EDGAR Online, Inc. (EDGR) - Description of business
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OVERVIEW We are a leading provider of value-added business and financial information on global companies. We make information and a variety of end user tools available via online subscriptions and licensing agreements to a large user base in the financial, corporate and advisory professions. Using our products and services, customers can quickly view and analyze specific aspects of a public companys business, financial and ownership history. We also have developed a proprietary automated data parsing, tagging and processing system that allows for the conversion of unstructured data into eXtensible Markup Languages (XML), eXtensible Business Reporting Language (XBRL) and other formats, as well as tools for the easy viewing and analysis of this data. This system, utilized to power our own applications, can also be used by customers to add value to their own data use and distribution. Our customers include financial institutions such as investment funds, asset management firms, insurance companies and banks, stock exchanges and government agencies, as well as accounting firms, law firms, corporations and individual investors. INDUSTRY BACKGROUND The industry in which we compete is part of a broader industry that provides a wide range of real-time and historical content and services to various markets. This industry is highly competitive and includes both large and ses. According to Veronis and Suhler, a research and advisory firm, the top financial and economic content providers, which include companies such as Bloomberg, Reuters, Moodys, SNL, Thomson Financial, FactSet, McGraw-Hill and Standard & Poors, compete in a market with revenues of approximately $135 billion which is expected to increase 9% annually through 2010. Financial and economic information includes the profile, history, ownership, financial reporting, sales, marketing and business development of a company, as well its regulatory filings, analyst coverage, research reports, news alerts and stock quotes. Many of these providers also deliver services and solutions to manage and work with the information they provide, as do competitors in other areas such as consulting and advisory companies. OUR BUSINESS We provide financial and company information, data solutions and tools to professionals who rely on information to manage their business and make key investment decisions. We also are the leading company working with the global XBRL standard for financial reporting. Our proprietary processes are based on a deep understanding of XBRL and other technologies and tools which allow users to access and manipulate this data. These processes power our end user applications, data feeds and data solutions, and are flexible and customizable based on our clients needs. eXtensible Business Reporting Language Traditionally, corporate financial reporting has been a labor-intensive process involving the compilation of data from a variety of sources and formats. XBRL is an XML derivative for the electronic communication of business and financial data that simplifies the mechanics of working with financial statements. XBRL provides substantial benefits in the preparation, analysis and communication of financial information by using tags based on standardized accounting industry definitions to describe and identify different financial line items. This provides uniformity otherwise lacking in todays financial reporting and detail that makes business information more consistent and accessible. The potential widespread global adoption of the XBRL standard is driven by the increasing demand for analytics and transparent reporting by private and public companies and the institutions that finance and invest in these companies. In 2005, the SEC established a voluntary program relating to XBRL whereby registrants may furnish XBRL data in an exhibit to specified EDGAR filings. The SEC stated that the primary purpose of the program is to assess XBRL technology, including both the ability of registrants to tag their financial information using XBRL and the benefits of using tagged data for analysis. In 2006, the SEC further announced that it would offer expedited reviews of registration statements and annual reports to companies that volunteer for a test group as part of the SECs XBRL initiative. In addition, the SEC committed over $50 million to modernize the EDGAR system to become an XBRL compliant submission system and to ensure the maturity of the standard for future generations of corporate reporting. XBRL is a royalty-free and open global standard. It has been developed by XBRL International Inc., a not-for-profit consortium of over 500 leading companies involved in providing or using business information. We are a founding member of the XBRL consortium and one of the organizations developing and refining the standard. Members of the XBRL consortium include financial services and information providers, software and other technology providers and accounting and trade organizations. Our leadership position in this effort has enabled us to develop strategic alliances with such companies as Microsoft, R.R. Donnelley, Cartesis, the Shanghai Stock Exchange and others. The EDGAR System EDGAR, the acronym for Electronic Data Gathering Analysis and Retrieval, is the SECs electronic filing system. Public companies and their insiders, mutual funds and financial institutions use this system to submit or file statements, reports and forms with the SEC. The SEC established the EDGAR system to perform automated collection and acceptance of submissions by companies and others who are required to file disclosure documents with the SEC, and to make them available to the public. To power segments of our subscription and data products, we subscribe to a Level 1 feed of real-time SEC regulatory filings from the SECs dissemination agent, Keane, Inc. This feed is sent to our primary technology facility in Rockville, Maryland and immediately creates a historical archive of original, unaltered SEC filings dating back to 1993. The financial statements are processed and tagged in XBRL within hours of their submission. We maintain a relational database that supports complex search and retrieval mechanisms to access the filings archive and the data we have parsed and stored from both the SEC and other sources. The data sets we extract from the raw EDGAR filings are processed independently by our proprietary software, stored in databases, posted to our websites and distributed in multiple formats via our production servers to clients and third parties with whom we have distribution contracts. Our proprietary document processing systems create multiple representations of the original SEC documents, including XBRL, HTML, RTF, PDF and Excel. These value-added versions of the original document are a vital part of serving our customers needs to efficiently view, print and analyze the content reported in the SEC filings, and allow us to always provide a direct link back to the original filing for line item verification. Data and Solutions We also produce a specialized line of data feeds, products and solutions based on content sets that we have extracted from the SEC filings and data that we receive from the Chinese Stock Exchanges and other providers such as FT Interactive Data Corporation and Zacks. These customized solutions leverage our data processing platform and associated analytical tools. Data feeds and data solutions include, but are not limited to, standardized and as-reported fundamental financial data, annual and quarterly financial statements, insider trades, institutional holdings, initial and secondary public offerings, mutual fund e-prospectuses and Form 8-K disclosures. Each of these independent content sets represents a set of discrete facts that can be delivered in various ways based on customer needs. Data solutions include the conversion of data from unstructured content into XML and XBRL, data storage and delivery, and custom feeds and tools to access the information. We use a network of custom data parsers, integrity checks, and auditing tools to ensure a premium level of data quality and completeness and, as a result, believe that our data quality is among the best in the industry. PRODUCTS AND SERVICES We apply our proprietary technological know-how to extract, process and categorize raw information, and present it in a real-time or near real-time, user-friendly format. We use our proprietary processes to provide this information through a variety of our products and services via online subscriptions and licensing agreements, and make our platform available as a data solution for customers including information providers, exchanges, financial services organizations, government agencies, and corporations. Subscription Services We offer the following subscription services: I-Metrix Professional. The I-Metrix (www.imetrix.edgar-online.com) suite of products, including Standard, Professional, and Vision editions, is our premium end user subscription service. I-Metrix allows for in-depth analysis of companies and industries and is based on our extensive XBRL fundamental database, including historical and current information for over 12,000 companies. These products deliver fundamental data such as income statements, balance sheets and statements of cash flow, as well as earnings estimates, standard financial ratios, insider transactions, institutional ownership, and a suite of tools and models that allow users to search, screen and evaluate the data. EDGAR Pro and EDGAR Access. EDGAR Pro (www.pro.edgar-online.com) offers financial data, stock ownership, public offering data sets and advanced search tools. EDGAR Pro 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. Sales leads are primarily provided from the traffic to our subscription websites from Yahoo! Finance and Nasdaq.com, and from the migration of users from EDGAR Access. EDGAR Access (www.access.edgar-online.com), our retail product, has fewer features than EDGAR Pro and is available via single-seat, credit card purchase only. I-Metrix Data Products and Solutions I-Metrix Data Feeds. We make the content of our various databases available through direct data feed delivery. These products consist of digital data feeds transmitted through hosted web pages, multiple application programming interfaces, including FTP, .NET web services, or customized request response mechanisms. This allows our customers to seamlessly replicate a feature or functionality of our service inside that customers intranet, extranet and other proprietary products or applications. For instance, customers such as Standard & Poors, Lexis-Nexis, Shareholder.com and One Source use this mechanism to enhance the functionality of their own products and services. I-Metrix Data Solutions. I-Metrix data solutions leverage our data processing and distribution platform, and include conversion of unstructured content and information, data storage, distribution and analysis. For example, we enable filing agents, exchanges, regulators, financial service organizations and other companies to process content, including financial statements and footnotes, into an XBRL format. Specifically, R.R. Donnelley leverages this solution to provide their customers with a mechanism for filing XBRL financial statements with the SEC. Additionally, customers utilize digital data feeds and tools to access our XBRL formatted data to be integrated into third party products, client applications and custom solutions. Other Services We also generate 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 websites. Advertising and e-commerce revenue is recognized as the services are provided. GROWTH STRATEGY Our growth strategy is designed to capitalize on our brand recognition, our position as a provider of information to the financial and business community, our expertise in XBRL and our powerful data solutions platform. Increase Sales to New and Existing Customers Our sales force will enable us to realize our goal of expanding and increasing sales of our new and existing products and services, with particular emphasis on the new I-Metrix suite of products and data solutions. The sales group will continue to grow to meet the anticipated new demand for our services. Fundamental to our sales effort is the identification of key markets for higher value data solutions sales opportunities around the world. Our ongoing marketing activities involve lead generation and targeting for the sales team to focus on those users who are more suited to subscribe to our premium services and solutions and driving lower priced subscription products through our online registration system on our website, www.edgar-online.com. Develop New Products and Services We continue to enhance our existing products and services by increasing functionality, platform capability and including more varied data sets from EDGAR content and other business information sources. We also regularly develop and license new analytical and screening tools, as well as add new databases to enhance our offerings. For example, we have added a database of Chinese company financial statements. As foreign jurisdictions begin to require disclosures in XBRL, we will be further building our database of additional foreign financial statement data and offering our XBRL expertise to assist U.S. and global XBRL development efforts. Expand Functionality and Content Offerings We continuously introduce new value-added services which increase revenues from our existing customer base and attract new customers. We have sophisticated search technology under development to further mine data and information. For example, in 2006, we developed and launched a topics solution which allows for deeper searching into SEC documents to extract key concepts as opposed to key words. This process delivers more accurate results across very complex document databases. Additionally, we introduced more specialized and versatile tools and features for our products and services to further enrich the type of information utilized by our customers. We are currently focused on the following: Fundamental data. Fundamental data includes full XBRL and summary data sets of income statements, balance sheets, statements of cash flow and footnotes. We are expanding our fundamental data products to include information from sources other than SEC filings, such as earnings estimates and global data, as well as broadening the ways in which we present this data. Data solutions. We have recently productized our data conversion, extraction and tagging processes and made them available to clients in conjunction with associated tools to work with the data. Data mining. We continue to build integrated search tools that are based on real-time analysis of key events, topics and financial ratios. Expand Internationally We intend to market our services more aggressively to international markets and are expanding our database to include filings made outside the U.S. to provide our users with access to corporate and financial information from these filings. For example, in early 2006, we announced a partnership with the Shanghai Stock Exchange and the Shenzhen Stock Exchange through which we have access to the current financial filings of all Chinese companies that trade on these exchanges, as well as historical data for up to five years. We made the Chinese company financial information available to clients of our I-Metrix suite of products in early 2007. Expand Existing Alliances and Develop New Strategic Partnerships We will seek to leverage our position as a leading source of business and financial information, and our XBRL expertise, by broadening our existing channels and creating new strategic relationships. We believe that creating additional strategic relationships will allow us to reach a more diverse customer base, leverage our data platform beyond its current internal use, strengthen our brand awareness and ensure that we remain dominant in our current and future markets. We have developed strategic relationships with a number of industry leaders including R.R. Donnelley, Microsoft, TheMarkets.com and Cartesis. R.R. Donnelley. In January 2006, we entered into an agreement with R.R. Donnelley to begin offering to public companies a full service of SEC compliance solutions that process financial information into XBRL. The service allows public companies to submit XBRL financial statements concurrently with their SEC filings or subsequently on a Form 8-K. Additionally, in February 2006, we entered into a sales and marketing agreement with R.R. Donnelley through which the R.R. Donnelley global sales force is offering our EDGAR Pro and our I-Metrix suite of XBRL products to R.R Donnelleys customers and prospects. Microsoft. In October 2003, we signed a memorandum of understanding with Microsoft whereby we have worked with Microsoft to build analytical capabilities within Microsoft Excel, the first commercial application of the XBRL standard. In July 2004, we signed an additional agreement which allowed us to build this tool into the I-Metrix suite of products. With I-Metrix, users simply input a companys name or ticker symbol into an Excel spreadsheet, and that companys financial data is automatically inserted in the appropriate cells, saving time and ensuring accuracy. Our I-Metrix products have also been optimized for Microsoft Office 2007, and a version for that platform was released on February 28, 2007. TheMarkets.com. In October 2006, we announced a reseller agreement with TheMarkets.com which will leverage the sales force of TheMarkets.com to further distribute our I-Metrix products into the financial service marketplace. TheMarkets.coms sales force has been trained and began actively selling the product late in the fourth quarter of 2006. I-Metrix can be sold via this channel as an add-on to TheMarkets.com subscription product or as a bundled offering with their global research and estimates platform. Cartesis. In April, 2006, we announced a partnership with Cartesis, a business performance management software company, to provide external data and information from the EDGAR Online database to users of the Cartesis platform. As a result of this partnership, Cartesis users will be able to add an EDGAR Online subscription to their Cartesis purchase and pull in information on peers, competitors and industries to do benchmarking and other in-depth analysis along side their internal data. We are currently working on joint marketing programs with Cartesis to promote the solution. Pursue Strategic Acquisitions At the present time, we have no plans to make any acquisitions. However, we will consider specific acquisition opportunities if we feel they have strategic value. The types of acquisitions that we would consider as having strategic value include those that will enable us to offer additional services, enhance our selling and marketing efforts, improve technology and gain access to complementary services or information that may be of interest to our customer base. SALES AND MARKETING As of March 2, 2007, we have a staff of 21 employees dedicated to executing on our sales and marketing strategy. We believe that our primary target markets, financial services, data integrators, corporations, governmental agencies and advisory firms, will continue to represent an important source of revenue growth for the next few years. We promote our products and services through our direct sales organization, websites, marketing alliances, direct marketing and events. Through these efforts, we focus on I-Metrix, enterprise contracts for EDGAR Pro, data feed products and custom solutions via the direct sales force. We drive new potential EDGAR Pro and EDGAR Access customers to subscribe to our services online. Additionally, we up-sell higher value services to our existing subscribers. Our direct sales efforts are focused on decision makers and end users in our primary target markets. Our marketing programs are focused on lead generation and qualification programs, promotional and educational materials including white papers, product information, product tours and flash demos and traffic driving efforts including paid and organic search and pay-per-click advertising. Lead generation is managed using lists we acquire from third parties or names that we acquire through our own online registration system with traffic coming from partners such as Yahoo! Finance and Google Finance. In exchange for allowing users access to a basic level of financial information on a company through these websites and other marketing alliances, we drive traffic to our newly redesigned website that is architected to drive users to subscribe, find critical information and contact us via phone, email or live chat. CUSTOMERS Our customers include financial services companies such as Bank of America, Citigroup and Morgan Stanley, stock exchanges such as Nasdaq and the New York Stock Exchange, leading information companies such as Lexis-Nexis, Moodys and Reuters, and corporations such as Amgen, Intel and Verizon. We have over 240 clients that license our data products and services for use in existing intranet, extranet and other product applications. We also have over 17,700 individual users of I-Metrix, EDGAR Pro and EDGAR Access. These subscribers represent a wide array of users in the financial services, accounting, legal, corporate and other markets. COMPETITION We are a provider of financial and business information via subscriptions, data licenses and solutions. As such, we compete with businesses that provide similar information and have greater resources and market penetration than we do. As a result, they have been able to establish a stronger competitive position than we have, in part through greater marketing resources. We believe that competition for business information, tools and solutions includes such companies as Reuters, Standard & Poors, Thomson Financial and FactSet. Competition for information focused on financial data includes S&Ps Capital IQ, Dun & Bradstreet, SNL and other smaller niche players. Other competitors include companies such as 10-K Wizard Technology, which focuses on simple SEC data offerings, and MSN Money and Yahoo! Finance, which are more focused on serving individual investors. Many of these competitors have longer operating histories, larger, more established customer bases, greater brand recognition and significantly greater resources, particularly financial resources. As a result, they may develop products and services comparable or superior in terms of price and performance features to those developed by us or adapt more quickly than we can to new or emerging technologies and changes in customer requirements. We believe that we have a first-mover advantage around our XBRL platform and based on our platform, pricing, content and features of the products and services that we provide, we can remain highly competitive in the financial and business information market. We believe that the principal competitive factors in our market include the following: Speed of delivery; Accuracy; Transparency and granularity; Cost efficiencies; Scope of service; Quality of service; Convenience; Customer service; Reliability of service; and Availability of enhanced services. We believe our competitive strengths include the following: Proprietary Platform. The data processing, distribution and storage platform we have developed for our own products can also hold tremendous value for other companies who need to deliver accurate, timely and reliable data and information. The innovative way we have built the system allows for us to process data more efficiently than current manual or offshore models, and can be used to further enhance our own product and data offerings and add value to other companies, exchanges, agencies and financial institutions. Timeliness. Our information databases and products are created in real-time or near real-time. As a result, our clients benefit from access to company information as it is submitted to the SEC. Subscribers to our services also receive real-time alerts based on various criteria of importance to them. Similarly, our digital data feeds make available EDGAR documents and parsed data moments after they have been filed. Immediate access to new information is imperative for those in the financial services market requiring real-time data for competitive decision-making. Ease of use. Our user interfaces are built to work within our clients existing workflows. For example, I-Metrix enables clients to utilize Microsoft Excel and web-based systems to analyze financial statement data extracted from SEC filings for screening and analysis. Further, our subscription services are delivered via a standard web browser in a friendly, easy to use graphical user interface. We have worked to ensure that the data our users need to perform their jobs is typically no more than two clicks away. These efforts ensure that subscribers can begin using our services immediately, without any special training. Versatility and flexibility. We can provide our customers with a web-delivered subscription service that allows for immediate purchase, immediate use and easy access. Through our I-Metrix suite of products, we offer an end user solution, a web service to deliver XML or XBRL data in bulk, and a service to convert company data into standardized XBRL format. Our data feeds allow a high degree of customization for clients that want all or part of the offered databases and functionality built into their existing applications. We also will create customized databases, data solutions, tools, extracts and delivery mechanisms for clients with special needs. INTELLECTUAL PROPERTY The SEC has granted us a non-exclusive, royalty-free license to use the name EDGAR in our logo and corporate name through 2009. We also have over 401 unique registered domain names, including those representing our products, I-Metrix, EDGAR Pro and EDGAR Access. We have received registration for our I-Metrix, EDGAR Online and EDGAR Access trademarks from the U.S. Patent and Trademark Office. We also have registered trademarks and/or servicemarks on other service offerings, and have active patent applications for I-Metrix and related processes and products. Our success depends significantly upon our proprietary technology. We currently rely on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. Our employees execute confidentiality and non-use agreements which provide that any rights they may have in copyrightable works or patentable technologies belong to us. In addition, before entering into discussions with third parties regarding our proprietary technologies, we typically require that they enter into a confidentiality agreement with us. If these discussions result in a license or other business relationship, we typically also require that the agreement setting forth the parties respective rights and obligations include provisions for the protection of our intellectual property rights. TECHNOLOGY We develop and maintain our technology in-house and have created new distinct databases from EDGAR data such as XBRL fundamental data sets, initial public offering data, normalized financial data, ownership data and secondary public offering data. In addition, we can incorporate existing technologies and solutions driven by domestic and international data feeds, validation systems, charting applications, quoting applications, and various maintenance tools that ensure our commitment to data quality. Our proprietary technology has been focused on a framework approach, which allows us to integrate solutions that were developed internally or exclusively for us in combination with third-party vendors, as well as easily incorporate system modifications. Some of our proprietary solutions include our repository of financial information, mutual fund e-prospectuses, web-based customer interfaces, section extraction, form-type specific data extraction systems, XBRL and XML delivery systems, permissioning systems, alerting systems and our customer support and tracking system. Software solutions obtained commercially include the Great Plains Accounting System, Salesforce.com, the Autonomy Search Engine and the NetOwl Extractor. Over the last several years, we have developed various proprietary software solutions that enable us to perform many complex data mining functions necessary to deliver our services on a real-time and cost-effective basis to our customers. Our status as a Microsoft Certified Partner has allowed us to leverage newer technologies in support of creating proprietary applications, integrating them into our enterprise systems, and providing us a significant advantage over any competitors seeking to match our speed and accuracy in extracting data from the EDGAR database and delivering that data to a large number of customers in a variety of formats. INFRASTRUCTURE AND OPERATIONS Although third party development support is sometimes used in order to meet some aggressive development timelines, our employees now perform the majority of our development programming, as well as manage our content delivery infrastructure. We own all the application level systems that serve our content delivery. The largest portion of our development team is located in our Rockville, Maryland office. In addition, the delivery solutions developed and maintained for some of our largest corporate customers are hosted primarily in our data center in Rockville and are facilitated by our use of the Microsoft technologies framework. The Rockville data center is also the primary facility that provides services used to deliver and support all of our products, data feeds and other content delivery mechanisms. Redundancy, scalability and security have been and always will be a core focus of our support staff and executives. All of our critical systems, including our accounting system, user information databases, repository of EDGAR filings, and all of our real-time updated data sets are backed up on at least a daily basis and then stored offsite. Additionally, we make use of various applications and techniques to ensure the availability of our applications and data throughout the day using procedures like application or data replication, clustering, load balancing, and extensive application monitoring. Our systems are maintained on a 24 hour-a-day, 7 day-a-week basis by our own technicians. Our services are available to users 24 hours a day, 7 days a week. Customer service is available weekdays 9:00 a.m. to 5:00 p.m. (ET). Customer and support inquiries have the availability of our websites, e-mail and telephone options for assistance. EMPLOYEES As of March 2, 2007, we employed 87 people, two of whom are part-time employees. None of our employees is a member of a union. We believe that we have good relations with our employees. Competition in recruiting personnel in our industry is intense. We believe our future success will depend in part on our continued ability to recruit and retain highly skilled technical, management and sales and marketing personnel. CORPORATE HISTORY We are a Delaware corporation formed in November 1995 under the name Cybernet Data Systems, Inc. In January 1999, we changed our name to EDGAR Online, Inc. Our executive offices are located at 50 Washington Street, Norwalk, Connecticut 06854 and our telephone number is (203) 852-5666. AVAILABLE INFORMATION Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our website at www.edgar-online.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information posted on our website is not incorporated into this Annual Report on Form 10-K. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The public may read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. ITEM 1A. RISK FACTORS Forward-Looking and Cautionary Statements The consolidated financial statements and notes thereto included in this report and the related discussion describe and analyze our financial performance and condition for the periods indicated. For the most part, this information is historical. Our prior results, however, are not necessarily indicative of our future performance or financial condition. We, therefore, have included the following discussion of certain factors which could affect our future performance or financial condition. These factors could cause our future performance or financial condition to differ materially from its prior performance or financial condition or from managements expectations or estimates of our future performance or financial condition. These factors, among others, should be considered in assessing our future prospects and prior to making an investment decision with respect to our stock. We have a history of losses and we expect to incur losses for the foreseeable future. If we are unable to achieve profitability, our business will suffer and our stock price is likely to decline. We have never operated at a profit and we anticipate incurring a loss in 2007, and may incur additional losses in 2008. At December 31, 2006, we had an accumulated deficit of $57.8 million. As a result, we will need to increase our revenues significantly to achieve and sustain profitability. If revenues grow more slowly than we anticipate, or if operating expenses exceed our expectations or cannot be adjusted accordingly, we may incur further losses in the future. We cannot assure you that we will be able to achieve or sustain profitability. If we fail to increase revenues, we will not achieve or maintain profitability. Our revenues decreased from approximately $14.3 million in 2003, to approximately $12.9 million in 2004. Revenues increased to $14.2 million in 2005 and $16.2 million in 2006. To achieve profitability, we will need to continue to increase revenues substantially through implementation of our growth strategy and/or reduce expenses significantly. We cannot assure you that our revenues will grow or that we will achieve or maintain profitability in the future. We may not be able to obtain additional financing. We currently anticipate that our available cash resources combined with cash generated from operations will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. We may need to raise additional funds, however, to fund potential acquisitions, more rapid expansion and to develop new or enhance existing services or to respond to competitive pressures. We cannot assure you that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, our ability to fund our expansion, take advantage of unanticipated opportunities, develop or enhance services or products or otherwise respond to competitive pressures would be significantly limited. Our business, results of operations and financial condition could be materially adversely affected by these financing limitations. We have recorded impairment charges in connection with prior acquisitions and may record further impairment charges in the future, which could further delay our profitability. We are required to test goodwill 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. Annual reviews may result in future periodic impairments that could have a material adverse effect on the results of operations in the period recognized. Nasdaq related revenue has been decreasing as a percent of total revenue over the last few years and we expect that this trend will continue. A significant portion of our total revenues over the last two fiscal years has been attributable to the numerous work orders that we have performed under our agreements with Nasdaq. Sales to Nasdaq accounted for 10% and 7% of our total revenue during the years ended December 31, 2005 and 2006, respectively. We expect that Nasdaq will continue to be a significant customer despite the termination of an earlier technical services agreement. The loss of a significant customer such as Nasdaq would have a material adverse effect on our revenues. If we cannot generate new customers, we may not achieve profitability. To increase our revenues and achieve profitability, we must increase our customer base significantly. We generate leads for new users from our websites and through our content distribution relationships from such websites as Yahoo! Finance, Nasdaq.com and Google Finance. These leads must be converted into subscriptions or data licenses for one or more of our products and services at a rate higher than what we have been able to achieve so far. If we fail to do so, we may not achieve profitability. The timeliness of the adoption of XBRL as a reporting standard is uncertain and its failure to be accepted could adversely affect the growth of our business. We believe our future growth depends, in part, on the adoption of the XBRL data standard. In particular, we believe that our initiative with the I-Metrix suite of products will continue to provide us with a new source of subscribers. These products are designed for analyzing documents that have been formatted in XBRL and for use with Microsoft Excel and web-based systems. Since I-Metrix is based on a reporting language data standard, it is difficult to predict the adoption of this standard. As a result, our business and prospects could be affected if XBRL is not quickly and widely adopted. We rely on distribution agreements, and any failure to obtain or maintain such distribution relationships on reasonable terms, or failure to achieve revenue targets, could impair our ability to fully execute our business plan. We derive a portion of our business from sales of our products and services through distribution channels with strategic resellers. Depending on the distributor and the agreement, these distribution arrangements may not be exclusive and may only have a short term. Some of our distributors may not renew their distribution agreements with us. Further, some of our distributors may not achieve certain revenue targets outlined in our agreements. Also, in the future, existing and potential distributors may not offer distribution of our products and services to us on reasonable terms, or at all. If we fail to obtain distribution or to obtain distribution on terms that are reasonable, or such distributors fail to achieve certain revenue targets, we may not be able to fully execute our business plan. The industry in which we operate is highly competitive and has low barriers to entry. Increased competition would make profitability even more difficult to achieve. We compete with many providers of business and financial information including S&Ps Capital IQ, Dun & Bradstreet, Reuters, Standard & Poors, Thomson Financial, FactSet 10-K Wizard, MSN Money and Yahoo! Finance. Our industry is characterized by low barriers to entry, rapidly changing technology, evolving industry standards, frequent new product and service introductions and changing customer demands. Many of our existing competitors have longer operating histories, name recognition, market penetration, larger customer bases and significantly greater financial, technical and marketing resources than we do. Current competitors or new market entrants could introduce products with features that may render our products and services obsolete or uncompetitive. To be competitive and to serve our customers effectively, we must respond on a timely and cost-efficient basis to changes in technology, industry standards and customer preferences. The cost to modify our products, services or infrastructure in order to adapt to these changes could be substantial and we cannot assure you that we will have the financial resources to fund these expenses. Increased competition could result in reduced operating margins, as well as a loss of market share and brand recognition. If these events occur, they could have a material adverse effect on our revenue. Future enhancements to the SECs EDGAR system may erode demand for our services and our revenues may suffer as a result. Our future success will depend on our ability to continue to provide value-added services that distinguish our products from the type of EDGAR information available from the SEC on its website. The SEC currently provides free access on its website to raw EDGAR filings on a real-time basis. If the SEC were to make other changes to its website such as providing value-added services comparable to those provided by us, our results of operations and financial condition would be materially and adversely affected. Additionally, if the SEC were to enhance or upgrade services available on its website or the EDGAR filing system, we would need to tailor our products and services to be compatible with these new architectures or technologies, which would increase costs. If we are unable to do this, there may be a reduction in demand for our products and services and our revenues may suffer as a result. Our business could be adversely affected by any adverse economic developments in the financial services industry and/or the economy in general. We depend on the continued demand for the distribution of business and financial information. Therefore, our business is susceptible to downturns in the financial services industry and the economy in general. For example, we believe that decreases in the expenditures that corporations and individuals are willing to make to purchase the types of information we provide could result in a slower growth in the number of customers purchasing our information services, as we have experienced in the past. Any significant downturn in the market or in general economic conditions would likely hurt our business. If we fail to develop and introduce new products and services, our sales and competitive position will suffer. Our market is characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions and changing customer demands. To be successful, we must continue to enhance our existing services and develop and add new services by introducing products and services embodying new technologies, such as XBRL, to address our customers changing demands in a timely and cost effective manner. Our business could be adversely affected if we were to incur significant costs without generating related revenues or if we cannot adapt rapidly to these changes. Our business could also be adversely affected if we experience difficulties in introducing new or enhanced services or if these services are not favorably received by users. We may experience technical or other difficulties that could delay or prevent us from introducing new or enhanced services. If we are not successful in developing and marketing enhancements to our existing products and services or our products and services do not incorporate new technology on a timely basis, we may become less competitive and our revenues may suffer as a result. Future acquisitions and business combinations that we consummate may be difficult to integrate, disrupt our business, dilute stockholder value or divert management attention. We may continue to expand our operations and market presence by making acquisitions and entering into business combinations, investments, joint ventures or other strategic alliances, with other companies. We may have to issue debt or equity securities to pay for future acquisitions, which could be dilutive to our then current stockholders. No specific transactions are pending at the current time and we cannot assure you that we will consummate any transactions in the future. However, these transactions create risks, such as: difficulty assimilating the operations, technology and personnel of the combined companies; disrupting our ongoing business; problems retaining key technical and managerial personnel; additional operating losses and expenses of acquired businesses; and impairment of relationships with existing employees, customers and business partners. Any of the events described in the foregoing paragraph could have an adverse effect on our business, financial condition and results of operations and could cause the price of our common stock to decline. We depend on key personnel, the loss of whom could threaten our ability to operate our business successfully. Our future success will depend to a significant extent on the continued services of our senior management and other key personnel, particularly Susan Strausberg, our Chief Executive Officer, President and Secretary, Greg D. Adams, our Chief Financial Officer and Chief Operating Officer, Stefan Chopin, our Chief Technology Officer and Morton Mackof, Executive Vice President of Sales, all of whom are parties to written employment agreements. The loss of the services of any of them, or the services of other key employees, would likely have a material adverse effect on our business. We do not maintain key person life insurance for any of our personnel. Our future success will also depend on our continuing to attract, retain and motivate other highly skilled employees. Competition for qualified personnel in our industry is intense. We may not be able to retain our key employees or attract, assimilate or retain other highly qualified employees in the future. If we do not succeed in attracting new personnel or retaining and motivating our current personnel, our business will be adversely affected. In addition, the employment agreements with our key employees contain covenants that restrict their ability to compete against us or solicit our customers. These restrictive covenants, or some portion of these restrictive covenants, may be deemed to be against public policy and may not be fully enforceable. If these provisions are not enforceable, these employees may be in a position to leave us and work for our competitors or start their own competing businesses. We may encounter risks relating to security or other system disruptions and failures that could reduce the attractiveness of our sites and that could harm our business. Although we have implemented in our products various security mechanisms, our business is vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays or loss of data. For instance, because a portion of our revenue is based on individuals using credit cards to purchase subscriptions over the Internet and a portion from advertisers who seek to encourage people to use the Internet to purchase goods or services, our business could be adversely affected by these break-ins or disruptions. Additionally, our operations depend on our ability to protect systems against damage from fire, earthquakes, power loss, telecommunications failure, and other events beyond our control. Moreover, our websites and business solutions have, in the past, and may in the future, experience slower response times or other problems for a variety of reasons, including hardware and communication line capacity restraints, software failures or during significant increases in traffic when there have been important business or financial news stories and during the seasonal periods of peak SEC filing activity. These strains on our system could cause customer dissatisfaction and could discourage visitors from becoming paying subscribers. Although we have redundant feeds to our facilities, we also depend on the Level I EDGAR feed we purchase in order to provide SEC filings on a real-time basis. Our websites could experience disruptions or interruptions in service due to the failure or delay in the transmission or receipt of this information. These types of occurrences could cause users to perceive our websites and technology solutions as not functioning properly and cause them to use other methods or services of our competitors. Any disruption resulting from these actions may harm our business and may be very expensive to remedy, may not be fully covered by our insurance and could damage our reputation and discourage new and existing users from using our products and services. Any disruptions could increase costs and make profitability even more difficult to achieve. If we fail to secure or protect our proprietary rights, competitors may be able to use our technologies, which could weaken our competitive position, reduce our revenue or increase our costs. Our trademarks and other proprietary rights, principally our proprietary database technology, are essential to our success and our competitive position. We seek to protect our trademarks and other proprietary rights by entering into confidentiality agreements with our employees, consultants and content distribution partners, and attempting to control access to and distribution of our proprietary information. We also believe that factors such as the technological and creative skills of our personnel, new product developments, frequent product enhancements, name recognition, and reliable product maintenance are essential to establishing and maintaining a technology leadership position. We have obtained a non-exclusive, royalty-free license from the SEC to use the term EDGAR in our trademarks, service marks and corporate name. We have not, however, relied on a combination of copyright, trade secret and trademark laws in order to protect our proprietary rights. Despite our efforts to protect our proprietary rights from unauthorized use or disclosure, third parties may attempt to disclose, obtain or use our proprietary information. The precautions we take may not prevent this type of misappropriation. In addition, our proprietary rights may not be viable or of value in the future since the validity, enforceability and scope of protection of proprietary rights in Internet-related industries is uncertain and still evolving. Additionally, third parties could claim that our database technology infringes their proprietary rights. Claims of this sort and any resultant litigation, should it occur, could result in us being liable for damages and could result in our proprietary rights being invalidated. Even if we prevail, litigation could be time-consuming and expensive, and could divert the time and attention of management, any of which could materially adversely affect our business, results of operations and financial condition. Any claims or litigation could also result in limitations on our ability to use our trademarks and other intellectual property unless we enter into license or royalty agreements, which agreements may not be available on commercially reasonable terms, if at all. Legal uncertainties and government regulation of the Internet could adversely affect our business. Many legal questions relating to the Internet remain unclear and these areas of uncertainty may be resolved in ways that damage our business. It may take years to determine whether and how existing laws governing matters such as intellectual property, privacy, libel and taxation apply to the Internet. In addition, new laws and regulations that apply directly to Internet communications, commerce and advertising are becoming more prevalent. As the use of the Internet grows, there may be calls for further regulation, such as more stringent consumer protection laws. These possibilities could affect our business adversely in a number of ways. New regulations could make the Internet less attractive to users, resulting in slower growth in its use and acceptance than is expected. We may be affected indirectly by legislation that fundamentally alters the practicality or cost-effectiveness of utilizing the Internet, including the cost of transmitting over various forms of network architecture, such as telephone networks or cable systems, or the imposition of various forms of taxation on Internet-related activities. Complying with new regulations could result in additional cost to us, which could reduce our profit margins or leave us at risk of potentially costly legal action. We may be subject to liability for taxes by federal, state and foreign tax authorities. In the normal course of business, our tax filings are subject to audit by federal, state and foreign tax authorities. An audit by one taxing authority is currently ongoing. There is inherent uncertainty in the audit process. If necessary, we will record our best estimate of probable liabilities that may exist. We have no reason to believe that such audit would result in the payment of additional taxes or penalties or both that would have a material adverse effect on our results of operations or financial position, beyond amounts that are probable and estimable. Changes in accounting standards regarding stock option plans may limit the desirability of granting stock options, which may reduce our profitability and may affect our stock price. We adopted SFAS No. 123(R), Share-Based Payment, on January 1, 2006. This statement requires us to expense the value of stock options granted to employees over the vesting period of the options. The adoption of this statement may reduce the attractiveness of granting stock options because the additional expense associated with these grants will reduce our profitability. If we limit option grants, it could have an adverse effect on our ability to retain current employees and our ability to attract future employees. Additionally, the adoption of SFAS No.123(R) had, and may continue to have, a material impact on our net income and earnings per share. We cannot determine how investors will view the change in accounting treatment of stock-based compensation and the change in our practices and how these changes may impact our stock price and perception of our value. Our internal controls may be ineffective. Effective internal controls are necessary to provide reasonable assurance with respect to our financial reports and to effectively prevent fraud. Pursuant to the Sarbanes-Oxley Act of 2002, we are required to furnish a report by management on internal control over financial reporting, including managements assessment of the effectiveness of such control. Internal control over financial reporting may not prevent or detect misstatements because of our inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that the control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experiences difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting obligations, and there could be a material adverse effect on our stock price. We could face liability and other costs relating to our storage and use of personal information about our users. Users provide us with personal information, including credit card information, which we do not share without the users consent. Despite this policy of obtaining consent, however, if third persons were able to penetrate our network security or otherwise misappropriate our users personal or credit card information, we could be subject to liability, including claims for unauthorized purchases with credit card information, impersonation or other similar fraud claims, and misuses of personal information, such as for unauthorized marketing purposes. New privacy legislation may further increase this type of liability. California, for example, passed a privacy law that would apply to a security breach that affects unencrypted, computerized personal information of a California resident. Furthermore, we could incur additional expenses if additional regulations regarding the use of personal information were introduced or if federal or state agencies were to investigate our privacy practices. The price of our common stock has been volatile. The market price of our common stock has been, and is likely to continue to be, volatile and subject to wide fluctuations. Over the 52-week period ending March 2, 2007, the highest closing sales price of our common stock was $5.12 and the lowest closing sales price of our common stock was $2.88. In recent years, the stock market has experienced significant price and volume fluctuations, which has impacted the market prices of equity securities and viability of many small-cap companies. Some of these fluctuations appear to be unrelated or disproportionate to the operating performance of such companies. Future market movements may materially and adversely affect the market price of our common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None.