UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-27907

NETRATINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware		77-0461990
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

120 West 45^th Street, 35th Floor New York, New York		10036
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 703-5900

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 ý No o

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

The number of shares of the Registrant’s Common Stock outstanding as of April 29, 2005, was 36,447,842.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

NETRATINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	March 31, 2005			December 31, 2004
	(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	32,992		$	33,234
Short-term investments	162,755			164,368
Accounts receivable, net	14,689			13,679
Due from joint ventures	833			870
Due from related parties	1,271			1,170
Prepaid expenses and other current assets	3,208			3,106

Total current assets	215,748			216,427

Property and equipment, net	6,492			5,977
Intangibles, net	15,216			16,039
Goodwill	76,963			74,897
Other assets	1,218			1,117

Total assets	$	315,637		$	314,457

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,129		$	2,868
Accrued liabilities	8,926			8,727
Deferred revenue	13,367			11,435
Due to related parties	7,663			9,017
Restructuring liabilities	587			625

Total current liabilities	33,672			32,672

Restructuring liabilities, less current portion	716			799

Total liabilities	34,388			33,471

Minority interest	753			548
Commitments and contingencies	—			—

Stockholders’ equity:
Common stock, par value $0.001:
Authorized shares: 200,000; issued shares: 37,387 and 37,181 at March 31, 2005 and December 31, 2004, respectively; outstanding shares: 35,887 and 35,681 at March 31, 2005 and December 31, 2004, respectively	37			37
Additional paid-in capital	438,877			436,845
Accumulated other comprehensive income	734			1,079
Treasury stock	(20,631		)	(20,631		)
Accumulated deficit	(138,521		)	(136,892		)

Total stockholders’ equity	280,496			280,438

Total liabilities and stockholders’ equity	$	315,637		$	314,457

See accompanying notes to the condensed consolidated financial statements.

NETRATINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)

	Three Months Ended March 31,
	2005			2004

Revenue	$	16,433		$	13,266
Cost of revenue (exclusive of the amortization of stock-based compensation reported below)	5,568			5,904

Gross profit	10,865			7,362
Operating expenses:
Research and development	3,055			3,108
Sales and marketing	6,386			5,235
General and administrative	2,998			3,363
Restructuring expenses	—			(525		)
Amortization of intangibles	823			1,154
Amortization of stock-based compensation	—			2,276

Total operating expenses	13,262			14,611

Loss from operations	(2,397		)	(7,249		)

Equity in earnings of joint ventures	56			20
Interest income, net	917			781
Minority interest in net profit of consolidated subsidiaries	(205		)	(42		)

Net loss	$	(1,629	)	$	(6,490	)

Basic and diluted net loss per common share	$	(0.05	)	$	(0.19	)

Shares used to compute basic and diluted net loss per common share	35,775			34,058

See accompanying notes to the condensed consolidated financial statements.

NETRATINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	Three Months Ended March 31,
	2005			2004
OPERATING ACTIVITIES
Net cash used in operating activities	$	(499	)	$	(2,178	)

INVESTING ACTIVITIES
Acquisition of property and equipment	(1,283		)	(1,381		)
Purchase of short term investments	(18,284		)	(64,088		)
Sale of short term investments	19,552			75,921
Acquisitions, net of cash acquired and investments in joint ventures	(1,806		)	(10,782		)

Net cash used in investing activities	(1,821		)	(330		)

FINANCING ACTIVITIES
Proceeds from stock issuances	2,032			1,380

Net cash provided by financing activities	2,032			1,380

Effect of exchange rate fluctuations	46			418

Net decrease in cash and cash equivalents	(242		)	(710		)
Cash and cash equivalents at beginning of period	33,234			49,909

Cash and cash equivalents at end of period	$	32,992		$	49,199

See accompanying notes to the condensed consolidated financial statements.

NETRATINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of NetRatings, Inc. (NetRatings or the Company) have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto included in NetRatings’ annual report on Form 10-K for the fiscal year ended December 31, 2004.

The financial information included herein reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the results for the interim period. All significant intercompany transactions and balances are eliminated upon consolidation. NetRatings consolidates the results of operations and financial position of its international operations on a one month lag. The impact of this one month lag is not significant to NetRatings’ consolidated financial results. Operating results for the three months ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

2. COMPREHENSIVE LOSS

The components of comprehensive loss are as follows (in thousands):

	Three Months Ended March 31,
	2005			2004
Net loss	$	(1,629	)	$	(6,490	)
Accumulated translation adjustment	(129		)	(991		)
Unrealized gain (loss) on short-term investments	(216		)	150

Comprehensive loss	$	(1,974	)	$	(7,331	)

3. STOCKHOLDERS’ EQUITY

As allowed by SFAS 123, the Company follows the disclosure requirements only of SFAS 148, but continues to account for its employee stock option plans in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” which results in no charge to earnings when options are issued at fair market value. Pro forma information presented below regarding net loss required under SFAS 148 has been determined as if the Company had accounted for its stock options under the fair value method of SFAS 148. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s GAAP and pro forma information follows (in thousands, except per share data):

	Three Months Ended March 31,
	2005			2004

Net loss	$	(1,629	)	$	(6,490	)
Less: Stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects	(509		)	(1,015		)

Pro forma net loss	$	(2,138	)	$	(7,505	)

Basic and diluted net loss per share	$	(0.05	)	$	(0.19	)

Pro forma basic and diluted net loss per share	$	(0.06	)	$	(0.22	)

4. GOODWILL AND INTANGIBLE ASSETS

On February 25, 2005, NetRatings acquired the remaining 50% of its Italian joint venture, Red Sheriff S.r.l., for approximately $2.0 million in cash, resulting in an increase to goodwill of approximately $1.9 million. During the first quarter of 2005, NetRatings also finalized the purchase price allocation related to Red Sheriff, resulting in a net increase to goodwill of approximately $0.2 million. The impact of this transaction on NetRatings’ consolidated results of operations is not significant and therefore the Company does not include pro forma results for this acquisition.

Goodwill and other intangible assets, along with their weighted average lives as of March 31, 2005, consisted of the following (in thousands, except average life):

	Gross carrying amount		Accumulated amortization		Net		Weighted average life

Intangible assets continuing to be amortized:
Core technologies	$	5,482	$	2,104	$	3,378	7
Customer contracts	4,940		3,290		1,650		3
Patents and other	15,682		5,494		10,188		11

Total other intangible assets	$	26,104	$	10,888	$	15,216

Goodwill					$	76,963

Based on the current amount of intangibles subject to amortization, the estimated amortization expense for each of the succeeding five years is as follows: 2005 - $2.8 million; 2006 - $2.4 million; 2007 - $2.4 million; 2008 - $1.8 million; and 2009 - $1.4 million. As of October 1, 2004, the Company performed its annual evaluation of goodwill and other intangibles and no impairment was indicated. The Company will reassess the carrying value of its goodwill and intangible assets each year as of October 1, unless indicators of impairment become apparent earlier.

5. RESTRUCTURING EXPENSES

Restructuring expenses have been established in connection with (i) a restructuring plan approved by management and initiated in the first quarter of 2002 and (ii) acquisitions in 2002 and 2003. Each of the restructuring plans involved (i) the termination of employees, all of whom were terminated as of March 31, 2004; (ii) lease termination costs and other costs associated with vacating certain facilities and abandoning certain long-lived assets; and (iii) amounts accrued related to payments for certain products and/or projects which were eliminated as a result of the restructurings.

The following table summarizes activity associated with the restructuring expenses for the quarter ended March 31, 2005 (in thousands):

	Balance December 31, 2004		Utilized Cash			Balance March 31, 2005

Lease commitments and related write-down of property and equipment	$	1,424	$	(121	)	$	1,303

6. INDUSTRY SEGMENT AND FOREIGN OPERATIONS

NetRatings operates in one segment for providing media and market research focused on Internet audience behavior and activity. For geographical reporting, revenues are attributed to the geographic location in which the customer is located. Our geographic regions include the United States (US), Europe, Middle East and Africa (EMEA), and Asia Pacific and Latin America (APLA). Long-lived assets consist primarily of property and equipment and are attributed to the geographic location in which they are located.

The following tables set forth revenue and property and equipment, for the three months indicated (in thousands):

	Three months ended March 31, 2005 *
	US		EMEA		APLA		Total

Revenue	$	7,613	$	5,210	$	3,610	$	16,433
Property and equipment *	2,603		1,646		2,243		6,492

	Three months ended March 31, 2004 *
	US		EMEA		APLA		Total

Revenue	$	6,265	$	4,661	$	2,340	$	13,266
Property and equipment *	2,431		1,109		1,045		4,585

* The amounts indicated for property and equipment are as of March 31, 2005 and 2004, respectively.

7. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which requires companies to measure and recognize compensation expense for all stock-based payments at fair value. The FASB required companies to adopt SFAS No. 123(R) no later than the first interim or annual period beginning after June 15, 2005. On April 14, 2005, the Securities and Exchange Commission announced an amendment to the compliance dates for SFAS 123(R) that delays the effective date for calendar year-end companies until the beginning of 2006. NetRatings is currently evaluating the impact of SFAS No. 123(R) on its financial position and results of operations, which management believes will be material. See Stock-Based Compensation above for information related to the pro forma effects on NetRatings’ reported net loss and net loss per share when applying the fair value recognition provisions of the previous SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

8. CONTINGENCIES

The Company is involved in certain legal proceedings. See Legal Proceedings in Part II, Item 1 of this Report. Management currently believes that the resolution of these matters will not have a material adverse impact on NetRatings’ financial position, results of operations or cash flows.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Some of the statements contained in this Form 10-Q (this “Report”) are forward-looking statements, including but not limited to those specifically identified as such, that involve risks and uncertainties. The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. These statements are based on current expectations and assumptions and involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Important factors that may cause actual results to differ from expectations include those discussed elsewhere in this Report on Form 10-Q under the heading “Risk Factors That May Affect Our Performance.”

Summary

We are a leading provider of Internet audience measurement and analysis in the United States and around the world. All of our products and services are designed to assist companies in making critical business decisions regarding their Internet strategies and initiatives. We have a highly diversified and global client base, including large and small companies in the media, technology, advertising, financial services, consumer products, retail and travel industries. VNU N.V., through its subsidiaries ACNielsen Corporation and Nielsen Media Research, currently owns approximately 60% of our outstanding common stock.

Our revenues for the first quarter of 2005 totaled $16.4 million, compared to $15.9 million in the fourth quarter of 2004 and $13.3 million in the first quarter of 2004. As of March 31, 2005, we had 1,432 clients, compared to 1,429 clients as of December 31, 2004 and 1,166 clients as of March 31, 2004. The increases in our revenues and number of clients during the last year is the result of organic growth in our product portfolio. We expect our revenues and client base to continue to grow as (i) our newer products gain marketplace acceptance, (ii) we develop additional products and services, (iii) we launch our products and services in new international territories and (iv) we cross-sell our products and services to our global client base.

We have incurred operating losses and net losses since our inception and, as of March 31, 2005, our accumulated deficit was $138.5 million. Since the beginning of 2002, however, we have made significant progress in reducing our annual operating loss

and annual net loss. Our operating loss decreased from $39.9 million in 2002 to $29.7 million in 2003 and to $20.2 million in 2004, and our operating loss for the first quarter of 2005 was $2.4 million. Likewise, our net loss decreased from $38.9 million in 2002 to $25.1 million in 2003 and to $17.4 million in 2004, and our net loss for the first quarter of 2005 was $1.6 million. Our ability to reduce our operating and net losses, and our belief that we will make further progress in reducing such losses in 2005, is attributable to a number of factors. First, we expect the revenue growth we have experienced in the past few years to continue, particularly as we generate sales from our MegaPanel services. Second, a significant initial investment was required to launch certain of our services in 2003 and 2004, including our MegaPanel services, and while the ongoing expense to operate such services will continue, we expect such expenses to be less than the initial expenses required to launch such services. In addition, because we offer syndicated panel services, and because we are able to utilize our existing databases to expand our custom analytical offerings, our revenue growth does not require a direct corresponding increase in our product expenses.

As of March 31, 2005, our cash and cash equivalents and short-term investments totaled $195.7 million, which we believe is sufficient to meet our cash needs for at least the next twelve months.

Industry Trends

The success of our business depends heavily on the expanding use of the Internet for advertising, commerce and communications. Internet advertising, e-commerce and the number of people logging onto the Internet, particularly through the use of Internet broadband connections, have dramatically increased in recent years and we expect this growth to continue in upcoming years both in the United States and abroad. These growth trends have made the Internet an increasingly important component of companies’ overall business strategies. As a result, companies conducting business online are increasingly seeking analysis and insights to (i) define and reach their target audiences, (ii) measure the effectiveness of their advertising and marketing strategies, (iii) benchmark their performance with their competitors and (iv) increase brand equity and commerce revenue.

Companies are also increasingly recognizing that, compared with other media, the Internet allows online market participants to obtain a unique understanding of consumer behavior. Unlike with other forms of advertising, including print, radio and television, advertisers can (i) target advertising in an unprecedented manner, (ii) confirm whether consumers have actually viewed advertisements (and when) and (iii) decipher whether consumers have taken certain actions, whether completing a purchase or visiting a Web site, and understand exactly why. Because of the unique dynamics of the Internet, we expect that Internet advertising and commerce will not only continue to grow in coming years, but that Internet advertising and commerce will garner a larger percentage of total advertising and commerce dollars. We believe that this growth will require a commensurate increase in Internet media and market research, and that we are particularly well-suited to address the global needs of online participants.

Product Portfolio

Our goal for the last few years has been to offer the most comprehensive global portfolio of Internet media and market research products and services. In order to reach this goal, we have focused on both strategic acquisitions in the United States and abroad and investing in new products to meet changing marketplace needs. As a result of these efforts, we currently offer a wide range of products and services in the United States and in many countries throughout Europe, Asia Pacific and Latin America. We believe that this product portfolio and breadth of coverage will enable us to continue to increase our client base, increase our ability to sell multiple products to clients and increase the total sales to individual clients.

In the first half of 2002, we acquired AdRelevance, our online advertising expenditure service, and @Plan, which provides demographic, lifestyle and product preference information. During 2002, we also made strategic acquisitions designed to expand our NetView service around the world, which provides detailed panel-based Internet audience information. These included our acquisition of NetValue S.A., an international provider of Internet audience measurement services, and the purchase from ACNielsen Corporation of the 80.1% interest in ACNielsen eRatings.com that we did not already own. Since the beginning of 2003, we have acquired LemonAd (now branded AdRelevance(i)), our international online advertising measurement service, and Red Sheriff, a global provider of site-centric-based Internet audience measurement tools.

In conjunction with these strategic acquisitions, we have also devoted significant resources to internal product development. Our key new products and services include (i) MegaPanel, which includes our vertical offerings, such as MegaView Financial,

MegaView Retail and MegaView Search, as well as WebIntercept, a behavioral-based online survey research tool that provides surveying capabilities on real-time Internet behavior; and (ii) Homescan Online, a joint initiative with ACNielsen that combines offline consumer purchasing data with Internet audience measurement data. We believe these new products and services, as well as additional MegaPanel offerings, will be important to our financial performance over the next few years.

Revenue Overview

We generate revenues primarily from the sale of our Internet media and market research products and services, which include both syndicated products and customized products. Syndicated products currently represent a significant majority of our total revenues, and our goal is for syndicated products to continue to represent a significant majority of our total revenues.

We sell a majority of our syndicated products and services on an annual subscription basis. We recognize revenue from the sale of our syndicated products and services ratably over the term of the subscription agreement. Subscription fees invoiced in advance are recorded as deferred revenue until earned. Revenue from customized products and services is recognized in the period in which the product or service is provided. As a result, a significant portion of revenue recognized in any period results from the amortization of deferred revenue balances.

In France, Japan and Latin America, we offer many of our services through joint ventures with leading local market research and information services companies. We currently own 56.8% of NetRatings Japan, our Japanese subsidiary, while the remaining ownership interest is owned by TransCosmos, Dentsu.com and other investors. We currently own 66% of Mediametrie NetRatings, our French subsidiary, and the remainder is owned by Mediametrie. We currently own 49% of Ibope eRatings.com, our Latin American joint venture, and the remainder is owned by Ibope. NetRatings uses the equity method to account for its investment in Ibope eRatings.com. In each of these locations, revenue is allocated between NetRatings and the subsidiary or joint venture company depending on the location of the customer and the location of the panel whose data is used in the service. As a result of the Red Sheriff acquisition, we also obtained a 50% ownership interest in an Italian company, Red Sheriff S.r.l., which offers site-centric-based services in Italy. On February 25, 2005, we purchased the remaining 50% of Red Sheriff S.r.l. As a result, NetRatings will include the results of operations of Red Sheriff S.r.l. in its consolidated financial statements beginning in the second quarter of 2005.

We have experienced revenue growth in each of the years since we launched our first product in 1999, as demonstrated by the table below:

Years ended December 31:	Revenues (in thousands)
2000	$	20,411
2001	$	23,504
2002	$	29,706
2003	$	41,432
2004	$	59,294

Three months ended March 31:
2004	$	13,266
2005	$	16,433

We expect our 2005 revenues to exceed our 2004 revenues, primarily as a result of sales from our new products and services, the launch of our new and existing products and services in new international territories and cross-selling our products and services to our global client base.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires our management to make estimates and assumptions 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 period. On an ongoing basis, our management evaluates its estimates and judgments, including those related to bad debts, investments, income taxes, contingencies and litigation. Our management bases its estimates and judgments about the carrying values of assets and liabilities on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Our management believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its financial statements:

Revenue Recognition

We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104, Revenue Recognition. SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (4) is based on management’s judgment regarding the collectibility of those fees. We sell a majority of our products and services pursuant to one-year subscription agreements. We recognize revenue from the sale of these subscription products and services ratably over the term of the subscription agreement. Subscription fees invoiced are recorded as deferred revenue until earned. If a contract’s collectibility comes into question, revenue recognition is discontinued until collectibility is reasonably assured. This determination is based on management’s judgment and could adversely affect both revenue and deferred revenue.

Accounting for Joint Venture Transactions

The results of operations for each joint venture entity are reflected in the consolidated results of operations beginning on the date that we acquired majority control of such entity. In the second quarter of 2002, we acquired the remaining 80.1% interest in ACNielsen eRatings.com. In the second quarter of 2003, we acquired a majority interest in NetRatings Japan, our Japanese joint venture, and in the fourth quarter of 2003, we acquired a majority interest in Mediametrie NetRatings, our French joint venture. In the first quarter of 2005, we acquired the remaining 50% interest in Red Sheriff S.r.l. Our transactions with these four entities prior to our acquisition of majority control, as well as our transactions with our Latin American joint venture, Ibope eRatings.com, are accounted for in our financial statements as set forth below.

Our joint ventures pay us a royalty for the use of our technology. This royalty revenue is based on a percentage of each sale made by our equity method investees pursuant to each joint venture’s operating agreement. This revenue is recognized ratably over the period of the contract in our statement of operations.

Our joint venture partners maintain Internet audience measurement panels in the countries in which the joint ventures are located. Revenue from Internet audience measurement services, which can either be sold by us or the joint venture partner, is allocated between the two parties based on the location of the customer and the location of the panel whose data is used in the service. We record commission revenue and expense related to these sales ratably over the period of the contract in the revenue and cost of revenue lines in our statement of operations.

We provide data hosting and support services to the joint ventures. We charge the joint venture for their share of the data center costs which is recorded as a reduction to our actual data center costs included in the cost of revenue line in our statement of operations.

Each of the transactions described in the three preceding paragraphs is included in the operating statement of our equity method joint ventures as well. We record our percentage of the joint venture’s net profit (loss) in the net equity in earnings (losses) of joint ventures line in our statement of operations.

Bad Debt

We manage credit risk on accounts receivable by performing ongoing credit evaluations of our customers, reviewing our accounts and contracts and by providing appropriate allowances for uncollectible amounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of customers to make contractually required payments. If the financial conditions of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Allowances are based on management’s judgment which considers historical experience and specific knowledge of accounts that may not be collectible.

Legal Contingencies

We are currently involved in certain legal proceedings. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses, in accordance with FAS 5. A determination of the amount of reserves required, if any, for these contingencies are made after careful analysis of each individual case. Losses are recognized for legal contingencies when both the probability of occurrence and the loss can be reasonably estimated. We do not believe the outcomes to these matters will have a material adverse effect on our financial position. Nonetheless, it is possible that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategy related to these proceedings.

Goodwill and Intangible Assets

Our long lived assets include goodwill and other intangible assets. In accordance with SFAS No. 142, goodwill and

indefinite-lived intangibles are not amortized, but are reviewed at least annually for impairment. We retain an independent appraisal firm which annually provides a valuation of our company’s fair value, based on a discounted cash flow analysis. This cash flow analysis requires significant judgment and estimates by management relating to assumptions about expected future operating performance and appropriate discount rates. An impairment loss is recorded if the estimated future cash flows plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. Our estimate of discounted cash flows may differ from actual cash flows due to, among other things, economic conditions, changes to our business model and changes in operating performance. An impairment loss recorded in the future, if any, could have a material adverse impact on our financial position or results of operations.

We performed our annual evaluation of goodwill and intangibles as of October 1, 2004 at which time no impairment was indicated. There has been no indication of impairment since October 1, 2004. We will reassess the carrying value of goodwill and intangible assets each year as of October 1, unless indicators of impairment become apparent earlier.

Results of Operations

The following table sets forth certain financial data as a percentage of revenue for the three months indicated:

	Three months ended March 31,
	2005		2004

Revenue	100	%	100	%
Cost of revenue	34	%	45	%
Gross profit	66	%	55	%
Operating expenses:
Research and development	19	%	23	%
Sales and marketing	39	%	39	%
General and administrative	18	%	25	%
Restructuring expenses	—		(4	)%
Amortization of intangibles	5	%	9	%
Stock-based compensation	—		17	%
Total operating expenses	81	%	109	%
Loss from operations	(15	)%	(54	)%
Equity in earnings (losses) of joint ventures	—		—
Interest income, net	6	%	6	%
Minority interest in net loss of consolidated subsidiaries	(1	)%	—
Net loss	(10	)%	(48	)%

Revenue. We generate revenue primarily from the sale of our Internet audience measurement products and services. We typically sell our syndicated services pursuant to one-year subscription agreements. We also derive a portion of our revenue from our customized products and services and from joint venture and other distribution partners.

As of March 31, 2005, 1,432 customers worldwide subscribed to our products and services compared to 1,429 at the end of 2004. As of March 31, 2004, 1,166 customers worldwide subscribed to our products and services. The increase of 266 customers since March 31, 2004 is the result of organic growth in our worldwide customer base. We expect our global customer base to increase in the next few quarters as we market and sell our new products and services and expand into new geographical markets.

Our global client renewal rate was 81% for the first quarter of 2005, an increase over the global client renewal rate of 76% for the first quarter of 2004. Our global average sales price was $48,000 for the first quarter of 2005, compared with $46,000 for the first quarter of 2004. During the quarter ended March 31, 2005, no customer accounted for more than 10% of our revenue.

Revenue increased 24% to $16.4 million for the quarter ended March 31, 2005, compared to $13.3 million for the quarter ended March 31, 2004. The increase in our organic revenue growth resulted from (i) new business sales of our products and services; (ii) the launch of new product offerings; (iii) price increases for existing products and services; and (iv) an increase in sales of our custom research and analytical services.

Cost of Revenue. Cost of revenue consists primarily of expenses related to the recruitment, maintenance and support of our Internet audience measurement panels, which are expensed as they are incurred. Cost of revenue also includes data collection costs for our products and services and operational costs related to data centers. Accordingly, such expenses are not matched with any revenue or subscriptions generated in a given period and are higher in periods in which we are involved in significant panel development activities.

Cost of revenue decreased 6% to $5.6 million, or 34% of revenue, for the three months ended March 31, 2005 from $5.9 million, or 45% of revenue, for the comparable period in 2004. The decrease in cost of revenue was due primarily to (i) reductions in our MegaPanel and NetView panel recruitment costs and (ii) the elimination of our Hispanic panel in the third quarter of 2004. The decrease in costs was partially offset by (i) additional data collection costs related to our SiteCensus product and (ii) additional costs related to expanding the scope of information available through our MegaPanel product. As a percentage of revenue, our cost of revenue decreased 11% from March 2004 to March 2005. This decrease is due to the fact that a large portion of the expense related to launching a new product is incurred prior to the launch of such product. Once a product is launched, however, the cost of operating and maintaining such product is reduced and our revenue opportunity increases. As a result, our cost of revenue declines as a percentage of revenue. During the first quarter of 2004, we incurred significant expenses related to launching our new products, particularly MegaPanel, and these expenses declined since that time.

Research and Development. Research and development expenses consist primarily of compensation and related costs for personnel associated with our research and product development activities. These costs are expensed as incurred.

Research and development expenses were $3.1 million for each of the quarters ended March 31, 2005 and 2004. As a percentage of sales, research and development costs were 19% and 23% for the quarters ended March 31, 2005 and 2004, respectively.

Sales and Marketing. Sales and marketing expenses consist primarily of salaries, benefits and commissions to our salespeople and analysts, as well as costs related to seminars, promotional materials, public relations, corporate marketing and other sales and marketing programs.

Sales and marketing expenses increased 22% to $6.4 million, or 39% of revenue, for the quarter ended March 31, 2005 from $5.2 million, or 39% of revenue, for the comparable period in 2004. The increase in sales and marketing expenses was primarily related to additional personnel to support our global expansion including SiteCensus and custom analytics work related to MegaPanel.

General and Administrative. General and administrative expenses consist primarily of salaries and related costs for executive management, finance, accounting, human resources, legal, information technology and other administrative personnel, in addition to professional fees and other general corporate expenses.

General and administrative expenses decreased 11% to $3.0 million, or 18% of revenue, for the quarter ended March 31, 2005 from $3.4 million, or 25% of revenue, for the comparable quarter in 2004. The decrease in general and administrative expenses was primarily due to personnel reductions related to integrating our administrative operations.

Restructuring Expenses. During the first quarter of 2004, the Company negotiated an amendment to the lease for its offices in Milpitas, California which included a release from its obligations for the abandoned portion of the facility, resulting in a reversal of restructuring expense of $525,000.

Amortization of Intangibles. Amortization of intangible expenses decreased 29% to $0.8 million, or 5% of revenue, for the quarter ended March 31, 2005 from $1.2 million, or 9% of revenue, for the comparable period in 2004. The decrease was primarily due to some assets reaching their final amortization period during 2004.

Amortization of Stock-based Compensation. Stock-based compensation represents amortization of deferred service costs related to stock warrants which Nielsen Media Research exercised in December 1999. Amortization of stock-based compensation was $0 for the quarter ended March 31, 2005 compared to $2.3 million, or 17% of revenue, for the comparable period in 2004. The decrease is the result of reaching the final amortization period for the deferred service costs in the fourth quarter of 2004. As of December 31, 2004, the deferred service costs were fully amortized. Accordingly, no amortization costs related to the stock warrants exercised by Nielsen Media Research in December 1999 will be incurred in future periods.

In 2005, the Board of Directors and compensation committee approved grants of restricted stock in connection with certain modifications to the Company’s compensation policy. As a result, restricted stock was granted on April 1, 2005 which will result in stock-based compensation expense during the remainder of 2005.

Equity in Earnings (Losses) of Joint Ventures. Equity in earnings from joint ventures was $56,000 and $20,000 for the quarters ended March 31, 2005 and 2004, respectively. The equity in earnings from joint ventures for each of these quarters reflected our equity in the earnings of our joint venture in Italy, Red Sheriff S.r.l. In the first quarter of 2004, these earnings were partially offset by losses related to Ibope eRatings, our Latin America joint venture. As a result of the losses incurred by Ibope eRatings.com, our balance in our investment in Ibope eRatings.com was zero as of March 31, 2004, and therefore no losses were recorded after the first quarter of 2004.

Interest Income, Net. Interest income, net, increased 17% to $0.9 million for the quarter ended March 31, 2005, from $0.8 million for

the quarter ended March 31, 2004. The increase in interest income was due to a higher interest yield on our investments in 2005.

Minority Interest. Minority interest was $(205,000) and $(42,000) for the quarters ended March 31, 2005 and 2004, respectively. During the quarter ended March 31, 2005, we held majority interests in NetRatings Japan and Mediametrie NetRatings. During the quarter ended March 31, 2004, we held majority interests in Red Sheriff, NetRatings Japan and Mediametrie NetRatings. Red Sheriff had a negative equity balance on the date we acquired majority control of Red Sheriff and, therefore, we recognized 100% of the loss of Red Sheriff during the first half of 2004.

Operating Loss and Net Loss. Operating loss decreased 67% to $2.4 million, or 15% of revenue, for the quarter ended March 31, 2005 from $7.2 million, or 54% of revenue, for the quarter ended March 31, 2004. For the quarter ended March 31, 2005, our net loss decreased to $1.6 million, or $0.05 per share, on approximately 35.8 million weighted average shares outstanding, as compared with a net loss of $6.5 million, or $0.19 per share, on approximately 34.1 million weighted average shares outstanding, for the quarter ended March 31, 2004. The decreases in operating loss and net loss were primarily due to (i) increased revenue from organic growth; (ii) decreased amortization of stock-based compensation; (iii) decreased cost of revenue related to our NetView home and work panels; and (iv) decreases in general and administrative costs. These improvements to operating loss and net loss were partially offset by additional personnel to support our global expansion including SiteCensus and custom analytics work related to MegaPanel.

Inflation

Our management currently believes that inflation has not had a material impact on continuing operations.

Liquidity and Capital Resources

At March 31, 2005, the Company’s cash and cash equivalents and short-term investments totaled $195.7 million compared to $197.6 million at March 31, 2004.

Net cash used in operating activities was $0.5 million for the three month period ended March 31, 2005, due to our net loss of $1.6 million and cash used in working capital changes of $0.7 million, which was partially offset by non-cash charges of $1.8 million. The non-cash expenses include $0.8 million for amortization of intangible assets, $0.8 million for depreciation and $0.2 million in other non-cash expenses. Net cash used in operating activities totaled $2.2 million for the three month period ended March 31, 2004, due to our net loss of $6.5 million and cash used in working capital changes of $0.1 million, which was partially offset by non-cash charges of $4.4 million. The non-cash expenses included $2.3 million for amortization of stock-based compensation, $1.2 million for amortization of intangible assets, $0.7 million for depreciation and $0.2 million in other non-cash charges. We will continue to use cash to fund our operations.

Net cash used in investing activities for the three month period ended March 31, 2005 was $1.8 million. This amount reflects cash paid for acquisitions, net of cash acquired, of $1.8 million and the acquisition of property and equipment of $1.3 million, which was partially offset by net sales of our short-term investments of $1.3 million. During the corresponding period in 2004, net cash used in investing activities was $0.3 million. This amount reflects cash paid for acquisitions, net of cash acquired, of $10.8 million and the acquisition of property and equipment of $1.4 million, which was partially offset by net sales of our short-term investments of $11.9 million. We had no material capital expenditure commitments at March 31, 2005. We expect capital expenditures in future quarters to continue at approximately the same rate as the first quarter of 2005 as we expand our data center and international operations. We expect net cash provided by investing activities to be further reduced by use of our short-term investments to support operations.

Net cash provided by financing activities totaled $2.0 million for the three month period ended March 31, 2005, reflecting stock issued as a result of the exercise of options and our employee stock purchase plan. Net cash provided by financing activities was $1.4 million for the three month period ended March 31, 2004, reflecting stock issued as a result of the exercise of options and our employee stock purchase plan.

While we have historically made additional contributions to our joint ventures in order to maintain our ownership percentage, we are not contractually required to make such contributions. In the event of a request for capital infusion, we have the option as to whether or not we participate in the round of funding. Should we elect not to participate, our equity position would be diluted in that joint venture.

We believe that our existing balances of cash and cash equivalents and short-term investments will be sufficient to meet our cash needs for working capital and capital expenditures for at least the next 12 months, although we could elect to seek additional funding prior to that time.

RISK FACTORS THAT MAY AFFECT OUR PERFORMANCE

An investment in our company involves a high degree of risk. You should carefully consider the risks below, together with the other information contained in this report, before you make an investment decision with respect to our company. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we deem immaterial may also impair our business operations. Any of the following risks could (i) materially adversely affect our business, operating results and financial condition, (ii) cause the trading price of our common stock to decline and (iii) cause you to lose all or part of your investment.

WE HAVE INCURRED LOSSES SINCE OUR INCEPTION AND WE MAY BE UNABLE TO ACHIEVE PROFITABILITY

We incurred net losses of $25.1 million for the year ended December 31, 2003, $17.4 million for the year ended December 31, 2004 and $1.6 million for the quarter ended March 31, 2005. As of March 31, 2005, our accumulated deficit was $138.5 million. We intend to continue to incur significant expenditures as our company grows and as we expand our portfolio of products and services. As a result, we will need to generate significant additional revenue to achieve and maintain profitability. We may not be able to achieve significant revenue growth in the future. Our operating results for future periods are subject to numerous uncertainties and we may not achieve sufficient revenue to become profitable.

WE HAVE A LIMITED OPERATING HISTORY IN THE EVOLVING MARKET FOR INTERNET AUDIENCE MEASUREMENT AND ANALYSIS

We were incorporated in July 1997 and did not start generating revenue until the quarter ended September 30, 1998. We introduced our NetView service in the quarter ended September 30, 1999. Many of our other products and services were first offered by us during the last few years. Accordingly, we are still in the early stages of development and have only a limited operating history upon which to evaluate our business. One should evaluate our likelihood of financial and operational success in light of the risks, uncertainties, expenses, delays and difficulties associated with an early-stage business in an evolving market, many of which may be beyond our control, including:

• the risk that a competing company’s Internet audience measurement service will become the accepted standard in the marketplace;

• the extent of growth, if any, in the Internet media research and market research markets;

• potential inability to successfully manage any significant growth we may achieve in the future;

• potential inability to successfully integrate any acquired business, technology or service; and

• the risks associated with operating a business in numerous international markets.

IF OUR NEW PRODUCTS OR SERVICES DO NOT GENERATE THE REVENUES THAT WE ANTICIPATE, OUR FINANCIAL RESULTS WILL SUFFER

During the past few years, we launched a number of new products and services that we believe will generate interest in the marketplace and result in increased revenues in the coming years. Our financial results during 2005 and beyond will depend in part on the success of these new product initiatives and our ability to generate meaningful revenues from them. If we fail in our efforts to market and sell these new products and services, our financial results will be negatively affected. Furthermore, we believe that our new products and services fill gaps in our product portfolio and that the introduction of new products will not result in decreased sales of our existing products. If we are mistaken in our view of the marketplace, and the introduction of these new products results in decreased sales of our existing portfolio, then our financial results will also be negatively affected.

OUR QUARTERLY REVENUES MAY FLUCTUATE SIGNIFICANTLY AND BECAUSE OUR EXPENSE LEVELS ARE BASED IN LARGE PART ON OUR ESTIMATES OF FUTURE REVENUES, AN UNEXPECTED SHORTFALL IN REVENUE WOULD SIGNIFICANTLY HARM OUR OPERATING RESULTS AND COULD LEAD TO REDUCED PRICES FOR OUR STOCK

Due to the evolving nature of our business and the markets in which we compete, our future revenue is difficult to forecast. Further, our expense levels are based largely on our investment plans and estimates of future revenue. We may be unable to adjust our

spending to compensate for an unexpected shortfall in revenue. Accordingly, any significant shortfall in revenue relative to our planned expenditures in a particular quarter would harm our results of operations and could lead our stock price to fall sharply, particularly following quarters in which our operating results fail to meet expectations.

Factors that may cause fluctuations in our revenues or operating results on a quarterly basis include the following, some of which are beyond our control:

• the amount and timing of operating costs and capital expenditures related to the expansion of our business;

• the amount and timing of costs related to changes in the size or composition of our panels, particularly as a result of turnover among panel members;

• the impact on our renewal rates caused by our customers’ budgetary constraints or a perceived lack of need for our services;

• changes in demand for our products and services due to the announcement or introduction of new products and services or the cancellation of existing products and services by us or our competitors;

• changes in the pricing of our products and services in light of the services and pricing offered by our competitors;

• the impact of possible acquisitions or equity investments both on our operations and on our reported operating results due to associated accounting charges; and

• technical difficulties or service interruptions that significantly harm our ability to deliver our products and services on schedule.

WE HAVE LIMITED ABILITY TO FORECAST THE RATE AT WHICH SUBSCRIPTIONS FOR OUR SERVICES MAY BE RENEWED, AND WE MAY NOT ACHIEVE SUFFICIENTLY-HIGH RENEWAL RATES TO BECOME PROFITABLE

We derive a large percentage of our revenue from annual subscriptions for our services. As our business becomes more established, we expect subscription renewals and sales of additional products and services to existing customers to account for an increasing proportion of our revenue. Any unexpectedly low renewal rates or a reduction in the number of products and services that we are able to sell to existing customers would harm our operating results and could prevent us from becoming profitable. To date, renewals have been an essential element of our revenue growth. We cannot assure you that we will be able to achieve or sustain high renewal rates, particularly during an economic downturn. Additionally, because many Internet-related businesses are still in the early stages of development, consolidations in our customer base or the failure of a significant number of our customers’ businesses could cause a decline in renewal rates for our products and services.

IF THE INTERNET ADVERTISING AND ELECTRONIC COMMERCE MARKETS DEVELOP SLOWER THAN WE EXPECT, OUR BUSINESS WILL SUFFER

Our future success will depend on an increase in the use of the Internet as an advertising medium, the proliferation of e-commerce and the use of the Internet as part of multi-channel marketing strategies. These markets and marketing techniques are fairly new and rapidly evolving, and it is not certain that the current trends will continue throughout the world.

The adoption of Internet advertising, particularly by entities that have historically relied on traditional media for advertising, requires the acceptance of a new way of conducting business. These companies may find Internet advertising to be less effective than traditional advertising for promoting their products and services. They may also be unwilling to pay premium rates for advertising that is targeted at specific types of users based on demographic profiles or recent Internet behavior. The Internet advertising and e-commerce markets may also be adversely affected by privacy issues surrounding the targeting of this type of advertising or the use of personal information. Providers of goods and services online continue to work toward the establishment of commerce models that are cost effective and unique, and effectively deal with issues such as channel conflict and infrastructure costs. Growth in the use of the Internet for e-commerce may not continue, or the Internet may not be adopted as a medium of commerce by a broad base of customers worldwide. Because of the foregoing factors, among others, the market for Internet advertising and e-commerce may not continue to grow or grow at significant rates. If these markets fail to develop or develop slower than we expect, our business will suffer.

THE MARKET FOR INTERNET AUDIENCE MEASUREMENT AND ANALYSIS IS HIGHLY COMPETITIVE, AND IF WE CANNOT COMPETE EFFECTIVELY, OUR REVENUES WILL DECLINE

The market for Internet audience measurement and analysis is rapidly evolving and highly competitive. We compete with a number of companies in the market for Internet audience measurement services and analytical services, and we expect competition in this market to intensify in the future.

We believe that the principal competitive factors in our market are:

• the ability to provide high-quality, accurate and reliable data regarding Internet audience behavior and activity in a timely manner;

• the breadth and depth of the product and services offered and their flexibility and ease of use;

• the availability of data across various geographic areas;

• the ability to offer high-quality analytical services based on the Internet audience measurement information;

• the ability to offer products and services that meet the changing needs of our customers; and

• the prices that are charged for the products and services, as well as the general economic conditions.

Some of our competitors may be able to:

• devote greater resources to marketing and promotional campaigns;

• adopt more aggressive pricing policies; or

• devote more resources to technology and systems development.

In light of these factors, we may be unable to compete successfully in our market.

IF WE FAIL TO SUCCESSFULLY CLOSE AND INTEGRATE ACQUISITIONS, OUR BUSINESS WILL SUFFER

We may continue to acquire or make investments in complementary businesses, technologies, services or products if appropriate opportunities arise. Negotiating such acquisitions can be difficult, time consuming and expensive and our ability to close such transactions may often be subject to approvals, such as governmental regulation, which are beyond our control. Consequently, we can make no assurances that such acquisitions, once undertaken and announced, will close.

Further, the process of integrating any acquired business, technology, service or product into our business may result in unforeseen operating difficulties and expenditures. Integration of an acquired company may also consume significant management time and attention that would otherwise be available for the ongoing development of our business. Moreover, the anticipated benefits of any acquisition may not be realized. We may be unable to identify, negotiate or finance future acquisitions or investments successfully, or to integrate successfully any acquisitions with our current business. Future acquisitions could result in potentially dilutive issuances of equity securities or the incurrence of debt, contingent liabilities or amortization expenses related to intangible assets, any of which could harm our business.

WE ARE DEPENDENT ON NIELSEN MEDIA RESEARCH AND ACNIELSEN FOR VARIOUS SERVICES RELATED TO OUR DOMESTIC AND INTERNATIONAL OPERATIONS

The data for our NetView service is collected from randomly-selected panels of Internet users. Our NetView Internet audience measurement panel in the United States has been developed and is maintained by Nielsen Media Research as part of our strategic relationship with that company. In addition, ACNielsen has granted us a license to use ACNielsen’s sampling methodology and the “Nielsen” name outside North America in the Internet audience measurement business, and has entered into a service agreement to provide us with the services of certain dedicated marketing and panel management personnel who are employed by ACNielsen, as well as specific back office services. Accordingly, for a significant period of time, we expect that our business will be substantially dependent upon these arrangements for the continued maintenance of our international Internet audience measurement panels and for other international business operations. Any failure on the part of Nielsen Media Research, ACNielsen or our other business partners to devote adequate resources to the development or maintenance of such panels or other sampling methodologies, or to maintain the overall quality of these methodologies, will harm our business. In addition, Nielsen Media Research may terminate its

obligations with respect to Internet audience measurement panels in the event it no longer holds at least 5% of our outstanding stock on a fully-diluted basis.

VNU N.V., THROUGH ITS WHOLLY-OWNED SUBSIDIARIES NIELSEN MEDIA RESEARCH AND ACNIELSEN, CONTROLS A MAJORITY OF OUR OUTSTANDING STOCK AND ITS REPRESENTATIVES CONSTITUTE A MAJORITY OF OUR BOARD OF DIRECTORS

VNU, N.V., through its wholly-owned subsidiaries Nielsen Media Research and ACNielsen, has a majority stock ownership position in NetRatings, which enables it to control the direction and policies of NetRatings, including the election of our board of directors, amendment of our certificate of incorporation, and decisions regarding mergers, acquisitions, consolidations and the sale of all or substantially all of our assets. This control may have the effect of discouraging certain types of transactions involving a change of control.

In addition, VNU can control or influence the terms of our important commercial transactions, including our strategic relationships with Nielsen Media Research and ACNielsen. VNU’s representatives on our board are expected to recuse themselves from deliberations in which they have a conflict of interest. However, these directors may take actions that favor VNU’s interests over the interests of other stockholders, as a result, for instance, of conflicts of interest that are not apparent at the time of such actions.

OUR BRAND IS DEPENDENT ON THE REPUTATIONS OF THIRD PARTIES OVER WHICH WE HAVE NO CONTROL

The strength of the Nielsen//NetRatings brand is also closely dependent on the reputations of Nielsen Media Research, ACNielsen and other business partners and the strength of their brands. Therefore, any negative publicity generated by Nielsen Media Research, ACNielsen or our other business partners, whether or not directly related to any Nielsen//NetRatings branded products or services, as well as any erosion of the strength of any of their brands, will adversely affect our own brand identity.

OUR COSTS TO DEVELOP AND MAINTAIN ACCURATE INTERNET AUDIENCE MEASUREMENT PANELS, INCLUDING PANELS FOR OUR MEGAPANEL SERVICE, ARE SIGNIFICANT AND MAY INCREASE

We believe that the quality, size and scope of our panels are critical to the success of our business. To date, the expense of recruiting and operating our audience measurement panels has made up a very significant portion of the cost of revenue reported on our financial statements and, therefore, any increase in this expense will likely result in a decrease in our gross margin. The costs associated with maintaining the quality, size and scope are dependent on many factors some of which are beyond our control, including the cooperation rate of potential panel members and turnover among existing panel members, and accordingly we cannot necessarily control these costs to match increases or decreases in revenue. To the extent that such additional expenses are not accompanied by increased revenue, our results of operations will be harmed. Recruiting panelists for our MegaPanel service in Europe and the United States has also required significant investment and there can be no assurance that we will be able to achieve or maintain panels of sufficient size to meet client demand. We have limited experience in developing Internet audience measurement panels, and we could experience lower cooperation rates or higher turnover rates in the future.

OUR INTERNATIONAL OPERATIONS POSE UNIQUE RISKS THAT MAY DIVERT OUR MANAGEMENT’S ATTENTION AND RESOURCES

As a result of our acquisitions in the past few years, we offer our products and services in numerous countries around the world. Our international markets will require significant management attention and resources. In addition, there can be no assurance of the continued growth of Internet usage and electronic commerce in international markets. The international markets for audience measurement services have historically been localized and difficult to penetrate.

The success of our international operations will depend on our ability to:

• effectively select the appropriate countries to serve;

• recruit and maintain panels that are representative of a geographic area;

• control costs and effectively manage foreign operations;

• manage third-party vendors who will likely perform panel operations; and

• effectively develop, market, and sell new products and services in new, unfamiliar markets.

Even if we are successful in managing our international operations, we will be subject to a number of risks inherent in engaging in international operations, including:

• changes in regulatory requirements;

• deficiencies in the telecommunications infrastructure in some countries;

• reduced protection for intellectual property rights in some countries;

• more rigorous levels of privacy protection in some countries;

• potentially adverse tax consequences;

• economic and political instability; and

• fluctuations in currency exchange rates.

OUR BUSINESS MAY BE HARMED IF WE SUPPLY INACCURATE INFORMATION TO OUR CUSTOMERS

If we furnish inaccurate information to our customers, our brand may be harmed. The information that we collect and information in our databases may contain inaccuracies that our customers may not accept. Any dissatisfaction by our customers with our measurement or collection methodologies or databases could have an adverse effect on our ability to attract new customers and retain existing customers and could ultimately harm our brand. Our customer contracts generally provide that each customer must indemnify us for any damages arising from the use of data, reports or analyses by the customer or the performance of any consulting, analytic or other services by us. However, we cannot be certain that our contract provisions provide sufficient protection and, in any event, enforcing these protections could be very costly. Any liability that we incur or any harm to our brand that we suffer because of irregularities or inaccuracies in the data we supply to our customers could harm our business.

CONCERN OVER SPYWARE COULD IMPAIR OUR ABILITY TO RECRUIT PANELISTS OR MAINTAIN PANELS OF SUFFICIENT SIZE TO MEET CLIENT DEMAND, WHICH IN TURN COULD MATERIALLY ADVERSELY AFFECT OUR ABILITY TO PROVIDE OUR PRODUCTS AND SERVICES

Public concern has increased recently regarding certain kinds of downloadable software known as “spyware” and “adware.” These types of programs are often installed on a computer without the consent of the user or without the user’s full understanding while navigating the Internet. Concern over spyware and adware might cause users to be less inclined to download software from the Internet, including our proprietary metering technology, which could make it difficult to recruit additional panelists or maintain panels of sufficient size to meet client demand.

Moreover, in response to spyware and adware concerns, numerous programs are available (many of which are available for free) that claim to identify and remove spyware and adware from users’ computers. While our technology is not spyware, some of these anti-spyware programs have identified our software as spyware or as a potential spyware application. We actively seek to persuade the authors of these anti-spyware programs that our software should not be included on their lists of spyware applications or potential spyware applications. However, to the extent that we are not successful, or to the extent that new anti-spyware programs classify our software as spyware or as a potential spyware application, our goodwill might be harmed and users of these programs might uninstall our software. Loss of goodwill or a decrease in the size of our panels could increase the cost of recruiting panelists and materially adversely affect our ability to provide our products and services to our clients, which in turn could cause our expected revenues to decline.

TECHNOLOGICAL CHANGES MAY RESULT IN WIDESPREAD BLOCKING OR ERASING OF COOKIES, WHICH COULD REDUCE THE AMOUNT AND VALUE OF THE INFORMATION WE COLLECT AND ADVERSELY AFFECT OUR ABILITY TO PROVIDE OUR PRODUCTS AND SERVICES TO CLIENTS

Our SiteCensus technology currently uses “cookies” and “action tags” to track the behavior of Internet users. Cookies are small files of information placed on an Internet user’s computer to collect information about the user’s visits to a Web site. An action tag, also known as “web beacon,” “pixel tag,” and “clear gif,” generally consists of a small string of invisible code that represents a graphic image request on a Web page that companies place on their Web sites to allow them to analyze the general usage patterns of visitors to their Web sites. Third-party software and our own technology and privacy policy make it easy for users to block or delete our cookies. Software programs, sometimes marketed as adware or spyware detectors, may block our cookies by default or prompt users to delete or block our cookies. If a large percentage of users delete or block our cookies, this could, among other things, reduce the amount and value of the information we collect, cause us to spend substantial money and time to change our technology, and

adversely affect our ability to provide our SiteCensus service to our clients.

Changes in Web browsers may also encourage users to block our cookies or impair our ability to use cookies and action tags for data collection purposes. Technologies like the Platform for Privacy Preferences (P3P) may also limit the collection of information from cookies and action tags. If these or other technological changes are implemented and we are unable to adapt our technology and practices adequately in response to these changes, then the value of our SiteCensus service will be substantially impaired.

PRIVACY CONCERNS COULD LEAD TO LEGISLATIVE, REGULATORY AND OTHER LIMITATIONS THAT COULD AFFECT OUR ABILITY TO COLLECT AND USE INFORMATION ABOUT INTERNET USERS, IMPAIR OUR ABILITY TO PROVIDE OUR PRODUCTS AND SERVICES TO CLIENTS AND EXPOSE US TO LIABILITY

Privacy concerns could lead to legislative, judicial and regulatory limitations on our ability to collect, maintain and use information about Internet users both in the United States and abroad. Restrictions could be placed upon the collection, management, aggregation and use of information, which could require significant engineering time and resources. Recently, the legislatures of the States of Utah and California enacted legislation designed to protect Internet users’ privacy by prohibiting certain kinds of downloadable software defined as “spyware.” Similar legislation has been introduced in other states and the U.S. Congress, including the Safeguard Against Privacy Invasions Act in the House of Representatives and the SPYBLOCK Act in the Senate. In addition, the European Union has adopted a directive requiring the disclosure of the use of cookies and instructions on their removal. It is possible that this legislation or future legislation intended to regulate spyware could affect our ability to collect information, which could prevent us from operating or distributing some of our products and services or which could require us to change our business practices. In addition, failure to comply with the law and regulatory requirements may result in, among other things, administrative enforcement actions and fines, class action lawsuits and civil and criminal liability. The occurrence of one or more of these events could materially harm our business, results of operation and financial condition.

WE MAY NOT BE SUCCESSFUL IN THE DEVELOPMENT OR INTRODUCTION OF NEW PRODUCTS AND SERVICES TO KEEP UP WITH THE PROLIFERATION OF ALTERNATIVE INTERNET ACCESS DEVICES AND TECHNOLOGIES RELATED TO THE EXPECTED CONVERGENCE OF THE INTERNET AND TELEVISION

We believe that an increasing proportion of Internet use will involve alternative Internet access devices such as Web-enabled phones, television set-top boxes and Internet enabled gaming consoles and that there will eventually be a convergence of Internet content and television programming. Accordingly, in order to continue to provide information about audience behavior throughout all major segments of the Internet, we will be required to develop new products and services that address these evolving technologies. We may be unsuccessful in identifying new product and service opportunities or in developing or marketing new products and services in a timely or cost-effective manner. In addition, product innovations may not achieve the market penetration or price stability necessary for profitability. Finally, we may not be successful in adapting our data collection software to evolving types of Internet access devices or content. If we are unable to provide audience measurement information regarding any significant segments of Internet use, demand for our products and services may suffer.

WE MAY NOT BE ABLE TO RECRUIT OR RETAIN QUALIFIED PERSONNEL

Our future success depends in large part on our ability to attract, retain and motivate highly skilled employees in many locations around the world. Although we provide compensation packages that include competitive salaries, stock options, restricted stock, bonus incentives and other employee benefits, we may be unable to retain our key employees or to attract, assimilate and retain other highly qualified employees in the future. If we are unable to attract or retain key employees, our business would suffer.

THE AUDIENCE MEASUREMENT SERVICES OFFERED BY NIELSEN MEDIA RESEARCH OR ACNIELSEN MAY EVENTUALLY HAVE FEATURES THAT OVERLAP WITH FEATURES OF OUR INTERNET AUDIENCE MEASUREMENT SERVICES AS A RESULT OF CONVERGENCE OF TELEVISION AND THE INTERNET

Nielsen Media Research’s principal business consists of providing television audience measurement services based on audience panels that it develops independent of its strategic relationship with us. ACNielsen also derives a substantial portion of its revenue from television audience measurement services outside of the United States. If television and the Internet converge in the future as expected, any Internet audience information that is reported by television audience measurement services through these VNU subsidiaries may overlap with the audience information that is reported by the Nielsen//NetRatings Internet audience measurement services. In the event of such overlap, VNU’s services could begin competing with our services for the same research budgets among customers in the marketplace, and its offering of such services could conflict with its obligation to develop and maintain our Internet audience panels.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS

We regard our intellectual property as critical to our success. We rely on patent, trademark, copyright and trade secret laws to protect our proprietary rights, and we seek to obtain the issuances of patents for our core technology and the registration of our material trademarks and service marks in the United States and in selected other countries. We cannot assure you, however, that the steps we have taken will be sufficient to protect our intellectual property from infringement or misappropriation. Moreover, effective intellectual property protections may not be available in every country in which we offer our products and services to the extent these protections are available in the United States. Our patent applications or trademark registrations may not be approved or, even if approved, could be challenged by others or invalidated through administrative process or litigation. If our patent applications or trademark registrations are not approved because third parties own rights to the technology we are trying to patent or the trademarks we are trying to register, our use of such technology or trademark would be restricted unless we enter into arrangements with the third-party owners, which might not be possible on commercially reasonable terms or at all.

WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT WOULD BE COSTLY TO RESOLVE OR MAY REQUIRE US TO MAKE CHANGES TO OUR TECHNOLOGY OR BUSINESS

Third parties may, from time to time, assert claims that we have infringed upon their proprietary rights or claims that our own trademarks, patents or other intellectual property rights are invalid. Such claims could adversely affect our reputation and the value of our own proprietary rights. From time to time we have been, and we may in the future be, subject to such claims in the ordinary course of our business, including claims of alleged infringement of patents, trademarks and other intellectual property rights of third parties. Protection of proprietary rights in Internet-related industries is inherently uncertain due to the rapidly evolving technological environment. As such, there may be numerous patent applications pending, many of which are confidential when filed, that provide for technologies similar to ours.

Any claims of infringement and any resulting litigation, should they occur, could subject us to significant liability for damages, restrict us from using our technology or from operating our business generally or require us to make changes to our technology. Any claims of this type, with or without merit, could be time-consuming to defend, result in costly litigation and divert management attention and resources. In addition, such claims could result in limitations on our ability to use the intellectual property subject to these claims unless we are able to enter into royalty, licensing or other similar arrangements with the third parties asserting these claims. Such agreements, if required, may be unavailable on terms acceptable to us, or at all. If we are unable to enter into these types of agreements, we may be required to either cease offering the subject product or change our technology underlying the applicable product. If a successful claim of infringement is brought against us and we fail to develop non-infringing technology or to license the infringed or similar technology on a timely basis, it could materially adversely affect our business, financial condition and results of operations.

SYSTEM FAILURES OR DELAYS IN THE OPERATION OF OUR COMPUTER AND COMMUNICATIONS SYSTEMS MAY HARM OUR BUSINESS

Our success depends on the efficient and uninterrupted operation of our computer and communications systems. A failure of our network or data gathering procedures could impede the processing of data, customer orders and day-to-day management of our business and could result in the corruption or loss of data.

The servers on which we collect our panel members’ data reside in Nielsen Media Research’s facilities in Oldsmar, Florida. We currently do not have a backup facility to provide redundant network capacity in the event of a system failure. Accordingly, our ability to collect Internet audience data in real time is dependent upon the efficient and uninterrupted operation of Nielsen Media Research’s computer and communications hardware and software systems. Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins and similar events at Nielsen Media Research’s computer facility could result in interruptions in the flow of data to our servers. In addition, any failure by Nielsen Media Research’s computer facility to provide our required data communications capacity could result in interruptions in our service. In the event Nielsen Media Research should discontinue its services to us, we would be required to transfer our data collection operations to an alternative provider of server hosting services. Such a transfer could be costly and result in significant delays in our ability to deliver our products and services to our customers, which could damage our reputation and harm our business.

We intend to develop back-up systems outside of Nielsen Media Research’s facilities in Oldsmar, Florida. However, as we replicate our systems at other locations, we will face a number of technical challenges, particularly with respect to database replications, which we may not be able to address successfully. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur.

ANY MISAPPROPRIATION OF PERSONAL INFORMATION ABOUT OUR PANELISTS THAT IS STORED ON OUR COMPUTERS COULD HARM OUR REPUTATION OR EXPOSE US TO CLAIMS ARISING FROM DAMAGES SUFFERED BY THOSE PANELISTS

Personal information regarding our panelists is included in the data that our software captures from a panelist’s Internet use. Our panel data are released only on an anonymous basis. However, if a person were to penetrate our network security or otherwise misappropriate sensitive data about our panel members, our reputation could be harmed or we could be subject to claims or litigation arising from damages suffered by panel members as a result of such misappropriation. Under California SB 1386, companies that maintain data on California residents are required to inform individuals of any security breaches that result in their personal information being stolen. In the event that any personal information about our panelists residing in California was misappropriated, we could incur significant costs in complying with the disclosure requirements of California SB 1386. In addition, any such disclosure could harm our reputation and result in a higher rate of panel attrition.

GOVERNMENTAL REGULATION OF THE INTERNET MIGHT HARM OUR BUSINESS

The applicability to the Internet of existing laws governing issues such as property ownership, libel and personal privacy is uncertain. In addition, governmental authorities in various countries may seek to further regulate the Internet with respect to issues such as user privacy, pornography, acceptable content, advertising, e-commerce, taxation and the pricing, characteristics and quality of products and services. Therefore, any new legislation regulating the Internet could inhibit the growth of the Internet and decrease the acceptance of the Internet as a communications and commercial medium, which might harm our business. Finally, the global nature of the Internet could subject us to the laws of a foreign jurisdiction in an unpredictable manner.

LEGISLATIVE ACTIONS, HIGHER INSURANCE COSTS AND REGULATORY REQUIREMENTS APPLICABLE TO PUBLIC REGISTRANTS ARE LIKELY TO CAUSE OUR GENERAL AND ADMINISTRATIVE EXPENSES TO INCREASE AND MAY IMPACT OUR FUTURE FINANCIAL POSITION AND RESULTS OF OPERATIONS

In order to comply with the Sarbanes-Oxley Act of 2002, as well as changes to Nasdaq listing standards and rules adopted by the Securities and Exchange Commission, we may be required to enhance our internal controls and hire additional personnel and additional outside legal, accounting and advisory services, all of which will cause our general and administrative costs to increase. For example, in 2004 we hired outside consultants to assist us with our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, which resulted in additional general and administrative expenses during 2004. Insurers may also increase premiums, causing our premiums for various insurance policies, including our directors’ and officers’ insurance policy, to increase. Changes in the accounting rules, in particular the rules relating to accounting for employee stock options, are likely to materially increase the expenses that we report under generally accepted accounting principles and adversely affect our operating results. In addition, any such changes may impact the amount of equity compensation we grant to our employees, which may affect our ability to recruit or retain key employees.

WE ARE SUBJECT TO PENDING LEGAL PROCEEDINGS

We are currently subject to a securities class action complaint relating to our initial public offering. The plaintiffs allege that our prospectus was materially false and misleading because it failed to disclose that the underwriters required several investors who sought large allocations of stock in the offering to pay excessive underwriters’ compensation in the form of increased brokerage commissions on other trades and required investors to agree to buy shares of our stock after the offering was completed at predetermined prices as a precondition to obtaining allocations in the offering. The plaintiffs further allege that because of these purchases, our stock price after its initial public offering was artificially inflated. Similar complaints have been filed against a number of other issuers that had initial public offerings in 1999 and 2000. While we have accepted a settlement proposal from the plaintiffs, the settlement is subject to approval of the judge. If the settlement is not approved by the judge, the litigation will continue. An adverse outcome could materially affect our results of operations and financial position.

A SALE BY VNU OF ITS STAKE IN NETRATINGS COULD ADVERSELY AFFECT OUR STOCK PRICE

There are no contractual restrictions on the ability of VNU, through its Nielsen Media Research or ACNielsen subsidiaries, to sell shares of our common stock, although sales in the public market will be subject to the volume limitations of SEC Rule 144. Pursuant to these volume limitations, a controlling stockholder may sell shares under Rule 144 only if the shares to be sold, together with the shares sold during the past three months, do not exceed the greater of 1% of the issuer’s outstanding shares or the average weekly trading volume of the issuer’s shares during the preceding four calendar weeks. Nielsen Media Research, ACNielsen and several of our other stockholders have the right, under certain circumstances, to require us to register their stock for sale to the public, with the exception of the shares issued to ACNielsen in the acquisition of eRatings. Should VNU decide to sell its stake in NetRatings, it could adversely affect our stock price. Additionally, VNU will have the ability to transfer control of NetRatings, possibly at a premium over the then- current market price. Because VNU will have the ability to effect such a transfer of control unilaterally, other stockholders could be denied an opportunity to participate in the transaction and receive a premium for their shares.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of March 31, 2005, we had cash and cash equivalents and short-term investments of $195.7 million consisting of cash and highly liquid, short-term investments. The primary objective of our investment activities is to preserve capital while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and short-term investments in a variety of government and corporate obligations and money market funds. As of March 31, 2005, our investments had a weighted-average time to maturity of approximately 169 days.

Investments in both fixed-rate and floating-rate interest-earning instruments carry varying degrees of interest rate risk. The fair market value of our fixed-rate securities may be adversely impacted due to a rise in interest rates. In general, securities with longer maturities are subject to greater interest-rate risk than those with shorter maturities. While floating rate securities generally are subject to less interest-rate risk than fixed-rate securities, floating-rate securities may produce less income than expected if interest rates decrease. Declines of interest rates over time will reduce our interest income from our cash and cash equivalents and short-term investments and, accordingly, could adversely affect our net income and earnings per share. For example, if interest rates were to instantaneously increase (decrease) by 100 basis points, the fair market value of our total investment portfolio would decrease (increase) by approximately $0.7 million.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

Securities Class Action Complaint

A class action lawsuit was filed on November 6, 2001 in the United States District Court for the Southern District of New York on behalf of purchasers of our common stock alleging violations of federal securities laws. The case is now designated as In re NetRatings, Inc. Initial Public Offering Securities Litigation, related to In re Initial Public Offerings Securities Litigation. The case is brought purportedly on behalf of all persons who purchased the Company’s common stock from December 8, 1999 through December 6, 2000. The complaint names as defendants NetRatings; two of our former directors; and investment banking firms that served as underwriters for our initial public offering in December 1999. The Plaintiffs electronically served an amended complaint on or about April 19, 2002. The amended complaint alleges violations of Section 11 and 15 of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934, on the grounds that the prospectus incorporated in the registration statement for the offering failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the shares of our stock sold in the initial public offering, and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares of our stock sold in the initial public offering to those customers in exchange for which the customers agreed to purchase additional shares of our stock in the aftermarket at pre-determined prices. The amended complaint also alleges that false analyst reports were issued following the IPO. No specific damages are claimed.

We are aware that similar allegations have been made in lawsuits relating to more than 300 other initial public offerings conducted in 1999 and 2000. Those cases, including our case, have been consolidated for pretrial purposes before the Honorable Judge Shira A. Scheindlin. On July 15, 2002, we (as well as the other issuer defendants) filed a motion to dismiss the complaint. The motions were heard on November 1, 2002. In February 2003, the judge granted the motion to dismiss certain of the claims against NetRatings and the two individual defendants and denied the motion to dismiss certain other claims against NetRatings and the two individual defendants. In July 2004, we and the individual defendants accepted a settlement proposal made to all of the issuer defendants. Under the terms of the settlement, the plaintiffs will dismiss and release all claims against participating defendants in exchange for a contingent payment guaranty by the insurance companies collectively responsible for insuring the issuers in all related cases, and the assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. Under the guaranty, the insurers will be required to pay the amount, if any, by which $1 billion exceeds the aggregate amount ultimately collected by the plaintiffs from the underwriter defendants in all the cases. The settlement is subject to approval of the Court, which cannot be assured. If the settlement is not approved by the Court, we intend to defend the lawsuit vigorously. However, the litigation is in the preliminary stage, and we cannot predict its outcome. The litigation process is inherently uncertain. If litigation proceeds and its outcome is adverse to us and if we are required to pay significant monetary damages, an adverse outcome could materially affect our results of operations and financial position.

Item 6. Exhibits

Exhibit Number		Exhibit

31.1		Certificate of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certificate of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certificate of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certificate of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Date: May 10, 2005
	NETRATINGS, INC.
	By:	/s/ Todd Sloan

		Todd Sloan Executive Vice President of Corporate Development, Chief Financial Officer And Secretary (Principal Accounting and Financial Officer)

	By:	/s/ William Pulver

		William Pulver President, Chief Executive Officer and Director

Part I.		FINANCIAL INFORMATION
Item 1.		Financial Statements
		Condensed Consolidated Balance Sheets - March 31, 2005 (Unaudited) and December 31, 2004
		Condensed Consolidated Statements of Operations - Three Months ended March 31, 2005 and 2004 (Unaudited)
		Condensed Consolidated Statements of Cash Flows - Three Months ended March 31, 2005 and 2004 (Unaudited)
		Notes to Condensed Consolidated Financial Statements
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4.		Controls and Procedures
Part II.		OTHER INFORMATION
Item 1.		Legal Proceedings
Item 6.		Exhibits
		Signatures