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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

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(Mark One)

|/x/ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2001

OR

|/ / | 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

95-4504143(State or other jurisdiction of
incorporation or organization)

(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 /x/  No / /

There
were 18,029,355 shares of outstanding Common Stock of the registrant as of November 9, 2001.

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US SEARCH.COM INC.        Form 10-Q for the quarterly period ended September 30, 2001        INDEX

|                               |                                                                                                | Page Number                                                                          
|------------------------------ | ---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------
|Part I.  FINANCIAL INFORMATION |                                                                                                | 3                                                                                    
|                               | Item 1.  Financial Statements                                                                  |                                                                                      
|                               |                                                                                                | Statements of Operations for the nine month periods ended September 30, 2001 and 2000
|                               |                                                                                                | Balance Sheets as of September 30, 2001 and December 31, 2000                        
|                               |                                                                                                | Statements of Cash Flows for the nine month periods ended September 30, 2001 and 2000
|                               |                                                                                                | Notes to Financial Statements                                                        
|                               | Item  2. Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                      
|                               | Item  3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                      
|Part II.  OTHER INFORMATION    |                                                                                                | 25                                                                                   
|                               | Item 1.  Legal Proceedings                                                                     |                                                                                      
|                               | Item 2.  Changes in Securities and Use of Proceeds                                             |                                                                                      
|                               | Item 3.  Defaults Upon Senior Securities                                                       |                                                                                      
|                               | Item 4.  Submission of Matters to a Vote of Security Holders                                   |                                                                                      
|                               | Item 5.  Other Information                                                                     |                                                                                      
|                               | Item 6.  Exhibits and Reports on Form 8-K                                                      |                                                                                      
|SIGNATURES                     |                                                                                                | 28                                                                                   
|INDEX TO EXHIBITS              |                                                                                                |                                                                                      

2

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PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

US SEARCH.com Inc.
STATEMENTS OF OPERATIONS

|                                                                                                                                                                                                                                                      |                                                                                                                                               | Nine months Ended                                     |            | Three Months Ended |            
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------- | ------------------ | -----------
|
|
|Net revenue                                                                                                                                                                                                                                           |                                                                                                                                               | $                                                     | 14,464,00  |                    | $          
|Cost of services                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       | 3,516,000  |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       |            |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               | Gross profit                                          |            |                    | 10,948,000 
|                                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       |            |                    |            
|Operating expenses:                                                                                                                                                                                                                                   |                                                                                                                                               |                                                       |            |                    |            
|                                                                                                                                                                                                                                                      | Selling and marketing (including non cash charges relating to stock options and warrants of $0, $1,815,000, $0, and $1,659,000, respectively) |                                                       |            | 7,703,000          |            
|                                                                                                                                                                                                                                                      | Information technology                                                                                                                        |                                                       |            | 3,395,000          |            
|                                                                                                                                                                                                                                                      | General and administrative(including noncash charges relating to stock options of $0, $32,000, $0 and $198,000, respectively)                 |                                                       |            | 7,270,000          |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       |            |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               | Total operating expenses                              |            |                    | 18,368,000 
|                                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       |            |                    |            
|Loss from operations                                                                                                                                                                                                                                  |                                                                                                                                               |                                                       | (7,420,000 | )                  |            
|Interest income (expense), net (including non-cash charges of $92,000 and $787,000 relating to warrants, beneficial conversion feature and amortization of debt issuance costs for the three and nine months ended
September 30, 2001, respectively.) |                                                                                                                                               |                                                       | (897,000   | )                  |            
|Other income, net                                                                                                                                                                                                                                     |                                                                                                                                               |                                                       | 26,000     |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       |            |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               | Loss before income taxes                              |            |                    | (8,291,000 
|Provision for income taxes                                                                                                                                                                                                                            |                                                                                                                                               |                                                       | 2,000      |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       |            |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               | Net loss                                              |            |                    | (8,293,000 
|Deemed dividend on exchange of preferred stock                                                                                                                                                                                                        |                                                                                                                                               |                                                       | 12,575,000 |                    |            
|Accretion of discount on preferred stock                                                                                                                                                                                                              |                                                                                                                                               |                                                       | 203,000    |                    |            
|Accrued preferred stock dividends                                                                                                                                                                                                                     |                                                                                                                                               |                                                       | 200,000    |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       |            |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               | Net loss attributable to common stockholders          |            | $                  | (21,271,000
|                                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       |            |                    |            
|                                                                                                                                                                                                                                                      |                                                                                                                                               | Net loss per share attributable to common stockholder |            | $                  | (1.18      
|                                                                                                                                                                                                                                                      |                                                                                                                                               |                                                       |            |                    |            
|Weighted-average shares outstanding used in per share calculation                                                                                                                                                                                     |                                                                                                                                               |                                                       | 17,968,189 |                    |            

The accompanying notes are an integral part of these statements.

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US SEARCH.com Inc.
BALANCE SHEETS

|                                                  |                                                                                                                                          | September 30, 2001                                   |         | December 31, 2000 |           
|------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ----------------- | ----------
|
|ASSETS:                                           |                                                                                                                                         
|Current assets:                                   |                                                                                                                                          |                                                      |         |                   |           
|                                                  | Cash and cash equivalents                                                                                                                |                                                      | $       | 2,595,000         |           
|                                                  | Restricted cash                                                                                                                          |                                                      |         | 1,200,000         |           
|                                                  | Accounts receivable, net                                                                                                                 |                                                      |         | 118,000           |           
|                                                  | Other current assets                                                                                                                     |                                                      |         | 2,295,000         |           
|                                                  |                                                                                                                                          |                                                      |         |                   |           
|                                                  | Total current assets                                                                                                                     |                                                      |         | 6,208,000         |           
|                                                  | Property and equipment, net                                                                                                              |                                                      |         | 9,210,000         |           
|                                                  | Other assets                                                                                                                             |                                                      |         | 173,000           |           
|                                                  |                                                                                                                                          |                                                      |         |                   |           
|                                                  | Total assets                                                                                                                             |                                                      | $       | 15,591,000        |           
|                                                  |                                                                                                                                          |                                                      |         |                   |           
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):   |                                                                                                                                         
|Current Liabilities:                              |                                                                                                                                          |                                                      |         |                   |           
|                                                  | Accounts payable                                                                                                                         |                                                      | $       | 5,934,000         |           
|                                                  | Accrued liabilities                                                                                                                      |                                                      |         | 898,000           |           
|                                                  | Bank debt, current portion                                                                                                               |                                                      |         | 1,185,000         |           
|                                                  | Notes payable, current portion                                                                                                           |                                                      |         | 259,000           |           
|                                                  | Capital lease obligations, current portion                                                                                               |                                                      |         | 281,000           |           
|                                                  |                                                                                                                                          |                                                      |         |                   |           
|                                                  |                                                                                                                                          | Total current liabilities                            |         |                   | 8,557,000 
|Bank debt, net of current portion                 |                                                                                                                                          |                                                      | 233,000 |                   |           
|Capital lease obligations, net of current portion |                                                                                                                                          |                                                      | 7,000   |                   |           
|Notes payable                                     |                                                                                                                                          |                                                      |         |                   |           
|Other non-current liabilities                     |                                                                                                                                          |                                                      | 5,000   |                   |           
|                                                  |                                                                                                                                          |                                                      |         |                   |           
|                                                  |                                                                                                                                          | Total liabilities                                    |         |                   | 8,802,000 
|                                                  |                                                                                                                                          |                                                      |         |                   |           
|Mandatorily redeemable preferred stock            |                                                                                                                                          |                                                      |        |                   |           
|Stockholders' equity (deficit):                   |                                                                                                                                          |                                                      |         |                   |           
|                                                  | Preferred stock, $0.001 par value; 203,113 shares issued and outstanding as of September 30, 2001 and 0 as of December 31, 2000          |                                                      |         |                  |           
|                                                  | Common stock; $0.001 par value; 18,029,355 shares issued and outstanding as of September 30, 2001 and 17,938,244 as of December 31, 2000 |                                                      |         | 18,000            |           
|                                                  | Additional paid-in capital                                                                                                               |                                                      |         | 77,645,000        |           
|                                                  | Accumulated deficit                                                                                                                      |                                                      |         | (70,874,000       | )         
|                                                  |                                                                                                                                          |                                                      |         |                   |           
|                                                  |                                                                                                                                          | Total stockholders' equity (deficit)                 |         |                   | 6,789,000 
|                                                  |                                                                                                                                          |                                                      |         |                   |           
|                                                  |                                                                                                                                          | Total liabilities and stockholders' equity (deficit) |         | $                 | 15,591,000
|                                                  |                                                                                                                                          |                                                      |         |                   |           

The
accompanying notes are an integral part of these statements.

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US SEARCH.com Inc.
Statement of Cash Flows
(unaudited)

|                                                                            |                                                                                    | Nine months Ended September 30, |           
|--------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------- | ----------
|
|Cash flows from operating activities:                                       |                                                                                    |                                 |           
|                                                                            | Net Loss                                                                           |                                 | $         
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                                                    |                                 |           
|                                                                            | Depreciation and amortization                                                      |                                 |           
|                                                                            | Provision for doubtful accounts                                                    |                                 |           
|                                                                            | Stock option compensation                                                          |                                 |           
|                                                                            | Loss on disposal of property and equipment                                         |                                 |           
|                                                                            | Charge for warrants and beneficial conversion feature on convertible notes payable |                                 |           
|                                                                            | Amortization of debt issuance costs                                                |                                 |           
|                                                                            | Interest on convertible notes payable                                              |                                 |           
|                                                                            | Change in assets and liabilities:                                                  |                                 |           
|                                                                            |                                                                                    | Accounts receivable             |           
|                                                                            |                                                                                    | Prepaid and other assets        |           
|                                                                            |                                                                                    | Accounts payable                |           
|                                                                            |                                                                                    | Accrued liabilities             |           
|                                                                            |                                                                                    |                                 |           
|Net cash used in operating activities                                       |                                                                                    |                                 | (6,994,000
|                                                                            |                                                                                    |                                 |           
|Cash flows from investing activities:                                       |                                                                                    |                                 |           
|                                                                            | Purchase of property and equipment                                                 |                                 |           
|                                                                            | Proceeds from disposal of property and equipment                                   |                                 |           
|                                                                            |                                                                                    |                                 |           
|Net cash used by investing activities                                       |                                                                                    |                                 | (3,615,000
|                                                                            |                                                                                    |                                 |           
|Cash flows from financing activities:                                       |                                                                                    |                                 |           
|                                                                            | Increase restricted cash                                                           |                                 |           
|                                                                            | Proceeds from bank financing                                                       |                                 |           
|                                                                            | Repayments of third party notes payable                                            |                                 |           
|                                                                            | Repayments of capital lease obligations                                            |                                 |           
|                                                                            | Proceeds from notes payable                                                        |                                 |           
|                                                                            | Debt issuance costs                                                                |                                 |           
|                                                                            | Net proceeds from convertible preferred stock                                      |                                 |           
|                                                                            | Proceeds from stock option exercises                                               |                                 |           
|                                                                            |                                                                                    |                                 |           
|Net cash provided by financing activities                                   |                                                                                    |                                 | 10,373,000
|                                                                            |                                                                                    |                                 |           
|Net decrease in cash and cash equivalents                                   |                                                                                    |                                 | (236,000  
|Cash at beginning of period                                                 |                                                                                    |                                 | 2,831,000 
|                                                                            |                                                                                    |                                 |           
|Cash at end of period                                                       |                                                                                    | $                               | 2,595,000 
|                                                                            |                                                                                    |                                 |           
|Non-cash items:                                                             |                                                                                    |                                 |           
|                                                                            | Conversion of notes payable to convertible preferred stock                         |                                 | $         
|                                                                            | Issuance of warrants in connection with bank financing                             |                                 |           
|                                                                            | Issuance of warrants in connection with convertible notes payable                  |                                 |           
|                                                                            | Capital lease obligations                                                          |                                 |           
|                                                                            | Conversion of accounts payable to notes payable                                    |                                 |           

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, corporate and professional clients with a single, comprehensive access point to a broad range of
individual reference services and background screening services. Individual reference services include personal identifying information about individuals that can be used to identify, locate or verify
the identity and background of an individual. The Company was formed as a California S Corporation in 1994, and reincorporated as a Delaware Corporation in April 1999.

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 present fairly the financial
position of the Company as of September 30, 2001, and the results of its operations for the three and nine month periods ended September 30, 2001 and 2000. Interim results are not
necessarily indicative of results to be expected for a full fiscal year.

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 September 30, 2001, stock options representing 13,237,561 shares of common stock,
42,107,304 shares issuable on conversion of Series A-1 convertible preferred stock and warrants representing 1,750,000 and 8,750 shares of common and preferred stock, respectively,
have been excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive stock. As of September 30, 2000, there were 6,690,444
options and 1,750,000 warrants which are excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"),
"Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company does not believe that the adoption of SFAS 141 will have a significant impact on its financial statements.

In
June 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective
January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard

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includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain
intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires companies to
complete a transitional goodwill impairment assessment. The Company does not believe that the adoption of SFAS 142 will have a significant impact on its financial statements.

Reclassifications

Certain reclassifications have been made to the 2000 financial statements to conform with the 2001 presentation.

3.  Notes Payable:

In February 2001 and March 2001, Pequot Private Equity Fund II, L.P. ("Pequot") advanced the Company an aggregate of $10 million from the
issuance of $10,150,000 of promissory notes that were convertible into Series A-1 Convertible Preferred Stock. The promissory notes bore interest at a rate of seven percent (7%) per
annum and, if not previously converted into Series A-1 Convertible Preferred Stock, were due and payable on April 1, 2002. On June 5, 2001, the promissory notes and
accrued interest were converted to 103,113 shares of Series A-1 Preferred Stock with a conversion price of $0.48237 per common share (see Note 5).

In
June 2001, the Company recorded as additional interest expense a non-cash charge of $445,000 for a contingent beneficial conversion feature ("BCF") relating to
the March 2001 note. The BCF was computed based on the difference between the effective conversion price per share and the fair value of the common stock on the commitment date of the
March 30, 2001 note, multiplied by the most beneficial number of shares into which the promissory note was convertible.

To
induce Pequot to advance the purchase price of the Series A-1 Convertible Preferred Stock in the form of the promissory notes, the Company agreed to issue to
Pequot a warrant to purchase up to 5,000 shares of Series A-1 Convertible Preferred Stock at an initial purchase price of $100 per share. 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 of $250,000 was recorded as additional interest
expense in June 2001.

4.  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
September 30, 2001, the minimum non-cancelable payments due under these agreements are approximately $1.2 million for the remainder of 2001, $3.2 million for 2002 and
$1.4 million for 2003.

Lease Agreement

In September 1999, the Company entered into a five-year lease for a 52,500 square foot facility located in the Marina Del Rey area of Los
Angeles, California. Under the terms of the lease agreement, the Company is committed to make total rental payments of $3.5 million over the remaining term of the lease.

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Supplier Agreement

In October 2001, the Company entered into a data supply agreement. The terms of the agreement provide for minimum non-cancelable payments of
$207,000 in the remainder of 2001, $828,000 in 2002 and $621,000 in 2003.

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, the company's motion for summary judgment
was granted and the court ordered that both counts of plaintiff's complaint be dismissed with prejudice. The Plaintiff filed an appeal to the United States Court of Appeals for the Fourth Circuit
which is pending.

On
August 14, 2000 a proposed class action complaint was filed against the Company in the Superior Court of the State of California for the County of Los Angeles, Dorothy
Pilkington and Alice Schwartz-Scholl on behalf of themselves, and all other similarly situated, and on behalf of the general public vs. US Search.com, Inc., Case No. BC234858. The Complaint
claims damages for breach of contract, violation of Unfair Practices Act, violation of the Consumer Legal Remedies Act, fraud and negligent misrepresentation in connection with the Company's adoption
services. The Company and its insurance carrier have agreed with plaintiffs' counsel to terms for a settlement of this matter that has been approved by the court. The Company's insurance carrier has
agreed to coverage of the settlement amount with the Company agreeing to contribute $50,000 pursuant to a promissory note bearing no interest and payable in January 2002.

In
May 2001, ChoicePoint, Inc., the successor entity to DBT Online, Inc., served the Company with a complaint filed 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. The Company 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 Company believes that it has meritorious defenses to ChoicePoint's claims and that some of the allegations contained in the complaint are without merit
and were filed maliciously and in bad faith. The Company intends to defend itself vigorously in this action. The Company also believes that it has meritorious counter-claims against ChoicePoint and
intends to prosecute vigorously those claims. Even if the Company is ultimately successful in defending itself, the costs related to this litigation, including the fees and costs of the attorneys and
other litigation support professionals, could be significant.

5.  Series A-1 Convertible Preferred Stock

On June 5, 2001 the Company issued 203,113 shares of the Company's newly issued Series A-1 Convertible Preferred Stock (the
"Series A-1 Preferred") and a warrant to purchase an additional 5,000 shares of Series A-1 Preferred (the "Series A-1 Warrant"). The
Series A-1 Preferred and the Series A-1 Warrant (collectively, the "Securities") were issued pursuant to a Preferred Stock Exchange and Purchase Agreement by and
between the Company and Pequot (the "Agreement"). The Series A-1 Convertible Preferred Stock has a stated value of $100 per share, a par value of $0.001 per share and is convertible
into common stock of the Company at $0.48237 per share of common stock.

Pursuant
to the Agreement, Pequot exchanged all of the outstanding shares of Series A Preferred Stock it purchased in September 2000, delivered to the Company for
cancellation the Series A Warrant to purchase up to 75,000 additional shares of Series A Preferred Stock that was issued in connection with the September transaction, and converted two
promissory notes bearing interest at an annual rate

8

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of 7% in the aggregate amount of $10.150 million (see Note 3) for 203,113 shares of Series A-1 Preferred.

In
connection with the Agreement, the Company agreed to present to its stockholders a proposal to increase the authorized common stock of the Company to allow fully the conversion of
the Series A-1 Convertible Preferred Stock and the exercise of Series A-1 Warrant and stock options which may be issued pursuant to existing stock option plans of
the Company. On July 25, 2001, the shareholders of the Company voted to increase the authorized number of common shares of the Company to 150,000,000.

As
a result of the exchange of the Series A Preferred Stock for the Series A-1 Preferred Stock, the Company recorded in the second quarter ended
June 30, 2001, a deemed dividend on the exchange of $12.6 million, representing the excess of the fair value of the Series A-1 Preferred over the carrying value
of the Series A Preferred Stock, the cancelled Series A Warrant and a portion of the beneficial conversion feature recorded in September 2000.

The
following is a summary of the principal terms of the Series A-1 Preferred:

Dividends

From the date of original issuance of the Series A-1 Convertible Preferred Stock through September 7, 2003, the holders of such
preferred stock, in preference to the holders of shares of any class or series of capital stock of the Company with respect to dividends, shall be entitled to receive, when, as and if declared by the
Board of Directors of the Company, non-cumulative cash dividends at an annual rate of 6%. After September 7, 2003, the holders of Series A-1 Convertible Preferred
Stock shall receive cumulative dividends at an annual rate of 6%, which dividends shall be paid quarterly in the form of additional shares of Series A-1 Preferred or cash at the
Company's election. In addition, in the event any dividends are declared with respect to the common stock of the Company, the holders of Series A-1 Preferred shall be entitled to
receive as additional dividends an amount equal to the amount of dividends that each such holder would have received had the Series A-1 Preferred been converted into common stock as
of the date immediately prior to the record date of such dividend.

Liquidation Preference

In the event of a liquidation, dissolution or winding up of the affairs of the Company, the holders of Series A-1 Preferred shall be
entitled to receive out of the assets of the Company an amount in cash or stock at the Company's discretion equal to $100 per share of Series A-1 Preferred plus an amount equal to
all declared and unpaid and any accrued and unpaid dividends through the date of the distribution before any payment is made or assets distributed to the holders of any class or series of the common
stock of the Company or any other class or series of the Company's capital stock ranking junior to the Series A-1 Preferred with respect to liquidation. After the above-referenced
liquidation preference is paid, the holders of the Common Stock and the Series A-1 Preferred, on an as converted basis, will participate ratably in the remaining assets available
for distribution to the stockholders. The acquisition of the Company resulting in a transfer of more than 50% of the outstanding voting power of the Company or the sale of all or substantially all of
the assets of the Company shall be treated as a liquidation of the Company unless the holders of a majority-in-interest of the Series A-1 Preferred shall
agree not to treat such event as a liquidation; provided, that the Company may unilaterally and without action of any holder of the Series A-1 Preferred elect to pay this amount in
shares of common stock of the Company.

The
Series A-1 Preferred is classified as equity in the accompanying balance sheet as the Company has the right, unilaterally and without action of the holders of
the Series A-1 Preferred, to elect to pay the liquidation amount in shares of common stock in lieu of cash.

9

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Optional Redemption

At any time after September 7, 2005, the Company may, upon sixty (60) days written notice to the holders of the Series A-1
Preferred Stock, redeem all, but not less than all, of the then issued and outstanding shares of Series A-1 Preferred for an amount equal to $103.00 per share of
Series A-1 Preferred, plus the amount of any accrued and unpaid dividends thereon.

Voting Rights

The holders of Series A-1 Preferred shall be entitled to vote together with the holders of common stock on all matters submitted for a vote
of the stockholders of the Company, including the election of directors. The holders of Series A-1 Preferred shall also have the right, voting separately as a single class, to elect
up to 2 members of the Board of Directors of the Company (the "Series A-1 Directors"). If there shall occur certain material events with respect to the Company, including, among
other events, the Company's failure to timely declare or pay the required dividends on the Series A-1 Preferred, or any obligation of the Company, whether as principal, guarantor,
surety or other obligor for the payment of indebtedness or borrowed money in excess of $5,000,000 becoming or being declared due and payable prior to the express maturity thereof and not being paid
when due or within any grace period and such default remaining uncured for 15 days, the holders of the Series A-1 Preferred shall have the right, voting as a separate class,
to elect a sufficient number of additional directors of the Company such that the Series A-1 Directors constitute a majority of the Board of Directors of the Company. This right
shall terminate upon the curing of the event that gave rise to it.

Preemptive Rights

In the event that the Company proposes to issue any shares of its common stock or securities convertible into or exchangeable or exercisable for shares of
Common Stock in any transaction (other than certain specified exceptions) each holder of Series A-1 Preferred shall have the right to purchase its pro rata amount of such shares
(computed on an as-converted and fully diluted basis).

Conversion

The Series A-1 Preferred is convertible at any time after the effectiveness of an increase in the authorized number of shares of common
stock of the Company sufficient to allow the conversion of the
Series A-1 Preferred into common stock. The conversion price per share of the Series A-1 Preferred shall be $0.48237, subject to adjustment under certain
circumstances.

The
Series A-1 Preferred will automatically convert to common stock upon the earlier of (1) the daily price of common stock exceeding $3.00 for ten
consecutive days during a 25 day period after September 7, 2001 and (2) a firmly written public offering of the company's common stock for gross proceeds of at least
$25 million.

Special Approval Rights

As long as Pequot and/or its affiliates, in the aggregate, hold more than 25% of the Series A-1 Preferred, the Company will not take certain
actions without the consent of the Board of Directors and the consent of the Series A-1 Directors.

6.  Bank Debt

In September 2001, the company entered into a loan and security agreement with a bank for a $3.0 million credit facility. The facility consists
of a revolving credit line totaling $2,000,000 with a $1,000,000 letter of credit sublimit and an equipment line totaling $1,000,000. Up to 30% of the equipment line may be used for the purchase of
software. Borrowings under the revolving credit line

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bear interest at the prime rate plus 2.5% and are due and payable on September 11, 2002. Principal payments under the equipment line are due in equal monthly installments for hardware advances
and in 18 equal installments for software advances and bear interest at the prime rate plus 2.75%. The credit facility is collateralized by all of the personal property of the company, tangible and
intangible.

The
credit facility contains a number of significant financial covenants including minimum liquidity, operating performance, EBITDA variance and monthly cash burn with which the
company must comply. As of September 30, 2001 the company was not in compliance with certain of these financial covenants. The Company has subsequently received a waiver from the bank.

In
connection with the Agreement, the company issued the bank a warrant to purchase 3,750 shares of the company's Series A-1 Convertible Preferred Stock with an
exercise price of $100 per share. The Series A-1 Convertible Preferred Stock is convertible into 777,412 shares of the company's common stock at a price of $0.48237 per share. As a
result of the issuance of the warrant, the company has recorded
non-cash debt issuance costs in the amount of $1.1 million which are being amortized over the life of the loan. Debt issuance costs are included in other current assets in the accompanying
balance sheet.

In
October 2001 the company issued a standby letter of credit under the facility on behalf of its landlord for $1,000,000, releasing $1,000,000 from restricted cash.

7.  Subsequent Event

On October 10, 2001 the company signed a letter of intent to acquire Professional Resource Screening, Inc. (PRSI), a privately held background
screening company. Under the terms of the agreement, the Company will pay up to $16.0 million in total consideration, of which $11.5 million is in the form of Company common stock. The
agreement provides for total cash payments of $3.0 million, of which $400,000 is due on January 15, 2002, $1,080,000 in monthly installment payments due beginning 30 days after the close
of the transaction, and potential payments totaling $1,520,000 based on future cashflow and profitability beginning seven months after the close of the transaction. The agreement also provides for an
earnout whereby the selling shareholders of PRSI may be eligible for up to $1.5 million in additional compensation after meeting certain profitability and revenue targets. As of
November 9, 2001, the Company has loaned PRSI $285,000 of which $50,000 was outstanding as of September 30, 2001. The promissory notes are unsecured, bear interest at 7% and are payable
in three months of the date of disbursement.

Up
to one year after the closing of the transaction, the Company may reduce the total purchase price by the amount of any material unrecorded liabilities or any material impairment of
assets listed on the closing balance sheet.

The
transaction is expected to close in January 2002 pending customary regulatory and shareholder approval and other closing conditions.

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

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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 individual, corporate and professional clients with a single, comprehensive access point to a broad range of information and data for
locating individuals, discovering more about individuals and businesses, preventing fraud and screening prospective employees, among other things. Our services can be accessed through our Web sites, www.ussearch.comandwww.verotrust.com, or by calling one of our toll free telephone numbers,
1-800-USSEARCH for consumers or 1-877-327-2410 for businesses.

US
SEARCH's core competency of accessing data from many disparate sources is leveraged across the three product lines that US SEARCH provides: consumer services, corporate services
and internet trust services. US SEARCH is currently developing differentiating, proprietary technology that will allow the Company to more efficiently access disparate data in order to answer precise
questions and to integrate results of its searches into meaningful responses that provide the information US SEARCH customers seek, whether it is to locate an individual, verify a business, screen a
prospective employee or provide a risk profile that will help one entity determine whether or not to engage in a transaction with another. US SEARCH has filed a patent application pertaining to this
technology.

Results of Operations

Comparison of the Three Months Ended September 30, 2001 to the Three Months Ended September 30, 2000

Net Revenues.Our net revenues decreased from approximately $5.2 million for the three months ended
September 30, 2000 to approximately $4.5 million for the three months ended September 30, 2001, representing a 13.3% decrease. The elimination of non cost effective television and
Internet advertising contracts beginning in the fourth quarter of 2000 contributed significantly to the decrease. Decreased website visitor traffic, especially in September 2001, also
contributed to the decline in revenues for the period.

Gross Profit.Gross profit increased from approximately $2.8 million for the three months ended
September 30, 2000, to approximately $3.5 million for the three months ended September 30, 2001, representing a 24.8% increase. Gross profit as a percentage of net revenues was
approximately 76.9% and 53.5% for the three month periods ended September 30, 2001 and 2000, respectively. Data acquisition and fulfillment costs as a percentage of revenues in 2001 decreased
significantly compared to 2000 due to the use of a lower cost data providers for certain products. Increased productivity also contributed significantly to the increase in gross profit.

Selling and Marketing Expenses.Selling and marketing expenses, excluding non cash charges of $1.7 million for
the three months ended September 30, 2000, decreased from approximately $5.9 million for the three months ended September 30, 2000 to approximately $2.5 million for the
three months ended September 30, 2001. In the quarter ended September 30, 2000, the Company recorded a $2.2 million non-cash charge for warrants issued to one of its
Internet advertising partners in

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connection with the termination of a long-term commitment. As a percentage of net revenues, selling and marketing expenses including non-cash charges decreased to approximately 54% for the
three months ended September 30, 2001, from approximately 113% for the three months ended September 30, 2000. Advertising costs declined in the three months ending September 30,
2001, compared to the same period in 2000 due to the restructuring of our online advertising agreements requiring lower guaranteed minimum payments and elimination of non cost effective TV
advertising.

Information Technology Expenditures.Information technology expenditures remained relatively flat for the three month
period ended September 30, 2001 as compared to the 2000 period.

General and Administrative Expenses.General and administrative expenses for the three months ended
September 30, 2001 remained relatively flat compared to the same period in 2000. The small change is the result of a $402,000 increase in collection expenses and a $113,000 increase in
depreciation expense offset primarily by substantial decreases in amounts paid for outside professionals, including legal fees.

Interest Income (Expense) Net.Interest expense, net of interest income, was $96,000 for the three months ended
September 30, 2001 compared to interest income of $112,000 for the three months ended September 30, 2000. This increase in interest expense is primarily attributable to a non cash charge
of $92,000 associated with warrants issued in conjunction with the company's credit facility from the bank.

Comparison of the Nine months Ended September 30, 2001 to the Nine months Ended September 30, 2000

Net Revenues.Net revenues decreased from approximately $18.6 million for the nine months ended
September 30, 2000 to approximately $14.5 million for the nine months ended September 30, 2001, representing a 22.2% decrease. The elimination of non cost effective television and
Internet advertising contracts beginning in the fourth quarter of 2000 contributed significantly to the decrease. Decreased website visitor traffic, especially in September 2001, also
contributed to the decline in revenues for the period.

Gross Profit.Gross profit increased from approximately $9.9 million for the nine months ended
September 30, 2000, to approximately $10.9 million for the nine months ended September 30, 2001, representing a 10.6% increase. Gross profit as a percentage of net revenues was
approximately 75.7% and 53.3% for the nine month periods ended September 30, 2001, and September 30, 2000, respectively. Data acquisition and fulfillment costs as a percentage of
revenues in 2001 decreased by approximately $2.5 million, or by 60%, compared to 2000 due to the use of lower cost data providers for certain products. Also contributing to the improvement in
gross margin was increased productivity resulting in savings of approximately $1.9 million.

Selling and Marketing Expenses.Selling and marketing expenses excluding non-cash charges of
$1.8 million in the nine months ended September 30, 2000 decreased from approximately $21.0 million to approximately $7.7 million for the nine months ended
September 30, 2001. As a percentage of net revenues, selling and marketing expenses, excluding the non cash charges, decreased to approximately 53.3% for the nine months ended
September 30, 2001, from approximately 112.6% for the nine months ended September 30, 2000. Advertising costs declined due to the restructuring of our online advertising agreements
requiring lower guaranteed minimum payments and the elimination of non cost effective television advertising contracts.

Information Technology Expenses.Information technology expenses increased from approximately $2.8 million for
the nine months ended September 30, 2000 to approximately $3.4 million for the same nine month period in 2001. The increase is due to increased investment in the Company's proprietary

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technology and customer relationship management systems. We expect to continue investing in this technology through the remainder of 2001.

General and Administrative Expenses.General and administrative expenses decreased 21.5% from approximately
$9.3 million for the nine months ended September 30, 2000 to approximately $7.3 million for the nine months ended September 30, 2001. This decrease is primarily due to
severance payments made to certain terminated executives in the first quarter of 2000 and significant decreases in payroll and payroll related expenses as well as amounts paid to outside consultants.
These decreases were partially offset by a $350,000 increase in depreciation expense and $127,000 in legal fees.

Interest Income (Expense) Net.Interest expense, net of interest income, was $897,000 for the nine months ended
September 30, 2001 compared to net interest income of $494,000 for the nine months ended September 30, 2000. Included in 2001 interest expense are non cash charges totaling $695,000
related to warrants and the beneficial conversion feature associated with the company's convertible debt and $92,000 related to warrants issued in conjunction with the Company's credit facility with
the bank.

Liquidity and Capital Resources

As of September 30, 2001, cash and cash equivalents have decreased to $2.6 million (excluding $1.2 million of restricted cash pledged as
collateral principally in connection with our building lease) from $2.8 million at December 31, 2000.

Cash
used in operations totaled $7.0 million for the nine months ended September 30, 2001, resulting from reduced revenues and operating expenses incurred for the
development of other business lines.

Cash
used in investing activities totaled $3.6 million for the nine months ended September 30, 2001. This is primarily attributable to the continued investment in
software and web development.

Cash
provided by financing activities totaled $10.4 million for the nine months ended September 30, 2001. In 2001 the company received approximately $10 million
of proceeds in connection with the issuance of convertible notes payable. In June 2001 those notes and accrued interest in the aggregate
amount of $10.3 million were converted into Series A-1 preferred stock. In addition the mandatorily redeemable preferred stock was exchanged for the newly created
Series A-1 preferred stock.

In
September 2001, the company entered into a loan and security agreement with a bank for a $3.0 million credit facility of which $1.4 million is currently
outstanding. The facility consists of a revolving credit line totaling $2.0 million with a $1.0 million letter of credit sublimit and an equipment line totaling $1.0 million. Up
to 30% of the equipment line may be used for the purchase of software. Borrowings under the revolving credit line bear interest at the prime rate plus 2.5% and are due and payable on
September 11, 2002. Principal payments under the equipment line are due in equal monthly installments for hardware advances and in 18 equal installments for software advances bearing interest
at the prime rate plus 2.75%. The credit facility is collateralized by all of the personal property of the company, tangible and intangible.

The
credit facility contains a number of significant financial covenants including minimum liquidity, operating performance, EBITDA variance and monthly cash burn with which the
company must comply. As of September 30, 2001 the company was not in compliance with certain of these financial covenants. The Company has subsequently received a waiver from the bank.

In
connection with the loan and security Agreement, the Company issued the bank a warrant to purchase 3,750 shares of the company's Series A-1 Convertible Preferred
Stock with an exercise price of $100 per share. The Series A-1 Convertible Preferred Stock issuable on exercise of the warrant is convertible into 777,412 shares of the company's
common stock at a price of $0.48237 per share. As a

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result of the issuance of the warrant, the company recorded debt issuance costs in the amount of $1.1 million which are being amortized over the life of the loan.

In
October 2001 the company issued a standby letter of credit under the facility on behalf of its landlord for $1,000,000, making available cash in that amount for unrestricted
use.

Since
inception the company has experienced negative cash flow from operations and expects to continue to experience significant negative cash flow from operations in the foreseeable
future. The company's existing capital resources including cash generated from operations may not be sufficient to meet its cash requirements through the next 12 months. Management is currently
in the process of obtaining additional financing which it believes will be completed in the next 60 days. No assurance, however, can be given that the company will be able to raise the
additional financing. If the financing is not available when required or is not available on acceptable terms, the company may be unable to develop or enhance our services, take advantage of business
opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business and results of operations.

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.

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

We incurred significant net losses of approximately $6.8 million in 1998, $26.4 million in 1999, $29.4 million in 2000 and
$8.3 million in the first nine months of 2001. As of September 30, 2001, we had an accumulated deficit of approximately $71 million. We expect to incur additional losses and
continued negative cash flow from operations for the fourth quarter of 2001. We have achieved positive contribution in our consumer business by reducing our staff as well as data acquisition and
advertising expenses related to that business. However, we may never achieve profitability.

Our revenues and operating results may fluctuate significantly

Our quarterly revenues and operating results have fluctuated in the past, and may significantly fluctuate in the future due to a variety of factors, many of
which are outside of our control. These factors include:



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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. 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. We believe that we have meritorious defenses to ChoicePoint's claims and that some of the
allegations contained in the complaint are without merit and were filed maliciously and in bad faith. We intend to defend ourself vigorously in this action. We also believe that we have meritorious
counter-claims against ChoicePoint and intend to prosecute vigorously those claims. Even if we are ultimately successful in defending ourselves, the costs related to this litigation, including the
fees and costs of our attorneys and other litigation support professionals, could be significant.

We face competition from many sources

The market in which we operate is highly competitive and highly fragmented.

Currently,
our competition falls into four categories:



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We may be unable to respond to the competitive efforts of other companies

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 developing information search services, background checks for individual or corporate clients and internet trust services than we are willing or able to
accomplish. 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 for information used in our services

We obtain data used in our services from a limited number of third party suppliers. Some of these suppliers offer services that may compete with ours. One of
our data suppliers, offers trust services comparable to some of our service offerings. If our current suppliers raise their prices, or if, due to limitations or restrictions placed on a supplier by
government regulations or its own contractual arrangements, or for other reasons, the information they provide becomes unavailable or unreliable, we may need to find alternative sources of
information. The time it takes to identify and contract with suitable alternative data suppliers, as well as integrate these data sources into our service offerings, could cause service disruptions,
increased costs and reduced quality of our services. Additionally, costs of obtaining data that may be necessary in our new service offerings, such as criminal record searches, could be significantly
higher, on a per transaction basis, than our current information costs. Termination of existing agreements, or, failure after termination, to enter into new agreements with third party suppliers on
terms favorable to us, could have a material adverse effect on our business, financial condition and results of operations. Additionally, failure to obtain the data and information necessary for our
intended service offerings at commercially reasonable costs or at all could prevent us from offering these new services and our business, financial condition and results of operations could be
materially adversely affected. We have recently changed from DBT to Confichek for most of our data needs. Confichek's cost structure is significantly more favorable than DBT's.
ChoicePoint, Inc., which recently acquired DBT has filed a lawsuit against us, so it is possible that we would be unable to purchase data from DBT or ChoicePoint in the future.

We may incur liability based on consumer complaints

A substantial amount of our business involves sales of services to consumers. We have received customer complaints concerning the quality of our services
directly and have received inquiries from consumer agencies such as the Better Business Bureau and state attorney general consumer divisions although we have seen a decline in consumer agency
complaints, most likely as a result of our quality assurance efforts during the past year. We could in the future experience similar complaints and inquiries from consumers and governmental and
consumer agencies. 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. This could in turn have a
material adverse effect on our business, financial condition and results of operations.

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Our business and financial performance may suffer if we are unsuccessful in expanding our service offering especially our corporate and trust services offerings

Our strategy includes expanding the market awareness of our existing services. We intend to offer a greater number of new services available through our Web
site and to develop and promote service offerings to address the needs of corporate and professional clients. We have very limited experience in providing employment screening and trust services to
corporate and professional clients. Attracting these clients will require 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 fail in our efforts to provide these new services in a timely and cost-effective manner. If individual or corporate clients
are unwilling to pay for the aggregation of data and information, or if the market for our services, particularly our corporate and trust services fails to develop or continues to develop more slowly
than anticipated, our business and prospects will be materially adversely affected. Implementing these measures will substantially increase our operating expenses and will place considerable strain on
our existing management and operational resources. We will incur a substantial portion of these expenses before we achieve any meaningful revenues or market acceptance of new services. Our new
services may not achieve a sustainable level of market acceptance or ever become profitable. If a new service is unsuccessful, our reputation and brand position may be damaged and this may make it
more difficult to sell our existing services. A significant amount of our future growth depends on our ability to offer these new services. If we fail to grow our corporate and trust services, our
business, financial condition and results of operation could be materially adversely affected.

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 may need to raise additional capital that may not be available

The company's existing capital resources including cash generated from operations may not be sufficient to meet its cash requirements through the next
12 months. Management is currently in the process of obtaining additional financing which it believes will be completed in the next 60 days. No assurance, however, can be given that the
company will be able to raise the additional financing. If the financing is not available when required or is not available on acceptable terms, the company may be unable to develop or enhance our
services, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business and results of operations.

We are dependent upon the success of the products and services offered by our partners

In our efforts to increase the market acceptance of our services and to more effectively market our services to corporate and professional clients, we intend
to continue to develop and establish relationships with key partners and enter into affiliate and co-marketing programs. Our intent is that these partners will promote our services or
incorporate our services into their products and services intended for the corporate, professional and trust services markets. We have little or no ability to influence the marketing efforts of these
partners and these partners may fail to dedicate adequate resources necessary to successfully develop and market products which incorporate our services. As a result, our success in the corporate,
professional and trust services market is dependent in part on factors which are outside our control which include the performance of our partners and the market acceptance of our partners' products
and services.

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Agreements with partners may not result in any increase in our revenues or improvement in our operations or financial conditions

Existing arrangements with partners such as NetHot Development, BeFree, Employee Matters, elance and AAFES generally do not contain minimum purchase
commitments or payment obligations. Similarly, new agreements with additional partners may not contain any minimum purchase commitments or payment obligations or may be limited to a pilot or test
program. As a result, existing agreements and new agreements, if any, with partners may not result in any meaningful increase in our revenues, or any improvement in our operations or financial
condition.

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

A substantial portion of our operating expenses are related to management personnel, administrative support and our advertising agreements. Our advertising is
typically conducted under non-cancelable fixed term contracts. Additionally, we have entered into data supplier contracts that have minimum payment obligations. As a result, a substantial
portion of our expenses in any given period is fixed and based in part on our expectations of future revenues and advertising and sales productivity. We may be unable to adjust our spending in a
timely manner to compensate for any unexpected revenue shortfall. If we are unable to generate sufficient revenues to offset our advertising costs or the minimum payment obligations under the
agreement with our key database and information supplier, or if we are unable to lower our advertising costs to respond to lower than expected revenues, our results of operations will suffer and the
market price of our common stock could fall or our business could fail.

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. Although we have restructured all of our marketing and advertising agreements, significantly reducing our costs, advertising on the
Internet remains expensive, new and evolving. Although many of our advertising agreements are now based on a "revenue share" model, we have minimum payment commitments with certain of our advertising
partners whether or not the advertising was effective. We may not be able to maintain our existing marketing relationships with other Internet companies. We may also be unable to enter into new
marketing relationships with Internet companies, which generate adequate returns to offset related costs. We currently anticipate that these expenses will continue to constitute a significant portion
of our total operating expenses in future periods although we have significantly reduced these costs. 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.

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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. Our revenues, reputation and brand would be harmed and the value of our services to clients would be reduced if we experience technical difficulties that result in slower response times,
disruptions or unavailability of the services. We have experienced unanticipated system interruptions in the past and, although we have upgraded our infrastructure, these interruptions may occur again
in the future. For example, we have experienced
system disruptions and slower response times as we change or upgrade the software and hardware running on our network. In addition, telephone systems and networks are subject to unanticipated
downtimes due to national disasters, power outages and similar events. Our servers may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which
could lead to interruptions, delays, loss of data or the inability to accept and fulfill client orders. The occurrence of any of these events may have a material adverse effect on our business,
financial condition and results of operations.

California's current energy crisis could disrupt our operations and increase our expenses

California is in the midst of an energy crisis that could disrupt our operations and increase our expenses. In the event of a power shortage, California has on
some recent occasions implemented, and may in the future continue to implement, rolling power blackouts throughout the State. If blackouts interrupt our power supply, we may be temporarily unable to
operate. Future interruptions could damage our reputation, harm our ability to retain existing customers and to obtain new customers, and could result in lost revenue, any of which could have a
material adverse effect on our business, financial condition and results of operations. Furthermore, as a result of the energy crisis electricity prices have increased and are likely to increase in
the future. If wholesale prices continue to increase, our operating expenses will likely increase.

We may be subject to federal and state laws relating to 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 "header" information contained in various consumer credit reporting agencies' databases to find, among other items, current and previous addresses, social security numbers used
by an individual, or possible other names (such as maiden names, married names, etc.). "Header" information consists of such information as the name, social security number, date of birth, and current
and previous addresses on a consumer credit report. We also search these databases 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. If federal
and/or state laws are amended or enacted in the future relating to access and use of personal information, in particular, and privacy and civil rights, in general, there could be a material adverse
effect on our business financial condition, 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
personnel. The loss of any 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

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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 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.

"1-800
U.S. SEARCH", our logo, "The Public Record Portal" and "Reuniting America Two People at a Time" are our registered trademarks. In addition, we have applied for
registered trademark status for "US SEARCH.com" and "VeroTrust" service marks in the United States and intend to pursue registration internationally through applications. Effective 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
trademark, service mark or other proprietary rights might be difficult and expensive and we may be unable to protect our brand and our trademarks from third party challenges. Our US SEARCH 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 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 and verotrust.com. As domain name extensions are added, we may be unable to
acquire all of the extensions for US Search and/or Verotrust. We know of at least one competitor that has a corporate name and domain name similar to ours. We believe that these similarities may cause
confusion on the part of potential clients, and this confusion may harm our business, financial condition, and results of operations. We have sent several cease-and-desist
letters to this competitor and have engaged in settlement discussions. If these discussions do not result in resolution, we may be required to file lawsuits to protect our interests. 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 property rights.

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 from third parties. Advances in computer capabilities, new discoveries in the field of cryptography, or

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other events or developments may result in a compromise or breach of the security measures used by us to protect customer transaction data. If any compromise of our security were to occur, it could
materially adversely affect our reputation and business. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations
and damage to our reputation and customers' willingness to engage in electronic commerce on our Web site. We may be required to expend significant capital and other resources to protect against these
security breaches or to alleviate problems caused by these breaches. If our third-party contractors experience security breaches involving the storage and transmission of proprietary information, such
as credit card numbers, our reputation may be damaged and we may be exposed to risk of loss or litigation.

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.. 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.

We could face liability based on the nature of our services and the content of the materials that we provide

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 sent to consumers. 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. 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.

We could face claims from clients or the subjects of our search reports that are not covered by insurance

We could be held liable to clients and/or to the subjects of individual search reports prepared by us for inaccurate information or misuse of the information.
We have internal practices designed to help ensure that information contained in our services meet industry standards for accuracy. We have retained counsel to ensure that we are in compliance with
the Fair Credit Reporting Act and similar state laws with respect to our pre-employment screening services. However, we do not currently maintain liability insurance to cover claims by
clients or the subjects of reports. Based on our research, losses from these claims are either uninsurable or the insurance that is available is so limited in coverage that it is not economically
practicable. We intend to continue our efforts to obtain insurance coverage for these types of claims but adequate insurance coverage may not be available on terms acceptable to us. Claims of
violations of the FCRA or similar state laws may be made against us in the future and the claims, if made, may not be successfully defended. Uninsured losses from claims could materially adversely
affect our business and results of operations.

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We face risks associated with government regulation and legal uncertainties relating to the Internet

We are subject to regulations applicable to businesses generally and laws or regulations specifically applicable to electronic commerce. Due to concerns
arising in connection with the increasing popularity
and use of the Internet, a number of new or changed laws, governmental policies and/or regulations may be adopted, or cases may be decided, with respect to the Internet or commercial online services
covering issues such as property ownership, user privacy, libel, pricing, acceptable content, copyrights, trademarks and /or other intellectual 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.

Our services may suffer as a result of natural disasters

Our ability to successfully receive and complete search requests and provide high-quality client service largely depends on the efficient and
uninterrupted operation of our computer and communications hardware systems. Substantially all of our computer and communications hardware is currently located at facilities in Southern California,
which is an area susceptible to earthquakes. Our systems and operations may be vulnerable to damage or interruption from earthquakes, fire, flood, power loss, telecommunications failure,
break-ins and similar events. 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.



Our certificate of incorporation grants our board of directors the authority to issue up to 650,000 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 Preferred Stock to Pequot. The Series A-1 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 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 of 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.



Pequot Private Equity Fund II, L.P. currently beneficially holds approximately 65% 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

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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 and 35% of the
shares of Common Stock issued upon conversion of the Series A-1 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 Preferred Stock, of the Board of Directors being nominated by Pequot Private Equity Fund II, L.P., (iii) our the 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
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.

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 September 30, 2001 and our total liabilities as of September 30,
2001 consist primarily of notes payable and accounts payable which have fixed interest rates and were not subject to any significant market risk.

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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.

On
August 14, 2000 a proposed class action complaint was filed against the Company in the Superior Court of the State of California for the County of Los Angeles, Dorothy
Pilkington and Alice Schwartz-Scholl on behalf of themselves, and all other similarly situated, and on behalf of the general public vs. US Search.com, Inc., Case No. BC234858. The Complaint
claims damages for breach of contract, violation of Unfair Practices Act, violation of the Consumer Legal Remedies Act, fraud and negligent misrepresentation in connection with the Company's adoption
services. The Company and its insurance carrier have agreed with plaintiffs' counsel to terms for a settlement that has been approved by the court. The Company's insurance carrier has agreed to
coverage of the settlement amount with the Company agreeing to contribute $50,000 pursuant to a promissory note bearing no interest and payable in one year.

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. 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. We believe that we have meritorious defenses to ChoicePoint's claims and that some of the allegations contained
in the complaint are without merit and were filed maliciously and in bad faith. We intend to defend ourself vigorously in this action. We also believe that we have meritorious counter-claims against
ChoicePoint and intend to prosecute vigorously those claims. Even if we are ultimately successful in defending ourselves, the costs related to this litigation, including the fees and costs of our
attorneys and other litigation support professionals, could be significant.

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 June 5, 2001 the Company issued to Pequot Private Equity Fund II, L.P. 203,113 shares of the Company's newly issued Series A-1
Convertible Preferred Stock (the "Series A-1 Preferred") and a warrant to purchase an additional 5,000 shares of Series A-1 Preferred (the
"Series A-1 Warrant"). The Series A-1 Preferred and the Series A-1 Warrant (collectively, the "Securities") were issued pursuant to a Preferred
Stock Exchange and Purchase Agreement by and between the Company and Pequot (the "Agreement"). The Series A-1 Convertible Preferred Stock has a stated value of $100 per share, a par
value of $0.001 per share and is convertible into common stock of the Company at $0.48237 per share of common stock. The Securities were issued to Pequot in a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof and Rule 506 of Regulation D promulgated thereunder.

Pursuant
to the Agreement, Pequot exchanged all of the outstanding shares of Series A Preferred Stock it purchased in September 2000, delivered to the Company for
cancellation the Series A Warrant to purchase up to 75,000 additional shares of Series A Preferred Stock that was issued in connection

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with the September transaction, and converted two promissory notes bearing interest at an annual rate of 7% in the aggregate amount of $10.150 million (see Note 3 to the financial
statements) for 203,113 shares of Series A-1 Preferred.

In
connection with the Agreement, the Company agreed to present to its stockholders a proposal to increase the authorized common stock of the Company to allow fully the conversion of
the Series A-1 Convertible Preferred Stock and the exercise of Series A-1 Warrant and options which may be issued pursuant to existing options plans of the
Company. On July 25, 2001, the shareholders of the Company voted to increase the authorized number of common shares of the Company to 150,000,000.

Item 3.  Defaults upon Senior Securities

None

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

The Company held its annual stockholders' meeting on July 25, 2001. The following matters were voted on at the meeting:



For

Against

Abstain

No-Vote51,987,184

163,615




Votes Cast52,149,779


Name of Director Elected

For

Against or WithheldThomas W. Patterson

52,146,969

2,810


Votes Cast42,069,857

(Preferred Only)


Name of Preferred Director Elected

For

Against or WithheldRichard R. Heitzmann

42,069,857

0


Name of Each Other Director whose Term of Office as Director continued After the MeetingPeter Locke
Donald Kushner
Alan Mendelson
Brent Cohen
Harry B. Chandler
Lawrence J. Lenihan, Jr.




For

Against

Abstain

No-Vote58,985,774

164,025

1,000

0




For

Against

Abstain

No-Vote51,983,314

164,165

3,320

0


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For

Against

Abstain

No-Vote52,142,649

4,850

3,300

0


Item 5.  Other Information

None

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: November 14, 2001 |  | By:                           
|                        |  | By:                           

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