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UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

|  |  |                                                  
|- |  | -------------------------------------------------
|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)    
|  |  | OF THE SECURITIES EXCHANGE ACT OF 1934           
|  |  |                                                  
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
|  |  | OF THE SECURITIES EXCHANGE ACT OF 1934           

For the fiscal year ended December 31, 2002

Commission File No. 0-24205



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Factual Data Corp.(Exact name of Registrant as specified in its charter)

|                                |  |                    
|------------------------------- |  | -------------------
|Colorado                        |  | 84-1449911         
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

5200 Hahns Peak Drive, Loveland, Colorado 80538(Address of principal executive offices) (Zip code)

(970) 663-5700
(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x

The aggregate market value of the voting stock held by non-affiliates of
the registrant on March 3, 2003, was approximately $26 million based upon the
reported closing sale price of such shares on the Nasdaq National Market for
that date. As of March 3, 2003, there were 6,190,884 shares outstanding of
which 2,721,641 were held by non-affiliates.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrants most recently completed
second fiscal quarter: $39,097,000

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrants Proxy Statement to be filed with the Commission in
connection with the Annual Meeting of Shareholders scheduled to be held on May
2, 2003 are incorporated by reference into Part III of this Report on Form
10-K.

The exhibit index appears on page E-1.



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TABLE OF CONTENTS



|                                                                                                        |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|Item 1. Description of Business                                                                        
|Item 2. Properties                                                                                     
|Item 3. Legal Proceedings                                                                              
|Item 4. Submission of Matters to a Vote of Security Holders                                            
|Item 5. Market for Registrants Common Equity and Related Shareholder Matters                          
|Item 6. Selected Financial Data                                                                        
|Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|Item 7A. Quantitative and Qualitative Disclosure about Market Risk                                     
|Item 8. Financial Statements and Supplementary Data                                                    
|Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure           
|Item 10. Directors and Executive Officers of the Registrant                                            
|Item 11. Executive Compensation                                                                        
|Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
|Item 13. Certain Relationships and Related Transactions                                                
|Item 14. Controls and Procedures                                                                       
|Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                              
|EX-23.1 Consent of BDO Seidman LLP                                                                     
|EX-23.2 Consent of Ehrhardt Keefe Steiner                                                              
|EX-99.1 Certification of Chief Executive Officer                                                       
|EX-99.2 Certification of Chief Financial Officer                                                       



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##### Table of Contents



FACTUAL DATA CORP.
2002 ANNUAL REPORT ON FORM 10-K

Table of Contents

|         |  |                                                                                                |  |      |    | 
|-------- |  | ---------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Item     |  | Description                                                                                    |  | Page |   
|         |  |                                                                                                |  |      |   
|Item 1.  |  | Description of Business                                                                        |  |      | 1  | 
|Item 2.  |  | Properties                                                                                     |  |      | 16 | 
|Item 3.  |  | Legal Proceedings                                                                              |  |      | 16 | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                            |  |      | 17 | 
|Item 5.  |  | Market for Registrants Common Equity and Related
Shareholder Matters                          |  |      | 17 | 
|Item 6.  |  | Selected Financial Data                                                                        |  |      | 18 | 
|Item 7.  |  | Managements Discussion and Analysis of Financial
Condition
and Results of Operations          |  |      | 20 | 
|Item 7A  |  | Quantitative and Qualitative Disclosure about
Market Risk                                      |  |      | 28 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                                    |  |      | 28 | 
|Item 9.  |  | Changes In and Disagreements with Accountants on
Accounting
and Financial Disclosure           |  |      | 28 | 
|Item 10. |  | Directors and Executive Officers of the Registrant                                             |  |      | 29 | 
|Item 11. |  | Executive Compensation                                                                         |  |      | 29 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners and
Management and Related Shareholder Matters |  |      | 29 | 
|Item 13. |  | Certain Relationships and Related Transactions                                                 |  |      | 29 | 
|Item 14. |  | Controls and Procedures                                                                        |  |      | 29 | 
|Item 15. |  | Exhibits, Financial Statement Schedules, and
Reports on Form
8-K                               |  |      | 29 | 

STATEMENT UNDER THE SECURITIES LITIGATION REFORM ACT OF 1995

This annual report on Form 10-K contains forward-looking statements that
involve a number of risks and uncertainties. Such forward-looking statements
are not historical facts and constitute or rely upon projections, forecasts,
assumptions or other forward-looking information. Generally these statements
may be identified by the use of forward-looking words or phrases such as
believes, expects, anticipates, intends, plans, estimates, may,
and should. These statements are inherently subject to known and unknown
risks, uncertainties and assumptions. Our future results could differ
materially from those expected or anticipated in the forward-looking
statements. Specific factors that might cause such differences include factors
described and discussed in the description of our business in Item 1 and in our
managements discussion and analysis of financial condition and results of
operations in Item 7 of this report.





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PART I




Item 1.Description of Business

Our Company

We provide a wide range of customized information services to businesses
across the United States that assist them in making critical decisions, such as
determining whether to make a mortgage or other loan, offer employment, accept
new tenants, or enter into a business relationship. We specialize in providing
customized mortgage credit reports and other mortgage related services,
consumer credit reports, employment screening, resident screening, and
commercial credit reports. Our customers include mortgage lenders and
independent mortgage brokers, consumer lenders, employers, property managers,
and other business customers desiring information regarding creditworthiness
and other matters. We believe we are an industry leader in delivering our
service offerings over the Internet and in utilizing technology and focusing on
customer service to provide our services with the speed, reliability, accuracy,
and customization that industry participants increasingly demand.

To date, mortgage services have been our primary business and providing
mortgage credit reports has generated the majority of our revenue. We believe
that we currently are the second largest provider of mortgage credit reports in
the United States and the largest provider to independent mortgage brokers. In
addition, we are one of five approved direct information vendors for Freddie
Macs automated underwriting system and one of 12 approved direct information
vendors for Fannie Maes automated underwriting system. We are also integrated
with the top mortgage loan origination software systems in the United States.

We believe our success in the mortgage services industry results from our
focus on developing and offering industry-leading technology and providing
industry-leading customer service. This focus is based on our long-standing
view that technology and customer service are rapidly transforming the highly
fragmented and non-automated mortgage services industry. Our technology has
transformed the preparation and delivery of mortgage credit reports from a
completely manual procedure with a several day turnaround to a completely
automated process with turnaround time approaching a matter of seconds for many
of our services.

In order to capitalize on our competitive advantages in the mortgage
credit reporting industry, we began an aggressive expansion plan in 1998. Since
that time, we have acquired 37 mortgage service businesses. Prior to our
acquisition of these businesses, the businesses had found it increasingly
difficult to make the managerial and capital commitments necessary to achieve
required customer service levels and upgrade technology and systems,
particularly with market demands for increased speed, accuracy, and
cost-effectiveness.

In an effort to leverage the core competencies and infrastructure that we
developed in becoming a leader in the mortgage credit reporting industry, we
initiated a
diversification strategy into related information service businesses.
Further, we developed our resident screening, employment screening, and
commercial credit information businesses internally. We expanded into the
consumer credit reporting industry by entering into three lease agreements with
Experian Information Solutions, Inc. beginning in mid-2000. Through these
leases, we sell Experian consumer credit reports to retail banks, retail
merchants, automotive dealerships, credit unions, and other businesses in three
states. Under these arrangements, we also provide pre-screened promotional
lists and account-monitoring programs to financial services providers, such as
credit card issuers and home equity line of credit lenders.

In 2002, we launched FDinsight, to offer consumers advanced background
information about people and companies that affect them professionally and
personally. We also created our Direct Lender Services Division in 2002 to
focus on offering our web-based technology platform to banks, credit unions and
lenders in the home equity, home improvement and second mortgage market. We
grew our business in 2002 by acquiring three of our mortgage credit reporting
franchises, increasing our corporate territory in Florida, Kansas and
Pennsylvania. We established new relationships with other mortgage industry
leaders, AppIntell, Basis100, FNC and Ocwen; and a non-mortgage industry
leader, RentRight. Our 4 Hours or Its Free guarantee program was implemented
in 2002 to provide clients with a guaranteed four-hour turnaround on online
customer service update requests. Furthermore, in 2002 we launched services
aimed at the mortgage backed securities market via portfolio services.





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Our Services

We specialize in gathering data from a wide range of sources, adding value
by updating and analyzing that information, and electronically delivering and
presenting it in the manner that best suits each customers decision-making
process. The following tables set forth certain information relating to our
services.

Mortgage Information Services

|                                                         |  |                                                                                                                                           |  |                                                               
|-------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------
|Service                                                  |  | Description                                                                                                                               |  | Purpose                                                       
|                                                         |  |                                                                                                                                           |  |                                                               
|Merged credit reports                                    |  | Financial history is
obtained
from one to three credit
repositories; duplicate
information is removed;
and
data is merged and
reformatted |  | Assists lending
decisions                                     
|                                                         |  |                                                                                                                                           |  |                                                               
|Credit scores                                            |  | Credit scores are
obtained
from one to three credit
repositories                                                                          |  | Assists lending
decisions                                     
|                                                         |  |                                                                                                                                           |  |                                                               
|Credit score updates                                     |  | Update financial history
from the data source                                                                                             |  | Update credit scores
for reevaluation of loan
decision        
|                                                         |  |                                                                                                                                           |  |                                                               
|Identity authentications                                 |  | Finds identity theft,
fraud,
and misrepresentation
upon
application                                                                       |  | Helps prevent loan
losses                                     
|                                                         |  |                                                                                                                                           |  |                                                               
|Fannie
Mae DesktopOriginator/DesktopUnderwriter Services |  | Provider of merged credit
reports to Desktop
Underwriter                                                                                  |  | Assists lenders in automated
underwriting decisions           
|                                                         |  |                                                                                                                                           |  |                                                               
|Freddie Mac Loan
Prospector
Services                     |  | Direct credit provider of
merged credit reports to
Loan
Prospector                                                                        |  | Assists lenders in
automated
underwriting decisions           
|                                                         |  |                                                                                                                                           |  |                                                               
|Information
updates  online
customer service            |  | Verifies and updates
current
status and loan balance                                                                                      |  | Assists lenders in
evaluating
loan decisions with
updated
data
|                                                         |  |                                                                                                                                           |  |                                                               
|Flood determination
certificates                         |  | Flood zone determinations                                                                                                                 |  | Assists lenders in loan
closings                              
|                                                         |  |                                                                                                                                           |  |                                                               
|Automated property
valuations                            |  | Online property
valuations                                                                                                                |  | Assists lenders in
collateral
value determinations            
|                                                         |  |                                                                                                                                           |  |                                                               
|Third-party originator due
diligence reviews             |  | Investigates the
credentials
of third-party loan
originators                                                                              |  | Reduces fraudulent loan
submissions                           
|                                                         |  |                                                                                                                                           |  |                                                               
|Portfolio loan reviews                                   |  | Provides current credit
scores, automated
property
valuations, or other loan
portfolio data                                               |  | Determines quality of loan
portfolio                          
|                                                         |  |                                                                                                                                           |  |                                                               
|Tax return verifications                                 |  | Accesses IRS tax record
information                                                                                                       |  | Verifies tax
information to
reduce fraud                      

Consumer and Commercial Information Services

|                                |  |                                                                |  |                                                    
|------------------------------- |  | -------------------------------------------------------------- |  | ---------------------------------------------------
|Service                         |  | Description                                                    |  | Purpose                                            
|                                |  |                                                                |  |                                                    
|Consumer credit reports         |  | Provides financial and
credit
history information              |  | Assists in lending
decisions                       
|                                |  |                                                                |  |                                                    
|Risk scores                     |  | Provides Fair Isaac Credit
(FICO) scores                       |  | Assists in lending decisions                       
|                                |  |                                                                |  |                                                    
|Consumer credit segment
reports |  | Provides miscellaneous
historical data                         |  | Provides collection
aids and
employment
evaluations
|                                |  |                                                                |  |                                                    
|Pre-screen products             |  | Provides pre-approved mail
and telemarketing
promotional
lists |  | Assists in identifying new
accounts                

2



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|                            |  |                                                                     |  |                                                                                           
|--------------------------- |  | ------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------
|Account management
services |  | Reviews existing account
portfolio                                  |  | Monitors account
portfolios                                                               
|                            |  |                                                                     |  |                                                                                           
|Commercial credit reports   |  | Provides commercial,
financial, and credit
history
information      |  | Assists in lending
decisions                                                              
|                            |  |                                                                     |  |                                                                                           
|FDinsight                   |  | Provides history and
background information on
people and companies |  | Third party
verification of
information used in
making professional
and personal
decisions

Resident Screening Services

|                           |  |                                                                                                                                           |  |                                                 
|-------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------
|Service                    |  | Description                                                                                                                               |  | Purpose                                         
|                           |  |                                                                                                                                           |  |                                                 
|Resident qualifier
scores  |  | Assigns score weighting                                                                                                                   |  | Fair Housing
compliance and
applicant evaluation
|                           |  |                                                                                                                                           |  |                                                 
|Eviction data searches     |  | Searches eviction
databases
for unlawful detainer and
monetary judgments                                                                  |  | Reduces credit risk                             
|                           |  |                                                                                                                                           |  |                                                 
|Criminal records
searches  |  | Searches state and county
criminal record history                                                                                         |  | Assures safe housing
environment                
|                           |  |                                                                                                                                           |  |                                                 
|Residence history
searches |  | Investigates previous
residence history                                                                                                   |  | Decreases customers
bad debt
expense           
|                           |  |                                                                                                                                           |  |                                                 
|Public records
searches    |  | Searches for tax liens,
judgments, and bankruptcy
history                                                                                 |  | Reduces credit risk                             
|                           |  |                                                                                                                                           |  |                                                 
|Merged credit reports      |  | Financial history is
obtained
from one to three credit
repositories; duplicate
information is removed;
and
data is merged and
reformatted |  | Assists with renting
decisions                  
|                           |  |                                                                                                                                           |  |                                                 
|Fraud searches             |  | Finds fraud,
misrepresentation, and
inconsistencies upon
application                                                                      |  | Reduces fraudulent resident
applications        

Employment Screening Services

|                                 |  |                                                |  |                                                                        
|-------------------------------- |  | ---------------------------------------------- |  | -----------------------------------------------------------------------
|Service                          |  | 10. Description                                |  | 11. Purpose                                                            
|                                 |  |                                                |  |                                                                        
|Identification
verifications     |  | Compares database
information
with application |  | Verifies applicants
identity, former
residence,
and employment history
|                                 |  |                                                |  |                                                                        
|Residence
verifications          |  | Provides history of past
residency             |  | Compares application
information                                       
|                                 |  |                                                |  |                                                                        
|Financial history
verifications  |  | Provides summary of
applicants credit history |  | Assists in hiring
decisions                                            
|                                 |  |                                                |  |                                                                        
|Criminal history
searches        |  | Provides felony and
misdemeanor history        |  | Verifies applicants
criminal
history                                  
|                                 |  |                                                |  |                                                                        
|Motor vehicle reports            |  | Provides history of
applicants driving record |  | Provides applicants
driving
history                                   
|                                 |  |                                                |  |                                                                        
|Employment history
verifications |  | Provides information from
previous employers   |  | Validates application
information and work
history                     
|                                 |  |                                                |  |                                                                        
|Substance abuse
testing          |  | Detects substance abuse                        |  | Assures work place
safety                                              
|                                 |  |                                                |  |                                                                        
|Education
verifications          |  | Provides information from
educational records  |  | Validates education
information on resume
or
application               

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Our Acquisition Program

We have acquired 37 information service businesses since 1998, 13 of which
were system affiliates (i.e., former franchisees or licensees). The total
purchase price for these acquisitions was approximately $36.5 million.
Approximately $20.4 million of this amount was paid in cash, most of which we
generated through our initial public offering in 1998 and our private placement
in early 1999; $13.8 million was paid with promissory notes or bank debt; and
$2.3 million was paid with shares of our common stock. In virtually all of
these acquisitions, we were able to bolster the margins of the acquired
businesses significantly. We accomplished this by quickly integrating the
acquired businesses onto our low-cost, efficient technology platform and by
eliminating most of their overhead.

Due to the fragmented nature of the industry, the large number of smaller
companies, and various industry trends, the opportunity to acquire information
service businesses is abundant. Many of these businesses have increasingly
found it difficult to make the managerial and capital commitments necessary to
achieve required customer service levels and upgrade technology and systems,
particularly with market demands for increased speed, accuracy, and
cost-effectiveness.

We believe our company is regarded as an attractive acquirer by
information service companies because of the following factors:



| |  |  | our historical growth and performance;                                                                                                                                              
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the reputation of our management team;                                                                                                                                              
|
| |  |  | the ability of management and employees of acquired companies
to participate in our growth and expansion through potential stock
ownership and career advancement opportunities; and
|
| |  |  | our ability to offer liquidity to the owners of acquired
companies.                                                                                                                 

We focus our acquisition efforts on information service businesses. Likely
acquisition candidates are companies that meet the following characteristics:



| |  |  | be accretive to earnings;                                                                                             
| | - |  | ----------------------------------------------------------------------------------------------------------------------
|
| |  |  | increase our customer and revenue base;                                                                               
|
| |  |  | offer significant economies of scale through consolidation of
facilities, marketing, and administrative functions; and
|
| |  |  | need to associate with a technologically sophisticated
information service provider in order to remain competitive.   

Customer Service and Support

We devote considerable effort to customer service and support. Each staff
member within our company is certified to understand the Fair Credit Reporting
Act, the laws that govern our business and the rights of consumers. Our
customer service representatives are available 12 hours per day during the
business week.

In addition to the initially received report, our customers require
additional data, verifications and updated information on 20% of the reports we
issue. Our 4 Hours or Its Free guarantee demonstrates our commitment to
provide what we believe to be the fastest turnaround time in the industry. We
are able to take customer service requests online and immediately begin
processing the request. We continually monitor the quality of our
customer-support services and enhance our performance guidelines to provide the
highest quality service.

We train our technical support staff in all aspects of our software, all
loan origination systems with which we are integrated, and the most common
Internet browsers. Our technical support department is available 12 hours per
day during the business week. Our goal is to assure that each technical support
representative is able to solve a customers problem within five minutes. If
this is not possible, our senior technical support representatives work with
the customer until the problem is solved. With their knowledge of customer
requirements and the demands made on our software, our technical support
department is an integral part of our attention to servicing customer needs in
a timely and friendly manner.

4



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Our Technology

Our advanced proprietary software and web-based applications enable us to
deliver thorough, accurate reports that meet our customers formatting
specifications. Our technological efforts are designed to enhance our
technological leadership, expand our ability to handle additional volume
without a commensurate increase in costs, and enhance the speed, reliability,
customization, and user-friendliness of our service offerings. Over the past
six years, we have invested significant management attention, personnel, and
more than $7.5 million on proprietary computer software, state-of-the-art
hardware, and communications systems. We employ 51 technical staff, including
18 software programmers, to continue to expand our electronic capabilities and
develop new applications and service offerings. Our information, processing,
and telecommunications systems can access up to 18,000 files per hour and have
a capacity exceeding 50,000 transactions per day. In addition, our systems are
scalable, enabling us to grow our customer base and portfolio of services
without degrading efficiency or expending substantial funds.

We are one of five approved information vendors for Freddie Macs
automated underwriting system and one of 12 approved direct vendors for Fannie
Maes automated underwriting system. As the two largest sources of capital for
the mortgage industry, Freddie Mac and Fannie Mae have developed numerous
programs to simplify the underwriting process and lower the overall cost for
both borrowers and lenders. To
protect the integrity of their automated underwriting systems, both
entities limit the number of directly approved service providers. We believe
our technology has allowed us to establish relationships with Freddie Mac and
Fannie Mae, which have provided us with expertise, expanded market position,
and enhanced industry credibility.

We collect, integrate, analyze, and deliver information from our
technology centers in Loveland and Denver, Colorado. In the event of an
interruption of service at either of our centers, the other center can be used
to supplement or replace the services as needed. We rely on load balancing and
fail-over services from Sprint, as well as redundant routing services within
our own network, to ensure that all work is handled expeditiously.

We believe our systems have sufficient back-up and disaster recovery
capability. Because of those precautions, we have experienced little downtime.
Nevertheless, our business depends on our ability to protect the technology
centers against damage from fire, power loss, telecommunications failure,
natural disasters, and similar occurrences. Despite our precautionary backup
power and duplicate telecommunication facilities, we could experience a natural
disaster, hardware or software malfunction, or other interruption of technology
center operations. Extended interruptions in our services could be
significantly detrimental, and our insurance may not be adequate to compensate
us for all resulting losses.

Privacy and Security Concerns

Privacy and consumer advocates and federal regulators have become
increasingly concerned about how personal information is collected, used,
shared, and maintained. For most of our services, we are regulated as a
consumer reporting agency under the Fair Credit Report Act, or FCRA. We also
must comply with the laws of all 50 states. Finally, there is increasing
pressure from regulators, legislators, and the private sector for firms engaged
in providing information services to restrict the type of information they
collect, to adopt controls on how they use and share information, and to ensure
that their databases of sensitive information are secure.

We expend significant effort to assure the security of information that we
receive and reports that we generate. We believe we are the only information
services provider that requires every employee to be certified under the FCRA.
Our staff members receive FCRA training and must pass the certification exam
administered by the Consumer Data Industry Association, an international trade
association representing consumer credit, mortgage credit reporting, collection
service, resident screening, and employment reporting companies. If we acquire
a business whose employees are not certified, we require them to complete the
FCRA training and certification.

Additionally, our technology centers, website, and computer systems are
tested by an independent security firm at least four times each year. These
voluntary audits help to reduce our exposure to computer viruses, hackers,
common theft, and system failure.

5



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Competition

We operate in a highly competitive and fragmented industry with a large
number of companies in each of our service offerings. While a significant
number of these companies are small and operate solely on a local or regional
basis, several large companies, including Equifax Credit Information Services,
Inc. and The First American Corporation, have substantially greater financial,
marketing, and other resources and much greater name recognition than we do.

The primary competitive factors in the information services industry
include the following:



| |  |  | responsiveness and reliability of customer service personnel,           
| | - |  | ------------------------------------------------------------------------
|
| |  |  | accuracy and completeness of reports,                                   
|
| |  |  | user-friendliness and customization of reports,                         
|
| |  |  | technological sophistication and integration with customers technology,
|
| |  |  | speed of delivery,                                                      
|
| |  |  | fraud detection capabilities,                                           
|
| |  |  | price,                                                                  
|
| |  |  | brand recognition, and                                                  
|
| |  |  | security.                                                               

Our primary competitors in the mortgage services industry include The
First American Corporation, CBC Companies, Inc., Fidelity National Information
Services, Inc., and Equifax Credit Information Services, Inc. In addition, we
estimate that there are approximately 1,100 providers of mortgage credit
reports, a significant number of which are companies that are small and which
operate on a local or regional basis.

In the consumer credit industry, our primary competitors are TransUnion
LLC and Equifax Credit Information Services, Inc., both of which are also
credit repositories that maintain large databases of credit information. We are
a significant customer of both companies.

We compete in the resident screening services industry, primarily with
Resident Data, Inc., Rent Grow, Inc., and The First American Corporation.

Some of our competitors in the employment screening industry include
ChoicePoint, Inc., Avert, Inc. (a division of Automatic Data Processing, Inc.),
and TransUnion LLC.

Government Regulation

Fair Credit Reporting Act.The FCRA governs consumer reporting agencies
and the methods they use to produce and sell consumer reports. For example, the
FCRA
prohibits disclosure of obsolete information, which is generally adverse
consumer information that is more than seven years old.

The primary goal of the FCRA is to ensure that consumer information is not
made available to persons or businesses that do not have a permissible purpose
to receive such information. The statute permits consumer reporting agencies to
furnish a consumer report only when requested or authorized by the subject
consumer, or when requested by a person or business that the agency believes
intends to use the information for legitimate business purposes, including the
following:



| |  |  | to make decisions about new transactions, to monitor risk,
and to comply with the terms of existing credit relationships; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | to make hiring or promotion decisions.                                                                                       

The FCRA permits consumers to hold a consumer reporting agency liable if
the agency willfully or negligently fails to comply with the statute. Officers
and directors of consumer reporting agencies that knowingly and willfully
disclose consumer information to unauthorized persons or businesses may suffer
criminal penalties.

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State laws.Many states have at least one unique statute or regulation
that affects the information services industry, including the following:



| |  |  | a number of states have laws similar, but not identical, to
the FCRA;                                                                                                              
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | some states require businesses engaged in investigative
reporting (a term that includes some of the techniques used to
generate certain types of consumer reports), to be licensed;
|
| |  |  | numerous states regulate the type of information that can be
made available to the public or impose conditions on the release of
certain information;                              
|
| |  |  | certain states prohibit access to workers compensation
histories; and                                                                                                             
|
| |  |  | some states require a signed release from the subject of the
report before personal information may be released.                                                                   

Customers

Our customers include some of the nations largest mortgage originators,
real estate investment trusts, government sponsored enterprises, and employers.
Our customer base consists primarily of independent mortgage brokers, but also
includes property management firms, a variety of banks and credit unions,
automobile dealers, collection agencies, and employers of all types. No
customer accounted for more than 10% of our revenue during fiscal 2002.

Sales and Marketing

We maintain an active sales and marketing program to expand our market
share throughout the United States. Key aspects of our sales and marketing
program include the following:



| |  |  | face-to-face marketing efforts with prospective customers by
23 national account representatives and 54 sales representatives
managed by 8 regional managers;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in-house telemarketing to existing and prospective customers
that have indicated interest in purchasing our services;                                        
|
| |  |  | public relations efforts;                                                                                                                                    
|
| |  |  | participating in trade shows and seminars;                                                                                                                   
|
| |  |  | advertising in trade publications;                                                                                                                           
|
| |  |  | utilizing our website; and                                                                                                                                   
|
| |  |  | mailing quarterly news releases to existing and prospective customers.                                                                                       

Certain Strategic Relationships

We have a number of strategic relationships that are critical to our
business.



| |  |  | Reseller Agreements with Equifax, Experian, and TransUnion.
On October 8 and November 17, 1998, and October 20, 2001, we entered
into reseller services agreements with Equifax, Experian, and
TransUnion, respectively, which are the three preeminent national
credit repositories in the United States. Under these agreements, we
purchase consumer credit information, on a nonexclusive basis, for
resale to our customers.                             
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |   |  | Each agreement enables us to resell the information and reports
for use solely in connection with credit granting, mortgage
processing, employment screening, and resident screening. Under
each agreement, we may also disclose the credit information to a
consumer who requests disclosure. In addition, the Equifax and
TransUnion agreements permit the use of the information in
connection with a legitimate business transaction, involving
consumers.
|
| |   |  | The Equifax agreement will remain in effect until terminated by
either party upon at least one years notice. Under the Experian
agreement, Experian will continue to renew the agreement for
successive one-year periods as long as we are in compliance under
the agreement and Experian continues to provide services to other
resellers. The TransUnion agreement will remain in effect                                                                   

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| |   |  | until
terminated upon at least 60 days prior notice by either party.
Each agreement also provides for termination in the event of our
breach, bankruptcy, or insolvency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Affiliate Services Agreements with Experian.Effective April
28 and December 1, 2000 and February 1, 2001, we entered into three
agreements with Experian to sell consumer credit reporting services
on consumers
who reside in Colorado, the southern portion of Texas, and
Wyoming, respectively. Under each of these agreements, Experian
has agreed to allow us, on a non-exclusive basis, to access all
credit and other information in its database associated with
consumers living in these geographical areas. In addition,
Experian assigned to us certain subscriber agreements for certain
of its customers located within these areas. We also receive fees
from Experian when it sells information to its customers regarding
consumers who live in the geographical areas covered by the
agreement.
|
| |   |  | The agreements for Wyoming and portions of south Texas restrict us
from entering into any similar agreement with any other consumer
reporting agency during the term of the agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |   |  | Each agreement has an initial term of ten years and continues for
successive one-year periods unless either party delivers to the
other party a written notice of intent not to renew the agreement
at least six months before the end of the initial ten-year term or
any one-year renewal period. In addition, either party may
terminate the agreement upon the insolvency or bankruptcy of the
other party or following the other partys breach of the
agreement. Experian may also terminate the agreement if we were to
enter into a transaction without Experians approval that results
in a change in our control, ownership, or management.                                                                                                                                                           
|
| |  |  | Credit Report Transmission and Access Marketing Agreement
with Fannie Mae and Credit Reporting Company Agreement with Freddie
Mac.On November 11, 1998 and January 1, 2000, we entered into
agreements with Fannie Mae and Freddie Mac, respectively, granting
us the right to access technology and information and processing
capabilities available through these organizations automated
underwriting systems and databases, for use in processing consumer
mortgage loan applications. Under the Fannie Mae agreement, we
provide these services to our customers for which we pay fees to
Fannie Mae. Under the Freddie Mac agreement, we provide these
services to its customers for which Freddie Mac pays us a fee.                                                                                    
|
| |   |  | The Fannie Mae agreement will remain in effect for successive
12-month periods until terminated by either party upon 30 days
notice. However, Fannie Mae may terminate the agreement at any
time for any reason upon 60 days advance notice. Fannie Mae also
may terminate the agreement upon our insolvency, bankruptcy, or
breach of the agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                            

Freddie Mac has the right to terminate the agreement for any reason in its
sole discretion upon 30 days advance notice. Freddie Mac would also have the
right to terminate the agreement if it had concerns regarding our financial
condition or if we failed to perform adequately under the agreement.

System Affiliates

From 1989 to 1993, we franchised our mortgage credit reporting system to
companies we call system affiliates. Franchisees pay us fees to use our name
and our methods to generate reports. In 1993, we offered licensing agreements
that permit licensees to use our systems to service their own customers in
return for a percentage of their gross billings. We discontinued executing
license agreements and franchise
agreements in 1995. We will honor our existing contractual obligations,
but we do not intend to offer new franchises or licenses in the future. In
2002, system affiliates provided 2.0% of our gross revenue compared to 2.5% in
2001. We expect revenue from system affiliates will decline over time since the
number of system affiliates will likely decline.

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Intellectual Property

We rely on a combination of trademark, servicemark, copyright, trade
secret and contract protection (like licenses) to establish and protect our
proprietary rights in our services and technology. We currently maintain 146
registered trademarks, servicemarks, and copyrights. We are not aware of any
infringement of our proprietary rights.

Insurance

We maintain commercial general liability and property insurance. This
policy provides for a general liability aggregate limit of $2 million, and $5
million annual aggregate umbrella coverage. We also carry an errors and
omissions policy covering our various service offerings. This policy provides
$2 million coverage for each of our seven processing centers.

Employees

As of March 3, 2003, we employed 273 people on a full-time and 7 people on
a part-time basis. Of our full-time employees, 13 are involved in
administration, 32 in finance and accounting, 82 in sales and marketing, 51 in
technology and systems, and 95 in operations. There are no union or collective
bargaining agreements between us and our employees. We consider our
relationship with our employees to be good.

Other Information

Factual Data was incorporated in the State of Colorado in 1985. Our
principal office is located at 5200 Hahns Peak Drive, Loveland, Colorado 80538,
and our telephone number is (970) 663-5700.

SPECIAL CONSIDERATIONS

To inform shareholders of our future plans and business strategies, this
report contains statements concerning our future performance, intentions,
objectives, plans and expectations that are or may be deemed to be
forward-looking statements. Our ability to do this has been fostered by the
Private Securities Litigation Reform Act of 1995, which provides a safe
harbor for forward-looking statements to encourage companies to provide
prospective information so long as those statements are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those discussed in the statement. Such
factors affecting us include, but are not limited to, the following:

A decrease in demand for mortgage credit reports will likely decrease our earnings.

Our primary service is the preparation of our mortgage credit reports. The
demand for this service depends primarily upon the level of home mortgage
originations and refinancings and, to a lesser extent, the efforts of lenders
to develop new, and monitor existing, credit relationships. Consumer demand for
mortgage credit tends to vary as a result of interest rate fluctuations and
general economic conditions, with demand tending to decrease during periods of
economic contraction or rising interest rates. As a result of our lack of
diversification and dependence on mortgage market activity, a downturn in the
demand for mortgage credit reports would adversely affect our business,
operating results, and financial condition, particularly if we were unable to
control our costs, including labor, and communication charges, during a period
of reduced demand.

Our diversification efforts may be unsuccessful.

We plan to diversify our business and reduce our reliance on the mortgage
industry through acquisitions of non-mortgage information service businesses
and the introduction of new services developed internally. Each of these
strategies involves substantial risks and uncertainties, and we cannot provide
assurance that our acquisition program or new service offerings will be
successful.

Historically, the majority of the businesses we have acquired have been
mortgage-related. We believe our acquisition program has allowed us to rapidly
grow our business. To the extent that we are able to continue to

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acquire
attractive mortgage-related businesses, we intend to do so. Accordingly, our
dependence on the mortgage industry may increase.

Our acquisition strategy involves significant risks, including a drain on our
resources, unforeseen expenses, increased competition for acquisitions,
additional debt, shareholder dilution, and a lower stock price.

During 1998, we implemented a consolidation strategy to acquire businesses
that we believe have the potential to complement or expand our business. Our
growth strategy of acquiring additional businesses involves significant risks,
including the following:

Drain on resources.The acquisition process requires a substantial
commitment of management time and resources in considering various potential
acquisition candidates, including the exchange of confidential information,
conducting due diligence, negotiating acquisition terms, and completing the
acquisition. As a result of these and other factors, a number of potential
acquisitions that from time to time appear likely to occur are not consummated.

Unforeseen expenses.Acquisitions may entail reorganizing acquired
business operations, corporate infrastructure and systems, and financial
controls. Unforeseen expenses, difficulties, and delays frequently encountered
in connection with rapid expansion through acquisitions could inhibit our
growth and negatively impact our profitability.

Competition for acquisitions may negatively affect our investment returns.
We may be unable to identify suitable acquisition candidates or to complete
the acquisition of candidates that we identify. Competition for acquisition
candidates may increase purchase prices for acquisitions to levels beyond our
financial capability or to levels that would not result in the returns required
by our acquisition criteria. We may not be able to identify suitable
acquisition candidates at economical prices, and we may not be able to compete
for available acquisition opportunities.

We may incur debt or dilute our shareholders.We may issue common or
preferred stock and incur substantial indebtedness in acquiring additional
businesses. Issuances of common stock in future acquisitions may dilute
shareholders. We may also issue preferred stock with terms and preferences that
exceed the rights of common shareholders. We may incur indebtedness in
connection with acquisitions, and we cannot assure you that the operations and
cash flow of the acquired entity will be sufficient to repay the debt. Finally,
we may not be able to borrow funds at economical terms or issue common stock
with a sufficient market price to complete the acquisitions.

The market price of our common stock may be negatively affected due to
timing and integration concerns.The size, timing, and integration cost of any
future acquisitions may cause substantial fluctuations in our operating results
from quarter to quarter. Consequently, operating results for any quarter may
not be indicative of the results that may be achieved for any subsequent
quarter or for a full fiscal year. These fluctuations could adversely affect
the market price of our common stock.

Our internal growth and operating strategies involve risk.

In addition to pursuing growth by acquisitions, we intend to continue to
pursue a strategy of growth by introducing new services in our existing and new
markets. Accomplishing these expansion goals will depend on a number of
factors, including the following:



| |  |  | our ability to identify new markets in which we can sell our
existing or additional services;
| | - |  | ---------------------------------------------------------------------------------------------
|
| |  |  | our ability to hire, train, and retain qualified personnel;                                  
|
| |  |  | the timely integration of new services with existing operations;                             
|
| |  |  | our ability to achieve adequate market penetration at
favorable operating margins; and       
|
| |  |  | our financial resources.                                                                     

We may not be able to introduce new services on a timely or profitable
basis. Moreover, the costs associated with introducing new services may
adversely affect our profitability.

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As a result of these growth strategies, we expect to expend significant
time and effort in introducing new services. Our systems, procedures, controls,
and financial resources may not be adequate to support our expanding
operations. The inability to
manage our growth effectively could have a material adverse effect on our
business, financial condition, and results of operations.

Our planned growth also will impose significant added responsibilities on
members of senior management and require us to identify, recruit, and integrate
additional senior level managers. We may not be able to identify, hire, or
train suitable additions to management.

We must integrate the operations of acquired businesses.

Our success depends, in part, on our ability to integrate the operations
of the acquired businesses and other businesses we acquire in the future,
including centralizing certain functions to achieve cost savings, pursuing
programs and processes that promote cooperation and the sharing of
opportunities and resources, developing sales and marketing programs, and
retaining acquired customers. We may not be able to oversee the combined entity
efficiently or to implement effectively our growth and operating strategies. To
the extent that we successfully implement our acquisition strategy, our
resulting growth will place significant additional demands on our management
and infrastructure. Our failure to implement successfully our strategies or
operate effectively the combined entity could have a material adverse effect on
our business, financial condition, and results of operations. These effects
could include lower revenue; higher cost of sales; increased selling, general,
and administrative expenses; and reduced margins.

We may require significant additional capital to expand our business.

Our growth strategy will require us to secure significant additional
capital. Our future capital requirements will depend upon the size, timing, and
structure of future acquisitions and our working capital and general corporate
needs. If we finance future acquisitions in whole or in part through the
issuance of common stock or securities convertible into or exercisable for
common stock, existing shareholders will experience dilution in the voting
power of their common stock and earnings per share could be negatively
impacted. The extent to which we will be able or willing to use our common
stock for acquisitions will depend on the market value of our common stock from
time to time and the willingness of potential sellers to accept our common
stock as full or partial consideration. Our inability to use our common stock
as consideration, to generate cash from operations, or to obtain funding
through debt or equity financings in order to pursue our acquisition program
could materially limit our growth.

As of December 31, 2002, we had approximately $7.8 million in cash and
cash equivalents, and $6.0 million available on our operating line of credit.
Any borrowings made to finance future acquisitions or for operations could make
us more vulnerable to a downturn in our operating results, a downturn in
economic conditions, or increases in interest rates on borrowings that are
subject to interest rate fluctuations. If our cash flow from operations is
insufficient to meet our debt service requirements, we could be required to
sell additional equity securities, refinance our obligations, or dispose of
assets in order to meet our debt service requirements. In addition, our credit
arrangements
contain financial and operational covenants and other restrictions with
which we must comply, including the maintenance of various financial ratios,
limitations on capital expenditures, and the incurrence of additional
indebtedness. Adequate financing may not be available if and when we need it or
may not be available on terms acceptable to us. The failure to obtain
sufficient financing on favorable terms and conditions could have a material
adverse effect on our growth prospects and our business, financial condition,
and results of operations.

We may not be successful in implementing our business strategy due to the
significant competition we face.

We operate in a highly competitive environment with a large number of
companies competing with each of our service offerings. For example, there are
approximately 1,100 providers of mortgage credit reports. While a significant
number of these companies are small and operate solely on a local or regional
basis, several large companies with which we compete, including The First
American Corporation, CBC Companies, Inc., Equifax Credit Information Services,
Inc., Fidelity National Information Services, Inc., and Experian Information
Solutions, Inc., have substantially greater financial, marketing, and other
resources and much greater name recognition than we do.

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Our agreements with the three preeminent credit repositories have limited
scope, can be cancelled on short notice, allow for unspecified future price
increases, and expose us to claims and liabilities from the use of inaccurate
information.

We do not maintain our own databases. To obtain consumer credit data, we
rely on agreements with the three preeminent national credit repositories:
Equifax Credit Information Services, Inc., Experian Information Solutions,
Inc., and TransUnion, LLC. Substantial portions of our business depend on our
ability to access consumer credit data from these credit repositories and to do
so at a cost that is comparable with our competitors.

Under each agreement, we may resell the information and reports for use
solely in connection with credit granting, mortgage processing, employment
screening, and resident screening, but not for insurance underwriting,
collections, or governmental licensing transactions. Under each agreement, we
may also disclose the credit information to a consumer who is denied a benefit
and requests disclosure. In addition, the Experian and TransUnion agreements
permit the use of the information in connection with a legitimate business
transaction involving the consumer.

The agreements do not guarantee the accuracy or correctness of the
information contained in the databases maintained by credit repositories, but
require us to hold the repositories harmless and indemnify them from claims or
liabilities arising from the use of inaccurate information contained in the
databases.

Equifax and TransUnion have the right to terminate upon one year and 60
days advance notice, respectively. Experian can terminate in the event of a
breach by us.

We also have service agreements with Experian covering Colorado, Wyoming,
and the southern portion of Texas. Experian could terminate any of the
agreements on at least six months notice before the end of the initial 10-year
term or before the end of any succeeding one-year term.

In view of our dependence on these three credit repositories for our
consumer credit data, substantial harm to our business would result if any of
these three repositories, for whatever reason, were to terminate any of these
agreements and we were unable to enter into an acceptable replacement
agreement. In addition, any substantial increase in the prices we pay these
repositories for consumer credit data that we cannot pass through to our
customers could have a material adverse impact on our results of operations and
our ability to compete.

Our indebtedness could adversely affect our financial position and limit our
ability to expand our business.

As of December 31, 2002, we had outstanding approximately $14.8 million of
indebtedness, including $8.4 million under capital lease obligations, and
approximately $6.4 million under bank debt and notes payable from acquisitions.
We may incur additional indebtedness in the future to finance acquisitions,
expand our service offerings, or make capital expenditures. Our current credit
facilities contain, and any additional credit facilities can be expected to
contain, restrictive financial, operational, and other covenants.

Our level of debt could have a number of negative consequences, including
the following:



| |  |  | requiring us to dedicate a substantial portion of our cash
flow from operations to repayment of debt, thereby limiting the
availability of cash for other purposes;                                   
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | increasing our vulnerability to adverse economic conditions
or worsening operating results by making it more difficult to borrow
additional funds to maintain our operations;                         
|
| |  |  | hindering our flexibility in planning for or reacting to
changes in our business and industry by preventing us from borrowing
money to expand our business or upgrade our equipment or facilities;
and
|
| |  |  | limiting or impairing our ability to obtain financing in the
future for working capital, capital expenditures, acquisitions, or
general corporate purposes.                                           

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Our business is subject to governmental regulation, increasing concern about
privacy issues, and legal considerations.

Concerns about individual privacy and the collection, distribution, and
use of information about individuals have led to substantial governmental
regulation of the credit reporting industry. The credit reporting industry is
regulated under the federal Fair Credit Reporting Act, or FCRA, and by
legislation in many states. The credit reporting industry has been subject to
increased legislative attention. Bills are pending in various state
legislatures that are generally intended to regulate how personal information
is used. While we do not believe that any of the proposed state bills, if
passed as currently drafted, would have a material adverse effect on us, there
can be no assurance that pending or additional federal or state
consumer-oriented legislation will not significantly limit demand for, or
increase the costs of, certain of our services. Under general legal concepts
and, in some instances, under specific federal and state statutes, we could be
held liable to customers or to the subjects of credit reports prepared by us
for inaccurate information or misuse of information. We maintain internal
policies designed to help assure that credit information retrieved by us is
accurate and complies with provisions of the FCRA. We may not be able to defend
successfully any claims made against us, and insurance may not cover any such
claims. Uninsured losses from such claims might arise that could adversely
impact our operations and financial condition.

We may not be able to meet the automated level of performance required by some
of our larger customers and strategic relationships, and the agreements we have
with Fannie Mae and Freddie Mac can be cancelled on short notice.

Mortgage originators and secondary mortgage market participants, including
Fannie Mae and Freddie Mac, require that any mortgage originated or purchased
be supported by a credit report on the mortgagee that is prepared by an
independent entity, such as us. A number of the larger mortgage originators and
purchasers are increasingly using automated credit reporting techniques that
require credit report providers to render almost instantaneous responses, often
within 60 seconds or less. We may not be able to continue to provide the level
of performance required by these or other large institutions. Additionally, we
may not be able to match the level of technological service provided, or
developed in the future, by competitors. We also recently introduced a program
under which we guarantee to complete line item verifications and updates on our
mortgage credit reports within four hours of a request, or the service is free
of charge. Our inability to meet the guaranty could adversely affect our
revenue and harm our reputation in the industry.

In order to provide mortgage credit reports to a growing number of our
customers, we rely on access to the automated underwriting systems owned and
maintained by Fannie Mae and Freddie Mac, which are the two largest
participants in the secondary mortgage market. We receive this access through
agreements with Fannie Mae and Freddie Mac. As a result of these agreements, we
depend to a great extent on the success of the Fannie Mae and Freddie Mac
automated underwriting systems, which currently constitute a relatively small
but growing portion of all conforming mortgage originations. There can be no
assurance that Fannie Mae and Freddie Mac will continue or expand
these programs, maintain current cost structures, or determine not to
impose additional procedures or requirements.

Fannie Mae has the right to terminate the agreement at any time for any
reason upon 60 days notice. Fannie Mae also may terminate the agreement in the
event of our bankruptcy, insolvency, or breach. Freddie Mac has the right to
terminate the agreement in its sole discretion upon 30 days notice. The
termination of either agreement, and the denial of our access to Fannie Maes
and Freddie Macs systems, would have a major detrimental impact on our ability
to provide automated mortgage credit reports.

Any hardware or software malfunction, loss of telecommunications capabilities,
or other operational interruptions at either of our data centers for more than
a short period of time could adversely affect our ability to service our
customers.

Any hardware or software malfunction, loss of telecommunications
capabilities, or other operational interruptions at either of our data centers
for more than a short period of time could adversely affect our ability to
service our customers. Although we maintain redundant systems and backups in
and between our two data centers,

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we remain subject to the consequences of
power loss, internal or external telecommunications failures, fire, and various
natural disasters.

We depend on our intellectual property and technological know-how, and our
failure to protect that intellectual property or advance our know-how could
have an adverse effect on our business.

We rely on trademark and copyright laws, trade secret protection, and
confidentiality and other agreements with our employees, customers, and others
to protect our intellectual property. However, some of our intellectual
property and our technological know-how is not protected and, despite our
precautions, it may be possible for third parties to use our intellectual
property and know-how without authorization from us. We may not be successful
in protecting our proprietary rights and know-how. Any infringement of any of
our intellectual property rights or third-party use of our know-how could have
an adverse effect on our ability to operate successfully.

We depend on key personnel.

Our success depends, in large part, upon the continuing efforts and
abilities of our executive officers, particularly our Chief Executive Officer,
J. H. Donnan. We do not have an employment agreement with Mr. Donnan or any of
our other executive officers or key personnel. In addition, we likely will
depend on the key management of any significant businesses we acquire in the
future. The loss of the services of one or more of our key employees before we
are able to attract and retain qualified replacement personnel could adversely
affect our business.

Our articles of incorporation, bylaws, and Colorado law could make it more
difficult for a third party to acquire us.

Our articles of incorporation and bylaws contain provisions that may have
the effect of making more difficult, discouraging, or delaying attempts by
others to obtain
control of our company, even when these attempts may be in the best
interests of our shareholders. These provisions include the following:



| |  |  | the ability of our Board of Directors to issue authorized but
unissued common and preferred stock without action by our
shareholders;                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a classified Board of Directors, which provides for the
election of directors for three-year terms, with approximately
one-third of the Board of Directors standing for election each year;   
|
| |  |  | limitations on alteration of the classified Board provisions
and the ability of shareholders to remove directors; and                                                                         
|
| |  |  | the requirement to obtain the affirmative vote of the holders
of at least two-thirds of our capital stock to approve a merger,
dissolution, or sale of all or substantially all of our assets.

We must evaluate our intangible assets annually for impairment.

Our intangible assets are recorded at cost less accumulated amortization.
Customer rights and customer lists are amortized using the straight-line method
over 15 years, and non-compete agreements and franchise agreements are
amortized using the straight-line method over the life of the agreements, which
extend from three to ten years. Our license agreements to access information
are amortized using the ratio of the units accessed over the ten year initial
term of the agreement. Our intellectual property is amortized using the
straight-line method over 13 to 15 years and loan origination costs are
amortized using the straight-line method over the loan term.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.
SFAS 142 provides that goodwill and certain intangibles no longer will be
amortized, but instead will be tested for impairment at least annually. In the
event that we determine our intangible assets have been impaired, we must
record a write-down of those assets on our statement of operations during the
period of impairment. Our determination of impairment will consider various
factors, including the following:

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| |  |  | significant underperformance relative to expected historical
or projected future operating results;          
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | significant changes in the manner of our use of the acquired
assets or the strategy for our overall business;
|
| |  |  | significant negative industry or economic trends;                                                            
|
| |  |  | significant decline in our stock price for a sustained period; and                                           
|
| |  |  | our market capitalization relative to net book value.                                                        

We adopted SFAS 142 during 2002, and although we did not recognize any
impairment upon such adoption, we may incur impairments of our intangible
assets or goodwill in the future.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 requires the recognition
of an impairment loss if the carrying amount of a long-lived assets is not
recoverable from their undiscounted cash flows and measures the impairment loss
as the difference between the carrying amount and fair value of the assets.

We expect to continue to amortize our customer lists and intellectual
property over the same time periods as previously used. These recent accounting
pronouncements, however, require the testing of our intangible assets for
impairment at least once each year. In addition, we are required to assess the
consumptive life, or longevity, of our intangible assets and adjust their
amortization periods accordingly. Our net intangible assets were recorded on
our balance sheet at approximately $27.8 million as of December 31, 2002, and
we expect the carrying value of net intangible assets will increase
significantly as we acquire additional businesses. Any impairments of those
assets in future periods, or a reduction in their consumptive lives, could
materially and adversely affect our statement of operations and financial
position.

Directors, officers, and certain other shareholders own a significant portion
of our common stock.

Our directors and executive officers and persons associated with them
beneficially own a total of approximately 56.7% of the issued and outstanding
shares of our common stock. As a result of this ownership, these persons have
the power to control our company, including the election of directors, the
determination of matters requiring shareholder approval, and other matters
pertaining to corporate governance. This concentration of ownership also may
have the effect of delaying or preventing a change in control of our company.

Our stock price may be volatile.

The market price of our common stock could be subject to wide fluctuations
as a result of many factors, including the following:



| |  |  | variations in quarterly operating results;                                          
| | - |  | ------------------------------------------------------------------------------------
|
| |  |  | amortization and possible impairment of the carrying value of
our intangible assets;
|
| |  |  | the level and success of our acquisition program and new
service offerings;         
|
| |  |  | the success of our integration of acquisitions;                                     
|
| |  |  | changes in earnings estimates published by analysts;                                
|
| |  |  | the level of interest rates;                                                        
|
| |  |  | general economic, political, market, and industry conditions;                       
|
| |  |  | seasonality and weather conditions;                                                 
|
| |  |  | governmental policies and regulations;                                              
|
| |  |  | industry performance in general;                                                    
|
| |  |  | factors relating to suppliers, customers, and competitors; and                      
|
| |  |  | recruitment or departures of key personnel.                                         

In addition, the relatively few number of shares held by the public,
periodically weak market demand for small- and mid-capitalization stocks, and
price and volume fluctuations in the stock market unrelated to our performance
could result in significant fluctuations in the market price of our common
stock. The performance of our common stock could adversely affect our ability
to raise equity in the public markets and adversely affect our acquisition
program.

15



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##### Table of Contents



Shareholders may incur immediate and substantial dilution.

The issuance of additional common or preferred stock in the future,
including shares that we may issue pursuant to exercise of outstanding options
or warrants and future acquisitions, may result in dilution in the net tangible
book value per share of our common stock. Our Board of Directors has the power
and authority to determine the terms of an offering of shares of our capital
stock, or securities convertible into or exchangeable for these shares, to the
extent of our shares of authorized and unissued capital stock.

Sales of large number of shares could adversely affect the price of our common
stock.

Substantial sales of our common stock in the public market, including
shares issued upon the exercise of outstanding options and warrants, or the
perception that these sales could occur, may have a depressive effect on the
market price of our common stock and could impair our ability to raise capital
or make acquisitions through the issuance of equity securities. As of March 3,
2003, there were 6,190,884 shares of our common stock outstanding. Of these
shares, 2,721,641 are freely tradable without restriction or further
registration under the securities laws and directors, officers, and other
affiliates of our company hold 3,469,243 shares. We have registered for resale
1,669,243 shares held by affiliates of two of our directors. The remaining
balance of shares held by our directors, officers and other affiliates are
subject to the resale limitations of Rule 144 described below. In addition,
approximately 744,944 shares issuable upon the exercise of options and warrants
outstanding as of March 3, 2003 may become available for sale in the public
markets.

In general, under Rule 144 adopted under the Securities Act, any person
that beneficially owns restricted securities for one year and any person deemed
to be an affiliate of our company is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of (1) 1% of the
then outstanding shares of common stock of our company or (2) the average
weekly trading volume in common stock during the four calendar weeks preceding
such sale. A person that is not an affiliate and has held restricted securities
for at least two years is entitled to sell such shares without any limitations.




Item 2.Properties

Our corporate offices are located in two buildings in Loveland, Colorado.
We have 20-year operating leases for 32,086 square feet of space in one
building and 19,349 square feet in the other. We anticipate the two spaces will
be adequate to meet our office requirements for the foreseeable future. We also
hold six operating leases for our regional offices, most of which are not
material and none of which has a term exceeding ten years.




Item 3. Legal Proceedings

We are not a party to any legal proceedings except those in the ordinary
course of our business. We believe there is no proceeding threatened or pending
against us which, if determined adversely, would have a material adverse effect
on our financial condition or results of operations.

16



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##### Table of Contents



PART II




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

We held our 2002 Annual Meeting of Shareholders on November 1, 2002. The
following matters were acted upon at the meeting:



| |  |  | we elected two members to our Board of Directors to serve
three year terms and until their successors are elected and
qualified;                                                        
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | we considered and approved a proposal to amend our Articles
of Incorporation to increase the number of authorized shares of our
common stock from 10,000,000 to 50,000,000 shares;      
|
| |  |  | we considered and approved a proposal to increase the number
of shares reserved for issuance under our 1999 Employee Formula
Award Stock Option Plan from 400,000 to 600,000 shares; and
|
| |  |  | we ratified the appointment of BDO Seidman, LLP as our
independent public accountants for the fiscal year ending December
31, 2002.                                                     

The results of voting on these matters at the meeting were as follows:

|                            |  |     |           |  |          |  |         |         |  |  |         |  |  |  |        | 
|--------------------------- |  | --- | --------- |  | -------- |  | ------- | ------- |  |  | ------- |  |  |  | ------ | 
|                            |  | For |           |  | Withhold |  |         | Against |  |  | Abstain | 
|                            |  |     |           |  |          |  |         |         |  |  |         | 
|Election of Abdul H. Rajput |  |     | 4,653,513 |  |          |  | 246,598 |         |  |  |        |  |  |  |       | 
|Election of Robert J. Terry |  |     | 4,653,513 |  |          |  | 246,598 |         |  |  |        |  |  |  |       | 
|Amendment to Articles       |  |     | 4,537,244 |  |          |  |        |         |  |  | 354,872 |  |  |  | 7,995  | 
|Employees Plan              |  |     | 4,532,419 |  |          |  |        |         |  |  | 364,877 |  |  |  | 2,815  | 
|Independent Accountants     |  |     | 4,853,458 |  |          |  |        |         |  |  | 18,638  |  |  |  | 28,015 | 




Item 5. Market for Registrants Common Equity and Related Shareholder Matters

General

Our common stock is quoted on the Nasdaq National Market under the symbol
FDCC. The following table sets forth, for the periods indicated, the high and
low sales prices of our common stock as reported on the Nasdaq National Market:

|               |  |      |       |  |     |   |      | 
|-------------- |  | ---- | ----- |  | --- | - | ---- | 
|2001           |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|First Quarter  |  | $    | 7.06  |  |     | $ | 5.00 | 
|Second Quarter |  |      | 7.73  |  |     |   | 6.81 | 
|Third Quarter  |  |      | 11.75 |  |     |   | 7.21 | 
|Fourth Quarter |  |      | 11.34 |  |     |   | 7.79 | 
|              
|2002           |  |      |       |  |     |   |      | 
|               |  |      |       |  |     |   |      | 
|First Quarter  |  | $    | 9.00  |  |     | $ | 6.75 | 
|Second Quarter |  |      | 12.04 |  |     |   | 5.95 | 
|Third Quarter  |  |      | 11.79 |  |     |   | 6.95 | 
|Fourth Quarter |  |      | 8.19  |  |     |   | 6.19 | 

On March 3, 2003, the last reported sales price of our common stock as
reported on the Nasdaq National Market was $9.45 per share. As of March 3,
2003, there were 39 holders of record of our common stock and approximately 600
beneficial owners of our common stock.

We have not paid or declared cash distributions or dividends on our common
stock and do not intend to pay cash dividends in the foreseeable future. Our
bank credit facility has customary restraints on our ability to pay cash

17



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##### Table of Contents



dividends. Any cash dividends in the future will be determined by our Board of
Directors based on our earnings, financial condition, capital requirements, and
other relevant factors.

Equity Compensation Plan Information

The following sets forth information as of March 17, 2003 concerning
compensation plans (including individual compensation arrangements) under which
shares of our common stock are authorized for issuance:

Equity Compensation Plan Information

|                                                               |  |                            |         |  |                           |   |       |                         |  |  |         | 
|-------------------------------------------------------------- |  | -------------------------- | ------- |  | ------------------------- | - | ----- | ----------------------- |  |  | ------- | 
|Plan Category                                                  |  | Number of securities to be |         |  | Weighted average exercise |   |       | Number of securities    | 
|                                                               |  | issued upon exercise of    |         |  | price of outstanding      |   |       | remaining available for | 
|                                                               |  | outstanding options,       |         |  | options, warrants         |   |       | future issuance         | 
|                                                               |  | warrants and rights        |         |  | and rights                |   |       |                         |  | 
|                                                               |  |                            |         |  |                           |   |       |                         | 
|Equity compensation
plans approved by
security holders:        |  |                            |         |  |                           |   |       |                         |  |  |         | 
|1997 Stock Incentive
Plan                                      |  |                            | 42,725  |  |                           | $ | 6.41  |                         |  |  | 153,608 | 
|1999 Employee Stock
Purchase Plan(1)                           |  |                            | -0-     |  |                           |   | -0-   |                         |  |  | 57,438  | 
|1999 Formula Award
Stock Option Plan                           |  |                            | 548,726 |  |                           | $ | 7.81  |                         |  |  | 47,283  | 
|                                                               |  |                            |         |  |                           |   |       |                         | 
|Equity compensation
plans not approved by
security holders:    |  |                            |         |  |                           |   |       |                         |  |  |         | 
|Various grants outside
the above shareholder
approved plans(2) |  |                            | 50,500  |  |                           | $ | 8.00  |                         |  |  | -0-     | 
|                                                               |  |                            |         |  |                           |   |       |                         | 
|Consultants warrants(3)                                       |  |                            | 100,000 |  |                           | $ | 10.20 |                         |  |  | -0-     | 
|                                                               |  |                            |         |  |                           |   |       |                         | 
|Underwriters options(4)                                       |  |                            | 993     |  |                           | $ | 7.15  |                         |  |  | -0-     | 
|                                                               |  |                            |         |  |                           |   |       |                         | 



---

|(1) |  | Under this plan, employees may purchase our shares at 90% of their fair
market value determined at the beginning or end of each quarterly stock
purchase period.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Represents options to purchase shares granted to seven of our officers
and employees. The options have ten-year terms and were granted in 2001.                 
|   
|(3) |  | Represents warrants granted to a consultant. Exercise of the warrants is
subject to certain conditions. The warrants expire in September 2003.                  
|   
|(4) |  | These options expire on May 13, 2003.                                                                                                                           




Item 6.Selected Financial Data

The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and related notes
thereto appearing elsewhere in this report. The consolidated statements of
operations data for the years ended December 31, 1998, 1999 and 2001 and the
consolidated balance sheet data as of December 31, 1998, 1999, and 2000 are
derived from our consolidated financial statements, which have been audited by
Ehrhardt Keefe Steiner & Hottman PC, our former independent public accountants.
The consolidated statements of operations data for the years ended December 31,
2001 and 2002 and the consolidated balance sheet data as of December 31, 2001
and 2002 are derived from our consolidated financial statements, which have
been audited by BDO Seidman, LLP, our independent public accountants, as
indicated in their report included herein. The selected financial data provided
below is not necessarily indicative of our future results of operations or
financial performance.

18



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|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |        |        |  |   |        |        | 
|------------------------------------ | --------------------------------------------- | ------------------------ | ------------------ | ---------------------------------------- | ----- | ---- | ---- | ------ | ------ | ---- | - | ------- | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                     |                                               |                          |                    | For the Years Ended December 31,         |      
|                                     |                                               |                          |                    |                                          |      
|                                     |                                               |                          |                    | 1998                                     |       |      | 1999 |        |        | 2000 |   |         | 2001   |  |      | 2002   |       
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |        |       
|                                     |                                               |                          |                    | (in thousands, except per share amounts) |      
|Statements of Operations Data:       |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |        |        |  |   |       
|Revenue:                             |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |        |        |  |   |       
|                                     | Mortgage services                             |                          | $                  | 8,867                                    |       |      | $    | 23,738 |        |      | $ | 25,560  |        |  | $    | 42,552 |        |  | $ | 52,738 |       
|                                     | Consumer services                             |                          |                    |                                         |       |      |      |       |        |      |   | 3,180   |        |  |      | 6,476  |        |  |   | 6,972  |       
|                                     | Other services                                |                          |                    | 1,077                                    |       |      |      | 2,092  |        |      |   | 2,521   |        |  |      | 2,212  |        |  |   | 3,362  |       
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|                                     |                                               | Total revenue            |                    |                                          | 9,944 |      |      |        | 25,830 |      |   |         | 31,261 |  |      |        | 51,240 |  |   |        | 63,072 | 
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|Operating expenses:                  |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |        |        |  |   |       
|                                     | Cost of services                              |                          |                    | 4,747                                    |       |      |      | 15,400 |        |      |   | 18,280  |        |  |      | 29,828 |        |  |   | 33,871 |       
|                                     | Selling, general, and administrative          |                          |                    | 2,067                                    |       |      |      | 4,907  |        |      |   | 8,132   |        |  |      | 9,263  |        |  |   | 12,757 |       
|                                     | Depreciation and amortization                 |                          |                    | 776                                      |       |      |      | 2,715  |        |      |   | 4,131   |        |  |      | 3,621  |        |  |   | 4,555  |       
|                                     | Acquisition consolidation costs(1)            |                          |                    |                                         |       |      |      | 1,245  |        |      |   | 602     |        |  |      | 158    |        |  |   | 115    |       
|                                     | Branch efficiency costs(2)                    |                          |                    |                                         |       |      |      |       |        |      |   | 3,046   |        |  |      | (170   | )      |  |   |       |       
|                                     | Impairment adjustment to
intangible assets(3) |                          |                    |                                         |       |      |      |       |        |      |   | 11,798  |        |  |      |       |        |  |   |       |       
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|                                     |                                               | Total operating expenses |                    |                                          | 7,590 |      |      |        | 24,267 |      |   |         | 45,989 |  |      |        | 42,700 |  |   |        | 51,298 | 
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|                                     | Income (loss) from operations                 |                          |                    | 2,354                                    |       |      |      | 1,563  |        |      |   | (14,728 | )      |  |      | 8,540  |        |  |   | 11,774 |       
|                                     | Other income                                  |                          |                    | 185                                      |       |      |      | 201    |        |      |   | 502     |        |  |      | 496    |        |  |   | 484    |       
|                                     | Interest expense                              |                          |                    | (152                                     | )     |      |      | (580   | )      |      |   | (1,542  | )      |  |      | (2,239 | )      |  |   | (1,485 | )     
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|                                     | Income (loss) before income taxes             |                          |                    | 2,387                                    |       |      |      | 1,184  |        |      |   | (15,768 | )      |  |      | 6,797  |        |  |   | 10,773 |       
|                                     | Income tax expense (benefit)                  |                          |                    | 810                                      |       |      |      | 525    |        |      |   | (5,611  | )      |  |      | 2,661  |        |  |   | 4,313  |       
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|                                     | Net income (loss)                             |                          | $                  | 1,577                                    |       |      | $    | 659    |        |      | $ | (10,157 | )      |  | $    | 4,136  |        |  | $ | 6,460  |       
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|Earnings (loss) per share:           |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |        |        |  |   |       
|                                     | Basic                                         |                          | $                  | 0.59                                     |       |      | $    | 0.13   |        |      | $ | (1.89   | )      |  | $    | 0.72   |        |  | $ | 1.05   |       
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|                                     | Diluted                                       |                          | $                  | 0.57                                     |       |      | $    | 0.13   |        |      | $ | (1.89   | )      |  | $    | 0.71   |        |  | $ | 1.04   |       
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|Weighted average shares outstanding: |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |        |        |  |   |       
|                                     | Basic                                         |                          |                    | 2,681                                    |       |      |      | 4,938  |        |      |   | 5,383   |        |  |      | 5,757  |        |  |   | 6,154  |       
|                                     | Diluted                                       |                          |                    | 2,769                                    |       |      |      | 5,219  |        |      |   | 5,383   |        |  |      | 5,819  |        |  |   | 6,210  |       
|                                    
|                                     |                                               |                          | As of December 31, |                                         
|                                     |                                               |                          |                    |                                         
|                                     |                                               |                          | 1998               |                                          |       | 1999 |      |        | 2000   |      |   | 2001    |        |  | 2002 |       
|                                     |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |       
|                                     |                                               |                          | (in thousands)     |                                         
|Balance Sheet Data:                  |                                               |                          |                    |                                          |       |      |      |        |        |      |   |         |        |  |      |        |        |  |   |       
|                                     | Current assets                                |                          | $                  | 6,331                                    |       |      | $    | 5,637  |        |      | $ | 6,322   |        |  | $    | 12,794 |        |  | $ | 16,205 |       
|                                     | Total assets                                  |                          |                    | 18,177                                   |       |      |      | 39,692 |        |      |   | 42,800  |        |  |      | 50,884 |        |  |   | 53,508 |       
|                                     | Current liabilities                           |                          |                    | 4,546                                    |       |      |      | 8,014  |        |      |   | 12,781  |        |  |      | 14,268 |        |  |   | 14,168 |       
|                                     | Long-term debt and other liabilities          |                          |                    | 2,795                                    |       |      |      | 6,319  |        |      |   | 5,971   |        |  |      | 4,754  |        |  |   | 3,766  |       
|                                     | Experian and other capital lease
obligations  |                          |                    |                                         |       |      |      |       |        |      |   | 8,793   |        |  |      | 7,387  |        |  |   | 4,559  |       
|                                     | Shareholders equity                          |                          |                    | 10,836                                   |       |      |      | 25,359 |        |      |   | 15,255  |        |  |      | 24,475 |        |  |   | 31,014 |       



---

|(1) |  | Acquisition consolidation costs include charges for items such as
recruiting fees, salaries, and travel costs from the consolidation and
relocation of the acquired companies operations to our regional
processing centers. 
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Branch-efficiency costs consist primarily of future operating lease
payments for office space, telecommunications and office equipment,
leasehold improvements, furniture, and equipment.                                     
|   
|(3) |  | During fiscal 2000, we elected to change our method of evaluating
intangible assets from an undiscounted cash flow approach to a discounted
cash flow approach, resulting in a one-time charge of approximately $11.8
million.

19



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|                          |            |                               |   |                                  |     |  |      |       |       |      |   |         |        |   |   |        |       |  |   |        |       | 
|------------------------- | ---------- | ----------------------------- | - | -------------------------------- | --- |  | ---- | ----- | ----- | ---- | - | ------- | ------ | - | - | ------ | ----- |  | - | ------ | ----- | 
|                          |            |                               |   | For the Years Ended December 31, |    
|                          |            |                               |   |                                  |    
|                          |            |                               |   | 1998                             |     |  | 1999 |       |       | 2000 |   |         | 2001   |   |   | 2002   |      
|                          |            |                               |   |                                  |     |  |      |       |       |      |   |         |        |   |   |        |      
|                          |            |                               |   | (in thousands)                   |    
|SUPPLEMENTAL INFORMATION: |            |                               |   |                                  |     |  |      |       |       |      |   |         |        |   |   |        |       |  |   |       
|                          | Net income |                               | $ | 1,577                            |     |  | $    | 659   |       |      | $ | (10,157 | )      |   | $ | 4,136  |       |  | $ | 6,460  |      
|                          | Add back:  |                               |   |                                  |     |  |      |       |       |      |   |         |        |   |   |        |       |  |   |        |      
|                          |            | Interest expense              |   |                                  | 152 |  |      |       | 580   |      |   |         | 1,542  |   |   |        | 2,239 |  |   |        | 1,485 | 
|                          |            | Income tax expense (benefit)  |   |                                  | 810 |  |      |       | 525   |      |   |         | (5,611 | ) |   |        | 2,661 |  |   |        | 4,313 | 
|                          |            | Depreciation and amortization |   |                                  | 776 |  |      |       | 2,715 |      |   |         | 4,131  |   |   |        | 3,621 |  |   |        | 4,555 | 
|                          |            | Impairment                    |   |                                  |    |  |      |       |      |      |   |         | 11,798 |   |   |        |      |  |   |        |      | 
|                          |            |                               |   |                                  |     |  |      |       |       |      |   |         |        |   |   |        |      
|                          | EBITDA(1)  |                               | $ | 3,315                            |     |  | $    | 4,479 |       |      | $ | 1,703   |        |   | $ | 12,657 |       |  | $ | 16,813 |      
|                          |            |                               |   |                                  |     |  |      |       |       |      |   |         |        |   |   |        |      



---

|(1) |  | EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization and, in the year 2000, impairment charges. EBITDA should
not be considered as an alternative to net income (as an indicator of
operating performance) or as an alternative to cash flow (as a measure of
liquidity or ability to service debt obligations) and is not in accordance
with, nor superior to, generally accepted accounting principles, but
provides additional information for evaluating us. Our measure of EBITDA
may not be the same as similar measures described by other companies.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with
our audited consolidated financial statements, including the notes thereto
contained elsewhere in this report. This discussion contains forward-looking
statements that involve risks, uncertainties, and assumptions. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of a variety of factors, including the special
considerations set forth in Item 1 and elsewhere in this report.

Overview

We provide a wide range of customized information services to businesses
across the United States that assist them in making critical decisions, such as
determining whether to make a mortgage or other loan, offer employment, accept
new tenants, or enter into a business relationship. We specialize in providing
customized mortgage credit reports and other mortgage related services,
consumer credit reports, employment screening, resident screening, and
commercial credit reports. Our customers include mortgage lenders and
independent mortgage brokers, consumer lenders, employers, property managers,
and other business customers desiring information regarding creditworthiness
and other matters. We believe we are an industry leader in delivering our
service offerings over the Internet and in utilizing technology and focusing on
customer service to provide our services with the speed, reliability,
accuracy, and customization that industry participants increasingly demand.

While capitalizing on the favorable mortgage market environment, we have
also successfully garnered new market share in our non-mortgage business lines.
Revenue in our non-mortgage divisions increased 19 percent over 2001 results,
emphasizing our ability to grow in new markets in less than favorable market
conditions.

In our mortgage-based division, dramatic increases in flood zone
determinations, as well as increases in fraud detection products and automated
property valuation services outlined the successful launch of new lines through
our industry leading delivery channel, www.factualdata.com. Additionally, we
achieved $7 million in new revenue growth over 2001 from new or expanded major
account relationships thanks to our national/major account marketing team, our
technological superiority and our Four Hours or Its Free guarantee.

We have also been successful in reaching new markets for our current
products with the successful launch of our services aimed at the mortgage
backed securities market via our industry leading portfolio services, as well
as the launch of our direct lender services division and our recently announced
relationship with Bankers Systems.

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We have successfully increased our margins by decreasing our cost of
services sold as a percentage of revenue. We increased our revenue through
national account growth and new products, resulting in dilution to many of our
fixed expenses as well as volume generated discounts on variable expenses. Our
cash generation and revenue growth have allowed us to pay down debt while
increasing cash on hand for both operating needs and acquisitions in the
future. 2002 resulted in the highest revenue, EPS and cash position we have
enjoyed in our history thus far, and we are pleased with our efficiencies and
expanding growth opportunities.

Critical Accounting Policies

We have identified the policies below as critical to our business
operations and the understanding of our results of operations. The impact and
any associated risks related to these policies on our business operations is
discussed throughout Managements Discussion and Analysis of Financial
Condition and Results of Operations when such policies affect our reported and
expected financial results.

In the ordinary course of business, we have made a number of estimates and
assumptions relating to the reporting of results of operations and financial
condition in the preparation of our financial statements in conformity with
accounting principles generally accepted in the United States. Actual results
could differ significantly from those estimates under different assumptions and
conditions. We believe that the following discussion addresses our most
critical accounting policies, which are those that are most important to the
portrayal of our financial condition and results of operations and require
our most difficult, subjective, and complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain.

Revenue Recognition

We recognize revenue when the mortgage credit report or other information,
collectively a unit, has been delivered to the customer, persuasive evidence
of the terms of the arrangement exists, our fee is fixed and determinable, and
collectibility is reasonably assured. Delivery usually takes place
electronically and revenue is recognized when the customer has access to the
data. Our 4 Hours or Its Free guarantee applies to line-item verifications
and updates on our reports. We do not recognize revenue on services subject to
the guarantee until the guarantee conditions are met. The fees we charge our
customers are based on the type of unit delivered. We do not receive upfront
set up fees or other upfront fees from our customers. Our cost of services
primarily includes data costs, which are expensed when the unit is delivered to
the customer.

Valuation of Goodwill and Other Intangible Assets

We assess the impairment of identifiable intangible assets and goodwill
whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors we consider important that could trigger an
impairment review include the following:



| |  |  | significant underperformance relative to expected historical
or projected future operating results;          
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | significant changes in the manner of our use of the acquired
assets or the strategy for our overall business;
|
| |  |  | significant negative industry or economic trends;                                                            
|
| |  |  | significant decline in our stock price for a sustained period; and                                           
|
| |  |  | our market capitalization relative to net book value.                                                        

In 2002, Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, became effective. As of December 31,
2001 and 2002, the net carrying amount of goodwill of $168,971 and $565,971,
respectively, is no longer amortized and is subject to impairment testing under
SFAS No. 142. In lieu of amortization, we were required to perform an initial
impairment review of our goodwill in 2002 and an annual impairment review
thereafter. We completed our first annual impairment test of goodwill as of
October 1, 2002 and determined goodwill and other intangible assets are not
impaired. This determination was based on valuation

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analyses performed by an
independent valuation firm. The valuation analysis performed by the independent
valuation firm was in accordance with the guidelines established by SFAS 142
and employed generally accepted valuation techniques. The valuation techniques
employed by the independent valuation firm included a discounted cash flow
analysis, analysis of guideline publicly-traded companies, and analysis of
guideline similar transactions. Goodwill and other intangible assets will be
tested annually and whenever events and circumstances occur indicating that the
assets may be impaired. We have also evaluated the useful lives of our existing
intangible assets and
determined that the existing useful lives are appropriate. Other intangible
assets of $27.8 million at December 31, 2002 are subject to the amortization
methods prescribed by SFAS No. 142. Our customer rights and customer lists are
amortized using the straight-line method over 15 years, and non-compete
agreements and franchise agreements are amortized using the straight-line
method over the life of the agreements, which extend from three to ten years.
Our license agreements to access information are amortized using the ratio of
the units accessed, for the period, to the total units estimated to be accessed
over the ten year initial term of the agreement. Our intellectual property is
amortized using the straight-line method over 13 to 15 years and loan
origination costs are amortized using the straight-line method over the loan
term.

Allowance for Doubtful Accounts

We estimate the uncollectability of our accounts receivable. We
specifically analyze accounts receivable, historical bad debts, customer
concentrations, customer creditworthiness, current economic trends, and changes
in our customer payment terms when evaluating the adequacy of the allowance for
doubtful accounts. Material differences may result in the amount and timing of
expenses for any period if we made different judgments or utilized different
estimates. Our accounts receivable was $7.6 million as of December 31, 2002,
and our allowance for doubtful accounts was $301,000 as of December 31, 2002.

Accounting for Income Taxes

As part of the process of preparing our consolidated financial statements,
we are required to estimate our income taxes. This process involves estimating
our current tax exposure together with assessing temporary differences
resulting from differing treatment of items for tax and accounting purposes.
These differences result in deferred tax assets and liabilities, which are
recorded in our consolidated balance sheet.

Significant judgment is required in determining our provision for income
taxes and deferred tax assets and liabilities. We recorded a net deferred tax
asset of approximately $3.4 million at December 31, 2002, of which
approximately $3.6 million related to intangible assets. We believe that it is
more likely than not that the deferred tax assets will be realized from the
generation of future taxable income. Although the deferred tax asset is
considered realizable, actual amounts could be reduced, and charged against our
results from operations in future periods, if we do not generate sufficient
future taxable income.

Capitalized Software Development Costs

We capitalize costs, which include primarily salaries in connection with
developing software for internal use. We use judgment in determining whether
development costs meet the criteria for immediate expense or capitalization.
Direct costs incurred in the development of software are capitalized once the
preliminary project stage is completed, management has committed to funding the
project, and completion and use of the software for its intended purpose are
probable. We cease capitalization of development costs once the software has
been substantially completed and is ready for its intended use. We capitalized
$755,000, $749,000, and $794,000 of costs during the years
ended December 31, 2000, 2001, and 2002, respectively. The software
development costs capitalized are amortized over the estimated useful life of
the software, which we estimate to be three years. Amortization expense was
$514,000, $654,000, and $751,000 for the years ended December 31, 2000, 2001,
and 2002, respectively.

Accounting Pronouncements

Several recent pronouncements of the Financial Accounting Standards Board
are discussed in Item 8Financial Statements and Supplemental DataSummary of
Significant Accounting Policies. Readers are urged to

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review that section with
respect to these recent pronouncements, some of which could have a material
impact on our financial position and results of future operations.

Results of Operations

Years Ended December 31, 2001 and 2002

We classify our business operations into three reporting segments:
mortgage services, consumer services, and other services. Historically, we have
derived most of our revenue from mortgage services, with our primary service in
this segment being our mortgage credit reports. Through our consumer services
business, we generate revenue primarily from the delivery of consumer credit
reports. Our other services consist of resident and employment screening
services. Revenue, cost of services, and cost of services as a percent of
revenue for our operating segments for the periods indicated are as follows (in
thousands):

|                                         |  |          |        |   |          |   |       |          |  |   |       |   |  |   |        |  
|---------------------------------------- |  | -------- | ------ | - | -------- | - | ----- | -------- |  | - | ----- | - |  | - | ------ | -
|Year Ended                               |  | Mortgage |        |   | Consumer |   |       | Other    |  |   |       |   | 
|December 31, 2001                        |  | Services |        |   | Services |   |       | Services |  |   | Total |  
|                                         |  |          |        |   |          |   |       |          |  |   |       |  
|Revenue                                  |  | $        | 42,552 |   |          | $ | 6,476 |          |  | $ | 2,212 |   |  | $ | 51,240 |  
|Cost of services                         |  |          | 24,286 |   |          |   | 3,872 |          |  |   | 1,670 |   |  |   | 29,828 |  
|Cost of services as
a percent of
revenue |  |          | 57.1   | % |          |   | 59.8  | %        |  |   | 75.5  | % |  |   | 58.2   | %

|                                         |  |          |        |   |          |   |       |          |  |   |       |   |  |   |        |  
|---------------------------------------- |  | -------- | ------ | - | -------- | - | ----- | -------- |  | - | ----- | - |  | - | ------ | -
|Year Ended                               |  | Mortgage |        |   | Consumer |   |       | Other    |  |   |       |   | 
|December 31, 2002                        |  | Services |        |   | Services |   |       | Services |  |   | Total |  
|                                         |  |          |        |   |          |   |       |          |  |   |       |  
|Revenue                                  |  | $        | 52,738 |   |          | $ | 6,972 |          |  | $ | 3,362 |   |  | $ | 63,072 |  
|Cost of services                         |  |          | 27,134 |   |          |   | 4,258 |          |  |   | 2,479 |   |  |   | 33,871 |  
|Cost of services as
a percent of
revenue |  |          | 51.5   | % |          |   | 61.1  | %        |  |   | 73.7  | % |  |   | 53.7   | %

Total revenue increased $11.9 million, or 23.2%, from $51.2 million in
2001 to $63.1 million in 2002.

Mortgage services revenue increased $10.1 million, or 23.7%, from $42.6
million in 2001 to $52.7 million in 2002 as a result of our ability to obtain
new business from national accounts and independent mortgage brokers,
acquisitions in key market areas, continued advances in our technology, and a
favorable mortgage environment, which fueled demand for our mortgage services.

Consumer services revenue increased $500,000, or 7.7%, from $6.5 million
in 2001 to $7.0 million in 2002 as a result of the addition of new customers in
these territories.

Other services revenue increased $1.2 million, or 54.5%, from $2.2 million
in 2001 to $3.4 million in 2002. This increase in resident and employment
screening services was a result of the development of new customers.

Cost of services are direct operational costs and consist of data costs,
salaries, and telecommunications costs. Total cost of services increased $4.1
million, or 13.8%, from $29.8 million in 2001 to $33.9 million in 2002. These
costs are primarily variable costs, which tend to fluctuate with changes in
revenue, but tend to remain fairly consistent as a percentage of revenue. As a
percentage of revenue, cost of services decreased from 58.2% in 2001 to 53.7%
in 2002.

Mortgage cost of services increased $2.8 million, or 11.5%, from $24.3
million in 2001 to $27.1 million in 2002 as a result of our increased revenue.
However, as a percentage of revenue, mortgage cost of services decreased from
57.1% in 2001 to 51.5% in 2002 as a result of lower data costs and our ability
to use our technology to reduce salary costs.

Consumer cost of services increased $400,000, or 10.3%, from $3.9 million
in 2001 to $4.3 million in 2002 as a result of increased revenue. As a
percentage of revenue, these costs remained fairly consistent, increasing from
59.8% in 2001 to 61.1% in 2002.

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Other cost of services increased $800,000, or 47.1%, from $1.7 million in
2001 to $2.5 million in 2002 and decreased as a percentage of revenue from
75.5% in 2001 to 73.7% in 2002. This decrease was due to increased automation
of our employment screening and resident screening services, thus decreasing
our direct personnel costs.

Selling, general, and administrative expenses increased $3.5 million, or
37.6%, from $9.3 million in 2001 to $12.8 million in 2002. As a percentage of
revenue, these costs increased from 18.1% to 20.3%. $937,000 of the increase
was due to one-time costs related to an abandoned securities offering, the
negotiation and costs associated with a terminated merger agreement and costs
associated with our FDinsight project. The remainder of this periods increase
was primarily due to increased corporate personnel and employee benefit
expenses of $1.7 million, business development and training expenses of
$560,000 and other selling, general and administrative expenses of $303,000.

Depreciation and amortization increased $1.0 million, or 27.8%, from $3.6
million in 2001 to $4.6 million in 2002. This increase was due to depreciation
and amortization on hardware and software upgrades to our technology center and
the expansion of our corporate and branch facilities totaling $432,000. Also
contributing to the increase in amortization are our license agreements to sell
Experian information, which increased $398,000. The $170,000 balance of the
increase was due to amortization
on newly acquired intangibles from acquisitions net of a $3,000 reduction
in goodwill amortization.

Acquisition consolidation costs decreased $43,000, or 27.2%, from $158,000
in 2001 to $115,000 in 2002. This decrease was due primarily to the fewer
number of acquisitions in 2002 than in 2001. These costs included consolidation
charges for items such as recruiting fees, salaries, and travel costs for the
consolidation and relocation of the acquired companies to our regional
processing centers.

Interest expense decreased $700,000, or 31.8%, from $2.2 million in 2001
to $1.5 million in 2002. This decrease was primarily due to a reduction of the
outstanding balance on our bank revolving line of credit from $2.2 million at
December 31, 2001 to no outstanding balance at December 31, 2002 and the
decrease in interest rates on the line of credit from 10.1% to 4.2%.

Income tax expense was $4.3 million in 2002 compared to an income tax
expense of $2.7 million in 2001. Our effective tax rate was 39.1% for 2001 and
40.0% for 2002.

As a result of the foregoing factors, net income in 2002 was $6.5 million,
or $1.04 per diluted share, compared to a net income of $4.1 million, or $0.71
per diluted share, in 2001.

Our EBITDA (earnings before interest, taxes, depreciation, and
amortization), was $16.8 million in 2002 compared to $12.7 million in 2001, a
$4.1 million, or a 32.3%, increase over 2001.

Years Ended December 31, 2000 and 2001

Revenue, cost of services, and cost of services as a percent of revenue
for our operating segments for the periods indicated are as follows (in
thousands):

|                                         |  |          |        |   |          |   |       |          |  |   |       |   |  |   |        |  
|---------------------------------------- |  | -------- | ------ | - | -------- | - | ----- | -------- |  | - | ----- | - |  | - | ------ | -
|Year Ended                               |  | Mortgage |        |   | Consumer |   |       | Other    |  |   |       |   | 
|December 31, 2000                        |  | Services |        |   | Services |   |       | Services |  |   | Total |  
|                                         |  |          |        |   |          |   |       |          |  |   |       |  
|Revenue                                  |  | $        | 25,560 |   |          | $ | 3,180 |          |  | $ | 2,521 |   |  | $ | 31,261 |  
|Cost of services                         |  |          | 15,417 |   |          |   | 1,875 |          |  |   | 988   |   |  |   | 18,280 |  
|Cost of services as
a percent of
revenue |  |          | 60.3   | % |          |   | 59.0  | %        |  |   | 39.2  | % |  |   | 58.5   | %

|                                         |  |          |        |   |          |   |       |          |  |   |       |   |  |   |        |  
|---------------------------------------- |  | -------- | ------ | - | -------- | - | ----- | -------- |  | - | ----- | - |  | - | ------ | -
|Year Ended                               |  | Mortgage |        |   | Consumer |   |       | Other    |  |   |       |   | 
|December 31, 2001                        |  | Services |        |   | Services |   |       | Services |  |   | Total |  
|                                         |  |          |        |   |          |   |       |          |  |   |       |  
|Revenue                                  |  | $        | 42,552 |   |          | $ | 6,476 |          |  | $ | 2,212 |   |  | $ | 51,240 |  
|Cost of services                         |  |          | 24,286 |   |          |   | 3,872 |          |  |   | 1,670 |   |  |   | 29,828 |  
|Cost of services as
a percent of
revenue |  |          | 57.1   | % |          |   | 59.8  | %        |  |   | 75.5  | % |  |   | 58.2   | %

Total revenue increased $19.9 million, or 63.6%, from $31.3 million in
2000 to $51.2 million in 2001.

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Mortgage services revenue increased $17.0 million, or 66.4%, from $25.6
million in 2000 to $42.6 million in 2001 as a result of our ability to obtain
new business from national accounts and independent mortgage brokers,
acquisitions in key market areas, continued advances in our technology, and a
favorable mortgage environment, which fueled demand for our mortgage services.

Consumer services revenue increased $3.3 million, or 103.1%, from $3.2
million in 2000 to $6.5 million in 2001 as a result of the benefit of a full
year of business in all three Experian territories and the addition of new
customers in these territories.

Other services revenue decreased $300,000, or 12.0%, from $2.5 million in
2000 to $2.2 million in 2001. This overall decrease consisted of a $453,000
increase in resident and employment screening services as a result of the
development of new customers, offset by a $753,000 decrease as a result of our
termination of a resident screening agreement.

Cost of services are direct operational costs and consist of data costs,
salaries, and telecommunications costs. Total cost of services increased $11.5
million, or 62.8%, from $18.3 million in 2000 to $29.8 million in 2001. These
costs are primarily variable costs, which tend to fluctuate with changes in
revenue, but tend to remain fairly consistent as a percentage of revenue. As a
percentage of revenue, cost of services decreased from 58.5% in 2000 to 58.2%
in 2001.

Mortgage cost of services increased $8.9 million, or 57.8%, from $15.4
million in 2000 to $24.3 million in 2001 as a result of our increased revenue.
However, as a percentage of revenue, mortgage cost of services decreased from
60.3% in 2000 to 57.1% in 2001 as a result of lower data costs and our ability
to use our technology to reduce salary costs.

Consumer cost of services increased $2.0 million, or 105.3%, from $1.9
million in 2000 to $3.9 million in 2001 as a result of increased revenue. As a
percentage of revenue, these costs remained fairly consistent, increasing from
59.0% in 2000 to 59.8% in 2001.

Other cost of services increased $712,000, or 72.1%, from $988,000 in 2000
to $1.7 million in 2001 and increased as a percentage of revenue from 39.2% in
2000 to 75.5% in 2001. This increase was due to our implementation of a new
marketing call center for other services during the fourth quarter of 2000 and
our termination of a resident screening agreement.

Selling, general, and administrative expenses increased $1.2 million, or
14.8%, from $8.1 million in 2000 to $9.3 million in 2001. As a percentage of
revenue, these costs decreased from 26.0% to 18.1%, a 7.9% reduction. We expect
selling, general, and administrative expenses to increase in the aggregate as
we grow our business. However, these expenses should tend to decrease as a
percentage of revenue as we integrate acquisitions and lower our costs through
continued technological advances.

Depreciation and amortization decreased $500,000 or 12.2%, from $4.1
million in 2000 to $3.6 million in 2001. This decrease reflected the impact on
amortization of the $11.8 million write-down of intangible assets in 2000. The
adjustment was the result of our election to change our accounting policy in
assessing our intangible assets from a policy based upon undiscounted cash
flows to a policy that utilizes discounted cash flows. We believed that the use
of a discounted methodology was preferable and was consistent with the
methodology we utilized in assessing acquisition opportunities.

Acquisition consolidation costs decreased $444,000, or 73.8%, from
$602,000 in 2000 to $158,000 in 2001. This decrease was due primarily to the
fewer number of acquisitions in 2001 than in 2000. These costs included
consolidation charges for items such as recruiting fees, salaries, and travel
costs for the consolidation and relocation of the acquired companies to our
regional processing centers.

In 2001, we recorded a $170,000 reduction in our previous estimate of
branch efficiency costs of $3.0 million in 2000. The branch efficiency costs in
2000 consisted primarily of future operating lease payments for office space,
telecommunications and office equipment, leasehold improvements, furniture, and
equipment.

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In 2000, we recorded an impairment adjustment to intangible assets of
$11.8 million because of a change in accounting policy. In 2001, we did not
have any impairment adjustment.

Interest expense increased $700,000, or 46.7%, from $1.5 million in 2000
to $2.2 million in 2001. This increase was primarily due to a full year of
interest recognized under our $10.3 million Experian capitalized lease
agreements during 2001.

Income tax expense was $2.7 million in 2001 compared to an income tax
benefit of $5.6 million in 2000. Our effective tax rate was 39.1% for 2001.

As a result of the foregoing factors, net income in 2001 was $4.1 million,
or $0.71 per diluted share, compared to a net loss of $10.2 million, or $1.89
per diluted share, in 2000.

Our EBITDA (earnings before interest, taxes, depreciation, and
amortization but excluding branch efficiency costs and an impairment adjustment
to intangible assets), was $12.5 million in 2001 compared to $4.7 million in
2000, a $7.8 million, or a 165.9%, increase over 2000.

Quarterly Results of Operations

The following table presents selected consolidated financial information
for each of our last eight fiscal quarters. The information has been derived
from unaudited consolidated financial statements that, in the opinion of
management, reflects all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the quarterly information.
The operating results for any quarter are not necessarily indicative of the
results for any subsequent quarter.

|                                     |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |         |  |   |        |       |  |   |        |       | 
|------------------------------------ | ------------------------------------ | - | -------------- | ----- |  | ------- | ------ | ----- | -------- | - | ------ | ------- |  | - | ------- | ----- | - | ------- | ------ | ----- | -------- | - | ------ | ------- |  | - | ------ | ----- |  | - | ------ | ----- | 
|                                     |                                      |   | Quarter Ended  |      
|                                     |                                      |   |                |      
|                                     |                                      |   | 2001           |       |  | 2002    |       
|                                     |                                      |   |                |       |  |         |       
|                                     |                                      |   | Mar. 31        |       |  | June 30 |        |       | Sept. 30 |   |        | Dec. 31 |  |   | Mar. 31 |       |   | June 30 |        |       | Sept. 30 |   |        | Dec. 31 | 
|                                     |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |         | 
|                                     |                                      |   | (in thousands) |      
|Revenue                              |                                      | $ | 13,064         |       |  | $       | 12,715 |       |          | $ | 11,873 |         |  | $ | 13,588  |       |   | $       | 13,489 |       |          | $ | 14,093 |         |  | $ | 18,002 |       |  | $ | 17,487 |      
|Operating expenses:                  |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |         |  |   |        |       |  |   |        |      
|                                     | Cost of services                     |   |                | 7,531 |  |         |        | 7,413 |          |   |        | 6,930   |  |   |         | 7,954 |   |         |        | 7,186 |          |   |        | 8,074   |  |   |        | 9,560 |  |   |        | 9,051 | 
|                                     | Selling, general, and administrative |   |                | 2,295 |  |         |        | 2,215 |          |   |        | 2,133   |  |   |         | 2,622 |   |         |        | 2,817 |          |   |        | 3,431   |  |   |        | 3,441 |  |   |        | 3,068 | 
|                                     | Depreciation and amortization        |   |                | 861   |  |         |        | 896   |          |   |        | 909     |  |   |         | 954   |   |         |        | 994   |          |   |        | 1,048   |  |   |        | 1,081 |  |   |        | 1,432 | 
|                                     | Acquisition consolidation costs      |   |                | 37    |  |         |        | 60    |          |   |        | 61      |  |   |         |      |   |         |        | 109   |          |   |        | 6       |  |   |        |      |  |   |        |      | 
|                                     | Branch efficiency costs              |   |                |      |  |         |        |      |          |   |        |        |  |   |         | (170  | ) |         |        |      |          |   |        |        |  |   |        |      |  |   |        |      | 
|                                     |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |        
|Total operating expenses             |                                      |   | 10,723         |       |  |         | 10,584 |       |          |   | 10,033 |         |  |   | 11,360  |       |   |         | 11,106 |       |          |   | 12,559 |         |  |   | 14,082 |       |  |   | 13,551 |      
|                                     |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |        
|Income from operations               |                                      |   | 2,341          |       |  |         | 2,131  |       |          |   | 1,840  |         |  |   | 2,228   |       |   |         | 2,383  |       |          |   | 1,534  |         |  |   | 3,920  |       |  |   | 3,936  |      
|Other expense, net                   |                                      |   | 507            |       |  |         | 570    |       |          |   | 376    |         |  |   | 289     |       |   |         | 300    |       |          |   | 238    |         |  |   | 261    |       |  |   | 202    |      
|                                     |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |        
|Income before income taxes           |                                      |   | 1,834          |       |  |         | 1,561  |       |          |   | 1,464  |         |  |   | 1,939   |       |   |         | 2,083  |       |          |   | 1,296  |         |  |   | 3,659  |       |  |   | 3,734  |      
|Income tax expense                   |                                      |   | 692            |       |  |         | 633    |       |          |   | 555    |         |  |   | 781     |       |   |         | 787    |       |          |   | 514    |         |  |   | 1,449  |       |  |   | 1,562  |      
|                                     |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |        
|Net income                           |                                      | $ | 1,142          |       |  | $       | 928    |       |          | $ | 909    |         |  | $ | 1,158   |       |   | $       | 1,296  |       |          | $ | 782    |         |  | $ | 2,210  |       |  | $ | 2,172  |      
|                                     |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |        
|Earnings (loss) per share:           |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |         |  |   |        |       |  |   |        |      
|                                     | Basic                                |   | $              | .21   |  |         | $      | .17   |          |   | $      | .15     |  |   | $       | .19   |   |         | $      | .21   |          |   | $      | .13     |  |   | $      | .36   |  |   | $      | .35   | 
|                                     |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |        
|                                     | Diluted                              |   | $              | .21   |  |         | $      | .17   |          |   | $      | .15     |  |   | $       | .19   |   |         | $      | .21   |          |   | $      | .13     |  |   | $      | .35   |  |   | $      | .35   | 
|                                     |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |        
|Weighted average shares outstanding: |                                      |   |                |       |  |         |        |       |          |   |        |         |  |   |         |       |   |         |        |       |          |   |        |         |  |   |        |       |  |   |        |      
|                                     | Basic                                |   |                | 5,387 |  |         |        | 5,389 |          |   |        | 6,119   |  |   |         | 6,120 |   |         |        | 6,121 |          |   |        | 6,125   |  |   |        | 6,181 |  |   |        | 6,189 | 
|                                     | Diluted                              |   |                | 5,391 |  |         |        | 5,400 |          |   |        | 6,262   |  |   |         | 6,206 |   |         |        | 6,176 |          |   |        | 6,233   |  |   |        | 6,268 |  |   |        | 6,216 | 

26



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##### Table of Contents



The following table sets forth selected consolidated financial information
as a percentage of total revenue for each of our last eight fiscal quarters.

|                           |                                      |  |               |      |   |         |       |      |          |  |       |         |   |  |         |      |   |         |       |      |          |  |       |         |   |  |       |      |   |  |       |      |  
|-------------------------- | ------------------------------------ |  | ------------- | ---- | - | ------- | ----- | ---- | -------- |  | ----- | ------- | - |  | ------- | ---- | - | ------- | ----- | ---- | -------- |  | ----- | ------- | - |  | ----- | ---- | - |  | ----- | ---- | -
|                           |                                      |  | Quarter Ended |     
|                           |                                      |  |               |     
|                           |                                      |  | 2001          |      |   | 2002    |      
|                           |                                      |  |               |      |   |         |      
|                           |                                      |  | Mar. 31       |      |   | June 30 |       |      | Sept. 30 |  |       | Dec. 31 |   |  | Mar. 31 |      |   | June 30 |       |      | Sept. 30 |  |       | Dec. 31 |  
|                           |                                      |  |               |      |   |         |       |      |          |  |       |         |   |  |         |      |   |         |       |      |          |  |       |         |  
|Revenues                   |                                      |  | 100.0         | %    |   |         | 100.0 | %    |          |  | 100.0 | %       |   |  | 100.0   | %    |   |         | 100.0 | %    |          |  | 100.0 | %       |   |  | 100.0 | %    |   |  | 100.0 | %   
|Operating expenses:        |                                      |  |               |      |   |         |       |      |          |  |       |         |   |  |         |      |   |         |       |      |          |  |       |         |   |  |       |      |   |  |       |     
|                           | Cost of services                     |  |               | 57.6 |   |         |       | 58.3 |          |  |       | 58.4    |   |  |         | 58.5 |   |         |       | 53.3 |          |  |       | 57.3    |   |  |       | 53.1 |   |  |       | 51.8 |  
|                           | Selling, general, and administrative |  |               | 17.6 |   |         |       | 17.4 |          |  |       | 17.9    |   |  |         | 19.3 |   |         |       | 20.9 |          |  |       | 24.3    |   |  |       | 19.1 |   |  |       | 17.5 |  
|                           | Depreciation and amortization        |  |               | 6.6  |   |         |       | 7.0  |          |  |       | 7.7     |   |  |         | 7.0  |   |         |       | 7.3  |          |  |       | 7.5     |   |  |       | 6.0  |   |  |       | 8.2  |  
|                           | Acquisition consolidation costs      |  |               | 0.3  |   |         |       | 0.5  |          |  |       | 0.5     |   |  |         |     |   |         |       | 0.8  |          |  |       |        |   |  |       |     |   |  |       |     |  
|                           | Branch efficiency costs              |  |               |     |   |         |       |     |          |  |       |        |   |  |         | (1.2 | ) |         |       |     |          |  |       |        |   |  |       |     |   |  |       |     |  
|                           |                                      |  |               |      |   |         |       |      |          |  |       |         |   |  |         |      |   |         |       |      |          |  |       |        
|Total operating expenses   |                                      |  | 82.1          |      |   |         | 83.2  |      |          |  | 84.5  |         |   |  | 83.6    |      |   |         | 82.3  |      |          |  | 89.1  |         |   |  | 78.2  |      |   |  | 77.5  |     
|                           |                                      |  |               |      |   |         |       |      |          |  |       |         |   |  |         |      |   |         |       |      |          |  |       |        
|Income from operations     |                                      |  | 17.9          |      |   |         | 16.8  |      |          |  | 15.5  |         |   |  | 16.4    |      |   |         | 17.7  |      |          |  | 10.9  |         |   |  | 21.8  |      |   |  | 22.5  |     
|Other expense, net         |                                      |  | 3.9           |      |   |         | 4.5   |      |          |  | 3.2   |         |   |  | 2.1     |      |   |         | 2.2   |      |          |  | 1.7   |         |   |  | 1.5   |      |   |  | 1.2   |     
|                           |                                      |  |               |      |   |         |       |      |          |  |       |         |   |  |         |      |   |         |       |      |          |  |       |        
|Income before income taxes |                                      |  | 14.0          |      |   |         | 12.3  |      |          |  | 12.3  |         |   |  | 14.3    |      |   |         | 15.5  |      |          |  | 9.2   |         |   |  | 20.3  |      |   |  | 21.3  |     
|Income tax expense         |                                      |  | 5.3           |      |   |         | 5.0   |      |          |  | 4.7   |         |   |  | 5.7     |      |   |         | 5.9   |      |          |  | 3.6   |         |   |  | 8.0   |      |   |  | 8.9   |     
|                           |                                      |  |               |      |   |         |       |      |          |  |       |         |   |  |         |      |   |         |       |      |          |  |       |        
|                           | Net income                           |  |               | 8.7  | % |         |       | 7.3  | %        |  |       | 7.6     | % |  |         | 8.6  | % |         |       | 9.6  | %        |  |       | 5.6     | % |  |       | 12.3 | % |  |       | 12.4 | %
|                           |                                      |  |               |      |   |         |       |      |          |  |       |         |   |  |         |      |   |         |       |      |          |  |       |        

Liquidity and Capital Resources

We had a cash balance of $7.8 million at December 31, 2002. As of December
31, 2002, we had working capital totaling $2.0 million. We anticipate our
working capital to continue to increase as we generate cash flow from
operations.

On April 30, 2002, we renewed our $10.0 million credit facility agreement
with our bank whereby we converted the existing $1.7 million balance on our
line of credit
into a new $4.0 million term loan and modified its terms. The balance of
the term loan as of December 31, 2002 was $3.3 million. The term loan requires
monthly principal payments of $83,333, through April 30, 2006 with interest at
the floating rate or Eurodollar rate of 4.188% at December 31, 2002. Our $6.0
million line of credit bears interest at the floating rate or Eurodollar rate
as defined in the agreement of 4.6% at December 31, 2002. As of December 31,
2002 and as of March 3, 2003, there were no amounts outstanding on our credit
line. Principal and unpaid interest, if any, is due April 30, 2003. The line of
credit and the term loan are collateralized by substantially all of our assets.
The credit line requires us to meet certain financial restrictive covenants,
all of which were met as of December 31, 2002, including the following:



| |                                                                   
| | ------------------------------------------------------------------
| |  minimum quarterly EBITDA levels;                                
|
| |  interest coverage ratio;                                        
|
| |  book-to-net worth ratio                                         
|
| |  debt service ratio;                                             
|
| |  annual capital expenditures;                                    
|
| |  total funded debt to last twelve months pro forma EBITDA; and   
|
| |  total senior funded debt to last twelve months pro forma EBITDA.

We are currently working to extend and increase our credit facilities.

We believe that our anticipated cash requirements for operations will be
met from internally generated funds and our bank credit line. We may be
required to obtain additional public, private, or debt financing or a
combination of the foregoing to continue our acquisition program and
development of new information services.

27



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##### Table of Contents



Contractual Commitments and Commercial Commitments

The following table sets forth a summary of our contractual obligations
and commercial commitments as of December 31, 2002:

|             |  |                |   |  |           |   |       |         |  |   |               |  |  |           |       |  |       |   |        |  |  |   |        | 
|------------ |  | -------------- | - |  | --------- | - | ----- | ------- |  | - | ------------- |  |  | --------- | ----- |  | ----- | - | ------ |  |  | - | ------ | 
|             |  |                |   |  |           |   |       |         |  |   |               |  |  | Experian  |       |  |       |   |        |  |  |   |       
|Year Ending  |  | Line of        |   |  | Long-Term |   |       | Capital |  |   | Capital Lease |  |  | Operating |       |  |       |   |       
|December 31, |  | Credit         |   |  | Debt      |   |       | Leases  |  |   | Agreements    |  |  | Leases    |       |  | Total |  
|             |  |                |   |  |           |   |       |         |  |   |               |  |  |           |       |  |       |  
|             |  | (in thousands) |  
|2003         |  | $              |  |  |           | $ | 2,908 |         |  | $ | 484           |  |  | $         | 3,274 |  |       | $ | 1,608  |  |  | $ | 8,274  | 
|2004         |  |                |  |  |           |   | 1,978 |         |  |   | 233           |  |  |           | 3,361 |  |       |   | 1,615  |  |  |   | 7,187  | 
|2005         |  |                |  |  |           |   | 1,190 |         |  |   | 44            |  |  |           | 2,031 |  |       |   | 1,299  |  |  |   | 4,564  | 
|2006         |  |                |  |  |           |   | 334   |         |  |   |              |  |  |           | 89    |  |       |   | 1,097  |  |  |   | 1,520  | 
|2007         |  |                |   |  |           |   |      |         |  |   |              |  |  |           |      |  |       |   | 1,119  |  |  |   | 1,119  | 
|Thereafter   |  |                |  |  |           |   |      |         |  |   |              |  |  |           |      |  |       |   | 10,794 |  |  |   | 10,794 | 
|             |  |                |   |  |           |   |       |         |  |   |               |  |  |           |       |  |       |  
|Total        |  | $              |   |  |           | $ | 6,410 |         |  | $ | 761           |  |  | $         | 8,755 |  |       | $ | 17,532 |  |  | $ | 33,458 | 
|             |  |                |   |  |           |   |       |         |  |   |               |  |  |           |       |  |       |  




Item 7A.Quantitative and Qualitative Disclosure about Market Risk

We had an interest rate swap agreement for a principal amount of $4.0
million, which expired in May 2002. We used the interest rate swap agreement to
manage interest rate risk with regard to our variable rate notes payable. Our
interest rate swap did not qualify for using the hedge method of accounting.

As of December 31, 2002, our notes payable to corporations and individuals
totaling $3.1 million bore interest at fixed rates ranging from 5.0% to 12.0%.
Our Experian capital lease agreements totaling
$8.8 million are discounted at a fixed rate of interest of 10.0%, and our other
capital lease obligations totaling $761,000 are discounted at fixed rates of
interest ranging from 8.1% and 10.7%.

Our senior bank debt totaling $3.3 million carries a variable rate of
interest of 4.188%.

We are also exposed to some market risk through interest rates related to
our cash and cash equivalents balances of $7.8 million. These funds are
generally invested in money market funds with short maturities.

We believe that fluctuations in interest rates on our debt obligations and
our cash and cash equivalents in the near term will not materially affect our
operating results, financial position, or cash flows.




Item 8.Financial Statements and Supplementary Data

Reference is made to the financial statements, the notes thereto, and the
reports thereon, commencing on page F-1 of this report, which financial
statements, notes, and reports are incorporated herein by reference.




Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

28



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##### Table of Contents



PART III




Item 10.Directors and Executive Officers of the Registrant

Information concerning our directors and executive officers appearing
under the caption Election of Three Directors in our Proxy Statement (the
Proxy Statement) filed with the Securities and Exchange Commission in
connection with our Annual Meeting of Shareholders scheduled to be held on May
2, 2003, is incorporated herein by reference in response to this Item 10.




Item 11.Executive Compensation

The information contained in the Proxy Statement in the section titled
Executive CompensationCash and Other Compensation, Our Bonus Programs,
Executive Officers Stock Options, and Compensation Committee Report on
Executive Compensation with respect to executive compensation, and in the
section entitled Election of Three DirectorsDirector Compensation with
respect to director compensation, is incorporated hereby by reference in
response to this Item 11.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters




The information contained in the section titled Security Ownership of
Certain Beneficial Owners and Management in the Proxy Statement, with respect
to security ownership of certain beneficial owners and management, is
incorporated herein by reference in response to this Item 12.




Item 13.Certain Relationships and Related Transactions

The information contained in the section titled Security Ownership of
Certain Beneficial Owners and ManagementCertain Relationships and Related
Transactions of the Proxy Statement, with respect to certain relationships and
related transactions, is incorporated herein by reference in response to this
Item 13.




Item 14.Controls and Procedures

We carried out an evaluation under the supervision and with the
participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of a date within 90 days prior to the date of filing this Annual
Report on Form 10-K (the Evaluation Date). Based on that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that, as of the
Evaluation Date, our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in our Exchange Act reports was
recorded, processed, summarized and reported within the applicable time
periods. Since the Evaluation Date, there have been no significant changes to
our internal controls or, to our knowledge, in
other factors that could significantly affect these controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.




Item 15.Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)  Financial Statements and Financial Statement Schedules



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | (1) Financial Statements are listed in the Index to Consolidated
Financial Statements on page F-1 of this report.

(b)  Reports on Form 8-K



| |      
| | -----
| | None.

29



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##### Table of Contents



(c)  Exhibits

|        |  |   |  |                                                                                                                                                                                                       
|------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                       
|Number  |  |   |  | Description                                                                                                                                                                                           
|        |  |   |  |                                                                                                                                                                                                       
|3.1     |  |  |  | Restated and Amended Articles of Incorporation.(1)                                                                                                                                                    
|        |  |   |  |                                                                                                                                                                                                       
|3.1     |  |   |  | Articles of Amendment to the Restated and Amended
Articles of Incorporation.(1A)                                                                                                                      
|        |  |   |  |                                                                                                                                                                                                       
|3.2     |  |  |  | Amended Bylaws of the Registrant.(1)                                                                                                                                                                  
|        |  |   |  |                                                                                                                                                                                                       
|4.1     |  |  |  | Specimen Common Stock Certificate of the Registrant.(1)                                                                                                                                               
|        |  |   |  |                                                                                                                                                                                                       
|4.2     |  |  |  | Form of Representative Option Agreement.(1)                                                                                                                                                           
|        |  |   |  |                                                                                                                                                                                                       
|4.3     |  |  |  | Share Purchase Agreement dated March 25, 1999 by and
between the
Registrant and the purchasers thereto, together with
Registration Rights
Agreement and Investors Agreement of even date
therewith.(2)
|        |  |   |  |                                                                                                                                                                                                       
|10.1    |  |  |  | Office Lease between FDC Office I, LLC and Lenders
Resource
Incorporated dated August 14, 1997 and as amended
December 26, 1997.(1)                                                                   
|        |  |   |  |                                                                                                                                                                                                       
|10.2    |  |  |  | Registrants 1997 Stock Incentive Plan, as amended, with
form of Stock
Option Agreement.(1)                                                                                                           
|        |  |   |  |                                                                                                                                                                                                       
|10.3    |  |  |  | Credit Agreement dated May 23, 2000 between the
Registrant and Wells
Fargo Bank, N.A.(3)                                                                                                              
|        |  |   |  |                                                                                                                                                                                                       
|10.5    |  |  |  | Form of Indemnification Agreement.(1)                                                                                                                                                                 
|        |  |   |  |                                                                                                                                                                                                       
|10.7    |  |  |  | Amendment to Credit Agreement dated March 27, 2001 between
the Registrant and Wells Fargo Bank, N.A.(4)                                                                                               
|        |  |   |  |                                                                                                                                                                                                       
|10.8    |  |  |  | Experian Affiliate Services Agreement (Lease
Expansion-Colorado), between Experian Information
Solutions, Inc. and
the Registrant, dated April 28, 2000.(5)                                           
|        |  |   |  |                                                                                                                                                                                                       
|10.11   |  |  |  | Agreement for Service  Consumer Reporting Agencies,
between Equifax
Credit Information Services, Inc. and the Registrant,
dated October 8, 1998.(7)                                                  
|        |  |   |  |                                                                                                                                                                                                       
|10.12   |  |  |  | Reseller Services Agreement, between the Registrant and
Experian Information Solutions, Inc., dated November 17,
1998.(7)                                                                             
|        |  |   |  |                                                                                                                                                                                                       
|10.13   |  |  |  | Reseller Service Agreement, between the Registrant and
TransUnion LLC,
dated October 30, 2001.(7)                                                                                                     
|        |  |   |  |                                                                                                                                                                                                       
|10.14   |  |  |  | Second Amendment to Credit Agreement dated April 30, 2001
between the Registrant and Wells Fargo Bank, N.A.(7)                                                                                        
|        |  |   |  |                                                                                                                                                                                                       
|10.16   |  |  |  | 1999 Employee Stock Purchase Plan.(6)                                                                                                                                                                 
|        |  |   |  |                                                                                                                                                                                                       
|10.17   |  |  |  | 1999 Formula Award Stock Option Plan.(6)                                                                                                                                                              
|        |  |   |  |                                                                                                                                                                                                       
|10.18   |  |  |  | Credit Reporting Company Agreement, between the Registrant
and Federal Home Loan Mortgage Corporation, dated January
1, 2000.(7)                                                                      
|        |  |   |  |                                                                                                                                                                                                       
|10.19   |  |  |  | Experian Affiliate Services Agreement (Lease Expansion
South Texas) between Experian Information Solutions, Inc.
and the Registrant dated December 1, 2000.(8)                                        
|        |  |   |  |                                                                                                                                                                                                       
|10.20   |  |  |  | Experian Agreement Services Agreement (Lease
Expansion-Wyoming) between Experian Information
Solutions, Inc. and the Registrant dated February 1,
2001.(8)                                            
|        |  |   |  |                                                                                                                                                                                                       
|10.21   |  |  |  | Credit Report Transmission and Access Agreement between
Fannie Mae and the Registrant dated November 11, 1998.(8)                                                                                     
|        |  |   |  |                                                                                                                                                                                                       
|21      |  |  |  | Subsidiaries of the Registrant.(4)                                                                                                                                                                    
|        |  |   |  |                                                                                                                                                                                                       
|23.1    |  |  |  | Consent of BDO Seidman LLP.*                                                                                                                                                                          
|        |  |   |  |                                                                                                                                                                                                       
|23.2    |  |  |  | Consent of Ehrhardt Keefe Steiner & Hottman PC.*                                                                                                                                                      
|        |  |   |  |                                                                                                                                                                                                       
|99.1    |  |  |  | Chief Executive Officer Certification under Section 906
of the Sarbanes-Oxley Act of 2002.*                                                                                                           

30



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##### Table of Contents



|     |  |   |  |                                                                                            
|---- |  | - |  | -------------------------------------------------------------------------------------------
|99.2 |  |  |  | Chief Financial Officer Certification under Section 906
of the Sarbanes-Oxley Act of 2002.*



---

|*    |  | Filed herewith.                                                                                                                                 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(1)  |  | Incorporated by reference to our Registration Statement on Form SB-2
(Registration No. 333-47051).                                              
|    
|(1A) |  | Incorporated by reference to our Quarterly Report on Form 10-Q filed with
the Commission on November 13, 2002.                                  
|    
|(2)  |  | Incorporated by reference to our Current Report on Form 8-K filed with
the Commission on April 12, 1999.                                        
|    
|(3)  |  | Incorporated by reference to our Current Report on Form 8-K filed with
the Commission on June 6, 2000.                                          
|    
|(4)  |  | Incorporated by reference to our Annual Report on Form 10-KSB for the
year ended December 31, 2000 filed with the Commission on March 30, 2001. 
|    
|(5)  |  | Incorporated by reference to our Current Report on Form 8-K filed with
the Commission on August 17, 2000.                                       
|    
|(6)  |  | Incorporated by reference to our Registration Statement on Form S-8
(Registration No. 333-92693) filed with the Commission on December 14,
1999.
|    
|(7)  |  | Incorporated by reference to our Annual Report on Form 10-K filed with
the Commission on April 16, 2001.                                        
|    
|(8)  |  | Incorporated by reference to Amendment No. 1 to our Annual Report on Form
10-K filed with the Commission on April 26, 2001.                     

31



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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

| |                   |                                                             
| | ----------------- | ------------------------------------------------------------
| | FACTUAL DATA CORP
|
| | By:               | /s/ J.H. DONNAN
J.H. Donnan, ChairmanChief Executive Officer

Date: March 28, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

|                                       |  |                                                                                              |  |               
|-------------------------------------- |  | -------------------------------------------------------------------------------------------- |  | --------------
|Signature                              |  | Title                                                                                        |  | Date          
|                                       |  |                                                                                              |  |               
|/s/ J.H. DONNANJ.H. Donnan             |  | Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer) |  | March 28, 2003
|                                      
|/s/ TODD A. NEIBERGERTodd A. Neiberger |  | Chief Financial Officer and a
Director (Principal Financial
and Accounting Officer)          |  | March 28, 2003
|                                      
|/s/ JAMES N. DONNANJames N. Donnan     |  | President and a Director                                                                     |  | March 28, 2003
|                                      
|/s/ ROBERT J. TERRYRobert J. Terry     |  | Director                                                                                     |  | March 26, 2003
|                                      
|/s/ ABDUL H. RAJPUTAbdul H. Rajput     |  | Director                                                                                     |  | March 26, 2003
|                                      
|/s/ DANIEL G. HELLEDaniel G. Helle     |  | Director                                                                                     |  | March 27, 2003
|                                      
|/s/ J. BARTON GOODWINJ. Barton Goodwin |  | Director                                                                                     |  | March 28, 2003

32



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##### Table of Contents



CERTIFICATION

In connection with the Annual Report of Factual Data Corp. (the
Registrant) on Form 10-K for the year ended December 31, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the Report), I,
J.H. Donnan, Chief Executive Officer of the Registrant, certify, that:



| | (1) |  | I have reviewed this annual report on Form 10-K of the
Registrant;
| | --- |  | ------------------------------------------------------------------



| | (2) |  | Based on my knowledge, this annual 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 periods covered by this annual report;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) |  | Based on my knowledge, the financial statements and other
financial information included in this annual 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 annual report;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) |  | The Registrants other certifying officer 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 with those entities, particularly
during the period in which the annual 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 annual report (the
Evaluation Date); and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. |  | presented in this annual 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 officer and I have
disclosed, based on our most recent evaluation, to the Registrants
auditors and the audit committee of the Registrants board of
directors:
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) |  | The Registrants other certifying officer and I have
indicated in this annual 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/ J.H. Donnan
Chief Executive Officer
March 24, 2003

33



---



##### Table of Contents



CERTIFICATION

In connection with the Annual Report of Factual Data Corp. (the
Registrant) on Form 10-K for the year ended December 31, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the Report), I,
Todd A. Neiberger, Chief Financial Officer of the Registrant, certify, that:



| | (1) |  | I have reviewed this annual report on Form 10-K of the
Registrant;
| | --- |  | ------------------------------------------------------------------



| | (2) |  | Based on my knowledge, this annual 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 periods covered by this annual report;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) |  | Based on my knowledge, the financial statements and other
financial information included in this annual 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 annual report;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) |  | The Registrants other certifying officer 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 with those entities, particularly
during the period in which the annual 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 annual report (the
Evaluation Date); and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. |  | presented in this annual 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 officer and I have
disclosed, based on our most recent evaluation, to the Registrants
auditors and the audit committee of the Registrants board of
directors:
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) |  | The Registrants other certifying officer and I have
indicated in this annual 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/ Todd A. Neiberger
Chief Financial Officer
March 24, 2003

34



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##### Table of Contents



FACTUAL DATA CORP.

CONTENTS

|                                                   |  |      |           | 
|-------------------------------------------------- |  | ---- | --------- | 
|                                                   |  | Page |          
|                                                   |  |      |          
|Report of Independent Certified Public Accountants |  |      | F-2       | 
|Independent Auditors Report                       |  |      | F-3       | 
|Consolidated Balance Sheets                        |  |      | F-4 - 5   | 
|Consolidated Statements of Operations              |  |      | F-6       | 
|Consolidated Statements of Shareholders Equity    |  |      | F-7       | 
|Consolidated Statements of Cash Flows              |  |      | F-8       | 
|Summary of Significant Accounting Policies         |  |      | F-9 - 21  | 
|Notes to Consolidated Financial Statements         |  |      | F-22 - 45 | 

F-1



---



##### Table of Contents



Report of Independent Certified Public Accountants

The Board of Directors and Shareholders
Factual Data Corp.
Loveland, Colorado

We have audited the accompanying consolidated balance sheets of Factual Data
Corp. and its subsidiary as of December 31, 2002 and 2001 and the related
consolidated statements of operations, shareholders equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Factual Data Corp.
and its subsidiary at December 31, 2002 and 2001 and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.

As described in Note 3 to the consolidated financial statements, the Company
adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets,
effective January 1, 2002.



| | /s/ BDO Seidman, LLP
| | --------------------

January 31, 2003
Los Angeles, California

F-2



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##### Table of Contents



Independent Auditors Report

The Board of Directors and Shareholders
Factual Data Corp.
Loveland, Colorado

We have audited the accompanying consolidated statements of operations, changes
in shareholders equity and cash flows for the year ended December 31, 2000 of
Factual Data Corp. and Subsidiary. These consolidated financial statements are
the responsibility of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the results of operations and cash flows of
Factual Data Corp. and Subsidiary for the year ended December 31, 2000 in
conformity with generally accepted accounting principles.



| | /s/ Ehrhardt Keefe Steiner & Hottman, P.C.
| | ------------------------------------------

March 28, 2001
Denver, Colorado

F-3



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##### Table of Contents



Factual Data Corp.and Subsidiary
Consolidated Balance Sheets

|                                           |                                        |                                                                                |            |            |           |   |            |            |           | 
|------------------------------------------ | -------------------------------------- | ------------------------------------------------------------------------------ | ---------- | ---------- | --------- | - | ---------- | ---------- | --------- | 
|December 31,                               |                                        | 2001                                                                           |            |            | 2002      |  
|                                           |                                        |                                                                                |            |            |           |  
|Assets(Notes 5 and 6)                      |                                        |                                                                                |            |            |           |   |            |           
|Current assets:                            |                                        |                                                                                |            |            |           |   |            |           
|                                           |                                        | Cash and cash equivalents                                                      |            | $          | 6,163,743 |   |            | $          | 7,826,653 | 
|                                           |                                        | Trade accounts receivable, net of
allowance of $243,946 and $300,786
(Note 14) |            |            | 5,919,521 |   |            |            | 7,346,692 | 
|                                           |                                        | Prepaid expenses and other                                                     |            |            | 244,356   |   |            |            | 665,628   | 
|                                           |                                        | Deferred income taxes (Note 8)                                                 |            |            | 466,344   |   |            |            | 365,834   | 
|                                           |                                        |                                                                                |            |            |           |  
|Total current assets                       |                                        |                                                                                | 12,793,964 |            |           |   | 16,204,807 |           
|                                           |                                        |                                                                                |            |            |           |  
|Property and equipment,net (Notes 2 and
6) |                                        |                                                                                | 5,722,515  |            |           |   | 5,716,378  |           
|                                           |                                        |                                                                                |            |            |           |  
|Other assets:                              |                                        |                                                                                |            |            |           |   |            |           
|                                           | Goodwill (Note 3)                      |                                                                                |            | 168,971    |           |   |            | 565,971    |          
|                                           | Intangible assets, net (Notes 3 and 6) |                                                                                |            | 28,515,039 |           |   |            | 27,809,703 |          
|                                           | Deferred income taxes (Note 8)         |                                                                                |            | 3,463,237  |           |   |            | 3,048,234  |          
|                                           | Other assets                           |                                                                                |            | 219,805    |           |   |            | 162,409    |          
|                                           |                                        |                                                                                |            |            |           |  
|Total other assets                         |                                        |                                                                                | 32,367,052 |            |           |   | 31,586,317 |           
|                                           |                                        |                                                                                |            |            |           |  
|Total assets                               |                                        | $                                                                              | 50,883,531 |            |           | $ | 53,507,502 |           
|                                           |                                        |                                                                                |            |            |           |   |            |           

See accompanying summary of significant accounting
policies and notes to consolidated financial statements.

F-4



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##### Table of Contents



Factual Data Corp.and Subsidiary
Consolidated Balance Sheets

|                                                                                 |                                                                                                          |      |            |            |      |   |            |            | 
|-------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ---- | ---------- | ---------- | ---- | - | ---------- | ---------- | 
|December 31,                                                                     |                                                                                                          | 2001 |            |            | 2002 |  
|                                                                                 |                                                                                                          |      |            |            |      |  
|Liabilities and Shareholders Equity                                             |                                                                                                          |      |            |            |      |   |            |           
|Current liabilities:                                                             |                                                                                                          |      |            |            |      |   |            |           
|                                                                                 | Line of credit (Note 5)                                                                                  |      | $          | 2,200,000  |      |   | $          |           | 
|                                                                                 | Current portion of long-term debt (Note 6)                                                               |      |            | 2,650,862  |      |   |            | 3,345,403  | 
|                                                                                 | Current portion of capitalized lease obligation  license
agreements (Note 6)                            |      |            | 1,927,139  |      |   |            | 3,096,616  | 
|                                                                                 | Accounts payable                                                                                         |      |            | 4,806,209  |      |   |            | 4,034,104  | 
|                                                                                 | Accrued branch efficiency costs                                                                          |      |            | 510,199    |      |   |            | 52,729     | 
|                                                                                 | Accrued compensation                                                                                     |      |            | 1,335,466  |      |   |            | 1,875,410  | 
|                                                                                 | Income taxes payable                                                                                     |      |            | 332,138    |      |   |            | 1,165,459  | 
|                                                                                 | Accrued expenses                                                                                         |      |            | 426,986    |      |   |            | 531,496    | 
|                                                                                 | Deferred revenue                                                                                         |      |            | 78,624     |      |   |            | 66,898     | 
|                                                                                 |                                                                                                          |      |            |            |      |  
|Total current liabilities                                                        |                                                                                                          |      | 14,267,623 |            |      |   | 14,168,115 |           
|Capitalized lease obligation  license agreements, less current
portion (Note 6) |                                                                                                          |      | 7,386,831  |            |      |   | 4,559,385  |           
|Long-term debt, less current portion (Note 6)                                    |                                                                                                          |      | 4,754,222  |            |      |   | 3,765,526  |           
|                                                                                 |                                                                                                          |      |            |            |      |  
|Total liabilities                                                                |                                                                                                          |      | 26,408,676 |            |      |   | 22,493,026 |           
|                                                                                 |                                                                                                          |      |            |            |      |  
|Commitments and Contingencies(Notes 6 and 7)                                     |                                                                                                          |      |            |            |      |   |            |           
|Shareholders equity(Note 9):                                                    |                                                                                                          |      |            |            |      |   |            |           
|                                                                                 | Preferred stock, no par value, 1,000,000 shares authorized;
none issued and outstanding                  |      |            |           |      |   |            |           | 
|                                                                                 | Common stock, no par value, 50,000,000 shares authorized;
6,120,380 and 6,190,884 issued and outstanding |      |            | 27,615,506 |      |   |            | 27,695,398 | 
|                                                                                 | Retained earnings (accumulated deficit)                                                                  |      |            | (3,140,651 | )    |   |            | 3,319,078  | 
|                                                                                 |                                                                                                          |      |            |            |      |  
|Total shareholders equity                                                       |                                                                                                          |      | 24,474,855 |            |      |   | 31,014,476 |           
|                                                                                 |                                                                                                          |      |            |            |      |  
|Total liabilities and shareholders equity                                       |                                                                                                          | $    | 50,883,531 |            |      | $ | 53,507,502 |           
|                                                                                 |                                                                                                          |      |            |            |      |   |           

See accompanying summary of significant accounting
policies and notes to consolidated financial statements.

F-5



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##### Table of Contents



Factual Data Corp.and Subsidiary
Consolidated Statements of Operations

|                                              |                                                     |         |             |            |           |   |            |            |           |   |            |            |           | 
|--------------------------------------------- | --------------------------------------------------- | ------- | ----------- | ---------- | --------- | - | ---------- | ---------- | --------- | - | ---------- | ---------- | --------- | 
|Year Ended December 31,                       |                                                     | 2000    |             |            | 2001      |   |            | 2002       |          
|                                              |                                                     |         |             |            |           |   |            |            |          
|Revenue:                                      |                                                     |         |             |            |           |   |            |            |           |   |            |           
|                                              | Mortgage services                                   |         | $           | 25,559,738 |           |   | $          | 42,551,506 |           |   | $          | 52,738,434 |          
|                                              | Consumer services                                   |         |             | 3,180,380  |           |   |            | 6,476,520  |           |   |            | 6,971,808  |          
|                                              | Other services                                      |         |             | 2,521,088  |           |   |            | 2,212,195  |           |   |            | 3,361,496  |          
|                                              |                                                     |         |             |            |           |   |            |            |          
|Total revenue                                 |                                                     |         | 31,261,206  |            |           |   | 51,240,221 |            |           |   | 63,071,738 |           
|                                              |                                                     |         |             |            |           |   |            |            |          
|Operating expenses:                           |                                                     |         |             |            |           |   |            |            |           |   |            |           
|                                              | Cost of services                                    |         |             | 18,279,719 |           |   |            | 29,828,159 |           |   |            | 33,870,719 |          
|                                              | Selling, general and administrative                 |         |             | 8,131,984  |           |   |            | 9,263,426  |           |   |            | 12,756,831 |          
|                                              | Depreciation and amortization                       |         |             | 4,130,988  |           |   |            | 3,620,783  |           |   |            | 4,554,567  |          
|                                              | Acquisition consolidation costs                     |         |             | 601,809    |           |   |            | 158,114    |           |   |            | 115,478    |          
|                                              | Branch efficiency costs (Note 4)                    |         |             | 3,046,516  |           |   |            | (169,973   | )         |   |            |           |          
|                                              | Impairment adjustment to
intangible assets (Note 3) |         |             | 11,798,674 |           |   |            |           |           |   |            |           |          
|                                              |                                                     |         |             |            |           |   |            |            |          
|Total operating expenses                      |                                                     |         | 45,989,690  |            |           |   | 42,700,509 |            |           |   | 51,297,595 |           
|                                              |                                                     |         |             |            |           |   |            |            |          
|Income (loss) from operations                 |                                                     |         | (14,728,484 | )          |           |   | 8,539,712  |            |           |   | 11,774,143 |           
|                                              |                                                     |         |             |            |           |   |            |            |          
|Other income (expense):                       |                                                     |         |             |            |           |   |            |            |           |   |            |           
|                                              | Other income                                        |         |             | 501,780    |           |   |            | 496,256    |           |   |            | 484,435    |          
|                                              | Interest expense                                    |         |             | (1,542,028 | )         |   |            | (2,238,603 | )         |   |            | (1,485,699 | )        
|                                              |                                                     |         |             |            |           |   |            |            |          
|Total other expense                           |                                                     |         | (1,040,248  | )          |           |   | (1,742,347 | )          |           |   | (1,001,264 | )         
|                                              |                                                     |         |             |            |           |   |            |            |          
|Income (loss) before income taxes             |                                                     |         | (15,768,732 | )          |           |   | 6,797,365  |            |           |   | 10,772,879 |           
|Income tax expense (benefit) (Note 8)         |                                                     |         | (5,610,502  | )          |           |   | 2,660,507  |            |           |   | 4,313,150  |           
|                                              |                                                     |         |             |            |           |   |            |            |          
|Net income (loss)                             |                                                     | $       | (10,158,230 | )          |           | $ | 4,136,858  |            |           | $ | 6,459,729  |           
|                                              |                                                     |         |             |            |           |   |            |            |           |  
|Earnings (loss) per share(Note 10):           |                                                     |         |             |            |           |   |            |            |           |   |            |           
|                                              |                                                     | Basic   |             | $          | (1.89     | ) |            | $          | 0.72      |   |            | $          | 1.05      | 
|                                              |                                                     | Diluted |             | $          | (1.89     | ) |            | $          | 0.71      |   |            | $          | 1.04      | 
|                                              |                                                     |         |             |            |           |   |            |            |           |  
|Weighted average shares
outstanding(Note 10): |                                                     |         |             |            |           |   |            |            |           |   |            |           
|                                              |                                                     | Basic   |             |            | 5,382,590 |   |            |            | 5,756,808 |   |            |            | 6,154,267 | 
|                                              |                                                     | Diluted |             |            | 5,382,590 |   |            |            | 5,819,337 |   |            |            | 6,209,693 | 
|                                              |                                                     |         |             |            |           |   |            |            |           |  

See accompanying summary of significant accounting
policies and notes to consolidated financial statements.

F-6



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##### Table of Contents



Factual Data Corp.and Subsidiary
Consolidated Statements of Shareholders Equity

|                                             |                                                                                   |        |              |         |        |              |            |           |       |   |                   |             |   |   |            |             |  
|-------------------------------------------- | --------------------------------------------------------------------------------- | ------ | ------------ | ------- | ------ | ------------ | ---------- | --------- | ----- | - | ----------------- | ----------- | - | - | ---------- | ----------- | -
|                                             |                                                                                   |        |              |         |        |              |            |           |       |   | Retained Earnings |             |   |   |            |            
|                                             |                                                                                   |        | Common Stock |         |        | (Accumulated |            |           |       |   |                  
|                                             |                                                                                   |        |              |         |        | Deficit)     |            |           | Total |  
|Years Ended December 31, 2000, 2001 and 2002 |                                                                                   | Shares |              |         | Amount |              |            |           |       |   |                   |            
|                                             |                                                                                   |        |              |         |        |              |            |           |       |   |                   |             |   |  
|Balance,January 1, 2000                      |                                                                                   |        | 5,380,103    |         |        | $            | 22,478,244 |           |       | $ | 2,880,721         |             |   | $ | 25,358,965 |            
|                                             | Shares issued for employee stock
purchases and exercise of employee stock
options |        |              | 7,268   |        |              |            | 54,565    |       |   |                   |            |   |   |            | 54,565      |  
|                                             | Net loss                                                                          |        |              |        |        |              |            |          |       |   |                   | (10,158,230 | ) |   |            | (10,158,230 | )
|                                             |                                                                                   |        |              |         |        |              |            |           |       |   |                   |            
|Balance,December 31, 2000                    |                                                                                   |        | 5,387,371    |         |        |              | 22,532,809 |           |       |   | (7,277,509        | )           |   |   | 15,255,300 |            
|                                             | Exercise of investor warrants (Note 9)                                            |        |              | 725,759 |        |              |            | 5,020,767 |       |   |                   |            |   |   |            | 5,020,767   |  
|                                             | Shares issued for employee stock
purchases and exercise of employee stock
options |        |              | 7,250   |        |              |            | 61,930    |       |   |                   |            |   |   |            | 61,930      |  
|                                             | Net income                                                                        |        |              |        |        |              |            |          |       |   |                   | 4,136,858   |   |   |            | 4,136,858   |  
|                                             |                                                                                   |        |              |         |        |              |            |           |       |   |                   |            
|Balance,December 31, 2001                    |                                                                                   |        | 6,120,380    |         |        |              | 27,615,506 |           |       |   | (3,140,651        | )           |   |   | 24,474,855 |            
|                                             | Cashless exercise of (174,648) placement
agent options and warrants (Note 9)      |        |              | 62,302  |        |              |            |          |       |   |                   |            |   |   |            |            |  
|                                             | Shares issued for employee stock purchases                                        |        |              | 5,374   |        |              |            | 48,318    |       |   |                   |            |   |   |            | 48,318      |  
|                                             | Exercise of employee stock options                                                |        |              | 2,828   |        |              |            | 31,574    |       |   |                   |            |   |   |            | 31,574      |  
|                                             | Net income                                                                        |        |              |        |        |              |            |          |       |   |                   | 6,459,729   |   |   |            | 6,459,729   |  
|                                             |                                                                                   |        |              |         |        |              |            |           |       |   |                   |            
|Balance, December 31, 2002                   |                                                                                   |        | 6,190,884    |         |        | $            | 27,695,398 |           |       | $ | 3,319,078         |             |   | $ | 31,014,476 |            
|                                             |                                                                                   |        |              |         |        |              |            |           |       |   |                   |            

See accompanying summary of significant accounting policies and notes to consolidated financial statements.

F-7



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##### Table of Contents



Factual Data Corp.and Subsidiary
Consolidated Statements of Cash Flows

|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |           |            |   |            |           |            |  
|---------------------------------------------------------- | ---------------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------- | ---------- | ----------- | ---------- | - | ---------- | --------- | ---------- | - | ---------- | --------- | ---------- | -
|Increase (Decrease) in Cash and Cash Equivalents (Note 12) |                                                      |                                                                                   |                                                            |            |             |            |   |            |           |            |   |           
|                                                          
|Year Ended December 31,                                    |                                                      | 2000                                                                              |                                                            |            | 2001        |            |   | 2002       |          
|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |          
|Cash flows from operating activities:                      |                                                      |                                                                                   |                                                            |            |             |            |   |            |           |            |   |           
|                                                           |                                                      | Net income (loss)                                                                 |                                                            | $          | (10,158,230 | )          |   | $          | 4,136,858 |            |   | $          | 6,459,729 |           
|                                                           |                                                      | Reconciliation of net income (loss) to net
cash provided by operating activities: |                                                            |            |             |            |   |            |           |            |   |            |           |           
|                                                           |                                                      |                                                                                   | Depreciation and amortization                              |            |             | 4,130,988  |   |            |           | 3,620,783  |   |            |           | 4,554,567  |  
|                                                           |                                                      |                                                                                   | Loss on disposals of fixed assets                          |            |             | 49,725     |   |            |           | 25,430     |   |            |           | 3,849      |  
|                                                           |                                                      |                                                                                   | Gain on refinancing of debt                                |            |             | (189,014   | ) |            |           |           |   |            |           |           |  
|                                                           |                                                      |                                                                                   | Bad debt expense                                           |            |             | 417,708    |   |            |           | 627,976    |   |            |           | 537,377    |  
|                                                           |                                                      |                                                                                   | Unrealized loss on swap agreement                          |            |             |           |   |            |           | 58,994     |   |            |           |           |  
|                                                           |                                                      |                                                                                   | Net cash settlements under swap agreement                  |            |             |           |   |            |           | 101,128    |   |            |           | 59,733     |  
|                                                           |                                                      |                                                                                   | Impairment adjustment to intangible assets                 |            |             | 11,421,163 |   |            |           |           |   |            |           |           |  
|                                                           |                                                      |                                                                                   | Branch efficiency costs                                    |            |             | 3,001,611  |   |            |           | (169,973   | ) |            |           |           |  
|                                                           |                                                      |                                                                                   | Deferred income taxes                                      |            |             | (4,907,828 | ) |            |           | 554,216    |   |            |           | 515,513    |  
|                                                           |                                                      | Changes in assets and liabilities, net of business acquisitions:                  |                                                            |            |             |            |   |            |           |            |   |            |           |           
|                                                           |                                                      |                                                                                   | Accounts receivable                                        |            |             | (904,434   | ) |            |           | (2,485,134 | ) |            |           | (1,837,861 | )
|                                                           |                                                      |                                                                                   | Prepaid expenses and other                                 |            |             | 148,495    |   |            |           | (37,320    | ) |            |           | (421,272   | )
|                                                           |                                                      |                                                                                   | Income tax receivable/payable                              |            |             | (393,547   | ) |            |           | 1,319,696  |   |            |           | 833,321    |  
|                                                           |                                                      |                                                                                   | Other assets                                               |            |             | 100,906    |   |            |           | (14,322    | ) |            |           | 67,396     |  
|                                                           |                                                      |                                                                                   | Accrued branch efficiency costs                            |            |             |           |   |            |           | (824,525   | ) |            |           | (457,470   | )
|                                                           |                                                      |                                                                                   | Accounts payable                                           |            |             | 1,067,065  |   |            |           | 580,471    |   |            |           | (772,105   | )
|                                                           |                                                      |                                                                                   | Accrued expenses and compensation                          |            |             | (527,988   | ) |            |           | 1,221,749  |   |            |           | 644,454    |  
|                                                           |                                                      |                                                                                   | Deferred revenue                                           |            |             | 37,851     |   |            |           | 40,774     |   |            |           | (11,726    | )
|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |          
|                                                           | Net cash provided by operating activities            |                                                                                   |                                                            | 3,294,471  |             |            |   | 8,756,801  |           |            |   | 10,175,505 |          
|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |          
|Cash flows from investing activities:                      |                                                      |                                                                                   |                                                            |            |             |            |   |            |           |            |   |           
|                                                           |                                                      |                                                                                   | Cash used for software development costs                   |            |             | (754,996   | ) |            |           | (749,216   | ) |            |           | (793,553   | )
|                                                           |                                                      |                                                                                   | Purchases of property and equipment                        |            |             | (1,252,755 | ) |            |           | (1,127,342 | ) |            |           | (1,360,971 | )
|                                                           |                                                      |                                                                                   | Purchases of intangible assets                             |            |             |           |   |            |           | (149,740   | ) |            |           | (48,787    | )
|                                                           |                                                      |                                                                                   | Net cash settlements under swap agreement                  |            |             |           |   |            |           | (101,128   | ) |            |           | (59,733    | )
|                                                           |                                                      |                                                                                   | Proceeds from sale of equipment                            |            |             |           |   |            |           |           |   |            |           | 24,508     |  
|                                                           |                                                      |                                                                                   | Cash used in the acquisition of businesses                 |            |             | (2,404,458 | ) |            |           | (1,250,000 | ) |            |           | (1,220,454 | )
|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |          
|                                                           | Net cash used in investing activities                |                                                                                   |                                                            | (4,412,209 | )           |            |   | (3,377,426 | )         |            |   | (3,458,990 | )        
|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |          
|Cash flows from financing activities:                      |                                                      |                                                                                   |                                                            |            |             |            |   |            |           |            |   |           
|                                                           |                                                      |                                                                                   | Principal payments on long-term debt                       |            |             | (2,422,221 | ) |            |           | (3,439,860 | ) |            |           | (4,466,830 | )
|                                                           |                                                      |                                                                                   | Net proceeds from warrants exercised                       |            |             |           |   |            |           | 5,020,767  |   |            |           |           |  
|                                                           |                                                      |                                                                                   | Borrowings on line of credit                               |            |             | 2,906,395  |   |            |           | 1,900,000  |   |            |           |           |  
|                                                           |                                                      |                                                                                   | Payments on line of credit                                 |            |             |           |   |            |           | (3,106,395 | ) |            |           | (2,200,000 | )
|                                                           |                                                      |                                                                                   | Proceeds from issuance of long-term debt                   |            |             |           |   |            |           |           |   |            |           | 1,533,333  |  
|                                                           |                                                      |                                                                                   | Net proceeds from employee stock purchase and option plans |            |             | 54,565     |   |            |           | 61,930     |   |            |           | 79,892     |  
|                                                           |                                                      |                                                                                   | Loan origination costs                                     |            |             | (97,020    | ) |            |           |           |   |            |           |           |  
|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |          
|                                                           | Net cash provided by (used in) financing activities  |                                                                                   |                                                            | 441,719    |             |            |   | 436,442    |           |            |   | (5,053,605 | )        
|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |          
|                                                           | Net increase (decrease) in cash and cash equivalents |                                                                                   |                                                            | (676,019   | )           |            |   | 5,815,817  |           |            |   | 1,662,910  |          
|                                                           | Cash and cash equivalents, beginning of year         |                                                                                   |                                                            | 1,023,945  |             |            |   | 347,926    |           |            |   | 6,163,743  |          
|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |          
|                                                           | Cash and cash equivalents, end of year               |                                                                                   | $                                                          | 347,926    |             |            | $ | 6,163,743  |           |            | $ | 7,826,653  |          
|                                                           |                                                      |                                                                                   |                                                            |            |             |            |   |            |          

See accompanying summary of significant accounting
policies and notes to consolidated financial statements.

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Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Organization and Business   |  | Factual Data Corp. (the Company)
was incorporated in the State of
Colorado in 1985. The Company
provides a wide range of customized
information services to businesses
across the United States that assist
them in making critical decisions,
such as determining whether to make
a mortgage or other loan, offer
employment, accept new tenants, or
enter into a business relationship.
Factual Data specializes in
providing customized mortgage credit
reports and other mortgage related
services, consumer credit reports,
employment screening, resident
screening, and commercial credit
reports.
|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                            |  | Factual Datas customers include
mortgage lenders and independent
mortgage brokers, consumer lenders,
employers, property managers, and
other business customers desiring
information regarding
creditworthiness and other matters.                                                                                                                                                                                                                                                                                                                                                                        
|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Principles of Consolidation |  | The consolidated financial
statements include the accounts of
the Company and its wholly owned
subsidiary, FDC Acquisition, Inc.
All significant intercompany
accounts and transactions have been
eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                             

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Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Revenue Recognition |  | Mortgage and Consumer Services                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                    |  | Revenue generated from providing mortgage and consumer
credit reports and other information services is
recognized when the information has been delivered to
the customer.                                                                                                                                                                                                                                                                                                 
|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                    |  | Pursuant to various franchise and license agreements,
system affiliates, franchised offices and licensed
offices of the Company are required to pay the Company
royalties based on a percentage of their sales.
Royalty revenue is recognized in the month earned
based on reported sales activity. In addition, system
affiliates that provide employee background screening
services are required to pay $100 per month for
national advertising conducted by the Company.
|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                    |  | Royalties allowed under the agreements are recognized
the month earned based on the percentage of adjusted
gross billings, as reported by the system affiliates.
Included in mortgage services revenue are royalties of
$1,172,480, $1,307,228 and $1,278,674 for the years
ended December 31, 2000, 2001 and 2002.                                                                                                                                                         
|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                    |  | The Company provides flood zone determinations to its
customers through flood vendors and receives a
commission for each flood certification sold. Revenue
is recognized when the flood certification has been
delivered to the customer. Included in mortgage
services revenue are commissions of $209,105, $245,976
and $594,962 for the years ended December 31, 2000,
2001 and 2002.                                                                                    

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Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                          |  | Other Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                          |  | Other services revenue is generated
from providing employment and
residential credit reports for
employers and property managers.
Revenues from other services are
recognized when the information has
been delivered to the customer.                                                                                                                                                                                                                                                          
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                          |  | Deferred Revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                          |  | Deferred revenue primarily
represents deposits that the Company
requires certain customers to
maintain.                                                                                                                                                                                                                                                                                                                                                                                         
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Cash and Cash Equivalents |  | The Company considers highly liquid
investments purchased with original

maturities of three months or less
and money market accounts to be cash
equivalents.                                                                                                                                                                                                                                                                                                                                   
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Property and Equipment    |  | Property and equipment are recorded
at cost. Provisions for depreciation
are computed using the straight-line
method over estimated useful lives
ranging from 3 to 30 years.
Maintenance and repairs are charged
to expense as incurred and
expenditures for major improvements
are capitalized. When assets are
retired or otherwise disposed of,
the property accounts are relieved
of costs and accumulated
depreciation and any resulting gain
or loss is credited or charged to
operations.

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Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Goodwill and Intangible Assets |  | Intangible assets are recorded at
cost less accumulated amortization.
Customer rights and customer lists
are amortized using the
straight-line method over 15 years,
and non-compete agreements and
franchise agreements are amortized
using the straight-line method over
the life of the agreements, which
extend from three to ten years.
License agreements to access
information are amortized using the
ratio of the units accessed, for the
period, to the total units estimated
to be accessed over the ten-year
initial term of the agreement.
Intellectual property is amortized
using the straight-line method over
13 to 15 years and loan origination
costs are amortized using the
straight-line method over the loan
term.
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                               |  | Deferred acquisition costs consist
of direct third party costs
associated with the Companys
investigation of potential future
acquisitions. Any costs associated
with unsuccessful efforts are
expensed in the period in which the
potential acquisition has been
deemed to be unsuccessful. There
were no deferred acquisition costs
at December 31, 2001 and 2002.                                                                                                                                                                                                                                                                                                                                                                    
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                               |  | Goodwill represents the excess of
the cost over the fair value of net
assets acquired at the date of
acquisition. Effective January 1,
2002 the Company adopted Statement
of Financial Accounting Standards
(SFAS) No. 142. As of December
31, 2002, the Company had $565,971
in unamortized goodwill. Upon the
adoption of SFAS No. 142, goodwill
is no longer amortizable and will be
subject to impairment testing. As a
result, the Company has not
amortized goodwill for the
year-ended December 31, 2002.
Goodwill amortization for the
year-ended December 31, 2000 and
2001 was $269 and $3,274.                                                                                                                              

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Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Long-Lived Assets               |  | Long-lived assets and identifiable
intangibles are reviewed for
impairment whenever events or
changes in circumstances indicate
that the carrying amount may not be
recoverable. If the expected
undiscounted future cash flow from
the use of the assets and its
eventual disposition is less than
the carrying amount of the assets,
an impairment loss is recognized and
measured using the assets fair
value.                                                                                                                                       
|                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Software Development Costs      |  | The Company applies the provisions
of Statement of Position 98-1 (SOP
98-1), Accounting for Costs of
Computer Software Developed for
Internal Use. In accordance with
SOP 98-1, the Company capitalizes
certain payroll costs incurred in
connection with developing or
obtaining software for internal use.
Qualifying software costs are
capitalized and amortized over the
estimated useful life of the
software of three years.                                                                                                                  
|                               
|                                |  | The Company capitalized $754,996,
$749,216 and $793,553 of costs for
the years ended December 31, 2000,
2001 and 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Acquisition Consolidation Costs |  | The Company presents certain costs
incurred in connection with the
Companys acquisitions, as
acquisition consolidation costs.
These costs include charges for
items such as recruiting fees,
salaries and travel costs for the
consolidation and relocation of the
acquired companies operations to
the Companys regional processing
centers.                                                                                                                                                                                                         
|                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Comprehensive Income            |  | SFAS No. 130, Reporting
Comprehensive Income, governs the
financial statement presentation of
changes in shareholders equity
resulting from non-owner sources.
Comprehensive income includes all
changes in equity except those
resulting from investments by owners
and distribution to owners. For the
years ended December 31, 2000, 2001
and 2002, the Company had no items
of comprehensive income (loss) other
than net income or loss; therefore,
a separate statement of
comprehensive income (loss) has not
been presented for these periods.

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Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Use of Estimates             |  | The preparation of the Companys
consolidated financial statements,
in conformity with accounting
principles generally accepted in the
United States of America, requires
the Company to make estimates and
assumptions that effect the reported
amounts of assets and liabilities,
the disclosure of contingent assets
and liabilities at the date of the
consolidated financial statements,
and the reported revenue and
expenses during the reporting
periods. Actual results could
differ from those estimates.
|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Income Taxes                 |  | The Company accounts for income
taxes under SFAS No. 109,
Accounting for Income Taxes.
Deferred income taxes result from
temporary differences. Temporary
differences are differences between
the tax basis of assets and
liabilities and their reported
amounts in the financial statements
that will result in taxable or
deductible amounts in future years.                                                                                                                                                  
|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Concentration of Credit Risk |  | The Companys financial instruments
that are exposed to concentrations
of credit risk consist of cash and
cash equivalent balances in excess
of the insurance provided by
governmental insurance authorities.
The Companys cash and cash
equivalents are placed with
financial institutions and are
primarily in demand deposit
accounts.                                                                                                                                                                         
|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                             |  | The Company had cash balances at
December 31, 2001 in excess of FDIC
limits of $6,063,743.                                                                                                                                                                                                                                                                                                                                                                                                                         
|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                             |  | The Company had cash balances at
December 31, 2002 in excess of FDIC
limits of $995,763 at one financial
institution and $6,630,890 at
another financial institution.                                                                                                                                                                                                                                                                                                                                              
|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                             |  | Concentrations of credit risk with
respect to accounts receivable are
associated with many customers
dispersed across geographic areas.
The Company reviews a customers
credit history before extending
credit and establishes an allowance
for doubtful accounts based upon the
credit risk of specific customers,
historical trends and other
information.                                                                                                                                                      

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Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                    |  | Management reviews accounts receivable on a monthly
basis to determine if any receivables will potentially
be uncollectible. Specific accounts receivable
balances that are determined to be uncollectible,
along with a general reserve, are included in the
overall allowance for doubtful accounts. After all
attempts to collect a receivable have failed, the
receivable is written off against the allowance.
Based on current customer credit information
management believes the allowance for doubtful
accounts as of December 31, 2002 is adequate.
However, actual write-offs might exceed the recorded
allowance.
|                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Fair Value of
Financial
Instruments |  | The estimated fair value of financial instruments has
been determined using available market information or
other appropriate valuation methodologies. However,
considerable judgment is required in interpreting
market data to develop estimates of fair value.
Consequently, the estimates are not necessarily
indicative of the amounts that could be realized or
would be paid in a current market exchange. The
carrying amounts of financial instruments reported on
the consolidated balance sheets approximate their
respective fair values.                                                                        
|                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Segment Information                 |  | The Company follows the provisions of SFAS No. 131,
Disclosures about Segments of an Enterprise and
Related Information. This statement establishes
standards for the reporting of information about
operating segments in annual and interim financial
statements. Operating segments are defined as
components of an enterprise for which separate
financial information is available that is evaluated
regularly by the chief operating decision makers in
deciding how to allocate resources and in assessing
performance.                                                                                             
|                                   
|                                    |  | The Company currently operates in three business
segments: mortgage services, consumer services and
other services, which consist of resident and
employment screening services.                                                                                                                                                                                                                                                                                                                                                                                                                                             

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Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Derivative Instruments |  | Effective January 1, 2001, the
Company adopted SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities,
as amended. Under SFAS No. 133, all
derivative instruments, whether
designated as hedging relationships
or not, are required to be recorded
on the balance sheet at fair value.
Derivatives that are not designated
as hedges must be adjusted to fair
value through net income (loss). If
the derivative is a hedge, depending
on the nature of the hedge, changes
in the fair value of derivatives are
either offset against the change in
fair value of assets, liabilities,
or a firm commitment through net
income (loss) until the hedged item
is recognized in net income (loss).
The ineffective portion of a
derivatives change in fair value is
immediately recognized in earnings.
The effect of adoption of this new
accounting standard on the Companys
results of operations, financial
position and cash flows was not
material.

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Factual Data Corp.and SubsidiariesSummary of Significant Accounting Policies

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Stock Options |  | At December 31, 2002, the Company has a stock-based employee compensation plan, which is described more fully
in Note 9. The Company accounts for this plan under the recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation is reflected in net income (loss), as all options
granted under this plan had an exercise price equal to the market value of the underlying common stock on the
date of grant. The following table illustrates the effect on net income (loss) if the Company had applied
the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.

|                                                                                                                                     |             |      |             |       |      |   |           |      |  |   |           |      | 
|------------------------------------------------------------------------------------------------------------------------------------ | ----------- | ---- | ----------- | ----- | ---- | - | --------- | ---- |  | - | --------- | ---- | 
|Year Ended December 31,                                                                                                              |             | 2000 |             |       | 2001 |   |           | 2002 | 
|                                                                                                                                     |             |      |             |       |      |   |           |      | 
|Net income (loss) as reported                                                                                                        |             | $    | (10,158,230 | )     |      | $ | 4,136,858 |      |  | $ | 6,459,729 |     
|Deduct: Total stock-based
employee compensation
expense determined under
fair value based method for
all awards, net of income
taxes |             |      | (102,016    | )     |      |   | (246,229  | )    |  |   | (408,130  | )   
|                                                                                                                                     |             |      |             |       |      |   |           |      | 
|Net income (loss) pro forma                                                                                                          |             | $    | (10,260,246 | )     |      | $ | 3,890,629 |      |  | $ | 6,051,599 |     
|                                                                                                                                     |             |      |             |       |      |   |           |      | 
|Basic earnings (loss)
per share:                                                                                                     |             |      |             |       |      |   |           |      |  |   |           |     
|                                                                                                                                     | As reported |      | $           | (1.89 | )    |   | $         | 0.72 |  |   | $         | 1.05 | 
|                                                                                                                                     | Pro forma   |      | $           | (1.91 | )    |   | $         | 0.68 |  |   | $         | 0.98 | 
|Diluted earnings (loss)
per share:                                                                                                   |             |      |             |       |      |   |           |      |  |   |           |     
|                                                                                                                                     | As reported |      | $           | (1.89 | )    |   | $         | 0.71 |  |   | $         | 1.04 | 
|                                                                                                                                     | Pro forma   |      | $           | (1.91 | )    |   | $         | 0.67 |  |   | $         | 0.97 | 
|                                                                                                                                     |             |      |             |       |      |   |           |      | 

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##### Table of Contents



Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Net Income (Loss) Per Share      |  | The Company provides for the
calculation of Basic and Diluted
earnings per share in accordance
with SFAS No. 128, Earnings Per
Share. Basic earnings per share
includes no dilution and is computed
by dividing income (loss) available
to common shareholders by the
weighted average number of common
shares outstanding for the period.
Diluted earnings per share reflect
the potential dilution of securities
that could share in the earnings of
an entity. See Note 10 for further
discussion.                                                                                                                             
|                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Recent Accounting Pronouncements |  | In June 2001, the FASB issued SFAS
No. 143, Accounting for Asset
Retirement Obligations. SFAS No.
143 requires the fair value of a
liability for an asset retirement
obligation to be recognized in the
period in which it is incurred if a
reasonable estimate of fair value
can be made. The associated asset
retirement costs are capitalized as
part of the carrying amount of the
long-lived asset. The Company
adopted SFAS No. 143, effective
January 1, 2002. The adoption of
this statement did not have material
impact on the Companys consolidated
financial statements.                                                 
|                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                 |  | In August 2001, the FASB issued SFAS
No. 144, Accounting for the
Impairment or Disposal of Long-Lived
Assets. SFAS No. 144 requires that
those long-lived assets be measured
at the lower of carrying amount or
fair value, less cost to sell,
whether reported in continuing
operations or in discontinued
operations. Therefore, discontinued
operations will no longer be
measured at net realizable value or
include amounts for operating losses
that have not yet occurred. SFAS No.
144 was effective as of January 1,
2002 and its adoption did not have a
material impact on the Companys
consolidated financial statements.

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##### Table of Contents



Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Recent Accounting Pronouncements
(continued) |  | In April 2002, the FASB issued SFAS
No. 145, Rescission of FASB
Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13,
and Technical Corrections. This
statement eliminates the current
requirement that gains and losses on
debt extinguishment must be
classified as extraordinary items in
the income statement. Instead, such
gains and losses will be classified
as extraordinary items only if they
are deemed to be unusual and
infrequent, in accordance with the
current generally accepted
accounting practice criteria for
extraordinary classification. In
addition, SFAS No. 145 eliminates an
inconsistency in lease accounting by
requiring that modifications of
capital leases that result in
reclassification as operating leases
be accounted for consistent with
sale-leaseback accounting rules. The
statement also contains other
non-substantive corrections to
authoritative accounting literature.
The Company believes the adoption
of this statement effective January
1, 2003, will have no material
impact on its financial statements.
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                             |  | In July 2002, the FASB issued SFAS
No. 146, Accounting for Costs
Associated with Exit or Disposal
Activities. SFAS No. 146 requires
companies to recognize costs
associated with exit or disposal
activities when they are incurred
rather than at the date of a
commitment to an exit or disposal
plan. Examples of such costs
covered by the standard include
lease termination costs and certain
employee severance costs associated
with a restructuring, discontinued
operation, plant closing or other
exit or disposal activity. SFAS No.
146 is effective prospectively for
exit and disposal activities
initiated after December 31, 2002.
As the provisions of SFAS No. 146
are to be applied prospectively
after its adoption date, the Company
cannot determine the potential
effects that the adoption of SFAS
No. 146 will have on its future
results of operations or financial
position.                                                                                                                                                                       

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##### Table of Contents



Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Recent Accounting Pronouncements
(continued) |  | In December 2002, the FASB issued
SFAS No. 148, Accounting for
Stock-Based Compensation-Transition
and Disclosure-an amendment of FASB
Statement No. 123. SFAS No. 148
amends SFAS No. 123, Accounting for
Stock-Based Compensation, to
provide alternative methods of
transition for a voluntary change to
the fair value based method of
accounting for stock-based employee
compensation. In addition, SFAS No.
148 amends the disclosure
requirements of SFAS No. 123 to
require prominent disclosures in
both annual and interim financial
statements about the method of
accounting for stock-based employee
compensation and the effect of the
method used on reported results.
The Company is required to follow
the prescribed format and provide
the additional disclosures required
by SFAS No. 148 in its annual
financial statements for the year
ended December 31, 2002 and must
also provide the disclosures in its
quarterly reports containing
condensed financial statements for
interim periods beginning with the
quarterly period ended March 31,
2003. The Company has determined
that it will not change to the fair
value based method.
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                             |  | In November 2002, the FASB issued
interpretation No. 45, Guarantors
Accounting and Disclosure
Requirements for Guarantees,
Including Indirect Guarantees of
Indebtedness of Others, which
disclosures are effective for
financial statements issued after
December 15, 2002. This statement
did not have any effect on the
Companys consolidated financial
statements as of December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                             |  | In January 2003, the FASB issued
Interpretation No. 46,
Consolidation of Variable Interest
Entities, (FIN No. 46), which
requires the consolidation of
variable interest entities, as
defined. FIN No. 46 is applicable
to financial statements to be issued
by the Company after 2002. The
Company does not believe that FIN
No. 46 will have any effect on its
consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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Factual Data Corp.and Subsidiary
Summary of Significant Accounting Policies

|                  |  |                                                                                                                                                                                                                                                     
|----------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Reclassifications |  | Certain reclassifications have been made to the 2000 and
2001 financial statements to conform to the 2002
financial statement presentation. Such
reclassifications have no effect on financial position
or net income (loss) as previously reported.

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. Business
Acquisitions |  | The Company completed four asset acquisitions (Datafax Credit Bureau of West Palm Beach,
Professional Mortgage Reference Services, Inc., Affiliated Real Estate Services, L.L.C.,
and Sparks Publishing and Reporting Corporation) in 2002; two acquisitions (Credit Bureau
of Dallas, Inc. and Factual Data of Florida) in 2001; and four acquisitions (C.B.
Unlimited, Inc., Quality Credit Reports, LLC, Air Credit Reporting Midwest, Inc. and
Credit Bureau of Carbon County Credit Reporting Department) in 2000. The purpose of
these acquisitions was either to acquire competitors or to acquire franchise rights,
enabling the Company to increase market share. The acquisitions have been accounted for
using the purchase method of accounting and the results of operations of each of these
entities are reflected in the consolidated financial statements from the date of the
acquisitions. The aggregate purchase price allocation of the acquisitions and
consideration paid were as follows:

|                                   |  |              |     |   |           |   |           |      |           |   |           | 
|---------------------------------- |  | ------------ | --- | - | --------- | - | --------- | ---- | --------- | - | --------- | 
|                                   |  | Lives        |     |   | 2001      |   |           | 2002 |          
|                                   |  |              |     |   |           |   |           |      |          
|Fair value of assets:              |  |              |     |   |           |   |           |      |           |   |           | 
|Property and equipment             |  | 3 to 7 years |     | $ | 265,300   |   |           | $    | 5,500     |  
|Customer rights and
customer lists |  | 15 years     |     |   | 2,348,350 |   |           |      | 1,732,954 |  
|Non-compete agreements             |  | 3 years      |     |   | 40,000    |   |           |      | 220,000   |  
|Goodwill                           |  |              | N/A |   |           |   | 160,200   |      |           |   | 397,000   | 
|Franchise and license
agreements   |  | 10 years     |     |   | 135,000   |   |           |      |          |  
|Intellectual property              |  | 15 years     |     |   |          |   |           |      |          |  
|Other assets                       |  |              | N/A |   |           |   | 1,150     |      |           |   | 10,000    | 
|                                   |  |              |     |   |           |   |           |      |          
|                                   |  |              |     |   |           | $ | 2,950,000 |      |           | $ | 2,365,454 | 
|                                   |  |              |     |   |           |   |           |      |          
|Consideration paid:                |  |              |     |   |           |   |           |      |           |   |           | 
|Notes payable issued               |  |              |     |   |           | $ | 1,700,000 |      |           | $ | 1,145,000 | 
|Cash payments                      |  |              |     |   |           |   | 1,250,000 |      |           |   | 1,220,454 | 
|                                   |  |              |     |   |           |   |           |      |          
|                                   |  |              |     |   |           | $ | 2,950,000 |      |           | $ | 2,365,454 | 
|                                   |  |              |     |   |           |   |           |      |          

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

| | The following pro forma information presents the consolidated results of operations of the Company as if the 2001
acquisitions had occurred on January 1, 2000 and the 2002 acquisitions had occurred on January 1, 2001. The pro forma
financial data does not purport to be indicative of the actual results, which would have been obtained, or the results,
which may be obtained in the future.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                |  |      |            |   |      |   |            |      |  |   |            | 
|------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | 
|Year Ended December 31,         |  | 2000 |            |   | 2001 |   |            | 2002 | 
|                                |  |      |            |   |      |   |            |      | 
|Total revenue                   |  | $    | 37,854,920 |   |      | $ | 54,115,683 |      |  | $ | 63,643,779 | 
|Net income (loss)               |  | $    | (9,659,745 | ) |      | $ | 4,627,987  |      |  | $ | 6,571,626  | 
|Basic earnings (loss) per share |  | $    | (1.79      | ) |      | $ | 0.80       |      |  | $ | 1.07       | 
|Diluted earnings (loss) per     |  | $    | (1.79      | ) |      | $ | 0.80       |      |  | $ | 1.06       | 
|share
Basic shares              |  |      | 5,382,590  |   |      |   | 5,756,808  |      |  |   | 6,154,267  | 
|Diluted shares                  |  |      | 5,382,590  |   |      |   | 5,819,337  |      |  |   | 6,209,693  | 
|                                |  |      |            |   |      |   |            |      | 

|   |                        |  |                                                   
|-- | ---------------------- |  | --------------------------------------------------
|2. | Property and
Equipment |  | Property and equipment consisted of the following:

|                                               |  |      |            |  |      |   |            | 
|---------------------------------------------- |  | ---- | ---------- |  | ---- | - | ---------- | 
|December 31,                                   |  | 2001 |            |  | 2002 |  
|                                               |  |      |            |  |      |  
|Computer equipment and software                |  | $    | 5,252,330  |  |      | $ | 5,879,902  | 
|Furniture and fixtures                         |  |      | 2,801,741  |  |      |   | 3,192,626  | 
|Software development costs                     |  |      | 3,026,818  |  |      |   | 3,820,370  | 
|Leasehold improvements                         |  |      | 619,885    |  |      |   | 890,760    | 
|Vehicles                                       |  |      | 146,376    |  |      |   | 176,896    | 
|                                               |  |      |            |  |      |  
|                                               |  |      | 11,847,150 |  |      |   | 13,960,554 | 
|Less accumulated depreciation and amortization |  |      | 6,124,635  |  |      |   | 8,244,176  | 
|                                               |  |      |            |  |      |  
|                                               |  | $    | 5,722,515  |  |      | $ | 5,716,378  | 
|                                               |  |      |            |  |      |  

| | Depreciation expense for the years ended December 31, 2000, 2001 and 2002 was $1,586,838, $1,726,340 and $2,132,303.
| | --------------------------------------------------------------------------------------------------------------------

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|                     |  |                                              
|-------------------- |  | ---------------------------------------------
|3. Intangible
Assets |  | Intangible assets consisted of the following:

|                                   |  |             |  |   |            |   |            |      |            |   |            | 
|---------------------------------- |  | ----------- |  | - | ---------- | - | ---------- | ---- | ---------- | - | ---------- | 
|December 31,                       |  | Lives       |  |   | 2001       |   |            | 2002 |           
|                                   |  |             |  |   |            |   |            |      |           
|Customer rights and customer lists |  | 15 years    |  | $ | 24,362,094 |   |            | $    | 26,149,336 |  
|Non-compete agreements             |  | 3 years     |  |   | 1,505,151  |   |            |      | 1,725,151  |  
|Franchise and license agreements   |  | 10 years    |  |   | 8,334,350  |   |            |      | 8,044,036  |  
|Intellectual property              |  | 13-15 years |  |   | 462,902    |   |            |      | 462,902    |  
|Loan origination costs             |  | 5 years     |  |   | 97,020     |   |            |      | 97,020     |  
|                                   |  |             |  |   |            |   |            |      |           
|                                   |  |             |  |   |            |   | 34,761,517 |      |            |   | 36,478,445 | 
|Less accumulated amortization      |  |             |  |   |            |   | 6,246,478  |      |            |   | 8,668,742  | 
|                                   |  |             |  |   |            |   |            |      |           
|                                   |  |             |  |   |            | $ | 28,515,039 |      |            | $ | 27,809,703 | 
|                                   |  |             |  |   |            |   |            |      |           

| | The Company completed an impairment test of intangible assets in 2002 and has determined goodwill and other
intangible assets are not impaired. Intangible assets will be tested annually and whenever events and circumstances
occur indicating that the assets may be impaired.


Upon the adoption of SFAS No. 142, the Company evaluated the useful lives of existing intangible assets and
determined that the existing useful lives are appropriate.Future amortization expense for the Companys intangible assets is estimated as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         |  |   |            | 
|------------------------ |  | - | ---------- | 
|Year Ending December 31, |  |   |            | 
|                         |  |   |            | 
|2003                     |  | $ | 2,563,772  | 
|2004                     |  |   | 2,583,383  | 
|2005                     |  |   | 2,589,505  | 
|2006                     |  |   | 2,653,887  | 
|2007                     |  |   | 2,743,645  | 
|Thereafter               |  |   | 14,675,511 | 
|                         |  |   |           
|                         |  | $ | 27,809,703 | 
|                         |  |   |           

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

| | The following tables summarizes the activity in the Companys goodwill and intangible assets for the
periods indicated:
| | -----------------------------------------------------------------------------------------------------------------------

|                                    |  |      |            |   |      |   |            |      |  |   |            |   | 
|----------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - | 
|Year Ended December 31,             |  | 2000 |            |   | 2001 |   |            | 2002 | 
|                                    |  |      |            |   |      |   |            |      | 
|Goodwill:                           |  |      |            |   |      |   |            |      |  |   |            |  
|Beginning balance                   |  | $    | 9,040      |   |      | $ | 8,771      |      |  | $ | 168,971    |  
|Additions                           |  |      |           |   |      |   | 163,474    |      |  |   | 397,000    |  
|Amortization                        |  |      | (269       | ) |      |   | (3,274     | )    |  |   | -          |  
|                                    |  |      |            |   |      |   |            |      | 
|Total goodwill                      |  | $    | 8,771      |   |      | $ | 168,971    |      |  | $ | 565,971    |  
|                                    |  |      |            |   |      |   |            |      | 
|Customer rights and
customer lists: |  |      |            |   |      |   |            |      |  |   |            |  
|Beginning balance                   |  | $    | 26,059,421 |   |      | $ | 18,830,777 |      |  | $ | 19,843,170 |  
|Additions                           |  |      | 3,066,269  |   |      |   | 2,617,061  |      |  |   | 1,787,242  |  
|Impairment                          |  |      | (8,422,725 | ) |      |   |           |      |  |   |           |  
|Amortization                        |  |      | (1,872,188 | ) |      |   | (1,604,668 | )    |  |   | (1,710,733 | )
|                                    |  |      |            |   |      |   |            |      | 
|Ending balance                      |  | $    | 18,830,777 |   |      | $ | 19,843,170 |      |  | $ | 19,919,679 |  
|                                    |  |      |            |   |      |   |            |      | 
|Franchise and license
agreements:   |  |      |            |   |      |   |            |      |  |   |            |  
|Beginning balance                   |  | $    | 71,250     |   |      | $ | 7,551,190  |      |  | $ | 7,959,000  |  
|Additions (reduction)
(Note 12)     |  |      | 10,335,940 |   |      |   | 570,506    |      |  |   | (290,314   | )
|Impairment                          |  |      | (2,647,096 | ) |      |   |           |      |  |   |           |  
|Amortization                        |  |      | (208,904   | ) |      |   | (162,696   | )    |  |   | (560,982   | )
|                                    |  |      |            |   |      |   |            |      | 
|Ending balance                      |  | $    | 7,551,190  |   |      | $ | 7,959,000  |      |  | $ | 7,107,704  |  
|                                    |  |      |            |   |      |   |            |      | 
|Other intangibles:                  |  |      |            |   |      |   |            |      |  |   |            |  
|Beginning balance                   |  | $    | 1,364,196  |   |      | $ | 782,939    |      |  | $ | 712,869    |  
|Additions                           |  |      | 610,654    |   |      |   | 56,028     |      |  |   | 220,000    |  
|Impairment                          |  |      | (728,853   | ) |      |   |           |      |  |   |           |  
|Amortization                        |  |      | (463,058   | ) |      |   | (126,098   | )    |  |   | (150,549   | )
|                                    |  |      |            |   |      |   |            |      | 
|Ending balance                      |  | $    | 782,939    |   |      | $ | 712,869    |      |  | $ | 782,320    |  
|                                    |  |      |            |   |      |   |            |      | 
|Total intangible assets             |  | $    | 27,164,906 |   |      | $ | 28,515,039 |      |  | $ | 27,809,703 |  
|                                    |  |      |            |   |      |   |            |      | 

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the year ended December 31, 2000, the Company recorded an impairment
adjustment to its intangible assets of $11,798,674. The adjustment was the
result of the Company electing to change its accounting policy in assessing its
intangible assets from one based upon undiscounted cash flows to a policy which
utilizes discounted cash flows. The Company believed that the use of a
discounted methodology was preferable, and consistent with the methodology
utilized by management in assessing acquisition investment opportunities. In
applying this discounted approach the Company evaluated its aggregate
intangible assets individually on a reporting unit basis in assessing
recoverability of net capitalized amounts. In determining the appropriate rate
at which to discount future cash flows of each reporting unit, the Company
reviewed internal and market factors to estimate the industry or market rate of
return required for similar investments. This methodology was utilized until
January 1, 2002, at which time the Company adopted the provisions of SFAS No.
144.

|                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. Branch
Efficiency Costs |  | During the fourth quarter of 2000, the Company recorded an expense of $3,046,516 in connection with its decision to combine
several of its branch offices for efficiency purposes. The combination was possible due to the completion and development
of the Companys technology center located at its headquarters. Management believes that the strategic decision to combine
several of its branches will result in significant future savings to the Company as a result of efficiencies created through
the use of technology.
A summary of the activity for these accruals is as follows:

|                           |                        |   |                 |           |   |              |   |            |                   |   |         |          |   |   |           |            |  
|-------------------------- | ---------------------- | - | --------------- | --------- | - | ------------ | - | ---------- | ----------------- | - | ------- | -------- | - | - | --------- | ---------- | -
|                           |                        |   | Operating lease |           |   | Property and |   |            | Severance, moving |   |         |          |   |  
|                           |                        |   | payments        |           |   | equipment    |   |            | and relocation    |   |         | Total    |  
|                           |                        |   |                 |           |   |              |   |            |                   |   |         |          |  
|Balance, January 1, 2000   |                        | $ |                |           |   | $            |  |            |                   | $ |        |          |   | $ |          |           
|                           | Beginning accrual      |   |                 | 1,296,179 |   |              |   | 1,541,819  |                   |   |         | 208,518  |   |   |           | 3,046,516  |  
|                           | Write-down of assets   |   |                 |          |   |              |   | (1,541,819 | )                 |   |         |         |   |   |           | (1,541,819 | )
|                           |                        |   |                 |           |   |              |   |            |                   |   |         |         
|Balance, December 31, 2000 |                        |   | 1,296,179       |           |   |              |  |            |                   |   | 208,518 |          |   |   | 1,504,697 |           
|                           | Amounts paid/recovered |   |                 | (871,396  | ) |              |   | 132,201    |                   |   |         | (85,330  | ) |   |           | (824,525   | )
|                           | Adjustments            |   |                 | (16,781   | ) |              |   | (132,201   | )                 |   |         | (20,991  | ) |   |           | (169,973   | )
|                           |                        |   |                 |           |   |              |   |            |                   |   |         |         
|Balance, December 31, 2001 |                        |   | 408,002         |           |   |              |  |            |                   |   | 102,197 |          |   |   | 510,199   |           
|                           | Amounts paid           |   |                 | (457,470  | ) |              |   |           |                   |   |         |         |   |   |           | (457,470   | )
|                           | Adjustments            |   |                 | 102,197   |   |              |   |           |                   |   |         | (102,197 | ) |   |           |           |  
|                           |                        |   |                 |           |   |              |   |            |                   |   |         |         
|Balance, December 31, 2002 |                        | $ | 52,729          |           |   | $            |  |            |                   | $ |        |          |   | $ | 52,729    |           
|                           |                        |   |                 |           |   |              |   |            |                   |   |         |         

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. Line of
Credit |  | On April 30, 2002, the Company renewed its $10.0 million
credit facility with a bank whereby the Company converted
the existing $1.7 million balance on the line of credit
into a new $4.0 million term loan with modified terms and
entered into a new $6.0 million line of credit facility.
The term loan requires monthly principal payments of
$83,333 through April 30, 2006 plus interest at the
floating rate or Eurodollar rate (4.188% at December 31,
2002). The $6.0 million line of credit bears interest at
the floating rate or Eurodollar rate as defined in the
agreement (4.188% at December 31, 2002). There were no
amounts drawn on the line of credit at December 31, 2002.
There was $2,200,000 drawn on the line of credit that
existed at December 31, 2001. The line of credit and the
term loan require that the Company meet certain financial
covenants and, as of December 31, 2002, the Company was
in compliance with such covenants. The line of credit
and the term loan are collateralized by substantially all
of the Companys assets.

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|                         |  |                                                  
|------------------------ |  | -------------------------------------------------
|6. Long-term Obligations |  | Long-term obligations consisted of the following:

|                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |           |  |      |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|December 31,                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 2001 |           |  | 2002 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |           |  |      |  
|Term note payable to a bank: monthly principal and
interest payments total $96,051 through April 2006
Interest is calculated at the floating rate or
Eurodollar rate as defined in the note agreement
(4.188% at December 31, 2002). The term note is
collateralized by substantially all of the
Companys assets.                                                                                                              |  | $    | 2,733,333 |  |      | $ | 3,333,333 | 
|Notes payable to corporations and individuals
incurred in the acquisition of several businesses
Monthly principal and interest payments total
$115,186 and are due through November 2005
Quarterly principal and interest payments total
$155,494 and are due through March 2005. Interest
is payable at rates ranging from 5% to 12%. Notes
are collateralized by security agreements and
assets acquired in the acquisitions. |  |      | 3,511,091 |  |      |   | 3,076,635 | 
|Various capital lease obligations
expiring through June 2005
Monthly principal and interest
payments to $44,743 with interest
at rates ranging from 8.47% to
11.48%, collateralized by office
furniture and equipment.                                                                                                                                                                                                          |  |      | 1,160,660 |  |      |   | 700,961   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |           |  |      |  
|Total long-term debt                                                                                                                                                                                                                                                                                                                                                                                                            |  |      | 7,405,084 |  |      |   | 7,110,929 | 
|Less current portion                                                                                                                                                                                                                                                                                                                                                                                                            |  |      | 2,650,862 |  |      |   | 3,345,403 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |           |  |      |  
|Long-term debt, less current portion                                                                                                                                                                                                                                                                                                                                                                                            |  | $    | 4,754,222 |  |      | $ | 3,765,526 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |           |  |      |  

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company had one interest rate swap agreement for a principal amount of
$4,000,000 that expired in May 2002. The interest rate swap agreement was
entered into in May 2000, in connection with the Companys term note payable.
Under the agreement, the Company paid a fixed rate of interest of 10.10%, and
therefore effectively converted the Companys term note payable from a floating
rate obligation into a fixed-rate obligation. At December 31, 2001, the
estimated fair value of the interest rate swap was a $58,994 liability and was
included in accounts payable in the accompanying consolidated balance sheet
with the corresponding amount included in interest expense in the accompanying
consolidated statement of operations for the year ended December 31, 2001. The
Companys interest rate swap did not qualify for the use of the hedge method of
accounting. The Company was exposed to credit risk in the event of
non-performance by the counter-party to the interest rate swap agreement. The
Company had no interest rate swap agreements outstanding at December 31, 2002.

Capitalized lease obligations for service license agreements
consisted of the following:

|                                                                                                                                                                                                |  |      |           |  |      |   |           | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|December 31,                                                                                                                                                                                    |  | 2001 |           |  | 2002 |  
|                                                                                                                                                                                                |  |      |           |  |      |  
|Capital lease
obligations for
service license
agreements expiring in
April and December
2005 and February
2006. Monthly
principal and interest
payments total
$270,626, with
interest at 9.985% |  | $    | 9,313,970 |  |      | $ | 7,656,001 | 
|Less current maturities                                                                                                                                                                         |  |      | 1,927,139 |  |      |   | 3,096,616 | 
|                                                                                                                                                                                                |  |      |           |  |      |  
|Capitalized lease
obligations-license
agreements, less
current portion                                                                                                                          |  | $    | 7,386,831 |  |      | $ | 4,559,385 | 
|                                                                                                                                                                                                |  |      |           |  |      |  

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

| |  |                                                                 
| |  | ----------------------------------------------------------------
| |  | Future maturities of these long-term obligations are as follows:

|                                  |  |                |           |  |                |   |         |       |  |   |                    |  |  |   |           | 
|--------------------------------- |  | -------------- | --------- |  | -------------- | - | ------- | ----- |  | - | ------------------ |  |  | - | --------- | 
|Year Ending                       |  |                |           |  |                |   |         |       |  |   |                    |  |  |   |           | 
|December 31,                      |  | Long-Term Debt |           |  | Capital Leases |   |         | Total |  |   | License Agreements | 
|                                  |  |                |           |  |                |   |         |       |  |   |                    | 
|2003                              |  | $              | 2,908,102 |  |                | $ | 484,396 |       |  | $ | 3,392,498          |  |  | $ | 3,274,171 | 
|2004                              |  |                | 1,978,228 |  |                |   | 232,888 |       |  |   | 2,211,116          |  |  |   | 3,360,922 | 
|2005                              |  |                | 1,190,304 |  |                |   | 44,111  |       |  |   | 1,234,415          |  |  |   | 2,031,290 | 
|2006                              |  |                | 333,334   |  |                |   |        |       |  |   | 333,334            |  |  |   | 89,066    | 
|2007                              |  |                |          |  |                |   |        |       |  |   |                   |  |  |   |          | 
|                                  |  |                |           |  |                |   |         |       |  |   |                    | 
|                                  |  |                | 6,409,968 |  |                |   | 761,395 |       |  |   | 7,171,363          |  |  |   | 8,755,449 | 
|Less amount
representing
interest |  |                |          |  |                |   | 60,434  |       |  |   | 60,434             |  |  |   | 1,099,448 | 
|                                  |  |                |           |  |                |   |         |       |  |   |                    | 
|                                  |  |                | 6,409,968 |  |                |   | 700,961 |       |  |   | 7,110,929          |  |  |   | 7,656,001 | 
|Less current
maturities           |  |                | 2,908,102 |  |                |   | 437,301 |       |  |   | 3,345,403          |  |  |   | 3,096,616 | 
|                                  |  |                |           |  |                |   |         |       |  |   |                    | 
|                                  |  | $              | 3,501,866 |  |                | $ | 263,660 |       |  | $ | 3,765,526          |  |  | $ | 4,559,385 | 
|                                  |  |                |           |  |                |   |         |       |  |   |                    | 

| |  |                                                                            
| |  | ---------------------------------------------------------------------------
| |  | The Companys property and equipment held under capital leases consists of:

|                                |  |      |           |  |      |   |           | 
|------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|December 31,                    |  | 2001 |           |  | 2002 |  
|                                |  |      |           |  |      |  
|Computer equipment and software |  | $    | 1,137,937 |  |      | $ | 1,137,937 | 
|Furniture and fixtures          |  |      | 487,747   |  |      |   | 487,747   | 
|                                |  |      |           |  |      |  
|Less: accumulated amortization  |  |      | 809,247   |  |      |   | 1,053,428 | 
|                                |  |      |           |  |      |  
|                                |  | $    | 816,437   |  |      | $ | 572,256   | 
|                                |  |      |           |  |      |  

| |  |                                                                                                     
| |  | ----------------------------------------------------------------------------------------------------
| |  | Amortization expense related to capital leases is included in depreciation and amortization expense.

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|   |                               |  |                                                                                                                                                                                                                                                                                                   
|-- | ----------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|7. | Commitments and
Contingencies |  | Operating Leases                                                                                                                                                                                                                                                                                  
|   |                               |  | The Company has non-cancelable long-term operating lease
agreements for office space, office furnishings and
equipment.                                                                                                                                                                           
|   |                               | 
|   |                               |  | Rent expense for the operating leases, net of sublease income
for the years ended December 31, 2000, 2001 and 2002 was
approximately $1,405,669, $1,131,114 and $1,341,938. Future
minimum lease payments required under long-term operating
leases in effect at December 31, 2002 are as follows:

|                         |  |   |            | 
|------------------------ |  | - | ---------- | 
|Year Ending December 31, |  |   |            | 
|                         |  |   |            | 
|2003                     |  | $ | 1,608,457  | 
|2004                     |  |   | 1,615,245  | 
|2005                     |  |   | 1,298,534  | 
|2006                     |  |   | 1,097,313  | 
|2007                     |  |   | 1,119,065  | 
|Thereafter               |  |   | 10,793,402 | 
|                         |  |   |           
|                         |  |   | 17,532,016 | 
|Less: sublease income    |  |   | 958,689    | 
|                         |  |   |           
|                         |  | $ | 16,573,327 | 
|                         |  |   |           

| |  |                                                                                                                                                                                                                                                                                                                                                                          
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Bonus Plans                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                          
| |  | Effective April 24, 2001, the Compensation Committee of the
Board of Directors approved two Bonus Plans (the Plans) to
compensate certain officers and employees of the Company for
their successful achievement of specific pre-determined
objectives. For the years ended December 31, 2001 and 2002
compensation earned under the Plans was $724,313 and
$1,113,279.

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Self Funded Insurance Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company is self-insured for certain losses relating to employee medical
benefits. The Company has purchased stop-loss coverage, which covers
individual claims greater than $45,000 and aggregate annual claims greater
than $947,784. Self-insured losses are accrued based upon the Companys
estimate of the aggregate liability for uninsured claims. Amounts accrued for
uninsured losses as of December 31, 2001 and 2002 totaled $185,770 and $
247,227.                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 401(k) Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company maintains a 401(k) plan for its eligible employees. Participation
is voluntary and employees are eligible to participate at age 21 and upon
completing one month of employment with the Company. The Company matches 50%
of the employees contributions up to 4% of the employees salary. Company
contributions vest ratably, 20% per year, over five years. During the years
ended December 31, 2000, 2001 and 2002, the Company contributed $139,122, $
146,470 and $172,447 to the 401(k) plan
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company is not a party to any legal proceedings except those in the
ordinary course of its business. The Company believes there is no proceeding
threatened or pending against it which, if determined adversely, would have a
material adverse effect on its financial condition, results of operations or
cash flows.                                                                                                                                                                                    

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|   |                              |  |                                                           
|-- | ---------------------------- |  | ----------------------------------------------------------
|8. | Income Tax Expense (Benefit) |  | The provision for income taxes consisted of the following:
|   |                              | 

|                              |         |      |            |            |      |   |           |           |  |   |           |           | 
|----------------------------- | ------- | ---- | ---------- | ---------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|Year Ended                    |         |      |            |            |      |   |           |           |  |   |           |          
|December 31,                  |         | 2000 |            |            | 2001 |   |           | 2002      | 
|                              |         |      |            |            |      |   |           |           | 
|Current provision
(benefit):  |         |      |            |            |      |   |           |           |  |   |           |          
|                              | Federal |      | $          | (611,326   | )    |   | $         | 1,832,474 |  |   | $         | 3,227,991 | 
|                              | State   |      |            | (91,348    | )    |   |           | 273,817   |  |   |           | 569,646   | 
|                              |         |      |            |            |      |   |           |           |  |  
|                              |         |      | (702,674   | )          |      |   | 2,106,291 |           |  |   | 3,797,637 |          
|                              |         |      |            |            |      |   |           |           |  |  
|Deferred provision
(benefit): |         |      |            |            |      |   |           |           |  |   |           |          
|                              | Federal |      |            | (4,269,810 | )    |   |           | 479,925   |  |   |           | 438,186   | 
|                              | State   |      |            | (638,018   | )    |   |           | 74,291    |  |   |           | 77,327    | 
|                              |         |      |            |            |      |   |           |           |  |  
|                              |         |      | (4,907,828 | )          |      |   | 554,216   |           |  |   | 515,513   |          
|                              |         |      |            |            |      |   |           |           |  |  
|                              |         | $    | (5,610,502 | )          |      | $ | 2,660,507 |           |  | $ | 4,313,150 |          
|                              |         |      |            |            |      |   |           |           |  |  

| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | A reconciliation of the effective tax rates and the statutory U.S. federal income tax rates is as follows:

|                                                    |  |      |      |   |      |  |      |      |  |  |      |  
|--------------------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|Year Ended                                          |  |      |      |   |      |  |      |      |  |  |      |  
|December 31,                                        |  | 2000 |      |   | 2001 |  |      | 2002 | 
|                                                    |  |      |      |   |      |  |      |      | 
|U.S. federal
statutory rates                        |  |      | 34.0 | % |      |  | 34.0 | %    |  |  | 34.0 | %
|State income tax
benefit, net of
federal tax amount |  |      | 3.3  |   |      |  | 3.3  |      |  |  | 3.3  | %
|Other                                               |  |      | (1.7 | ) |      |  | 1.8  |      |  |  | 2.7  | %
|                                                    |  |      |      |   |      |  |      |      | 
|Effective tax rate                                  |  |      | 35.6 | % |      |  | 39.1 | %    |  |  | 40.0 | %
|                                                    |  |      |      |   |      |  |      |      | 

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Factual Data Corp.and Subsidiary
Notes to Consolidated Financial Statements

|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|Temporary differences that give rise to a significant portion of the net
deferred tax asset are as follows:

|                                |           |      |           |           |      |   |           |           | 
|------------------------------- | --------- | ---- | --------- | --------- | ---- | - | --------- | --------- | 
|December 31,                    |           | 2001 |           |           | 2002 |  
|                                |           |      |           |           |      |  
|Self-insured medical claims     |           | $    | 69,293    |           |      | $ | 101,363   |          
|Consolidation costs             |           |      | 190,304   |           |      |   | 21,620    |          
|Allowance for doubtful accounts |           |      | 90,992    |           |      |   | 123,322   |          
|Accrued wages and vacation      |           |      | 93,751    |           |      |   | 119,529   |          
|Interest rate swap accrued      |           |      | 22,004    |           |      |   | -         |          
|                                |           |      |           |           |      |  
|                                | Current   |      |           | 466,344   |      |   |           | 365,834   | 
|                                |           |      |           |           |      |  
|Property and equipment          |           |      | 37,624    |           |      |   | (127,101  | )        
|Capitalized software            |           |      | (401,704  | )         |      |   | (459,050  | )        
|Intangible assets               |           |      | 3,827,317 |           |      |   | 3,634,385 |          
|                                |           |      |           |           |      |  
|                                | Long-term |      |           | 3,463,237 |      |   |           | 3,048,234 | 
|                                |           |      |           |           |      |  
|Net deferred tax asset          |           | $    | 3,929,581 |           |      | $ | 3,414,068 |          
|                                |           |      |           |           |      |  

|                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|At December 31, 2001 and 2002, the Company believes it is more likely than not
that the deferred tax asset is fully realizable, and therefore, no valuation
allowance has been recorded

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Factual Data Corp.and Subsidiary
Notes to Consolidated Financial Statements

|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|9. Shareholders Equity |  | Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                        |  | The Company is authorized to issue
1,000,000 shares of preferred stock.
As of December 31, 2002, no
preferred stock has been issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                        |  | Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                        |  | In 1999, the Company issued
1,912,451 shares of its common stock
in a private placement, resulting in
net proceeds to the Company of
$13,863,539. An agent earned
warrants to purchase 55,641 shares
of the Companys common stock. In
2002 these warrants were exercised
on a cashless basis into 16,410
shares of the Companys common
stock.                                                                                                                                                                                                                                                                                                                                                             
|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                        |  | The Company issued warrants to
purchase 1.5 million shares of its
common stock and options to purchase
120,000 shares of common stock in
connection with its initial public
offering. Of these warrants, 1.38
million had an exercise price of
$7.15 per share and the other
120,000 warrants had an exercise
price of $7.04. During 2001,
warrants to purchase 725,759 shares
of common stock were exercised. The
Company received net proceeds of
$5,020,767 from the exercise and the
balance of the unexercised warrants
expired in 2001. In 2002 119,007
options were exercised on a cashless
basis into 45,892 shares of the
Companys common stock. The
remaining 993 options expire on May
13, 2003.

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Factual Data Corp.and Subsidiary
Notes to Consolidated Financial Statements

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|In 2000, Company issued 100,000 warrants in connection with a consulting
agreement. Of these warrants, 40,000 have an exercise price of $9.00 per share
and 60,000 have an exercise price $11.00 per share. The warrants expire in
September 2003. The warrants become exercisable by the holder only when the
common stock price trades at the exercise price for 20 consecutive days.
Additionally, the warrants require the achievement of certain specified
performance criteria directly related to raising capital to be met, prior to
becoming exercisable. Compensation expense will be measured and recorded when
the performance criteria are met. As of December 31, 2002, the performance
criteria had not been met                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Stock Purchase Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Effective January 1, 2000, the Company established an Employee Stock Purchase
Plan, which allows eligible employees to purchase shares of the Companys
common stock for 90% of the fair market value at the lesser of either the
beginning or end of each quarter stock purchase period. An employee must have
been employed by the Company for at least one year before becoming eligible to
participate in the plan. A maximum of 75,000 shares of common stock are
available for sale under the plan. During the years ended December 31, 2000,
2001 and 2002, employees purchased 6,601, 5,587, and 5,374 shares for $48,894,
$43,533, and $48,318, respectively. In 2001, 2500 of the shares were purchased
on the open market by the Company and issued to the employees

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Factual Data Corp.and Subsidiary
Notes to Consolidated Financial Statements

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Stock Option Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|The Company has adopted the 1997 Stock Incentive Plan whereby the Board of
Directors may issue both tax qualified and nonqualified stock options to
officers, employees, consultants and others. Under the plan, the Company has
reserved 200,000 shares for issuance of common stock. As of December 31, 2001
and 2002, options to purchase 49,725 shares of the Companys common stock had
been granted under this plan and options to purchase 43,225 and 42,725 shares
of common stock were outstanding as of December 31, 2001 and 2002. The shares
vest equally over three years from the date of grant                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Effective January 1, 2000, the Company established the 1999 Employee Formula
Award Stock Option Plan. The Company has reserved 600,000 shares of its common
stock for issuance upon the exercise of options available for grant under the
plan. Employees who have been employed by the Company or one of its affiliates
for at least one year and employees who are designated as full-time are
eligible for participation in the plan. The options vest equally over five
years and are exercisable for ten years. Unless revised by the Board of
Directors, the number of shares of common stock underlying the options granted
on each anniversary date to eligible employees shall be the sum of (1) the
quotient of (a) the eligible employees compensation for twelve months
preceding the Anniversary Date multiplied by 10%, divided by (b) the market
price of the Companys common stock at the date of issuance, plus (2) the
product of 10% of the quotient obtained in (a) above multiplied by the number
of years the employee has been with the Company. Options granted under the
plan will be equal to or greater than the market price of the Companys common
stock on the date of grant. As of December 31, 2001 and 2002, options to
purchase 252,708 and 405,656 shares of the Companys common stock had been
granted under this plan and options to purchase 191,010 and 317,230 shares of
common stock were outstanding at December 31, 2001 and 2002.

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Factual Data Corp.and Subsidiary
Notes to Consolidated Financial Statements

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|On May 21, 2001, the Company granted 50,500 options, outside of its option
plans, with an exercise price of $8.00 per share to seven employees. On
July 19, 2002, the Board of Directors modified the options to allow the
holders to exercise the options on a cashless basis. During the year ended
December 31, 2002, in accordance with Financial Interpretation No. 44,
Accounting for Certain Transactions Involving Stock Options, no deferred
compensation or amortization was recorded in stockholders equity because
the Companys stock price was less than the options exercise prices at
December 31, 2002.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|During January 2003, the Company
granted options to acquire 38,591 and
194,464 shares of common stock to its executive officers and employees,
respectively                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|The Company applies APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for the plans. Under
APB Opinion 25, when the exercise price of the Companys employee stock
options is less than the market price of the underlying stock on the date of
grant, compensation cost is recognized                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|SFAS No. 148, Accounting for Stock-Based Compensation, requires the
Company to provide pro forma information regarding net income and net income
per share as if compensation cost for the Companys stock option plans and
other stock awards had been determined in accordance with the fair value
based method prescribed in SFAS No. 148. The Company estimated the fair
value of each stock award at the grant date by using the Black-Scholes
option-pricing model with the following weighted-average assumptions:                                                                                                

|                        |  |          |     |          |      |          |     |      |  |  |     |  
|----------------------- |  | -------- | --- | -------- | ---- | -------- | --- | ---- |  |  | --- | -
|Year Ended December 31, |  | 2000     |     |          | 2001 |          |     | 2002 | 
|                        |  |          |     |          |      |          |     |      | 
|Dividend yield          |  |          | 0   | %        |      |          | 0   | %    |  |  | 0   | %
|Expected volatility     |  |          | 42  | %        |      |          | 44  | %    |  |  | 55  | %
|Discount rate           |  |          | 5.5 | %        |      |          | 5.2 | %    |  |  | 4.9 | %
|Expected lives          |  | 10 years |     | 10 years |      | 10 years
|                        |  |          |     |          |      |          |     |      | 

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | A summary of the status of the Companys stock option plans and outstanding options and warrants is presented below:

|                              |  |            |          |   |                  |   |      |            |  |  |                |   |  |   |       | 
|----------------------------- |  | ---------- | -------- | - | ---------------- | - | ---- | ---------- |  |  | -------------- | - |  | - | ----- | 
|                              |  | Options    |          |   | Warrants         |  
|                              |  |            |          |   |                  |  
|                              |  | Number of  |          |   | Weighted         |   |      | Number of  |  |  | Weighted       |  
|                              |  | Underlying |          |   | Average Exercise |   |      | Underlying |  |  | Average        |  
|                              |  | Shares     |          |   | Price            |   |      | Shares     |  |  | Exercise Price |  
|                              |  |            |          |   |                  |   |      |            |  |  |                |  
|Outstanding January
1, 2000   |  |            | 155,334  |   |                  | $ | 6.80 |            |  |  | 1,555,541      |   |  | $ | 7.34  | 
|Granted                       |  |            | 110,353  |   |                  |   | 7.13 |            |  |  | 100,000        |   |  |   | 10.20 | 
|Cancelled                     |  |            | (32,390  | ) |                  |   | 7.02 |            |  |  |               |   |  |   |      | 
|Exercised                     |  |            | (667     | ) |                  |   | 5.50 |            |  |  |               |   |  |   |      | 
|                              |  |            |          |   |                  |   |      |            |  |  |                |  
|Outstanding
December 31, 2000 |  |            | 232,630  |   |                  |   | 6.93 |            |  |  | 1,655,541      |   |  |   | 7.51  | 
|Granted                       |  |            | 206,080  |   |                  |   | 6.72 |            |  |  |               |   |  |   | -     | 
|Cancelled                     |  |            | (29,812  | ) |                  |   | 6.51 |            |  |  | (774,141       | ) |  |   | 7.46  | 
|Exercised                     |  |            | (4,163   | ) |                  |   | 6.15 |            |  |  | (725,759       | ) |  |   | 7.15  | 
|                              |  |            |          |   |                  |   |      |            |  |  |                |  
|Outstanding
December 31, 2001 |  |            | 404,735  |   |                  |   | 6.86 |            |  |  | 155,641        |   |  |   | 9.31  | 
|Granted                       |  |            | 152,948  |   |                  |   | 8.80 |            |  |  |               |   |  |   |      | 
|Cancelled                     |  |            | (24,400  | ) |                  |   | 7.75 |            |  |  |               |   |  |   |      | 
|Exercised                     |  |            | (121,835 | ) |                  |   | 7.03 |            |  |  | (55,641        | ) |  |   | 8.08  | 
|                              |  |            |          |   |                  |   |      |            |  |  |                |  
|Outstanding
December 31, 2002 |  |            | 411,448  |   |                  | $ | 7.48 |            |  |  | 100,000        |   |  | $ | 10.20 | 
|                              |  |            |          |   |                  |   |      |            |  |  |                |  
|Exercisable
December 31, 2000 |  |            | 144,333  |   |                  | $ | 6.83 |            |  |  | 1,379,900      |   |  | $ | 7.15  | 
|                              |  |            |          |   |                  |   |      |            |  |  |                |  
|Exercisable
December 31, 2001 |  |            | 159,928  |   |                  | $ | 6.85 |            |  |  | 55,641         |   |  | $ | 8.08  | 
|                              |  |            |          |   |                  |   |      |            |  |  |                |  
|Exercisable
December 31, 2002 |  |            | 89,514   |   |                  | $ | 6.64 |            |  |  |               |   |  | $ |      | 
|                              |  |            |          |   |                  |   |      |            |  |  |                |  

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|                                                                        |  |         |      |  |          |   |      | 
|----------------------------------------------------------------------- |  | ------- | ---- |  | -------- | - | ---- | 
|                                                                        |  | Options |      |  | Warrants |  
|                                                                        |  |         |      |  |          |  
|Weighted average fair value of options and warrants
granted during 2002 |  | $       | 6.21 |  |          | $ |     | 
|Weighted average fair value of options and warrants
granted during 2001 |  | $       | 4.39 |  |          | $ |     | 
|Weighted average fair value of options and warrants
granted during 2000 |  | $       | 4.66 |  |          | $ | 3.17 | 
|                                                                        |  |         |      |  |          |  

| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | The following information summarizes stock options and warrants outstanding and exercisable at December 31, 2002:

|                |   |             |  |         |       |         |  |       |             |      |        |          |   |       |  |          |  |        |          |      |   |      | 
|--------------- | - | ----------- |  | ------- | ----- | ------- |  | ----- | ----------- | ---- | ------ | -------- | - | ----- |  | -------- |  | ------ | -------- | ---- | - | ---- | 
|Outstanding     |   | Exercisable | 
|                |   |             | 
|                |   |             |  |         |       |         |  |       | Weighted    |      |        |          |   |       |  |          |  |        |          |      |   |     
|                |   |             |  |         |       |         |  |       | Average     |      |        |          |   |       |  |          |  |        |          |      |   |     
|                |   |             |  |         |       |         |  |       | Remaining   |      |        | Weighted |   |       |  |          |  |        | Weighted |     
|                |   |             |  |         |       |         |  |       | Contractual |      |        | Average  |   |       |  |          |  |        | Average  |     
|Exercise        |   |             |  |         |       | Life in |  |       | Exercise    |      |        |          |   |       |  | Exercise | 
|Prices          |   | Number      |  |         | Years |         |  | Price |             |      | Number |          |   | Price | 
|                |   |             |  |         |       |         |  |       |             |      |        |          |   |       | 
|Options:        |   |             |  |         |       |         |  |       |             |      |        |          |   |       |  |          |  |        |          |     
|                | $ | 5.50        |  |         |       | 19,500  |  |       |             | 5.37 |        |          | $ | 5.50  |  |          |  | 19,500 |          |      | $ | 5.50
|                |   | 6.31        |  |         |       | 123,445 |  |       |             | 8.05 |        |          |   | 6.31  |  |          |  | 24,691 |          |      |   | 6.31 | 
|                |   | 6.50        |  |         |       | 5,000   |  |       |             | 5.43 |        |          |   | 6.50  |  |          |  | 5,000  |          |      |   | 6.50 | 
|                |   | 7.04        |  |         |       | 993     |  |       |             | 0.38 |        |          |   | 7.04  |  |          |  | 993    |          |      |   | 7.04 | 
|                |   | 7.13        |  |         |       | 67,188  |  |       |             | 7.05 |        |          |   | 7.13  |  |          |  | 26,230 |          |      |   | 7.13 | 
|                |   | 8.00        |  |         |       | 55,500  |  |       |             | 8.20 |        |          |   | 8.00  |  |          |  | 13,100 |          |      |   | 8.00 | 
|                |   | 8.80        |  |         |       | 139,822 |  |       |             | 9.05 |        |          |   | 8.80  |  |          |  |       |          |      |   |     | 
|                |   |             |  |         |       |         |  |       |             |      |        |          |   |       |  |         
|$5.50 to $8.80  |   |             |  | 411,448 |       |         |  | 8.07  |             |      | $      | 7.48     |   |       |  | 89,514   |  |        | $        | 6.64 |  
|                |   |             |  |         |       |         |  |       |             |      |        |          |   |       |  |          | 
|Warrants:       |   |             |  |         |       |         |  |       |             |      |        |          |   |       |  |          |  |        |          |     
|                | $ | 9.00        |  |         |       | 40,000  |  |       |             | 3.17 |        |          | $ | 9.00  |  |          |  |       |          |      | $ |     | 
|                |   | 11.00       |  |         |       | 60,000  |  |       |             | 3.17 |        |          |   | 11.00 |  |          |  |       |          |      |   |     | 
|                |   |             |  |         |       |         |  |       |             |      |        |          |   |       |  |          | 
|$9.00 to $11.00 |   |             |  | 100,000 |       |         |  | 3.17  |             |      | $      | 10.20    |   |       |  |         |  |        | $        |     |  
|                |   |             |  |         |       |         |  |       |             |      |        |          |   |       |  |          | 

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|    |                           |  |                                                                                               
|--- | ------------------------- |  | ----------------------------------------------------------------------------------------------
|10. | Earnings (Loss)
Per Share |  | The following table sets forth the computation of basic and diluted earnings (loss) per share:

|                                                                     |                            |      |             |       |      |   |           |        |  |   |           |        | 
|-------------------------------------------------------------------- | -------------------------- | ---- | ----------- | ----- | ---- | - | --------- | ------ |  | - | --------- | ------ | 
|Year Ended December 31,                                              |                            | 2000 |             |       | 2001 |   |           | 2002   | 
|                                                                     |                            |      |             |       |      |   |           |        | 
|Numerator:                                                           |                            |      |             |       |      |   |           |        |  |   |           |       
|Net income (loss) available to
common shareholders                   |                            | $    | (10,158,230 | )     |      | $ | 4,136,858 |        |  | $ | 6,459,729 |       
|                                                                     |                            |      |             |       |      |   |           |        | 
|Denominator:                                                         |                            |      |             |       |      |   |           |        |  |   |           |       
|Basic earnings per share 
weighted average shares                   |                            |      | 5,382,590   |       |      |   | 5,756,808 |        |  |   | 6,154,267 |       
|Effect of dilutive securities:                                       |                            |      |             |       |      |   |           |        |  |   |           |       
|                                                                     | Stock options and warrants |      |             |      |      |   |           | 62,529 |  |   |           | 55,426 | 
|                                                                     |                            |      |             |       |      |   |           |        | 
|Denominator for diluted earnings
per share  weighted average
shares |                            |      | 5,382,590   |       |      |   | 5,819,337 |        |  |   | 6,209,693 |       
|                                                                     |                            |      |             |       |      |   |           |        | 
|Earnings (loss) per share:                                           |                            |      |             |       |      |   |           |        |  |   |           |       
|                                                                     | Basic                      |      | $           | (1.89 | )    |   | $         | 0.72   |  |   | $         | 1.05   | 
|                                                                     | Diluted                    |      | $           | (1.89 | )    |   | $         | 0.71   |  |   | $         | 1.04   | 
|                                                                     |                            |      |             |       |      |   |           |        | 

| |                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | For the years ended December 31, 2000, 2001 and 2002 total stock options and warrants exercisable into
1,888,171, 497,847 and 456,022 shares of common stock, were not included in the computation of diluted
loss per share because their effect was anti-dilutive. These options and warrants could potentially
dilute earnings per share in future periods.

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|    |                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11. | Business
Segment Information |  | The Company operates in three business segments: mortgage services, consumer services and other services, which
consists of resident and employment screening services. The accounting policies utilized by the segments is
the same as those described for the Company in the Summary of Accounting Policies. Operating results and other
financial data are presented for the principal business segments as follows:

|                   |                               |          |          |            |          |          |   |            |       |  |       |           |  |  |   |             |  
|------------------ | ----------------------------- | -------- | -------- | ---------- | -------- | -------- | - | ---------- | ----- |  | ----- | --------- |  |  | - | ----------- | -
|                   |                               |          | Mortgage |            |          | Consumer |   |            | Other |  |       |           |  | 
|Year Ended         |                               | Services |          |            | Services |          |   | Services   |       |  | Total |          
|                   |                               |          |          |            |          |          |   |            |       |  |       |          
|December 31, 2000: |                               |          |          |            |          |          |   |            |       |  |       |           |  |  |   |            
|                   | Revenue                       |          | $        | 25,559,738 |          |          | $ | 3,180,380  |       |  | $     | 2,521,088 |  |  | $ | 31,261,206  |  
|                   | Cost of services              |          |          | 15,416,590 |          |          |   | 1,875,191  |       |  |       | 987,938   |  |  |   | 18,279,719  |  
|                   | Segment profit (loss)         |          |          | (8,997,451 | )        |          |   | (1,877,451 | )     |  |       | 716,672   |  |  |   | (10,158,230 | )
|                   | Total assets                  |          |          | 31,120,270 |          |          |   | 10,944,450 |       |  |       | 735,377   |  |  |   | 42,800,097  |  
|                   | Depreciation and amortization |          |          | 3,667,513  |          |          |   | 317,253    |       |  |       | 146,222   |  |  |   | 4,130,988   |  
|                   | Interest expense              |          |          | 923,110    |          |          |   | 603,135    |       |  |       | 15,783    |  |  |   | 1,542,028   |  
|                   | Capital expenditures          |          |          | 2,228,310  |          |          |   | 14,173     |       |  |       | 12,860    |  |  |   | 2,255,343   |  
|                   |                               |          |          |            |          |          |   |            |       |  |       |           | 
|December 31, 2001: |                               |          |          |            |          |          |   |            |       |  |       |           |  |  |   |            
|                   | Revenue                       |          | $        | 42,551,506 |          |          | $ | 6,476,520  |       |  | $     | 2,212,195 |  |  | $ | 51,240,221  |  
|                   | Cost of services              |          |          | 24,286,011 |          |          |   | 3,872,304  |       |  |       | 1,669,844 |  |  |   | 29,828,159  |  
|                   | Segment profit                |          |          | 3,966,320  |          |          |   | 140,136    |       |  |       | 30,402    |  |  |   | 4,136,858   |  
|                   | Total assets                  |          |          | 38,264,508 |          |          |   | 11,675,014 |       |  |       | 944,009   |  |  |   | 50,883,531  |  
|                   | Depreciation and amortization |          |          | 3,173,542  |          |          |   | 325,611    |       |  |       | 121,630   |  |  |   | 3,620,783   |  
|                   | Interest expense              |          |          | 1,208,224  |          |          |   | 1,018,383  |       |  |       | 11,996    |  |  |   | 2,238,603   |  
|                   | Capital expenditures          |          |          | 2,150,703  |          |          |   | 7,499      |       |  |       | 8,375     |  |  |   | 2,166,577   |  
|                   |                               |          |          |            |          |          |   |            |       |  |       |           | 
|December 31, 2002: |                               |          |          |            |          |          |   |            |       |  |       |           |  |  |   |            
|                   | Revenue                       |          | $        | 52,738,434 |          |          | $ | 6,971,808  |       |  | $     | 3,361,496 |  |  | $ | 63,071,738  |  
|                   | Cost of services              |          |          | 27,134,217 |          |          |   | 4,258,222  |       |  |       | 2,478,280 |  |  |   | 33,870,719  |  
|                   | Segment profit                |          |          | 5,971,441  |          |          |   | 340,900    |       |  |       | 147,388   |  |  |   | 6,459,729   |  
|                   | Total assets                  |          |          | 40,949,287 |          |          |   | 11,453,249 |       |  |       | 1,104,966 |  |  |   | 53,507,502  |  
|                   | Depreciation and amortization |          |          | 3,667,996  |          |          |   | 738,242    |       |  |       | 148,329   |  |  |   | 4,554,567   |  
|                   | Interest expense              |          |          | 633,996    |          |          |   | 849,898    |       |  |       | 1,805     |  |  |   | 1,485,699   |  
|                   | Capital expenditures          |          |          | 2,091,564  |          |          |   | 1,758      |       |  |       | 61,202    |  |  |   | 2,154,524   |  
|                   |                               |          |          |            |          |          |   |            |       |  |       |           | 

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|               |  |                                                                                                                                                                                                                                                                                                                 
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|12. Cash
Flows |  | Supplemental disclosure of non-cash investing and financing activities:                                                                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                 
|               |  | During the year ended December 31, 2001, the Company entered into a capital lease for
$570,706 in connection with acquiring territorial license rights.                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                 
|               |  | During the years ended December 31, 2000 and 2001, the Company financed fixed asset
purchases of $247,592 and $290,019, with notes payable and capital leases. No
capital leases were entered into in 2002.                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                 
|               |  | During the years ended December 31, 2000, 2001 and 2002, the Company issued notes
payable of $675,000, $1,700,000 and $1,145,000 in connection with acquisitions.                                                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                                 
|               |  | During the year ended December 31, 2002, the Company reduced the carrying value of
certain license agreements and related capital lease obligations by $290,314 in
connection with the revision of certain provisions of the agreements and recorded a
receivable of $126,687 for amounts due from the licensor.

|                           |  |      |           |  |      |   |           |      |  |   |           | 
|-------------------------- |  | ---- | --------- |  | ---- | - | --------- | ---- |  | - | --------- | 
|Year Ended December 31,    |  | 2000 |           |  | 2001 |   |           | 2002 | 
|                           |  |      |           |  |      |   |           |      | 
|Cash paid for interest     |  | $    | 1,546,114 |  |      | $ | 2,233,706 |      |  | $ | 1,346,218 | 
|Cash paid for income taxes |  |      | 197,364   |  |      |   | 749,533   |      |  |   | 2,964,316 | 
|                           |  |      |           |  |      |   |           |      | 

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|    |                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ---------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|13. | Summarized
Quarterly Results
(Unaudited) |  | The following table presents unaudited operating results for each quarter within the two most recent
years. The Company believes that all necessary adjustments consisting only of normal recurring
adjustments, have been included in the amounts stated below to present fairly the following quarterly
results when read in conjunction with the financial statements. Results of operations for any particular
quarter are not necessarily indicative of results of operations for a full fiscal year.

|                   |                               |  |         |            |  |         |   |            |         |  |   |            |  |  |   |            | 
|------------------ | ----------------------------- |  | ------- | ---------- |  | ------- | - | ---------- | ------- |  | - | ---------- |  |  | - | ---------- | 
|                   |                               |  | First   |            |  | Second  |   |            | Third   |  |   | Fourth     | 
|                   |                               |  | Quarter |            |  | Quarter |   |            | Quarter |  |   | Quarter    | 
|                   |                               |  |         |            |  |         |   |            |         |  |   |            | 
|December 31, 2001: |                               |  |         |            |  |         |   |            |         |  |   |            |  |  |   |           
|                   | Revenue                       |  | $       | 13,064,407 |  |         | $ | 12,714,923 |         |  | $ | 11,872,688 |  |  | $ | 13,588,203 | 
|                   | Operating expenses            |  |         | 10,723,492 |  |         |   | 10,583,742 |         |  |   | 10,032,668 |  |  |   | 11,360,607 | 
|                   | Gross profit                  |  |         | 5,533,123  |  |         |   | 5,301,861  |         |  |   | 4,942,707  |  |  |   | 5,634,371  | 
|                   | Net income                    |  |         | 1,142,026  |  |         |   | 928,242    |         |  |   | 908,558    |  |  |   | 1,158,032  | 
|                   | Basic earnings per share(1)   |  |         | 0.21       |  |         |   | 0.17       |         |  |   | 0.15       |  |  |   | 0.19       | 
|                   | Diluted earnings per share(1) |  |         | 0.21       |  |         |   | 0.17       |         |  |   | 0.15       |  |  |   | 0.19       | 
|                   |                               |  |         |            |  |         |   |            |         |  |   |            | 
|December 31, 2002: |                               |  |         |            |  |         |   |            |         |  |   |            |  |  |   |           
|                   | Revenue                       |  | $       | 13,489,251 |  |         | $ | 14,093,418 |         |  | $ | 18,001,909 |  |  | $ | 17,487,160 | 
|                   | Operating expenses            |  |         | 11,106,061 |  |         |   | 12,559,109 |         |  |   | 14,081,938 |  |  |   | 13,550,487 | 
|                   | Gross profit                  |  |         | 6,303,339  |  |         |   | 6,019,291  |         |  |   | 8,441,814  |  |  |   | 8,436,575  | 
|                   | Net income                    |  |         | 1,296,168  |  |         |   | 781,660    |         |  |   | 2,209,661  |  |  |   | 2,172,240  | 
|                   | Basic earnings per share(1)   |  |         | .21        |  |         |   | .13        |         |  |   | .36        |  |  |   | 0.35       | 
|                   | Diluted earnings per share(1) |  |         | .21        |  |         |   | .13        |         |  |   | .35        |  |  |   | 0.35       | 
|                   |                               |  |         |            |  |         |   |            |         |  |   |            | 

|    |                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Earnings per share are computed independently for each quarter and the full year based upon respective
average shares outstanding. Therefore, the sum of the quarterly net earnings per share amounts may not
equal the annual amounts reported.

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Factual Data Corp.and SubsidiariesNotes to Consolidated Financial Statements

|    |                                                                     | 
|--- | ------------------------------------------------------------------- | 
|14. | Valuation and Qualifying Accounts  Allowance for Doubtful Accounts

|                             |  |   |           |            |  |            |           |            |            |   |         |        |  |            |         |  |  | 
|---------------------------- |  | - | --------- | ---------- |  | ---------- | --------- | ---------- | ---------- | - | ------- | ------ |  | ---------- | ------- |  |  | 
|                             |  |   |           |            |  |            |           | Charged to |            |   |         |        |  |            |         |  | 
|                             |  |   |           |            |  |            |           | Cost and   |            |   |         |        |  |            |         |  | 
|                             |  |   |           | Balance at |  |            | Expenses, |            |            |   |         |        |  | Balance at |        
|                             |  |   |           | Beginning  |  |            | Net of    |            |            |   |         |        |  | End of     |        
|Description                  |  |   | of Period |            |  | Recoveries |           |            | Deductions |   |         | Period | 
|                             |  |   |           |            |  |            |           |            |            |   |         |        | 
|Year ended December 31, 2000 |  | $ | 208,150   |            |  | $          | 408,537   |            |            | $ | 513,156 |        |  | $          | 103,531 | 
|Year ended December 31, 2001 |  | $ | 103,531   |            |  | $          | 544,442   |            |            | $ | 404,027 |        |  | $          | 243,946 | 
|Year ended December 31, 2002 |  | $ | 243,946   |            |  | $          | 527,645   |            |            | $ | 470,805 |        |  | $          | 300,786 | 
|                             |  |   |           |            |  |            |           |            |            |   |         |        | 

F-45



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##### Table of Contents



EXHIBIT INDEX

|        |  |   |  |                                                                                                                                                                                                       
|------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                       
|Number  |  |   |  | Description                                                                                                                                                                                           
|        |  |   |  |                                                                                                                                                                                                       
|3.1     |  |  |  | Restated and Amended Articles of Incorporation.(1)                                                                                                                                                    
|3.1     |  |  |  | Articles of Amendment to the Restated and Amended
Articles of Incorporation.(1A)                                                                                                                      
|3.2     |  |  |  | Amended Bylaws of the Registrant.(1)                                                                                                                                                                  
|4.1     |  |  |  | Specimen Common Stock Certificate of the Registrant.(1)                                                                                                                                               
|4.2     |  |  |  | Form of Representative Option Agreement.(1)                                                                                                                                                           
|4.3     |  |  |  | Share Purchase Agreement dated March 25, 1999 by and
between the
Registrant and the purchasers thereto, together with
Registration Rights
Agreement and Investors Agreement of even date
therewith.(2)
|10.1    |  |  |  | Office Lease between FDC Office I, LLC and Lenders
Resource
Incorporated dated August 14, 1997 and as amended
December 26, 1997.(1)                                                                   
|10.2    |  |  |  | Registrants 1997 Stock Incentive Plan, as amended, with
form of Stock
Option Agreement.(1)                                                                                                           
|10.3    |  |  |  | Credit Agreement dated May 23, 2000 between the
Registrant and Wells
Fargo Bank, N.A.(3)                                                                                                              
|10.5    |  |  |  | Form of Indemnification Agreement.(1)                                                                                                                                                                 
|10.7    |  |  |  | Amendment to Credit Agreement dated March 27, 2001 between
the Registrant and Wells Fargo Bank, N.A.(4)                                                                                               
|10.8    |  |  |  | Experian Affiliate Services Agreement (Lease
Expansion  Colorado), between Experian Information
Solutions, Inc. and
the Registrant, dated April 28, 2000.(5)                                         
|10.11   |  |  |  | Agreement for Service  Consumer Reporting Agencies,
between Equifax
Credit Information Services, Inc. and the Registrant,
dated October 8, 1998.(7)                                                  
|10.12   |  |  |  | Reseller Services Agreement, between the Registrant and
Experian Information Solutions, Inc., dated November 17,
1998.(7)                                                                             
|10.13   |  |  |  | Reseller Service Agreement, between the Registrant and
TransUnion LLC,
dated October 30, 2001.(7)                                                                                                     
|10.14   |  |  |  | Second Amendment to Credit Agreement dated April 30, 2001
between the Registrant and Wells Fargo Bank, N.A.(7)                                                                                        
|10.16   |  |  |  | 1999 Employee Stock Purchase Plan.(6)                                                                                                                                                                 
|10.17   |  |  |  | 1999 Formula Award Stock Option Plan.(6)                                                                                                                                                              
|10.18   |  |  |  | Credit Reporting Company Agreement, between the Registrant
and Federal Home Loan Mortgage Corporation, dated January
1, 2000.(7)                                                                      
|10.19   |  |  |  | Experian Affiliate Services Agreement (Lease Expansion 
South Texas) between Experian Information Solutions, Inc.
and the Registrant dated December 1, 2000.(8)                                      
|10.20   |  |  |  | Experian Agreement Services Agreement (Lease
Expansion  Wyoming) between Experian Information
Solutions, Inc. and the Registrant dated February 1,
2001.(8)                                          
|10.21   |  |  |  | Credit Report Transmission and Access Agreement between
Fannie Mae and the Registrant dated November 11, 1998.(8)                                                                                     
|21      |  |  |  | Subsidiaries of the Registrant.(4)                                                                                                                                                                    
|23.1    |  |  |  | Consent of BDO Seidman LLP.*                                                                                                                                                                          
|23.2    |  |  |  | Consent of Ehrhardt Keefe Steiner & Hottman PC.*                                                                                                                                                      
|99.1    |  |  |  | Chief Executive Officer Certification under Section 906
of the Sarbanes-Oxley Act of 2002.*                                                                                                           
|99.2    |  |  |  | Chief Financial Officer Certification under Section 906
of the Sarbanes-Oxley Act of 2002.*                                                                                                           



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|*   |  | Filed herewith.                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------
|   
|(1) |  | Incorporated by reference to our Registration Statement on Form SB-2
(Registration No. 333-47051).





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##### Table of Contents



|     |  |                                                                                                                                                 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|(1A) |  | Incorporated by reference to our Quarterly Report on Form 10-Q filed
with the Commission on November 13, 2002.                                  
|     |  |                                                                                                                                                 
|(2)  |  | Incorporated by reference to our Current Report on Form 8-K filed with
the Commission on April 12, 1999.                                        
|     |  |                                                                                                                                                 
|(3)  |  | Incorporated by reference to our Current Report on Form 8-K filed with
the Commission on June 6, 2000.                                          
|     |  |                                                                                                                                                 
|(4)  |  | Incorporated by reference to our Annual Report on Form 10-KSB for the
year ended December 31, 2000 filed with the Commission on March 30, 2001. 
|     |  |                                                                                                                                                 
|(5)  |  | Incorporated by reference to our Current Report on Form 8-K filed with
the Commission on August 17, 2000.                                       
|     |  |                                                                                                                                                 
|(6)  |  | Incorporated by reference to our Registration Statement on Form S-8
(Registration No. 333-92693) filed with the Commission on December 14,
1999.
|     |  |                                                                                                                                                 
|(7)  |  | Incorporated by reference to our Annual Report on Form 10-K filed with
the Commission on April 16, 2001.                                        
|     |  |                                                                                                                                                 
|(8)  |  | Incorporated by reference to Amendment No. 1 to our Annual Report on Form
10-K filed with the Commission on April 26, 2001.