UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

OR

Commission file number 000-50698

GREENFIELD ONLINE, INC.

21 River Road, Wilton, CT 06897
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (203) 834-8585

N/A

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

Number of shares of Common Stock outstanding as of November 1, 2004 was 16,471,435 shares.

GREENFIELD ONLINE, INC.

FORM 10-Q
TABLE OF CONTENTS

GREENFIELD ONLINE, INC.

CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

1

GREENFIELD ONLINE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

2

GREENFIELD ONLINE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)
(Unaudited)

[Continued from above table, first column(s) repeated]

The accompanying notes are an integral part of these consolidated financial statements.

3

GREENFIELD ONLINE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

4

GREENFIELD ONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 —Basis of Presentation:

Basis of Presentation

     References herein to “we,” “us” or “our” refer to Greenfield Online, Inc. and its consolidated subsidiaries unless the context specifically requires otherwise.

     The accompanying unaudited consolidated financial statements of Greenfield Online, Inc. and its wholly-owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in compliance with the rules and regulations of the Securities and Exchange Commission, all significant intercompany accounts and transactions have been eliminated in consolidation. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, these financial statements reflect all adjustments, consisting of normal recurring adjustments necessary to present fairly these financial statements. Operating results for the three and nine-month periods ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in our prospectus filed on July 16, 2004 pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended (the “Securities Act”) for the year ended December 31, 2003, which include unaudited interim consolidated financial statements as of and for the three months ended March 31, 2004 and 2003.

Reverse Stock Split and Initial Public Offering

     These consolidated financial statements give effect to a reverse one-for-14 split of our outstanding common stock that was effected on July 7, 2004. In July 2004, we completed the initial public offering of our common stock at a public offering price of $13.00 per share, including the sale of 4 million shares by us and 1.75 million shares by certain selling stockholders. All shares of our Series C-2 Redeemable Non-Voting Preferred Stock, par value $0.0001 (“Series C-2”), were redeemed and all outstanding shares of the remaining series of Preferred Stock were converted into shares of our common stock on a one-for-14 basis. Net proceeds to us from the initial public offering totaled approximately $34.8 million, after payment of underwriters’ commissions of $3.6 million, the mandatory conversion and dividend payment of approximately $9.4 million to the holders of our Series B Convertible Participating Preferred Stock, par value $0.0001 (“Series B”), the mandatory redemption of all outstanding shares of our Series C-2 for approximately $2.1 million and costs associated with the initial public offering amounting to approximately $2.1 million. The remaining proceeds will be utilized for working capital and other general corporate purposes, including potential acquisitions.

5

International Expansion — India, Europe and Canada

     In July 2003, we incorporated Greenfield Online Private Limited in Gurgaon, India (“GFOL India”) for the purpose of providing us with data processing and survey programming services. In August 2003, we incorporated under the laws of the United Kingdom, through our wholly-owned subsidiary Greenfield Online Europe, Ltd. (“GFOL Europe”) to provide us with a presence in Europe to meet the expected increase in demand for our Internet survey solutions in Europe. In April 2004, we began operations in Canada through our wholly-owned subsidiary Greenfield Online Canada, Ltd. (“GFOL Canada”) to meet the expected increase in demand for our Internet survey solutions in Canada.

Note 2 — Summary of Significant Accounting Policies:

     Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission and the instructions to Form 10-Q. The accounting policies we follow are set forth in our recently filed prospectus filed on July 16, 2004 pursuant to Rule 424(b)(4) of the Securities Act in the notes to our consolidated financial statements for the year ended December 31, 2003, and have not materially changed.

     Panelist Incentives. Our panelists receive incentives for participating in our surveys, which are earned by the panelist when we receive a timely survey response. A panelist has the right to claim his or her incentive payment at any time prior to its expiration, which is generally one year. We accrue incentives as incurred, and reverse expirations to the statement of operations as the expirations occur. Unclaimed incentives historically have represented less than 10% of total incentives incurred, however, for the three and nine months ended September 30, 2004, unclaimed incentives represented approximately 22% and 12%, respectively, of total incentives incurred. This increase in the percentage of unclaimed incentives is due primarily to the shift in our incentive program away from cash payments to a program emphasizing prize-based incentives, which we instituted in April 2004. As a result of this shift, the amount of unclaimed incentives resulting from our historically cash-based program has increased relative to the diminishing amount of cash incentives we award. The amount of unclaimed incentives is representative of unclaimed incentives experienced in prior periods, but fluctuations in the amount of unclaimed incentives may affect our results of operations in future periods.

     Concentration of Credit Risk. Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of trade accounts receivable. We periodically review our accounts receivable for collectibility and provide for an allowance for doubtful accounts to the extent that amounts are not expected to be collected. Two customers under common control accounted for more than 10% of our net sales. GfK-Custom Research, Inc. and GfK-ARBOR, LLC, on a combined basis, accounted for approximately 13% and 15%, respectively of our net sales for each of the three and nine months ended September 30, 2004.

     Stock-Based Compensation. We have awarded certain stock option and warrant grants in which the fair value of our underlying stock on the date of grant exceeded the exercise price. As a result, we have recorded unearned stock-based compensation, which is being amortized over the service period, generally four years. Accordingly, we have amortized $1.1 million and $830,000 of stock based compensation expense in the statement of operations for the nine months ended September 30, 2004 and 2003, respectively, related to these option grants. Stock-based compensation cost for the nine months ended September 30, 2004 totaled $1.1 million, including compensation cost of zero related to the notes receivable from stockholder. Stock-based compensation expense for the nine months ended September 30, 2003 totaled $830,000, including compensation cost of $48,000 related to the notes receivable from stockholders. In connection with options forfeited during the nine months ended September 30, 2004, we wrote-off $156,000 of unearned stock-based compensation as a reduction of additional paid-in capital.

6

     We account for stock-based compensation using the intrinsic-value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations, and have adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) as amended by Statement of Financial Accounting Standards No. 148 “Accounting for Stock-Based Compensation, Transition and Disclosure, an amendment of SFAS 123” (“SFAS No. 148”), for such awards. If we had elected to recognize compensation expense using a fair value approach, and therefore determined compensation based on the value as determined by the modified Black-Scholes option pricing model, our pro-forma income (loss) and income (loss) per share for the three and nine months ended September 30, 2004 and 2003 would have been as follows:

7

Note 3 — Sale of Custom Research Business:

     We entered into an asset purchase agreement (the “Asset Purchase Agreement”) to sell the assets of our custom research business (the “Custom Research Business”) to Taylor Nelson Sofres Operations, Inc. (“TNSO”), which was completed on January 31, 2002. For the sale, we received approximately $2,000,000 at closing and an additional $600,000 during 2003, when certain conditions in the Asset Purchase Agreement were met. The sale of the Custom Research Business included the conveyance of 19 full-time employees, all contracts of the Custom Research Business and a sublease of certain office space. Further, we gave up our right to perform custom research for end-user clients for a period of three years.

     Contemporaneously with the execution of the Asset Purchase Agreement, we entered into an Alliance, License and Supply Agreement (the “Alliance Agreement”) with Taylor Nelson Sofres Intersearch (“TNSI”), an affiliate of TNSO, originally scheduled to expire on January 30, 2007. During the term of the Alliance Agreement, TNSI was required to allow us to service substantially all of its U.S.-based custom marketing research and Internet sample requirements, with a contractual minimum of $200,000 per month of qualifying revenue (as defined in the Alliance Agreement) from purchases of sample and other services in the first year, increasing to a minimum of $300,000 per month in the second year, for a total of $5.4 million in guaranteed payments over the first two years. The Alliance Agreement also specified that no payments would be made for the first three months’ services in 2002. Because we were required to provide the services, we treated $600,000 of the cash received upon sale of the Custom Research Business as an advance deposit on the first three months of services under the Alliance Agreement. Accordingly, we viewed the total contractual payments for the Alliance Agreement to be approximately $6.0 million. In December 2003, the minimum purchases, as required under the Alliance Agreement, were satisfied by TNSI.

8

     We determined that the two agreements with TNSO and TNSI constituted a multiple element arrangement in which the stipulated proceeds from the sale, and the stipulated guaranteed payments in the Alliance Agreement, are required to be allocated between the sale transaction and the Alliance Agreement. We obtained an independent valuation of the Custom Research Business sold and the Alliance Agreement. We also compared the pricing in the Alliance Agreement to that of similarly situated customers using the guidance in EITF 00-21. In determining the most appropriate allocation of fair value, we weighted most significantly the value of our research services sold separately to these customers based upon the fact that our prices for services to third parties are more objective and verifiable than estimating the value of the business disposed of. Accordingly, at the time, we determined that the fair value of the future services amounted to approximately $5.6 million. The $400,000 difference between the contractual amount of $6.0 million and the fair value of the services of $5.6 million was recorded as a contract asset upon sale of the Custom Research Business and the simultaneous signing of the Alliance Agreement. This asset was amortized against revenue on a straight-line basis, which is substantially similar to the pattern in which the services were provided. Therefore, $17,000 and $150,000 was amortized during the nine months ended September 30, 2004 and 2003, respectively. We recorded a pre-tax gain on the sale of the Custom Research Business in the amount of $1.5 million and $600,000 in year ended December 31, 2002 and 2003, respectively, as a result of this transaction. The $600,000 gain was recorded in 2003, when the associated contingencies lapsed and the cash was received, which is included in “other income (expense)” in the accompanying statement of operations.

     On November 26, 2003, we and TNSI amended the Alliance Agreement to provide that: the term would expire on December 31, 2006, with no automatic renewal rights; that we would be allowed to sell Internet data collection services to end-users; and that during the term of the Alliance Agreement, TNSI and NFO Worldgroup, Inc (“NFO”), which Taylor Nelson Sofres plc, the parent company of TNSO, had acquired in 2003, would provide us with an opportunity to bid on substantially all of TNSI and NFO’s third-party U.S.-based Internet consumer sample business.

Note 4 — Prepaid expenses and other current assets:

     Prepaid expenses and other current assets consisted of the following at September 30, 2004 and December 31, 2003 ($ in thousands):

     In an effort to manage the additional risks of being a public company, we increased our insurance coverage, contemporaneously with the completion of the initial public offering.

9

Note 5 — Property and Equipment, net:

     Property and equipment, net consisted of the following at September 30, 2004 and December 31, 2003 ($ in thousands):

     Depreciation expense amounted to $851,000 and $746,000 for the nine months ended September 30, 2004 and 2003, respectively, including amounts recorded under capital leases.

     Included in property and equipment above are assets acquired under capital leases, which are summarized below at September 30, 2004 and December 31, 2003 ($ in thousands):

Note 6 — Other intangible assets, net:

     Other intangible assets consists of the following at September 30, 2004 and December 31, 2003 ($ in thousands):

10

     Amortization of internal use software amounted to $275,000 and $204,000 for the nine months ended September 30, 2004 and 2003, respectively, which is included in cost of revenues in the accompanying statement of operations. Amortization of other intangible assets (excluding internal use software) amounted to zero and $66,000 for the nine months ended September 30, 2004 and 2003, respectively.

Note 7 — Accrued expenses and other current liabilities:

     Accrued expenses and other current liabilities consisted of the following at September 30, 2004 and December 31, 2003 ($ in thousands):

     For the nine months ended September 30, 2004 and 2003, we reversed panelist incentives accrual of $243,000 and $191,000, respectively, for the expirations of the incentives.

     We have arrangements with Microsoft Corporation through Microsoft Network (“MSN”). Through these arrangements, we pay MSN for network traffic routed to our website where participants respond to our surveys. We also incur a fee to MSN for surveys completed and delivered to clients. Fees for first time traffic routed to our website through MSN, which are included in panel acquisition expense, amounted to $111,000 and $1.1 million for the nine months ended September 30, 2004 and 2003, respectively. In 2003, MSN began charging us fees for surveys completed and delivered through MSN referrals. Such fees for completed surveys, which are included in cost of revenues, amounted to $633,000 and $21,000, respectively for the nine months ended September 30, 2004 and 2003.

Note 8 — Related Parties:

Notes receivable from Stockholder

     In May 1999, Hugh O. Davis, one of our executive officers, borrowed $75,000 from us in order to purchase shares of our common stock. In connection with the loan, Mr. Davis executed and delivered to us (i) a promissory note maturing on May 17, 2004 in the principal amount of $75,000, with a compounding annual interest rate of 5.3% and (ii) a pledge agreement under which he pledged as collateral for the loan all of his shares of our stock and any cash or securities received in respect of such securities. In connection with our sale of stock to Greenfield Holdings and other existing stockholders in March 2001, Mr. Davis borrowed an additional $56,000 from us in order to purchase securities from Greenfield Holdings (which securities were later exchanged for shares of our Series A Preferred Stock in connection with our recapitalization in December 2002). In connection with the second loan, (i) Mr. Davis executed and delivered to us a promissory note maturing on May 17, 2004 in the principal amount of $56,000 with a compounding annual interest rate of 8% and (ii) the pledge agreement was amended to include the additional securities acquired by Mr. Davis as collateral for the loans. Mr. Davis failed to repay the notes on May 17, 2004. We provided Mr. Davis with a notice of default and, on May 23, 2004, we repossessed a portion of the shares pledged as collateral pursuant to the pledge agreement with a value equal to the amounts due under the notes, including interest thereon. The repossession of the shares was recorded as treasury stock, offsetting the note receivable from stockholder. Since March 2001, we have not modified the terms of these arrangements with Mr. Davis.

11

Note 9 — Revolving Credit Facility:

     We have a credit facility (the “SVB Credit Facility”) with Silicon Valley Bank (“SVB”) in the amount of $1,875,000 at September 30, 2004 and December 31, 2003 based upon an 80% advance rate on eligible accounts receivable (the “Borrowing Base”). The SVB Credit Facility bears interest at a rate equal to the prime rate plus 1%, plus a collateral handling fee of 0.375% of the monthly average daily financed receivable balance. The SVB Credit Facility is collateralized by our general assets, matures on August 22, 2005 and is subject to a covenant, which requires us to achieve certain performance targets each quarter that the SVB Credit Facility is outstanding. Although we had outstanding borrowings during each period, we did not have an outstanding balance at September 30, 2004 or December 31, 2003. In addition, we incurred interest expense in the amount of $82,000 and $103,000, respectively, for each of the nine months ended September 30, 2004 and 2003 associated with the SVB Credit Facility.

     On July 15, 2004, we amended the SVB Credit Facility to allow us to maintain our primary depository account outside of SVB until October 15, 2004. On October 15, 2004, we further amended the SVB Credit Facility to convert our previously monthly-based performance covenants to quarterly-based covenants, and to allow us to maintain our primary depository account outside of SVB until December 31, 2004, when a portion of our excess funds will be deposited with SVB, the amount of which will later be determined between us and SVB. Prior to these amendments, we were required to maintain our primary depository account with SVB. Upon the completion of our initial public offering, we deposited the net proceeds in a cash management account maintained outside of SVB.

Note 10 — Earnings per share:

     Net income (loss) per share. We report net income (loss) per share in accordance with Statement of Financial Accounting Standards No. 128 “Earnings per Share” (“SFAS 128”). Under SFAS 128, basic earnings per share, which excludes dilution, is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could be exercised or converted into common shares, and is computed by dividing net income or loss available to common stockholders by the weighted average of common shares outstanding plus the dilutive potential common shares. Diluted earnings per share includes in-the-money stock options and warrants using the treasury stock method and also includes the assumed conversion of preferred stock using the if-converted method if dilutive. Due to the participation features of our Series A, Series B and Series C-1 Preferred Stock, basic and diluted earnings per share has been calculated using the “two-class” method, which is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In loss periods, no amounts are allocated to the participating securities. During a loss period, the assumed exercise of in-the-money stock options and warrants and the conversion of convertible preferred stock noted above has an anti-dilutive effect and therefore, these instruments are excluded from the computation of dilutive earnings per share. Weighted average potential common shares of 12,000 and 24,000, respectively for the three months ended September 30, 2004 and 2003 and 9,000 and 24,000, respectively for the nine months ended September 30, 2004 and 2003 were excluded from the computation of diluted earnings per share as they would be anti-dilutive. Net loss available to common stockholders for the three and nine months ended September 30, 2004 includes a $28.1 million charge to common stockholders related to the liquidation preference of our Series B. This charge for the liquidation preference reflects the difference between the carrying value of the Series B and the value received by the Series B stockholders when the Series B was converted to common stock at the initial public offering.

12

     The following is a reconciliation of basic number of common shares outstanding to diluted number of common and common stock equivalent shares outstanding (in thousands):

Note 11 — Preferred Stock:

     Immediately prior to the initial public offering, the Company had four classes of preferred stock issued and outstanding. The Series A Convertible Participating Preferred Stock (“Series A”), the Series B Convertible Preferred Stock (“Series B”), the Series C-1 Convertible Participating Preferred Stock (“Series C-1”), and the Series C-2 Redeemable Non-Voting Preferred Stock (“Series C-2”). In July 2004, upon completion of the initial public offering the Series A converted into 2,915,559 shares of common stock; the shares of Series B were redeemed for a combination of cash and common stock. In accordance with EITF topic D-42, The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock, $28.1 million was recognized as a charge against income available to common shareholders, representing the excess of the fair value of the consideration given to extinguish the Series B preferred shares (cash and common stock) over the carrying value (plus accrued and unpaid dividends) of the preferred shares at the date of redemption; the Series C-1 was converted into 5,330,526 shares of common stock; and the Series C-2 was redeemed for approximately $2.1 million.

Note 12 — Commitments and Contingencies:

Legal Contingencies:

     From time to time, in the ordinary course of business, we are subject to legal proceedings. While it is not possible to determine the ultimate outcome of such matters, it is management’s opinion that the resolution of any pending issues will not have a material adverse effect on our consolidated financial position, cash flows or results of operations.

NOTE 13 — Subsequent Events:

     OpinionSurveys.com Panel Acquisition. On October 21 2004, we completed the purchase of certain Internet-based survey panel assets from The Dohring Company (“Dohring”) for a total purchase price of $3.0 million in cash. The assets we acquired in this acquisition include the complete OpinionSurveys.com panel, certain profile information contained in its database, title to the domain names “OpinionSurveys.com” and “OpinionSurvey.com,” as well as certain intellectual property associated with the OpinionSurveys.com panel. The acquisition was effected pursuant to an Asset Purchase Agreement by and among us, Dohring and Doug C. Dohring dated as of August 18, 2004.

     Amendment to SVB Credit Facility. In July 2004, the Company amended the SVB Credit Facility to allow the Company to maintain its primary depositary account outside of SVB until October 15, 2004. On October 15, 2004, the Company further amended the SVB Credit Facility to convert its previously monthly-based performance covenants to quarterly-based covenants, and to allow the Company to maintain its primary depositary account outside of SVB until December 31, 2004, when a portion of our excess funds will be deposited with SVB, the amount of which will later be determined between the Company and SVB.

13

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this quarterly report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section entitled “Risk Factors” in our prospectus filed with the Securities and Exchange Commission on July 16, 2004 pursuant to Rule 424(b)(4) of the Securities Act and in this Form 10-Q. See “Cautionary Note Regarding Forward-Looking Statements.”

Critical Accounting Policies and Estimates

     Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in conformity with GAAP in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, we evaluate our estimates and judgments. We base our estimates on historical experience, independent instructions, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     For further information regarding our critical accounting policies, please refer to the Management’s Discussion and Analysis section of our final prospectus filed with the SEC on July 16, 2004 pursuant to Rule 424(b)(4). There have been no material changes during the nine months ended September 30, 2004.

Results of Operations

Quarter Ended September 30, 2004 Versus Quarter Ended September 30, 2003
Nine Months Ended September 30, 2004 Versus Nine Months Ended September 30, 2003

     Net Revenues. Net revenues for the three months ended September 30, 2004 were $12.0 million, compared to $7.0 million for the three months ended September 30, 2003, an increase of $5.0 million, or 70.5%. Net revenues for the nine months ended September 30, 2004 were $30.9 million, compared to $17.6 million for the nine months ended September 30, 2003, an increase of $13.3 million, or 75.5%. Net revenues increased due to an increase in the number of survey projects completed. This increase was seen primarily in the full-service and sample-only solutions and, to a lesser extent, in tracking studies. In addition, increased demand for our services was driven by market factors, including the need for customers to improve profitability by using less costly Internet-based marketing research data and the impact of the Do Not Call registry on marketing research firms, which had previously relied heavily on telephone-based data collection methods. We believe that the revenue growth from our Internet survey solutions will continue to be strong in the remainder of 2004, although sequential quarterly year over year growth rates may decline.

14

     Gross Profit. Gross profit for the three months ended September 30, 2004 was $9.5 million, compared to $4.5 million for the three months ended September 30, 2003, an increase of $5.0 million, or 112.3%. Gross profit for the three months ended September 30, 2004 was 79.1% of net revenues, compared to 63.5% for the three months ended September 30, 2003. Gross profit for the nine months ended September 30, 2004 was $23.4 million, compared to $11.5 million for the nine months ended September 30, 2003, an increase of $11.8 million, or 102.7%. Gross profit for the nine months ended September 30, 2004 was 75.7% of net revenues, compared to 65.5% for the nine months ended September 30, 2003. Due to the more productive use of panelist incentives as a result of a shift from cash incentive payments to a prized-based program, the gross margin was positively impacted by approximately 11.5 percentage points for the three months ended September 30, 2004 and by approximately 5.5 percentage points for the nine months ended September 30, 2004. Additionally, gross margin increased due primarily to a decline in costs related to direct project personnel as a result of our India expansion, whereby we moved a significant portion of survey production and data processing to our India facility during 2003. The shift to our India facility positively impacted our gross margin by approximately 4.4 percentage points for the three months ended September 30, 2004 and by approximately 5.2 percentage points for the nine months ended September 30, 2004.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended September 30, 2004 were $5.9 million, compared to $3.2 million for the three months ended September 30, 2003, an increase of $2.7 million, or 81.8%. Selling, general and administrative expenses for the nine months ended September 30, 2004 were $15.2 million, compared to $8.1 million for the nine months ended September 30, 2003, an increase of $7.1 million, or 87.6%. Selling expenses, primarily personnel costs and related commissions, increased approximately $350,000 and $1.9 million, respectively, for the three and nine months ended September 30, 2004 as a result of hiring new sales and sales-support personnel in order to better promote our products and services. Personnel costs associated with selling, general and administrative expenses increased approximately $787,000 and $1.8 million, respectively, for the three and nine months ended September 30, 2004 as a result of hiring senior executives in panel and marketing management, staffing required in finance and administration to operate as a public company and the addition of personnel in panel and administration in our operations in India. Advertising and promotion increased approximately $240,000 and $630,000, respectively, in the three and nine months ended September 30, 2004 as we increased our spending in direct mail, print and web advertising and redesigned our website, logo and collateral marketing materials. General and administrative expenses, excluding personnel costs, increased approximately $1.3 million and $2.8 million, respectively, in the three and nine months ended September 30, 2004 primarily as a result of public company expenses, recruitment fees for personnel additions, office expansion in India, Europe and Canada, as well as other professional fees incurred to support our revenue growth and international expansion. Selling, general and administrative expenses as a percentage of net revenues increased to 49.0% for the three months ended September 30, 2004 from 45.9% of the net revenue for the three months ended September 30, 2003, and increased to 49.4% for the nine months ended September 30, 2004 from 46.2% of net revenue for the nine months ended September 30, 2003. We expect selling, general and administrative expenses to remain relatively consistent as a percentage of revenues during the remainder of 2004 and expect it to decline as a percentage of revenues through 2005, as we realize the benefit of low incremental variable costs associated with future revenue growth.

     Panel Acquisition Expenses. Panel acquisition expenses were $599,000 for the three months ended September 30, 2004, compared to $311,000 for the three months ended September 30, 2003, an increase of $288,000, or 92.6%. Panel acquisition expenses were $1.8 million for the nine months ended September 30, 2004, compared to $1.1 million for the nine months ended September 30, 2003, an increase of $713,000, or 67.4%. Panel acquisition expenses increased as a result of our continuing efforts to expand and diversify our panel, primarily in Europe and Canada, where we incurred approximately $277,000 and $722,000 of additional panel acquisition costs for the three and nine months ended September 30, 2004, respectively. Our panel recruiting through MSN has declined significantly in the three and nine months ended September 30, 2004 compared to the three and nine months ended September 30, 2003, primarily as a result of our continuing efforts to expand the number of our panelist recruiting sources and to find lower cost alternatives to recruiting through MSN.

     Depreciation and Amortization Expenses. Depreciation and amortization expenses for the three months ended September 30, 2004 were $388,000, compared to $279,000 for the three months ended September 30, 2003, an increase of $109,000, or 39.1%. Depreciation and amortization expenses for the nine months ended September 30, 2004 were $851,000, compared to $812,000 for the nine months ended September 30, 2003, an increase of $39,000, or 4.8%. This increase in depreciation and amortization expense occurred as a result of the 2004 capital expenditure plan associated with retooling our infrastructure, as well as the build out of our India facility.

15

     Interest Income (Expense), Net. Net interest income for the three months ended September 30, 2004 was $36,000, compared to net interest expense of $99,000 for the three months ended September 30, 2003. Net interest expense for the nine months ended September 30, 2004 was $94,000, compared to $338,000 for the nine months ended September 30, 2003, a decrease of $244,000, or 72.2%. The decreases in interest expense were due primarily to lower debt levels outstanding during the 2004 period as well as interest earned on invested proceeds from our initial public offering.

     Related Party Interest Expense, Net. Related party interest expense for the three months ended September 30, 2004 was $1.1 million, compared to related party interest expense of $29,000 for the three months ended September 30, 2003. Related party interest expense for the nine months ended September 30, 2004 was $1.1 million, compared to related party interest expense of $27,000 for the nine months ended September 30, 2003. The increase in the related party interest expense was due to the acceleration of unamortized debt discount associated with our Series C-2 Redeemable Non-Voting Preferred Stock, par value $0.0001 (“Series C-2”), which was redeemed on July 25, 2004 using proceeds from our initial public offering.

     Other Income (Expense), Net. Other expense for the three months ended September 30, 2004 was $10,000, compared to zero for the three months ended September 30, 2003. Other expense for the nine months ended September 30, 2004 was $26,000, compared to other income of $600,000 for the nine months ended September 30, 2003. Other expense for the three and nine months ended September 30, 2004 related primarily to the effects of currency translation associated with our operations in India, Europe and Canada. Other income for the nine months ended September 30, 2003 related to the contingent gain on the sale of our Custom Research Business, which was completed in January 2002. The contingent gain could not be recognized until January 2003, when certain conditions were met and the cash was collected. For a further discussion of the sale of our Custom Research Business, see Note 3 to our consolidated financial statements, included elsewhere in this quarterly report.

     Provision for Income Taxes. We recorded an income tax provision for the three and nine months ended September 30, 2004 of $51,000 and $193,000, respectively, compared to $17,000 and $80,000, respectively, for the three and nine months ended September 30, 2003. Our effective tax rate was 3.9% and 5.5%, respectively, for the three and nine months ended September 30, 2004, compared to 4.8% and 6.1%, respectively, for the three and nine months ended September 30, 2003. The tax provision was primarily related to federal and state taxes that could not be offset by net operating loss carry-forwards. We establish valuation allowances in accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“FAS 109”). At September 30, 2004 and December 31, 2003, the valuation allowance fully offset the gross deferred tax asset. Because we were in a cumulative loss position for the three year period ending September 30, 2004, we do not believe there is sufficient evidence to release any of our valuation allowance as of September 30, 2004, however, we will continue to reassess our need for a valuation allowance in the fourth quarter and in 2005. As a result of this reassessment, we may reduce our valuation allowance when we believe we are more likely than not to realize such deferred tax assets.

     Net Income. Our net income for the three and nine months ended September 30, 2004 was $1.2 million and $3.3 million, respectively, compared to $335,000 and $1.2 million, respectively, for the three and nine months ended September 30, 2003. The increase in net income was primarily the result of increased revenues partially offset by increased selling, general and administrative expenses and panel acquisition expenses, and acceleration of the unamortized debt discount on our Series C-2 as more fully described above. Net income per common share includes the effects of using the two-class method, which allocates earnings among common stock and participating preferred securities. Net loss available to common stockholders for the three and nine months ended September 30, 2004 includes a $28.1 million charge to common stockholders related to our Series B Convertible Participating Preferred Stock (“Series B”) liquidation preference, which arose as a result of our initial public offering. Net loss available to common stockholders for the three and nine months ended September 30, 2004 was $1.91 and $4.39, respectively, for basic and diluted, as compared to net income per share of $0.01 and $0.05, respectively, for basic and diluted for the three and nine months ended September 30, 2003. Excluding the $28.1 million charge for our Series B liquidation preference, net income available to common stockholders would have been $1.1 million and $1.4 million, respectively, for the three and nine months ended September 30, 2004 and net income per common share would have been $0.08 and $0.22, respectively, for basic and $0.07 and $0.20, respectively, for diluted for the three and nine months ended September 30, 2004.

16

Liquidity and Capital Resources

     Since our inception, we have financed our operations primarily through sales of equity and debt securities, from borrowings under our credit facilities, from the proceeds from the sale of our Custom Research Business and, more recently, through cash flows from operations. We have received a total of $43.0 million from private offerings of our equity and debt securities. In July 2004, we completed our initial public offering of shares of our common stock at a public offering price of $13.00 per share, and raised approximately $34.8 million in net proceeds after payment of underwriters commissions of $3.6 million, a mandatory conversion and dividend payment of approximately $9.4 million to the holders of our Series B, a mandatory redemption of all outstanding shares of our Series C-2 for approximately $2.1 million and costs associated with our initial public offering of shares of our common stock amounting to approximately $2.1 million. At September 30, 2004, we had approximately $38.4 million in cash and cash equivalents on hand.

     Cash provided by operations for the nine months ended September 30, 2004 was $2.1 million, compared to $2.6 million for the nine months ended September 30, 2003. The decrease in cash flow from operations in the 2004 period was primarily attributable to an increase in our accounts receivable days sales outstanding, which was primarily due to our largest client in 2003, TNSI, moving from terms which required prepayment for services in 2003 to standard commercial terms in 2004. For the three months ended September 30, 2003, TNSI represented 14% of total revenues with effectively zero days sales outstanding. Days sales outstanding was further affected by the growth of our revenues associated with tracking studies, in which we collect data monthly over the course of a year. We generally recognize revenue from our tracking studies on a monthly basis as the data is collected, but invoice our customers on a quarterly basis. This effectively increases our days sales outstanding for our tracking studies as compared to our other survey solutions. Cash provided by operations was further decreased due to the net reduction in accounts payable, accrued expenses and other current liabilities. These decreases were significantly, but not completely, offset by our increased profitability.

     Cash used by investing activities was $1.2 million for the nine months ended September 30, 2004, compared to cash provided by investing activities of $341,000 for the nine months ended September 30, 2003. This decrease of $1.5 million was due to our capital expenditure program initiated in 2004, which accounted for approximately $900,000, as well as a one-time $600,000 contingent gain on sale of our Custom Research Business in 2003.

     Cash provided by financing activities was $33.8 million for the nine months ended September 30, 2004, compared to cash used by financing activities of $2.1 million for the nine months ended September 30, 2003. The difference was primarily the result of the net proceeds from our initial public offering, which was completed in July 2004.

     Our working capital at September 30, 2004 was $39.9 million, compared to $1.0 million at December 31, 2003, an increase of $38.9 million. The increase in working capital was primarily due to the net proceeds from our July 2004 initial public offering. Excluding the effect of the increase in cash, working capital increases resulted from increased accounts receivable, prepaid expenses and other current assets. The increase in accounts receivable resulted from our additional revenues and the increase in our days sales outstanding as described above. Although our receivables and corresponding days sales outstanding increased, a significant portion of this increase occurred from business generated in September, which resulted in large accounts receivable balances remaining current as of September 30, 2004. We believe that based on our history of insignificant bad debts and our improved accounts receivable aging, the allowances as recorded are adequate to cover our estimated potential future bad debts. The increase in prepaid expenses and other current assets was due primarily to increased insurance coverage, which we obtained to manage the additional risk of operating as a public company, to a deposit that was paid to a specific vendor and to increased deferred project costs. These increases in working capital were partially offset by an increase in accounts payable, which resulted from additional expenses incurred attributable to our increased personnel and costs related thereto; and to expanded international operations, including overhead costs.

     We have maintained a banking relationship with Silicon Valley Bank (“SVB”) since September 2001. In August 2003, we amended our credit facility with SVB to extend the maturity date until August 2005 and reduce the applicable interest rate. This credit facility allows for borrowings of up to $1.9 million, based upon an 80% advance rate on eligible accounts receivable (the “Borrowing Base”), and bears interest at a rate equal to the prime rate plus 1%, plus a collateral handling fee of 0.375% of the monthly average daily financed receivable balance. The credit facility is collateralized by a pledge of our general assets and contains a covenant that requires us to achieve EBITDA (as defined in the credit facility) of $1.00 or more during each quarter that the facility is outstanding. In October 2003, we repaid the entire outstanding balance under the facility, and at December 31, 2003 the entire amount was available for borrowing, subject to the sufficiency of the Borrowing Base. On September 30, 2004, the Borrowing Base was sufficient to allow us to borrow the entire amount available under the credit facility, although we had no outstanding borrowings under the credit facility. Interest on the facility is payable monthly, and the entire balance of the facility, including principal, interest and unpaid charges, if any, is payable on August 22, 2005. In April 2004, we amended the credit facility to allow us to incur purchase money obligations, including capital leases, of up to $2,250,000 in the aggregate. In July 2004, we amended the credit facility again to allow us to maintain our primary deposit account outside of SVB through October 15, 2004. Upon the completion of our initial public offering, we deposited the net proceeds in a cash management account maintained outside of SVB. On

17

October 15, 2004, we further amended the credit facility to convert our previously monthly-based performance covenants to quarterly-based covenants, and to allow us to maintain our primary depository account outside of SVB until December 31, 2004, when a portion of our excess funds will be deposited with SVB, the amount of which will later be determined between us and SVB.

     We also maintain an ongoing relationship with Somerset Capital Group Ltd. (“Somerset Capital”), a leasing company, to finance the acquisition of equipment, software and office furniture pursuant to leases, which we have recorded as capital leases. While we do not have a firm commitment from Somerset Capital to provide additional financing, Somerset Capital has indicated that it intends to finance our budgeted capital expenditures for 2004 within the United States if we request it to do so. In the event that Somerset Capital declined to continue to finance our capital expenditure requirements, we believe that alternative sources of such funding would be available to us to satisfy such needs.

     At September 30, 2004 and December 31, 2003, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

     We have an agreement with MSN under which we pay fees for panelists recruited via the MSN website, plus fees associated with surveys taken by these panelists. Our agreement with MSN, as amended, required us to make guaranteed quarterly payments, which would be credited against recruiting and survey fees. Our obligation to make these guaranteed payments has lapsed but we continue to be obligated to make current payments to MSN for panelists they recruit and for surveys taken by MSN recruited panelists. In 2004 there has been a continued decline in panel recruitment through MSN and a decline in our use of MSN recruited panelists, resulting in lower payments to MSN in 2004 as compared to 2003, and we anticipate this decline to continue over the next twelve months. We anticipate that any increased liquidity associated with this decreasing reliance on MSN and MSN panelists will be offset by additional expenditures that we make to gain access to other panel recruiting sources.

     In the nine months ended September 30, 2004, we incurred capital expenditures of $761,000 and $1.8 million related to India and North America, respectively. For the remainder of fiscal 2004, we expect capital expenditures to total approximately $2.8 million, including approximately $1.0 million for the construction of our operations facility in India and $1.8 million for our operations in North America. In the United States, capital expenditures were applied primarily to upgrade computer servers and networking equipment to manage increased Internet-based survey production and data collection, to upgrade personal computers for employees and to purchase new Internet telephony equipment to facilitate international communications. These capital expenditures will be funded by a combination of capital leases from Somerset Capital and cash flow from operations. In India, our 2004 capital expenditures consisted primarily of leasehold improvements, office furniture, computer equipment, Internet telephony equipment and other costs associated with building our Indian facility. These expenditures were funded from our cash flow from operations and other available financing sources, including our credit facility. In addition, costs we have incurred and may incur in the development, enhancement and integration of software programs, technologies and methodologies, in order to keep pace with technological changes and enhance our Internet survey solutions, have and will also be funded from our cash flow from operations and other available financing sources, including our credit facility.

18

     There were no material changes outside the ordinary course of business in our contractual obligations during the nine months ending September 30, 2004, except for the Series C-2 redemption payment and the Series B conversion and dividend payment made in connection with our initial public offering. The following table summarizes our contractual obligations at September 30, 2004 and the effect such obligations are expected to have on our liquidity and cash flow in future periods:

     Based on our current level of operations and anticipated growth, we believe that our cash generated from operations, amounts available under our credit facility and future capital leasing arrangements with Somerset Capital, together with the net proceeds that we received from our initial public offering, will be adequate to finance our working capital and other capital expenditure requirements through the foreseeable future, although no assurance can be given in this regard. Poor financial results, unanticipated expenses, acquisitions of technologies, businesses or assets or strategic investments could give rise to additional financing requirements sooner than we expect. There can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our then-current stockholders.

Risk Factors

     You should carefully consider the risks described below and elsewhere in this report, which could materially and adversely affect our business, results of operations or financial condition. If any of the following risks actually occurs, the market price of our common stock would likely decline.

If we are unable to maintain the size or demographic composition of the Greenfield Online panel, our clients may stop using our products and services.

     The commercial viability of our marketing research data and our overall business is dependent on our ability to attract and maintain active panelists and ensure optimal panel composition to accommodate a broad variety of marketing research requests. There is currently no historical benchmark by which to predict the optimal size of research panels to ensure high response rates and maximum revenue generation per panelist. If we are unable to accurately determine or build optimal-sized panels, our current panelists may become overused and unresponsive to our requests to participate in surveys. If we fail to regenerate our panel with new and active panelists on a regular basis, the size and demographic diversity of the Greenfield Online panel may decrease and our clients may reduce or stop using our products and services, which may lead to a decline in our revenues.

     If the number of panelists participating in the Greenfield Online panel decreases, the cost of acquiring new panelists becomes excessive or the demographic composition of our panel narrows, our ability to provide our clients with accurate and statistically relevant information could suffer. This risk is likely to increase as our clients’ needs expand, and as more demographically diverse surveys are requested by our clients.

19

If the rate at which our panelists respond to our surveys decreases, we may not be able to meet our clients’ needs.

     Our panelists participate in our surveys on a voluntary basis only, and there can be no assurance that they will continue to do so. Our ability to maintain adequate response rates may be harmed if:

•

our email-based survey invitations are not received by our panelists due to the use of spam-filtering and blocking software by individuals, corporations and Internet service providers;

•

our panelists become dissatisfied with the forms of participation incentives we offer; or

•

our panelists respond less frequently to our surveys, or stop responding altogether due to excessive requests for participation from us or other researchers.

     If we fail to maintain adequate response rates, we may be unable to meet current or future demand for our products and services and our revenues may decline.

If the rate at which our panelists respond to our surveys decreases, we may be required to expend additional funds to retain our panelists or provide additional incentives to encourage panelist participation.

     In the past, the responsiveness of our panelists has been variable and a function of the length of the surveys to be completed and the incentives offered to our panelists in exchange for their participation. The incentives we offer panelists to participate in surveys generally consist of the opportunity to enter into sweepstakes and win prizes or direct cash incentives. If we are required to increase incentives or undertake more costly campaigns to retain our current panelists, our operating expenses may increase and our operating income may decline.

We derived approximately 25% of our total net revenues from two clients in fiscal 2003. For the nine months ended September 30, 2004 we derived approximately 20% of our total net revenues from our top two clients. If we were to lose, or if there were a material reduction in business from, these clients or our other significant clients, our net revenues might decline substantially.

     In fiscal 2003, we derived approximately 25% of our total net revenues from two clients that accounted for approximately 13% and 12%, respectively. Either client may terminate or reduce its use of our products and services at any time in the future. Our ten largest clients accounted for approximately 39%, of our total net revenues for the nine months ended September 30, 2004. If we lose business from any of our top ten clients, our net revenues may decline substantially.

We may not be able to successfully compete with marketing research firms and other potential competitors.

     The market for our products and services is highly competitive. We compete for clients with other Internet-based marketing research data collection firms, such as SPSS Service Bureau and Harris Interactive Service Bureau; firms offering respondent-only services, such as Survey Sampling, Inc., Zing Wireless, Inc., Ciao AG and e-Rewards, Inc.; and large marketing research companies, such as The Kantar Group and Harris Interactive, Inc. We expect to face intense competition in the future from other marketing research data collection firms that develop Internet-based products and services.

     We also expect to face competition from other companies with access to large databases of individuals with whom they can communicate through the Internet, such as email service providers and Internet-based direct marketers, as well as companies that develop and maintain a large volume of Internet traffic on their websites, such as large Internet portals, networks and search engines. These companies may, either alone or in alliance with other firms, enter the Internet-based marketing research data collection market.

20

     Many of our current and potential competitors have longer operating histories, greater brand recognition and significantly greater financial and other resources than we do. These competitors may be able to undertake more extensive sales and marketing campaigns offering their services, adopt more aggressive pricing policies, and make more attractive offers to potential employees, strategic partners, panelists and customers than we can. In addition, these competitors and potential competitors may develop technologies that are superior to ours, or that achieve greater market acceptance than our own. If we do not successfully compete with these companies, we might experience a loss of market share and reduced revenues and profitability.

Consolidation in the marketing research industry may result in fewer potential clients for us and a smaller market in general if companies with existing Internet-based panels combine with companies without such panels.

     Consolidations within the marketing research industry in general and among our clients in particular, such as the acquisition of NFO Worldgroup, Inc. by Taylor Nelson Sofres, Plc, and the acquisition of ARBOR, Inc., by GfK-AG, could cause us to lose business from clients that acquire companies with Internet-based panels of their own. Similarly, our smaller clients could be acquired by larger marketing research companies that have their own Internet-based panel such as the recent acquisition of Wirthlin Worldwide by Harris Interactive, Inc., and their need for our products and services could be reduced or eliminated as a result. In either case, our net revenues would be reduced.

If our clients develop their own Internet-based panels, we may lose some or all of their business.

     Some of our large clients have the financial resources and sufficient need for Internet survey solutions that they may decide to build their own Internet-based panels. Should some or all of these clients decide to build their own Internet-based panels and succeed in doing so, their need for our products and services could be reduced or eliminated. Additionally, should our smaller clients consolidate and achieve sufficient scale, it may become economically feasible for them to build their own Internet-based panels. If they do so, their need for our products and services could be reduced or eliminated. In either case, our revenues would decline.

If the marketplace significantly slows its migration from traditional data collection methods to Internet-based marketing research data collection, our growth may slow or cease altogether.

     The marketplace must continue to accept the Internet as a medium for collecting marketing research survey data and convert to Internet data collection methodologies in order for our business to grow at the rate that we anticipate. In addition, the success of our business depends on our ability to develop and market Internet survey solutions that achieve broad market acceptance and facilitate the transition from traditional data collection methods. If the marketplace slows its migration to Internet-based data collection products and services, we may have difficulty obtaining new clients and our revenues could decline.

If we do not keep pace with technological change, we may be unable to implement our business strategy successfully.

     The marketing research data collection industry, particularly the Internet-based marketing research data collection industry, is characterized by intense competition, rapid new product and service developments and evolving methodologies. To succeed, we will need to effectively develop and integrate various software programs, technologies and methodologies required to enhance and improve our Internet survey solutions. Any enhancements of new products or services must meet the needs of our current and potential clients and achieve significant market acceptance. Our success will also depend on our ability to adapt to changing technologies by continually improving the performance features and reliability of our products and services. We may experience difficulties that could delay or prevent the successful development, introduction or marketing of new products and services. We could also incur substantial costs if we need to modify our products and services or infrastructure to adapt to these changes.

21

If we are unable to manage and support our growth effectively, we may not be able to execute our business strategy successfully.

     We are rapidly expanding our international operations, but have limited experience expanding sales and operations facilities in foreign countries. If we fail to successfully expand our sales and marketing efforts in Europe we will be unable to address a sizeable portion of the worldwide market for Internet-based survey data collection and may not be able to grow our business at the rate we anticipate. We are integrating new personnel to support our growth, which makes it difficult to maintain our standards, controls and procedures. Members of our senior management team will be required to devote considerable amounts of their time and attention to this expansion, which may reduce the time and attention they will have available to manage our operations and pursue strategic opportunities.

     Our employee base has grown from 54 in February 2002 to approximately 271 as of September 30, 2004, including employees of our subsidiaries in India, the United Kingdom and Canada. If our business continues to grow, we could be required to hire a significant number of additional employees in the United States and abroad. The recruiting, hiring, training and integration of a large number of employees throughout the world will place a significant strain on our management and operational resources. If we are unable to successfully develop, implement, maintain and enhance our financial and accounting systems and controls, integrate new personnel and manage expanded operations, we may not be able to effectively manage our growth.

     We are concentrating a significant portion of our operational capacity in our facility located in India and may open additional facilities elsewhere in the world. If we fail to successfully build or maintain our operations in India or elsewhere, we may suffer interruptions in the delivery of our products and services to our clients. In addition, if we fail in this regard, we may be required to relocate these international operations to the United States or elsewhere and thereby incur higher labor costs and additional transitional costs.

If we are unable to achieve international growth of the Greenfield Online panel or to overcome other risks of international operations, we may be unable to conduct business on a global level.

     Expanding our business and the Greenfield Online panel to operate on a global level could pose the following risks to us:

•

more restrictive privacy laws;

•

difficulty in recruiting and managing employees in foreign countries;

•

aversion to U.S. companies or non-domestic companies in the regions where we plan to expand;

•

unexpected changes in regulatory requirements;

•

export controls relating to encryption technology;

•

currency exchange rate fluctuations;

•

problems collecting accounts receivable and longer collection periods;

•

potentially adverse tax consequences;

•

political instability; and

•

Internet access restrictions.

22

     Additionally, in the process of expanding our global operations, we may encounter more restrictive regulations and laws in Europe or elsewhere, especially laws related to privacy rights, that could inhibit our ability to expand the Greenfield Online panel. In particular, we self-certify to the U.S. Department of Commerce Safe Harbor framework, which is designed to meet the data privacy rules under the European Commission’s Directive on Data Protection and prohibits the transfer of personal data to non-European Union nations that do not meet the European “adequacy” standard for privacy protection. We have little or no control over the risks listed above and may experience some or all of these risks.

We have significant operations in India that could be limited or prohibited by changes in the political or economic stability of India or government policies in India or the United States.

     We have a substantial team of professionals in India who provide us with data processing and other services. The development of our operations center in India has been facilitated partly by the liberalization policies pursued by the Indian government over the past decade. Recent elections in India have brought a new government into power. The economic liberalization policies that have been pursued by previous governments may not continue in the future, the rate of economic liberalization could change or new laws and policies affecting our business could be introduced. A significant change in India’s economic liberalization and deregulation policies could increase our labor costs or create new regulatory expenses for us. Also, according to the National Foundation for American Policy, at least 36 states have introduced legislation aimed at restricting overseas outsourcing and encouraging U.S. businesses to keep their operations within the United States. The U.S. Senate has recently approved an amendment that would prohibit companies from using money from federal contracts to outsource jobs overseas, and would prohibit state contract work from being performed overseas with money received from federal grants. If these or similar laws or regulations are enacted, our ability to continue overseas operations could be harmed and our competitive position would be damaged.

Potential acquisitions or investments in other companies may have a negative impact on our business and our stock price.

     As part of our strategy to expand the Greenfield Online panel, our technology infrastructure and products and services, we may consider acquiring or making investments in complementary businesses, services, products or technologies as appropriate opportunities arise, such as our acquisition of OpinionSurveys.com. The risks we may face should we acquire or invest in complementary businesses include:

•

difficulties with the integration and assimilation of the acquired business, including maintaining the frequency of survey participation of panelist who join our panel through acquisitions;

•

diversion of our management team’s attention from other business concerns;

•

availability of favorable acquisition or investment financing;

•

potential undisclosed liabilities associated with acquisitions; and

•

loss of key employees of any acquired business.

     Acquisitions or investments may require us to expend significant amounts of cash. This would result in our inability to use these funds for other business purposes. Additionally, if we fund acquisitions through further issuances of our common stock, our stockholders will be diluted, which may cause the market price of our common stock to decline. The potential impairment or complete write-off of goodwill and other intangible assets related to any such acquisition may reduce our overall earnings, which in turn could negatively affect the price of our common stock.

23

Our success depends on our ability to retain the current members of our senior management team and other key personnel.

     Our success depends to a significant extent on the continued services of our core senior management team of Dean A. Wiltse, our CEO; Robert E. Bies, our Executive Vice President and CFO; and Jonathan A. Flatow, our Vice President and General Counsel. If one or more of these individuals were unable or unwilling to continue in his present position, our business would be disrupted and we might not be able to find replacements on a timely basis or with the same level of skill and experience. Finding and hiring any such replacements could be costly and might require us to grant significant equity awards or other incentive compensation, which could adversely impact our financial results. We do not maintain key-person life insurance for any of our management personnel or other key employees.

If we fail to continue to attract and retain project management professionals and other highly-skilled personnel, we may be unable to successfully execute our business strategy.

     Our business model is based and our success depends upon our ability to attract, retain and motivate highly-skilled project management professionals and other technical, managerial, marketing, sales and client support personnel throughout the world. Because competition to attract trained technical and project management personnel is intense in the marketing research data collection industry, we may experience difficulty attracting, integrating or retaining the number of qualified personnel needed to successfully implement our business strategy. If we are delayed in recruiting key employees, we may be forced to incur significant additional recruitment, compensation and relocation expenses. If we are unable to hire and retain such personnel in the future, we may not be able to operate our business as we do today or meet the needs of our clients.

We may be at a competitive disadvantage if we are unable to protect our proprietary rights or if we infringe on the proprietary rights of others, and related litigation could be time consuming and costly.

     Because we operate our business through websites and rely heavily on computer hardware and software, proprietary rights, particularly trade secrets and copyrights, are critical to our success and competitive position. The actions we take to protect our proprietary rights may be inadequate. In addition, effective copyright, trademark and trade secret protection may be unenforceable or limited in certain countries and, due to the global nature of the Internet, we may be unable to control the dissemination of our content and products and the use of our products and services. In addition, third-parties may claim that we have violated their intellectual property rights. For example, companies have recently brought claims against other Internet companies regarding alleged infringement of patent rights relating to methods of doing business over the Internet. To the extent that we violate a patent or other intellectual property right of another party, we may be prevented from operating our business as planned or may be required to pay damages, obtain a license, if available, for the use of the patent or other right to use a non-infringing method to accomplish our objectives.

     Our ability to execute our business strategy will suffer if a successful claim of infringement is brought against us and we are unable to introduce new trademarks, develop non-infringing technology or license the infringed or similar technology on a timely basis. Moreover, our general liability insurance may not be adequate to cover all or any of the costs incurred defending patent or trademark infringement claims, or to indemnify us for liability that may be imposed.

Fluctuations in our quarterly operating results may cause our stock price to decline and limit our stockholders’ ability to sell our common stock in the public market.

     In the past, our operating results have fluctuated significantly from quarter to quarter and we expect them to continue to do so in the future due to a variety of factors, many of which are outside of our control. Our operating results may in some future quarter fall below the expectations of securities analysts and investors. In this event, the trading price of our common stock could decline significantly. In addition to the risks disclosed elsewhere in this report, factors outside of our control that have caused our quarterly operating results to fluctuate in the past and that may affect us in the future, include:

24

•		fluctuations in general economic conditions;
•		demand for marketing research products and services generally;

•

fluctuations in the marketing research budgets of the end-users serviced by our marketing research clients;

•

the failure of our large clients to win Internet-based marketing research projects; and

•

the development of products and services by our competitors.

     In addition, factors within our control, such as our capacity to deliver projects to our clients in a timely fashion, have caused our operating results to fluctuate in the past and may affect us similarly in the future.

     The factors listed above may affect both our quarter-to-quarter operating results as well as our long-term success. Given the fluctuations in our operating results, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance or to determine any trend in our performance. Fluctuations in our quarterly operating results could cause the market price of and demand for our common stock to fluctuate substantially, which may limit your ability to sell our common stock on the public market.

We might have difficulty obtaining additional capital, which could prevent us from achieving our business objectives. If we are successful in raising additional capital, it may have a dilutive effect on our stockholders.

     We may need to raise additional capital in the future to fund the expansion of the Greenfield Online panel and the marketing of our products and services, or to acquire or invest in complementary businesses, technologies or services. If additional financing is not available, or available only on terms that are not acceptable to us, we may be unable to fund the development and expansion of our business, attract qualified personnel, promote our brand name, take advantage of business opportunities or respond to competitive pressures. Any of these events may harm our business. Also, if we raise funds by issuing additional shares of our common stock or debt securities convertible into common stock, our stockholders will experience dilution, which may be significant, to their ownership interest in us. If we raise funds by issuing shares of a different class of stock other than our common stock or by issuing debt, the holders of such different classes of stock or debt securities may have rights senior to the rights of the holders of our common stock.

Government regulations could limit our Internet activities or result in additional costs of doing business and conducting marketing research on the Internet.

     The federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”), which took effect on January 1, 2004, imposes a series of new requirements on the use of commercial email messages and directs the FTC to issue new regulations that define relevant criteria and to enforce the Act. Among other things, one proposal being examined by the FTC is a federal “Do Not Email” registry. The CAN-SPAM Act and the regulations enforcing the Act may significantly impact the manner in which we recruit and communicate with our panelists. It may also expose us to potential liability or require us to change or abandon our webmaster affiliate program and other recruitment techniques. We may also need to develop technology or systems to comply with the Act’s requirements for honoring “opt-out” requests. Additionally, there are at least 36 state statutes that purport to regulate the distribution of commercial email. If we cannot comply with the requirements of the CAN-SPAM Act or these state statutes, we may need to cease operating portions of our business, which could reduce our revenues.

25

     The Internet Tax Freedom Act (the “ITFA”) that was originally passed in 1995 prohibited states or political subdivisions from (i) imposing taxes on Internet access and (ii) imposing multiple and discriminatory taxes on e-commerce. The ITFA expired on November 1, 2003 and has not been renewed. As a result of the expiration of the ITFA, states are no longer prohibited under federal law from imposing taxes that were covered by the ITFA. In the absence of a renewal of the ITFA, states may begin to impose taxes on Internet access, related charges and other e-commerce products and services. If one or more states impose such taxes in a manner that results in the taxation of Internet access providers, ourselves, our customers or other parties upon whom these parties or our panelists rely for access to the Internet or other products or services, our expenses may increase and it may become difficult to recruit and maintain our panelists or sell our products and services. Proposed legislation has been introduced in Congress to reinstate and broaden the ITFA. It is unclear whether or not this legislation will be enacted and, if so, the substance of its provisions.

     A number of states within the United States are participants in the Streamlined Sales Tax Project (the “SSTP”), which seeks to establish a uniform, nationwide state-based taxation system that requires remote sellers to administer and collect their respective sales taxes even though they do not maintain a presence within that state. If the SSTP is successful in implementing such a system, and if our products or services are subject to this system, our resulting tax, administrative and compliance burden will increase.

     Separately, countries belonging to the European Union (the “EU”) impose a value added tax (“VAT”) on the sale of goods and services, including digital goods and services. An EU Directive that took effect on July 1, 2003 requires businesses that sell digital goods and services from outside the EU to certain customers within the EU to collect, administer and remit the VAT. To the extent that our products or services are subject to the EU Directive, our resulting administrative and compliance burden will increase.

     In February 1999, the FCC issued a declaratory ruling interpreting the Telecommunications Act of 1996 to allow local exchange carriers to receive reciprocal compensation for traffic delivered to information service providers, particularly Internet service providers, on the basis that traffic bound for Internet service providers is largely interstate. As a result of this ruling, the costs of transmitting data over the Internet may increase. If this occurs, our tax liability and operating expenses may increase.

     In addition to those described above, we expect more stringent laws and regulations to be enacted both domestically and globally in the near future due to the increasing popularity and use of the Internet. Any new legislation or regulations or the application of existing laws and regulations to the Internet could limit our effectiveness in conducting Internet-based marketing research and increase our operating expenses. In addition, the application of existing laws to the Internet could expose us to substantial liability for which we might not be indemnified by content providers or other third-parties. Existing laws and regulations currently address, and new laws and regulations and industry self-regulatory initiatives are likely to address, a variety of issues that could have a direct impact on our business, including:

•

user privacy and expression;

•

the rights and safety of children;

•

intellectual property;

•

information security;

•

anti-competitive practices;

•

the convergence of offline channels with Internet commerce; and

•

taxation and pricing.

26

     Current laws that explicitly apply to the Internet have not yet been interpreted by the U.S. courts and their applicability and scope are not yet defined. Any new laws or regulations relating to the Internet could have an impact on the growth of the Internet and, as a result, might limit our ability to administer our surveys and provide our products and services.

Cautionary Note Regarding Forward-Looking Statements

     This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained herein, including statements of our expectations regarding Internet survey solutions revenues, selling, general and administrative expenses, profitability, financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” beginning on page 18 and in our prospectus filed on July 16, 2004 pursuant to Rule 424(b)(4) of the Securities Act, including, among other things:

•

the acceptance of our Internet-based marketing research data collection products and services by existing and potential clients;

•

our ability to maintain and expand the Greenfield Online panel both domestically and internationally;

•

our ability to market our Internet survey solutions;

•

our ability to continue to develop and improve our technology infrastructure;

•

significant increases in competitive pressures in the marketing research data collection industry;

•

our ability to attract and retain experienced project management professionals;

•

the effect that the Do Not Call registry and other regulations may have on the adoption of Internet-based marketing research data collection;

•

the growth of Internet penetration outside the United States;

•

our ability to expand internationally; and

•

our ability to identify, consummate and integrate potential acquisition targets.

     These risks are not exhaustive. Other sections of this report on 10-Q include additional factors, which could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We assume no obligation to update any forward-looking statements after the date of this report as a result of new information, future events or developments, except as required by federal securities laws.

     You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

27

Item 3: Quantitative and Qualitative Disclosures About Market Risk

     We operate primarily in the United States. However, we have recently expanded internationally and are exposed to certain market risks arising from transactions that in the normal course of business include fluctuations in interest rates and currency exchange rates. These risks are not expected to be material. However, no assurance can be given that such risks will not become material. While we have not used derivative financial instruments in the past, we may, on occasion, use them in the future in order to manage or reduce these risks. We do not expect to enter into derivative or other financial instruments for trading or speculative purposes.

Item 4: Controls and Procedures

     As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on their evaluation, our certifying officers concluded that our disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by us in our periodic reports filed with the Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

     We believe that a controls system, no matter how well designed and operated, is based in part upon certain assumptions about the likelihood of future events, and therefore can only provide reasonable, not absolute, assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

28

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     None.

Item 2. Changes in Securities; Use of Proceeds and Issuer Purchases of Equity Securities

     (b) On July 15, 2004, our registration statement on Form S-1 (Registration No. 333-114391) was declared effective for our initial public offering, pursuant to which we registered 4 million shares of common stock to be sold by us and 1 million shares sold by certain of our stockholders. The stock was offered at $13.00 per share or an aggregate of $52 million for us, and $13 million for the selling stockholders. As a result of our initial public offering, we received net proceeds of approximately $34.8 million (after underwriters’ commissions of $3.6 million, the $9.4 million conversion and dividend payment to holders of our Series B Convertible Participating Preferred Stock, the $2.1 million mandatory redemption of Series C-2 Redeemable Non-Voting Preferred Stock and expenses of approximately $2.1 million). We intend to use the remaining net proceeds from the initial public offering for working capital and general corporate purposes, including potential acquisitions. Pending use of the net proceeds of this offering, we have invested the funds in short-term, interest bearing, investment-grade securities.

Item 3. Defaults Upon Senior Securities

     None.

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

     None.

Item 5. Other Information

     None.

Item 6. Exhibits

Exhibits

29

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	GREENFIELD ONLINE, INC.
	By:	/s/ Robert E. Bies
		Robert E. Bies
		Executive Vice President and Chief Financial Officer (and duly authorized officer)

Dated: November 4, 2004

30