10-K 1 final01_10k.txt TOTAL RESEARCH FORM 10-K ENDING 6/30/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [ X ] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended June 30, 2001. [ ]Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from ___ to ___. Commission File Number: 0-15692. TOTAL RESEARCH CORPORATION -------------------------- (Exact name of registrant as specified in its charter) Delaware 22-2072212 ---------------------------------------- -------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 5 Independence Way, Princeton, New Jersey 08543-5305 ---------------------------------------- -------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (609) 520-9100 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered: None --------------------------- ----------------------------------------- Securities pursuant to Section 12(g) of the Act: Common Stock, $.001 par value ----------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value of shares of Common Stock of the registrant held by non-affiliates of the registrant based on the closing price of the Common Stock on August 29, 2001 was $28,073,516. As of August 29, 2001, there were 13,537,167 shares of the Company's Common Stock ($.001 par value) outstanding. DOCUMENTS INCORPORATED BY REFERENCE None. PART I Information contained or incorporated by reference in this report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), which represent the expectations or beliefs of Total Research Corporation (the "Company"), including, but not limited to, statements concerning industry performance, the Company's operations, performance, financial condition, growth and acquisition strategies, margins and growth in sales of the Company's products. For this purpose, any statements contained in this Annual Report that are not statements of historical fact may be deemed to be forward-looking statements. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. See, e.g., "Management's Discussion and Analysis of Financial Condition and Results of Operations." No assurance can be given that the future results covered by the forward-looking statements will be achieved. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the Company's control. The information set forth below identifies important factors with respect to such forward-looking statements, including certain risks and uncertainties that could cause actual results to vary materially from the future results covered in such forward-looking statements. Other factors could also cause actual results to vary materially from the future results covered in such forward-looking statements. ITEM 1. DESCRIPTION OF BUSINESS MERGER WITH HARRIS INTERACTIVE INC. On August 6, 2001, the Company announced the signing of a definitive merger agreement with Harris Interactive Inc., a Delaware corporation ("Harris"). The merger, which is subject to regulatory approval and approval by the stockholders of both companies, calls for Harris to exchange 1.222 shares of Harris common stock, par value $.001 per share, for each share of the Company's common stock, par value $.001 per share. When completed, existing Harris stockholders will own approximately 67.25 percent and the Company's stockholders will own approximately 32.75 percent of the outstanding equity of the combined company, respectively. Stockholders representing approximately 53 percent of the total outstanding common stock of Harris and approximately 24 percent of the total outstanding common stock of the Company have executed voting agreements pursuant to which they have agreed to vote their shares in favor of the transactions contemplated by the merger agreement. The merger is expected to be finalized in the fourth quarter of calendar year 2001. Following the merger, the Company will become a wholly owned subsidiary of Harris and, initially, will continue to operate under its existing name in the United States and Europe. OVERVIEW OF THE BUSINESS The Company is a leading full-service custom and web-enabled marketing organization that provides global marketing research and marketing services to assist its clients with the pricing and positioning of new or existing products, customer loyalty measurements, brand equity and e-commerce issues, organizational structure and other marketing concerns. The Company provides services for its clients by using proprietary market research and other marketing technologies developed by the Company and distributed throughout various mediums including the Internet. The Company's clients consist principally of Fortune 100 corporations operating in a wide array of industries, including automotive, chemicals, consumer products, financial services, government, health care, information technologies, manufacturing, telecommunications, travel and utilities. The Company's professional staff has business experience in each industry for which it conducts market research. The Company operates as one business segment. It services its clients through its four divisions (Customer Loyalty Management, Global Life Sciences, Strategic Brand Research, and Total Research Europe) each of which has specific industry and/or product expertise. The Company's divisions are located in several cities in the United States and in London, England. The Company also maintains relationships 1 with market research organizations in South America and Asia to collect data internationally on behalf of the Company. The Company operates telephone data collection centers in Tampa, Florida and London, England to assist in collecting data for clients. The Tampa calling center currently has 130 CATI (Computer Assisted Telephone Interviewing) stations. The London calling center has 150 CATI stations. The Company's phone centers conduct interviews utilizing computer programmed questionnaires that are immediately uploaded to the Company's central data-processing center, thereby enabling research to be collected and analyzed more efficiently and effectively. The Company also utilizes Total e-Survey(TM), a web-based data collection methodology that utilizes advanced research techniques to collect data over the Internet. The Company has complete in-house data processing operations which provide for rapid, thorough and secure on-site data management and analysis. The Company supports many platforms and file types both to exchange data and to provide extensive database design and management capabilities. The Company also provides its clients with sample management services and survey data results using a variety of software applications. It also has a large and continually expanding array of proprietary software developed internally to reduce research labor, enhance service quality, assist with survey data analysis and generate client reports. The Company continues to coordinate significant internal projects to develop Internet portals and virtual private networks for its clients to access and analyze data. The Company's newly formed software research and development team is continually engaged in efforts to develop, evaluate and adapt new technologies to improve and expand the Company's processes, services and products. The Company was incorporated under the laws of the State of New Jersey in 1975 and was reincorporated under the laws of the State of Delaware in 1986. The Company maintains its principal executive offices at 5 Independence Way, Princeton, New Jersey 08543, and its telephone number is (609) 520-9100. In May of 2000, the Company acquired Romtec Plc, a European information technology research and marketing services company and its Romtec Plc's 51 percent interest in the Romtec-GfK joint venture. The total acquisition price consisted of cash and notes amounting to a maximum of $7.2 million. The operations of Romtec Plc were integrated into the Company's Total Research Europe division during fiscal 2001. On June 29, 2001, the Company sold its 51 percent interest in its Romtec-GfK joint venture to GfK Marketing Service Limited, a German-based market research company. The consideration for the sale of the Company's interest was $2.34 million, which was used to retire debt from the Romtec acquisition and repay other debt on the Company's balance sheet. The Total Research Europe division continues to market services under the Total/Romtec brandname. On April 4, 2001, the Company acquired Teligen Limited, a United Kingdom-based market research and consultancy company located in Richmond, Surrey. Teligen specializes in the telecommunications marketplace worldwide. Teligen's single largest area of specialization is tariffing, providing a range of custom products that collect, analyze and report on European telecommunication charges and services to corporate users, regulators and service providers. CLIENTS In fiscal 2001, approximately 44 percent of the Company's revenues were earned from among the 100 largest commercial and financial companies in the United States. The Company currently serves approximately 200 commercial clients and government agencies. During fiscal 2001, approximately 71 percent of the revenues earned by the Company were from clients who had previously retained the Company. In fiscal 2001, two clients each represented approximately 11 percent of the Company's annual revenues earned for the year. In fiscal 2000, one client represented 21 percent of the Company's annual revenues earned for that year. For fiscal 1999, no single client accounted for greater than 10 percent of the 2 Company's annual revenues. The following chart sets forth certain information regarding the Company's annual revenues during the past three fiscal years:

PRODUCTS AND SERVICES The Company believes it enjoys advantages over competitors due to its ability to conduct predictive marketing research studies, which attempt to predict consumer, business or physician behavior in various alternative scenarios. The Company believes this is superior to more traditional market research, which is diagnostic in nature. The Company's principal proprietary predictive technologies and associated services include the following: o TOTAL E-SURVEY(TM) is the Company's web service that combines the firm's advanced market research technologies and international expertise to provide a web-based data collection capability. o EQUITREND(R) measures the perceived quality of a brand or product based upon consumer experiences with, and perceptions of, the brand. o COMPONENT ASSESSMENT (COMPASS(R)) is designed to enable clients to analyze the structure of a competitive market and to determine the effect that individual product attributes have on a customer's purchase decision. COMPASS(R) is commonly used by clients for developmental stage products and to understand the key drivers of product choice. o PREDICTIVE SEGMENTATION(R) is a technology that enables marketers to identify the various segments and/or sub-markets of individual products and to differentiate the demands of each segment. Clients utilize Predictive Segmentation to combine demographic and usage/attitude factors to determine the optimal segmentation for their products. o PRICE ELASTICITY MEASUREMENT SYSTEM (PEMS(R)) permits the evaluation of pricing strategies for different products and services. PEMS is designed to enable the client to predict sales of products and services under a broad range of possible competitive pricing scenarios. o TOTAL RESEARCH BIAS CORRECTION (TRBC(R)) is a technology that enables marketers to improve the accuracy and value of any research by reducing fundamental sources of bias, error and distortion in 3 market research data. This results in a better understanding of marketing behavior and substantial improvement of the predictive accuracy and value of market research. TRBC(R) is especially valuable in multi-national studies. GEOGRAPHIC LOCATIONS The Company's headquarters are located in Princeton, New Jersey. The Company has domestic offices in Minneapolis and Tampa as well as two international offices in London, England. The Company has an agreement pursuant to which the Company authorizes Paradigma S.A. ("Paradigma") to use the name "Total Research Argentina". The Company has an alliance with Asia Marketing Intelligence ("AMI"), the largest independent data collection services firm in Asia, which enables the Company to offer full, comprehensive service for its Asian component of global studies. INTERNATIONAL OPERATIONS In fiscal 2001, approximately 40 percent of the Company's revenues were attributable to projects that the Company conducts for its clients involving market research which is performed on a global basis. The Company has conducted research projects in Europe, South America, Canada, Africa, China, Japan, Australia and India. To engage in its international market research activities, the Company has expanded multi-lingual telephone interviewing facilities and developed a network of relationships (such as those with Paradigma and AMI) with market research organizations in essential locations around the world. These alliances enable the Company to maintain the quality and reliability of its data collection activities. ORGANIZATIONAL STRUCTURE The Company currently operates as four market research divisions. The Customer Loyalty Management division operates from offices in Princeton and Minneapolis. This division provides clients with an organized, controlled means of improving their operating results and marketplace performance through the effective use of information from customers and employees. Clients are primarily in the telecommunications, information technology, travel, and banking industries. The Customer Loyalty division accounted for approximately 29 percent of the revenues generated by the Company in fiscal 2001. The Global Life Sciences division is international in nature, with staff in both the Princeton and London offices. The division conducts global market research in the pharmaceutical, health care, biotechnology and agricultural industries. Global Life Sciences accounted for approximately 14 percent of the revenues generated by the Company in fiscal 2001. The Strategic Brand Research division operates from the Princeton and Minneapolis offices. The division conducts market research on a global basis in the consumer products/consumer packaging goods, information technology, automotive and telecommunications industries. This division accounted for approximately 21 percent of the revenues generated by the Company in fiscal 2001. The Total Research Europe division operates from the Company's London, England offices. The Total Research Europe division conducts market research mainly within Europe and Asia in the consumer products/consumer packaging goods, financial services, information technology, manufacturing/industrial and telecommunications industries. The Total Research Europe division accounted for approximately 36 percent of the revenues generated by the Company in fiscal 2001. 4 FEE ARRANGEMENTS The Company generally obtains full-service and advanced level research assignments through competitive bidding. Most contracts are awarded on a fixed-fee basis, subject to adjustment under certain circumstances. The Company also designs and implements multi-client studies, such as EquiTrend(R)and Airtrack, to address informational needs shared by multiple existing and potential clients. The Company usually develops the initial focus and study design of a multi-client study at its own expense prior to obtaining client commitments. The Company then sells the completed study to existing and potential clients on a non-exclusive basis. COMPETITION The market research industry is highly competitive and is characterized by a large number of relatively small organizations and a limited number of large full service organizations, many of which are believed to have financial resources greater than those of the Company. Management believes that it is currently one of the leading providers of market research and analysis services using advanced statistical techniques. In 2001, the Company was listed as the 22nd largest US company, measured by revenues, in the marketing research industry by a leading industry publication. The Company's primary competitors include: Burke Marketing Services, Inc.; M/A/R/C, Inc.; Maritz, Market Facts, Inc.; National Analysts; Opinion Research Corporation; and Walker Research Incorporated. The Company believes that the principal competitive factors in today's marketing research marketplace are the quality and validity of data collection, effective uses of technology as well as the ability to efficiently design, execute and prepare reports on marketing research. The Company believes that the principal competitive factors for marketing research using advanced statistical techniques are the quality of its personnel and the Company's experience in developing and executing statistical marketing research. During economic downturns, the Company may experience increased competition for research budgets, which are often vulnerable to global corporate overhead reduction. The Company seeks to minimize the risk of revenue losses by serving multiple industries. EMPLOYEES As of June 30, 2001, the Company employed 244 full-time employees. The Company uses approximately 500 part-time, hourly employees for data gathering and processing purposes. All employees are non-union. The Company believes that its relationship with its labor force is good. TRADEMARKS The Company owns 13 trademarks registered with the United States Patent and Trademark Office and/or similar regulatory authorities in other countries. Federally registered trademarks have perpetual life, provided they are renewed on a timely basis and used properly as trademarks, subject to the rights of third parties to seek cancellation of the marks. The Company regards its trademarks and other proprietary rights as valuable assets and believes that they have significant value in the marketing of its products. The Company protects its trademarks against infringement. FACTORS AFFECTING FUTURE PERFORMANCE Fluctuations in economic trends could harm the Company's business. The Company's operating results are affected by general economic conditions, as well as trends in the marketing industry. A reduction in marketing expenditures by the Company's clients could result from a general decline in economic conditions or a decline in economic conditions in particular markets where the Company conducts business. If the Company's clients reduce their marketing expenditures, the Company's business would likely suffer. 5 Fluctuations in the Company's operating results may cause its stock price to decline and its business to suffer. A number of factors that are beyond the Company's control can adversely affect the demand of the Company's existing clients for its services and impair its ability to attract new clients. These include the following: o general economic conditions; o development of products and services by the Company's competitors; o changes in management or ownership of an existing client; and o other industry-specific trends. As a result of any or all of the foregoing, the Company may provide different amounts of services to its clients from year to year, and these differences can contribute to fluctuations in the Company's operating results. The Company may not be able to compete successfully. The markets for the Company's products and services are highly competitive. The Company competes for clients with market research firms offering traditional market research and Internet-based services. The Company faces competition from other traditional market research firms who have developed Internet-related products and services and from other companies with access to large databases of individuals with whom they can conduct research. Although the Company believes that it offers a competitive combination of services and products, many of the Company's current and potential competitors have longer operating histories and greater financial and marketing resources. These competitors may be able to undertake more extensive marketing campaigns for their services, adopt more aggressive pricing policies and make more attractive offers to potential employees, strategic partners and customers. The above factors, either alone or in combination, could result in reduced levels of revenue and profitability. The Company is dependent on senior management and other key employees. The Company's success depends to a significant extent upon its senior management and certain other key employees. The loss of the service of senior management or other key employees could have a material adverse effect on the Company. Furthermore, the Company believes that its future success will also depend to a significant extent upon its ability to attract, train and retain highly skilled technical, management, sales and marketing personnel. Competition for such personnel is intense, and the Company expects that such competition will continue for the foreseeable future. The Company has from time to time experienced difficulty in attracting candidates with appropriate qualifications. The failure to attract or retain such personnel could have a material adverse effect on the Company's business, operating results and financial condition. ITEM 2. DESCRIPTION OF PROPERTY The Company's headquarters and principal United States operating facility is located in Princeton, New Jersey. As of June 30, 2001, the Company leased approximately 46,000 square feet of office space for its Princeton operations; the lease expires June 30, 2006. The Company is currently sub-leasing approximately 10,000 square feet of this space to a third party. The Company leases 6,083 square feet for a sales office in Minneapolis, Minnesota. The lease expires on April 30, 2004. The Company leases 13,529 square feet for a telephone data-collection facility 6 in Tampa, Florida. The lease expires on December 31, 2004. In the United Kingdom, the Company leases 21,473 square feet for its Brentford, London office space. The lease expires October 31, 2010 with a tenant break clause at October 31, 2004. In addition to the Brentford facility, the Company leases approximately 10,000 square feet of office space in Maidenhead, London. The lease expires in 2005. ITEM 3. LEGAL PROCEEDINGS As of June 30, 2001, there were no material legal actions or proceedings pending or, to the knowledge of the Company, threatened, to which the property of the Company was subject, or to which the Company was a party. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of fiscal 2001, no matters were submitted to a vote of security holders of the Company. 7 PART II ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock trades on the Nasdaq National Market. The quarterly high and low closing bid prices of the Company's common stock, as reported by the Nasdaq National Market, from fiscal 2000 to August 29, 2001, were as follows: High Low Fiscal 2000 First Quarter $4.00 $3.13 Second Quarter 7.94 3.25 Third Quarter 7.63 5.00 Fourth Quarter 6.00 2.38 Fiscal 2001 First Quarter $4.03 $2.69 Second Quarter 3.88 2.75 Third Quarter 3.69 2.56 Fourth Quarter 2.48 1.90 Fiscal 2002 First Quarter (through August 29, 2001) $2.86 $1.91 The above listed quotes reflect inter-dealer prices without retail mark-up, mark-down or commissions and are not necessarily representative of actual transactions. As of August 29, 2001, the Company had 388 stockholders of record of its common stock. The Company has never declared a dividend and does not plan to do so in the near future. In July of 1998, the Company entered into an agreement with a number of investors pursuant to which the Company sold 1,000,000 shares of common stock at $2.25 per share and issued options to purchase an aggregate of 250,000 shares of common stock at an exercise price of $2.25 per share (exercisable for 5 years). Such common stock was sold in a transaction that was exempt from registration under Section 4(2) of the Securities Act of 1933, as amended. The agreement also provides that the investors will, under certain circumstances, provide or arrange for others to provide up to $25,000,000 in debt or equity financing to complete acquisitions and/or projects approved by the Company's Board of Directors. 8 ITEM 6. SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA FOR YEARS ENDED --------------------------------------- JUNE 30, 2001, 2000, 1999, 1998 AND 1997 ---------------------------------------- The selected financial data as of June 30, 2001, 2000, 1999, 1998, and 1997 and for each of the years then ended has been derived from the audited consolidated financial statements of the Company. The selected financial data should be read in conjunction with, and is qualified in its entirety by, the Consolidated Financial Statements of the Company and the notes thereto and the other financial information included in Item 14 of the Company's Annual Report on Form 10-K for the year ended June 30, 2001.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS --------------------- The Company is a full-service consultative marketing research corporation that provides marketing research and information to assist its clients with the pricing and positioning of new or existing products, customer loyalty measurements, brand equity issues and other marketing concerns. 9 The following table sets forth, for the periods indicated certain historical income statement and other data for the Company and also sets forth such data as a percentage of gross revenues (in thousands).

FISCAL YEAR ENDED JUNE 30, 2001 AS COMPARED TO FISCAL YEAR ENDED JUNE 30, 2000 Revenues increased approximately 6.0 percent from fiscal 2000 to fiscal 2001. This is attributable to stability in the core business and to the acquisition of Romtec in May 2000. Fiscal 2001 core business declined slightly after the Company's leading client in fiscal 2000 (21 percent of fiscal 2000 revenue) decreased its volume to represent 11 percent of fiscal 2001 revenue. The gross profit increased from approximately $25,728,000 in fiscal 2000 to approximately $28,735,000 in fiscal 2001, an increase of $3,007,000. Gross profit increased as a result of increased revenues and because direct costs decreased as a percentage of revenues. Direct costs as a percentage of revenues were reduced, as more use was made of the Company's internal telephone facilities. Additionally, the Romtec work, in general, requires lower direct costs to service. As a percentage of revenues, gross profit increased from 50.7 percent of revenues in fiscal 2000 to 53.4 percent of revenues in fiscal 2001. Operating costs increased from approximately $22,739,000 in fiscal 2000 to approximately $25,304,000 in fiscal 2001, or $2,565,000. As a percentage of revenues, operating costs increased from 44.8 percent in fiscal 2000 to 47.0 percent in fiscal 2001. The increase is attributable to increased costs associated with a full year of Romtec's operations, as well as increased costs for labor, depreciation and rents. Included in unusual charges are transaction costs related to the proposed merger with Harris. Income from operations increased as a percentage of revenues from 5.9 percent in fiscal 2000 to 6.1 percent in fiscal 2001, or approximately $297,000. The increase is primarily due to lower direct costs as a percentage of revenues in fiscal 2001 than in fiscal 2000. Net interest income decreased from fiscal 2000 to fiscal 2001 by approximately $38,000. This is the result of loans used to acquire Romtec being outstanding for a longer period of time in fiscal 2001 than fiscal 2000 and generating more interest expense. The provision for income taxes increased from approximately $1,189,000 in fiscal 2000 to $1,206,000 in fiscal 2001, or $17,000, due to increased income in fiscal 2001. The effective tax rate decreased from 38.3 percent in fiscal 2000 to 37.0 percent in fiscal 2001 primarily due to a higher percentage of income being earned overseas in lower tax rate jurisdictions. The Company defines backlog as the unearned portions of its existing contracts at each balance sheet date. As of June 30, 2001, backlog was approximately $15,383,000, as compared to a backlog of 10 FISCAL YEAR ENDED JUNE 30, 2001 AS COMPARED TO FISCAL YEAR ENDED JUNE 30, 2000 (CONT'D) approximately $19,900,000 as of June 30, 2000. The amount of backlog at any time may not be indicative of intermediate or long-term trends in the Company's operations. FISCAL YEAR ENDED JUNE 30, 2000 AS COMPARED TO FISCAL YEAR ENDED JUNE 30, 1999 Revenues increased approximately 22.0 percent from fiscal 1999 to fiscal 2000. This was attributed to growth in the core business. Included in fiscal 2000 revenues are Romtec results for May and June. The gross profit increased from approximately $21,112,000 in fiscal 1999 to approximately $25,728,000 in fiscal 2000, an increase of $4,616,000. However, as a percentage of revenues, gross profit declined from 50.8 percent of revenues in fiscal 1999 to 50.7 percent of revenues in fiscal 2000. The gross profit was negatively impacted by two multi-million dollar projects that included large amounts of data collection and processing that occurred during the first six months of the fiscal year. It was also negatively impacted by a significant reduction in a large contract by a client late in the fourth quarter. Operating costs increased from approximately $17,802,000 in fiscal 1999 to approximately $22,739,000 in fiscal 2000, or $4,937,000. As a percentage of revenues, operating costs increased from 42.8 percent in fiscal 1999 to 44.8 percent in fiscal 2000. The increase was attributed to additional costs associated with increasing the capacity of the Company's two centers, startup costs associated with developing new web products and services, additional marketing costs for new sales material as well as additional labor costs. Unusual costs recorded in 1999 related to the transition agreement for key executives. Income from operations decreased as a percentage of revenues from 7.2 percent to 5.9 percent in fiscal 2000, or approximately ($1,000). The decrease was primarily attributed to the increase in operating costs from year to year. Interest income decreased from fiscal 1999 to fiscal 2000 by approximately ($79,000). This is the result of the interest paid on loans used to acquire Romtec and the Company's working capital facility offset by interest earned on higher cash balances held in the United States and by Romtec. The provision for income taxes decreased due to lower income before taxes for the reasons stated above. The effective tax rate decreased from 38.6 percent in fiscal 1999 to 38.3 percent in fiscal 2000 primarily due to a higher percentage of income being earned overseas in lower tax rate jurisdictions. The Company defines backlog as the unearned portions of its existing contracts at each balance sheet date. As of June 30, 2000, backlog was approximately $19,900,000, as compared to a backlog of approximately $18,100,000 as of June 30, 1999. The $19,900,000 figure is the largest backlog figure in the Company's history. The amount of backlog at any time may not be indicative of intermediate or long-term trends in the Company's operations. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company's cash and cash equivalents decreased from approximately $6,712,000 in fiscal 2000 to approximately $2,308,000 in fiscal 2001. The Company was able to generate approximately $814,000 from operating activities and approximately $1,107,000 from investing activities, which included the sale of Romtec GfK. The Company was able to generate positive cash flows from the issuance of common stock in connection with the exercise of stock options. The Company utilized approximately $6,189,000 in cash to repay bank and other related debt incurred related to the acquisition of Romtec, approximately $1,018,000 to purchase equipment and leasehold improvements, and approximately $38,000 to purchase 16,500 shares of the Company's stock. 11 LIQUIDITY AND CAPITAL RESOURCES (CONT'D) ------------------------------- As of June 30, 2001, the Company's working capital increased $695,000 to $4,760,000 from $4,065,000 as of June 30, 2000, and the current ratio increased from 1.21 in fiscal 2000 to 1.33 in fiscal 2001. The Company has a credit agreement with Fleet/Summit Bank, located in Princeton, NJ. The credit agreement consists of two facilities with aggregate borrowing availability of up to $10 million. Facility "A" is a term loan and was designated for the acquisition of Romtec (acquired May 12, 2000), a wholly owned subsidiary of the Company, and is capped at $3,500,000. Facility "B" is a line of credit designated for working capital purposes, and is capped at the difference between $10,000,000 less the balance of Facility "A". The interest rate for the entire credit agreement is prime plus one-half percent. This credit agreement is scheduled to expire on March 31, 2005. All outstanding balances under this agreement were repaid as of June 30, 2001. In addition, the Company has a bank overdraft facility of (pound)400,000 (approximately $566,000 U.S. dollars) with Barclays Bank, its London bank. The borrowings are charged at a rate of 3 percent above the UK base Rate. At June 30, 2001 and 2000, borrowings were (pound)0 against this overdraft facility. IMPACT OF INFLATION ------------------- Inflation had no material effect on the financial performance of the Company during fiscal 2001. NEW ACCOUNTING PRONOUNCEMENTS FROM FINANCIALS --------------------------------------------- In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001 with early application allowed at the beginning of fiscal years beginning after March 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with these Statements. Other intangible assets will continue to be amortized over their useful lives. The Company will implement early adoption of the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of fiscal 2002. Application of the non-amortization provisions of the Statement is expected to result in an increase in operating income of approximately $337,000 per year. During the first quarter of 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of July 1, 2001, and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. In June 1998, the FASB issued SFAS No. 133 ("Statement 133"), Accounting for Derivative Instruments and Hedging Activities. This Statement requires that all derivatives be recorded in the balance sheet as either an asset or liability measured at its fair value and that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company will be required to adopt Statement 133, as amended by Statement No. 137, which deferred the effective date to January 1, 2001. The provisions of this statement shall not be applied retroactively to financial statements of prior periods. The Company will adopt Statement 133 as of July 1, 2001. The Company believes that there will be no impact to the Company's results of operations, financial position or cash flows upon the adoption of Statement 133. ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKETING RISK The Company has two foreign operating subsidiaries whose financial statements are translated using the accounting policies described in Note 1 of the Notes to the Consolidated Financial Statements. The Company is subject to exposure from the risk of currency fluctuations as the value of the foreign 12 currency fluctuates against the dollar. The Company does not believe that it is exposed to material foreign exchange market risk. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and notes thereto are presented under Item 14 of this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 13 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. IDENTIFICATION OF DIRECTORS Albert Angrisani, age 52. Mr. Angrisani has been a Director of the Company since 1994 and has been President and Chief Executive Officer since July 1998. Prior to July 1998, Mr. Angrisani was a consultant to the Company. From January 1993 to April 1998, Mr. Angrisani was the President of the Princeton-Potomac Management Company, a consulting and financial services firm. David Brodsky, age 64. Mr. Brodsky has been a Director of the Company since 1998 and has been Chairman of the Board of Directors of the Company since July 1998. He has been a private investor during the past six years. He is directly involved in the Company's e-Commerce business initiatives. See the section on "Certain Relationships and Related Transactions". John P. Freeman, age 42. Mr. Freeman has been a Director of the Company since 1999. Mr. Freeman is Senior Vice President, Capital Markets and a founder of Emerging Growth Equities, Ltd., an investment banking and institutional research brokerage firm. Mr. Freeman also is the founder and President and CEO of Covenant Partners, a hedge fund focused on investing in the direct marketing industry. From November 1992 to May 1996, Mr. Freeman was the Director of Investor Relations and Strategic Planning and Development for DiMark, Inc. Prior to his employment at DiMark, he was the Director of Investor Relations for ADVANTA, a direct marketer of consumer financial services products, from 1990 to 1992. George Lindemann, age 65. Mr. Lindemann has been a Director of the Company since 1998. Mr. Lindemann has been Chairman and Chief Executive Officer of Southern Union Company since February 1990. He is also Chairman & Chief Executive Officer of Activated Communications, Inc. He was the founder, Chairman and Chief Executive Officer of Metro Mobile CTS, Inc. from 1982 to 1992 when it merged with Bell Atlantic Corporation. During the same period, he was President and Chief Executive Officer of Metro Mobile Communications, Inc. Howard L. Shecter, age 58. Mr. Shecter has been a Director of the Company since 1998. Mr. Shecter is a senior partner with the law firm of Morgan, Lewis & Bockius LLP and has been with such firm since 1968. Mr. Shecter served as a managing partner of Morgan, Lewis, & Bockius LLP from 1979 to 1983 and was the Chairman of the Executive Committee of that firm in 1985. Mr. Shecter is also a director of Ashbridge Corporation, Ashbridge Investment Management and Heintz Investment Company. He is directly involved in the Company's corporate development initiatives. See the section on "Certain Relationships and Related Transactions". J. Edward Shrawder, age 60. Mr. Shrawder has been a Director of the Company since 1993. Mr. Shrawder has been the Chief Financial Officer of Kent Research, a marketing research firm located in Illinois, since 1993. From 1987 to 1990, he was President of Elrick & Lavidge, a major marketing research firm. Lorin Zissman, age 71. Mr. Zissman has been a Director of the Company since 1975. Mr. Zissman, founder of the Company, become Chairman Emeritus of the Board of Directors in April 1998. Mr. Zissman served as Chairman of the Board of Directors and Chief Executive Officer of the Company from its founding in 1975 to April 1998. DIRECTOR COMPENSATION Directors who are employees of the Company do not receive compensation for serving on the Board of Directors. Non-employee directors are reimbursed for their out-of-pocket expenses incurred in connection with attending Board meetings. Non-employee directors elected to the Board prior to September 23, 1998 received 10,000 stock options upon joining the Board of Directors. Since September 23, 1998, 14 non-employee directors joining the Board receive 50,000 stock options. In addition, at the end of each year of service on the Board of Directors, each director receives 10,000 stock options. See also "Certain Relationships and Related Transactions - Agreements with Other Employee Directors." IDENTIFICATION OF EXECUTIVE OFFICERS The following table provides certain information as of August 1, 2001, about each of the Company's executive officers. Name Position(s) with Company ---- ------------------------ Albert Angrisani President, Chief Executive Officer and Director Harry McCord Executive Vice President, Managing Director Global Life Sciences & Brand Gareth Davies Managing Director, Total Research Europe Division Theresa Flanagan President, Customer Loyalty Jane B. Giles Corporate Secretary William Guerin Vice President, Business Development Patti Hoffman Chief Administrative Officer Matthew Kirby Chief Financial Officer Chris Kuever Chief Technology Officer Russell V. Nathan Chairman, Total Research Europe Division Mark Nissenfeld, Ph.D. Executive Vice President The business experience, principal occupation, employment and certain other information concerning each of the Company's executive officers is set forth below. Albert Angrisani, age 52, has been the Company's President and Chief Executive Officer since July 1998. Prior to July 1998, Mr. Angrisani was a consultant to the Company. From January 1993 to April 1998, Mr. Angrisani was the President of the Princeton-Potomac Management Company, a consulting and financial services firm. Gareth Davies, age 44, assumed the position of Managing Director, Total Research Europe division in June 1998. In 1989 he joined Business Marketing Services as a Financial Controller and had been its Financial Director prior to its purchase by Total Research Corporation in 1994. Theresa Flanagan, age 40, became President of the Customer Loyalty Management division of the Company in July 1996. Ms. Flanagan joined the Company in 1983 and served as Senior Vice President from June 1993 to July 1996. Jane B. Giles, age 55, has been Corporate Secretary since July 1, 1999. She joined the Company in April 1997 as Human Resources Manager. Prior to joining the Company she was employed by Mobil Oil Corporation for 20 years as a Human Resources Specialist. William Guerin, age 42, joined the Company in July 1999 as Vice President of Business Development. Prior to opening his own consulting firm in August 1998, he served as Manager of Sales Performance for Pennsylvania Power and Light Company, Inc. from 1996 to 1998. Patti Hoffman, age 52, assumed the position of Chief Administrative Officer effective as of July 1, 1999. From June 1996 to June 1999, she had been President of the U .S. Regional Offices division of the 15 Company. Ms. Hoffman joined the Company in February 1995 as Vice President-Human Resources. Prior to that time, Ms. Hoffman was an independent human resources consultant. Matthew Kirby, age 44, has been Chief Financial Officer since July 2000. He joined the Company in April 2000 as Acting Chief Financial Officer, Acting Chief Accounting Officer and Acting Treasurer. Prior to joining the Company he had been with United News and Media, plc as Executive Vice President, Chief Financial Officer from 1989 to 2000. From 1984 to 1989 he had been Director of Accounting with USA Network and from 1981 to 1984 he was International Accountant for AFS International/Intercultural Programs, Inc. Chris Kuever, age 45, became Chief of Global Operations in April 2001. From January 1999 to April 2001 he was Senior Vice President and Director of Global Operations. He joined the Company in March 1989 and most recently was Vice President and Director of Data Processing. Harry McCord, age 50, joined the Company on July 23, 2001 as Executive Vice President, Managing Director. Prior to joining the Company he had been Vice President/Officer of ORC International from 2000 to present. From 1998 to 1999 Mr. McCord had been Senior Vice President/Director of Ziment Associates. Russell V. Nathan, age 62, was founder, chairman and managing director of Romtec Plc, which went public in an initial public offering on the London Stock Exchange in April 1996. Since the acquisition of Romtec Plc by the Company on May 12, 2000, Mr. Nathan has served as Chairman of Total Research Europe division. In 1997, Mr. Nathan was awarded a Commander of the British Empire in Queen's Birthday Honours. Mr. Nathan is past chairman of the British Market Research Association, Thames Valley Enterprise, Thames Valley Business Link and Thames Valley Economic Partnership. Currently he is a Vice-President of the Marketing Council and a Director of the South East England Development Agency. Mark Nissenfeld, Ph.D., age 44, became Executive Vice President and Director of Pricing and Project Management Financial Controls in July 2000. From July 1996 to July 2000, he was President of the Global Life Sciences division of the Company. Dr. Nissenfeld joined the Company in June 1993 as Research Director of the Company and Managing Director of the Life Sciences division. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers and persons who beneficially own more than ten percent of the Company's Common Stock to report their ownership of and transactions in the Company's Common Stock to the Securities and Exchange Commission and the Nasdaq National Market. Copies of these reports are also required to be supplied to the Company. The Company believes, based solely on a review of the copies of such reports received by the Company, that during year end June 30, 2001 all Section 16(a) reporting requirements applicable to its directors, executive officers, and 10% shareholders were complied with except as follows: Matthew Kirby inadvertently filed late the initial Form 3 to disclose his holdings of the Company's common stock at the time he was appointed Chief Financial Officer; Russell V. Nathan inadvertently filed late the Form 4 to disclose his stock option grant on November 9, 2000 for 100,000 shares. 16 ITEM 11. EXECUTIVE COMPENSATION. SUMMARY COMPENSATION TABLE The following table sets forth compensation earned, whether paid or deferred, by each Named Executive Officer for services rendered in all capacities to the Company during the fiscal years ended June 30, 2001, 2000 and 1999.

STOCK OPTIONS The following table contains information concerning the grant of stock options under the Company's 1995 Stock Incentive Plan to the Named Executive Officers during the 2001 fiscal year: 17 OPTION GRANTS IN LAST FISCAL YEAR

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND VALUE OF OPTIONS AT FISCAL YEAR END

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee consisted of Albert Angrisani, David Brodsky, John P. Freeman, George Lindemann and Howard L. Shecter. Mr. Angrisani, in addition to being a director, is also President and Chief Executive Officer of the Company. No executive officer of the Company served on the compensation committee of another entity or on any other committee of the board of directors of another entity performing similar functions during the last fiscal year, with the exception of J. Edward Shrawder, a director of California Investment Management and Howard Shecter, director of Heintz Investment Company, Ashbridge Corporation and Ashbridge Investment Management.. COMPENSATION OF THE CHIEF EXECUTIVE OFFICER The compensation package of Mr. Angrisani, the Company's President and Chief Executive Officer, consists primarily of base salary and bonus components. The levels of base salary and bonus, as well as the factors considered in determining such levels, are established by Mr. Angrisani's Employment Agreement and the Compensation Committee of the Company's Board of Directors. In fiscal 2001, Mr. Angrisani earned a base salary of $325,000. In addition, pursuant to his employment agreement, Mr. Angrisani receives certain other customary perquisites and benefits. As of August 1, 2001, Mr. Angrisani beneficially owned 430,000 incentive stock options which were granted to Mr. Angrisani on April 6, 1999, which are subject to a 10-year vesting schedule (although the options will become fully vested and exercisable upon the consummation of the proposed merger with Harris). Mr. Angrisani's ability to sell the shares acquired through the exercise of these stock options is contingent upon meeting designated performance goals. 18 STOCK PERFORMANCE GRAPH The following graph depicts the cumulative total return on the Company's Common Stock compared to the cumulative total return for the Nasdaq Composite Index and the Nasdaq Industrial Index. The graph assumes an investment of $100 on June 30, 1996. Reinvestment of dividends is assumed in all cases. [insert graph] The comparisons on the graph above are required by the Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance of the Company's Common Stock. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth information, as of August 1, 2001, concerning the common stock of the Company beneficially owned by (i) each director and nominee of the Company, (ii) the Company's Chief Executive Officer and its other four most highly compensated Executive Officers during the fiscal year ended June 30, 2001 (collectively, the "Named Executive Officers"), (iii) all executive officers and directors as a group, and (iv) each stockholder known by the Company to be the beneficial owner of more than 5% of the outstanding common stock.

(1) Includes 126,315 shares subject to options exercisable within 60 days and 28,225 performance bonus shares. (2) Includes 256,282 shares subject to options exercisable within 60 days. (3) Includes 188,500 shares subject to options exercisable within 60 days and 10,000 shares owned jointly with her spouse. (4) Includes 22,500 shares subject to options exercisable within 60 days - includes 200,000 shares owned by a limited partnership over which he has investment power as the General Manager. (5) Includes 66,000 shares subject to options exercisable within 60 days. (6) Includes 115,000 shares subject to options exercisable within 60 days. 20 (7) Includes 226,315 shares subject to options exercisable within 60 days and 20,000 shares owned jointly with his spouse. (8) Includes 44,999 shares subject to options exercisable within 60 days. (9) Includes an aggregate of 1,143,311 shares subject to options exercisable within 60 days. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS EMPLOYMENT AGREEMENTS The Company has an employment agreement with Albert Angrisani dated as of July 3, 2000, pursuant to which Mr. Angrisani will serve as President and Chief Executive Officer of the Company for an extended term ending June 30, 2002, at an annual salary of $325,000, subject to an upward adjustment by the Executive Committee of the Board of Directors in fiscal years 2001 and 2002. Mr. Angrisani is also entitled to receive a bonus of up to $175,000 per annum based upon the Company's financial performance. If Mr. Angrisani's employment is terminated by the Company for any reason other than Cause (as defined in the employment agreement) or disability or following a Change in Control (as defined in the employment agreement) for any reason other than Cause, or Mr. Angrisani terminates his employment for Good Reason (as defined in the employment agreement), then the Company is obligated to pay him a lump sum cash severance payment of $1,000,000 and to continue providing all employee benefits to Mr. Angrisani and his family for the remainder of the Term (as defined in the employment agreement) and all options held by Mr. Angrisani would vest immediately. In addition, in the event of a Change in Control, Mr. Angrisani will receive a $250,000 bonus, and if he remains employed for one year following the Change in Control, he will receive another $250,000 bonus and the benefits listed in the previous sentence. Mr. Angrisani has agreed not to engage in a Competing Business (as defined in the employment agreement) during the Term and for a period of one year thereafter, subject to certain exceptions. Mr. Angrisani's employment agreement provides for three non-collateralized annual loans of $100,000 each from the Company. The entire principal and interest on such loans is due on June 30, 2002, provided that the entire amount may be forgiven under certain circumstances described in Mr. Angrisani's employment agreement. Mr. Angrisani's employment agreement provides for a loan of $500,000 to be used by Mr. Angrisani to exercise all or a portion of his non-qualified Option Shares. Interest will be at the minimum applicable federal rate for IRS purposes. Such loans shall be secured by Mr. Angrisani's pledge of sufficient number of Company shares so that the market value of the pledged shares as of the date of loan is at least equal to 125% of the principal amount thereof. The payment term of the loans will be as follows. The entire principal and interest due under the loans will be due on the earlier of (i) June 30, 2002 or (ii) the date Mr. Angrisani's employment with the Company is terminated. This provision shall survive termination of Mr. Angrisani's employment.. The Company has entered into an employment agreement with each of Theresa Flanagan, Patti Hoffman, Matthew Kirby, and Mark Nissenfeld, dated as of January 2, 1997, January 1, 1999, July 3, 2000 and January 1, 1999, respectively, pursuant to which each serves as an executive officer of the Company for the following periods: Theresa Flanagan for the term ending June 30, 2003, Patti Hoffman for the term ending December 31, 2001, Matthew Kirby for the term ending June 30, 2002 and Mark Nissenfeld for the term ending September 30, 2001. Each of such executive officers is entitled to participate in all benefit plans and performance bonuses offered by the Company. Each such executive officer has agreed not to solicit any of the Company's clients or employees for a period of one year following the termination of his or her respective employment agreement. AGREEMENTS WITH OTHER EMPLOYEE DIRECTORS The Company has employment agreements with certain of its executive officers. In addition, Messrs. Brodsky and Shecter have employment agreements for the period of July 2001 through June 30, 2002, for $75,000 each, to compensate them for their active participation in specific aspects of the Company's business. Messrs. Brodsky's and Shecter's employment agreements are subject to adjustment by the Compensation Committee of the Board of Directors in fiscal year 2002, based on changes in corporate goals and objectives. 21 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS OF FORM 8K

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable or the required information is given in the Financial Statements or Notes thereto, and therefore have been omitted. (b) Reports on Form 8-K None. (c) Exhibits The following documents are filed as part of this Form 10-K at the page indicated or are incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the filing with the Commission which included such document. Exhibit No. Description ----------- ----------- 2.1 Certificate of Merger dated February 17, 1987 (incorporated herein by reference by the 1999 Form 10-K); 2.2 Offer Letter, dated as of April 20, 2000 (incorporated herein by reference to Exhibit 2.1 to the Form 8-K); 2.3 Deed of Irrevocable Undertaking, dated as of April 13, 2000, by Russell Nathan (incorporated herein by reference to Exhibit 2.2 to the Form 8-K); 22 Exhibit No. Description ----------- ----------- (cont'd) 2.4 Deed of Warranties, dated as of April 13, 2000, by Russell Nathan (as Warrantor), Total Research Acquisitions Limited and the Company (incorporated herein by reference to Exhibit 2.3 to the Form 8-K); 2.5 Agreement and Plan of Merger by and among Harris Interactive Inc., Total Merger Sub Inc. and the Company, dated as of August 5, 2001 (incorporated herein by reference to Exhibit 2.1 to the Form 8-K filed on August 14, 2001); 3.1 Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Registration Statement on Form S-18, as amended, Registration No. 33-9078-NY; the "Form S-18"); 3.2 By-laws of the Company (incorporated herein by reference to Exhibit 3.2 to the Form S-18); 10.1 Lease, dated as of December 12, 1985, between the Company and Bellemeade Development Corporation (incorporated herein by reference to Exhibit 10.2 to the Form S-18); 10.2 Total Research Corporation Savings & Retirement Plan (incorporated herein by reference to Exhibit 10.3 to the Form S-18); 10.3 Employment Agreement, dated as of January 2, 1997, by and between the Company and Terri Flanagan (incorporated herein by reference to Exhibit 1 of the 1997 Form 10-K); 10.4 Sublease, dated July 17, 1997, between the Company and Hexaware Technologies (incorporated herein by reference by the 1999 Form 10-K); 10.5 Employment Agreement, dated as of July 3, 2000, by and between the Company and Albert Angrisani; 10.6 Employment Agreement, dated as of January 1, 1999, by and between the Company and Patti Hoffman (incorporated herein by reference by the 1999 Form 10-K); 10.7 Employment Agreement, dated as of January 1, 1999, by and between the Company and Eric Zissman (incorporated herein by reference by the 1999 Form 10-K); 10.8 Employment Agreement, dated as of January 1, 1999, by and between the Company and Mark Nissenfeld (incorporated herein by reference by the 1999 Form 10-K); 10.9 Loan Agreement, dated January 1, 1999, between Fleet/Summit Bank and the Company (incorporated herein by reference by the 1999 Form 10-K); 10.10 1995 Stock Incentive Plan (incorporated herein by reference by the Form S-8, Registration No. 333-74635); 10.11 1986 Stock Incentive Plan (incorporated herein by reference by the Form S-8, Registration No. 333-74631); 10.12 Employment Agreement, dated as of July 1, 2000, by and between the Company and Howard L. Shecter; 23 Exhibit No. Description ----------- ----------- (cont'd) 10.13 Employment Agreement, dated as of July 1, 2000, by and between the Company and David Brodsky; 10.14 Employment Agreement, dated as of July 1, 2001, by and between the Company and Charles J. Cunningham; 10.15 Employment Agreement, dated as of July 3, 2000, by and between the Company and Matthew Kirby; 10.16 Employment Agreement, dated as of January 1, 2001, by and between the Company and Chris Kuever; 21.1 List of Subsidiaries; 23.1 Consent of Ernst & Young LLP. dated August 29, 2001. 24 SIGNATURES In accordance with Section 13 or 15 (d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 30, 2001 TOTAL RESEARCH CORPORATION By:/s/Albert Angrisani --------------------------------- Albert Angrisani, Chief Executive Officer In accordance with Section 13 or 15 (d) of the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. TOTAL RESEARCH CORPORATION Dated: August 30, 2001 By:/s/David Brodsky --------------------------------- DAVID BRODSKY, Chairman of the Board of Directors Dated: August 30, 2001 By:/s/Albert Angrisani --------------------------------- ALBERT ANGRISANI, Chief Executive Officer (principal executive officer), Director Dated: August 30, 2001 By:/s/Matthew Kirby --------------------------------- MATTHEW KIRBY, Acting Chief Financial Officer and Acting Chief Accounting Officer Dated: August 30, 2001 By:/s/Howard Shecter --------------------------------- HOWARD SHECTER, Director Dated: August 30, 2001 By:/s/George Lindemann --------------------------------- GEORGE LINDEMANN, Director Dated: August 30, 2001 By:/s/Jack Freeman --------------------------------- JACK FREEMAN, Director Dated: August 30, 2001 By:/s/J. Edward Shrawder --------------------------------- J. EDWARD SHRAWDER, Director Dated: August 30, 2001 By:/s/Lorin Zissman --------------------------------- LORIN ZISSMAN, Director 25 TOTAL RESEARCH CORPORATION AND SUBSIDIARIES For the Years Ended June 30, 2001, 2000 and 1999 Reports of Independent Auditors F-1 Consolidated Balance Sheets as of June 30, 2001 and 2000 F-2 Consolidated Statements of Income for the Years Ended June 30, 2001, 2000 and 1999 F-3 Consolidated Statements of Stockholders' Equity for the Years Ended June 30, 2001, 2000 and 1999 F-4 Consolidated Statements of Cash Flows for the Years Ended June 30, 2001, 2000 and 1999 F-5 Notes to the Consolidated Financial Statements F-6 Schedules: Schedule II - Valuation and Qualifying Accounts S-1 26 REPORT OF INDEPENDENT AUDITOR To the Board of Directors and Stockholders of Total Research Corporation and Subsidiaries We have audited the accompanying consolidated balance sheets of Total Research Corporation and Subsidiaries as of June 30, 2001 and 2000, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended June 30, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Total Research Corporation and Subsidiaries as of June 30, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ERNST & YOUNG, LLP MetroPark, New Jersey August 17, 2001 F-1

F-2

F-3

F-4

F-5 NOTE 1 -THE COMPANY ----------- The Company performs marketing research and marketing services for various Fortune 100 companies in a broad spectrum of industries. No single customer accounted for more than 10 percent of the Company's revenues and 10 percent of accounts receivable in the year ended June 30, 1999. For the year ended June 30, 2000, one customer accounted for 21 percent of total revenues of the Company. For the year ended June 30, 2001, two customers each accounted for 11 percent of revenues and one accounted for 11 percent of accounts receivable. The Company services these clients through its United States locations in Princeton, New Jersey; Minneapolis, Minnesota; Tampa, Florida; and its overseas locations in London, England. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ REVENUE RECOGNITION ------------------- The Company employs the percentage of completion method of accounting to report its revenues on its single-client studies, while on multi-client studies it recognizes revenues when the results are delivered to its clients. Clients are generally billed in accordance with the terms of the applicable contracts, which are not necessarily indicative of the stage of completion of the project. For single-client studies, the stage of completion and earned revenues are determined for each project for the applicable period. The amount by which the work completed exceeds billings to clients is carried as a current asset on the Company's balance sheet and is shown as "costs and estimated earnings in excess of billings on uncompleted contracts". Where billings exceed work completed, the amounts are carried on the Company's balance sheet as a current liability and are shown as "billings in excess of costs and estimated earnings." PRINCIPLES OF CONSOLIDATION --------------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of inter-company accounts and transactions. USE OF ESTIMATES ---------------- The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and 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. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS ------------------------- For the purpose of the statement of cash flows, cash equivalents include certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. FIXED ASSETS ------------ Fixed assets are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets: three years for software development and five to ten years for office equipment and fixtures. Leasehold improvements are amortized over the shorter of the economic lives or the underlying lease term. F-6 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) ------------------------------------------ DEFERRED RENT ------------- The excess of lease payments on a straight-line basis over the actual monthly payments is recorded as deferred rent, which will reverse in future periods. Included in other long-term assets is deferred rent of approximately $53,300 and $9,550, at June 30, 2001 and 2000. Included in other long-term liabilities is deferred rent of approximately $46,016 and $25,500, at June 30, 2001 and 2000, respectively. GOODWILL -------- Goodwill has been recorded in relation to the excess of the purchase price over the fair values of the identified assets acquired. The Company amortizes goodwill over periods ranging from 20 to 25 years. The carrying value of goodwill is evaluated periodically in relation to the operating performance and future undiscounted net cash flows of the underlying business. Impairment adjustments will be recorded if the sum of expected future net cash flows is less than the carrying amount of the goodwill. INCOME TAXES ------------ The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. The provision for income taxes includes Federal, foreign, state and local income taxes. The unremitted earnings of the Company's foreign subsidiaries are considered to be permanently reinvested and are not expected to be remitted to the parent company. Calculation of any possible future tax liabilities is not practical. IMPAIRMENT OF LONG-LIVED ASSETS ------------------------------- The Company records impairment losses on long-lived assets used in operations or expected to be disposed when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. As of June 30, 2001, no impairments have occurred. STOCK-BASED COMPENSATION ------------------------ As permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation, the Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for its employee option plans. Under APB 25, no compensation expense is recognized at the time of option grant if the exercise price of the Company's employee stock option equals or exceeds the fair market value of the underlying common stock on the date of grant. EARNINGS PER SHARE ------------------ Basic and diluted earnings per share are calculated in accordance with Financial Accounting Standards Board Statement No. 128, "Earnings Per Share". The difference between basic weighted average shares outstanding and diluted weighted average shares outstanding of 303,509, 1,244,307 and 1,107,413 for each of the years ended June 30, 2001, June 30, 2000 and June 30, 1999, respectively, relates entirely to employee stock options. FOREIGN CURRENCY TRANSLATION ---------------------------- All balance sheet accounts of foreign subsidiaries, all of which are located in Europe, have been translated at exchange rates in effect at the balance sheet date. Income statement amounts have been translated at average rates of exchange in effect during the year. The gains and losses resulting from the changes in exchange rates from year to year have been recorded within other comprehensive income. F-7 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) ------------------------------------------ Comprehensive income for the years ended June 30 consisted of: 2001 2000 1999 ---- ---- ---- Net income $2,049,545 $1,916,628 $1,975,737 Translation adjustment (431,554) (92,221) (58,527) Unrealized Gain (Loss) (33,200) - - ----------------- ---------------- -------------- Comprehensive Income $1,584,791 $1,824,407 $1,917,210 ================= ================ ============== NOTE 3. ACQUISITIONS AND DISPOSITION ---------------------------- In May of 2000, the Company acquired Romtec Plc and its subsidiary ("Romtec"), a European Internet research and marketing services company. The total acquisition price consisted of cash and notes amounting to a maximum of $7.2 million. The excess of the purchase price and direct acquisition costs over the fair value of the net assets acquired was calculated as follows (approximately): Cash paid at closing $4,100,000 Notes due to Seller (See Note 6) 3,100,000 --------- Total Purchase Price $7,200,000 Fair value of net assets acquired 1,800,000 ---------- Excess purchase price 5,400,000 Direct acquisition costs 200,000 ---------- Total goodwill $5,600,000 ========== The acquisition was accounted for as a purchase, and the operations of Romtec are included in the accompanying consolidated statements of income from the purchase date. The purchase price has been allocated to the assets acquired and liabilities assumed based on their fair values as of the acquisition date. Romtec had a 51 percent interest ownership in its subsidiary, Romtec GfK. The total amount of goodwill is being amortized on a straight-line basis over 25 years. In addition, the acquisition was completed through a newly formed, wholly-owned subsidiary, Total Research Holdings Limited. On April 4, 2001, the Company acquired Teligen Limited, a UK-based market research and consultancy company for (pound)2 plus the assumption of liabilities of $930,000 which resulted in goodwill of $930,000 which is being amortized over 25 years. The acquisition was accounted for as a purchase and the results of operations have been included in the accompanying consolidated statements of income from the purchase date through June 30, 2001. On June 29, 2001, the Company sold its 51 percent interest in the Romtec GfK joint venture to GfK, a German based market research company, for $2.3 million which equaled the net book value at the transaction date, primarily consisting of $2.1 million of goodwill. The Company had acquired its 51 percent interest in connection with the Romtec acquisition described above. The following table presents the unaudited pro forma consolidated results of operations for the years ended June 30, 2001, 2000 and 1999 as if the above Romtec acquisition had occurred on July 1, 1998, as if the Teligen acquisition had occurred on July 1, 1999 and as if the Romtec GfK disposition had occurred on July 1, 2000: UNAUDITED --------- 2001 2000 1999 ---- ---- ---- Sales $53,335,000 $52,029,000 $48,563,000 Net income 1,413,000 1,587,000 2,035,000 Basic net income per share 0.11 0.13 0.18 Diluted net income per share 0.11 0.12 0.16 F-8 NOTE 3. ACQUISITIONS AND DISPOSITION (CONT'D) ---------------------------- The pro forma amounts reflect amortization of the excess of purchase price over the net assets acquired and the related tax effect. The pro forma results are not necessarily indicative of the results of operations that would have occurred had the acquisition taken place at the beginning of the periods presented nor are they intended to be indicative of results that may occur in the future. NOTE 4 - CONCENTRATION OF CASH BALANCE ----------------------------- At June 30, 2001, a cash balance of $1,989,092 is maintained in a bank account insured by the Federal Deposit Insurance Corporation (FDIC). This balance exceeds the insured amount of $100,000. NOTE 5 - FIXED ASSETS ------------ June 30, 2001 2000 -------------- ------------- Office equipment and fixtures $ 8,072,359 $ 7,983,218 Software development 1,400,144 894,111 Leasehold improvements 927,631 956,935 -------------- ------------- 10,400,134 9,834,264 Less: accumulated depreciation and amortization of fixed assets. 6,565,524 5,575,904 -------------- ------------- $ 3,834,610 $ 4,258,360 ============== ============= Depreciation expense for the years ended June 30, 2001, 2000 and 1999 was approximately $1,338,000, $860,000 and $776,000, respectively. Amortization expense for the years ended June 30, 2001, 2000 and 1999 was approximately $423,000, $346,000 and $343,000, respectively. NOTE 6 - DEBT ---- Long-term debt consists of the following: June 30, 2001 2000 ---- ---- Summit Bank credit agreement Facility "A" $ 3,383,334 Facility "B" 700,000 Bank overdraft facility - Note payable - Romtec acquisition $ 949,953 3,057,477 -------------------- ----------------------- 7,140,811 Less current portion 949,953 3,438,318 -------------------- ----------------------- Long-term portion of debt $ - $ 3,702,493 ==================== ======================= The Company has a credit agreement with Fleet/Summit Bank, located in Princeton, NJ. The credit agreement consists of two facilities with aggregate borrowing availability of up to $10 million. Facility "A" is a term loan and was designated for the acquisition of Romtec (acquired May 12, 2000), a wholly owned subsidiary of the Company, and is capped at $3,500,000. Borrowings under Facility "A" were $ 0 and $3,383,334 at June 30, 2001 and 2000. Facility "B" is a line of credit and is designated for working capital purposes, and is capped at the difference between $10 million less the balance of Facility F-9 NOTE 6 - DEBT (CONT'D) ---- "A". Borrowings under Facility "B" were $0 and $700,000 at June 30, 2001 and 2000. The interest rate for the entire credit agreement is prime plus one-half percent As of June 30, 2001, the Company was in compliance with all financial covenants. In addition, the Company has a bank overdraft facility of (pound)400,000 (approximately $566,000 U.S. dollars) with Barclays Bank, its London bank. The borrowings are charged at a rate of 3 percent above the UK base Rate. At June 30, 2001 and 2000, borrowings were (pound)0 against this overdraft facility. In connection with the acquisition of Romtec as described in Note 3, the Company had a note payable to the Seller in the total amount of $3,057,477. Of this amount, $2,038,318 was a guaranteed payment which was made on the first anniversary of the acquisition. The remaining amount of $949,953 is to be made on the second anniversary of the acquisition and may be adjusted should Romtec fall short of specified operating targets. The Company believes such operating targets will be met. NOTE 7 - COMMITMENTS AND CONTINGENCIES ----------------------------- OPERATING LEASES ---------------- The Company is committed under various leases for office space. In addition, the Company subleases a portion of its office premises. Approximate future minimum rental payments and sublease rentals under non-cancelable leases are as follows: For the Years Ending June 30, -------- Rental Sublease Payments Rentals Net -------- ------- --- 2002 $ 1,885,661 $199,179 $ 1,686,482 2003 1,879,932 209,264 1,670,668 2004 1,872,174 - 1,872,174 2005 1,493,049 - 1,493,049 2006 1,167,803 - 1,167,803 Thereafter 1,090,591 - 1,090,591 -------------- ------------- -------------- Total minimum Payments required $ 9,389,210 $ 408,443 $ 8,980,767 ============== ============= ============== In addition to the above minimum rentals, the leases are subject to escalation clauses covering increases in real estate taxes and operating costs over the base year. The leases provide for renewal options for periods from two to ten years. Net rental expense charged to operations was approximately $2,074,000, $1,732,000 and $1,178,000 for the fiscal years ended June 30, 2001, 2000 and 1999, respectively. EMPLOYMENT AGREEMENTS --------------------- The Company has entered into employment agreements with key management personnel. These agreements expire at different times through June 30, 2002. They contain provisions for future base salaries through this date that total $1,416,000. There is also a bonus arrangement for up to 20 percent of the base salary if individual goals are met. In addition, key management will be eligible for an excess bonus if such goals are exceeded. F-10 NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONT'D) ----------------------------- On July 3, 2000, the Company entered into an employment agreement with an officer of the Company, providing, among other things, for the employment by the Company of the officer for a term of two years, effective immediately. Included in other assets as of June 30, 2001 is a non-collateralized loan receivable, with interest at the IRS rate of 8 percent, from this officer amounting to $300,000, which is due June 30, 2002. Additionally, in accordance with this employment agreement, in April 2001, the officer borrowed $500,000. Such loan was used in connection with the exercise of options and the officer has provided shares which are held by the Company, equal to 125 percent of the loan value as collateral for the loan. Accordingly, such loan has been reflected as a contra-equity account in stockholders' equity on the balance sheet at June 30, 2001. In fiscal 1999 the Company entered into transition agreements with two former employees and directors of the Company. The agreements ended on June 30, 2001 and provide for total compensation of $320,000 and is included in the income statement as an unusual cost. NOTE 8 - INCOME TAXES ------------ Deferred tax attributes resulting from differences between financial accounting amounts and tax basis of assets and liabilities at June 30 are as follows: Current assets and (liabilities) 2001 2000 ---- ---- Allowance for doubtful accounts $ 19,871 $ 38,351 Accrued vacation 170,179 190,931 Accrued expenses 32,626 32,626 Other (2,765) (10,948) ------------------------------- Total current deferred tax asset $219,911 $250,960 =============================== Non-current assets and (liabilities) Depreciation $(136,709) $(253,302) Deferred rental obligation 2,889 (6,339) Capitalized market research products - 64,917 Transition agreement - 129,044 Other 13,393 13,284 ------------------------------- Total non-current deferred tax asset (liability) $(120,427) $ (52,396) =============================== The Company has a history of operating earnings. Although recognition is not assured, management has determined that the future operating income of the Company will more likely than not be sufficient to recognize fully these net deferred tax assets. As a result, no valuation allowance has been provided for either year. The sources of income before income taxes for the year ended June 30 is as follows: 2001 2000 1999 ---- ---- ---- United States $ 1,620,757 $2,398,620 $ 2,422,613 United Kingdom 1,635,283 707,444 797,944 ------------------------------------------- Total $ 3,256,040 $3,106,064 $ 3,220,557 ============================================= F-11 NOTE 8 - INCOME TAXES (CONT`D) --------------------- The components of the provision for income taxes for the years ended June 30 are as follows: Current expense 2001 2000 1999 ---- ---- ---- Federal $ 365,317 $ 469,762 $ 866,768 State 133,178 135,427 138,095 Foreign 608,920 188,811 229,886 ---------------------------------------------- 1,107,415 794,000 1,234,749 Deferred expense (benefit) Federal 88,935 310,424 10,071 State 24,926 71,264 - Foreign (14,781) 13,748 - ---------------------------------------------- $1,206,495 $1,189,436 $1,244,820 ============================================== Reconciliation of the tax provision computed at the U.S. statutory tax rate to the income tax provided for the years ended June 30 is as follows: 2001 2000 1999 ---- ---- ---- Computed provision at the statutory rate $1,107,054 $1,056,052 $1,055,508 International rate differences (58,033) (25,528) 12,707 State income tax, net 104,349 136,416 136,638 Other 53,125 22,496 39,967 ------------------------------------- Income tax provision $1,206,495 $1,189,426 $1,244,820 ===================================== Included in Prepaid expenses and other current assets at June 30, 2001 and 2000 are prepaid taxes of $226,000 and $1,504,000, respectively. NOTE 9 - EMPLOYEE BENEFITS AND DEFERRED COMPENSATION ------------------------------------------- The Company maintains a 401(k) Savings Plan for the benefit of all its employees. The 401(k) Savings Plan is funded through the Company's and participating employees' contributions and generally provides that employees may contribute, through payroll reductions, from 1 percent to 15 percent of their compensation. The Company has, in the past, made a matching contribution in an amount equal to 50 percent of each participating employee's elective contribution up to 6 percent of the participating employee's compensation. Company contributions charged to operating expense were approximately $355,000, $498,000 and $205,000 for fiscal years ended June 30, 2001, 2000, and 1999, respectively. F-12 NOTE 10 - ACCRUED EXPENSES ---------------- The following is a summary of the items that comprise the accrued expenses and other current liabilities at June 30: 2001 2000 ---- ---- Bonus and other payroll accruals $ 1,476,847 $ 2,050,756 Vacation accrual 581,256 480,426 Accrued project direct costs 1,851,531 1,232,784 Accrued transition agreements 129,320 324,704 Other 725,081 227,174 ----------------------------- $ 4,764,035 $ 4,315,844 ============================= NOTE 11 - STOCK OPTION PLANS ------------------ The Company has elected to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related interpretations in accounting for its employee stock options as permitted under Financial Accounting Standards Statement No. 123, "Accounting for Stock-Based Compensation," (SFAS 123) the fair value alternative method. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Under SFAS 123, the Company will provide pro forma net income and pro forma earnings per share. The Company's 1986 Stock Option Plan has authorized the grant of options to personnel for up to 1,800,000 shares of the Company's common stock. Under the Plan, options may be granted at not less than fair market value on the date of grant (85 percent of fair market value with respect to non-qualified options). Options granted under the plan become exercisable at such times as the Company elects and expire five years after the date of grant (five years and one day with respect to non-qualified options). On April 16, 1996 the Company adopted the 1995 Stock Incentive Plan and froze the 1986 Stock Option Plan. The 1995 Stock Incentive Plan authorizes the Company to issue 4,500,000 stock options (of which 500,000 shares are subject to stockholder approval) to existing and future Officers, Directors, Employees and Consultants of the Company. Incentive Stock Options or Non-Statutory Stock Options become exercisable at such times as the Company elects and may be issued for a term of no more than ten years from the date of grant, at an option price not less than 100 percent of the fair market value of the Company's common stock at the date of grant. In addition, any non-employee director shall be automatically granted an option to purchase 10,000 shares of common stock for each year that such person serves as a director. However, such options shall vest 33-1/3 percent for each twelve months of continuous service until fully vested. As of June 30, 2001, there are 65,111 options available for grant. Pro forma information regarding net income and earnings per share is required by SFAS 123 and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for all options was estimated at the date of grant using the Black-Scholes option "pricing model with the following weighted-average assumptions for June 30, 2001, 2000 and 1999, respectively: risk-free interest rates of 5.72 percent, 5.68 percent and 5.20 percent; dividend yields of 0 percent, 0 percent and 0 percent; volatility factors of the expected market price of the Company's common stock of .63 , .78 and .76; and a weighted average expected life of the option of 7 years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded F-13 NOTE 11 - STOCK OPTION PLANS (CONT'D) ------------------ options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 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 pro forma information follows: June 30, 2001 2000 1999 ---- ---- ---- Pro forma net income $1,460,046 $1,340,972 $1,640,445 Pro forma income per share Basic 0.11 0.11 0.14 Diluted 0.11 0.10 0.13 The effect of pro forma compensation expense arising from stock options was to decrease net income by $589,499, $575,656 and $335,292 for the years ended June 30, 2001, 2000 and 1999, respectively. A summary of the Company's stock option activity, and related information for the years ended June 30, follows:

F-14 NOTE 11 - Stock Option Plans (cont'd) ------------------ Following is a summary of the status of stock options outstanding at June 30, 2001:

The Company received 67,689, 4,535 and 98,949 shares of its own Common Stock with a fair market value of $232,632, $15,813 and $371,971 in connection with the exercise of certain stock options during fiscal years 2001, 2000 and 1999, respectively. F-15 NOTE 12 - GEOGRAPHIC SEGMENT INFORMATION ------------------------------ The Company identifies its segments based on the Company's geographic locations and industries in which the Company operates. The Company currently has two reportable segments: US Market Research and UK Market Research. There were no significant inter-segment events which materially affected the financial statements. The Company measures segment profits based on income before income taxes. Information on segments and reconciliation to consolidated totals for the years ended June 30 (in thousands) are as follows: Year ended June 30, 2001: US Market UK Market Total Research Research Segments -------- -------- -------- Revenues $ 32,403 $ 21,379 $ 53,782 Depreciation and amortization 1,008 753 1,761 Operating income 1,174 2,112 3,286 Interest income (expense) 446 (332) 114 Income before income taxes 1,621 1,635 3,256 Total assets 17,925 11,284 29,209 Capital expenditures 906 112 1,018 Year ended June 30, 2000: Revenues $34,523 $ 16,233 $ 50,756 Depreciation and amortization 967 239 1,206 Operating income 2,116 873 2,989 Interest income (expense) 228 (76) 152 Income before income taxes 2,344 762 3,106 Total assets 25,578 9,541 35,119 Capital expenditures 1,543 895 2,438 Year ended June 30, 1999: Revenues $28,990 $ 12,572 $ 41,562 Depreciation and amortization 902 218 1,120 Unusual charge 320 - 320 Operating income 2,148 842 2,990 Interest income (expense) 274 (44) 230 Income before income taxes 2,423 798 3,221 Total assets 14,783 6,934 21,717 Capital expenditures 414 861 1,275 F-16 NOTE 13 - STOCKHOLDERS' EQUITY -------------------- On July 1, 1998, the Company closed an agreement with a number of investors, pursuant to which, among other things, the Investors purchased an aggregate of 1,000,000 shares of the Company's Common Stock at a price of $2.25 per share, and the Company issued options, exercisable at any time within five (5) years from the issuance thereof, to purchase an aggregate of 250,000 shares of the Company's Common Stock at an exercise price of $2.25 per share. The Purchase Agreement includes a provision whereby the Investors will, on a best efforts basis, assist the Company in obtaining up to $25,000,000 in debt or equity financing for acquisitions or other projects approved by the Board of Directors of the Company. On June 30, 1999, the Company's Board of Directors authorized the Company to repurchase from time to time over the next two years in open market transactions or otherwise up to one million shares of the Company's common stock. For the years ended June 30, 2001 and 2000, the Company has repurchased 16,500 shares and 76,250 shares, at a cost of $37,994 and $285,000, respectively, which were immediately retired. On June 5, 2001, the Company's Board of Directors authorized the company to repurchase from time to time over a one-year period ending June 30, 2002 in open market transactions up to one million shares of the Company's common stock. NOTE 14 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS ---------------------------------------------- In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001 with early application allowed at the beginning of fiscal years beginning after March 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with these Statements. Other intangible assets will continue to be amortized over their useful lives. The Company will implement early adoption of the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of fiscal 2002. Application of the non-amortization provisions of the Statement is expected to result in an increase in operating income of approximately $337,000 per year. During the first quarter of 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of July 1, 2001, and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. In June 1998, the FASB issued SFAS No. 133 ("Statement 133"), Accounting for Derivative Instruments and Hedging Activities. This Statement requires that all derivatives be recorded in the balance sheet as either an asset or liability measured at its fair value and that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company will be required to adopt Statement 133, as amended by Statement No. 137, which deferred the effective date to January 1, 2001. The provisions of this statement shall not be applied retroactively to financial statements of prior periods. The Company will adopt Statement 133 as of July 1, 2001. The Company believes that there will be no impact to the Company's results of operations, financial position or cash flows upon the adoption of Statement 133. F-17 NOTE 15 - QUARTERLY RESULTS OF OPERATIONS ------------------------------- The following table presents summarized quarterly results for fiscal 2001 and 2000:

(1) Gross profit was reduced by two multi-million dollar projects that included a large amount of data collection and processing costs. NOTE 16 - INTEREST INCOME, NET -------------------- The components of interest income, net for the years ended June 30, are as follows:

NOTE 17 - SUBSEQUENT EVENT ---------------- On August 6, 2001, the Company announced the signing of a definitive merger agreement with Harris Interactive Inc. ("Harris"). The merger, which is subject to regulatory approval and approval by the stockholders of both companies, calls for Harris to exchange 1.222 shares of Harris stock for each share of the Company's. When completed, existing Harris stockholders will own approximately 67.25 percent and the Company's stockholders will own approximately 32.75 percent of the outstanding equity of the combined company. Stockholders representing approximately 53 percent of the total outstanding common stock of Harris and approximately 24 percent of the total outstanding common stock of the Company have executed voting agreements pursuant to which they have agreed to vote their shares in favor of the transactions contemplated by the merger agreement. The merger is expected to be finalized in the fourth quarter of calendar year 2001. Following the merger, the Company will become a wholly owned subsidiary of Harris and, initially, will continue to operate under its existing name in the US and Europe. Transaction charges totaling approximately $145,000 were incurred in conjunction with the merger. Through June 30, 2001, these costs are reported as unusual charges in the accompanying Consolidated Statement of Income. F-18 Schedule II - Valuation and Qualifying Accounts TOTAL RESEARCH CORPORATION AND SUBSIDIARIES Rule 12-09. Valuation and Qualifying Accounts

(1) Write offs of fully reserved bad debts. S-1 Exhibit 21.1 LIST OF COMPANY'S SUBSIDIARIES ------------------------------ 1. BlinkE Inc., a Delaware corporation 2. The Idea Farm, Inc., a Delaware corporation 3. Total Research Holdings Limited, a United Kingdom company 4. Total Research Acquisitions Limited, a United Kingdom company 5. Total Research Limited, a United Kingdom company 6. Research Europe Limited, a United Kingdom company 7. Teligen Limited, a United Kingdom company 8. Romtec Limited, a United Kingdom company Exhibit 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8 No.s 333-74635 and 333-74631) pertaining to the Total Research Corporation 1995 and 1986 Stock Incentive Plans and in the related Prospectus of our report dated August 17, 2001, with respect to the consolidated financial statements and schedule of Total Research Corporation included in the Annual Report (Form 10-K) for the year ended June 30, 2001. /s/ERNST & YOUNG LLP MetroPark, New Jersey August 29, 2001

TOTAL RESEARCH CORP 10-K