(1) BASIS OF PRESENTATION

EDGAR Online, Inc. was incorporated in the State of Delaware in November 1995 under the name Cybernet Data Systems, launched its EDGAR Online website in January 1996, and went public in May 1999 under its current name. The Company creates and distributes financial data and public filings for equities, mutual funds, and a variety of other publicly traded assets. The highly detailed data produced by the Company assists in the analysis of the financial, business and ownership conditions of a company or investment vehicle. The Company has also developed high volume distribution techniques for managing and delivering regulatory filings. In addition, the Company has developed proprietary automated data parsing, tagging and processing systems that allow for rapid conversion of unstructured data into structured financial data sets. The Company specializes in the use of the financial reporting standard called eXtensible Business Reporting Language (“XBRL”) and leverages its automated processing platform and expertise in XBRL to produce both standard and custom data sets and to assist companies with the creation of their own XBRL financial reports. The Company also creates tools and web sites for easy viewing and analysis of this XBRL data. Consumers of our information are generally financial, corporate and advisory professionals who work in financial institutions such as investment funds, asset management firms, insurance companies and banks, stock exchanges and government agencies, as well as accounting firms, law firms, corporations or individual investors.

The unaudited interim financial statements of the Company as of September 30, 2009 and for the three and nine months ended September 30, 2008 and 2009 included herein have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Article 10 of Regulation S-X under the Exchange Act. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

In the opinion of the Company, the accompanying unaudited interim financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of September 30, 2009 and the results of its operations for the three and nine months ended September 30, 2008 and 2009 and cash flows for the nine months ended September 30, 2008 and 2009. The results for the three and nine months ended September 30, 2009 are not necessarily indicative of the expected results for the full 2009 fiscal year or any future period.

These financial statements should be read in conjunction with the financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC in March 2009. The condensed consolidated balance sheet information was derived from the audited consolidated financial statements as of that date.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company 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. Significant estimates embedded in the condensed consolidated financial statements for the periods presented concern the allowance for doubtful accounts, the fair values of goodwill and other intangible assets and the estimated useful lives of intangible assets.

(2) INCOME (LOSS) PER SHARE

Basic income (loss) per share excludes dilution for common stock equivalents and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is calculated using the treasury stock method and reflects, in periods in which they have a dilutive effect, the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted and resulted in the issuance of common stock.

Diluted net income per share for the three months ended September 30, 2009 included the effect of 1,287,378 options with a weighted average exercise price of $1.16 and the effect of 248,495 unvested restricted stock grants. Diluted net loss per share is the same as basic net loss per share amounts for the three months ended September 30, 2008 and the nine months ended September 30, 2008 and 2009 as the Company reported a net loss and therefore all outstanding stock options, unvested restricted stock grants and warrants are anti-dilutive. Diluted net loss per share does not include the effect of outstanding stock options, unvested restricted stock grants and warrants for the three and nine months ended September 30, 2008 and the nine months ended September 30, 2009 of 3,885,714 and 3,976,857, respectively. A reconciliation of shares used in calculating basic and diluted net income per share for the three months ended September 30, 2009 is as follows:

(3) SOFTWARE DEVELOPMENT COSTS

The Company capitalizes software development costs in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 985-20 (previously Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed”). Software development costs are capitalized after technological feasibility is established. Once the software products become available for general release to the public, the Company amortizes such costs over the related product’s estimated economic useful life to cost of revenues. Net capitalized software development costs (included in other assets) totaled $416 and $252 at December 31, 2008 and September 30, 2009, respectively. Related amortization expense, included in cost of revenues, totaled $55 for both the three months ended September 30, 2008 and 2009 and $164 for both the nine months ended September 30, 2008 and 2009.

The Company capitalizes internal-use software development costs in accordance with ASC Topic 350-40 (previously Statement of Position No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”). The Company capitalizes internal-use software development costs once certain criteria are met. Once the internal-use software is ready for its intended use, the capitalized internal-use software costs will be amortized over the related software’s estimated economic useful life in amortization and depreciation expense. Our computer software is also subject to review for impairment as events or changes in circumstances occur indicating that the amount of the asset reflected in the Company’s balance sheet may not be recoverable. Net capitalized internal-use software costs (included in property and equipment) were $725 and $1,484 at December 31, 2008 and September 30, 2009, respectively. Related amortization expense totaled $0 and $122 in the three months ended September 30, 2008 and 2009, respectively and $0 and $245 in the nine months ended September 30, 2008 and 2009, respectively.

(4) LONG-TERM DEBT

On April 5, 2007, the Company entered into a Financing Agreement (“Financing Agreement”) with Rosenthal & Rosenthal, Inc. (“Rosenthal”) for additional working capital. Under the Financing Agreement, Rosenthal made a term loan in the principal amount of $2,500 to the Company and has additionally agreed to provide up to an additional $2,500 under a revolving line of credit. Interest on outstanding borrowings under the Financing Agreement is payable at variable rates of interest over the published JPMorgan Chase prime rate (with a minimum prime rate of 6%), 2.5% on the term loan and 2% on borrowings under the revolving credit facility. The Company’s obligations under the term loan are evidenced by a secured Term Note and all of the Company’s obligations to Rosenthal are secured by a first priority security interest in substantially all of the Company’s assets.

The Financing Agreement, as amended most recently on March 13, 2009, terminates on March 30, 2011 unless sooner terminated by either party in accordance with the terms of the Financing Agreement. The terms include a provision that would allow the lender to accelerate the due date of the debt based on certain circumstances. The Company is required to maintain certain levels of working capital and tangible net worth pursuant to the Financing Agreement. On April 22, 2008, these amounts were amended effective as of December 31, 2007. On March 13, 2009, these amounts were amended effective as of December 31, 2008. The Company was in compliance with the amended terms at September 30, 2009.

In connection with the Financing Agreement, the Company issued to Rosenthal a warrant to purchase 100,000 shares of the Company’s common stock at an exercise price equal to $2.81 (the market price of the Company’s common stock on the closing date of the transaction) which warrant expires on April 30, 2010. A discount related to the warrant totaling $125 was recorded based on the Black-Scholes-Merton fair value of the warrant on the date of issue and is being amortized over the term of the Financing Agreement. Also in connection with this transaction, the Company paid its financial advisor $125, which represents 3% of the gross principal amount of the term loan and 2% of the gross principal amount of the revolving credit.

The term loan, as amended, is due as follows: (i) $21 per month from July 1, 2008 through and including March 1, 2009; (ii) $42 from April 1, 2009 through the maturity date and (iii) the entire remaining unpaid balance on the maturity date. At September 30, 2009, $500 was classified as the current portion of long-term debt and $1,528 was classified long-term debt. There were $66 of unamortized deferred financing costs included in other assets. The Company has not received any funding under the revolving line of credit as of September 30, 2009. Interest expense under the Agreement totaled $84 and $77 for the three months ended September 30, 2008 and 2009, respectively, and included $31 and $17, respectively, of amortization of deferred financing costs and warrant discount. Interest expense under the Agreement totaled $254 and $250 for the nine months ended September 30, 2008 and 2009, respectively, and included $91 and $51, respectively, of amortization of deferred financing costs and warrant discount.

(5) STOCK-BASED COMPENSATION

Stock Compensation Expense

The Company records stock-based compensation expense under the provisions of FASB ASC Topic 718 (previously SFAS No. 123 (R), “Share-Based Payment”). Stock-based compensation expense for the three and nine months ended September 30, 2008 and 2009 was recognized in the following income statement expenses:

This expense increased the Company’s net loss per share by $0.01 in the three months ended September 30, 2008 and decreased the Company’s net income per share by $0.01 in the three months ended September 30, 2009, and increased the Company’s net loss per share by $0.03 and $0.04 in the nine months ended September 30, 2008 and 2009, respectively.

The estimated per share weighted-average grant-date fair values of stock options granted during the three months ended September 30, 2008 and 2009 were $1.00 and $0.84, respectively. The estimated per share weighted-average grant-date fair values of stock options granted during the nine months ended September 30, 2008 and 2009 were $1.51 and $0.99, respectively. Amounts were determined using the Black-Scholes-Merton option pricing model based on the following assumptions:

The assumptions used in calculating the value of stock options, which involve inherent uncertainties and the application of management judgment, were based on the following:

Stock Options and Restricted Stock Grants as of September 30, 2009

In May 2005, the Company adopted the 2005 Stock Award and Incentive Plan (the “2005 Plan”) which replaced all previous stock option plans which in total had authorized the issuance of options to purchase up to 4.1 million shares of the Company’s common stock since the Company’s inception. All remaining available shares under the Company’s prior stock option plans became available under the 2005 Plan upon its adoption. In addition, the 2005 Plan, when adopted, authorized 1,087,500 new shares of common stock for equity awards. The 2005 Plan authorizes a broad range of awards, including stock options, stock appreciation rights, restricted stock, non-restricted stock and deferred stock. At the Annual Meeting of Stockholders held on June 23, 2008, the 2005 Plan was amended to increase the number of shares available for grant by 1,000,000. At the Annual Meeting of Stockholders held on June 10, 2009, the 2005 Plan was amended to increase the number of shares available for grant by an additional 1,000,000 shares. The 2009 amendment also makes clear that under the 2005 Plan the Company may not reprice stock options or stock appreciation rights without shareholder approval.

Option awards are generally granted with an exercise price equal to the closing market price of the Company’s common stock on the date of grant. Option awards generally vest over three years and have ten year contractual terms.

Option activity for the nine months ended September 30, 2009 is as follows:

The aggregate intrinsic value represents the difference between the exercise price of the underlying awards and the market price of the Company’s common stock for those awards that have an exercise price below the market price at September 30, 2009. During the nine months ended September 30, 2009, the aggregate intrinsic value of options exercised under the Company’s stock option plans was approximately $4. Cash received from stock options exercised during the nine months ended September 30, 2009 was $16.

In addition, the Company granted restricted shares under the 2005 Plan during the nine months ended September 30, 2009. Restricted shares have no exercise price and vest depending on the individual grants. The fair value of the restricted shares is based on the market value of the Company’s common stock on the date of grant. Restricted share activity is as follows:

The aggregate intrinsic value was calculated based on the market price of the Company’s common stock at September 30, 2009. During the nine months ended September 30, 2009, the aggregate intrinsic value of shares vested was $258, determined based on the market price of the Company’s common stock on the respective vesting dates.

At September 30, 2009, 1,413,185 shares were available for grant under the 2005 Plan.

(6) FAIR VALUE OF FINANCIAL INSTRUMENTS

The financial statement carrying values of the Company’s cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities at December 31, 2008 and September 30, 2009, approximate their fair value because of the immediate or short-term maturity of these instruments. The Company maintains a cash balance at one financial institution with balances insured by the Federal Deposit Insurance Corporation (“FDIC”). At times, the balance at such financial institution exceeds the FDIC insured limits. The financial statement carrying value of the Company’s long-term debt approximates its fair value based on interest rates currently available to the Company for borrowings with similar characteristics and maturities.

(7) RECENT ACCOUNTING PRONOUNCEMENTS

Adopted

In June 2009, FASB issued Accounting Standards Update No. 2009-01, “Generally Accepted Accounting Principles” (“ASC Topic 105”) which establishes the FASB Accounting Standards Codification (the “Codification” or “ASC”) as the official single source of authoritative U.S. generally accepted accounting principles (“GAAP”). All existing accounting standards are superseded. All other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission (“SEC”) guidance organized using the same topical structure in separate sections within the Codification. Following the Codification, the Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.

The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective for our third quarter 2009 financial statements and the principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification.

In August 2009, the FASB issued ASU No. 2009-05, “Measuring Liabilities at Fair Value” (“ASU 2009-05”). ASU 2009-05 amends ASC Topic 820 and clarifies that, where a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following methods: 1) a valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar liabilities or similar liabilities when traded as assets and/or 2) a valuation technique that is consistent with the principles of ASC Topic 820. ASU 2009-05 also clarifies that, when estimating the fair value of a liability, a reporting entity is not required to adjust to include inputs relating to the existence of transfer restrictions on that liability. The adoption of ASU 2009-05 did not have a material impact on the Company’s financial statements.

In April 2009, the FASB issued guidance within ASC Topic 825-10, “Financial Instruments – Overall,” concerning interim disclosures about fair value instruments. This guidance requires that disclosures about the fair value of a company’s financial instruments be made whenever summarized financial information for interim reporting periods is made. The provisions of this guidance are effective for interim periods ending after June 15, 2009. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In May 2009, the FASB issued guidance within ASC Topic 855-10, “Subsequent Events,” relating to subsequent events. This guidance establishes principles and requirements for subsequent events. This guidance defines the period after the balance sheet date during which events or transactions that may occur would be required to be disclosed in a company’s financial statements. Public entities are required to evaluate subsequent events through the date that financial statements are issued. This guidance also provides guidelines for evaluating whether or not events or transactions occurring after the balance sheet date should be recognized in the financial statements. This guidance requires disclosure of the date through which subsequent events have been evaluated. The Company has evaluated subsequent events immediately prior to the date of issuance of this report.

Not Yet Adopted

On September 23, 2009, the FASB ratified provisions of ASC Topic 605-25 related to revenue recognition for multiple-element arrangements. ASC Topic 605-25 amends prior guidance and requires an entity to apply the relative selling price allocation method in order to estimate the selling price for all units of accounting, including delivered items, when vendor-specific objective evidence or acceptable third-party evidence does not exist. These provisions contained within ASC Topic 605-25 are effective for revenue arrangements entered into or which contain material modifications in fiscal years beginning on or after June 15, 2010, applied prospectively. Earlier application is permitted as of the beginning of an entity’s fiscal year. The Company is currently evaluating the potential impact that these provisions within ASC Topic 605-25 will have on its consolidated financial statements.

A reconciliation of shares used in calculating basic and diluted net income per share for the three months ended September 30, 2009 is as follows:

The Company records stock-based compensation expense under the provisions of FASB ASC Topic 718 (previously SFAS No. 123 (R), “Share-Based Payment”). Stock-based compensation expense for the three and nine months ended September 30, 2008 and 2009 was recognized in the following income statement expenses:

Option activity for the nine months ended September 30, 2009 is as follows:

Restricted share activity is as follows: