EOL EOL Financial Statement Financial Statement SEC compliant SEC compliant EN EN Liv A. Watson Liv A. Watson 8/29/2002 8/30/2002 Greg Adams Edgar Online Inc EOL Edgar information portal 4/1/2002 6/30/2002 3 Month 12/31/2002 not Audited Pro Forma 4115000 695 3420000 3744000 644000 1784000 588000 728000 -324000 -55000 -379000 -379000 -0.02 -0.02 16956000 -0.02 24565000 33486000 7449 5765 5279 3461 1847 2026 201 298 2104 2519 2189 8009 11970 16292 853 901 24565000 33486000 7061000 9526000 5193000 5719000 1008000 1680000 1918000 1393000 2251000 2621000 16000 25000 1868000 3800000 7000 17504000 23960000 0.01 0.01 30000000 30000000 170000 156000 0.01 0.01 1000000 1000000 58173000 54741000 -40839000 -30935000 841000 -9904000 10745000 584000 874000 9317000 85000 2000 94000 -24000 -671000 524000 -40000 -169000 -169000 1146000 3402000 44000 -16000 -2246000 -38000 3461000 5279000 221000 761(revenue recoginitgon policy) (4) REVENUE RECOGNITION We derive revenues from four primary sources: contracts with corporate customers for customized data, sale of our technical services to construct and/or operate the technical systems our customers use to integrate our data and data from other sources into their products and services, seat based subscriptions to our Web site services and advertising and other e-commerce based revenues. Revenue from data sales is recognized over the term of the contract, which are typically non-cancelable, one-year contracts with automatic renewal clauses, or, in the case of certain up-front fees, over the estimated customer relationship period. Revenue from technical services, consisting primarily of time and materials based contracts, is recognized in the period services are rendered. Revenue from seat-based subscriptions is recognized ratably over the subscription period, which is typically three or twelve months. Advertising and e-commerce revenue is recognized as the services are provided. Revenue is recognized provided acceptance, or delivery if applicable has occurred, collection of the resulting receivable is probable and no significant obligations remain. If amounts are received in advance of the services being performed, the amounts are recorded and presented as deferred revenues. (9) RECENT ACCOUNTING PRONOUNCEMENTS (1054 Changes in Presentation of Comparative Financial Statements) also 768 Recently Issued Accounting Standards In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated or completed after June 30, 2001. SFAS No. 141 also specifies the criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. SFAS No. 141 was effective July 1, 2001, except with regard to business combinations that were initiated prior to that date, which the Company accounted for using the purchase method of accounting. SFAS No. 142, which is effective for fiscal years beginning after December 15, 2001, requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 144). The Company adopted SFAS 142 effective January 1, 2002. The adoption of these accounting standards required that assembled workforce with a net book value of $3.4 million as of January 1, 2002 be subsumed into goodwill and also eliminated the amortization of goodwill commencing January 1, 2002. SFAS No. 142 also required the Company to perform a transitional assessment by June 30, 2002, to determine whether there is an impairment of goodwill. To perform this assessment, the Company compared the fair value of the FIS reporting unit, as determined by an independent valuation firm, to the carrying amount of the related net assets. This assessment indicated that goodwill associated with the FIS acquisition was impaired as of January 1, 2002. Accordingly, the Company recognized a $9.3 million non-cash charge, recorded as of January 1, 2002, as the cumulative effect of a change in accounting principle for the write-down of goodwill to its fair value. The impaired goodwill was not deductable for tax purposes, and as a result, no tax benefit has been recorded in relation to the change. SFAS 142 also requires goodwill to be tested annually and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company has elected to perform its annual tests for indications of goodwill impairment as of December 31 of each year. These reviews may result in future periodic impairments that could have a material adverse effect on the results of operations in the period recognized. 3 ME 06/30/02 3 ME 06/30/01 6 ME 06/30/02 6 ME 06/30/01 LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE Reported loss ($379) ($2,690) ($587) ($4,396) Goodwill amortization -- 381 -- 735 Adjusted loss ($379) ($2,309) ($587) ($3,661) PER SHARE OF COMMON STOCK - BASIC AND DILUTED Reported loss ($0.02) ($0.18) (0.03) ($0.29) Goodwill amortization -- 0.03 -- 0.05 Adjusted loss ($0.02) ($0.15) (0.03) ($0.24) (2) RECLASSIFICATIONS (774 reclassification) The Company has reclassified revenues into data sales, technical services, seat-based subscriptions and advertising and e-commerce revenues. Also, in 2002, the Company reclassified capital based tax payments from the income tax provision to general and administrative expenses. Prior comparative amounts have been reclassified to conform to this presentation. EDGAR Online, Inc. ("the Company"), formerly Cybernet Data Systems, Inc., was incorporated in the State of Delaware in November 1995 and launched its EDGAR Online Internet Web site in January 1996. The Company is a provider of financial information derived from U.S. Securities and Exchange Commission (SEC) data and developer of financial and business system solutions. The Company sells to the corporate market and Internet portals as well as running five destination Web sites. The Company has entered into several arrangements with other Internet service providers to market financial information services. (776 nature of business). LOSS PER SHARE (1076 gain/lost per share) Loss per share is presented in accordance with the provisions of SFAS No. 128, Earnings Per Share, and the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 98. Under SFAS No. 128, Basic EPS excludes dilution for common stock equivalents and is computed by dividing income or loss available to common shareholders by the weighted average number of common shares outstanding for the period. (787 EPS) Financial instruments that potentially subject the Company to significant concentration of credit risk (concentration of credit risk 790)consist primarily of accounts receivable. The most significant concentration of credit risk relates to NASDAQ, which comprised 27% and 17% of the Company's total gross receivable balance at June 30, 2002 and December 31, 2001, respectively. No other customer accounted for more than 10% of accounts receivable at June 30, 2002 or December 31, 2001. NASDAQ comprised 34% and 42% of the company's total revenue during the six months ended June 30, 2002 and 2001, respectively. The other customers are geographically dispersed throughout the United States with no one customer accounting for more than 10% of revenues during the three months ended June 30, 2002 or 2001. In addition, the Company has not experienced any significant credit losses to date from any one customer. As a result of the adoption of SFAS 142, "Goodwill and Other Intangible Assets", the Company completed its required impairment review and recorded an impairment charge of $9.3 million (873 Impairment or Disposal of Long-Lived Assets). During the second quarter of 2001, the Company recorded a $275,000 loss on investment, included in interest and other income (expense), related to an equity investment made in 2000. This investment was accounted for under the cost method. The company in which the investment was made had lower than expected financial results over the previous several quarters as compared to those forecasted at the time of the investment. As a result, the carrying amount was reduced to $0.( 874 Impairment Loss on Assets Held and Used) (878 Description of the Impaired Assets to be Disposed Of) The fair values of the Company's long-term obligations (Long-Term Debt 938) are based on the amount of future cash flows associated with the notes, discounted using an appropriate interest rate. PRIVATE PLACEMENT OF COMMON STOCK (1022 number of shares of stock issued) In December 2001 and January 2002, we consummated a private sale of common stock and warrants to certain institutional investors. Pursuant to these transactions, we sold an aggregate of 2,000,000 shares of Common Stock, at a purchase price of $2.50 per share, along with four-year warrants to purchase an aggregate of 400,000 shares of Common Stock at an exercise price of $2.875 per share resulting in gross proceeds of $5,000,000. (3) BUSINESS COMBINATIONS (1039 Business Acquisitions) 1040 Acquired Company InformationOn October 30, 2000, the Company acquired all the outstanding equity of Financial Insight Systems, Inc. (FIS), pursuant to the terms and conditions of an agreement and plan of merger dated October 18, 2000 for $28,148,575. (1041 cost of acquired company)The purchase price included (1) the issuance of 2,450,000 restricted shares of EDGAR Online common stock valued at $9,579,500, (2) the payment of $17,765,000 consisting of (i) a cash payment of $11,765,000 and (ii) a series of two year 7.5% senior subordinated secured promissory notes in the total principal amount of $6,000,000 and (3) $804,075 for the payment of fees and acquisition related expenses. The aggregate purchase price of $28,148,575 was originally allocated to the purchased assets and liabilities based on their relative fair market values at the date of acquisition. The excess purchase price over the estimated fair value of the tangible assets acquired has been allocated as follows: (4) $8,796,406 to goodwill with an estimated useful life of 12 years. (1043 Goodwill From Newly Acquired Company) (9) RECENT ACCOUNTING PRONOUNCEMENTS (1054 Changes in Presentation of Comparative Financial Statements) also 768 Recently Issued Accounting Standards In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated or completed after June 30, 2001. SFAS No. 141 also specifies the criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. SFAS No. 141 was effective July 1, 2001, except with regard to business combinations that were initiated prior to that date, which the Company accounted for using the purchase method of accounting. SFAS No. 142, which is effective for fiscal years beginning after December 15, 2001, requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 144). The Company adopted SFAS 142 effective January 1, 2002. The adoption of these accounting standards required that assembled workforce with a net book value of $3.4 million as of January 1, 2002 be subsumed into goodwill and also eliminated the amortization of goodwill commencing January 1, 2002. SFAS No. 142 also required the Company to perform a transitional assessment by June 30, 2002, to determine whether there is an impairment of goodwill. To perform this assessment, the Company compared the fair value of the FIS reporting unit, as determined by an independent valuation firm, to the carrying amount of the related net assets. This assessment indicated that goodwill associated with the FIS acquisition was impaired as of January 1, 2002. Accordingly, the Company recognized a $9.3 million non-cash charge, recorded as of January 1, 2002, as the cumulative effect of a change in accounting principle for the write-down of goodwill to its fair value. The impaired goodwill was not deductable for tax purposes, and as a result, no tax benefit has been recorded in relation to the change. SFAS 142 also requires goodwill to be tested annually and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company has elected to perform its annual tests for indications of goodwill impairment as of December 31 of each year. These reviews may result in future periodic impairments that could have a material adverse effect on the results of operations in the period recognized. Total restructuring costs $ 995 $ 307 $ (93) $(100) $ 114 (6) RESTRUCTURING COSTS (1125 restructuring charges) (1137 discontinued operations) In 2001, the Company closed the Kirkland, WA office. The office closing completed the Company's consolidation of its technical operations. During the second quarter of 2001, the Company recorded a $912,000 pre-tax charge which is included in operating expenses in the consolidated statement of operations. In September 2001, the Company incurred $84,000 of additional severance costs related to restructuring at FIS. In March 2002, the Company negotiated a contract termination, thereby eliminating $100,000 of future obligations. Restructuring costs include the following: Employment termination payments 319 28 (39) --Employment termination payments - FIS 84 -- -- -- -- RESTRUCTURING COSTS (1125 restructuring charges) (1137 discontinued operations) In 2001, the Company closed the Kirkland, WA office. The office closing completed the Company's consolidation of its technical operations. During the second quarter of 2001, the Company recorded a $912,000 pre-tax charge which is included in operating expenses in the consolidated statement of operations. In September 2001, the Company incurred $84,000 of additional severance costs related to restructuring at FIS. In March 2002, the Company negotiated a contract termination, thereby eliminating $100,000 of future obligations. Restructuring costs include the following: Write down of fixed assets $ 234 Non-recoverable lease payments (need new items for) 170 97 (45) (10) 42 Non-cancelable service contracts (need new items for) 188 182 (9) (101) 72 EOL 2002-06-30 ISO4217:USD EOL 2002-06-30 EOL 2001-12-31 ISO4217:USD EOL 2001-12-31