##### Table of Contents



---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---



FORM 10-Q



---



(Mark One)

|    |  |                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

OR



|      |  |                                                                                                                                              
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________TO _________

Commission file number:  0-27741

Viador Inc.

(Exact name of registrant as specified in its charter)


|                                                                       |  |                                                  
|---------------------------------------------------------------------- |  | -------------------------------------------------
|DELAWARE(State or other jurisdiction of
incorporation or organization) |  | 94-3234636(I.R.S. Employer Identification Number)

977 Benecia Avenue,
Sunnyvale, California 94085

(Address of principal executive offices) (Zip Code)


Telephone Number (408) 735-5956

(Registrants telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]     No  [   ]

As of May 10, 2002, there were 33,148,412 shares of the Registrants Common
Stock outstanding, par value $0.001 per share.



---

---





---

TABLE OF CONTENTS



|                               |                                                                                               |                                                      |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM I. FINANCIAL STATEMENTS                                                                 
|                               |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                               |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                               |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                               |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II  OTHER INFORMATION   
|                               | ITEM 1. LEGAL PROCEEDINGS.                                                                   
|                               | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                               | ITEM 5. OTHER INFORMATION                                                                    
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                    
|INDEX TO EXHIBITS             
|EXHIBIT 3.2                   



---



##### Table of Contents



VIADOR INC.

FORM 10-Q
INDEX
FOR QUARTER ENDED MARCH 31, 2002

|                               |                                                                                                               |    |      | 
|------------------------------ | ------------------------------------------------------------------------------------------------------------- | -- | ---- | 
|                               |                                                                                                               |    | Page | 
|                               |                                                                                                               |    |      | 
|PART I  FINANCIAL INFORMATION
|ITEM 1.                        | Condensed Consolidated Financial Statements:                                                                  |    |     
|                               | Condensed Consolidated Balance Sheets  March 31, 2002 and
December 31, 2001 (unaudited)                      |    | 3   
|                               | Condensed Consolidated Statements Of Operations  Three Months
Ended March 31, 2002 and 2001     (unaudited)  |    | 4   
|                               | Condensed Consolidated Statements of Cash Flows  Three Months
Ended March 31, 2002 and 2001
     (unaudited) |    | 5   
|                               | Notes to Condensed Consolidated Financial Statements (unaudited)                                              |    | 6   
|ITEM 2.                        | Managements Discussion and Analysis of Financial Condition and
Results of Operations                         |    | 15  
|ITEM 3.                        | Quantitative and Qualitative Disclosures about Market Risk                                                    |    | 30  
|                              
|PART II  OTHER INFORMATION   
|ITEM 1.                        | Legal Proceedings                                                                                             |    | 39  
|ITEM 2.                        | Changes in Securities and Use of Proceeds                                                                     |    | 40  
|ITEM 3.                        | Defaults Upon Senior Securities                                                                               |    | 41  
|ITEM 4.                        | Submission of Matters to a Vote of Security Holders                                                           |    | 41  
|ITEM 5.                        | Other Information                                                                                             |    | 41  
|ITEM 6.                        | Exhibits and Reports on Form 8-K                                                                              |    | 41  
|Signatures                     |                                                                                                               | 42

2



---



##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM I. FINANCIAL STATEMENTS




VIADOR INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data; unaudited)

|                                      |                                                                                                                                                                                                |                                             |     |                |       |                   |     |         |        |  
|------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | --- | -------------- | ----- | ----------------- | --- | ------- | ------ | -
|                                      |                                                                                                                                                                                                |                                             |     | March 31, 2002 |       | December 31, 2001
|                                      |                                                                                                                                                                                                |                                             |     |                |       |                  
|ASSETS                                |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|Current assets:                       |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|                                      | Cash and cash equivalents                                                                                                                                                                      |                                             | $   | 1,238          |       |                   | $   | 518     |       
|                                      | Restricted cash                                                                                                                                                                                |                                             |     | 41             |       |                   |     | 525     |       
|                                      | Accounts receivable, net of allowance of $272
on March 31, 2002, and $380 on December 31,
2001                                                                                                 |                                             |     | 1,312          |       |                   |     | 1,195   |       
|                                      | Other current assets                                                                                                                                                                           |                                             |     | 245            |       |                   |     | 182     |       
|                                      |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|                                      |                                                                                                                                                                                                | Total current assets                        |     |                | 2,836 |                   |     |         | 2,420  |  
|Property and equipment, net           |                                                                                                                                                                                                |                                             | 588 |                |       |                   | 726 |        
|Other assets                          |                                                                                                                                                                                                |                                             | 153 |                |       |                   | 160 |        
|                                      |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|                                      |                                                                                                                                                                                                | Total assets                                |     | $              | 3,577 |                   |     | $       | 3,306  |  
|                                      |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|LIABILITIES AND STOCKHOLDERS DEFICIT |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|Current liabilities:                  |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|                                      | Accounts payable                                                                                                                                                                               |                                             | $   | 358            |       |                   | $   | 2,273   |       
|                                      | Accrued liabilities                                                                                                                                                                            |                                             |     | 555            |       |                   |     | 582     |       
|                                      | Accrued vacation and bonus                                                                                                                                                                     |                                             |     | 224            |       |                   |     | 242     |       
|                                      | Accrued restructuring expense                                                                                                                                                                  |                                             |     | 13             |       |                   |     | 23      |       
|                                      | Deferred revenue                                                                                                                                                                               |                                             |     | 2,665          |       |                   |     | 2,605   |       
|                                      |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|                                      |                                                                                                                                                                                                | Total liabilities                           |     |                | 3,815 |                   |     |         | 5,725  |  
|                                      |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|Convertible note payable              |                                                                                                                                                                                                |                                             | 21  |                |       |                   |    |        
|Stockholders deficit:                |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|                                      | Convertible preferred stock, $0.001 par
value: 10,000,000 shares authorized as of
March 31, 2002 and December 31, 2001; none
issued and outstanding as of March 31, 2002
and December 31, 2001 |                                             |     |               |       |                   |     |        |       
|                                      | Common stock, $0.001 par value: 100,000,000
shares authorized as of March 31, 2002 and
December 31, 2001; 33,147,212 shares issued
and outstanding as of March 31, 2002 and
December 31, 2001  |                                             |     | 34             |       |                   |     | 34      |       
|                                      | Additional paid-in capital                                                                                                                                                                     |                                             |     | 75,749         |       |                   |     | 74,809  |       
|                                      | Deferred stock-based compensation                                                                                                                                                              |                                             |     | (425           | )     |                   |     | (452    | )     
|                                      | Treasury stock                                                                                                                                                                                 |                                             |     | (34            | )     |                   |     | (34     | )     
|                                      | Accumulated deficit                                                                                                                                                                            |                                             |     | (75,591        | )     |                   |     | (76,776 | )     
|                                      | Accumulated other comprehensive income                                                                                                                                                         |                                             |     | 8              |       |                   |     |        |       
|                                      |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|                                      |                                                                                                                                                                                                | Total stockholders deficit                 |     |                | (259  | )                 |     |         | (2,419 | )
|                                      |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        
|                                      |                                                                                                                                                                                                | Total liabilities and stockholders deficit |     | $              | 3,577 |                   |     | $       | 3,306  |  
|                                      |                                                                                                                                                                                                |                                             |     |                |       |                   |     |        

See accompanying notes to condensed consolidated financial statements.

3



---



##### Table of Contents






VIADOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)

|                                                                     |                                                                   |                          |              |        |                    |       |        |        |        |       | 
|-------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------ | ------------ | ------ | ------------------ | ----- | ------ | ------ | ------ | ----- | 
|                                                                     |                                                                   |                          |              |        | Three Months Ended
|                                                                     |                                                                   |                          |              |        | March 31,         
|                                                                     |                                                                   |                          |              |        |                   
|                                                                     |                                                                   |                          |              |        | 2002               |       | 2001  
|                                                                     |                                                                   |                          |              |        |                    |       |       
|Revenue:                                                             |                                                                   |                          |              |        |                    |       |        |       
|                                                                     | License                                                           |                          | $            | 700    |                    |       | $      | 2,254  |       
|                                                                     | Service                                                           |                          |              | 698    |                    |       |        | 1,361  |       
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|                                                                     |                                                                   | Total revenue            |              |        | 1,398              |       |        |        | 3,615  |      
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|Cost of revenue:                                                     |                                                                   |                          |              |        |                    |       |        |       
|                                                                     | Amortization of capitalized software                              |                          |              |       |                    |       |        | 423    |       
|                                                                     | License and service cost of revenue                               |                          |              | 246    |                    |       |        | 1,791  |       
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|                                                                     |                                                                   | Total cost of revenue    |              |        | 246                |       |        |        | 2,214  |      
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|                                                                     |                                                                   |                          | Gross profit |        |                    | 1,152 |        |        |        | 1,401 | 
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|Operating expenses:                                                  |                                                                   |                          |              |        |                    |       |        |       
|                                                                     | Sales and marketing                                               |                          |              | 289    |                    |       |        | 4,586  |       
|                                                                     | Research and development                                          |                          |              | 527    |                    |       |        | 1,949  |       
|                                                                     | General and administrative                                        |                          |              | 425    |                    |       |        | 1,487  |       
|                                                                     | Amortization of goodwill                                          |                          |              |       |                    |       |        | 107    |       
|                                                                     | Amortization of stock-based compensation*                         |                          |              | 4      |                    |       |        | 204    |       
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|                                                                     |                                                                   | Total operating expenses |              |        | 1,245              |       |        |        | 8,333  |      
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|Operating loss                                                       |                                                                   |                          | (93          | )      |                    |       | (6,932 | )     
|Non-cash interest expense                                            |                                                                   |                          | (21          | )      |                    |       |       |       
|Other income and expense, net                                        |                                                                   |                          | (5           | )      |                    |       | 86     |       
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|Net
loss before income taxes and extraordinary item                  |                                                                   |                          | (119         | )      |                    |       | (6,846 | )     
|Extraordinary gain on extinguishment of debt                         |                                                                   |                          | 1,311        |        |                    |       |       |       
|Provision for income taxes                                           |                                                                   |                          | (7           | )      |                    |       |       |       
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|                                                                     |                                                                   | Net income (loss)        |              | $      | 1,185              |       |        | $      | (6,846 | )    
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|Basic
and diluted net loss per share:                                |                                                                   |                          |              |        |                    |       |        |       
|                                                                     | Net loss before extraordinary gain on extinguishment of debt      |                          | $            | (0.00  | )                  |       | $      | (0.38  | )     
|                                                                     | Extraordinary item  gain on extinguishment of debt, net of taxes |                          |              | 0.04   |                    |       |        |       |       
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|                                                                     | Net income (loss)                                                 |                          | $            | 0.04   |                    |       | $      | (0.38  | )     
|                                                                     |                                                                   |                          |              |        |                    |       |        |       
|Weighted average shares used to compute net income (loss) per share: |                                                                   |                          |              |        |                    |       |        |       
|                                                                     | Basic
and diluted                                                 |                          |              | 33,107 |                    |       |        | 18,197 |       



---

|* |  | The allocation of the amortization of stock-based compensation relates to
the expense categories is set forth below (in thousands, unaudited):
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

|                           |  |                    |   |      |  |   |     | 
|-------------------------- |  | ------------------ | - | ---- |  | - | --- | 
|                           |  | Three Months Ended
|                           |  | March 31,         
|                           |  |                   
|                           |  | 2002               |   | 2001
|                           |  |                    |   |     
|Cost of revenue            |  | $                  | 1 |      |  | $ | 2   | 
|Sales and marketing        |  |                    | 1 |      |  |   | 51  | 
|Research and development   |  |                    | 2 |      |  |   | 53  | 
|General and administrative |  |                    |  |      |  |   | 98  | 
|                           |  |                    |   |      |  |   |     | 
|                           |  | $                  | 4 |      |  | $ | 204 | 
|                           |  |                    |   |      |  |   |     | 

See accompanying notes to condensed consolidated financial statements.

4



---



##### Table of Contents






VIADOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |        |        |        |  
|--------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | --------------------------------------------------- | ------ | ------------------ | ---- | ------- | ------ | ------ | ------ | -
|                                                                            |                                                                                        |                                                                      |                                                     |        | Three Months Ended
|                                                                            |                                                                                        |                                                                      |                                                     |        | March 31,         
|                                                                            |                                                                                        |                                                                      |                                                     |        |                   
|                                                                            |                                                                                        |                                                                      |                                                     |        | 2002               |      | 2001   
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |        
|Cash flows from operating activities:                                       |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|Net income (loss)                                                           |                                                                                        | $                                                                    | 1,185                                               |        |                    | $    | (6,846  | )     
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|                                                                            | Depreciation and amortization                                                          |                                                                      |                                                     | 138    |                    |      |         | 861    |       
|                                                                            | Amortization of deferred stock-based compensation                                      |                                                                      |                                                     | 4      |                    |      |         | 204    |       
|                                                                            | Amortization of deferred stock-based charges                                           |                                                                      |                                                     | 23     |                    |      |         | 48     |       
|                                                                            | Extraordinary gain on extinguishment of debt                                           |                                                                      |                                                     | (1,311 | )                  |      |         |       |       
|                                                                            | Non-cash interest expense                                                              |                                                                      |                                                     | 21     |                    |      |         |       |       
|                                                                            | Changes in operating assets and liabilities:                                           |                                                                      |                                                     |        |                    |      |         |        |       
|                                                                            |                                                                                        | Accounts receivable                                                  |                                                     |        | (117               | )    |         |        | 223    |       
|                                                                            |                                                                                        | Other current assets and other assets                                |                                                     |        | (56                | )    |         |        | (156   | )     
|                                                                            |                                                                                        | Accounts payable, accrued liabilities and accrued vacation and bonus |                                                     |        | (165               | )    |         |        | (1,774 | )     
|                                                                            |                                                                                        | Accrued restructuring expenses                                       |                                                     |        | (10                | )    |         |        | (328   | )     
|                                                                            |                                                                                        | Deferred revenue                                                     |                                                     |        | 60                 |      |         |        | (646   | )     
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|                                                                            |                                                                                        |                                                                      | Net cash used in operating activities               |        |                    | (228 | )       |        |        | (8,414 | )
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|Cash flows from investing activities:                                       |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|                                                                            | Capital expenditures                                                                   |                                                                      |                                                     |       |                    |      |         | (436   | )     
|                                                                            | Capitalization of software development costs                                           |                                                                      |                                                     |       |                    |      |         | (93    | )     
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|                                                                            |                                                                                        |                                                                      | Net cash used in investing activities               |        |                    |     |         |        |        | (529   | )
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|Cash flows from financing activities:                                       |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|                                                                            | Repayment of bank line of credit                                                       |                                                                      |                                                     |       |                    |      |         | (5,000 | )     
|                                                                            | Repayment of note payable from business acquisition                                    |                                                                      |                                                     |       |                    |      |         | (1,000 | )     
|                                                                            | Proceeds
from issuance of convertible note payable and warrants, net of issuance costs |                                                                      |                                                     | 940    |                    |      |         |       |       
|                                                                            | Proceeds from issuance of common stock                                                 |                                                                      |                                                     |       |                    |      |         | 6      |       
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|                                                                            |                                                                                        |                                                                      | Net cash provided by (used in) financing activities |        |                    | 940  |         |        |        | (5,994 | )
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|Effect of exchange rate on cash and cash equivalents                        |                                                                                        |                                                                      | 8                                                   |        |                    |      | 28      |       
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|Net increase (decrease) in cash and cash equivalents                        |                                                                                        |                                                                      | 720                                                 |        |                    |      | (14,909 | )     
|Cash and cash equivalents, beginning of period                              |                                                                                        |                                                                      | 518                                                 |        |                    |      | 15,955  |       
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|Cash and cash equivalents, end of period                                    |                                                                                        | $                                                                    | 1,238                                               |        |                    | $    | 1,046   |       
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|Supplemental disclosure of cash flow information:                           |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|                                                                            | Cash paid for interest                                                                 |                                                                      | $                                                   | 7      |                    |      | $       | 3      |       
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|Supplemental disclosure of non-cash financing activities:                   |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|                                                                            | Value
of beneficial conversion feature on convertible note
payable                     |                                                                      | $                                                   | 628    |                    |      | $       |       |       
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       
|                                                                            | Value of warrants issued with convertible note payable                                 |                                                                      | $                                                   | 372    |                    |      | $       |       |       
|                                                                            |                                                                                        |                                                                      |                                                     |        |                    |      |         |       

See accompanying notes to condensed consolidated financial statements.

5



---



##### Table of Contents






VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements
include the accounts of Viador Inc. and its subsidiary (referred to hereafter
as Viador, we, us or our), after elimination of all intercompany
accounts and transactions, and have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The results of operations for the interim periods presented are not necessarily
indicative of the results expected for any subsequent quarter or for the entire
year ending December 31, 2002. These condensed consolidated financial
statements and the notes included herein should be read in conjunction with
Viadors audited financial statements and notes for the year ended December 31,
2001 included in our Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2001.

The condensed consolidated financial statements have been prepared on a
going concern basis, which contemplates, among other things, the realization of
assets and the satisfaction of liabilities in the normal course of business.
Although Viador reported net income of $1.2
million for the most recent quarter ended March 31, 2002, our recurring net
losses, including $6.8 million for the quarter ended March 31, 2001 and $24.5
million for the year ended December 31, 2001, raise substantial doubt regarding
our ability to continue as a going concern. In 2001, our revenue was not
sufficient to support our operations, and revenue will not be sufficient to
support operations until such time, if any, that Viadors enterprise
information portal software gains substantial market acceptance. Viador expects
to continue to use cash in operations and incur operating losses in the
foreseeable future, and may need to obtain additional funding to sustain our
operations in 2002. We obtained debt financing of $1.0 million in the first
quarter of 2002, as well as a commitment for additional debt financing of up to
$2.0 million, subject to our meeting certain financial and business conditions
(see Note 3). We believe that these actions will allow Viador to continue as a
going concern for the next twelve months. However, the consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amount and classification of
liabilities or any other adjustments that might be necessary should Viador be
unable to continue as a going concern.

Note 2. Summary of Significant Accounting Policies



| | (a) |  | Use of Estimates
| | --- |  | ----------------

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.



| | (b) |  | Revenue Recognition
| | --- |  | -------------------

Viador licenses its software products to end user customers, original
equipment manufacturers, or OEMs, and value added resellers, or VARs. Software
license revenue from sales to end users is generally recognized upon receipt of
a signed contract or purchase order and delivery of the software, provided the
related fee is fixed and determinable and collectibility of the fee is probable
and vendor-specific objective evidence for all undelivered elements has been
established. Vendor-specific objective evidence of fair value for consulting
services is based on the price charged when those services are sold separately.
We establish sufficient vendor-specific objective evidence of the fair value of
post-contract customer support based on the contractually specified annual
renewal rates for such services. License revenue is recorded under the residual
method described in SOP 98-9 for arrangements in which licenses are sold with
consulting services, post-contract customer support or both. However, the
entire fee related to arrangements that require us to deliver specified
additional features or upgrades is deferred until delivery of the feature
and/or upgrade has occurred, unless we have sufficient vendor-specific
objective evidence of fair value to allocate revenue to the various elements in
these arrangements. Fees related to arrangements that require Viador to deliver
unspecified additional products are deferred and recognized ratably over the
term of the contract. All of the

6



---



##### Table of Contents



VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

contract software revenue related to arrangements involving consulting
services that are essential to the functionality of the software at the
customer site is deferred and recognized as the services are performed.

Software revenue related to arrangements to maintain the compatibility of
our software products with the software products or platforms of the customer
or other vendor is recognized ratably over the term of the arrangement. License
revenue from OEM arrangements in which Viador earns a royalty based on a
specified percentage of OEM sales to end users incorporating our software is
recognized upon delivery by the OEM to the end user provided collection is
probable.

Service revenue consists of fees from professional services including
integration of software, application development, training and software
installation. Viador bills professional services fees on a time and materials
basis. We recognize professional services fees as the services are performed.

Customers typically purchase post-contract customer support agreements
annually, which are priced based on a fixed percentage of the product license
fee. Viador recognizes revenue allocated to post-contract customer support
agreements ratably over the term of the agreements, which are typically one
year.

Cost of license revenue includes royalties due to third parties for
integrated technology, the cost of manuals and product documentation,
production media used to deliver our products and shipping costs, including the
costs associated with the electronic transmission of software to new customers,
amortization of capitalized software development costs, and an allocation of
our facilities, communications and depreciation expenses.

Cost of service revenue includes salaries and related expenses for
consulting services, customer support, implementation and training services
organizations, and costs of contracting with third parties that provide
services to customers.



| | (c) |  | Financial Instruments and Concentration of Credit Risk
| | --- |  | ------------------------------------------------------

The carrying value of our financial instruments, including cash and cash
equivalents, accounts receivable and payable and notes payable approximates
fair market value. Financial instruments that potentially subject Viador to
concentrations of credit risk consist primarily of cash and cash equivalents,
trade accounts receivable and convertible notes payable (see Note 3).

Viador sells its products and services to customers in diversified
industries. Credit risk is concentrated in North America, Europe and Asia. We
perform ongoing credit evaluations of our customers financial condition and,
generally, require no collateral from our customers. We maintain reserves to
provide for estimated credit losses. Actual credit losses could differ from
such estimates.



| | (d) |  | Software Development Costs
| | --- |  | --------------------------

Viador accounts for its software development expenses in accordance with
Statement of Financial Accounting Standards No. 86, Accounting for the Costs
of Computer Software to Be Sold, Leased, or Otherwise Marketed. This statement
requires that, once technological feasibility of a new product enhancement has
been established, all subsequent costs incurred in developing that product or
enhancement to a commercially acceptable level be capitalized and amortized.
Viador uses a detailed program design approach in determining technological
feasibility. All software costs are amortized as a cost of revenue either on a
straight-line basis, or on the basis of each products projected revenue,
whichever results in greater amortization, over the remaining estimated
economic life of product, which is generally estimated to be two years. In the
quarter ended June 30, 2001, the remaining balance of previously capitalized
software development costs was fully amortized as projection of any future
revenue from underlying product sales was deemed to be uncertain for purposes
of evaluating recoverability. Consequently, net capitalized software
development costs amounted to zero as of March 31, 2002. We recorded
amortization of software development costs of approximately $423,000 for the
quarter ended March 31, 2001 in cost of revenue.

7



---



##### Table of Contents



VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)



| | (e) |  | Stock-Based Compensation
| | --- |  | ------------------------

Viador applies the intrinsic value-based method of accounting prescribed
by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, in accounting for its employee stock option plan. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. In
April 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 44 (FIN No. 44), Accounting for Certain Transactions
Involving Stock Compensation: An Interpretation of APB No. 25. Viador has
adopted the provisions of FIN No. 44, and such adoption did not materially
impact our results of operations. SFAS No. 123, Accounting for Stock-Based
Compensation, established accounting and disclosure requirements using a fair
value-based method of accounting for stock-based employee compensation plans.
As allowed by SFAS No. 123, we have elected to continue to apply the intrinsic
value-based method of accounting described above, and have adopted the
disclosure requirements of SFAS No. 123.



| | (f) |  | Comprehensive Income (Loss)
| | --- |  | ---------------------------

SFAS No. 130, Reporting Comprehensive Income, establishes standards for
the reporting and display of comprehensive income and its components in the
financial statements. Items of comprehensive income (loss) that Viador
currently reports relate to foreign currency translation adjustments.

The components of comprehensive loss, net of tax, for the three months
ended March 31, 2002 and 2001 were as follows (in thousands):

|                                   |                                          |                                   |       |                    |       |      |        |     |        |  
|---------------------------------- | ---------------------------------------- | --------------------------------- | ----- | ------------------ | ----- | ---- | ------ | --- | ------ | -
|                                   |                                          |                                   |       | Three Months Ended
|                                   |                                          |                                   |       | March 31,         
|                                   |                                          |                                   |       |                   
|                                   |                                          |                                   |       | 2002               |       | 2001
|                                   |                                          |                                   |       |                    |       |     
|Net income (loss)                  |                                          | $                                 | 1,185 |                    |       | $    | (6,846 | )  
|Other comprehensive income (loss): |                                          |                                   |       |                    |       |      |        |    
|                                   | Foreign currency translation adjustments |                                   |       | 8                  |       |      |        | (28 | )     
|                                   |                                          |                                   |       |                    |       |      |        |    
|                                   |                                          | Total comprehensive income (loss) |       | $                  | 1,193 |      |        | $   | (6,874 | )
|                                   |                                          |                                   |       |                    |       |      |        |    



| | (g) |  | Goodwill and Other Intangible Assets
| | --- |  | ------------------------------------

In July 2001, the
FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets,which supersedes APB Opinion No. 17,
Intangible Assets.SFAS No. 142 requires that
goodwill and other intangibles with an indefinite useful life not be amortized,
but be tested for impairment at least annually by applying a fair-value-based
test. Also, if the benefit of an intangible asset is obtained through
contractual or other legal rights, or if the intangible asset can be sold,
transferred, licensed, rented or exchanged, an acquired intangible asset should
be separately recognized. Viador adopted SFAS No. 142 in the
quarter ended March 31, 2002. The adoption of SFAS No. 142 did not have a material effect on our
consolidated financial position or results of operations. We had no goodwill
and no significant other intangible assets as of March 31, 2002 or December 31,
2001.

On January 20, 2000, Viador acquired a distributor in Switzerland, the
purchase price allocation of which resulted in $2.1 million in goodwill. In the
three months ended June 30, 2001, the remaining unamortized portion of this
goodwill was deemed impaired as actual revenue for the acquired
company was
below projected revenue, and key management personnel terminated employment
with the subsidiary located in Switzerland. Amortization expense related to
goodwill was approximately $107,000 for the three months ended March 31, 2001.

8



---



##### Table of Contents



VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

The following table presents the impact of SFAS No. 142 on net income
(loss) per share if the standard been in effect for the first quarter of 2001
(in thousands, except per-share amounts):

|                                                         |                          |   |                    |   |      |   |        |     | 
|-------------------------------------------------------- | ------------------------ | - | ------------------ | - | ---- | - | ------ | --- | 
|                                                         |                          |   | Three Months Ended
|                                                         |                          |   | March 31,         
|                                                         |                          |   |                   
|                                                         |                          |   | 2002               |   | 2001
|                                                         |                          |   |                    |   |     
|Reported net income (loss)                               |                          | $ | 1,185              |   |      | $ | (6,846 | )  
|Adjustments:                                             |                          |   |                    |   |      |   |        |    
|                                                         | Amortization of goodwill |   |                    |  |      |   |        | 107 | 
|                                                         |                          |   |                    |   |      |   |        |    
|Adjusted net income (loss)                               |                          | $ | 1,185              |   |      | $ | (6,739 | )  
|                                                         |                          |   |                    |   |      |   |        |    
|Reported
net income (loss) per share  basic and diluted |                          | $ | 0.04               |   |      | $ | (0.38  | )  
|                                                         |                          |   |                    |   |      |   |        |    
|Adjusted
net income (loss) per share  basic and diluted |                          | $ | 0.04               |   |      | $ | (0.37  | )  
|                                                         |                          |   |                    |   |      |   |        |    
|



| | (h) |  | Impairment of Long-Lived Assets
| | --- |  | -------------------------------

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets.SFAS No. 144 serves to clarify
and further define the provisions of SFAS No. 121 Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
SFAS No. 144 does not apply to goodwill and other intangible assets that are
not amortized. Viador adopted SFAS No. 144 effective January 1, 2002. The
adoption of Statement 144 did not have a material effect on our consolidated
financial position or results of operations.



| | (i) |  | Recent Accounting Pronouncements
| | --- |  | --------------------------------

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations.SFAS No. 143 requires that the fair value of an asset
retirement obligation be recorded as a liability in the period in which it
is incurred. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. Viador expects to adopt SFAS No. 143 effective January 1,
2003. The adoption of Statement 143 is not expected to have a material effect
on our consolidated balance sheet or results of operations.

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.SFAS No. 145 rescinds SFAS No. 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. As a
result, the criteria in APB Opinion No. 30 will now be used to classify those gains
and losses. SFAS No. 64 amended SFAS No. 4, and is no longer necessary because
SFAS No. 4 has been rescinded. SFAS No. 44 was issued to establish accounting
requirements for the effects of transition to the provisions of the Motor
Carrier Act of 1980. Because the transition has been completed, SFAS No. 44 is
no longer necessary. SFAS No. 145 amends SFAS No. 13 to require that certain
lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback
transactions.

The provisions of this Statement related to the rescission of SFAS No. 4
will be applied in fiscal years beginning after May 15, 2002. Any gain or loss
on extinguishment of debt that was classified as an extraordinary item in prior
periods presented that does not meet the criteria in APB Opinion No. 30 for
classification as an extraordinary item shall be reclassified. Early
application of the provisions of this Statement related to the rescission of
SFAS No. 4 is encouraged. Viador expects to adopt this provision of SFAS No.
145 effective with its fiscal year beginning January 1, 2003, at which time it
expects to reclassify its gain associated with extinguishment of debt out of
extraordinary items.

Certain other provisions of this Statement related to SFAS No. 13 are
effective for transactions occurring after May 15, 2002, with early application
encouraged. All other provisions of this Statement are effective for financial

9



---



##### Table of Contents



VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

statements issued on or after May 15, 2002, with early application
encouraged. Viador does not anticipate the remaining provisions of this
statement will have a material effect on its consolidated financial position or
results of operations.



| | (j) |  | Reclassifications
| | --- |  | -----------------

Certain prior period balances have been reclassified to conform to the current
period presentations.

Note 3. Note Payable

On March 18, 2002, Viador received $1.0 million in financing through a
private offering of debt securities and a commitment to provide additional debt
financing of up to $2.0 million upon request from Mr. Heungyeung Yeung, who
currently holds certain of Viadors equity securities. Mr. Yeungs commitment
to provide $2.0 million in additional debt financing is conditioned upon none
of the following events (default events) having occurred: 1) a material
adverse event affecting Viadors business, operations, properties, financial
condition, or prospects which would materially impair Viadors ability to
perform its obligations under the agreement and any of the notes and warrants
issued in connection with this financing; 2) the closing of a debt or equity
financing or other financial arrangement by Viador involving proceeds to it of
$1.0 million or more from investors not related to Mr. Yeung that would result
in such investors holding twenty-five percent (25%) or more of Viadors
outstanding securities; 3) any material change in Viadors management team, and
4) any transaction that would result in a change in voting control of Viador.
The $1.0 million obligation is secured by the accounts receivable of Viador.
The note is callable if any of the following conditions occur: 1) Viador fails
to makes any payment when due, 2) the breach of any condition of the note and
subsequent failure to cure within twenty (20) days following notice of such
default, 3) any transaction that would result in a change in
voting control of Viador, and 4) the filing of a petition by or
against Viador under any provision of applicable bankruptcy or similar law
relating to insolvency, or appointment of a receiver, trustee, custodian, or
liquidator of or for all or any substantial part of the assets or property of
Viador, or the making of a general assignment for the benefit of creditors by
Viador.

As consideration for the funds and the commitment to provide additional
funds, Viador issued a convertible promissory note and two warrants to Mr.
Yeung. The note has a principal amount of $1.0 million and is convertible into
16,711,230 shares of Viadors common stock. The note accrues interest at a
stated rate of 1% per year and matures on March 18, 2004.

One of the warrants is exercisable in whole or in part, at any time or
from time to time, for 3,333,333 shares of Viadors common stock at an exercise
price of $0.06 per share. The second warrant is exercisable for an aggregate of
3,333,333 shares of Viadors common stock at an exercise price of $0.06 per
share, but is subject to vesting, such that 25% of the warrant becomes
exercisable every six months and is entirely exercisable on March 18, 2004, two
years after the issuance date. The second warrant ceases to vest in the event
Mr. Yeung fails to fulfill his commitment to provide additional funding.
However, if Mr. Yeungs failure to provide additional funding is due to
Viadors failure to meet any of the conditions above, the second warrant
becomes fully exercisable. Both warrants expire on March 18, 2005.

We allocated the
total proceeds received of $1.0 million to the
warrants using the Black-Scholes
option pricing model using the following assumptions: no dividends; contractual
life of 3 years; risk-free interest rate of 3.1%; and expected
volatility of 187%,
resulting in a value of the warrants of approximately $372,000, and the
beneficial conversion feature, which was limited to the remaining proceeds of
$628,000. Accordingly, we recorded the beneficial conversion feature
of the convertible note of
$628,000 as additional paid-in capital and initially recorded the carrying
value of the note at zero. The carrying value of the note is being accreted to
its face value of $1.0 million over the term of the note (24 months) using the
effective interest method, resulting in a non-cash interest charge of $21,000
during the first quarter of 2002. In connection with this financing, we
incurred a commission payable to Mr. Yeung in the amount of
$60,000, which reduced the amount we recorded as proceeds from this
arrangement. As of March 31, 2002, the carrying amount of the
note payable of $21,000 was net of unamortized discount of $979,000.

10



---



##### Table of Contents



VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

Each time Viador receives additional funding from Mr. Yeung, it will issue
to Mr. Yeung a convertible promissory note with a principal amount equal to the
amount of such additional funding. Interest on any such note will accrue at a
rate equal to the sum of (a) the prime rate in effect on loans made by
Citibank, N.A. as of the date of such note, plus (b) three percent (3%). Any
such note will be convertible into either shares of common stock or any equity
securities Viador issues to a third party or third parties in one or more bona
fide, arms-length transactions for the purpose of raising capital during the
term of such note. If the note is converted into Viadors common stock, the
note will be convertible into a number of shares of common stock equal to the
total principal and interest amount outstanding on the note at the time of
conversion divided by $0.05984. If the note is converted into another class of
equity securities issued in an equity financing, the note will be convertible
into a number of shares of such equity securities equal to the total principal
and interest amount outstanding on the note at the time of conversion divided
by the price per share or unit at which such equity securities are sold to
third party investors.

None of the notes or warrants issued or issuable to Mr. Yeung are
convertible or exercisable if the conversion or exercise of any such note or
warrant would result in Mr. Yeung or his affiliates holding more than 49.9% of
Viadors issued and outstanding voting stock.

Note 4. Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted-average
number of outstanding shares of common stock excluding shares of restricted
stock subject to repurchase. Diluted net income (loss) per share is computed
using the weighted-average number of shares of common stock outstanding
including, when dilutive, shares of restricted stock subject to repurchase,
potential common shares from outstanding stock options and warrants to purchase
common stock computed using the treasury stock method, and from convertible
securities using the as if converted method. The potential common shares
associated with shares issuable under stock options, warrants and convertible
notes (see Note 5), as well as restricted shares subject to
repurchase, have been excluded from the computation of diluted
net income (loss) per share for all periods presented because the effect would have been
antidilutive. In accordance with SFAS No. 128,Earnings per Share, the
control number in determining whether those potential common shares are
dilutive or antidilutive is income (loss) from continuing operations before
extraordinary items. The following is a reconciliation of shares used to compute earnings per share (in thousands):

11



---



##### Table of Contents



VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

|                                                            |  |                    |        |      |  |  |        |  
|----------------------------------------------------------- |  | ------------------ | ------ | ---- |  |  | ------ | -
|                                                            |  | Three Months Ended
|                                                            |  | March 31,         
|                                                            |  |                   
|                                                            |  | 2002               |        | 2001
|                                                            |  |                    |        |     
|Weighted average shares outstanding                         |  |                    | 33,147 |      |  |  | 18,228 |  
|Weighted average restricted shares subject to repurchase    |  |                    | (40    | )    |  |  | (31    | )
|                                                            |  |                    |        |      |  |  |        |  
|Shares used to compute basic and diluted earnings per share |  |                    | 33,107 |      |  |  | 18,197 |  
|                                                            |  |                    |        |      |  |  |        |  

Note 5. Shares Reserved for Future Issuance

Shares of common stock reserved for future issuance is as follows (in
thousands):

|                                                                            |  |           |        |              |  |           |        |  |  |  |       | 
|--------------------------------------------------------------------------- |  | --------- | ------ | ------------ |  | --------- | ------ |  |  |  | ----- | 
|                                                                            |  | March 31, |        | December 31, |  | March 31,
|                                                                            |  | 2002      |        | 2001         |  | 2001     
|                                                                            |  |           |        |              |  |          
|Shares issuable under stock options                                         |  |           | 5,051  |              |  |           | 5,051  |  |  |  | 5,677 | 
|Shares available for future grant under stock
option plans                  |  |           | 5,948  |              |  |           | 4,174  |  |  |  | 1,073 | 
|Shares available for future issuance under the
Employee Stock Purchase Plan |  |           | 1,378  |              |  |           | 715    |  |  |  | 783   | 
|Shares issuable pursuant to warrants to purchase
common stock               |  |           | 10,885 |              |  |           | 4,268  |  |  |  | 50    | 
|Shares issuable pursuant to convertible note payable                        |  |           | 16,711 |              |  |           |       |  |  |  |      | 
|                                                                            |  |           |        |              |  |           |        |  |  |  |       | 
|                                                                            |  |           | 39,973 |              |  |           | 14,208 |  |  |  | 7,583 | 
|                                                                            |  |           |        |              |  |           |        |  |  |  |       | 

12



---



##### Table of Contents



VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

Note 6. Restructuring Expense and Impairment

In December 2000, the Board of Directors approved a restructuring program
designed to streamline Viadors business and to reduce costs, which resulted in
the accrual of a restructuring expense of $693,000. During 2001, the Board of
Directors approved restructuring programs designed to further streamline
Viadors business and to reduce costs, resulting in additional restructuring
expense of $251,000. The following table depicts the activity for the
restructuring accrual through March 31, 2002 (in thousands):

|                                                   |       |   |           |    |      |   |       |   |  |   |      |    | 
|-------------------------------------------------- | ----- | - | --------- | -- | ---- | - | ----- | - |  | - | ---- | -- | 
|                                                   |       |   | Severance |    | Rent |   | Total
|                                                   |       |   |           |    |      |   |      
|Restructuring accrual, December 31, 2000           |       | $ | 234       |    |      | $ | 459   |   |  | $ | 693  |   
|Additions to restructuring accrual, April 2001     |       |   | 144       |    |      |   |      |   |  |   | 144  |   
|Additions to restructuring accrual, June 2001      |       |   | 73        |    |      |   |      |   |  |   | 73   |   
|Additions to restructuring accrual, September 2001 |       |   | 10        |    |      |   |      |   |  |   | 10   |   
|Additions to restructuring accrual, December 2001  |       |   | 24        |    |      |   |      |   |  |   | 24   |   
|Cash payments (January 2001 through December 2001) |       |   | (462      | )  |      |   | (459  | ) |  |   | (921 | ) 
|Cash payments (January 2002 through March 2002)    |       |   | (10       | )  |      |   |      |   |  |   | (10  | ) 
|                                                   |       |   |           |    |      |   |       |   |  |   |      |   
|                                                   | Total |   | $         | 13 |      |   | $     |  |  |   | $    | 13 | 
|                                                   |       |   |           |    |      |   |       |   |  |   |      |   

Note 7. Extraordinary Gain on Extinguishment of Debt

In the fourth quarter of 2001, Viador recorded an extraordinary gain on
extinguishment of debt to reflect settlement of an outstanding debt of $314,000
with a payment of $128,000. Separately, in December 2001, Viador reversed a
disputed payable in the amount of $191,000, which had been carried for
approximately two years. Viador was unsuccessful in its attempts to contact
this vendor, and therefore believes that this vendor is no longer in business.
This $191,000 gain was also recorded as an extraordinary gain on extinguishment
of debt.

In the first quarter of 2002, Viador consummated workout agreements with
certain of its creditors, representing approximately $1.8 million of its
outstanding accounts payable, pursuant to which these creditors agreed to
released Viador from any obligation to repay any such amounts in exchange for
payment of 25% of the total debt Viador owed them as of September 30, 2001.
Viador paid the creditors that were party to the workout agreements their
respective agreed upon amounts aggregating approximately $467,000, resulting in
the recognition of an extraordinary gain on extinguishment of approximately
$1.3 million.

These amounts were not included in gross income for income tax purposes
because the income from the discharge of indebtedness is not included in gross
income for tax purposes when a companys liabilities exceed the fair value of
its assets. However, net tax operating loss for the current and prior
years were reduced by
the amount discharged.

Note 8. Geographic, Segment and Significant Customer Information

Viador has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
manner in which public companies report information about operating segments in
annual and interim financial statements. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The method for determining what information to report is based on
the way management organizes the operating segments within Viador for the
purposes of making operating decisions and assessing financial performance.

13



---



##### Table of Contents



VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

Viadors chief operating decision-maker is considered to be the chief
executive officer, or CEO. The CEO reviews financial information presented on
an entity level basis accompanied by disaggregated information about revenue by
product type for purposes of making operating decisions and assessing financial
performance. The entity level financial information is identical to the
information presented in the accompanying statements of operations. Therefore,
Viador has determined that it operates in a single operating segment:
Enterprise information portal systems. The disaggregated information reviewed
on a product basis is as follows (in thousands):

|         |          |               |   |                    |       |      |   |       |       | 
|-------- | -------- | ------------- | - | ------------------ | ----- | ---- | - | ----- | ----- | 
|         |          |               |   | Three Months Ended
|         |          |               |   | March 31,         
|         |          |               |   |                   
|         |          |               |   | 2002               |       | 2001
|         |          |               |   |                    |       |     
|Revenue: |          |               |   |                    |       |      |   |      
|         | License  |               | $ | 700                |       |      | $ | 2,254 |      
|         | Services |               |   | 698                |       |      |   | 1,361 |      
|         |          |               |   |                    |       |      |   |      
|         |          | Total revenue |   | $                  | 1,398 |      |   | $     | 3,615 | 
|         |          |               |   |                    |       |      |   |      

Significant customer information is as follows:

|           |  |                             |    |                  |  |                |    |   |  |  |    |  
|---------- |  | --------------------------- | -- | ---------------- |  | -------------- | -- | - |  |  | -- | -
|           |  | Percentage of Total Revenue |    |                  |  |               
|           |  | Three Months Ended          |    | Percentage of   
|           |  | March 31,                   |    | Total Accounts  
|           |  |                             |    | Receivable as of
|           |  | 2002                        |    | 2001             |  | March 31, 2002
|           |  |                             |    |                  |  |               
|Customer A |  |                             | 28 | %                |  |                | 22 | % |  |  | 30 | %

Viador markets products mainly from operations in North America.
International sales are primarily to customers in Europe and Asia Pacific.
Revenue derived from international sales was 7% of total revenue for the
three months ended March 31, 2002 and 39% of total revenue for the three months
ended March 31, 2001.

Revenue aggregating 6% of total revenue for the three months ended March
31, 2002 was generated from a customer who is also a stockholder of Viador,
and whose ownership percentage was 1% as of March 31, 2002. Revenue aggregating
3% of total revenue for the three months ended March 31, 2001 was generated
from a customer who is also a stockholder of Viador, and whose ownership
percentage was 2% as of March 31, 2001.

Note 8. Litigation

Pending Class Action Law Suit

On November 13, 2001, Viador and certain of its current and former
officers and directors, together with the underwriters of its October 25, 1999
Initial Public Offering (IPO), were named as defendants in a class action
complaint alleging violations of the federal securities laws in the United
States District Court, Southern District of New York. The Court appointed a
lead plaintiff on April 15, 2002, and plaintiffs filed an Amended Class Action
Complaint on April 22, 2002. The essence of the complaint is that defendants
issued and sold Viadors common stock pursuant to the IPO without disclosing to
investors that certain underwriters of the IPO had solicited and received
excessive and undisclosed commissions from certain investors. The complaint
also alleges that the Registration Statement for the IPO failed to disclose
that the underwriters allocated Viador shares to customers in exchange for the
customers promises to purchase additional shares in the after-market at
pre-determined prices above the offering price, thereby maintaining, distorting
and/or inflating the market price for the shares in the after-market.

The lawsuit is part of the IPO Allocation Securities Litigation pending
in the United States District Court for the Southern District of New York.
Approximately 310 companies and over 30 underwriters have been sued in actions
alleging claims nearly identical to those alleged against Viador. The cases are
being coordinated for pre-trial purposes before the Hon. Schira Scheindlin. The
IPO Allocation Securities Litigation is in its early stages. No date

14



---



##### Table of Contents



VIADOR INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

has been set for the filing of responsive pleadings by any defendant. The
Court has indicated that it intends to follow specialized but as yet
unidentified procedures for the submission and determination of motions to
dismiss. Discovery is stayed pending the outcome of motions to dismiss. This
proceeding is at a very early stage and Viador is unable to speculate as to its
ultimate outcome.

Other Pending Litigation

On January 11,
2002, William Grinder, an individual, filed a personal injury
complaint for unspecified monetary damages in San Francisco County
Superior Court alleging causes of action for negligence and negligent
hiring against Viador and certain other named defendants. Viador is
currently investigating the allegations and cannot evaluate
plaintiffs claims at this time.

Note 9. Subsequent Event

On May 10, 2002,
attorneys for one of Viadors customers, CMS, sent a letter to
Viador reporting that CMS had filed a suit against Viador in the
United States District Court for the Eastern District of Virginia,
Alexandria Division. According to the letter, the complaint alleges
breach of contract and seeks monetary damages of approximately
$281,000. Viador has not been served with the complaint and cannot
evaluate its claims or Viadors response at this time.

15



---



##### Table of Contents








|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------

Except for the historical financial information contained herein, the
matters discussed in this quarterly report on Form 10-Q may be considered
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Act of
1934, as amended. Such statements include declarations regarding the intent,
beliefs or current expectations of Viador and our management. Such
forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties. Actual results could differ materially
from those indicated by such forward-looking statements. We undertake no
obligation to publicly release the results of any revision to these
forward-looking statements that may be made to reflect events or circumstances
after the dates hereof or to reflect the occurrence of unanticipated events.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not limited to:
Viadors short operating history, which makes it difficult to predict its
future results of operations; the dependence of Viadors revenue upon its suite
of products; Viadors history of operating losses and expected future losses,
which could impede its ability to address the risks and difficulties
encountered by companies in new and rapidly evolving markets; Viadors future
operating results could fluctuate, which may cause volatility or a decline in
the price of Viadors stock.

Overview

We develop and market Internet software that enables businesses to create
enterprise information portals for both business-to-business, or B2B, and
business-to-employee, or B2E, use. An enterprise information portal gives users
a single browser-based interface with which to quickly and easily access
information from a variety of enterprise data sources. We believe the Viador
E-Portal offers a comprehensive and integrated enterprise information portal
that is specifically designed for the World Wide Web and works with a
customers existing hardware and software systems, without the need for
additional technology expenditures. It provides our customers with the ability
to manage and share information on a secure and cost-effective basis that can
accommodate significant increases in the number of users and amount of
information. As more users contribute increasing amounts of information to the
portal, we believe our customers are able to increase business productivity and
efficiency.

We were incorporated as Infospace Inc. in California in December 1995. In
January 1999, we changed our name to Viador Inc., and we subsequently
reincorporated in the State of Delaware. In October 1999, we raised gross
proceeds of $41.4 million through an initial public offering. Since our
inception, we have developed web-based products designed to permit our
customers to search, analyze and deliver relevant information to users within
and outside the enterprise. We delivered our first product, Web-Charts, in
September 1996. Over the last two years, we introduced more sophisticated web
products and a proprietary web security server product. In the first quarter of
1999, we first shipped a fully integrated web-based product suite called the
Viador E-Portal, which integrated our prior product offerings. In the fourth
quarter of 1999, we introduced the Business-to-Business E-Portal, a product and
services offering that is designed to allow personalized communication and
information exchange between businesses. In the second quarter of 2000, we
introduced Viador Portlets, a technology for easily extending the Viador
E-Portal by adding tightly integrated modules for accessing additional data
sources and applications. In the fourth quarter of 2000, we introduced Viador
E-Portal Express, a portal user interface that set new standards for
performance and scalability.

We delivered significantly enhanced products in the fourth quarter of 2001
as follows: In October 2001, we announced general availability of our E-Portal
6.4, a major advance that allows enterprises to rapidly deploy custom user
interfaces based on open standards and point-and-click design tools. In
November 2001, we announced E-Portal 6.4 which complies with the standards for
accessible compliance with the Web Accessibility Initiative, or WAI of the
World Wide Web Consortium, or W3C.

Historically, we have focused our selling efforts in North America and
derived a majority of our revenue from North America. However, we believe it is
important to have an international presence and we intend to continue to
conduct business in markets outside the United States, primarily through
distributors. We conduct business internationally through a variety of
distribution and service partners in Europe, Greece, the United Kingdom and
Canada. In Asia, we use distributors in Japan, Korea, Indonesia, China, Hong
Kong and Thailand.

16



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

Recent Events

Debt Financing

On March 18, 2002, Viador received $1.0 million in financing through a
private offering of debt securities and a commitment to provide additional debt
financing of up to $2.0 million upon request from an existing stockholder. The
commitment to provide $2.0 million in additional debt financing is subject to
our meeting certain financial and business conditions and obligations under the
notes and warrants issued in connection with the $1.0 million debt financing.
For more information regarding this debt financing, see Note 3 of the Notes to
Condensed Consolidated Financial Statements.

Renegotiation with Creditors

In the first quarter of 2002, Viador consummated workout agreements with
certain of its creditors representing approximately $1.8 million of its
outstanding accounts payable. Under the workout agreement, these creditors
agreed to release us from any obligation to repay any such amounts in exchange
for payment of 25% of the total debt we owed them as of September 30, 2001,
which aggregated approximately $467,000, resulting in the recognition of an
extraordinary gain on extinguishment of debt of $1.3 million. For more
information regarding the workout agreement, see Note 7 of the Notes to
Condensed Consolidated Financial Statements.

Class Action Law Suit

On November 13, 2001, Viador and certain of its current and former
officers and directors, together with the underwriters of its October 25, 1999
Initial Public Offering (IPO), were named as defendants in a class action
complaint alleging violations of the federal securities laws in the United
States District Court, Southern District of New York. The Court appointed a
lead plaintiff on April 15, 2002, and plaintiffs filed an Amended Class Action
Complaint on April 22, 2002. The essence of the complaint is that defendants
issued and sold Viadors common stock pursuant to the IPO without disclosing to
investors that certain underwriters of the IPO had solicited and received
excessive and undisclosed commissions from certain investors. The complaint
also alleges that the Registration Statement for the IPO failed to disclose
that the underwriters allocated Viador shares to customers in exchange for the
customers promises to purchase additional shares in the after-market at
pre-determined prices above the offering price, thereby maintaining, distorting
and/or inflating the market price for the shares in the after-market.

The lawsuit is part of the IPO Allocation Securities Litigation pending
in the United States District Court for the Southern District of New York.
Approximately 310 companies and over 30 underwriters have been sued in actions
alleging claims nearly identical to those alleged against Viador. The cases are
being coordinated for pre-trial purposes before the Hon. Schira Scheindlin. The
IPO Allocation Securities Litigation is in its early stages. No date has been
set for the filing of responsive pleadings by any defendant. The Court has
indicated that it intends to follow specialized but as yet unidentified
procedures for the submission and determination of motions to dismiss.
Discovery is stayed pending the outcome of motions to dismiss. This proceeding
is at a very early stage and Viador is unable to speculate as to its ultimate
outcome.

Other Pending Litigation

On January 11,
2002, William Grinder, an individual, filed a personal injury
complaint for unspecified monetary damages in San Francisco County
Superior Court alleging causes of action for negligence and negligent
hiring against Viador and certain other named defendants. Viador is
currently investigating the allegations and cannot evaluate
plaintiffs claims at this time.

On May 10, 2002,
attorneys for one of Viadors customers, CMS, sent a letter to
Viador reporting that CMS had filed a suit against Viador in the
United States District Court for the Eastern District of Virginia,
Alexandria Division. According to the letter, the complaint alleges
breach of contract and seeks monetary damages of approximately
$281,000. Viador has not been served with the complaint and cannot
evaluate its claims or Viadors response at this time.

NASDAQ Notice of Noncompliance and Delisting

Effective on October 31, 2001 our securities were delisted from the
National Market tier of the Nasdaq Stock Market because of our failure to
comply with the minimum bid price, net tangible assets and stockholders
equity,

17



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

market capitalization, total assets, total revenue, and stockholder
approval and audit committee composition requirements. Our shares of common
stock are now traded on the Over-the-Counter Bulletin Board.

Effect of Economic Conditions

In the first half of the year 2000, a significant portion of our customers
were newly funded internet-related companies that wanted to move quickly in
their buying decisions. Starting with the second half of the year 2000, our
customers have tended to be more conservative buyers and scaled down their
budgets for capital expenditures. The economic environment of 2001 exacerbated
this situation. In addition, potential customers have questioned our viability
as a company since our stock price and cash balances have decreased throughout
the years 2001 and 2000. The tragic events of September 11, 2001 had pervasive
negative effects across our markets and generally further slowed purchasing
activity. These changes lengthened the sales cycle and reduced the overall
demand for our product. We continued to be negatively impacted by these
economic conditions in the first quarter of 2002.

Critical Accounting Policies

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
contingencies at the date of the financial statements and reported amounts of
revenue and expenses during the reporting period. For this reason, actual
results could differ from those estimates. Our critical accounting policies are
as follows:



| |  |  | revenue recognition;                                        
| | - |  | ------------------------------------------------------------
|
| |  |  | estimating allowance for doubtful accounts;                 
|
| |  |  | assessing outcome of litigation; and                        
|
| |  |  | impairment of long-lived and intangible assets and goodwill.

Revenue Recognition

Viador follows the revenue recognition principles described in Statement
of Position (SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-9.
We license our software products to end user customers, OEMs and VARs. Software
license revenue from sales to end users is generally recognized upon receipt of
a signed contract or purchase order and delivery of the software, provided the
related fee is fixed and determinable and collectibility of the fee is probable
and vendor-specific objective evidence for all undelivered elements has been
established. Vendor-specific objective evidence of the fair value for
consulting services is based on the price charged when those services are sold
separately. We establish vendor-specific objective evidence of fair value of
post-contract customer support based on contractually stipulated annual renewal
rates for those services. Accordingly, license revenue is recorded under the
residual method described in SOP 98-9 for arrangements in which licenses are
sold with consulting services, post-contract customer support or both. However,
the entire fee related to arrangements that require us to deliver specified
additional features or upgrades is deferred until delivery of the feature
and/or upgrade has occurred, unless we have sufficient vendor-specific
objective evidence of fair value to allocate revenue to the various elements in
these arrangements. Fees related to arrangements that require us to deliver
unspecified additional products are deferred and recognized ratably over the
term of the contract. All of the contract software revenue related to
arrangements involving consulting services that are essential to the
functionality of the software is deferred and recognized as the services are
performed.

Software revenue related to arrangements to maintain the compatibility of
our software products with the software products or platforms of the customer
or other vendor is recognized ratably over the term of the arrangement. License
revenue from OEM arrangements in which Viador earns a royalty based on a
specified percentage of OEM sales to end users incorporating our software is
recognized upon delivery by the OEM to the end user provided collection is
probable.

18



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

Service revenue consists of fees from professional services including
integration of software, application development, training and software
installation. Viador bills professional services fees on a time and materials
basis. We recognize professional services fees as the services are performed.

Customers typically purchase post-contract customer support agreements
annually, which are priced based on a fixed percentage of the product license
fee. Viador recognizes revenue allocated to post-contract customer support
agreements ratably over the term of the agreements, which are typically one
year.

Failure to recognize revenue correctly could lead to material misstatement
of our financial performance, thus exposing our credibility and market
valuation.

Estimating Allowance for Doubtful Accounts

We perform ongoing credit evaluations of our customers financial
condition and generally do not require collateral. We maintain allowances for
potential credit losses, and these allowances are based on estimates by
management. If the estimates of credit risk are understated, we could be
exposed to significant amounts of bad debts in excess of our provisions.

Assessing Outcome of Litigation

Managements current estimated liability related to certain pending
litigation is based on claims for which our management believes it is probable
a liability has been incurred and can estimate the amount or range of loss. We
have recorded the minimum estimated liability related to those claims, where
there is a range of loss. Because of the uncertainties related to both the
amount and range of loss on the remaining pending litigation, management is
unable to make a reasonable estimate of the liability that could result from an
unfavorable outcome and therefore, no liability has been accrued. As additional
information becomes available, we will assess the potential liability related
to our pending litigation and revise our estimates. Such revisions in our
estimates of the potential liability could materially impact our results of
operation and financial position.

Impairment of Long-lived and Intangible Assets and Goodwill

We evaluate our long-lived assets, including goodwill, for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Goodwill and other intangibles with an
indefinite useful life are tested for impairment at least annually by applying
a fair-value-based test. Recoverability of other assets to be held and used,
including assets to be disposed of other than by sale, is measured by a
comparison of the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of by sale are reported at the lower of the carrying amount of
the assets or estimated fair value less costs to sell. A number of factors can
trigger an impairment review, such as significant underperformance relative to
historical or projected future operating results, significant changes in the
manner of use of the acquired assets or the strategy for our overall business,
or significant negative industry or economic trends. The effect of such
valuation adjustments can significantly effect our financial performance and
market valuation. If we fail to identify assets that have been impaired, we may
fail to record an impairment or we may fail to record and impairment in the
proper period. If we fail to accurately estimate fair value, any impairment
loss that we record may not be accurate.

Recent Accounting Pronouncements

Accounting for Asset Retirement Obligations

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations.SFAS No. 143 requires that the fair value of an asset
retirement obligation be recorded as a liability in the period in which it
is incurred. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. Viador expects to adopt SFAS No. 143 effective January 1,
2003. We do not believe the adoption of Statement 143 will have a material
effect on our consolidated financial position or results of operations.

19



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections

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.SFAS No. 145 rescinds SFAS No. 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. As a
result, the criteria in APB Opinion No. 30 will now be used to classify those gains
and losses. SFAS No. 64 amended SFAS No. 4, and is no longer necessary because
SFAS No. 4 has been rescinded. SFAS No. 44 was issued to establish accounting
requirements for the effects of transition to the provisions of the Motor
Carrier Act of 1980. Because the transition has been completed, SFAS No. 44 is
no longer necessary. SFAS No. 145 amends SFAS No. 13 to require that certain
lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback
transactions.

The provisions of this Statement related to the rescission of SFAS No. 4
will be applied in fiscal years beginning after May 15, 2002. Any gain or loss on
extinguishment of debt that was classified as an extraordinary item in prior
periods presented that does not meet the criteria in APB Opinion No. 30 for
classification as an extraordinary item are reclassified. Early application of
the provisions of this Statement related to the rescission of SFAS No. 4 is
encouraged. Viador expects to adopt this provision of SFAS No. 145 effective
with its fiscal year beginning January 1, 2003, at which time it expects to
reclassify its gain associated with extinguishment of debt out of extraordinary
items.

Certain other provisions of this Statement related to SFAS No. 13 will be
effective for transactions occurring after May 15, 2002, with early application
encouraged. All other provisions of this Statement will be effective for
financial statements issued on or after May 15, 2002, with early application
encouraged. Viador does not anticipate the remaining provisions of this
statement will have a material effect on its consolidated financial position or
results of operations.

Fluctuations in Operating Results

We expect to experience significant fluctuations in our future results of
operations due to a variety of factors, many of which are outside of our
control, including:



| |  |  |  demand for and market acceptance of our products and services, both domestically and internationally;
| |  |  | -------------------------------------------------------------------------------------------------------
|
| |  |  |  introductions of new products and services or enhancements by us and our competitors;                
|
| |  |  |  competitive factors that affect our pricing;                                                         
|
| |  |  |  the size and timing of customer orders;                                                              
|
| |  |  |  hiring and retention of key personnel;                                                               
|
| |  |  |  the mix of products and services we sell;                                                            
|
| |  |  |  availability and terms of additional financing;                                                      
|
| |  |  |  the timing and magnitude of our capital expenditures; and                                            
|
| |  |  |  conditions specific to the enterprise information portal market and other general economic factors.  

In addition, we completed several restructurings of our business during
2001, resulting in significant cost reductions from prior periods.
Consequently, we believe that period-to-period comparisons of our operating
results are not necessarily meaningful and that those comparisons cannot be
relied upon as indicators of future performance. For more information regarding
restructurings, see Note 6 of Notes to Condensed Consolidated Financial
Statements.

For the three months
ended March 31, we had net income of $1.2 million in
2002 and a net loss of $6.8 million in 2001. For the years ended December 31,
we had net losses of approximately $24.5 million in 2001, $29.3 million in
2000, and $13.3 million in 1999. As of March 31, 2002, our accumulated deficit
is $75.6 million.

20



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

Results of Operations

We manage and evaluate the performance of our business through a single
operating segment: Enterprise information portals. The following table sets
forth certain statement of operations data as a percentage of total revenue for
the periods indicated:

|                                                    |                                          |                          |              |    |                    |    |      |     |      |    | 
|--------------------------------------------------- | ---------------------------------------- | ------------------------ | ------------ | -- | ------------------ | -- | ---- | --- | ---- | -- | 
|                                                    |                                          |                          |              |    | Three Months Ended
|                                                    |                                          |                          |              |    | March 31,         
|                                                    |                                          |                          |              |    |                   
|                                                    |                                          |                          |              |    | 2002               |    | 2001
|                                                    |                                          |                          |              |    |                    |    |     
|Revenue:                                            |                                          |                          |              |    |                    |    |      |    
|                                                    | License                                  |                          |              | 50 | %                  |    |      | 62  | %   
|                                                    | Service                                  |                          |              | 50 |                    |    |      | 38  |     
|                                                    |                                          |                          |              |    |                    |    |      |    
|                                                    |                                          | Total revenue            |              |    | 100                |    |      |     | 100  |   
|                                                    |                                          |                          |              |    |                    |    |      |    
|Cost of revenue:                                    |                                          |                          |              |    |                    |    |      |    
|                                                    | Amortization of capitalized software     |                          |              |   |                    |    |      | 12  |     
|                                                    | License and service cost of revenue      |                          |              | 18 |                    |    |      | 49  |     
|                                                    |                                          |                          |              |    |                    |    |      |    
|                                                    |                                          | Total cost of revenue    |              |    | 18                 |    |      |     | 61   |   
|                                                    |                                          |                          |              |    |                    |    |      |    
|                                                    |                                          |                          | Gross profit |    |                    | 82 |      |     |      | 39 | 
|                                                    |                                          |                          |              |    |                    |    |      |    
|Operating expenses:                                 |                                          |                          |              |    |                    |    |      |    
|                                                    | Sales and marketing                      |                          |              | 21 |                    |    |      | 127 |     
|                                                    | Research and development                 |                          |              | 38 |                    |    |      | 54  |     
|                                                    | General and administrative               |                          |              | 30 |                    |    |      | 41  |     
|                                                    | Amortization of goodwill                 |                          |              |   |                    |    |      | 3   |     
|                                                    | Amortization of stock-based compensation |                          |              |   |                    |    |      | 6   |     
|                                                    |                                          |                          |              |    |                    |    |      |    
|                                                    |                                          | Total operating expenses |              |    | 89                 |    |      |     | 231  |   
|                                                    |                                          |                          |              |    |                    |    |      |    
|Operating loss                                      |                                          |                          | (7           | )  |                    |    | (192 | )  
|Non-cash interest expense                           |                                          |                          | (2           | )  |                    |    |     |    
|Other income and expense, net                       |                                          |                          |             |    |                    |    | 2    |    
|                                                    |                                          |                          |              |    |                    |    |      |    
|Net loss before income taxes and extraordinary item |                                          |                          | (9           | )  |                    |    | (190 | )  
|Extraordinary gain on extinguishment of debt        |                                          |                          | 94           |    |                    |    |     |    
|Provision for income taxes                          |                                          |                          |             |    |                    |    |     |    
|                                                    |                                          |                          |              |    |                    |    |      |    
|                                                    |                                          | Net income (loss)        |              |    | 85                 | %  |      |     | (190 | )%
|                                                    |                                          |                          |              |    |                    |    |      |    

Three Months Ended March 31, 2002 as Compared to Three Months Ended March 31,
2001

Revenue

Viador follows the revenue recognition principles described in Statement
of Position (SOP) 97-2,Software Revenue Recognition, as amended by SOP 98-9.
For more information on our revenue recognition policy, refer toCritical
Accounting Policies  Revenue Recognition.

Total Revenue.
Total revenue decreased by 61% to approximately $1.4
million for the three months ended March 31, 2002 from approximately $3.6
million for the three months ended March 31, 2001. For the three months ended
March 31, 2002, license revenue and service revenue each
accounted for 50% of total revenue. The decrease in total revenue in the first
quarter of 2002 compared to the first quarter of 2001 was primarily due to
reductions in license revenue resulting from decreased demand for our products
and secondarily, a reduction in service revenue associated with reduced demand
for our consulting services. The percentage shift toward service revenue is due
to lower new customer license revenue caused both by the generally poor
economic climate and our financial condition versus the continuing demand from
existing customers for customization of their licensed portal products.

License Revenue.License revenue decreased by 69% to approximately
$700,000 for the three months ended March 31, 2002 from approximately $2.3
million for the three months ended March 31, 2001. The decrease in

21



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

license revenue is due primarily to a reduction in software purchases
attributable to general adverse economic conditions and customer concerns
regarding our viability.

Service Revenue. Service revenue decreased by 49% to approximately
$698,000 for the three months ended March 31, 2002 from approximately $1.4
million for the three months ended March 31, 2001. The decrease in service
revenue is primarily due to a decrease in consulting services provided, as well
as a decrease in the number of maintenance contracts from the same quarter in
the prior year.

Channel Mix. We distribute our products directly through a direct sales
force and indirectly through OEMs, VARs and systems integrators. Indirect
channel revenue decreased as a percent of total revenue to 46% in the first
quarter of 2002 from 56% in the first quarter of 2001. Indirect channel revenue
decreased both as a percentage of total revenue and in absolute dollars in the
first quarter of 2002 compared to the same period of the prior year because of
the adverse economic conditions. In general, the distribution of revenue among
channels will fluctuate in future periods depending on the timing of new
product releases, our ability to expand our use of OEMs and VARs, the timing
of direct sales to large customer accounts and customer buying patterns.

Customer Concentration. Customer orders during a particular quarter
typically vary considerably in size, from as low as several thousand dollars to
over $500,000. One customer accounted for 28% of recognized revenue
for the quarter ended March 31, 2002. Because of the large size of some
individual customer orders relative to total orders during a quarter, our
revenue may fluctuate significantly from one quarter to the next. If a customer
who places a large order cancels or reduces the order, or if we are unable to
fulfill the order in a timely fashion or are otherwise unable to recognize
revenue for the order in the quarter in which it is anticipated, it could
result in increased volatility in our revenue.

Geographic Mix.International revenue (sales outside of the United States)
decreased as a percent of total revenue to 7% in the first quarter of 2002
from 39% in the first quarter of 2001. International revenue for the three
months ended March 31, 2002 decreased in absolute dollars from the similar
period in the prior year because of dramatic reductions made to our European
direct sales organization during 2001. We plan to continue to pursue
international markets by partnering with OEMs, VARs and distributors throughout
the world. International revenue may fluctuate in future periods as a result of
competition, the general demand for Internet- and intranet-related products in
international markets, and general economic conditions of the regions. See
Risk Factors that May Affect Future Results.

Deferred Revenue. Deferred revenue primarily consists of the unrecognized
portion of license and service revenue received pursuant to support contracts,
consulting and prepaid license royalties. Deferred revenue was approximately
$2.7 million as of March 31, 2002 and $2.6 million as
of December 31, 2001.

Cost of revenue

Cost of license revenue includes royalties due to third parties for
integrated technology, the cost of manuals and product documentation,
production media used to deliver our products and shipping costs, including the
costs associated with the electronic transmission of software to new customers,
amortization of capitalized software development costs, and an allocation of
our facilities, communications and depreciation expenses. Cost of service
revenue includes salaries and related expenses for consulting services,
customer support, implementation and training services organizations, and costs
of contracting with third parties engaged to provide consulting services to
customers.

Cost of revenue decreased by 89% to approximately $246,000 for the three
months ended March 31, 2002 from approximately $2.2 million for the three
months ended March 31, 2001. Cost of revenue decreased to 18% of total revenue
for the three months ended March 31, 2002 from 61% for the three months ended
March 31, 2001. The decrease in cost of revenue resulted primarily from the
elimination of capitalized software amortization and the significant decline in
revenue. Amortization of capitalized software costs was accelerated in the
second quarter of 2002 as projection of any future revenue from underlying
product sales was deemed to be uncertain for purposes of evaluating
recoverability.

22



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

Gross profit for the
three months ended March 31, 2002 was 82% of total
revenue compared to 39% of total revenue for the three months ended March 31,
2001. This increase in gross profit is primarily due to the elimination of
capitalized software amortization costs and decreased payroll and overhead
expenses resulting from the restructurings undertaken by management during 2001
in order to bring Viadors cost structure into alignment with its revenue. We
cannot predict if our restructuring and cost control efforts will continue to
be effective in the future because of our inability to predict economic
conditions and the competitive environment. See Risk Factors that May Affect
Future Results.

Operating Expenses

Our operating expenses are classified into five general categories: sales
and marketing, research and development, general and administrative,
amortization of stock-based compensation and amortization of goodwill. We
classify all charges to these operating expense categories based on the nature
of the expenditures. Although each category includes expenses that are category
specific, each category also includes expenses that may be common to the other
categories, such as salaries, employee benefits, bonuses, travel and
entertainment costs, telephone expenses, rent, facilities costs and third-party
professional service fees. The sales and marketing category of operating
expenses includes sales commissions, public relations and advertising, trade
shows, marketing collateral materials and web seminars. We allocate the total
costs for overhead and facilities to each of the functional areas that use the
overhead and facilities services based on their estimated usage as measured
primarily by employee headcount. These allocated charges include facility rent
and utilities for the corporate office and depreciation expense for office
furniture and equipment.

Viadors total operating expenses for the three months ended March 31,
2002 were $1.2 million or 82% of total revenue, compared to $8.3 million or
231% of total revenue for the three months ended March 31, 2001. The decrease
in operating expenses in absolute dollars for the three months ended March 31,
2002 compared to the corresponding earlier year resulted from our efforts to
streamline our operations and reduce our expenditure levels. In connection with
our restructurings during 2001, we reduced our headcount significantly and
aggressively cut other costs, including costs associated with our office lease.
It is possible that we will have further cost reductions in the future.

Sales and Marketing

Sales and marketing expenses consist of operating expenses associated with
Viadors sales, marketing, international and other business development
efforts. Sales and marketing expenses for the three months ended March 31, 2002
were $289,000 or 21% of total revenue, compared to $4.6 million, or 127% of
total revenue, in the same period of the prior year. Sales and marketing
expenses decreased in absolute dollars for the three months ended March 31,
2002 as compared to the similar period in 2001 primarily due to reduced
salaries and related expenses resulting from decreased staffing associated with
restructurings in December 2000 and April, June, September and December 2001.
We believe that sales and marketing expenses are likely to remain relatively
constant or increase in absolute dollars in the near term as we do not
currently anticipate further cost containment measures. However, these
projections can change should economic and market conditions require
alternative actions. See Risk Factors that May Affect Future Results.

Research and Development

Research and development expenses consist of operating expenses associated
with software development. Research and development expense decreased by 73% to
$527,000 or 38% of total revenue in the first quarter of 2002 as compared to
$1.9 million or 54% of total revenue for the same period in 2001. The decrease
in research and development expenses was principally due to our reduced use of
outside contractors and reduced salary-related expenses from our restructurings
in December 2000 and April, June, September and December 2001. We believe that
research and development expenses are likely to remain relatively constant or
increase slightly in absolute dollars in the near term as we do not currently
anticipate further cost containment measures. However, these projections can
change should economic and market conditions require alternative actions. See
Risk Factors that May Affect Future Results.

23



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

General and Administrative

General and administrative expenses for all years presented consist
primarily of compensation and fees for professional services. General and
administrative expenses for the three months ended March 31, 2002 and 2001 were
$425,000 or 30% of total revenue in 2002, and $1.5 million or 41% of total
revenue in 2001. General and administrative expense decreased primarily due to
decreased staffing associated with the announced restructurings in December
2000 and April, June, September and December 2001. We believe that general and
administrative expenses are likely to remain relatively constant or increase
slightly in absolute dollars in the near term as we do not currently anticipate
further cost containment measures. However, these projections can change should
economic and market conditions require alternative actions. See Risk Factors
that May Affect Future Results.

Amortization of Stock-based Compensation

Amortization of stock-based compensation primarily consists of charges
incurred for employee stock options issued with exercise prices less than the
fair market value of our stock at the date of grant. Amortization of
stock-based compensation for the three months ended March 31, 2002 was $4,000
compared to $204,000 in the same period of the prior year. The significant
decrease is primarily due to the significant reduction in staffing associated
with our restructurings during 2001. We anticipate granting a significant
number of options to purchase our common stock to certain key employees and
advisors in the second quarter of 2002. To the extent these options are granted
to non-employees, we will incur increased stock-based compensation charges,
which will negatively impact our operating results in the periods in which
these options vest. See Risk Factors that May Affect Future Results.

Amortization of Goodwill

Amortization of goodwill was attributable to the acquisition of a
distributor in Switzerland in January 2000 and is based on a straight-line
method over the expected period to be benefited, which was five years.
Amortization of goodwill for the three months ended March 31, 2001 was
$107,000, or 3%, of total revenue. At December 31, 2000, we performed an
impairment evaluation of goodwill. The evaluation was based on current year
activities and projected cash flows as compared to the carrying value of
goodwill. Our evaluation indicated that the December 31, 2000 balance of $1.7
million was recoverable. At June 30, 2001, we performed a further evaluation of
goodwill to determine whether it was recoverable. The evaluation was based on
current year activities and projected cash flows as compared to the carrying
value of goodwill. This evaluation indicated that the $1.5 million of goodwill
remaining unamortized was impaired as actual revenue for the acquired company
were significantly below projected revenue and key management personnel
terminated employment with the subsidiary located in Switzerland. Consequently,
we recorded an impairment charge for the entire remaining unamortized balance
in the second quarter of 2001.

Non-Cash Interest Expense

On March 18, 2002, Viador received $1.0 million in financing through a
private offering of debt and equity securities and a commitment to provide
additional financing of up to $2.0 million upon request Mr. Yeung, a current
investor. Mr. Yeungs commitment to provide $2.0 million in additional debt
financing is subject to certain conditions relating to Viadors ability to meet
its obligations under the notes and warrants issued to Mr. Yeung and certain
business and financial conditions, including changes in equity ownership,
composition of Viadors management team and any change in control. For more
information regarding this debt financing, see Note 3 of the Notes to
Condensed, Consolidated Financial Statements.

As consideration for the funds and the commitment to provide additional
funds, Viador issued a convertible promissory note and two warrants to Mr.
Yeung. The note has a principal amount of $1.0 million and is convertible into
16,711,230 shares of Viadors common stock. The note accrues interest at a
stated rate of 1% per year and matures on March 18, 2004.

We allocated the
total proceeds received of $1.0 million to the
warrants using the Black-Scholes
option pricing model using the following assumptions: no dividends; contractual
life of 3 years; risk-free interest rate of 3.1%; and expected
volatility of 187%,
resulting in a value of the warrants of approximately $372,000, and the
beneficial conversion feature, which was limited to the remaining proceeds of
$628,000. Accordingly, we recorded the beneficial conversion feature of
$628,000 as additional paid-in

24



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

capital and initially recorded the carrying value of the note at zero. The
carrying value of the note is being accreted to its face value of $1.0 million
over the term of the note (24 months) using the effective interest method,
resulting in a non-cash interest charge of $21,000 during the first quarter of
2002. In connection with this financing, we incurred a commission payable to
Mr. Yeung in the amount of $60,000 which was recorded as an offset to
proceeds from this arrangement. Non-cash interest expense will increase in future
periods as Viador continues to accrete this note to its face value of $1.0
million over the next 24 months. If the holder of the note elects to convert
the note prior to its repayment date, this accretion will accelerate in the
period of conversion.

Other Income and Expense, Net

Other income and expense, net, decreased to expense of $5,000 for the
three months ended March 31, 2002 from income of approximately $86,000 for the
three months ended March 31,2001. This decrease was due to a reduction in
interest-bearing cash and investment balances.

Extraordinary gain on extinguishment of debt

In the first quarter of 2002, we consummated workout agreements with
certain of our creditors, representing approximately $1.8 million of our
outstanding accounts payable. These creditors released us from any obligation
to repay any such amounts in exchange for payment of 25% of the total debt we
owed them as of September 30, 2001. We paid the creditors that were party to
the workout agreements their respective agreed upon amounts aggregating
approximately $467,000, resulting in the recognition of an extraordinary gain
on extinguishment of debt of $1.3 million.

Provision for Income Taxes

For the three months ended March 31, 2002 provision for income taxes was
$7,000. We incurred a loss for the three month period ended March 31, 2001, and
therefore, no income tax provision was recorded. The net deferred tax assets as
of March 31, 2002 were zero, net of a valuation allowance. Realization of
Viadors net deferred tax assets depends on Viador generating sufficient
taxable income in future years in appropriate tax jurisdictions to obtain
benefit from the reversal of temporary differences and from net operating loss
and credit carryforwards.

During the quarter ended March 31, 2002, Viador recorded income from
cancellation of indebtedness of $1.3 million that was not includable in gross
income for tax purposes because the income from the discharge of indebtedness
is not included in gross income for tax purposes when a companys liabilities
exceed the fair value of its assets. However, Viador is required to reduce its
current year net operating income by this $1.3 million income from the
discharge of indebtedness, resulting in a net operating loss for income tax
purposes.

Net Income or Loss

For the three months
ended March 31, 2002 net income was $1.2 million or
85% of total revenue. For the three months ended March 31, 2001 net loss was
$6.8 million or 190% of total revenue.

Liquidity and Capital Resources

From our inception, we have financed our operations primarily through an
initial public offering and private equity placements totaling approximately
$63.8 million. As of March 31, 2002, we had an accumulated deficit of
approximately $75.6 million and cash and cash equivalents of approximately $1.2
million. We had net income of $1.2 million for the three months ended March 31,
2002, and we had net losses of approximately $24.5 million for the year ended
2001, $29.3 million for the year ended 2000 and $13.3 million for the year
ended 1999. The size of our accumulated deficit, our losses since inception and
our ongoing need for capital to continue our operations raises substantial
doubt as to our ability to continue as a going concern. We expect to continue
to use cash in operations and to incur operating losses in the foreseeable
future. We obtained $1.0 million in debt financing in the first quarter of
2002, as well as a commitment for up to $2.0 million in additional debt
financing subject to our meeting certain financial and business conditions.
There can be no assurance that we will be successful in our efforts to control
expenses, generate sufficient revenue or obtain additional financing. Failure
to reduce and control expenses, generate sufficient revenue and/or to obtain
additional financing will result in a material adverse effect on our ability

25



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

to meet our business objectives and continue as a going concern. Absent debt or
equity financing beyond the $2.0 million currently committed to us, and
excluding significant expenditures required for our major projects, we
currently anticipate that the cash on hand and anticipated cash flow from
operations will only be adequate to fund our operations in the ordinary course
of business for the next twelve months. For additional information, see Notes 1
and 3 of the Notes to Condensed Consolidated Financial Statements.

As of March 31, 2002, our principal source of liquidity was $1.2 million
in cash and cash equivalents, representing a $720,000 increase from the
December 31, 2001 balance of $518,000. Net cash used by operating activities
for the three months ended March 31, 2002 was approximately $228,000, while net
cash used for the three months ended March 31, 2001 was approximately $8.4
million. For the three months ended March 31, 2002, this use of cash resulted
primarily from decreases in accounts payable and increases
in accounts receivable, offset in part by our operating income. We did not use
any cash for investing purposes in the three months ended March 31, 2002. Net
cash used in investing activities for the three months ended March 31, 2001 was
approximately $529,000. Net cash provided by financing activities for the three
months ended March 31, 2002 was approximately $940,000 and resulted from
the net proceeds from the issuance of a convertible note payable.

Viadors principal commitments as of March 31, 2002 consisted of
obligations under noncancelable operating leases for monthly rent. We have no
present commitments or arrangements assuring us of any future equity or debt
financing other than the $2.0 million commitment from a current investor
discussed further in Note 3 to the Notes to Condensed Consolidated Financial
Statements. This commitment to provide $2.0 million in additional debt
financing is subject to Viadors ability to meet its obligations under the
notes and warrants issued, and certain business and financial conditions,
including changes in our equity ownership, composition of our management team
and any change in control. We cannot assure you that any further equity or debt
financing will be available to us on favorable terms, or at all.

We are currently attempting to raise additional financing to fund our
operations. There can be no assurance that we will be successful in our efforts
to reduce expenses or to obtain additional financing. Failure to reduce and
control expenses, generate sufficient revenue and/or to obtain additional
financing will result in a material adverse effect on our ability to meet our
business objectives and continue as a going concern. Based on our assumptions,
which we believe are reasonable, we believe we may have sufficient cash to
reach profitability provided that we meet the revenue and expense goals
contained in our business plan.

Our liquidity and capital requirements depend on numerous factors
discussed under the section entitled Risk Factors That May Affect Future
Results.Factors such as the ability to expand our customer base, the level of
investment in our business, the level of expenditures for marketing and sales,
the level of investment in distribution, customer service and other
capabilities would also increase our liquidity requirements. The timing and
amount of these capital requirements cannot be accurately predicted.

Our financial statements were prepared on the assumption that we will
continue as a going concern. The report of our independent accountants for the
year ended December 31, 2001 acknowledged that we have incurred losses in each
of the last three fiscal years. These conditions raise substantial doubt as to
our ability to continue as a going concern. Our financial statements included
herein do not include any adjustments that might result should we be unable to
continue as a going concern.

26



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

Risks Related to Viador

We may seek protection, or be the subject of involuntary proceedings, under the
Federal Bankruptcy Code.

We may seek protection under Chapter 11 of the Federal Bankruptcy Code.
Additionally, we are subject to the risk that creditors may seek to commence
involuntary bankruptcy proceedings against us. If we file for Chapter 11
protection, or if involuntary proceedings are commenced against us by our
creditors, our creditors or other parties in interest may be permitted to
propose their own plan, and we could be unsuccessful in having a plan of
reorganization confirmed that is acceptable to the requisite number of
creditors and holders entitled to vote on such a plan. This could lead to our
inability to emerge from Chapter 11. Moreover, once bankruptcy proceedings are
commenced, either by the filing of a voluntary petition or if an involuntary
petition is filed against us, our creditors could seek our liquidation. If a
plan were consummated or if we were liquidated, it would almost certainly
result in our creditors receiving less than 100% of the face value of their
claims, and in the claims of our equity holders being cancelled in whole. In
addition, during any bankruptcy or similar proceeding, we would need court
approval to take any actions out of the ordinary course of business, which
would result in our inability to manage the normal operations of the company
and which would cause us to incur additional costs associated with the
bankruptcy process. Any bankruptcy or similar proceeding will cause us to be in
default on our convertible note payable. See Note 3 of Notes to Condensed
Consolidated Financial Statements for more information on this note.

There is substantial doubt about our ability to continue as a going concern.

The Independent Auditors Report issued in connection with Viadors
audited financial statements included in our Form 10-K/A for the year ended
December 31, 2001, expresses substantial doubt about our ability to continue as
a going concern, due to the lack of sufficient sources of revenue and our
dependence on our ability to raise capital from stockholders or other sources
to sustain operations.

Although we reported
net income of $1.2
million for the most recent quarter ended March 31, 2002, our recurring net
losses, including $6.8 million for the quarter ended March 31, 2001 and $24.5
million for the year ended December 31, 2001, raise substantial doubt regarding
Viadors ability to continue as a going concern. In 2001, our revenue was not
sufficient to support our operations, and revenue will not be sufficient to
support operations until such time, if any, that Viadors enterprise
information portal software gains substantial market acceptance. We expect to
continue to use cash in operations and to incur operating losses in the
foreseeable future.

As a result of questions concerning our status as a going concern, our
customers and vendors may decide not to do business with us.

Due to concerns regarding our ability to continue operations, customers
and vendors may decide not to conduct business with us, or may conduct business
with us on terms that are less favorable than those customarily extended by
them. Additionally, we are currently experiencing some resistance in the
marketplace and we believe that one of the several factors for this resistance
is related to concerns regarding our ability to continue our business as a
going concern. In any event, if customers and vendors decide not to conduct
business with us, our revenue would decrease further, and our business will
suffer significantly.

We cannot predict whether we will be successful because we have a short
operating and sales history.

We were founded in 1995, and began offering software products in the third
quarter of 1996. Our primary product, the Viador E-Portal, was first shipped in
the first quarter of 1999. We introduced Viador Portlets in the second quarter
of 2000 and Viador E-Portal Express in the fourth quarter of 2000.

We have made significant investments in our sales and marketing programs,
personnel recruitment, product development and infrastructure and have
experienced significant losses on a quarterly and annual basis in the past. You
must consider us and our prospects in light of the risks and difficulties
encountered by companies in the early stage of development, particularly
companies in new and rapidly evolving markets. The revenue and income

27



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

potential of our business and market is unproven, and our limited operating
history makes it difficult to evaluate us and our prospects.

Our ability to address these risks depends on a number of factors, which
include our ability to:



| |  |  | provide software that is reliable, cost-effective and able to
accommodate significant increases in the number of users and amount of
information;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | market the Viador E-Portal, our other products and the Viador brand
name effectively;                                                            
|
| |  |  | continue to grow our infrastructure to accommodate new developments
in the enterprise information portal software market and increased
sales;    
|
| |  |  | retain and motivate qualified personnel; and                                                                                                     
|
| |  |  | respond to competition.                                                                                                                          

We may not be successful in meeting these challenges and addressing these
risks and uncertainties. If we are unable to do so, our business will not be
successful and your investment in our capital stock will decline in value.

Failure to raise additional capital will have a material adverse effect on our
ability to operate as a going concern.

We may have insufficient capital to fund our operations and business
objectives through the next 12 months. We are actively seeking financing for
our current capital needs through the sale of additional equity and/or the
issuance of debt. However, the significant contraction in the capital markets,
particularly in the technology sector, combined with our early stage of
commercial operations has made it difficult to raise additional capital. If we
do not obtain additional cash funding, the carrying amounts of certain assets,
including property, equipment and capitalized software development costs may
not be recovered.

Additional future equity or debt financing may not be available to us on
favorable terms or at all. Future borrowing instruments such as credit
facilities and lease agreements are also likely to contain restrictive
covenants and will likely require us to pledge assets as security for
borrowings under those future arrangements. Failure to raise sufficient
additional capital would have a material adverse effect on our ability to
operate as a going concern or to achieve our business objectives. See
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources.

Our cost-cutting efforts may harm our business.

Our management has implemented plans designed to reduce our cash
requirements through a combination of reductions in equipment purchases and
operating expenditures, including significant reductions in our workforce
during 2001. However, there can be no assurance that these plans will be
successful or that the implementation of these plans will not have a material
adverse effect on our business, financial condition or results of operations.

Our business currently depends on revenue related to the Viador E-Portal, and
it is uncertain whether the market will increasingly accept this product.

We generate most of our revenue from licenses and services related to the
products comprising the Viador E-Portal. We expect that these products, and
future upgraded versions of these products, will continue to account for a
large portion of our revenue for the foreseeable future. Our future financial
performance will depend on increasing acceptance of our current products and on
the successful development, introduction and customer acceptance of new and
enhanced versions of our products. Our business could be harmed if we fail to
deliver the enhancements to our products that customers want.

The market for enterprise information portal software is still in its
infancy as an emerging technology and there can be no assurance that customers
will adopt our products. Accordingly, we cannot accurately estimate the

28



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

potential demand for our products and services. We believe that market
acceptance of our products and services depends principally on our ability to:



| |  |  | effectively market the Viador E-Portal, our other products and our services;                                                
| | - |  | ----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | retain a sufficient number of qualified sales and marketing personnel;                                                      
|
| |  |  | provide high-quality and reliable customer support for our products;                                                        
|
| |  |  | distribute and price our products and services in a manner that is
more appealing to customers than that of our competitors;
|
| |  |  | develop a favorable reputation among our customers, potential
customers and participants in the software industry; and      
|
| |  |  | withstand downturns in general economic conditions or conditions
that would slow corporate spending on software products.   

Some of the foregoing factors are beyond our control. If our customer base
does not expand, we may never become profitable and our stock price will likely
decline.

Our services consist of maintenance, support, consulting and training.
Service revenue represented 50% of total revenue for the three months ended
March 31, 2002 and 38% for the three months ended March 31, 2001. For the year
ended December 31, 2001, service revenue represented 49% of total revenue. We
anticipate that service revenue will fluctuate as a percentage of total revenue
in the future. If service revenue is less than anticipated, our fixed costs of
providing services will exceed our service revenue and our operating results
could be materially adversely affected.

Continuing uncertainty of the U.S. economy, which has spread to Europe and
Asia, may have serious implications for the growth and stability of our
business and may negatively affect our stock price.

The revenue growth and profitability of our business depends significantly
on the overall demand for software products, particularly in the product
segments in which we compete. Softening demand for these products caused by
ongoing economic uncertainty may result in decreased revenue or earnings levels
or growth rates. The U.S. economy has weakened and market conditions continue
to be challenging. This weakening has resulted in individuals and companies
delaying or reducing expenditures. Further delays or reductions in spending
could have a material adverse effect on demand for our services, and
consequently on our business, operating results, financial condition, prospects
and stock price. In addition, the terrorist acts of September 11, 2001 and
subsequent terrorist activities have created an uncertain economic environment
and we cannot predict the impact of these events, or of any related military
action, on our customers or business. We believe that these events may cause
some businesses to eliminate or further curtail spending on technology related
to our products.

We have a history of losses and may not be able to achieve profitability in the
future.

Since our inception, we have experienced recurring operating losses,
negative cash flows from operations and net losses in each quarterly and annual
period with the exception of the most recent quarter, in which we incurred only
an insignificant operating profit. As of March 31, 2002, we had an accumulated
deficit of approximately $75.6 million. Revenue from our software and related
services may not be sufficient to make, or keep us profitable in the future. If
we do achieve profitability, we cannot be certain that we can sustain or
increase profitability on a quarterly or annual basis, particularly to the
extent that we face a weak economic environment and significant competition.

We were unable to maintain our listing on The Nasdaq National Market tier of
the Nasdaq Stock Market and there may be no active trading market for our
common stock.

On July 3, 2001, we received a letter from Nasdaq indicating we failed to
comply with the minimum bid price required for continued listing as set forth
in marketplace rule 4450 (a) (5) and that our securities were, therefore,
subject to delisting from Nasdaq. We requested a hearing before a Nasdaq
Listing Qualifications Panel to review

29



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

this determination. On August 15, 2001, Nasdaq notified us of additional
deficiencies including net tangible assets and stockholders equity, market
capitalization, total assets, total revenue, and audit committee composition
requirements. Despite our attempts to remedy these deficiencies, on October 30,
2001 Nasdaq notified us that our securities would be delisted from the Nasdaq
National Stock Market tier of the Nasdaq Stock Market effective with the
opening of business on October 31, 2001. The delisting occurred on October 31,
2001 and our shares of common stock are now traded on the Over-the-Counter
Bulletin Board. Since we have been delisted from Nasdaq, we cannot assure you
that an active trading market for our common stock will continue. If an active
trading market for our common stock is not sustained, you may not be able to
sell your common stock when you need to do so, or at a price acceptable to you,
or even at all.

The delisting of our stock has had a material negative impact on the
trading market and price of our stock and has subjected us to certain state
regulatory requirements. Low-priced stocks are subject to additional risks,
including the potential loss of effective trading markets.

The trading price for our common stock has fallen substantially and this could
affect our ability to raise capital and your ability to resell your shares at
or above the price you paid to purchase such shares.

The stock market, in general, and the trading prices of shares in public
technology companies, have been extremely volatile and have experienced a
substantial drop in market price. Indeed, the trading price of our common stock
dropped significantly, thereby precipitating our delisting from Nasdaq. We
believe that this drop has resulted from many factors, some of which are beyond
our control, such as:



| |  |  | investor perception of us and Internet-related businesses in general;          
| | - |  | -------------------------------------------------------------------------------
|
| |  |  | general economic conditions both in the United States and in foreign countries;
|
| |  |  | our results of operations;                                                     
|
| |  |  | adverse business developments;                                                 
|
| |  |  | changes in financial estimates by securities analysts; and                     
|
| |  |  | announcements by our competitors of new products and services.                 

As a result of these factors, and due to the risks related to the absence
of an active trading market for our common stock, we cannot assure you that the
trading price of our common stock will not continue to drop or stay at its
currently low price. The significant decreases in the trading price of our
common stock and the currently low trading price that we are experiencing is
likely to affect our visibility and credibility in our market and will likely
limit our ability to raise capital in the future. Additionally, as a result of
our low stock trading price and our delisting from Nasdaq, you may not be able
to resell your shares of common stock when you need to or at prices higher than
what you paid to purchase such shares.

Class action litigation due to stock price volatility could lead to substantial
costs and divert our managements attention and resources.

In the past, securities class action litigation often has been brought
against a company following periods of volatility in the market price of its
securities. Companies in the software industry, particularly those whose
product offerings are related to the Internet, are especially vulnerable to
this kind of litigation due to the high volatility of their stock prices.
Accordingly, we have been the target of securities litigation, such as the
class action lawsuit filed against us by The Plaintiffs Executive Committee.
Securities litigation could result in substantial costs and could divert our
managements attention and resources from business operations. For further
information regarding the lawsuit, see Item 1, Legal Proceedings in Part II
of this Form 10-Q.

30



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

Future sales of our common stock may negatively affect our stock price.

The market price of our common stock could decline as a result of sales of
a large number of shares of our common stock in the market, or the perception
that such sales could occur. These sales also might make it more difficult for
us to sell equity securities in the future at a time and at a price that we
deem appropriate.

Our operating results in one or more future periods may fluctuate significantly
and may fail to meet or exceed the expectations of securities analysts or
investors, causing our stock price to fall.

We may experience significant fluctuations in our future results of
operations due to a variety of factors, many of which are outside of our
control, including:



| |  |  | demand for and market acceptance of our products and services, both domestically and internationally;                                                 
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | introduction of products and services or enhancements by us and our competitors;                                                                      
|
| |  |  | competitive factors that affect our pricing;                                                                                                          
|
| |  |  | the mix of products and services we sell;                                                                                                             
|
| |  |  | the size and timing of customer orders, particularly large orders,
some of which represent more than 10% of total revenue during a
particular quarter;
|
| |  |  | retention of key personnel;                                                                                                                           
|
| |  |  | conditions specific to the enterprise information portal market and other general economic factors;                                                   
|
| |  |  | changes in generally accepted accounting policies, especially those
related to the recognition of software revenue; and                               
|
| |  |  | new government legislation or regulation.                                                                                                             

We typically receive 50% to 70% of our orders in the last month of each
fiscal quarter because our customers often delay purchases of products until
the end of the quarter and our sales organization and our individual sales
representatives strive to meet quarterly sales targets. Because a substantial
portion of our costs are relatively fixed and based on anticipated revenue, a
failure to book an expected order in a given quarter will likely not be offset
by a corresponding reduction in costs and, therefore, could adversely affect
our operating results for that quarter. Due to these factors, we believe that
period-to-period comparisons of our operating results are not necessarily
meaningful and cannot be relied upon as indicators of future performance. In
future periods, our operating results may be below the expectations of public
market analysts and investors. In this event, the price of our common stock may
fall significantly.

Because our customers orders vary substantially in size, our quarterly
operating results are difficult to forecast and may fluctuate.

Customer orders during a particular quarter typically vary considerably in
size, from as low as several thousand dollars to over one million dollars.
Because of the large size of some individual customer orders relative to total
orders during a quarter, our revenue may fluctuate significantly from one
quarter to the next. If a customer who places a large order cancels or reduces
the order, or if we are unable to fulfill the order in a timely fashion or are
otherwise unable to recognize revenue for the order in the quarter in which it
is anticipated, it could result in increased volatility in our revenue and
stock price.

Since our sales cycle is long, unpredictable and subject to seasonal
fluctuations, it is difficult to accurately forecast our revenue; if we fail to
achieve our forecasted revenue, our operating results will suffer and our stock
price may decline.

The typical sales cycle of our products is long and unpredictable and
requires both a significant capital investment decision by our customers and
the education of potential customers regarding the use and benefits of our
products. Our sales cycle is generally between three and nine months long. A
successful sales cycle typically includes presentations to both business and
technical decision makers. The implementation of our products involves

31



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

a significant commitment of resources by prospective customers. Accordingly, a
purchase decision for a potential customer typically requires the approval of
several senior decision makers. Our sales cycle is also affected by the
business conditions of each prospective customer. Due to the relative
importance of many of our individual product sales, a lost or delayed sale
could adversely affect our quarterly operating results. Our sales cycle is also
affected by seasonal fluctuations as a result of our customers fiscal year
budgeting cycles and slow summer purchasing patterns overseas. Also, we expect
revenue to be higher in the fourth quarter than in other quarters of the year
since many customers strive to spend unused budgeted dollars before the end of
the year.

If our software contains errors, we may lose customers or experience reduced
market acceptance of our products.

Our software products are inherently complex and may contain defects and
errors that are detected only when the products are in use. In addition, some
of our customers may require enhanced customization of our software for their
specific needs, and these modifications may increase the likelihood of
undetected defects or errors. Further, we often render implementation,
consulting and other technical services, the performance of which typically
involves working with sophisticated software, computing and networking systems,
and we could fail to meet customer expectations as a result of any defects or
errors. As a result, we may lose customers, customers may fail to implement our
products more broadly within their organization and we may experience reduced
market acceptance of our products. Our products are designed to facilitate the
secure transmission of sensitive business information to specified parties
outside the business over the Internet. As a result, the reputation of our
software products for providing good security is vital to their acceptance by
customers. Our products may be vulnerable to break-ins, theft or other improper
activity that could jeopardize the security of information for which we are
responsible. Problems caused by product defects, failure to meet project
milestones for services or security breaches could result in loss of or delay
in revenue, loss of market share, failure to achieve market acceptance,
diversion of research and development resources, harm to our reputation,
increased insurance costs or increased service and warranty costs. To address
these problems, we may need to expend significant capital resources that may
not have been budgeted.

Product liability claims could harm our business.

Our license agreements with customers typically contain provisions
designed to limit our exposure to potential product liability claims. All
domestic and international jurisdictions may not enforce these limitations.
Although we have not experienced any product liability claims to date, we may
encounter this type of claim in the future. Product liability claims brought
against us, whether or not successful, could divert the attention of our
management and key personnel and could be expensive to defend.

We may be unable to maintain or grow our international operations, which could
slow or undermine our overall growth.

Sales from outside
the United States accounted for 7% of our total
revenue for the three months ended March 31, 2002 and 39% for the three months
ended March 31, 2001. For the year ended December 31, 2001, we derived 19% of
our total revenue from sales outside the United States. We derive our
international revenue primarily from sales in Canada, Europe and Asia Pacific.
We intend to continue to pursue international markets by partnering with OEMs,
VARs and distributors, and anticipate that in the foreseeable future a
significant portion of our revenue may be derived from sources outside the
United States. If we are unable to maintain or grow our international
operations, it could slow or undermine our overall growth.

We have not identified any material risk associated with doing business in
Canada, other than risk associated with foreign currency exchange rate
fluctuations. In Japan, we have an exclusive distribution relationship with
Mitsui. We also face country-specific risks in Europe and the Asia-Pacific
region, such as fluctuation in currency exchange rates, general economic
conditions in Europe and the Asia-Pacific region and regulatory uncertainties
associated with being a foreign company doing business in those geographic
areas.

Our international operations are subject to a number of risks, including:



| |  |  |  costs of customizing our products for foreign countries;
| |  |  | ----------------------------------------------------------

32



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------



| |  |  | protectionist laws and business practices favoring local competition;                
| | - |  | -------------------------------------------------------------------------------------
|
| |  |  | dependence on the performance of local resellers and other strategic partners;       
|
| |  |  | adoption of general Internet technologies in each international market;              
|
| |  |  | compliance with multiple, conflicting and changing governmental laws and regulations;
|
| |  |  | longer sales and payment cycles;                                                     
|
| |  |  | import and export restrictions and tariffs;                                          
|
| |  |  | difficulties in staffing and managing international operations;                      
|
| |  |  | greater difficulty or delay in accounts receivable collection;                       
|
| |  |  | foreign currency exchange rate fluctuations;                                         
|
| |  |  | multiple and conflicting tax laws and regulations; and                               
|
| |  |  | political and economic instability.                                                  

If our plan to sell the Viador E-Portal directly to customers is not
successful, we may not be able to grow our revenue and our stock price may
suffer.

We sell our products primarily through our domestic direct sales
organization and we support our customers with our technical and customer
support staff in several field offices. Our ability to achieve revenue growth
in the future will depend on our ability to recruit and train sufficient
technical, customer and direct sales personnel. We have in the past and may in
the future experience difficulty in recruiting qualified sales, technical and
support personnel. Our inability to rapidly and effectively expand our direct
sales force and our technical and support staff could reduce or eliminate our
growth and cause our stock price to fall.

We depend on technology licensed from third parties and, if we do not maintain
those license arrangements, this could result in delays in shipping our
products and services, which could harm our business.

We license our search engine technology, which is integrated into the
Viador E-Portal, from Inktomi. This technology provides users of our products
with the ability to search and classify information. We also license JRUN, a
Java servlet engine from Macromedia, which is necessary for users to access the
Viador E-Portal. This software may not continue to be available on commercially
reasonable terms, or at all. Our loss of or inability to maintain either of
these technology licenses could result in delays in the sale of our products
and services until equivalent technology, if available, is identified, licensed
and integrated, which could harm our business.

If we do not manage the recent reduction in our workforce, it could have a
material adverse effect on our business.

During the year ended December 31, 2001, we reduced our workforce by a
total of 173 people to reduce costs. At March 31, 2002, our workforce totaled
31 employees. It is possible that we will have further workforce and cost
reductions in the future.

Any failure to manage the impact of the workforce reduction on our product
development schedules, our ability to retain remaining personnel, or our
ability to recruit new employees in the future could have a material adverse
effect on our business, operating results and financial condition.

If we are unable to motivate and retain our personnel, it could have a
material, adverse effect on our business.

Our success depends in large part on our ability to motivate and retain
highly skilled employees on a timely basis. Our workforce reductions and any
future workforce reduction could result in some disruption in our ongoing
operations and harm our efforts to motivate existing employees. Our failure to
retain highly skilled personnel may

33



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

limit the rate at which we generate revenue and develop new products or product
enhancements. This could have a material adverse effect on our business,
operating results and financial condition.

Loss of either of our executive officers could harm our business.

Our future success depends to a significant degree on the skills,
experience and efforts of our senior management. In particular, we depend upon
the continued services of Stan X. Wang, our president and chief executive
officer, and Nathan A. Cammack, our chief financial officer. The loss of the
services of Messrs. Wang and/or Cammack could harm our business and operations.
In addition, we have not obtained life insurance benefiting us on any of our
employees or entered into employment agreements with our key employees. If any
of our key employees left or was seriously injured and unable to work and we
were unable to find a qualified replacement, our business could be harmed.

If we do not successfully recruit and retain skilled personnel for permanent
management positions, we may not be able to effectively implement our business
objectives.

We have experienced significant personnel changes at the senior management
level. During 2001, Dick Warmington resigned as interim president and chief
executive officer and Alice Pilch resigned as chief financial officer. We
appointed Stan X. Wang president and chief executive officer in August 2001 and
Nathan A. Cammack chief financial officer in October 2001. On October 1, 2001,
Don Cochrane resigned as vice president of worldwide sales and marketing. We
have not yet appointed a new vice president of worldwide sales and marketing.
We cannot predict how these changes in management will affect our business.
However, if we fail to recruit and retain qualified individuals to permanently
serve in these senior management positions, our business, financial condition
and results of operations will be seriously harmed.

We may not be able to recruit and retain personnel, which would impair our
growth.

We are highly dependent on certain members of our management and
engineering staff, including, without limitation, our chief executive officer
and our chief financial officer. The loss of one or more of these officers
could impede the achievement of our business objectives. Furthermore,
recruiting and retaining qualified financial and technical personnel is
critical to our success. If our business grows, we will also need to recruit a
significant number of management, technical and other personnel for our
business. Competition for employees in our industry is intense. Our ability to
attract and retain skilled and experienced personnel may be adversely impacted
by limitations on our ability to issue stock options due to the delisting of
our common stock from the Nasdaq National Market System. During the second
quarter of 2002, we anticipate granting a significant number of options to
purchase our common stock to certain key employees and advisors. We may not be
able to continue to attract and retain skilled and experienced personnel on
acceptable terms, and the granting of stock options to key advisors who are not
employees will result in a charge to operating expense, which will negatively
impact our results of operations.

If we are unable to effectively protect our proprietary rights, our competitors
may be able to copy important aspects of our products or product presentation,
which would undermine the relative appeal of our products to customers and
reduce our sales.

We believe that proprietary rights are important to our business. We
principally rely upon a combination of patent, copyright, trademark and trade
secret laws as well as contractual restrictions to protect our proprietary
technology. We have filed applications seeking U.S. patents on two inventions.
However, patents for these inventions may not issue and it is possible that
these and any other patents issued to us may be circumvented by our competitors
or otherwise may not provide significant proprietary protection or commercial
advantage to us. Similarly, our trademark, service mark and copyright rights
may not provide significant proprietary protection or commercial advantage to
us, and the measures we take to maintain the confidentiality of our trade
secrets may be ineffective. If we are unable to effectively protect our
proprietary rights, our competitors may be able to copy important aspects of
our products or product message, which would undermine the relative appeal of
our products to customers and thus reduce our sales.

34



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

If our products infringe upon the proprietary rights of others, we may be
forced to pay high prices to license new technology or stop selling our
products.

Our commercial success will also depend in part on our not infringing the
proprietary rights of others and not breaching technology licenses that cover
technology used in our products. It is uncertain whether any third-party
proprietary rights will require us to develop alternative technology or to
alter our products or processes, obtain licenses or cease certain activities.
If any licenses of that type are required, we may not be able to obtain those
licenses on commercially favorable terms, if at all. Our failure to obtain a
license to any technology that we may require to commercialize our products and
services could cause our business and prospects to suffer. Litigation, which
could result in substantial cost to us, may also be necessary to enforce any
patents issued or licensed to us or to determine the scope and validity of
third-party proprietary rights.

Our business may be affected by the events of September 11, 2001.

Our business and operating results may differ materially from our
expectations due to consequences attributable to the events that took place in
New York City and Washington D.C. on September 11, 2001. We cannot predict the
nature or effect on our revenue or operations of any future political or
economic events and policies that may arise directly or indirectly as a result
of those events. In addition, these events may continue to have a negative
impact on the general emotions and psychology of the marketplace, which could
cause our stock price to fluctuate.

Risks Related To Our Industry

The markets in which we compete are highly competitive, and we may not be able
to compete effectively.

The market for our products is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. Our primary source of direct competition
comes from independent software vendors of corporate portal software. We also
compete with business intelligence software vendors, large application software
vendors, and application server vendors providing a portal add-on. Business
intelligence software is installed on a personal computer and permits the
analysis of information in databases. We also face indirect competition from
potential customers internal development efforts. We cannot assure that we
will be able to successfully compete against current and future competitors, or
that competitive pressures we face will not materially adversely affect our
business, prospects, operating results and financial condition.

If we fail to manage technological change or effectively respond to changes in
customer needs, demand for our products and services will drop and our business
will suffer.

The market for enterprise information portals is still in an early stage
of development and is characterized by rapidly changing technology, evolving
industry standards, frequent new service and product introductions and changes
in customer demands. Our future success will depend to a substantial degree on
our ability to offer products and services that incorporate leading technology
and respond to technological advances and emerging industry standards and
practices on a timely and cost-effective basis. You should be aware that:



| |  |  | our technology or systems may become obsolete upon the introduction of alternative technologies;                                                                                
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the technological life cycles of our products are difficult to estimate;                                                                                                        
|
| |  |  | we may not have sufficient resources to develop or acquire new
technologies or to introduce new services capable of competing with
future technologies or service offerings; and
|
| |  |  | the price of the products and services we provide may decline as
rapidly as, or more rapidly than, the cost of any competitive
alternatives.                                    

We may not be able to effectively respond to the technological
requirements of the changing market for enterprise information portals. To the
extent we determine that new technologies and equipment are required to remain
competitive, the development, acquisition and implementation of those
technologies and equipment are

35



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

likely to continue to require significant capital investment by us. We may not
have sufficient capital for this purpose in the future, and even if it is
available, investments in new technologies may not result in commercially
viable technological processes and there may not be commercial applications for
those technologies. If we do not develop and introduce new products and
services and achieve market acceptance in a timely manner, demand for our
products and services will drop and our business will suffer.

Our business and prospects will suffer if we are unable to adequately respond
to customer demands.

We expect that our customers increasingly will demand additional
information and reports with respect to the services we provide. In addition,
if we are successful in implementing our marketing strategy, we also expect the
demands on our technical support resources to grow rapidly, and we may
experience difficulties in responding to customer demand for our services and
providing technical support in accordance with our customers expectations. We
expect that these demands will require not only the addition of new management
personnel, but also the development of additional expertise by existing
management personnel and the establishment of long-term relationships with
third-party service vendors. We may not be able to keep pace with any growth,
successfully implement and maintain our operational and financial systems or
successfully obtain, integrate and utilize the employees, facilities,
third-party vendors and equipment, or management, operational and financial
resources necessary to manage a business in our evolving and increasingly
competitive industry. If we are unable to address these customer demands, our
business and prospects will suffer.

Our future success will depend upon the ability of our products to work with a
large variety of hardware, software, database and networking systems.

We currently serve, and intend to continue to serve, a customer base with
a wide variety of hardware, software, database and networking systems. To gain
broad market acceptance, we believe that we may have to support an increased
number of systems in the future. We currently develop our products on Microsoft
Windows NT and Solaris. Therefore, we experience a delay when we adapt our
products to be installed on other major servers. A delay in any rollout of our
product onto a new system could adversely affect our revenue and operating
results. There can be no assurance that we will adequately expand our data
source and system coverage to service potential customers, or that the
expansion will be sufficiently rapid to meet or exceed the system and data
source coverage of our competitors. The success of our products will depend on
various factors, including the ability of our products to integrate and be
compatible with customer systems, particularly hardware systems, operating
systems and data sources, as well as or better than competitive offerings. The
success of our products will also depend on the ability of our existing
products to work well with one another, with new products we are developing and
with new software being developed by third parties. We cannot assure you that
we will successfully develop and market product enhancements or new products
that respond to these technological changes, shifting customer tastes or
evolving industry standards, or that we will not experience difficulties that
could delay or prevent the successful development, introduction and marketing
of these products. If we are unable to develop and introduce new products or
enhancements of existing products in a timely manner or if we experience delays
in the commencement of commercial shipments of new products and enhancements,
our business will suffer.

Our officers, directors and affiliates may be able to control all matters
submitted for stockholder approval, and you will be subject to their decisions.

Some of our stockholders own a large enough stake in us to have a
significant influence on the matters presented to a vote of stockholders. As a
result, these stockholders may be able to control all matters requiring
stockholder approval, including the election and removal of directors, the
approval of significant corporate transactions, such as any merger,
consolidation or sale of all or substantially all of our assets, and the
control of our management and affairs. Accordingly, that concentration of
ownership may delay, defer or prevent a change in control of Viador, impede a
merger, consolidation, takeover or other business combination involving Viador
or discourage a potential acquirer from making a tender offer or otherwise
attempting to obtain control of Viador, any of which could have a material
adverse effect on the market price of our common stock.

36



---



##### Table of Contents





|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
|------- |  | -------------------------------------------------------------------------------------------------

We have certain anti-takeover defenses that could prevent an acquisition of our
business that you might favor.

Provisions of our certificate of incorporation and bylaws and the
provisions of Delaware law could have the effect of delaying, deferring or
preventing an acquisition of our business. For example, our board of directors
is divided into three classes to serve staggered three-year terms, we may
authorize the issuance of up to 10,000,000 shares of blank check preferred
stock, our stockholders may not take actions by written consent and our
stockholders are limited in their ability to make proposals at stockholder
meetings.

We rely on a continuous power supply.

In the summer of 2001, California experienced an energy crisis that could
disrupt our operations and increase our expenses of our California facilities.
In the event of an acute power shortage, that is, when power reserves for the
State of California fall below certain critical levels, California has on some
occasions implemented, and may in the future continue to implement, rolling
blackouts throughout California. We currently do not have adequate backup
generators or alternate sources of power in the event of a blackout, and our
current insurance does not provide coverage for any damages we or our customers
may suffer as a result of any interruption in our power supply. If blackouts
interrupt our power supply, we would be temporarily unable to continue
operations at our California facilities. Any such interruption in our ability
to continue operations at our facilities could damage our reputation, harm our
ability to retain existing customers and to obtain new customers, and could
result in lost revenue, any of which could substantially harm our business and
results of operations.

37



---



##### Table of Contents






ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Investment Portfolio

Viador places its investments in instruments that meet high credit quality
standards, as specified in Viadors investment policy guidelines; the policy
also limits the amount of credit exposure to any one issue, issuer, or type of
instrument. Our interest income is sensitive to changes in the general level of
U.S. interest rates, particularly since the majority of our cash and cash
equivalent investments are in short-term instruments. Due to the short-term
nature of our investments, we believe that there is no material risk exposure.
At March 31, 2002 and December 31, 2001, we held no interest-bearing
investments.

Impact of Foreign Currency Exchange Rate Change

We develop products in the United States and market our products in North
America, Europe and the Asia-Pacific region. As a result, our financial results
could be affected by factors such as changes in foreign currency exchange rates
or weak economic conditions in foreign markets. No foreign currency derivatives
were purchased or written during the three months ended March 31, 2002.

38



---



##### Table of Contents






PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS.

Class Action Law Suit

On November 13, 2001, Viador and certain of its current and former
officers and directors, together with the underwriters of its October 25, 1999
Initial Public Offering (IPO), were named as defendants in a class action
complaint alleging violations of the federal securities laws in the United
States District Court, Southern District of New York. The Court appointed a
lead plaintiff on April 15, 2002, and plaintiffs filed an Amended Class Action
Complaint on April 22, 2002. The essence of the complaint is that defendants
issued and sold Viadors common stock pursuant to the IPO without disclosing to
investors that certain underwriters of the IPO had solicited and received
excessive and undisclosed commissions from certain investors. The complaint
also alleges that the Registration Statement for the IPO failed to disclose
that the underwriters allocated Viador shares to customers in exchange for the
customers promises to purchase additional shares in the after-market at
pre-determined prices above the offering price, thereby maintaining, distorting
and/or inflating the market price for the shares in the after-market.

The lawsuit is part of the IPO Allocation Securities Litigation pending
in the United States District Court for the Southern District of New York.
Approximately 310 companies and over 30 underwriters have been sued in actions
alleging claims nearly identical to those alleged against Viador. The cases are
being coordinated for pre-trial purposes before the Hon. Schira Scheindlin. The
IPO Allocation Securities Litigation is in its early stages. No date has been
set for the filing of responsive pleadings by any defendant. The Court has
indicated that it intends to follow specialized but as yet unidentified
procedures for the submission and determination of motions to dismiss.
Discovery is stayed pending the outcome of motions to dismiss. This proceeding
is at a very early stage and Viador is unable to speculate as to its ultimate
outcome.

Other Pending Litigation

On January 11,
2002, William Grinder, an individual, filed a personal injury
complaint for unspecified monetary damages in San Francisco County
Superior Court alleging causes of action for negligence and negligent
hiring against Viador and certain other named defendants. Viador is
currently investigating the allegations and cannot evaluate
plaintiffs claims at this time.

On May 10, 2002,
attorneys for one of Viadors customers, CMS, sent a letter to
Viador reporting that CMS had filed a suit against Viador in the
United States District Court for the Eastern District of Virginia,
Alexandria Division. According to the letter, the complaint alleges
breach of contract and seeks monetary damages of approximately
$281,000. Viador has not been served with the complaint and cannot
evaluate its claims or Viadors response at this time.

39



---



##### Table of Contents






ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



| | (a) |  | Modification to Instruments Defining the Rights of Common Stockholders.
| | --- |  | -----------------------------------------------------------------------

On April 15, 2002, we amended our bylaws to provide that a majority of our
stockholders may call a special meeting of the stockholders.



| | (b) |  | Material Limitations or Qualifications on Rights of Common
Stockholders Resulting from the Issuance or Modification of Other
Securities.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------

On March 18, 2002, we issued convertible debt securities in private
offerings. These issuances of convertible debt securities may materially affect
the rights evidenced by the common stock since such debt securities would have
priority over the common stock in the distribution of proceeds from any sale of
our assets and any subsequent distribution.



| | (c) |  | Information Required by Item 701 of Regulation S-K.
| | --- |  | ---------------------------------------------------

On March 18, 2002, we received $1.0 million in financing through a private
offering of debt securities and a commitment to provide us with additional
financing of up to $2.0 million upon our request from Mr. Heungyeung Yeung, who
currently holds certain of our securities. Mr. Yeungs commitment to provide
$2.0 million in additional financing is subject to certain conditions relating
to our ability to meet our obligations under the notes and warrants issued to
Mr. Yeung, changes in our equity ownership, composition of our management team
and any change in control. See Note 3 of Notes to Condensed Consolidated
Financial Statements for additional information.

As consideration for the funds and the commitment to provide additional
funds, we issued a convertible promissory note and two warrants to Mr. Yeung.
The note has a principal amount of $1 million and is convertible into
16,711,230 shares of our common stock. The note accrues interest at a stated
rate of 1% per year and matures on March 18, 2004. In connection with this
financing, we incurred a commission payable to Mr. Yeung in the amount of
$60,000.

One of the warrants is exercisable in whole or in part, at any time or
from time to time, for 3,333,333 shares of our common stock at an exercise
price of $0.06 per share. The second warrant is exercisable for an aggregate of
3,333,333 shares of our common stock at an exercise price of $0.06 per share,
but is subject to vesting, such that 25% of the warrant becomes exercisable
every six months and is entirely exercisable on March 18, 2004, two years after
the issuance date. The second warrant ceases to vest in the event Mr. Yeung
fails to fulfill his commitment to provide additional funding. However, if Mr.
Yeungs failure to provide additional funding is due to our failure to meet any
of the conditions above, the second warrant becomes fully exercisable. Both
warrants expire on March 18, 2005.

Each time we receive additional funding from Mr. Yeung, we will issue to
Mr. Yeung a convertible promissory note with a principal amount equal to the
amount of such additional funding. Interest on any such note will accrue at a
rate equal to the sum of (a) the prime rate in effect on loans made by
Citibank, N.A. as of the date such note, plus (b) three percent (3%). Any such
note will be convertible into either shares of our common stock or any equity
securities we issue to a third party or third parties in one or more bona fide,
arms-length transactions for the purpose of raising capital during the term of
such note. If the note is converted into our common stock, the note will be
convertible into a number of shares of our common stock equal to the total
principal and interest amount outstanding on the note at the time of conversion
divided by $0.05984. If the note is converted into another class of equity
securities issued in an equity financing, the note will be convertible into a
number of shares of such equity securities equal to the total principal and
interest amount outstanding on the note at the time of conversion divided by
the price per share or unit at which such equity securities are sold to third
party investors.

None of the notes or warrants issued or issuable to Mr. Yeung are
convertible or exercisable if the conversion or exercise of any such note or
warrant would result in Mr. Yeung or his affiliates holding more than 49.9% of
our issued and outstanding voting stock.

40



---



##### Table of Contents



ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (CONTINUED)

The offering and issuance were exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof, as a
transaction not involving a public offering.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.




ITEM 5. OTHER INFORMATION

See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Recent Events on page 17.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits.
| | --- |  | ---------

INDEX TO EXHIBITS

|            |  |                                                       
|----------- |  | ------------------------------------------------------
|Exhibit No. |  | Exhibit Title                                         
|            |  |                                                       
|3.2         |  | Form of Amended and Restated Bylaws                   
|           
|* 10.2      |  | Form of Amended and Restated 1999 Stock Incentive Plan



---

|* |  | - Incorporated by reference to the Registrants Proxy Statement for the
2002 Annual Meeting of Stockholders as amended on May 2, 2002.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | Reports on Form 8-K.
| | --- |  | --------------------

| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Viador filed a Current Report on Form 8-K with the Securities and
Exchange Commission on March 20, 2002 under Item 5 regarding the debt
financing of up to $3.0 million received by Viador in March 2002.

41



---



##### Table of Contents






SIGNATURES

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

|                   |  |     |  |                                                                                                    
|------------------ |  | --- |  | ---------------------------------------------------------------------------------------------------
|                   |  |     |  | VIADOR INC.(Registrant)                                                                            
|                  
|Date: May 20, 2002 |  | By: |  | /s/ Nathan A. Cammack                                                                              
|                   |  |     |  |                                                                                                    
|                   |  |     |  | Nathan A. Cammack
Chief Financial Officer and Secretary(Principal Financial and Accounting Officer)

42



---



##### Table of Contents






INDEX TO EXHIBITS

|            |  |                                                       
|----------- |  | ------------------------------------------------------
|Exhibit No. |  | Exhibit Title                                         
|            |  |                                                       
|3.2         |  | Form of Amended and Restated Bylaws                   
|           
|* 10.2      |  | Form of Amended and Restated 1999 Stock Incentive Plan



---

|* |  | - Incorporated by reference to the Registrants Proxy Statement for the
2002 Annual Meeting of Stockholders as amended on May 2, 2002.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------

43