline in QCS
and charges taken for severance and contingent payments, partially offset by a
decrease in stock compensation expense, and increases in performance in SCRG,
Guideline and Teltech. See “Acquisitions” below for a description of the
Guideline and Teltech transactions.
  *Income
Taxes*
  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.
  The
$210,000 income tax provision for the year ended December 31, 2003 represents
28% of pre-tax income. The income tax provision was different than the statutory
rate because expenses, such as certain stock compensation expense, meals and
entertainment and key-man life insurance premiums, which are not deductible for
tax purposes, resulted in a different effective tax rate than the statutory
rate.
  **Results
of Operations - Calendar Year 2003 Compared to Calendar Year 2002**
  The
Company manages its consulting and business advisory services in the following
four business segments: Quick Consulting Service, Strategic Consulting and
Research Group, Quantitative Market Research and Teltech. The Company operates
primarily in the United States. Quantitative Market Research was added as a
segment as a result of the acquisition of Guideline on April 1, 2003. Teltech
was added as a segment as a result of its acquisition by the Company on July 1,
2003. See Note 3. “Acquisitions” to the financial statements for a more detailed
description of these acquisitions. 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)**2003**
    
    **2002**
    
    **$
      Change**
    
    **%
      Change****Revenues**QCS
    
    $
    18,391
    
    $
    18,624
    
    $
    (233
    )
    
    (1.25
    )%SCRG
    
    
    1,415
    
    
    2,204
    
    
    (789
    )
    
    (35.80
    )%Quantitative
      Market Research
    
    
    7,669
    
    
    —
    
    
    7,669
    
    
    —Teltech
    
    
    4,094
    
    
    —
    
    
    4,094
    
    
    —Total
      revenues
    
    $
    31,569
    
    $
    20,828
    
    $
    10,741
    
    
    59.15
    %
 
 **
 *Revenues*
  Revenues
increased from $20,828,000 in 2002 to $31,569,000 in 2003. The increase in
revenue was due to the acquisitions of Guideline on April 1, 2003, and Teltech
on July 1, 2003, which are described in “Acquisitions” below, offset by declines
in our QCS and SCRG segments. Specifically, QCS was affected by cancellations of
retainer accounts, which were not sufficiently offset by new retainer sales
during 2003. We believe that cancellations primarily resulted from continued
weak general economic conditions, as well as the perception among certain
customers that research can be conducted internally using the internet. The
primary factor contributing to the decline in SCRG revenue was the decline in
the number of new projects booked, which we believe resulted primarily from weak
general economic conditions.
 
 
 18
 
 *QCS*
  QCS
revenues, which result from annual retainer contracts paid by clients on a
monthly, quarterly, semi-annual or annual basis, decreased by $233,000, or
1.25%, from $18,624,000 in 2002 to $18,391,000 in 2003. The decrease from 2002
to 2003 was a result of cancellations that were not sufficiently offset by new
clients and increased rates. We believe that cancellations
were primarily a result of continued weak economic conditions, as well as the
perception among certain customers that research can be conducted internally
using the internet. At
December 31, 2003, there were a greater number of annual renewals which were
billed than during the same period in the prior year, and this contributed to a
higher accounts receivable balance at December 31, 2003 than December 31, 2002.
The monthly fees billed to retainer clients (the retainer base) decreased from
the beginning of 2003 to the end of 2003 by 9.9%, from $1,488,338 to
$1,341,285.
  *SCRG*
  SCRG
revenues, which result from consulting engagements addressing clients’ business
issues, decreased by $789,000, or 35.8%, from $2,204,000 in 2002 to $1,415,000
in 2003. The decrease from 2002 to 2003 was due to the continued decline in new
projects booked, which we believe resulted primarily from weak general economic
conditions. The Customer Satisfaction Survey and Research Division accounted for
3.7% and 19.0% of SCRG’s revenue for 2003 and 2002, respectively. The Customer
Satisfaction Survey and Research Division was taken over by the Quantitative
Market Research segment during 2003.
  *Quantitative
Market Research*
  Quantitative
Market Research revenues, which result from custom market research consulting
engagements, such as conducting surveys and focus groups, were $7,669,000 from
the date of acquisition through December 31, 2003. We acquired this line of
business on April 1, 2003.
  *Teltech*
  Teltech
revenues, which result from on-demand research, outsourced information services
and in-depth projects, were $4,094,000 from the date of acquisition through
December 31, 2003.   We acquired this line of business on July 1,
2003.
 
 
 19
  **Years
      Ended December 31,**(in
      thousands)**2003**
    
    **2002**
    
    **$
      Change**
    
    **%
      Change****Operating
      income (loss)**QCS
    
    $
    2,281
    
    $
    3,986
    
    $
    (1,705
    )
    
    (42.78
    )%SCRG
    
    
    (526
    )
    
    (169
    )
    
    (357
    )
    
    (211.24
    )%Quantitative
      Market Research
    
    
    828
    
    
    —
    
    
    828
    
    
    —Teltech
    
    
    408
    
    
    —
    
    
    408
    
    
    —Segment
      operating income
    
    
    2,991
    
    
    3,817
    
    
    (826
    )
    
    (21.64
    )%Corporate
      and other1
    
    
    (3,160
    )
    
    (5,500
    )
    
    2,340
    
    
    42.55
    %Operating
      income (loss)
    
    $
    (169
    )
    $
    (1,683
    )
    $
    1,514
    
    
    89.96
    %1Represents the effect of direct costs and selling, general and
      administrative expenses not attributable to a single segment.
 
 *Costs
of products and services sold*
  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 $7,090,000, or 69.8%, from $10,153,000 in 2002 to
$17,243,000 in 2003 . Direct
costs represented 48.7% and 54.6% of revenues, respectively, in 2002 and 2003.
The increase in total direct costs was primarily the result of the acquisition
of Guideline during the quarter ended June 30, 2003 and the acquisition of
Teltech during the quarter ended September 30, 2003. Guideline’s and Teltech’s
direct costs consist of both direct labor and direct costs, such as
subcontractors who perform fieldwork for many of their projects, annual costs
related to the use of external content providers, and other necessary costs
incurred in order to fulfill client requests. Exclusive of Guideline and
Teltech, direct costs decreased as a result of decreased use of sub-contractors
in SCRG, and more favorable pricing from our use of outside electronic services.
Excluding potential acquisitions and factoring in the impact of a full twelve
months results of Guideline and Teltech, we expect direct costs as a percentage
of sales in 2004 to be consistent with 2003.
  *Selling,
general and administrative expenses*
  Selling,
general and administrative expenses increased by $2,137,000, or 17.3%, from
$12,358,000, or 59.3% of revenue, in 2002 to $14,495,000, or 45.9% of revenue,
in 2003. In 2003 and 2002, we recorded additional accruals of $468,000 and
$257,000, respectively, under a severance plan approved by our Board of
Directors. The increase in selling, general and administrative expenses was due
primarily to the acquisitions of Guideline, which took place during the quarter
ended June 30, 2003 (total Guideline selling, general and administrative
expenses were $1,405,000), and Teltech, which took place during the quarter
ended September 30, 2003 (total Teltech selling, general and administrative
expenses were $465,000). Also, selling, general and administrative expenses
increased from 2002 to 2003 partially as a result of stock compensation expense.
These were partially offset by various cost containment measures implemented
during the year ended December
31 , 2003.
Excluding potential acquisitions, we expect selling, general and administrative
expenses, exclusive of stock compensation expense, to increase in line with
inflation in 2004.
  *Interest
income and expense*
  Interest
income decreased by $13,000 from $15,000 in 2002 to $2,000 in 2003. The decrease
in 2003 was a result of lower cash balances in interest bearing accounts
throughout 2003.
   20
  Interest
expense increased by $531,000 from $156,000 in 2002 to $687,000 in 2003. The
increase was a result of additional borrowings, related to the acquisitions of
Guideline and Teltech, during the year ended December
31 , 2003,
which were partially offset by repayments on existing debt. Included in interest
expense was non-cash interest expense of $182,000, which was accreted as
additional interest expense due to the difference between the initial relative
fair value and the stated value of the notes that the Company issued to Petra
Mezzanine Fund, L.P. in connection with the above acquisitions.
  *Other
income*
  We have a
9.1% interest in SRI, and in March 2003, received an $87,000 distribution in
respect of that interest. We share in profits of SRI, but do not share in
losses. This is the only distribution that we received from this partnership
interest, and the distribution was recognized as other income. SRI is a business
conference and event company.
  We
received dividends of $30,000 related to our cash surrender value of life
insurance policies. This was reported as part of other income for the year ended
December 31, 2003.
  *Operating
Income (Loss)*
  Our
results of operations improved by $1,514,000 from a loss of ($1,683,000) in 2002
to a loss of ($169,000) in 2003. This is primarily the result of the
acquisitions of Guideline and Teltech during 2003, offset by decreases in QCS
and SCRG, and stock compensation expense. See “Acquisitions” below for a
description of the Guideline and Teltech transactions.
  *Income
Taxes*
  The
$210,000 income tax provision for the year ended December 31, 2003 represents
28% of pre-tax income. The income tax provision was different than the statutory
rate because expenses, such as certain stock compensation expense, meals and
entertainment and key-man life insurance premiums, which are not deductible for
tax purposes, resulted in a different effective tax rate than the statutory
rate.
  The
$264,000 income tax benefit for the year ended December 31, 2002 represents 12%
of pre-tax loss. In 2002, a valuation allowance was provided for certain state
and local carryforward net operating losses, as we determined that it was a
reasonable possibility that such assets would not be realized during the
carryforward period The income tax benefit was lower than the statutory rate due
primarily to the recording of a valuation allowance, and expenses, such as
certain stock compensation expense, meals and entertainment and key-man life
insurance premiums, which are not deductible for tax purposes.
   21
 **Segment
Data**
  The
Company manages its consulting and business advisory services in the following
four business segments: Quick Consulting, Strategic Consulting, Quantitative
Market Research and Teltech. The Company operates primarily in the United
States. Quantitative Market Research was added as a segment as a result of the
acquisition of Guideline on April 1, 2003. Teltech was added as a segment as a
result of its acquisition by the Company on July 1, 2003. See footnote 3
“Acquisitions” for a more detailed description of these acquisitions.
 **Years
      Ended December 31,**(in
      thousands)**2004**
    
    **2003**
    
    **2002****Revenues**QCS
    
    $
    16,904
    
    $
    18,391
    
    $
    18,624SCRG
    
    
    1,936
    
    
    1,415
    
    
    2,204Quantitative
      Market Research
    
    
    11,371
    
    
    7,669
    
    
    —Teltech
    
    
    8,226
    
    
    4,094
    
    
    —Total
      revenues
    
    $
    38,437
    
    $
    31,569
    
    $
    20,828**Operating
      income (loss)**QCS
    
    $
    1,357
    
    $
    2,281
    
    $
    3,986SCRG
    
    
    164
    
    
    (526
    )
    
    (169
    )Quantitative
      Market Research
    
    
    1,160
    
    
    828
    
    
    —Teltech
    
    
    922
    
    
    408
    
    
    —Segment
      operating income
    
    
    3,603
    
    
    2,991
    
    
    3,817Corporate
      and other1
    
    
    (3,859
    )
    
    (3,160
    )
    
    (5,500
    )Operating
      income (loss)
    
    $
    (256
    )
    $
    (169
    )
    $
    (1,683
    )**Income
      (loss) before taxes**QCS
    
    $
    1,357
    
    $
    2,281
    
    $
    3,986SCRG
    
    
    164
    
    
    (526
    )
    
    (169
    )Quantitative
      Market Research
    
    
    1,023
    
    
    408
    
    
    —Teltech
    
    
    782
    
    
    286
    
    
    —Segment
      income before taxes
    
    
    3,326
    
    
    2,449
    
    
    3,817Corporate
      and other1
    
    
    (5,271
    )
    
    (3,186
    )
    
    (5,956
    )Income
      (loss) before taxes
    
    $
    (1,945
    )
    $
    (737
    )
    $
    (2,139
    )**Depreciation
      and amortization**QCS
    
    $
    577
    
    $
    762
    
    $
    460SCRG
    
    
    79
    
    
    120
    
    
    59Quantitative
      Market Research
    
    
    36
    
    
    41
    
    
    —Teltech
    
    
    98
    
    
    47
    
    
    —Total
      segment depreciation and amortization
    
    
    790
    
    
    970
    
    
    519Corporate
      and other
    
    
    141
    
    
    173
    
    
    420Total
      depreciation and amortization
    
    $
    931
    
    $
    1,143
    
    $
    939**Total
      Assets**QCS
    
    $
    2,741
    
    $
    2,990SCRG
    
    
    597
    
    
    372Quantitative
      Market Research
    
    
    3,996
    
    
    3,071Teltech
    
    
    3,062
    
    
    2,377Total
      segment assets
    
    
    10,396
    
    
    8,810Corporate
      and other
    
    
    19,626
    
    
    14,158Total
      assets
    
    $
    30,022
    
    $
    22,968**Capital
      Expenditures**QCS
    
    $
    186
    
    $
    133
    
    $
    134SCRG
    
    
    8
    
    
    5
    
    
    3Quantitative
      Market Research
    
    
    23
    
    
    —
    
    
    —Teltech
    
    
    62
    
    
    —
    
    
    —Total
      segment capital expenditures
    
    
    279
    
    
    138
    
    
    137Corporate
      and other
    
    
    253
    
    
    319
    
    
    320Total
      capital expenditures
    
    $
    532
    
    $
    457
    
    $
    4571Represents the effect of direct costs and selling, general and
      administrative expenses not attributable to a single segment.
 
 In 2003,
the Company changed its internal overhead allocation methodology, including
depreciation and amortization, which resulted in greater amounts of corporate
overhead being allocated to the business segments in order to better gauge each
segments contribution to profitability. Also, the acquisitions of Guideline and
Teltech triggered a reapportionment of corporate overhead allocations to
business segments. Had this methodology been in place during 2002 segment
operating (loss) income and depreciation and amortization would have been, on a
pro forma basis, as follows:
 
 22
  **Years
      Ended December 31,**(in
      thousands)**2004**
      **actual**
    
    **2003**
      **actual**
    
    **2002**
      **pro
      forma****Operating
      (loss) income**QCS
    
    $
    1,357
    
    $
    2,281
    
    $
    1,386SCRG
    
    
    164
    
    
    (526
    )
    
    (428
    )Quantitative
      Market Research
    
    
    1,160
    
    
    828
    
    
    --Teltech
    
    
    922
    
    
    408
    
    
    --Segment
      operating income
    
    
    3,603
    
    
    2,991
    
    
    958Corporate
      and other
    
    
    (3,859
    )
    
    (3,160
    )
    
    (2,641
    )Operating
      loss
    
    $
    (256
    )
    $
    (169
    )
    $
    (1,683
    )**Depreciation
      and amortization**QCS
    
    $
    577
    
    $
    762
    
    $
    647SCRG
    
    
    79
    
    
    120
    
    
    85Quantitative
      Market Research
    
    
    36
    
    
    41
    
    
    --Teltech
    
    
    98
    
    
    47
    
    
    --Total
      segment depreciation and amortization
    
    
    790
    
    
    970
    
    
    732Corporate
      and other
    
    
    141
    
    
    173
    
    
    207Total
      depreciation and amortization
    
    $
    931
    
    $
    1,143
    
    $
    939
 
 **Quarterly
Financial Data**
 
 The
following table sets forth selected quarterly data for the years ended December
31, 2004 and 2003 (in thousands, except per share data). The operating results
are not indicative of results for any future period.
 
 Quarter
      ended
    
    Revenues
    
    Operatingincome
      (loss)
    
    Income
      (loss)before provision (benefit) forincome
      taxes
    
    Net
      income(loss)attributable to commonshareholders
    
    Income
      (loss)per share:
      basic1
    
    Income
      (loss)per share:
      diluted1March
      31, 2004
    
    $
    9,606
    
    $
    (547
    )
    $
    (868
    )
    $
    (987
    )
    $
    (0.07
    )
    $
    (0.07
    )June
      30, 2004
    
    
    9,711
    
    
    (672
    )
    
    (1,955
    )
    
    (1,399
    )
    
    (0.08
    )
    
    (0.06
    )September
      30, 2004
    
    
    9,915
    
    
    1,431
    
    
    1,369
    
    
    1,104
    
    
    0.08
    
    
    0.05December
      31, 2004
    
    
    9,205
    
    
    (468
    )
    
    (491
    )
    
    (816
    )
    
    (0.04
    )
    
    (0.04
    )March
      31, 2003
    
    $
    5,102
    
    $
    127
    
    $
    187
    
    $
    176
    
    $
    0.02
    
    $
    0.02June
      30, 2003
    
    
    7,063
    
    
    (865
    )
    
    (1,050
    )
    
    (1,160
    )
    
    (0.11
    )
    
    (0.11
    )September
      30, 2003
    
    
    9,168
    
    
    577
    
    
    371
    
    
    2
    
    
    0.00
    
    
    0.00December
      31, 2003
    
    
    10,236
    
    
    (9
    )
    
    (246
    )
    
    (262
    )
    
    (0.02
    )
    
    (0.02
    )1Quarterly data is rounded and totals may or may not equal year end basic
      and diluted earnings per share.
 As
discussed in Note 9 to the Consolidated Financial Statements, during 2004
the Company recorded a charge to operations of $604,000 related to severance
payments to be made to former employees. Approximately $75,000 was recorded
related to bonus and commission arrangements in the quarter ended December 31,
2004.
   23
 
 
 In the
fourth quarter of 2003, we recorded a charge of $309,000 related to the
retirement of our President. In the fourth quarter of 2003 a charge related to
severance costs of $127,000 was recorded. Also, approximately $217,000  was
recorded related to bonus and commission arrangements at December 31, 2003.
  **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 $4,519,000 and $821,000 at December 31, 2004 and 2003,
respectively. Our working capital position (current assets less current
liabilities) at December 31, 2004 was $2,832,000 as compared to $(2,066,000) at
December 31, 2003. Included in current liabilities is unearned retainer income
of $3,472,000 and $3,612,000 as of December 31, 2004 and 2003, respectively.
Such amounts reflect amounts billed, but not yet earned.
  Cash
(used in) provided by operating activities was $(1,078,000), $835,000 and
$(627,000) in the years ended December 31, 2004, 2003 and 2002, respectively. In
2004, the most significant operating activities were: a net loss of $1,945,00, 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 $305,000, 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 $2,033,000, $7,427,000 and $319,000 in the years
ended December 31, 2004, 2003 and 2002, respectively. The primary use of cash in
2004 was for costs related to the acquisition of Guideline of $1,127,000, and
Teltech of $441,000, primarily for contingent payments made to the former owners
in accordance with the acquisition agreements. The primary use of cash in 2003
was the acquisition of Guideline during the quarter ended June 30, 2003 for
$3,895,000, and the acquisition of Teltech during the quarter ended September
30, 2003 for $3,075,000. Capital expenditures during 2004, 2003 and 2002 were
mainly for computer hardware upgrades and leasehold improvements. Total capital
expenditures were $532,000, $457,000 and $457,000 in the years ended December
31, 2004, 2003 and 2002, respectively. During the year ending December 31, 2005,
we expect to spend approximately $600,000 for capital items, the major portions
of which will be used for computer hardware and software upgrades and for
leasehold improvements.
  Cash
provided by (used in) financing activities was $6,809,000, $6,445,000 and
$(37,000) in the years ended December 31, 2004, 2003 and 2002, respectively. In
2004, the most significant financing activities were: the net proceeds obtained
through the private placement of Common Stock in the aggregate amount of
$12,168,000, proceeds from the exercise of stock options of $45,000 and proceeds
obtained from borrowings under notes payable of $200,000, offset by principal
payments under notes payable of $5,576,000 and payments under capital leases of
$28,000. In 2003, the most significant items were: the net proceeds obtained
from the borrowings under notes payable of $2,688,000 related to the
acquisitions of Guideline and Teltech, offset by repayments of $435,000; the
issuance of preferred stock for $693,000; the issuance of warrants for
$1,507,000; the proceeds from the issuance of common stock in the aggregate
amount of $1,663,000; and, the proceeds from exercise of stock options of
$329,000. In 2002, the most significant items were: the proceeds obtained from
the borrowings under notes payable to JP Morgan Chase Bank of $3,230,000, offset
by repayments of former Senior Subordinated Notes under debt agreements with
previous investors of $3,243,000.
 
 
 
 24
 
 
 During
May 2004, the Company repaid the entire outstanding balance on a term note with
JP Morgan Chase Bank (the “Term Note”). The Term Note bore interest at prime
plus 1.25%. The repayment effectively terminates the Term Note and any remaining
obligations to the Term Note.
  The
Company maintains a $1,000,000 line of credit with JP Morgan Chase Bank (the
“Line of Credit”). The Line of Credit bears interest at prime plus 0.50% (5.75%
at December 31, 2004) and is renewable annually. During May 2004, the Company
repaid the entire outstanding balance. The Line of Credit contains certain
restrictions on the conduct of the Company’s business, including, among other
things, restrictions on incurring debt, and creating or suffering liens. At
December 31, 2004, the Company had the entire $1,000,000 Credit Line available
to use.
  The Line
of Credit is secured by a general security interest in substantially all of the
Company’s assets. Pursuant to Amendment No. 2 and Consent to Amended and
Restated Senior Grid Promissory Note, dated May 20, 2004, all financial
covenants previously related to the Line of Credit were eliminated.
  On April
1, 2003, the Company issued a Promissory Note (the “Note”), along with preferred
stock and warrants, with a face value of $3,000,000 and a stated interest
rate of 13.5%, as a part of the financing for the acquisition of Guideline. The
Note was recorded at its initial relative fair value of $1,868,000. The
difference between the initial relative fair value and the stated value was
accreted as additional interest expense over the maturities of the Note, and the
resulting effective interest rate was approximately 25%. During May 2004, the
Company repaid the outstanding principal balance of $3,000,000. Related interest
expense was $1,112,000 for the year ended December 31, 2004, of which $955,000
related to the non-cash accretion of the carrying value of the Note to the
stated value of the Note for the year ended December 31, 2004. The repayment
effectively terminates the Note and any remaining obligations under the Note.
  On July
1, 2003, the Company issued a Second Promissory Note (the “Second Note”), along
with warrants,  with a face value of $500,000 and a stated interest
rate of 13.5%, as a part of the financing for the acquisition of Teltech, a
former business unit of Sopheon Corporation. The Second Note was recorded at its
initial relative fair value of $320,000. The difference between the initial
relative fair value and the stated value was accreted as additional interest
expense over the maturities of the Second Note, and the resulting effective
interest rate was approximately 25%. During May 2004, the Company repaid the
outstanding principal balance of $500,000. Related interest expense was $202,000
for the year ended December 31, 2004, of which $175,000 related to the non-cash
accretion of the carrying value of the Second Note to the stated value of the
Second Note for the year ended December 31, 2004. The repayment effectively
terminates the Second Note and any remaining obligations under the
Second Note.
  On May
10, 2004 (the “Closing Date”), the Company raised $13,500,000 through a private
placement of (i) 6,000,000 shares of the Company’s Common Stock, and
(ii) warrants to purchase an aggregate of 3,000,000 shares of Common Stock.
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 $1,332,000, 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.
   25
 
 
 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 Line of Credit with JP Morgan Chase, will be sufficient to fund our
operations for the foreseeable future.
  **Contractual
Obligations**
  The
following table includes aggregate information about our contractual obligations
as of December 31, 2004 and the periods in which payments are due:
 
 As
      of December 31, 2004
      (in
      thousands)Total
    
    Less
      than 1 year
    
    1 -
      3 years
    
    3 -
      5 years
    
    After
      5 yearsLong
      term operating lease commitments
    
    $
    9,070,000
    
    $
    1,160,000
    
    $
    2,309,000
    
    $
    2,108,000
    
    $
    3,493,000Long
      term capital lease commitments
    
    
    365,000
    
    
    131,000
    
    
    234,000
    
    
    —
    
    
    —Deferred
      compensation and other
    
    
    264,000
    
    
    47,000
    
    
    74,000
    
    
    72,000
    
    
    71,000$
    9,699,000
    
    $
    1,338,000
    
    $
    2,617,000
    
    $
    2,180,000
    
    $
    3,564,000
 
 **Inflation**
  We have
in the past been able to increase the price of our products and services
sufficiently to offset the effects of inflation on direct costs, and anticipate
that we will be able to do so in the future.
  **Off-Balance-Sheet
Arrangements**
  As of
December 31, 2004, we did not have any off-balance-sheet
arrangements.
  **Critical
Accounting Policies**
  Our
management’s discussion and analysis of financial condition and results of
operations 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.
   26
 **
 **
 *Revenue
Recognition*
  Approximately
60% of the Company’s 2004 revenues were derived from subscription contracts with
customers, including all of the revenues of the QCS business segment and
approximately 50% of the revenues of the Teltech business segment. The remaining
40% of the Company’s 2004 revenues consisted of quantitative 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 QCS, charge customers fixed monthly
subscription fees to access QCS 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 Teltech business segment,
a customer pays a fixed annual fee, which entitles it to access any of the
Company’s service offerings throughout the contract period, up to the total
amount of the annual deposit fee. Since deposit account customers can “spend”
their contract fee at any time within the annual contract period, deposit
account revenues are only recognized within the contract period as services are
actually provided to customers, with any unused deposit amounts recognized as
revenue in the final month of the contract. As with retainer fees, deposit
contract fees are required to be paid in advance, primarily annually, and any
billed amounts relating to future periods are recorded as unearned retainer
income, a current liability on the Company’s balance sheet.
  With
regard to the Company’s non-subscription based services, including quantitative
market research, in-depth consulting and outsourced information services,
revenues are recognized primarily on a percentage-of-completion basis. The
Company typically enters into discrete contracts with customers for these
services on a project-by-project basis. Payment milestones differ from contract
to contract based on the client and the type of work performed. Generally, the
Company invoices a client for a portion of a project in advance of work
performed, with the balance invoiced throughout the fulfillment period and/or
after the work is completed. However, revenue and costs are only recognized to
the extent of each contract’s percentage-of-completion. Any revenue earned in
excess of billings is recorded as a current asset on the Company’s balance
sheet, while any billings in excess of revenue earned, which represent billed
amounts relating to future periods, are recorded as unearned revenue, a current
liability on the Company’s balance sheet.
  *Goodwill
and Intangibles*
  Goodwill
consists of the excess of the purchase price over the fair value of identifiable
net assets of businesses acquired. Effective January 1, 2002 we adopted
Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and
Other Intangible Assets,” under which goodwill is no longer amortized. Instead,
goodwill is evaluated for impairment using a two-step process that is performed
at least annually and whenever events or circumstances indicate impairment may
have occurred. The first step is a comparison of the fair value 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.
   27
 
 
 Intangible
Assets, including customer relationships, trademarks and other intangible assets
are amortized over their estimated useful lives unless they are deemed to have
indefinite useful lives. Upon the adoption of SFAS 142, intangible assets deemed
to have indefinite useful lives, such as trade names, are not amortized and are
subject to annual impairment tests. An impairment exists if the carrying value
of the indefinite-lived intangible asset exceeds its fair value. For other
intangible assets subject to amortization, an impairment is recognized if the
carrying amount is not recoverable and the carrying amount exceeds the fair
value of the intangible asset. Amortizable intangibles are tested for impairment
if a triggering event occurs.
  *Income
Taxes*
  Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis and operating
losses and tax credit carryforwards. Deferred tax assets and liabilities are
measured using currently enacted tax rates. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. We have tax loss carryforwards that have been
recognized as assets on our balance sheet. These assets are subject to
expiration from 2013 to 2023. Realization of the net deferred tax assets is
dependent on future reversals of existing taxable temporary differences and
adequate future taxable income, exclusive of reversing temporary differences and
carryforwards. In 2004 and 2002, after we performed an analysis of our deferred
tax assets and projected future taxable income, valuation allowances were
provided for various carryforward tax operating loss assets, as we determined
that it was more likely than not that these assets may not be fully realized
during the carryforward period.
  *Non-Marketable
Equity Securities*
  The
preferred share securities in idealab! is an investment in a start-up
enterprise. As of December 31, 2004, 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. These securities are accounted for
under the lower of cost or market method.
 
  28
  **New
Accounting Pronouncements**
  *Share-Based
Payment*
  In
December 2004, the Financial Accounting Standards Board (FASB) issued the
revised Statement of Financial Accounting Standards No. 123, “Share-Based
Payment” (“SFAS 123 (R)”). SFAS 123 (R) requires compensation costs related to
share-based payment transactions to be recognized in the financial statements.
Generally, compensation cost will be measured based on the grant-date fair value
of the equity or liability instruments issued. In addition, liability awards
will be remeasured each reporting period. Compensation cost will be recognized
over the requisite service period, generally as the award vests. The Company is
required to adopt SFAS 123 (R) in the fourth quarter of 2005. SFAS 123 (R)
applies to all awards granted after June 30, 2005 and to previously-granted
awards unvested as of the adoption date. The Company is currently evaluating the
effect of SFAS 123 (R) on its financial statements and related
disclosures.
  **Other
Commitments and Contingencies**
  Within
thirty days from the second anniversary date of the acquisition of Guideline, a
potential deferred consideration amount (the “Two Year Deferred Consideration”)
of $1.845 million contingent upon Guideline achieving adjusted EBITDA (as
defined in the purchase agreement) for the 24-month period following the
acquisition (“Two Year Adjusted EBITDA”) of $2.65 million plus 25% of the amount
by which Two Year Adjusted EBITDA exceeds $2.65 million would be due. If Two
Year Adjusted EBITDA is less than $2.65 million, but greater than $2.2 million,
the Two Year Deferred Consideration would be between $0 and $1.845 million based
on a specific formula set forth in the purchase agreement. 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.
  On March
14, 2005, we entered into two separate Stock Purchase Agreements pursuant to
which we intend to acquire, subject to the terms of such Stock Purchase
Agreements, each of Atlantic Research & Consulting, Inc. and Signia
Partners, Inc. in April 2005. We intend to finance the acquisition with a
combination of our cash resources and/or funds obtained in connection with a
proposed senior credit facility with Bank of America. For more information
regarding the acquisitions of Atlantic Consulting & Research and Signia
Partners, please refer to Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Subsequent Events and Note 18 to
our consolidated financial statements included elsewhere in this Annual Report
on Form 10-K for the fiscal year ended December 31, 2004.
 ****
 **Acquisitions**
  ***Guideline***
  On April
1, 2003, the Company purchased all of the issued and outstanding stock of
Guideline. Guideline is a provider of quantitative custom market research.
Guideline’s ability to provide high-level analytic survey research was a
strategic fit with the Company’s efforts to address its clients’ critical
business needs. The integration of Guideline’s services allowed the Company to
address the requirements of its many marketing and market research clients. The
addition of Guideline will also make the Company one of the first fully
comprehensive research and advisory firms to offer an inclusive suite of both
primary and secondary specialized business intelligence, strategic research and
consulting services. These factors contributed to a purchase price that resulted
in the recognition of goodwill of $7.4 million.
 
 The
consideration for this acquisition consisted of the following:
  ·
    Approximately $5,027,000 paid in cash (includes
      $431,000 of paid transaction costs during the year ended December 31, 2003
      and $86,000 of paid transaction costs during the year ended December 31,
      2004), net of cash acquired;·
    Of the amount paid in cash, a deferred
      consideration amount (the “One Year Deferred Consideration”) of $1 million
      was paid on May 24, 2004 as Guideline achieved adjusted EBITDA (as defined
      in the purchase agreement) for the twelve-month period following the
      acquisition (“One Year Adjusted EBITDA”) of at least $1.2
      million. On
      the same date, an additional $50,000 of advanced earnout was paid by the
      Company to an executive of Guideline, pursuant to an agreement between
      this executive, the former owners of Guideline and the
      Company.;·
    571,237 common shares valued at $760,000
      (295,043 of the common shares were placed in escrow to secure the
      indemnification obligations of the sellers); and·
    Within thirty days after the date of
      determination following the second anniversary date of the acquisition, a
      potential deferred consideration amount (the “Two Year Deferred
      Consideration”) of $1.845 million contingent upon Guideline achieving
      adjusted EBITDA (as defined in the purchase agreement) for the 24-month
      period following the acquisition (“Two Year Adjusted EBITDA”) of $2.65
      million plus 25% of the amount by which Two Year Adjusted EBITDA exceeds
      $2.65 million would be due. If Two Year Adjusted EBITDA is less than $2.65
      million, but greater than $2.2 million, the Two Year Deferred
      Consideration would be between $0 and $1.845 million based on a specific
      formula set forth in the purchase agreement. 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.
 
 
 29
 
 The
571,237 shares issued to the former owners of Guideline may be put back to the
Company during a 120-day period beginning April 5, 2005. Such shares are
classified in the balance sheet as redeemable common stock. If the shares are
put back to the Company, the cash to be paid by the Company will be equal to
150% of the initial redemption value of the shares, or $1,090,000. Based on the
fair value of the shares as of March 31, 2004, the Company recorded accretion on
redeemable common stock of $113,000 for the quarter ended March 31, 2004,
resulting in redeemable common stock having a carrying value of $1,090,000.
Therefore, no further accretion was required to be recorded for the nine months
ended December 31, 2004.
  This
acquisition was financed at closing with the combination of the Company’s cash
resources, the assumption of certain liabilities of Guideline and by the receipt
of cash of $3,303,000 (net of financing costs of $197,000) consisting of (a) a
promissory note with a $3,000,000 face value; (b) the issuance of 333,333 shares
of convertible, redeemable, Series A preferred stock (“Preferred Stock”); and
(c) the issuance of a warrant to purchase 675,000 common shares.
  The
333,333 shares of Preferred Stock were issued pursuant to a Series A Preferred
Stock Purchase Agreement (the “Preferred Stock Purchase Agreement”) dated April
1, 2003. These shares have been recorded at estimated fair value of $693,000
using the relative fair value method. 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. For the year ended December
31, 2004, the Company recorded preferred dividends of $40,000, resulting in a
redemption value for the Preferred Stock of $570,000 at December 31,
2004.
   30
 
 
 The
Company has finalized its valuation of the assets and liabilities acquired for
the allocation of the purchase price of the Guideline transaction as of December
31, 2004, with the exception of the Two Year Deferred Consideration, which is
contingent upon the financial performance of Guideline through April 1,
2005.
 
 ***Teltech***
  As of
July 1, 2003, Ttech Acquisition Corp. (“Ttech”), a subsidiary of the Company,
purchased from Sopheon Corporation (“Sopheon”) assets and assumed certain
specified liabilities of Sopheon’s Teltech business unit. Teltech is a provider
of custom research and information services, focused on R&D and engineering
departments of larger corporations, markets into which the Company was
interested in expanding. The Company believed this acquisition offered
significant cross-selling opportunities and cost synergies. These factors
contributed to a purchase price that resulted in the recognition of goodwill of
$4.8 million.
  The
consideration for this acquisition consisted of the following:
  ·
    Approximately
      $3,320,000 paid in cash (including $245,000 of transaction
      costs);
 
 ·
    Of
      the amount paid in cash, consideration of $200,000 was paid by the Company
      to Sopheon during the quarter ended June 30, 2004 in full satisfaction of
      an earnout, as defined in the purchase agreement dated June 25, 2003; and
 
 ·
    32,700
      unregistered shares of the Company’s Common Stock, valued at $50,000.
      These shares were placed in escrow to secure the indemnification
      obligations of the sellers set forth in the purchase agreement through
      June 25, 2004, pursuant to an escrow agreement among Sopheon, the Company,
      Ttech and Kane Kessler, P.C. (the “Escrow Agreement”). These shares were
      previously released to Sopheon from escrow during the second quarter of
      2004.
 
 The
Company has finalized its valuation of the assets and liabilities acquired for
its allocation of the purchase price of the Teltech transaction as of December
31, 2004.
  The
following table sets forth the components of the purchase price for both the
Guideline and Teltech acquisitions:
 
 **Guideline**
    
    **Teltech**
    
    **Total**Cash
      paid
    
    $
    5,027,000
    
    $
    3,520,000
    
    $
    8,547,000Accrued
      estimate of portion of Two Year Deferred
      Consideration
    
    
    2,030,000
    
    
    —
    
    
    2,030,000Common
      stock issued to sellers
    
    
    760,000
    
    
    50,000
    
    
    810,000Total
      purchase consideration
    
    $
    7,817,000
    
    $
    3,570,000
    
    $
    11,387,000
 
  31
  The
following table provides the fair value of the acquired assets and assumed
liabilities:
 
 **Guideline**
    
    **Teltech**
    
    **Total**Current
      assets
    
    $
    1,786,000
    
    $
    1,235,000
    
    $
    3,021,000Property
      and equipment
    
    
    89,000
    
    
    287,000
    
    
    376,000Other
      assets
    
    
    267,000
    
    
    —
    
    
    267,000Liabilities
      assumed, current
    
    
    (2,236,000
    )
    
    (3,358,000
    )
    
    (5,594,000
    )Liabilities
      assumed, non-current
    
    
    (67,000
    )
    
    —
    
    
    (67,000
    )Fair
      value of net liabilities assumed
    
    
    (161,000
    )
    
    (1,836,000
    )
    
    (1,997,000
    )Goodwill
    
    
    7,409,000
    
    
    4,755,000
    
    
    12,164,000Amortizable
      intangible assets
    
    
    421,000
    
    
    527,000
    
    
    948,000Indefinite-lived
      intangible assets
    
    
    148,000
    
    
    124,000
    
    
    272,000Total
      purchase consideration
    
    $
    7,817,000
    
    $
    3,570,000
    
    $
    11,387,000
 
 Amortizable
intangible assets, which generally include customer lists, are amortized over a
period of 7 years. Amortization of intangible assets was $135,000 and $83,000
for the years ended December 31, 2004 and 2003, respectively.
  The
unaudited pro forma information in the table below represents consolidated
results of operations as if the acquisitions of Guideline and Teltech had
occurred as of January 1, 2003. The unaudited pro forma information has been
included for comparative purposes and is not indicative of the results of
operations of the consolidated Company had the acquisition occurred as of
January 1, 2003, nor is it necessarily indicative of future
results.
 
 *Results
of Operations*
 
 **ActualTwelvemonthsended**
      **December31,**
    
    **Pro
      Forma**
      **Twelvemonthsended**
      **December31,****2004**
    
    **2003****(unaudited)**Total
      revenue
    
    $
    38,437,000
    
    $
    37,200,000Net
      loss
    
    $
    (1,945,000
    )
    $
    (1,018,000
    )Loss
      per share attributable to common shareholders:
      Basic
      and diluted
    
    $
    (0.12
    )
    $
    (0.08
    )
 
 **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 following:
 
 32
 ****
 **Factors
That Could Affect Our Future Results**
  ***We
are dependent on client renewals of our retainer-based
services.*** ****
  We
derived approximately 44% of our total revenues in 2004 from QCS, our
subscription-based retainer business. In the year ended December 31, 2004, QCS
experienced a 13.7% decrease in retainer clients, and a 9.7% decrease in holders
of it’s the QCS membership card. We may not be successful in maintaining
retainer renewal rates or the size of our retainer client base. Also, our
ability to renew retainer 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 large and growing number of highly
      talented professionals in a very competitive job
market.
 ·
    We
      may be unsuccessful in understanding and anticipating market trends and
      the changing needs of our clients.
 ·
    We
      may not be able to deliver products and services of the quality and
      timeliness to withstand competition.
 
 If we are
unable to successfully maintain our retainer rates or sustain the necessary
level of performance, such an inability could have a material adverse effect on
our business and financial results, which may require us to modify our business
objectives or reduce or cease some of the products and services that we
offer.
  ***We
are dependent on the revenue we receive from non-recurring SCRG and Quantitative
Market Research engagements.***
  We
derived approximately 6% of our revenues during the year ended December 31, 2004
from SCRG, and approximately 30% of our revenues during the year ended December
31, 2004 from Quantitative Market Research. We currently anticipate continued
growth in revenues from SCRG and Quantitative Market Research as projected
demand increases for projects of longer duration and complexity. SCRG and
Quantitative Market Research engagements vary in number, size and scope and
typically are project based and non-recurring. Our ability to replace completed
SCRG and Quantitative Market Research engagements with new engagements is
subject to a number of risks, including the following:
 
 ·
    We
      may be unsuccessful in delivering consistent, high quality and timely
      consulting services to our clients.
 ·
    We
      may not be able to hire and retain a large and growing number of highly
      talented professionals in a very competitive job market.
 ·
    We
      may be unsuccessful in understanding and anticipating market trends and
      the changing needs of our clients.
 ·
    We
      may not be able to deliver consulting services of the quality and
      timeliness to withstand competition.
 
 
 33
 
 If we are
not able to replace completed SCRG and Quantitative Market Research engagements
with new engagements, such an inability could have a material adverse effect on
our business and financial results, which may require us to modify our business
objectives or reduce or cease some of the products and services that we
offer.
  ***Our
operating results are subject to potential fluctuations beyond 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 QCS retainers that expire in the
      fourth quarter of each year.
 ·
    The
      level and timing of renewals of retainers and subscriptions of our QCS and
      Teltech services.
 ·
    The
      mix of QCS and Teltech revenue versus SCRG and Quantitative Market
      Research revenue.
 ·
    The
      number, size and scope of SCRG and Quantitative Market Research
      engagements 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 consultants and corporate sales personnel.
 ·
    Consultant
      utilization rates and specifically, the accuracy of estimates of resources
      required to complete ongoing SCRG and Quantitative Market Research
      engagements.
 ·
    Changes
      in the spending patterns of our clients.
 ·
    Our
      accounts receivable collection experience.
 ·
    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 be relied upon as an indication of
future results of operations.
  ***We
may not be able to timely respond to rapid changes in the market or the needs of
our clients.***
  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 often dramatic changes, including the following,
characterize our industry:
 
 ·
    Introduction
      of new products and obsolescence of others.
 ·
    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. We commit substantial resources to meeting
these challenges. If we fail to provide insightful timely information in a
manner that meets changing market needs, such a failure could have a material
and adverse effect on our future operating results.
 ******
 **
 34
 ******
 ***We
are dependent on our ability to attract and retain qualified
personnel.***
  We need
to hire, train and retain a significant number of additional qualified employees
to execute our strategy and support our growth. In particular, we need trained
consultants, corporate sales specialists, and product development and operations
staff. We continue to experience intense competition in recruiting and retaining
qualified employees. The pool of experienced candidates is small, and we compete
for qualified employees against many companies. If we are unable to successfully
hire, retain, and motivate a sufficient number of qualified employees, such an
inability will have a material adverse effect on our business and financial
results.
  ***We
face severe competition.*** ****
  The
consulting industry is extremely competitive. We compete directly with other
independent providers of similar services and indirectly with the internal
staffs of current and prospective client organizations. We also compete
indirectly with larger electronic and print media companies and consulting
firms. Our indirect competitors, many of which have substantially greater
financial, information gathering and marketing resources than us, could choose
to compete directly against us in the future.
  Our
current and future competitors may develop products and services that are more
effective than our products and services. Competitors may also produce their
products and services at less cost and market them more effectively. If we are
unable to successfully compete against existing or new competitors, such an
inability will have a material adverse effect on our operating results and would
likely result in pricing pressure and loss of market share.
  ***We
may not be successful in the development and marketing of new products or
services.***
  Our
future success depends on our ability to develop or acquire new products and
services that address specific industry and business sectors and changes in
client requirements. The process of internally researching, developing,
launching and gaining client acceptance of a new product or service is
inherently risky and costly. Assimilating and marketing an acquired product or
service is also risky and costly. Currently, we have formed several strategic
alliances with other information providers and various business associations in
order to expand our client base and allow for the rollout of a new service
continuum. If we are unable to develop new products and services or manage our
strategic investments, such inabilities could have a material adverse effect on
our operating results.
  ***We
are dependent on key personnel, the loss of any may adversely affect
us.***
  We rely,
and will continue to rely, in large part on our key management, research,
consulting, sales, product development and operations personnel. Our success in
part depends on our ability to motivate and retain highly qualified employees.
If a majority of the members of our Operating Management Group leave the
Company, such loss or losses could have a material adverse effect on
us.
  ***Our
product pricing may limit our potential market.***
  Our
pricing strategy may limit the potential market for our QCS, Teltech, SCRG, and Quantitative
Market Research services. As a result, we may be required to reduce prices for our various
services or to introduce new products and services with lower prices in order to
expand or maintain our market share or broaden our target market. These actions
could have a material adverse effect on our business and results of
operations.
 
 ******
 35
 ******
 ***We
may not be able to effectively manage our growth.***
  Growth
places significant demands on our management, administrative, operational and
financial resources. Our ability to manage growth, should it continue to occur,
will require us to continue to improve our systems and to motivate and
effectively manage an evolving workforce. If our management is unable to
effectively manage a changing and growing business, the quality of our products,
our retention of key employees, and our results of operations could be
materially adversely affected.
  ***Any
acquisitions that we attempt or complete could prove difficult to integrate or
require a substantial commitment of management time and other
resources.***
  As part
of our business strategy, we look to buy or make investments in complementary
businesses, products and services. If we find a business we wish to acquire, we
could have difficulty negotiating the terms of the purchase, financing the
purchase, including, without limitation, deferred consideration such as
earnouts, and integrating and assimilating the employees, products and
operations of the acquired business. Acquisitions may disrupt the ongoing
business of the Company and distract management. Furthermore, acquisition of new
businesses may not lead to the successful development of new products, or if
developed, such products may not achieve market acceptance or prove to be
profitable. A given acquisition may also have a material adverse effect on our
financial condition or results of operations. In addition, we may be required to
incur debt or issue equity to pay for any future acquisitions.
 
 ***We
are vulnerable to volatile market conditions.***
  The
market prices of our common stock have been highly volatile. The market has from
time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. Please see the
table contained in Item 5 “Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities” of Part II of
this report which sets forth the range of high and low bids of our common stock
for the calendar quarters indicated.
  ***We
do not expect to pay dividends on our common stock in the foreseeable future.***
  Although
our shareholders may receive dividends if, as and when declared by our board of
directors, we do not intend to pay dividends on our common stock in the
foreseeable future. Therefore, you should not purchase our common stock if you
need 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.***
  In April
2001, due to our failure to comply with NASDAQ’s minimum bid price, our common
stock was delisted from the NASDAQ and is now traded on the OTC Bulletin Board.
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 (the "Exchange Act"). 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 the common stock.
   36
 ******
 ***Recently
enacted and proposed regulatory changes will cause us to incur increased
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 as we evaluate
the implications of new rules and devote resources to respond to 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.
  **Subsequent
Events**
 
 **Agreement
to Acquire Atlantic Research & Consulting, Inc.**
 
 On March
14, 2005, the Company agreed to acquire all of the capital stock of Atlantic
Research & Consulting, Inc. (“Atlantic”) upon the terms and subject to the
conditions contained in the Stock Purchase Agreement (the “Atlantic Purchase
Agreement”) between the Company and Peter Hooper (“Hooper”), as the sole
stockholder of Atlantic. The consideration for this acquisition will consist of
$3,000,000 in cash payable at closing, $500,000 of unregistered shares of the
Company’s common stock issuable at closing, 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 the first day of the month following the closing date
exceeds $3,300,000, Hooper will also receive additional deferred consideration
equal to the amount of such excess multiplied by 0.50.
 
 The
Company intends to close the Atlantic acquisition during April of 2005, subject
to customary conditions set forth in the Atlantic Purchase Agreement. Atlantic
Research & Consulting, Inc., headquartered in Boston, Massachusetts, is a
rapidly growing quantitative and qualitative custom market research firm,
focusing on financial services, management consulting, health care, and public
sectors.
 
 Simultaneously
with the acquisition, Atlantic will enter into new employment agreements with
Hooper and two other senior executives of Atlantic.
 
 The
Company intends to finance the acquisition with a combination of the Company’s
cash resources and/or funds obtained in connection with a proposed senior credit
facility with Bank of America. Bank of America has issued a Commitment Letter
(the “Commitment Letter”) to the Company pursuant to which it agreed to provide
to the Company a senior secured credit facility in the aggregate amount of
$9,000,000 (the “Credit Facility”). The commitments contained in the Commitment
Letter are subject to usual and customary conditions and the Company cannot
guarantee that it will be able to close and receive the financing contemplated
in the Credit Facility.
 
 No
assurances can be given that the Atlantic acquisition will be consummated or, if
such acquisition is consummated, as to the final terms of such acquisition.
 
 **Agreement
to Acquire Signia Partners, Inc.**
 
 On March
14, 2005, the Company agreed to acquire all of the capital stock of Signia
Partners, Inc. (“Signia”) upon the terms and subject to the conditions contained
in the Stock Purchase Agreement (the “Signia Purchase Agreement”) between the
Company and Charles Douglas House (“House”), as the sole stockholder of Signia.
The consideration for this acquisition will consist of $3,400,000 in cash
payable at closing, $300,000 of unregistered shares of the Company’s common
stock issuable at closing, 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.
 
 The
Company intends to close the acquisition during April of 2005, subject to
customary conditions set forth in the Signia Purchase Agreement. Signia
Partners, Inc., headquartered just outside of Washington, D.C., is a leading
provider of in-depth business research and fact-based decision support, focusing
on the financial services, health care and consumer sectors.
 
 Simultaneously
with the acquisition, Signia will enter into new employment agreements with
House and two other senior executives of Signia.
 
 The
Company intends to finance the acquisition with a combination of the Company’s
cash resources and/or funds obtained in connection with the proposed Credit
Facility described above. The commitments contained in the Commitment Letter are
subject to usual and customary conditions and the Company cannot guarantee that
it will be able to close and receive the financing contemplated in the Credit
Facility.
 
 No
assurances can be given that the Signia acquisition will be consummated or, if
such acquisition is consummated, as to the final terms of such acquisition.
 
  **Item
7A. Quantitative and Qualitative Disclosures About Market
Risk**
  As of
December 31, 2004, our primary exposure to market risks included fluctuations in
interest rates on our short-term and long-term borrowings with an aggregate
balance of $1,876,000 under a term note and a $1,000,000 line of credit with JP
Morgan Chase Bank (respectively, the “Term Note” and “Line of Credit”). Based on
this balance, an immediate change of one percent in the interest rate would have
caused a change in interest expense of approximately $20,000 on an annual basis.
The Line of Credit bears interest at prime plus 0.50% (5.75% at December 31,
2004).
  During
May 2004, the Company repaid the entire outstanding balances on the Term Note
and the Line of Credit thereby significantly reducing our primary exposure to
market risks. The Company does, however, continue to maintain the Line of Credit
and any future borrowings thereunder, would increase our exposure to market
risk. Our objective in maintaining the Line of Credit 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 Line of Credit, were the Company to borrow thereunder, would have a
material adverse effect on our consolidated financial statements. However, no
assurance can be given that such a risk will not have a material adverse effect
on our financial statements in the future.
  There has
been no material change in our assessment of our sensitivity to market risk as
of December 31, 2004, as compared to the information included in Part II, Item
7A, “Quantitative and Qualitative Disclosures About Market Risk”, of our Form
10-K for the year ended December 31, 2003, as filed with the Securities and
Exchange Commission on March 26, 2004.
   37
 
 We do not
invest or trade in any derivative financial or commodity instruments, nor do we
invest in any foreign financial instruments. ******
  **Item
8. Financial Statements and Supplementary Data**
  The
response to this item is incorporated by reference from our Consolidated
Financial Statements and notes thereto which are included in this report
beginning on page F-1. Certain selected quarterly financial data is included
under Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations 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 such term is 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 period covered by
this report 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 period covered by this
report.
 **PART
III**
 
 The
information called for pursuant to this Part III, Items 10, 11,12,13 and 14 is
incorporated by reference from our definitive proxy statement, which we intend
to file with the Securities and Exchange Commission no later than April 30,
2005.
  **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, 2004 and 2003
    
    F-3Consolidated
      statements of operations - Years ended December 31, 2004, 2003 and 2002
    
    F-4Consolidated
      statements of changes in shareholders’ equity - Years ended December 31,
      2004,
      2003
      and 2002
    
    F-5Consolidated
      statements of cash flows - Years ended December 31, 2004, 2003 and
      2002
    
    F-6Notes
      to consolidated financial statements
    
    F-7
   38
 
 (2)
    Financial
      Statement Schedule:
  Valuation and Qualifying Accounts on Schedule
      II
    F-32
 
 (3)
    Exhibits:
   Exhibit
      Number
    
    Description
      of Exhibit2.1
    
    Stock
      Purchase Agreement, dated as of March 14, 2005, by and between Find/SVP,
      INC. and Peter Hooper (incorporated by reference to the Company’s Form 8-K
      filed on March 15, 2005)2.2
    
    Stock
      Purchase Agreement, dated as of March 14, 2005, by and
      among Find/SVP, Inc. and Charles Douglas House (incorporated by
      reference to the Company’s Form 8-K filed on March 15,
    2005)3.1
    
    Certificate
      of Incorporation of the Company(incorporated
      by reference to the Company’s Registration Statement on Form S-18 (Reg.
      No. 33-8634-NY) which became effective with the Securities and Exchange
      Commission on October 31, 1986)3.2
    
    Certificate
      of Amendment of Certificate of Incorporation of the Company(incorporated
      by reference to the Company’s Registration Statement on Form S-18 (Reg.
      No. 33-8634-NY) which became effective with the Securities and Exchange
      Commission on October 31, 1986)3.3
    
    Certificate
      of Amendment of Certificate of Incorporation of the Company(incorporated
      by reference to the Company’s Registration Statement on Form S-18 (Reg.
      No. 33-8634-NY) which became effective with the Securities and Exchange
      Commission on October 31, 1986)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).
  39
   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)4.1
    
    Specimen
      of the Company’s Common Stock Certificate (incorporated by reference to
      the Company’s Registration Statement on Form S-18 (Reg. No. 33-8634-NY)
      which became effective with the Securities and Exchange Commission on
      October 31, 1986)10.1
    
    License
      Agreement, dated October 11, 1971, between the Company and SVP
      International (incorporated by reference to the Company’s Registration
      Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with
      the Securities and Exchange Commission on October 31,
  1986)10.2
    
    Amendment
      to License Agreement, datedMarch
      23,1981,between
      the Company and SVP International (incorporated by reference to the
      Company’s Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which
      became effective with the Securities and Exchange Commission on October
      31, 1986)10.3
    
    Amendment
      to License Agreement, dated November 21, 2001, between the Company and SVP
      International (incorporated
      by reference to the Company’s Form 10-K filed for the year ended December
      31, 2002)10.4
    
    Lease,
      dated March 15, 1995, between Urbicum Associates, L.P. and the Company,
      related to premises on 4thfloor at 641 Avenue of the Americas, New York, NY (incorporated by
      reference to the Company’s Form 10-K filed for the year ended December 31,
      1994)10.5
    
    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)#10.6
    
    The
      Company’s 401(k) and Profit Sharing Plan (incorporated by reference to the
      Company’s Form S-8, filed on March 29, 1996)#10.7
    
    The
      Company’s 1996 Stock Option Plan (incorporated by reference to the
      Company’s Definitive Proxy Statement, filed on May 10,
    2002)10.8
    
    Stock
      Purchase Agreement, dated January 15, 1998, between SVP, S.A. and the
      Company (incorporated by reference to the Company’s Form 10-K filed for
      the year ended December 31, 1999)#10.9
    
    Amended
      and restated Employment Agreement, dated November 21, 2001, between the
      Company and Andrew P. Garvin (incorporated by reference to the Company’s
      Form 10-K filed for the year ended December 31, 2001)#10.10
    
    Amendment
      No. 1 to Amended and Restated Employment Agreement, dated December 31,
      2002, between the Company and Andrew P. Garvin (incorporated by reference
      to the Company’s Form 10-K filed for the year ended December 31,
      2002)
  40
  #10.11
    
    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)#10.12
    
    Employment
      Agreement, dated February 6, 2002, between the Company and Martin E.
      Franklin (incorporated by reference to the Company’s Form 10-K filed for
      the year ended December 31, 2001)#10.13
    
    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)#10.14
    
    Employment
      Agreement, dated May 13, 2002, between the Company and Daniel S.
      Fitzgerald (incorporated by reference to the Company’s Form 10-Q filed for
      the quarter ended June 30, 2002)#10.15
    
    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)10.16
    
    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)10.17
    
    Escrow
      Agreement, dated as of April 1, 2003, by and among Jay L. Friedland,
      Robert La Terra, Morris Whitcup, the Company, Inc. and Kane Kessler, P.C.
      (incorporated by reference to the Company’s Form 8-K filed on April 16,
      2003)#10.18
    
    Employment
      Agreement, dated as of April 1, 2003, by and between Jay L. Friedland and
      Guideline Research Corp. (incorporated by reference to the Company’s Form
      8-K filed on April 16, 2003)#10.19
    
    Employment
      Agreement, dated as of April 1, 2003, by and between Robert La Terra and
      Guideline Research Corp. (incorporated by reference to the Company’s Form
      8-K filed on April 16, 2003)#10.20
    
    Stock
      Option Agreement, dated April 1, 2003, by and between the Company and
      Robert La Terra (incorporated by reference to the Company’s Form 8-K filed
      on April 16, 2003)10.21
    
    Promissory
      Note, dated as of April 1, 2003, made by the Company in favor of Petra
      Mezzanine Fund, L.P. (incorporated by reference to the Company’s Form 8-K
      filed on April 16, 2003)10.22
    
    Loan
      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)10.23
    
    Security
      Agreement, dated as of April 1, 2003, made by the Company in favor of
      Petra Mezzanine Fund, L.P. (incorporated by reference to the Company’s
      Form 8-K filed on April 16, 2003)10.24
    
    Trademark
      and Patent Security Agreement, dated as of April 1, 2003, made by the
      Company in favor of Petra Mezzanine Fund, L.P. (incorporated by reference
      to the Company’s Form 8-K filed on April 16, 2003)
  41
  10.25
    
    Security
      Agreement, dated as of April 1, 2003, made by Guideline Research Corp.,
      Tabline Data Services, Inc., Guideline/Chicago, Inc., Advanced Analytics,
      Inc. and Guideline Consulting Corp. in favor of Petra Mezzanine Fund, L.P.
      (incorporated by reference to the Company’s Form 8-K filed on April 16,
      2003)10.26
    
    Guaranty
      Agreement, dated as of April 1, 2003, made by Guideline Research Corp.,
      Tabline Data Services, Inc., Guideline/Chicago, Inc., Advanced Analytics,
      Inc. and Guideline Consulting Corp. in favor of Petra Mezzanine Fund, L.P.
      (incorporated by reference to the Company’s Form 8-K filed on April 16,
      2003)10.27
    
    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)10.28
    
    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)10.29
    
    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)10.30
    
    Amended
      and Restated Term Promissory Note, dated as of April 1, 2003, made by the
      Company in favor of JPMorgan Chase Bank (incorporated by reference to the
      Company’s Form 8-K filed on April 16, 2003)10.31
    
    Amended
      and Restated Senior Grid Promissory Note, dated as of April 1, 2003, made
      by the Company in favor of JPMorgan Chase Bank (incorporated by reference
      to the Company’s Form 8-K filed on April 16, 2003)10.32
    
    Amendment
      No. 1 to Security Agreement, dated as of April 1, 2003, made by the
      Company and JPMorgan Chase Bank (incorporated by reference to the
      Company’s Form 8-K filed on April 16, 2003)10.33
    
    Subordination
      Agreement, dated as of April 1, 2003, Petra Mezzanine Fund, L.P., the
      Company, Guideline Research Corp., Tabline Data Services, Inc.,
      Guideline/Chicago, Inc., Advanced Analytics, Inc., Guideline Consulting
      Corp., and JPMorgan Chase Bank. (incorporated by reference to the
      Company’s Form 8-K filed on April 16, 2003)10.34
    
    Subsidiary
      Security Agreement**,**dated as of April 1, 2003, made by Guideline Research Corp., Tabline Data
      Services, Inc., Guideline/Chicago, Inc., Advanced Analytics, Inc. and
      Guideline Consulting Corp. in favor of JPMorgan Chase Bank (incorporated
      by reference to the Company’s Form 8-K filed on April 16,
      2003)10.35
    
    Subsidiary
      Guaranty Agreement, dated as of April 1, 2003, made by Guideline Research
      Corp., Tabline Data Services, Inc., Guideline/Chicago, Inc., Advanced
      Analytics, Inc. and Guideline Consulting Corp. in favor of JPMorgan Chase
      Bank (incorporated by reference to the Company’s Form 8-K filed on April
      16, 2003)10.36
    
    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)10.37
    
    Promissory
      Note, dated as of July 1, 2003, made by the Company in favor of Petra
      Mezzanine Fund, L.P. (incorporated by reference to the Company’s Form 8-K
      filed on July 16, 2003)
  42
  10.38
    
    Amended
      and Restated Loan Agreement, dated July 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 July 16, 2003)10.39
    
    First
      Amendment to Security Agreement, dated July 1, 2003, by and between the
      Company and Petra Mezzanine Fund, L.P. (incorporated by reference to the
      Company’s Form 8-K filed on July 16, 2003)10.40
    
    Amended
      and Restated Security Agreement, dated July 1, 2003, by and between
      Guideline Research Corp., Tabline Data Services, Inc., Guideline/Chicago,
      Inc., Advanced Analytics, Inc., Guideline Consulting Corp., and TTech
      Acquisition Corp. in favor of Petra Mezzanine Fund, L.P. (incorporated by
      reference to the Company’s Form 8-K filed on July 16,
  2003)10.41
    
    Amended
      and Restated Guaranty Agreement, dated July 1, 2003, by and between
      Guideline Research Corp., Tabline Data Services, Inc., Guideline/Chicago,
      Inc., Advanced Analytics, Inc., Guideline Consulting Corp., and TTech
      Acquisition Corp. in favor of Petra Mezzanine Fund, L.P. (incorporated by
      reference to the Company’s Form 8-K filed on July 16,
  2003)10.42
    
    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)10.43
    
    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)10.44
    
    Amendment
      No. 1 to Amended And Restated Term Promissory Note, dated as of July 1,
      2003, made by the Company in favor of JPMorgan Chase Bank (incorporated by
      reference to the Company’s Form 8-K filed on July 16,
  2003)10.45
    
    Amendment
      No. 1 to Amended And Restated Senior Grid Promissory Note, dated as of
      July 1, 2003, made by the Company in favor of JPMorgan Chase Bank
      (incorporated by reference to the Company’s Form 8-K filed on July 16,
      2003)10.46
    
    First
      Amendment to Subordination Agreement, dated July 1, 2003, by and among
      Petra Mezzanine Fund, L.P., the Company, Guideline Research Corp., Tabline
      Data Services, Inc., Guideline/Chicago, Inc., Advanced Analytics, Inc.,
      Guideline Consulting Corp., and TTech Acquisition Corp., and JPMorgan
      Chase Bank (incorporated by reference to the Company’s Form 8-K filed on
      July 16, 2003)10.47
    
    Subsidiary
      Security Agreement**,**dated as of July 1, 2003, made by TTech Acquisition Corp. in favor of
      JPMorgan Chase Bank (incorporated by reference to the Company’s Form 8-K
      filed on July 16, 2003)10.48
    
    Subsidiary
      Guaranty Agreement, dated as of July 1, 2003, made by TTech Acquisition
      Corp. in favor of JPMorgan Chase Bank (incorporated by reference to the
      Company’s Form 8-K filed on July 16, 2003)10.49
    
    2003
      Stock Incentive Plan (incorporated by reference to the Company’s
      Definitive Proxy Statement filed on April 30,
2003)
  43
  #10.50
    
    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)10.51
    
    Amendment
      No. 2 and Consent to Amended and Restated Senior Grid Promissory Note,
      dated May 20, 2004, between the Company and JPMorgan Chase Bank
      (incorporated by reference to the Company’s Form 10-Q filed on August 13,
      2004)10.52
    
    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)#10.53
    
    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)#10.54
    
    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)#10.55
    
    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)#10.56
    
    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)#10.57
    
    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)10.58
    
    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)10.59
    
    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)21.1
    
    List
      of Subsidiaries (Incorporated by reference to the Company’s Form 10-K for
      the year ended December 31, 2003, filed on March 26,
  2004)*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






**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.
 **FIND/SVP,
      INC.(Registrant)**By:
    **/s/
      David Walke**David
      Walke,
      Chief
      Executive OfficerMarch
      18, 2005
  
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 
 (1)
    Principal
      Executive Officer:**/s/
      David Walke**David
      WalkeChief
      Executive OfficerMarch
      18, 2005(2)
    Principal
      Financial Officer and Principal Accounting Officer:**/s/
      Peter M. Stone**Peter
      M. StoneChief
      Financial OfficerMarch
      18, 2005(3)
    Board
      of Directors:**/s/
      Andrew P. Garvin**Andrew
      P. GarvinFounder
      and DirectorMarch
      18, 2005**/s/
      Martin E. Franklin**Martin
      E. FranklinChairman
      of Board of DirectorsMarch
      18, 2005**/s/ David
      Walke**David
      WalkeDirectorMarch
      18, 2005**/s/
      Marc L. Reisch**Marc
      L. ReischDirectorMarch
      18, 2005**/s/
      Denise L. Shapiro**Denise
      L. ShapiroDirectorMarch
      18, 2005**/s/
      Brian Ruder**Brian
      RuderDirectorMarch
      18, 2005**/s/
      Warren Struhl**Warren
      StruhlDirectorMarch
      18, 2005
  45






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).
  E-1
   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)4.1
    
    Specimen
      of the Company’s Common Stock Certificate (incorporated by reference to
      the Company’s Registration Statement on Form S-18 (Reg. No. 33-8634-NY)
      which became effective with the Securities and Exchange Commission on
      October 31, 1986)10.1
    
    License
      Agreement, dated October 11, 1971, between the Company and SVP
      International (incorporated by reference to the Company’s Registration
      Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with
      the Securities and Exchange Commission on October 31,
  1986)10.2
    
    Amendment
      to License Agreement, datedMarch
      23,1981,between
      the Company and SVP International (incorporated by reference to the
      Company’s Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which
      became effective with the Securities and Exchange Commission on October
      31, 1986)10.3
    
    Amendment
      to License Agreement, dated November 21, 2001, between the Company and SVP
      International (incorporated
      by reference to the Company’s Form 10-K filed for the year ended December
      31, 2002)10.4
    
    Lease,
      dated March 15, 1995, between Urbicum Associates, L.P. and the Company,
      related to premises on 4thfloor at 641 Avenue of the Americas, New York, NY (incorporated by
      reference to the Company’s Form 10-K filed for the year ended December 31,
      1994)10.5
    
    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)#10.6
    
    The
      Company’s 401(k) and Profit Sharing Plan (incorporated by reference to the
      Company’s Form S-8, filed on March 29, 1996)#10.7
    
    The
      Company’s 1996 Stock Option Plan (incorporated by reference to the
      Company’s Definitive Proxy Statement, filed on May 10,
    2002)10.8
    
    Stock
      Purchase Agreement, dated January 15, 1998, between SVP, S.A. and the
      Company (incorporated by reference to the Company’s Form 10-K filed for
      the year ended December 31, 1999)#10.9
    
    Amended
      and restated Employment Agreement, dated November 21, 2001, between the
      Company and Andrew P. Garvin (incorporated by reference to the Company’s
      Form 10-K filed for the year ended December 31, 2001)#10.10
    
    Amendment
      No. 1 to Amended and Restated Employment Agreement, dated December 31,
      2002, between the Company and Andrew P. Garvin (incorporated by reference
      to the Company’s Form 10-K filed for the year ended December 31,
      2002)
  E-2
  #10.11
    
    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)#10.12
    
    Employment
      Agreement, dated February 6, 2002, between the Company and Martin E.
      Franklin (incorporated by reference to the Company’s Form 10-K filed for
      the year ended December 31, 2001)#10.13
    
    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)#10.14
    
    Employment
      Agreement, dated May 13, 2002, between the Company and Daniel S.
      Fitzgerald (incorporated by reference to the Company’s Form 10-Q filed for
      the quarter ended June 30, 2002)#10.15
    
    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)10.16
    
    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)10.17
    
    Escrow
      Agreement, dated as of April 1, 2003, by and among Jay L. Friedland,
      Robert La Terra, Morris Whitcup, the Company, Inc. and Kane Kessler, P.C.
      (incorporated by reference to the Company’s Form 8-K filed on April 16,
      2003)#10.18
    
    Employment
      Agreement, dated as of April 1, 2003, by and between Jay L. Friedland and
      Guideline Research Corp. (incorporated by reference to the Company’s Form
      8-K filed on April 16, 2003)#10.19
    
    Employment
      Agreement, dated as of April 1, 2003, by and between Robert La Terra and
      Guideline Research Corp. (incorporated by reference to the Company’s Form
      8-K filed on April 16, 2003)#10.20
    
    Stock
      Option Agreement, dated April 1, 2003, by and between the Company and
      Robert La Terra (incorporated by reference to the Company’s Form 8-K filed
      on April 16, 2003)10.21
    
    Promissory
      Note, dated as of April 1, 2003, made by the Company in favor of Petra
      Mezzanine Fund, L.P. (incorporated by reference to the Company’s Form 8-K
      filed on April 16, 2003)10.22
    
    Loan
      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)10.23
    
    Security
      Agreement, dated as of April 1, 2003, made by the Company in favor of
      Petra Mezzanine Fund, L.P. (incorporated by reference to the Company’s
      Form 8-K filed on April 16, 2003)10.24
    
    Trademark
      and Patent Security Agreement, dated as of April 1, 2003, made by the
      Company in favor of Petra Mezzanine Fund, L.P. (incorporated by reference
      to the Company’s Form 8-K filed on April 16, 2003)
  E-3
  10.25
    
    Security
      Agreement, dated as of April 1, 2003, made by Guideline Research Corp.,
      Tabline Data Services, Inc., Guideline/Chicago, Inc., Advanced Analytics,
      Inc. and Guideline Consulting Corp. in favor of Petra Mezzanine Fund, L.P.
      (incorporated by reference to the Company’s Form 8-K filed on April 16,
      2003)10.26
    
    Guaranty
      Agreement, dated as of April 1, 2003, made by Guideline Research Corp.,
      Tabline Data Services, Inc., Guideline/Chicago, Inc., Advanced Analytics,
      Inc. and Guideline Consulting Corp. in favor of Petra Mezzanine Fund, L.P.
      (incorporated by reference to the Company’s Form 8-K filed on April 16,
      2003)10.27
    
    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)10.28
    
    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)10.29
    
    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)10.30
    
    Amended
      and Restated Term Promissory Note, dated as of April 1, 2003, made by the
      Company in favor of JPMorgan Chase Bank (incorporated by reference to the
      Company’s Form 8-K filed on April 16, 2003)10.31
    
    Amended
      and Restated Senior Grid Promissory Note, dated as of April 1, 2003, made
      by the Company in favor of JPMorgan Chase Bank (incorporated by reference
      to the Company’s Form 8-K filed on April 16, 2003)10.32
    
    Amendment
      No. 1 to Security Agreement, dated as of April 1, 2003, made by the
      Company and JPMorgan Chase Bank (incorporated by reference to the
      Company’s Form 8-K filed on April 16, 2003)10.33
    
    Subordination
      Agreement, dated as of April 1, 2003, Petra Mezzanine Fund, L.P., the
      Company, Guideline Research Corp., Tabline Data Services, Inc.,
      Guideline/Chicago, Inc., Advanced Analytics, Inc., Guideline Consulting
      Corp., and JPMorgan Chase Bank. (incorporated by reference to the
      Company’s Form 8-K filed on April 16, 2003)10.34
    
    Subsidiary
      Security Agreement**,**dated as of April 1, 2003, made by Guideline Research Corp., Tabline Data
      Services, Inc., Guideline/Chicago, Inc., Advanced Analytics, Inc. and
      Guideline Consulting Corp. in favor of JPMorgan Chase Bank (incorporated
      by reference to the Company’s Form 8-K filed on April 16,
      2003)10.35
    
    Subsidiary
      Guaranty Agreement, dated as of April 1, 2003, made by Guideline Research
      Corp., Tabline Data Services, Inc., Guideline/Chicago, Inc., Advanced
      Analytics, Inc. and Guideline Consulting Corp. in favor of JPMorgan Chase
      Bank (incorporated by reference to the Company’s Form 8-K filed on April
      16, 2003)10.36
    
    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)10.37
    
    Promissory
      Note, dated as of July 1, 2003, made by the Company in favor of Petra
      Mezzanine Fund, L.P. (incorporated by reference to the Company’s Form 8-K
      filed on July 16, 2003)
  E-4
  10.38
    
    Amended
      and Restated Loan Agreement, dated July 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 July 16, 2003)10.39
    
    First
      Amendment to Security Agreement, dated July 1, 2003, by and between the
      Company and Petra Mezzanine Fund, L.P. (incorporated by reference to the
      Company’s Form 8-K filed on July 16, 2003)10.40
    
    Amended
      and Restated Security Agreement, dated July 1, 2003, by and between
      Guideline Research Corp., Tabline Data Services, Inc., Guideline/Chicago,
      Inc., Advanced Analytics, Inc., Guideline Consulting Corp., and TTech
      Acquisition Corp. in favor of Petra Mezzanine Fund, L.P. (incorporated by
      reference to the Company’s Form 8-K filed on July 16,
  2003)10.41
    
    Amended
      and Restated Guaranty Agreement, dated July 1, 2003, by and between
      Guideline Research Corp., Tabline Data Services, Inc., Guideline/Chicago,
      Inc., Advanced Analytics, Inc., Guideline Consulting Corp., and TTech
      Acquisition Corp. in favor of Petra Mezzanine Fund, L.P. (incorporated by
      reference to the Company’s Form 8-K filed on July 16,
  2003)10.42
    
    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)10.43
    
    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)10.44
    
    Amendment
      No. 1 to Amended And Restated Term Promissory Note, dated as of July 1,
      2003, made by the Company in favor of JPMorgan Chase Bank (incorporated by
      reference to the Company’s Form 8-K filed on July 16,
  2003)10.45
    
    Amendment
      No. 1 to Amended And Restated Senior Grid Promissory Note, dated as of
      July 1, 2003, made by the Company in favor of JPMorgan Chase Bank
      (incorporated by reference to the Company’s Form 8-K filed on July 16,
      2003)10.46
    
    First
      Amendment to Subordination Agreement, dated July 1, 2003, by and among
      Petra Mezzanine Fund, L.P., the Company, Guideline Research Corp., Tabline
      Data Services, Inc., Guideline/Chicago, Inc., Advanced Analytics, Inc.,
      Guideline Consulting Corp., and TTech Acquisition Corp., and JPMorgan
      Chase Bank (incorporated by reference to the Company’s Form 8-K filed on
      July 16, 2003)10.47
    
    Subsidiary
      Security Agreement**,**dated as of July 1, 2003, made by TTech Acquisition Corp. in favor of
      JPMorgan Chase Bank (incorporated by reference to the Company’s Form 8-K
      filed on July 16, 2003)10.48
    
    Subsidiary
      Guaranty Agreement, dated as of July 1, 2003, made by TTech Acquisition
      Corp. in favor of JPMorgan Chase Bank (incorporated by reference to the
      Company’s Form 8-K filed on July 16, 2003)10.49
    
    2003
      Stock Incentive Plan (incorporated by reference to the Company’s
      Definitive Proxy Statement filed on April 30,
2003)
  E-5
  #10.50
    
    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)10.51
    
    Amendment
      No. 2 and Consent to Amended and Restated Senior Grid Promissory Note,
      dated May 20, 2004, between the Company and JPMorgan Chase Bank
      (incorporated by reference to the Company’s Form 10-Q filed on August 13,
      2004)10.52
    
    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)#10.53
    
    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)#10.54
    
    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)#10.55
    
    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)#10.56
    
    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)#10.57
    
    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)10.58
    
    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)10.59
    
    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)21.1
    
    List
      of Subsidiaries (Incorporated by reference to the Company’s Form 10-K for
      the year ended December 31, 2003, filed on March 26,
  2004)*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-6
  **FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA**
 
 **FIND/SVP,
INC. AND SUBSIDIARIES**
 Index to
Consolidated Financial Statements and Schedule
 
 
 PageReport
      of Independent Registered Public Accounting Firm
    
    F-2Consolidated
      Balance Sheets as of December 31, 2004 and 2003
    
    F-3Consolidated
      Statements of Operations for the years ended December 31, 2004, 2003 and
      2002
    
    F-4Consolidated
      Statements of Shareholders’ Equity for the years ended December 31, 2004,
      2003 and 2002
    
    F-5Consolidated
      Statements of Cash Flows for the years ended December 31, 2004, 2003 and
      2002
    
    F-6Notes
      to Consolidated Financial Statements
    
    F-7Schedule:Valuation
      and Qualifying Accounts on Schedule II
    
    F-32
   F-1




**REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To the
Board of Directors and Stockholders of
 Find/SVP,
Inc.
 New York,
New York
 
 We have
audited the accompanying consolidated balance sheets of Find/SVP, Inc. and
subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related
consolidated statements of operations, shareholders’ equity, and cash flows for
each of the three years in the period ended December 31, 2004. 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 Find/SVP, Inc. and subsidiaries as of
December 31, 2004 and 2003, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2004, 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 goodwill on January 1, 2002 to conform to
Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other
Intangible Assets” and its method of accounting for stock-based compensation on
January 1, 2004 to conform with SFAS No. 123, “Accounting for Stock-Based
Compensation”.
 
 /s/
Deloitte & Touche LLP
 New York,
New York
 March 14,
2005


F-2




**** **FIND/SVP,
INC. AND SUBSIDIARIES**
 Consolidated
Balance Sheets
 December
31
 (in
thousands, except share and per share data)
 
 **Assets**
    
    **2004**
    
    **2003**Current
      assets:Cash
      and cash equivalents
    
    $
    4,519
    
    $
    821Accounts
      receivable, less allowance for doubtful accounts of$164
      and $271 in 2004 and 2003, respectively
    
    
    6,215
    
    
    6,190Deferred
      tax assets
    
    
    696
    
    
    505Prepaid
      expenses and other current assets
    
    
    1,240
    
    
    920Total
      current assets
    
    
    12,670
    
    
    8,436Equipment,
      software development and leasehold improvements, at cost,less
      accumulated depreciation and amortization
    
    
    2,336
    
    
    2,368Goodwill,
      net
    
    
    12,214
    
    
    8,765Intangibles,
      net
    
    
    1,002
    
    
    1,137Deferred
      tax assets
    
    
    783
    
    
    961Deferred
      rent
    
    
    335
    
    
    398Cash
      surrender value of life insurance
    
    
    127
    
    
    214Non-marketable
      equity securities
    
    
    23
    
    
    185Other
      assets
    
    
    532
    
    
    504$
    30,022
    
    $
    22,968**Liabilities
      and Shareholders’ Equity**Current
      liabilities:Trade
      accounts payable
    
    $
    1,267
    
    $
    2,609Accrued
      expenses and other
    
    
    5,099
    
    
    3,205Current
      maturities of notes payable
    
    
    —
    
    
    1,076Unearned
      retainer income
    
    
    3,472
    
    
    3,612Total
      current liabilities
    
    
    9,838
    
    
    10,502Notes
      payable
    
    
    —
    
    
    3,170Deferred
      compensation and other liabilities
    
    
    404
    
    
    419Total
      liabilities
    
    
    10,242
    
    
    14,091Redeemable
      convertible preferred stock, $.0001 par value.Authorized
      2,000,000 shares; issued and outstanding333,333
      shares in 2003
    
    
    570
    
    
    530Redeemable
      common stock, $.0001 par value. Issued andoutstanding
      571,237 shares in 2003
    
    
    1,090
    
    
    977Commitments
      and contingencies (Note 8)Shareholders’
      equity:Common
      stock, $.0001 par value. Authorized 100,000,000 shares;issued
      and outstanding 18,828,416 shares in 2004;issued
      and outstanding 12,641,295 shares in 2003
    
    
    2
    
    
    1Capital
      in excess of par value
    
    
    25,850
    
    
    12,995Deferred
      stock-based compensation
    
    
    (214
    )
    
    (53
    )Loan
      receivable for stock purchase
    
    
    (50
    )
    
    (50
    )Accumulated
      deficit
    
    
    (7,468
    )
    
    (5,523
    )Total
      shareholders’ equity
    
    
    18,120
    
    
    7,370$
    30,022
    
    $
    22,968
  See
accompanying notes to consolidated financial statements.
   F-3






**FIND/SVP,
INC. AND SUBSIDIARIES**
 Consolidated
Statements of Operations
 Years
ended December 31
 (in
thousands, except share and per share data)
 
 **2004**
    
    **2003**
    
    **2002**Revenues
    
    $
    38,437
    
    $
    31,569
    
    $
    20,828Operating
      expenses:Direct
      costs
    
    
    22,384
    
    
    17,243
    
    
    10,153Selling,
      general and administrative expenses
    
    
    16,309
    
    
    14,495
    
    
    12,358Total
      operating expenses
    
    
    38,693
    
    
    31,738
    
    
    22,511Operating
      loss
    
    
    (256
    )
    
    (169
    )
    
    (1,683
    )Interest
      income
    
    
    14
    
    
    2
    
    
    15Other
      income
    
    
    4
    
    
    117
    
    
    —Gain
      on sale of assets
    
    
    92
    
    
    —
    
    
    —Interest
      expense
    
    
    (1,609
    )
    
    (687
    )
    
    (156
    )Equity loss
      on investment
    
    
    (94
    )
    
    —
    
    
    —Impairment
      on investment
    
    
    (96
    )
    
    —
    
    
    (315
    )Loss
      before (benefit) provisionfor
      income taxes
    
    
    (1,945
    )
    
    (737
    )
    
    (2,139
    )(Benefit)
      provision for income taxes
    
    
    —
    
    
    210
    
    
    (264
    )Net
      loss
    
    
    (1,945
    )
    
    (947
    )
    
    (1,875
    )Less:
      Preferred dividends
    
    
    (40
    )
    
    (30
    )
    
    —Less:
      Accretion on redeemable common shares
    
    
    (113
    )
    
    (250
    )
    
    —Net
      loss attributable to common shareholders
    
    $
    (2,098
    )
    $
    (1,227
    )
    $
    (1,875
    )Loss
      per common share - basic and diluted:
    
    $
    (0.12
    )
    $
    (0.10
    )
    $
    (0.18
    )Weighted
      average number of common sharesoutstanding:Basic
      and diluted
    
    
    17,212,834
    
    
    11,765,619
    
    
    10,138,703
  See
accompanying notes to consolidated financial statements.
   F-4






**FIND/SVP,
INC. AND SUBSIDIARIES**
 Consolidated
Statements of Shareholders’ Equity
 Years
ended December 31
 (in
thousands, except share amounts )
 Deferred
    
    
    LoanCapital
      in
    
    
    stock-
    
    
    receivable
    
    
    
    
    
    TotalCommon
      Stock
    
    
    excess
      of
    
    
    based
    
    
    for
      stock
    
    
    Accumulated
    
    
    shareholders’Shares
    
    
    Amount
    
    
    par value
    
    
    compensation
    
    
    purchase
    
    
    deficit
    
    
    equityBALANCE
      AT JANUARY 1, 2002
    
    
    10,043,443
    
    $
    1
    
    $
    7,669
    
    $
    (479
    )
    $
    —
    
    $
    (2,701
    )
    $
    4,490Net
      loss
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (1,875
    )
    
    (1,875
    )Exercise
      of stock options and warrants
    
    
    108,159
    
    
    —
    
    
    49
    
    
    —
    
    
    —
    
    
    —
    
    
    49Common
      stock issued
    
    
    62,500
    
    
    —
    
    
    50
    
    
    —
    
    
    —
    
    
    —
    
    
    50Loan
      receivable for stock purchase
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (50
    )
    
    —
    
    
    (50
    )Stock-based
      compensation
    
    
    —
    
    
    —
    
    
    632
    
    
    293
    
    
    —
    
    
    —
    
    
    925BALANCE
      AT DECEMBER 31, 2002
    
    
    10,214,102
    
    
    1
    
    
    8,400
    
    
    (186
    )
    
    (50
    )
    
    (4,576
    )
    
    3,589Net
      loss
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (947
    )
    
    (947
    )Exercise
      of stock options and warrants
    
    
    742,809
    
    
    —
    
    
    329
    
    
    —
    
    
    —
    
    
    —
    
    
    329Common
      stock issued in connection
      with
      the Teltech acquisition
    
    
    1,649,384
    
    
    —
    
    
    1,713
    
    
    
    
    
    —
    
    
    —
    
    
    1,713Common
      stock issued to a vendor
    
    
    35,000
    
    
    —
    
    
    44
    
    
    —
    
    
    —
    
    
    —
    
    
    44Preferred
      stock issued
    
    
    —
    
    
    —
    
    
    193
    
    
    —
    
    
    —
    
    
    —
    
    
    193Warrants
      issued in connection with the
      Guideline
      acquisition
    
    
    —
    
    
    —
    
    
    742
    
    
    —
    
    
    —
    
    
    —
    
    
    742Warrants
      issued in connection with the
      Teltech
      acquisition
    
    
    —
    
    
    —
    
    
    763
    
    
    —
    
    
    —
    
    
    —
    
    
    763Stock-based
      compensation
    
    
    —
    
    
    —
    
    
    1,091
    
    
    133
    
    
    —
    
    
    —
    
    
    1,224Preferred
      stock dividends
    
    
    —
    
    
    —
    
    
    (30
    )
    
    —
    
    
    —
    
    
    —
    
    
    (30
    )Accretion
      on redeemable common stock
    
    
    —
    
    
    —
    
    
    (250
    )
    
    —
    
    
    —
    
    
    —
    
    
    (250
    )BALANCE
      AT DECEMBER 31, 2003
    
    
    12,641,295
    
    
    1
    
    
    12,995
    
    
    (53
    )
    
    (50
    )
    
    (5,523
    )
    
    7,370Net
      loss
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (1,945
    )
    
    (1,945
    )Exercise
      of stock options and warrants
    
    
    187,121
    
    
    —
    
    
    45
    
    
    —
    
    
    —
    
    
    —
    
    
    45Common
      stock issued
    
    
    6,000,000
    
    
    1
    
    
    12,167
    
    
    —
    
    
    —
    
    
    —
    
    
    12,168Stock-based
      compensation
    
    
    —
    
    
    —
    
    
    790
    
    
    (194
    )
    
    —
    
    
    —
    
    
    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
    
    
    —
    
    
    —
    
    
    (7
    )
    
    33
    
    
    —
    
    
    —
    
    
    26BALANCE
      AT DECEMBER 31, 2004
    
    
    18,828,416
    
    $
    2
    
    $
    25,850
    
    $
    (214
    )
    $
    (50
    )
    $
    (7,468
    )
    $
    18,120
  See accompanying notes to consolidated financial
    statements








F-5






**FIND/SVP,
INC. AND SUBSIDIARIES**
 Consolidated
Statements of Cash Flows
 Years
ended December 31
 (in
thousands)
 
 **2004**
    
    **2003**
    
    **2002**Cash
      flows from operating activities:Net
      loss
    
    $
    (1,945
    )
    $
    (947
    )
    $
    (1,875
    )Adjustments
      to reconcile net loss to net cash(used
      in) provided by operating activities:Depreciation
      and amortization
    
    
    931
    
    
    1,143
    
    
    939Allowance
      for doubtful accounts
    
    
    129
    
    
    110
    
    
    128Unearned
      retainer income
    
    
    (140
    )
    
    (233
    )
    
    (277
    )Deferred
      income taxes
    
    
    —
    
    
    160
    
    
    (264
    )Compensation
      from option grants
    
    
    596
    
    
    1,224
    
    
    925Impairment
      on investment
    
    
    96
    
    
    —
    
    
    315Deferred
      compensation
    
    
    (126
    )
    
    (114
    )
    
    61Non-cash
      interest
    
    
    1,357
    
    
    224
    
    
    —Unrealized
      loss on investment
    
    
    94
    
    
    —
    
    
    —Gain
      on sale of asset
    
    
    (92
    )
    
    —
    
    
    —Changes
      in assets and liabilities:Increase
      in accounts receivable
    
    
    (154
    )
    
    (1,625
    )
    
    (666
    )(Increase)
      decrease in prepaid expensesand
      other current assets
    
    
    (320
    )
    
    167
    
    
    (120
    )Decrease in
      rental asset
    
    
    63
    
    
    177
    
    
    5Decrease in
      cash surrender value of life insurance
    
    
    87
    
    
    408
    
    
    329(Increase)
      decrease in other assets
    
    
    (305
    )
    
    (394
    )
    
    20(Decrease)
      increase in accounts payable and accrued expenses
    
    
    (1,349
    )
    
    535
    
    
    (147
    )Net
      cash (used in) provided by operating activities
    
    
    (1,078
    )
    
    835
    
    
    (627
    )Cash
      flows from investing activities:
    
    
    (1,127
    )
    
    (3,895
    )
    
    —Purchase
      of Guideline, including related transaction costs paid
    
    
    (441
    )
    
    (3,075
    )
    
    —Purchase
      of Teltech, including related transaction costs paidCapital
      expenditures
    
    
    (532
    )
    
    (457
    )
    
    (457
    )Sale
      of non-marketable securities
    
    
    67
    
    
    —
    
    
    —Repayment
      of notes receivable
    
    
    —
    
    
    —
    
    
    138Net
      cash used in investing activities
    
    
    (2,033
    )
    
    (7,427
    )
    
    (319
    )Cash
      flows from financing activities:Principal
      borrowings under notes payable, net of closing costs
    
    
    200
    
    
    2,688
    
    
    3,230Principal
      payments under notes payable
    
    
    (5,576
    )
    
    (435
    )
    
    (3,243
    )Proceeds
      from exercise of stock options and warrants
    
    
    45
    
    
    329
    
    
    49Issuance
      of preferred stock
    
    
    —
    
    
    693
    
    
    —Issuance
      of warrant
    
    
    —
    
    
    1,507
    
    
    —Issuance
      of common stock
    
    
    12,168
    
    
    1,663
    
    
    50Payments
      under capital leases
    
    
    (28
    )
    
    —
    
    
    —Receipt
      of note for issuance of common stock
    
    
    —
    
    
    —
    
    
    (50
    )Increase
      in deferred financing fees
    
    
    —
    
    
    —
    
    
    (73
    )Net
      cash provided (used in) by financing activities
    
    
    6,809
    
    
    6,445
    
    
    (37
    )Net
      increase (decrease) in cashand
      cash equivalents
    
    
    3,698
    
    
    (147
    )
    
    (983
    )Cash
      and cash equivalents at beginning of year
    
    
    821
    
    
    968
    
    
    1,951Cash
      and cash equivalents at end of year
    
    $
    4,519
    
    $
    821
    
    $
    968
 See
accompanying notes to consolidated financial statements.
   F-6









**FIND/SVP,
INC. AND SUBSIDIARIES**


Notes to
Consolidated Financial Statements


December
31, 2003, 2002 and 2001


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




FIND/SVP,
Inc. and its wholly-owned subsidiaries (collectively, "FIND/SVP" or the
"Company")  provide a
full range of custom research, consulting, quantitative market research and
outsourced information services that address its customers’ critical business
information needs. 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.
In addition, with its acquisitions in 2003 of Guideline Research Corp.
(“Guideline”) and Teltech, as well as its internal development of new service
offerings, the Company also provides a range of specialized higher priced
research and consulting services, such as quantitative custom market research
and due diligence research services, that address a particular strategic
business information need within specific markets such as R&D, Healthcare,
Marketing and Private Equity/Money Management.




The
Company is organized into four business segments: Quick Consulting Service
(“QCS”), which is a subscription-based service that functions like an in-house
corporate research center for its customers; Strategic Consulting and Research
Group (“SCRG”), which provides in-depth custom research and competitive
intelligence services for larger projects; Quantitative Market Research, which
provides full service quantitative custom market research services, such as
large-scale consumer surveys; and Teltech, which provides a full range of
outsourced information and consulting services to customers in R&D and
related technical sectors.





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




**BASIS
OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION**





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





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





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





**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.






F-7





**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 five years, and proprietary management information software system is
depreciated over ten years. Leasehold improvements are amortized by the
straight-line method over the shorter of the term of the lease or the estimated
life of the asset.





The
Company recognizes software development costs on its website development and
cost tracking systems in accordance with EITF 00-02, “Accounting for Website
Development Costs” and Statement of Position 98-1, “Accounting for the Costs of
Computer Software Developed or Obtained for Internal Uses”, respectively.
Accordingly, the Company expenses all costs incurred that relate to the planning
and post implementation phases of development. Costs incurred in the development
phase are capitalized and recognized over the product’s estimated useful life if
the product is expected to have a useful life beyond one year. Costs associated
with repair or maintenance of the existing site is expensed as incurred. The
Company capitalized approximately $151,000 and $161,000 of internal development
and internal use software costs during the years ended December 31, 2004 and
2003, 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 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.





Prior to
adoption of SFAS No. 142, the Company amortized goodwill on a straight-line
basis, resulting in the recording of approximately $10,000 of expense in each of
the years ended December 31, 2001 and 2000. At December 31, 2004, there is
$12,214,000 of goodwill on the balance sheet, for which no impairment has been
identified.






F-8








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. These assets are tested for impairment if a
triggering event occurs. Amortization of intangible assets for the years ended
December 31, 2004 and 2003 amounted to $135,000 and $83,000, respectively.





**DEFERRED
      CHARGES**





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





**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.





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





Basic
earnings (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding. Diluted earnings per share
is computed by dividing net income (loss) by a diluted weighted average number
of common shares outstanding. Diluted net income (loss) per 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 and diluted earnings per share for the years
ended December 31, 2004, 2003 and 2002, the Company used a weighted average
number of common shares outstanding of 17,212,834, 11,765,619, and 10,138,703,
respectively. In the years ended December 31, 2004, 2003 and 2002 there was no
dilutive effect.





Options,
warrants and redeemable convertible preferred shares, including accrued
preferred dividends, to purchase 8,449,240, 5,117,248, and 3,320,522 common
shares during the years ended December 31, 2004, 2003 and 2002, 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 QCS, charge customers fixed monthly
subscription fees to access QCS services, and revenues are recognized ratably
over the term of each subscription. Retainer fees are required to be paid in
advance by customers on either a monthly, quarterly or annual basis, and all
billed amounts relating to future periods are recorded as an unearned retainer
income liability on the Company’s balance sheet. In the case of deposit
contracts, which are used primarily by Teltech, a customer pays a fixed annual
fee, which entitles it to access any of the Company’s service offerings
throughout the contract period, up to the total amount of the annual deposit
fee. Since deposit account customers can “spend” their contract fee at any time
within the annual contract period, deposit account revenues are only recognized
within the contract period as services are actually provided to customers, with
any unused deposit amounts recognized as revenue in the final month of the
contract. As with retainer fees, deposit contract fees are required to be paid
in advance, primarily annually, and any billed amounts relating to future
periods are recorded as unearned retainer income, a current liability on the
Company’s balance sheet.






F-9





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





**CASH
AND CASH EQUIVALENTS**





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





**FAIR
      VALUE OF FINANCIAL INSTRUMENTS**





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





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





Non-marketable
equity securities are valued at the lower of historical cost or estimated net
realizable value.





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. Subordinated debt is recorded at its initial
relative fair value, and the difference between the initial relative fair value
and the stated value will be accreted as additional interest expense over the
maturities.








F-10





**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.





**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, as amended by SFAS No. 148, under
the modified prospective method. The
Company currently records compensation expense based upon the fair value of
stock-based awards (both restricted stock and stock options).  The
Company recognized compensation cost of approximately $596,000, $1,224,000, and
$925,000 for the years ended December 31, 2004, 2003, and 2002,
respectively . In 2004,
the Company recorded a transition adjustment upon adoption of SFAS No. 123 of
$13,000 related to long-term deferred tax assets. Prior to adopting SFAS No.
123, as amended, the Company accounted for its stock option grants under APB No.
25, “Accounting for Stock Issued to Employees” utilizing the intrinsic value
method for variable awards. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
“Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, net loss
would have decreased in 2003 and 2002 to the pro forma amounts indicated
below:





**2003**
    
    **2002**Net
      loss attributable to common shareholders, as reported
    
    $
    (1,227,000
    )
    $
    (1,875,000
    )Add:
      Stock-based employee compensation expense included in reported net loss,
      net
      of tax related effects
    
    
    1,224,000
    
    
    925,000Deduct:
      Total stock-based employee compensation expense determined under
      fair
      value based method for all awards, net of related tax
    effects
    
    
    (409,000
    )
    
    (399,000
    )Pro
      forma net loss
    
    $
    (412,000
    )
    $
    (1,349,000
    )Loss
      per share:Basic
      and DilutedAs
      reported
    
    $
    (0.10
    )
    $
    (0.18
    )Pro
      forma
    
    $
    (0.04
    )
    $
    (0.13
    )





The per
share weighted-average fair value of stock options granted during 2004, 2003 and
2002 was $1.52, $1.05, and $0.96, respectively. Such amounts were determined
using the Black-Scholes option pricing model with the following weighted-average
assumptions: 2004 - expected dividend yield of 0%, risk-free interest rate range
of 3.24% to 3.81%, volatility range of 88.6% to 96.4% and an expected life of 5
years; 2003 - expected dividend yield of 0%, risk-free interest rate of 3.24%,
volatility of 107% and an expected life of 5 years; 2002- expected dividend
yield of 0%, risk-free interest rate of 6%, volatility of 111% and an expected
life of 5 years. For 2004, volatility was generally calculated over the five
preceding years. For 2003 and 2002, volatility was calculated over the five
preceding years.








F-11


****


**NEW
ACCOUNTING PRINCIPLES**





In
December 2004, the Financial Accounting Standards Board (FASB) issued the
revised SFAS No. 123, “Share-Based Payment” (SFAS 123 (R)). SFAS 123 (R)
requires compensation costs related to share-based payment transactions to be
recognized in the financial statements. Generally, compensation cost will be
measured based on the grant-date fair value of the equity or liability
instruments issued. In addition, liability awards will be remeasured each
reporting period. Compensation cost will be recognized over the requisite
service period, generally as the award vests. The Company is required to adopt
SFAS 123 (R) in the fourth quarter of 2005. SFAS 123 (R) applies to all awards
granted after June 30, 2005 and to previously-granted awards unvested as of the
adoption date. The Company is currently evaluating the effect of SFAS 123 (R) on
its financial statements and related disclosures.




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




***Guideline***





On April
1, 2003, the Company purchased all of the issued and outstanding stock of
Guideline. Guideline is a provider of quantitative custom market research.
Guideline’s ability to provide high-level analytic survey research was a
strategic fit with the Company’s efforts to address its clients’ critical
business needs. The integration of Guideline’s services allowed the Company to
address the requirements of its many marketing and market research clients. The
addition of Guideline will also make the Company one of the first fully
comprehensive research and advisory firms to offer an inclusive suite of both
primary and secondary specialized business intelligence, strategic research and
consulting services. These factors contributed to a purchase price that resulted
in the recognition of goodwill of $7.4 million.





The
consideration for this acquisition consisted of the following:





·
    Approximately
      $5,027,000 paid in cash (includes $431,000 of paid transaction costs
      during the year ended December 31, 2003 and $86,000 of paid transaction
      costs during the year ended December 31, 2004), net of cash
      acquired;





·
    Of
      the amount paid in cash, a deferred consideration amount (the “One Year
      Deferred Consideration”) of $1 million was paid on May 24, 2004 as
      Guideline achieved adjusted EBITDA (as defined in the purchase agreement)
      for the twelve-month period following the acquisition (“One Year Adjusted
      EBITDA”) of at least $1.2 million. On the same date, an additional $50,000
      of advanced earnout was paid by the Company to an executive of Guideline,
      pursuant to an agreement between this executive, the former owners of
      Guideline and the Company.;





·
    571,237
      common shares valued at $760,000 (295,043 of the common shares were placed
      in escrow to secure the indemnification obligations of the sellers); and






F-12





·
    Within
      thirty days after the date of determination following the second
      anniversary date of the acquisition, a potential deferred consideration
      amount (the “Two Year Deferred Consideration”) of $1.845 million
      contingent upon Guideline achieving adjusted EBITDA (as defined in the
      purchase agreement) for the 24-month period following the acquisition
      (“Two Year Adjusted EBITDA”) of $2.65 million plus 25% of the amount by
      which Two Year Adjusted EBITDA exceeds $2.65 million would be due. If Two
      Year Adjusted EBITDA is less than $2.65 million, but greater than $2.2
      million, the Two Year Deferred Consideration would be between $0 and
      $1.845 million based on a specific formula set forth in the purchase
      agreement. 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.




The
571,237 shares issued to the former owners of Guideline may be put back to the
Company during a 120-day period beginning April 5, 2005. Such shares are
classified in the balance sheet as redeemable common stock. If the shares are
put back to the Company, the cash to be paid by the Company will be equal to
150% of the initial redemption value of the shares, or $1,090,000. Based on the
fair value of the shares as of March 31, 2004, the Company recorded accretion on
redeemable common stock of $113,000 for the quarter ended March 31, 2004,
resulting in redeemable common stock having a carrying value of $1,090,000.
Therefore, no further accretion was required to be recorded for the nine months
ended December 31, 2004.





This
acquisition was financed at closing with the combination of the Company’s cash
resources, the assumption of certain liabilities of Guideline and by the receipt
of cash of $3,303,000 (net of financing costs of $197,000) consisting of (a) a
promissory note with a $3,000,000 face value; (b) the issuance of 333,333 shares
of convertible, redeemable, Series A preferred stock (“Preferred Stock”); and
(c) the issuance of a warrant to purchase 675,000 common shares.





The
333,333 shares of Preferred Stock were issued pursuant to a Series A Preferred
Stock Purchase Agreement (the “Preferred Stock Purchase Agreement”) dated April
1, 2003. These shares have been recorded at estimated fair value of $693,000
using the relative fair value method. 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. For the year ended December
31, 2004, the Company recorded preferred dividends of $40,000 resulting in a
redemption value for the Preferred Stock of $570,000 at December 31,
2004.





The
Company has finalized its valuation of the assets and liabilities acquired for
the allocation of the purchase price of the Guideline transaction as of December
31, 2004, with the exception of the Two Year Deferred Consideration, which is
contingent upon the financial performance of Guideline through April 1,
2005.








F-13





***Teltech***





As of
July 1, 2003, Ttech Acquisition Corp. (“Ttech”), a subsidiary of the Company,
purchased from Sopheon Corporation (“Sopheon”) assets and assumed certain
specified liabilities of Sopheon’s Teltech business unit. Teltech is a provider
of custom research and information services, focused on R&D and engineering
departments of larger corporations, markets into which the Company was
interested in expanding. The Company believed this acquisition offered
significant cross-selling opportunities and cost synergies. These factors
contributed to a purchase price that resulted in the recognition of goodwill of
$4.8 million.





The
consideration for this acquisition consisted of the following:




·
    Approximately
      $5,027,000 paid in cash (includes $431,000 of paid transaction
      costs);


·
    Of
      the amount paid in cash, consideration of $200,000 was paid by the Company
      to Sopheon during the quarter ended June 30, 2004 in full satisfaction of
      an earnout, as defined in the purchase agreement dated June 25, 2003; and





·
    32,700
      unregistered shares of the Company’s Common Stock, valued at $50,000.
      These shares were placed in escrow to secure the indemnification
      obligations of the sellers set forth in the purchase agreement through
      June 25, 2004, pursuant to an escrow agreement among Sopheon, the Company,
      Ttech and Kane Kessler, P.C. (the “Escrow Agreement”). These shares were
      previously released to Sopheon from escrow during the second quarter of
      2004.





The
Company has finalized its valuation of the assets and liabilities acquired for
its allocation of the purchase price of the Teltech transaction as of December
31, 2004.





The
following table sets forth the components of the purchase price for both the
Guideline and Teltech acquisitions:





**Guideline**
    
    **Teltech**
    
    **Total**Cash
      paid
    
    $
    5,027,000
    
    $
    3,520,000
    
    $
    8,547,000Accrued
      estimate of portion of Two Year Deferred Consideration
    
    
    2,030,000
    
    
    —
    
    
    2,030,000Common
      stock issued to sellers
    
    
    760,000
    
    
    50,000
    
    
    810,000Total
      purchase consideration
    
    $
    7,817,000
    
    $
    3,570,000
    
    $
    11,387,000








F-14





The
following table provides the fair value of the acquired assets and assumed
liabilities:





**Guideline**
    
    **Teltech**
    
    **Total**Current
      assets
    
    $
    1,786,000
    
    $
    1,235,000
    
    $
    3,021,000Property
      and equipment
    
    
    89,000
    
    
    287,000
    
    
    376,000Other
      assets
    
    
    267,000
    
    
    —
    
    
    267,000Liabilities
      assumed, current
    
    
    (2,236,000
    )
    
    (3,358,000
    )
    
    (5,594,000
    )Liabilities
      assumed, non-current
    
    
    (67,000
    )
    
    —
    
    
    (67,000
    )Fair
      value of net liabilities assumed
    
    
    (161,000
    )
    
    (1,836,000
    )
    
    (1,997,000
    )Goodwill
    
    
    7,409,000
    
    
    4,755,000
    
    
    12,164,000Amortizable
      intangible assets
    
    
    421,000
    
    
    527,000
    
    
    948,000Indefinite-lived
      intangible assets
    
    
    148,000
    
    
    124,000
    
    
    272,000Total
      purchase consideration
    
    $
    7,817,000
    
    $
    3,570,000
    
    $
    11,387,000





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





The
unaudited pro forma information in the table below represents consolidated
results of operations as if the acquisitions of Guideline and Teltech had
occurred as of January 1, 2003. The unaudited pro forma information has been
included for comparative purposes and is not indicative of the results of
operations of the consolidated Company had the acquisition occurred as of
January 1, 2003, nor is it necessarily indicative of future
results.





*Results
of Operations*





**Actual**
      **Twelve
      months ended**
      **December
      31,**
    
    **Pro
      forma Twelve months ended**
      **December
      31,****2004**
    
    **2003****(unaudited)**Total
      revenue
    
    $
    38,437,000
    
    $
    37,200,000Net
      loss
    
    $
    (1,945,000
    )
    $
    (1,018,000
    )Loss
      per share attributable to common shareholders:Basic
      and diluted
    
    $
    (0.12
    )
    $
    (0.08
    )






**(4)**
    **NON-MARKETABLE
      EQUITY SECURITIES**





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-15





In
January 2003, the Company exercised its put option and idealab! declined to
repurchase the preferred shares. This information was considered in the
recurring evaluation of the carrying value of the preferred shares at the lower
of historical cost or estimated net realizable value. Using this information
together with other publicly available information about idealab!, the Company
concluded the net realizable value of its idealab! preferred shares had declined
to an estimated $185,000 at December 31, 2003.





Subsequent
to the quarter ended March 31, 2004 in a letter dated April 23, 2004 from
idealab! to its shareholders, idealab! announced that it had reached a
settlement with certain holders of its Series D Preferred Stock, which does not
include the Company (the “plaintiffs”), whereby the plaintiffs agreed to vote
their shares in favor of an amendment to idealab!’s charter that would reduce
the liquidation preference of idealab!’s Series D Preferred Stock from $100.00
per share to $19.00 per share. Furthermore, upon completion of the above
settlement, idealab! also stated in its April 23, 2004 letter that it plans to
commence a tender offer for its Series D shares, including those held by the
Company, for $19.00 per share. The settlement agreement requires that the
purchase price be reduced by the tendering holders’ pro rata share of the
plaintiffs’ litigation expenses. These expenses will range from $1.00 to $1.50
per share. As a result of this pending settlement, the Company concluded the net
realizable value of its idealab! preferred shares had declined to an estimated
$89,000 at March 31, 2004, and took a charge to operations of $96,000 during the
quarter then ended. Since the idealab! preferred shares continue to be an
investment in a start-up enterprise, it is reasonably possible in the near term
that our estimate of the net realizable value of the preferred shares could be
further reduced.





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





**(5)**
    **EQUIPMENT,
      SOFTWARE DEVELOPMENT AND LEASEHOLD IMPROVEMENTS,
    NET**




At
December 31, 2004 and 2003, equipment, software development and leasehold
improvements consist of the following:





**2004**
    
    **2003**Furniture,
      fixtures and equipment
    
    $
    7,817,000
    
    $
    7,346,000Software
      development
    
    
    3,223,000
    
    
    3,072,000Leasehold
      improvements
    
    
    2,161,000
    
    
    2,075,00013,201,000
    
    
    12,493,000Less:
      accumulated depreciation and amortization
    
    
    10,865,000
    
    
    10,125,000$
    2,336,000
    
    $
    2,368,000





Depreciation
expense amounted to approximately $740,000, $1,016,000 and $848,000 for the
years ended December 31, 2004, 2003 and 2002, respectively.








F-16




**(6)**
    **GOODWILL
      AND INTANGIBLES**
 
 **Goodwill:**
 
 The
changes in the carrying amount of goodwill for the year ended December 31, 2004
are as follows:
 
 **Quantitative****Market****QCS**
    
    **SCRG**
    
    **Research**
    
    **Teltech****Segment**
    
    **Segment**
    
    **Segment**
    
    **Segment**
    
    **Total**Balance
      as of January 1, 2003
    
    $
    24,000
    
    $
    51,000
    
    $
    —
    
    $
    —
    
    $
    75,000Goodwill
      related to acquisition of Guideline
    
    
    —
    
    
    —
    
    
    4,234,000
    
    
    —
    
    
    4,234,000Goodwill
      related to acquisition of Teltech
    
    
    —
    
    
    —
    
    
    —
    
    
    4,456,000
    
    
    4,456,000Balance
      as of December 31, 2003
    
    
    24,000
    
    
    51,000
    
    
    4,234,000
    
    
    4,456,000
    
    
    8,765,000Contractual
      earnout adjustment
    
    
    —
    
    
    **—**
    
    
    3,080,000
    
    
    200,000
    
    
    3,280,000Transaction
      costs adjustment
    
    
    —
    
    
    **—**
    
    
    82,000
    
    
    99,000
    
    
    181,000Other
    
    
    —
    
    
    (1,000
    )
    
    13,000
    
    
    —
    
    
    12,000Goodwill
      written off related to saleof Information Advisor
      business
    
    
    (24,000
    )
    
    —
    
    
    —
    
    
    —
    
    
    (24,000
    )Balance
      as of December 31, 2004
    
    $
    —
    
    $
    50,000
    
    $
    7,409,000
    
    $
    4,755,000
    
    $
    12,214,000
 
 
 **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, 2003**Customer
      relationships
    $
    948,000
    
    
    $
    (83,000)**Unamortized
      intangible assets as of December 31, 2003**Trade
      names
    $
    272,000**Amortized
      intangible assets as of December 31, 2004**Customer
      relationships
    $
    948,000
    
    
    $
    (218,000)**Unamortized
      intangible assets as of December 31, 2004**Trade names
    $
    272,000**Aggregate
      Amortization Expense:**For
      the year ended December 31, 2003
    $
    83,000For
      the year ended December 31, 2004
    $
    135,000**Estimated
      Amortization Expense:**For
      the year ended December 31, 2005
    $
    135,000For
      the year ended December 31, 2006
    $
    135,000For
      the year ended December 31, 2007
    $
    135,000For
      the year ended December 31, 2008
    $
    135,000




F-17




**(7)**
    **OTHER
      ASSETS**





At
December 31, 2004 and 2003, other assets consist of the following:





**2004**
    
    **2003**Deferred
      charges, net
    
    $
    169,000
    
    $
    77,000Security
      deposits
    
    
    196,000
    
    
    196,000Investment
    
    
    167,000
    
    
    --Deferred
      financing fees, net
    
    
    --
    
    
    217,000Other
    
    
    --
    
    
    14,000$
    532,000
    
    $
    504,000





On
September 29, 2004, the Company, Empire Media, LLC (“Empire”), and TripleHop
Technologies, Inc. (“TripleHop”) (the Company, Empire, and TripleHop are
hereinafter referred to individually as a "Member" and collectively as
"Members"), entered into an Operating Agreement (the “Agreement”) in order to
formally establish the Find.com joint venture. Find.com has been organized as a
Delaware LLC, with the Company and Empire owning 47.5% each, and TripleHop
owning the balance. In exchange for its 47.5% voting interest, the Company
initially contributed $50,000 cash in March 2004 and will enter into a license
agreement with Find.com related to Find.com’s use of the “find.com” URL. In
exchange for its 47.5% voting interest, Empire contributed $100,000 cash and
will enter into a license agreement with Find.com related to Find.com’s rights
to public Empire produced content. In exchange for its 5.0% non-voting interest,
TripleHop entered into a license agreement with Find.com related to Find.com’s
use of the underlying software which serves as the core search functionality
powering the “find.com” website.





Find.com
was formed for the purpose of developing, launching, owning and operating a
business-focused Internet search portal utilizing the "find.com" URL, to provide
search-initiated access to proprietary content and generic World Wide Web-based
search results; the site is intended to be advertising supported in whole or in
part, and content shall be free and/or sold on a pay-per-view basis, or on such
basis as Find.com shall determine from time to time.





During
the year ended December 31, 2004, the Company recorded an unrealized loss of
$94,000 on its investment in Find.com. This represents the Company’s share of
the net loss of Find.com as of and for the year ended December 31, 2004.
Subsequent to its initial investment, the Company contributed an additional
$211,000 during 2004. As of December 31, 2004, the Company’s investment in
Find.com is $167,000. The Company accounts for its investment in Find.com under
the equity method of accounting for investments.





We have a
9.1% interest in Strategic Research Institute, L.P. (“SRI”), and in March 2003,
received an $87,000 distribution in respect of that interest. We share in
profits of SRI, but do not share in losses. This is the only distribution that
we received from this partnership interest, and the distribution was recognized
as other income. SRI is a business conference and event company. The value of
this investment is zero.





Amortization
of deferred charges was $47,000 and $44,000 for the years ended December 31,
2004 and 2003, respectively. Amortization of deferred financing fees was $27,000
and $42,000 for the years ended December 31, 2004 and 2003, respectively, and is
included in interest expense.






F-18




**(8)**
    **COMMITMENTS
      AND CONTINGENCIES**





The
Company has an operating lease agreement for its principal offices, which
expires in 2013, under which rental payments decline over the term of the lease.
Rental expense under this lease is recorded on a straight-line basis. Rental
payments through December 31, 2004 and 2003 exceeded rental expense
recorded on this lease through such dates by $335,000 and $506,000,
respectively.





The
Company has an operating lease for additional office space that expires in 2005,
under which rental payments increase over the term of the lease. Rental expense
on this lease is recorded on a straight-line basis. Accordingly, rent recorded
through December 31, 2003 exceeded scheduled payments through such date by
$108,000. This lease was formally abandoned during 2004 (see Note 9).


****


The
Company’s leases of office space include standard escalation clauses. Rental
expense under leases for office space was $2,105,000, $1,854,000 and $1,504,000
in 2004, 2003 and 2002, respectively.





The
future minimum lease payments under noncancellable operating leases as of
December 31, 2004 were as follows:





Year
      ending December 31
    
    Operating
      Leases2005
    
    $
    1,160,0002006
    
    
    1,159,0002007
    
    
    1,150,0002008
    
    
    1,026,0002009
    
    
    1,082,000Thereafter
    
    
    3,493,000Total
      minimum lease payments
    
    $
    9,070,000





The
following table includes aggregate information about our contractual obligations
as of December 31, 2004 and the periods in which payments are due.





As
      of December 31, 2004
      (in
      thousands)Total
    
    Less
      than 1 year
    
    1 -
      3 years
    
    3 -
      5 years
    
    After
      5 yearsLong
      term operating lease commitments
    
    $
    9,070,000
    
    $
    1,160,000
    
    $
    2,309,000
    
    $
    2,108,000
    
    $
    3,493,000Long
      term capital lease commitments
    
    
    365,000
    
    
    131,000
    
    
    234,000
    
    
    —
    
    
    —Deferred
      compensation and other
    
    
    264,000
    
    
    47,000
    
    
    74,000
    
    
    72,000
    
    
    71,000$
    9,699,000
    
    $
    1,338,000
    
    $
    2,617,000
    
    $
    2,180,000
    
    $
    3,564,000





See Note
3 for information regarding contingent payments related to the acquisitions of
Guideline and Teltech. See Note 9 for information related to accrued
severance and retirement amounts. See Note 13 for information related to
Deferred Compensation.








F-19








**(9)**
    **ACCRUED
      EXPENSES**


****





Accrued
expenses at December 31, 2004 and 2003 consisted of the
following:





**2004**
    
    **2003**Accrued
      bonuses and employee benefits
    
    $
    1,049,000
    
    $
    790,000Accrued
      expenses incurred on behalf of clients
    
    
    281,000
    
    
    282,000Accrued
      SVP royalty
    
    
    654,000
    
    
    1,048,000Accrued
      severance
    
    
    478,000
    
    
    449,000Accrued
      earnout
    
    
    2,030,000
    
    
    —Accrued
      rent
    
    
    232,000
    
    
    —Other
      accrued expenses
    
    
    375,000
    
    
    636,000$
    5,099,000
    
    $
    3,205,000





During
2004, the Company formally abandoned its lease on one of its three New York City
locations. This lease had been substantially unutilized by the Company during
2004. As a result, the Company recorded a charge to earnings of $530,000 during
the second quarter of 2004, representing the total value of all remaining rent
and commercial rent tax obligations, and the amortization of remaining leasehold
improvements which was included in selling, general and administrative expenses.
As of December 31, 2004, $232,000 remains accrued for future rent and commercial
rent tax payments.





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





During
2004 and 2003, the Company recorded additional accruals of $604,000 and
$196,000, respectively, under a severance plan approved by the Board of
Directors and communicated to employees. In 2004, the Company paid $584,000
related to both severance plans. As of December 31, 2004, a balance of $478,000
remains accrued. Payments related to the remaining severance accrual at December
31, 2004 will be completed by the end of June 2005.








F-20





****


**(10)**
    **NOTES
      PAYABLE**








Notes
payable as of December 31, 2004 and 2003 consist of the following:





**2004**
    
    **2003**Bank
      borrowings under Term Note
    
    $
    —
    
    $
    1,200,000Bank
      borrowings under Line of Credit
    
    
    —
    
    
    676,000Borrowings
      under debt agreements with investors:$3,000,000
      Promissory Note, net of unamortized
      discount
      of $968,000 as of December 31, 2003, due
      December
      31, 2008
    
    
    —
    
    
    2,032,000$500,000
      Promissory Note, net of unamortized
      discount
      of $162,000 as of December 31, 2003, due
      December
      31, 2008
    
    
    —
    
    
    338,000Total
      notes payable
    
    
    —
    
    
    4,246,000Less
      current installments
    
    
    —
    
    
    1,076,000Notes
      payable, excluding current
      installments
    
    $
    —
    
    $
    3,170,000





****


**DEBT
AGREEMENTS WITH BANK**





During
May 2004, the Company repaid the entire outstanding balance on a term note with
JP Morgan Chase Bank (the “Term Note”). The Term Note bore interest at prime
plus 1.25%.





The
Company maintains a $1,000,000 line of credit with JP Morgan Chase Bank (the
“Line of Credit”). The Line of Credit bears interest at prime plus 0.50% (5.75%
at December 31, 2004). During May 2004, the Company repaid the entire
outstanding balance of $876,000. The Line of Credit contains certain
restrictions on the conduct of the Company’s business, including, among other
things, restrictions on incurring debt, and creating or suffering
liens.





The Line
of Credit is secured by a general security interest in substantially all of the
Company’s assets. Pursuant to Amendment No. 2 and Consent to Amended and
Restated Senior Grid Promissory Note, dated May 20, 2004, all financial
covenants previously related to the Line of Credit were eliminated.





**DEBT
AGREEMENTS WITH INVESTORS**





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





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








F-21





**(11)**
    **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 $5.5 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 $1,332,000, 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.





During
2003, the Company issued 2,255,621 shares. Cash proceeds received for stock
issuances during 2003 totaled approximately $2,376,000. Of the amount issued in
2003, 571,237 shares were deemed redeemable common stock and is classified as
mezzanine equity. See Note 3 “Acquisitions” in connection with the Guideline
acquisition.





**COMMON
STOCK WARRANTS**





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





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





At
December 31, 2004 and 2003, warrants to purchase 5,125,515 and 2,125,515,
respectively, of the Company’s common shares remain outstanding at exercise
prices ranging from $0.01 to $3.00 and $0.01 to $2.25, respectively.





**STOCK
OPTION PLAN**





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








F-22





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





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





Activity
under the stock option plans is summarized as follows:





Available
      for
      grant
    
    Options
      Granted
    
    Weighted
      average
      exercise
      priceJanuary
      1, 2002
    
    
    546,700
    
    
    2,893,250
    
    $
    0.92Granted
    
    
    (353,000
    )
    
    353,000
    
    
    1.10Exercised
    
    
    —
    
    
    (142,850
    )
    
    0.76Cancelled
    
    
    350,100
    
    
    (350,100
    )
    
    1.99December
      31, 2002
    
    
    543,800
    
    
    2,753,300
    
    
    0.82Additional
      authorized
    
    
    1,500,000
    
    
    —
    
    
    —Granted
    
    
    (892,500
    )
    
    892,500
    
    
    1.32Exercised
    
    
    —
    
    
    (742,262
    )
    
    0.39Cancelled
    
    
    260,138
    
    
    (260,138
    )
    
    1.13December
      31, 2003
    
    
    1,411,438
    
    
    2,643,400
    
    
    1.06Granted
    
    
    (857,750
    )
    
    857,750
    
    
    2.13Exercised
    
    
    —
    
    
    (187,121
    )
    
    0.85Cancelled
    
    
    472,978
    
    
    (472,978
    )
    
    1.74December
      31, 2004
    
    
    1,026,666
    
    
    2,841,051
    
    $
    0.99Exercisable
      at December 31, 2004
    
    
    
    
    
    1,888,208
    
    $
    1.01Exercisable
      at December 31, 2003
    
    
    
    
    
    1,488,495
    
    $
    1.12Exercisable
      at December 31, 2002
    
    
    
    
    
    1,351,724
    
    $
    0.92








F-23








****


**Range**
    
    ****Number
      of Options**Outstanding**
    
    ******Remaining
      Average**Contractual Life in Years
      -**Outstanding Options**
    
    ****Number
      of Options**Exercisable**
    
    ******Remaining
      Average**Contractual Life in
      Years-**Options Exercisable**$0.41
      - $0.50
    
    
    758,
      600
    
    
    6.85
    
    
    752,
      600
    
    
    6.85$0.63
      - $0.80
    
    
    253,050
    
    
    6.41
    
    
    242,
      100
    
    
    6.44$0.97
      - $1.43
    
    
    795,251
    
    
    6.76
    
    
    560,
      658
    
    
    6.75$1.45
      - $1.84
    
    
    468,000
    
    
    8.97
    
    
    154,900
    
    
    8.97$1.90
      - $3.69
    
    
    566,
      150
    
    
    8.45
    
    
    177,
      950
    
    
    8.45**Totals**
    
    
    **2,841,
      051**
    
    
    
    
    
    **1,
      888,208**


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.
 
 During
2003, options to purchase 892,500 shares of common stock were granted under the
1996 Plan and the 2003 Incentive Plan at prices ranging from $1.15 to $1.80,
including 412,500 non-recurring option grants related to the acquisitions of
Guideline and Teltech. The options issued qualified as incentive stock options
whereby the price of the options were at fair market value at the time of
grant.
 
 Stock
options were granted in November 2001 for future services to be rendered to the
Company by the Chief Executive Officer, the Chairman and a consultant. In 2003,
our Board approved the acceleration of the vesting of 105,000 and 117,000
options granted to the Chairman and CEO, respectively, which the CEO and
Chairman then exercised for cash.
 
 **LOAN
RECEIVABLE FOR STOCK PURCHASE**
 
 In 2002,
the Company made a $50,000 loan to a then employee for the purchase of shares of
the Company’s stock in conjunction with a private equity offering. The loan is
interest-free, and matures and becomes payable on April 15, 2005.
 
 **RESTRICTED
STOCK**
 
 During
2004, 100,000 shares of restricted stock were granted to the Company’s Chief
Operating Officer. Deferred compensation expense related to these shares was
calculated at fair value on the date of grant, and is being amortized over the
total vesting period of four years. Compensation expense related to these shares
was $47,000 for the year ended December 31, 2004. Deferred compensation expense
was $214,000 at December 31, 2004 and is included in Shareholders
Equity.
 
 **REDEEMABLE
      CONVERTIBLE PREFERRED STOCK**
 
 The
Company has authorized preferred stock consisting of 2,000,000 shares at $.0001
par value. At December 31, 2004, there were 333,333 shares of redeemable
convertible preferred stock outstanding. See footnote (3) “Acquisitions” for a
further explanation of redeemable convertible preferred stock issued during 2003
in connection with the Guideline acquisition.
 
 **(12)**
    **SVP
      INTERNATIONAL**
 
 The
Company has an agreement with SVP International S.A. (“SVP International”), a
subsidiary of Amalia S.A. Prior to November 2001, SVP International and its
affiliates owned 37% of the common shares of the Company. The agreement provides
that SVP International will aid and advise us in the operation of an information
service and permit access to other global SVP information centers, and the use
of the SVP trademark and logo. The agreement shall continue in perpetuity,
unless amended by the parties. The Company pays royalties to SVP International
computed using a formula based on percentages of service and product revenues,
subject to certain limitations, as defined.
  F-24
 
 Royalty
expense under the agreement, which is based on a percentage of revenue as
stipulated in the agreement, was $118,000, $117,000 and $133,000 for the years
ended December 31, 2004, 2003 and 2002, respectively.
 
 The
Company receives and renders information services to other members of the SVP
network. Charges for such services are made at rates similar to those used for
other clients. As of December 31, 2004 and 2003, the Company’s liability, net of
receivables recorded in other current assets, to SVP International was $78,000
and $497,000, respectively.
 
 **(13)**
    **INCOME
      TAXES**
 
 The
provision (benefit) for income taxes consists of the following:
 
 2004
    
    2003
    
    2002Current:Federal
    
    $
    —
    
    $
    154,000
    
    $
    —State
      and local
    
    
    —
    
    
    56,000
    
    
    —$
    —
    
    $
    210,000
    
    $
    —Deferred:Federal
    
    
    (533,000
    )
    
    —
    
    
    (396,000
    )State
      and local
    
    
    (188,000
    )
    
    —
    
    
    (111,000
    )(721,000
    )
    
    
    
    
    (507,000
    )Change
      in valuation allowance
    
    
    721,000
    
    
    —
    
    
    243,000$
    —
    
    $
    210,000
    
    $
    (264,000
    )
 In 2004
and 2002, valuation allowances were 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. Income tax
provision (benefit) differs from the amount computed by multiplying the
statutory rate of 34% to income before income taxes due to the
following:
 
 **2004**
    
    **2003**
    
    **2002**Income
      tax benefit at statutory rate
    
    $
    (681,000
    )
    $
    (251,000
    )
    $
    (727,000
    )Increase
      (reduction) in income taxes resulting
      from:Change
      in valuation allowance
    
    
    721,000
    
    
    —
    
    
    243,000State
      and local taxes (benefit), net of
      federal
      income tax benefit
    
    
    (122,000
    )
    
    26,000
    
    
    (111,000
    )Taxable
      (nontaxable) income resulting from decrease (increase) in cash surrender
      value of life insurance
    
    
    —
    
    
    (17,000
    )
    
    —Stock
      compensation expense
    
    
    61,000
    
    
    432,000
    
    
    292,000Nondeductible
      expenses
    
    
    22,000
    
    
    20,000
    
    
    22,000Other
    
    
    (1,000
    )
    
    —
    
    
    17,000$
    —
    
    $
    210,000
    
    $
    (264,000
    )
   F-25
 
 The tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets, net of deferred tax liabilities at December 31, 2004 and
2003 are presented below:
 
 **2004**
    
    **2003**Deferred
      tax assets:Federal
      net operating loss carryforwards
    
    $
    747,000
    
    $
    407,000State
      and local net operating loss carryforwards
    
    
    435,000
    
    
    315,000Deferred
      compensation
    
    
    84,000
    
    
    137,000Royalty
      expenses
    
    
    273,000
    
    
    103,000Depreciation
      and amortization
    
    
    588,000
    
    
    337,000Stock
      compensation expense
    
    
    55,000
    
    
    (80,000
    )Write-down
      of non-marketable equity securities
    
    
    131,000
    
    
    132,000Severance
      and separation charges
    
    
    57,000
    
    
    140,000Accrued
      bonus
    
    
    211,000
    
    
    81,000Deferred
      tax assets acquired from Guideline
    
    
    50,000
    
    
    50,000Other,
      net
    
    
    (188,000
    )
    
    87,000Deferred
      tax asset
    
    
    2,443,000
    
    
    1,709,000Valuation
      allowance
    
    
    (964,000
    )
    
    (243,000
    )Net
      deferred tax asset
    
    
    1,479,000
    
    
    1,466,000Less
      current portion
    
    
    696,000
    
    
    505,000Net
      deferred tax asset, excluding current portion
    
    $
    783,000
    
    $
    961,000
 
 Of the
net deferred tax asset, $696,000 and $505,000 as of December 31, 2004 and 2003,
respectively, are classified as current.
 
 Federal
net operating loss carryforwards of $747,000 expire from 2020 to 2023. Of the
state and local tax loss carryforward assets of $435,000, approximately $215,000
expire in 2013, with the remainder expiring from 2020 to 2023.
 
 **(14)**
    **EMPLOYEE
      BENEFITS AND DEFERRED COMPENSATION**
 
 **EMPLOYEE
      BENEFIT PLANS**
 
 The
Company sponsors a 401(k) and profit sharing plan under which eligible
participants may elect to defer eligible compensation up to governmental
limitations. 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
plan was $116,000, $104,000 and $79,000 for the years ended December 31, 2004,
2003 and 2002, respectively.
 
 **DEFERRED
      COMPENSATION**
 
 The
Company has a deferred compensation arrangement with Andrew Garvin, the founder
and former President of the Company. In November 2003, Mr. Garvin announced his
early retirement as of December 31, 2003. The Company revised the calculation of
Mr. Garvin’s accrued deferred compensation to reflect his announced date of
retirement. Accordingly, the present value of the obligation as of December 31,
2003 was approximately $243,000. This will be paid over the contractual term of
10 years, which began in January 2004. On September 29, 2004, the Company and
Mr. Garvin executed Amendment No. 1 to the Separation Agreement dated as of
December 31, 2003 in order to restructure the timing and reduced amount of
certain deferred compensation payments. During the year ended December 31, 2004,
payments totaling approximately $96,000 were made. The remaining liability at
December 31, 2004 is approximately $138,000.
 
 
 F-26
   **EMPLOYMENT
      AGREEMENTS**
 
 On
January 1, 2005, the Company amended its employment agreement with David
Walke, the CEO 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 the CEO to receive compensation and
certain benefits for various lengths of time upon termination without cause, or
voluntary termination upon certain conditions, which includes the acquisition by
a party of 30% or more of the outstanding shares of common stock of the Company
or a change in the majority of incumbent Board members, and certain other
occurrences.
 
 On
January 1, 2005, the Company amended its employment agreement with Peter Stone,
the CFO 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 which will vest according to the
respective restricted stock award agreements. The employment agreement also
contains certain severance provisions entitling the CFO 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 April
28, 2004, the Company entered into an employment agreement with Marc Litvinoff,
commencing on May 17, 2004 and continuing until May 16, 2005; provided, that the
employment agreement shall be automatically renewed for an additional one-year
period unless the Company provides Mr. Litvinoff with written notice. The
employment agreement provides for a base salary of $230,000 per annum, plus
incentive compensation. Pursuant to the employment agreement, Mr. Litvinoff will
be granted a ten-year stock option to purchase 50,000 shares of the Company’s
Common Stock at the fair market value on the date of grant. Options to purchase
10,000 shares under this grant vested immediately with the balance generally
vesting, subject to certain acceleration events, ratably at the end of each of
the first three years of Employee’s employment. Pursuant to Mr. Litvinoff’s
employment agreement, Mr. Litvinoff will also be awarded (i) 100,000 shares of
restricted common stock under the Company’s 2003 Stock Incentive Plan on the
commencement date and (ii) 25,000 shares of restricted common stock upon
commencement of a second year term. Mr. Litvinoff’s employment agreement
provides further that if Mr. Litvinoff leaves the employ of the Company for good
reason, is terminated by the Company without cause, or the employment agreement
is not renewed by the Company, then, in each such case, Mr. Litvinoff shall be
entitled to receive the base salary described above (and certain benefits) fora period
of six (6) months from the date of termination; provided, that for each full
month that Mr. Litvinoff is employed by the Company after the commencement of
the term, such period shall be increased by one additional month up to an
additional six months (equaling up to an aggregate maximum period of twelve
months).Mr.
Litvinoff has agreed to a non-competition covenant during the term and the
Restricted Period, which is defined as six months after the date of
termination.
 The
Company had an employment agreement with Martin Franklin, the Chairman of the
Board of Directors of the Company, which expired in November 2004.


Pursuant
to the employment agreements described above, salary commitments for the next
five years are as follows:
  Year
      ending December 31,2005
    
    $
    700,0002006
    
    
    579,0002007
    
    
    483,0002008
    
    
    —2009
    
    
    —Total
      salary commitments
    
    $
    1,762,000
   F-27
  **(15)**
    **SUPPLEMENTAL
      CASH FLOW INFORMATION**
 
 Cash paid
for interest and income taxes during the years ended December 31, 2004,
2003 and 2002 was as follows:
 
 **2004**
    
    **2003**
    
    **2002**Interest
    
    $
    64,000
    
    $
    447,000
    
    $
    217,000Income
      taxes
    
    $
    —
    
    $
    49,000
    
    $
    6,000
 
 Non-cash
operating activities:
 
 In
January 2003, the Company issued 35,000 shares of the Company’s common stock to
a vendor, valued at approximately $44,000.
 
 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, 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 acquisition.
 
 Non-cash
financing activities:
 
 In
connection with the Guideline acquisition in 2003, the Company issued 571,237
unregistered shares of the Company’s common stock that were fair valued at
$760,000 and redeemable at the option of the holder during a specified period of
time (see Note 3).
 
 In
connection with the Teltech acquisition in 2003, the Company issued 32,700
unregistered shares of the Company’s common stock that were fair valued at
$50,000 (see Note 3).
 
 During
2004 and 2003, the Company recorded preferred dividends of $40,000 and $30,000,
respectively.
 
 During
2004 and 2003, the Company recorded accretion on redeemable common shares,
issued in connection with the Guideline acquisition, of $113,000 and $250,000,
respectively.
 
 In August
2004, the Company purchased certain equipment under a capital lease arrangement
for approximately $185,000, with payments on a monthly basis over a 36-month
period commencing September 1, 2004.
 
 In
September 2003, the Company purchased certain equipment under a capital lease
arrangement for approximately $48,000, with payments on a monthly basis over a
48-month period commencing October 1, 2003.
 
 During
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.
 
 During
2003, the Company recorded the cashless exercise of 83,663 options, of
which 39,351 options were cancelled, at prices ranging from $0.62 to
$1.062, in exchange for 44,312 shares of common stock at prices ranging from
$1.25 to $1.90.
 
  F-28
 
 **(16)**
    **SEGMENT
      REPORTING**
 The
Company manages its consulting and business advisory services in the following
four business segments: Quick Consulting (“QCS”), Strategic Consulting (“SCRG”),
Quantitative Market Research and Teltech. The Company operates primarily in the
United States. Quantitative Market Research was added as a segment as a result
of the acquisition of Guideline on April 1, 2003. Teltech was added as a segment
as a result of its acquisition by the Company on July 1, 2003. See footnote 3
“Acquisitions” for a more detailed description of these acquisitions. 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)**2004**
    
    **2003**
    
    **2002****Revenues**QCS
    
    $
    16,904
    
    $
    18,391
    
    $
    18,624SCRG
    
    
    1,936
    
    
    1,415
    
    
    2,204Quantitative
      Market Research
    
    
    11,371
    
    
    7,669
    
    
    --Teltech
    
    
    8,226
    
    
    4,094
    
    
    --Total
      revenues
    
    $
    38,437
    
    $
    31,569
    
    $
    20,828**Operating
      income (loss)**QCS
    
    $
    1,357
    
    $
    2,281
    
    $
    3,986SCRG
    
    
    164
    
    
    (526
    )
    
    (169
    )Quantitative
      Market Research
    
    
    1,160
    
    
    828
    
    
    --Teltech
    
    
    922
    
    
    408
    
    
    --Segment
      operating income
    
    
    3,603
    
    
    2,991
    
    
    3,817Corporate
      and other1
    
    
    (3,859
    )
    
    (3,160
    )
    
    (5,500
    )Operating
      income (loss)
    
    $
    (256
    )
    $
    (169
    )
    $
    (1,683
    )**Income
      (loss) before taxes**QCS
    
    $
    1,357
    
    $
    2,281
    
    $
    3,986SCRG
    
    
    164
    
    
    (526
    )
    
    (169
    )Quantitative
      Market Research
    
    
    1,023
    
    
    408
    
    
    --Teltech
    
    
    782
    
    
    286
    
    
    --Segment
      income before taxes
    
    
    3,326
    
    
    2,449
    
    
    3,817Corporate
      and other1
    
    
    (5,271
    )
    
    (3,186
    )
    
    (5,956
    )Income
      (loss) before taxes
    
    $
    (1,945
    )
    $
    (737
    )
    $
    (2,139
    )**Depreciation
      and amortization**QCS
    
    $
    577
    
    $
    762
    
    $
    460SCRG
    
    
    79
    
    
    120
    
    
    59Quantitative
      Market Research
    
    
    36
    
    
    41
    
    
    --Teltech
    
    
    98
    
    
    47
    
    
    --Total
      segment depreciation and amortization
    
    
    790
    
    
    970
    
    
    519Corporate
      and other
    
    
    141
    
    
    173
    
    
    420Total
      depreciation and amortization
    
    $
    931
    
    $
    1,143
    
    $
    939**Total
      Assets**QCS
    
    $
    2,741
    
    $
    2,990SCRG
    
    
    597
    
    
    372Quantitative
      Market Research
    
    
    3,996
    
    
    3,071Teltech
    
    
    3,062
    
    
    2,377Total
      segment assets
    
    
    10,396
    
    
    8,810Corporate
      and other
    
    
    19,626
    
    
    14,158Total
      assets
    
    $
    30,022
    
    $
    22,968**Capital
      Expenditures**QCS
    
    $
    186
    
    $
    133
    
    $
    134SCRG
    
    
    8
    
    
    5
    
    
    3Quantitative
      Market Research
    
    
    23
    
    
    --
    
    
    --Teltech
    
    
    62
    
    
    --
    
    
    --Total
      segment capital expenditures
    
    
    279
    
    
    138
    
    
    137Corporate
      and other
    
    
    253
    
    
    319
    
    
    320Total
      capital expenditures
    
    $
    532
    
    $
    457
    
    $
    4571Represents the effect of direct costs and selling, general and
      administrative expenses not attributable to a single segment.
   F-29
 
 
 In 2003,
the Company changed its internal overhead allocation methodology, including
depreciation and amortization, which resulted in greater amounts of corporate
overhead being allocated to the business segments in order to better gauge each
segments contribution to profitability. Also, the acquisitions of Guideline and
Teltech triggered a reapportionment of corporate overhead allocations to
business segments. Had this methodology been in place during 2002, segment
operating (loss) income and depreciation and amortization would have been, on a
pro forma basis, as follows:
 
 **Years
      Ended December 31,**(in
      thousands)**2004**
      **actual**
    
    **2003**
      **actual**
    
    **2002**
      **pro
      forma****Operating
      (loss) income**QCS
    
    $
    1,357
    
    $
    2,281
    
    $
    1,386SCRG
    
    
    164
    
    
    (526
    )
    
    (428
    )Quantitative
      Market Research
    
    
    1,160
    
    
    828
    
    
    --Teltech
    
    
    922
    
    
    408
    
    
    --Segment
      operating income
    
    
    3,603
    
    
    2,991
    
    
    958Corporate
      and other
    
    
    (3,859
    )
    
    (3,160
    )
    
    (2,641
    )Operating
      loss
    
    $
    (256
    )
    $
    (169
    )
    $
    (1,683
    )**Depreciation
      and amortization**QCS
    
    $
    577
    
    $
    762
    
    $
    647SCRG
    
    
    79
    
    
    120
    
    
    85Quantitative
      Market Research
    
    
    36
    
    
    41
    
    
    --Teltech
    
    
    98
    
    
    47
    
    
    --Total
      segment depreciation and amortization
    
    
    790
    
    
    970
    
    
    732Corporate
      and other
    
    
    141
    
    
    173
    
    
    207Total
      depreciation and amortization
    
    $
    931
    
    $
    1,143
    
    $
    939
   ****(17)**
    **UNAUDITED
      QUARTERLY
DATA****
 
 The
following table sets forth selected quarterly data for the years ended December
31, 2004 and 2003 (in thousands, except per share data). The operating results
are not indicative of results for any future period.
  Quarter
      ended
    
    Revenues
    
    Operating
      income
      (loss)
    
    Income
      (loss) before provision (benefit) forincome
      taxes
    
    Net
      income (loss) attributable to commonshareholders
    
    Income
      (loss) per share:
      basic1
    
    Income
      (loss) per share:
      diluted1March
      31, 2004
    
    $
    9,606
    
    $
    (547
    )
    $
    (868
    )
    $
    (987
    )
    $
    (0.07
    )
    $
    (0.07
    )June
      30, 2004
    
    
    9,711
    
    
    (672
    )
    
    (1,955
    )
    
    (1,399
    )
    
    (0.08
    )
    
    (0.06
    )September
      30, 2004
    
    
    9,915
    
    
    1,431
    
    
    1,369
    
    
    1,104
    
    
    0.08
    
    
    0.05December
      31, 2004
    
    
    9,205
    
    
    (468
    )
    
    (491
    )
    
    (816
    )
    
    (0.04
    )
    
    (0.04
    )March
      31, 2003
    
    $
    5,102
    
    $
    127
    
    $
    187
    
    $
    176
    
    $
    0.02
    
    $
    0.02June
      30, 2003
    
    
    7,063
    
    
    (865
    )
    
    (1,050
    )
    
    (1,160
    )
    
    (0.11
    )
    
    (0.11
    )September
      30, 2003
    
    
    9,168
    
    
    577
    
    
    371
    
    
    2
    
    
    0.00
    
    
    0.00December
      31, 2003
    
    
    10,236
    
    
    (9
    )
    
    (246
    )
    
    (262
    )
    
    (0.02
    )
    
    (0.02
    )
 1 Quarterly data is rounded and totals may or may not equal year end basic and
diluted earnings per share.
   F-30
 
 
 As
discussed in Note 9, during 2004 the Company recorded a charge to operations of
$604,000 related to severance payments to be made to former employees.
Approximately $75,000 was recorded related to bonus and commission arrangements
in the quarter ended December 31, 2004.
 
 As
discussed in Note 8, in the fourth quarter of 2003, the Company recorded a
charge to operations of $309,000 related to the retirement of the Company’s
President. Also, the Company recorded a charge of $127,000 related to severance
payments to be made to 5 former employees. Approximately $95,000 was recorded
related to bonus and commission arrangements in the quarter ended December 31,
2003.
  ****(18)**
    **SUBSEQUENT
      EVENT****
 ****
 **Agreement
to Acquire Atlantic Research & Consulting, Inc.**
 
 On March
14, 2005, the Company agreed to acquire all of the capital stock of Atlantic
Research & Consulting, Inc. (“Atlantic”) upon the terms and subject to the
conditions contained in the Stock Purchase Agreement (the “Atlantic Purchase
Agreement”) between the Company and Peter Hooper (“Hooper”), as the sole
stockholder of Atlantic. The consideration for this acquisition will consist of
$3,600,000 in cash payable at closing, $500,000 of unregistered shares of the
Company’s common stock issuable at closing, 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 the first day of the month following the closing date
exceeds $3,300,000, Hooper will also receive additional deferred consideration
equal to the amount of such excess multiplied by 0.50.
 
 The
Company intends to close the Atlantic acquisition during April of 2005, subject
to customary conditions set forth in the Atlantic Purchase Agreement. Atlantic
Research & Consulting, Inc., headquartered in Boston, Massachusetts, is a
rapidly growing quantitative and qualitative custom market research firm,
focusing on financial services, management consulting, health care, and public
sectors.
 Simultaneously
with the acquisition, Atlantic will enter into new employment agreements with
Hooper and two other senior executives of Atlantic.
 
 The
Company intends to finance the acquisition with a combination of the Company’s
cash resources and/or funds obtained in connection with a proposed senior credit
facility with Bank of America. Bank of America has issued a Commitment Letter
(the “Commitment Letter”) to the Company pursuant to which it agreed to provide
to the Company a senior secured credit facility in the aggregate amount of
$9,000,000 (the “Credit Facility”). The commitments contained in the Commitment
Letter are subject to usual and customary conditions and the Company cannot
guarantee that it will be able to close and receive the financing contemplated
in the Credit Facility.
 
 No
assurances can be given that the Atlantic acquisition will be consummated or, if
such acquisition is consummated, as to the final terms of such acquisition.
 
 **Agreement
to Acquire Signia Partners, Inc.**
 
 On March
14, 2005, the Company agreed to acquire all of the capital stock of Signia
Partners, Inc. (“Signia”) upon the terms and subject to the conditions contained
in the Stock Purchase Agreement (the “Signia Purchase Agreement”) between the
Company and Charles Douglas House (“House”), as the sole stockholder of Signia.
The consideration for this acquisition will consist of $3,400,000 in cash
payable at closing, $300,000 of unregistered shares of the Company’s common
stock issuable at closing, 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.
 
 The
Company intends to close the acquisition during April of 2005, subject to
customary conditions set forth in the Signia Purchase Agreement. Signia
Partners, Inc., headquartered just outside of Washington, D.C., is a leading
provider of in-depth business research and fact-based decision support, focusing
on the financial services, health care and consumer sectors.
 
 Simultaneously
with the acquisition, Signia will enter into new employment agreements with
House and two other senior executives of Signia.
 
 The
Company intends to finance the acquisition with a combination of the Company’s
cash resources and/or funds obtained in connection with the proposed Credit
Facility described above. The commitments contained in the Commitment Letter are
subject to usual and customary conditions and the Company cannot guarantee that
it will be able to close and receive the financing contemplated in the Credit
Facility.
 
 No
assurances can be given that the Signia acquisition will be consummated or, if
such acquisition is consummated, as to the final terms of such
acquisition.
  F-31
 Schedule
II
 
 **FIND/SVP,
INC. AND SUBSIDIARIES**
 
 Valuation
and Qualifying Accounts
 
 Years
ended December 31, 2004, 2003 and 2002
 (in
thousands of dollars)
 
 
 **Classification**
    
    Balance
      atbeginningof
      year
    
    Additions
      charged toearnings
    
    Write
      offs(recoveries)
    
    Balance
      at
      end
      of yearYear
      ended December 31, 2004:Allowance
      for doubtful accounts
    
    $
    271
    
    $
    129
    
    $
    236
    
    $
    164Year
      ended December 31, 2003:Allowance
      for doubtful accounts
    
    $
    150
    
    $
    110
    
    $
    (11
    )
    $
    271Year
      ended December 31, 2002:Allowance
      for doubtful accounts
    
    $
    126
    
    $
    128
    
    $
    104
    
    $
    150


F-32