##### 





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year ended December 31, 2007
  Commission File Number
    000-51644
  VOCUS, INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware

58-1806705(State or Other Jurisdiction
    of

(I.R.S. EmployerIncorporation or
    Organization)

Identification
    No.)   4296 Forbes Boulevard
 Lanham, Maryland 20706
 (301) 459-2590
 (Address including zip code, and
    telephone number, including area code, of principal executive
    offices)
  Securities registered pursuant to Section 12(g) of the
    Act:
 None
  Securities registered pursuant to Section 12(b) of the
    Act:
  Common Stock, par value $.01 per share
 (Title of Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated filer
    o

Accelerated filer
    þ

Non-accelerated
    filer o(Do not check if a smaller
    reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      Documents
    Incorporated by Reference
  Form 10-K, Form 10-K.




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##### 





TABLE OF
    CONTENTS
  PagePART IItem 1.


Business


3Item 1A.


Risk Factors


13Item 1B.


Unresolved Staff Comments


25Item 2.


Properties


25Item 3.


Legal Proceedings


25Item 4.


Submissions of Matters to a Vote of Security
    Holders


25PART IIItem 5.


Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchase of Equity Securities


25Item 6.


Selected Financial Data


28Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


30Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


38Item 8.


Financial Statements and Supplementary Data


38Item 9.


Changes In and Disagreements With Accountants and
    Financial Disclosure


38Item 9A.


Controls and Procedures


38Item 9B.


Other Information


41PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


41Item 11.


Executive Compensation


41Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


41Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


41Item 14.


Principal Accountant Fees and Services


41PART IVItem 15.


Exhibits and Financial Statement Schedules


41  1




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##### 



CAUTIONARY
    NOTES REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-K
  
    our plans to develop and market new products and the timing of
    these development programs;
    our estimates regarding our capital requirements and our needs
    for additional financing;
    our estimates of expenses and future revenues and profitability;
    our estimates of the size of the markets for our solutions;
    the rate and degree of market acceptance of our
    solutions; and
    the success of other competing technologies that may become
    available.     2




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##### 



PART I  Item 1.
    Business  Overview
          Industry
    Background
  Public
    Relations
     3




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##### 



Public
    Relations and the On-Demand Software Market
   4




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##### 



Our
    Solutions
        
    Improved effectiveness of public
    relations.  Our on-demand software helps
    organizations maximize effectiveness through the automation and
    integration of disconnected processes. Our solutions help
    organizations manage large amounts of information, deliver
    consistent and well-executed communications, collaborate among
    large or geographically dispersed teams and analyze and report
    on the effectiveness of their PR.
    Increased productivity of PR functions.  Our
    on-demand software incorporates features and best practices that
    automate PR functions to reduce or eliminate manual, paper-based
    and discrete business activities. Our solutions allow customers
    to maximize the investment in their PR resources and often lead
    to a redeployment of PR professionals from repetitive, low-value
    tasks to high-value strategic initiatives. In addition, we
    provide capabilities that help our customers significantly
    reduce the time it takes to monitor, analyze and summarize large
    volumes of news and other information. 5




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
    Enhanced collaboration.  The growth of global
    brands and large or geographically dispersed PR teams has
    increased the need for organizations to quickly and easily share
    critical business information and plan well coordinated
    communications. Our web-based solution provides shared,
    real-time access to a central repository of information related
    to media contacts, relationship history, PR activities, news,
    documents and reporting. We believe that by improving the
    management, control, retention and sharing of this information,
    our solutions enable companies to deliver more effective and
    consistent communications.
    Lower total cost of ownership.  Our on-demand
    delivery model enables our customers to achieve significant
    savings relative to a traditional enterprise software model. Our
    customers do not spend time installing or maintaining the
    servers, network and storage equipment, security products, or
    other infrastructure hardware and software necessary to ensure a
    scalable and reliable service. In addition, because all upgrades
    are implemented on our servers the product enhancements
    automatically become part of our offering, allowing customers to
    immediately benefit from the upgrade.
    Rapid deployment and scalability.  Our
    on-demand software can be deployed rapidly and provisioned
    easily, without our customers having to make large and risky
    upfront investments in software, hardware, implementation
    services and dedicated IT staff. The delivery platform for our
    software allows the solution to scale to suit customers
    needs. Additional users with defined privileges can be
    provisioned with minimal implementation time and new modules,
    such as analytics & measurement, can be deployed
    quickly and transparently to existing customers.  Our
    Strategy
    
    Maintain focus on our core market.  We believe
    that the public relations market represents a large and growing
    opportunity that will allow us to continue our growth for the
    foreseeable future. We expect that there will continue to be
    substantial business spending on the processes that our
    solutions automate, and that competition is fragmented and
    specialized. As a result, we believe that our focus on producing
    a suite of integrated applications for this market will allow us
    to capitalize on this opportunity.
    Expand direct and indirect distribution
    channels.  We intend to expand our direct sales
    force and our indirect distribution channels to increase our
    coverage and penetration of the PR market particularly to small
    and mid-sized organizations. We believe there are opportunities
    to market and sell our solutions, through partnerships with
    select third parties, to reach small to mid-sized customers that
    would take longer or be more difficult to target with a direct
    sales force.
    Expand international market penetration.  We
    believe that the public relations market represents a
    significant global opportunity. We intend to expand our
    international distribution channels to increase our
    international business, which accounted for approximately 9% of
    our 2007 revenues. To suit individual markets, our software is
    currently available in five languages  English,
    French, Spanish, German and Italian. We expect to deploy our
    solution in additional languages in the future.
    Selectively pursue strategic acquisitions.  The
    fragmented nature of our market provides opportunities for
    selective acquisitions. We have acquired and integrated several
    private companies to date, and we intend to continue to identify
    and acquire companies which would either expand our
    solutions functionality, provide access to new customers
    or markets, or both.  Our
    Products
  On-Demand
    Public Relations Management
   6




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
    Contact Management.  Allows customers easy
    access to our database of journalists, media outlets and
    publicity opportunities. Customers can quickly create targeted
    lists, send messages by email, fax or mail and track meetings,
    telephone calls and other important activities.
    Collateral Management.  Provides a central and
    easily accessible repository in which to store all PR
    information that needs to be shared internally or externally
    throughout the organization. Can include documents or files of
    any type, such as media kits, photographs, videos, executive
    biographies, annual reports and other PR materials.
    Project Management.  Helps organize PR
    projects, including press releases, speaking engagements, or
    publicity events. A graphical dashboard shows the status of all
    open projects, allowing users to check milestones, reminders,
    allocated and used resources, team assignments and other tasks
    from the planning stage through execution and
    follow-up
    reporting.
    Newsrooms.  Provides journalists, analysts,
    public officials and other key audiences 24/7 access to an
    organizations breaking news, press releases, digital
    collateral, grassroots advocacy tools and other critical 7




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##### 



public information. Matches the look and feel of the
    organizations website and allows PR professionals to
    quickly and easily update content when and where they want,
    without the need for IT support.  
    PRWeb Online Newswire.  Allows organizations to
    increase their online visibility by distributing their news
    directly to online news sites such as Google News and Yahoo!
    News and directly to the public through millions of daily RSS
    feeds and other social media tools. Optimizes press releases for
    search engines to help ensure that press releases are
    prominently displayed on search results and drive traffic to an
    organizations website.
    Email Campaigns.  Enables organizations to
    deliver interactive communications that provide online access to
    related collateral material and to track and measure response
    rates and other campaign metrics. Provides a simple process for
    delivering information to journalists, analysts, legislators and
    other key audiences. Also provides valuable metrics on campaign
    initiatives, including emails opened, documents downloaded and
    options selected.
    Analytics &
    Measurement.  Automatically transforms relevant
    data about news coverage, PR activities and online newsroom
    statistics into valuable insight about a PR departments
    programs and results. Provides executive-level dashboards,
    allowing an organizations senior management to better
    understand the impact of relevant news, monitor the competitive
    landscape and recognize trends emerging in the media.
    News On-Demand.  Continuously monitors over
    25,000 news sources, including print, broadcast, Internet news
    sites and key blogs to identify and deliver relevant news
    coverage to customers based on their individual criteria. News
    clippings are stored in a searchable database, for easy viewing,
    printing and sharing.    
    Public Relations Small Business
    Edition.  Designed primarily for small
    organizations and includes online press release distribution and
    basic reporting capabilities.
    Public Relations Standard Edition.  Designed
    primarily for small organizations and includes contact
    management and basic reporting capabilities.
    Public Relations Professional
    Edition.  Designed primarily to meet the needs of
    mid-sized and large organizations and provides contact
    management, news management and expanded reporting capabilities.
    Public Relations Enterprise Edition.  Provides
    increased flexibility and functionality typically required by
    large organizations. Enterprise Edition is our most fully
    featured edition and includes all of the functionality of the
    Professional Edition, along with project management, collateral
    management, comprehensive reporting and configuration
    capabilities.
    Government Relations Edition.  Designed to meet
    an organizations government relations needs, including
    communications with public officials and grassroots advocates,
    compliance reporting and issues and legislation management.    Technology,
    Development and Operations
  Technology
   8




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Development
    Site
    Operations
    back-up.
    Customer
    Support
  on-site, on-site
 9




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Sales and
    Marketing
        Our
    Customers
    Competition
    
    generic desktop software and other commercially available
    software not specifically designed for PR;
    PR solution providers offering products specifically designed
    for PR;
    outsourced PR service providers; and
    custom-developed solutions.   10




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
    broad product functionality and depth of integration;
    ease of use;
    low total cost of ownership and easily demonstrable
    cost-effective benefits for customers;
    flexibility and configurability to meet complex customer
    requirements;
    rapid deployment and adoption;
    speed, reliability and functionality;
    system performance, security, scalability and reliability;
    ease of integration with existing applications and data;
    availability and quality of implementation, training and
    help-desk services; and
    competitive sales and marketing capabilities.  Intellectual
    Property and Proprietary Content
     11




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Employees
    Executive
    Officers and Key Employees
    Name

Age

PositionRichard Rudman*


46


Chief Executive Officer, President and ChairmanStephen Vintz*


39


Chief Financial Officer, Treasurer and SecretaryWilliam Wagner*


40


Chief Marketing OfficerNorman Weissberg*


46


Senior Vice President, North American SalesAndrew Muir*


52


Managing Director, Vocus InternationalWilliam Donnelly


52


Senior Vice President, Corporate DevelopmentDarren Stewart


39


Senior Vice President, Customer ServicesMark Heys


36


Chief Technology Officer     *
    
    Denotes an executive officer  Richard Rudman
  Stephen Vintz
 12




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##### 



William Wagner
  Norman Weissberg
  Andrew Muir
  William Donnelly
  Darren Stewart
  Mark Heys
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K www.vocus.com.
  Item 1A.
    Risk
    Factors   13




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##### 



Risks
    Related to Our Business and Industry
  The
    markets for our on-demand software and solutions are emerging,
    which makes it difficult to evaluate our business and future
    prospects and may increase the risk of your
    investment.
    
    generating sufficient revenue to maintain profitability;
    managing growth in our operations;
    managing the risks associated with developing new services and
    modules;
    attracting and retaining customers; and
    attracting and retaining key personnel.    If our
    on-demand solutions are not widely accepted, our business will
    be harmed.
    A
    majority of our on-demand solutions are sold pursuant to
    subscription agreements, and if our existing subscription
    customers elect either not to renew these agreements or renew
    these agreements for fewer modules or users, our business,
    financial condition and results of operations will be adversely
    affected.
    Because
    we recognize subscription revenue over the term of the
    applicable subscription agreement, the lack of subscription
    renewals or new subscription agreements may not be immediately
    reflected in our operating results.
   14




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Our
    business model continues to evolve, which may cause our results
    of operations to fluctuate or decline.
    We
    depend on search engines to attract new customers, and if those
    search engines change their listings or our relationship with
    them deteriorates or terminates, we may be unable to attract new
    customers and our business may be harmed.
    We
    might not generate increased business from our current
    customers, which could limit our revenue in the
    future.
    Failure
    to effectively develop and expand our sales and marketing
    capabilities could harm our ability to increase our customer
    base and achieve broader market acceptance of our
    solutions.
   15




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##### 



If we
    fail to develop our brands cost-effectively, our business may
    suffer.
    If our
    information database does not maintain market acceptance, our
    business, financial condition and results of operations could be
    adversely affected.
    We
    depend on search engines for the placement of our
    customers online news distribution, and if those search
    engines change their listings or our relationship with them
    deteriorates or terminates, our reputation will be harmed and we
    may lose customers or be unable to attract new
    customers.
    We
    have incurred operating losses in the past and may incur
    operating losses in the future.
    Our
    quarterly results of operations may fluctuate in the future. As
    a result, we may fail to meet or exceed the expectations of
    investors or securities analysts which could cause our stock
    price to decline.
    
    our ability to retain and increase sales to existing customers
    and attract new customers; 16




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##### 




    changes in the volume and mix of subscriptions sold and press
    releases distributed in a particular quarter;
    seasonality of our business cycle, given that our subscription
    volumes are normally lowest in the first quarter and highest in
    the fourth quarter;
    our policy of expensing sales commissions at the time our
    customers are invoiced for a subscription agreement, while the
    majority of our revenue is recognized ratably over future
    periods;
    the timing and success of new product introductions or upgrades
    by us or our competitors;
    changes in our pricing policies or those of our competitors;
    the amount and timing of expenditures related to expanding our
    operations;
    changes in accounting policies or the timing of non-recurring
    charges;
    changes in the payment terms for our products and
    services; and
    the purchasing and budgeting cycles of our customers.      We
    face competition, and our failure to compete successfully could
    make it difficult for us to add and retain customers and could
    reduce or impede the growth of our business.
    
    PR solution providers offering products specifically designed
    for PR;
    generic desktop software and other commercially available
    software not specifically designed for PR;
    outsourced PR service providers; and
    custom-developed solutions.     17




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If we
    fail to respond to evolving industry standards, our on-demand
    solutions may become obsolete or less competitive.
    If
    there are interruptions or delays in providing our on-demand
    solutions due to third-party error, our own error or the
    occurrence of unforeseeable events, delivery of our solutions
    could become impaired, which could harm our relationships with
    customers and subject us to liability.
        The
    market for our solutions among large customers may be limited if
    they require customized features or functions that we do not
    currently intend to provide in our solutions or that would be
    difficult for individual customers to customize within our
    solutions.
   18




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Acquisitions
    could prove difficult to integrate, disrupt our business, dilute
    stockholder value and consume resources that are necessary to
    sustain our business.
    
    issue additional equity securities that would dilute the
    ownership of our stockholders;
    use cash that we may need in the future to operate our business;
    incur or assume debt on terms unfavorable to us or that we are
    unable to repay;
    incur large charges or substantial liabilities;
    encounter difficulties retaining key employees of an acquired
    company or integrating diverse business cultures; and
    become subject to adverse tax consequences, substantial
    depreciation or deferred compensation charges.    We may
    be liable to our customers and may lose customers if we provide
    poor service, if our solutions do not comply with our agreements
    or if there is a loss of data.
     19




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If our
    solutions fail to perform properly or if they contain technical
    defects, our reputation will be harmed, our market share would
    decline and we could be subject to product liability
    claims.
      Changes
    in laws and/or regulations related to the Internet or changes in
    the Internet infrastructure itself may cause our business to
    suffer.
      If we
    are unable to protect our proprietary technology and other
    intellectual property rights, it will reduce our ability to
    compete for business.
     20




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If a
    third-party asserts that we are infringing its intellectual
    property, whether successful or not, it could subject us to
    costly and time-consuming litigation or expensive licenses, and
    our business may be harmed.
    
    divert managements attention;
    result in costly and time-consuming litigation;
    require us to enter into royalty or licensing agreements, which
    may not be available on acceptable terms, or at all; or
    require us to redesign our solutions to avoid infringement.    Our
    growth could strain our personnel and infrastructure resources,
    and if we are unable to implement appropriate controls and
    procedures to manage our growth, we may not be able to
    successfully implement our business plan.
      We are
    dependent on our executive officers, and the loss of any of them
    may prevent us from implementing our business plan in a timely
    manner if at all.
   21




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##### 



We may
    not be able to attract and retain the highly skilled employees
    we need to support our planned growth.
    Because
    we conduct operations in foreign jurisdictions, which accounted
    for approximately 9% of our 2007 revenues, and because our
    business strategy includes expanding our international
    operations, our business is susceptible to risks associated with
    international operations.
    
    fluctuations in currency exchange rates;
    unexpected changes in foreign regulatory requirements;
    difficulties in managing and staffing international operations;
    potentially adverse tax consequences, including the complexities
    of foreign value added tax systems and restrictions on the
    repatriation of earnings; and
    the burdens of complying with a wide variety of foreign laws and
    different legal standards.    We
    might require additional capital to support business growth, and
    this capital might not be available.
   22




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Our
    reported financial results may be adversely affected by changes
    in accounting principles generally accepted in the United
    States.
      Compliance
    with new regulations governing public company corporate
    governance and reporting is uncertain and
    expensive.
    Risks
    Related to our Common Stock and the Securities Markets
  If
    securities analysts do not publish research or reports about our
    business or if they downgrade our stock, the price of our stock
    could decline.
    Volatility
    of our stock price could adversely affect
    stockholders.
    
    quarterly variations in our operating results;
    seasonality of our business cycle;
    interest rate changes; 23




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##### 




    changes in the markets expectations about our operating
    results;
    our operating results failing to meet the expectation of
    securities analysts or investors in a particular period;
    changes in financial estimates and recommendations by securities
    analysts concerning our company or the on-demand software
    industry in general;
    operating and stock price performance of other companies that
    investors deem comparable to us;
    news reports relating to trends in our markets;
    changes in laws and regulations affecting our business;
    material announcements by us or our competitors;
    sales of substantial amounts of common stock by our directors,
    executive officers or significant stockholders or the perception
    that such sales could occur; and
    general economic and political conditions such as recessions and
    acts of war or terrorism.  Provisions
    in our amended and restated certificate of incorporation and
    bylaws or Delaware law might discourage, delay or prevent a
    change of control of our company or changes in our management
    and, therefore, depress the trading price of our
    stock.
    
    establish a classified board of directors so that not all
    members of our board of directors are elected at one time;
    provide that directors may only be removed for cause
    and only with the approval of 662/3 percent of our
    stockholders;
    require super-majority voting to amend our bylaws or specified
    provisions in our amended and restated certificate of
    incorporation;
    authorize the issuance of blank check preferred
    stock that our board of directors could issue to increase the
    number of outstanding shares and to discourage a takeover
    attempt;
    limit the ability of our stockholders to call special meetings
    of stockholders;
    prohibit stockholder action by written consent, which requires
    all stockholder actions to be taken at a meeting of our
    stockholders;
    provide that the board of directors is expressly authorized to
    adopt, amend, or repeal our bylaws; and
    establish advance notice requirements for nominations for
    election to our board of directors or for proposing matters that
    can be acted upon by stockholders at stockholder meetings.    Future
    sales, or the availability for sale, of our common stock may
    cause our stock price to decline.
  Rule 10b5-1
 24




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##### 



Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties      Item 3.
    Legal
    Proceedings      Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities  Market
    for Common Stock
   25




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##### 



mark-up,
  High


LowFiscal Year Ended December 31, 2006First Quarter

$
15.34


$
10.00Second Quarter


16.40



12.19Third Quarter


15.78



12.80Fourth Quarter


18.11



14.87Fiscal Year Ended December 31, 2007First Quarter

$
21.49


$
16.86Second Quarter


27.31



19.53Third Quarter


30.12



23.10Fourth Quarter


37.30



29.96     Dividends
    Uses of
    Proceeds From Registered Securities
  Form S-1 (No. 333-125834),
       26




---



##### 



Performance
    Graph
    
  12/7/2005

12/31/2005

12/31/2006

12/31/2007Vocus, Inc.

$
100.00


$
115.44


$
186.67


$
383.67Nasdaq Composite


100.00



97.93



107.25



117.77Nasdaq Computer and Data Processing Index


100.00



97.03



103.00



125.51  27




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##### 



Item 6.
    Selected
    Financial Data    Year Ended December 31,2003(5)


2004(6)


2005


2006(7)


2007(In thousands, except per share data)Consolidated Statement of Operations:Revenues

$
15,434


$
20,393


$
28,062


$
40,328


$
58.076Cost of revenues(1)(2)


3,244



4,368



6,537



8,293



10,922Accelerated amortization of prepaid royalty fees and contract
    termination costs










1,399







Gross profit


12,190



16,025



20,126



32,035



47,154Operating expenses:(2)(3)Sales and marketing


8,285



11,708



14,837



18,912



26,548Research and development


2,201



2,064



2,515



2,896



3,822General and administrative


4,493



3,942



6,051



9,626



14,743Amortization of intangible assets


788



976



1,605



1,705



2,862Total operating expenses


15,767



18,690



25,008



33,139



47,975Loss from operations


(3,577
)


(2,665
)


(4,882
)


(1,104
)


(821
)Other income (expense):Interest and other income


12



99



177



1,819



2,541Interest expense


(41
)


(35
)


(359
)


(88
)


(47
)Total other income (expense)


(29
)


64



(182
)


1,731



2,494Income (loss) before income taxes and cumulative effect of a
    change in accounting principle


(3,606
)


(2,601
)


(5,064
)


627



1,673Provision for income taxes














185



674Income (loss) before cumulative effect of a change in accounting
    principal


(3,606
)


(2,601
)


(5,064
)


442



999Cumulative effect of a change in accounting principle(4)


896















Net income (loss)


(2,710
)


(2,601
)


(5,064
)


442



999Accretion of preferred stock


(1,547
)


(1,582
)


(1,900
)






Net income (loss) attributable to common stockholders

$
(4,257
)

$
(4,183
)

$
(6,964
)

$
442


$
999Net income (loss) attributable to common stockholders per share,
    basic

$
(1.07
)

$
(1.04
)

$
(1.43
)

$
0.03


$
0.06Net income (loss) attributable to common stockholders per share,
    diluted

$
(1.07
)

$
(1.04
)

$
(1.43
)

$
0.03


$
0.05     (1)
    
    Cost of revenues includes amortization of intangible assets in
    the following amounts:  Year Ended December 31,2003


2004


2005


2006


2007Amortization of intangible assets

$
478


$
397


$
402


$
344


$
120  28




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##### 



(2)
    
    Cost of revenues and operating expenses include stock-based
    compensation from stock option awards pursuant to
    SFAS No. 123R, Share-Based Payment, in the
    following amounts:  Year Ended December 31,2003


2004


2005


2006


2007Cost of revenues

$



$



$



$
69


$
581Sales and marketing














530



1,498Research and development














219



548General and administrative














1,042



2,915Total

$



$



$



$
1,860


$
5,542   (3)
    
    Operating expenses include stock-based compensation related to
    purchases of our common stock in the following amounts:  Year Ended December 31,2003


2004


2005


2006


2007Research and development

$
247


$



$



$



$
General and administrative


246







1,006







   (4)
    
    On January 1, 2003, we changed our revenue recognition
    policy. This change was made to comply with provisions of EITF
    00-21,
    Revenue Arrangements with Multiple Deliverables. Upon
    adoption of EITF
    00-21 on
    January 1, 2003, we recorded a cumulative effect of a
    change in accounting principle of $896 representing the
    unrecognized revenue that would have been recognized in prior
    periods had we retroactively applied EITF
    00-21.(5)
    
    On January 24, 2003, we acquired Public Affairs
    Technologies, Inc. a provider of software to manage corporate
    communications and public relations. The operating results of
    Public Affairs Technologies have been included in our results of
    operations since the date of acquisition.(6)
    
    On November 8, 2004, we acquired Gnossos Software, Inc., a
    provider of software to manage corporate communications and
    government relations. The operating results of Gnossos have been
    included in our results of operations since the date of
    acquisition.(7)
    
    On August 4, 2006, we acquired PRWeb International, Inc.,
    an online distributor of press releases. The operating results
    of PRWeb have been included in our results of operations since
    the date of acquisition.  December 31,2003


2004


2005


2006


2007(In thousands)Balance Sheet Data:Cash and cash equivalents

$
1,573


$
7,554


$
40,027


$
26,506


$
56,541Working capital (deficit)


(8,590
)


(5,442
)


24,915



8,521



42,013Total assets


9,571



19,618



55,836



74,770



114,243Total debt


339



3,001



1,407



762



335Total deferred revenue


12,393



16,052



20,696



26,631



34,964Redeemable stock


22,488



28,830



189



33



Stockholders equity (deficit)


(28,227
)


(31,738
)


30,387



40,974



71,004  29




---



##### 



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with our consolidated financial statements and
    related notes that appear elsewhere in this report. In addition
    to historical consolidated financial information, the following
    discussion contains forward-looking statements that reflect our
    plans, estimates and beliefs. Our actual results could differ
    materially from those discussed in the forward-looking
    statements. Factors that could cause or contribute to these
    differences include those discussed below and elsewhere in this
    report, particularly in Risk Factors in
    Item 1A.
  Overview
          Sources
    of Revenues
     30




---



##### 



Cost of
    Revenues and Operating Expenses
  Cost of Revenues.
    Sales and Marketing.
    Research and Development.
  General and Administrative.
  Amortization of Intangible Assets.
  Critical
    Accounting Policies
   31




---



##### 



Revenue Recognition. Revenue Recognition in Financial Statements Revenue
    Recognition.
    No. 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21), on-demand
    Sales Commissions.
  Stock-Based Compensation. Accounting for Stock Issued to Employees Accounting for
    Stock-Based
    Compensation
  Share-Based
    Payment
 32




---



##### 



Business Combinations.
  Impairment of Long-Lived Assets.
  Goodwill.
 33




---



##### 



Results
    of Operations
    Year Ended December 31,2005


2006


2007Revenues


100
%


100
%


100
%Cost of revenues


23



21



19Accelerated amortization of prepaid royalty fees and contract
    termination costs


5







Gross profit


72



79



81Operating expenses:Sales and marketing


53



47



46Research and development


9



7



6General and administrative


21



24



25Amortization of intangible assets


6



4



5Total operating expenses


89



82



82Loss from operations


(17
)


(3
)


(1
)Other income (expense), net


(1
)


4



4Income (loss) before income taxes


(18
)


1



3Provision for income taxes










1Net income (loss)


(18
)%


1
%


2
%     Year Ended December 31,2005


2006


2007Total deferred revenue (in thousands at year end)

$
20,696


$
26,631


$
34,964Net cash provided by operating activities (in thousands)

$
1,736


$
10,412


$
16,032Active customers


1,384



1,727



2,427   Years
    Ended December 31, 2007 and 2006
  Revenues.
  Cost of Revenues.
 34




---



##### 



Sales and Marketing Expenses.
  Research and Development Expenses.
  General and Administrative Expenses.
  Amortization of Intangible
    Assets.
  Other Income (Expense).
  Provision for Income Taxes.
  Years
    Ended December 31, 2006 and 2005
  Revenues.
 35




---



##### 



Cost of Revenues.
  Accelerated Amortization of Prepaid Royalty Fees and Contract
    Termination Costs.
  Sales and Marketing Expenses.
  Research and Development Expenses.
  General and Administrative Expenses.
  Amortization of Intangible
    Assets.
 36




---



##### 



Other Income (Expense).
  Provision for Income Taxes.
  Liquidity
    and Capital Resources
                Payments Due by periodLess than


1-3


3-5


More thanContractual Obligations

Total


1 Year


Years


Years


5 YearsOperating leases

$
2,703


$
940


$
1,247


$
516


$
Contractual commitments


2,116



1,392



720



4



Long-term debt under notes payable


235



202



33







Interest on long-term debt under notes payable


10



9



1







Capital lease obligations


113



37



65



11



Total obligations

$
5,177


$
2,580


$
2,066


$
531


$
  37




---



##### 



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Foreign
    Currency Exchange Risk
      Interest
    Rate Sensitivity
    Item 8.
    Financial
    Statements and Supplementary Data  Form 10-K.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e) Rules 13a-15(b) 15d-15(b),
  Changes
    in Internal Controls
    Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f).
   38




---



##### 



39




---



##### 



Report of
    Independent Registered Public Accounting Firm
    on Internal Control Over Financial Reporting
                    40




---



##### 



Item 9B.
    Other
    Information    PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services    PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Documents filed as part of this report:
    
    Report of Independent Registered Public Accounting Firm;
    Consolidated balance sheets as of December 31, 2006 and
    2007;
    Consolidated statements of operations for the years ended
    December 31, 2005, 2006 and 2007;
    Consolidated statements of stockholders equity for the
    years ended December 31, 2005, 2006 and 2007;
    Consolidated statements of cash flows for the years ended
    December 31, 2005, 2006 and 2007; and
    Notes to consolidated financial statements.    
    Schedule II  Valuation and Qualifying Accounts.    Exhibits
   41




---



##### 



SIGNATURES
    VOCUS, INC.
  By:
    /s/  Richard
    Rudman       POWER OF
    ATTORNEY
  Form 10-K,
    Signature

Title

Date/s/  Richard
    RudmanRichard
    Rudman

Chief Executive Officer, President and Chairman (Principal
    Executive Officer)

March 14, 2008/s/  Stephen
    VintzStephen
    Vintz

Chief Financial Officer and Treasurer (Principal Financial and
    Accounting Officer)

March 14, 2008/s/  Robert
    LentzRobert
    Lentz

Chief Technology Officer and Director

March 14, 2008/s/  Kevin
    BurnsKevin
    Burns

Director

March 14, 2008/s/  Gary
    GoldingGary
    Golding

Director

March 14, 2008/s/  Ronald
    KaiserRonald
    Kaiser

Director

March 14, 2008/s/  Richard
    MooreRichard
    Moore

Director

March 14, 2008  42




---



##### 



Vocus,
    Inc. and Subsidiaries
  Index to Financial Statements
  Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2006 and 2007


F-3Consolidated Statements of Operations for years
    ended December 31, 2005, 2006 and 2007


F-4Consolidated Statements of Stockholders
    Equity for years ended December 31, 2005, 2006 and 2007


F-5Consolidated Statements of Cash Flows for years
    ended December 31, 2005, 2006 and 2007


F-6Notes to Consolidated Financial Statements


F-7  F-1




---



##### 



Report of
    Independent Registered Public Accounting Firm          Share-Based
    Payment Considering the
    Effects of Prior Year Misstatements when Quantifying
    Misstatements in Current Year Financial Statements
       F-2




---



##### 



Vocus,
    Inc. and Subsidiaries
  Consolidated Balance Sheets
  December 31,2006


2007(Dollars in thousands, except per share data)Current assets:Cash and cash equivalents

$
26,506


$
56,541Short-term investments


3,357



10,939Accounts receivable, net of allowance for doubtful accounts of
    $280 and $251 at December 31, 2006 and December 31,
    2007, respectively


10,139



14,354Prepaid expenses and other current assets


1,146



1,957Total current assets


41,148



83,791Property, equipment and software, net


4,359



4,236Intangible assets:Customer relationships, net


4,115



2,599Trade name, net


3,717



3,154Agreements not-to-compete, net


3,587



2,804Purchased technology, net


191



71Intangible assets, net


11,610



8,628Goodwill


17,112



17,090Other assets


541



498Total assets

$
74,770


$
114,243Current liabilities:Accounts payable

$
1,459


$
1,043Accrued compensation


2,054



3,057Accrued expenses


2,587



3,112Current portion of notes payable and capital lease obligations


427



233Current portion of deferred revenue


26,100



34,333Total current liabilities


32,627



41,778Notes payable and capital lease obligations, net of current
    portion


335



102Deferred income taxes


185



639Other liabilities


85



89Deferred revenue, net of current portion


531



631Total liabilities


33,763



43,239Commitments and contingencies






Redeemable common stock, $0.01 par value, 5,000 shares
    issued and outstanding at December 31, 2006


33



Stockholders equity:Preferred stock, $0.01 par value, 10,000,000 shares
    authorized; no shares issued and outstanding at
    December 31, 2006 and December 31, 2007






Common stock, $0.01 par value, 90,000,000 shares
    authorized; 16,993,515 and 18,656,415 issued at
    December 31, 2006 and December 31, 2007, respectively;
    15,982,738 and 17,645,638 shares outstanding at
    December 31, 2006 and December 31, 2007, respectively


170



186Additional paid-in capital


80,526



109,553Treasury stock, 1,010,777 shares at December 31, 2006
    and 2007, at cost


(3,283
)


(3,283
)Accumulated other comprehensive loss


(48
)


(60
)Accumulated deficit


(36,391
)


(35,392
)Total stockholders equity


40,974



71,004Total liabilities, redeemable stock and stockholders equity

$
74,770


$
114,243    F-3




---



##### 



Vocus,
    Inc. and Subsidiaries
 Consolidated
    Statements of Operations  Year Ended December 31,2005


2006


2007(Dollars in thousands, except per share data)Revenues

$
28,062


$
40,328


$
58,076Cost of revenues, including amortization expense of $402, $344,
    and $120 for the years ended December 31, 2005, 2006, and
    2007, respectively


6,537



8,293



10,922Accelerated amortization of prepaid royalty fees and contract
    termination costs


1,399







Gross profit


20,126



32,035



47,154Operating expenses:Sales and marketing


14,837



18,912



26,548Research and development


2,515



2,896



3,822General and administrative


6,051



9,626



14,743Amortization of intangible assets


1,605



1,705



2,862Total operating expenses


25,008



33,139



47,975Loss from operations


(4,882
)


(1,104
)


(821
)Other income (expense):Interest and other income


177



1,819



2,541Interest expense


(359
)


(88
)


(47
)Total other income (expense)


(182
)


1,731



2,494Income (loss) before provision for income taxes


(5,064
)


627



1,673Provision for income taxes






185



674Net income (loss)


(5,064
)


442



999Accretion of preferred stock


(1,900
)






Net income (loss) attributable to common stockholders

$
(6,964
)

$
442


$
999Net income (loss) attributable to common stockholders per share:Basic


(1.43
)


0.03


$
0.06Diluted


(1.43
)


0.03


$
0.05Weighted average shares outstanding used in computing per share
    amounts:Basic


4,867,710



15,367,851



17,147,889Diluted


4,867,710



16,339,254



18,267,020    F-4




---



##### 



Vocus,
    Inc. and Subsidiaries
 Consolidated
    Statements of Stockholders Equity  AccumulatedAdditional








Other





TotalCommon Stock


Paid-In


Treasury


Deferred


Comprehensive


Accumulated


StockholdersShares


Amount


Capital


Stock


Compensation


Income (Loss)


Deficit


Equity(Dollars in thousands, except per share data)Balance at December 31, 2004


4,693,330


$
47


$



$
(1,520
)

$
(34
)

$
27


$
(30,258
)

$
(31,738
)Exercise of stock options


285,020



3



238



















241Deferred compensation related to stock option grants


















1







(1
)


Amortization of deferred compensation


















14











14Repurchase of 392,731 shares of common stock














(1,763
)














(1,763
)Accretion of preferred stock










(238
)














(1,662
)


(1,900
)Accretion of redeemable common stock


























(6
)


(6
)Initial public offering, net of costs


5,000,000



50



39,971



















40,021Conversion of preferred stock


5,826,668



58



30,489



















30,547Issuance of stock options to non-employee










10



















10Comprehensive loss:Foreign currency translation






















25







25Net loss


























(5,064
)


(5,064
)Total comprehensive loss






























(5,039
)Balance at December 31, 2005


15,805,018



158



70,470



(3,283
)


(19
)


52



(36,991
)


30,387Cumulative effect of the adoption of SAB No. 108


























158



158Reclassification of deferred compensation upon adoption of
    SFAS No. 123R










(19
)






19











Initial public offering, costs










(48
)


















(48
)Issuance of common stock in connection with acquisition


494,543



5



7,200



















7,205Issuance of common stock to directors


5,343







56



















56Exercise of stock options


664,483



7



893



















900Accretion of redeemable common stock










(5
)


















(5
)Forfeiture of common stock redemption right


24,128







161



















161Stock-based compensation










1,818



















1,818Comprehensive income:Foreign currency translation






















(104
)






(104
)Unrealized net gain on available for sale securities, net of tax






















4







4Net income


























442



442Total comprehensive income






























342Balance at December 31, 2006


16,993,515



170



80,526



(3,283
)






(48
)


(36,391
)


40,974Public offering, net of costs


1,217,137



12



21,645



















21,657Issuance of common stock to directors


5,196







110



















110Exercise of stock options and warrants


435,567



4



1,594



















1,598Income tax benefit from stock option exercises










78



















78Accretion of redeemable common stock










(1
)


















(1
)Forfeiture of common stock redemption right


5,000







34



















34Stock-based compensation










5,567



















5,567Comprehensive income:Foreign currency translation






















(25
)






(25
)Unrealized net gain on available for sale securities, net of tax






















13







13Net income


























999



999Total comprehensive income






























987Balance at December 31, 2007


18,656,415


$
186


$
109,553


$
(3,283
)

$



$
(60
)

$
(35,392
)

$
71,004    F-5




---



##### 



Vocus,
    Inc. and Subsidiaries
 Consolidated
    Statements of Cash Flows  Year Ended December 31,2005


2006


2007(Dollars in thousands)Cash flows from operating activitiesNet income (loss)

$
(5,064
)

$
442


$
999Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depreciation and amortization of property, equipment and software


784



1,171



1,480Amortization of intangible assets


2,007



2,049



2,982Loss (gain) on disposal of assets






7



(26
)Impairment of long-lived assets






28



24Stock-based compensation


1,030



1,874



5,657Provision for doubtful accounts


51



182



75Gain on extinguishment of debt






(128
)


Deferred income taxes






185



454Income tax benefit from the exercise of stock options










(78
)Changes in operating assets and liabilities:Accounts receivable


(1,691
)


(4,250
)


(4,277
)Prepaid expenses and other current assets


198



95



(744
)Other assets


7



(58
)


(25
)Accounts payable


(214
)


1,180



(416
)Accrued compensation


53



568



1,020Accrued expenses


(144
)


1,167



599Deferred revenue


4,701



5,900



8,304Other liabilities


18







4Net cash provided by operating activities


1,736



10,412



16,032Cash flows from investing activitiesCash paid for acquisitions






(21,264
)


Purchases of property and equipment


(1,391
)


(790
)


(1,046
)Software development and information database costs


(2,241
)


(217
)


(322
)Proceeds from disposal of assets










34Purchases of short-term investments


(1,400
)


(5,475
)


(14,237
)Sales of short-term investments






2,401



625Maturities of short-term investments






1,121



6,043Net cash used in investing activities


(5,032
)


(24,224
)


(8,903
)Cash flows from financing activitiesProceeds from public offerings, net of offering costs


40,021



(48
)


21,657Repurchase of common stock


(2,769
)






Proceeds from exercise of stock options and warrants


241



900



1,598Proceeds from borrowings under revolving line of credit


4,416







Payments under revolving line of credit


(6,805
)






Proceeds from notes payable


972



235



Payments on notes payable and capital lease obligations


(284
)


(825
)


(427
)Income tax benefit from the exercise of stock options










78Net cash provided by financing activities


35,792



262



22,906Effect of exchange rate changes on cash and cash equivalents


(23
)


29



Net increase (decrease) in cash and cash equivalents


32,473



(13,521
)


30,035Cash and cash equivalents at beginning of year


7,554



40,027



26,506Cash and cash equivalents at end of year

$
40,027


$
26,506


$
56,541Supplemental disclosure of cash flow information:Cash paid for interest

$
288


$
67


$
36Cash paid for income taxes

$



$



$
20Supplemental disclosure of non-cash investing and financing
    activities:Assets acquired under capital leases

$
107


$
45


$
Conversion of redeemable preferred stock into common stock

$
30,547


$



$
Forfeiture of common stock redemption right

$



$
161


$
34Issuance of common stock in connection with acquisition

$



$
7,205


$
    F-6




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial Statements
  1.
    Business
    Description  Organization
    and Description of Business
    2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
    Use of
    Estimates
    Cash
    and Cash Equivalents
    Short-term
    Investments
      Allowance
    for Doubtful Accounts
    Software
    Development and Information Database Costs
   F-7




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
    Property,
    Equipment and Software
    Business
    Combinations and Intangible Assets
  Business Combinations
    Goodwill
  Goodwill and Other Intangible Assets
  Impairment
    of Long-Lived Assets
  Accounting for the Impairment or Disposal of
    Long-Lived Assets
 F-8




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
  Redeemable
    Stock
    Foreign
    Currency and Operations
    Comprehensive
    Income (Loss)
    Revenue
    Recognition
      No. 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21),
   F-9




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
  Deferred
    Revenue
  12-month
  Sales
    Commissions
    Advertising
    Costs
    Stock-Based
    Compensation
  Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
    Year EndedDecember 31,2005Net loss attributable to common stockholders, as reported

$
(6,964
)Stock-based compensation expense, as reported


1,030Pro forma stock-based compensation expense


(231
)Pro forma net loss attributable to common stockholders

$
(6,165
)Net loss attributable to common stockholders per share:As reported

$
(1.43
)Pro forma

$
(1.27
)     Six Months EndedJune 30,


December 31,2005


2005Dividend yield


0
%


0
%Average risk-free interest rate


4.2
%


4.4
%Expected term (years)


4



4 - 6Stock price volatility


(*
)


52% - 53
%     (*)
    
    Assumption is not applicable to minimum value method F-10




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
     Share-Based Payment
  Concentrations
    of Credit Risk
        Fair
    Value of Financial Instruments
    Income
    Taxes
    Accounting for Uncertainty in Income Taxes
 F-11




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
        Earnings
    Per Share
      2005


2006


2007Net income (loss) attributable to common stockholders

$
(6,964
)

$
442


$
999Weighted average shares outstanding, basic


4,867,710



15,367,851



17,147,889Dilutive effect of:Options to purchase common stock






757,600



1,046,643Warrants to purchase common stock






213,803



72,488Weighted average shares outstanding, diluted


4,867,710



16,339,254



18,267,020Net income (loss) attributable to common stockholders per share:Basic

$
(1.43
)

$
0.03


$
0.06Diluted

$
(1.43
)

$
0.03


$
0.05     December 31,2005


2006


2007Options to purchase common stock


2,468,351



2,205,351



3,351,363Warrants to purchase common or preferred stock


361,446



225,520



Total options and warrants to purchase common stock


2,829,797



2,430,871



3,351,363  F-12




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
  Segment
    Data
    Reclassifications
    Adoption
    of SAB No. 108
  Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements
  Recent
    Accounting Pronouncements
  Fair Value Measurements No. 157-1, Application of FASB Statement No. 157 to FASB Statement
    No. 13 and Other Accounting Pronouncements that Address
    Fair Value Measurements for Purposes of Lease Classification or
    Measurement under Statement 13 No. 157-1), Effective Date of FASB Statement No. 157 No. 157-2)
  The Fair Value Option for
    Financial Assets and Financial Liabilities
  Business Combinations,
 F-13




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
  3.
    Public
    Offerings of Common Stock      4.
    Acquisition      Cash

$
20,940Common stock


7,205Transaction costs


324Total purchase consideration

$
28,469     AmortizationPeriodTrade name


7 years


$
3,946Agreements not-to-compete


5 years



3,913Customer relationships


5 years



3,041Purchased technology


2 years



240Property and equipment


3 - 5 years



341Goodwill






17,090Assumed liabilities






(102
)Total purchase price





$
28,469    F-14




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
    Year EndedDecember 31,2005


2006Pro forma revenues

$
31,973


$
44,065Pro forma net loss

$
(7,828
)

$
(269
)Accretion of preferred stock


(1,900
)


Pro forma net loss attributable to common stockholders

$
(9,728
)

$
(269
)Pro forma basic and diluted net loss attributable to common
    stockholders per share

$
(1.81
)

$
(0.02
)     5.
    Short-Term
    Investments    Unrealized


Fair Market


Cash and Cash


Short-TermCost


Gains


Losses


Value


Equivalents


InvestmentsCash

$
14,215


$



$



$
14,215


$
14,215


$
Money market funds


765











765



765



Commercial paper


9,905











9,905



9,905



Government-sponsored agency debt securities


2,623



4







2,627



1,271



1,356Corporate notes and bonds


2,351











2,351



350



2,001Total

$
29,859


$
4


$



$
29,863


$
26,506


$
3,357     Unrealized


Fair Market


Cash and Cash


Short-TermCost


Gains


Losses


Value


Equivalents


InvestmentsCash

$
22,790


$



$



$
22,790


$
22,790


$
Money market funds


4,816











4,816



4,816



Commercial paper


22,891











22,891



22,891



Government-sponsored agency debt securities


12,216



16







12,232



3,794



8,438Certificates of deposit


4,250



1







4,251



2,250



2,001Corporate notes and bonds


500











500







500Total

$
67,463


$
17


$



$
67,480


$
56,541


$
10,939      F-15




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
  6.
    Property,
    Equipment and Software    December 31,2006


2007Purchased software, computer and office equipment

$
3,116


$
3,788Office furniture


564



743Leasehold improvements


847



896Equipment under capital lease obligations


239



155Capitalized software development costs


495



788Information database costs


2,327



2,3277,588



8,697Less accumulated depreciation and amortization


(3,229
)


(4,461
)Property, equipment and software, net

$
4,359


$
4,236     7.
    Intangible
    Assets    GrossUseful Life


Carrying





Net Carryingin Years


Amount


Amortization


AmountCustomer relationships


3 - 5


$
8,586


$
(4,471
)

$
4,115Trade name


7



3,946



(229
)


3,717Agreements not-to-compete


2 - 5



4,195



(608
)


3,587Purchased technology


2



2,251



(2,060
)


191Total





$
18,978


$
(7,368
)

$
11,610     GrossUseful Life


Carrying





Net Carryingin Years


Amount


Amortization


AmountCustomer relationships


3 - 5


$
8,352


$
(5,753
)

$
2,599Trade name


7



3,946



(792
)


3,154Agreements not-to-compete


2 - 5



4,195



(1,391
)


2,804Purchased technology


2



1,667



(1,596
)


71Total





$
18,160


$
(9,532
)

$
8,628  F-16




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
    2008

$
2,7232009


1,9262010


1,8212011


1,2602012


5642013


334$
8,628   8.
    Debt  Term
    Loans and Equipment Line of Credit
      2008

$
2022009


33Total future minimum principal payments

$
235   Note
    Payable
    9.
    Redeemable
    Convertible Preferred Stock    10.
    Stock-Based
    Compensation   F-17




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
  10-year
  Share-Based Payment
  Year EndedDecember 31,2006


2007Cost of revenues

$
69


$
581Sales and marketing


530



1,498Research and development


219



548General and administration


1,042



2,915Total

$
1,860


$
5,542   paid-in-capital.
   F-18




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
    Year EndedDecember 31,2006


2007Stock price volatility


53
%


52
%Expected term (years)


6.3



6.2Risk-free interest rate


5.0
%


4.8
%Dividend yield


0
%


0
%         Weighted-


Aggregate IntrinsicWeighted-


Average


Value as ofNumber of


Range of


Average


Contractual


December 31,Options


Exercise Prices


Exercise Price


Term


2007(In thousands)Balance at January 1, 2005


1,100,082


$
0.30 - 4.77


$
1.32Granted


1,703,047



4.77 - 9.00



7.96Exercised


(285,020
)


0.30 - 2.99



0.85Forfeited or cancelled


(49,758
)


0.30 - 9.00



3.11Balance at December 31, 2005


2,468,351



0.30 - 9.00



5.92Granted


348,833



12.42 - 16.80



13.57Exercised


(565,266
)


0.30 - 9.00



1.59Forfeited or cancelled


(46,567
)


2.46 - 12.42



5.22Balance at December 31, 2006


2,205,351


$
0.30 - 16.80


$
8.26Granted


1,526,250



18.65 - 35.98



19.16Exercised


(255,327
)


0.30 - 18.65



6.26Forfeited or cancelled


(124,911
)


2.46 - 25.90



17.41Balance at December 31, 2007


3,351,363


$
0.30 - 35.98


$
13.03



8.2


$
72,064Expected to vest at December 31, 2007


3,148,158


$
0.30 - 35.98


$
12.89



8.2


$
68,116Exercisable at December 31, 2007


893,859


$
0.30 - 18.65


$
7.95



7.0


$
23,757  F-19




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
    Options OutstandingWeighted-





Options ExercisableAverage


Weighted-





Weighted-Range of

Outstanding


Remaining


Average


Exercisable


AverageExercise

as of


Contractual


Exercise


as of


ExercisePrices

12/31/07


Term


Price


12/31/07


Price$ 0.30 - $ 3.59


123,160



2.9


$
1.46



122,158


$
1.46$ 3.60 - $ 7.19


308,219



7.0



4.78



112,802



4.74$ 7.20 - $10.78


1,198,234



7.9



9.00



590,817



9.00$10.79 - $14.38


238,750



8.5



13.09



28,750



13.05$14.39 - $17.99


52,584



8.5



15.98



11,334



16.02$18.00 - $21.58


1,372,416



9.0



18.73



27,998



18.65$21.59 - $35.98


58,000



9.6



27.00







3,351,363



8.2


$
13.03



893,859


$
7.95       Common
    Stock Repurchases
    11.
    Employee
    Benefit Plans    12.
    Income
    Taxes   F-20




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
      2006


2007Current expense

$



$
220Deferred expense


185



454Provision for income taxes

$
185


$
674     2006


2007Statutory federal tax rate


35
%


35
%State income taxes


11



7Effect of foreign losses


6



8Non-deductible stock-based compensation


24



11Other non-deductible expenses


6



4Changes in valuation allowance


(53
)


(25
)29
%


40
%     December 31,2006


2007Deferred tax assets:NOL carryforwards

$
7,470


$
4,035Allowance for doubtful accounts


106



96Deferred revenue


107



109Accrued expenses


590



200Depreciation


404



230Intangible asset amortization


1,682



2,576Stock-based compensation


538



2,382Other


37



172Total deferred tax assets


10,934



9,800Valuation allowance


(10,021
)


(9,044
)Net deferred tax assets


913



756Deferred tax liabilities:Capitalized software development


(812
)


(756
)Goodwill


(185
)


(639
)Other


(101
)


Total deferred tax liabilities


(1,098
)


(1,395
)Net deferred tax liabilities

$
(185
)

$
(639
)  F-21




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
        13.
    Commitments
    and Contingencies  Purchase
    Commitments
      Leases
   F-22




---



##### 



Vocus,
    Inc. and Subsidiaries
 Notes to
    Consolidated Financial
    Statements  (Continued)
    Operating


CapitalLeases


Leases2008

$
940


$
372009


690



362010


557



292011


337



112012


179



Total future minimum payments

$
2,703



113Less amount representing interest






(13
)Less current portion






(31
)Long-term capital lease obligations





$
69   Letter
    of Credit
    Litigation
    and Claims
    14.
    Quarterly
    Financial Information (Unaudited)  March 31,


June 30,


September 30,


December 31,


March 31,


June 30,


September 30,


December 31,2006


2006


2006


2006


2007


2007


2007


2007Summary consolidated statement of operations data:Revenues

$
8,262


$
9,189


$
10,757


$
12,120


$
12,597


$
14,080


$
15,072


$
16,327Gross profit


6,300



7,239



8,620



9,876



10,117



11,275



12,372



13,390Net income (loss)


(182
)


(2
)


150



476



2



(3
)


475



525Net income (loss) per share:Basic

$
(0.01
)

$
(0.00
)

$
0.01


$
0.03


$
0.00


$
(0.00
)

$
0.03


$
0.03Diluted

$
(0.01
)

$
(0.00
)

$
0.01


$
0.03


$
0.00


$
(0.00
)

$
0.03


$
0.03Weighted average shares outstanding used in computing per share
    amounts:Basic


14,965,271



15,083,982



15,498,524



15,911,788



16,016,478



17,364,691



17,563,147



17,625,002Diluted


14,965,271



15,083,982



16,320,518



16,806,020



16,598,471



17,364,691



18,629,400



19,184,725  F-23




---



##### 



Vocus,
    Inc.
  Schedule II  Valuation and Qualifying
    Accounts
  Balance








Balance atBeginning of


Charged to





End ofPeriod


Expense


Deductions


PeriodAllowance for doubtful accounts:Year ended December 31, 2005

$
199


$
51


$
(57
)(1)

$
193Year ended December 31, 2006


193



182



(95
)(1)


280Year ended December 31, 2007


280



75



(104
)(1)


251Deferred tax valuation allowance:Year ended December 31, 2005

$
10,020


$
1,917


$



$
11,937Year ended December 31, 2006


11,937



(1,916
)






10,021Year ended December 31, 2007


10,021



(977
)






9,044     (1)
    
    Uncollectible accounts written-off, net of recoveries. II-1




---



##### 



Index to
    Exhibits
  ExhibitNumbers

Exhibits3
.1(6)

Fifth Amended and Restated Certificate of Incorporation.3
.2(6)

Amended and Restated Bylaws.4
.1(4)

Specimen common stock certificate.10
.1(1)

1999 Stock Option Plan.10
.2(1)

Form of Option Agreement under Registrants 1999 Stock
    Option Plan.10
.3(5)

2005 Stock Award Plan.10
.4(10)

Form of Option Agreement for executive officers under
    Registrants 2005 Stock Award Plan.10
.5(10)

Form of Option Agreement for non-employee directors under
    Registrants 2005 Stock Award Plan.10
.6(1)

Agreement of Lease, dated December 21, 2000, between MOR
    FORBES LLLP and Registrant as amended.10
.7(5)

Form of Indemnification Agreement entered into by the Registrant
    and each of its executive officers and directors.10
.8(2)

License Agreement between the Registrant and PR Newswire
    Association LLC, dated August 1, 2003, as amended.10
.9(10)

Amended and Restated Agreement between the Registrant and PR
    Newswire Association, Inc., dated August 1, 2006.10
.10(3)

OEM License Agreement between the Registrant and Moreover
    Technologies, Inc., dated March 1, 2006, as amended.10
.11(7)

Form of Employment Agreement for Richard Rudman, Robert Lentz
    and Stephen Vintz, and schedule of details omitted therefrom.10
.12(7)

Form of Employment Agreement for William Donnelly and Norman
    Weissberg, and schedule of details omitted therefrom.10
.13*

Summary of board of directors compensation.10
.14(8)

Employment Agreement for William Wagner dated July 17, 2006.10
.15(8)

Indemnification Agreement for William Wagner dated July 17,
    2006.10
.16(9)

Asset Purchase Agreement, dated August 4, 2006, among the
    Registrant, Vocus PRW Holdings LLC, PRWeb, LLC and the sole
    stockholder of PRWeb International, Inc. and sole owner of
    PRWeb, LLC.10
.17*

Employment Agreement for Andrew Muir, dated April 14, 200410
.18*

Form of Restricted Stock Agreement for executive officers under
    Registrants 2005 Stock Award Plan.10
.19*

Form of Restricted Stock Agreement for non-employee directors
    under Registrants 2005 Stock Award Plan.10
.20(11)

Form of Separation Agreement and Release for Robert Lentz.21
.1*

List of subsidiaries.23
.1*

Consent of Ernst & Young LLP.24
.1*

Power of Attorney (included on the signature page to this
    report).31
.1*

Certification of Chief Executive Officer pursuant to
    Rules 13a-14
    and 15d-14 promulgated under the Securities Exchange Act of 1934.31
.2*

Certification of Chief Financial Officer pursuant to
    Rules 13a-14
    and 15d-14 promulgated under the Securities Exchange Act of 1934.32
.1**

Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith**
    
    Furnished herewith II-2




---



##### 



(1)
    
    Incorporated by reference to an exhibit to the Registration
    Statement on
    Form S-1
    of Vocus, Inc. (Registration
    No. 333-125834)
    filed with the Securities and Exchange Commission on
    June 15, 2005.(2)
    
    Incorporated by reference to an exhibit to Amendment No. 2
    to the Registration Statement on
    Form S-1
    of Vocus, Inc. (Registration No.
    333-125834)
    filed with the Securities and Exchange Commission on
    August 5, 2005.(3)
    
    Incorporated by reference to an exhibit to the Current Report on
    Form 8-K of
    Vocus, Inc. filed with the Securities and Exchange Commission on
    March 1, 2006.(4)
    
    Incorporated by reference to an exhibit to Amendment No. 5
    to the Registration Statement on
    Form S-1
    of Vocus, Inc. (Registration No.
    333-125834)
    filed with the Securities and Exchange Commission on
    November 9, 2005.(5)
    
    Incorporated by reference to an exhibit to Amendment No. 6
    to the Registration Statement on
    Form S-1
    of Vocus, Inc. (Registration No.
    333-125834)
    filed with the Securities and Exchange Commission on
    December 6, 2005.(6)
    
    Incorporated by reference to an exhibit to the Registration
    Statement on
    Form S-8
    of Vocus, Inc. (Registration
    No. 333-132206)
    filed with the Securities and Exchange Commission on
    March 3, 2006.(7)
    
    Incorporated by reference to an exhibit to the Current Report on
    Form 8-K of
    Vocus, Inc. filed with the Securities and Exchange Commission on
    December 12, 2005.(8)
    
    Incorporated by reference to an exhibit to the Current Report on
    Form 8-K of
    Vocus, Inc. filed with the Securities and Exchange Commission on
    July 20, 2006.(9)
    
    Incorporated by reference to an exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed with the Securities and Exchange Commission on
    August 14, 2006.(10)
    
    Incorporated by reference to an exhibit to the Registrants
    Annual Report on
    Form 10-K
    filed with the Securities and Exchange Commission on
    March 2, 2007.(11)
    
    Incorporated by reference to an exhibit to the Current Report on
    Form 8-K
    of Vocus, Inc. filed with the Securities and Exchange Commission
    on February 8, 2008. II-3