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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(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, 2002

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from                              to

Commission file number 0-26149

US SEARCH.COM INC.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                   
|----------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 95-4504143
(I.R.S. Employer
Identification Number)

5401 Beethoven Street, Los Angeles, CA 90066
(Address of principal executive offices, including zip code)

(310) 302-6300
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) Yes x No o and (2)
has been subject to such filing requirements for the past 90 days. Yes x  No o

There were 96,992,327 shares of outstanding Common Stock of the registrant
as of November 1, 2002.



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TABLE OF CONTENTS



|                              |                                                                                               |                                       |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS          
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS
|                              |                                                                                               | 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                           
|                              | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION   
|                              | 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                   
|EXHIBIT 10.2                 



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US SEARCH.COM INC.

Form 10-Q for the quarterly period ended September 30, 2002

INDEX

|                  |  |                       |  |                                                                                                              |  | 
|----------------- |  | --------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | 
|Part I.           |  | FINANCIAL INFORMATION |  |                                                                                                             
|                  |  | Item 1.               |  | Financial Statements                                                                                         |  | 
|                  |  |                       |  | Consolidated Statements of Operations for the three and
nine month periods ended September 30, 2002 and 2001 |  | 
|                  |  |                       |  | Consolidated Balance Sheets as of September 30, 2002 and
December 31, 2001                                   |  | 
|                  |  |                       |  | Consolidated Statements of Cash Flows for
the nine month periods ended September 30,
2002 and 2001           |  | 
|                  |  |                       |  | Notes to Consolidated Financial Statements                                                                   |  | 
|                  |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 
|                  |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 
|                  |  | Item 4.               |  | Controls and Procedures                                                                                      |  | 
|Part II.          |  | OTHER INFORMATION     |  |                                                                                                             
|                  |  | Item 1.               |  | Legal Proceedings                                                                                            |  | 
|                  |  | Item 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        |  |                      
|CERTIFICATIONS    |  |                      
|INDEX TO EXHIBITS |  |                      

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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements

US SEARCH.com Inc.




CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited)


|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |           |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------------------ | ----------- | ------------------ | ----------- | ------------------ | ---------- | ------------------ | ----------- | ------------------ | ----------- | --------- | ----------- | - | ---------- | --------- | ---------- | -
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             | Nine Months Ended  |             | Three Months Ended
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                   
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             | September 30, 2002 |             | September 30, 2001 |            | September 30, 2002 |             | September 30, 2001
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                   
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             | (unaudited)       
|Net revenue                                                                                                                                                                                                                                                                                                                                         |                            | $                                                      | 22,616,000  |                    |             | $                  | 14,464,000 |                    |             | $                  | 8,427,000   |           |             | $ | 4,517,000  |          
|Cost of services                                                                                                                                                                                                                                                                                                                                    |                            |                                                        | 6,713,000   |                    |             |                    | 3,516,000  |                    |             |                    | 2,511,000   |           |             |   | 1,039,000  |          
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          
|                                                                                                                                                                                                                                                                                                                                                    | Gross profit               |                                                        |             | 15,903,000         |             |                    |            | 10,948,000         |             |                    |             | 5,916,000 |             |   |            | 3,478,000 |           
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          
|Operating expenses:                                                                                                                                                                                                                                                                                                                                 |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          
|                                                                                                                                                                                                                                                                                                                                                    | Selling and marketing      |                                                        |             | 8,887,000          |             |                    |            | 7,703,000          |             |                    |             | 2,974,000 |             |   |            | 2,456,000 |           
|                                                                                                                                                                                                                                                                                                                                                    | Information technology     |                                                        |             | 2,611,000          |             |                    |            | 3,395,000          |             |                    |             | 674,000   |             |   |            | 1,024,000 |           
|                                                                                                                                                                                                                                                                                                                                                    | General and administrative |                                                        |             | 9,594,000          |             |                    |            | 7,270,000          |             |                    |             | 2,818,000 |             |   |            | 2,652,000 |           
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          
|                                                                                                                                                                                                                                                                                                                                                    |                            | Total operating expenses                               |             |                    | 21,092,000  |                    |            |                    | 18,368,000  |                    |             |           | 6,466,000   |   |            |           | 6,132,000  |  
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          
|Loss from operations                                                                                                                                                                                                                                                                                                                                |                            |                                                        | (5,189,000  | )                  |             |                    | (7,420,000 | )                  |             |                    | (550,000    | )         |             |   | (2,654,000 | )        
|Interest expense, net (including non-cash charges
relating to warrants, beneficial conversion
features, and amortization of debt issuance costs
of $15,707,000 and $13,807,000 for the nine and
three months ended September 30, 2002,
respectively, and $948,000 and $92,000 for the
nine and three-months ended September 30, 2001,
respectively) |                            |                                                        | (15,956,000 | )                  |             |                    | (897,000   | )                  |             |                    | (13,882,000 | )         |             |   | (96,000    | )        
|Other (expense) income, net                                                                                                                                                                                                                                                                                                                         |                            |                                                        | (134,000    | )                  |             |                    | 26,000     |                    |             |                    | (140,000    | )         |             |   | 3,000      |          
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          
|                                                                                                                                                                                                                                                                                                                                                    |                            | Loss before income taxes                               |             |                    | (21,279,000 | )                  |            |                    | (8,291,000  | )                  |             |           | (14,572,000 | ) |            |           | (2,747,000 | )
|Provision for income taxes                                                                                                                                                                                                                                                                                                                          |                            |                                                        | 2,000       |                    |             |                    | 2,000      |                    |             |                    |            |           |             |   |           |          
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          
|                                                                                                                                                                                                                                                                                                                                                    |                            | Net loss                                               |             |                    | (21,281,000 | )                  |            |                    | (8,293,000  | )                  |             |           | (14,572,000 | ) |            |           | (2,747,000 | )
|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           |             | $                  | (21,281,000 | )                  |            | $                  | (21,271,000 | )                  |             | $         | (14,572,000 | ) |            | $         | (2,747,000 | )
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          
|                                                                                                                                                                                                                                                                                                                                                    |                            | Net loss per share attributable to common
stockholders |             | $                  | (0.46       | )                  |            | $                  | (1.18       | )                  |             | $         | (0.18       | ) |            | $         | (0.15      | )
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          
|Weighted-average shares outstanding used in per
share calculation                                                                                                                                                                                                                                                                                   |                            |                                                        | 45,809,470  |                    |             |                    | 17,968,189 |                    |             |                    | 83,298,856  |           |             |   | 18,025,816 |          
|                                                                                                                                                                                                                                                                                                                                                    |                            |                                                        |             |                    |             |                    |            |                    |             |                    |             |           |             |   |            |          

The accompanying notes are an integral part of these statements.

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US SEARCH.com Inc.




CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |           |           |            | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------------------------- | --------- | ------------- | ---------- | ------------ | --------- | --------- | ---------- | 
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           | September 30, |            | December 31,
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           | 2002          |            | 2001        
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |             
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           | (unaudited)   |            |              |           |          
|ASSETS:                                                                                                                                                                            |                                                                                                                                     |                      |                           |           |               |            |              |          
|Current assets:                                                                                                                                                                    |                                                                                                                                     |                      |                           |           |               |            |              |          
|                                                                                                                                                                                   | Cash and cash equivalents                                                                                                           |                      | $                         | 2,450,000 |               |            | $            | 3,148,000 |          
|                                                                                                                                                                                   | Restricted cash                                                                                                                     |                      |                           | 1,055,000 |               |            |              | 750,000   |          
|                                                                                                                                                                                   | Accounts receivable, net of allowance for
doubtful accounts of $72,000 as of September 30,
2002 and $24,005 as of December 31, 2001 |                      |                           | 1,924,000 |               |            |              | 696,000   |          
|                                                                                                                                                                                   | Prepaids and other current assets                                                                                                   |                      |                           | 1,393,000 |               |            |              | 1,854,000 |          
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |          
|                                                                                                                                                                                   |                                                                                                                                     | Total current assets |                           |           | 6,822,000     |            |              |           | 6,448,000 |           
|Property and equipment, net                                                                                                                                                        |                                                                                                                                     |                      | 9,052,000                 |           |               |            | 9,409,000    |          
|Goodwill                                                                                                                                                                           |                                                                                                                                     |                      | 10,588,000                |           |               |            | 8,648,000    |          
|Intangibles, net                                                                                                                                                                   |                                                                                                                                     |                      | 2,728,000                 |           |               |            | 2,960,000    |          
|Other assets                                                                                                                                                                       |                                                                                                                                     |                      | 249,000                   |           |               |            | 270,000      |          
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |          
|                                                                                                                                                                                   |                                                                                                                                     |                      | Total assets              |           | $             | 29,439,000 |              |           | $         | 27,735,000 | 
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |          
|LIABILITIES AND STOCKHOLDERS EQUITY:                                                                                                                                              |                                                                                                                                     |                      |                           |           |               |            |              |          
|Current liabilities:                                                                                                                                                               |                                                                                                                                     |                      |                           |           |               |            |              |          
|                                                                                                                                                                                   | Accounts payable                                                                                                                    |                      | $                         | 4,594,000 |               |            | $            | 7,182,000 |          
|                                                                                                                                                                                   | Accrued liabilities                                                                                                                 |                      |                           | 1,890,000 |               |            |              | 1,930,000 |          
|                                                                                                                                                                                   | PRSI acquisition obligations, current portion                                                                                       |                      |                           | 528,000   |               |            |              | 902,000   |          
|                                                                                                                                                                                   | Bank debt, current portion                                                                                                          |                      |                           | 1,185,000 |               |            |              | 1,375,000 |          
|                                                                                                                                                                                   | Notes payable, current portion                                                                                                      |                      |                           | 50,000    |               |            |              | 3,896,000 |          
|                                                                                                                                                                                   | Capital lease obligations, current portion                                                                                          |                      |                           | 200,000   |               |            |              | 280,000   |          
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |          
|                                                                                                                                                                                   |                                                                                                                                     |                      | Total current liabilities |           |               | 8,447,000  |              |           |           | 15,565,000 | 
|Bank debt, net of current portion                                                                                                                                                  |                                                                                                                                     |                      | 38,000                    |           |               |            |             |          
|PRSI acquisition obligations, net of current portion                                                                                                                               |                                                                                                                                     |                      | 1,417,000                 |           |               |            | 1,654,000    |          
|Capital lease obligations, net of current portion                                                                                                                                  |                                                                                                                                     |                      | 9,000                     |           |               |            | 156,000      |          
|Other non-current liabilities                                                                                                                                                      |                                                                                                                                     |                      | 5,000                     |           |               |            | 5,000        |          
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |          
|                                                                                                                                                                                   |                                                                                                                                     |                      | Total liabilities         |           |               | 9,916,000  |              |           |           | 17,380,000 | 
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |          
|Commitments and contingencies (Note 6)                                                                                                                                             |                                                                                                                                     |                      |                           |           |               |            |              |          
|Stockholders equity:                                                                                                                                                              |                                                                                                                                     |                      |                           |           |               |            |              |          
|Preferred stock $0.001 par value; 1,000,000 shares
authorized, 0 and 203,113 shares issued and
outstanding at September 30, 2002 and December 31,
2001 respectively                |                                                                                                                                     |                      |                          |           |               |            |             |          
|Common stock $0.001 par value; 300,000,000 shares
authorized; 96,992,327 and 26,183,058 shares issued
and outstanding as of September 30, 2002 and
December 31, 2001, respectively |                                                                                                                                     |                      | 97,000                    |           |               |            | 26,000       |          
|Additional paid-in capital                                                                                                                                                         |                                                                                                                                     |                      | 115,225,000               |           |               |            | 84,847,000   |          
|Accumulated deficit                                                                                                                                                                |                                                                                                                                     |                      | (95,799,000               | )         |               |            | (74,518,000  | )        
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |          
|Total stockholders equity                                                                                                                                                         |                                                                                                                                     |                      | 19,523,000                |           |               |            | 10,355,000   |          
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |          
|Total liabilities and stockholders equity                                                                                                                                         |                                                                                                                                     | $                    | 29,439,000                |           |               | $          | 27,735,000   |          
|                                                                                                                                                                                   |                                                                                                                                     |                      |                           |           |               |            |              |          

The accompanying notes are an integral part of these statements.

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US SEARCH.com Inc.




CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited)


|                                                                            |                                                                       |                                                    |            |                     |   |      |            |            |   | 
|--------------------------------------------------------------------------- | --------------------------------------------------------------------- | -------------------------------------------------- | ---------- | ------------------- | - | ---- | ---------- | ---------- | - | 
|                                                                            |                                                                       |                                                    |            | Nine Months        
|                                                                            |                                                                       |                                                    |            | Ended September 30,
|                                                                            |                                                                       |                                                    |            |                    
|                                                                            |                                                                       |                                                    |            | 2002                |   | 2001
|                                                                            |                                                                       |                                                    |            |                     |   |     
|Cash flows from operating activities:                                       |                                                                       |                                                    |            |                     |   |      |            |           
|                                                                            | Net loss                                                              |                                                    | $          | (21,281,000         | ) |      | $          | (8,293,000 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                                       |                                                    |            |                     |   |      |            |           
|                                                                            | Depreciation and amortization                                         |                                                    |            | 2,295,000           |   |      |            | 965,000    |  
|                                                                            | Non-cash interest expense and beneficial conversion feature           |                                                    |            | 15,707,000          |   |      |            | 948,000    |  
|Change in assets and liabilities:                                           |                                                                       |                                                    |            |                     |   |      |            |           
|                                                                            | Accounts receivable                                                   |                                                    |            | (1,228,000          | ) |      |            | (77,000    | )
|                                                                            | Prepaid and other assets                                              |                                                    |            | (10,000             | ) |      |            | (77,000    | )
|                                                                            | Accounts payable and accrued expenses                                 |                                                    |            | (2,434,000          | ) |      |            | (460,000   | )
|                                                                            |                                                                       |                                                    |            |                     |   |      |            |           
|Net cash used in operating activities                                       |                                                                       |                                                    | (6,951,000 | )                   |   |      | (6,994,000 | )         
|                                                                            |                                                                       |                                                    |            |                     |   |      |            |           
|Cash flows from investing activities:                                       |                                                                       |                                                    |            |                     |   |      |            |           
|                                                                            | Purchase of property and equipment                                    |                                                    |            | (1,705,000          | ) |      |            | (3,615,000 | )
|                                                                            | PRSI acquisition costs                                                |                                                    |            | (220,000            | ) |      |            |           |  
|                                                                            |                                                                       |                                                    |            |                     |   |      |            |           
|Net cash used by investing activities                                       |                                                                       |                                                    | (1,925,000 | )                   |   |      | (3,615,000 | )         
|                                                                            |                                                                       |                                                    |            |                     |   |      |            |           
|Cash flows from financing activities:                                       |                                                                       |                                                    |            |                     |   |      |            |           
|                                                                            | Increase in restricted cash                                           |                                                    |            | (305,000            | ) |      |            |           |  
|                                                                            | Repayments of third party notes payable                               |                                                    |            | (586,000            | ) |      |            | (664,000   | )
|                                                                            | Repayment of PRSI acquisition obligation                              |                                                    |            | (697,000            | ) |      |            |           |  
|                                                                            | Repayments of bank debt                                               |                                                    |            | (309,000            | ) |      |            |           |  
|                                                                            | Repayments of capital lease obligations                               |                                                    |            | (227,000            | ) |      |            | (168,000   | )
|                                                                            | Proceeds from bank financing                                          |                                                    |            |                    |   |      |            | 1,418,000  |  
|                                                                            | Proceeds from notes payable, net                                      |                                                    |            | 10,233,000          |   |      |            | 10,000,000 |  
|                                                                            | Debt issuance costs                                                   |                                                    |            |                    |   |      |            | (256,000   | )
|                                                                            | Proceeds from stock option exercises                                  |                                                    |            | 69,000              |   |      |            | 43,000     |  
|                                                                            |                                                                       |                                                    |            |                     |   |      |            |           
|Net cash provided by financing activities                                   |                                                                       |                                                    | 8,178,000  |                     |   |      | 10,373,000 |           
|                                                                            |                                                                       |                                                    |            |                     |   |      |            |           
|Net decrease in cash and cash equivalents                                   |                                                                       |                                                    | (698,000   | )                   |   |      | (236,000   | )         
|Cash at beginning of period                                                 |                                                                       |                                                    | 3,148,000  |                     |   |      | 2,831,000  |           
|                                                                            |                                                                       |                                                    |            |                     |   |      |            |           
|Cash at end of period                                                       |                                                                       | $                                                  | 2,450,000  |                     |   | $    | 2,595,000  |           
|                                                                            |                                                                       |                                                    |            |                     |   |      |            |           
|                                                                            |                                                                       | Supplemental cash flow disclosure is comprised of: |            |                     |   |      |            |            |   | 
|Cash paid for interest                                                      |                                                                       | $                                                  | 267,000    |                     |   |      |           |           
|Non-cash investing and financing activities:                                |                                                                       |                                                    |            |                     |   |      |            |           
|                                                                            | Conversion of notes payable to preferred stock                        |                                                    | $          |                    |   |      | $          | 10,000,000 |  
|                                                                            | Conversion of accounts payable to notes payable                       |                                                    | $          |                    |   |      | $          | 285,000    |  
|                                                                            | Issuance of warrants in connection with convertible notes payable     |                                                    | $          | 1,937,000           |   |      | $          | 250,000    |  
|                                                                            | Issuance of warrants to third parties                                 |                                                    | $          | 228,000             |   |      | $          | 1,100,000  |  
|                                                                            | Goodwill recorded upon the resolution of purchase price contingencies |                                                    | $          | 1,720,000           |   |      | $          |           |  
|                                                                            | Conversion of notes payable and accrued interest to common stock      |                                                    | $          | 14,746,000          |   |      | $          |           |  
|                                                                            | Beneficial conversion feature on convertible notes payable            |                                                    | $          | 11,749,000          |   |      | $          | 445,000    |  

The accompanying notes are an integral part of these statements.

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US SEARCH.COM INC.




NOTES TO FINANCIAL STATEMENTS


(unaudited)


1. Organization and Business:

US SEARCH.com Inc. (the Company) provides individual reference services
and background information about individuals. The Company was formed as a
California S Corporation in 1994, and reincorporated as a Delaware corporation
in April 1999. On December 28, 2001 the Company acquired all of the outstanding
stock of Professional Resource Screening, Inc. (PRSI), which provides
pre-employment screening services primarily to large corporations, including
Fortune 1000 companies in the United States.

2. Summary of Significant Accounting Policies:

Basis of Presentation

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

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,
2002, and the results of its operations for the three and nine month periods
ended September 30, 2002 and 2001. Interim results are not necessarily
indicative of results to be expected for a full fiscal year.

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

Net Loss Per Share

Basic net loss per common share is computed using the weighted average
number of shares of common stock outstanding and diluted net loss per common
share is computed using the weighted average number of shares of common stock
and common equivalent shares outstanding. Common equivalent shares related to
convertible preferred stock, convertible notes payable, stock options and
warrants are excluded from the computation when their effect is anti-dilutive.
As of September 30, 2002, stock options representing 19,757,470 shares of
common stock and warrants representing 10,407,019 shares of common stock have
been excluded from the calculation of diluted earnings per share because their
inclusion would be anti-dilutive. As of September 30, 2001, stock options
representing 13,237,561 shares of common stock and warrants representing
1,750,000 shares of common stock and 8,750 shares of preferred stock, have been
excluded from the calculation of diluted earnings per share because their
inclusion would be anti-dilutive. Also excluded at September 30, 2001 are
42,107,303 common shares that were issuable on conversion of Series A-1
convertible preferred stock.

Managements Plans

Since inception, the Company has experienced negative cash flows from
operations. The Company had a working capital deficit of $1,625,000 and an
accumulated deficit of $95,799,000 as of September 30, 2002. Based on our
current operating plans, management believes existing cash resources and cash
forecasted by management to be generated by operations and potentially
available from a renegotiated bank financing arrangement will be sufficient to
meet working capital and capital requirements through at least the next twelve
months. Managements plans to attain profitability and generate additional cash
flows include, increasing revenues from enterprise and consumer services,
focusing on cost reductions and operational efficiencies to be derived from
further deployment of US SEARCHs technologies, and the launch of additional
products. There is no assurance that management will be

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successful with these plans. However, if events and circumstances occur such
that US SEARCH does not meet its current operating plan as expected, and US
SEARCH is unable to raise additional financing, US SEARCH may be required to
reduce certain discretionary spending, which could have a material adverse
effect on US SEARCHs ability to achieve its intended business objectives.

Reclassifications

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

3. Notes Payable:

In December 2001, the Company issued a $3,500,000 promissory note to
Pequot Private Equity Fund II, L.P. (Pequot). The promissory note bore
interest at a rate of eight percent (8%) per annum and, if not previously
converted into common stock, was due and payable on December 20, 2002. This
note and accrued interest automatically converted into 6,922,399 shares of
common stock at the conversion price of $0.5292 on July 18, 2002.

In January 2002, the Company issued 8% Convertible Promissory Notes due
January 17, 2003 in the aggregate principal amount of $4,600,000 and four year
warrants to purchase up to an aggregate of 1,782,176 shares of common stock at
an initial exercise price of $1.044 per share. These notes and accrued interest
automatically converted into 9,143,182 shares of common stock at the conversion
price of $0.5292 on July 18, 2002.

In March 2002, the Company issued 8% Convertible Promissory Notes due
December 20, 2002 in the aggregate principal amount of $6,075,000 ($5,700,000
in proceeds net of issuance costs) and five year warrants to purchase up to an
aggregate of 2,144,118 shares of our common stock at an initial exercise price
of $1.044 per share. The Company also issued warrants to purchase 714,706
shares of common stock at an exercise price of $0.85 per share to the
principals of the offering placement agent. These notes and accrued interest
automatically converted into 11,798,470 shares of common stock on July 18,
2002.

In accordance with Accounting Principles Board Opinion No. 14 Accounting
for Convertible Debt and Debt Issued with Stock Purchase Warrants, the
relative fair value of the warrants issued in conjunction with the December,
January and March notes (the Notes) totaled $452,000 and $730,000 and,
$892,000, respectively. Warrants issued to the placement agent had a fair value
of $315,000. Such amounts were being recorded as interest expense over the
terms of the notes. On conversion of
the notes, on July 18 2002, the remaining unamortized discount relating to
these warrants and issuance costs of $1.9 million was recorded as interest
expense.

In July 2002, upon the conversion of the 8% Convertible Promissory Notes
with an aggregate principal amount of $14,226,000, the Company recorded as
additional interest expense a non-cash charge of $11,749,000 for a beneficial
conversion feature (BCF) relating to the Notes. 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, multiplied by the number of
shares into which the promissory notes were convertible, limited to the amount
of proceeds allocated to the notes at the commitment date.

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During July 2002, the Company entered into an agreement to settle a note
payable for $525,000. The settlement agreement resulted in a gain of $61,000
which was recorded in the accompanying statement of operations during the three
months ended September 30, 2002. As of September 30, 2002, the Company has
repaid $300,000 of the amount due, and is obligated to repay the remaining
$225,000 in monthly installments of $75,000 through December 2002.

4. Bank Debt

On August 7, 2002, the Company entered into an agreement with Comerica
Bank to amend its loan and security agreement (Amendment Number Two). The
Comerica facility was amended to reduce the revolving credit line to
$1,000,000 from $3,000,000. Amounts under the borrowing base line may be
advanced based on up to 80% of eligible receivables as defined in the
agreement. Borrowings under the revolving credit line are due and payable on
March 26, 2003. Total borrowings under the revolving credit facility totaled
$1,000,000 at September 30, 2002.

Significant financial covenants with which the Company must comply include
operating performance requirements, minimum EBITDA requirements and a
debt/tangible net worth ratio. Additionally, in accordance with the terms of
Amendment Number Two, the amount of unrestricted cash the Company must maintain
on deposit with the bank was reduced from $1,250,000 to $250,000. As of
September 30, 2002, the Company must also maintain deposits of approximately
$800,000 with the bank as collateral for credit card processing and a standby
letter of credit. Effective April 2002, the Company placed a $750,000 deposit
with the bank to collateralize an outstanding standby letter of credit. The
letter of credit and the required deposit is reduced by $83,333 per month and
matures on November 30, 2002. The amount of the letter of credit and the
collateral deposit at October 1, 2002 was $166,000. The Company was in
compliance with or had received a bank waiver of covenants at
September 30, 2002.

In connection with a previous amendment to the loan and security
agreement, the Company agreed to issue the bank a warrant to purchase 55,487
shares of the Companys common stock at an exercise price of $0.85 per share.
The warrant expires on March 14, 2007. As a result of the issuance of the
warrant, the Company recorded a non-cash charge of $24,000, which is included
in debt issuance costs for the period ended September 30, 2002.

5. Capital Stock

During the nine months ended September 30, 2002, the Company issued to
certain vendors a warrant, which matures March 5, 2007, to purchase 75,000
shares at an exercise price of $1.20 per share; and a warrant, which matures on
January 3, 2005, to purchase 137,143 shares at an exercise price of $0.01 per
share.

As of close of business on July 18, 2002, Pequot Private Equity Fund II,
L.P., the holder of all 203,113 shares of Series A-1 Convertible Preferred
Stock outstanding on that date, elected to convert all of its Series of A-1
Convertible Preferred Stock into Common Stock. The conversion price of the
Series of A-1 Convertible Preferred Stock was $0.48237 per share, which
resulted in the issuance of an aggregate of 42,107,303 shares of Common Stock
upon conversion of the Series of A-1 Convertible Preferred Stock.

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6. Commitments And Contingencies

Strategic Alliance Commitments

The Company has several cancelable and non-cancelable distribution and
marketing agreements with various Internet companies. The terms of these
agreements provide for varying levels of exclusivity and minimum and maximum
fees payable based on the number of banners, buttons and text links displayed
on affiliate web sites. At September 30, 2002, the minimum non-cancelable
payments due under these agreements are approximately $825,000 for the
remainder of 2002, approximately $3,300,000 for 2003, and approximately
$550,000 for 2004.

The Company has entered into an agreement with a supplier of online public
records data. At September 30, 2002, the non-cancelable payments under this
agreement are $207,000 due in 2002 and $690,000 due in 2003.

Legal Proceedings

On April 3, 2000, a two count trade name and service mark complaint was
filed against US SEARCH in the United States District Court for the Eastern
District of Virginia, styled U.S. Search, LLC v USSearch.com Inc. Civil Action
No. 00-554-A. On January 26, 2001, our motion for summary judgment was granted
and the court ordered that both counts of plaintiffs complaint be dismissed
with prejudice. The Plaintiff has appealed the judgment to the U.S. Court of
Appeals, Fourth Circuit. The hearing on appeal was held June 6, 2002. On August
16, 2002, the Court of Appeals affirmed the grant of summary judgment in favor
of the Company.

In May 2001, ChoicePoint, Inc., the successor entity to DBT Online, Inc.,
filed a complaint against us in Palm Beach County, Florida alleging breach of
contract, fraudulent misrepresentation, unjust enrichment, quantum meruit and
breach of the implied covenant of good faith and fair dealing. The Complaint
sought approximately $1.5 million in damages, as well as interest and
attorneys fees. We removed this action to the United States District Court for
the Southern District of Florida. The United States District Court for the
Southern District of Florida ordered the matter to arbitration. An arbitration
hearing was held in April 2002 and in June 2002 the arbitration awarded us a
credit of $297,671 to be deducted from invoices of $1,418,731. ChoicePoint has
filed a Motion to Confirm the Arbitration Award and we have filed a Motion to
Modify and correct the Arbitration Award to provide additional credits. We are
awaiting the District Courts ruling on these motions. While awaiting a ruling
on the motions, we paid $100,000 of the Award during the three months ended
September 30, 2002. We have approximately $979,000 accrued for this liability
at September 30, 2002. The costs related to this litigation to date have been
less than $100,000. As of November 1, 2002 the Company had paid a total of
$300,000 towards the settlement amount, resulting in an accrued liability of
approximately $779,000.

On June 25, 2002, a complaint seeking $434,000 in damages was filed
against Professional Resource Screening, Inc. in Superior Court of California,
County of Contra Costa, styled Wood Warren & Co. v. Professional Resource
Screening, Inc., No.C02-01816, alleging breach of an oral agreement relating to
investment banking services, negligent misrepresentation, promissory estoppel,
equitable estoppel and quantum meruit. Although it is too early to predict the
outcome of this litigation, the Company believes it has meritorious defenses to
plaintiffs claims.

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

7. Unaudited Pro Forma Results of Operations for the Nine and Three Months Ended September 30, 2001

Unaudited pro forma consolidated results of operations are presented in
the table below for the nine and three months ended September 30, 2001. The
proforma results of operations reflect the acquisition of Professional Resource
Screening, Inc., which are not reflected in the September 30, 2001 historical
results, as if the acquisition was consummated as of January 1, 2001.
Historical results for the nine and three months ended September 30, 2002,
which include the results of Professional Resource Screening, Inc. for the
entire period, are presented for comparability.

|                                                       |  |                    |         |                    |  |                    |         |                    |  |   |         |   |  |   |        |  
|------------------------------------------------------ |  | ------------------ | ------- | ------------------ |  | ------------------ | ------- | ------------------ |  | - | ------- | - |  | - | ------ | -
|                                                       |  | Nine Months        |         | Nine Months        |  | Three Months       |         | Three Months      
|                                                       |  | Ended              |         | Ended              |  | Ended              |         | Ended             
|                                                       |  | September 30, 2002 |         | September 30, 2001 |  | September 30, 2002 |         | September 30, 2001
|(in thousands)                                         |  | Historical         |         | Pro Forma          |  | Historical         |         | Pro Forma         
|                                                       |  |                    |         |                    |  |                    |         |                   
|Net revenue                                            |  | $                  | 22,616  |                    |  | $                  | 20,859  |                    |  | $ | 8,427   |   |  | $ | 6,300  |  
|Net loss                                               |  |                    | (21,281 | )                  |  |                    | (8,686  | )                  |  |   | (14,572 | ) |  |   | (3,089 | )
|Net loss attributable to common stockholders           |  |                    | (21,281 | )                  |  |                    | (21,664 | )                  |  |   | (14,572 | ) |  |   | (3,089 | )
|Net loss per share attributable to common stockholders |  | $                  | (0.46   | )                  |  | $                  | (0.81   | )                  |  | $ | (0.18   | ) |  | $ | (0.12  | )

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

8. Related Party Transactions

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

In connection with the acquisition of PRSI, the company recorded
acquisition obligations of $2,556,000, representing the present value of future
installment obligations to be made to the selling shareholders. The installment
obligation of $3,000,000 bears no interest, and was discounted by $444,000.
During the nine month period ended September 30, 2002, the company made
installment payments of $750,000 to the former shareholders of PRSI.

Lawrence D. Lenihan, Jr., a member of the Board of Directors of the
Company, is Managing Director of Pequot Capital Management, the general partner
of Pequot Private Equity Fund II, L.P. (Pequot) which beneficially holds
54.16% of our outstanding common stock.

As of the close of business on July 18, 2002, Pequot, the holder of the
203,113 shares of Series A-1 Convertible Preferred Stock, elected to convert
all of its Series A-1 Convertible Preferred Stock into Common Stock. The
conversion price of the Series A-1 Convertible Preferred Stock was $0.48237 per
share, which resulted in the issuance of an aggregate of 42,107,303 shares of
Common Stock upon conversion of the Series A-1 Convertible Preferred Stock.

On December 20, 2001, the Company sold to Pequot for $3,500,000 an 8%
Convertible Promissory Note due December 20, 2002 in the principal amount of
$3.5 million (the December Note) and a four year warrant to purchase up to an
aggregate of 1,117,497 shares of Common Stock at an initial exercise price of
$1.044 per share (the December Warrant). On July 18, 2002, the December Note
automatically converted into Common Stock pursuant to the terms of the December
Notes. The conversion price of the notes was $0.5292 per share, which resulted
in the issuance of an aggregate 6,922,399 shares of Common Stock upon
conversion of the December Note and accrued interest.

Alan C. Mendelson, a director of the Company, is a partner at Latham &
Watkins, a law firm which provides legal services to the Company. The Company
incurred legal fees of $49,000 and $273,000 to Latham & Watkins during the
three and nine months ended September 30, 2002, respectively. The Company
incurred legal fees of $82,000 and $176,000 to Latham & Watkins during the
three and nine months ended September 30, 2001, respectively.

Harry B. Chandler, a director of the Company, is the Executive Vice
President of Overture, Inc. (formerly Goto.com), an internet search provider
which provides advertising services to the Company. During the three and nine
month periods ended September 30, 2002, the Company incurred $81,000 and
$227,000, respectively, for fees to Overture.

9. Goodwill

In connection with
the Merger Agreement (Note 8), and as more fully described
in Note 10 of Notes to the Financial Statements for the year ended December 31,
2001, the purchase price of $14,353,000 was reduced by the contingent purchase
consideration pending the outcome of a revenue contingency. The Merger
Agreement provides that in the event that net revenues for PRSI for 2002 are
less than $9,000,000, the selling shareholders will be required to return
$500,000 plus any shortfall in revenues below $9,000,000 in cash or company
stock. In accordance with SFAS 142, at December 28, 2001, the Company did not
record $4,500,000 of the purchase price representing that portion of the
purchase price deemed contingent. At December 31, 2001, Management estimated
that achieving a revenue threshold above $5,000,000 could not be assured beyond
a reasonable doubt, as specified in SFAS 142.

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During the three months ended September 30, 2002, revenues for PRSI
exceeded the previously estimated $5,000,000 threshold by $1,720,000, and the
Company recorded additional goodwill of $1,720,000 to recognize additional
purchase price to the extent that revenue contingencies were resolved.
Additional purchase consideration will be recorded in the three months ending
December 31, 2002 as revenue contingencies are resolved.




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

Forward-Looking Statements

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

Overview

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

Our consumer and small and medium enterprise products provide direct
(Internet and telephone) individual locator, and other public record searches
to consumers and these services and pre-employment screening

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services to small and medium-sized businesses. Our enterprise product provides
employment screening and risk mitigation services to large enterprises and
organizations.

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



| |  |  | Enterprise services. We provide large businesses, government
agencies and other large employers with a variety of employment
screening, background check and risk mitigation products and services
via an online, Web-based system that enables instant ordering and
prompt delivery of results. Customers can customize their search and
decision parameters online using a drag-and-drop browser interface.
Our employment screening products include social security number
traces, federal and state felony and misdemeanor record searches,
employment and education verification, and credit histories. We also
provide character reference checks and drug screening via third party
providers. We also offer a Management Services program that provides
customers with an outsourced solution to background investigations,
which includes analysis of developed investigation data, management
of FCRA communications, legal compliance, and direct applicant
contact.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Consumer-focused services. We provide consumer clients and
small and medium sized businesses with a single, comprehensive access
point to a broad range of information to assist them in locating
individuals or to learn more information about people in their lives
or with whom they do business. Our consumer clients can obtain public
information including addresses, aliases, phone numbers, property
ownership, court records, professional license verification,
corporate affiliations and death record information. We also offer
nanny and contractor background check services for consumers and
employment screening for small businesses.                                                                                                                                                                                                                                                                                                                        

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

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

Our cost of services consists primarily of payroll and benefits, data
acquisition costs, and local and long distance telephone charges associated
with providing our services, and payment processing costs. Our cost of services
is likely to increase with increasing revenue levels. The Company has entered
into an agreement with a supplier of online public record data. At September
30, 2002, the non-cancelable payments under this agreement are $207,000 in 2002
and $690,000 in 2003.

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

Selling and marketing expenses constitutes a significant portion of our
operating expenses. Internet advertising expenses are the most significant
selling and marketing expense. The Company has several cancelable and
non-cancelable distribution and marketing agreements with various Internet
companies. The terms of these agreements provide for varying levels of
exclusivity and minimum and maximum fees payable based on the number of
banners, buttons and text links displayed on affiliate web sites. At September
30, 2002, the minimum non-cancelable payments due under these agreements are
approximately $825,000 for 2002, and $3,300,000 for 2003, and $550,000 for
2004.

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

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

Results of Operations

Comparison of the Three Months Ended September 30, 2002 to the Three Months Ended September 30, 2001

Net Revenues.Our net revenues increased from approximately $4.5
million for the three months ended September 30, 2001 to approximately $8.4
million for the three months ended September 30, 2002, representing a 86.6%
increase. Approximately $2.5 million of the increase is attributable to our
acquisition of PRSI in December 2001 and the Companys entrance into the
enterprise services sector. The remaining $1.4 million increase was due to
growth in the Companys consumer business. Through a combination of
establishing new channel partnerships, strengthening existing channel
partnership relationships, and implementing enhanced search technology, the
Company was able to increase internet traffic to its website and improve
customer conversion rates for the consumer business.

Gross Profit.Gross profit increased from approximately $3.5 million
for the three months ended September 30, 2001, to approximately $5.9 million
for the three months ended September 30, 2002, representing a 70.1% increase.
Gross profit as a percentage of net revenues was approximately 70.2% and 77.0%
for the three month periods ended September 30, 2002 and 2001, respectively.
The decrease in gross margin reflects the change in product mix as a result of
the Companys December 2001 acquisition of PRSI, which has a lower gross margin
than the consumer business, offset by cost reductions in the Companys consumer
business. Increased automation in our consumer business, which resulted in a
reduction in direct labor expense for the consumer business, also contributed
to an increase in gross profit.

Selling and Marketing Expenses.Selling and marketing expenses
increased by $500,000 to $3.0 million for the three month period ended
September 30, 2002 as compared to $2.5 million for the 2001 period. The change
is the net result of an increase of $440,000 due to the December 2001
acquisition of PRSI and $450,000 due to increased advertising costs and the
addition of new Internet advertising providers. These increases are partially
offset by reductions in other costs, consisting primarily of a $340,000
reduction in selling and marketing labor costs. Although costs increased,
selling and marketing expenses were 35.3% of sales for the three months ended
September 30, 2002 compared to 54.4% of sales for the three months ended
September 30, 2001. The decrease in the ratio of selling and marketing expenses
to sales is a result of the Companys efforts to reduce customer acquisition
costs and to implement more efficient means of marketing by taking steps such
as developing better channel partnerships.

Information Technology Expenditures.Information technology
expenditures decreased by $350,000 for the three-month period ended September
30, 2002 as compared to the 2001 period. The change is the net result of a
$105,000 increase due to the December 2001 acquisition of PRSI, primarily
offset by a $245,000 reduction in payroll costs due to a reduction in
headcount, and a $100,000 decrease in consulting costs due to implementation of
certain of the Companys internally developed software.

General and Administrative Expenses.General and administrative
expenses for the three months ended September 30, 2002 increased by $166,000
compared to the same period in 2001. The change is primarily the result of a
$479,000 increase due to the December 2001 acquisition of PRSI, a $186,000
increase in depreciation expense as a result of the initial implementation of
certain of the Companys internally developed software, partially offset by a
$135,000 reduction in legal fees. Additionally, there was a net $407, 000
reduction in credit card dispute chargebacks and related chargeback fees. To
achieve the reduction in chargebacks, the Company introduced several new credit
card authentication procedures to verify credit card transactions.

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Interest Expense, Net.Interest expense, net of interest income, was
$13,882,000 for the three months ended September 30, 2002 as compared to
$96,000 for the same period in 2001. In July 2002, upon the conversion of the
8% Convertible Promissory Notes with an aggregate principal amount of
$14,226,000, the Company recorded as additional interest expense a non-cash
charge of $11,749,000 for a beneficial conversion feature relating to the
Notes. Included in interest expense for 2002 are non-cash interest charges of
$1,932,000 related to the amortization of discounts and issuance costs on the
Companys convertible notes payable. During July 2002 the Company wrote off all
remaining discounts on the convertible notes upon conversion of the notes.
Interest expense also includes $126,000 related to the amortization of debt
issuance costs incurred in conjunction with the Companys bank credit facility.

Other Income (Expense), Net.Other expense, net of other income, was
$140,000 for the three months ended September 30, 2002 as compared to $3,000
for the same period in 2001. In July 2002, upon the conversion of the 8%
Convertible Promissory Notes with an aggregate principal amount of $14,226,000,
the Company wrote off approximately $140,000 of financing costs.

Comparison of the Nine Months Ended September 30, 2002 to the Nine Months Ended September 30, 2001

Net Revenues.Our net revenues increased from approximately $14.5
million for the nine months ended September 30, 2001 to approximately $22.6
million for the nine months ended September 30, 2002, representing a 56.4%
increase. Approximately $6.7 million of the increase is attributable to our
acquisition of PRSI in December 2001 and the Companys entrance into the
enterprise services sector. The remaining $1.4 million increase is due to an
increase in the Companys consumer services business. Through a combination of
establishing new channel partnerships, strengthening existing channel
partnership relationships, and implementing enhanced search technology, the
Company was able to increase internet traffic to its website and improve
customer conversion rates for the consumer business.

Gross Profit.Gross profit increased from approximately $10.9 million
for the nine months ended September 30, 2001, to approximately $15.9 million
for the nine months ended September 30, 2002, representing a 45.3% increase.

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Gross profit as a percentage of net revenues was approximately 70.3% and 75.7%
for the nine month periods ended September 30, 2002 and 2001, respectively. The
decrease in gross margin reflects the change in product mix as a result of the
Companys December 2001 acquisition of PRSI, which has a lower gross margin
than the consumer business, offset by cost reductions in the Companys consumer
business. Increased automation in our consumer business resulting in a
reduction of direct labor expense also contributed to the increase in gross
profit.

Selling and Marketing Expenses.Selling and marketing expenses
increased by $1.2 million to $8.9 million for the nine month period ended
September 30, 2002 as compared to $7.7 million for the 2001 period. The change
is the net result of an increase of $1,455,000 due to the December 2001
acquisition of PRSI, and $1,256,000 due to increased advertising costs and the
addition of new Internet advertising providers, partially offset by a
$1,036,000 reduction in selling and marketing labor costs. There was also a net
reduction of approximately $491,000 in other discretionary selling and
marketing costs, consisting of miscellaneous costs such as consulting fees,
travel and entertainment costs, and public relations fees. Although costs
increased, selling and marketing expenses were 39.3% of sales for the nine
months ended September 30, 2002 compared to 53.3% of sales for the nine months
ended September 30, 2001. The decrease in the ratio of selling and marketing
expenses to sales is a result of the Companys efforts to reduce customer
acquisition costs and to implement more efficient means of marketing by taking
steps such as developing better channel partnerships.

Information Technology Expenditures.Information technology
expenditures decreased by $784,000 for the nine-month period ended September
30, 2002 as compared to the 2001 period, due primarily to a $893,000 reduction
in payroll costs due to reduction in headcount, a $288,000 net reduction in
consulting fees due to implementation of certain of the Companys internally
developed software, and a $175,000 increase in software maintenance fees.
Additionally, during the three-month period ended September 30, 2002, the
Company reversed accruals of approximately $129,000 as it determined that
activities related to those accruals were settled for less than the amounts
originally estimated. These net cost reductions were partially offset by the
$409,000 of increased costs resulting from the December 2001 acquisition of
PRSI.

General and Administrative Expenses.General and administrative
expenses for the nine months ended September 30, 2002 increased by $2,324,000
compared to the same period in 2001. The change is primarily the result of a
$1,829,000 increase due to the December 2001 acquisition of PRSI and a $644,000
increase in depreciation expense as a result of initial implementation of
certain of the Companys internally developed software. Additionally, there was
a net $346,000 reduction in credit card dispute chargebacks and related
chargeback fees. To achieve the reduction in chargebacks, the Company
introduced several new credit card authentication procedures to verify credit
card transactions. There was also a net increase of approximately $197,000 in
other miscellaneous costs.

Interest Expense, Net.Interest expense, net of interest income, was
$15,956,000 for the nine months ended September 30, 2002 as compared to
$897,000 for the same period in 2001. In July 2002, upon the conversion of the
8% Convertible Promissory Notes with an aggregate principal amount of
$14,226,000, the Company recorded as additional interest expense a non-cash
charge of $11,749,000 for a beneficial conversion feature relating to the
Notes. Included in interest expense for 2002 are non-cash interest charges of
$3,430,000 related to the amortization of discounts and issuance costs on the
Companys convertible and vendor notes payable. During July 2002 the Company
wrote off all remaining discounts on the convertible notes upon conversion of
the notes. Interest expense also includes $528,000 related to the amortization
of debt issuance costs incurred in conjunction with the Companys bank credit
facility.

Other Income (Expense), Net.Other expense, net of other income, was
$134,000 for the nine months ended September 30, 2002 as compared to $26,000
for the same period in 2001. In July 2002, upon the conversion of the 8%
Convertible Promissory Notes with an aggregate principal amount of $14,226,000,
the Company wrote off approximately $140,000 of financing costs.

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Liquidity and Capital Resources

As of September 30, 2002, cash and cash equivalents has decreased to $3.5
million (including $1.1 million of restricted cash pledged as collateral in
connection with the Companys credit facility) from $3.9 million (including
$750,000 of restricted cash) at December 31, 2001.

Cash used in operations was $7.0 million for each of the nine-month
periods ended September 30, 2002 and 2001. The cash used in operations during
the 2002 period is the result of continued operating losses and the growth in
accounts receivable due to the Companys entrance into the enterprise services
sector.

Cash used in investing activities decreased to $1.9 million for the nine
months ended September 30, 2002 as compared to $3.6 million for the nine months
ended on September 30, 2001. This is attributable to reduced investment in
software development because of the completion and implementation of certain
projects, reduced computer equipment purchases and license fees.

Cash provided by financing activities was approximately $8.2 million for
the nine months ended September 30, 2002 as compared to $10.4 million for the
nine months ended September 30, 2001. The cash provided in the 2002 period is
primarily attributable to $10.2 million in net cash proceeds from issuance of
our January and March 2002 convertible notes payable, partially offset by
$697,000 of payments made in conjunction with our December 2001 acquisition of
PRSI, the repayment of $1.1 million in obligations to financial institutions
and other unrelated third parties, and the increase in restricted cash of
$305,000 in accordance with our amended credit facility.

On August 7, 2002, the Company entered into an agreement with Comerica
Bank to amend its loan and security agreement (Amendment Number Two). The
Comerica facility was amended to reduce the revolving credit line to
$1,000,000 from $3,000,000. Amounts under the borrowing base line may be
advanced based on up to 80% of eligible receivables as defined in the
agreement. Borrowings under the revolving credit line are due and payable on
March 26, 2003. Total borrowings under the revolving credit facility totaled
$1,000,000 at September 30, 2002. Pursuant to the terms of Amendment Number
Two, all further credit advances under the revolving credit line are subject to
credit approval by the bank.

Significant financial covenants with which the Company must comply include
operating performance requirements, minimum EBITDA requirements and a
debt/tangible net worth ratio. In accordance with the terms of Amendment
Number Two, the amount of unrestricted cash the Company must maintain on
deposit with the bank was reduced from $1,250,000 to $250,000. As of September
30, 2002, the Company must also maintain deposits of $800,000 with the bank as
collateral for credit card processing and a standby letter of credit. Effective
April 2002, the Company placed a $750,000 deposit with the bank to
collateralize an outstanding standby letter of credit. The letter of credit and
the required deposit is reduced by $83,333 per month and matures on November
30, 2002. The amount of the letter of credit and the collateral deposit at
October 1, 2002 was $166,000.

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In December 2001, we issued 8% Convertible Promissory Notes due December
20, 2002 in the aggregate principal amount of $3.5 million. In January 2002, we
issued 8% Convertible Promissory Notes due January 17, 2003 in the aggregate
principal amount of $4.6 million. In March 2002, we issued 8% Convertible
Promissory Notes due December 20, 2002 in the aggregate principal amount of
$6.1 million with net proceeds of $5.7 million. At the 2002 Annual Meeting of
Stockholders, held on July 18, 2002, the Companys stockholders approved the
issuance of the shares of common stock underlying the notes and, consequently,
these notes and accrued interest automatically converted into common stock on
July 18, 2002. These notes, with an aggregate principal amount of $14.2 million
and accrued interest, converted into 27,864,051 shares of common stock.

As of close of business on July 18, 2002, Pequot Private Equity Fund II,
L.P., the holder of all 203,113 shares of Series A-1 Convertible Preferred
Stock, elected to convert all of its Series of A-1 Convertible Preferred Stock
into Common Stock. The conversion price of the Series A-1 Convertible Preferred
Stock was $0.48237 per share, which resulted in the issuance of an aggregate of
42,107,303 shares of common stock upon conversion of the Series of A-1
Convertible Preferred Stock.

Since inception, we have experienced negative cash flows from operations.
We had a working capital deficit of $1.6 million and an accumulated deficit of
$95.8 million as of September 30, 2002. Based on our current operating plans,
management believes existing cash resources and cash forecasted by management
to be generated by operations and potentially available from a renegotiated
bank financing arrangement will be sufficient to meet working capital and
capital requirements through at least the next twelve months. Managements
plans to attain profitability and generate additional cash flows include,
increasing revenues from enterprise and consumer services, focusing on cost
reductions and operational efficiencies to be derived from further deployment
of our technologies, and the launch of additional products. There is no
assurance that management will be successful with these plans. If we are unable
to meet our current operating plan and are unable to raise additional
financing, we may be required to reduce certain discretionary spending, which
could have a material adverse effect on our ability to achieve our intended
business objectives.

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Contractual Obligations and Commercial Commitments.

The following table summarizes all significant contractual payment
obligations as of September 30, 2002, by payment due date:

|                             |       |       |       |         |  |           |                    |            |  |  |       |        |       |  |     |     | 
|---------------------------- | ----- | ----- | ----- | ------- |  | --------- | ------------------ | ---------- |  |  | ----- | ------ | ----- |  | --- | --- | 
|                             |       |       |       |         |  |           | Payments by Period |            |  |  |      
|                             |       |       |       |         |  |           | ($Thousands)       |            |  |  |      
|                             |       |       |       |         |  |           |                    |            |  |  |      
|                             |       |       |       |         |  |           | Remainder          |            |  |  |       |        | 2005-
|Contractual Obligation       |       | Total |       | of 2002 |  | 2003-2004 |                    | thereafter
|                             |       |       |       |         |  |           |                    |           
|Bank debt                    |       |       | 1,223 |         |  |           | 76                 |            |  |  | 1,147 |        |       |  |    |    
|Advertising commitments      |       |       | 4,675 |         |  |           | 825                |            |  |  | 3,850 |        |       |  |    |    
|Capital lease obligations    |       |       | 209   |         |  |           | 55                 |            |  |  | 151   |        |       |  | 3   |    
|Operating lease obligations  |       |       | 3,846 |         |  |           | 377                |            |  |  | 3,006 |        |       |  | 463 |    
|Minimum purchase commitments |       |       | 897   |         |  |           | 207                |            |  |  | 690   |        |       |  |    |    
|PRSI payment obligations (a) |       |       | 2,220 |         |  |           | 150                |            |  |  | 2,070 |        |       |  |    |    
|                             | Total |       | $     | 13,070  |  |           | $                  | 1,690      |  |  | $     | 10,914 |       |  | $   | 466 | 



---

|(a) |  | Includes payment obligations of $1,520,000, payable in equal monthly
installments of $127,000 commencing January 2004. These payments may be
accelerated commencing October 2002 based on the profitability and cash
flows of PRSI.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Risk Factors affecting our Business, Operating Results and Financial Condition

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

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

Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market immediately. As of May 28, 2002 we
had 27,343,222 shares issued and outstanding, of which 18,408,080 were
restricted. We registered for resale 49,027,948 shares, including 11,800,000 of
the restricted shares currently outstanding. In addition to the shares
discussed above, Pequot Private Equity Fund II, L.P. elected to convert its
Series A-1 Convertible Preferred Stock into 42,107,303 shares of our Common
Stock.

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The following chart summarizes the number of shares of our Common Stock
that are available for resale as of November 1, 2002 as compared to May 28,
2002.

|                 |  |             |            |             |  |             |            |          |  |        |            |             |  |            |     |  
|---------------- |  | ----------- | ---------- | ----------- |  | ----------- | ---------- | -------- |  | ------ | ---------- | ----------- |  | ---------- | --- | -
|                 |  |             |            |             |  |             |            |          |  |        |            |             |  | Percentage
|                 |  |             |            |             |  |             |            |          |  | Freely |            | Increase of
|                 |  | Total       |            | Restricted  |  | Tradable    |            | Freely  
|                 |  | Outstanding |            | Shares      |  | Shares      |            | Tradable
|                 |  | Shares      |            | Outstanding |  | Outstanding |            | Shares  
|                 |  |             |            |             |  |             |            |         
|May 28, 2002     |  |             | 27,343,222 |             |  |             | 18,408,080 |          |  |        | 8,935,142  |             |  |            |    |  
|November 1, 2002 |  |             | 96,992,327 |             |  |             | 58,637,782 |          |  |        | 38,354,545 |             |  |            | 329 | %

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

The market price of our Common Stock has fluctuated significantly. Since
going public in June 1999, the closing price of our Common Stock on NASDAQ has
ranged from a high of $17.375 to a low of $0.1888. During the last twelve
months, the closing price of our Common Stock has ranged from a high of $1.84
to a low of $0.19. On October 30, 2002, the closing price of our Common Stock
was $0.34. The market price of our Common Stock could continue to be subject to
significant fluctuations as a result of numerous factors, many of which are
beyond our control. Among the factors that could affect our stock price are:



| |  |  | quarterly variations in our operating results;                                          
| | - |  | ----------------------------------------------------------------------------------------
|
| |  |  | changes in revenue or earnings estimates or publication of research reports by analysts;
|
| |  |  | speculation in the press or investment community about our business;                    
|
| |  |  | fluctuations in stock market prices and volumes, particularly of similar companies;     

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| |  |  | changes in market valuations of similar companies;                                                      
| | - |  | --------------------------------------------------------------------------------------------------------
|
| |  |  | strategic actions by us or our competitors such as acquisitions or restructurings;                      
|
| |  |  | regulatory developments;                                                                                
|
| |  |  | additions or departures of key personnel;                                                               
|
| |  |  | general market conditions, including the effect of market conditions on our customers and suppliers; and
|
| |  |  | domestic and international economic factors unrelated to our performance.                               

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

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

The trading price of our Common Stock has fallen below $1.00 per share,
and, therefore, it may be delisted from the NASDAQ National Market. If our
Common Stock is delisted from the NASDAQ National Market, you may be unable to
dispose of your shares. In February 2001 and September 2002 we received notices
from the NASDAQ Stock Market that we were not in compliance with the $1.00
minimum bid requirement for continued listing on the NASDAQ National Market and
that our common stock was subject to delisting from the NASDAQ National Market.
In March 2001 we participated in a hearing before the NASDAQ Listing
Qualifications Panel to appeal the earlier decision to delist out common stock.
In June 2001 we received a notification from NASDAQ that the NASDAQ Listing
Qualifications Panel had determined that we regained compliance with the
requirements for continued listing on the NASDAQ National Market and,
accordingly, determined to continue to list our common stock on the NASDAQ
National Market. On October 24, 2002 we participated in another hearing before
the NASDAQ Listing Qualification Panel to appeal the September 2002 decision to
delist our common stock. We are awaiting the Panels decision.

We are in compliance with all continued listing requirements except
NASDAQs minimum bid price requirement. At the October 2002 hearing, we
requested an extension of time to achieve compliance with the minimum bid price
requirement and we informed the Hearing Panel, among other things, that our
Board of Directors had approved a reverse stock split, if necessary, to achieve
compliance.

If we are unable to maintain compliance with the requirements for
continued listing on the NASDAQ National Market, including the $1.00 minimum
bid requirement and the net tangible assets maintenance requirement; we may be
subject to delisting from the NASDAQ National Market. On October 30, 2002, the
closing price for our common stock was $0.34 per share. If we are delisted from
the NASDAQ National Market System, trading in our common stock could occur, if
at all, in the NASDAQ Small Cap Market or in the over-the-counter market in
so-called pink sheets or, if then available, the OTC Bulletin Board. As a
result, the holders of our common stock would find it more difficult to dispose
of, or to obtain accurate quotations as to the market value of, our common
stock.

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

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

We incurred significant net losses of approximately $26.4 million in 1999,
$29.4 million in 2000, $11.9 million in 2001 and $21.3 million in the first
nine months of 2002. As of September 30, 2002, we had an accumulated deficit of
approximately $95.8 million. If our revenue does not grow as expected or
capital and operating expenditures exceed our plans, our business, operating
results and financial condition will be materially adversely affected. We
cannot be certain if or when we will be profitable or if or when we will
generate positive operating cash flow.

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

In December 2001, we acquired Professional Resource Screening, Inc. The
acquisition will present numerous challenges to us, including the integration
of the operations and personnel of Professional Resource Screening. We will
also be subject to special risks such as possible unanticipated liabilities and
costs, diversion of management attention and loss of personnel. In addition, we
may not achieve the revenue levels, increased earnings, profitability,
efficiencies or synergies that we believe justified the acquisition. In
addition, while we have no current plan to acquire any specific business or
businesses, we may, from time to time, pursue other acquisitions of businesses
that complement or expand our existing business. There can be no assurance that
the anticipated economic, operational and other benefits of any future
acquisition will be achieved. In addition, acquisitions may involve the
expenditure of significant funds and involve a number of risks, including
diversion of management attention, unanticipated problems, liabilities or
contingencies and risks of entering markets in which we have limited or no
direct expertise. We cannot assure you that Professional Resource Screening or
any businesses we acquire in the future will generate sufficient revenue to
offset the associated costs or other adverse effects or that we will be able to
successfully integrate or manage Professional Resource Screening. The
occurrence of some or all of these events could have a material adverse effect
on our business, results of operations or financial condition.

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

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



| |  |  | free individual locator and information services, including
services offered by Internet search engines, telephone companies and
other third parties who publish free printed or electronic
directories such as Yahoo, Inc. and Infospace, Inc.;                                                                                                                                                                             
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | fee-based Internet search services offering comparable
services, such as KnowX.com;                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | local, regional and national private investigation firms, such
as Kroll-OGara Company, Pinkerton, the Proudfoot Reports division of
ASI Solutions, Inc., and a significant number of companies operating
on either a national scale or a local or regional basis; and the
employment screening market, where our competitors include Avert,
Inc., ChoicePoint, Inc., Hire Check, Inc. and General Information
Services, Inc.

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

Many of our competitors have greater financial and marketing resources
than we do and may have significant competitive advantages through other lines
of business, their existing client base and other business relationships. These
competitors and other potential competitors may undertake more extensive
marketing campaigns, adopt more aggressive pricing policies and devote more
resources to developing information search services, background checks for
individual or corporate clients and internet trust services than we are willing
or able to accomplish. In addition, our competitors or potential competitors
may develop services that are superior to ours, develop services less expensive
than ours or that achieve greater market acceptance than our services. We may
not be able to successfully compete against our current or future competitors
with respect to any of these factors. As a response to changes in the
competitive environment, we may make pricing, service or marketing decisions
such as reducing our prices or increasing our advertising, all of which may
affect our operating results. If we are unsuccessful in responding to our
competitors, our business, financial condition and results of operations will
be materially adversely affected.

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

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

We may incur liability based on consumer complaints

A substantial amount of our business involves sales of services to
individual consumers. We have received customer complaints concerning the
quality of our services, including complaints about the currency and/or

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

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

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

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

A substantial portion of our operating expenses is related to management
personnel, administrative support and our advertising agreements. Many of these
agreements have non-cancelable fixed terms and minimum payment obligations. As
a result, a substantial portion of our expenses in any given period is fixed
costs. If we are unable to generate sufficient revenues to offset our operating
costs or if we are unable to lower our advertising costs to respond to lower
than expected revenues, our results of operations would be materially adversely
affected. Our minimum non-cancelable payments under certain distribution and
marketing agreements with various Internet companies are $4.7 million as of
September 30, 2002.

We depend on our marketing agreements with Internet companies

An important element of our current business strategy is to maintain
relationships with a number of Internet search engines and popular Web sites
for advertising and to direct and attract traffic to our Web site. The most
significant of these agreements are with Yahoo!, Inc. and InfoSpace, Inc. We
entered into a new agreement with Yahoo! in September 2002, which expires on
February 29, 2004 and our agreement with InfoSpace expires on September 30,
2003. These advertising agreements constitute a significant portion of our
operating expenses. If the costs associated with these advertising agreements
increases, we may not be able to maintain our existing marketing relationships
or enter into future marketing relationships with other Internet companies. Any
termination of existing agreements or failure to enter into new agreements with
Internet companies on terms favorable to us could have a material adverse
effect on our business, financial condition and results of operations.

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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 white pages directories, our
advertising will no longer appear on their Web sites. This could significantly
reduce our advertising reach and, consequently, lower the number of potential
clients visiting our Web site, which could in turn materially adversely affect
our business, financial condition and results of operations.

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

We depend on the satisfactory performance, reliability and availability of
our Web site and telecommunications infrastructure to attract clients and
generate sales. We cannot assure you that we will be able to protect our
operations from a system outage or data loss by events beyond our control.
Events that could cause system interruptions include:



| |  |  | fire;                                       
| | - |  | --------------------------------------------
|
| |  |  | earthquake;                                 
|
| |  |  | terrorist attacks;                          
|
| |  |  | natural disasters;                          
|
| |  |  | computer viruses;                           
|
| |  |  | unauthorized entry;                         
|
| |  |  | telecommunications failure; and             
|
| |  |  | power loss and California rolling blackouts.

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

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

Many privacy and consumer advocates and federal regulators have become
increasingly concerned with the use of personal information, particularly
credit header information. For certain qualified business customers, we use
the social security numbers of individuals to search various databases,
including those of consumer credit reporting agencies. For example, we search
the credit header information contained in various consumer credit reporting
agencies databases to find, among other items, date of birth, current and
previous addresses, social security numbers used by an individual or possible
other names (such as married

24



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##### Table of Contents



names, etc.). 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. Our results of operations could
suffer materially if federal or state laws or regulations are amended or
enacted in the future, or cases decided relating to the access and use of
personal information, or privacy and civil rights, in general, or with respect
to the Internet or commercial online services covering issues such as property
rights, distribution, taxation, access charges and other fees, and quality of
products and services. Cost increases relating to this government regulation
could result in these increased costs being passed along to Internet end users
and could dampen the growth in use of the Internet as a communications and
commercial medium, which could have a material adverse effect on our business
and results of operations.

We depend on our key management personnel for our future success

Our success depends to a significant degree upon the continued
contributions of our executive management team and its ability to effectively
manage the anticipated growth of our operations and personnel. The loss of
Brent Cohen, our CEO, David Wachtel, our CTO, or other members of our
management team and the inability to hire additional senior management, if
necessary, could have a material adverse effect on our business and results of
operations. In addition, increased costs of new personnel, including members of
executive management, could have a material adverse effect on our business and
operating results.

The Internet may fail to support the growth of electronic commerce

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

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

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

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

25



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##### Table of Contents



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

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

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

We rely on encryption and other technologies to provide system security to
effect secure transmission of confidential information, such as credit card
numbers. We license these technologies from third parties. We cannot assure you
that our use of applications designed for data security, or that of our
third-party contractors will effectively counter evolving security risks. A
security or privacy breach could:



| |  |  | expose us to additional liability;                                 
| | - |  | -------------------------------------------------------------------
|
| |  |  | increase our expenses relating to resolution of these breaches; and
|
| |  |  | deter customers from using our services.                           

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

We face risks related to chargebacks processed from our merchant bank

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

Under the terms of our Merchant Card Agreement with Visa, chargebacks as a
percentage of interchange transactions must not exceed 2.5% and the ratio of
customer dispute chargebacks to interchange transactions must not exceed 1%.
Although our chargeback rate has periodically exceeded the permissible rates,
in our merchant card agreements, during July, August, and September 2002, the
company was in compliance with the rates.

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

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

We may face potential liability from individuals, government agencies or
businesses for defamation, invasion of privacy, negligence, copyright, patent
or trademark infringement and other claims based on the nature and content of
the materials that appear on our Web site or in our search reports. We also
face potential

26



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##### Table of Contents



liability to clients and/or the subjects of individual search reports prepared
by us for inaccurate information or misuse of the information. Although we
carry a limited amount of general liability and errors and omissions insurance,
our insurance may not cover claims of these types or may not be adequate to
indemnify us for all liability that may be imposed. In addition, this insurance
may not remain available to us on acceptable terms. Additionally, we do not
currently maintain liability insurance to cover claims by the subjects of
reports. Any imposition of liability, particularly liability that is not
covered by insurance or is in excess of our insurance coverage, could have a
material adverse effect on our reputation and our business and results of
operations.

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

Our certificate of incorporation grants our board of directors the
authority to issue up to 1,000,000 shares of preferred stock, and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights of these shares without any further vote or action by the stockholders.
Previously, we have issued preferred stock with voting, liquidation, dividend
and other rights superior to those of the common stock. Although all preferred
stock previously issued has been converted to common stock, we may issue
additional preferred stock in the future and the rights of the holders of
common stock will be subject to, and maybe adversely affected by, the rights of
any preferred stock that may be issued in the future. The issuance of preferred
stock could have the effect of making it more difficult for a third party to
acquire a majority of our outstanding voting stock which could decrease the
market value of our stock. Further, provisions in our certificate of
incorporation and bylaws and Delaware law could have the effect of delaying or
preventing a third party from acquiring us, even if a change in control would
be in the best interest of our stockholders. These provisions include the
inability of stockholders to act by written consent without a meeting and
procedures required for director nomination and stockholder proposal.

Pequot Private Equity Fund II, L.P. (Pequot) currently beneficially
holds approximately 54.16% of our common stock and will be able to exercise
voting control over issues presented to our stockholders for approval.

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

Pequot will be able to exercise voting control over issues presented to
our stockholders for approval. Further, by virtue of the Stockholders Agreement
and their combined voting control Pequot possesses certain 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.

27



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##### Table of Contents



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

Our executive officers, directors and principal stockholders beneficially
own, in total, 69.25% of our outstanding common stock. As a result, these
stockholders may have interests that are different from and may conflict with
yours, and will be able to influence matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. This could have the effect of delaying or preventing a change of
control of our company or otherwise cause us to take action that may not be in
the best interests of all stockholders, either of which in turn could reduce
the market price per share of our common stock or prevent you from receiving a
premium in such transaction. This concentration of stock ownership may
adversely affect the trading price of our common stock due to investors
perception that conflicts of interest may exist or arise.

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

As of September 30, 2002, we had granted options and warrants to purchase
an aggregate of approximately 30,164,489 shares of common stock at exercise
prices ranging from $0.01 per share to $11.13 per share. To the extent that the
stock options and warrants are exercised, material dilution of the ownership
interest of our stockholders will occur. We also expect that in the ordinary
course of our business we will issue additional warrants and grant additional
stock options including, but not limited to, options granted pursuant to our
stock option plans.




Item 3. Quantitative and qualitative disclosures about market risk

We considered the provision of Financial Reporting Release No. 48
Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and
Qualitative Information about Market Risk Inherent In Derivative Financial
Instruments, Other Financial Instruments and Derivative Commodity Instruments.
We had no holdings of derivative financial instruments at September 30, 2002
and our total liabilities as of September 30, 2002 consist primarily of notes
payable and accounts payable that have fixed interest rates and were not
subject to any significant market risk.




Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures as such term is
defined under Rule 13a-14(c) of the Securities Exchange Act of 1934, as amended
(the Exchange Act), that are designed to ensure that information required to
be disclosed in the Companys reports required to be filed under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms, and that
such information is accumulated and communicated to the Companys management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, the Companys
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives and the Companys management necessarily is required
to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.

Within 90 days prior to the date of this report, the Company carried out
an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and the
Companys Chief Financial Officer, of the effectiveness of the design and
operation of the Companys disclosure controls and procedures. Based on the
foregoing, the Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures were effective.

There have been no significant changes in the Companys internal controls
or in other factors that could significantly affect the internal controls
subsequent to the date the Company completed its evaluation.




PART II. OTHER INFORMATION




Item 1. Legal Proceedings

On April 3, 2000 a two count trade name and service mark complaint was
filed against the Company in the United States District Court for the Eastern
District of Virginia, styled U.S. Search, LLC v USSearch.com Inc. Civil Action
No. 00-554-A. On January 26, 2001, our motion for summary judgment was granted
and the court ordered that both counts of plaintiffs complaint be dismissed
with prejudice. Plaintiff has appealed this matter to the U.S. Court of
Appeals, Fourth Circuit. The hearing on appeal was held on June 6, 2002. On
August 16, 2002, the Court of Appeals affirmed the grant of summary judgment in
the Companys favor.

28



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In May 2001, ChoicePoint, Inc., the successor entity to DBT Online, Inc.,
filed a complaint against us in Palm Beach County, Florida alleging breach of
contract, fraudulent misrepresentation, unjust enrichment, quantum meruit and
breach of the implied covenant of good faith and fair dealing. ChoicePoint
sought approximately $1.5 million in damages, as well as interest and
attorneys fees. US SEARCH removed this action to the United States District
Court for the Southern District of Florida. The United States District Court
for the Southern District of Florida ordered the matter to arbitration. In June
2002 the arbitrator awarded us a credit of $297,671 to be deducted from
invoices of $1,418,731. ChoicePoint has filed a motion to confirm the
Arbitration Award and we have filed a motion to modify and correct the
Arbitration award to provide additional credits. We are awaiting rulings on
these motions. In the third quarter of 2002, we had paid ChoicePoint $100,000
of the award. At September 30, 2002, the Company had approximately $979,000
accrued for this liability. The costs related to this litigation, including the
fees and costs of our attorneys and other litigation support professionals,
have been less than $100,000. As of November 1, 2002, the Company had paid a total
of $300,000 of the award, leaving approximately $779,000 accrued for this
liability.

On June 25, 2002, a complaint seeking $434,000 in damages was filed
against Professional Resource Screening, Inc. in Superior Court of California,
county of Contra Costa, styled Wood Warren & Co. v. Professional Resource
Screening, Inc., No. C02-01816, alleging breach of an oral agreement relating
to investment banking services, negligent misrepresentation, promissory
estoppel, equitable estoppel and quantum meruit. Although it is too early to
predict the outcome, the Company believes it has meritorious defenses to
plaintiff claims.

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

29



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##### Table of Contents






Item 2. Changes in Securities and Use of Proceeds.

On July 18, 2002 we issued to the holders of our 8% Convertible Promissory
Notes an aggregate of 27,864,051 shares of common stock upon conversion in full
of our then outstanding 8% Convertible Promissory Notes (the Note Conversion
Shares). The issuance of the Note Conversion Shares was exempt from the
registration requirements of the Act pursuant to Sections 3(a)(9) and 4(2)
thereof and Rule 506 of Regulation D promulgated thereunder.

On July 18, 2002 we issued to Pequot Private Equity Fund II, L.P. (Pequot)
42,107,303 shares of common stock upon conversion in full of all shares of
Series A-1 Convertible Preferred Stock then held by Pequot (the Series A-1
Conversion Shares). The issuance of the Series A-1 Conversion Shares was
exempt from the registration requirements of the Act pursuant to Sections
3(a)(9) and 4(2) thereof and Rule 506 of Regulation D promulgated thereunder.




Item 3. Defaults upon Senior Securities

None




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

The Company held its annual stockholders meeting on July 18, 2002. The
following matters were voted on at the meeting:



| | 1. |  | To approve an amendment to the Companys Certificate of Incorporation
to increase the number of authorized shares of Common Stock from
150,000,000 to 300,000,000.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|           |  |         |         |         |  |         |   |  |  |  |   | 
|---------- |  | ------- | ------- | ------- |  | ------- | - |  |  |  | - | 
|For        |  | Against |         | Abstain |  | No-Vote
|           |  |         |         |         |  |        
|55,676,092 |  |         | 205,100 |         |  |         | 0 |  |  |  | 0 | 



| | 2. |  | To ratify the issuance of the Companys 8% Convertible Promissory
Notes and to approve the issuance of Common Stock upon conversion
thereof.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|           |  |         |       |         |  |         |   |  |  |  |   | 
|---------- |  | ------- | ----- | ------- |  | ------- | - |  |  |  | - | 
|For        |  | Against |       | Abstain |  | No-Vote
|           |  |         |       |         |  |        
|55,872,692 |  |         | 8,500 |         |  |         | 0 |  |  |  | 0 | 



| | 3. |  | To elect three Common Stock directors to hold office until the 2005
Annual Meeting of Shareholders.
Brent Cohen
Peter Locke
Alan Mendelson
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------

|           |  |         |        |         |  |         |     |  |  |  |   | 
|---------- |  | ------- | ------ | ------- |  | ------- | --- |  |  |  | - | 
|For        |  | Against |        | Abstain |  | No-Vote
|           |  |         |        |         |  |        
|55,864,572 |  |         | 16,120 |         |  |         | 500 |  |  |  | 0 | 



| | 4. |  | To approve an amendment to the Companys Amended and Restated 1998
Stock Incentive Plan to increase the aggregate number of shares of
Common Stock authorized for issuance under such plan by 10,000,000
shares
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|           |  |         |        |         |  |         |       |  |  |  |   | 
|---------- |  | ------- | ------ | ------- |  | ------- | ----- |  |  |  | - | 
|For        |  | Against |        | Abstain |  | No-Vote
|           |  |         |        |         |  |        
|55,867,692 |  |         | 12,500 |         |  |         | 1,000 |  |  |  | 0 | 

30



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##### Table of Contents






Item 5. Other Information

None




Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits: Exhibit 10.2. Amendment No. 5 to the Advertising and
Promotion Agreement dated September 11, 2002.

(b)  Reports on Form 8-K:

During the quarter ended September 30, 2002, we filed current reports on
Form 8-K on the following dates:



| |  |  | July 23, 2002 (Item 5. Other Events);              
| | - |  | ---------------------------------------------------
|
| |  |  | August 7, 2002 (Item 5. Other Events);             
|
| |  |  | August 14, 2002 (Item 9. Regulation FD Disclosure).




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, 2002 |  | By: |  | /s/ BRENT N. COHEN                                 
|                        |  |     |  |                                                    
|                        |  |     |  | Brent N. CohenPresident and Chief Executive Officer
|                        |  |     |  |                                                    
|                        |  | By: |  | /s/ JEFFREY R. WATTS                               
|                        |  |     |  |                                                    
|                        |  |     |  | Jeffrey R. WattsChief Financial Officer            

31



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Section 302 Certification:

Chief Executive Officer

I, Brent N. Cohen, President and Chief Executive Officer of US SEARCH.com
Inc., certify that:

| |                                                                             
| | ----------------------------------------------------------------------------
| | 1. I have reviewed this quarterly report on Form 10-Q of US SEARCH.com
Inc.;

| |                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;

| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report;

| |                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4. The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;

| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and

| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the
audit committee of registrants board of directors (or persons performing
the equivalent function):

| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and

| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

| |                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.

|                        |  |  |  |                                                     
|----------------------- |  |  |  | ----------------------------------------------------
|                        |  |  |  | /s/ BRENT N. COHEN                                  
|                        |  |  |  |                                                     
|                        |  |  |  | Brent N.
Cohen
President and Chief Executive Officer
|Date: November 14, 2002 |  |  |  |                                                     





---



##### Table of Contents



Chief Financial Officer

I, Jeffrey R. Watts, Chief Financial Officer, certify that:

| |                                                                             
| | ----------------------------------------------------------------------------
| | 1. I have reviewed this quarterly report on Form 10-Q of US SEARCH.com
Inc.;

| |                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;

| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report;

| |                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4. The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;

| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and

| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the
audit committee of registrants board of directors (or persons performing
the equivalent function):

| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and

| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

| |                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.

|                        |  |  |  |                                         
|----------------------- |  |  |  | ----------------------------------------
|                        |  |  |  | /s/ JEFFREY R. WATTS                    
|                        |  |  |  |                                         
|                        |  |  |  | Jeffrey R. Watts
Chief Financial Officer
|Date: November 14, 2002 |  |  |  |