10QSB

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)
(x)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2003

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from      to      

Commission file number 000-22849

Visual Data Corporation

(Exact name of small business issuer as specified in its charter)

Florida

(State or other jurisdiction of incorporation or organization)

65-0420146

(IRS Employer Identification No.)

1291 SW 29 Avenue, Pompano Beach, Florida 33069

(Address of principal executive offices)

954-917-6655

(Issuer’s telephone number)

(Former name, former address and former fiscal year,
if changed since last report)

     Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (x) No ( ).

     State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date. As of May 1, 2003 the registrant had issued and outstanding 35,165,914 shares of common stock.

     Transitional Small Business Disclosure Format (check one); Yes ( ) No (x)

TABLE OF CONTENTS

	CONDENSED CONSOLIDATED BALANCE SHEETS
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EX-99.A Certification of the CFO
EX-99.B Certification of the CEO

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

INDEX TO FINANCIAL STATEMENTS

	Page Number
Table of Contents		2
Condensed Consolidated Balance Sheets at March 31, 2003 (Unaudited) and September 30, 2002		3
Condensed Consolidated Statements of Operations for the Six and Three Months Ended March 31, 2003 and 2002 (Unaudited)		5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2003 and 2002 (Unaudited)		7
Notes to Unaudited Condensed Consolidated Financial Statements		10 – 19

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VISUAL DATA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

			March 31,		September 30,
			2003		2002
			(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	10,979	$	60,603
	Accounts receivable, net of allowance for doubtful accounts of $346,971 and $394,837, respectively			1,242,058		1,343,729
	Prepaid expenses			316,239		467,051
	Inventories			207,959		348,733
	Other current assets			27,305		18,407
		Total current assets		1,804,540		2,238,523
PROPERTY AND EQUIPMENT, net				1,262,824		1,993,214
INTANGIBLE ASSETS, net				4,375,235		4,682,408
OTHER NON-CURRENT ASSETS				991,364		246,201
		Total assets	$	8,433,963	$	9,160,346

(Continued)

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VISUAL DATA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

			March 31,			September 30,
			2003			2002
			(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable and accrued liabilities		$	2,464,201		$	2,670,111
	Deferred revenue			93,796			108,010
	Current portion of obligations under capital leases			229,544			334,351
	Convertible debentures			1,502,598			—
	Notes payable			1,426,349			1,129,047
		Total current liabilities		5,716,488			4,241,519
LONG-TERM PORTION OF OBLIGATIONS UNDER
CAPITAL LEASES				—			92,056
CONVERTIBLE DEBENTURES				—			1,461,587
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY:
	Preferred stock, authorized 5,000,000 shares Class A7, par value $.0001 per share, authorized 162,500 shares, 116,832 and 11,832 issued and outstanding, respectively			12			1
	Common stock, par value $.0001 per share; authorized 75,000,000 shares, 34,582,914 and 31,762,164 issued and outstanding			3,458			3,176
	Additional paid-in capital			56,119,627			54,517,509
	Accumulated deficit			(53,405,622	)		(51,155,502	)
		Total stockholders’ equity		2,717,475			3,365,184
		Total liabilities and stockholders’ equity	$	8,433,963		$	9,160,346

The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these consolidated financial statements.

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VISUAL DATA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

				Six Months Ended						Three Months Ended
				March 31,						March 31,
				2003			2002			2003			2002
REVENUE:
Webcasting and related equipment sales				$	1,808,343		$	1,923,986		$	851,523		$	1,390,891
Network equipment sales and rentals					362,256			508,262			148,901			309,826
Network usage					1,129,795			1,289,308			544,392			600,401
Travel production and distribution					216,411			306,010			94,487			166,471
Other					—			9,229			—			9,229
			Total Revenue		3,516,805			4,036,795			1,639,303			2,476,818
OPERATING EXPENSES:
	Webcasting and related equipment costs				665,816			649,299			311,984			521,017
	Network equipment sales and rentals				182,945			253,370			88,221			165,042
	Network usage				554,197			789,678			269,523			385,100
	Travel production and distribution				7,579			58,531			2,319			32,730
	General and administrative:
		Compensation			1,973,034			2,471,932			985,294			1,320,994
		Professional fees			541,231			736,134			318,888			437,995
		Other			650,067			709,073			314,722			363,785
	Sales and marketing				13,266			101,804			6,342			44,815
	Depreciation and amortization				1,061,942			892,482			513,030			603,259
			Total operating expenses		5,650,077			6,662,303			2,810,323			3,874,737
Loss from operations					(2,133,272	)		(2,625,508	)		(1,171,020	)		(1,397,919	)
OTHER INCOME (EXPENSE):
	Interest income				199			2,693			55			1,640
	Loss on debenture				—			(3,573,103	)		—			(3,573,103	)
	Interest expense				(418,745	)		(408,827	)		(190,453	)		(291,457	)
	Other income (expense)				301,698			6,428			285,078			69,036
			Total other income (expense), net		(116,848	)		(3,972,809	)		94,680			(3,793,884	)
Net loss from continuing operations					(2,250,120	)		(6,598,317	)		(1,076,340	)		(5,191,803	)
DISCONTINUED OPERATIONS:
	Loss from golf, leisure and syndication group				—			(588,760	)		—			—
	Loss from financial solutions group				—			(174,216	)		—			(1,674	)
	Loss from discontinued operations				—			(762,976	)		—			(1,674	)
Net Loss					(2,250,120	)	$	(7,361,293	)	$	(1,076,340	)	$	(5,193,477	)

(Continued)

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VISUAL DATA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Continued, Unaudited)

		Six Months Ended March 31,						Three Months Ended March 31,
		2003			2002			2003			2002
Loss per share – basic and diluted:
	Continuing operations	$	(.07	)	$	(.34	)	$	(.03	)	$	(.23	)
	Discontinued operation		—			(.04	)		—			—
Net loss per share		$	(.07	)	$	(.38	)	$	(.03	)	$	(.23	)
Weighted average shares of common stock outstanding			32,039,441			19,242,472			32,652,464			22,303,986

The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these consolidated financial statements.

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VISUAL DATA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

				Six Months Ended
				March 31,
				2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Loss			$	(2,250,120	)	$	(7,361,293	)
		Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization			1,061,942			892,482
		Provision (reduction) in allowance for doubtful accounts			(47,866	)		46,842
		Reduction in allowance for inventory obsolescence			—			(59,000	)
		Loss from discontinued operations			—			762,976
		Loss from write-off of GSI debenture			—			3,573,103
		Loss from retirement of fixed assets			19,001			—
		Gain on settlements of obligations			(314,579	)		—
		Interest expense on convertible debentures and other			273,553			273,384
		Amortization of discount on notes payable			44,603			—
		Amortization of debt issue costs			46,271			—
		Amortization of deferred services and incentives			341,092			593,421
		Changes in assets and liabilities:
			Decrease (increase) in accounts receivable		149,537			(201,434	)
			Decrease (increase) in prepaid expenses		(87,094	)		38,260
			Increase in other current assets		(8,898	)		(49,387	)
			Decrease in inventories		140,774			102,895
			(Decrease) increase in accounts payable and accrued liabilities		307,722			(533,452	)
			Decrease in deferred revenue		(14,214	)		(114,433	)
Net cash used in operating activities					(338,276	)		(2,035,636	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Acquisitions of property and equipment				(43,380	)		(15,532	)
	Decrease in restricted cash				—			182,189
	Acquisition of Media On Demand				—			79,875
	Increase in other non-current assets				1,795			25,933
Net cash (used in) provided by investing activities					(41,585	)		272,465

(Continued)

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VISUAL DATA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued, Unaudited)

			Six Months Ended
			March 31,
			2003			2002
CASH FLOWS FROM FINANCING ACTIVITIES:
	Payments on mortgage note payable		$	—		$	(22,898	)
	Payments on capital leases			(161,863	)		(119,044	)
	Proceeds from issuance of common stock, net			—			450,000
	Proceeds from notes payable			361,000			2,000,000
	Repayment of notes payable			(94,800	)		(200,000	)
	Proceeds from issuance of preferred stock, net			225,900			261,000
	Redemption of convertible debentures			—			(345,000	)
	Proceeds from exercise of warrants and options			—			325,010
Net cash provided by financing activities				330,237			2,349,068
CASH USED IN DISCONTINUED OPERATIONS:
		Operating activities		—			(527,637	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				(49,624	)		58,260
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				60,603			52,161
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	10,979		$	110,421
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Cash paid during the period for interest		$	18,259		$	91,676

(Continued)

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VISUAL DATA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued, Unaudited)

		Six Months Ended
		March 31,
		2003		2002
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
	Conversion of debentures	$	—	$	858,170
	Issuance of warrants and options for deferred services and incentives		349,801		307,474
	Investment in OnStream Media by issuing common stock		—		200,000
	Investment in OnStream Media by issuing preferred stock		750,000		—
	Issuance of stock for interest		22,200		584,618
	Issuance of stock for repayment of debt		84,500		—
	Issuance of common stock for media content		—		222,000
	Issuance of common stock for MOD acquisition		—		2,279,855
	Issuance of common stock for payment of accounts payable		170,010		165,795

The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these consolidated financial statements.

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VISUAL DATA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Visual Data Corporation (The “Company” or “VDAT”), organized in 1993, is a full service broadband media company that specializes in webcasting, networking solutions for the entertainment industry and marketing solutions for the travel industry. VDAT is comprised of three operating groups including: Visual Data Webcasting Group, Visual Data Networking Solutions Group (EDNET) and Visual Data Travel Group (includes HotelView and ResortView).

The Visual Data Webcasting Group provides an array of corporate-oriented web-based media services to the corporate market including live audio and video webcasting, packaged corporate announcements, and rich media information storage and distribution for any business entity. The Webcasting Group generates revenues through production and distribution fees. On February 7, 2002, MediaOnDemand.com, Inc. (“MOD”) was merged with and into VDAT/MOD Acquisition Corp., a Florida corporation and a wholly owned subsidiary of Visual Data Corporation. MOD provided The Company with expanded capabilities and clients in the media video webcasting segment.

Visual Data’s Networking Solutions Group, which is comprised of our EDNET subsidiary, provides connectivity within the entertainment and advertising industries through its private network, which encompasses production and post-production companies, advertisers, producers, directors, and talent. The network enables high-speed exchange of high quality audio, compressed video and multimedia data communications, utilizing long distance carriers, regional phone companies, satellite operators, and major Internet Service Providers. The Networking Solutions Group also provides systems integration and engineering services, application-specific technical advice, audio equipment, proprietary and off-the-shelf codecs, teleconferencing equipment, and other innovative products to facilitate the Company’s broadcast and production applications.

The Networking Solutions Group manages a global network of over 500 North American affiliates, and nearly 200 international associates, in cities throughout the United States, Canada, Mexico, Europe, and the Pacific Rim. The Network Solutions Group generates revenues from the sale, rental and installation of equipment, network usage, distribution fees and other related fees.

The Visual Data Travel Group produces Internet-based multi-media streaming videos such as hotel, resort, golf facility, travel destination and time-share productions designed to keep a high level of viewer interest. These concise, broadband-enabled “vignettes” generally have running times from 2-4 minutes. In addition to the high-end vignettes, the Company offers a commercial on the web (“COW”), which consists of a 2 minute narrated photo presentation of corporate properties. The Company warehouses all of its travel content on its own on-line travel portal – Travelago.com (“Travelago”).

The Visual Data Travel Group generates revenues from production and distribution fees. The Company owns or co-owns virtually all the content created, which provides content for syndication.

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VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Nature of Business (Continued)

During the fiscal year ended September 30, 2002, the Company had two additional operating groups, the Visual Data Financial Solutions Group and the Visual Data Golf, Leisure and Syndication Group. The Visual Data Financial Solutions Group was established in November 1999 to address the information needs of the financial sector. The Golf, Leisure and Syndication Group was formed in December 2000 with the acquisition of the Golf Society of the U.S. which is a membership business that markets to the golfing community. Its members were provided with the opportunity to acquire equipment, greens fees, trips and various other benefits at a discounted price. In December 2001 the Company decided to discontinue the operations of both the Financial Solutions Group and the Golf, Leisure and Syndication Group as a result of their adverse impact on the Company’s financial condition and in keeping with our overall strategic plan.

Liquidity and Going Concern

The consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since its inception, and has an accumulated deficit of $53,405,622 as of March 31, 2003. The Company’s operations have been financed primarily through the issuance of equity. The Company’s liquidity has substantially diminished because of such continuing operating losses and a working capital deficit of approximately $3.9 million and the Company will be required to seek additional capital to continue operations. As a result, there is substantial doubt about the Company’s ability to continue as a going concern. For the six months ended March 31, 2003, we had a net loss from continuing operations of approximately $2,250,000, reclassified the approximately $1,500,000 convertible debenture from non-current to current and cash used in operations of approximately $338,000. The terms of our outstanding 6% convertible debentures provide that our failure to maintain a listing of our common stock on the Nasdaq Stock Market is an event of default under the debentures. If our common stock was to be delisted from the Nasdaq SmallCap Market, the debenture holders would have the right, after five days, to demand the repayment in full of all amounts outstanding under the debentures. The Company’s forecast for fiscal year 2003 anticipates a reduction in cash used for operations. At March 31, 2003, we had approximately $11,000 of cash and cash equivalents. Subsequent to March 31, 2003 we have raised an additional $600,000 through the issuance of a promissory note. See Note 9.

The Company is currently seeking to raise up to $2.0 million of additional funds through the private placement of equity or a combination of debt and equity. Although the Company believes that there are a number of parties interested in participating in such placement, there is no guarantee that the Company will be successful in raising all or a portion of such funds.

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VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Liquidity and Going Concern (Continued)

We are constantly evaluating our cash needs and existing burn rate. In addition, we have a plan whereby certain non-essential personnel and administrative costs will continue to be reduced so that we may continue to meet operating and financing obligations as they come due. Based upon an ongoing evaluation of our cash needs, we may seek to raise additional capital through the sale of equity and debt securities to provide funding for ongoing future operations. No assurances can be given that we will be successful in obtaining additional capital, or that such capital will be available on terms acceptable to us. Our ability to grow revenues, achieve cost savings or raise sufficient additional capital will be necessary to service our existing indebtedness. In addition, our ability to refinance existing indebtedness is subject to future economic conditions, market conditions, business conditions and other factors. We cannot assure you that we will be able to raise additional working capital to fund these anticipated deficits. Further, there can be no assurance that even if such additional capital is obtained or the planned cost reductions are implemented, that we will achieve profitability or positive cash flow. The Company’s continued existence is dependent upon its ability to raise capital and to market and sell our services successfully. The financial statements do not include any adjustments to reflect future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty.

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of Visual Data Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the 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 revenue and expenses during the reporting period. Estimates are used when accounting for allowances for doubtful accounts, revenue reserves, inventory reserves, depreciation and amortization, taxes, contingencies and impairment allowances. Such estimates are reviewed on an on-going basis and actual results could differ from those estimates.

Comprehensive Income or Loss

The Company has no components of other comprehensive income or loss, and accordingly, net loss equals comprehensive loss for all periods presented.

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VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Share

For the periods ended March 31, 2003 and 2002, net loss per share is based on the weighted average number of shares of common stock outstanding. Since the effect of common stock equivalents was anti-dilutive, all such equivalents were excluded from the calculation of net loss per share. The total outstanding options and warrants, which have been excluded from the calculation of loss per share, were 14,082,457 and 15,761,833 at March 31, 2003 and 2002, respectively. In addition, the Company has 116,832 shares of Class A-7 Convertible Preferred Stock and approximately $1,503,000 in convertible debentures at March 31, 2003, which can potentially convert into 4,673,280 and 5,309,534 shares of our common stock, respectively. The potential dilutive effects of the Class A-7 Convertible Preferred Stock and convertible debentures have been excluded from the calculation of net loss per share.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Interim Financial Data

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The annual financial statements of the Company as of September 30, 2002 should be read in conjunction with these statements. The interim financial information included herein has not been audited. However, management believes the accompanying unaudited interim financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the consolidated financial position of VDAT and subsidiaries as of March 31, 2003 and the results of their operations and cash flows for the six months ended March 31, 2003 and 2002. The results of operations and cash flows for the period are not necessarily indicative of the results of operations or cash flows that can be expected for the year ending September 30, 2003.

NOTE 2: INVESTMENTS

The Company has an investment in Curaspan, Inc. for approximately $108,000. This investment was accounted for under the cost method of accounting since we own a minority interest in this business. The carrying value of these investments is periodically evaluated by the Company to determine if any impairment has occurred. The investment in Curaspan, Inc. was fully reserved at December 31, 2002 as a result of their losses from operations during the last two fiscal years in addition to an existing burn rate which requires additional capital to sustain the operation.

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VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 2: INVESTMENTS (Continued)

On March 31, 2003, the Company increased its $200,000 investment in Onstream Media by an additional $750,000. Our board of directors appointed Randy Selman and Alan Saperstein to represent the Company on the board of directors of Onstream Media. There are currently 4 board members on the Onstream Media board of directors. Onstream media provides a desktop solution for corporations to better manage their digital rich media without the major capital expense for the hardware, software and additional staff necessary to build their own digital asset management solution. The Onstream system digitizes, encodes, indexes, transports and centralizes all rich media content within an organization and makes it immediately available worldwide, saving valuable time and money. The system is designed and managed by SAIC, the country’s foremost IT security firm, providing services to all branches of the federal government as well as the worlds leading corporations. As of March 31, 2003, the Company’s investment is accounted for under the equity method. As a result of the transaction occurring on March 21, 2003, no equity pick-up was performed for the quarter ended March 31, 2003 due to the immateriality. The Company will fully implement the equity accounting transaction as of April 1, 2003. See Note 8.

These investments are included in the caption entitled other non-current assets in the accompanying consolidated balance sheets.

NOTE 3: CONVERTIBLE DEBENTURES AND NOTES PAYABLE

On December 8, 2000 we sold an aggregate of $2,040,000 principal amount of 6% convertible debentures to Halifax Fund, LP and Palladin Opportunity Fund, LLC, two unaffiliated third parties. Halifax Fund, LP and Palladin Opportunity Fund, LLC are affiliates as a result of common control of the entities. Each of Halifax Fund, LP and Palladin Opportunity Fund, LLC purchased the convertible debentures in the ordinary course of business, and at the time of purchase neither Halifax Fund, LP or Palladin Opportunity Fund, LLC had any agreement or understanding, directly or indirectly, with any person to distribute either the convertible debentures or the shares of our common stock into which they are convertible.

In January 2001, the debenture holders converted $800,000 principal amount of the debentures and $6,312 of accrued interest into an aggregate of 803,740 shares of our common stock based upon the then current conversion price of $1.003 per share pursuant to the terms of the debentures. On October 5, 2001, the debenture holders exercised their warrants for an aggregate of 500,000 shares of our common stock. The exercise price of these warrants was adjusted from $4.00 per share to $.65 per share by us at the time of exercise.

On May 23, 2001, the Company sold an additional 998,702 shares of common stock for $1.50 per share. As a result of the anti-dilution provisions of the warrants issued in conjunction with these debentures, the number of shares issuable upon the exercise of the five year warrants has been increased to 272,289 shares and the exercise price has been reduced to $1.955 per share.

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VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 3: CONVERTIBLE DEBENTURES AND NOTES PAYABLE (Continued)

For a period of five days beginning on May 24, 2001, we had the right to sell to the purchasers an additional $1,020,000 principal amount of convertible debentures, with identical terms to those described above. On May 24, 2001, we exercised the put right for an additional $1,020,000 principal amount of 6% convertible debentures.

The floor price reset to $.288 per share on December 8, 2001, and as a result of common stock issued by the Company below the $.288 per share, the floor price was reset to $.283, the lowest selling price of common stock by the Company. The floor of the convertible debenture is re-set when the Company sells stock for less then the existing floor, while the convertible debenture is still outstanding.

On December 11, 2001, the debenture holders converted $381,000 of principal and $23,048 of accrued interest into 701,472 shares of our common stock at a conversion price of $.576 per share pursuant to the terms of the debentures.

On March 11, 2002, we redeemed $300,000 of the outstanding principal of the convertible debentures at 115% of par (for a total of $345,000), and the debenture holders each converted $200,000 of the outstanding principal and $54,119 of accrued interest (on the conversion and redemption) into and aggregate of 885,226 shares of common stock at $.513 per share, in accordance with the conversion calculation from the 6% Convertible Debentures. We modified the terms of the 6% convertible debentures to redeem the remaining $1,179,000 of outstanding principal at 115% of par value in six equal quarterly installments beginning on July 1, 2002.

We granted the purchasers certain rights of first refusal as they relate to private equity or equity related transactions, and have agreed to certain other limitations regarding the issuance of securities at prices less than the conversion prices described above.

In August 2002 the debenture holders asserted a default in the modification agreement related to the debentures. We believe that if a default has occurred, the debenture holders only remedy is to convert the debentures into shares of our common stock as described above. The default notification also provided notice that the number of registrable securities (as defined in the registration rights agreement) exceeded 85% of the number of shares covered by the Company’s existing registration statements, and the Company had 15 days to comply. The Company filed a Form S-3 to comply with this requirement.

In the event that the market price of the Company’s common shares shall be less than $1.50 per share for 20 consecutive trading days, at the Company’s option all or a portion of the 6% Convertible Debentures are redeemable in an amount equal to 115% of the Outstanding Principal Amount (as that term is defined in the 6% Convertible Debenture) plus all accrued but unpaid interest and all Delay Payments (as that term is defined in the 6% Convertible Debenture), subject to certain conditions. The Company’s redemption right shall, if exercised, be irrevocable, may be exercised no more than twice and may not be exercised again until three months after the first redemption closing date. In addition, the holders of the 6% Convertible Debentures have the right to convert the debentures at any time until the Redemption

15

VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 3: CONVERTIBLE DEBENTURES AND NOTES PAYABLE (Continued)

Closing Date. At March 31, 2003, the outstanding principal and interest on the 6% Convertible Debenture was $1,502,598. The balance at March 31, 2003 includes the redemption premium of approximately $177,000.

On December 4, 2001 we entered into a private debt financing transaction with a shareholder pursuant to the terms and conditions of a Loan Agreement, a Secured Promissory Note in the principal amount of $3 million and a Security Agreement. Under the terms of the debt financing transaction, the lender advanced us $1.5 million at closing. The note bears interest at approximately 12%, which was prepaid in January 2002 with the issuance of 500,000 shares of common stock. This payment of interest utilizing common stock results in an effective interest rate of 36%. In February 2002 we took the final advance on the note and agreed to prepay the interest on the note with 500,000 additional shares of common stock. This value of the stock issued was approximately $585,000. In June 2002, we issued 55,000 shares of stock valued at $34,500 to the lender as a principal payment. The balance on the note at March 31, 2003 is $1,050,000.

Beginning April 2002 we were required to make principal payments on the note of $125,000 per month, until such time as we repaid $1 million of the note, and thereafter our monthly payments shall be fixed at $100,000. At such time as we receive equity or strategic financing in excess of $1.5 million (other than certain excluded transactions), 30% of the net proceeds of such funds will be used by us to reduce the principal owed under the note. If we receive $5 million in an equity or strategic financing transaction (other than certain excluded transactions), then the entire remaining principal amount of the note is to be repaid by us. In April 2003, the Company received a $600,000 loan from a shareholder. These were advances for a transaction the Company was in the process of finalizing. On May 5, 2003, the Company and the shareholder refinanced the existing obligation of the Company. See Note 9.

We granted the lender a security interest in substantially all of our tangible and intangible assets, and issued him a warrant to purchase 1 million shares of our common stock at an exercise price of $1.00 per share. We agreed to file a registration statement with the SEC to register the resale of the shares issuable upon the exercise of this warrant, as well as the shares issued as interest under the note, within six months from the date of the transaction and we granted the lender certain piggy-back registration rights. The shares underlying the warrants have not been registered as of yet, although, the Company received a waiver from the warrant holder.

In conjunction with the transaction, all members of our management have each agreed to limit their annual compensation under certain circumstances while the loan is outstanding. In addition, the Chief Executive Officer and Executive Vice President each agreed to cancel 750,000 options held by them to purchase shares of our common stock.

In November 2002, the Company received a $200,000 loan from a shareholder. The principal plus interest of $6,666 are due on March 25, 2003. In addition, the Company issued 75, 000 shares of common stock to the lender. As of March 31, 2003, the Company was delinquent on the repayment of this note. The Company is currently in discussions with the note holder to modify the terms of the agreement.

16

VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 3: CONVERTIBLE DEBENTURES AND NOTES PAYABLE (Continued)

In January 2003, the Company received a loan from a shareholder for $100,000. The principal plus interest of $3,333 are due May 15, 2003. In addition, the Company issued 37,500 shares of common stock to the lender.

The Company leases certain computer equipment and office equipment. Interest rates range from 11% to 27% on these leases. During the three months ended March 31, 2003, the Company negotiated settlements with several of these leases and paid approximately $82,500. As a result, a gain of approximately $32,000 was recognized during the three months ended March 31, 2003 associated with these settlements. The Company is currently in default on other capital lease obligations not settled and its capital lease obligations have been classified as current. Included in the current portion of capital leases is approximately $117,000 of payments that are past due. Most of these leases are personally guaranteed by the Company’s Divisional President of MOD.

In October and November 2002, The Company received loans from directors and officers aggregating $61,000. The loans were made to cover short term working capital needs and do not currently bear interest. Upon repayment of these loans, the directors will decide the appropriate compensation for these loans, which will not exceed the current financing terms.

17

VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 4: SEGMENT INFORMATION

The Company’s operations are currently comprised of three operating groups; Visual Data Webcasting Group, Visual Data Networking Solutions Group and Visual Data Travel Group. These operating units are managed from the Company’s Pompano Beach facility, the San Francisco facility directed by EDNET and the New York facility directed by MOD.

All material balances related to Company sales, primary business activities, and location of property and equipment are within the United States.

For the six and three months ended March 31, 2003, the Company provided webcasting services to one significant customer, CCBN. This customer was a customer of MOD, and, therefore, we do not have revenues from this customer until the quarter ended March 31, 2002. For the six and three months ended March 31, 2002, the Company provided webcasting services to one significant customer, PR Newswire. During the later part of fiscal 2002, PR Newswire created an operating group, Multivu, to manage the large video events. In addition, PR Newswire transitioned their audio only webcasting business to Thomson financial. Therefore, PR Newswire was not a significant customer for the six and three months ended March 31, 2003. For the six months ended March 31, 2003 and 2002 sales to CCBN were approximately $656,000 or 19% and approximately $145,000 or 4% of total consolidated revenue, respectively. For the three months ended March 31, 2003 and 2002 sales to CCBN were approximately $295,000 or 18% and approximately $145,000 or 6% of total consolidated revenue. For the six months ended March 31, 2003 and 2002 sales to PR Newswire were approximately $11,000 or 0% and $829,000 or 20% of total consolidated revenue, respectively. For the three months ended March 31, 2003 and 2002 sales to PR Newswire were approximately $11,000 or 1% and $371,000 or 15% of total consolidated revenue, respectively. The contract with either of these customers can be terminated upon a 30-day notification.

18

VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 4: SEGMENT INFORMATION (Continued)

Detailed below are the results of operations by segment for the six and three months ended March 31, 2003 and 2002.

	Six Months Ended						Three Months Ended
	March 31,						March 31,
	2003			2002			2003			2002
Revenue:
Webcasting Group	$	1,808,343		$	1,923,986		$	851,523		$	1,390,891
Networking Solutions Group		1,492,051			1,797,570			693,293			910,227
Travel Group and Other		216,411			315,239			94,487			175,700
Total consolidated revenue		3,516,805			4,036,795			1,639,303			2,476,818
Segment operating income (loss)
Webcasting Group		198,727			509,503			71,095			288,030
Networking Solutions Group		156,036			(137,669	)		39,392			(54,687	)
Travel Group and Other		83,578			(260,425	)		44,116			(104,829	)
Total operating income		438,341			111,409			154,603			128,514
Depreciation and amortization		1,061,942			892,482			513,030			603,259
Corporate and unallocated shared expenses		1,509,671			1,844,436			812,593			923,174
Other expense (income)		116,848			3,972,809			(94,680	)		3,793,884
Loss before discontinued operations		(2,250,120	)		(6,598,317	)		(1,076,340	)		(5,181,803	)
Loss from discontinued operations		—			(762,976	)		—			(1,674	)
Net loss	$	(2,250,120	)	$	(7,361,293	)	$	(1,076,340	)	$	(5,193,477	)

	As of March 31,
	2003		2002
Total assets:
Webcasting Group	$	3,615,370	$	4,309,203
Networking Solutions Group		3,101,964		4,548,992
Travel Group		206,703		823,151
Other		1,519,926		3,071,237
Total	$	8,433,963	$	13,752,583

19

VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 5: STOCK OPTIONS AND WARRANTS

On February 9, 1997, the Board of Directors and a majority of the Company’s shareholders adopted the 1996 Stock Option Plan (the “Plan”). Pursuant to an amendment to the Plan ratified by shareholders on July 16, 1999, the Company reserved an aggregate of 2,500,000 shares of common stock for issuance pursuant to options granted under the Plan (“Plan Options”). On March 30, 2001, an amendment to the Plan, ratified by the shareholders, reserved an aggregate of 5,000,000 Plan Options. On April 11, 2002, an amendment to the Plan, ratified by the shareholders, reserved an aggregate of 11,000,000 Plan Options and added an equity compensation component. At March 31, 2003 and 2002 the Company has granted options to management, employees and directors under the Plan. The term of these options are from three to eight years and the vesting periods are from immediate to four years.

All options are granted at a price equal to or greater than the fair market value at the date of grant. Detail of option activity for management, employees and directors for the six months ended March 31, 2003 is as follows:

				Weighted Average
	Number of Shares			Exercise Price
Balance, beginning of period		8,924,659		$	2.20
Expired		(1,569,225	)		2.18
Exercised		—			—
Granted		33,000			.30
Balance, end of period		7,388,434		$	2.20
Exercisable at end of period		5,204,666		$	2.57

The Company has granted options to management, employees, directors and consultants that are outside of the Plan. For the six months ended March 31, 2003, the Company granted 10,000 options to consultants at a weighted average fair value of $.10 per share and an exercise price of $.30 per share. At March 31, 2003 the Company had 2,497,191 granted options to consultants outstanding. These options have been accounted for under Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation,” (“SFAS 123”). The Company has recognized approximately $42,000 and $405,000 in expense for consultant options during the six months ended March 31, 2003 and 2002, respectively. The Company has recognized approximately $24,000 and $235,000 in expense for consultant options during the three months ended March 31, 2003 and 2002, respectively.

At March 31, 2003, there were vested warrants to purchase an aggregate of 4,196,832 shares of common stock outstanding, inclusive of the Debenture Warrants and warrant issued to lender discussed in Note 3. All warrants outstanding are fully vested. The warrants contain exercise prices ranging from $.30 to $16.50 expiring from July 2003 to April 2007.

20

VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 6: ACQUISITION OF MEDIA ON DEMAND.COM

On February 7, 2002, MediaOnDemand.com, Inc. (“MOD”) was merged with and into VDAT/MOD Acquisition Corp., a Florida corporation and a wholly owned subsidiary of Visual Data Corporation. VDAT controlled MOD as of January 1, 2002 and had made advances of $157,000 to MOD as of that date. The results of MOD are included in these financial statements as if the transaction had occurred on January 1, 2002. All outstanding shares of MOD capital stock and options have been converted into an aggregate of 3,400,000 shares of VDAT restricted common stock. The value of the common stock issued was approximately $2.1 million, based on a share value of $0.63 on February 7, 2002. The estimated fair market value of the tangible assets and the liabilities acquired resulted in a negative net asset base of approximately $1 million. Therefore, as a result of the acquisition, approximately $3.1 million of the purchase price was allocated to customer lists. This intangible asset is being amortized over a five-year period. The following table sets forth the unaudited pro-forma consolidated results of operations for the six and three months ended March 31, 2003 and 2002 giving effect to the acquisition of MOD, as if the acquisition had occurred as of the beginning of the periods presented (in thousands, except per share data):

	Six Months Ended						Three Months Ended
	March 31,						March 31,
	2003			2002			2003			2002
Revenues	$	3,517		$	4,789		$	1,639		$	3,229
Net loss		(2,250	)		(8,396	)		(1,076	)		(5,193	)
Net loss per share	$	(0.07	)	$	(0.37	)	$	(0.03	)	$	(0.20	)

NOTE 7: DISCONTINUED OPERATIONS

In December of 2001, management adopted a plan to sell the Company’s Golf, Leisure and Syndication Group segment and cease operations of the Financial Solutions Group segment in order to focus on certain core businesses. Accordingly, the operating results of these segments have been segregated from continuing operations and reported as a separate line item on the statement of operations. The Visual Data Golf, Leisure and Syndication Group and Financial Solutions Group have been classified as discontinued operations for all periods presented in the accompanying financial statements.

Losses form discontinued operations amounted to approximately $763,000 and $2,000 for the six and three months ended March 31, 2002, respectively. There were no losses from discontinued operations recognized during the six and three months ended March 31, 2003. As a result of our decision in December 2001 to sell our interest in the Golf, Leisure and Syndication Group, approximately $589,000 and $0 of operating losses are classified as discontinued operations for the six and three months ended March 31, 2002, respectively. In December 2001, we also decided to cease operations in the Financial Solutions Group and have classified approximately $174,000 and $2,000 as discontinued operations for the six and three months ended March 31, 2003, respectively.

21

VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 7: DISCONTINUED OPERATIONS (Continued)

Our decision to discontinue the operations of these groups is in keeping with our business strategy of focusing on strategic operations that compliment our core business. We intend to retain the golf library and integrate this content into our Travel Group, thereby adding additional rich media content that can be used for syndication to third parties. On January 10, 2002, the Company executed a Stock Purchase Agreement for the sale of the Golf Society of the U.S. for a $6.5 million 6% Convertible Debenture (the “Debenture”). The Debenture is convertible into common stock of Golf Society International, Inc. (“GSI”), an unaffiliated third party. The Debenture is for five years and limits the beneficial ownership of the Company to 19.9%, with the exception of a simultaneous conversion and private or public sale of the investment. During fiscal year 2002, we fully reserved (net of the unrealized gain on the sale) the amount of the debenture received from GSI as GSI has ceased operations.

On April 30, 2002, an action was instituted by the Company in the Circuit Court for the Fifteenth Judicial Circuit for Palm Beach County, Florida, entitled Visual Data Corporation v. Golf Society International, Inc. and Howard Stern. The Complaint seeks damages in excess of $6.5 million for breach of contract, fraud in the inducement, negligent misrepresentation and fraudulent misrepresentation against Golf Society International, Inc. and Howard Stern. In October 2002, the Court entered a Default Final Judgment against Golf Society International, Inc. and Howard Stern for approximately $7.5 million. We presently intend to pursue collection of this amount, although, we have fully reserved the amount as a result of the financial condition of GSI and our belief is that collection of this default will be unlikely.

The following table sets forth a summary of the results of operations of the Company’s Financial Solutions Group (“TFN”) and the Golf, Leisure and Syndication Group (“GSUS”):

		Six Months Ended					Three Months Ended
		March 31,					March 31,
		2003		2002			2003		2002
TFN:
	Revenue	$	—	$	15		$	—	$	—
	Operating loss		—		(174,216	)		—		(1,674	)
	Net loss	$	—	$	(174,216	)	$	—	$	(1,674	)
GSUS:
	Revenue	$	—	$	516,790		$	—	$	—
	Operating loss		—		(588,760	)		—		—
	Net loss	$	—	$	(588,760	)	$	—	$	—

22

VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 8: EQUITY

In October and November 2002, the Company sold 20,000 shares of Class A-7 Convertible Preferred Stock (“Shares of Preferred”) for $240,000 and paid a financing fee of $31,200, issued 5,000 Shares of Preferred for services rendered and to be rendered and issued 15,000 Shares of Preferred in a conversion from common stock. Each Share of Preferred converts to 40 shares of common stock (at $.30 per share). The Company allowed investors to convert common stock purchased in March or June 2002, which was adjusted to $.30 per share and $.283 per share, respectively, into Shares of Preferred if they purchased an equal or greater amount of Shares of Preferred. The 600,000 shares of common stock that were converted into 15,000 Shares of Preferred would result in the issuance of 600,000 shares of common stock if converted under the terms of the Shares of Preferred.

In January 2003, the Company sold 2,500 Shares of Preferred for $30,000 and paid a financing fee of $3,900.

In March 2003, the Company issued 62,500 Shares of Preferred, with a value of $750,000, to Onstream Media in exchange for 1,500,000 of common stock in Onstream Media. This increases the Company’s ownership in Onstream Media to approximately 29%. The total investment in Onstream Media is approximately $950,000.

As of March 31, 2003, the Company has not declared the dividend as prescribed in the designation of the Shares of Preferred. The amount owed at March 1, 2003 was approximately $29,000.

23

VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE 9: SUBSEQUENT EVENTS

In April 2003, the Company received a $600,000 loan from a shareholder. These were advances for a transaction the Company was in the process of finalizing. On May 5, 2003, the Company and the shareholder refinanced the existing obligation of the Company. The shareholder note had a balance of $1,050,000 at March 31, 2003. The shareholder agreed to fund an additional $950,000 as working capital, $1,000,000 as restricted cash and restructure the balance on his note of $1,050,000 into this transaction. As a result, the Company has a long-term note of $3,000,000 to the shareholder, which is collateralized by all of the assets of the Company. As compensation for this transaction, the Company issued the shareholder 140,000 shares of Class A-8 Convertible Preferred Stock (“Class A-8”). The stated value of the Class A-8 is $6 per share. The Class A-8 is zero coupon and converts to 20 shares of common stock (at $.30 per share). In addition, the note bears interest at 5.25%, payable quarterly, beginning July 15, 2003. The loan is a 36-month loan, with interest only payments on a Quarterly basis, and a balloon at the end of the term. The $1,000,000 is restricted cash is to be utilized at the shareholder’s discretion. In addition, the shareholder converted his outstanding common stock in the Company, approximately 2,200,000 shares, into 110,000 shares of Class A-8.

In March 2003 we received a letter from The Nasdaq Stock Market informing us that we were eligible to have our common stock delisted from The Nasdaq SmallCap Market at the opening of business March 28, 2003. In the letter received from The Nasdaq Stock Market, we were notified that we had not regained compliance with the minimum $1.00 bid price per share requirement, as set forth in Marketplace Rule 4310(c)(4). In addition, we were informed that we were not eligible for an additional 90 calendar day compliance period given that we do not meet the initial inclusion requirements of The Nasdaq SmallCap Market under Marketplace Rule 4310(c)(2)(A); specifically that we do not qualify with the $5 million stockholders’ equity, $50 million market value of listed securities or $750,000 net income from continuing operations requirement.

We availed ourselves of our right to appeal this determination to a Nasdaq Listing Qualifications Panel, pursuant to the procedures set forth in the Nasdaq Marketplace Rule 4800 Series. This hearing request automatically stayed the delisting of our common stock pending the Panel’s decision. On April 24, 2003 we appeared at an oral hearing with the Panel. In our proxy statement filed on April 24, 2003 for our 2003 Annual Meeting of Shareholders to be held on June 20, 2003 we proposed a reverse stock split of up to one for twenty as part of our proposed plan of compliance with respect to the minimum $1.00 bid requirement. At the hearing the Panel advised us that it is reviewing our plan to regain compliance with the $1.00 minimum bid requirement and as well as additionally reviewing our ability to meet the continued listing standards of the Nasdaq SmallCap Market for the foreseeable future. There are no assurances that the Panel will grant our request for continued listing on The Nasdaq SmallCap Market.

24

ITEM 2.

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

The following discussion should be read together with the information contained in the Consolidated Financial Statements and related Notes included in the annual report.

OVERVIEW

We are a full service broadband media company that specializes in webcasting, networking solutions for the entertainment industry and marketing solutions for the travel industry. Our operations are comprised of three operating groups, including:

• Visual Data Webcasting Group

• Visual Data Networking Solutions Group

• Visual Data Travel Group

REVENUE RECOGNITION

Our Webcasting Group recognizes revenue from live and on-demand webcasts at the time an event is accessible for streaming over the Internet. Revenue is recognized from the sale of equipment when the equipment is shipped. For customer service projects, revenue is recognized when service is performed. A significant component of our Network Solutions Group’s revenue relates to the sale of equipment, which is recognized when the equipment is installed or upon signing of a contract after a free trial period. Our Network Solutions Group recognizes revenues from equipment installation and bridging when service is performed. Network usage revenue is recognized based on customers’ monthly usage. Our Network Solutions Group leases some equipment to customers under terms that are accounted for as operating leases. Rental revenue from leases is recognized ratably over the life of the lease and the related equipment is depreciated over its estimated useful life. All leases of the related equipment contain fixed terms. Our Travel Group libraries recognize production revenue at the time of completion of video production services. Per hit charges are recognized when users watch a video on the Internet. Fixed monthly fees are recognized on a monthly basis consistent with the terms of the contracts. Commissions on bookings are recognized when the stays are completed.

25

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Six months ended March 31, 2003 compared to six months ended March 31, 2002:

REVENUE

We recognized revenue of approximately $3,517,000 from continuing operations for the period ended March 31, 2003, representing a decrease of approximately $520,000 (13%) over revenues of approximately $4,037,000 for the same period last year. Revenues from the Webcasting Group accounted for approximately $1,808,000 for the period ended March 31, 2003 as compared to approximately $1,924,000 for the same period in 2002, which represents a decrease of approximately $116,000 (6%). Included in last year results were revenues from a one-time studio construction project for Lehman Brothers for approximately $368,000. Revenues from network equipment sales from the Networking Solutions Group accounted for approximately $362,000 for the period ended March 31, 2003 as compared to approximately $508,000 for the same period in 2002, which represents a decrease of approximately $146,000 (29%). This decrease was due to cash constraints on the Company that limited the Company’s ability to purchase inventory, and, therefore, created a reduction in equipment sales and rentals. Revenues from network usage amounted to approximately $1,130,000 as compared to $1,289,000 representing a decrease of $159,000 (12%). This decrease is the result of fewer customers utilizing our network. During fiscal year 2002 we transitioned the circuits for some of our customers from our control to theirs. This decision was based upon the usage incurred by these customers, the customer’s payment history as well as the margin achieved from these circuits. In addition, we experienced some churn of existing customers who had decided to manage their own networks. Revenues from the Travel Group accounted for approximately $216,000 for the period ended March 31, 2003 as compared to approximately $306,000 for the same period in 2002, which represents a decrease of approximately $90,000 (29%.) The decrease is the result of fewer new customer vignettes produced. The Company, as part of its overall strategy to become cash flow positive, decided to minimize expenses and reduce the staff to essential employees. By making these changes, the Company has transitioned the Travel Group from a division that burns cash to be cash flow positive (when unburdened by corporate overhead).

26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

OPERATING EXPENSES

Cost of webcasting revenue amounted to approximately $666,000 for the period ended March 31, 2003, as compared to approximately $649,000 for the same period last year, which represents an increase of approximately $17,000 (3%). Cost of webcasting revenue increased due to an expansion and additional redundancy of our webcasting facilities including co-location and bandwidth. Cost of revenue from the network equipment sales and rentals accounted for approximately $183,000 for the period ended March 31, 2003 as compared to approximately $253,000 for the same period in 2002, which represents a decrease of approximately $70,000 (28%) due to fewer sales. Cost of revenue from network usage accounted for approximately $554,000 for the period ended March 31, 2003 as compared to approximately $790,000 for the same period in 2002, which represents a decrease of approximately $236,000 (30%) as a result of less costs due to reduced revenues and the decision to transition less profitable circuits directly to customers. Travel production and distribution cost of revenue for the period ended March 31, 2003 was approximately $8,000 representing a decrease of approximately $51,000 (86%) from $59,000 for the same period last year as a result of fewer new customer vignettes produced.

Compensation expense for the period ended March 31, 2003 of approximately $1,973,000 decreased approximately $499,000 or 20% from approximately $2,472,000 for the same period last year due to cost containment measures adopted which were partially offset by additional costs related to the acquisition of MOD. These cost containment measures resulted in reductions to the overall number of employees. Professional fees of approximately $541,000 for the period ended March 31, 2003 decreased approximately $195,000 (26%) from approximately $736,000 for the same period last year due to reduced legal, option and warrant expense and the timing for filing of the annual report. Other administrative expenses of approximately $650,000 decreased approximately $59,000 (8%) from approximately $709,000 during the same period last year due to reduced costs incurred as a result of cost containment measures adopted offset by additional costs of MOD. Sales and marketing decreased approximately $89,000 (87%) to approximately $13,000 for the period ended March 31, 2003 as compared to approximately $102,000 for the same period last year due to reduced marketing costs as a part of the cost containment program. Depreciation and amortization of approximately $1,062,000 for the period ended March 31, 2003 increased approximately $170,000 (19%) from approximately $892,000 for the same period last year due the depreciation of assets acquired from MOD and the amortization of the customer list resulting from the MOD acquisition.

27

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

OTHER INCOME (EXPENSE)

Other expense was approximately $117,000 during the period ended March 31, 2003, as compared to approximately $3,973,000 for the same period last year, which represents an decrease of approximately $3,856,000 (97%). The decrease is the result of the loss recognized from the GSI debenture of approximately $3,573,000, which is partially off-set by the $296,000 increase in other income. Other income was approximately $302,000 for the period ended March 31, 2003 as compared to approximately $6,000 for the same period last year representing an increase of $296,000 or (49%). Included in other income for the period ended March 31, 2003 are gains recognized from settlements of existing obligations with creditors and lenders.

DISCONTINUED OPERATIONS

Losses from discontinued operations amounted to approximately $763,000 for the period ended March 31, 2002. As a result of our decision in December 2001 to sell our interest in the Golf, Leisure and Syndication Group, approximately $589,000 of operating losses are classified as discontinued operations for the period ended March 31, 2002. In December 2001, we also decided to cease operations in the Financial Solutions Group and have classified approximately $174,000 as discontinued operations for the period ended March 31, 2002.

28

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Three months ended March 31, 2003 compared to three months ended March 31, 2002:

REVENUE

We recognized revenue of approximately $1,639,000 from continuing operations for the period ended March 31, 2003, representing a decrease of approximately $838,000 (34%) over revenues of approximately $2,477,000 for the same period last year. Revenues from the Webcasting Group accounted for approximately $852,000 for the period ended March 31, 2003 as compared to approximately $1,391,000 for the same period in 2002, which represents a decrease of approximately $539,000 (39%). Included in last year results were revenues from a one-time studio construction project for Lehman Brothers for $368,000. In addition, as a result of competition the Company decreased it’s pricing, which resulted in a decline in revenues. Revenues from network equipment sales from the Networking Solutions Group accounted for approximately $149,000 for the period ended March 31, 2003 as compared to approximately $310,000 for the same period in 2002, which represents a decrease of approximately $161,000 (52%). This decrease was due to cash constraints on the Company that limited the Company’s ability to purchase inventory, and, therefore, created a reduction in equipment sales and rentals. Revenues from network usage amounted to approximately $544,000 for the period ended March 31, 2003 as compared to approximately $600,000 for the same period in 2002, representing a decrease of $56,000 (9%). This decrease is the result of fewer customers utilizing our network. During fiscal year 2002 we transitioned the circuits for some of our customers from our control to theirs. This decision was based upon the usage incurred by these customers, the customer’s payment history as well as the margin achieved from these circuits. In addition, we experienced some churn of existing customers who had decided to manage their own networks. Revenues from the Travel Group accounted for approximately $94,000 for the period ended March 31, 2003 as compared to approximately $166,000 for the same period in 2002, which represents a decrease of approximately $72,000 (43%.) The decrease is the result of fewer new customer vignettes produced. The Company, as part of its overall strategy to become cash flow positive, decided to minimize expenses and reduce the staff to essential employees. By making these changes, the Company has transitioned the Travel Group from a division that burns cash to be cash flow positive (when unburdened by corporate overhead).

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

OPERATING EXPENSES

Cost of webcasting revenue amounted to approximately $312,000 for the period ended March 31, 2003, as compared to approximately $521,000 for the same period last year, which represents a decrease of approximately $209,000 (40%). The decrease is the result of a decrease in sales. Cost of revenue from the network equipment sales and rentals accounted for approximately $88,000 for the period ended March 31, 2003 as compared to approximately $165,000 for the same period in 2002, which represents a decrease of approximately $77,000 (47%) due to reduced sales. Cost of revenue from network usage accounted for approximately $270,000 for the period ended March 31, 2003 as compared to approximately $385,000 for the same period in 2002, which represents a decrease of approximately $115,000 (30%) as a result of less costs due to reduced revenues and the decision to transition less profitable circuits directly to customers. Travel production and distribution cost of revenue for the period ended March 31, 2003 was approximately $2,000 representing a decrease of approximately $31,000 (94%) from $33,000 for the same period last year as a result of fewer new customer vignettes produced.

Compensation expense for the period ended March 31, 2003 of approximately $985,000 decreased approximately $336,000 or 25% from approximately $1,321,000 for the same period last year due to cost containment measures adopted. These cost containment measures resulted in reductions to the overall number of employees. Professional fees of approximately $319,000 for the period ended March 31, 2003 decreased approximately $119,000 (27%) from approximately $438,000 for the same period last year due to reduced legal and the timing for filing of the annual report. Other administrative expenses of approximately $315,000 decreased approximately $49,000 (13%) from approximately $364,000 during the same period last year due to reduced costs incurred as a result of cost containment measures adopted. Sales and marketing decreased approximately $39,000 (87%) to approximately $6,000 for the period ended March 31, 2003 as compared to approximately $45,000 for the same period last year due to reduced marketing costs as a part of the cost containment program. Depreciation and amortization of approximately $513,000 for the period ended March 31, 2003 decreased approximately $90,000 (15%) from approximately $603,000 for the same period last year due to several assets fully depreciating.

30

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

OTHER INCOME (EXPENSE)

Other income was approximately $95,000 during the period ended March 31, 2003, as compared to other expense of approximately $3,794,000 for the same period last year, which represents an decrease of approximately $3,889,000 (103%). The decrease is the result of the loss recognized from the GSI debenture of approximately $3,573,000 and a decrease in interest expense of approximately $101,000, which is partially off-set by the $216,000 increase in other income. Interest expense amounted to approximately $190,000 for the period ended March 31, 2003 compared to approximately $291,000 for the same period last year representing a decrease of approximately $101,000, primarily due to reduced interest on the debentures and mortgage interest included last year on the building. Other income was approximately $285,000 for the period ended March 31, 2003 as compared to approximately $69,000 for the same period last year representing an increase of $216,000. Included in other income for the period ended March 31, 2003 are gains recognized from settlements of existing obligations with creditors and lenders.

DISCONTINUED OPERATIONS

Losses from discontinued operations amounted to approximately $2,000 for the period ended March 31, 2002 as a result of our decision in December 2001 to sell our interest in the Golf, Leisure and Syndication Group and the Financial Solutions Group.

LIQUIDITY AND CAPITAL RESOURCES

Our working capital deficit at March 31, 2003 was approximately $3,911,000, an increase of approximately $1,908,000 from a deficit of approximately $2,003,000 at September 30, 2002. The decrease in working capital was primarily attributable to cash used in operating activities of approximately $338,000 for the six months ended March 31, 2003. The Company has been operating with a cash burn rate. In order to manage cash flows, the Company has issued common stock to satisfy obligations. For the six months ended March 31, 2003, the Company has issued approximately 1,437,000 shares of common stock to satisfy approximately $170,000 of obligations.

Net cash used in investing activities was approximately $42,000 for the six months ended March 31, 2003. Net cash provided by financing activities for the six months ended March 31, 2003 was approximately $330,000. Principal sources of cash were net proceeds from the issuance of preferred stock of approximately $226,000 and the issuance of short-term debt securities of approximately $361,000 partially offset by approximately $257,000 of debt and capital lease repayments. In addition to the operating burn rate, the Company has a debt service from one of its loans and monthly obligations on its capital leases. The company has settled several capital leases which resulted in a net gain of approximately $32,000. The Company is not current with payments on other capital leases not settled.

At March 31, 2003, we have approximately $11,000 of cash. We do not presently have any commitment for capital expenditures. Based upon our current operations and anticipated acquisitions, we will need to raise additional capital through debt or equity to provide for our operations for the next 12 months. Our ability to grow revenues, achieve cost savings or raise sufficient additional capital will be necessary to service our existing indebtedness. In addition, our ability to refinance existing indebtedness is subject to future economic conditions, market conditions, business and other factors. We cannot assure you that we

31

will be able to raise additional working capital to fund these anticipated deficits. If we are unable to significantly increase our revenues or raise working capital when needed to fund ongoing losses, the viability of our future operations may be in question.

We are constantly evaluating our cash needs and existing burn rate. In addition, we have a plan whereby certain non-essential personnel and administrative costs will continue to be reduced so that we may continue to meet operating and financing obligations as they come due. Based upon an ongoing evaluation of our cash needs, we will seek to raise additional capital through the sale of equity and debt securities to provide funding for ongoing future operations. No assurances can be given that we will be successful in obtaining additional capital, or that such capital will be available on terms acceptable to us. Further, there can be no assurance that even if such additional capital is obtained or the planned cost reductions are implemented, that we will achieve profitability or positive cash flow or be able to continue as a business.

ITEM 3. CONTROLS AND PROCEDURES

Our management, which includes our CEO and our CFO, have conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-14(c) promulgated under the Securities and Exchange Act of 1934, as amended) as of a date (the “Evaluation Date”) within 90 days prior to the filing date of this report. Based upon that evaluation, our management has concluded that our disclosure controls and procedures are effective for timely gathering, analyzing and disclosing the information we are required to disclose in our reports filed under the Securities Exchange Act of 1934, as amended. There have been no significant changes made in our internal controls or in other factors that could significantly affect our internal controls subsequent to the Evaluation Date.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Except for historical information contained herein, the matters discussed in this report are forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These forward-looking statements are based largely on the Company’s expectation and are subject to a number of risks and uncertainties, including but not limited to economic, competitive and other factors affecting the Company’s operations and the fluctuation of the company’s common stock price, and other factors discussed elsewhere in this report and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Many of these factors are beyond the Company’s control. Actual results could differ materially from the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this report will, in fact, occur.

32

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 2. Changes in Securities.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None

Item 6. Exhibits and Reports on Form 8-K.

Exhibits

99 (a) – Certification of Chief Financial Officer

99 (b) – Certification of Chief Executive Officer

Reports on Form 8-K

On March 19, 203, we filed a Report on Form 8-K with the Securities and Exchange Commission disclosing, under Item 5., that the Company requested a hearing to appeal the delisting from the Nasdaq SmallCap Market..

On May 7, 2003 we filed a Report on Form 8-K with the Securities and Exchange Commission disclosing, under Item 5., that the Company entered into a private debt financing.

33

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Visual Data Corporation,
	A Florida corporation
Date: May 12, 2003
	/s/ Randy S. Selman
	Randy S. Selman,
	President and Chief Executive Officer
	/s/ Gail L. Babitt
	Chief Financial Officer
	And Principal Accounting Officer

34

CERTIFICATION

     I, Randy S. Selman, certify that:

    1.    I have reviewed this quarterly report on Form 10-QSB of Visual Data Corporation;

    2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances made, not misleading with respect to the period covered by this quarterly report;

    3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

    4.    The registrant’s other certifying officer and I are responsible for establishing for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

              a.         designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

              b.         evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

              c.         presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

    5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

              a.         all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

              b.         any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

    6.    The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

     May 12, 2003

By: /s/ Randy S. Selman

Randy S. Selman,

President, CEO and principal

executive officer

35

CERTIFICATION

     I, Gail Babitt, certify that:

    1.    I have reviewed this quarterly report on Form 10-QSB of Visual Data Corporation;

    2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances made, not misleading with respect to the period covered by this quarterly report;

    3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

    4.    The registrant’s other certifying officer and I are responsible for establishing for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

              a.         designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

              b.         evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

              c.         presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

    5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

              a.         all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

              b.         any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

    6.    The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

     May 12, 2003

By: /s/ Gail Babitt

Gail Babitt, Chief Financial Officer

36 EX-99.A 3 g82787exv99wa.htm EX-99.A CERTIFICATION OF THE CFO

Exhibit 99(a)

CERTIFICATION OF CHIEF FINANCIAL OFFICER

     Pursuant to Section 906 of the Sarbanes-Oxley Act 2002 (18 U.S.C. 1350), the undersigned, Gail Babitt, Chief Financial Officer of Visual Data Corporation (the “Company”) has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2002 (the “Report”).

     The undersigned certifies that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

     IN WITNESS WHEREOF, the undersigned has executed this certification as of the 12th day of May 2003.

VISUAL DATA CORPORATION

/s/ Gail L. Babitt

Name: Gail Babitt

Title: Chief Financial Officer

37 EX-99.B 4 g82787exv99wb.htm EX-99.B CERTIFICATION OF THE CEO

Exhibit 99(b)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

     Pursuant to Section 906 of the Sarbanes-Oxley Act 2002 (18 U.S.C. 1350), the undersigned, Randy Selman, Chief Executive Officer of Visual Data Corporation (the “Company”) has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2002 (the “Report”).

     The undersigned certifies that: (1) the Report [fully] complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

     IN WITNESS WHEREOF, the undersigned has executed this certification as of the 12th day of May 2003.

VISUAL DATA CORPORATION

/s/ Randy S. Selman

Name: Randy Selman

Title: Chief Executive Officer

38 -----END PRIVACY-ENHANCED MESSAGE-----

EX-99.A

EX-99.A Certification of the CFO

EX-99.B

EX-99.B Certification of the CEO