##### 



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, 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, 2006
  Commission File Number
    000-51644
  VOCUS, INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware

58-1806705(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    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
 o þ o
  Rule 12b-2 o þ
      Documents
    Incorporated by Reference
  Form 10-K, Form 10-K.




---



##### 



TABLE OF
    CONTENTS
  
  PagePART IItem 1.


Business


3Item 1A.


Risk
    Factors


13Item 1B.


Unresolved Staff
    Comments


24Item 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


39Item 9B.


Other
    Information


41PART IIIItem 10.


Directors and
    Executive Officers of the Registrant


41Item 11.


Executive
    Compensation


41Item 12.


Security Ownership
    of Certain Beneficial Owners and Management


41Item 13.


Certain
    Relationships and Related Transactions


41Item 14.


Principal
    Accountant Fees and Services


41PART IVItem 15.


Exhibits and
    Financial Statement Schedules


41   1




---



##### 



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




---



##### 



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




---



##### 



Public
    Relations and the On-Demand Software Market
   4




---



##### 



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.
    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 5




---



##### 



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 they automatically become part of
    our offering, allowing customers to benefit from product
    enhancement immediately.
    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
    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.
    Increase revenue from existing customers.  We
    believe there is significant opportunity to expand our
    relationships with existing customers. We expect to continue to
    increase revenue by selling additional modules to existing
    customers and increasing the number of users per customer. The
    modular architecture of our solution is conducive to developing
    and deploying additional functionality. To date, we have
    expanded our original solution set to include contact
    management, collateral management, project management,
    newsrooms, PRWeb online newswire, email campaigns, analytics
    & measurement and news on-demand.
    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. We believe there are
    opportunities to market and sell our solutions, through
    partnerships with select third parties, to reach certain market
    segments that would be more difficult or expensive 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 7% of
    our 2006 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




---



##### 




    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 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. 7




---



##### 




    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 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 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




---



##### 



Development
    Site
    Operations
    back-up.
    Customer
    Support
  on-site, on-site
  24/7
 9




---



##### 



Sales and
    Marketing
        Our
    Customers
  not-for-profit
  Competition
    
    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.   10




---



##### 




    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




---



##### 



Employees
    Executive
    Officers and Key Employees
    Name

Age

PositionRichard Rudman*


45


Chief Executive Officer, President
    and ChairmanRobert Lentz*


46


Chief Technology Officer and
    DirectorStephen Vintz*


38


Chief Financial Officer, Treasurer
    and SecretaryWilliam Wagner*


39


Chief Marketing OfficerNorman Weissberg*


45


Vice President, North American
    SalesWilliam Donnelly


51


Senior Vice President, Corporate
    DevelopmentAndrew Muir


51


Managing Director, Vocus
    InternationalMatthew Siegal


43


Vice President, Business
    DevelopmentDarren Stewart


38


Vice President, Client Services     *
    
    Denotes an executive officer  Richard Rudman
  Robert Lentz
  Stephen Vintz
 12




---



##### 



William Wagner not-for-profit
  Norman Weissberg
  William Donnelly
  Andrew Muir
  Matthew Siegal
  Darren Stewart
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K www.vocus.com.
  Item 1A.
    Risk
    Factors   13




---



##### 



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
    substantial 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




---



##### 



Our
    business model continues to evolve, which may cause our results
    of operations to fluctuate or decline.
    We
    might not generate increased business from our current
    customers, which could limit our revenue in the
    future.
    If our
    information database does not maintain market acceptance, our
    business, financial condition and results of operations could be
    adversely affected.
    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.
   15




---



##### 




    our ability to retain and increase sales to existing customers
    and attract new customers;
    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.     16




---



##### 



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.
       17




---



##### 



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.
    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.    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.
   18




---



##### 



If we
    fail to develop our brands cost-effectively, our business may
    suffer.
    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.
      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.
     19




---



##### 



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.
      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. 20




---



##### 



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.
    We may
    not be able to attract and retain the highly skilled employees
    we need to support our planned growth.
   21




---



##### 



Because
    we conduct operations in foreign jurisdictions, which accounted
    for approximately 7% of our 2006 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.
    Our
    reported financial results may be adversely affected by changes
    in accounting principles generally accepted in the United
    States.
     22




---



##### 



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;
    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. 23




---



##### 



The
    concentration of our capital stock ownership with insiders will
    likely limit your ability to influence corporate
    matters.
    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
 Item 1B.  Unresolved
    Staff Comments   24




---



##### 



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
  mark-up,
  High


LowFiscal Year Ended
    December 31, 2005Fourth Quarter (from
    December 7, 2005)

$
11.25


$
10.00Fiscal Year Ended
    December 31, 2006First Quarter


15.34



10.00Second Quarter


16.40



12.19Third Quarter


15.78



12.80Fourth Quarter


18.11



14.87    25




---



##### 



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




---



##### 



Performance
    Graph
  
  12/7/2005

12/31/2005

12/31/2006Vocus, Inc.

$
100.00


$
115.44


$
186.67Nasdaq Composite


100.00



97.93



107.25Nasdaq Computer and Data
    Processing Index


100.00



97.03



103.00  27




---



##### 



Item 6.
    Selected
    Financial Data    Year Ended December 31,2002


2003(5)


2004(6)


2005


2006(7)(In thousands, except per share data)Consolidated Statement of
    Operations:Revenues(1)

$
11,524


$
15,434


$
20,393


$
28,062


$
40,328Cost of revenues(2)(3)


2,679



3,244



4,368



6,537



8,293Accelerated amortization of
    prepaid royalty fees and contract termination costs














1,399



Gross profit


8,845



12,190



16,025



20,126



32,035Operating expenses:(3)(4)Sales and marketing


6,755



8,285



11,708



14,837



18,912Research and development


1,487



2,201



2,064



2,515



2,896General and administrative


3,886



4,493



3,942



6,051



9,626Amortization of intangible assets


78



788



976



1,605



1,705Total operating expenses


12,206



15,767



18,690



25,008



33,139Loss from operations


(3,361
)


(3,577
)


(2,665
)


(4,882
)


(1,104
)Other income (expense):Interest and other income


78



12



99



177



1,819Interest expense


(85
)


(41
)


(35
)


(359
)


(88
)Total other income (expense)


(7
)


(29
)


64



(182
)


1,731Income (loss) before income taxes
    and cumulative effect of a change in accounting principle


(3,368
)


(3,606
)


(2,601
)


(5,064
)


627Provision for income taxes


















185Income (loss) before cumulative
    effect of a change in accounting principle


(3,368
)


(3,606
)


(2,601
)


(5,064
)


442Cumulative effect of a change in
    accounting principle(1)






896











Net income (loss)


(3,368
)


(2,710
)


(2,601
)


(5,064
)


442Accretion of preferred stock


(1,316
)


(1,547
)


(1,582
)


(1,900
)


Net income (loss) attributable to
    common stockholders

$
(4,684
)

$
(4,257
)

$
(4,183
)

$
(6,964
)

$
442Net income (loss) attributable to
    common stockholders per share, basic and diluted

$
(1.18
)

$
(1.07
)

$
(1.04
)

$
(1.43
)

$
0.03     (1)
    
    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. Had
    we adopted EITF
    00-21 on
    January 1, 2002, our revenues would have increased, and our
    net loss would have decreased $194 in 2002. 28




---



##### 



(2)
    
    Cost of revenues includes amortization of intangible assets in
    the following amounts:  Year Ended December 31,2002


2003


2004


2005


2006(In thousands)Amortization of intangible assets

$
292


$
478


$
397


$
402


$
344   (3)
    
    Cost of revenues and operating expenses include stock-based
    compensation related to the adoption of SFAS No. 123R,
    Share-Based Payment, in the following amounts:  Year Ended December 31,2002


2003


2004


2005


2006(In thousands)Cost of revenues

$



$



$



$



$
69Sales and marketing


















530Research and development


















219General and administrative


















1,042Total

$



$



$



$



$
1,860   (4)
    
    Operating expenses include stock-based compensation related to
    purchases of our common stock in the following amounts:  Year Ended December 31,2002


2003


2004


2005


2006(In thousands)Research and development

$



$
247


$



$



$
General and administrative






246







1,006



   (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 31,2002


2003


2004


2005


2006(In thousands)Balance Sheet Data:Cash and cash equivalents

$
2,411


$
1,573


$
7,554


$
40,027


$
26,506Working capital (deficit)


(4,589
)


(8,590
)


(5,442
)


24,915



8,521Total assets


6,068



9,571



19,618



55,836



74,770Total debt


424



339



3,001



1,407



762Total deferred revenue


10,070



12,393



16,052



20,696



26,631Redeemable stock


17,967



22,488



28,830



189



33Stockholders equity (deficit)


(23,958
)


(28,227
)


(31,738
)


30,387



40,974  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
      not-for-profit
      Sources
    of Revenues
   30




---



##### 



and/or
    Cost of
    Revenues and Operating Expenses
  Cost of Revenues.
    Sales and Marketing.
    Research and Development.
 31




---



##### 



General and Administrative.
  Amortization of Intangible Assets. not-to-compete
  Critical
    Accounting Policies
      Revenue Recognition. Revenue Recognition in Financial Statements Revenue
    Recognition.
    No. 00-21, Revenue Arrangements with Multiple Deliverables 00-21),
    Stock-Based Compensation. Accounting for Stock Issued to Employees Accounting for Stock-Based
    Compensation
 32




---



##### 



Share-Based
    Payment
        Business Combinations. not-to-compete
  Impairment of Long-Lived Assets.
  Goodwill.
 33




---



##### 



Results
    of Operations
    Year Ended December 31,2004


2005


2006Revenues


100
%


100
%


100
%Cost of revenues


21



23



21Accelerated amortization of
    prepaid royalty fees and contract termination costs






5



Gross profit


79



72



79Operating expenses:Sales and marketing


58



53



47Research and development


10



9



7General and administrative


19



21



24Amortization of intangible assets


5



6



4Total operating expenses


92



89



82Loss from operations


(13
)


(17
)


(3
)Other income (expense), net






(1
)


4Income (loss) before income taxes


(13
)


(18
)


1Provision for income taxes










Net income (loss)


(13
)%


(18
)%


1
%     Year Ended December 31,2004


2005


2006Total deferred revenue (in
    thousands at year end)

$
16,052


$
20,696


$
26,631Net cash provided by operating
    activities (in thousands)

$
2,067


$
1,736


$
10,412Active customers


1,140



1,384



1,727   Years
    Ended December 31, 2006 and 2005
  Revenues.
  Cost of Revenues.
 34




---



##### 



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.
  Other Income (Expense).
 35




---



##### 



Provision for Income Taxes.
  Years
    Ended December 31, 2005 and 2004
  Revenues.
  Cost of Revenues.
  Accelerated Amortization of Prepaid Royalty Fees and Contract
    Termination Costs.
  Sales and Marketing Expenses.
  Research and Development Expenses.
 36




---



##### 



General and Administrative Expenses.
  Amortization of Intangible
    Assets.
  Other Income (Expense).
  Provision for Income Taxes.
  Liquidity
    and Capital Resources
      and/or
       37




---



##### 



Payments Due by periodLess than








More thanContractual Obligations

Total


1 Year


1 - 3 Years


3 - 5 Years


5 Years(In thousands)Operating leases

$
2,713


$
882


$
1,281


$
550


$
Contractual commitments


1,565



1,088



477







Long-term debt under notes payable


627



392



235







Interest on long-term debt under
    notes payable


46



35



11







Capital lease obligations


156



43



73



40



Total obligations

$
5,107


$
2,440


$
2,077


$
590


$
     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   38




---



##### 



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).
         39




---



##### 



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




---



##### 



Item 9B.
    Other
    Information.    PART III   Item 10.
    Directors
    and Executive Officers of the Registrant  Form 10-K.
   Item 11.
    Executive
    Compensation     Item 12.
    Security
    Ownership of Certain Beneficial Owners and
    Management     Item 13.
    Certain
    Relationships and Related Transactions     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, 2005 and
    2006;
    Consolidated statements of operations for the years ended
    December 31, 2004, 2005 and 2006;
    Consolidated statements of stockholders equity for the
    years ended December 31, 2004, 2005 and 2006;
    Consolidated statements of cash flows for the years ended
    December 31, 2004, 2005 and 2006; 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 2, 2007/s/  Stephen
    VintzStephen
    Vintz

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

March 2, 2007/s/  Robert
    LentzRobert
    Lentz

Chief Technology Officer and
    Director

March 2, 2007/s/  Michael
    BronfeinMichael
    Bronfein

Director

March 2, 2007/s/  Kevin
    BurnsKevin
    Burns

Director

March 2, 2007/s/  Gary
    GoldingGary
    Golding

Director

March 2, 2007/s/  Ronald
    KaiserRonald
    Kaiser

Director

March 2, 2007/s/  Richard
    MooreRichard
    Moore

Director

March 2, 2007  42




---



##### 



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


F-2Consolidated
    Balance Sheets as of December 31, 2005 and 2006


F-3Consolidated
    Statements of Operations for years ended December 31, 2004,
    2005 and 2006


F-4Consolidated
    Statements of Stockholders Equity for years ended
    December 31, 2004, 2005 and 2006


F-5Consolidated
    Statements of Cash Flows for years ended December 31, 2004,
    2005 and 2006


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 31,2005


2006(Dollars in thousands, except per share data)ASSETSCurrent assets:Cash and cash equivalents

$
40,027


$
26,506Short-term investments


1,400



3,357Accounts receivable, net of
    allowance for doubtful accounts of $193 and $280 at
    December 31, 2005 and 2006, respectively


6,012



10,139Prepaid royalty fees


493



415Other current assets


695



731Total current assets


48,627



41,148Property, equipment and software,
    net


4,161



4,359Intangible assets:Customer relationships, net


2,217



4,115Trade name, net






3,717Agreements
    not-to-compete,
    net


8



3,587Purchased technology, net


294



191Total intangible assets, net


2,519



11,610Goodwill






17,112Other assets


529



541Total assets

$
55,836


$
74,770LIABILITIES, REDEEMABLE STOCK,
    AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
268


$
1,459Accrued compensation


1,451



2,054Accrued expenses


1,333



2,587Current portion of notes payable
    and capital lease obligations


642



427Current portion of deferred revenue


20,018



26,100Total current liabilities


23,712



32,627Notes payable and capital lease
    obligations, net of current portion


765



335Deferred income taxes






185Other liabilities


105



85Deferred revenue, net of current
    portion


678



531Total liabilities


25,260



33,763Commitments and contingenciesRedeemable common stock,
    $.01 par value, 29,128 and 5,000 shares issued and
    outstanding at December 31, 2005 and 2006, respectively


189



33Stockholders equity:Preferred stock, $.01 par
    value, 10,000,000 shares authorized, no shares issued and
    outstanding






Common stock, $.01 par value,
    90,000,000 shares authorized, 15,805,018 and
    16,993,515 shares issued at December 31, 2005 and
    2006, respectively; 14,794,241 and 15,982,738 shares
    outstanding at December 31, 2005 and 2006, respectively


158



170Additional paid-in capital


70,470



80,526Treasury stock,
    1,010,777 shares at December 31, 2005 and 2006, at cost


(3,283
)


(3,283
)Deferred compensation


(19
)


Accumulated other comprehensive
    income (loss)


52



(48
)Accumulated deficit


(36,991
)


(36,391
)Total stockholders equity


30,387



40,974Total liabilities, redeemable
    stock, and stockholders equity

$
55,836


$
74,770    F-3




---



##### 



Vocus,
    Inc. and Subsidiaries
  Consolidated
    Statements of Operations
  Year Ended December 31,2004


2005


2006(Dollars in thousands, except per share data)Revenues

$
20,393


$
28,062


$
40,328Cost of revenues, including
    amortization expense of $397, $402, and $344 for the years ended
    December 31, 2004, 2005, and 2006, respectively


4,368



6,537



8,293Accelerated amortization of
    prepaid royalty fees and contract termination costs






1,399



Gross profit


16,025



20,126



32,035Operating expenses:Sales and marketing


11,708



14,837



18,912Research and development


2,064



2,515



2,896General and administrative


3,942



6,051



9,626Amortization of intangible assets


976



1,605



1,705Total operating expenses


18,690



25,008



33,139Loss from operations


(2,665
)


(4,882
)


(1,104
)Other income (expense):Interest and other income


99



177



1,819Interest expense


(35
)


(359
)


(88
)Total other income (expense)


64



(182
)


1,731Income (loss) before income taxes


(2,601
)


(5,064
)


627Provision for income taxes










185Net income (loss)


(2,601
)


(5,064
)


442Accretion of preferred stock


(1,582
)


(1,900
)


Net income (loss) attributable to
    common stockholders

$
(4,183
)

$
(6,964
)

$
442Net income (loss) attributable to
    common stockholders per share:Basic

$
(1.04
)

$
(1.43
)

$
0.03Diluted

$
(1.04
)

$
(1.43
)

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


4,032,572



4,867,710



15,367,851Diluted


4,032,572



4,867,710



16,339,254    F-4




---



##### 



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





TotalAdditional








Other





StockholdersCommon Stock


Paid-In


Treasury


Deferred


Comprehensive


Accumulated


EquityShares


Amount


Capital


Stock


Compensation


Income (Loss)


Deficit


(Deficit)(Dollars in thousands, except per share data)Balance at December 31, 2003


4,621,497


$
46


$



$
(1,520
)

$



$



$
(26,753
)

$
(28,227
)Issuance of common stock in
    connection with acquisition


29,128



1



138



















139Issuance of warrants










398



















398Exercise of stock options


42,705







92



















92Deferred compensation related to
    stock option grants










50







(50
)










Amortization of deferred
    compensation


















16











16Accretion of preferred stock










(678
)














(904
)


(1,582
)Comprehensive loss:Foreign currency translation






















27







27Net loss


























(2,601
)


(2,601
)Total comprehensive loss






























(2,574
)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
    offering 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
)Exercise of stock options and
    warrants


664,483



7



893



















900Issuance of common stock in
    connection with acquisition


494,543



5



7,200



















7,205Stock-based compensation


5,343







1,874



















1,874Forfeiture of common stock
    redemption right


24,128







161



















161Accretion of redeemable common stock










(5
)


















(5
)Comprehensive income:Foreign currency translation






















(104
)






(104
)Unrealized net gain on available
    for sale securities






















4







4Net income


























442



442Total comprehensive income






























342Balance at December 31, 2006


16,993,515


$
170


$
80,526


$
(3,283
)

$



$
(48
)

$
(36,391
)

$
40,974    F-5




---



##### 



Vocus,
    Inc. and Subsidiaries
  Consolidated
    Statements of Cash Flows
  Year Ended December 31,2004


2005


2006(Dollars in thousands)Cash flows from operating
    activitiesNet income (loss)

$
(2,601
)

$
(5,064
)

$
442Adjustments to reconcile net income
    (loss) to net cash provided by operating activities:Depreciation and amortization of
    property, equipment and software


397



784



1,171Amortization of intangible assets


1,373



2,007



2,049Loss on disposal of assets


5







7Impairment of long lived assets










28Stock-based compensation


16



1,030



1,874Provision for doubtful accounts


(54
)


51



182Deferred income taxes










185Gain on extinguishment of debt










(128
)Changes in operating assets and
    liabilities:Accounts receivable


(343
)


(1,691
)


(4,250
)Prepaid royalty fees


(575
)


660



78Other current assets


(210
)


(462
)


17Other assets


(165
)


7



(58
)Accounts payable


196



(214
)


1,180Accrued compensation


427



53



568Accrued expenses


321



(144
)


1,167Deferred revenue


3,265



4,701



5,900Other liabilities


15



18



Net cash provided by operating
    activities


2,067



1,736



10,412Cash flows from investing
    activitiesCash paid for acquisitions


(2,613
)






(21,264
)Purchases of property and equipment


(417
)


(1,391
)


(790
)Software development and
    information database costs


(312
)


(2,241
)


(217
)Purchases of short-term investments






(1,400
)


(5,475
)Sales of short-term investments










2,401Maturities of short-term investments










1,121Net cash used in investing
    activities


(3,342
)


(5,032
)


(24,224
)Cash flows from financing
    activitiesProceeds from issuance of
    redeemable convertible preferred stock and warrants, net of
    offering costs


4,975







Proceeds from initial public
    offering, net of offering costs






40,021



(48
)Repurchase of common stock






(2,769
)


Proceeds from exercise of stock
    options and warrants


92



241



900Proceeds from borrowings under
    revolving line of credit


2,389



4,416



Payments under revolving line of
    credit






(6,805
)


Proceeds from notes payable


95



972



235Payments on notes payable and
    capital lease obligations


(238
)


(284
)


(825
)Deferred financing costs


(72
)






Net cash provided by financing
    activities


7,241



35,792



262Effect of exchange rate changes on
    cash and cash equivalents


15



(23
)


29Net increase (decrease) in cash and
    cash equivalents


5,981



32,473



(13,521
)Cash and cash equivalents at
    beginning of year


1,573



7,554



40,027Cash and cash equivalents at end of
    year

$
7,554


$
40,027


$
26,506Supplemental disclosure of cash
    flow information:Cash paid for interest

$
24


$
288


$
67Supplemental disclosure of
    non-cash investing and financing activities:Assets acquired under capital leases

$
16


$
107


$
45Conversion of redeemable preferred
    stock into common stock

$



$
30,547


$
Forfeiture of common stock
    redemption right

$



$



$
161Issuance 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
  Available-for-sale available-for-sale available-for-sale held-to-maturity
    Allowance
    for Doubtful Accounts
   F-7




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Software
    Development and Information Database Costs
      Property
    and Equipment
    Business
    Combinations and Intangible Assets
  Business Combinations
  not-to-compete
  Goodwill
  Goodwill and Other Intangible
    Assets
   F-8




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Impairment
    of Long-Lived Assets
  Accounting for the Impairment or
    Disposal of Long-Lived Assets
  Redeemable
    Stock
    Foreign
    Currency and Operations
    Comprehensive
    Income (Loss)
  available-for-sale
  Revenue
    Recognition
      No. 00-21, Revenue Arrangements with Multiple Deliverables 00-21),
 F-9




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
          Deferred
    Revenue
  12-month
  Royalty
    Fees
      Sales
    Commissions
   F-10




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Advertising
    Costs
    Stock-Based Compensation
  Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
    Year Ended December 31,2004


2005Net loss attributable to common
    stockholders, as reported

$
(4,183
)

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


16



1,030Pro forma stock-based compensation
    expense


(57
)


(231
)Pro forma net loss attributable to
    common stockholders

$
(4,224
)

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

$
(1.04
)

$
(1.43
)Pro forma

$
(1.05
)

$
(1.27
)     Year Ended


Six Months EndedDecember 31,


June 30,


December 31,2004


2005


2005Dividend yield


0
%


0
%


0
%Average risk-free interest rate


4.2
%


4.2
%


4.4
%Expected term (years)


4



4



4 - 6Stock price volatility


(*
)


(*
)


52% - 53
%     (*)
    
    Assumption is not applicable to minimum value method    Share-Based Payment
 F-11




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Concentrations
    of Credit Risk
      Fair
    Value of Financial Instruments
    Income
    Taxes
    Net
    Income (Loss) Attributable to Common Stockholders Per
    Share
   F-12




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     2004


2005


2006Net income (loss) attributable to
    common stockholders

$
(4,183
)

$
(6,964
)

$
442Weighted average shares
    outstanding, basic


4,032,572



4,867,710



15,367,851Dilutive effect of:Options to purchase common stock










757,600Warrants to purchase common stock










213,803Weighted average shares
    outstanding, diluted


4,032,572



4,867,710



16,339,254Net income (loss) attributable to
    common stockholders per share:Basic

$
(1.04
)

$
(1.43
)

$
0.03Diluted

$
(1.04
)

$
(1.43
)

$
0.03     December 31,2004


2005Options to purchase common stock


1,100,082



2,468,351Warrants to purchase common or
    preferred stock


361,446



361,446Shares of common stock into which
    outstanding preferred stock is convertible


5,826,668



Total options, warrants and
    preferred stock exercisable or convertible into common stock


7,288,196



2,829,797   Segment
    Data
    Reclassifications
    Adoption
    of SAB No. 108
  Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements
 F-13




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes
  Fair Value
    Measurements
  3.
    Initial
    Public Offering of Common Stock and Reverse Stock
    Split  one-for-one one-for-one 3-for-1
  4.
    Acquisitions      Cash

$
20,940Common stock


7,205Transaction costs


324Total purchase consideration

$
28,469  F-14




---



##### 



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






17,112Assumed liabilities






(124
)Total purchase price





$
28,469       Year Ended December 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
)     Gnossos
   F-15




---



##### 



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

$
2,500Common stock


139Redeemable common stock


183Deferred payments due to seller


400Transaction costs


112$
3,334     AmortizationPeriodCustomer relationships


4 years


$
3,015Purchased technology


2 years



701Property and equipment


3 years



18Assumed liabilities






(400
)Total





$
3,334       Year EndedDecember 31,2004Pro forma revenues

$
21,600Pro forma net loss

$
(3,674
)Accretion of preferred stock


(1,582
)Pro forma net loss attributable to
    common stockholders

$
(5,256
)Pro forma basic and diluted net
    loss attributable to common stockholders per share

$
(1.29
)        F-16




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   5.
    Short-Term
    Investments    Unrealized


Fair Market


Cash and Cash


Short-TermCost


Gains


Losses


Value


Equivalents


InvestmentsCash

$
6,424


$



$



$
6,424


$
6,424


$
Money market funds


6,733











6,733



6,733



Commercial paper


26,870











26,870



26,870



Corporate notes and bonds


1,400











1,400







1,400Total

$
41,427


$



$



$
41,427


$
40,027


$
1,400     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   available-for-sale
  available-for-sale
  6.
    Property,
    Equipment and Software    December 31,2005


2006Purchased software, computer and
    office equipment

$
2,386


$
3,153Office furniture


421



557Leasehold improvements


646



847Equipment under capital lease
    obligations


1,018



1,066Capitalized software development
    costs


297



495Information database costs


2,327



2,3277,095



8,445Less accumulated depreciation and
    amortization


(2,934
)


(4,086
)Property, equipment and software,
    net

$
4,161


$
4,359  F-17




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    7.
    Intangible
    Assets    GrossUseful Life


Carrying


Accumulated


Net Carryingin Years


Amount


Amortization


AmountCustomer relationships


3 - 4


$
5,545


$
(3,328
)

$
2,217Agreements
    not-to-compete


3



282



(274
)


8Purchased technology


2



2,011



(1,717
)


294Total





$
7,838


$
(5,319
)

$
2,519     GrossUseful Life


Carrying


Accumulated


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


3 - 5



4,195



(608
)


3,587Purchased technology


2



2,251



(2,060
)


191Total





$
18,978


$
(7,368
)

$
11,610     2007

$
2,9812008


2,7232009


1,9262010


1,8212011


1,260Thereafter


899$
11,610   8.
    Debt  Revolving
    Line of Credit
    Term
    Loans and Equipment Line of Credit
   F-18




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      2007

$
3922008


2022009


33Total future principal payments

$
627Less current portion


(392
)Long-term portion

$
235   9.
    Redeemable
    Convertible Preferred Stock        one-for-one
   F-19




---



##### 



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


Series B


Series CShares


Amount


Shares


Amount


Shares


Amount


TotalBalance at December 31, 2003


1,719,542


$
2,779



3,378,655


$
19,709






$



$
22,488Issuance of Series C


















728,471



4,577



4,577Accretion






213







1,355







14



1,582Balance at December 31, 2004


1,719,542



2,992



3,378,655



21,064



728,471



4,591



28,647Accretion






187







1,257







456



1,900Conversion


(1,719,542
)


(3,179
)


(3,378,655
)


(22,321
)


(728,471
)


(5,047
)


(30,547
)Balance at December 31, 2005





$







$







$



$
   10.
    Warrants  one-for-one
    11.
    Stock-Based
    Compensation  10-year
   F-20




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Cost of revenues

$
69Sales and marketing


530Research and development


219General and administrative


1,042Total

$
1,860     paid-in-capital.
      Stock price volatility


53
%Expected term (years)


6.3Risk-free interest rate


5.0
%Dividend yield


0
%      F-21




---



##### 



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


Aggregate IntrinsicWeighted 


Remaining


Value as ofNumber of


Range of


Average


Contractual


December 31,Options


Exercise Prices


Exercise Price


Term


2006Balance at January 1, 2004


1,092,071


$
0.30 - 2.46


$
1.22Granted


102,540



2.46 - 4.77



3.36Exercised


(42,705
)


0.30 - 2.46



2.16Forfeited or cancelled


(51,824
)


0.30 - 3.99



2.55Balance at December 31, 2004


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


$
8.26



8.4


$
18,840Vested and expected to vest at
    December 31, 2006


2,075,914


$
0.30 - 16.80


$
8.21



8.4


$
17,824Exercisable at December 31,
    2006


590,678


$
0.30 - 15.74


$
5.90



7.1


$
6,435     Options OutstandingWeighted-





Options ExercisableAverage


Weighted-





Weighted-Range of

Outstanding


Remaining


Average


Exercisable


AverageExercise

as of


Contractual


Exercise


as of


ExercisePrices

12/31/06


Term


Price


12/31/06


Price$ 0.30 - $ 2.00


91,591



3.0


$
0.30



91,591


$
0.30$ 2.01 - $ 4.00


142,061



5.2



2.73



116,381



2.57$ 4.01 - $ 7.25


369,908



8.1



4.83



68,414



4.85$ 7.26 - $10.50


1,253,958



8.9



9.00



314,043



9.00$10.51 - $13.75


260,000



9.5



13.04







$13.76 - $16.80


87,833



9.5



15.17



249



15.742,205,351



8.4


$
8.26



590,678


$
5.90    F-22




---



##### 



Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Common
    Stock Repurchases
    12.
    Employee
    Benefit Plans    13.
    Income
    Taxes      2006Current expense

$
Deferred expense


185Provision for income taxes

$
185     2006Statutory federal tax rate


35
%State income taxes


11Effect of foreign losses


6Non-deductible stock-based
    compensation


24Other non-deductible expenses


6Changes in the valuation allowance


(53
)29
%  F-23




---



##### 



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


2006Deferred tax assets:Net operating loss carryforwards

$
8,505


$
9,157Allowance for doubtful accounts


74



106Deferred revenue


2,468



107Accrued expenses


254



590Depreciation


350



404Intangible asset amortization


1,219



1,682Stock-based compensation






538Other


36



37Total deferred tax assets


12,906



12,621Valuation allowance


(11,937
)


(11,708
)Net deferred tax assets


969



913Deferred tax liabilities:Capitalized software development


(867
)


(812
)Goodwill






(185
)Capital leases


(102
)


(101
)Total deferred tax liabilities


(969
)


(1,098
)Net deferred tax liabilities

$



$
(185
)       14.
    Commitments
    and Contingencies  Purchase
    Commitments
    Leases
   F-24




---



##### 



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


CapitalLeases


Leases2007

$
882


$
432008


757



372009


524



362010


387



292011


163



11Total future minimum payments

$
2,713



156Less amount representing interest






(21
)Less current portion






(35
)Long-term capital lease obligations





$
100   Letter
    of Credit
    Litigation
    and Claims
    15.
    Quarterly
    Financial Information (Unaudited)  March 31,


June 30,


September 30,


December 31,


March 31,


June 30,


September 30,


December 31,2005


2005


2005


2005


2006


2006


2006


2006Summary consolidated statement of
    operations data:Revenues

$
6,100


$
6,794


$
7,297


$
7,871


$
8,262


$
9,189


$
10,757


$
12,120Gross profit(1)


4,643



5,263



4,149



6,071



6,300



7,239



8,620



9,876Net income (loss) attributable to
    common stockholders


(1,457
)


(1,237
)


(3,485
)


(785
)


(182
)


(2
)


150



476Net income (loss) attributable to
    common stockholders per share:Basic

$
(0.35
)

$
(0.29
)

$
(0.86
)

$
(0.11
)

$
(0.01
)

$
(0.00
)

$
0.01


$
0.03Diluted

$
(0.35
)

$
(0.29
)

$
(0.86
)

$
(0.11
)

$
(0.01
)

$
(0.00
)

$
0.01


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


4,168,621



4,327,914



4,031,908



6,921,331



14,965,271



15,083,982



15,498,524



15,911,788Diluted


4,168,621



4,327,914



4,031,908



6,921,331



14,965,271



15,083,982



16,320,518



16,806,020     (1)
    
    Gross profit for the three months ended September 30, 2005
    and December 31, 2005 includes $1,449 and $(50) of
    accelerated amortization of prepaid royalty fees and contract
    termination costs. F-25




---



##### 



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


Charged





Balance atBeginning of


to





End ofPeriod


Expense


Deductions


Period(Dollars in thousands)Allowance for doubtful accounts
    (deducted from accounts receivable)Year ended December 31, 2004

$
280


$
(54
)

$
(27
)(1)

$
199Year ended December 31, 2005


199



51



(57
)(1)


193Year ended December 31, 2006


193



182



(95
)(1)


280Deferred tax valuation allowance
    (deducted from net deferred taxes)Year ended December 31, 2004

$
8,512


$
1,508


$



$
10,020Year ended December 31, 2005


10,020



1,917







11,937Year ended December 31, 2006


11,937



(229
)






11,708     (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)

Form of warrant to purchase common
    stock and schedule of details omitted therefrom.10
.2(1)

Form of warrant to purchase
    Series B preferred stock and schedule of details omitted
    therefrom.10
.3(1)

1999 Stock Option Plan.10
.4(1)

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

2005 Stock Award Plan.10
.6*

Form of Option Agreement for
    executive officers under Registrants 2005 Stock Award Plan.10
.7*

Form of Option Agreement for
    non-employee directors under Registrants 2005 Stock Award
    Plan.10
.8(1)

Third Amended and Restated
    Registration Rights Agreement among the Registrant and the other
    parties named therein, dated as of December 20, 2004.10
.9(1)

Agreement of Lease, dated
    December 21, 2000, between MOR FORBES LLLP and Registrant
    as amended.10
.10(1)

Asset Purchase Agreement, dated as
    of November 8, 2004, among the Registrant, Vocus GS
    Holdings LLC, Gnossos Software, Inc. and Steven Robert Kantor.10
.11(5)

Form of Indemnification Agreement
    entered into by the Registrant and each of its executive
    officers and directors.10
.12(2)

Agreement between the Registrant
    and PR Newswire Association, Inc., dated March 14, 2001.10
.13(2)

License Agreement between the
    Registrant and PR Newswire Association LLC, dated August 1,
    2003, as amended.10
.14*

Amended and Restated Agreement
    between the Registrant and PR Newswire Association, Inc., dated
    August 1, 2006.10
.15(3)

OEM License Agreement between the
    Registrant and Moreover Technologies, Inc., dated March 1,
    2006, as amended.10
.16(2)

Redemption Agreement between
    the Registrant and Robert Lentz, dated July 1, 2005.10
.17(7)

Form of Employment Agreement for
    Richard Rudman, Robert Lentz and Stephen Vintz, and schedule of
    details omitted therefrom.10
.18(7)

Form of Employment Agreement for
    William Donnelly and Norman Weissberg, and schedule of details
    omitted therefrom.10
.19(8)

Summary of board of directors
    compensation.10
.20(9)

Employment Agreement for William
    Wagner dated July 17, 2006.10
.21(9)

Indemnification Agreement for
    William Wagner dated July 17, 2006.10
.22(10)

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.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




---



##### 



(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 the Current Report on
    Form 8-K
    of Vocus, Inc. filed with the Securities and Exchange Commission
    on February 6, 2007.(9)
    
    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.(10)
    
    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.