UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, DC 20549 

 
FORM 8-K/A 

 
AMENDMENT NO. 1 
TO 
CURRENT REPORT PURSUANT 
TO SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934 
 
Date of report (Date of earliest event reported): May 5, 2004 

 
FIRST ADVANTAGE CORPORATION 
(Exact Name of Registrant as Specified in Its Charter) 

 
					
Delaware	 	0-50285	 	61-1437565	
(State or Other
Jurisdiction of incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification Number)	
 
One Progress Plaza, Suite 2400 
St. Petersburg, Florida 33701 
(Address of principal executive offices) 
 
(727) 214-3411 
(Registrant’s telephone number) 
 
Not Applicable. 
(Former name or former address, if changed since last report) 

Item 2. Acquisition or Disposition of Assets. 
 
On May 6, 2004, First Advantage Corporation (the “Company”) filed a Current Report on Form 8-K reporting a newly created subsidiary of the Company, CIC Enterprises, LLC and the acquisition of substantially all of the assets of CIC Enterprises, Inc., STEPS, Inc., SFC, Inc., and Horton, Inc. This amendment number 1 amends Item 7 of the subject Current Report on Form 8-K to provide the financial statements and pro forma financial information as set forth in Item 7. 
 
Item 7. Financial Statements. Pro Forma Financial Information and Exhibits. 
 
(a)	Financial statements of business acquired. 	
 
Audited combined balance sheets of CIC Enterprises, Inc. and Affiliated Companies as of December 31, 2003 and 2002 and the related combined statements of operations, changes in shareholders’ equity and cash flows for the years ended December 31, 2003 and 2002. 
 
Unaudited combined balance sheets of CIC Enterprises, Inc. and Affiliated Companies as of March 31, 2004 and the related unaudited combined statements of operations, changes in shareholders’ equity and cash flows for the three months ended March 31, 2004 and 2003. 
 
Financial statements of other businesses acquired. 
 
Audited consolidated balance sheets of CoreFacts, LLC as of December 31, 2003 and 2002 and the related consolidated statements of income and members’ equity and cash flows for the years ended December 31, 2003 and 2002.1 
 
Unaudited consolidated balance sheets of CoreFacts, LLC as of March 31, 2004 and the related unaudited consolidated statements of income and members’ equity and cash flows for the three months ended March 31, 2004 and 2003.1 
 
Audited consolidated balance sheets of Realeum, Inc. as of December 31, 2003 and 2002 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years ended December 31, 2003 and 2002.1 
 
Unaudited consolidated balance sheets of Realeum, Inc. as of March 31, 2004 and the related unaudited consolidated statements of operations, stockholders’ deficit and cash flows for the three months ended March 31, 2004 and 2003.1 

1	This includes the audited and unaudited financial statements for two other acquisitions completed by the Company that are subject to another Form 8-K/A to be filed by the Company. 	

(b)	Pro forma financial information. 	
 
Unaudited pro forma combined balance sheet of First Advantage Corporation and Subsidiaries as of March 31, 2004 and the unaudited pro forma combined statement of income (loss) for the year ended December 31, 2003 and for the three months ended March 31, 2004.2 
 
(c)	Exhibits. 	

Exhibit No.
	  	Description
	
2.1	  	Asset Purchase Agreement Among First Advantage Corporation, CIC Enterprises, LLC, CIC Enterprises, Inc., STEPS, Inc., SFC, Inc. and Horton, Inc. (incorporated by reference to Current Report on Form 8-K filed by the Company on May 6, 2004)	
99.1	  	Press Release dated May 5, 2004 (incorporated by reference to Current Report on Form 8-K filed by the Company on May 6, 2004)	

2	This includes the unaudited pro forma financial information for two other acquisitions completed by the Company that are subject to another Form 8-K/A to be filed by the Company. 	

Report of Independent Certified Public Accountants 
 
To the Board of Directors and Shareholders 
of CIC Enterprises, Inc. and Affiliated Companies 
 
In our opinion, the accompanying combined balance sheets as of December 31, 2003 and 2002 and the related combined statements of operations, of shareholders’ equity and of cash flows present fairly, in all material respects, the financial position of CIC Enterprises, Inc. and Affiliated Companies (the “Company”) at December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 
 
/s/ Pricewaterhouse Coopers LLP 
 
Tampa, Florida 
June 16, 2004 

CIC Enterprises, Inc. and Affiliated Companies 
Combined Balance Sheets 
December 31, 2003 and 2002 

 	  	2003
	 	 	2002
	 	
Assets	  	 	 	 	 	 	 	 	
Current assets	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	5,584,354	 	 	$	6,756,012	 	
Restricted cash and reimbursements receivable	  	 	1,200,000	 	 	 	1,200,000	 	
Investments	  	 	122,900	 	 	 	100	 	
Accounts receivable (less allowance for doubtful accounts of $107,387 and $46,678 in 2003 and 2002, respectively)	  	 	3,552,585	 	 	 	1,951,153	 	
Prepaid expenses and other current assets	  	 	22,571	 	 	 	101	 	
 	  				 				
Total current assets	  	 	10,482,410	 	 	 	9,907,366	 	
Property and equipment, net	  	 	903,156	 	 	 	757,526	 	
Other assets	  	 	120,475	 	 	 	108,794	 	
 	  				 				
Total assets	  	$	11,506,041	 	 	$	10,773,686	 	
 	  				 				
Liabilities and Shareholders’ Equity	  	 	 	 	 	 	 	 	
Current liabilities	  	 	 	 	 	 	 	 	
Accounts payable	  	 	531,535	 	 	 	578,060	 	
Accrued compensation	  	 	4,659,035	 	 	 	5,286,718	 	
Client deposit	  	 	1,200,000	 	 	 	1,200,000	 	
Other accrued liabilities	  	 	364,594	 	 	 	384,790	 	
 	  				 				
Total current liabilities	  	 	6,755,164	 	 	 	7,449,568	 	
 	  				 				
Commitments and contingencies	  	 	 	 	 	 	 	 	
Shareholders’ equity	  	 	 	 	 	 	 	 	
Common stock	  	 	4,000	 	 	 	4,000	 	
Additional paid-in capital	  	 	12,010,393	 	 	 	12,010,393	 	
Accumulated other comprehensive income	  	 	20,075	 	 	 	—  	 	
Accumulated deficit	  	 	(7,283,591	)	 	 	(8,690,275	)	
 	  				 				
Total shareholders’ equity	  	 	4,750,877	 	 	 	3,324,118	 	
 	  				 				
Total liabilities and shareholders’ equity	  	$	11,506,041	 	 	$	10,773,686	 	

The accompanying notes are an integral part of these combined financial statements. 
 
2 

CIC Enterprises, Inc. and Affiliated Companies 
Combined Statements of Operations 
For the Years Ended December 31, 2003 and 2002 

 	  	2003
	 	 	2002
	 	
Service revenues	  	$	18,623,187	 	 	$	17,027,076	 	
Cost of service revenues	  	 	854,537	 	 	 	525,609	 	
 	  				 				
Gross margin	  	 	17,768,650	 	 	 	16,501,467	 	
Salaries and benefits	  	 	11,863,886	 	 	 	11,971,553	 	
Other selling, general, and administrative expenses	  	 	4,418,587	 	 	 	5,156,548	 	
 	  				 				
Income (loss) from operations	  	 	1,486,177	 	 	 	(626,634	)	
 	  				 				
Other income (expense)	  	 	 	 	 	 	 	 	
Interest expense	  	 	(563	)	 	 	—  	 	
Interest income	  	 	19,181	 	 	 	35,398	 	
Other income	  	 	15,498	 	 	 	151,882	 	
 	  				 				
Total other income (expense)	  	 	34,116	 	 	 	187,280	 	
 	  				 				
Net income (loss)	  	 	1,520,293	 	 	 	(439,354	)	
Unrealized gain on investments	  	 	20,075	 	 	 	—  	 	
 	  				 				
Comprehensive income (loss)	  	$	1,540,368	 	 	$	(439,354	)	

The accompanying notes are an integral part of these combined financial statements. 
 
3 

CIC Enterprises, Inc. and Affiliated Companies 
Combined Statements of Changes in Shareholders’ Equity 
For the Years Ended December 31, 2003 and 2002 

 	  	Common Stock
	  	Additional
Paid-in
Capital
	  	Accumulated
Other
Comprehensive
Income
	  	Accumulated
Deficit
	 	 	Total
Shareholders’
Equity
	 	
 	  	Shares
	  	Amount
	  		  		  			 			
Balance, December 31, 2001	  	1,300	  	$	4,000	  	$	10,587,893	  	$	—  	  	$	(7,956,171	)	 	$	2,635,722	 	
Net loss	  	—  	  	 	—  	  	 	—  	  	 	—  	  	 	(439,354	)	 	 	(439,354	)	
Shareholders' contributions	  	—  	  	 	—  	  	 	1,422,500	  	 	—  	  	 	—  	 	 	 	1,422,500	 	
Shareholders' distributions	  	—  	  	 	—  	  	 	—  	  	 	—  	  	 	(294,750	)	 	 	(294,750	)	
 	  		  			  			  			  				 				
Balance, December 31, 2002	  	1,300	  	 	4,000	  	 	12,010,393	  	 	—  	  	 	(8,690,275	)	 	 	3,324,118	 	
Net income	  	—  	  	 	—  	  	 	—  	  	 	—  	  	 	1,520,293	 	 	 	1,520,293	 	
Unrealized gain on investments	  	—  	  	 	—  	  	 	—  	  	 	20,075	  	 	—  	 	 	 	20,075	 	
Shareholders' distributions	  	—  	  	 	—  	  	 	—  	  	 	—  	  	 	(113,609	)	 	 	(113,609	)	
 	  		  			  			  			  				 				
Balance, December 31, 2003	  	1,300	  	$	4,000	  	$	12,010,393	  	$	20,075	  	$	(7,283,591	)	 	$	4,750,877	 	

The accompanying notes are an integral part of these combined financial statements. 
 
4 

CIC Enterprises, Inc. and Affiliated Companies 
Combined Statements of Cash Flows 
For the Years Ended December 31, 2003 and 2002 

 	  	2003
	 	 	2002
	 	
Cash flows from operating activities	  	 	 	 	 	 	 	 	
Net income (loss)	  	$	1,520,293	 	 	$	(439,354	)	
Adjustments to reconcile net income (loss) to net cash used in	  	 	 	 	 	 	 	 	
operating activities	  	 	 	 	 	 	 	 	
Depreciation and amortization	  	 	366,177	 	 	 	188,882	 	
Change in operating assets and liabilities:	  	 	 	 	 	 	 	 	
Restricted cash and reimbursements receivable	  	 	—  	 	 	 	(307,729	)	
Accounts receivable	  	 	(1,601,432	)	 	 	(182,539	)	
Prepaid expenses and other current assets	  	 	(22,470	)	 	 	108	 	
Other assets	  	 	(11,681	)	 	 	(62,109	)	
Accounts payable	  	 	(46,525	)	 	 	64,098	 	
Accrued compensation	  	 	(627,683	)	 	 	(807,362	)	
Client deposit	  	 	—  	 	 	 	307,729	 	
Other accrued liabilities	  	 	(20,196	)	 	 	(254,971	)	
 	  				 				
Net cash used in operating activities	  	 	(443,517	)	 	 	(1,493,247	)	
 	  				 				
Cash flows from investing activities	  	 	 	 	 	 	 	 	
Proceeds from sale of investments	  	 	—  	 	 	 	75	 	
Purchase of investments	  	 	(102,725	)	 	 	—  	 	
Purchases of property and equipment	  	 	(511,807	)	 	 	(495,360	)	
 	  				 				
Net cash used in investing activities	  	 	(614,532	)	 	 	(495,285	)	
 	  				 				
Cash flows from financing activities	  	 	 	 	 	 	 	 	
Shareholders’ contributions	  	 	—  	 	 	 	1,422,500	 	
Shareholders’ distributions	  	 	(113,609	)	 	 	(294,750	)	
 	  				 				
Net cash (used in) provided by financing activities	  	 	(113,609	)	 	 	1,127,750	 	
 	  				 				
Decrease in cash and cash equivalents	  	 	(1,171,658	)	 	 	(860,782	)	
Cash and cash equivalents at beginning of year	  	 	6,756,012	 	 	 	7,616,794	 	
 	  				 				
Cash and cash equivalents at end of year	  	$	5,584,354	 	 	$	6,756,012	 	
 	  				 				
Supplemental disclosures of cash flow information	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	563	 	 	$	—  	 	

The accompanying notes are an integral part of these combined financial statements. 
 
5 

CIC Enterprises, Inc. and Affiliated Companies 
Notes to Combined Financial Statements 
December 31, 2003 and 2002 
 
1.	Organization and Nature of Business 	
 
CIC Enterprises, Inc. (CIC) and its affiliated companies, Horton, Inc. (Horton), STEPS, Inc. (STEPS), and SFC, Inc. (SFC) (combined, the Companies), have three principal lines of business: credits and incentives which helps clients maximize their tax reduction opportunities through the pursuit of available federal, state, and local credits and incentives; transportation consulting which helps owners and operators of trucks save money through improved fleet asset management and regulatory compliance; and sales and use tax consulting which seeks to identify and recover overpayments of tax and establish a system to avoid future overpayments. 
 
2.	Significant Accounting Policies 	
 
Principles of Combination 
 
The combined financial statements include the accounts of the Companies; which operate as four Indiana S-corporations under common management. All significant inter-related transactions and balances have been eliminated. 
 
Use of Estimates 
 
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the statements. Actual results could differ from the estimates and assumptions used. 
 
Fair Value of Financial Instruments 
 
The carrying amount of the Company’s financial instruments at December 31, 2003 and 2002, which includes cash and cash equivalents and accounts receivable, approximates fair value because of the short maturity of those instruments. 
 
Cash Equivalents 
 
The Company considers cash equivalents to be all short-term investments that have an initial maturity of 90 days or less. 
 
Accounts Receivable 
 
Accounts receivable are due from companies in a broad range of industries located throughout the United States. Credit is extended based on an evaluation of the customer’s financial condition, and generally, collateral normally is not required. 
 
The allowance for all probable uncollectible receivables is based on a combination of historical data, cash payment trends, specific customer issues, write-off trends, general economic conditions and other factors. These factors are continuously monitored by management to arrive at the estimate for the amount of accounts receivable that may be ultimately uncollectible. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, the Company records a specific allowance for bad debts against amounts due, to reduce the net recognized receivable to the amount it reasonable believes will be collected. This analysis requires making significant estimates, and changes in facts and circumstances could result in material changes in the allowance for uncollectible receivables. Management believes that the allowance at December 31, 2003 and 2002 is reasonably stated. 
 
6 

CIC Enterprises, Inc. and Affiliated Companies 
Notes to Combined Financial Statements 
December 31, 2003 and 2002 
 
Property and Equipment 
 
Property and equipment is recorded at cost. Property and equipment include computer software acquired and developed for internal use. Software development costs are capitalized from the time technological feasibility is established until the software is ready for use. 
 
The Company follows Statement of Position (SOP) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” SOP 98-1 requires the Company to capitalize interest costs incurred and certain payroll-related costs of employees directly associated with developing software in addition to incremental payments to third parties. 
 
Depreciation on leasehold improvements is computed on the straight-line method over the life of the related lease, ranging from 39 to 40 years. Depreciation on vehicles is computed using a straight-line method over their estimated useful lives of 5 years. Depreciation on furniture and equipment is computed using the straight-line method over their estimated useful lives ranging from 3 to 7 years. Capitalized software costs are amortized using the straight-line method over estimated useful lives of 3 years. 
 
Client Deposit 
 
Client deposit represents $1.2 million of funds received from a client to be utilized to pay any and all applicable titling, registration, and tax fees incurred on behalf of the client in connection with a transportation consulting agreement. This deposit is maintained in a separate bank account for the sole purpose stated above, with the Company being reimbursed by the client monthly for fees incurred. Included in the accompanying combined balance sheet at December 31, 2003 and 2002 is $814,191 and $865,208, respectively, in restricted cash and $385,809 and $334,792, respectively in reimbursements receivable due from the client for reimbursable fees and expenses related to this arrangement. 
 
Income Taxes 
 
The shareholders have consented to the Companies’ elections to be taxed under the provisions of Section 1362(a) of the Internal Revenue Code which provides for the Companies’ income to be taxed directly to their shareholders. Accordingly, no credit or provision for income taxes has been reflected in these financial statements. 
 
Impairment of Long-Lived Assets 
 
Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinuance of operations. SFAS 144 superseded SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to Be Disposed of” and APB Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”. The initial adoption of this standard did not have a significant impact on financial position or results of operations of the Company. 
 
With respect to long-lived assets to be held and used, an asset (or group of assets) will be considered impaired when the expected undiscounted cash flows from use and disposition are less than the asset’s carrying value. The amount of any impairment charge will be based on the difference between the carrying and fair value of the asset. The determination of fair values considers quoted market prices, if available, and prices for similar assets and the results of other valuation techniques. 
 
7 

CIC Enterprises, Inc. and Affiliated Companies 
Notes to Combined Financial Statements 
December 31, 2003 and 2002 
 
For assets to be sold, an asset (or group of assets) that meets the criteria established by SFAS 144 for classification of assets held for sale will be carried at the lower of carrying amount or fair value less cost to sell. 
 
Revenue Recognition and Labor Costs 
 
Credits and Incentive Division revenues are generated from transaction fees based on a percentage of the value of the tax credit identified and are recognized in the period that such credit is reported to the client. In a limited number of circumstances, these fees are not earned until the client is able to utilize the identified credit or incentive. In these situations, revenue is recognized in the period the client is able to utilize the benefit. 
 
Transportation Consulting revenues are principally recognized monthly, based on the total number of vehicles in a clients’ fleet. 
 
Sales and Use Tax Consulting revenues are generated from transaction fees based on a percentage of the value of the tax credit identified and are recognized in the period a client actually utilizes the credit. 
 
At December 31, 2003 and 2002, the Companies have approximately $1,468,000 and $2,180,000 of pending billings which would be realized if their clients are able to utilize identified tax credits. 
 
The Companies expense associated labor and other operating costs as incurred due to the contingent nature of successful billings. 
 
Comprehensive Income 
 
SFAS No. 130, “Reporting Comprehensive Income”, governs the financial statement presentation of changes in stockholders’ equity resulting from non-owner sources. Comprehensive income includes all changes in equity except those resulting from investments by owners and distribution to owners. 
 
3.	Property and Equipment 	
 
As of December 31, 2003 and 2002, property and equipment is as follows: 

 	  	2003
	 	 	2002
	 	
Furniture and equipment	  	$	3,506,795	 	 	$	2,823,519	 	
Vehicles	  	 	233,077	 	 	 	182,110	 	
Construction in process	  	 	—  	 	 	 	274,968	 	
Leasehold improvements	  	 	64,311	 	 	 	64,311	 	
 	  				 				
 	  	 	3,804,183	 	 	 	3,344,908	 	
Less accumulated depreciation	  	 	(2,901,027	)	 	 	(2,587,382	)	
 	  				 				
Property and equipment, net	  	$	903,156	 	 	$	757,526	 	

Deprecation and amortization expense was $366,177 and $188,882 for the years ended December 31, 2003 and 2002, respectively, and is included in selling, general, and administrative expenses. 
 
8 

CIC Enterprises, Inc. and Affiliated Companies 
Notes to Combined Financial Statements 
December 31, 2003 and 2002 
 
4.	Shareholders’ Equity 	
 
At December 31, 2003 and 2002, the Companies’ equity accounts were as follows: 

 	  	2003
	 	 	2002
	 	
 	  	Common
Stock
	  	Additional
Paid In
Capital
	  	Retained
Earnings
Accumulated
(Deficit)
	 	 	Common
Stock
	  	Additional
Paid In
Capital
	  	Retained
Earnings
(Deficit)
	 	
CIC	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
No par value 1,000 shares authorized 100 shares issued and outstanding	  	$	1,000	  	$	8,708,732	  	$	(10,981,077	)	 	$	1,000	  	$	8,708,732	  	$	(10,431,187	)	
Horton	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
No par value 1,000 shares authorized 100 shares issued and outstanding	  	 	1,000	  	 	400,000	  	 	3,252,440	 	 	 	1,000	  	 	400,000	  	 	2,682,526	 	
STEPS	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
No par value 1,000 shares authorized, issued and outstanding	  	 	1,000	  	 	2,663,161	  	 	(6,361,403	)	 	 	1,000	  	 	2,663,161	  	 	(5,825,769	)	
SFC	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
No par value 100 shares authorized, issued and outstanding	  	 	1,000	  	 	238,500	  	 	6,806,449	 	 	 	1,000	  	 	238,500	  	 	4,884,155	 	
 	  			  			  				 			  			  				
 	  	$	4,000	  	$	12,010,393	  	$	(7,283,591	)	 	$	4,000	  	$	12,010,393	  	$	(8,690,275	)	

5.	Employee Benefits 	
 
The Companies have two contributory 401(k) plans (the Plans). One plan covers all eligible employees of CIC and Horton and the other plan covers all eligible employees of STEPS and SFC. The Plans contain a discretionary matching provision which ranges from 25% to 50% of employees’ elective deferrals up to a maximum of 6% of eligible employees’ compensation. In addition, the plans provide for a discretionary profit-sharing provision. The Company’s expense related to the Plans amounted to approximately $38,500 and $28,600 for the years ended December 31, 2003 and approximately $20,200 and $26,900 for the year ended December 31, 2002, respectively. There were no discretionary profit-sharing contributions authorized in 2003 or 2002. 
 
6.	Commitments and Contingencies 	
 
Operating Leases 
 
The Company leases two facilities in Indianapolis, Indiana under operating leases expiring in April 2006 and June 2007, at monthly rental of approximately $37,300. Monthly rental payments associated with these leases are subject to an annual adjustment based on a certain consumer price index. Rent expense under operating leases was approximately $514,000 and $476,000 for the years ended December 31, 2003 and 2002, respectively. 
 
Future minimum rental payments under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2003, are as follows: 

Year ending December 31,
	  	Amount
	
2004	  	$	466,378	
2005	  	 	464,902	
2006	  	 	270,217	
2007	  	 	94,465	
 	  			
 	  	$	1,295,962	

7.	Subsequent Event 	
 
On April 30, 2004, First Advantage Corporation (First Advantage) acquired substantially all of the assets of CIC Enterprises, Inc., STEPS, Inc., SFC, Inc. and Horton, Inc., under the terms of an asset purchase agreement. In consideration for the purchase of the assets, First Advantage Corporation paid the sellers an aggregate purchase price of approximately $30,000,000, in a combination of cash and notes. 
 
In connection with the acquisition, up to $14 million of the purchase price is contingent upon the renewal by the United States government of the Work Opportunity Tax Credit program or a similar program. The contingent consideration placed in escrow is comprised of an $11 million subordinated note and a $3 million convertible note (“escrowed assets”). The final amount of the escrowed assets may be reduced based upon the timing, similarity and retroactive application of a new program. If no renewal event, as defined in the acquisition agreement, has occurred prior to December 31, 2005, the entire amount of the escrowed assets will be forfeited by the sellers and returned to First Advantage. 
 
9 

CIC Enterprises, Inc. and Affiliated Companies 
 
Combined Balance Sheets (Unaudited) 

 	  	March 31,
2004
	 	 	December 31,
2003
	 	
Assets	  	 	 	 	 	 	 	 	
Current assets:	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	2,445,807	 	 	$	5,584,354	 	
Restricted cash and reimbursements receivable	  	 	1,200,000	 	 	 	1,200,000	 	
Investments	  	 	137,825	 	 	 	122,900	 	
Accounts receivable, net	  	 	3,400,754	 	 	 	3,552,585	 	
Prepaid expenses and other current assets	  	 	22,790	 	 	 	22,571	 	
 	  				 				
Total current assets	  	 	7,207,176	 	 	 	10,482,410	 	
Property and equipment, net	  	 	845,119	 	 	 	903,156	 	
Other assets	  	 	148,185	 	 	 	120,475	 	
 	  				 				
Total assets	  	$	8,200,480	 	 	$	11,506,041	 	
 	  				 				
Liabilities and Shareholders’ Equity	  	 	 	 	 	 	 	 	
Current liabilities:	  	 	 	 	 	 	 	 	
Accounts payable	  	$	372,006	 	 	$	531,535	 	
Accrued compensation	  	 	292,647	 	 	 	4,659,035	 	
Client deposit	  	 	1,200,000	 	 	 	1,200,000	 	
Other accrued liabilities	  	 	372,532	 	 	 	364,594	 	
 	  				 				
Total current liabilities	  	 	2,237,185	 	 	 	6,755,164	 	
Commitments and contingencies	  	 	 	 	 	 	 	 	
Shareholders’ equity:	  	 	 	 	 	 	 	 	
Common stock	  	 	4,000	 	 	 	4,000	 	
Additional paid-in capital	  	 	12,710,393	 	 	 	12,010,393	 	
Accumulated other comprehensive income	  	 	—  	 	 	 	20,075	 	
Accumulated deficit	  	 	(6,751,098	)	 	 	(7,283,591	)	
 	  				 				
Total shareholders’ equity	  	 	5,963,295	 	 	 	4,750,877	 	
 	  				 				
Total liabilities and shareholders’ equity	  	$	8,200,480	 	 	$	11,506,041	 	

The accompanying notes are an integral part of these combined financial statements. 
 
-1- 

CIC Enterprises, Inc. and Affiliated Companies 
 
Combined Statements of Operations 
For the Three Months Ended March 31, 2004 and 2003 (Unaudited) 

 	  	For the Three Months Ended
March 31,
	
 	  	2004
	 	 	2003
	
Service revenues	  	$	4,335,915	 	 	$	5,383,152	
Cost of service revenues	  	 	134,293	 	 	 	30,335	
 	  				 			
Gross margin	  	 	4,201,622	 	 	 	5,352,817	
Salaries and benefits	  	 	1,797,622	 	 	 	1,783,373	
Other selling, general, and administrative expenses	  	 	1,170,920	 	 	 	1,393,908	
 	  				 			
Income from operations	  	 	1,233,080	 	 	 	2,175,536	
 	  				 			
Interest and other income:	  	 	 	 	 	 	 	
Interest income	  	 	1,710	 	 	 	5,523	
Other income	  	 	—  	 	 	 	2,121	
 	  				 			
Total interest and other income	  	 	1,710	 	 	 	7,644	
 	  				 			
Net income	  	$	1,234,790	 	 	$	2,183,180	
 	  				 			
Unrealized gain on investments	  	 	(20,075	)	 	 	—  	
 	  				 			
Comprehensive income	  	$	1,214,715	 	 	$	2,183,180	

The accompanying notes are an integral part of these combined financial statements. 
 
-2- 

CIC Enterprises, Inc. and Affiliated Companies 
 
Combined Statements of Changes in Shareholders’ Equity 
For the Three Months Ended March 31, 2004 (Unaudited) 

 	  	Common Stock
	  	Additional
Paid-in Capital
	  	Accumulated
Other
Comprehensive
Income
	 	 	Accumulated
Deficit
	 	 	Total
Shareholders’
Equity
	 	
 	  	Shares
	  	Amount
	  		  			 			 			
Balance, December 31, 2003	  	1,300	  	 	4,000	  	 	12,010,393	  	 	20,075	 	 	 	(7,283,591	)	 	 	4,750,877	 	
Net income	  	—  	  	 	—  	  	 	—  	  	 	—  	 	 	 	1,234,790	 	 	 	1,234,790	 	
Unrealized gain on investments	  	—  	  	 	—  	  	 	—  	  	 	(20,075	)	 	 	—  	 	 	 	(20,075	)	
Shareholders’ contributions	  	—  	  	 	—  	  	 	700,000	  	 	—  	 	 	 	—  	 	 	 	700,000	 	
Shareholders’ distributions	  	—  	  	 	—  	  	 	—  	  	 	—  	 	 	 	(702,297	)	 	 	(702,297	)	
 	  		  			  			  				 				 				
Balance, March 31, 2004	  	1,300	  	$	4,000	  	$	12,710,393	  	$	—  	 	 	$	(6,751,098	)	 	$	5,963,295	 	

The accompanying notes are an integral part of these combined financial statements. 
 
-3- 

CIC Enterprises, Inc. and Affiliated Companies 
 
Combined Statements of Cash Flows 
For the Three Months Ended March 31, 2004 and 2003 (Unaudited) 

 	  	For the Three Months Ended
March 31,
	 	
 	  	2004
	 	 	2003
	 	
Cash flows from operating activities:	  	 	 	 	 	 	 	 	
Net income	  	$	1,234,790	 	 	$	2,183,180	 	
Adjustments to reconcile net loss to net cash used in operating activities:	  	 	 	 	 	 	 	 	
Depreciation and amortization	  	 	76,344	 	 	 	72,287	 	
Change in operating assets and liabilities:	  	 	 	 	 	 	 	 	
Accounts receivable	  	 	151,831	 	 	 	(1,996,677	)	
Prepaid expenses and other current assets	  	 	(219	)	 	 	101	 	
Other assets	  	 	(27,710	)	 	 	3,198	 	
Accounts payable	  	 	(159,529	)	 	 	(201,767	)	
Accrued compensation	  	 	(4,366,388	)	 	 	(5,140,846	)	
Other accrued liabilities	  	 	7,938	 	 	 	48,903	 	
 	  				 				
Net cash used in operating activities	  	 	(3,082,943	)	 	 	(5,031,621	)	
 	  				 				
Cash flows from investing activities:	  	 	 	 	 	 	 	 	
Sale (purchase) of investments	  	 	(35,000	)	 	 	75	 	
Purchases of property and equipment	  	 	(18,307	)	 	 	(189,096	)	
 	  				 				
Net cash used in investing activities	  	 	(53,307	)	 	 	(189,021	)	
 	  				 				
Cash flows from financing activities:	  	 	 	 	 	 	 	 	
Shareholders’ contributions	  	 	700,000	 	 	 	—  	 	
Shareholders’ distributions	  	 	(702,297	)	 	 	(482,392	)	
 	  				 				
Net cash used in financing activities	  	 	(2,297	)	 	 	(482,392	)	
 	  				 				
Decrease in cash and cash equivalents	  	 	(3,138,547	)	 	 	(5,703,034	)	
Cash and cash equivalents at beginning of period	  	 	5,584,354	 	 	 	6,756,012	 	
 	  				 				
Cash and cash equivalents at end of period	  	$	2,445,807	 	 	$	1,052,978	 	

The accompanying notes are an integral part of these combined financial statements. 
 
-4- 

CIC Enterprises, Inc. and Affiliated Companies 
 
Notes to Combined Financial Statements 
March 31, 2004 and 2003 (Unaudited) 
 
1.	Organization and Nature of Business 	
 
CIC Enterprises, Inc. (CIC) and its affiliated companies, Horton, Inc. (Horton), STEPS, Inc. (STEPS), and SFC, Inc. (SFC) (combined, the Companies), have three principal lines of business: credits and incentives which helps clients maximize their tax reduction opportunities through the pursuit of available federal, state, and local credits and incentives; transportation consulting which helps owners and operators of trucks save money through improved fleet asset management and regulatory compliance; and sales and use tax consulting which seeks to identify and recover overpayments of tax and establish a system to avoid future overpayments. 
 
The accompanying unaudited combined financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair statement of the results for the interim period have been included. 
 
For further information, refer to the combined financial statements and notes thereto for the year ended December 31, 2003 included in this Form 8-K/A. 
 
Operating results for the three months ended March 31, 2004 and 2003 are not necessarily indicative of the results that may be expected for the entire fiscal year. 
 
-5- 

CIC Enterprises, Inc. and Affiliated Companies 
 
Notes to Combined Financial Statements 
March 31, 2004 and 2003 (Unaudited) 
 
2.	Shareholders’ Equity 	
 
At March 31, 2004 and December 31, 2003, the Companies’ equity accounts were as follows: 

 	  	March 31, 2004
	 	 	December 31, 2003
	 	
 	  	Common
Stock
	  	Additional
Paid-in
Capital
	  	Retained
Earnings
(Deficit)
	 	 	Common
Stock
	  	Additional
Paid-in
Capital
	  	Retained
Earnings
(Deficit)
	 	
CIC	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
No par value	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
1,000 shares authorized	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
100 shares issued and outstanding	  	$	1,000	  	$	9,408,732	  	$	(7,214,164	)	 	$	1,000	  	$	8,708,732	  	$	(10,981,077	)	
Horton	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
No par value	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
1,000 shares authorized	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
100 shares issued and outstanding	  	 	1,000	  	 	400,000	  	 	1,425,112	 	 	 	1,000	  	 	400,000	  	 	3,252,440	 	
STEPS	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
No par value	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
1,000 shares authorized, issued and outstanding	  	 	1,000	  	 	2,663,161	  	 	(2,466,836	)	 	 	1,000	  	 	2,663,161	  	 	(6,361,403	)	
SFC	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
No par value	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
100 shares authorized, issued and outstanding	  	 	1,000	  	 	238,500	  	 	1,504,790	 	 	 	1,000	  	 	238,500	  	 	6,806,449	 	
 	  			  			  				 			  			  				
 	  	$	4,000	  	$	12,710,393	  	$	(6,751,098	)	 	$	4,000	  	$	12,010,393	  	$	(7,283,591	)	

3.	Subsequent Event 	
 
On April 30, 2004, First Advantage Corporation acquired substantially all of the assets of CIC Enterprises, Inc., STEPS, Inc., SFC, Inc. and Horton, Inc., under the terms of an asset purchase agreement. In consideration for the purchase of the assets, First Advantage Corporation paid the sellers an aggregate purchase price of $30,000,000, in a combination of cash and notes. 
 
In connection with the acquisition, up to $14 million of the purchase price is contingent upon the renewal by the United States government of the Work Opportunity Tax Credit program or a similar program. The contingent consideration placed in escrow is comprised of an $11 million subordinated note and a $3 million convertible note (“escrowed assets”). The final amount of the escrowed assets may be reduced based upon the timing, similarity and retroactive application of a new program. If no renewal event, as defined in the acquisition agreement, has occurred prior to December 31, 2005, the entire amount of the escrowed assets will be forfeited by the seller and returned to First Advantage Corporation. 
 
-6- 

REPORT OF INDEPENDENT ACCOUNTANTS 
 
To the Board of Directors and Members 
of CoreFacts, LLC: 
 
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and members’ equity, and of cash flows present fairly, in all material respects, the financial position of CoreFacts, LLC at December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 
 
/s/ Argy, Wiltse & Robinson, P.C. 
 
McLean, Virginia 
April 9, 2004 

COREFACTS, LLC 
 
CONSOLIDATED BALANCE SHEETS 
 
DECEMBER 31, 2003 AND 2002 

 	  	2003
	  	2002
	
ASSETS	  	 	 	  	 	 	
Current assets	  	 	 	  	 	 	
Cash and cash equivalents	  	$	345,678	  	$	216,770	
Accounts receivable, net of allowance for doubtful accounts of $52,435 and $64,589, respectively	  	 	1,422,109	  	 	1,243,228	
Prepaid expenses and other current assets	  	 	237,833	  	 	131,646	
 	  			  			
Total current assets	  	 	2,005,620	  	 	1,591,644	
Property and equipment, net	  	 	137,257	  	 	125,400	
Other assets	  	 	12,202	  	 	12,202	
 	  			  			
Total assets	  	$	2,155,079	  	$	1,729,246	
 	  			  			
LIABILITIES AND MEMBERS’ EQUITY	  	 	 	  	 	 	
Current liabilities	  	 	 	  	 	 	
Accounts payable	  	$	44,570	  	$	49,157	
Accrued expenses	  	 	119,320	  	 	30,561	
Bank line-of-credit	  	 	0	  	 	150,000	
 	  			  			
Total current liabilities	  	 	163,890	  	 	229,718	
Members’ equity	  	 	1,991,189	  	 	1,499,528	
 	  			  			
Total liabilities and members’ equity	  	$	2,155,079	  	$	1,729,246	

The accompanying notes are an integral part of these financial statements. 
 
-2- 

COREFACTS, LLC 
 
CONSOLIDATED STATEMENTS OF INCOME AND MEMBERS’ EQUITY 
 
YEARS ENDED DECEMBER 31, 2003 AND 2002 

 	  	2003
	 	 	2002
	 	
Service revenues	  	$	5,815,732	 	 	$	3,807,743	 	
Cost of service revenues	  	 	2,131,834	 	 	 	1,242,441	 	
 	  				 				
Gross margin	  	 	3,683,898	 	 	 	2,565,302	 	
 	  				 				
Salaries and benefits	  	 	480,850	 	 	 	380,470	 	
Rent expense	  	 	314,997	 	 	 	288,584	 	
Bad debt expense	  	 	79,296	 	 	 	137,289	 	
Depreciation and amortization	  	 	44,595	 	 	 	31,438	 	
Other operating expenses	  	 	388,790	 	 	 	267,477	 	
 	  				 				
Total operating expenses	  	 	1,308,528	 	 	 	1,105,258	 	
 	  				 				
Operating income	  	 	2,375,370	 	 	 	1,460,044	 	
 	  				 				
Interest income (expense)	  	 	 	 	 	 	 	 	
Interest income	  	 	1,289	 	 	 	4,332	 	
Interest expense	  	 	(368	)	 	 	(1,615	)	
 	  				 				
Total interest income, net	  	 	921	 	 	 	2,717	 	
 	  				 				
Net income	  	 	2,376,291	 	 	 	1,462,761	 	
Members’ equity at the beginning of the year	  	 	1,499,528	 	 	 	1,374,277	 	
Members’ distributions	  	 	(1,884,630	)	 	 	(1,337,510	)	
 	  				 				
Members’ equity at the end of the year	  	$	1,991,189	 	 	$	1,499,528	 	

The accompanying notes are an integral part of these financial statements. 
 
-3- 

COREFACTS, LLC 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
 
YEARS ENDED DECEMBER 31, 2003 AND 2002 

 	  	2003
	 	 	2002
	 	
Cash flows from operating activities:	  	 	 	 	 	 	 	 	
Net income	  	$	2,376,291	 	 	$	1,462,761	 	
 	  				 				
Adjustments to reconcile net income to net cash provided by operating activities:	  	 	 	 	 	 	 	 	
Depreciation and amortization	  	 	44,595	 	 	 	31,438	 	
Allowance for doubtful accounts	  	 	(12,154	)	 	 	50,974	 	
Change in operating assets and liabilities	  	 	 	 	 	 	 	 	
Accounts receivable	  	 	(166,727	)	 	 	(104,853	)	
Prepaid expenses and other current assets	  	 	(106,187	)	 	 	(96,808	)	
Accounts payable	  	 	(4,587	)	 	 	30,440	 	
Accrued expenses	  	 	88,759	 	 	 	(32,195	)	
 	  				 				
Total adjustments	  	 	(156,301	)	 	 	(121,004	)	
 	  				 				
Net cash provided by operating activities	  	 	2,219,990	 	 	 	1,341,757	 	
 	  				 				
Cash flows from investing activity:	  	 	 	 	 	 	 	 	
Purchases of property and equipment	  	 	(56,452	)	 	 	(79,374	)	
 	  				 				
Net cash used in investing activity	  	 	(56,452	)	 	 	(79,374	)	
 	  				 				
Cash flows from financing activities:	  	 	 	 	 	 	 	 	
Net (repayments) borrowings under bank line-of-credit	  	 	(150,000	)	 	 	150,000	 	
Members’ distributions	  	 	(1,884,630	)	 	 	(1,337,510	)	
 	  				 				
Net cash used in financing activities	  	 	(2,034,630	)	 	 	(1,187,510	)	
 	  				 				
Net increase in cash and cash equivalents	  	 	128,908	 	 	 	74,873	 	
Cash and cash equivalents at the beginning of the year	  	 	216,770	 	 	 	141,897	 	
 	  				 				
Cash and cash equivalents at the end of the year	  	$	345,678	 	 	$	216,770	 	
 	  				 				
Supplementary disclosure of cash flow information:	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	368	 	 	$	1,615	 	

The accompanying notes are an integral part of these financial statements. 
 
-4- 

COREFACTS, LLC 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 
DECEMBER 31, 2003 AND 2002 
 
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES 
 
CoreFacts, LLC, (CoreFacts or the Company) was formed in the Commonwealth of Virginia on September 12, 2000. CoreFacts is a nationwide provider of forensic and investigative services. The Company will cease operations on November 30, 2040, or earlier, if certain events occur, as defined in the operating agreement. 
 
Principles of consolidation 
 
The consolidated financial statements for the year ended December 31, 2003 and 2002 include the accounts of the Company and CoreFacts, Inc. (a wholly-owned subsidiary). All significant inter-company transactions and balances have been eliminated. 
 
Use of estimates 
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. 
 
Revenue recognition 
 
Revenue from services is recognized as incurred and billed upon completion of each case. If a fixed fee agreement is made, revenue is recognized upon completion of contracted services. Retainers are recorded as current liabilities until the case is complete and then used to offset related receivables. 
 
Cash equivalents 
 
The Company considers all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents. 
 
Property and equipment 
 
Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years. 
 
Income taxes 
 
The Company is a limited liability company for income tax reporting purposes. As such, the Company is not subject to corporate income taxes and the income, deductions, credits and other tax attributes of the Company flow to the members of the Company. 
 
-5- 

NOTE 2 - PROPERTY AND EQUIPMENT 
 
Property and equipment consists of the following at December 31: 

 	  	2003
	 	 	2002
	 	
Computer equipment	  	$	169,378	 	 	$	139,075	 	
Software	  	 	56,411	 	 	 	33,433	 	
Furniture and office equipment	  	 	31,149	 	 	 	27,978	 	
 	  				 				
 	  	 	256,938	 	 	 	200,486	 	
Less: accumulated depreciation and amortization	  	 	(119,681	)	 	 	(75,086	)	
 	  				 				
 	  	$	137,257	 	 	$	125,400	 	

NOTE 3 - BANK LINE-OF-CREDIT 
 
The Company has a $300,000 working capital line-of-credit which bears interest at a rate of prime plus 1% (5% at December 31, 2003). The $150,000 demand note at December 31, 2002 was borrowed under the line-of-credit, was collateralized by the assets of the Company, and personally guaranteed by a principal member of the Company. The demand note was repaid during 2003. At December 31, 2003, there are no amounts outstanding under the line-of-credit. 
 
Interest expense, which approximated interest paid, totaled $368 and $1,615 for the years ended December 31, 2003 and 2002, respectively. 
 
NOTE 4 - EMPLOYEE BENEFIT PLAN 
 
Effective January 1, 2003, the Company adopted the CoreFacts 401(k) Plan (the Plan). The Plan is available to all employees. The Plan allows for employee-elective contributions up to the maximum deductible amount as determined by the Internal Revenue Code, but not to exceed 90% of their annual compensation. The Company makes matching contributions on elective deferrals up to 4% of annual compensation. The Company may contribute an additional discretionary amount that is allocated to each participant in proportion to his or her compensation earned while a participant for that plan year. The Company’s expense related to the Plan amounted to $29,135 for the year ended December 31, 2003. 
 
NOTE 5 - RELATED PARTIES 
 
During the year 2002, a principal member of the Company withdrew from employment with the Company. Under the provisions of the Operating Agreement, his ownership units were converted to termination units. The termination units were worth $78,500 on the date of withdrawal and were payable in no more than three equal annual installments, the first payment of $38,500 was made within 90 days after the date of termination, with the remaining $40,000 balance paid during 2003. 
 
-6- 

NOTE 6 - CONCENTRATION OF CREDIT RISK 
 
The Company is subject to credit risk concentrations primarily from cash and cash equivalents and accounts receivable. The Company believes the risk of loss associated with cash and cash equivalents is very low, since cash and cash equivalents are maintained in a financial institution. The Company’s accounts receivable balances consist primarily of amounts due under contracts with law firms and other commercial companies. Accounts receivable are generally due within 30 days and no collateral is required. The Company maintains a reserve for potential credit losses and historically such losses have been within management’s expectations. 
 
NOTE 7 - COMMITMENTS 
 
The Company leases office space under the terms of a noncancelable operating lease that expires in September 2005. The following is a schedule by year of the approximate future minimum lease payments required under this operating lease, which has an initial or remaining term in excess of one year as of December 31, 2003: 

Years ending December 31,
	  	 	
2004	  	$	227,000	
2005	  	 	175,000	
 	  			
 	  	$	402,000	

NOTE 8 - SUBSEQUENT EVENT 
 
Subsequent to December 31, 2003, the members of the Company entered into an agreement whereby First Advantage Corporation acquired all of the membership interest in the Company under the terms of a membership interest agreement. In consideration for the purchase of the membership interests, First Advantage Corporation paid the sellers an aggregate purchase price of $15,500,000, in a combination of cash and notes payable. 
 
-7- 

CoreFacts, LLC 
 
Consolidated Balance Sheets (Unaudited) 

 	  	March 31,
2004
	  	December 31,
2003
	
Assets	  	 	 	  	 	 	
Current assets:	  	 	 	  	 	 	
Cash and cash equivalents	  	$	544,371	  	$	345,678	
Accounts receivable	  	 	1,735,014	  	 	1,422,109	
Prepaid expenses and other current assets	  	 	120,766	  	 	237,833	
 	  			  			
Total current assets	  	 	2,400,151	  	 	2,005,620	
Property and equipment, net	  	 	137,026	  	 	137,257	
Other assets	  	 	12,202	  	 	12,202	
 	  			  			
Total assets	  	$	2,549,379	  	$	2,155,079	
 	  			  			
Liabilities and Members’ Equity	  	 	 	  	 	 	
Current liabilities:	  	 	 	  	 	 	
Accounts payable	  	$	129,479	  	$	44,570	
Accrued and other liabilities	  	 	232,255	  	 	119,320	
 	  			  			
Total current liabilities	  	 	361,734	  	 	163,890	
Commitments and contingencies	  	 	 	  	 	 	
Members’ equity	  	 	2,187,645	  	 	1,991,189	
 	  			  			
Total liabilities and members’ equity	  	$	2,549,379	  	$	2,155,079	

-1- 

CoreFacts, LLC 
 
Consolidated Statements of Income and Members’ Equity 
For the Three Months Ended March 31, 2004 and 2003 (Unaudited) 

 	  	For the Three Months Ended
March 31,
	 	
 	  	2004
	 	 	2003
	 	
Service revenues	  	$	1,643,237	 	 	$	719,580	 	
Cost of service revenues	  	 	601,051	 	 	 	271,750	 	
 	  				 				
Gross Margin	  	 	1,042,186	 	 	 	447,830	 	
Operating Expenses:	  	 	 	 	 	 	 	 	
Salaries and benefits	  	 	187,938	 	 	 	114,467	 	
Depreciation and amortization	  	 	12,151	 	 	 	10,145	 	
Other operating expenses	  	 	212,088	 	 	 	171,929	 	
 	  				 				
Total operating expenses	  	 	412,177	 	 	 	296,541	 	
 	  				 				
Income from operations	  	 	630,009	 	 	 	151,289	 	
 	  				 				
Interest (expense) income:	  	 	 	 	 	 	 	 	
Interest expense	  	 	—  	 	 	 	(166	)	
Interest income	  	 	1,316	 	 	 	479	 	
 	  				 				
Total interest income, net	  	 	1,316	 	 	 	313	 	
 	  				 				
Net income	  	 	631,325	 	 	 	151,602	 	
Members’ equity, beginning of period	  	 	1,991,189	 	 	 	1,499,528	 	
Distributions to members	  	 	(434,869	)	 	 	(274,241	)	
 	  				 				
Members’ equity, end of period	  	$	2,187,645	 	 	$	1,376,889	 	

The accompanying notes are an integral part of these consolidated financial statements. 
 
-2- 

CoreFacts, LLC 
 
Consolidated Statements of Cash Flows 
For the Three Months Ended March 31, 2004 and 2003 (Unaudited) 

 	  	For the Three Months Ended
March 31,
	 	
 	  	2004
	 	 	2003
	 	
Cash flows from operating activities:	  	 	 	 	 	 	 	 	
Net income	  	$	631,325	 	 	$	151,602	 	
Adjustments to reconcile net income to net cash provided by operating activities:	  	 	 	 	 	 	 	 	
Depreciation expense	  	 	12,151	 	 	 	10,145	 	
Change in operating assets and liabilities:	  	 	 	 	 	 	 	 	
Accounts receivable	  	 	(312,905	)	 	 	359,812	 	
Prepaid expenses and other current assets	  	 	117,067	 	 	 	76,290	 	
Accounts payable	  	 	84,909	 	 	 	(38,540	)	
Accrued and other liabilities	  	 	112,935	 	 	 	104,523	 	
 	  				 				
Net cash provided by operating activities	  	 	645,482	 	 	 	663,832	 	
 	  				 				
Cash flows from investing activities:	  	 	 	 	 	 	 	 	
Purchases of property and equipment	  	 	(11,920	)	 	 	(2,109	)	
 	  				 				
Net cash used in investing activities	  	 	(11,920	)	 	 	(2,109	)	
 	  				 				
Cash flows from financing activities:	  	 	 	 	 	 	 	 	
Borrowings (repayments) on line of credit	  	 	—  	 	 	 	(150,000	)	
Distributions to members	  	 	(434,869	)	 	 	(274,241	)	
 	  				 				
Net cash used in financing activities	  	 	(434,869	)	 	 	(424,241	)	
 	  				 				
Increase in cash and cash equivalents	  	 	198,693	 	 	 	237,482	 	
Cash and cash equivalents at beginning of period	  	 	345,678	 	 	 	216,770	 	
 	  				 				
Cash and cash equivalents at end of period	  	$	544,371	 	 	$	454,252	 	
 	  				 				
Supplemental disclosures of cash flow information:	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	—  	 	 	$	166	 	

The accompanying notes are an integral part of these consolidated financial statements. 
 
-3- 

CoreFacts, LLC 
 
Notes to Consolidated Financial Statements 
March 31, 2004 and 2003 (Unaudited) 
 
1.	Organization and Nature of Business 	
 
CoreFacts, LLC (the Company) is a nationwide provider of forensic and investigative services, is a Virginia Limited Liability Company established September 12, 2000. The Company will cease operations on September 12, 2040. 
 
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair statement of the results for the interim period have been included. 
 
For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, 2003 included in this Form 8-K/A. 
 
Operating results for the three months ended March 31, 2004 and 2003 are not necessarily indicative of the results that may be expected for the entire fiscal year. 
 
2.	Subsequent Event 	
 
Subsequent to December 31, 2003, the members of the Company entered into an agreement whereby First Advantage Corporation acquired all the membership interest in the Company under the terms of a membership interest agreement. In consideration for the purchase of the membership interests, First Advantage Corporation paid the sellers an aggregate purchase price of $15,500,000, in a combination of cash and notes payable. 
 
-4- 

Report of Independent Certified Public Accountants 
 
To the Board of Directors and Shareholders 
of Realeum, Inc. 
 
In our opinion, the accompanying consolidated balance sheet as of December 31, 2003 and the related consolidated statements of income, of shareholders’ deficit and of cash flows present fairly, in all material respects, the financial position of Realeum, Inc. and subsidiaries (the “Company”) at December 31, 2003, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 of the notes to the consolidated financial statements, the Company’s recurring losses from operations and net capital deficiency raise substantial doubt about its ability to continue as a going concern. Management’s plans as to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 
 
/s/ Pricewaterhouse Coopers LLC 
 
Tampa, Florida 
June 18, 2004 
 
1 

Report of Independent Auditors 
 
Board of Directors and Stockholders 
Realeum, Inc. 
 
We have audited the accompanying consolidated balance sheet of Realeum, Inc. as of December 31, 2002, and the related consolidated statement of operations, stockholders’ equity (deficit), and cash flows for the year then ended. Our responsibility is to express an opinion on these financial statements based on our audit. 
 
We conducted our audit in accordance with accounting principles generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Realeum, Inc. at December 31, 2002, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. 
 
As discussed in Note 1 to the financial statements, the Company’s recurring losses from operations and net capital deficiency raise substantial doubt about its ability to continue as a going concern. Management’s plans as to these matters are also described in Note 1. The 2002 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 
 
/s/ Ernst & Young LLP 
 
McLean, Virginia 
 
April 25, 2003, except 
for the third paragraph 
of Note 5, as to which the 
date is May 29, 2003 

Realeum, Inc. 
Consolidated Balance Sheets 
December 31, 2003 and 2002 

 	  	2003
	 	 	2002
	 	
Assets	  	 	 	 	 	 	 	 	
Current assets	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	1,115,084	 	 	$	1,381,669	 	
Restricted cash	  	 	634,783	 	 	 	621,739	 	
Accounts receivable (less allowance for doubtful accounts of $6,466 and $0 in 2003 and 2002, respectively)	  	 	80,521	 	 	 	41,785	 	
Prepaid expenses and other current assets	  	 	215,197	 	 	 	330,079	 	
 	  				 				
Total current assets	  	 	2,045,585	 	 	 	2,375,272	 	
Property and equipment, net	  	 	874,420	 	 	 	2,065,465	 	
Restricted cash	  	 	—  	 	 	 	634,783	 	
Other assets	  	 	317,642	 	 	 	583,258	 	
 	  				 				
Total assets	  	$	3,237,647	 	 	$	5,658,778	 	
 	  				 				
Liabilities and Stockholders' Deficit	  	 	 	 	 	 	 	 	
Current liabilities	  	 	 	 	 	 	 	 	
Accounts payable and accrued expenses	  	$	438,108	 	 	$	1,167,419	 	
Deferred revenue	  	 	190,726	 	 	 	460,634	 	
Current portion of long-term debt	  	 	730,326	 	 	 	1,014,260	 	
Other liabilities	  	 	108,472	 	 	 	—  	 	
 	  				 				
Total current liabilities	  	 	1,467,632	 	 	 	2,642,313	 	
Long-term debt	  	 	—  	 	 	 	730,326	 	
Deferred revenue	  	 	197,530	 	 	 	287,383	 	
 	  				 				
Total liabilities	  	 	1,665,162	 	 	 	3,660,022	 	
Commitments and contingencies	  	 	 	 	 	 	 	 	
Series A redeemable convertible preferred stock, $0.01 par value No shares authorized, issued or outstanding	  	 	—  	 	 	 	14,551,059	 	
Series B redeemable convertible preferred stock, $0.01 par value No shares authorized, issued or outstanding	  	 	—  	 	 	 	14,556,312	 	
Series AA redeemable convertible preferred stock, $0.01 par value 13,821,840 shares authorized; 13,211,604 shares issued and outstanding	  	 	34,669,476	 	 	 	—  	 	
Stockholders' deficit	  	 	 	 	 	 	 	 	
Common stock, $0.01 par value; 20,000,000 shares authorized;	  	 	 	 	 	 	 	 	
1,811,655 and 17,418,975 shares issued and outstanding	  	 	 	 	 	 	 	 	
at December 31, 2003 and 2002, respectively	  	 	18,116	 	 	 	174,190	 	
Additional paid in capital	  	 	5,495,217	 	 	 	5,189,616	 	
Warrants	  	 	190,403	 	 	 	190,403	 	
Accumulated deficit	  	 	(38,755,737	)	 	 	(32,524,773	)	
Unearned compensation	  	 	(44,990	)	 	 	(138,051	)	
 	  				 				
Total stockholders’ deficit	  	 	(33,096,991	)	 	 	(27,108,615	)	
 	  				 				
Total liabilities and stockholders’ deficit	  	$	3,237,647	 	 	$	5,658,778	 	

The accompanying notes are an integral part of these financial statements. 
 
2 

Realeum, Inc. 
Consolidated Statements of Operations 
For the Years Ended December 31, 2003 and 2002 

 	  	2003
	 	 	2002
	 	
Revenues	  	 	 	 	 	 	 	 	
Subscription	  	$	666,638	 	 	$	560,000	 	
Services	  	 	398,585	 	 	 	532,689	 	
 	  				 				
Total revenues	  	 	1,065,223	 	 	 	1,092,689	 	
 	  				 				
Cost of revenues	  	 	 	 	 	 	 	 	
Subscription	  	 	828,197	 	 	 	1,164,553	 	
Services	  	 	1,277,108	 	 	 	818,244	 	
 	  				 				
Total cost of revenues	  	 	2,105,305	 	 	 	1,982,797	 	
 	  				 				
Gross margin	  	 	(1,040,082	)	 	 	(890,108	)	
Operating Expenses	  	 	 	 	 	 	 	 	
Research and development	  	 	2,741,387	 	 	 	6,499,277	 	
Sales and marketing	  	 	1,027,144	 	 	 	2,286,660	 	
General and adminsitrative	  	 	1,362,327	 	 	 	1,930,545	 	
Impairment of software development costs	  	 	—  	 	 	 	9,915,644	 	
 	  				 				
Total operating expenses	  	 	5,130,858	 	 	 	20,632,126	 	
 	  				 				
Loss from operations	  	 	(6,170,940	)	 	 	(21,522,234	)	
 	  				 				
Other income (expense)	  	 	 	 	 	 	 	 	
Interest expense	  	 	(122,755	)	 	 	(254,037	)	
Interest income	  	 	60,484	 	 	 	127,705	 	
Other income (expense)	  	 	2,247	 	 	 	(56,683	)	
 	  				 				
Total other income (expense)	  	 	(60,024	)	 	 	(183,015	)	
 	  				 				
Net loss	  	$	(6,230,964	)	 	$	(21,705,249	)	

The accompanying notes are an integral part of these financial statements. 
 
3 

Realeum, Inc. 
Consolidated Statements of Stockholders’ Equity (Deficit) 
For the Years Ended December 31, 2003 and 2002 

 	  	Common Stock
	 	 	Additional
Paid-in
Capital
	 	 	Warrants
	  	Accumulated
Deficit
	 	 	Deferred
Stock
Compensation
	 	 	Total
Stockholders’
Equity
(Deficit)
	 	
 	  	Shares
	 	 	Amount
	 	 			 		  			 			 			
Balance at December 31, 2001	  	17,484,794	 	 	$	174,847	 	 	$	5,205,896	 	 	$	82,000	  	$	(10,819,524	)	 	$	(268,122	)	 	$	(5,624,903	)	
Cancellation of restricted stock grants	  	(79,893	)	 	 	(799	)	 	 	(25,566	)	 	 	—  	  	 	—  	 	 	 	26,365	 	 	 	—  	 	
Amortization of unearned stock compensation	  	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	  	 	—  	 	 	 	103,706	 	 	 	103,706	 	
Warrant issued	  	—  	 	 	 	—  	 	 	 	—  	 	 	 	108,403	  	 	—  	 	 	 	—  	 	 	 	108,403	 	
Exercise of stock options	  	14,074	 	 	 	142	 	 	 	9,286	 	 	 	—  	  	 	—  	 	 	 	—  	 	 	 	9,428	 	
Net loss	  	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	  	 	(21,705,249	)	 	 	—  	 	 	 	(21,705,249	)	
 	  			 				 				 			  				 				 				
Balance at December 31, 2002	  	17,418,975	 	 	 	174,190	 	 	 	5,189,616	 	 	 	190,403	  	 	(32,524,773	)	 	 	(138,051	)	 	 	(27,108,615	)	
Cancellation of restricted stock grants	  	(8,800	)	 	 	(88	)	 	 	(2,821	)	 	 	—  	  	 	—  	 	 	 	2,909	 	 	 	—  	 	
Amortization of unearned stock compensation	  	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	  	 	—  	 	 	 	90,152	 	 	 	90,152	 	
Exercise of stock options	  	4,288	 	 	 	43	 	 	 	2,394	 	 	 	—  	  	 	—  	 	 	 	—  	 	 	 	2,437	 	
Preferred stock converted to common upon Series AA preferred stock sale	  	110,135,613	 	 	 	1,101,356	 	 	 	28,006,015	 	 	 	—  	  	 	—  	 	 	 	—  	 	 	 	29,107,371	 	
Common shares exchanged for Series AA preferred stock	  	(109,433,543	)	 	 	(1,094,336	)	 	 	(27,863,036	)	 	 	—  	  	 	—  	 	 	 	—  	 	 	 	(28,957,372	)	
Reverse stock split	  	(16,304,878	)	 	 	(163,049	)	 	 	163,049	 	 	 	—  	  	 	—  	 	 	 	—  	 	 	 	—  	 	
Net loss	  	—  	 	 	 	—  	 	 	 	 	 	 	 	—  	  	 	(6,230,964	)	 	 	—  	 	 	 	(6,230,964	)	
 	  			 				 				 			  				 				 				
Balance at December 31, 2003	  	1,811,655	 	 	$	18,116	 	 	$	5,495,217	 	 	$	190,403	  	$	(38,755,737	)	 	$	(44,990	)	 	$	(33,096,991	)	

The accompanying notes are an integral part of these financial statements. 
 
4 

Realeum, Inc. 
Consolidated Statements of Cash Flows 
For the Years Ended December 31, 2003 and 2002 

 	  	2003
	 	 	2002
	 	
Cash flows from operating activities	  	 	 	 	 	 	 	 	
Net income	  	$	(6,230,964	)	 	$	(21,705,249	)	
Adjustments to reconcile net income to net cash provided by operating activities	  	 	 	 	 	 	 	 	
Depreciation expense	  	 	1,198,797	 	 	 	1,175,031	 	
Compensation expense recorded for issuance of restricted stock, net of cancellations	  	 	90,152	 	 	 	103,706	 	
Noncash interest	  	 	—  	 	 	 	137,654	 	
Interest on note receivable from officer	  	 	(13,002	)	 	 	(12,216	)	
Loss on disposal of fixed assets	  	 	—  	 	 	 	56,683	 	
Impairment of software development costs	  	 	—  	 	 	 	9,915,644	 	
Change in operating assets and liabilities	  	 	 	 	 	 	 	 	
Accounts receivable, prepaid expenses and other current assets	  	 	76,145	 	 	 	(328,986	)	
Other assets	  	 	278,618	 	 	 	210,892	 	
Accounts payable and accrued liabilities	  	 	(729,311	)	 	 	(690,473	)	
Deferred revenue	  	 	(359,761	)	 	 	(46,757	)	
Other liabilities	  	 	108,472	 	 	 	—  	 	
 	  				 				
Net cash used in operating activities	  	 	(5,580,854	)	 	 	(11,184,071	)	
 	  				 				
Cash flows from investing activities	  	 	 	 	 	 	 	 	
Change in restricted cash balances	  	 	621,740	 	 	 	(137,867	)	
Proceeds from the sale of property and equipment	  	 	—  	 	 	 	1,000	 	
Purchases of property and equipment	  	 	(7,753	)	 	 	(1,477,012	)	
Acquisition of software product and related costs	  	 	—  	 	 	 	(235,245	)	
 	  				 				
Net cash provided by (used in) investing activities	  	 	613,987	 	 	 	(1,849,124	)	
 	  				 				
Cash flows from financing activities	  	 	 	 	 	 	 	 	
Proceeds from issuance of common stock	  	 	2,437	 	 	 	9,431	 	
Proceeds from issuance of preferred stock, net of related costs	  	 	5,712,105	 	 	 	14,406,312	 	
Proceeds from issuance of notes payable	  	 	—  	 	 	 	1,000,000	 	
Restriction of cash under compensating balance agreement	  	 	—  	 	 	 	(956,521	)	
Repayments of long-term debt	  	 	(1,014,260	)	 	 	(473,915	)	
 	  				 				
Net cash provided by financing activities	  	 	4,700,282	 	 	 	13,985,307	 	
 	  				 				
Increase in cash and cash equivalents	  	 	(266,585	)	 	 	952,112	 	
Cash and cash equivalents at beginning of year	  	 	1,381,669	 	 	 	429,557	 	
 	  				 				
Cash and cash equivalents at end of year	  	$	1,115,084	 	 	$	1,381,669	 	
 	  				 				
Supplemental disclosures of cash flow information	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	122,755	 	 	$	116,383	 	
Non-cash transactions	  	 	 	 	 	 	 	 	
Issuance of preferred stock in satisfaction of accrued liability	  	$	—  	 	 	$	150,000	 	
Unearned compensation charge (forfeitures), net	  	 	(2,909	)	 	 	(26,365	)	
Issuance of Series AA preferred stock in satisfaction	  	 	 	 	 	 	 	 	
of Series A and B preferred stock	  	 	29,107,371	 	 	 	—  	 	
 
The accompanying notes are an integral part of these financial statements. 
 
5 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
1.	Organization and Nature of Business 	
 
Realeum, Inc. (the Company) was incorporated on June 21, 2000 under the laws and provisions of the state of Delaware. 
 
Realeum, Inc., headquartered in McLean, Virginia, provides property management and asset optimization software and services to the multifamily real estate industry. The Company currently operates in one business segment. 
 
The Company derives revenue principally from the license of its Realeum Foundation™ product and the delivery of associated implementation, collocation (ASP) and support services. The mix of products and services sold varies by customer. 
 
In prior years, the Company was a Development Stage Company as defined in Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises. 
 
Liquidity Considerations 
 
The Company faces significant risks associated with successful execution of its planned business strategy as it emerges from the development stage. These risks include, but are not limited to, continued technology and product development, introduction and market acceptance of products and related services, sufficient liquidity, competition from existing and new competitors which may enter the marketplace, retention of key personnel and current economic conditions. 
 
These risks faced by the Company raise substantial doubt about the Company’s ability to continue as a going concern. To reduce its expenditures, the Company has downsized its operations in 2002, which included reducing headcount, and the curtailment of capital spending and most nonessential expenditures. Management believes that these actions have reduced its ongoing operating expenses, and related cash outflow, such that the Company will have sufficient working capital to support necessary activities through 2003 and beyond. If these actions previously taken in response to the risks identified are not sufficient, management is committed to the successful execution of its operating plan and will take further action, as deemed necessary, to align its operations and reduce expenditures through additional headcount reductions and other cost cutting measures. 
 
While the Company plans to reach sustainable positive cash flow through its current and planned product offerings and expansion of its customer base without additional capital financing, there is no assurance that it will succeed in doing so, or that it will generate sufficient revenue to enable it to continue operations over the longer term. If additional capital financing is necessary, there can be no assurance that it will be available on favorable terms, or at all. If additional funding is not available should it become necessary, the Company may be unable to continue as a going concern and achieve its intended business strategy. The consolidated financial statements do not include any adjustments that may result from this uncertainty. 
 
6 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
2.	Summary of Significant Accounting Policies 	
 
Basis of Presentation 
 
The Company is the successor to a related entity, Trillium Data Solutions, LLC (Trillium). On June 21, 2000 in exchange for the issuance of 13,615,875 shares of Realeum common stock to the owner’s of Trillium, all assets and liabilities of Trillium were assigned to Realeum. The primary assets transferred were capitalized software development costs totaling approximately $3,400,000 related to products under development. The transfer of assets and liabilities to the Company has been accounted for as an exchange of interests under common control and such amounts have been recorded at the historical amounts. The total amount of net assets transferred was approximately $2,100,000. 
 
Principles of Consolidation 
 
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 
 
Use of Estimates 
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 
 
Cash and Cash Equivalents 
 
The Company considers all highly liquid investments with an original or remaining maturity at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and high liquid money market funds. 
 
Restricted Cash 
 
The Company has issued an $300,000 letter of credit to its landlord, whereby the Company granted the landlord a security interest and limited powers of attorney over a certificate of deposit. The certificate serves as collateral supporting a lease for the Company’s headquarters. The letter of credit is callable if the Company defaults on its lease. The letter of credit may be reduced by amendment in increments of $100,000, on first and second anniversary dates of the lease agreement. As of December 31, 2003, $200,000 remained restricted. 
 
In November of 2002, the Company entered into an installment note payable agreement whereby the Company agreed to maintain a money market cash balance equal to the outstanding balance of the installment note payable, serving as collateral against the installment note payable in favor of the lender. The balance due under the note has been classified as short-term restricted cash in the amount of $434,783. 
 
Property and Equipment 
 
Property and equipment, including leasehold improvements, are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful life of the assets, generally three to five years. The cost of equipment acquired under a capital lease is amortized over the shorter of the life of the lease, or the estimated useful life of the assets. Maintenance and repairs are charged to operations as incurred and major improvements are capitalized. The cost of assets retired or otherwise disposed of and the accumulated depreciation 
 
7 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
thereon are removed from the accounts with any gain or loss realized upon sale or disposal credited or charged to operations, respectively. 
 
Concentration of Credit Risk and Significant Customers 
 
Financial instruments which potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, accounts receivable and other current assets. The Company by policy and practice maintains its cash and cash equivalents with financial institutions that the Company believes are of high credit quality. Deposits with these financial institutions may exceed the amounts of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company generally requires no collateral from its customers. To reduce its risk, the Company periodically reviews the credit worthiness of its customers and may establish reserves for potential credit losses. 
 
At December 31, 2003 and 2002, one customer, who is a related party, accounted for 100% of revenue and gross accounts receivable. 
 
Fair Value of Financial Instruments 
 
The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at cost, which approximates their fair market value because of the short-term maturity of these instruments. Notes payable are carried at cost, which approximates fair value due to the proximity of the implicit rate of these financial instruments and the prevailing market rates for similar instruments. 
 
Impairment of Long-Lived Assets 
 
The Company periodically evaluates the carrying value of long-lived assets for impairment, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Factors considered important which could trigger an impairment review include, but are not limited to significant changes in the manner of use or anticipated manner of use of the acquired assets or the strategy for the Company’s overall business, significant negative industry or economic trends, significant negative trends with regard to the Company’s revenue goals and a significant decline in the value of the Company’s stock. When the Company determines that the carrying value of a long-lived asset may not be recoverable based on the existence of one or more of the above indicators for impairment, the Company measures any impairment based on a projected undiscounted cash flow method, which is compared to the asset’s carrying value. If an asset is considered to be impaired, the impairment loss is recorded based on the difference between the fair value of the assets and its carrying amount. During 2002, the Company noted that future projected costs were in excess of the fair value of future revenues streams related to the costs. Accordingly, the Company recorded an impairment charge (Note 12). 
 
Revenue Recognition 
 
Revenues are derived from subscriptions of bundled term license, post contract support and, in most cases, hosting services. The Company recognizes such revenue using the “subscription” method, whereby the initial and renewal amounts are recognized ratably over the period of the license during which the services are expected to be provided. Revenue for implementation and training, directly related to the initial subscription, are recognized ratably over the initial contract term. Revenue for training or consulting services that are not bundled or directly associated with the initial subscription is recognized based on achievement of billable milestones as written in the contract or upon contract completion and currently comprises less that 5% of overall revenue. The 
 
8 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
Company licenses its software products to end users primarily through the Company’s direct sales force. 
 
The Company recognizes revenue pursuant to the requirements of American Institute of Certified Public Accountants (“AICPA”) Statement of Position No. 97-2 “Software Revenue Recognition” (“SOP 97-2”), issued in October 1997, as amended by AICPA Statements of Position 98-4 and 98-9. For all arrangements, the Company determines whether persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection is probable. If any of these criteria are not met, revenue recognition is deferred until such time as all criteria are met. 
 
Research and Development Costs 
 
The Company accounts for software development costs under Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Certain Computer Software to be Sold, Leased or Otherwise Marketed”, under which certain software development costs are capitalized after technological feasibility has been established. Product development costs incurred in the period between achievement of technological feasibility, which the Company defines as the establishment of a working model and until the general availability of such software to customers of a product has been established are capitalized until the time at which the product is considered available for general release. 
 
No internally-generated software development costs were capitalized during fiscal years 2003 and 2002. 
 
Advertising Expense 
 
Advertising costs are generally expensed as incurred. Advertising costs totaled approximately $6,726 and $59,000 during the years ended December 31, 2003 and 2002, respectively. 
 
Income Taxes 
 
The Company uses the liability method to account for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are remeasured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recorded to reduce the deferred tax asset if it is more likely than not that some portion of the asset will not be realized. No income tax benefit has been recorded in the statement of operations as realization is uncertain. 
 
Stock-Based Compensation 
 
The Company accounts for its stock-based compensation in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” and complies with the disclosure provisions of SFAS 123, “Accounting for Stock-Based Compensation”. Under APB No. 25, compensation expense is based on the difference, if any, on the date of the grant, between the fair value of the Company’s stock and the exercise price of the option. 
 
Unearned compensation is amortized and expensed in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 28 (“FIN 28”). The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS 123 and Emerging Issues Task Force (“EITF”) No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in 
 
9 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
Conjunction with Selling, Goods or Services.” The Company uses the Black-Scholes option pricing model to value options granted to non-employees. The related expense is recorded over the period in which the related services are received. 
 
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure. SFAS 148 amends SFAS 123 to provide alternative methods of transition for a voluntary change to the fair-value for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for fiscal years beginning after December 15, 2002. 
 
The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: 
 
Option Value Information (a) 

 	  	Year Ended
December 31,
	 	
 	  	2003
	 	 	2002
	 	
Expected dividend yield	  	 	—  	 	 	 	—  	 	
Expected volatility	  	 	0	%	 	 	100	%	
Risk free interest rate	  	 	0.00	%	 	 	4.50	%	
Expected option term (in years)	  	 	—  	 	 	 	5	 	
Fair value of options granted	  	$	0.00	 	 	$	0.22	 	
 
(a) Weighted averages of option grants during each period 
 
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s 2003 and 2002 reported and pro forma information follows: 

 	  	Year Ended December 31,
	 	
 	  	2003
	 	 	2002
	 	
Net loss, as reported	  	$	(6,230,964	)	 	$	(21,705,249	)	
Deduct: total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effect	  	 	(362,293	)	 	 	(395,252	)	
 	  				 				
Pro forma net loss	  	$	(6,593,257	)	 	$	(22,100,501	)	

Recent Pronouncements 
 
In November 2002, the EITF reached a consensus on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Realeum is currently evaluating the effect that the adoption of EITF Issue No. 00-21 will have on its results of operations and financial condition. 
 
3.	Balance Sheet Components 	
 
Other current assets 

 	  	December 31,
	
 	  	2003
	  	2002
	
Prepaid expenses	  	$	215,198	  	$	326,824	
Due from employees	  	 	—  	  	 	3,255	
 	  			  			
 	  	$	215,198	  	$	330,079	

Property and equipment, net 

 	  	December 31,
	 	
 	  	2003
	 	 	2002
	 	
Collocation hardware and software	  	$	1,100,305	 	 	$	1,100,305	 	
Computer hardware	  	 	1,219,507	 	 	 	1,268,885	 	
Computer software	  	 	1,358,001	 	 	 	1,375,181	 	
Furniture and equipment	  	 	78,072	 	 	 	78,072	 	
 	  				 				
 	  	 	3,755,885	 	 	 	3,822,443	 	
Less accumulated depreciation and amortization	  	 	(2,881,465	)	 	 	(1,756,978	)	
 	  				 				
Property and equipment, net	  	$	874,420	 	 	$	2,065,465	 	

Depreciation and amortization totaled approximately $1,199,000 and $1,175,000 for the years ended December 31, 2003 and 2002, respectively. 
 
As of December 31, 2003, $1,900,000 of fixed assets were subject to a lien resulting from equipment-financing notes. 
 
10 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
Other assets 

 	  	December 31,
	
 	  	2003
	  	2002
	
Note receivable from officer	  	$	229,584	  	$	216,582	
Deferred financing costs	  	 	6,832	  	 	49,166	
Deferred implementation costs	  	 	81,226	  	 	317,510	
 	  			  			
 	  	$	317,642	  	$	583,258	

Deferred implementation costs relate to labor costs incurred during the performance of implementation services under sales contracts. These costs are recognized ratably over the term of the sales contract and upon acceptance by the customer. All revenue associated with these sales have been deferred until acceptance by the customer and are also recognized ratably over the contract term. 
 
Accounts payable and accrued liabilities 

 	  	December 31,
	
 	  	2003
	  	2002
	
Accounts payable	  	$	106,213	  	$	108,634	
Accrued compensation and benefits	  	 	156,883	  	 	749,153	
Accrued trade liabilities	  	 	175,012	  	 	309,632	
 	  			  			
 	  	$	438,108	  	$	1,167,419	

4.	Preferred Stock 	
 
Series A Redeemable Convertible Preferred Stock 
 
On August 28, 2000, the Company issued 21,061,328 shares of Series A redeemable convertible preferred stock (Series A Preferred Stock) for $0.72 per share for net proceeds of $14,551,059. Holders of Series A Preferred Stock are entitled to receive non-cumulative cash dividends at a rate of $0.07 per share, when and as declared by the Board of Directors. As of December 31, 2001 no dividends had been declared by the Board of Directors. In the event of liquidation or winding up of the Company, holders of Series A Preferred Stock receive a liquidation preference of $0.72 per share (Original Purchase Price) plus an amount equal to all dividends declared but unpaid thereon, computed to the date payment thereof is made available. The holders of Series A Preferred Stock are entitled to such number of votes per share on each such action as shall equal the number of shares of Class A Common Stock into which each share of Series A Preferred Stock is then convertible. In addition, the holders of Series A Preferred Stock are entitled to elect two directors to the Company’s Board of Directors. Each share of Series A Preferred Stock is convertible, at the option of the holder, into one share of Class A Common Stock. Shares of Series A Preferred Stock automatically convert into shares of Class A Common Stock upon the consummation of an initial public offering in which the public offering price is not less than $2.14 per share and the gross proceeds to the Company are not less than $20,000,000. 
 
Upon request of the holders of at least two-thirds of the outstanding shares of all Preferred Stock, voting as a single class, the Company will redeem any outstanding shares of Series A Preferred Stock for cash according to the percentages listed below on the first anniversary of the date such request is delivered to the Company provided, however, that the first redemption date will be no earlier than August 18, 2005: 

Date of Redemption
	  	Percentage of Shares of Series A
Convertible Preferred
Stock then Outstanding that can
be Redeemed
	
First Anniversary	  	25% of all shares then outstanding	
Second Anniversary	  	33-1/3% of all shares then outstanding	
Third Anniversary	  	50% of all shares then outstanding	
Fourth Anniversary	  	100% of the shares then outstanding	
 
11 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
The Series A preferred stock shall be redeemed at an amount equal to $0.7122 per share, subject to adjustment based on future events, plus an amount equal to all dividends declared but not paid. 
 
Series B Redeemable Convertible Preferred Stock 
 
On January 3, 2002 and April 9, 2002, the Company completed the sale of 68,573,188 shares of Series B convertible redeemable preferred stock (Series B Preferred Stock) at a per share price of $0.21, for net proceeds of $14,556,312, net of offering costs. The holders of Series B Preferred Stock are entitled to receive cash dividends on an annual basis, at a rate of $0.02 per share, when and as declared by the Board of Directors. In the event of liquidation or winding up of the Company, holders of Series B Preferred Stock receive a liquidation preference of $0.213654 per share (Original Purchase Price) plus an amount equal to all dividends declared but unpaid thereon, computed to the date payment thereof is made available. The holders of Series B Preferred Stock are entitled to such number of votes per share on each such action as shall equal the number of shares of Class A Common Stock into which each share of Series B Preferred Stock is convertible. In addition, the holders of Series B Preferred Stock are entitled to elect two directors to the Company’s Board of Directors while there are at least 30 million shares of Series B Preferred Stock outstanding. Each share of Series B Preferred Stock is convertible, at the option of the holder, into one share of Class A Common Stock. Shares of Series B Preferred Stock may automatically convert into shares of Class A Common Stock upon the consummation of an initial public offering in which the public offering price is not less that $2.14 per share and the gross proceeds to the Company are not less than $20,000,000, if so determined by the holders of 70% of the outstanding Series B Preferred Stock. 
 
Upon request of the holders of at least two-thirds of the outstanding shares of all Preferred Stock, voting as a single class, the Company will redeem any outstanding shares of Series B Preferred Stock for cash according to the percentages listed below on the first anniversary of the date such request is delivered to the Company, provided however that the first redemption date will be no earlier than August 18, 2005: 

Date of Redemption
	  	Percentage of Shares of Series B
Convertible Preferred
Stock then Outstanding that can
be Redeemed
	
First Anniversary	  	25% of all shares then outstanding	
Second Anniversary	  	33-1/3% of all shares then outstanding	
Third Anniversary	  	50% of all shares then outstanding	
Fourth Anniversary	  	100% of the shares then outstanding	
 
The Series B Preferred Stock shall be redeemed at an amount equal to $0.213654 per share, subject to adjustment based on future events, plus an amount equal to all dividends declared by not paid. 
 
Sale of Redeemable Convertible Preferred Stock 
 
On February 5, 2003, the Company completed the sale of 27,173,283 shares of Series AA convertible redeemable preferred stock (Series AA Preferred Stock) at a per share price of $0.21, providing approximately $5,700,000, net of offering costs. Immediately following the closing of the Series AA Preferred Stock, all previously existing classes of preferred stock were automatically converted into shares of Common Stock at a predetermined redemption price. Following this conversion, each purchaser of Series AA Preferred Stock was entitled to exchange each share of converted Common Stock for additional Series AA Preferred Shares at an agreed upon pro rata basis. 
 
The holders of Series AA Preferred Stock are entitled to receive a cash dividend of 10 percent per annum on each outstanding share of Series AA Preferred Stock. Such dividends shall be cumulative. In the event of liquidation or winding up of the Company, holders of Series AA Preferred Stock receive a liquidation preference of two times the Series AA Preferred Stock issue price of $0.213654 per share (Original Purchase Price) plus an amount equal to all dividends 
 
12 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
accrued but unpaid thereon. After such liquidation preference has been satisfied, holders of Series AA Preferred Stock participate with holders of the Company’s Common Stock to an aggregate amount of four times the Series AA Preferred Stock issue price. 
 
Shares of Series AA Preferred Stock may automatically convert into shares of Class A Common Stock upon the consummation of an initial public offering in which the public offering price is not less that $1.07 per share and the gross proceeds to the Company are not less than $40,000,000, if so determined by the holders of seventy percent of the outstanding Series AA Preferred Stock. 
 
Upon request of the holders of at least seventy percent of the outstanding shares of all Series AA Preferred Stock, voting as a single class, the Company will redeem any outstanding shares of Series AA Preferred Stock for cash provided that no such redemption shall occur prior to January 31, 2007 and not more than 50% of the aggregate number of shares of Series AA Preferred Stock outstanding immediately prior to the first redemption date may be redeemed prior to January 31, 2008. 
 
The Series AA Preferred Stock shall be redeemed at an amount equal to $0.213654 per share, subject to adjustment based on future events, plus an amount equal to all dividends accrued but unpaid. At December 31, 2003 no dividends were declared by the Company. 
 
5.	Stockholders’ Equity 	
 
Common Stock 
 
In June 2000, the Company authorized 54,000,000 shares of Class A and Class B common stock, $0.01 par value. In conjunction with the sale of Series B Redeemable Convertible Preferred Stock, the Company authorized an additional 99,882,693 shares of Class A and Class B common stock; of which 17,418,975 and 17,484,794 shares were issued and outstanding at December 31, 2002 and 2001, respectively. The current equity structure consists of 799,246 Class A (voting) and 16,685,547 Class B (nonvoting) common stock. Dividends may be declared on the common stock. Both classes of common stock have equal rights and privileges as to dividends. In the event of liquidation or winding up of the Company and after the payment of all preferential amounts required to be paid to the holders of Preferred Stock, any remaining funds shall be distributed among the holders of the issued and outstanding preferred stock and common stock on an as-if-converted basis. 
 
Included within the Class B common stock amounts noted above are 1,177,519 shares of restricted stock. The shares were issued at $0.33 per share and vest over a four year term. The Company recorded compensation expense, related to vesting of these restricted common shares, of $93,061 and $103,706 for the years ended December 31, 2003 and 2002, respectively. 
 
On May 29, 2003, the Board of Directors approved the conversion of the Company’s Series A and Series B Common Stock into a single class of common stock on a one-for-one basis. In addition, the Board of Directors declared a ten-for-one reverse stock split for both common and preferred stock classes. Subsequent to the reverse stock split, the Company’s authorized shares totaled, 33,821,840; 13,821,840 designated as preferred stock and 20,000,000 designated as common stock. 
 
Common Stock Warrants 
 
In May of 2002, in connection with a capital lease arrangement, the Company issued a warrant to purchase 561,656 shares of Series B Preferred Stock at $0.21 per share. The 
 
13 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
warrant was immediately vested and exercisable upon issuance and has a term of ten years. The Company estimated the fair value of the warrant using the Black-Scholes option pricing model, at the date of grant and the following assumptions: Risk free rate of 3.9%, no expected dividends and 100% volatility. Due to its financial condition, the Company does not expect to utilize the capital lease facility and has recognized the fair value of the warrant of $108,403 as interest expense for the year ended December 31, 2002. 
 
In April 2001, in connection with an equipment and financing arrangement, the Company issued a warrant to purchase 136,800 shares of common stock at $0.71 per share. The fair value of the warrant of $82,000 will be recognized as interest expense over the life of the associated financing instrument. The warrant was immediately vested and exercisable upon issuance and has a term of the later of seven years or three years after the closing of an initial public offering of the Company’s common stock. The Company estimated the fair value of the warrant using the Black- Scholes option pricing model, at the date of grant and the following assumptions: Risk free rate of 4.4%, no expected dividends and 100% volatility. 
 
Common Stock Options 
 
During 2003 and 2002, the Company issued -0- and 6,943,826 options for shares of common stock at $0 and $0.22 per share to its employees. 
 
In June 2000, the Company adopted the Realeum, Inc. 2000 Stock Incentive Plan (the 2000 Plan) to provide for the granting of stock awards, such as stock options, restricted common stock and stock appreciation rights to employees, directors and other individuals as determined by the Board of Directors. The Company has reserved 23,077,519 shares of common stock for issuance under the 2000 Plan. 
 
Stock options granted under the 2000 Plan can be either incentive stock options (ISOs) as defined by the Internal Revenue Code, or nonqualified stock options. The Board of Directors determines who will receive options under the 2000 Plan and determines the vesting period, which is generally four years. Options may have a maximum term of 10 years. The exercise price of ISOs granted under the 2000 Plan must be at least equal to the fair market value of the common stock on the date of grant. The Board of Directors determines the exercise price of nonqualified options based upon fair market value at the date of grant. 
 
The Company applies APB No. 25 in accounting for its stock option plan and, accordingly, recognizes compensation expense for the difference between the fair value of the underlying common stock and the grant price of the option at the date of grant. 
 
14 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
A summary of all of the stock option activity is as follows: 

 	  	Options
Available for
Grant
	 	 	Options
Outstanding
	 	 	Weighted
Average
Excercise Price
	
Balance at December 31, 2001	  	6,967,995	 	 	4,380,550	 	 	$	0.64	
Additional shares authorized	  	10,229,108	 	 	—  	 	 	 	0.00	
Options granted	  	(6,950,863	)	 	6,950,863	 	 	 	0.22	
Options exercised	  	—  	 	 	(14,074	)	 	 	0.67	
Restricted stock cancelled	  	79,893	 	 	—  	 	 	 	0.00	
Options cancelled	  	1,788,732	 	 	(1,788,732	)	 	 	0.37	
 	  			 			 	 	 	
Balance at December 31, 2002	  	12,114,865	 	 	9,528,607	 	 	 	0.39	
Options exercised	  	—  	 	 	(4,288	)	 	 	—  	
Restricted stock cancelled	  	8,800	 	 	—  	 	 	 	—  	
Options cancelled	  	701,450	 	 	(701,450	)	 	 	—  	
Reverse stock split	  	(11,542,600	)	 	(7,940,582	)	 	 	—  	
 	  			 			 	 	 	
Balance at December 31, 2003	  	1,282,515	 	 	882,287	 	 	$	—  	

The options outstanding at December 31, 2003 range in price from $0.22 to $0.72 per share and have a weighted average remaining contractual life of 6.58 years. At December 31, 2003, 609,403 options were vested and 483,543 were exercisable at a weighted average price per share of $0.63. 
 
In connection with certain stock option grants during the period ended December 31, 2000, the Company recorded unearned compensation for the deemed fair value of restricted stock grants totaling $519,248, which is being amortized over the four year vesting period of the grants. Amortization of unearned compensation totaled $90,152 and $103,706 for the years ended December 31, 2003 and 2002, respectively. 
 
6.	Commitments and Contingencies 	
 
Operating Leases 
 
The Company leases office space under a non-cancelable operating lease, expiring July 31, 2006. Total rent expense was approximately $660,000 and $461,000 for the years ending December 31, 2003 and 2002, respectively. 
 
Future minimum payments under noncancelable operating leases with initial terms of one year are as follows: 

Year ending December 31,	  	 	 	
2004	  	$	671,265	
2005	  	 	682,674	
2006	  	 	402,664	
 	  			
 	  	$	1,756,603	

Letter of Credit 
 
The Company has issued an $200,000 letter of credit to its landlord, whereby the Company granted the landlord a security interest and limited powers of attorney over a certificate of deposit. The certificate serves as collateral supporting a lease for the Company’s headquarters. The letter of credit is callable if the Company defaults on its lease. The letter of credit may be reduced by amendment in increments of $100,000, on first and second anniversary dates of the lease agreement. 
 
Purchase Commitments 
 
On March 25, 2002, the Company entered into an agreement with a hosting service provider for procurement of dedicated web hosting services which are part of the Company’s collocation services offering. The agreement has a term of 36 months. Under the agreement, the Company is required to make specified minimum monthly payments. The aggregate amount of such required payments at December 31, 2003 is as follows: 

Year ending December 31,	  	 	 	
2004	  	$	103,800	
2005	  	 	25,950	
 	  			
 	  	$	129,750	

Total purchases under this contract during the years ended December 31, 2003 and 2002 totaled approximately $110,431 and $90,000, respectively. 
 
7.	Income Taxes 	
 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax 
 
15 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
purposes. Significant components of the Company’s deferred tax assets and deferred tax liabilities are presented below: 

 	  	December 31,
	 	
 	  	2003
	 	 	2002
	 	
Net operating loss carryforwards	  	$	9,867,932	 	 	$	5,290,118	 	
Stock compensation	  	 	148,520	 	 	 	113,451	 	
Capitalized start up costs	  	 	2,847,581	 	 	 	3,652,106	 	
Fixed assets	  	 	(1,534,758	)	 	 	(457,489	)	
Other	  	 	240,395	 	 	 	96,686	 	
Impairment loss	  	 	3,857,186	 	 	 	3,857,186	 	
 	  				 				
Total deferred tax assets	  	 	15,426,856	 	 	 	12,552,058	 	
Valuation allowance	  	 	(15,426,856	)	 	 	(12,552,058	)	
 	  				 				
Net deferred tax asset	  	$	—  	 	 	$	—  	 	

The Company has approximately $25,367,000 and $13,599,000 in net operating loss carryforwards as of December 31, 2003 and 2002, respectively for income tax purposes, which expire beginning principally in 2021. The timing and manner in which the operating loss carryforwards may be utilized in any year will be limited to the Company’s ability to generate future earnings and may be limited due to change in ownership rules. The Company has established a valuation allowance totaling $15,427,000 and $12,552,000 at December 31, 2003 and 2002, respectively for the full amount of the net deferred tax asset due to the uncertainty regarding its ability to realize the benefits of such asset. There was no current or deferred provision for income taxes for the years ended December 31, 2003 and 2002. The differences between the statutory federal income tax rates and the effective income tax rate is mainly due to the effects of the valuation allowance and state taxes. 
 
8.	Related Party Transactions 	
 
In August 2001, the Company advanced $200,000 to an officer in exchange for an unsecured note receivable bearing simple interest at a rate of 6.0%. The maturity date of this note was December 31, 2002 and was subsequently extended for an additional 12 months by the Board of Directors in January of 2003. 
 
During 2003 and 2002, the Company contracted for services in the amount of approximately $0 and $134,000, respectively, with a company upon which the Company’s Chief Executive Officer held a seat on the Board of Directors. 
 
9.	Debt 	
 
Notes payable consist of amounts payable to an equipment financing company and a bank. All are collateralized by the underlying assets as follows: 

 	  	December 31,
	 	
 	  	2003
	 	 	2002
	 	
12.5% note, principal and interest payable monthly; matures May 2004	  	$	112,110	 	 	$	279,358	 	
12.4% note, principal and interest payable monthly, matures October 2003	  	 	—  	 	 	 	163,913	 	
12.4% note, principal and interest payable monthly, matures May 2004	  	 	12,465	 	 	 	31,060	 	
12.7% note, principal and interest payable monthly, matures June 2004	  	 	5,365	 	 	 	12,362	 	
12.2% note, principal and interest payable monthly, matures August 2004	  	 	23,422	 	 	 	47,807	 	
11.2%note, principal and interest payable monthly, matures November 2004	  	 	122,476	 	 	 	220,357	 	
11.8% note, principal and interest payable monthly, matures January 2005	  	 	19,706	 	 	 	33,208	 	
Bank prime, (4.25% at December 31, 2002) note, principal and interest payable monthly; matures October 2004	  	 	434,782	 	 	 	956,521	 	
 	  				 				
 	  	 	730,326	 	 	 	1,744,586	 	
Less: current portion of long-term debt	  	 	(730,326	)	 	 	(1,014,260	)	
 	  				 				
Long-term debt, non-current	  	$
	—  
	 
	 	$
	730,326

 
10.	401(k) Plan 	
 
In January 2001, the Company established the Realeum, Inc. 401(k) Plan (the Plan). The Plan was established to qualify as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. The Plan covers all employees who have completed one month of service and has reached age 21. Employees may elect to contribute up to 15% of their total compensation, subject to Code limitations. The Company currently does not match employee contributions. 
 
11.	Restructuring of Operation 	
 
On November 29, 2001, the Board of Directors agreed to a restructuring plan to designed to reduce operating expenses. In connection with the restructuring, the Company reduced its workforce by 19 employees and contractors. The total amount of the restructuring charge was approximately 
 
16 

Realeum, Inc. 
Notes to Consolidated Financial Statements 
December 31, 2003 and 2002 
 
$226,000 and is comprised of employee-related expenses for employee terminations. The entire charge consists of cash-related expenses. 
 
As of December 31, 2001, the company had incurred approximately $58,000 related to the restructuring. The remaining reserve was approximately $168,000 related to severance payments and was paid in the first quarter of 2002. 
 
12.	Impairment of Long-Lived Assets 	
 
As part of the Company’s review of its fourth quarter 2002 financial results, an impairment assessment of its long-lived assets was performed. The assessment was performed primarily due to the overall decline in industry growth rates and the Company’s lower than expected 2002 operating results and expected 2003 operating results. As a result, an impairment charge aggregating approximately $9,900,000 was recorded in 2002 to adjust capitalized software development costs and purchased software products to $0, which approximated their estimated fair value. 
 
13.	Subsequent Events 	
 
On April 29, 2004, the Company was sold to First Advantage Corporation for a total purchase price of approximately $1.6 million. In connection with the acquisition, up to $12 million of additional purchase price is contingent upon the attainment of certain annual revenue amounts through December 31, 2007. 
 
17 

Realeum, Inc. 
 
Consolidated Balance Sheets (Unaudited) 

 	  	March 31,
2004
	 	 	December 31,
2003
	 	
Assets	  	 	 	 	 	 	 	 	
Current assets:	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	171,354	 	 	$	1,115,084	 	
Restricted cash	  	 	—  	 	 	 	634,782	 	
Accounts receivable, net	  	 	48,969	 	 	 	80,521	 	
Prepaid expenses and other current assets	  	 	65,306	 	 	 	215,198	 	
 	  				 				
Total current assets	  	 	285,629	 	 	 	2,045,585	 	
Property and equipment, net	  	 	662,710	 	 	 	874,420	 	
Other assets	  	 	388,431	 	 	 	317,642	 	
 	  				 				
Total assets	  	$	1,336,770	 	 	$	3,237,647	 	
 	  				 				
Liabilities and Stockholders’ Deficit	  	 	 	 	 	 	 	 	
Current liabilities:	  	 	 	 	 	 	 	 	
Accounts payable and accrued expenses	  	$	189,169	 	 	$	438,108	 	
Deferred revenue	  	 	152,430	 	 	 	190,726	 	
Current portion of long-term debt	  	 	125,000	 	 	 	730,326	 	
Other liabilities	  	 	246,656	 	 	 	108,472	 	
 	  				 				
Total current liabilities	  	 	713,255	 	 	 	1,467,632	 	
Deferred revenue	  	 	181,624	 	 	 	197,530	 	
 	  				 				
Total liabilities	  	 	894,879	 	 	 	1,665,162	 	
Commitments and contingencies	  	 	 	 	 	 	 	 	
Series AA redeemable convertible preferred stock, $0.01 par value 13,821,840 shares authorized; 13,211,604 shares issued and outstanding	  	 	34,669,476	 	 	 	34,669,476	 	
Stockholders’ deficit:	  	 	 	 	 	 	 	 	
Common stock, $0.01 par value; 20,000,000 shares authorized; 1,811,655 shares issued and outstanding	  	 	18,116	 	 	 	18,116	 	
Additional paid in capital	  	 	5,495,217	 	 	 	5,495,217	 	
Warrants	  	 	190,403	 	 	 	190,403	 	
Accumulated deficit	  	 	(39,908,826	)	 	 	(38,755,737	)	
Unearned compensation	  	 	(22,495	)	 	 	(44,990	)	
 	  				 				
Total stockholders’ deficit	  	 	(34,227,585	)	 	 	(33,096,991	)	
 	  				 				
Total liabilities and stockholders’ deficit	  	$	1,336,770	 	 	$	3,237,647	 	

The accompanying notes are an integral part of these consolidated financial statements. 
 
-1- 

Realeum, Inc. 
 
Consolidated Statements of Operations 
For the Three Months Ended March 31, 2004 and 2003 (Unaudited) 

 	  	For the Three Months Ended
March 31,
	 	
 	  	2004
	 	 	2003
	 	
Revenues	  	 	 	 	 	 	 	 	
Subscription	  	$	109,980	 	 	$	125,000	 	
Services	  	 	187,181	 	 	 	88,539	 	
 	  				 				
Total revenues	  	 	297,161	 	 	 	213,539	 	
Cost of revenues	  	 	 	 	 	 	 	 	
Subscription	  	 	196,602	 	 	 	216,343	 	
Services	  	 	278,637	 	 	 	400,568	 	
 	  				 				
Total cost of revenues	  	 	475,239	 	 	 	616,911	 	
 	  				 				
Gross margin	  	 	(178,078	)	 	 	(403,372	)	
Operating Expenses:	  	 	 	 	 	 	 	 	
Research and development	  	 	580,765	 	 	 	553,130	 	
Sales and marketing	  	 	125,905	 	 	 	313,999	 	
General and administrative	  	 	258,970	 	 	 	362,844	 	
 	  				 				
Total operating expenses	  	 	965,640	 	 	 	1,229,973	 	
 	  				 				
Loss from operations	  	 	(1,143,718	)	 	 	(1,633,345	)	
 	  				 				
Interest (expense) income:	  	 	 	 	 	 	 	 	
Interest expense	  	 	(14,054	)	 	 	(47,794	)	
Interest income	  	 	4,683	 	 	 	18,732	 	
 	  				 				
Total interest (expense) income	  	 	(9,371	)	 	 	(29,062	)	
 	  				 				
Net loss	  	$	(1,153,089	)	 	$	(1,662,407	)	

The accompanying notes are an integral part of these consolidated financial statements. 
 
-2- 

Realeum, Inc. 
 
Consolidated Statements of Stockholders’ Deficit 
For the Three Months Ended March 31, 2004 (Unaudited) 

 	  	 	  	 	  	Additional
Paid-In
Capital
	  	 	  	 	 	 	Deferred
Stock
Compensation
	 	 	Total
Stockholders’
Deficit
	 	
 	  	Common Stock
	  		  	 	  	Accumulated
Deficit
	 	 			 			
 	  	Shares
	  	Amount
	  		  	Warrants
	  			 			 			
Balance at December 31, 2003	  	1,811,655	  	$	18,116	  	$	5,495,217	  	$	190,403	  	$	(38,755,737	)	 	$	(44,990	)	 	$	(33,096,991	)	
Amortization of unearned stock compensation	  	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	 	 	 	22,495	 	 	 	22,495	 	
Net loss	  	—  	  	 	—  	  	 	—  	  	 	—  	  	 	(1,153,089	)	 	 	—  	 	 	 	(1,153,089	)	
 	  		  			  			  			  				 				 				
Balance at March 31, 2004	  	1,811,655	  	$	18,116	  	$	5,495,217	  	$	190,403	  	$	(39,908,826	)	 	$	(22,495	)	 	$	(34,227,585	)	

The accompanying notes are an integral part of these consolidated financial statements. 
 
-3- 

Realeum, Inc. 
 
Consolidated Statements of Cash Flows 
For the Three Months Ended March 31, 2004 and 2003 (Unaudited) 

 	  	For the Three Months Ended
March 31,
	 	
 	  	2004
	 	 	2003
	 	
Cash flows from operating activities:	  	 	 	 	 	 	 	 	
Net loss	  	$	(1,153,089	)	 	$	(1,662,407	)	
Adjustments to reconcile net income to net cash provided by operating activities:	  	 	 	 	 	 	 	 	
Depreciation expense	  	 	213,459	 	 	 	312,458	 	
Compensation expense recorded for issuance of restricted stock, net of cancellations	  	 	22,495	 	 	 	25,575	 	
Change in operating assets and liabilities:	  	 	 	 	 	 	 	 	
Accounts receivable and other current assets	  	 	31,552	 	 	 	(64,695	)	
Prepaid expenses and Other assets	  	 	79,103	 	 	 	(15,841	)	
Accounts payable and accrued liabilities	  	 	(248,939	)	 	 	(253,730	)	
Deferred revenue	  	 	(54,202	)	 	 	(92,831	)	
Other liabilities	  	 	138,184	 	 	 	—  	 	
 	  				 				
Net cash used in operating activities	  	 	(971,437	)	 	 	(1,751,471	)	
 	  				 				
Cash flows from investing activities:	  	 	 	 	 	 	 	 	
Change in restricted cash balances	  	 	634,782	 	 	 	130,435	 	
Purchases of property and equipment	  	 	(1,749	)	 	 	(1,296	)	
 	  				 				
Net cash provided by investing activities	  	 	633,033	 	 	 	129,139	 	
 	  				 				
Cash flows from financing activities:	  	 	 	 	 	 	 	 	
Proceeds from issuance of common stock	  	 	—  	 	 	 	149,527	 	
Proceeds from issuance of preferred stock, net of related costs	  	 	—  	 	 	 	5,562,105	 	
Repayments of long-term debt	  	 	(605,326	)	 	 	(256,353	)	
 	  				 				
Net cash (used in) provided by financing activities	  	 	(605,326	)	 	 	5,455,279	 	
 	  				 				
Increase (decrease) in cash and cash equivalents	  	 	(943,730	)	 	 	3,832,947	 	
Cash and cash equivalents at beginning of period	  	 	1,115,084	 	 	 	1,381,669	 	
 	  				 				
Cash and cash equivalents at end of period	  	$	171,354	 	 	$	5,214,616	 	
 	  				 				
Supplemental disclosures of cash flow information:	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	14,054	 	 	$	47,794	 	
 	  				 				
Non-cash transactions:	  	 	 	 	 	 	 	 	
Issue of Series AA preferred stock in satisfaction of Series A and B preferred stock	  	$	—  	 	 	$	29,107,371	 	

The accompanying notes are an integral part of these consolidated financial statements. 
 
-4- 

Realeum, Inc. 
 
Notes to Consolidated Financial Statements 
March 31, 2004 and 2003 (Unaudited) 
 
1.	Organization and Nature of Business 	
 
Realeum, Inc. (the Company) was incorporated on June 21, 2000 under the laws and provisions of the state of Delaware. 
 
Realeum, Inc., headquartered in McLean, Virginia, provides property management and asset optimization software and services to the multifamily real estate industry. The Company currently operates in one business segment. 
 
The Company derives revenue principally from the license of its Realeum FoundationTM product and the delivery of associated implementation, collocation (ASP) and support services. The mix of products and services sold varies by customer. 
 
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair statement of the results for the interim period have been included. 
 
For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, 2003 included in this Form 8-K/A. 
 
Operating results for the three months ended March 31, 2004 and 2003 are not necessarily indicative of the results that may be expected for the entire fiscal year. 
 
2.	Significant Customer 	
 
For the three months ended March 31, 2004 and 2003, one customer, who is a related party, accounted for 100% of revenue and gross accounts receivable. 
 
3.	Subsequent Events 	
 
On April 29, 2004, the Company was sold to First Advantage Corporation for a total purchase price of approximately $1.6 million. In connection with the acquigsition, up to $12 million of additional purchase price is contingent upon the attainment of certain annual revenue amounts through December 31, 2007. 
 
-5- 

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS 
 
The following unaudited pro forma combined financial statements have been prepared to give effect to the acquisition by First Advantage of CoreFacts, LLC, Realeum, Inc. (Realeum) and certain assets and operations of CIC Enterprises, Inc. and Affiliated Companies (CIC) using the purchase method of accounting and the assumptions and adjustments described in the accompanying notes to unaudited pro forma combined financial statements. 
 
The table that follows presents unaudited pro forma financial data for First Advantage, CoreFacts, CIC and Realeum for the three months ended March 31, 2004 and for the year ended December 31, 2003 as if the acquisitions had been completed on January 1, 2003 for income statement purposes and on March 31, 2004 for balance sheet purposes. The pro forma information is based upon the historical consolidated financial statements of First Advantage, CoreFacts and Realeum, the historical combined financial statements of CIC and the assumptions, estimates and adjustments described in the notes to the unaudited pro forma combined financial information. The assumptions, estimates and adjustments are preliminary and have been made solely for purposes of developing such pro forma information. It is anticipated that the final purchase price allocation will not differ materially from the preliminary allocations. 
 
The unaudited pro forma combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the consolidated financial position or consolidated results of operations of First Advantage that would have been reported had the acquisitions occurred on the dates indicated, nor do they represent a forecast of the consolidated financial position of First Advantage at any future date or the consolidated results of operations for any future period. Furthermore, no effect has been given in the unaudited pro forma combined statements of income (loss) for synergistic benefits or cost savings that may be realized through the combination of the First Advantage, CoreFacts, CIC and Realeum or costs that may be incurred in integrating their operations. The unaudited pro forma combined financial information should be read in conjunction with the historical financial statements and related notes and management’s discussion and analysis of financial condition and results of operations of First Advantage which is included in its annual report on Form 10-K, which is incorporated by reference and the historical financial statements and related notes of CoreFacts, CIC and Realeum which are included in this Form 8-K/A. 

First Advantage Corporation and Subsidiaries 
 
Unaudited Pro forma Combined Balance sheet 
March 31, 2004 

 	  	First Advantage
Corporation
Historical
	  	Past
Acquisitions (E)
	  	CoreFacts, LLC
Historical
	  	CIC
Enterprises, Inc.
Historical
	  	Realeum, Inc.
Historical
	  	Pro Forma
Adjustments
	 	 	Pro Forma
	
Assets	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	
Current assets:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	
Cash and cash equivalents	  	$	7,480,000	  	$	—  	  	$	544,371	  	$	2,445,807	  	$	171,354	  	$	(2,445,807	)(D)	 	$	8,195,725	
Restricted cash and reimbursements receivable	  	 	—  	  	 	—  	  	 	—  	  	 	1,200,000	  	 	—  	  	 	—  	 	 	 	1,200,000	
Investments	  	 	—  	  	 	—  	  	 	—  	  	 	137,825	  	 	—  	  	 	(137,825	)(D)	 	 	—  	
Accounts receivable	  	 	31,306,000	  	 	835,164	  	 	1,735,014	  	 	3,400,754	  	 	48,969	  	 	(181,916	)(D)	 	 	37,143,985	
Income tax receivable	  	 	1,310,000	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	 	 	 	 	1,310,000	
Due from affiliates	  	 	380,000	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	 	 	 	 	380,000	
Prepaid expenses and other current assets	  	 	2,106,000	  	 	13,919	  	 	120,766	  	 	22,790	  	 	65,306	  	 	(22,790	)(D)	 	 	2,305,991	
 	  			  			  			  			  			  				 			
Total current assets	  	 	42,582,000	  	 	849,083	  	 	2,400,151	  	 	7,207,176	  	 	285,629	  	 	(2,788,338	)	 	 	50,535,701	
Property and equipment, net	  	 	19,376,000	  	 	452,828	  	 	137,026	  	 	845,119	  	 	662,710	  	 	300,000	(A)	 	 	 	
 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	(119,719	)(D)	 	 	21,653,964	
Goodwill	  	 	223,797,000	  	 	14,032,805	  	 	—  	  	 	—  	  	 	—  	  	 	20,550,892	(A)	 	 	258,380,697	
Intangible assets, net	  	 	22,254,000	  	 	3,474,817	  	 	—  	  	 	—  	  	 	—  	  	 	6,100,000	(A)	 	 	31,828,817	
Database development costs, net	  	 	7,321,000	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	100,000 	(A)	 	 	7,421,000	
Other assets	  	 	1,292,000	  	 	632	  	 	12,202	  	 	148,185	  	 	388,431	  	 	(49,780	)(D)	 	 	1,791,670	
 	  			  			  			  			  			  				 			
Total assets	  	$	316,622,000	  	$	18,810,165	  	$	2,549,379	  	$	8,200,480	  	$	1,336,770	  	$	24,093,055	 	 	$	371,611,849	

																									
 	  	First Advantage
Corporation
Historical
	  	Past
Acquisitions (E)
	  	CoreFacts, LLC
Historical
	  	CIC
Enterprises, Inc.
Historical
	 	 	Realeum, Inc.
Historical
	 	 	Pro Forma
Adjustments
	 	 	Pro Forma
	
Liabilities and Stockholder’s Equity	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	  	$	6,120,000	  	$	249,556	  	$	129,479	  	$	372,006	 	 	 	189,169	 	 	 	—  	 	 	$	7,060,210	
Accrued compensation	  	 	9,055,000	  	 	—  	  	 	16,075	  	 	292,647	 	 	 	98,182	 	 	 	—  	 	 	 	9,461,904	
Accrued liabilities	  	 	11,390,000	  	 	395,413	  	 	216,180	  	 	372,532	 	 	 	300,904	 	 	 	(369,571	)(D)	 	 	12,305,458	
Client deposit	  	 	—  	  	 	—  	  	 	—  	  	 	1,200,000	 	 	 	—  	 	 	 	—  	 	 	 	1,200,000	
Current portion of long-term debt and capital leases	  	 	9,295,000	  	 	69,384	  	 	—  	  	 	—  	 	 	 	125,000	 	 	 	—  	 	 	 	9,489,384	
 	  			  			  			  				 				 				 			
Total current liabilities	  	 	35,860,000	  	 	714,353	  	 	361,734	  	 	2,237,185	 	 	 	713,255	 	 	 	(369,571	)	 	 	39,516,956	
Long-term debt and capital leases, net of current portion	  	 	26,548,000	  	 	18,025,812	  	 	—  	  	 	—  	 	 	 	—  	 	 	 	33,055,457	(B)	 	 	77,629,269	
Deferred income taxes	  	 	1,582,000	  	 	—  	  	 	—  	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,582,000	
Other liabilities	  	 	1,863,000	  	 	70,000	  	 	—  	  	 	—  	 	 	 	181,624	 	 	 	—  	 	 	 	2,114,624	
 	  			  			  			  				 				 				 			
Total liabilities	  	 	65,853,000	  	 	18,810,165	  	 	361,734	  	 	2,237,185	 	 	 	894,879	 	 	 	32,685,886	 	 	 	120,842,849	
 	  			  			  			  				 				 				 			
Commitments and contingencies	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
								
Stockholders’ equity:	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred stock	  	 	—  	  	 	—  	  	 	—  	  	 	—  	 	 	 	34,669,476	 	 	 	(34,669,476	)(C)	 	 	—  	
Warrants	  	 	—  	  	 	—  	  	 	—  	  	 	—  	 	 	 	190,403	 	 	 	(190,403	)(C)	 	 	—  	
Deferred stock compensation	  	 	—  	  	 	—  	  	 	—  	  	 	—  	 	 	 	(22,495	)	 	 	22,495 	(C)	 	 	—  	
Members’ equity	  	 	—  	  	 	—  	  	 	2,187,645	  	 	—  	 	 	 	—  	 	 	 	(2,187,645	)(C)	 	 	—  	
Class A common stock	  	 	5,000	  	 	—  	  	 	—  	  	 	4,000	 	 	 	181,165	 	 	 	(185,165	)(C)	 	 	5,000	
Class B common stock	  	 	16,000	  	 	—  	  	 	—  	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	16,000	
Additional paid in capital	  	 	242,895,000	  	 	—  	  	 	—  	  	 	12,710,393	 	 	 	5,332,168	 	 	 	(18,042,561	)(C)	 	 	242,895,000	
Retained earnings	  	 	7,853,000	  	 	—  	  	 	—  	  	 	(6,751,098	)	 	 	(39,908,826	)	 	 	46,659,924	(C)	 	 	7,853,000	
 	  			  			  			  				 				 				 			
Total stockholders’ equity	  	 	250,769,000	  	 	—  	  	 	2,187,645	  	 	5,963,295	 	 	 	441,891	 	 	 	(8,592,831	)	 	 	250,769,000	
 	  			  			  			  				 				 				 			
Total liabilities and stockholders’ equity	  	$	316,622,000	  	$	18,810,165	  	$	2,549,379	  	$	8,200,480	 	 	$	1,336,770	 	 	$	24,093,055	 	 	$	371,611,849	

See the accompanying notes to the unaudited pro forma financial information. 
 
-2- 

First Advantage Corporation and Subsidiaries 
 
Unaudited Pro Forma Combined Statement of Income (Loss) 
For the Year Ended December 31, 2003 

 	  	First Advantage
Corporation
Historical
	 	 	Past
Acquisitions (E)
	 	 	CoreFacts,
LLC
Historical
	 	 	CIC
Enterprises,
Inc. Historical
	 	 	Realeum, Inc.
Historical
	 	 	Pro Forma
Adjustments
	 	 	Pro Forma
	 	
Service revenue	  	$	134,910,000	 	 	$	26,923,345	 	 	$	5,815,732	 	 	$	18,623,187	 	 	$	1,065,223	 	 	$	(3,279,922	)(D)	 	$	184,057,565	 	
Reimbursed government fee revenue	  	 	31,585,000	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	 	 	 	 	31,585,000	 	
 	  				 				 				 				 				 				 				
Total revenue	  	 	166,495,000	 	 	 	26,923,345	 	 	 	5,815,732	 	 	 	18,623,187	 	 	 	1,065,223	 	 	 	(3,279,922	)	 	 	215,642,565	 	
Cost of service revenue	  	 	38,154,000	 	 	 	12,769,261	 	 	 	2,131,834	 	 	 	854,537	 	 	 	2,105,305	 	 	 	(75,943	)(D)	 	 	55,938,994	 	
Government fees paid	  	 	31,585,000	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	31,585,000	 	
 	  				 				 				 				 				 				 				
Total cost of service	  	 	69,739,000	 	 	 	12,769,261	 	 	 	2,131,834	 	 	 	854,537	 	 	 	2,105,305	 	 	 	(75,943	)	 	 	87,523,994	 	
 	  				 				 				 				 				 				 				
Gross margin	  	 	96,756,000	 	 	 	14,154,084	 	 	 	3,683,898	 	 	 	17,768,650	 	 	 	(1,040,082	)	 	 	(3,203,979	)	 	 	128,118,571	 	
Salaries and benefits	  	 	51,178,000	 	 	 	6,427,471	 	 	 	480,850	 	 	 	11,863,886	 	 	 	3,506,840	 	 	 	(4,296,119	)(D)	 	 	69,160,928	 	
Other operating expenses	  	 	30,449,000	 	 	 	7,039,970	 	 	 	783,083	 	 	 	4,052,410	 	 	 	425,221	 	 	 	(1,112,353	)(D)	 	 	41,637,331	 	
Depreciation and amortization	  	 	8,428,000	 	 	 	1,643,177	 	 	 	44,595	 	 	 	366,177	 	 	 	1,198,797	 	 	 	(29,638	)(D)	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,080,000	(F)	 	 	12,731,108	 	
Impairment loss	  	 	1,739,000	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,739,000	 	
 	  				 				 				 				 				 				 				
Total operating expenses	  	 	91,794,000	 	 	 	15,110,618	 	 	 	1,308,528	 	 	 	16,282,473	 	 	 	5,130,858	 	 	 	(4,358,110	)	 	 	125,268,367	 	
 	  				 				 				 				 				 				 				
Income (loss) from operations	  	 	4,962,000	 	 	 	(956,534	)	 	 	2,375,370	 	 	 	1,486,177	 	 	 	(6,170,940	)	 	 	1,154,131	 	 	 	2,850,204	 	
 	  				 				 				 				 				 				 				
Other (expense) income:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	  	 	(154,000	)	 	 	(914,858	)	 	 	(368	)	 	 	(563	)	 	 	(122,755	)	 	 	(1,045,641	)(G)	 	 	(2,238,185	)	
Interest income	  	 	41,000	 	 	 	85,403	 	 	 	1,289	 	 	 	19,181	 	 	 	60,484	 	 	 	—  	 	 	 	207,357	 	
Other income	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	15,498	 	 	 	2,247	 	 	 	—  	 	 	 	17,745	 	
 	  				 				 				 				 				 				 				
Total other expense, net	  	 	(113,000	)	 	 	(829,455	)	 	 	921	 	 	 	34,116	 	 	 	(60,024	)	 	 	(1,045,641	)	 	 	(2,013,083	)	
 	  				 				 				 				 				 				 				
Income (loss) before income taxes	  	 	4,849,000	 	 	 	(1,785,989	)	 	 	2,376,291	 	 	 	1,520,293	 	 	 	(6,230,964	)	 	 	108,490	 	 	 	837,121	 	
Provision (benefit) for income taxes	  	 	2,046,000	 	 	 	(750,093	)	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(941,551	)(H)	 	 	354,356	 	
 	  				 				 				 				 				 				 				
Net income (loss)	  	$	2,803,000	 	 	$	(1,035,896	)	 	$	2,376,291	 	 	$	1,520,293	 	 	$	(6,230,964	)	 	$	1,050,041	 	 	$	482,765	 	
 	  				 				 				 				 				 				 				
Basic and diluted earnings (loss) per share	  	$	0.14	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	0.03	(I)	
 	  				 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 				
Basic and diluted weighted average shares outstanding:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	  	 	20,260,854	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	21,296,679	(I)	
 	  				 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 				
Diluted	  	 	20,397,587	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	21,433,412	(I)	

See the accompanying notes to the unaudited pro forma financial information. 
 
-3- 

First Advantage Corporation and Subsidiaries 
 
Unaudited Pro Forma Combined Statement of Income (Loss) 
For the Three Months Ended March 31, 2004 

 	  	First
Advantage
Corporation
Historical
	 	 	Past
Acquisitions
(E)
	 	 	CoreFacts,
LLC
Historical
	  	CIC
Enterprises,
Inc.
Historical
	  	Realeum, Inc.
Historical
	 	 	Pro Forma
Adjustments
	 	 	Pro Forma
	 	
Service revenue	  	$	45,959,000	 	 	$	3,075,868	 	 	$	1,643,237	  	$	4,335,915	  	$	297,161	 	 	$	(654,537	)(D)	 	$	54,656,644	 	
Reimbursed government fee revenue	  	 	11,474,000	 	 	 	—  	 	 	 	—  	  	 	—  	  	 	—  	 	 	 	 	 	 	 	11,474,000	 	
 	  				 				 			  			  				 				 				
Total revenue	  	 	57,433,000	 	 	 	3,075,868	 	 	 	1,643,237	  	 	4,335,915	  	 	297,161	 	 	 	(654,537	)	 	 	66,130,644	 	
Cost of service revenue	  	 	13,981,000	 	 	 	1,333,243	 	 	 	601,051	  	 	134,293	  	 	475,239	 	 	 	(16,871	)(D)	 	 	16,507,955	 	
Government fees paid	  	 	11,474,000	 	 	 	—  	 	 	 	—  	  	 	—  	  	 	—  	 	 	 	—  	 	 	 	11,474,000	 	
 	  				 				 			  			  				 				 				
Total cost of service	  	 	25,455,000	 	 	 	1,333,243	 	 	 	601,051	  	 	134,293	  	 	475,239	 	 	 	(16,871	)	 	 	27,981,955	 	
 	  				 				 			  			  				 				 				
Gross margin	  	 	31,978,000	 	 	 	1,742,625	 	 	 	1,042,186	  	 	4,201,622	  	 	(178,078	)	 	 	(637,666	)	 	 	38,148,689	 	
Salaries and benefits	  	 	17,712,000	 	 	 	513,579	 	 	 	187,938	  	 	1,797,622	  	 	557,101	 	 	 	(92,100	)(D)	 	 	20,676,140	 	
Other operating expenses	  	 	10,304,000	 	 	 	693,225	 	 	 	212,088	  	 	1,094,576	  	 	286,940	 	 	 	(296,264	)(D)	 	 	12,294,565	 	
Depreciation and amortization	  	 	2,640,000	 	 	 	138,860	 	 	 	12,151	  	 	76,344	  	 	121,599	 	 	 	(4,940	)(D)	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	270,000	(F)	 	 	3,254,014	 	
 	  				 				 			  			  				 				 				
Total operating expenses	  	 	30,656,000	 	 	 	1,345,664	 	 	 	412,177	  	 	2,968,542	  	 	965,640	 	 	 	(123,304	)	 	 	36,224,719	 	
 	  				 				 			  			  				 				 				
Income (loss) from operations	  	 	1,322,000	 	 	 	396,961	 	 	 	630,009	  	 	1,233,080	  	 	(1,143,718	)	 	 	(514,362	)	 	 	1,923,970	 	
 	  				 				 			  			  				 				 				
Other (expense) income:	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	  	 	(231,000	)	 	 	(161,682	)	 	 	—  	  	 	—  	  	 	(14,054	)	 	 	(251,020	)(G)	 	 	(657,756	)	
Interest income	  	 	11,000	 	 	 	25	 	 	 	1,316	  	 	1,710	  	 	4,683	 	 	 	—  	 	 	 	18,734	 	
 	  				 				 			  			  				 				 				
Total other expense, net	  	 	(220,000	)	 	 	(161,657	)	 	 	1,316	  	 	1,710	  	 	(9,371	)	 	 	(251,020	)	 	 	(639,022	)	
 	  				 				 			  			  				 				 				
Income (loss) before income taxes	  	 	1,102,000	 	 	 	235,304	 	 	 	631,325	  	 	1,234,790	  	 	(1,153,089	)	 	 	(765,382	)	 	 	1,284,948	 	
Provision (benefit) for income taxes	  	 	463,000	 	 	 	98,826	 	 	 	—  	  	 	—  	  	 	—  	 	 	 	(22,148	)(H)	 	 	539,678	 	
 	  				 				 			  			  				 				 				
Net income (loss)	  	$	639,000	 	 	$	136,478	 	 	$	631,325	  	$	1,234,790	  	$	(1,153,089	)	 	$	(743,234	)	 	$	745,270	 	
 	  				 				 			  			  				 				 				
Basic and diluted earnings (loss) per share	  	$	0.03	 	 	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	 	 	 	$	0.04 	(I)	
 	  				 	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	 	 	 				
Basic and diluted weighted average shares outstanding:	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Basic	  	 	21,155,223	 	 	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	21,931,943	(I)	
 	  				 	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	 	 	 				
Diluted	  	 	21,346,133	 	 	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	22,122,853	(I)	

See the accompanying notes to the unaudited pro forma financial information. 
 
-4- 

First Advantage Corporation and Subsidiaries 
 
Notes to Unaudited Pro Forma Financial Information 
 
(A)	The estimated purchase price of CoreFacts, CIC and Realeum for purposes of preparing these unaudited pro forma financial statements is $33.1 million, as described in the respective purchase agreements. The allocation of the purchase price is based upon preliminary estimates of the assets and liabilities acquired in accordance with SFAS 141. A full determination of the purchase price allocation will be made within twelve months of the effective acquisition date upon receipt of a final valuation analysis of tangible and intangible assets. It is anticipated that the final purchase price allocation will not differ materially from the preliminary allocations. 	
 
In connection with the acquisition of CIC, up to $14 million of additional purchase price is contingent upon the renewal by the United States government of the Work Opportunity Tax Credit program or a similar program. The contingent consideration placed in escrow is comprised of an $11 million subordinated note and a $3 million convertible note (“escrowed assets”). The final amount of the escrowed assets may be reduced based upon the timing, similarity and retroactive application of a new program. If no renewal event, as defined in the acquisition agreement, has occurred prior to December 31, 2005, the entire amount of the escrowed assets will be forfeited by the seller and returned to the Company. The contingent consideration will be allocated between goodwill and identifiable intangible assets at the time the contingency is resolved. 
 
In connection with the acquisition of Realeum, up to $12 million of additional purchase price is contingent upon the attainment of certain annual revenue amounts through December 31, 2007. The contingent consideration will be allocated to goodwill at the time the contingency is resolved. 
 
The allocation of the purchase price is estimated as follows: 

 	  	CoreFacts
	  	CIC
	  	Realeum
	  	Total
	
Goodwill	  	$	11,612,355	  	$	7,824,971	  	$	1,113,566	  	 	20,550,892	
Identifiable intangibles assets	  	 	1,700,000	  	 	4,400,000	  	 	—  	  	 	6,100,000	
Software	  	 	—  	  	 	300,000	  	 	—  	  	 	300,000	
Database	  	 	—  	  	 	100,000	  	 	—  	  	 	100,000	
Net assets acquired	  	 	2,187,645	  	 	3,375,029	  	 	441,891	  	 	6,004,565	
 	  			  			  			  			
 	  	$	15,500,000	  	$	16,000,000	  	$	1,555,457	  	$	33,055,457	

-5- 

First Advantage Corporation and Subsidiaries 
 
Notes to Unaudited Pro Forma Financial Information 
 
(B)	Adjustment reflects the borrowing of funds for the acquisition of CIC, CoreFacts and Realeum as follows: 	

 	  	CoreFacts
	  	CIC
	  	Realeum
	  	Total
	
Cash paid to sellers	  	$	5,166,667	  	$	14,000,000	  	$	—  	  	$	19,166,667	
Notes issued to sellers	  	 	5,166,667	  	 	—  	  	 	—  	  	 	5,166,667	
Convertible notes issued to sellers	  	 	5,166,666	  	 	2,000,000	  	 	1,555,457	  	 	8,722,123	
 	  			  			  			  			
Funds borrowed for acquisitions	  	$	15,500,000	  	$	16,000,000	  	$	1,555,457	  	$	33,055,457	

The cash paid to sellers included in the purchase price above was funded with additional borrowings under the Line of Credit and Promissory Note with First American. 
 
Certain of the convertible notes convert automatically into shares of the Company’s Class A common stock while others convert at the option of the Company or the holder. The conversion price per share is equal to the average of the closing price of the common stock for the ten consecutive trading days ending on the third trading day prior to the conversion date. Conversion may occur at such time as the Securities and Exchange Commission (“SEC”) declares effective a registration statement of the Company on Form S-3. 
 
(C)	Adjustment reflects the elimination of the stockholders’ equity of CIC, CoreFacts and Realeum. 	
 
-6- 

First Advantage Corporation and Subsidiaries 
 
Notes to Unaudited Pro Forma Financial Information 
 
(D)	Adjustment reflects the pro forma impact of the acquisition of CIC for assets, liabilities and related operations not acquired as part of the asset purchase agreement. 	
 
Assets and liabilities not acquired: 

 	  	March 31, 2004
	
Assets	  	 	 	
Current assets:	  	 	 	
Cash and cash equivalents	  	$	2,445,807	
Investments	  	 	137,825	
Accounts receivable	  	 	181,916	
Prepaid expenses and other current assets	  	 	22,790	
 	  			
Total current assets	  	 	2,788,338	
Property and equipment, net	  	 	119,719	
Other assets	  	 	49,780	
 	  			
Total assets	  	$	2,957,837	
 	  			
Liabilities	  	 	 	
Current liabilities:	  	 	 	
Accrued liabilities	  	$	369,571	
 	  			
Total liabilities	  	 	369,571	
 	  			
Net assets not acquired	  	 	2,588,266	
Net assets acquired	  	 	3,375,029	
 	  			
Net assets of CIC	  	$	5,963,295	

Operations not acquired: 

 	  	Year ended
December 31, 2003
	  	Three Months
ended
March 31, 2004
	
Service revenue	  	$	3,279,922	  	$	654,537	
Cost of service revenue	  	$	75,943	  	$	16,871	
Salaries and benefits	  	$	4,296,119	  	$	92,100	
Other operating expenses	  	$	1,112,353	  	$	296,264	
Depreciation and amortization	  	$	29,638	  	$	4,940	
 
-7- 

First Advantage Corporation and Subsidiaries 
 
Notes to Unaudited Pro Forma Financial Information 
 
(E)	Past acquisitions include six businesses acquired during the period from January to March 15, 2004 and one acquisition consummated in April 2004. These acquisitions are not significant individually or in the aggregate. The impact of these acquisitions is reflected on the unaudited pro forma combined statements of income (loss) for the year ended December 31, 2003 and the three months ended March 31, 2004 assuming the acquisitions occurred on January 1, 2003. The acquisition consummated in April, 2004 is reflected in the unaudited pro forma combined balance sheet as if it had occurred on March 31, 2004. 	
 
(F)	Adjustment reflects the effects of the acquisitions on amortization of the pro forma adjustment for other intangible assets, which consists of customer lists, non-compete agreements, software and database assets; amortized over their estimated useful lives ranging from 3-10 years as follows: 	

 	  	Intangible
Asset
	  	Estimated
Useful
Life
	  	Year
ended
December 31, 2003
	  	Three Months
ended
March 31, 2004
	
CoreFacts	  	 	 	  	 	  	 	 	  	 	 	
Non-compete agreements	  	$	1,300,000	  	3	  	$	433,333	  	$	108,333	
Customer relationships	  	 	400,000	  	6	  	 	66,667	  	 	16,667	
CIC	  	 	 	  	 	  	 	 	  	 	 	
Customer relationships	  	 	4,100,000	  	10	  	 	410,000	  	 	102,500	
Non-compete agreements	  	 	300,000	  	3	  	 	100,000	  	 	25,000	
Software assets	  	 	300,000	  	5	  	 	60,000	  	 	15,000	
Database assets	  	 	100,000	  	10	  	 	10,000	  	 	2,500	
 	  			  	 	  			  			
 	  	$	6,500,000	  	 	  	$	1,080,000	  	$	270,000	

(G)	Adjustment reflects the effects of notes issued in the acquisitions on interest expense as follows: 	

 	  	 	  	Year
ended
December 31, 2003
	  	Three Months
ended
March 31, 2004
	
CoreFacts	  	 	 	  	 	 	  	 	 	
Notes issued, interest at approximately 4%	  	$	10,333,333	  	$	388,724	  	$	86,790	
CIC	  	 	 	  	 	 	  	 	 	
Notes issued, interest at 5%	  	 	2,000,000	  	 	100,000	  	 	25,000	
Realeum	  	 	 	  	 	 	  	 	 	
Notes issued, interest at 5%	  	 	1,555,457	  	 	77,750	  	 	19,438	
Borrowed funds, interest at 30-day LIBOR plus average margin of 1.41%	  	 	19,166,667	  	 	479,167	  	 	119,792	
 	  			  			  			
 	  	$	33,055,457	  	$	1,045,641	  	$	251,020	

-8- 

First Advantage Corporation and Subsidiaries 
 
Notes to Unaudited Pro Forma Financial Information 
 
(H)	Adjustment reflects the effect of the acquisitions on the provision for income taxes as if taxes were calculated on a separate return basis. 	
 
(I)	Basic and diluted earnings per share is calculated as net income (loss) divided by the weighted average shares outstanding for the period. Weighted average shares outstanding used in the calculation of pro forma earnings per share includes pro forma adjustments for 522,825 shares issued in connection with the insignificant acquisitions of seven businesses during 2004 and common stock equivalents associated with convertible notes of 513,000 shares as follows: 	

 	  	Year ended
December 31, 2003
	  	Three Months
ended
March 31, 2004
	
Pro forma net income (loss)	  	$	482,765	  	$	745,270	
Interest on convertible notes as if converted, net of tax	  	 	214,709	  	 	50,943	
 	  			  			
Pro forma net income (loss)	  	$	697,474	  	$	796,213	
 	  			  			
Basic:	  	 	 	  	 	 	
Historical weighted average shares outstanding	  	 	20,260,854	  	 	21,155,223	
Shares issued in connection with the insignificant acquisitions	  	 	522,825	  	 	263,720	
Common stock equivalents associated with convertible notes	  	 	513,000	  	 	513,000	
 	  			  			
Pro forma weighted average shares outstanding	  	 	21,296,679	  	 	21,931,943	
 	  			  			
Diluted:	  	 	 	  	 	 	
Historical weighted average shares outstanding	  	 	20,397,587	  	 	21,346,133	
Shares issued in connection with the insignificant acquisitions	  	 	522,825	  	 	263,720	
Common stock equivalents associated with convertible notes	  	 	513,000	  	 	513,000	
 	  			  			
Pro forma weighted average shares outstanding	  	 	21,433,412	  	 	22,122,853	
 	  			  			
Earnings per share:	  	 	 	  	 	 	
Basic	  	$	.03	  	$	.04	
Diluted	  	$	.03	  	$	.04	
 
-9- 

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

FIRST ADVANTAGE CORPORATION	
		
By:	 	/s/ John Lamson
	
Name:	 	John Lamson	
Title:	 	Executive Vice President and	
 	 	Chief Financial Officer	
 
Dated: July 2, 2004