OVERVIEW

We create and distribute financial data and public filings for equities, mutual funds, and a variety of other publicly traded assets. We produce highly detailed data that helps in the analysis of the financial, business and ownership conditions of an investment. We are considered a pioneer and leader in the rapidly emerging financial reporting standard, XBRL, and use our automated processing platform and our expertise in XBRL to produce both datasets and tools to assist organizations with the creation, management and distribution of XBRL financial reports. We launched our EDGAR Online web site and began selling our subscription services and establishing contractual relationships with business and financial information web sites to supply EDGAR content in January 1996.

We went public in May 1999. In September 1999, we acquired all of the outstanding equity of Partes Corporation, owner of the Freeedgar.com web site for $9,900. The purchase price consisted of the issuance of common stock, stock options and warrants, the assumption of liabilities and acquisition related expenses. In October 2000, we acquired all the outstanding equity of Financial Insight Systems, Inc. for approximately $28,100. The purchase price included the issuance of common stock and notes, a cash payment and acquisition related expenses.

We recognize revenue from providing the following services:

Subscriptions. Our end-user subscription services include I-Metrix and I-Metrix Professional, EDGAR Pro and EDGAR Access. I-Metrix delivers a web only service while I-Metrix Professional allows a user to do in-depth analysis of companies and industries by providing fundamental data and a suite of tools and models that allow users to search, screen and evaluate the data via the web and a Microsoft Excel add-in. EDGAR Pro offers financial data, stock ownership, public offering data sets and advanced search tools. It is available via multi-seat and enterprise-wide contracts, and may also include add-on services such as global annual reports and conference call transcripts. EDGAR Access, our retail product, has fewer features than EDGAR Pro and is available via single-seat, credit card purchase only. Subscriptions also includes ancillary advertising and e-commerce revenues through the sale of advertising banners, sponsorships and through e-commerce activities such as marketing third party services to the users of our web sites. Revenue from subscription services is recognized ratably over the subscription period, which is typically 12 months. Advertising and e-commerce revenue is recognized as the services are provided.

Data and Solutions. We produce a specialized line of data feeds, products and solutions based on content sets that we have extracted from SEC filings and other data providers. Both our data products and solutions consist of digital data feeds transmitted through various formats including hosted web pages, multiple application programming interfaces, and other response mechanisms. Our data products include, but are not limited to, full access to SEC filings in multiple formats, standardized and as-reported fundamental financial data, annual and quarterly financial statements, insider trades, institutional holdings, initial and secondary public offerings, Form 8-K disclosures, electronic prospectuses and other investment instrument disclosure information. Our data solutions include the customization of our data products, the conversion of data from unstructured content into multiple formats including XML, XBRL and PDF, the storage and delivery of data and custom feeds and tools to access the information. Revenue from data licenses is recognized over the term of the contract, which are typically non-cancelable, one-year contracts with automatic renewal clauses. Our data solutions sometimes involve some upfront customization fees along with more traditional annual data licensing arrangements for the ongoing delivery of the data solution. In addition, some of our data solutions are billed on a time and materials basis, per service level agreements or for delivery of data. We review each contract in connection with the respective governing accounting literature to determine revenue recognition on a case-by-case basis. Revenue from time and materials based agreements and data delivery is recognized as the data and services are provided. Upfront customization fees are recorded systematically over the expected customer relationship period.

XBRL Filings. One of our data solutions provides partners and customers with a mechanism for converting financial statements into XBRL for filing with the SEC and potentially other regulators. Our primary partner in this channel is R.R. Donnelley & Sons, where we provide services to their customer base for compliance with upcoming SEC regulations mandating the submission of XBRL tagged company reports. This XBRL Filing solution leverages our data processing engine and proprietary business rules that we have developed for tagging US GAAP financials with the appropriate XBRL tags. Our process combines our XBRL knowledge and expertise with data-tagging automation and workflow. We recognize revenue from fixed fees on a ratable basis as well as per-filing fees as the services are provided.

CRITICAL ACCOUNTING POLICIES

There have been no material changes in our critical accounting policies and estimates from those disclosed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008. However, in 2009, we have categorized revenue into the following; subscriptions, data and solutions and XBRL filings. Prior period revenues have been reclassified accordingly.

RESULTS OF OPERATIONS

The following table sets forth the percentage relationships of certain items from our Condensed Consolidated Statements of Operations as a percentage of total revenues.

                                                THREE MONTHS ENDED
                                                     MARCH 31,
                                               2008            2009
              Total revenues                      100 %           100 %
              Cost of revenues                     16              27


              Gross profit                         84              73
              Operating expenses:
              Sales and marketing                  24              22
              Product development                  21              13
              General and administrative           42              49
              Amortization and depreciation         9              12


              Loss from operations                (12 )           (23 )
              Interest and other, net              (2 )            (3 )


              Net loss                            (14 )%          (26 )%

REVENUES

Total revenues for the three months ended March 31, 2009 decreased 15% to $4,235, from $4,991 for the three months ended March 31, 2008. The net decrease in revenues was primarily attributable to a $409, or 18%, decrease in subscriptions revenues and a $506, or 19%, decrease in data and solutions revenues which were partially offset by a $159, or 192%, increase in XBRL filings revenues.

SUBSCRIPTIONS



                                                 THREE MONTHS ENDED
                                                      MARCH 31,
                                                  2008          2009
                Revenues (in $000s)            $    2,287     $  1,878
                Percentage of total revenues           46 %         44 %
                Number of subscribers              12,400       10,700
                Average price per subscriber   $      738     $    702

Subscription revenues for the three months ended March 31, 2009 decreased from the three months ended March 31, 2008 due to decreased sales of EDGAR Pro and EDGAR Access, our retail service. Sales of our I-Metrix Professional premium product were flat. Our subscription business has been impacted by unprecedented business and workforce reductions in the financial services community over the past year and the current economic crisis in general. While we did add new subscribers to all of our subscription products, cancellations exceeded these new sales.

DATA AND SOLUTIONS



                                                 THREE MONTHS ENDED
                                                      MARCH 31,
                                                  2008          2009
                Revenues (in $000s)            $    2,621      $ 2,115
                Percentage of total revenues           52 %         50 %
                Number of contracts                   275          283

Data and solutions revenues decreased for the three months ended March 31, 2009 from the three months ended March 31, 2008 due in large part to non-recurring data solutions revenue of approximately $380 in the three months ended March 31, 2008. In addition, cancellations of data licenses contracts exceeded new contracts in the three months ended March 31, 2009.

XBRL FILINGS



                                                 THREE MONTHS ENDED
                                                      MARCH 31,
                                                2008           2009
                Revenues (in $000s)            $    83       $     242
                Percentage of total revenues         2 %             6 %

The increase in XBRL filings revenues for the three months ended March 31, 2009 from the three months ended March 31, 2008 was directly related to the SEC rules that require certain companies to file their documents in XBRL beginning with the period ending after June 15, 2009. We recognized revenue from both fixed fees and per-filing fees as companies began to prepare their documents in XBRL in anticipation of those rules.

COST OF REVENUES

Cost of revenues primarily consists of salaries and benefits of operations employees to produce data sets and create XBRL filings, fees paid to acquire data and the amortization of costs related to developing our I-Metrix products that were previously capitalized. In addition, in the three months ended March 31, 2008, barter advertising expense was recorded equal to the barter advertising revenue for that period. There were no barter revenues or expenses in the three months ended March 31, 2009.

Total cost of revenues for the three months ended March 31, 2009 increased $353,000, or 44%, to $1,151 from $798 for the three months ended March 31, 2008. The net increase in cost of revenues was primarily due to a $140 increase in payroll related expenses and the addition of $172 of XBRL related production costs.

GROSS PROFIT

Gross profit for the three months ended March 31, 2009 decreased $1,109, or 26%, to $3,084 from $4,193 for the three months ended March 31, 2008. The gross profit percentage decreased to 73% for the three months ended March 31, 2009 from 84% for the three months ended March 31, 2008. The decrease was due to lower total revenues as well as the higher cost of revenues related to XBRL filings revenues. We expect that gross profit percentages will remain at this lower rate as the lower margin XBRL filings revenues are expected to continue to increase as a percentage of total revenues.

OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses consist primarily of salaries and benefits, sales commissions, advertising expenses, public relations, and costs of marketing materials. Sales and marketing expenses for the three months ended March 31, 2009 decreased $286 or 24%, to $929 from $1,215 for the three months ended March 31, 2008. The net decrease was primarily due to a $273 decrease in payroll related expenses.

Development. Development expenses, which consist primarily of salaries and benefits and outside development costs, for the three months ended March 31, 2009 decreased $463, or 45%, to $558 from $1,021 for the three months ended March 31, 2008. The decrease was primarily due to the capitalization of certain payroll costs related to development of our XBRL processes. In the three months ended March 31, 2009, we capitalized $425 of such costs.

General and Administrative. General and administrative expenses consist primarily of salaries and benefits, insurance, fees for professional services, general corporate expenses and facility expenses. General and administrative expenses for the three months ended March 31, 2009 decreased $18, or 1%, to $2,087 from $2,105 for the three months ended March 31, 2008. The net decrease was primarily due to a $183 decrease in payroll related expenses which was partially offset by a $148 increase in stock compensation expense.

Depreciation and Amortization. Depreciation and amortization expenses include the depreciation of property and equipment and the amortization of definite lived intangible assets. Depreciation and amortization for the three months ended March 31, 2009 increased $30, or 6%, to $497 from $467 for the three months ended March 31, 2008 as a result of increased capital expenditures.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $282 for the three months ended March 31, 2009 compared to net cash used of $1,125 for the three months ended March 31, 2008. This was primarily due to increased collections of accounts receivable in the three months ended March 31, 2009.

Net cash used in investing activities was $567 for the three months ended March 31, 2009 compared to $190 for the three months ended March 31, 2008. The increase was due to $425 of capitalized product development costs in the three months ended March 31, 2009 which was partially offset by a decrease in capital expenditures of $139 for the three months ended March 31, 2009 compared to $190 for the three months ended March 31, 2008. The purchases were made to support our expansion and increased infrastructure.

Net cash used in financing activities was $47 for the three months ended March 31, 2009 compared to net cash provided of $31 for the three months ended March 31, 2008. Debt payments of $63 in the three months ended March 31, 2009 were slightly offset by proceeds from option exercises which totaled $16 in the three months ended March 31, 2009 compared to $31 in the three months ended March 31, 2008.

On April 5, 2007, we entered into the Financing Agreement with Rosenthal for additional working capital. Under the Financing Agreement, Rosenthal made a term loan in the principal amount of $2.5 million to us and has additionally agreed to provide up to an additional $2.5 million under a revolving line of credit. Interest on outstanding borrowings under the Financing Agreement is payable at variable rates of interest over the published JPMorgan Chase prime rate, 2.5% on the term loan and 2% on borrowings under the revolving credit facility. Our obligations under the term loan are evidenced by a secured Term Note and are secured by a first priority security interest in substantially all of our assets. We are required to maintain certain collateral ratios and financial covenants under the agreement. On April 22, 2008, the ratios and covenants were amended effective as of December 31, 2007. On March 13, 2009, the ratios and covenants were further amended effective December 31, 2008. In addition, the maturity date was extended to March 30, 2011 and the renewal date was extended to March 31, 2011. We were in compliance with these ratios and covenants, as amended, at March 31, 2009 and we believe that we will be in compliance throughout 2009. The Financing Agreement, as amended, terminates on March 30, 2011 unless sooner terminated by either party in accordance with the terms of the Financing Agreement. In connection with the Financing Agreement, we issued a warrant to purchase 100,000 shares of our common stock at an exercise price equal to $2.81 (the market price of our common stock on the closing date of the transaction) to Rosenthal. The warrant expires on April 30, 2010. Also in connection with this transaction, we paid our financial advisor $125,000, which represents 3% of the gross principal amount of the term loan and 2% of the gross principal amount of the revolving credit.

At March 31, 2009, we had cash and cash equivalents on hand of $1,730. We have no off-balance sheet arrangements at March 31, 2009. We believe that our existing capital resources will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. Thereafter, if cash generated from operations is insufficient to satisfy our liquidity requirements, we may need to raise additional funds through public or private debt or equity financings, strategic relationships or other arrangements. We may also consider such financings prior to such time if conditions suggest engaging in such a financing would be advantageous to us. There can be no assurance that such additional funding, if needed, will be available on terms attractive to us, or at all. The failure to raise capital when needed could materially adversely affect our business, results of operations and financial condition. If additional funds are raised through the issuance of equity securities, the percentage ownership of our then-current stockholders would be reduced.