FACTUAL DATA CORP, 424B1, 1998-05-13

FACTUAL DATA CORP
424B1, 1998-05-13
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE> 1
Filed pursuant to Rule 424(b)(1)
Registration No. 333-47051

PROSPECTUS

FACTUAL DATA CORP.
1,200,000 UNITS
CONSISTING OF

1,200,000 SHARES OF COMMON STOCK
AND
1,200,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS

All of the securities offered hereby are being sold by Factual Data Corp.
(the "Company"). The Common Stock and the Redeemable Common Stock Purchase
Warrants (the "Warrants") will be initially offered together as Units on the
basis of one share of Common Stock and one Warrant. Each Warrant will entitle
the holder to purchase one share of Common Stock at a price of $7.15 (the
"Warrant Exercise Price") during the three-year period commencing on the date of
this Prospectus. Commencing one year from the date hereof, the Warrants will be
redeemable upon 30 days prior written notice at a redemption price of $.05 per
Warrant if the closing high bid price of the Common Stock has exceeded the
Warrant Exercise Price by 50% or more for 20 consecutive trading days
immediately preceding the date of mailing of the notice of redemption, subject
to certain other conditions. See "Description of Securities."

Prior to this offering, there has been no public market for the securities
of the Company. For a discussion of the factors considered in determining the
initial public offering prices of the securities offered, see "Underwriting."
The Common Stock and Warrants have been approved for quotation on The Nasdaq
SmallCap Market under the trading symbols FDCC and FDCCW upon notice of
issuance.

---------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN RISKS
ASSOCIATED WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY. THE SECURITIES
OFFERED INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------

<TABLE>
<CAPTION>
=======================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(2) COMPANY(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit(1)................................. $5.60 $.56 $5.04
- -----------------------------------------------------------------------------------------------------------------------
Total(4).................................... $6,720,000 $672,000 $6,048,000
=======================================================================================================================
</TABLE>

(1) Each Unit consists of one share of Common Stock with an assigned value of
$5.50 and one Warrant with an assigned value of $.10. The Common Stock and
Warrants will be immediately separately transferable.

(2) The Company has agreed to pay Schneider Securities, Inc., the representative
of the Underwriters (the "Representative") a 3% non-accountable expense
allowance and to issue Representative's Options (as defined herein). The
Company has also agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(3) Before deducting offering expenses estimated at $559,000, including the
non-accountable expense allowance. See "Underwriting."

(4) The Company has granted to the Underwriters options, exercisable within 45
days after the date of this Prospectus, to purchase up to an additional
180,000 shares of Common Stock and 180,000 Warrants on the same terms as set
forth above solely to cover over-allotments, if any. If the options are
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $7,728,000, $772,800 and $6,955,200,
respectively. See "Underwriting."

The Common Stock and Warrants comprising the Units are being offered
severally by the Underwriters, subject to prior sale, when, as and if delivered
to and accepted by the Underwriters, and subject to their right to reject orders
in whole or in part and certain other conditions. It is expected that delivery
of certificates representing the shares of Common Stock and Warrants will be
made at the offices of the Representative on or about May 18, 1998.

SCHNEIDER SECURITIES, INC.

THE DATE OF THIS PROSPECTUS IS MAY 13, 1998

<PAGE> 2

[BACKSIDE OF FRONT COVER]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK AND
WARRANTS OF THE COMPANY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING BIDS, THE
IMPOSITION OF PENALTY BIDS, THE PURCHASE OF COMMON STOCK AND WARRANTS TO COVER
SYNDICATE SHORT POSITIONS AND OVER-ALLOTMENTS IN CONNECTION WITH THE OFFERING.
FOR A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING."

"Factual Data," among other servicemarks and trademarks used herein, is a
registered servicemark of the Company.

On the effective date of the Registration Statement of which this
Prospectus forms a part, the Company will become a "reporting company" under the
Securities Exchange Act of 1934 (the "1934 Act"). The Company intends to
register the Common Stock and Warrants under the 1934 Act as of the effective
date of the Registration Statement. The Company is a "small business issuer" as
defined under Regulation S-B adopted under the Securities Act of 1933, and will
file reports with the Commission pursuant to the 1934 Act on forms applicable to
small business issuers.

The Company intends to furnish its shareholders with annual reports
containing audited financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited interim financial
information.
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the information
appearing elsewhere in this Prospectus. See "Risk Factors" for information
prospective investors should consider. Unless otherwise indicated, all
information in this Prospectus assumes no exercise of the Underwriters'
over-allotment options, the Representative's Options or options granted or
reserved under the Company's stock incentive plan. Unless the context otherwise
requires, the term "Company" refers to and includes FDC Group, Inc. and Lenders
Resource Incorporated, both wholly owned subsidiaries of the Company. Industry
data used in this Prospectus was obtained from industry publications that the
Company believes to be reliable, but has not independently verified.

THE COMPANY

The Company provides a broad range of information services to mortgage and
consumer lenders, employers, landlords and other business customers located
throughout the United States. The Company specializes in preparing mortgage
credit reports ("MCRs") that are customized to each mortgage lender's
requirements and transmitted to lenders via the Internet, modem or facsimile.
The Company's larger customers include, among others, NationsBanc/Boatmen's
National, Chase Manhattan Residential, U.S. Home Mortgage, CoreStates Mortgage
and CTX Mortgage. In 1996, the Company was selected to be one of five approved
information vendors for the Federal Home Loan Mortgage Corporation's ("Freddie
Mac") automated underwriting system, Loan Prospector. Based on publicly reported
information concerning mortgage loans originated and refinanced in the United
States, management believes the Company, and its franchisees and licensees
(referred to herein as "System Affiliates"), are collectively one of the leading
suppliers of MCRs in the United States. The Company and its System Affiliates
delivered approximately 1.08 million and 1.43 million MCRs representing gross
system billings of approximately $27.3 million and $31.3 million in 1996 and
1997, respectively.

MCRs supplied by the Company generally fall in three categories:
residential mortgage credit reports ("RMCRs") under which the Company verifies
credit, employment and other information and conducts an in-person or telephone
interview with the loan applicant; residential mortgage credit reports that do
not encompass applicant interviews ("RMCR Jrs.(R)"); and Bureau Express(S)
reports, which provide only the merged credit information from the three primary
credit repositories in the United States without the verification performed in
RMCRs or RMCR Jrs. Through its expertise developed in mortgage credit reporting,
the Company has recently expanded its services to include EMPfacts(R), an
employment screening service, QUICKpeek(R) Identifier, an instant employment
screening service, QUICKpeek(R) Tenant, a credit and employment screening
service for use by leasing agents and landlords, and Corpdata, a credit
reporting service on businesses.

The Company markets its services through Company operated offices and its
System Affiliates which combined provide services to lenders in all states in
the continental United States from 45 locations. System Affiliates consisted of
30 franchisees and 34 licensees as of December 31, 1996, and 29 franchisees and
35 licensees as of December 31, 1997. The Company receives royalties, license
and other fees from its System Affiliates, which combined accounted for 36% and
55% of the Company's gross revenues for 1996 and 1997, respectively.

The Company's and System Affiliates' MCR and other information services
integrate data obtained from national credit repositories, criminal records,
motor vehicle records and other public information databases. The integration of
this information, and delivery of its services, is performed by the Company's
proprietary and non-proprietary computer software, hardware and state-of-the-art
communication systems. The Company credits its success to its technological
sophistication and employs 15 persons who are assigned to the continued
development and maintenance of its technology. The Company is committed to
maintaining its technological competitive advantage, and it will continue to
devote resources to this effort. See "Use of Proceeds."

1
<PAGE> 4

increased cost of new technologies that generally cannot be afforded by smaller
participants in the market. The Company's consolidation plan is designed to
expand its existing business and take advantage of its core competencies
including, among other things, its highly developed customer service program,
use of sophisticated technology to achieve efficiencies in the MCR market,
development of close working relationships with mortgage lenders, knowledge of
the MCR market and its experienced management team. The Company's consolidation
plan envisions the purchase of unaffiliated companies active in the MCR market
as well as companies that are presently franchisees or licensees of the Company.
Consistent with its consolidation plan, the Company concluded the acquisition of
Mirocon, Inc., a former franchisee providing MCR and other services, in December
1997. See "Business."

The Company's business is directly influenced by the mortgage lending
industry since its primary services are credit reports used by mortgage lenders.
The mortgage lending industry enjoyed a near record year in 1997 due to low
interest rates and a robust economy. Mortgage originations (including
refinancings) are estimated to have totaled approximately $870 billion in 1997,
almost 11% higher than the $785 billion in originations in 1996 and the
third-best year ever. The 1997 loan activity equates to the generation of an
estimated 11 million mortgage credit reports. See "Business -- Industry."

The Company's strategy is to enhance its position as a leading provider of
MCRs and associated information services. The principal components of the
Company's strategy are to: (i) implement its consolidation plan in order to
accelerate growth and leverage operating efficiencies, (ii) continue to
capitalize on its proprietary and non-proprietary technology to provide prompt
and accurate customer service, (iii) accelerate its market penetration through
engaging in additional sales and marketing activities to broaden its customer
base, (iv) increase revenue by bundling additional services with the Company's
MCRs and other services in order to facilitate "one-stop shopping" by its
customers, and (v) enhance the Company's relationships with key customers
through continued commitment to customer service and support and quality
control.

The Company was incorporated in the State of Colorado in 1985. The
Company's principal office is located at 5200 Hahns Peak Drive, Loveland,
Colorado 80538, and its telephone number is (970) 663-5700.

2
<PAGE> 5

THE OFFERING

Securities offered by the Company... 1,200,000 Units consisting of 1,200,000
shares of Common Stock and 1,200,000
Warrants. The Common Stock and Warrants
will be initially sold together but are
immediately separately transferable.
Each Warrant will entitle the holder to
purchase one share of Common Stock at
the Warrant Exercise Price during the
three-year period commencing on the
date of this Prospectus. Commencing one
year from the date hereof, the Warrants
will be redeemable upon 30 days' prior
written notice at a redemption price of
$.05 per Warrant if the closing high
bid price of the Common Stock has
exceeded the Warrant Exercise Price by
50% or more for at least 20 consecutive
trading days immediately preceding the
date of mailing of the notice of
redemption, subject to certain other
conditions. See "Description of
Securities."

Common Stock outstanding prior to
offering............................ 1,800,000 shares(1)

Common Stock to be outstanding after
offering............................ 3,000,000 shares(1)

Use of proceeds..................... For acquisitions, repayment of
indebtedness, technological
development, expansion of marketing
activities and services and working
capital. See "Use of Proceeds."

Nasdaq symbols: Common Stock........ FDCC

Warrants.......................... FDCCW
- ---------------

(1) Does not include up to (i) 27,000 shares of Common Stock issuable upon
exercise of options to be issued to employees and directors upon completion
of this offering which have an exercise price of $5.50 per share, (ii)
1,200,000 shares of Common Stock issuable upon full exercise of the
Warrants, (iii) 240,000 shares of Common Stock issuable upon full exercise
of the Representative's Options, and (iv) 180,000 shares of Common Stock and
180,000 Warrants issuable upon full exercise of the Underwriters'
over-allotment options.

3
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
HISTORICAL PRO FORMA(1)
------------------ ------------------
1996 1997 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME (LOSS) DATA:
Revenue............................................. $ 4,009 $ 3,520 $ 3,401 $ 4,370
Operating expenses.................................. 3,568 2,724 3,562 3,413
Net income (loss)................................... 284 503 (132) 598
Basic earnings (loss) per share(2).................. $ .16 $ .28 $ (.07) $ .33
Weighted average number of shares outstanding....... 1,800 1,800 1,800 1,800
OTHER STATISTICAL DATA:(3) 1996 1997
------- -------
Information services MCRs........................... 1,080 1,432
Gross system billings............................... $27,340 $31,318
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
ACTUAL AS ADJUSTED(4)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 116 $5,177
Total assets................................................ 2,864 7,543
Long term debt, including current portion................... 1,210 400
Shareholders' equity........................................ 647 6,136
</TABLE>

- ---------------

(1) Assumes the Company completed the acquisition of Mirocon, Inc. on January 1,
1996 and sold the Texas Territories on January 1, 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business -- Recent Acquisition," Note 2 to the Consolidated Financial
Statements and the Financial Statements of Mirocon, Inc.

(2) No difference exists between basic and diluted earnings per share.

(3) Represents the aggregate number of MCRs generated through the Company's
system for itself, and its System Affiliates, and the gross system billings
by the Company and its System Affiliates.

(4) Adjusted to reflect the sale by the Company of Units comprised of 1,200,000
shares of Common Stock and 1,200,000 Warrants offered hereby at the combined
offering price of $5.60 and application of the net proceeds. See "Use of
Proceeds."

4
<PAGE> 7

RISK FACTORS

This Prospectus contains statements which include forward looking
information. Those statements appear in a number of places in this Prospectus
and include statements regarding the intent, belief or current expectations of
the Company with respect to, among other things: (i) the Company's growth
strategy and the availability of companies which it believes may be acquired;
(ii) the Company's anticipated results of future operations and economies of
scale it believes may exist with acquisitions; (iii) regulatory matters
affecting or which in the future may affect the Company; (iv) matters related to
general economic conditions, particularly interest rates, and responses in
changes thereto by lenders and consumers; and (v) the Company's ability to
quickly react to changing interest rates. Prospective investors are cautioned
that any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual events and
results thereof may differ materially from those discussed in the forward
looking statements as a result of various factors. Moreover, any investment in
the securities being offered involves a high degree of risk and may result in a
loss of the entire amount invested. Therefore, prospective investors should
carefully consider the following risks, as well as all other information set
forth in this Prospectus.

Adverse Effects Due to Changes in Demand for Mortgage Credit Reports. The
Company's primary service is its mortgage credit report ("MCR"). In general, the
use of this service is driven by consumer demand for credit (via new home
mortgages and refinancings) and, to a lesser extent, lenders' efforts to develop
new, and monitor existing, credit relationships. Consumer demand for mortgage
credit tends to vary due to interest rate fluctuations and general economic
conditions. Management has found that MCR demand tends to increase during
periods of economic expansion or when interest rates are declining, although
consistent patterns cannot always be determined due to the complexity of the
economy. Consequently, revenue from MCRs, the Company's primary service at
present, is influenced materially by the foregoing factors. Since the Company's
expenses consist largely of labor, repository and communication charges, its
ability to control these costs as economic and interest rate trends change is
critical. Also, as MCRs are the Company's primary service, the Company's lack of
significant diversification in other services hinders the Company's ability to
withstand the negative impact of a downturn in demand for MCRs. See
"Business -- Industry" and "-- Mortgage Credit Reports."

Recent Consolidation Plan. The Company historically franchised and licensed
territories to companies already engaged in providing mortgage credit reporting
services in those territories. The Company is now implementing a consolidation
plan to acquire certain of its System Affiliates and competitors engaged in
providing MCR services that either complement or will expand its existing
business. Implementation of this plan could involve a number of risks, including
diversion of management time and Company financial resources in reviewing
acquisition candidates and assimilation of the acquired companies, adverse
short-term effects on the Company's operating results and the amortization of
acquired intangible assets. Also, there are 48 System Affiliates that have
exclusive territory rights which expire at various times through the year 2005.
The Company will be required to purchase a System Affiliate, or wait until the
expiration of the applicable agreement with the System Affiliate, before
expanding into, or acquiring a competitor in, the same territory. The impact of
this plan on the Company's operations, both long-term and short-term, remains
unknown. Although the Company has identified and has held, and will continue to
hold, discussions from time-to-time with potential acquisition candidates, no
agreement, arrangement, plan or understanding exists as of the date hereof with
respect to any acquisitions. Accordingly, no assurance can be given that the
Company will be successful in acquiring System Affiliates or other companies,
assets or service lines or that if acquired, such companies, assets or service
lines will be economically beneficial to the Company. See "Business -- Business
Strategy."

Competition. The MCR industry is highly fragmented. The Company faces both
direct and indirect competition for its services. There are large numbers of
companies engaged in the sale of one or more of the services offered by the
Company. A significant number of these competitors are small companies operating
on a local or regional basis, while some are large companies operating on a
national scale. Management believes there are approximately 1,400 companies in
the United States providing MCR services, among which are several large
companies having far greater financial resources than the Company, including CBC
Companies, Inc., Equifax Credit Information Services, Inc., The First American
Financial Corp., and Trans Union

5
<PAGE> 8

Corporation. The Company faces intense competition in MCR services from these
entities, and, as to its other services, from companies engaged in employment
and tenant application verification activities. See "Business -- Competition."

Government Regulation; Privacy Issues; Legal Considerations. The Company's
business involves the collection of consumer and business credit data and other
information and the distribution of such information to lenders and businesses
making credit and other decisions. Concerns about individual privacy and the
collection, distribution and use of information about individuals have led to
substantial governmental regulation of the credit reporting industry. The credit
reporting industry is regulated under the federal Fair Credit Reporting Act (the
"FCRA") and by legislation in many states. The credit reporting industry has
recently been subject to increased legislative attention. Legislation was
recently enacted amending the FCRA to refine the legal treatment of certain
credit reporting practices, including provisions codifying rules applicable to
prescreening. In addition, bills are pending in various state legislatures that
are generally intended to regulate how personal information is used in the
marketplace. While management does not believe that any of the proposed state
bills, if passed as currently drafted, would have a material adverse effect on
the Company, there can be no assurance that pending or additional federal or
state consumer-oriented legislation will not significantly limit demand for, or
increase the costs of, certain of the Company's services. See
"Business -- Government Regulation and Privacy Issues." Under general legal
concepts and, in some instances, under specific federal and state statutes, the
Company could be held liable to customers or to the subjects of credit reports
prepared by the Company for inaccurate information or misuse of information. The
Company maintains internal policies designed to help ensure that credit
information retrieved by it is accurate and that it otherwise complies with the
provisions of the FCRA. No assurance can be given that any claims made against
the Company can be successfully defended, that insurance will cover any such
claims or that uninsured losses from such claims might arise thereby adversely
impacting the operations and financial condition of the Company. See
"Business -- Government Regulation and Privacy Issues."

Control by Management. Existing shareholders of the Company will own
approximately 60% of the outstanding Common Stock upon completion of this
offering and will be able to elect all of the Company's Directors.

Dependence Upon Key Personnel. The Company is highly dependent on the
services of its President, Jerald H. Donnan, who is subject to a three year
employment agreement which was effective July 1, 1997. See
"Management -- Employment Agreements." To the extent that Mr. Donnan's services
become unavailable, there could be a material adverse effect on the operations
of the Company. In such an event, there can be no assurance that the Company
will be able to promote existing personnel or employ qualified persons on terms
favorable to the Company. The Company intends to secure a $1 million Key Man
term life insurance policy upon the life of Mr. Donnan as soon as possible
following the closing of this offering.

Dependence on Key Suppliers. The Company does not maintain its own consumer
credit database. Instead, the Company obtains consumer credit data from large,
national credit repositories such as Experian, Inc., TransUnion, Inc. and
Equifax, Inc. pursuant to "reseller" agreements with these entities. Generally,
the reseller agreements are terminable without cause by either party within a
short period of time upon written notice. Also, the agreements can be terminated
if the Company uses the information in violation of the FCRA or other applicable
laws, or in violation of the reseller agreement. In addition, the reseller
agreements typically do not provide any warranties as to the accuracy or
correctness of the information contained in the databases maintained by credit
repositories, and further provide that the Company will hold the repositories
harmless and indemnify them from claims or liabilities arising from the use of
inaccurate information contained in the databases. While the Company believes
its relationships with the various credit repositories is good, there can be no
assurance that its reseller agreements with the credit repositories will not be
terminated for any reason. The loss of access to the databases of key credit
repositories would materially and adversely affect the Company's business and
financial condition. See "Business -- Suppliers."

Need for Additional Financing. Proceeds from this offering are not
sufficient to enable the Company to fully implement its consolidation plan as
described under "Business -- Business Strategy." To the extent the Company
requires additional funds for acquisitions under its consolidation plan, the
Company will likely

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<PAGE> 9

consider funding such acquisitions through cash from operations, proceeds from
the exercise of the Warrants offered herein, the issuance of capital stock to
the acquisition candidates, further private or public debt or equity financing
or by a combination of the foregoing. Even if this offering is successful, there
is no assurance that the Warrants will be exercised, or that other sources of
equity or debt financing can be obtained by the Company.

Dilution. This offering will result in immediate substantial dilution of
$3.72 (66%) per share, which amount represents the difference between the pro
forma net tangible book value per share after the offering and the combined
public offering price of $5.60 per Unit comprised of one share of Common Stock
and one Warrant. In the event the Company issues shares of Common Stock in
connection with potential acquisitions, inventors' ownership interest in the
Company could also be diluted. See "Dilution" and "Business -- Business
Strategy."

Intellectual Property Rights and Limitations. The Company's success depends
in part upon its technological expertise and proprietary information and
technologies. The Company relies on a combination of trademark, servicemark,
copyright, trade secret and contract protection to establish and protect its
proprietary rights in its services and technology; however, because there is
little in the design, development or delivery of the Company's services that is
protectable under law, the Company's services are and will continue to be
subject to replication by competitors. The Company generally enters into
confidentiality agreements with customers and limits access to and distribution
of its proprietary information. There can be no assurance that these steps will
be adequate to deter misappropriation or infringement of the Company's
proprietary technologies and that costly litigation may not ensue. While the
Company intends to defend its intellectual property against unauthorized use or
infringement by others, the cost of defending such intellectual property could
be substantial in the event of infringement. The Company believes that its
intellectual property may be of significant value to the Company's business and
reputation. Failure or inability to defend the intellectual property could
adversely affect the Company. Although the Company believes that its
intellectual property and technologies do not infringe any proprietary rights of
others, the growing use of copyrights and patents to protect proprietary rights
has increased the risk that third parties may assert claims of infringement in
the future. The Company does not maintain a formal intellectual property
protection program. See "Business -- Intellectual Property."

Large Institutions' Special Requirements. The Federal National Mortgage
Association ("Fannie Mae") and Freddie Mac provide a secondary market for
residential mortgages. Both entities require that any mortgage purchased be
supported by a credit report on the mortgagee and prepared by an entity, such as
the Company, independent from the lender. The Company is aware that these and
other entities are increasingly using "automated" credit reporting techniques
which require credit report providers to render almost instantaneous responses,
often within 60 seconds or less. Although the Company is presently able to
provide such service, no assurance can be given that it will continue to be able
to provide the level of performance required by these or other large
institutional lenders or that it will be able to match the level of
technological service provided, or developed in the future, by competitors.

Risk of Data Center Failure. The Company's operations are dependent upon
its ability to protect its data center against damage from fire, power loss,
telecommunications failure, natural disasters or a similar event. The Company
moved into a new facility in Loveland, Colorado in April, 1998, which is
outfitted with backup power and duplicate telecommunication facilities;
nonetheless, in the event the Company experiences a natural disaster, hardware
or software malfunction or other interruption of its data center operations, the
Company's results of operations could be materially adversely affected. Extended
interruptions in the Company's services could be significantly detrimental, and
the Company's insurance may not be adequate to compensate the Company for all
resulting losses that may occur. See "Business -- Technology Center."

Effect of General Economic Conditions. The Company's business is directly
related to economic factors that affect the mortgage lending industry, including
interest rates, housing demand and general economic conditions. When these
factors adversely affect the mortgage lending industry, such factors will likely
exert downward pressure on the volume of MCRs requested, and may also increase
price competition among MCR suppliers. Although the Company believes that
current economic conditions favor continued growth in the

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<PAGE> 10

markets it serves, a future economic slowdown or recession could adversely
affect the Company's ability to maintain profitability. See "Business."

Determination of Offering Prices; Absence of Public Market; Price
Fluctuations. The public offering prices of the Common Stock and Warrants, and
the exercise price of the Warrants, have been determined by the Company and the
Representative and do not necessarily bear any relationship to assets, book
value, earnings history or other investment criteria. Prior to this offering,
there has been no public market for any class of the Company's securities.
Although the Common Stock and Warrants have been approved for quotation on The
Nasdaq SmallCap Market upon notice of issuance, there can be no assurance that
an active trading market will develop or that the market price of such
securities will not decline below the public offering price. Factors such as
quarterly fluctuations in results of operations, or market conditions in
general, may cause the market prices of the Company's securities to fluctuate,
perhaps substantially. In addition, in recent years the stock market has
experienced significant price and volume fluctuations. These fluctuations, which
are often unrelated to the operating performance of specific companies, have had
a substantial effect on the market price for many small capitalization
companies. Factors such as those cited above, as well as other factors which may
be unrelated to the operating performance of the Company, may adversely affect
the price of the Company's securities. See "Underwriting."

Shares Eligible for Future Sale. Sales of a substantial number of shares of
the Company's Common Stock in the public market following this offering could
adversely affect the market price of the Common Stock. The 1,800,000 shares of
Common Stock now outstanding are eligible for sale in the public market, subject
to compliance with Rule 144 under the Securities Act of 1933 (the "Securities
Act") (assuming all shares currently held in custody are released in accordance
with the terms of the custody agreement). Rule 144 provides that beneficial
owners of shares who have held such shares for one year may sell within a
three-month period a number of shares not exceeding the greater of 1% of the
total outstanding shares or the average trading volume of the shares during the
four calendar weeks preceding such sale. In the absence of agreements with the
Representative, the outstanding restricted Common Stock could be sold in
accordance with Rule 144 commencing 90 days from the date of this Prospectus.
However, pursuant to the terms of the Underwriting Agreement, the Representative
has required the holders of such shares to enter into lock-up agreements which
restrict the sale or disposition of such shares for 18 months from the date of
this Prospectus without the prior written consent of the Representative. See
"Principal Shareholders -- Custodial Shares" and "Shares Eligible for Future
Sale."

Anti-takeover Provisions. The Company's Articles of Incorporation and
Bylaws (the "Incorporation Documents") contain provisions that may make it more
difficult for a third party to acquire, or may discourage acquisition bids for,
the Company. The Board of Directors of the Company is authorized, without action
of its shareholders but subject to approval by the majority of the Company's
non-employee, independent directors, to issue authorized but unissued Common and
Preferred Stock. The existence of undesignated Preferred Stock and authorized
but unissued Common Stock enables the Company to discourage or to make it more
difficult to obtain control of the Company by means of a merger, tender offer,
proxy contest or otherwise. The Incorporation Documents provide further that (i)
directors may be elected for three-year terms, with approximately one-third of
the Board of Directors standing for election each year, (ii) to alter or repeal
the staggered board provision or other measures in the Incorporation Documents
relating to the matters listed in this paragraph, the affirmative vote of the
holders of not less than two-thirds of the votes entitled to be cast by the
holders of all stock entitled to vote in the election of directors is required,
(iii) the unanimous vote of the Board of Directors or the affirmative vote of
the holders of not less than two-thirds of the votes entitled to be cast by the
holders of all stock entitled to vote in the election of directors is required
to change the size of the Board of Directors, (iv) directors may only be removed
with or without cause by holders of not less than two-thirds of all stock
entitled to vote, (v) any action required or permitted to be taken by
shareholders of the Company must be effected at a duly called annual or special
meeting of such shareholders and may not be effected by consent in writing by
such shareholders, and (vi) the affirmative vote of the holders of two-thirds of
the Company's capital stock entitled to vote thereon is required to approve the
merger, dissolution or sale of all or substantially all of the assets of the
Company. The Company has also entered into employment agreements with its top
two executive officers which require significant severance

8
<PAGE> 11

pay upon termination of employment with the Company due to a change in control
of the Company. See "Management -- Employment Agreements" and "Description of
Securities -- Preferred Stock."

Absence of Dividends. The Company has not declared nor paid, and does not
intend to declare or pay, any cash or other dividends in the foreseeable future.
Earnings, if any, will be retained to finance the Company's operations and
growth. See "Dividend Policy."

Warrant Exercise and Redemption Provisions. Each Warrant offered hereby
entitles the holder to purchase one share of Common Stock at a price of $7.15
per share (130% of the initial offering price) commencing on the date hereof and
expiring three years thereafter. Holders may exercise such Warrants only if a
current prospectus relating to the Common Stock underlying the Warrants is then
in effect and only if such shares are qualified for sale under applicable state
securities laws of the states in which holders of the Warrants reside. The
Company will use its best efforts to have a current prospectus in effect during
the Warrant exercise period. There can be no assurance the Company will be
successful in maintaining a current prospectus covering the shares underlying
the Warrants. The Warrants may be deprived of any value in the event this
Prospectus or another prospectus covering the shares issuable upon exercise of
the Warrants is not kept current or if such shares are not registered or
otherwise qualified in the states in which holders of the Warrants reside.
Although during this offering the Warrants will not knowingly be sold in any
jurisdiction in which they are not registered or otherwise qualified, purchasers
of the Warrants may relocate to a jurisdiction in which the Common Stock
underlying the Warrants is not so registered or qualified. In addition,
purchasers of the Warrants in the open market may reside in a jurisdiction in
which the Common Stock underlying the Warrants is not registered or qualified.
If the Company is unable or chooses not to register or qualify or maintain the
registration or qualification of the Common Stock underlying the Warrants for
sale in all of the states in which the Warrant holders reside, the Company would
not permit such Warrants to be exercised and Warrant holders in those states may
have no choice but to either sell their Warrants or let them expire. Prospective
investors and other interested persons who wish to know whether Common Stock may
be issued upon the exercise of Warrants by holders in a particular state should
send a written inquiry to the Company or the Representative. Commencing one year
from the date of this Prospectus, the Warrants may be redeemed by the Company,
in whole but not in part, upon not less than 30 days' prior written notice at a
price of $.05 per Warrant at such time as the closing bid price of the Common
Stock equals or exceeds $10.73 (150% of the Warrant Exercise Price) for 20
consecutive trading days. The redemption notice must be provided not more than
five business days after conclusion of the 20 consecutive trading days in which
the closing bid price of the Common Stock equals or exceeds $10.73 per share.
While the Warrants may be exercised during the notice period prior to the date
of redemption, the holder may be unable (for financial or other reasons) to
exercise the Warrants at the time of receipt of the notice of redemption. See
"Description of Securities -- Warrants."

Securities Issuable Pursuant to Warrants, Options and Representative's
Options. At the date of this Prospectus, the Company has reserved 1,200,000
shares of Common Stock for issuance on exercise of the Warrants and 200,000
shares of Common Stock for issuance on exercise of options under the Company's
1997 Stock Incentive Plan, under which 27,000 options will be issued upon
completion of this offering. At the completion of this offering, the
Representative will receive options (collectively, the "Representative's
Options") to purchase 120,000 shares of Common Stock at a price per share of
$7.04 (128% of the price of the Common Stock), exercisable during a period of
four years commencing one year from the date of this Prospectus and Warrants to
purchase 120,000 shares of Common Stock at an exercise price per share of $9.15.
During the terms of the Warrants, the options and the Representative's Options,
the holders are given the opportunity to profit from a rise in the market price
of the Common Stock, and their exercise may dilute the ownership interest of
existing shareholders, including investors in this offering. The existence of
the Warrants, the options and the Representative's Options may affect adversely
the terms on which the Company may obtain additional equity financing. Moreover,
the holders are likely to exercise their rights to acquire Common Stock at a
time when the Company would otherwise be able to obtain capital on terms more
favorable that could be obtained through the exercise of such securities. See
"Description of Securities" and "Underwriting."

Repayment of Debt from Offering Proceeds. The Company has allocated
approximately $810,000, or 14.5%, of the net proceeds from this offering to
repay certain indebtedness of the Company. Approximately

9
<PAGE> 12

$435,000 will be used to retire a note which is personally guaranteed by Jerald
H. and Marcia R. Donnan, President and Executive Vice President of the Company,
respectively. See "Use of Proceeds."

Broad Management Discretion in Use of Proceeds to Make Unspecified
Acquisitions. The Company has allocated $3.0 million, or 53.6% of the estimated
net proceeds to be received in this offering, to the acquisitions of businesses
similar to its own. The Company's success will depend in part on the discretion
and judgment of the Company's management with respect to the application and
allocation of these proceeds in such acquisitions. Furthermore, management will
retain broad discretion over the allocation of proceeds received from the
exercise of Warrants, if any. See "Use of Proceeds," "Business -- Business
Strategy" and "Management."

Limitation of Liability. The Company's Articles of Incorporation provides
that a director of the Company shall not be personally liable for monetary
damages to the Company or its shareholders for a breach of fiduciary duty as a
director, subject to limited exceptions. Although such limitation of liability
does not affect the availability of equitable remedies such as injunctive relief
or rescission, the presence of these provisions in the Articles of Incorporation
could prevent the recovery of monetary damages against directors of the Company.
See "Management -- Indemnification of Officers and Directors."

Listing and Maintenance Criteria for Nasdaq Securities. The Common Stock
and Warrants have been approved for listing on The Nasdaq SmallCap Market upon
notice of issuance. The Company believes it will meet the recently adopted
standards for such listing which require: (i) net tangible assets of $4 million,
(ii) a public float of 1 million shares, (iii) a market value of the public
float of $5 million, (iv) three market makers, (v) a minimum $4.00 bid price per
share of common stock, and (vi) at least 300 shareholders.

Nasdaq has also adopted new criteria for continued Nasdaq SmallCap Market
eligibility. In order to continue to be included on The Nasdaq SmallCap Market
(thereby exempting a company from the "penny stock" regulations described
below), a company must maintain (i) at least two market makers, (ii) 300 holders
of its common stock, (iii) a minimum bid price of $1.00 per share of common
stock, (iv) net tangible assets of $2 million (unless the company had net income
of $500,000 in two of the last three years or a market capitalization of $35
million), (v) 500,000 shares in the public float, and (vi) a market value of the
public float of $1 million. The Company's failure to meet these maintenance
criteria in the future may result in the termination of listing of its
securities on The Nasdaq SmallCap Market. In such event, trading, if any, in the
securities may continue to be conducted in the non-Nasdaq over-the-counter
market in what are commonly referred to as the electronic bulletin board and the
"pink sheets." As a result, an investor may find it more difficult to dispose of
or to obtain accurate quotations as to the market value of the securities.

Disclosure Related to Penny Stocks. The Commission has adopted rules that
define a "penny stock" as equity securities priced at under $5.00 per share
which are not listed for trading on Nasdaq, (unless (i) the issuer has a net
worth of $2 million if in business for more than three years or $5 million if in
business for less than three years or (ii) the issuer has had average annual
revenues of $6 million or more for the prior three years). In the event that any
of the Company's securities are characterized in the future as penny stock,
broker-dealers dealing in the securities will be subject to the disclosure rules
for transactions involving penny stocks which require the broker-dealer among
other things to (i) determine the suitability of purchasers of the securities,
and obtain the written consent of purchasers to purchase such securities prior
to the transaction, (ii) provide customers with required risk disclosure
documents, disclose quotation and compensation information and provide monthly
price information and other required information and (iii) disclose the best
(inside) bid and offer prices for such securities and the price at which the
broker-dealer last purchased or sold the securities. The additional burdens
imposed upon broker-dealers may discourage them from effecting transactions in
penny stocks, which usually reduces the liquidity of such securities. The
Company's securities will not be considered a "penny stock" since they will be
listed on The Nasdaq SmallCap Market.

10
<PAGE> 13

DILUTION

The net tangible book value of the Company as of December 31, 1997 was
approximately $37,000, or $0.02 per share of Common Stock. Without taking into
account any other changes in tangible book value after December 31, 1997, except
to give pro forma effect to the sale by the Company of the Units comprised of
shares of Common Stock and Warrants in this offering at the combined offering
price of $5.60, the pro forma net tangible book value of the Company at December
31, 1997 would have been $5.6 million, or $1.88 per share of Common Stock. This
represents an immediate increase in net tangible book value of $1.86 per share
to existing holders of Common Stock and an immediate dilution of $3.72 per share
(66%) to purchasers of Common Stock in this offering, as illustrated in the
following table:

<TABLE>
<S> <C> <C>
Public offering price per Unit(1)........................... $5.60
Net tangible book value per share before this offering...... $ .02
Increase per share attributable to new investors(2)......... 1.86
-----
Pro forma net tangible book value per share after this
offering.................................................. 1.88
-----
Dilution per share to new investors......................... $3.72
=====
Dilution as a percent of public offering price per Unit..... 66%
=====
</TABLE>

- ---------------

(1) Represents the purchase price of one Unit consisting of one share of Common
Stock and one Warrant.

(2) After deduction of the underwriting discount and estimated offering
expenses.

The following table sets forth as of December 31, 1997 the difference
between the existing shareholders and the new investors with respect to the
number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid. The calculations in
this table exclude shares issuable, and proceeds receivable, upon the exercise
of the Warrants, stock options, the Representative's Options, and the
Underwriters' over-allotment options. See "Management -- Stock Incentive Plan,"
"Description of Securities" and "Underwriting." To the extent such foregoing
options or Warrants are exercised, there may be further dilution to new
investors.

<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION AVERAGE
-------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareholders........ 1,800,000 60% $ 647,000(1) 9% $0.36
New Investors................ 1,200,000 40% 6,720,000 91% 5.60
--------- ---- ---------- ----
Total.............. 3,000,000 100% $7,367,000 100%
========= ==== ========== ====
</TABLE>

- ---------------

(1) The amount shown is the net worth of the Company at December 31, 1997. See
the Consolidated Financial Statements.

11
<PAGE> 14

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
1,200,000 Units offered hereby, after deduction of the underwriting discount and
estimated expenses payable by the Company in connection with this offering, are
expected to be approximately $5.6 million (based on the combined offering price
of $5.60). The following table sets forth the anticipated use of proceeds from
the offering:

<TABLE>
<CAPTION>
APPLICATION AMOUNT PERCENT
----------- ---------- -------
<S> <C> <C>
Acquisitions................................................ $3,000,000 53.6%
Repayment of indebtedness................................... 810,000 14.5
Software and technology development......................... 600,000 10.7
Marketing and advertising................................... 600,000 10.7
Working capital and general corporate purposes.............. 590,000 10.5
---------- -----
Total............................................. $5,600,000 100.0%
========== =====
</TABLE>

The Company intends to allocate $3.0 million of the net proceeds from this
offering for the purpose of making acquisitions pursuant to its consolidation
plan which is more fully discussed in "Business -- Business Strategy." There are
no present agreements, plans, arrangements or understandings with respect to any
such acquisitions, and management retains broad discretion in making
acquisitions.

The Company intends to use approximately $435,000 of the net proceeds to
retire a note payable to a financial institution which bears interest at 2.75%
over the New York prime rate and which matures in December 2005. The note is
secured by substantially all of the Company's assets and is personally
guaranteed by Jerald H. and Marcia R. Donnan. Approximately $375,000 is intended
to be used by the Company to reduce indebtedness incurred in previous
acquisitions, including the required payment of $160,000 incurred in the
Mirocon, Inc. acquisition. These obligations bear interest at an average of 8%
and are unsecured. See "Business -- Recent Acquisition" and Note 2 to
Consolidated Financial Statements.

Approximately $600,000 of net proceeds will be allocated by the Company to
continue its software and technological support development activities,
including capital expenditures associated therewith. Approximately $600,000 of
the net proceeds will be allocated to the expansion of the Company's marketing
activities and services. The Company intends to allocate the remaining $590,000
of net proceeds for general working capital purposes. See "Business."

Proceeds, if any, from the exercise of Warrants will be used to continue
making acquisitions, to fund continued software and technological support
development and for working capital.

Pending the uses described above, the net proceeds to the Company will be
invested in short-term, government, government guaranteed or investment grade
securities.

12
<PAGE> 15

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1997, and as adjusted to give effect to the sale by the Company of
1,200,000 Units comprised of 1,200,000 shares of Common Stock and 1,200,000
Warrants at the combined offering price of $5.60 (after deducting the
underwriting discount and estimated offering expenses payable by the Company and
application of the net proceeds). The table should be read in conjunction with
the Consolidated Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
ACTUAL AS ADJUSTED(1)
------ --------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current maturities................ $1,210 $ 400
------ ------
Shareholders' equity:
Preferred Stock, 1,000,000 shares authorized; none issued
or outstanding......................................... -- --
Common Stock, 10,000,000 shares authorized; 1,800,000
shares issued and outstanding, 3,000,000 shares issued
and outstanding, as adjusted........................... 2 5,491
Retained earnings......................................... 645 645
------ ------
Shareholders' equity...................................... 647 6,136
------ ------
Total capitalization.............................. $1,857 $6,536
====== ======
</TABLE>

- ---------------

DIVIDEND POLICY

The Company has not paid any cash dividends on its Common Stock. It is the
current policy of the Company not to pay cash dividends on its Common Stock. Any
payment of cash dividends in the future will be dependent upon the Company's
financial condition, results of operations, current and anticipated cash
requirements, restrictions on the payment of dividends under the terms of any of
the Company's future financing arrangements and plans for expansion, as well as
other factors that the Board of Directors deems relevant. The Company's current
bank loan agreements do not prohibit the payment of dividends.

13
<PAGE> 16

SELECTED FINANCIAL DATA

The following consolidated selected financial data should be read in
conjunction with the Consolidated Financial Statements and related Notes thereto
appearing elsewhere in this Prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The consolidated statements
of income (loss) data for the years ended December 31, 1996 and 1997 and the
actual and adjusted consolidated balance sheet data as of December 31, 1997 are
derived from the consolidated financial statements of the Company which have
been audited by Ehrhardt Keefe Steiner & Hottman PC, the Company's independent
auditors, as indicated in their report included herein. The selected financial
data provided below is not necessarily indicative of the future results of
operations or financial performance of the Company. The pro forma data assumes
the Company completed the acquisition of Mirocon, Inc. on January 1, 1996 and
sold the Texas Territories on January 1, 1996.

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------- ----------------------
1996 1997 1996 1997
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT (IN THOUSANDS, EXCEPT
PER SHARE DATA) PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENTS OF INCOME (LOSS) DATA:
Revenue
System Affiliates..................................... $1,447 $1,951 $1,374 $1,896
Information services.................................. 2,066 735 1,531 1,640
Proceeds from the sale of Company operated
territories........................................ 480 714 480 714
Training, license and other........................... 16 120 16 120
------ ------ ------ ------
Total revenue................................. 4,009 3,520 3,401 4,370
------ ------ ------ ------
Operating Expenses
Costs of services provided............................ 2,124 1,301 1,708 1,587
Costs of Company operated territories................. 31 506 31 506
Selling, general and administrative................... 1,413 917 1,823 1,320
------ ------ ------ ------
Total operating expenses...................... 3,568 2,724 3,562 3,413
------ ------ ------ ------
Income (loss) from operations........................... 441 796 (161) 957
Other income............................................ 29 28 32 37
Interest expense........................................ (108) (77) (139) (103)
------ ------ ------ ------
Income (loss) before income taxes....................... 362 747 (268) 891
Income tax expense(benefit)............................. 78 244 (136) 293
------ ------ ------ ------
Net income(loss)........................................ $ 284 $ 503 $ (132) $ 598
====== ====== ====== ======
Basic earnings (loss) per share(1)...................... $ .16 $ .28 $ (.07) $ .33
====== ====== ====== ======
Weighted average common stock outstanding............... 1,800 1,800 1,800 1,800
====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
ACTUAL AS ADJUSTED(2)
------ --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 116 $5,177
Total assets................................................ 2,864 7,543
Total liabilities........................................... 2,217 1,407
Shareholders' equity........................................ 647 6,136
</TABLE>

- ---------------

(1) No difference exists between basic and diluted earnings (loss) per share.

(2) Adjusted to reflect the sale by the Company of the 1,200,000 Units comprised
of 1,200,000 shares of Common Stock and 1,200,000 Warrants offered hereby at
the combined offering price of $5.60 and application of the net proceeds.
See "Use of Proceeds."

14
<PAGE> 17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company specializes in preparing mortgage credit reports that are
customized to meet each lender's individual needs. The Company also provides a
broad range of credit, employment and other information services to mortgage
lenders, consumer lenders, employers, landlords, and other businesses. See
"Business."

The Company provides its services in two different fashions. The first
involves services sold directly by the Company to third party customers such as
mortgage lenders, financial institutions, private enterprises, and individuals
(referred to as "information services"). Secondly, the Company sells its
services through franchisees and licensees ("System Affiliates"). The Company
currently has 29 franchisees and 35 licensees. The System Affiliates provide
information services to customers using the Company's technology and pay
royalty, license and other fees to the Company.

During 1996 and 1997, the Company's primary emphasis, in addition to
expanding its market, was the completion of its technology center. This center
was necessary for the Company to provide its Bureau Express reports and other
on-line services to both third party users and System Affiliates. Associated
with this center were hardware costs of $111,000 and $143,000 in 1996 and 1997,
salaries to programmers of $400,000 and $468,000 in 1996 and 1997, and
communications costs of $157,000, primarily in 1997. The Company funded these
expenditures principally from the proceeds from the sale of certain Company
operated territories as described below.

On January 5, 1996, one Company developed territory (the "Indiana
Territory") was sold to a non-affiliated party for $480,000, which had a
financial reporting carrying value of $31,000. On January 6, 1997, the Company
sold certain areas (the "Texas Territories") to a non-affiliated party for
$714,000 which had a financial reporting carrying value of $506,000. The Company
sold both territories because they represented unique opportunities to maximize
current cash flow and fund the Company's technology center development. In
conjunction with the sales of these territories, the Company granted licenses to
the buyers to use its proprietary technology thereby assuring continued revenue
from these territories in the form of System Affiliates revenue. Each license
has a primary term of three years and is automatically extended for an
additional three years unless terminated by either party upon at least 60 days
advance written notice. Management of the Company believed the long range
economic benefit from the Texas Territories sale, which provided the capital to
enable the Company to accelerate the completion of its technology center,
outweighed the loss of information services revenue from those territories,
especially when mitigated by lower resultant costs and the receipt of license
fees after the sale. There are no agreements, arrangements or rights in favor of
the Company to repurchase these territories or licenses in the future.

The sale of these two territories resulted in a change in the mix of
revenues and decrease in certain expenses in 1997. Revenue associated with
information services, costs of services provided, and selling, general and
administrative expenses decreased in 1997 compared to 1996, while System
Affiliates revenue increased.

FUTURE TRENDS

In June of 1997, having substantially completed the technology center with
proceeds from the sale of the two territories, the Company redirected its focus
from the expansion of System Affiliates revenue to sales of information services
to third party customers. The Company believes this will result in increased
profitability due to higher gross profit experienced from information service
sales compared to System Affiliates revenue. In 1997, the Company realized gross
profit, as a percentage of total revenue, equal to 68% from sales of information
services compared to 49% gross profit, as a percentage of total revenue, from
System Affiliates revenue. See Note 9 to the Consolidated Financial Statements.
The Company does not intend to license or franchise territories to third parties
in the foreseeable future.

In order to expand information services, the Company has devised a
consolidation plan whereby it has targeted both competitors and System
Affiliates as potential acquisition candidates. See "Business -- Business

15
<PAGE> 18

Strategy." The Company's first acquisition under its consolidation plan occurred
in December of 1997 when the Company acquired substantially all of the assets of
Mirocon, Inc., a former franchisee located in Loveland, Colorado. As disclosed
in the unaudited pro forma combined statement of income for the year ended
December 31, 1997, Mirocon, Inc. had in excess of $900,000 in information
services revenue while contributing $95,000 to pro forma combined net income.
The Company intends to realize additional cost savings by consolidating Mirocon,
Inc.'s operations into the Company's facilities.

The Company expects to realize other benefits when it acquires System
Affiliates or competitors, such as reducing and consolidating accounting,
administrative and technology maintenance functions at each location by
performing these duties at its present facilities. Currently, there are 29
franchisees and 18 licensees that have exclusive territory rights to market the
Company's MCR information services. Most of the Company's existing franchise
agreements expire at various times through the year 2005 while most of the
Company's license agreements expire at various times through the year 2001. The
Company will be required to purchase a System Affiliate, or wait until the
expiration of the applicable agreement with the System Affiliate, before
expanding into, or acquiring a competitor in, the same territory.

As the Company implements its consolidation plan, it expects information
services revenue and gross profit to increase and System Affiliates revenue to
decrease as System Affiliates are either acquired or their agreements with the
Company expire. The Company also expects that revenue from the sale or licensing
of Company operated territories will substantially decrease or be eliminated in
future periods.

REVENUE RECOGNITION

The Company's accounting policies for significant revenue recognition are
as follows:

System Affiliates Revenue

Pursuant to the various franchise and license agreements, System Affiliates
are required to pay the Company royalties based on a percentage of gross
billings. In addition, territories providing EMPfacts services are required to
pay $100 per month for national advertising conducted by the Company. Royalties
under the franchise and license agreements are accrued based on the percentage
of gross billings as reported by System Affiliates and are included in accounts
receivable.

Information Service Revenue

The Company recognizes revenue generated from direct sales of mortgage
credit reports and other information services when the information has been
provided to the customer, since substantially all required services have then
been performed.

Software Development Costs

Software development costs are those costs, which are primarily payroll and
related costs, that are directly related to the development of the Company's
proprietary software technology.

In 1996, software development costs associated with internally developed
software used to support System Affiliates revenue and information services were
expensed as incurred by the Company.

In 1997, the Company adopted the provisions of Statement of Position (SOP)
98-1, "Accounting for Costs of Computer Software Developed for Internal Use."
Direct costs incurred in the development of software are capitalized once the
preliminary project stage is completed, management has committed to funding the
project and completion and use of the software for its intended purpose are
probable. The Company ceases capitalization of development costs once the
software has been substantially completed and is ready for its intended use.
Software development costs are amortized over their estimated useful lives of
three years. This SOP encourages early adoption but does not allow retroactive
restatement of previously issued financial statements. Accordingly, management
believes that adoption of SOP 98-1 in a year prior to the Company's initial
public offering ("IPO") would be more informative to users of financial
statements rather than in a period after its IPO. The effect of the adoption was
to increase 1997 net income by approximately

16
<PAGE> 19

$200,000 or $.11 per share of Common Stock. The 1997 increase resulted from
capitalized salaries of $450,000 less $150,000 of related amortization and
$100,000 of income taxes. Had the Company adopted SOP 98-1 in 1996, net income
would have been increased by approximately $178,000 to $462,000 or $.26 per
share of Common Stock.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated, as a percentage
of total revenues, those items included in the Company's Consolidated Statements
of Income and the Unaudited Pro Forma Combined Statements of Income (Loss):

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------- ----------------
(ACTUAL) (PRO FORMA)(1)
---------------- ----------------
1996 1997 1996 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenue
System Affiliates................................. 36.1% 55.4% 40.4% 43.4%
Information services.............................. 51.5 20.9 45.0 37.5
Proceeds from the sale of Company operated
territories.................................... 12.0 20.3 14.1 16.4
Training, license and other....................... .4 3.4 .5 2.7
----- ----- ----- -----
Total revenue............................. 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Operating Expenses
Costs of services provided........................ 53.0 37.0 50.2 36.3
Costs of Company operated territories............. 0.8 14.4 .9 11.6
Selling, general and administrative............... 35.2 26.0 53.6 30.2
----- ----- ----- -----
Total operating expenses.................. 89.0 77.4 104.7 78.1
----- ----- ----- -----
Income (loss) from operations....................... 11.0 22.6 (4.7) 21.9
Other income........................................ .7 .8 .9 .9
Interest expense.................................... (2.7) (2.2) (4.0) (2.4)
----- ----- ----- -----
Income (loss) before income taxes................... 9.0 21.2 (7.8) 20.4
----- ----- ----- -----
Income tax (expense) benefit........................ (1.9) (6.9) 3.9 (6.7)
----- ----- ----- -----
Net income(loss).................................... 7.1% 14.3% (3.9)% 13.7%
===== ===== ===== =====
</TABLE>

- ---------------

Years ended December 31, 1996 and 1997.

System Affiliates revenue increased $500,000, or 35%, from $1.45 million in
1996 to $1.95 million in 1997. The Texas Territories sold and licensed accounted
for $105,000 of the $500,000 increase in 1997. The remaining increase of
$395,000 is due to increased billing volume by System Affiliates and resultant
royalty, license and other fees.

Company information services revenue decreased $1.33 million, or 64%, from
$2.07 million in 1996 to $735,000 in 1997. The sale of the Texas Territories to
a Dallas based mortgage credit reporting agency, which then became a System
Affiliate in January of 1997, resulted in this decrease. The Texas Territories
accounted for $1.47 million of the 1996 information services revenue and none in
1997. The recent acquisition of Mirocon, Inc. in December of 1997 contributed
$85,000 to information services revenue in 1997.

Proceeds from the sale of Company operated territories increased by
$234,000, or 49%, from $480,000 in 1996 to $714,000 in 1997. Revenue generated
in 1996 represented the Indiana Territory sale, whereas revenue for 1997
consisted of the Texas Territories sale. With the Texas Territories sale, the
Company sold assets

17
<PAGE> 20

consisting of accounts receivable and intangibles with a net carrying value of
$506,000. The financial reporting carrying value of the Indiana Territory was
$31,000 which reflected the net book value of certain fixed assets. The
difference in the financial reporting carrying value of the Indiana Territory
and Texas Territories was due to the fact that the Indiana Territory was
organized and developed by the Company with relatively low capitalized costs
whereas the Texas Territories were previously acquired from a franchisee at
their market value.

Training, license and other revenue increased $104,000, or 650%, from
$16,000 in 1996 to $120,000 in 1997. The majority of this increase was a
one-time charge to System Affiliates for a marketing software interface.

Costs of services decreased $822,000, or 39%, from $2.12 million in 1996 to
$1.30 million in 1997. This decrease directly relates to the costs of
information services revenue associated with the Texas Territories sale.
Included in the costs of services provided are direct costs such as salaries,
employment taxes, telephone, rent and repository costs. The total of these
direct costs in the Texas Territories incurred in 1996 were $736,000. In
addition, in 1997, $453,000 of salary related costs were capitalized as software
development costs related to the Company's change in accounting policy described
in Note 3 of the Consolidated Financial Statements. The costs of services
provided for in 1997 also include $157,000 of costs directly related to the
completion of the Company's technology center.

Selling, general and administrative expenses decreased $496,000, or 35%,
from $1.41 million in 1996 to $917,000 in 1997. This decrease related to costs
associated with the operations of the Texas Territories sold, including $307,000
of salaries to sales representatives and $164,000 related to amortization of
intangible assets acquired in the original purchase of the Texas Territories.

Total operating costs decreased $850,000, or 24%, from $3.57 million in
1996 to $2.72 million in 1997 resulting in an increase in operating income of
$355,000, or 80%, from $441,000 in 1996 to $796,000 in 1997.

Interest expense decreased $32,000, or 29%, from $109,000 in 1996 to
$77,000 in 1997 due to a reduction in long-term debt.

Income taxes increased $166,000, or 213%, from $78,000 in 1996 to $244,000
in 1997. The effective tax rate increased 11.2% in 1997 because in 1996 the
Company was able to utilize research tax credits and the corporate surtax
exemption.

As a result of the foregoing factors, net income increased $219,000, or
77%, from $284,000 in 1996 to $503,000 in 1997.

The impact from the acquisition of Mirocon, Inc. can be seen in the pro
forma combined statements of income for the years ended December 31, 1996 and
1997. The Company's historical net income increased on a pro forma basis by
approximately 19% in 1997 as a result of the Mirocon, Inc. acquisition.

LIQUIDITY AND CAPITAL RESOURCES

From inception through 1994, the Company funded its operations through
various debt financing obligations, including a line of credit and a Small
Business Administration loan, and working capital. Since 1995, the Company has
met its capital requirements from operating cash flow and from the sale of
certain territories as described above.

In December of 1997, the Company acquired Mirocon, Inc. for approximately
$519,000, of which $100,000 has been paid. The remainder is evidenced by a note
payable of $419,000. The Company has required contractual payments under the
note of approximately $135,000 in 1998. Upon the completion of this offering, a
payment of the lesser of $160,000 or the outstanding balance on the note is
required.

The Company had cash balances of $397,000 at December 31, 1997. In 1997,
net cash provided from operations was approximately $1.2 million which resulted
from depreciation, amortization, and the financial carrying value in assets
related to territories sold in 1997. The Company also experienced an increase in
receivables of approximately $326,000. Net cash used in investing activities was
approximately $501,000. Cash

18
<PAGE> 21

payments on the Company's line of credit and principal payments on long-term
debt were approximately $321,000. Capital expenditures amounted to approximately
$593,000, which were partially offset by the collection of $185,000 on notes
receivable associated with the Indiana Territory sale. Cash used by financing
activities was approximately $357,000. With the exception of scheduled long-term
debt repayment of $442,000, the Company has no other material capital
commitments.

The Company's current consolidation plan calls for expansion of information
services through the acquisition of competitors and/or System Affiliates. While
the Company has not determined the number of acquisitions to be made, it has
identified a group of approximately 30 potential acquisition candidates,
although there are no agreements, arrangements or understandings with any
persons or entities as to any acquisition at the present time. The current use
of proceeds from this offering allocates $3.0 million for acquisitions.
Additional funding to complete the consolidation plan will be required and may
come from operations, future public or private equity or debt financings, the
issuance of Company securities to purchase the acquisition candidates, or any
combination of the foregoing. No assurances can be given that the Company will
be able to fully implement its consolidation plan.

INFLATION

Although the Company cannot accurately anticipate the effect of inflation
on its operations, the Company does not believe that inflation has had, or is
likely in the foreseeable future to have, a material effect on its results of
operations or financial condition.

YEAR 2000 COMPLIANCE

The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The "year 2000" problem
is pervasive and complex as virtually every computer operation will be affected
in some way by the rollover of the two-digit year value to 00. The issue is
whether computer systems will properly recognize date-sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail.

The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test its systems for year 2000 compliance. It is
anticipated that all reprogramming efforts will be complete by December 31,
1998, allowing adequate time for testing. To date, confirmations have been
received from the Company's primary processing vendors that plans are being
developed to address processing of transactions in the year 2000. The year 2000
problem could also affect the computer systems of the Company's customers, which
in turn could adversely impact the Company's revenue if such customers are
unable to order the Company's services due to their own year 2000 problems.
Management has not yet completed their full assessment of the year 2000
compliance expense and related potential effect on the Company's earnings,
although management believes that the costs of compliance and potential impact
on operations will not be material.

FORWARD-LOOKING STATEMENTS

Certain of the information discussed in the Prospectus, and in particular
in this section are forward-looking statements that involve risks and
uncertainties that might adversely affect the Company's operating results in the
future in a material way. Such risks and uncertainties include, without
limitation, the effect of national and regional economic and market conditions,
costs of labor and employee benefits, costs of marketing, costs of telephone and
repository's costs used in the operation of the business, intensity of
competition for locations as well as customers, changes in interest rates, legal
claims, and the availability of financing for the Company consolidation and
expansion plans. Most of these risks are beyond the control of the Company.
Notwithstanding that the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 is inapplicable to offers and sales pursuant to
this Prospectus, investors should use caution when reviewing forward-looking
statements.

19
<PAGE> 22

BUSINESS

GENERAL

The Company provides a broad range of information services to mortgage and
consumer lenders, employers, landlords and other business customers located
throughout the United States. The Company specializes in preparing mortgage
credit reports ("MCRs") that are customized to each mortgage lender's
requirements and transmitted to lenders via the Internet, modem or facsimile.
The Company's larger customers include, among others, NationsBanc/Boatmen's
National, Chase Manhattan Residential, U.S. Home Mortgage, CoreStates Mortgage
and CTX Mortgage. In 1996, the Company was selected to be one of five approved
information vendors for Freddie Mac's automated underwriting system, Loan
Prospector. Based on publicly reported information concerning mortgage loans
originated and refinanced in the United States, management believes the Company
and its System Affiliates are one of the leading suppliers of MCRs in the United
States. The Company and its System Affiliates delivered approximately 1.08
million and 1.43 million MCRs representing gross system billings of
approximately $27.3 million and $31.3 million in 1996 and 1997, respectively.

MCRs supplied by the Company generally fall in three categories:
residential mortgage credit reports ("RMCRs") under which the Company verifies
credit, employment and other information and conducts an in-person or telephone
interview with the loan applicant; residential mortgage credit reports that do
not encompass applicant interviews ("RMCR Jrs."); and Bureau Express reports,
which provide only the merged credit information from the three primary credit
repositories in the United States without the verification performed in RMCRs or
RMCR Jrs. Through its expertise developed in mortgage credit reporting, the
Company has recently expanded its services to include EMPfacts, an employment
screening service, QUICKpeek Identifier, an instant employment screening
service, QUICKpeek Tenant, a credit and employment screening service for use by
leasing agents and landlords, and Corpdata, a credit reporting service on
businesses.

The Company intends to implement a consolidation plan in the MCR business.
The Company believes a favorable environment exists for acquisitions because of
the highly fragmented nature of the industry and the increased cost of new
technologies that generally cannot be afforded by smaller participants in the
market. The Company's consolidation plan envisions the purchase of unaffiliated
companies active in the MCR market as well as System Affiliates. Consistent with
this consolidation plan, the Company concluded the acquisition of Mirocon, Inc.
in December 1997. The Company's consolidation plan is designed to expand its
existing business and take advantage of its core competencies including, among
other things, its highly developed customer service program, use of
sophisticated technology to achieve efficiencies in the MCR market, development
of close working relationships with mortgage lenders, knowledge of the MCR
market and its experienced management team.

INDUSTRY

The Company believes the mortgage credit reporting industry is highly
fragmented and consists of approximately 1,400 providers in the United States.
As the primary service of the Company is its MCRs, the Company's business is
directly related to the mortgage lending industry, which enjoyed a near record
year in 1997. Mortgage originations (including refinancings) have been estimated
at $870 billion in 1997, almost 11% higher than the $785 billion in originations
in 1996 and the third-best year ever. The 1997 loan activity equates to the
generation of an estimated 11 million mortgage credit reports.(1)

In 1997, there were about 4.3 million sales of existing homes and 10
million sales of new homes according to the Mortgage Bankers Association of
America. The Company estimates one million refinancings of existing homes
occurred in 1997. The Company also estimates, based on its historical
experience, that a significant number of applications for residential mortgage
credit were not funded for a variety of reasons during 1997.

- ---------------

1Source: Department of Housing and Urban Development and the Mortgage Bankers
Association of America.

20
<PAGE> 23

According to the Mortgage Bankers Association of America, the outlook for
the remainder of the decade appears stable due to demographics, particularly the
impact of the aging of the baby boom generation, which is entering its peak
earnings period. Presently, home ownership rates are approximately 66% for the
35-to-44 age group, 75% for the 45-to-54 age group and 80% for the 55-to-64 age
group. Although population growth and household formation rates are projected to
slow during the next 10 years, population growth within the top earning
groups -- ages 45-to-54 and 55-to-64 -- is projected to increase. Management
believes that interest rates will remain relatively stable in 1998. Thus, if the
foregoing home ownership and interest rate trends continue, demand for MCRs
should continue, although such results cannot be assured.

The mortgage credit reporting industry provides a valuable service to the
lending industry due to its report formatting and verification services.
Millions of pieces of credit data are furnished unverified to the three major
credit repositories from lenders and creditors worldwide. Due to the volume of
information and lack of verification at the credit repository level, significant
inaccuracies of information can occur in an individual's credit file which must
be verified and accurately reported.

Historically, mortgage credit reporting entities have performed these
services by manual verification in the form of calling creditors, lenders,
employers, landlords, and other businesses directly to verify information, and
reviewing public files and other information sources. However, the industry has
been undergoing significant change in terms of how services are requested, how
information is delivered, and the format in which the data is returned. These
changes have been driven by the advances in computer software and hardware,
along with advances in communications technology. The mortgage lending industry,
along with other users of credit information, expect quick turnaround of
accurate reports in a customized format in order to facilitate their lending
decisions. Thus, the Company believes that entities involved in mortgage credit
reporting must continually develop and maintain sophisticated computer and
communication technology to compete. Due to the costs and technical competence
required to keep abreast of technological advances in the industry, the Company
believes that the credit reporting industry will consolidate, and that the
market may be dominated by a handful of companies that have proven technological
capabilities and diversified product lines.

BUSINESS STRATEGY

The Company intends to expand its present business operations and to
develop new opportunities by, among other things, pursuing the following
strategies:

- Acquire System Affiliates and Competitors to Expand Business. The Company
intends to expand its business operations by purchasing certain of its
System Affiliates as well as purchasing competing businesses. While the
Company has not determined the number of acquisitions to be made, it has
identified approximately 30 potential acquisition candidates from the
approximately 1,400 mortgage credit reporting companies in the United
States, although there are no agreements, arrangements or understandings
with any persons or entities as to any acquisition at the present time.
The Company believes its consolidation plan will result in substantial
savings in accounting, administrative and technology expenses, and that
marketing of its ancillary services can be accelerated through
acquisitions. The Company may use cash, stock, or a combination thereof,
to effect any such acquisitions. To the extent the Company requires
additional funds for acquisitions under its consolidation plan, the
Company will likely consider funding such acquisitions through cash from
operations, proceeds (if any) from the exercise of the Warrants offered
herein, the issuance of capital stock to the acquisition candidates,
further private or public debt or equity financing or by a combination of
the foregoing.

- Capitalize on Sophisticated Technology. The Company believes its
technology is state-of-the-art, and to preserve this advantage, it
employs 15 technical persons, seven of whom are software programmers, to
continually upgrade its electronic capabilities and develop new
applications. The Company has budgeted a portion of the proceeds of this
offering to the continued maintenance and development of its technology.
If funds from operations or external financing sources permit, the
Company will devote additional resources to technological development and
implementation. The Company believes that speed and accuracy of service,
which are directly related to its technical ability, are critical to the
Company's growth and success.

21
<PAGE> 24

- Accelerate Market Penetration. The Company intends to accelerate its
market penetration throughout the United States by expanding and refining
sales and marketing techniques used by it over the past several years,
including: (i) face-to-face selling with prospective customers,
consisting primarily of larger companies; (ii) in-house telemarketing to
existing and prospective customers who have shown an interest in
purchasing the Company's services; (iii) public relations efforts; (iv)
participation in trade shows and seminars; (v) advertising in trade
publications; (vi) maintaining a web page on the Internet; and (vii)
mailing of quarterly news releases to existing and prospective customers.

- Increase Revenue and Customer Convenience by Offering Additional
Services. The Company intends to increase revenue and customer
convenience by providing one-stop shopping for its customers through
expanded services. The Company will attempt to accomplish this by
"bundling" with its MCRs the services of third party vendors that provide
appraisals, title insurance, flood certification and title searches. The
Company's strategy is to receive a commission or discount on such
services in order to enhance its revenues while better serving its
customers. The Company has already begun to implement this strategy as it
is currently offering flood determination certificates through a third
party vendor.

- Increase Quality Customer Service and Support. The Company intends to
expand and enhance its customer service and support program by: (i)
providing customer service representatives on-call for 12 hours a day
Monday through Friday; (ii) performing additional in-house training of
all franchisees, licensees and customer service representatives with
regard to the Company's services; (iii) enhancing quality control checks
on the Company's services; and (iv) revising, when appropriate, minimum
acceptable performance guidelines for employees. In addition, the Company
realizes the importance of employees to the success of its operations
and, therefore, strives to provide a positive work environment and
benefit package for employees.

RECENT ACQUISITION

In December 1997, the Company acquired the business of one if its
franchisees, Mirocon, Inc., for $519,000, of which $100,000 has been paid. The
remaining $419,000 of the purchase price is evidenced by a note to the seller
which requires five monthly principal-only payments of $7,000 beginning in
February 1998 with the remaining balance of $384,000 to be amortized over 55
months bearing interest at 8% per annum commencing June 1998. The terms of the
note also provide that upon closing of this offering, the Company is to pay at
least $160,000 towards the remaining balance of the note, and any amount
remaining outstanding after such payment is to be paid in 24 equal monthly
installments without interest. See "Use of Proceeds." The Company believes this
acquisition is typical of similar acquisitions that it could make upon
availability of funding.

MORTGAGE CREDIT REPORTS

The Company specializes in preparing MCRs that are customized to each
mortgage lender's requirements and transmitted to lenders via the Internet,
modem or facsimile. MCRs supplied by the Company generally fall in three
categories: RMCRs, under which the Company verifies credit, employment and other
information and conducts an in-person or telephone interview with the loan
applicant; RMCR Jrs., which do not encompass applicant interviews; and Bureau
Express Reports, which provide only the merged credit information in a
user-friendly integrated report from the three primary national credit
repositories in the United States without the Company verification performed in
the RMCRs or RMCR Jrs. Bureau Express Reports are typically compiled by the
Company's proprietary system in less than 60 seconds, free of duplication. The
system also provides a means to resolve inconsistencies between the credit
repositories' information.

22
<PAGE> 25

The following graph sets forth information concerning the annual volume of
MCRs performed by the Company and its System Affiliates for the years indicated:

MORTGAGE CREDIT REPORT VOLUME

'GRAPH'

The following graph sets forth information concerning the annual volume of
Bureau Express Reports performed by the Company and its System Affiliates for
the years indicated:

BUREAU EXPRESS REPORT VOLUME

'GRAPH'

The Company's MCR services are fully automated. Mortgage lenders submit
credit applications to the Company via facsimile or computer modem. Depending on
the type of MCR requested, applications are assigned to credit investigators who
poll the three credit repositories for credit reports, verify credit
information, residence history and employment history for the last two years,
check or verify legal proceedings and tax liens and conduct an interview with
the applicant regarding all the information obtained. If any discrepancies are
uncovered during the investigation, the Company contacts the applicant and
conducts a conference call with the reporting entity to clear up the matter.

23
<PAGE> 26

Once the report is completed, the Company delivers the report directly to
the mortgage lender's computer or by transmission via facsimile. In the future,
the Company hopes to receive most applications into its computer system via the
Internet. This technology has been implemented on a limited basis to date, but
the Company believes most mortgage lenders will eventually use the Internet for
most, if not all, of their communication needs. All report forms are customized
according to each lender's requirements and generated by the Company's
proprietary and non-proprietary computer system, thereby eliminating the need
for a stockpile of forms and effectively reducing overhead costs. Credit reports
are printed using state-of-the-art laser technology. Lenders can choose to
interface directly with the Company using their own mortgage origination or
processing software. The Company can also remotely laser print completed credit
reports in the lender's office. The Company provides its customers with
proprietary software which allows electronic ordering and retrieval of reports.
The Company effectively provides the lenders with all report forms because the
reports are generated by the computer system. The Company also adapts its
computer generated forms and reports to comply with different state
requirements.

To capture more of the market and to provide one stop shopping for its
customers, the Company is expanding its service line to include other services
required by mortgage lenders such as appraisals, title insurance, flood
certification and title searches, which the Company calls "bundled services."
Generally, the Company provides such bundled services through third party
providers, and the Company receives revenue by way of a commission or the spread
between the retail price paid by the customer and a wholesale price paid by the
Company. The Company also provides outsourcing to its customers, generally on an
"overflow basis." In effect, the Company acts as the loan processor by compiling
a complete loan application, with all required reports. The lender needs only to
approve the loan via its loan committee. This service constitutes a small
percentage of the Company's overall revenue. However, as the trend to
outsourcing of services continues, management of the Company anticipates this
service may constitute a larger portion of its revenue, especially during
periods of significant mortgage refinancings.

The Company certifies to lenders that its MCRs meet standards required by
Freddie Mac, Fannie Mae, the Veterans Administration, the Federal Housing
Administration, and the Rural Housing Service.

The Company has developed a program to assist lenders to low and moderate
income applicants with its Form 1003 Supplement. Determining such a borrower's
creditworthiness involves developing his/her credit history. However, many low
to moderate income borrowers do not always use the types of credit traditionally
reported to the credit repositories. Through the use of the Company's Affordable
Housing 1003 Supplement Form, the gap between traditional and non-traditional
credit is bridged. Credit history is developed through verifying non-traditional
credit such as utilities, car insurance, child care, furniture rental, loans
from employers, payments to savings accounts, and automatic deductions from
paychecks.

OTHER SERVICES

Although MCRs are, and are expected to remain, the Company's principal
business activity, it is developing additional services which it intends to
aggressively market in the future. The following describes the more important of
these services.

EMPfacts. Management of the Company believes employment screening is a
growing industry due in large part to the legal consequences of negligent
hiring, as well as the desire and necessity for employers to hire the best
applicants. The Company's EMPfacts employment screening services offer
state-of-the-art, accurate background checks that verify an applicant's
professional, educational and personal history. EMPfacts offers individual or
bundled screening services in the following areas:

- Substance Abuse Testing
- Motor Vehicle Record (MVR)
- Worker's Compensation History
- Public Records Information
- Fraud Searches
- Criminal History
- Education Verification

- Financial Reports
- Property Search
- Employment Verification
- Social Security Number Search
- Professional License Verification
- Psychological Testing

24
<PAGE> 27

The following graph sets forth information concerning the annual volume of
EMPfacts reports performed by the Company and its System Affiliates for the
years indicated:

EMPFACTS REPORT VOLUME

FACTUAL DATA CHART

QUICKpeek Identifier. The Company's QUICKpeek Identifier system enables
customers, via Windows compatible software, to receive an instant report, in 60
seconds or less, which can be viewed on screen or printed. By entering a
person's name, address and social security number, QUICKpeek Identifier provides
employment information, public records and fraud search, financial summaries and
residence information. The QUICKpeek Identifier program commenced in January
1997. The Company is in the process of developing various marketing strategies
to further its implementation.

QUICKpeek Tenant. The Company has designed a system specifically for
leasing agents and landlords with respect to rental property. The system checks
and reports information regarding a proposed tenant through credit repository
inquiries, employment history, public records, residence history, payment
habits, criminal and eviction data. This program was also initiated in 1997.

In 1997, a combined 4,587 QUICKpeek Identifier and QUICKpeek Tenant
searches were performed.

Corpdata. The Company also offers Corpdata, its credit reporting service on
small, medium and large sized businesses. Commercial credit repositories
sometimes do not have information on businesses and users can often expect to
receive a "No Record" response when seeking information on businesses. Corpdata
obtains credit information and other data about such businesses which can be
customized to meet customer needs.

SYSTEM AFFILIATES

From 1989 to 1993, the Company pursued a strategy of franchising its MCR
system. The Company earns fees based on each franchisee's use of its system to
generate reports for the franchisees' customers. In 1993, the Company terminated
its franchise program and began entering into licensing agreements whereby
licensees utilize the Company's systems to service their customers in return for
the payment to the Company of a percentage of their gross billings. The Company
presently has 29 franchisees and 35 licensees, the majority of which are
networked with the Company's Technology Center.

The Company's System Affiliates currently provide significant revenue to
the Company. For the years ended December 31, 1996 and 1997, System Affiliates
provided 36% and 55%, respectively, of the revenue of the Company.

25
<PAGE> 28

Franchises. The following table sets forth certain information at December
31,1997, about the geographic location of the Company's 29 franchises.

MCR Franchises Chart
- ---------------

(1) One of the Texas franchisees owns the Arizona and New Mexico franchises.

The Company has a standard Franchise Agreement that it has entered into
with its franchisees. While all agreements may not be completely uniform due to
modifications made pursuant to negotiations with each franchisee, in general,
the Franchise Agreements include the following provisions, among others:

- Franchisees are permitted to use the Company's trademarks in a specified
territory for the purpose of providing MCRs.

- Franchisees are provided with an operational manual, interface software
and training in connection with using the Company's software and systems
for producing MCRs.

- The term of the Franchise Agreement is generally 10 years and is
automatically extended unless (i) the franchisee declines to extend in
writing, or (ii) the Company declines to extend due to the franchisee
failing to comply with the Franchise Agreement, subject to a 30 day cure
period. In addition, the Franchise Agreement may also be terminated by
the Company upon notice if the franchisee becomes insolvent, bankrupt or
makes an assignment for the benefit of creditors, or if the franchisee is
in default under the Franchise Agreement.

26
<PAGE> 29

- The Franchise Agreements sometimes required an initial fee based on the
population of the franchisee's territory. In addition, franchisees are
required to pay a monthly royalty fee based on MCRs sold per month as set
forth in the following table:

<TABLE>
<CAPTION>
NUMBER OF MCRS SOLD PER MONTH PERCENTAGE OF GROSS SALES
- ----------------------------- -------------------------
<S> <C>
0 to 200................................................. 0%
201 to 400............................................... 7%
401 to 500............................................... 8%
501 to 700............................................... 9%
701 to 800............................................... 10%
801 & above.............................................. 11%
</TABLE>

Generally, when a franchise attains a certain royalty rate, the Franchise
Agreement requires that future royalties be based on that rate (unless a
higher royalty rate is attained) even though gross sales for a later month
fall below that royalty rate's threshold:

Also, franchisees are required to pay monthly fees as follows:

(a) 3% of all gross billings in connection with any out-sourced "bundled
services" provided by the Company; and

(b) a communication fee to cover communication costs incurred by the
Company.

- Typically, franchisees may not transfer or assign the Franchise Agreement
and related rights without the written consent of the Company. In
addition, the Franchise Agreement generally provides for a right of first
refusal in favor of the Company when a franchisee receives a bona-fide
offer to purchase its business.

27
<PAGE> 30

Licenses. The following table sets forth certain information about the
geographic location of the Company's 35 licenses in effect at December 31, 1997,
of which 18 are MCR licenses and 17 are EMPfacts licenses.

[LICENSES CHART]

The Company has a standard License Agreement that it enters into with its
licensees. While all licenses may not be completely uniform due to modifications
made pursuant to negotiations with each licensee, in general, the License
Agreements include the following provisions, among others:

- Licensees are permitted to use the Company's trademarks in a specified
territory for the purpose of providing MCRs and other Company services.

- Licensees are provided with an operational manual and approximately a
week of training in connection with using the Company's software and
systems.

- The term of the License Agreement is generally three years unless earlier
terminated and is automatically extended for another three years unless
terminated by either party upon at least 60 days advance written notice.
In addition, the Company (i) has the right to suspend services if the
licensee fails to pay any amounts due pursuant to the License Agreement
within 30 days, (ii) has the right to immediately terminate the license
if the licensee utilizes any other mortgage credit reporting software,
and (iii) has the right to compete with the licensee or grant other
licenses in the licensee's territory if the licensee breaches any
material term of the License Agreement.

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<PAGE> 31

- The License Agreements can require an initial fee based on the population
of the licensee's territory, although such fee is waived in many
instances. In addition, licensees are required to pay monthly fees as
follows:

(a) generally the greater of $700 or 5% of all gross billings of the
licensee from MCRs or other Company services;

(b) 3% of all gross billings in connection with any out-sourced "bundled
services" provided by the Company; and

As to both franchisees and licensees, the Company provides access to its
Technology Center (computer network system), updates to its software, hardware
and software support, training and marketing support, and the right to use the
Factual Data trademark and trade name. Some franchisees and licensees service
states outside of their office location.

In connection with the Company's consolidation plan, some System
Affiliate's exclusive territory rights could be a hindrance to the plan since
the Company will be required to purchase a System Affiliate, or wait until the
expiration of the applicable agreement with the System Affiliate, before
expanding into, or acquiring a competitor, in the same territory.

The Company presently operates two offices, both located in Colorado, which
market services in the following jurisdictions: Alaska, Colorado, District of
Columbia, Hawaii, Texas, Virginia, New Hampshire and West Virginia. Between the
Company operated offices and System Affiliates, the Company believes it provides
service to lenders in all states in the continental United States.

SUPPLIERS

The Company relies heavily on the three national credit
repositories -- Experian, Inc. TransUnion, Inc. and Equifax, Inc. -- and is
on-line with these repositories 24 hours per day. Each repository credit file
contains the following information which the Company accesses by computer modem:

Identifying Information -- name, address, former address, social security
number, and employment.

Credit History -- balances and payment history of credit cards, finance
companies, banks, mortgage loans, accounts referred for collection and accounts
written off.

Public Records -- tax liens, civil judgments, bankruptcies, foreclosures.

Inquiries -- credit grantors or authorized parties are listed as inquiries
when they have requested a copy of a credit file.

The Company also obtains other information, such as criminal and motor
vehicle history, from other third party suppliers from time to time. The Company
pays each repository a fee per completed inquiry.

New technology continues to be developed in the mortgage industry and by
major lenders to facilitate underwriting capability through artificial
intelligence systems. These systems require electronic information so that
decisions can be completed in minutes. The Company is one of five credit vendors
authorized to provide information to Freddie Mac's Loan Prospector underwriting
system which utilizes this advanced technology. Other value added networks
(private networks used to facilitate commercial communications) and systems are
currently being developed or tested by the Company.

TECHNOLOGY CENTER

The Company believes that the credit reporting industry will continue to
move to automated operations driven by comprehensive computer software, hardware
and communications programs and equipment. The Company is committed to
maintaining and developing leading technology to increase its customer service.
The following summarizes the Company's current technology.

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<PAGE> 32

Hardware. The Company's Technology Center is the nerve center for customer
and vendor communications. The Technology Center is designed to provide services
faster and less expensively than many competitors. Since 1996, the Company has
experienced minimal downtime at its Technology Center due to redundancy and
on-line monitoring.

Systems in the Technology Center are non-proprietary Windows 95 or Windows
NT based Intel platforms. Each system has at least one backup, and can be
repaired or replaced easily and cheaply. The server platform is Windows NT with
a mirrored server that can replace the primary server in minutes if necessary.
Backup power is available to the servers to ensure up to 45 minutes of
uninterrupted power. Networking is achieved through four 100Base-TX backbone
connections to four 3COM Network switches.

The Company works closely with its vendors to ensure high speed and
reliability. High-speed repository bureau lines allow it to pull up to 18,000
files per hour. The Company's systems automatically move to backup lines when
necessary. System availability is monitored continuously, and a technical
support specialist can be paged within 60 seconds if an outage is detected on
either the primary or secondary systems.

Service requests are delivered through the Company's computer system. This
system offers high speed and high volume capabilities. Call capacity is greater
than 10,000 calls per hour, up to the speed of the communications equipment of
its customers. Redundancy is achieved by sending fully redundant connections to
national hosts in Cheyenne, Wyoming as well as Amarillo, Texas. The Company is
connected to its outside offices through use of the Internet. The Technology
Center has primary and secondary Internet connections through two different
Internet Service Providers ("ISP"). Each office has a primary dedicated
connection to the Internet as well as a secondary dial-up connection through two
separate ISPs. Data flowing to and from the Technology Center is secured by
means of public key encryption technology and protected login passwords.

Software. The Company uses proprietary software developed in-house over the
past 13 years. The Company believes its proprietary software allows it to remain
competitive in an increasingly competitive marketplace. The Company's software
was originally written in 1984, and began full production use in 1985. From 1987
through 1997, the Company significantly developed and expanded its software
capability including its ability to completely customize reporting forms to the
various requirements of each customer. The Company has moved to Microsoft Visual
Studio for the majority of its new programs. The Company employs 15 persons in
its Technology Center of whom seven are software programmers, and the others are
full-time hardware and telecommunications specialists.

COMPETITION

The MCR industry is highly fragmented. The Company faces both direct and
indirect competition for its services. There are a large number of companies
engaged in the sale of one or more of the services offered by the Company, and
the Company believes that this number will increase. A significant number of
these competitors are small companies operating on a local scale while a limited
number are large companies operating on a national scale. Management believes
there are approximately 1,400 companies in the United States providing MCR
services. Certain of these competitors, including The First American Financial
Corp., CBC Companies, Inc., TransUnion Corporation, Equifax Credit Information
Services, Inc., Informative Research and Credit Data Kingston, are significantly
larger and have greater financial and marketing resources than the Company. The
Company and its System Affiliates combined are believed by management to account
for less than 10% of national MCRs delivered annually. The Company faces intense
competition not only from the above sources, but various companies engaged in
employment and tenant application verification services.

The primary competitive factors in most of the Company's existing and
contemplated related service areas are customer service, service accuracy, easy
to read reports, technological sophistication and speed of delivery, price and
name recognition. The Company believes that one of its most significant
advantages is its software and communications technology. Management believes
that the industry is moving towards an automated credit reporting system which
mandates quick turnaround of reliable, user-friendly credit reports. The Company
believes it has state-of-the-art technology which allows it to compete favorably
in the credit

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<PAGE> 33

reporting industry. In order to maintain this perceived advantage, the Company
currently has 15 employees assigned to the development and maintenance of the
Company's proprietary software and communications technology.

GOVERNMENT REGULATION AND PRIVACY ISSUES

The Company is a "consumer reporting agency" within the meaning of that
term as used in, and therefore is subject to, the provisions of the Fair Credit
Reporting Act (referred to herein as the "FCRA") and is regulated by the Federal
Trade Commission ("FTC") under the Federal Trade Commission Act. Under the
provisions of the FCRA, a consumer reporting agency may furnish a "consumer
report" in response to the order of a court having jurisdiction or in accordance
with written instructions of the consumer. Such information may also be
furnished to a person the Company has reason to believe intends to use the
information: (i) in connection with a credit transaction; (ii) for employment
purposes; (iii) in connection with the underwriting of insurance; (iv) in
connection with a determination of the consumer's eligibility for a license or
other benefit granted by a governmental instrumentality required by law; (v) as
a potential investor or servicer or current insurer, in connection with a
valuation of, or an assessment of the credit or prepayment risks associated
with, an existing obligation; or (vi) to a person who otherwise has a legitimate
business need for the information. The FCRA prohibits disclosure of obsolete
information concerning a consumer. Obsolete information generally means
information which is more than seven years old.

The FCRA requires a consumer reporting agency to maintain reasonable
procedures designed to ensure that the proscriptions on the use of obsolete
information are not violated, and that the information contained in a consumer
report is provided for a permissible purpose. In addition, a consumer reporting
agency must follow reasonable procedures to assure maximum possible accuracy of
the information concerning the consumer about whom the report relates. The FCRA
also requires a consumer reporting agency, upon request from a consumer, to
disclose all information about that consumer in its files, together with the
source and the recipients of the information. In some cases, this information
must be delivered to the consumer at no cost, and, in others, the agency may
charge a reasonable fee.

The FCRA provides that an investigative consumer report may not be prepared
on any consumer unless (1) such consumer receives notice thereof in writing not
later than three days after the date on which the report was first requested,
which must include a statement, among others, that the consumer has the right to
request complete disclosure of the nature and scope of the investigation
requested, or (2) the report is to be used for employment purposes for which the
consumer has specifically applied. The FCRA further provides that if the
consumer requests disclosure of the information, the consumer reporting agency
must make such disclosure in writing not later than five days after the date on
which the request for disclosure was received. A consumer reporting agency may
not be held liable for any violation of the FCRA provisions relating to
investigative consumer reports if that agency shows by a preponderance of the
evidence that at the time of the violation such agency maintained reasonable
procedures to assure compliance with those provisions. Of the Company's current
services, employment and reference checks may be investigative consumer reports
for purposes of the FCRA.

The FCRA provides for civil liability sanctions against a consumer
reporting agency by a consumer for willful or negligent noncompliance with the
FCRA and criminal sanctions against officers and directors thereof who knowingly
and willfully disclose information in a report to a person not authorized to
receive the information.

Under general legal concepts and, in some instances, by specific federal or
state statute, the Company could be held liable to customers and/or to the
subjects of reports for inaccurate information prepared by the Company (which is
not corrected after proper notice) or for misuse of the information. The FCRA
contains civil liability provisions for willful and negligent noncompliance with
its requirements. The FCRA further provides in effect that, except for liability
for willful or negligent noncompliance with the FCRA and false information
furnished with malice or willful intent to injure a consumer, neither a consumer
reporting agency, any user of information nor any person who furnishes
information to a consumer reporting agency will be liable

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<PAGE> 34

to the consumer for defamation, invasion of privacy or negligence based on
information provided on such consumer under the provisions of the FCRA.

The Company has developed and implemented internal policies designed to
help ensure that background information retrieved by it concerning a consumer is
accurate and that it otherwise complies with the provisions of the FCRA. In
addition, each customer of the Company is required to sign an agreement, wherein
such customer agrees, among other matters, to accept responsibility for using
information provided by the Company in accordance with the provisions of the
FCRA and the ADA. The Company also has internal checks in place regarding access
and release of such information. Additionally, the Company requires that all
employees sign a written acknowledgment covering the proper procedures for
handling confidential information.

State laws also impact the Company's business. There are a number of states
which have laws similar to the FCRA, and some states which have human rights
laws much like the Americans with Disabilities Act ("ADA"). In addition, to the
Company's knowledge, at least four states require companies engaged in
investigative reporting, such as EMPfacts, to be licensed in order to conduct
business within those states. A large number of states also regulate the type of
information which can be made available to the public and/or impose conditions
to the release of the information. For example some state laws prohibit access
to certain types of information, such as workers' compensation histories or
criminal histories, while others restrict access without a signed release from
the subject of the report. In addition, many privacy and consumer advocates and
federal regulators have become increasingly concerned with the use of personal
information. Attempts have been made and will continue to be made by these
groups to adopt new or additional federal and state legislation to regulate the
use of personal information. Existing federal and/or state laws, future
modifications thereto, or laws enacted in the future regulating consumer
reporting agencies or access and use of personal information, in particular, and
privacy and civil rights, in general, could materially adversely impact the
Company's operations.

The nature of the Company's business requires it to have certain licenses
and qualifications to do business in various states. Management believes it has
all material licenses, permits and qualifications necessary to the conduct of
its business.

SOFTWARE DEVELOPMENT COSTS

The Company incurs research and development costs associated with the
development and improvement of software utilized in its credit information and
delivery system. In 1996, software development costs associated with internally
developed software used to support System Affiliate revenue and information
service sales were expensed as incurred by the Company.

In 1997, the Company adopted the provisions of Statement of Position (SOP)
98-1, "Accounting for Costs of Computer Software Developed for Internal Use."
Direct costs incurred in the development of software are capitalized once the
preliminary project stage is completed, management has committed to funding the
project and completion and use of the software for its intended purpose are
probable. The Company ceases capitalization of development costs once the
software has been substantially completed and is ready for its intended use.
Software development costs are amortized over their estimated useful lives of
three years. Costs associated with upgrades and enhancements that result in
additional functionally are capitalized. See Note 3 to the Consolidated
Financial Statements for information concerning the Company's accounting
policies for software costs.

INTELLECTUAL PROPERTY

The Company has not yet adopted a formal intellectual property protection
program, and currently relies on a combination of trademark, servicemark,
copyright, trade secret and contract protection (licenses) to establish and
protect its proprietary rights in its services and technology. There can be no
assurance that such measures will provide meaningful protection to the Company.
The Company currently maintains approximately 43 trademarks, servicemarks and
copyrights all of which it believes are properly filed and recorded. The Company
does not have any knowledge of infringement of its proprietary rights.

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<PAGE> 35

FACILITIES

The Company relocated its corporate office to a new building in Loveland,
Colorado on April 3, 1998 and commenced a 20 year operating lease at that
facility. The lease calls for annual lease payments of the lesser of 11% of the
total construction costs for the premises once completed or $236,000, plus
applicable taxes, maintenance and insurance. The rent increases 15% every five
years for the duration of the lease. The Company anticipates the space will be
adequate to meet the Company's office requirements for the foreseeable future.

The Company assumed the lease obligations of its franchisee, Mirocon, Inc.,
when it purchased the assets of Mirocon, Inc. on December 1, 1997. The lease
requires monthly payments of $2,400 and expires on August 31, 2000. However, the
Company plans on exercising a provision of the lease which allows early
termination at the end of August 1998 upon the payment of $2,500.

INSURANCE

The Company maintains commercial general liability and property insurance.
The policy provides for a general liability aggregate limit of $2 million. In
addition, the policy also provides for products/completed operations, business
auto and personal property coverage.

EMPLOYEES

The Company employs 37 persons on a full-time basis in its corporate
headquarters in Loveland, Colorado. There are no union or collective bargaining
agreements between the Company and its employees and employee relations are
considered by management to be excellent. Approximately 14 employees have been
employed by the Company for five years or more. The Company retains consultants
from time to time as needed.

HISTORY OF THE COMPANY

Factual Data Corp was incorporated in the State of Colorado in 1985. The
Company was established for the purpose of providing value added information
services nationally to financial institutions primarily in the mortgage lending
industry.

In late 1986, the Company began its conversion from a manual operation to
an automated processing system to reduce labor costs and speed the delivery of
services from an average three to four day turnaround to a more aggressive one
to two day turnaround for a typical MCR. In 1986 a single software engineer
began work on the Company's software system for mortgage credit reporting. Today
the Company has 15 employees assigned to the development and maintenance of the
Company's software.

The Company recognized the importance of having national coverage in order
to compete for the larger national accounts while maintaining a local presence
and individualized MCR services. With limited capital resources, the Company
initially elected to franchise its MCR operations in order to achieve the goal
of national coverage. The first franchise, located in Loveland, Colorado was
sold in 1989. As of December 1, 1997, the Company, as part of its new
acquisition plan, purchased the business of this franchisee. In 1992, the
Company began licensing its proprietary software to existing consumer reporting
agencies ("CRAs"). The Company discontinued selling franchises in late 1995 and
continued to license its software and techniques to existing CRAs through 1997.

In late 1996, a newly completed employment screening service, EMPfacts was
introduced. EMPfacts services are used by employers for screening potential and
current employees. Background checks include criminal records, professional
license and education verifications, employment and residence verifications,
worker's compensation, driver's license records, financial summaries and public
records information. Substance abuse testing and psychological testing are
provided through the use of third party services.

The QUICKpeek Identifier was added to the EMPfacts services in late 1996.
Placed on the customer's computer system, this Windows(TM) based software allows
the customer on-line access to employment and

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<PAGE> 36

residence history, social security number confirmation, fraud investigation, and
financial and public records history.

LEGAL PROCEEDINGS

On April 27, 1998, the Company received a letter from Venture Funding, Ltd.
("VFL") alleging, among other things, the existence of a compensation
arrangement between VFL, through its authorized representative, and the Company.
VFL has alleged the existence of a valid, enforceable agreement between the
Company and VFL for unspecified services rendered by VFL. Prior to April 2,
1997, the Company and its representatives had engaged in certain correspondence
with persons believed to be associated with VFL, and with VFL itself, concerning
a possible finder's fee arrangement between the Company and VFL. In a private
placement memorandum issued by the Company in August 1997, which was reviewed by
representatives of VFL, no disclosure of any finder's arrangement was provided,
consistent with the Company's understanding that no such arrangement had been
made or entered into.

Prior to April 27, 1998, the Company had received no demand for
compensation from VFL. Based solely upon a review of the correspondence by and
between VFL and its representative, on the one hand, and the Company, on the
other, and certificates of Company officers, the Company's counsel believes the
claim is without foundation or merit. The Company intends to vigorously contest
any action brought, or claim asserted, by VFL, and intends to assert any and all
counterclaims as may be appropriate in any action initiated by VFL.

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<PAGE> 37

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jerald H. Donnan........ 52 Chairman of the Board, Chief Executive Officer and President
Marcia R. Donnan........ 53 Executive Vice President
Todd A. Neiberger....... 33 Chief Financial Officer and a Director
Russell E. Donnan....... 33 Vice President
James N. Donnan......... 26 Vice President and a Director
Robert J. Terry......... 57 Director
Abdul H. Rajput......... 50 Director
</TABLE>

The Company's Articles of Incorporation provide for a Board of Directors,
the size of which is set by the Board of Directors. The current Board of
Directors consists of five members. All directors hold office until the next
annual meeting of shareholders, or until their successors have been elected.
Officers serve at the discretion of the Board of Directors, except for Jerald H.
Donnan and Marcia R. Donnan who are employed pursuant to employment agreements.
See "-- Employment Agreements" below.

Jerald H. Donnan, Chairman of the Board, Chief Executive Officer and
President, has been with the Company since its incorporation in January 1985. He
is responsible for oversight of corporate development and services, and is
responsible for operations, technical development and policies and procedures.
Mr. Donnan's early career experience includes 15 years with Avco Financial
Services, Inc. where he was responsible for lending and collecting a
multi-hundred million dollar portfolio and managing geographically diverse
branches with many of employees. Mr. Donnan was a founding member and past
president of the National Credit Reporting Association, a trade association
founded to promote ethical standards and fair competition within the credit
reporting industry.

Marcia R. Donnan, Executive Vice President, has been with the Company since
its incorporation in January 1985. She is responsible for compliance with the
FCRA and all other federal, state and local laws as they apply to the gathering,
processing and distribution of credit information. Staff training and education
are also areas of her primary responsibility. Ms. Donnan spent 15 years in
credit reporting with Credit Information Systems (formerly Credit Bureau of
Council Bluffs, Inc.) as operations manager, prior to co-founding Factual Data
Corp. in 1985. Ms. Donnan is active in two credit reporting associations and she
concluded a second term as a director of Associated Credit Bureaus, Inc. in
January, 1997.

Todd A. Neiberger, Chief Financial Officer and a Director, joined the
Company in March 1995. Mr. Neiberger graduated from the University of Northern
Colorado in 1987 with a degree in accounting. Mr. Neiberger has 10 years
experience in staff, senior and management level positions with various public
accounting firms. From 1994 through 1995, he served as the audit manager of
Rickards & Co. P.C., and from 1991 through 1993 he served as the tax manager for
Krutchen & Co., both Fort Collins, Colorado based certified public accounting
firms. From 1988 through 1990 he was employed with Lemke, Feis & Co., P.C., a
certified public accounting firm, as a staff and senior level accountant in the
audit and tax department. Mr. Neiberger is a Certified Public Accountant and a
member of the Colorado Society of Certified Public Accountants and the American
Institute of Certified Public Accountants.

Russell E. Donnan, Vice President, has been employed by the Company since
August 1993. He is responsible for technical project management for software and
support services. Before coming to Factual Data Corp, he was a senior design
engineer at Apple Computer in the Power Book division from February 1992 to
August 1993. He is experienced in the super computer field and was previously
employed by Convex Computer (1990-1992) and was a founding member and employee
of Key Computer (1988-1990),

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<PAGE> 38

now a subsidiary of Amdahl Corporation. Mr. Donnan graduated from Ohio State
University in 1987 with a degree in electrical engineering.

James N. Donnan, Vice President and a Director, has been employed by the
Company on a full-time basis since 1994, and prior to that, on a part-time basis
since 1986. He is responsible for management of the Company operated mortgage
credit reporting production offices and EMPfacts employment screening
operations. His duties also include overall sales, growth and customer service
development. Mr. Donnan graduated from Colorado State University in 1994 with a
degree in history.

Robert J. Terry has been a Director since February 1998. From February 1994
to his retirement in January 1998, Mr. Terry served as a director, president and
chief operating officer of Mail-Well, Inc., a publicly traded envelope
manufacturer and printing company. From January 1992 to February 1994, Mr. Terry
served as executive vice president of Mail-Well Envelope, a subsidiary of
Georgia Pacific. From June 1989 to December 1991, Mr. Terry served as regional
vice president for Butler Paper in Englewood, Colorado. Mr. Terry obtained a
Bachelor of Science degree in Business from DePaul University in 1963 and
attended the Executive Program at the University of Michigan in 1988.

Abdul H. Rajput has been a Director since February 1998. Since 1991, Mr.
Rajput has been employed in San Diego, California, by Bank of America, a federal
savings bank, a subsidiary of Bank America Corp., where he currently holds the
position of executive vice president, administrative services. Since 1990, Mr.
Rajput has also owned and operated Factual Data Minnesota, Inc., one of the
Company's franchises which operates in Minnesota and Iowa. From 1980 to 1989,
Mr. Rajput was employed by Green Tree Financial Corp., St. Paul, Minnesota,
initially as vice president and then senior vice president for administration.
Mr. Rajput also serves on the board of directors of Security Pacific Housing
Services, Inc. Mr. Rajput obtained a Bachelor of Science degree in Mathematics
and a Master of Science degree in Statistics from the University of Sind,
Pakistan, in 1968 and 1970, respectively.

Russell and James Donnan are sons of Jerald and Marcia Donnan who are
husband and wife.

DIRECTOR COMPENSATION

Employee directors of the Company do not receive any fixed compensation for
their services as directors while non-employee directors receive compensation of
$7,500 annually plus a $500 travel allowance per calendar quarter. Messrs. Terry
and Rajput, the Company's two non-employee directors, will each be issued
options to purchase 5,000 shares of Common Stock upon the completion of this
offering. See "-- Stock Incentive Plan."

BOARD COMMITTEES

The Company has two Committees, an Audit Committee and Compensation
Committee. Messrs. Terry and Rajput, the two independent directors, serve on
each committee. Mr. Jerald Donnan, President of the Company, also serves on each
committee.

The primary function of the Compensation Committee is to review and make
recommendations to the Board with respect to the compensation, including
bonuses, of the Company's officers and to administer the Stock Incentive Plan.
The function of the Audit Committee is to review and approve the scope of audit
procedures employed by the Company's independent auditors, to review and approve
the audit reports rendered by the Company's independent auditors and to approve
the audit fee charged by the independent auditors. The Audit Committee reports
to the Board of Directors with respect to such matters and recommends the
selection of independent auditors.

EXECUTIVE COMPENSATION

The following table sets forth compensation awarded by the Company to
Jerald H. Donnan, its Chief Executive Officer and President, and Marcia R.
Donnan, its Executive Vice President, for services rendered during fiscal 1995,
1996 and 1997. Jerald H. Donnan and Marcia R. Donnan are husband and wife. No
person

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<PAGE> 39

serving as an executive officer as of February 1, 1998 or any former officer
received compensation in excess of $100,000 during the reported years.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ---------------------- -------
------------------------------------ OTHER
ANNUAL RESTRICTED OTHER
COMPEN- STOCK LTP COMPEN-
NAME AND FISCAL SALARY BONUS SATION AWARD(S) OPTIONS/ PAYOUTS SATION*
PRINCIPAL POSITION YEAR ($) ($) ($) ($) SARS ($) ($)
- ----------------------- ------ ------ ----- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerald H. Donnan 1997 82,445 -- 82,445 -- -- -- 10,265
President, Chief 1996 48,031 -- 48,031 -- -- -- 10,220
Executive Officer 1995 45,000 -- 45,000 -- -- -- 10,270
Marcia R. Donnan 1997 93,773 -- 93,773 -- -- -- 6,093
Executive Vice 1996 89,217 -- 89,217 -- -- -- 8,137
President 1995 4,742 -- 4,742 -- -- -- 4,262
</TABLE>

- ---------------

* Consists of certain health, life and accident insurance benefits and
automobile expense reimbursements.

EMPLOYMENT AGREEMENTS

Jerald H. Donnan and Marcia R. Donnan are parties to three year employment
agreements with the Company effective July 1, 1997. In addition to salaries of
$99,600 (which increase to $111,600 in year two and $123,600 in year three if
the Company has net income in those years), of each Mr. and Ms. Donnan are
entitled to health and accident insurance benefits and certain automobile
reimbursements. Both employment agreements also provide that if the employee is
terminated due to a change in control of the Company, then they are entitled to
severance pay equal to the product of 2.99 times the previous year's pay
(including bonuses). The employment agreements contain customary provisions as
to death, disability and termination for cause.

STOCK INCENTIVE PLAN

In April 1997, the Company adopted the 1997 Stock Incentive Plan (the
"Stock Incentive Plan"). The purpose of the Stock Incentive Plan is to provide
continuing incentives to the Company's key employees, which may include officers
and members of the Board of Directors. The Stock Incentive Plan provides for an
authorization of 200,000 shares of Common Stock for issuance thereunder. Under
the Stock Incentive Plan, the Company may grant to participants awards of stock
options and restricted stock or any combination thereof.

The Stock Incentive Plan is to be administered by the Compensation
Committee of the Board of Directors composed of at least one disinterested
member. Subject to the terms of the Stock Incentive Plan, the Compensation
Committee determines, among other matters, the persons to whom awards are
granted, the type of award granted, the number of shares granted, the vesting
schedule, employment requirements or performance goals relating to restricted
stock awards, the type of consideration to be paid to the Company upon exercise
of options and the terms of any option (which cannot exceed ten years).

Under the stock option component of the Stock Incentive Plan, the Company
may grant both incentive stock options ("incentive stock options) intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and options which are not qualified as incentive stock options;
provided that incentive stock options cannot be granted to any participant who
is not an employee of the Company. Stock options may not be granted at an
exercise price of less than the fair market value of the Common Stock on the
date of grant. The exercise price of incentive stock options granted to holders
of more than 10% of the Common Stock must be at least 110% of the fair market
value of the Common Stock on the date of grant, and the term of these options
cannot exceed five years. Options granted under the Stock Incentive Plan are not
transferable otherwise than by will or the laws of descent and distribution and,
during the lifetime of the optionholder, options are exercisable only by such
optionholder. In addition, outstanding options may not be exercised more than
three months (but in no event beyond the expiration date of the option) after
the

37
<PAGE> 40

optionholder ceases to be an employee of the Company, except that in the event
of the death or permanent and total disability of the optionholder, the option
may be exercised by the holder (or his estate, as the case may be) until the
first to occur of the expiration of the option period or the expiration of one
year after the date of death or permanent or total disability. The exercise
price may be paid in cash, in shares of Common Stock (valued at fair market
value at the date of exercise) by delivery of a promissory note or by a
combination of such means of payment, as may be determined by the Compensation
Committee.

Upon a change in control (as defined in the Stock Incentive Plan) of the
Company, all stock options granted under the Stock Incentive Plan will become
exercisable in full, and all restricted stock grants will become immediately
vested and any applicable restrictions will lapse. Also, in the event the number
of outstanding shares of Common Stock is increased or decreased or changed into
or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another company whether as the result of stock
split, stock dividend, combination or exchange of shares, merger or otherwise,
each share subject to an unexercised option shall be substituted for the number
and kind of shares of stock into which each share of the outstanding Common
Stock is to be changed for which each such share is to be exchanged and the
option price shall be increased or decreased proportionately.

Upon completion of this offering, the Company will grant and issue options
to purchase up to 17,000 shares of Common Stock to 22 employees of the Company
which will vest annually in one-third increments beginning on the first
anniversary date of the grant of such options and options to purchase 10,000
shares of Common Stock to the two non-employee directors of the Company, all
exercisable at the initial public offering price of the Common Stock offered
herein.

LIFE INSURANCE POLICY

The Company intends to obtain a Key Man term life insurance policy for
$1,000,000 upon the life of Jerald H. Donnan following closing of the offering
described herein. The death benefits under this policy will be payable in full
to the Company.

CERTAIN TRANSACTIONS

Jerald H. Donnan and Marcia R. Donnan personally guaranteed a $500,000 loan
from a financial institution in 1995. No separate consideration was paid for
such guarantee. The balance of the loan will be paid using a portion of the
proceeds from this offering. See "Use of Proceeds."

The Company has adopted a policy that future transactions between the
Company and its officers, directors and 5% or more shareholders are subject to
approval by a majority of the disinterested independent directors of the
Company. Any such transactions will be on terms believed to be no less favorable
than could be obtained from unaffiliated parties.

INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Company's Articles of Incorporation authorize the Company to indemnify
its directors for certain breaches of fiduciary duty to the Company and its
shareholders, and other liabilities, subject to certain limitations. Such
indemnification does not apply to acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or the payment of unlawful
distributions to shareholders.

The Company has also entered into indemnification agreements with all of
its executive officers and directors. The agreements require the Company to
indemnify such persons in all situations where indemnification is allowable by
Colorado law, including partial indemnification if the person is only partially
successful in the defense of a qualified proceeding. The agreements also require
the Company to advance costs and expenses, subject to certain requirements of
Colorado law, and to pay or reimburse such persons for costs and expenses
relating to that person's serving as a witness in any proceeding relating to the
Company.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

38
<PAGE> 41

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this Prospectus by (i)
each person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, (ii) each of the Company's executive
officers and directors, and (iii) all executive officers and directors as a
group. Common Stock not outstanding but deemed beneficially owned by virtue of
the right of an individual to acquire shares within 60 days are treated as
outstanding only when determining the amount and percentage of Common Stock
owned by such individual. Each person has sole voting and sole investment power
with respect to the shares shown except as noted.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(2) OFFERING
-------------------- -------------------
NAME(1) NUMBER PERCENT NUMBER PERCENT
------- --------- ------- -------- -------
<S> <C> <C> <C> <C>
Jerald H. Donnan.................................... 630,000 35% 630,000 22.5%
Marcia R. Donnan.................................... 630,000 35 630,000 22.5
Russell E. Donnan................................... 270,000 15 270,000 9.6
James N. Donnan..................................... 270,000 15 270,000 9.6
Todd A. Neiberger................................... -- -- -- --
Robert J. Terry(3).................................. 5,000 * 5,000 *
Abdul H. Rajput(3).................................. 5,000 * 5,000 *
All officers and directors as a group (seven
persons).......................................... 1,810,000 100% 1,810,000 60.1%
</TABLE>

- ---------------

* Less than 1%

(1) The address for each of the Donnans and Mr. Neiberger is 5200 Hahns Peak
Drive, Loveland, Colorado 80538; the address for Mr. Terry is 5402 South
Cottonwood Court, Greenwood Village, Colorado 80121; and the address for Mr.
Rajput is Post Office Box 8310, Rancho Santa Fe, California 82067.

(2) Shares beneficially owned prior to this offering include an aggregate of
500,000 shares of Common Stock held in custody and subject to release to the
Company's shareholders prior to the date hereof in 2003 or earlier upon the
Company reaching certain performance objectives. For further information
regarding the terms of such custody arrangement, see immediately below.

(3) Represents options issued upon the completion of this offering to purchase
shares of Common Stock at $5.50 per share which will be fully exercisable
upon issuance.

CUSTODIAL SHARES

As a condition to this offering, the Company's shareholders as of December
31, 1997, have been required to deposit an aggregate of 500,000 shares of Common
Stock of the Company owned by such shareholders (on a pro-rata basis) in custody
pursuant to a custody agreement with American Securities Transfer & Trust, Inc.
and the Representative. The Common Stock deposited in the custody account will
be subject to release to the shareholders upon the earlier of: (i) the Company
achieving pre-tax net income (excluding extraordinary items) of $3,000,000 in
the four complete calendar quarters immediately subsequent to the date of this
Prospectus; (ii) the Company achieving pre-tax net income (but excluding
extraordinary items) of $8,000,000 in the four complete calendar quarters
commencing one year after the date of this Prospectus; (iii) a merger or sale of
all or substantially all of the Company's assets if such transaction is approved
by the holders of a majority of the Company's outstanding shares not including
shares held by parties to the custody agreement; or (iv) seven years after the
date of this Prospectus. The determination of earnings per share will be made in
accordance with generally accepted accounting principles and will be based upon
the audited financial statements of the Company. The shares held in custody are
not transferable or assignable, although they may be voted by the holder. The
earnings levels set forth above were determined by negotiations between the
shareholders and the Representative and should not be construed to imply or
predict any future earnings by the Company. See "Underwriting" for information
concerning an 18 month lock-up of all presently outstanding shares.

39
<PAGE> 42

DESCRIPTION OF SECURITIES

UNITS

Each Unit offered in this Prospectus is comprised of one share of Common
Stock and one Redeemable Common Stock Purchase Warrant. The Common Stock and
Warrants will be immediately separately transferable upon completion of the
offering. There will be no separate market for the Units after this offering;
accordingly, only the Common Stock and Warrants have been approved for listing
on The Nasdaq SmallCap Market.

COMMON STOCK

The Company is authorized to issue 10,000,000 shares of Common Stock, of
which 1,800,000 shares of Common Stock are currently issued and outstanding.
Holders of shares of Common Stock are entitled to dividends as and when declared
by the Company's Board of Directors from funds legally available therefor, and
upon liquidation, dissolution or winding up of the Company to share ratably in
all assets remaining after payment of liabilities. The Company has not paid any
dividends to date nor does it anticipate paying any dividends on its Common
Stock in the foreseeable future. It is the Company's present policy to retain
earnings, if any, for use in the development and expansion of its business. The
holders of shares of the Common Stock are entitled to one vote for each share
held of record by them, and do not have the right to cumulate their votes for
election of directors. The holders of shares of Common Stock do not have
preemptive rights.

PREFERRED STOCK

The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors, subject to approval by the majority of
the Company's non-employee, independent directors. Accordingly, the Board of
Directors is empowered, without shareholder approval, to issue Preferred Stock
with dividend, liquidation, conversion, voting or other rights that could
aversely affect the voting power or other rights of the holders of the Company's
Common Stock. In the event of issuance, the Preferred Stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company. The Company has no present intention to
issue any shares of its Preferred Stock, and no shares of Preferred Stock are
currently outstanding.

WARRANTS

One Warrant will entitle the holder to purchase one share of Common Stock
at an exercise price of $7.15 (130% of the initial offering price of the Common
Stock) for a period of three years from the date hereof subject to the Company's
redemption rights described below. The Warrants will be issued pursuant to the
terms of a Warrant Agreement between the Company and American Securities
Transfer & Trust, Inc. (the "Warrant Agent"). The Company has authorized and
reserved for issuance the shares of Common Stock issuable on exercise of the
Warrants. The Warrants are exercisable to purchase a total of 1,200,000 shares
of Common Stock of the Company unless the Underwriters' over-allotment option
relating to the Warrants is exercised, in which case the Warrants are
exercisable to purchase a total of 1,380,000 shares of Common Stock.

The Warrant exercise price and the number of shares of Common Stock
purchasable upon exercise of the Warrants are subject to adjustment in the event
of, among other events, a stock dividend on, or a subdivision, recapitalization
or reorganization of, the Common Stock, or the merger or consolidation of the
Company with or into another corporation or business entity.

Commencing one year from the date of this Prospectus and until the
expiration of the Warrants, the Company, in its discretion, may redeem
outstanding Warrants, in whole but not in part, upon not less than 30 days'
notice, at a price of $.05 per Warrant, provided that the closing bid price of
the Common Stock equals or exceeds $10.73 (150% of the Warrant exercise price)
for 20 consecutive trading days. The redemption

40
<PAGE> 43

notice must be provided not more than five business days after conclusion of the
20 consecutive trading days in which the closing bid price of the Common Stock
equals or exceeds $10.73 per share. In the event the Company exercises its right
to redeem the Warrants, the Warrants will be exercisable until the close of
business on the date fixed for redemption in such notice. If any Warrant called
for redemption is not exercised by such time, it will cease to be exercisable
and the holder thereof will be entitled only to the redemption price.

The Company must have on file a current registration statement with the
Securities and Exchange Commission pertaining to the Common Stock underlying the
Warrants in order for a holder to exercise the Warrants or in order for the
Warrants to be redeemed by the Company. The shares underlying the Warrants must
also be registered or qualified for sale under the securities laws of the states
in which the Warrant holders reside. The Company intends to use its best efforts
to keep the Registration Statement incorporating this Prospectus current, but
there can be no assurance that such Registration Statement (or any other
registration statement filed by the Company covering shares underlying the
Warrants) can be kept current. In the event the Registration Statement covering
the underlying Common Stock is not kept current, or if the Common Stock
underlying the Warrants is not registered or qualified for sale in the state in
which a Warrant holder resides, the Warrants may be deprived of any value.

The Company is not required to issue any fractional shares of Common Stock
upon the exercise of Warrants or upon the occurrence of adjustments pursuant to
anti-dilution provisions. The Company will pay to holders of fractional
interests an amount equal to the cash value of such fractional interests based
upon the then-current market price of a share of Common Stock.

The Warrants may be exercised upon surrender of the certificate
representing such Warrants on or prior to the expiration date (or earlier
redemption date) of such Warrants at the offices of the Warrant Agent with the
form of "Election to Purchase" on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by payment of the full exercise
price by check payable to the order of the Company for the number of Warrants
being exercised. Shares of Common Stock issued upon exercise of Warrants for
which payment has been received in accordance with the terms of the Warrants
will be fully paid and non-assessable.

The Warrants do not confer upon the Warrantholder any voting or other
rights of a shareholder of the Company. Upon notice to the Warrantholders, the
Company has the right to reduce the exercise price or extend the expiration date
of the Warrants. Although this right is intended to benefit Warrantholders, to
the extent the Company exercises this right when the Warrants would otherwise be
exercisable at a price higher than the prevailing market price of the Common
Stock, the likelihood of exercise, and the resultant increase in the number of
shares outstanding, may impede or make more costly a change in control of the
Company.

ANTI-TAKEOVER PROVISIONS

The Company's Articles of Incorporation and Bylaws (the "Incorporation
Documents") contain provisions that may make it more difficult for a third party
to acquire, or may discourage acquisition bids for, the Company. The Board of
Directors of the Company is authorized, without action of its shareholders but
subject to approval by the majority of the Company's non-employee, independent
directors, to issue authorized but unissued Common and Preferred Stock. The
existence of undesignated Preferred Stock and authorized but unissued Common
Stock enables the Company to discourage or to make it more difficult to obtain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise. The Incorporation Documents provide further that (i) directors may be
elected for three-year terms, with approximately one-third of the Board of
Directors standing for election each year, (ii) to alter or repeal the staggered
board provision or other measures in the Incorporation Documents relating to the
matters listed in this paragraph, the affirmative vote of the holders of not
less than two-thirds of the votes entitled to be cast by the holders of all
stock entitled to vote in the election of directors is required, (iii) the
unanimous vote of the Board of Directors or the affirmative vote of the holders
of not less than two-thirds of the votes entitled to be cast by the holders of
all stock entitled to vote in the election of directors is required to change
the size of the Board of Directors, (iv) directors may only be removed with or
without cause by holders of not less than two-thirds of all stock entitled to
vote, (v) any action required or permitted to be taken by shareholders of the
41
<PAGE> 44

Company must be effected at a duly called annual or special meeting of such
shareholders and may not be effected by consent in writing by such shareholders,
and (vi) the affirmative vote of the holders of two-thirds of the Company's
capital stock entitled to vote thereon is required to approve the merger,
dissolution or sale of all or substantially all of the assets of the Company.
The Company has also entered into employment agreements with its top two
executive officers which require significant severance pay upon termination of
employment with the Company due to a change in control of the Company. See
"Management -- Employment Agreements" and "Description of
Securities -- Preferred Stock."

LISTING

The Common Stock and Warrants have been approved for quotation on The
Nasdaq SmallCap Market upon notice of issuance.

TRANSFER AGENT, WARRANT AGENT AND REGISTRAR

The transfer agent, Warrant Agent and registrar for the Company's Common
Stock and Warrants is American Securities Transfer & Trust, Inc.

42
<PAGE> 45

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
3,000,000 shares of Common Stock, assuming no exercise of the Warrants, the
Underwriters' over-allotment options, the Representative's Options or any other
options or warrants. Of these shares, the 1,200,000 shares of Common Stock sold
in this offering will be freely tradeable without restriction or registration
under the Securities Act, except that any shares purchased by an "affiliate" of
the Company (as defined in the rules and regulations promulgated under the
Securities Act) will be subject to the resale limitations under Rule 144 under
the Securities Act. The remaining 1,800,000 shares of outstanding Common Stock
were issued and sold by the Company in private transactions and/or in reliance
upon exemptions from registration under the Securities Act. Such shares may be
sold only pursuant to an effective registration statement filed by the Company
under the Securities Act, or an applicable exemption, including the exemption
contained in Rule 144 of the Securities Act.

In general, under Rule 144, a shareholder, including an affiliate of the
Company, may sell shares of Common Stock after at least one year has elapsed
since such shares were acquired from the Company or an affiliate of the Company.
The number of shares of Common Stock which may be sold within any three-month
period is limited to the greater of one percent of the then outstanding Common
Stock or the average weekly trading volume in the Common Stock during the four
calendar weeks preceding the date on which notice of such sale was filed under
Rule 144. Certain other requirements of Rule 144 concerning availability of
public information, manner of sale and notice of sale must also be satisfied. In
addition, a shareholder who is not an affiliate of the Company (and who has not
been an affiliate of the Company for 90 days prior to the sale) and who has
beneficially owned shares acquired from the Company or an affiliate of the
Company for over two years may resell the shares of Common Stock without
compliance with the foregoing requirements under Rule 144.

The Company's existing shareholders have agreed not to offer, sell or
otherwise dispose of any shares of Common Stock owned by them for a period of 18
months after the date of this Prospectus without the prior written consent of
the Representative. A portion of the shares owned by existing shareholders is
subject to a custody arrangement and may, under certain circumstances, be
released as late as seven years after the date of this Prospectus. In the
absence of agreements with the Representative, the outstanding restricted Common
Stock could be sold in accordance with Rule 144 commencing 90 days from the date
of this Prospectus.

No predictions can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Stock or Warrants prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock or Warrants, or the
perception that such sales may occur, could have a material adverse effect on
prevailing market prices of the Common Stock and Warrants.

43
<PAGE> 46

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, for which Schneider Securities, Inc. is acting as the
representative (the "Representative") have agreed to purchase from the Company
the number of Units set forth opposite their names, and will purchase the Units
at the price to public less the underwriting discount set forth on the cover
page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER UNITS
----------- ---------
<S> <C>
Schneider Securities, Inc. ................................. 1,150,000
Cruttenden Roth Incorporated................................ 50,000
---------
Total............................................. 1,200,000
=========
</TABLE>

The Underwriting Agreement provides that the Underwriters' obligations are
subject to conditions precedent and that the Underwriters are committed to
purchase all securities offered hereby (other than those covered by the
over-allotment options described below) if the Underwriters purchase any such
securities.

The Representative has advised the Company that the Underwriters propose to
offer the securities offered hereby, initially together, directly to the public
at the price to public set forth on the cover page of this Prospectus, and that
it may allow to certain dealers which are members of the National Association of
Securities Dealers, Inc., concessions not in excess of $.28. After the initial
public distribution of the shares of Common Stock and Warrants is completed, the
price of the shares of Common Stock and Warrants may change as a result of
market conditions. No change in such terms will change the amount of proceeds to
be received by the Company as set forth on the cover page of this Prospectus.
The Representative has further advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which any of them exercises
discretionary authority.

The Company has agreed to pay the Representative a nonaccountable expense
allowance of 3% of the aggregate public offering price of the securities
offered, including Common Stock and Warrants sold on exercise of either
over-allotment option, of which $30,000 has been previously paid to the
Representative. The Company has also agreed to pay all expenses in connection
with qualifying the securities offered hereby for sale under the laws of such
states as the Representative may designate.

The Company has granted the Underwriters options, exercisable for 45 days
after the date of this Prospectus, to purchase up to 180,000 additional shares
of Common Stock and 180,000 Warrants at the same price as the initial securities
offered. The Underwriters may purchase the Common Stock and Warrants solely to
cover over-allotments, if any, in connection with the sale of the securities
offered hereby.

The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934 (the "1934 Act"). Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the securities in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Underwriters to reclaim a
selling concession from a syndicate member when the securities originally sold
by such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Common Stock
or Warrants to be higher than they would otherwise be in the absence of such
transactions.

Neither the Company nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock or Warrants. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

44
<PAGE> 47

The Company's existing shareholders have agreed not to offer, sell or
otherwise dispose of any shares of capital stock owned by them for a period of
18 months after the date of this Prospectus without the prior written consent of
the Representative.

In connection with this offering, the Company will sell to the
Representative for a total purchase price of $100, purchase options (the
"Representative's Options") entitling the Representative or its assigns to
purchase one share of Common Stock and one Warrant for each 10 shares and 10
warrants sold to the public (excluding the over-allotment options). The
Representative's Options to purchase Common Stock and Warrants shall be
exercisable commencing one year from the date of this Prospectus and shall
expire five years from such date. The Warrants included in the Representative's
Options will each be exercisable to purchase one share of Common Stock at an
exercise price of $9.15 per share during the three year term of the Warrants.
The Representative's Options will contain certain anti-dilution provisions and
provide for the cashless exercise of such options utilizing securities of the
Company (which may include the implicit value of the Representative's Options or
Warrants being surrendered). The exercise price of the Representative's Options
to purchase Common Stock and Warrants is 128% of the public offering price or
$7.04 per share and $.128 per Warrant. The Company shall set aside and at all
times have available a sufficient number of securities to be issued upon
exercise of the Representative's Options. The Representative's Options and
underlying securities will be restricted from sale, transfer, assignment or
hypothecation for a period of one year after the date of this Prospectus, except
to officers of the Representative, co-underwriters, selling group members and
their officers or partners. Thereafter, the Representative's Options and
underlying securities will be transferable provided such transfer is in
accordance with the provisions of the Securities Act.

Upon any solicited exercise of the Warrants after one year from the date of
this Prospectus, the Company will pay the Representative a fee of 5% of the
aggregate exercise price for Warrant exercises if (i) the market price of the
Common Stock on the date the Warrant is exercised is greater than the then
exercise price of the Warrant, (ii) the exercise of the Warrant was solicited by
a member of the National Association of Securities Dealers, Inc. as designated
in writing on the Warrant Certificate subscription form (provided that any
request for exercise will be presumed to be unsolicited unless the customer
states in writing that the transaction was solicited and designates the
broker-dealer to receive compensation); (iii) the Warrant is not held in a
discretionary account; (iv) disclosure of compensation arrangements was made
both at the time of the offering and at the time of exercise of the Warrant; and
(iv) the solicitation of exercise of the Warrant was not in violation of
Regulation M promulgated under the 1934 Act. A portion of the 5% fee may be
reallowed by the Representative to participating broker-dealers.

Regulation M under the 1934 Act, as amended, will prohibit the
Representative from engaging in any market making activities with regard to the
Company's securities during the period commencing as of the date on which the
Representative becomes a participant in the solicitation of the exercise of
Warrants until the termination of such solicitation activity. As a result, the
Representative may be unable to make a market in the Company's securities during
certain periods while the Warrants are exercisable.

The Company and the Representative have entered into an agreement which
provides that, if the Representative arranges for the purchase or sale of
substantially all of the assets of the Company, or for a merger, consolidation
or acquisition accepted by the Company during the five-year period commencing on
the date of this Prospectus, the Representative will receive a fee based on a
sliding scale ranging from 5% of the first $1 million of consideration and
decreasing to 3% of the consideration in excess of $2 million.

Prior to this offering, there has not been a public market for the Common
Stock or Warrants. The public offering prices of the Common Stock and Warrants
have been determined by arm's-length negotiation between the Company and the
Representative. There is no direct relation between the offering price of the
Common Stock and Warrants or the exercise price of the Warrants and the assets,
book value or net worth of the Company. Among the factors considered by the
Company and the Representative in pricing the securities offered were the
results of operations, the current financial condition and future prospects of
the Company, the experience of management, the amount of ownership to be
retained by present shareholders, and the general condition of the economy and
the securities markets.

45
<PAGE> 48

In connection with this offering, the Company and the Underwriters have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, and if such indemnification is unavailable
or insufficient, the Company and the Underwriters have agreed to damage
contribution arrangements based upon relative benefits received from this
offering and relative fault resulting in such damages.

46
<PAGE> 49

LEGAL MATTERS

The validity of the securities offered will be passed upon the Company by
Jones & Keller, P.C., Denver, Colorado. Certain legal matters will be passed
upon for the Representative by Berliner Zisser Walter & Gallegos, P.C., Denver,
Colorado.

EXPERTS

The consolidated balance sheet of the Company at December 31, 1997, and the
consolidated statements of income, shareholders' equity and cash flows for each
of the two years ended December 31, 1996 and 1997 included in this Prospectus
have been included herein in reliance on the report of Ehrhardt Keefe Steiner &
Hottman PC, independent certified public accountants, given on the authority of
that firm as experts in accounting and auditing.

The balance sheets of Mirocon, Inc. as of December 31, 1996 and November
30, 1997, and the statements of income, shareholders' equity and cash flows for
the year ended December 31, 1996 and the eleven months ended November 30, 1997,
have been included herein in reliance on the report of Ehrhardt Keefe Steiner &
Hottman PC, independent certified public accountants, given on the authority of
that firm as experts in accounting and auditing.

The pro forma combined statements of income (loss) of the Company for the
years ended December 31, 1996 and 1997 have not been audited or reviewed by the
independent certified public accountants and they do not express an opinion or
purport to give any other form of assurance on them.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission a
Registration Statement (which term shall encompass any and all amendments
thereto) on Form SB-2 (the "Registration Statement") under the Securities Act,
with respect to the Common Stock and Warrants offered hereby. This Prospectus,
which is part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain items of which are omitted in accordance with the
rules and regulations of the Securities and Exchange Commission. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is hereby made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. For further information with
respect to the Company, reference is hereby made to the Registration Statement
and such exhibits and schedules filed as a part thereof, which may be inspected,
without charge, at the Public Reference Section of the Securities and Exchange
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549, and at the regional offices of the Securities and Exchange
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Securities and Exchange Commission maintains a web site that
contains reports, proxy and information statements regarding registrants that
file electronically with the Securities and Exchange Commission. The address of
this web site is (http://www.sec.gov). Copies of all or any portion of the
Registration Statement may be obtained from the Public Reference Section of the
Securities and Exchange Commission, upon payment of the prescribed fees.

47
<PAGE> 50

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
FACTUAL DATA CORP.
Independent Auditors' Report................................ F-2
Financial Statements
Consolidated Balance Sheet................................ F-3
Consolidated Statements of Income......................... F-4
Consolidated Statement of Changes in Shareholders'
Equity................................................. F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements.................. F-7

MIROCON, INC.
Independent Auditors' Report................................ F-17
Financial Statements
Balance Sheets............................................ F-18
Statements of Income...................................... F-19
Statement of Changes in Shareholders' Equity.............. F-20
Statements of Cash Flows.................................. F-21
Notes to Financial Statements............................... F-22
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME........... F-25
</TABLE>

F-1
<PAGE> 51

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Factual Data Corp.
Fort Collins, Colorado

We have audited the accompanying consolidated balance sheet of Factual Data
Corp. and Subsidiaries as of December 31, 1997, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
years ended December 31, 1996 and 1997. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Factual Data
Corp. and Subsidiaries as of December 31, 1997 and the results of their
operations and their cash flows for the years ended December 31, 1996 and 1997
in conformity with generally accepted accounting principles.

As discussed in Note 3, during 1997 the Company changed its method of
accounting for Costs of Computer Software Developed for Internal Use.

Ehrhardt Keefe Steiner & Hottman PC

January 22, 1998 (except for the last two paragraphs of
Note 11 as to which the date is April 28, 1998)
Denver, Colorado

F-2
<PAGE> 52

FACTUAL DATA CORP.

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997

ASSETS

<TABLE>
<S> <C>
Current assets
Cash...................................................... $ 396,752
Accounts receivable, net (Note 7)......................... 633,017
Note receivable (Note 4).................................. 117,160
Prepaid expenses.......................................... 7,438
Deferred tax asset (Note 10).............................. 64,577
----------
Total current assets.............................. 1,218,944
Property and equipment, net (Notes 5 and 7)................. 995,907
Other assets (Notes 2, 6 and 7)............................. 649,234
----------
$2,864,085
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable (Note 7).................................... $ 16,140
Current portion of long-term debt (Note 7)................ 282,396
Accounts payable.......................................... 590,467
Accrued payroll and expenses.............................. 152,513
Income taxes payable...................................... 61,154
----------
Total current liabilities......................... 1,102,670
Long-term debt (Note 7)..................................... 927,988
Deferred income taxes (Note 10)............................. 186,354
Commitments and contingency (Note 11)
Shareholders' equity (Note 8)
Common stock, 10,000,000 shares authorized; 1,800,000
issued and outstanding................................. 2,500
Retained earnings......................................... 644,573
----------
Total shareholders' equity........................ 647,073
----------
$2,864,085
==========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 53

FACTUAL DATA CORP.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Revenue
System affiliates......................................... $1,446,559 $1,950,668
Information services...................................... 2,066,254 734,946
Proceeds from the sale of Company operated territories
(Note 12).............................................. 480,000 714,365
Training, license and other............................... 16,000 119,692
---------- ----------
Total revenue..................................... 4,008,813 3,519,671
---------- ----------
Operating Expenses
Costs of services provided................................ 2,123,357 1,301,085
Costs of Company operated territories..................... 31,302 506,101
Selling, general and administrative....................... 1,412,974 916,521
---------- ----------
Total operating expenses.......................... 3,567,633 2,723,707
---------- ----------
Income from operations...................................... 441,180 795,964
Other income (expense)
Other income.............................................. 29,437 28,806
Interest expense.......................................... (108,919) (77,497)
---------- ----------
Total other expense............................... (79,482) (48,691)
---------- ----------
Income before income taxes.................................. 361,698 747,273
Income tax expense (Note 10)................................ 78,063 244,339
---------- ----------
Net income.................................................. $ 283,635 $ 502,934
========== ==========
Basic earnings per share.................................... $ .16 $ .28
========== ==========
Weighted average shares outstanding......................... 1,800,000 1,800,000
========== ==========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 54

FACTUAL DATA CORP.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK (NOTE 8) STOCK RETAINED SHAREHOLDERS'
---------------------- SUBSCRIPTIONS EARNINGS EQUITY
SHARES AMOUNT RECEIVABLE (DEFICIT) (DEFICIT)
---------- ------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995........ 1,800,000 $2,500 $(500) $(141,996) $(139,996)
Net income for the year ended
December 31, 1996................. -- -- -- 283,635 283,635
--------- ------ ----- --------- ---------
Balance at December 31, 1996........ 1,800,000 2,500 (500) 141,639 143,639
Collection of stock subscription.... -- -- 500 -- 500
Net income for the year ended
December 31, 1997................. -- -- -- 502,934 502,934
--------- ------ ----- --------- ---------
Balance at December 31, 1997........ 1,800,000 $2,500 $ -- $ 644,573 $ 647,073
========= ====== ===== ========= =========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 55

FACTUAL DATA CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1996 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income................................................ $ 283,635 $ 502,934
---------- ----------
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization.......................... 246,540 355,084
Deferred income taxes.................................. 57,670 128,867
Basis of non-current assets of territories sold........ 31,302 391,330
Issuance of note receivable for sale of company
operated territory.................................... (230,000) --
Changes in operating assets and liabilities
Accounts receivable.................................. 141,437 (325,503)
Prepaid expenses..................................... (1,668) 10,217
Other assets......................................... -- (23,460)
Accounts payable..................................... (106,224) 111,590
Accrued payroll, payroll taxes and expenses.......... (63,411) 24,275
Accrued taxes and other.............................. 20,386 30,017
---------- ----------
96,032 702,417
---------- ----------
Net cash provided by operating activities......... 379,667 1,205,351
---------- ----------
Cash flows from investing activities
Purchase of property and equipment........................ (111,882) (592,868)
Proceeds from sale of property and equipment.............. 11,687 29,504
Payments received on note receivable...................... -- 185,000
Increase in note receivable............................... -- (72,160)
Acquisition of a business................................. -- (50,000)
---------- ----------
Net cash provided by (used in) investing
activities..................................... (100,195) (500,524)
---------- ----------
Cash flows from financing activities
Line-of-credit, net....................................... 66,000 (66,000)
Principal payments on long-term debt...................... (341,481) (255,078)
Collection from common stock subscription................. -- 500
Deferred offering costs incurred net of accounts
payable................................................ -- (36,491)
---------- ----------
Net cash used in financing activities............. (275,481) (357,069)
---------- ----------
Net increase in cash........................................ 3,991 347,758
Cash, at beginning of period................................ 45,003 48,994
---------- ----------
Cash, at end of period...................................... $ 48,994 $ 396,752
========== ==========
</TABLE>

Supplemental disclosure of cash flow information:

Interest paid on borrowings for the years ended December 31, 1996
and 1997 was $108,919 and $78,578, respectively.

Supplemental disclosure of non-cash investing and financing activities:

During 1996, the Company received a note receivable of $230,000
related to the sale of certain fixed assets and Company operated
territory rights which had a total purchase price of $480,000.

During 1997, the Company financed fixed assets purchases totaling
$50,918 with notes payable.

During 1997, the Company incurred $61,739 in offering costs that
were included in accounts payable.

During 1997, the Company acquired a business for a cost of $50,000
cash and a note payable of $469,419 (Note 2).

See notes to consolidated financial statements.

F-6
<PAGE> 56

FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Factual Data Corp (the Company) was incorporated in the state of Colorado
in 1985. The Company was established for the purpose of providing information
services nationally to financial lending institutions primarily in the mortgage
lending industry. In April of 1997, the shareholders of Factual Data Corp
(Predecessor) and Lenders Resources, Inc. (Affiliate) exchanged all of their
outstanding shares of common stock in exchange for 1.8 million shares of common
stock in a newly formed holding company Factual Data Corp. (Successor).

The Company provides information services to lenders from its Company
operated offices and 65 franchised and licensed offices located in 45 states.
Franchised and licensed offices of the Company are referred to as system
affiliates and related revenue derived from such system affiliates is referred
to as system affiliate revenues.

In exchange for system affiliate revenue from its system affiliates, the
Company provides certain on-going services that include sophisticated technology
systems, training, marketing/sales assistance, management, techniques, and
policy and procedure manuals.

The Company's sophisticated technology platforms used to develop new
products and services allowed the Company to begin providing employee background
information under EMPfacts(SM) and QuickPeek Identifier(SM) reports for
employers and landlords.

PRINCIPLES OF CONSOLIDATION

The Company's consolidated financial statements include the accounts of
Factual Data Corp. and Lenders Resources Incorporated. All intercompany accounts
and transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers highly
liquid short-term investments with an original maturity of three months or less
to be cash equivalents. As of the balance sheet date, balances of cash and cash
equivalents at financial banking institutions exceeded the federally insured
limit by $247,308. The Company has not experienced any losses in such accounts
and believes it is not exposed to any significant credit risk on cash and cash
equivalents. The Company had no cash equivalents at December 31, 1997.

ACCOUNTS RECEIVABLE

In the normal course of business, the Company extends unsecured credit to
virtually all of its customers and system affiliates related to providing
information services. The Company's customers and system affiliates are located
throughout the United States.

Because of the credit risks involved, management has provided an allowance
for doubtful accounts of $4,000 which reflects its opinion of amounts which will
eventually become uncollectible. In the event of complete nonperformance by the
Company's customers or system affiliates, the maximum exposure to the Company is
the outstanding accounts receivable balance at the date of non-performance.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based on the estimated useful lives of the assets which
range from three to fifteen years.

F-7
<PAGE> 57
FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTANGIBLE ASSETS

Intangible assets are stated at cost, and consist of goodwill, customer
lists, covenants not to compete and deferred offering costs. Goodwill and
customer lists are amortized using the straight-line method over fifteen years.
Covenants not to compete are amortized over the life of the agreements, which
extend over five years.

Deferred offering costs consist of costs associated with the Company's
proposed initial public offering. These costs will be netted against the
proceeds of the offering if successful or charged to expense if the offering is
unsuccessful.

SOFTWARE DEVELOPMENT COSTS

In 1996, software development costs associated with internally development
software used to support system affiliate revenues and information service sales
were expensed as incurred by the Company.

In 1997, the Company adopted the provisions of Statement of Position (SOP)
98-1 "Accounting for Costs of Computer Software Developed for Internal Use".
Direct costs incurred in the development of software are capitalized once the
preliminary project stage is completed, management has committed to funding the
project and completion and use of the software for its intended purpose are
probable. The Company ceases capitalization of development costs once the
software has been substantially completed and is ready for its intended use.
Software development costs are amortized over their estimated useful lives of
three years. Costs associated with upgrades and enhancements that result in
additional functionality are capitalized.

INCOME TAXES

Deferred income taxes result from temporary differences. Temporary
differences are differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements that will result in taxable
or deductible amounts in future years. The Company's temporary differences
result primarily from depreciation of fixed assets, amortization of intangibles
and accrued vacation.

REVENUE RECOGNITION

System Affiliate

Pursuant to the various franchise and license agreements, network
affiliates are required to pay the Company royalties based on a percentage of
sales. In addition, territories providing EMPfacts(SM) services are required to
pay $100 per month for national advertising conducted by the Company.

Royalties as allowed by the franchise and license agreements are accrued
based on the percentage of adjusted gross billings, as reported by system
affiliates and are included in accounts receivable.

Advertising fees paid to the Company are included in the Company's balance
sheet. At December 31, 1997, the Company had collected fees in excess of the
amount expended for advertising by approximately $22,000.

INFORMATION SERVICES

The Company recognizes revenue generated from mortgage credit reports and
other information services when the information has been provided to the
customer, as substantially all required services have been performed. The
services represent revenue earned through Company owned locations.

INITIAL TERRITORY LICENSE FEES

Initial territory license fees are recognized as revenue when all material
services and conditions required to be performed by the Company are
substantially completed, which is generally when the territory

F-8
<PAGE> 58
FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

commences operations. Initial territory license fees collected by the Company
before all material services and conditions are substantially performed are
recorded as deferred territory license revenue. The Company received and
recognized as revenue $0 and $44,000 in initial territory license fees in 1996
and 1997, respectively, and did not receive any initial franchise fees in 1996
or 1997.

SOFTWARE LICENSE FEES

The Company recognizes revenue from the licensing of computer software when
the customer accepts the configured master. Subsequent to customer acceptance,
the Company has no significant post contract support obligations.

ADVERTISING COSTS

The Company expenses advertising and promotional expenses as incurred.

VALUATION OF LONG-LIVED ASSETS

The Company assesses valuation of long-lived assets in accordance with
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of. The
Company periodically evaluates the carrying value of long-lived assets to be
held and used, including goodwill and other intangible assets, when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved.

USE OF ESTIMATES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of financial instruments including cash, receivables,
prepaid expenses, accounts payable and accrued expenses approximate their fair
values as of December 31, 1997 because of the relatively short maturity of these
instruments.

The carrying amounts of notes payable and debt outstanding also approximate
their fair values as of December 31, 1997 because interest rates on these
instruments approximate the interest rate on debt with similar terms available
to the Company.

BASIC EARNINGS PER SHARE

The Company computes earnings per share in accordance with Statement of
Financial Accounting Standard No. 128. The Company has presented only basic
earnings per share as it had no dilutive potential common shares outstanding
during 1996 or 1997. Basic earnings per share has been computed based on the
weighted average number of shares outstanding.

F-9
<PAGE> 59
FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECLASSIFICATIONS

Certain reclassifications have been made to the financial statements for
the year ended December 31, 1996 to conform with the 1997 presentation.

NOTE 2 -- ACQUISITION OF ASSETS

Effective December 1, 1997, the Company purchased the assets of its
Loveland franchise, Mirocon, Inc. The results of operations of Mirocon, Inc.
from December 1, 1997 to December 31, 1997 have been included in the 1997
financial statements. The acquisition has been accounted for under the purchase
method of accounting.

The purchase price totaled $519,419 which has been allocated to the assets
purchased based on the fair market values on the date of acquisition, as
follows:

<TABLE>
<S> <C>
Computer equipment.......................................... $ 19,200
Furniture and fixtures...................................... 4,800
Non-compete agreement....................................... 50,000
Customer lists.............................................. 445,419
---------
519,419
Notes payable less discount of $1,081....................... (469,419)
---------
Cash paid at closing........................................ $ 50,000
=========
</TABLE>

The following table depicts the historical and unaudited pro forma results
of the Company's 1997 acquisition.

<TABLE>
<CAPTION>
YEAR ENDED RECORDED CONSOLIDATED
DECEMBER 31, 1996 AMOUNTS(1) MIROCON TOTAL ADJUSTMENTS(3) TOTAL
----------------- ---------- -------- ---------- -------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue..................... $4,008,813 $935,727 $4,944,540 $(72,290) $4,872,250
========== ======== ========== ======== ==========
Net income after taxes...... $ 283,635 $ 53,580 $ 337,215 $ 16,041 $ 353,256
========== ======== ========== ======== ==========
Basic earnings per share.... $ .16 $ .03 $ .19 $ .01 $ .20
========== ======== ========== ======== ==========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C> <C> <C> <C> <C>
Revenue................... $3,519,671 $904,587 $4,424,258 $(54,265) $4,369,993
========== ======== ========== ======== ==========
Net income after taxes.... $ 502,934 $ 68,432 $ 571,366 $ 26,302 $ 597,668
========== ======== ========== ======== ==========
Basic earnings per
share................... $ .28 $ .03 $ .31 $ .02 $ .33
========== ======== ========== ======== ==========
</TABLE>

- ---------------

(1) Includes the results of operations for Factual Data Corp. for the year ended
December 31, 1997 and 1996, respectively.

(2) Represents activity for the eleven months ended November 30, 1997.

(3) Adjustments relate to amortization of the non-compete agreement and customer
lists, officers' salaries and bonuses, franchise fee expense, and interest
expense on acquisition debt which would have been required had the Company
completed the acquisition as of January 1, 1996.

F-10
<PAGE> 60
FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3 -- CHANGE IN ACCOUNTING POLICY

In 1997 the Company adopted Statement of Position (SOP) 98-1, "Accounting
for Costs of Computer Software Developed for Internal Use". The Company expends
significant capital on internally developed software that is used to support
operations of both sales of services to financial lending institutions as well
as support for System Affiliates. This SOP encourages early adoption but does
not allow retroactive restatement of previously issued financial statements.
Accordingly, management believes that adoption of SOP 98-1 in a year prior to
its initial public offering (IPO) would be more informative to users of
financial statements rather than in a period after its IPO. The effect of the
change was to increase 1997 net income by approximately $200,000 or $.11 per
common share. Had the Company adopted SOP 98-1 in 1996, net income would have
been increased by approximately $178,000 to $461,813 or $.26 per common share.

NOTE 4 -- NOTES RECEIVABLE

Notes receivable consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Note receivable related to the sale of operating territory;
18% interest rate, balance due on or before June 30,
1998...................................................... $ 45,000
Note receivable from a corporation, interest rate at 8%; due
on demand................................................. 72,160
--------
$117,160
========
</TABLE>

NOTE 5 -- PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Computer equipment and software............................. $ 960,415
Furniture and fixtures...................................... 575,732
Software development costs.................................. 452,915
Leasehold improvements...................................... 20,938
Vehicles.................................................... 132,496
-----------
2,142,496
Less accumulated depreciation..................... (1,146,589)
-----------
$ 995,907
===========
</TABLE>

F-11
<PAGE> 61
FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- OTHER ASSETS

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Deposits and other.......................................... $ 39,276
Customer lists (Note 2)..................................... 445,419
Goodwill.................................................... 9,040
Covenant not to compete (Note 2)............................ 50,000
Deferred offering costs and other........................... 110,730
--------
654,465
Less accumulated amortization..................... (5,231)
--------
$649,234
========
</TABLE>

NOTE 7 -- NOTES PAYABLE

LINE-OF-CREDIT

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
The Company has a $100,000 line-of-credit. The
line-of-credit expires on May 5, 1998 and accrues interest
at the bank's index rate (10% at December 31, 1997). The
line is collateralized by substantially all the assets of
one of the Company's subsidiaries and is personally
guaranteed by officers of the Company..................... $ --
Unsecured note payable to an individual, monthly payment of
interest only of 10%. Due on demand....................... 16,140
--------
$ 16,140
========
</TABLE>

F-12
<PAGE> 62
FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LONG-TERM OBLIGATIONS

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Long-term debt obligations consist of the following:
Unsecured note payable to a corporation incurred in the
acquisition of a business. Note is payable in the
following terms; $50,000 (Note 2) principal payment on
January 15, 1998, five principal payments of $7,000 each
commencing on February 1, 1998 and ending on June 1, 1998.
Interest begins accruing June 1, 1998 at a rate of 8%.
Monthly payments of $8,396 for interest and principal
through January 2003. The contract contains a clause which
states that if Factual Data Corp. closes an initial public
offering, the corporation receives the lesser of $160,250
or any unpaid principal and interest on the note at the
time of the closing....................................... $ 469,419
Note payable to a financial institution, monthly principal
and interest payments of $7,102 through December 2005.
Interest at 2.75% over New York prime (Prime was 8.5% at
December 31, 1997). The note is collateralized by accounts
receivable and equipment. The note is also personally
guaranteed by certain shareholders........................ 435,035
Unsecured note payable to a corporation, monthly principal
and interest payments of $6,000 through November 1999.
Interest at 10.50%........................................ 150,896
Unsecured note payable to an individual, monthly principal
payments are the greater of $750 or 5% of gross billable
revenue of a certain corporate-owned franchise with the
balance due August 31, 2002. Interest at 8.5%............. 61,619
Unsecured note payable to a former franchisee, monthly
principal and interest payments of $5,000 through
September 1998. Interest is at 5.5%....................... 43,986
Various notes payable to financial institutions. Monthly
principal and interest payments ranging from $394 to
$1,578. Interest rates vary from 6.85% to 11%. Notes
mature at various times ranging from April 1997 to June
2001. Notes are collateralized by certain fixed assets and
automobiles............................................... 49,429
---------
1,210,384
Less current portion.............................. (282,396)
---------
$ 927,988
=========
</TABLE>

As of December 31, 1997, future maturities of long-term debt are as
follows:

<TABLE>
<CAPTION>
LONG-TERM
DEBT
----------
<S> <C>
Year ending December 31,
1998...................................... $ 282,396
1999...................................... 229,556
2000...................................... 149,113
2001...................................... 155,292
2002...................................... 161,241
Thereafter................................ 232,786
----------
Total long-term obligations............... $1,210,384
==========
</TABLE>

NOTE 8 -- SHAREHOLDERS' EQUITY

In April 1997, predecessor and affiliate, (two entities, owned 100% by
direct family members) were acquired in a share exchange with a new entity,
Factual Data Corp. (Successor). The combination has been accounted for as a
reorganization of companies under common control. The combination has been
accounted

F-13
<PAGE> 63
FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for in a manner similar to a pooling of interests in that the assets and
liabilities are transferred at historical cost and the result of operations
reflect the combination as if it occurred January 1, 1996. Four shareholders
were issued 1,800,000 shares of voting common stock in exchange for their voting
common stock in both original entities. All shares and per share amounts have
been restated to reflect this reincorporation as of January 1, 1996.

STOCK OPTION PLAN

Management of the Company has adopted a stock option plan whereby the Board
of Directors can issue both tax qualified and nonqualified options to officers,
employees, consultants and others. Under the plan, 200,000 shares of the
Company's stock would be reserved for options to be issued in the future. At
December 31, 1997, no options have been granted under the plan.

Subsequent to year end, options to acquire 27,000 shares of common stock at
$5.50 per share will be issued to employees of the Company upon completion of
its initial public offering.

NOTE 9 -- BUSINESS SEGMENTS

Operating results and other financial data are presented for the principal
business segments of the Company for the years ended December 31, 1996 and 1997.
Total revenue in one business segment includes information services which
represent sales by Company operated territories, in another segment, system
affiliate revenue and training, license, and other revenues and the third
segment is sales of Company operated territories, as reported in the Company's
consolidated financial statements.

Identifiable assets by business segment are those assets used in the
Company's operation of each segment.

<TABLE>
<CAPTION>
SYSTEM AFFILIATES SALES OF
AND LICENSE, COMPANY
INFORMATION TRAINING AND OPERATED
SERVICES OTHER TERRITORIES TOTALS
----------- ----------------- ----------- ----------
<S> <C> <C> <C> <C>
December 31, 1996
Net sales................................ $2,066,254 $1,462,559 $480,000 $4,008,813
Cost of services and territory sales..... $1,223,251 $ 900,106 $ 31,302 $2,154,659
Gross profit............................. $ 843,003 $ 562,453 $448,698 $1,854,154
Total assets............................. $ 981,755 $ 537,504 $240,031 $1,759,290
Depreciation and amortization............ $ 136,995 $ 37,068 $ 72,477 $ 246,540
Capital expenditures..................... $ 21,289 $ 90,593 $ -- $ 111,882
December 31, 1997
Net sales................................ $ 734,946 $2,070,360 $714,365 $3,519,671
Cost of services and territory sales..... $ 236,640 $1,064,445 $506,101 $1,807,186
Gross profit............................. $ 498,306 $1,005,915 $208,264 $1,712,485
Total assets............................. $1,364,049 $1,500,036 $ -- $2,864,085
Depreciation and amortization............ $ 111,100 $ 214,824 $ 29,160 $ 355,084
Capital expenditures..................... $ 2,069 $ 590,799 $ -- $ 592,868
</TABLE>

NOTE 10 -- INCOME TAXES

Deferred tax liabilities and assets are determined based on the difference
between the financial statement assets and liabilities and tax basis assets and
liabilities using the tax rates in effect for the year in which the differences
occur. The measurement of deferred tax assets is reduced, if necessary, by the
amount of any tax benefits that based on available evidence, are not expected to
be realized.

F-14
<PAGE> 64
FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the provision for income tax expense for the year ended
December 31, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- --------
<S> <C> <C>
Current.......................................... $20,393 $115,472
Deferred......................................... 57,670 128,867
------- --------
$78,063 $244,339
======= ========
</TABLE>

The deferred income tax assets and liabilities result primarily from
differing depreciation and amortization periods of certain assets, research and
development credits, and the recognition of certain expenses for financial
statement purposes and not for tax purposes.

The net current and long-term deferred tax assets (liabilities) in the
accompanying balance sheet include the following items:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Current deferred tax asset.............................. $ 75,853
Current deferred tax liability.......................... (11,276)
---------
$ 64,577
=========
Long-term deferred tax asset............................ $ --
Long-term deferred tax liability........................ (186,354)
---------
$(186,354)
=========
</TABLE>

The Company has research and development credit carryforwards of
approximately $31,000 at December 31, 1997, which if unused will expire in 2001.

RATE RECONCILIATION

The reconciliation of income tax expense by applying the Federal statutory
tax rates to the Company's effective income tax rate is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1997
---- ----
<S> <C> <C>
Federal statutory rate...................................... 34.0% 34.0%
State tax on income, net of federal income tax benefit...... 3.3 3.3
Federal surtax exemption.................................... (5.3) --
Research tax credits........................................ (6.5) (3.6)
Other, net.................................................. (4.0) (1.0)
---- ----
21.5% 32.7%
==== ====
</TABLE>

NOTE 11 -- COMMITMENTS

In 1996, the Company leased office space for its corporate owned franchise
locations under operating lease agreements which provide for the payment of rent
totaling approximately $1,900 per month. Rent expense under these operating
leases totaled $23,795 during the year ended December 31, 1996. These franchises
were sold January 1, 1997.

The Company leases its corporate office space under an operating lease
agreement which provides for the payment of $6,735 per month. This lease expires
April 1998, at which time the corporate office will relocate to

F-15
<PAGE> 65
FACTUAL DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

a nearby office and begin a 20 year operating lease. The new corporate office
lease calls for annual payments of the lesser of 11% of the total construction
costs for the premise once completed or $236,000. The rent increases 15% every 5
years for the duration of the lease. This lease expires approximately May of
2018. Rent expense under all operating leases totaled $149,823 and $147,452 for
the years ended December 31, 1996 and 1997, respectively.

The Company assumed the lease obligations for Mirocon, Inc. when it
acquired the operating assets on December 1, 1997. The facility lease calls for
monthly payments of $2,427 and expires on August 31, 2000. If the Company
defaults on this lease, the seller of the franchise is contingently liable. The
Company intends on relocating the office of Mirocon, Inc. to its new corporate
office in April 1998. In conjunction with its relocation the Company intends to
exercise its buyout option under the Mirocon, Inc. office lease effective
September 1, 1998 for approximately $2,500.

Future minimum annual lease payments are as follows:

<TABLE>
<S> <C>
Year Ended December 31,
1998......................................... $ 198,634
1999......................................... 255,507
2000......................................... 245,798
2001......................................... 226,378
2002......................................... 226,378
Thereafter................................... 4,603,874
----------
$5,756,569
==========
</TABLE>

The claim does not quantify any amounts owed and the Company and Corporate
counsel believe that the probability of material loss to the Company as a result
of this claim is slight.

NOTE 12 -- SALE OF TERRITORIES

In January 1996, the Company sold its Indiana territory it has started in
1992. The sales price was $480,000, of which $250,000 was paid in cash and the
balance in a note receivable. The required payments on the note balance, as
amended, were due and paid by September 1997. The purchaser acquired fixed
assets with a net book value of $31,302, as well as the customer base, the
ongoing business and a license to operate in the territory. Of the $480,000 sale
price, $125,000 was allocated to the fixed assets. The balance relates to
goodwill and customer lists.

In January 1997, the Company sold its Texas territories which were
reacquired by the Company from certain franchisees from 1990 to 1995. The sales
price was $714,000 which was paid in cash. The purchaser acquired accounts
receivable of $115,000, net intangibles of $276,000, and net fixed assets of
$115,000.

F-16
<PAGE> 66

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Mirocon, Inc.
Loveland, Colorado

We have audited the accompanying balance sheets of Mirocon, Inc. as of
December 31, 1996 and November 30, 1997, and the related statements of income,
changes in shareholders' equity and cash flows the year ended December 31, 1996
and for the eleven months ended November 30, 1997, respectively. 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 in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mirocon, Inc. as of December
31, 1996 and November 30, 1997 and the results of their operations and their
cash flows the year ended December 31, 1996 and for the eleven months ended
November 30, 1997 in conformity with generally accepted accounting principles.

Ehrhardt Keefe Steiner & Hottman PC

January 13, 1998
Denver, Colorado

F-17
<PAGE> 67

MIROCON, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1996 1997
------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $378,557 $194,793
Accounts receivable (net of allowance for doubtful
accounts of $0 (1996) and $10,427 (1997)).............. 74,450 125,755
-------- --------
Total current assets.............................. 453,007 320,548
Property and equipment (Note 2)............................. -- 7,000
Other assets
Intangible assets, net (Note 3)........................... 5,426 3,868
-------- --------
Total other assets................................ 5,426 3,868
-------- --------
$458,433 $331,416
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Advances from shareholders (Note 4)....................... $108,923 $ --
Accounts payable.......................................... 25,278 31,284
Accrued payroll, payroll taxes and expenses............... 19,242 35,363
-------- --------
Total current liabilities......................... 153,443 66,647
Commitments (Notes 5 and 6)
Shareholders' equity
Capital stock, no par value, 50,000 shares authorized,
20,000 shares issued and outstanding in 1996 and
1997................................................... 87,741 87,741
Retained earnings......................................... 217,249 177,028
-------- --------
Total shareholders' equity........................ 304,990 264,769
-------- --------
$458,433 $331,416
======== ========
</TABLE>

See notes to financial statements.

F-18
<PAGE> 68

MIROCON, INC.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ELEVEN
ENDED MONTHS ENDED
DECEMBER 31, NOVEMBER 30,
1996 1997
------------ ------------
<S> <C> <C>
Revenue
Information services...................................... $935,727 $904,587
-------- --------
Total revenue..................................... 935,727 904,587
-------- --------
Operating Expenses
Costs of services provided................................ 392,490 340,422
Selling, general and administrative....................... 463,582 468,973
-------- --------
Total operating expenses.......................... 856,072 809,395
-------- --------
Income from operations...................................... 79,655 95,192
Other income (expense)
Other income.............................................. 2,394 8,240
Interest expense.......................................... (469) --
-------- --------
Net income.................................................. 81,580 103,432
Pro forma adjustment -- provision for income taxes (Note
1)........................................................ 28,000 35,000
-------- --------
Pro forma net income........................................ $ 53,580 $ 68,432
======== ========
Pro forma basic earnings per share.......................... $ 2.68 $ 3.42
======== ========
Weighted average number of shares outstanding............... 20,000 20,000
======== ========
</TABLE>

See notes to financial statements.

F-19
<PAGE> 69

MIROCON, INC.

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
----------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------- --------- --------
<S> <C> <C> <C> <C>
Balance -- December 31, 1995...................... 20,000 $87,741 $ 237,452 $325,193
1996 shareholder distributions.................... -- -- (101,783) (101,783)
Net income for the year........................... -- -- 81,580 81,580
------ ------- --------- --------
Balance -- December 31, 1996...................... 20,000 87,741 217,249 304,990
1997 shareholder distributions.................... -- -- (143,653) (143,653)
Net income for the year........................... -- -- 103,432 103,432
------ ------- --------- --------
Balance -- November 30, 1997...................... 20,000 $87,741 $ 177,028 $264,769
====== ======= ========= ========
</TABLE>

See notes to financial statements.

F-20
<PAGE> 70

MIROCON, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE ELEVEN
ENDED MONTHS ENDED
DECEMBER 31, NOVEMBER 30,
1996 1997
------------ --------------
<S> <C> <C>
Cash flows from operating activities Net income............. $ 81,580 $ 103,432
--------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities Depreciation and
amortization........................................... 3,555 2,258
Changes in operating assets and liabilities
Accounts receivable, net............................. 16,152 (51,305)
Accounts payable..................................... 2,627 6,006
Accrued payroll, payroll taxes and expenses.......... (1,263) 16,121
--------- ---------
21,071 (26,920)
--------- ---------
Net cash provided by operating activities......... 102,651 76,512
--------- ---------
Cash flows from investing activities
Capital expenditures...................................... -- (7,700)
--------- ---------
Net cash used in investing activities............. -- (7,700)
--------- ---------
Cash flows from financing activities
Advances from (repayment to) shareholders, net............ 143 (108,923)
Distributions to shareholders............................. (101,783) (143,653)
--------- ---------
Net cash used in financing activities............. (101,640) (252,576)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 1,011 (183,764)
Cash and cash equivalents, at beginning of period........... 377,546 378,557
--------- ---------
Cash and cash equivalents, at end of period................. $ 378,557 $ 194,793
========= =========
</TABLE>

Supplemental disclosure of cash flow information:

Interest paid during the year was $469 for 1996 and $0 for 1997.

See notes to financial statements.

F-21
<PAGE> 71

MIROCON, INC.

NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Mirocon, Inc. (Mirocon) was incorporated in the state of Colorado in 1989.
The Company was established for the purpose of providing information services to
financial lending institutions primarily in the mortgage lending industry in the
Northern Colorado area under the Factual Data trade name through a license
agreement.

CASH AND CASH EQUIVALENTS

For the purpose of the statement of cash flows, the Company considers
highly liquid short-term instruments purchased with an original maturity of
three months or less to be cash equivalents. As of December 31, 1996 and
November 30, 1997, balances of cash and cash equivalents at financial banking
institutions exceeded the federally insured limit by $139,173 and $62,502,
respectively.

ACCOUNTS RECEIVABLE

In the normal course of business, the Company extends unsecured credit to
virtually all of its customers for information services. The Company's customers
are located in the Northern Colorado area.

Because of the credit risks involved, management has provided an allowance
for doubtful accounts which reflects its opinion of amounts which will
eventually become uncollectible. In the event of complete non-performance by
Mirocon's customers, the maximum exposure to Mirocon is the outstanding accounts
receivable balance at the date of non-performance.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using
accelerated methods based on the estimated useful lives of the assets which
range from three to seven years.

INTANGIBLE ASSETS

The goodwill and non-compete agreement were acquired when the current
shareholders purchased the licensed territory and other related assets in 1989.
The non-compete agreement was amortized over 3 years, the length of the
agreement. Goodwill is recorded as the difference between net assets and the
related purchase price and was amortized over the estimated useful life of five
years. The EMPfacts license represents fees paid to the licensor for the rights
to use basic EMPfacts and/or CORPdata software systems and management services
provided by the licensor.

INCOME TAXES

The Company has elected to be taxed under Subchapter S of the Internal
Revenue Code. Under these provisions, the Company is not subject to income taxes
as a separate entity. Income or loss of the Company is required to be included
in the income tax returns of the shareholders.

Included in the statement of operations are pro forma income tax
adjustments computed using the statutory rates in effect, which represent the
federal and state tax provisions that would have been required had the Company
been taxed as a C-corporation. Mirocon's effective statutory rate based on
pretax income was 34% for both the year ended December 31, 1996 and the eleven
months ended November 30, 1997.

F-22
<PAGE> 72
MIROCON, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Information Service

Mirocon recognizes revenue generated from mortgage credit reports and other
information services when the information has been provided to the customer, as
substantially all required services have been performed.

USE OF ESTIMATES

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of financial instruments including cash and cash
equivalents, receivables, accounts payable, accrued expenses, and advances from
shareholders approximate their fair values as of December 31, 1996 and November
30, 1997 because of the relatively short maturity of these instruments.

NOTE 2 -- PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1996 1997
------------ ------------
<S> <C> <C>
Furniture and fixtures..................................... $ 29,445 $ 29,445
Computer equipment and software............................ 59,582 67,282
Computer software.......................................... 28,457 28,457
--------- ---------
117,484 125,184
Less accumulated depreciation.................... (117,484) (118,184)
--------- ---------
$ -- $ 7,000
========= =========
</TABLE>

NOTE 3 -- INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1996 1997
------------ ------------
<S> <C> <C>
EMPfacts license........................................... $ 8,500 $ 8,500
Covenant not to compete.................................... 60,000 60,000
Goodwill................................................... 2,500 2,500
Loan origination fees...................................... 958 958
Organization costs......................................... 780 780
Other intangibles.......................................... 4,238 4,238
-------- --------
76,976 76,976
Less accumulated amortization.................... (71,550) (73,108)
-------- --------
$ 5,426 $ 3,868
======== ========
</TABLE>

F-23
<PAGE> 73
MIROCON, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 -- ADVANCES FROM SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

The advances from shareholders represents the shareholder's personal funds
advanced to Mirocon to be used for working capital as needed. The balance of the
advances was $108,923 at December 31, 1996 with the full balance being repaid in
1997.

NOTE 5 -- COMMITMENTS

The Company entered into a lease agreement for its office space on
September 1, 1990. The lease expires August 31, 2000 and the Company is
currently paying $2,427 per month. The Company's lease has been assumed by the
purchaser in conjunction with the sale of primarily all operating assets of the
Company (Note 7); however, the Company remains contingently liable under the
assignment of the lease. The purchaser of the Company's operating assets intends
to exercise the buyout option under the lease assumed effective September 1,
1998 for approximately $2,500.

Future minimum rental payments under the lease commitments are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1998............................................. $29,130
1999............................................. 29,130
2000............................................. 19,420
-------
$77,680
=======
</TABLE>

NOTE 6 -- PROFIT SHARING PLAN

The Company provides a SEP IRA profit sharing program for its employees. In
order to receive the profit sharing annual contribution, employees must work
full time for the calendar year.

The Company contributed $6,018 and $4,100 for 1996 and 1997, respectively.

NOTE 7 -- SUBSEQUENT EVENTS

Effective December 1, 1997, the Company sold primarily all operating assets
for a total purchase price of $519,419 which consisted of a $50,000 cash payment
at closing and a note receivable of $469,419. The sale also included a covenant
not to compete with the acquirer for a period of five years.

F-24
<PAGE> 74

UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME (LOSS)

The following unaudited pro forma combined statements of income (loss) for
the years ended December 31, 1996 and 1997, give effect to the business
combination of Factual Data Corp. and Mirocon, Inc. effective January 1, 1996,
including the related pro forma adjustments described in the notes thereto as
well as the sale of the Texas territory effective January 1, 1996. The
transaction between Factual Data Corp. and Mirocon, Inc. has been accounted for
as a combination of companies under the purchase method. A separate Proforma
combined balance sheet is not included as the acquisition took place December 1,
1997 and is included in the historical balance sheet of Factual Data Corp. at
December 31, 1997. The unaudited pro forma combined statements of income (loss)
also reflect the sale of the Texas territory effective January 1, 1997 as if the
territory sale took place January 1, 1996. These pro forma statements are not
necessarily indicative of the results of operations as they might have been had
the transaction become effective on the above mentioned date.

The pro forma combined statements of income (loss) for the year ended
December 31, 1997 and 1996 include the results of operations of Factual Data
Corp. and Mirocon, Inc.

The unaudited pro forma combined statements of income (loss) should be read
in conjunction with the separate historical financial statements and notes
thereto of Factual Data Corp. and Mirocon, Inc.

F-25
<PAGE> 75

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------
TEXAS MIROCON ACQUISITION
FACTUAL TERRITORIES --------------------- PRO FORMA
DATA(1) MIROCON TOTAL SOLD(7) DEBIT CREDIT COMBINED
---------- -------- ---------- ------------ -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
System affiliates................ $1,446,559 $ -- $1,446,559 $ --(2) $ 72,290 -- $1,374,269
Information services............. 2,066,254 935,727 3,001,981 (1,471,154) -- -- 1,530,827
Proceeds from the sale of Company
operated territories........... 480,000 -- 480,000 -- -- -- 480,000
Training, license and other...... 16,000 -- 16,000 -- -- -- 16,000
---------- -------- ---------- ------------ -------- -------- ----------
Total revenue.............. 4,008,813 935,727 4,944,540 (1,471,154) 72,290 -- 3,401,096
Operating Expenses
Costs of services provided....... 2,123,357 392,490 2,515,847 (735,776) --(2) 72,290 1,707,781
Costs of Company operated
territories.................... 31,302 -- 31,302 -- -- -- 31,302
Selling, general and
administrative................. 1,412,974 463,582 1,876,556 --(5) 39,695(3) 93,000 1,823,251
---------- -------- ---------- ------------ -------- -------- ----------
Total operating expenses... 3,567,633 856,072 4,423,705 (735,776) 39,695 165,290 3,562,834
Income (loss) from operations...... 441,180 79,655 520,835 (735,378) 111,985 165,290 (161,238)
Other income (expense)
Other income....................... 29,437 2,394 31,831 -- -- -- 31,831
Interest expense................. (108,919) (469) (109,388) --(4) 29,000 -- (138,388)
---------- -------- ---------- ------------ -------- -------- ----------
Income (loss) before income
taxes............................ 361,698 81,580 443,278 (735,378) 140,985 165,290 (267,795)
Income tax expense (benefit)....... 78,063 28,000 106,063 (250,029)(6) (47,935)(6) 56,199 (135,702)
---------- -------- ---------- ------------ -------- -------- ----------
Net income (loss).................. $ 283,635 $ 53,580 $ 337,215 $ (485,349) $ 93,050 $109,091 $ (132,093)
========== ======== ========== ============ ======== ======== ==========
Basic earnings (loss) per share.... 0.16 .03 0.19 (27) .05 .06 (.07)
========== ======== ========== ============ ======== ======== ==========
Weighted average pro forma shares
outstanding...................... 1,800,000 1,800,000 1,800,000
========== ========== ==========
</TABLE>

F-26
<PAGE> 76

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
FACTUAL ------------------------ PRO FORMA
DATA(1) MIROCON TOTAL DEBIT CREDIT COMBINED
---------- -------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue
System affiliates.............. $1,950,668 $ -- $1,950,668 $ 54,265(2) $ -- $1,896,403
Information services........... 734,946 904,587 1,639,533 -- -- 1,639,533
Proceeds from the sale of
Company operated
territories.................. 714,365 -- 714,365 -- -- 714,365
Training, license and other.... 119,692 -- 119,692 -- -- 119,692
---------- -------- ---------- ----------- -------- ----------
Total revenue........... 3,519,671 904,587 4,424,258 54,265 -- 4,369,993
---------- -------- ---------- ----------- -------- ----------
Operating Expenses
Costs of services provided..... 1,301,085 340,422 1,641,507 -- 54,265(2) 1,587,242
Costs of Company operated
territories.................. 506,101 -- 506,101 -- -- 506,101
Selling, general and
administrative............... 916,521 468,973 1,385,494 39,695(5) 105,547(3) 1,319,642
---------- -------- ---------- ----------- -------- ----------
Total operating
expenses.............. 2,723,707 809,395 3,533,102 39,695 159,812 3,412,985
Income from operations........... 795,964 95,192 891,156 93,960 159,812 957,008
Other income (expense)
Other income................... 28,806 8,240 37,046 -- -- 37,046
Interest expense............... (77,497) -- (77,497) 26,000(4) -- (103,497)
---------- -------- ---------- ----------- -------- ----------
Income before income taxes....... 747,273 103,432 850,705 119,960 159,812 890,557
Income tax expense (benefit)..... 244,339 35,000 279,339 (40,786)(6) 54,336(6) 292,889
---------- -------- ---------- ----------- -------- ----------
Net income....................... $ 502,934 $ 68,432 $ 571,366 $ 79,174 $105,476 $ 597,668
========== ======== ========== =========== ======== ==========
Basic earnings per share......... 0.28 .03 0.31 .04 .06 0.33
========== ======== ========== =========== ======== ==========
Weighted average pro forma shares
outstanding.................... 1,800,000 1,800,000 1,800,000
========== ========== ==========
</TABLE>

F-27
<PAGE> 77

NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME

The acquisition of the operating assets of Mirocon, Inc., included property
and equipment, a non-compete agreement and customer lists for a total purchase
price of $519,419. Factual Data Corp. issued a note payable for $469,419 and
paid $50,000 cash at closing. The purchase price has been allocated as follows:

<TABLE>
<CAPTION>
ASSET CATEGORY VALUATION
-------------- ---------
<S> <C>
Property and equipment...................................... $ 24,000
Non-compete agreement....................................... 50,000
Customer lists.............................................. 445,419
--------
$519,419
========
</TABLE>

The following adjustments are related to the business combination between
Factual Data Corp. and Mirocon, Inc.

1. Excludes the results from the Indiana territory which was sold effective
January 1, 1996 and excludes the results of the Texas territories in
1997 as these territories were sold effective January 1, 1997.

2. To eliminate royalty and franchise fees.

3. To eliminate officer's salaries and bonus, for a Mirocon officer who did
not continue employment with Factual Data Corp. and was not replaced.

4. To record interest expense on acquisition debt, which reflects an 8%
annual rate.

5. To record amortization expense on non-compete agreement and customer
list.

6. Pro-forma income tax adjustment at the statutory rate of 34%.

7. To reflect the direct operating revenues and costs which would have been
eliminated had the Texas territory been sold effective January 1, 1996.
No adjustments have been made to general and administrative costs for
the reduction to the level of support required in Company operated
territories.

F-28
<PAGE> 78

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OFFER
OR SOLICITATION BY ANYONE IN ANY JURISDICTION NOT AUTHORIZED, OR IN WHICH THE
PERSON MAKING SUCH AN OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Dilution.............................. 11
Use of Proceeds....................... 12
Capitalization........................ 13
Dividend Policy....................... 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 20
Management............................ 35
Principal Shareholders................ 39
Description of Securities............. 40
Shares Eligible for Future Sale....... 43
Underwriting.......................... 44
Legal Matters......................... 47
Experts............................... 47
Additional Information................ 47
Index to Financial Statements......... F-1
</TABLE>

UNTIL JUNE 8, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK
OR WARRANTS, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

======================================================
======================================================

1,200,000 UNITS
CONSISTING OF
1,200,000 SHARES OF COMMON STOCK

AND

1,200,000 REDEEMABLE COMMON
STOCK PURCHASE WARRANTS

FACTUAL DATA CORP.
--------------------
PROSPECTUS
--------------------

SCHNEIDER SECURITIES, INC.

MAY 13, 1998

======================================================