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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q/A
Amendment No. 1

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|(Mark One)                                    |                                                                                         
|--------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                             | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|For the quarterly period ended March 31, 2002
|OR                                           
|o                                             | 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 0-26149

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US SEARCH.COM INC.(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of
incorporation or organization)                                   |  | 95-4504143(I.R.S. Employer
Identification Number)
|-------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------
|5401 Beethoven Street, Los Angeles, CA 90066(Address of principal executive offices, including zip code)
|(310) 302-6300(Registrant's telephone number, including area code)                                      

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) Yes /x/ No / /, and (2) has been subject to
such filing requirements for the past 90 days.    Yes ý    No o

There
were 27,343,222 shares of outstanding Common Stock of the registrant as of May 28, 2002.

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US SEARCH.COM INC.
Form 10-Q for the quarterly period ended March 31, 2002
INDEX

|Part I.           |  | FINANCIAL INFORMATION
|----------------- |  | ---------------------
|                  |  | Item 1.              
|                  |  |                      
|                  |  |                      
|                  |  |                      
|                  |  |                      
|                  |  | Item 2.              
|                  |  | Item 3.              
|Part II.          |  | OTHER INFORMATION    
|                  |  | Item 1.              
|                  |  | Item 2.              
|                  |  | Item 3.              
|                  |  | Item 4.              
|                  |  | Item 5               
|                  |  | Item 6.              
|SIGNATURES        |  |                      
|INDEX TO EXHIBITS

2

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PART I. FINANCIAL INFORMATION



US SEARCH.com Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)

|                                                                                                                                                                                                                |                                                        | Three Months
Ended
March 31, 2002 |            | Three Months
Ended
March 31, 2001 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | --------------------------------- | ---------- | --------------------------------- | -
|Net revenue                                                                                                                                                                                                     |                                                        | $                                 | 6,663,000  |                                   | $
|Cost of services                                                                                                                                                                                                |                                                        |                                   | 1,988,000  |                                   |  
|                                                                                                                                                                                                                |                                                        |                                   |            |                                   |  
|                                                                                                                                                                                                                | Gross profit                                           |                                   |            | 4,675,000                         |  
|                                                                                                                                                                                                                |                                                        |                                   |            |                                   |  
|Operating expenses:                                                                                                                                                                                             |                                                        |                                   |            |                                   |  
|                                                                                                                                                                                                                | Selling and marketing                                  |                                   |            | 3,262,000                         |  
|                                                                                                                                                                                                                | Information technology                                 |                                   |            | 938,000                           |  
|                                                                                                                                                                                                                | General and administrative                             |                                   |            | 2,551,000                         |  
|                                                                                                                                                                                                                |                                                        |                                   |            |                                   |  
|                                                                                                                                                                                                                | Total operating expenses                               |                                   |            | 6,751,000                         |  
|                                                                                                                                                                                                                |                                                        |                                   |            |                                   |  
|Loss from operations                                                                                                                                                                                            |                                                        |                                   | (2,076,000 | )                                 |  
|Interest income (expense), net (including non-cash charges relating to warrants, convertible notes payable and amortization of debt issuance costs of $886,000 for the three-month period ended March 31, 2002) |                                                        |                                   | (935,000   | )                                 |  
|Other incomenet                                                                                                                                                                                                |                                                        |                                   | 15,000     |                                   |  
|                                                                                                                                                                                                                |                                                        |                                   |            |                                   |  
|                                                                                                                                                                                                                | Loss before income taxes                               |                                   |            | (2,996,000                        | )
|Provision for income taxes                                                                                                                                                                                      |                                                        |                                   | 2,000      |                                   |  
|                                                                                                                                                                                                                |                                                        |                                   |            |                                   |  
|                                                                                                                                                                                                                | Net loss                                               |                                   | $          | (2,998,000                        | )
|Accretion of discount on preferred stock                                                                                                                                                                        |                                                        |                                   |           |                                   |  
|Accrued preferred stock dividends                                                                                                                                                                               |                                                        |                                   |           |                                   |  
|                                                                                                                                                                                                                |                                                        |                                   |            |                                   |  
|                                                                                                                                                                                                                | Net loss attributable to common stockholders           |                                   | $          | (2,998,000                        | )
|                                                                                                                                                                                                                |                                                        |                                   |            |                                   |  
|                                                                                                                                                                                                                | Net loss per share attributable to common stockholders |                                   | $          | (0.11                             | )
|                                                                                                                                                                                                                |                                                        |                                   |            |                                   |  
|Weighted-average shares outstanding used in per share calculation                                                                                                                                               |                                                        |                                   | 26,610,383 |                                   |  

The
accompanying notes are an integral part of these statements.

3

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US SEARCH.com Inc.
CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                          |                                               | March 31,
2002            |                   | December 31,
2001 |           
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ------------------------- | ----------------- | ----------------- | ----------
|
|ASSETS:                                                                                                                                                                   |                                              
|Current assets:                                                                                                                                                           |                                               |                           |                   |                   |           
|                                                                                                                                                                          | Cash and cash equivalents                     |                           | $                 | 6,721,000         |           
|                                                                                                                                                                          | Restricted cash                               |                           |                   | 2,000,000         |           
|                                                                                                                                                                          | Accounts receivable, net                      |                           |                   | 1,318,000         |           
|                                                                                                                                                                          | Other current assets                          |                           |                   | 1,765,000         |           
|                                                                                                                                                                          |                                               |                           |                   |                   |           
|                                                                                                                                                                          |                                               | Total current assets      |                   |                   | 11,804,000
|                                                                                                                                                                          | Property and equipment, net                   |                           |                   | 9,162,000         |           
|                                                                                                                                                                          | Goodwill                                      |                           |                   | 8,806,000         |           
|                                                                                                                                                                          | Intangibles, net                              |                           |                   | 2,882,000         |           
|                                                                                                                                                                          | Other assets                                  |                           |                   | 270,000           |           
|                                                                                                                                                                          |                                               |                           |                   |                   |           
|                                                                                                                                                                          |                                               |                           | Total assets      |                   | $         
|                                                                                                                                                                          |                                               |                           |                   |                   |           
|LIABILITIES AND STOCKHOLDERS' EQUITY:                                                                                                                                     |                                              
|Current Liabilities:                                                                                                                                                      |                                               |                           |                   |                   |           
|                                                                                                                                                                          | Accounts payable                              |                           | $                 | 5,647,000         |           
|                                                                                                                                                                          | Accrued liabilities                           |                           |                   | 1,433,000         |           
|                                                                                                                                                                          | PRSI acquisition obligations, current portion |                           |                   | 545,000           |           
|                                                                                                                                                                          | Bank debt                                     |                           |                   | 1,185,000         |           
|                                                                                                                                                                          | Notes payable, current portion                |                           |                   | 12,544,000        |           
|                                                                                                                                                                          | Capital lease obligations, current portion    |                           |                   | 236,000           |           
|                                                                                                                                                                          |                                               |                           |                   |                   |           
|                                                                                                                                                                          |                                               | Total current liabilities |                   |                   | 21,590,000
|Notes payable, net of current portion                                                                                                                                     |                                               |                           | 155,000           |                   |           
|PRSI acquisition obligations                                                                                                                                              |                                               |                           | 1,580,000         |                   |           
|Capital lease obligations, net of current portion                                                                                                                         |                                               |                           | 119,000           |                   |           
|Other non-current liabilities                                                                                                                                             |                                               |                           | 5,000             |                   |           
|                                                                                                                                                                          |                                               |                           |                   |                   |           
|                                                                                                                                                                          |                                               |                           | Total liabilities |                   |           
|                                                                                                                                                                          |                                               |                           |                   |                   |           
|Commitments and contingencies                                                                                                                                             |                                               |                           |                   |                   |           
|Stockholders' equity:                                                                                                                                                     |                                               |                           |                   |                   |           
|Preferred stock $0.001 par value; 1,000,000 authorized, 203,113 shares issued and outstanding as of March 31, 2002 and December 31, 2001                                  |                                               |                           |                  |                   |           
|Common stock $0.001 par value; authorized 150,000,000 shares; 26,885,326 shares issued and outstanding as of March 31, 2002 and 26,183,058 shares as of December 31, 2001 |                                               |                           | 26,000            |                   |           
|Additional paid-in capital                                                                                                                                                |                                               |                           | 86,964,000        |                   |           
|Accumulated deficit                                                                                                                                                       |                                               |                           | (77,515,000       | )                 |           
|                                                                                                                                                                          |                                               |                           |                   |                   |           
|Total stockholders' equity                                                                                                                                                |                                               |                           | 9,475,000         |                   |           
|                                                                                                                                                                          |                                               |                           |                   |                   |           
|Total liabilities and stockholders' equity                                                                                                                                |                                               | $                         | 32,924,000        |                   | $         
|                                                                                                                                                                          |                                               |                           |                   |                   |           

The
accompanying notes are an integral part of these statements.

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US SEARCH.com Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

|                                                                            |                                                                   | Three Months
Ended
March 31, |                                                   
|--------------------------------------------------------------------------- | ----------------------------------------------------------------- | ---------------------------- | --------------------------------------------------
|
|Cash flows from operating activities:                                       |                                                                   |                              |                                                   
|                                                                            | Net loss                                                          |                              | $                                                 
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                                   |                              |                                                   
|                                                                            | Depreciation and amortization                                     |                              |                                                   
|                                                                            | Allowance for doubtful accounts                                   |                              |                                                   
|                                                                            | Non-cash Interest                                                 |                              |                                                   
|                                                                            | Amortization of debt issuance costs                               |                              |                                                   
|Change in assets and liabilities:                                           |                                                                   |                              |                                                   
|                                                                            | Accounts receivable                                               |                              |                                                   
|                                                                            | Prepaid and other                                                 |                              |                                                   
|                                                                            | Accounts payable and accrued expenses                             |                              |                                                   
|                                                                            |                                                                   |                              |                                                   
|Net cash used in operating activities                                       |                                                                   |                              | (3,942,000                                        
|Cash flows from investing activities:                                       |                                                                   |                              |                                                   
|                                                                            | Purchase of property and equipment                                |                              |                                                   
|                                                                            | Purchase of PRSI                                                  |                              |                                                   
|                                                                            |                                                                   |                              |                                                   
|Net cash used by investing activities                                       |                                                                   |                              | (663,000                                          
|Cash flows from financing activities:                                       |                                                                   |                              |                                                   
|                                                                            | Increase in restricted cash                                       |                              |                                                   
|                                                                            | Repayments of third party notes payable                           |                              |                                                   
|                                                                            | Repayment of acquisition obligation                               |                              |                                                   
|                                                                            | Repayments of bank debt                                           |                              |                                                   
|                                                                            | Repayments of capital lease obligations                           |                              |                                                   
|                                                                            | Proceeds from convertible notes payable                           |                              |                                                   
|                                                                            |                                                                   |                              |                                                   
|Net cash provided by financing activities                                   |                                                                   |                              | 8,178,000                                         
|                                                                            |                                                                   |                              |                                                   
|Net increase in cash and cash equivalents                                   |                                                                   |                              | 3,573,000                                         
|Cash at beginning of period                                                 |                                                                   |                              | 3,148,000                                         
|                                                                            |                                                                   |                              |                                                   
|Cash at end of period                                                       |                                                                   | $                            | 6,721,000                                         
|                                                                            |                                                                   |                              |                                                   
|                                                                            |                                                                   |                              | Supplemental cash flow disclosure is comprised of:
|Non-cash investing and financing activities:                                |                                                                   |                              |                                                   
|                                                                            | Conversion of accounts payable to notes payable                   |                              | $                                                 
|                                                                            | Issuance of warrants in connection with convertible notes payable |                              | $                                                 
|                                                                            | Issuance of warrants to third parties                             |                              | $                                                 

The
accompanying notes are an integral part of these statements.

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US SEARCH.COM INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)

1.    Organization and Business:

US SEARCH.com Inc. (the "Company") provides individual reference services and background information about individuals. The Company was formed as a
California S Corporation in 1994, and reincorporated as a Delaware corporation in April 1999. On December 28, 2001 the Company acquired all of the outstanding stock of Professional
Resource Screening, Inc. ("PRSI"), which provides pre-employment screening services primarily to Fortune 500 companies in the United States.

2.    Summary of Significant Accounting Policies:

Basis of Presentation

These unaudited financial statements and accompanying notes prepared in accordance with instructions to Form 10-Q have been condensed and,
therefore, do not contain certain information included in the Company's annual financial statements and accompanying notes. Therefore, you should read these unaudited condensed financial statements in
conjunction with the Company's annual financial statements.

The
unaudited condensed financial statements reflect, in the opinion of management, all adjustments which are of a normal recurring nature, necessary to fairly state the financial
position of the Company as of March 31, 2002, and the results of its operations for the three month periods ended March 31,
2002 and 2001. Interim results are not necessarily indicative of results to be expected for a full fiscal year.

Principles of Consolidation.The financial statements include the accounts of US SEARCH.com Inc. and its
wholly-owned subsidiary. All inter-company accounts and transactions have been eliminated in consolidation.

Net Loss Per Share

Basic net loss per common share is computed using the weighted average number of shares of common stock outstanding and diluted net loss per common share is
computed using the weighted average number of shares of common stock and common equivalent shares outstanding. Common equivalent shares related to convertible preferred stock, convertible notes
payable, stock options and warrants are excluded from the computation when their effect is antidilutive. As of March 31, 2002, stock options representing 17,734,287 shares of common stock and
warrants representing 10,209,427 shares of common stock have been excluded as their inclusion would be anti-dilutive. Also excluded are 42,107,303 shares issuable on conversion of
Series A-1 convertible preferred stock. As of March 31, 2001, there were options representing 12,667,592 shares of common stock and warrants representing 1,750,000 and 80,000
shares of common and preferred stock, respectively, 5,882,353 common shares issuable on conversion of Series A convertible preferred stock and 5,970,588 shares ultimately issuable upon
conversion of notes payable, which are excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive.

Management's Plans

Since inception we have experienced negative cash flows from operations. We have a working capital deficit of $9,800,000 and an accumulated deficit of $77,500,000
as of March 31, 2002. Based on our current operating plans, management believes existing cash resources, including the proceeds from the January and March 2002 Convertible Notes, cash
forecasted by management to be generated by operations and proceeds from the April 2002 bank financing arrangement will be sufficient to meet

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working capital and capital requirements through March 31, 2003. Also, management's plans to attain profitability and generate additional cash flows include, increasing revenues from
enterprise and consumer services, focusing on cost reductions and operational efficiencies to be derived from further deployment of US SEARCH's technologies, and the launch of additional products.
There is no assurance that management will be successful with these plans. However, if events and circumstances occur such that US SEARCH does not meet its current operating plan as expected, and US
SEARCH is unable to raise additional financing, US SEARCH may be required to reduce certain discretionary spending, which could have a material adverse effect on US SEARCH's ability to achieve our
intended business objectives.

Reclassifications

Certain reclassifications have been made to the 2001 financial statements to conform with the 2002 presentation.

3.    Notes Payable:

On January 18, 2002, the Company issued 8% Convertible Promissory Notes due January 17, 2003 in the aggregate principal amount of $4,600,000 and
four year warrants to purchase up to an aggregate of 1,782,176 shares of common stock at an initial exercise price of $1.044 per share. These notes are convertible into the number of shares of common
stock calculated by dividing the amount of principal and accrued but unpaid interest due under the notes by the lower of i) $0.783 or (ii) 90% of the 10-day average closing
bid price of the Company's common stock on the Nasdaq National Market for the 10 business days prior to the conversion date of the notes. These notes automatically convert into common stock upon
receipt of the approval of the stockholders of the issuance of the shares of common stock underlying the notes. If the notes have not converted into common stock prior to January 17, 2003, the
Company must repay the principal and all accrued but unpaid interest. The Company expects to present to its stockholders at the 2002 Annual Meeting of Stockholders a proposal to approve the issuance
of the shares of common stock underlying these notes.

On
March 15, 2002, the Company sold 8% Convertible Promissory Notes due December 20, 2002 in the aggregate principal amount of $6,075,000 ($5,700,000 in proceeds net of
issuance costs) and five year warrants to purchase up to an aggregate of 2,144,118 shares of our common stock at an initial exercise price of $1.044 per share. These notes are convertible into the
number of shares of common stock calculated by dividing the amount of principal and accrued but unpaid interest due under the notes by the lower of (i) $0.85 and (ii) the
10-day average closing bid price of the Company's common stock on the Nasdaq National Market for the 10 business days prior to the conversion date of the notes. These notes automatically
convert into common stock upon receipt of the approval of the Company's stockholders of the issuance of the shares of common stock underlying the notes. If the notes have not converted into common
stock prior to December 20, 2002, the Company must repay the principal and all accrued but unpaid interest. The Company expects to present to its stockholders at the 2002 Annual Meeting of
Stockholders a proposal to approve the issuance of the shares of common stock underlying the notes. The Company also issued warrants to purchase 714,706 shares of common stock at an exercise price of
$0.85 per share to the principals of the offering placement agent.

In
accordance with Accounting Principles Board Opinion No. 14 "Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants", the relative fair value of the
warrants issued in conjunction with the January and March notes totaled $730,000 and $892,000, respectively as well as $315,000 for warrants issued to the placement agent. Such amounts are being
recorded as interest expense over the terms of the notes. As of March 31, 2002, the Company has amortized approximately $246,000. The Company will also record a beneficial conversion feature on
both the January and March notes when they become convertible upon stockholder approval.

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Included
in notes payable is $526,000 net of discount of $55,000 due to a vendor. In conjunction with the terms of the note, the outstanding balance is due and payable within
90 days of the Company closing a financing, as defined, in excess of $10,000,000. As of March 31, 2002 the Company has closed financing in excess of $10,000,000.

4.    Bank Debt

On April 1, 2002, the Company entered into an agreement with the bank to amend its existing loan and security agreement ("Amendment Number One") with
Comerica Bank. The Comerica facility has been amended to increase the revolving credit line to $3,000,000 from $2,000,000, of which $1,000,000 has been designated as a borrowing base line. Amounts
under the borrowing base line may be advanced based on up to 80% of eligible receivables as defined in the agreement. Borrowings under the revolving credit line are due and payable on March 26,
2003. Total borrowings under the revolving credit facility totaled $1,000,000 at March 31, 2002.

The
Comerica agreement was also amended to remove the letter of credit sublimit from the revolving credit line. Under Amendment Number One, the Company will maintain a deposit with the
bank of $750,000 to collateralize its outstanding standby letter of credit. The letter of credit and the required deposit will reduce by $83,333 per month and mature on November 30, 2002. The
amount of the letter of credit and the collateral deposit at May 1, 2002 was $583,000.

Significant
financial covenants with which the Company must comply under Amendment Number One include operating performance, minimum EBITDA requirements and a debt/tangible net worth
ratio. Effective March 31, 2002, the Company is also required to maintain not less than $1,250,000 of its unrestricted cash on deposit with the bank at all times.

In
connection with the waiver and amendment agreement, the Company agreed to issue the bank a warrant to purchase 55,487 shares of the Company's common stock at an exercise price of
$0.85 per share which expires on March 27, 2008.

5.    Capital Stock

During the three months ended March 31, 2002, the Company issued to certain vendors a warrant to purchase 75,000 shares at an exercise price of $1.20 per
share which matures on March 5, 2007, and a warrant to purchase 137,143 shares at an exercise price of $0.01, which matures on January 3, 2005.

6.    Commitments And Contingencies:

Strategic Alliance Commitments

The Company has several cancelable and non-cancelable distribution and marketing agreements with various Internet companies. The terms of these
agreements provide for varying levels of exclusivity and minimum and maximum fees payable based on the number of banners, buttons and text links displayed on affiliate web sites. At March 31,
2002, the minimum non-cancelable payments due under these agreements are approximately $2,175,000 for the remainder of 2002.

The
Company has entered into an agreement with a supplier of online public record data. At March 31, 2002, the non-cancelable payments under this agreement are
$621,000 in 2002 and $690,000 in 2003.

Legal Proceedings

On April 3, 2000, a two count trade name and service mark complaint was filed against US SEARCH in the United States District Court for the Eastern
District of Virginia, styled U.S. Search, LLC v USSearch.com Inc. Civil Action No. 00-554-A. On January 26, 2001, our motion for

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summary judgment was granted and the court ordered that both counts of plaintiff's complaint be dismissed with prejudice. The Plaintiff has appealed the judgment to the U.S. Court of Appeals, Fourth
Circuit. The hearing on appeal has been scheduled for June 6, 2002. The parties are awaiting the outcome of the appeal.

In
May 2001, ChoicePoint, Inc., the successor entity to DBT Online, Inc., filed a complaint against us in Palm Beach County, Florida alleging breach of contract,
fraudulent misrepresentation, unjust enrichment, quantum meruit and breach of the implied covenant of good faith and fair dealing. The
Complaint sought approximately $1.5 million in damages, as well as interest and attorneys' fees. We removed this action to the United States District Court for the Southern District of Florida.
The United States District Court for the Southern District of Florida ordered the matter to arbitration. An arbitration hearing was held in April 2002 and in June 2002 the arbitration
awarded us a credit of $297,671 to be deducted from invoices of $1,418,731. We currently have approximately $1,000,000 accrued for this liability. The costs related to this litigation to date have
been less than $100,000.

The
Company may from time to time become a party to various legal proceedings arising in the ordinary course of business.

7.    Unaudited Pro Forma Results of Operations for the Three Months Ended March 31, 2001

Unaudited proforma consolidated results of operations are presented in the table below for the three months ended March 31, 2001. The proforma results of
operations reflect the acquisition of Professional Resource Screening, Inc., which are not reflected in the March 31, 2001 historical results, as if the acquisition was consummated as of
January 1, 2001. Historical results for the three months ended March 31, 2002, which includes the results of Professional Resource Screening, Inc. for the entire period, are
presented for comparability.

|(in thousands)                                         |  | Three Months Ended
March 31, 2002
Historical |       | Three Months Ended
March 31, 2001
Pro Forma |  
|------------------------------------------------------ |  | -------------------------------------------- | ----- | ------------------------------------------- | -
|Net revenue                                            |  | $                                            | 6,663 |                                             | $
|Net loss                                               |  | $                                            | 2,998 |                                             | $
|Net loss attributable to common stockholders           |  | $                                            | 2,998 |                                             | $
|Net loss per share attributable to common stockholders |  | $                                            | (0.11 | )                                           | $

These
unaudited pro forma results have been prepared for comparative purposes only and include material adjustments, such as amortization of identifiable intangible assets and interest
on installment obligations. The results do not purport to be indicative of the results of operations which actually would have resulted had the combination been in effect on January 1, 2001, or
of future results of operations of the consolidated company.

8.    Related Party Transactions

In accordance with the Agreement and Plan of Merger, dated as of December 28, 2001, by and among the Company, Professional Resource Screening, Inc.
("PRSI"), Irwin R. Pearlstein, Cheryl Pearlstein-Enos and David Pearlstein (the "Merger Agreement"), on December 28, 2001, the Company issued 8,148,148 shares of common stock to the
former shareholders of PRSI. Pursuant to the Merger Agreement on January 31, 2002 the Company issued an additional 651,852 shares of common stock to the former shareholders of PRSI.

9

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

Forward-Looking Statements

THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT HAVE BEEN MADE PURSUANT TO THE PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON OUR CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS ABOUT THE COMPANY'S BUSINESS, MANAGEMENT'S BELIEFS AND ASSUMPTIONS MADE
BY MANAGEMENT. WORDS SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES," "LIKELY", VARIATIONS OF SUCH WORDS AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT; THEREFORE, ACTUAL
RESULTS AND OUTCOMES MAY DIFFER MATERIALLY FROM WHAT IS EXPRESSED OR FORECASTED IN ANY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE THOSE SET FORTH BELOW UNDER "FACTORS
AFFECTING OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION" AND OUR OTHER PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. WE UNDERTAKE NO
OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

Overview

US SEARCH provides a full range of location and verification services to enterprises, consumers and small and medium sized business clients including identity
verification, individual location, criminal record checks, employment and education verifications, professional reference checks, credit and motor vehicle record checks, drug screening, and
pre-employment screening services. We are able to deliver location verification and screening services through our proprietary web-based applications and our patent pending US
SEARCH DARWIN technology. Our services can be accessed through our Web sites, USSEARCH.com, ussearch.com/business or prsinet.com or by calling our toll free telephone numbers,
1-800-USSEARCH for consumers, 1-877-327-2410 for small and medium businesses or 1-800-232-0247 for large
businesses.

Our
consumer and small and medium enterprise products provide direct (Internet and telephone) individual locator, and other public record searches to consumers and these services and
pre-employment screening services to small- and medium-sized businesses. Our enterprise product provides employment screening and risk mitigation services to large enterprises and
organizations.

Due
to the high level of automation, certain of our services can be conducted instantly online. We also offer assisted searches and screening services, both online and through our toll
free telephone number.



10

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Prices
for our non-instant consumer and small and medium business services have ranged from approximately $20 to $395 per search. Prices for "Instant Searches" range from approximately $10
to $15 per search. Prices for our large business services range from $3 to $495. The prices for our services vary based on the nature and amount of information and whether or not the search is
assisted by a search specialist.

Revenue
for our services are recognized when the results are delivered to the client. The terms of sale do not provide for refunds after our services have been delivered, however, in
instances where the clients indicate that the initial search result was unsuccessful, we may perform another search or provide a refund at our discretion. In addition, where clients desire additional
information they can request to broaden the scope of their "Instant Searches" and we apply up to a portion of the cost of the client's "Instant Searches" towards the cost of the more comprehensive
search.

Our
cost of services consists primarily of payroll and benefits, data acquisition costs, and local and long distance telephone charges associated with providing our services, and payment
processing costs. Our cost of services is likely to increase with increasing revenue levels. The Company has entered into an agreement with a supplier of online public record data. At March 31,
2002, the non-cancelable payments under this agreement are $621,000 in 2002 and $690,000 in 2003.

Our
operating expenses consist primarily of selling, marketing, general and administrative expenses and information technology costs. We expect our operating expenses to increase as we
attempt to expand our corporate sales force and our product lines.

Selling
and marketing expenses constitute the largest portion of our operating expenses. Internet advertising expenses are the most significant selling and marketing expense. The Company
has several cancelable and non-cancelable distribution and marketing agreements with various Internet companies. The terms of these agreements provide for varying levels of exclusivity and
minimum and maximum fees payable based on the number of banners, buttons and text links displayed on affiliate web sites. At March 31, 2002, the minimum non-cancelable payments due
under these agreements are approximately $2,175,000 for the remainder of 2002.

We
expect our selling and marketing expenses to increase as we attempt to expand our products and our market reach in both the consumer and enterprise services groups.

Information
technology expenses consist primarily of the compensation and benefits for employees and consultants involved in development, network administration, planning and maintenance
of our infrastructure. Certain costs associated with the development of software for internal use are
capitalized. Information technology costs are expected to increase with the continuing development of proprietary technology.

Our
general and administrative expenses consist primarily of compensation and related costs for administrative personnel, our occupancy costs and other overhead costs. We expect general
and administrative costs to remain flat or decrease as we continue to manage the size and growth of our organization.

Results of Operations

Comparison of the Three Months Ended March 31, 2002 to the Three Months Ended March 31, 2001

Net Revenues.Our net revenues increased from approximately $4.9 million for the three months ended March 31,
2001 to approximately $6.7 million for the three months ended March 31, 2002,

11

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representing a 35.0% increase. The $1.8 million increase is primarily attributable to our acquisition of PRSI in December 2001.

Gross Profit.Gross profit increased from approximately $3.5 million for the three months ended March 31, 2001,
to approximately $4.7 million for the three months ended March 31, 2002, representing a 33% increase. Gross profit as a percentage of net revenues was approximately 70% and 71% for the
three month periods ended March 31, 2002 and 2001, respectively. The change in gross profit reflects the change in product mix as a result of the Company's December 2001 acquisition of
PRSI and cost reductions in the Company's consumer business. Data acquisition and fulfillment costs for consumer sales decreased significantly from 14.6% to 10.5% as a percentage of revenues due the
use of a lower cost data providers for certain products. Increased automation also contributed significantly to the increase in gross profit, resulting in a reduction in direct labor expense.

Selling and Marketing Expenses.Selling and marketing expenses increased by $182,000 to $3.3 million for the three
month period ended March 31, 2002 as compared to $3.1 million for the 2001 period. The change is the net result of an increase of $450,000 due to the December 2001 acquisition of
PRSI and $280,000 due to the addition of new Internet advertising providers partially offset by reductions in selling and marketing labor costs.

Information Technology Expenditures.Information technology expenditures decreased by $305,000 for the three month period
ended March 31, 2002 as compared to the 2001 period, primarily due to a reduction in headcount.

General and Administrative Expenses.General and administrative expenses for the three months ended March 31, 2002
increased by $551,000 compared to the same period in 2001. The change is the net result of a $594,000 increase due to the December 2001 acquisition of PRSI and a $232,000 increase in
depreciation expense as a result of initial implementation of certain of the Company's internally developed software, partially offset by a $275,000 decrease in legal fees and other expenses.

Interest Income (Expense) Net.Interest expense, net of interest income, was $935,000 for the three months ended
March 31, 2002 as compared to interest income of $16,000 for the same period in 2001. Included in interest expense for 2002 are non-cash interest charges of $611,000 related to the
amortization of discounts on the Company's convertible and vendor notes payable. Also included is $275,000 related to the amortization of debt issuance costs incurred in conjunction with the Company's
bank credit facility.

Liquidity and Capital Resources

As of March 31, 2002, cash and cash equivalents have increased to $6.7 million (excluding $2.0 million of restricted cash pledged as
collateral in connection with the Company's credit facility) from $3.1 million at December 31, 2001.

Cash
used in operations totaled $3.9 million for both the three-month periods ended March 31, 2002 and 2001. Cash used in the 2002 period is the result of continued
operating losses and an acceleration of our vendor payments.

Cash
used in investing activities totaled $663,000 for the three months ended March 31, 2002. This is primarily attributable to the continued investment in software development.

Cash
provided by financing activities was approximately $8.2 million for the three months ended March 31, 2002. The cash provided is primarily attributable to
$10.2 million in net cash proceeds from issuance of our convertible notes payable partially offset by $490,000 of payments made in conjunction with our December 2001 acquisition of PRSI
and the reclassification of $1.25 million in cash as restricted in accordance with our amended credit facility.

12

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During
2001 we were not in compliance with the minimum liquidity, minimum revenue and monthly cash burn financial covenants in our credit facility. In December 2001, the bank
agreed to suspend financial covenant compliance and forbear from exercising its rights and remedies under the loan agreement, including termination of the agreement, until February 28, 2002. On
April 1, 2002, we entered into an agreement with the bank to amend our credit facility ("Amendment Number One"), to increase the revolving credit line to $3,000,000 from $2,000,000, of which
$1,000,000 has been designated as a borrowing base line. Amounts under the borrowing base line may be advanced based on up to 80% of eligible receivables as defined in the agreement. Borrowings under
the revolving credit line are due and payable on March 26, 2003. As of March 31, 2002, we were in compliance with our revised bank covenants. As of March 31, 2002, there is
$1.0 million outstanding and $2.0 million available under the revolving credit facility.

The
credit facility was also amended to remove the letter of credit sublimit from the revolving credit line. Under Amendment Number One, we are required to maintain a deposit with the
bank of $750,000 to collateralize our outstanding standby letter of credit. The letter of credit and the required deposit will reduce by $83,333 per month and mature on November 30, 2002. As of
March 31, 2002, there is $583,335 remaining under the standby letter of credit.

Significant
financial covenants with which we must comply under Amendment Number One include operating performance, minimum EBITDA requirements and a debt/tangible net worth ratio.
Effective March 31, 2002, we are also required to maintain not less than $1,250,000 of its unrestricted cash in deposit with the bank at all times.

In
connection with the Amendment Number One, we agreed to issue the bank a warrant to purchase 55,487 shares of the Company's common stock at an exercise price of $0.85 per share, which
matures on March 27, 2008.

In
December 2001, we issued 8% Convertible Promissory Notes due December 20, 2002 in the aggregate principal amount of $3.5 million. In January 2002, we
issued 8% Convertible Promissory Notes due January 17, 2003 in the aggregate principal amount of $4.6 million. In March 2002, we issued 8% Convertible Promissory Notes due
December 20, 2002 in the aggregate principal amount of $6.1 million with net proceeds of $5.7 million. These notes automatically convert into common stock upon receipt of approval
of the Company's stockholders of the issuance of the shares of common stock underlying the notes. We expect that these notes will convert prior to maturity of the notes.

Since
inception we have experienced negative cash flows from operations. We have a working capital deficit of $9.8 million and an accumulated deficit of $77.5 million as of
March 31, 2002. Based on our current operating plans, management believes existing cash resources, including the proceeds from the January and March 2002 sale of 8% Convertible
Promissory Notes, cash forecasted by management to be generated by operations and proceeds from the April 2002 credit facility amendment will be
sufficient to meet working capital and capital requirements through March 31, 2003. Also, management's plans to attain profitability and generate additional cash flows include, increasing
revenues from enterprise and consumer services, focusing on cost reductions and operational efficiencies to be derived from further deployment of our technologies, and the launch of additional
products. There is no assurance that management will be successful with these plans. If we are unable to meet our current operating plan as expected and are unable to raise additional financing, we
may be required to reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our intended business objectives.

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Contractual Obligations and Commercial Commitments.

The following table summarizes all significant contractual payment obligations as of March 31, 2002, by payment due date:

Payments by Period
($ Thousands)Contractual Obligation

Total

Remainder of 2002

2003-2004

2005-thereafterNotes payable(a)

$
14,865

$
14,865

$


$
Bank debt


1,340





1,340


Advertising commitments


2,175


2,175





Capital lease obligations


387


219


164


4Operating lease obligations


4,599


1,130


3,006


463Minimum purchase commitments


1,311


621


690


PRSI payment obligations(b)


2,510


440


2,070


Total

$
27,187

$
19,450

$
7,270

$
467


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Risk Factors affecting our Business, Operating Results and Financial Condition

The following is a discussion of certain risks, uncertainties and other factors that currently impact or may impact our business, operating results and/or
financial condition. Anyone evaluating us and making an investment decision with respect to our Common Stock or other securities is cautioned to carefully consider these factors, along with similar
factors and cautionary statements contained in our filings with the Securities and Exchange Commission.

The number of freely tradeable shares of our common stock will increase substantially as a result of registration rights agreements we have entered into with some of our
stockholders. This could adversely impact the trading price of our common stock.

Our current stockholders hold a substantial number of shares, which they will be able to sell in the public market immediately or in the near future. As of
May 28, 2002 we had 27,343,222 shares issued and outstanding, of which 18,408,080 are restricted and, as such, may not be freely resold. We are are registering for resale 38,509,284
shares, including 11,800,000 of the restricted shares currently outstanding, increasing the total number of outstanding shares to 54,052,506, an increase of 141%, and the total shares available for
sale to 47,444,426 an increase of 531%.

In
addition to the shares discussed above, Pequot Private Equity Fund II, L.P. holds shares of our Series A-1 Convertible Preferred Stock which, as of March 1,
2002, were convertible into 42,107,303 shares of our Common Stock and a warrant to purchase additional shares of our Series A-1 Convertible Preferred Stock which, as of
March 1, 2002, if exercised in full, would be convertible into 1,036,549 shares of our Common Stock. The Kushner-Locke Company holds, as of March 1, 2002, 6,108,080 shares of our Common
Stock. We have entered into a Registration Rights Agreement with Pequot and Kushner-Locke, pursuant to which Pequot and Kushner-Locke each has the right to require us to register the resale of these
shares of Common Stock. In addition the former shareholders of PRSI hold 8,800,000 shares of our Common Stock, which was partial consideration for the acquisition of PRSI.

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If
our shareholders approve the issuance of 8% Convertible Promissory Notes and the issuance of shares of Common Stock underlying the 8% Notes, that were sold on December 20,
2001, January 18, 2002 and March 15, 2002, the 8% Notes are convertible in the aggregate into 18,258,330 shares of Common Stock. In connection with the 8% Notes, warrants to purchase
5,267,290 shares of our Common Stock were issued. Assuming conversion in full of all Series A-1 Convertible Preferred Stock, all of our 8% Convertible Promissory Notes and an exercise in full
of all warrants, our book value per share of common stock would have decreased from $0.35 to $0.32 as of March 31, 2002. Sales of a substantial number of shares of our Common Stock, or the
perception that these sales could occur, could cause our Common Stock price to fall and could impair our ability to raise capital through the sale of additional equity securities. In addition, we have
entered into registration rights agreements with other investors that entitle such investors to have their shares registered for sale in the public market. The exercise of these rights could affect
the market price of our Common Stock.

The
following chart summarizes the number of shares of our Common Stock that will be available for resale as a result of this offering and that may become available for resale in the
future as a result of registration rights agreements entered into with certain of our stockholders.

|                                                                                                                  |  | Total
Outstanding
Shares |  | Restricted Shares
Outstanding |  | Freely Tradeable Shares
Outstanding |  | Percentage Increase of
Freely Tradeable Shares |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------ |  | ----------------------------- |  | ----------------------------------- |  | ---------------------------------------------- | -
|Prior to our contemplated Offering                                                                                |  | 27,343,222               |  | 18,408,080                    |  | 8,935,142                           |  |                                               |  
|Upon completion of the Offering                                                                                   |  | 54,052,506               |  | 6,608,080                     |  | 47,444,426                          |  | 531                                            | %
|Upon the registration for resale of the shares held by Pequot Capital Management and The Kushner-Locke Company(1) |  | 97,196,358               |  | 0                             |  | 97,196,358                          |  | 1,088                                          | %

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Our stock price may be volatile, and you may lose all or part of your investment

The market price of our Common Stock has fluctuated significantly. Since going public in June 1999, the closing price of our Common Stock on Nasdaq has
ranged from a high of $17.375 to a low of $0.1888. During the last twelve months, the closing price of our Common Stock has ranged from a high of $2.25 to a low of $0.610. On June 3, 2002, the
closing price of our Common Stock was $0.90. The market price of our Common Stock could continue to be subject to significant fluctuations as a result of numerous factors, many of which are beyond our
control. Among the factors that could affect our stock price are:



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The
stock markets in general, and the markets for technology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. We have experienced previous fluctuations in our common stock in the past and the
price of our stock remains volatile.

Your interests may be diluted by the issuance of shares of common stock upon conversion of our 8% Convertible Promissory Notes.

The 8% Convertible Promissory Notes issued in December 2001 and January 2002 will convert into shares of common stock at $0.783 per share if the trading price of
our common stock remains above $0.783 per share at the time of conversion. The 8% Convertible Promissory Notes issued in March 2002 will convert into shares of common stock at $0.85 per share if the
trading price of our common stock remains above $0.85 per share at the time of conversion. If the trading price of our common stock declines below $0.783, in the case of the 8% Convertible Promissory
Notes issued in December 2001 and January 2002, or $0.85, in the case of the 8% Convertible Promissory Notes issued in March 2002, we must issue additional shares of common stock to the holders of the
8% Convertible Promissory Notes. The following table sets forth the number and percentage of additional shares we will be required to issue if the trading price of our common stock declines by 25%,
50% and 75% from a trading price of $0.783, in the case of the 8% Convertible Promissory Notes issued in December 2001 and January 2002, or $0.85, in the case of the 8% Convertible Promissory Notes
issued in March 2002.

|                                                                         |  | No Decline |  | 25% Decline |  | 50% Decline |  | 75% Decline
|------------------------------------------------------------------------ |  | ---------- |  | ----------- |  | ----------- |  | -----------
|                                                                         |  |            |  |             |  |             |  |            
|8% Convertible Promissory Notes issued in December 2001 and January 2002 |  | 10,410,575 |  | 13,880,766  |  | 20,821,149  |  | 41,642,299 
|Expressed as a percentage of our currently outstanding Common Stock      |  | 38.1%      |  | 50.8%       |  | 76.1%       |  | 152.3%     
|8% Convertible Promissory Notes issued in March 2002                     |  | 7,147,059  |  | 9,529,412   |  | 14,294,118  |  | 28,588,235 
|Expressed as a percentage of our currently outstanding Common Stock      |  | 26.1%      |  | 34.9%       |  | 52.3%       |  | 104.6%     

In
addition, the holders of 8% Convertible Promissory Notes hold warrants to purchase up to an aggregate of 5,267,290 shares of our common stock at an initial exercise price of $1.044
per share.

We risk being delisted from The Nasdaq National Market.

If the trading price of our Common Stock falls below $1.00 per share, it may be delisted from the Nasdaq National Market. If our Common Stock is delisted from the
Nasdaq National Market, you may be unable to dispose of your shares. In February 2001 we received a notice from the Nasdaq Stock Market that we were not in compliance with the $1.00 minimum bid
requirement for continued listing on the Nasdaq National Market and that our common stock was subject to delisting from the Nasdaq National Market. In March 2001 we participated in a hearing
before the Nasdaq Listing Qualifications Panel to appeal the earlier decision to delist out common stock. In June 2001 we received a notification from Nasdaq that the Nasdaq Listing
Qualifications Panel had determined that we regained compliance with the requirements for continued listing on the Nasdaq National Market and, accordingly, determined to continue to list our common
stock on the Nasdaq National Market. If we are unable to maintain compliance with the requirements for continued listing on the Nasdaq National Market, including the $1.00 minimum bid requirement and
the net tangible assets maintenance requirement, we

16

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may be subject to delisting from the Nasdaq National Market. On June 28, 2002, the closing price for our common stock was $0.78 per share.

If the trading price per share of our common stock remains low, we may be delisted from The Nasdaq National Market.

The closing sale price of our Common Stock on June 28, 2002 was $0.78 per share. In December 2001, January 2002 and March 2002 we issued $14.2 million in
aggregate principal amount of 8% Convertible Promissory Notes. These notes convert into shares of our common stock at $0.783 per share, in the case of the notes issued in December 2001 and January
2002, and $0.85 per share, in the case of the notes issued in March 2002. If at the time the notes convert into common stock our common stock is trading below $0.783 per share, in the case of the
notes issued in December 2001 and January 2002, or $0.85 per share, in the case of the notes issued in March 2002, we will be required to issue additional shares of common stock upon conversion of the
notes. This could create downward pressure on the trading price of our common stock. To maintain listing on The Nasdaq National Market System we must maintain a trading price per share of more than
$1.00. If the trading price per share of our common stock remains below $1.00, we may be delisted from the Nasdaq National Market System. If we are unable to maintain compliance with the requirements
for continued listing on the Nasdaq National Market, including the $1.00 minimum bid requirement, we may be subject to delisting from the Nasdaq National Market. If we are delisted from the Nasdaq
National Market System, trading in our common stock could occur, if at all, in the over-the-counter market in so-called "pink sheets" or, if then available, the OTC Bulletin Board. As a result, the
holders of our common stock would find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock.

If
our common stock is delisted from trading on The Nasdaq Stock Market and the trading price is less than $5.00 per share, trading in our common stock would also be subject to the
requirements of Rule
15g-9 promulgated under the Securities Exchange Act of 1934. Under such rule, broker/dealers who recommend these low-priced securities to persons other than established customers and accredited
investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's
written consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure in connection with any trades involving a stock
defined as a penny stock (generally any equity security not traded on an exchange or quoted on The Nasdaq Stock Market that has a market price of less than $5.00 per share, subject to certain
exceptions), including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated with the penny stock market. These
requirements would likely severely limit the market liquidity of our common stock and the ability of our shareholders to dispose of their shares, particularly in a declining market.

We have incurred significant net losses and we may never achieve profitability

We incurred significant net losses of approximately $26.4 million in 1999, $29.4 million in 2000 and $11.9 million in 2001. As of
December 31, 2001, we had an accumulated deficit of approximately $74.5 million. If our revenue does not grow as expected or capital and operating expenditures exceed our plans, our
business, operating results and financial condition will be materially adversely affected. We cannot be certain if or when we will be profitable or if or when we will generate positive operating cash
flow.

Our acquisition of Professional Resource Screening, Inc., and future acquisitions, could have a material adverse effect on our business, results of operations or
financial condition.

In December 2001, we acquired Professional Resource Screening, Inc. The acquisition will present numerous challenges to us, including the integration of
the operations and personnel of Professional

17

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Resource Screening. We will also be subject to special risks such as possible unanticipated liabilities and costs, diversion of management attention and loss of personnel. In addition, we may not
achieve the revenue levels, increased earnings, profitability, efficiencies or synergies that we believe justified the acquisition. In addition, while we have no current plan to acquire any specific
business or businesses, we may, from time to time, pursue other acquisitions of businesses that complement or expand our existing business. There can be no assurance that the anticipated economic,
operational and other benefits of any future acquisition will be achieved. In addition, acquisitions may involve the expenditure of significant funds and involve a number of risks, including diversion
of management attention, unanticipated problems, liabilities or contingencies and risks of entering markets in which we have limited or no direct expertise. We cannot assure you that Professional
Resource Screening or any businesses we acquire in the future will generate sufficient revenue to offset the associated costs or other adverse effects or that we will be able to successfully integrate
or manage Professional Resource Screening. The occurrence of some or all of these events could have a material adverse effect on our business, results of operations or financial condition.

We face risk resulting from our litigation with ChoicePoint, Inc.

In May 2001, ChoicePoint, Inc., the successor entity to DBT Online, Inc., served us with a complaint that it filed against us in Palm Beach
County, Florida alleging breach of contract, fraudulent misrepresentation, unjust enrichment, quantum meruit and breach of the implied covenant of good faith and fair dealing. ChoicePoint sought
approximately $1.5 million in damages, as well as interest and attorneys' fees. We removed this action to the United States District Court for the Southern District of Florida. The United
States District Court for the Southern District of Florida ordered the matter to arbitration. The arbitration hearing was concluded in April 2002 and in June 2002 the arbitrator awarded us a
credit of $297,671 to be deducted from invoices of $1,418,731. We currently have approximately $1,000,000 accrued for this liability. To date, we have incurred an estimated $100,000 in costs and legal
fees in connection with this litigation.

We face competition from many sources. We may be unable to successfully compete with other companies in our industry.

We operate in a number of geographic and service markets which are fragmented and highly competitive. Currently, our competition falls into four categories:



There
are no significant barriers that would prevent new companies from entering the market in which we operate. In addition, some of our current suppliers and companies with which we
have advertising agreements may compete with us in the future, which may make it more difficult to advertise our services effectively on their Web sites.

Many
of our competitors have greater financial and marketing resources than we do and may have significant competitive advantages through other lines of business, their existing client
base and other business relationships. These competitors and other potential competitors may undertake more extensive marketing campaigns, adopt more aggressive pricing policies and devote more
resources to

18

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developing information search services, background checks for individual or corporate clients and internet trust services than we are willing or able to accomplish. In addition, our competitors or
potential competitors may develop services that are superior to ours, develop services less expensive than ours or that achieve greater market acceptance than our services. We may not be able to
successfully compete against our current or future competitors with respect to any of these factors. As a response to changes in the competitive environment, we may make pricing, service or marketing
decisions such as reducing our prices or increasing our advertising, all of which may affect our operating results. If we are unsuccessful in responding to our competitors, our business, financial
condition and results of operations will be materially adversely affected.

We are dependent on a limited number of third party database and other information suppliers. If we are unable to manage successfully our relationships with these suppliers,
the quality and availability of our services may be harmed.

We do not independently maintain most of the databases from which we gather information. We obtain the data used in our services from a limited number of third
party suppliers. If our current suppliers raise their prices, or are no longer able, due to government regulations or contractual arrangements, or are unwilling to provide us with certain data, we may
need to find alternative sources of information. If we are unable to identify and contract with suitable alternative data suppliers and integrate these data sources into our service offerings, we
could experience service disruptions, increased costs and reduced quality of our services. Additionally, if one or more of our suppliers terminates our existing agreements, we cannot assure you that
we will be able to obtain new agreements with third party suppliers on terms favorable to us, if at all. If one or more of these events were to occur, our business, financial condition and results of
operations could be materially adversely affected by increased costs, reduced revenue and lower profit margins.

We may incur liability based on consumer complaints

A substantial amount of our business involves sales of services to individual consumers. We have received customer complaints concerning the quality of our
services, including complaints about the currency and/or completeness of the data returned to customers. In addition, our customers have lodged similar complaints with consumer agencies, such as the
Better Business Bureau and state attorney general consumer divisions. These consumer agencies, in turn, send us an inquiry regarding the consumer complaint. We could in the future experience similar
complaints from consumers or inquiries from governmental and consumer agencies based on consumer complaints. If we are unable to resolve existing and future complaints and inquiries, we could be
subject to governmental regulatory
action as well as civil liability, which may have a material adverse effect on our business, financial condition and results of operations.

Our business and financial performance may suffer if we are unsuccessful in expanding our services, especially those related to employment screening and trust services, to
corporate and professional clients.

We intend to expand the number of services available through our Web site and develop and promote service offerings to address the needs of corporate and
professional clients. We have limited experience in providing trust services to corporate and professional clients. Attracting these clients will requires us to hire new sales and marketing personnel
or acquire companies already providing these services. We will also be required to spend money to develop and promote these new services. We may be unsuccessful in our efforts to provide these new
services in a timely and cost-effective manner and these services may never become profitable. If individual or corporate clients are unwilling to pay for these services or if the market for these
services fails to develop or continues to develop more slowly than anticipated, our business financial condition and results of operation will be materially adversely affected.

19

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We depend on a limited number of service offerings for a significant portion of our revenues

We have historically derived a substantial portion of our revenues from a small number of service offerings, particularly our individual locator, individual
profile reports and "Instant Searches" services. If we are unable to continue to offer these services or if our costs of providing these services increase such that we can no longer offer these
services at competitive prices, our business, financial condition, and results of operations may be materially adversely affected.

We have substantial fixed costs which may not be offset by our revenues

A substantial portion of our operating expenses is related to management personnel, administrative support and our advertising agreements. Many of these
agreements have non-cancelable fixed terms and minimum payment obligations. As a result, a substantial portion of our expenses in any given period is fixed costs. If we are unable to
generate sufficient revenues to offset our operating costs or if we are unable to lower our advertising costs to respond to lower than expected revenues, our results of operations would be materially
adversely affected. Our minimum non-cancelable payments under certain distribution and marketing agreements with various Internet companies is $2.7 million for the year ending
December 31, 2002.

We depend on our marketing agreements with Internet companies

An important element of our current business strategy is to maintain relationships with a number of Internet search engines and popular Web sites for advertising
and to direct and attract traffic to our Web site. The most significant of these agreements are with Yahoo!, Inc. and InfoSpace, Inc. Our agreement with Yahoo! expires on July 31,
2002 and our agreement with InfoSpace expires on September 30, 2003, although either party may cancel the last year of the InfoSpace agreement by giving written notice on or before
August 1, 2002. These advertising agreements constitute a significant portion of our operating expenses. If the costs associated with these advertising agreements increases, we may not be able
to maintain our existing marketing relationships or enter into future marketing relationships with other Internet companies. Any termination of existing agreements or failure to enter into new
agreements with Internet companies on terms favorable to us could have a material adverse effect on our business, financial condition and results of operations.

Our access to key Internet advertising depends on marketing agreements between other Internet companies that are beyond our control

Advertising arrangements with one Internet company may provide us access to another company's Web site. For example, our arrangement with InfoSpace provides us
with advertising within the white page directories of the AOL and MSN Web sites, independent of any agreements with AOL or MSN. Our advertising on these Web sites depends on the continued relationship
InfoSpace has with companies such as AOL and MSN. If this relationship is terminated for any reason and if we are either unable to enter into an agreement with these companies or unable to enter into
an agreement with another company that has an agreement providing access to AOL and/or MSN, our advertising will no longer appear on their Web sites. This could significantly reduce our advertising
reach and, consequently, lower the number of potential clients visiting our Web site, which could in turn materially adversely affect our business, financial condition and results of operations.

Service interruptions may have a negative impact on our revenues and may damage our reputation and decrease our ability to attract clients

We depend on the satisfactory performance, reliability and availability of our Web site and telecommunications infrastructure to attract clients and generate
sales. We can not assure you that we

20

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will be able to protect our operations from a system outage or data loss by events beyond our control. Events that could cause system interruptions include:



We
have experienced unanticipated system interruptions in the past and, although we have upgraded our infrastructure, these interruptions may occur again in the future. During the past
twelve months our system interruptions have been limited to less than two hours and have included a denial of service attack, after which we installed a Network Intrusion Detection System, and a power
management module outage at Exodus, our co-location facility. Substantially all of our computer and communications hardware is currently located at facilities in Southern California, which
is an area susceptible to earthquakes. We do not carry business interruption insurance sufficient to compensate fully for all losses, and in some cases, any losses from any or all these types of
events. The occurrence of any of these events may have a material adverse effect on our business, financial condition and results of operations.

We may be subject to federal and state laws relating to the Internet and the use of personal information and privacy rights

Many privacy and consumer advocates and federal regulators have become increasingly concerned with the use of personal information, particularly "credit header"
information. For certain qualified business customers, we use the social security numbers of individuals to search various databases, including those of consumer credit reporting agencies. For
example, we search the "credit header" information contained in various consumer credit reporting agencies' databases to find, among other items, date of birth, current and previous addresses, social
security numbers used by an individual or possible other names (such as married names, etc.). We also search these databses to determine if a customer's social security number is being used by any
other party. Attempts have been made and can be expected to continue to be made by various federal regulators and organized groups to adopt new or additional federal and state legislation to regulate
the use of personal information. Our results of operations could suffer materially if federal or state laws or regulations are amended or enacted in the future, or cases decided relating to the access
and use of personal information, or privacy and civil rights, in general, or with respect to the Internet or commercial online services covering issues such as property rights, distribution, taxation,
access charges and other fees, and quality of products and services. Cost increases relating to this government regulation could result in these increased costs being passed along to Internet end
users and could dampen the growth in use of the Internet as a communications and commercial medium, which could have a material adverse effect on our business and results of operations.

We depend on our key management personnel for our future success

Our success depends to a significant degree upon the continued contributions of our executive management team and its ability to effectively manage the
anticipated growth of our operations and

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personnel. The loss of Brent Cohen, our CEO, David Wachtel, our CTO, or other members of our management team and the inability to hire additional senior management, if necessary, could have a
material adverse effect on our business and results of operations. In addition, increased costs of new personnel, including members of executive management, could have a material adverse effect on our
business and operating results.

The Internet may fail to support the growth of electronic commerce

The rapid rise in the number of Internet users and the growth of electronic commerce and applications for the Internet have placed increasing strains on the
Internet's communications and transmissions infrastructure. This could lead to significant deterioration in transmission speeds and the reliability of the Internet as a commercial medium and,
consequently, could reduce the use of the Internet by businesses and individuals. The Internet may not be able to support the demands placed upon it by this continued growth. Any failure of the
Internet to support growth due to inadequate infrastructure or for any other reason would seriously limit its development as a viable source of commercial and interactive content and services. This
could materially adversely affect the acceptance of our services and our business.

Our success depends on our ability to protect and enforce our trademarks and other proprietary rights

We rely on a combination of patent, trademark, service mark, copyright and trade secret laws, restrictions on disclosure and transferring title and other methods
to protect our proprietary rights. We also generally enter into confidentiality agreements with our employees, business partners and/or others to protect our proprietary rights. It may be possible for
a third party to copy or otherwise obtain and use our proprietary information without authorization or to develop similar technology independently.

Our
registered trademarks include: "1-800 U.S. SEARCH", our logo, "The Public Record Portal", "Trust Identity," "Fraud Identity," "Vero Trust" and "Reuniting America Two
People at a Time". In addition, we have applied for a patent on our DARWIN technology and for registered trademark status for "US SEARCH.com", TrustIdentity", "FraudIdentity", and
"VeroTrust" service marks in the United States and intend to pursue registration internationally through applications. Effective patent, trademark, service mark, copyright and trade secret protection
may not be available in every country in which our products and services are made available, online or otherwise. Also, policing unauthorized use of our patent, trademark, service mark or other
proprietary rights might be difficult and expensive and we may be unable to protect our brand, patents, and trademarks from third party challenges. Our
brand may suffer and our business and results of operations could be materially and adversely affected if we are unable to effectively protect or enforce our patent, trademark, service marks or other
proprietary rights.

We may be unable to prevent third parties from developing Web sites and acquiring domain names similar to ours

We have registered several domain names, including 1800USSEARCH.com, ussearch.com, verotrust.com and prsinet.com. Competitors may obtain a corporate name and
domain name similar to ours which may cause confusion on the part of potential clients. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or
otherwise decrease the value of our trademarks and other proprietary rights and we may be required to file law suits to protect our interests. This would be costly and time consuming and our business
could suffer.

We face significant security risks related to our electronic transmission of confidential information

We rely on encryption and other technologies to provide system security to effect secure transmission of confidential information, such as credit card numbers. We
license these technologies

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from third parties. We cannot assure you that our use of applications designed for data security, or that of our third-party contractors will effectively counter evolving security risks. A security
or privacy breach could:



Any
inability to protect the security and privacy of our electronic transactions could have a material adverse effect on our profitability.

We face risks related to chargebacks processed from our merchant bank

Like many other service providers who accept credit card information without a signature over the telephone or Internet, we have issued credits as a result of
orders placed with fraudulent credit card information. We may suffer losses or damage to our reputation as a result of fraudulent use of credit card information in the future. Moreover, because we
offer services over the internet and accept credit card information without a signature, a certain percentage of our transactions are automatically charged back by the credit card companies pursuant
to their policies if the customer disputes the validity of the charge. Our chargeback rate has exceeded the permissible rates in our merchant card agreements, and we have been subject to significant
fines.

Under
the terms of our Merchant Card Agreement with Visa, chargebacks as a percentage of interchange transactions must not exceed 2.5% and the ratio of customer dispute chargebacks to
interchange transactions must not exceed 1%. In the period from April 1, 2001 through February 29, 2002, our Visa charge backs as a percentage of interchange transactions ranged from
1.61% to 3.16%. We have remained in compliance with the chargeback ratio since October 2001. Our ratio of customer dispute chargebacks to interchange transactions ratio for the same period has
ranged from 1.51% to 2.91%.

Loss
of credit card processing rights could materially adversely affect our business and results of operations. In addition, pursuant to the terms of our bank credit facility, we agreed
to reduce our chargeback rate to bring it within the permissible rates in our merchant card agreements. To accomplish this we have introduced several fraud prevention features, most notably CVV2
checks and we only accept VISA transactions which pass these checks. CVV2 is a new authentication procedure established by credit card companies which requires a cardholder to enter the CVV2 number
(the last 3 digits after the credit card number in the signature area of the card) at transaction time to verify that the card is on hand.

We could face liability based on the nature of our services and the content of the materials that we provide which may not be covered by insurance

We may face potential liability from individuals, government agencies or businesses for defamation, invasion of privacy, negligence, copyright, patent or
trademark infringement and other claims based on the nature and content of the materials that appear on our Web site or in our search reports. We also face potential liability to clients and/or the
subjects of individual search reports prepared by us for inaccurate information or misuse of the information. Although we carry a limited amount of general liability insurance, our insurance may not
cover claims of these types or may not be adequate to indemnify us for all liability that may be imposed. In addition, this insurance may not remain available to us on acceptable terms. Additionally,
we do not currently maintain liability insurance to cover claims by clients or the subjects of reports. Any imposition of liability, particularly liability that is not covered by insurance or is in
excess of our insurance coverage, could have a material adverse effect on our reputation and our business and results of operations.

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Our certificate of incorporation, bylaws and Delaware law contain provisions that could discourage a third party from acquiring us and consequently decrease the market value of
our common stock

Our certificate of incorporation grants our board of directors the authority to issue up to 1,000,000 shares of preferred stock, and to determine the price,
rights, preferences, privileges and restrictions, including voting rights of these shares without any further vote or action by the stockholders. In June 2001, we issued 203,113 shares of
Series A-1 Convertible Preferred Stock to Pequot Private Equity Fund II, L.P. The Series A-1 Convertible Preferred Stock was issued with voting, liquidation,
dividend and other rights superior to those of the common stock. The rights of the holders of common stock will be subject to, and maybe adversely affected by, the rights of the
Series A-1 Convertible Preferred Stock and any preferred stock that may be issued in the future. The issuance of preferred stock could have the effect of making it more difficult
for a third party to acquire a majority of our outstanding voting stock which could decrease the market value of our stock. Further, provisions in our certificate of incorporation and bylaws and
Delaware law could have the effect of delaying or preventing a third party from acquiring us, even if a change in control would be in the best interest of our stockholders. These provisions include
the inability of stockholders to act by written consent without a meeting and procedures required for director nomination and stockholder proposal. The holder of our Series A-1
Convertible Preferred Stock may acquire voting control upon the occurrence of certain events.

Pequot
Private Equity Fund II, L.P. currently beneficially holds approximately 63% of our common stock, assuming an immediate conversion of the Series A-1 Convertible
Preferred Stock currently held by it, exercise in full of the warrant and an immediate conversion of the Series A-1 Convertible Preferred Stock underlying the warrant.

We
have also entered into a Stockholders Agreement with Pequot Private Equity Fund II, L.P. and The Kushner-Locke Company. The Stockholders Agreement provides, among other things, that
Pequot Private Equity Fund II, L.P. and The Kushner-Locke Company will vote the shares of capital stock held by them in favor of (i) one member of the Board of Directors being nominated by
Kushner- Locke, (ii) one member, if Pequot Private Equity Fund II, L.P. owns between 10-35% of the shares of common stock issued upon conversion of the Series A-1
Convertible Preferred Stock, or two members, if Pequot Private Equity Fund II, L.P. owns at least 35% of the shares of common stock issued upon conversion of the Series A-1
Convertible Preferred Stock, of the Board of Directors being nominated by Pequot Private Equity Fund II, L.P., (iii) our Chief Executive Officer as a member of our Board of Directors, and
(iv) three independent members of the Board of Directors, each of which shall be nominated for election by the consent of the Board Members nominated by Pequot Private Equity Fund II, L.P. and
a majority of all other members of the Board of Directors other than Board Member nominated by The Kushner-Locke Company.

Pequot
Private Equity Fund II, L.P. will be able to exercise voting control over issues presented to our stockholders for approval. Further, by virtue of the Stockholders Agreement and
the rights, preferences and privileges of the Series A-1 Convertible Preferred Stock, Pequot Private Equity Fund II, L.P. possesses certain special voting and approval rights which
could prevent us from taking certain major corporate actions such as the issuance of additional securities, the payment of dividends, or the merger of us with or into another entity or sale of
substantially all of our assets.

Our directors, executive officers and existing stockholders and their affiliates will continue to have substantial control over our company, and their interests may differ from
and conflict with yours

Our executive officers, directors and principal stockholders beneficially own, in total, 89% of our outstanding common stock. As a result, these stockholders may
have interests that are different from and may conflict with yours, and will be able to influence matters requiring stockholder approval, including the election of directors and approval of
significant corporate transactions. This could have the effect of delaying or preventing a change of control of our company or otherwise cause us to take

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action that may not be in the best interests of all stockholders, either of which in turn could reduce the market price per share of our common stock or prevent you from receiving a premium in such
transaction. This concentration of stock ownership may adversely affect the trading price of our common stock due to investors' perception that conflicts of interest may exist or arise.

Your ownership interest may be materially diluted upon exercise of options and warrants

As of December 31, 2001, we had granted options and warrants to purchase an aggregate of approximately 22,143,916 shares of common stock at exercise prices
ranging from $0.01 per share to $11.13 per share. To the extent that the stock options are exercised, material dilution of the ownership interest of our stockholders will occur. We also expect that in
the ordinary course of our business we will issue additional warrants and grant additional stock options including, but not limited to, options granted pursuant to our stock option plans.

Item 3. Quantitative and qualitative disclosures about market risk

We considered the provision of Financial Reporting Release No. 48 "Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative
Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent In Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity
Instruments." We had no holdings of derivative financial instruments at March 31, 2002 and our total liabilities as of March 31, 2002 consist primarily of notes payable and accounts
payable that have fixed interest rates and were not subject to any significant market risk.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On April 3, 2000 a two count tradename and service mark complaint was filed against the Company in the United States District Court for the Eastern
District of Virginia, styled U.S. Search, LLC v USSearch.com Inc. Civil Action No. 00-554-A. On January 26, 2001, our motion for summary judgment was
granted and the court ordered that both counts of plaintiff's complaint be dismissed with prejudice. Plaintiff has appealed this matter to the U.S. Court of Appeals, Fourth Circuit. The hearing on
appeal is scheduled for June 6, 2002.

In
May 2001, ChoicePoint, Inc., the successor entity to DBT Online, Inc., filed a complaint against us in Palm Beach County, Florida alleging breach of contract,
fraudulent misrepresentation, unjust enrichment, quantum meruit and breach of the implied covenant of good faith and fair dealing. ChoicePoint sought approximately $1.5 million in damages, as
well as interest and attorneys' fees. US SEARCH removed this action to the United States District Court for the Southern District of Florida. The United States District Court for the Southern District
of Florida ordered the matter to arbitration. April 2002 and in June 2002 the arbitrator awarded us a credit of $297,671 to be deducted from invoices of $1,418,731. We currently have
approximately $1,000,000 accrued for this liability. We have not had enough time since the award was rendered to review the award and consider our options. The costs related to this litigation,
including the fees and costs of our attorneys and other litigation support professionals, have been less than $100.000.

We
may from time to time become a party to various legal proceedings arising in the ordinary course of business.

Item 2. Changes in Securities and Use of Proceeds.

On January 18, 2002, the Company sold to 26 accredited investors introduced to the Company by Pequot Capital Management, Inc. (the "January Purchasers") 8%
Convertible Promissory Notes due

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January 17, 2003 in the aggregate principal amount of $4.6 million (the "January Notes") and four year warrants to purchase up to an aggregate of 1,782,176 shares of common stock at an initial
exercise price of $1.044 per share (the "January Warrants"). The January Notes are convertible into the number of shares of common stock calculated by dividing the amount of principal and accrued but
unpaid
interest due under the notes by the lower of (i) $0.783 or (ii) 90% of the 10-day average closing bid price for the Company's common stock on the Nasdaq National Market for the 10 business days prior
to the conversion date of the January Notes. The January Notes automatically convert into common stock upon receipt of the approval of the stockholders of the Company of the issuance of the shares of
common stock underlying the January Notes. If the January Notes have not converted into common stock prior January 17, 2003, the principal and all accrued but unpaid interest will be immediately due
and payable. The Company expects to present to its stockholders at the 2002 Annual Meeting of Stockholders a proposal to approve the issuance of the shares of common stock underlying the January
Notes. The issuance and sale of the January Notes and the January Warrants to the January Purchasers was exempt from the registration requirements of the Securities Act of 1933, as amended (the "Act")
pursuant to Rule 506 of Regulation D promulgated thereunder.

On
March 15, 2002, the Company sold to 12 accredited investors arranged by Stonegate Securities Inc., the Company's placement agent (the "March Purchasers"), 8% Convertible Promissory
Notes due December 20, 2002 in the aggregate principal amount of $6.1 million (the "March Notes") and five year warrants to purchase up to an aggregate of 2,144,118 shares of common stock at an
initial exercise price of $1.044 per share (the "March Warrants"). The March Notes are convertible into the number of shares of common stock calculated by dividing the amount of principal and accrued
but unpaid interest due under the notes by the lower of (i) $0.85 or (ii) 90% of the 10-day average closing bid price for the Company's common stock on the Nasdaq National Market for the 10 business
days prior to the conversion date of the notes. These notes automatically convert into common stock upon receipt of the approval of the Company's stockholders of the issuance of the shares of common
stock underlying the March Notes. If the March Notes have not converted into common stock prior to December 20, 2002, the principal and all accrued but unpaid interest will be immediately due and
payable. The Company expects to present to its stockholders at the 2002 Annual Meeting of Stockholders a proposal to approve the issuance of the shares of common stock underlying these March Notes.
The issuance and sale of the March Notes and the March Warrants to the March Purchasers was exempt from the registration requirements of the Act pursuant to Rule 506 of Regulation D promulgated
thereunder.

In
compensation for its services as placement agent in connection with the sale of the March Notes and March Warrants to the March Purchasers, the Company paid Stonegate Securities, Inc.
fees in the aggregate of $375,000 and issued to affiliates of Stonegate Securities, Inc. warrants to purchase up to an aggregate of 714,706 shares of common stock at an exercise price of $0.85 per
share (the "Stonegate Warrants"). The issuance and sale of the Stonegate Warrants were exempt from the registration requirements of the Act pursuant to Rule 506 of Regulation D promulgated thereunder.

Item 3. Defaults upon Senior Securities

None

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

None

Item 5. Other Information

None

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Item 6. Exhibits and Reports on Form 8-K





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SIGNATURES

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

|                   |  | US SEARCH.COM INC.
(Registrant)
|------------------ |  | -------------------------------
|Date: July 2, 2002 |  | By:                            
|                   |  |                                
|                   |  | By:                            
|                   |  |                                

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