The background screening market is highly fragmented and represents a large market opportunity. According to a 2004 presentation by the National Association of Professional Background Screeners (\\\"NAPBS\\\"), the background screening market at that time was estimated to be $4.0 billion in size and to consist of more than 1,000 screening firms.

In addition to the increased demand driven by these socio-economic trends, several recent studies and reports have further supported the need for an effective employment screening program, including the NAPBS reported that approximately 40% of resumes contain material lies or omissions about education, past employment or qualifications; the U.S. Department of Labor reported that drug users are absent from work on average of five days per month due to drug use; and the Association of Certified Fraud Examiners estimates that companies lose more than $600 billion per year as a result of employee fraud.

Demand for employment screening solutions is also driven and influenced by trends in related markets. Leading HRO providers have increasingly looked to collaborate with other service providers, including background screening solution providers, to offer a comprehensive solution to potential customers without having to develop their own software applications or service offerings across all human resource (\\\"HR\\\") functional areas.

In November 2006, HRO Today magazine reported that human resource outsourcing is becoming increasingly prevalent among large and mid-sized enterprises as these companies look to reduce costs, focus on their core competencies and minimize capital investments. Additionally, Gartner estimates the worldwide HR business process outsourcing market will grow from $23.9 billion in 2005 to $33.4 billion in 2010, a 6.9% compound annual growth rate.

The Company offers criminal records searches, the core component of most employment screening programs, at the county, state and national level. The Company also offers other public and non-public records searches, such as searches of motor vehicle records, federal and state civil court records, and government lists (e.g., the Office of Foreign Asset Control Specially Designated Nationals List for use in maintaining compliance with the U.S.A. Patriot Act), as well as credit checks. The Company’s verifications services verify information provided by applicants, including prior employment, education, licenses and credentials.

Through established relationships with third-party laboratories, collection site networks, medical review officers and occupational health clinics, the Company offers a broad suite of employment related drug and health screening services. Drug and alcohol screening services include breath, urine, hair and saliva testing for pre-employment, random, post-accident, reasonable cause and return-to-duty screening. For industries that require physical health evaluations, the Company provides physicals, vision and hearing testing and lift testing.

The Company provides a suite of industry-specific screening services, which leverage its regulatory knowledge and screening capabilities and are often tailored to help customers meet the compliance requirements of regulated industries. The Company’s industry-specific programs include screening services for the transportation, healthcare, pharmaceutical and financial services industries.

The Company offers screening services throughout the United States and around the world. In 2006, the Company performed screening services in approximately 200 countries and territories worldwide, primarily for U.S.-based, multinational customers. The Company provides these services through a combination of internal resources and an established network of third-party providers.

Cost of service revenue increased $2.7 million, or 16.1%, to $19.6 million for the nine months ended September 30, 2006 as compared to $16.9 million in the corresponding period of the prior year.

Research and development expense increased $0.4 million, or 15.5%, to $2.7 million for the nine months ended September 30, 2006 as compared to $2.3 million in the corresponding period of the prior year.

Sales and marketing expense increased $1.3 million, or 26.7%, to $6.1 million for the nine months ended September 30, 2006 as compared to $4.8 million in the corresponding period of the prior year.

General and administrative expense increased $1.3 million, or 29.1%, to $5.8 million for the nine months ended September 30, 2006 as compared to $4.5 million in the corresponding period of the prior year.