##### 









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, 2005







Vocus, Inc.




|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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







Securities registered pursuant to Section 12(b) of the
Act: None


Securities registered pursuant to Section 12(g) of the
Act:


Common Stock, par value $.01 per share







o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2


|                          |  |                     |  |                        
|------------------------- |  | ------------------- |  | -----------------------
|Large accelerated filer o |  | Accelerated filer o |  | Non-accelerated filer þ

o þ






Documents Incorporated by Reference


10-K, 10-K.










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TABLE OF CONTENTS


|         |  |                                                                                                                    |  |      |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|         |  |                                                                                                                    |  | Page |   
|         |  |                                                                                                                    |  |      |   
|PART I  
|Item 1.  |  | Business                                                                                                           |  |      | 3  | 
|Item 1A. |  | Risk Factors                                                                                                       |  |      | 13 | 
|Item 1B. |  | Unresolved Staff Comments                                                                                          |  |      | 24 | 
|Item 2.  |  | Properties                                                                                                         |  |      | 24 | 
|Item 3.  |  | Legal Proceedings                                                                                                  |  |      | 24 | 
|Item 4.  |  | Submissions of Matters to a Vote of
    Security Holders                                                           |  |      | 25 | 
|        
|PART II 
|Item 5.  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchase of Equity
    Securities |  |      | 25 | 
|Item 6.  |  | Selected Financial Data                                                                                            |  |      | 26 | 
|Item 7.  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                          |  |      | 29 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                     |  |      | 37 | 
|Item 8.  |  | Financial Statements and Supplementary
    Data                                                                    |  |      | 38 | 
|Item 9.  |  | Changes In and Disagreements With
    Accountants and Financial Disclosure                                         |  |      | 38 | 
|Item 9A. |  | Controls and Procedures                                                                                            |  |      | 38 | 
|Item 9B. |  | Other Information                                                                                                  |  |      | 39 | 
|        
|PART III
|Item 10. |  | Directors and Executive Officers of the
    Registrant                                                             |  |      | 39 | 
|Item 11. |  | Executive Compensation                                                                                             |  |      | 39 | 
|Item 12. |  | Security Ownership of Certain Beneficial
    Owners and Management                                                 |  |      | 39 | 
|Item 13. |  | Certain Relationships and Related
    Transactions                                                                 |  |      | 39 | 
|Item 14. |  | Principal Accountant Fees and Services                                                                             |  |      | 39 | 
|        
|PART IV 
|Item 15. |  | Exhibits and Financial Statement
    Schedules                                                                     |  |      | 39 | 

1



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CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS


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




| |                                              
| | ---------------------------------------------
| | Corporate Communications and 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 corporate communications and
    PR. Our on-demand software helps organizations maximize
    effectiveness through the automation and integration of
    disconnected processes. Our solution helps 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 corporate communications and PR.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| 
| | Increased productivity of PR operations. Our software
    incorporates features and best practices that automate PR
    operations 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| 
| | Collaborative platform for the PR organization. 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 they automatically become part of
    our offering, allowing customers to benefit from product
    enhancement immediately. While we may pass some of the costs
    associated with product enhancements on to our customers through
    base service price increases or additional module pricing, any
    price increases would go into effect only upon the renewal of
    the subscription agreement. Based upon our market research and
    analysis, we believe that the cost of maintaining traditional
    software in-house can be two to three times as expensive as the
    license fee for the software. In such situations, we believe
    that the on-demand software model can be a compelling value
    proposition for organizations that are trying to reduce the
    complexities and costs associated with traditional enterprise
    software.

5



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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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, can be
    deployed quickly and transparently to existing customers.

Our Strategy






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Maintain focus on our core market. We believe the
    corporate communications and 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 collateral management, News
    On-Demand, interactive email campaigns, analytics and online
    newsroom.
| 
| | 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 corporate communications and 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 6% of
    our 2005 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 solutions
    functionality, provide access to new customers or markets, or
    both.                                                                                                                                                                                                      

Our Products




| |                           
| | --------------------------
| | On-Demand Public Relations



6



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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Contact Management. Allows customers easy access to our
    database of journalists, analysts, legislators and other key
    audiences. Customers can quickly create targeted lists, send
    messages by email, fax or mail and track meetings, telephone
    calls and other important activities.                                                                                                                                                                                                                
| 
| | News On-Demand. Continuously monitors print, broadcast
    and Internet news sites 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.                                                                                                                                                                                                                          
| 
| | 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. Collateral material 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.                                                                                                                          
| 
| | 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. In addition to providing a simple
    process for delivering information to journalists, analysts,
    legislators and other key audiences, our email campaigns provide
    valuable metrics on campaign initiatives, including emails
    opened, documents downloaded and options selected.
| 
| | Analytics. Automatically transforms relevant data about
    news coverage, PR activities and online newsroom statistics into
    valuable insight about a PR departments programs and
    results.                                                                                                                                                                                                                                                                                                                 
| 
| | Online Newsroom. 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. Our newsroom 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.                                         
| 
| | Compliance Reporting. Helps organizations track political
    action committee receipts and disbursements, and report
    information in compliance with federal and state election
    committee requirements.                                                                                                                                                                                                                                                                                                     
| 
| | Issues and Legislation Management. Helps customers track
    and manage issues and legislation specifically relevant to their
    organization.                                                                                                                                                                                                                                                                                                                                                                     

7



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|  |                                                                                                                                                                                                                                                                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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









| |            
| | -----------
| | Development





| |                
| | ---------------
| | Site Operations

around-the


8



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| |                 
| | ----------------
| | Customer Support

on-site, on-site


on-site,


Sales and Marketing








9



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Our Customers




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.                                                                             













|  |                                                                                               
|- | ----------------------------------------------------------------------------------------------
| | broad product functionality and depth of integration;                                         
| 
| | ease of use;                                                                                  
| 
| | low total cost of ownership and easily demonstrable
    cost-effective benefits for customers;

10



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|  |                                                                                     
|- | ------------------------------------------------------------------------------------
| | 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










Employees




11



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Executive Officers and Key Employees




|                  |  |     |    |  |          |                                                
|----------------- |  | --- | -- |  | -------- | -----------------------------------------------
|Name              |  | Age |    |  | Position
|                  |  |     |    |  |         
|Richard Rudman*   |  |     | 45 |  |          | Chief Executive Officer, President and Chairman
|Robert Lentz*     |  |     | 45 |  |          | Chief Technology Officer and Director          
|Stephen Vintz*    |  |     | 37 |  |          | Chief Financial Officer and Treasurer          
|William Donnelly* |  |     | 50 |  |          | Vice President, Sales                          
|Norman Weissberg* |  |     | 44 |  |          | Vice President, Account Sales                  
|Gary McNeil       |  |     | 42 |  |          | Vice President, Marketing                      
|Andrew Muir       |  |     | 50 |  |          | Managing Director, Vocus International         
|Matthew Siegal    |  |     | 42 |  |          | Vice President, Corporate Development          
|Darren Stewart    |  |     | 37 |  |          | Vice President, Client Services                






Richard Rudman


Robert Lentz


Stephen Vintz


William Donnelly


Norman Weissberg


Gary McNeil


Andrew Muir


12



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Matthew Siegal


Darren Stewart


Available Information


10-K, 10-Q, 8-K www.vocus.com.





Item 1A.     Risk Factors




Risks Related to Our Business and Industry


We operate in an emerging market which makes it difficult to
evaluate our business and future prospects and may increase the
risk of your investment.






|  |                                                                         
|- | ------------------------------------------------------------------------
| | generating sufficient revenue to achieve and maintain
    profitability;
| 
| | managing growth in our operations;                                      
| 
| | managing the risks associated with developing new modules;              
| 
| | attracting and retaining customers; and                                 
| 
| | attracting and retaining key personnel.                                 



13



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The market for on-demand software is at an early stage of
development, and if it does not develop or develops more slowly
than we expect, our business will be harmed.




Our solutions are sold pursuant to subscription agreements,
and if our existing customers elect either not to renew these
agreements or renew these agreements for fewer modules or seats,
our business, financial condition and results of operations will
be adversely affected.




Because we recognize 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.




We might not generate increased business from our current
customers, which could limit our revenue in the future.




If our new information database does not achieve market
acceptance, our business, financial condition and results of
operations could be adversely affected.




14



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##### 





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;                                                                                                          
| 
| | changes in the volume and mix of subscriptions sold 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 the payment terms for our products and
    services; and                                                                                                                                    
| 
| | the purchasing and budgeting cycles of our customers.                                                                                                                                                  





15



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quarter-to


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.                                                                             





If we fail to respond to evolving industry standards, our
on-demand software may become obsolete or less competitive.




If there are interruptions or delays in our services due to
third-party error, our own error or the occurrence of
unforeseeable events, delivery of our solutions and the use of
our service could become impaired, which could harm our
relationships with customers and subject us to liability.




16



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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.




We may expand through acquisitions of, investments in or
through business relationships with other organizations, all of
which may divert our managements attention, result in
dilution to our stockholders 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 debt on terms unfavorable to us or that we are unable to
    repay;                  

17



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|  |                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------
| | 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.




If we fail to develop our brand 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.




18



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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.






The success of our business depends on the continued growth
and acceptance of the Internet as a business and communications
tool, and the related expansion of the Internet
infrastructure.








If we are unable to protect our proprietary technology and
other intellectual property rights, it will reduce our ability
to compete for business.




19



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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.






20



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##### 



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.




Because we conduct operations in foreign jurisdictions, which
accounted for approximately 6% of our 2005 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.                                                                  



21



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##### 



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.






Compliance with new regulations governing public company
corporate governance and reporting is uncertain and
expensive.


Sarbanes-Oxley revenue-generating


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.




22



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##### 





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.                                                                          

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;

23



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|  |                                                                                                                                                                                              
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.


lock-up









|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments








|        |           
|------- | ----------
|Item 2. | Properties








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings





24



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|        |                                                     
|------- | ----------------------------------------------------
|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




|                                       |  |      |       |  |     |   |       | 
|-------------------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|                                       |  | High |       |  | Low |  
|                                       |  |      |       |  |     |  
|Fiscal Year Ended December 31, 2005    |  |      |       |  |     |   |       | 
|Fourth Quarter (from December 7, 2005) |  | $    | 11.25 |  |     | $ | 10.00 | 

97


Dividends




Recent Sales of Unregistered Securities




Uses of Proceeds From Registered Securities


S-1 333-125834),


25



---



##### 














|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                                                    |                                   |                                       |        |       |      |   |        |         |   |   |         |       |   |      |        |        |   |   |        |        |  
|----------------------------------------------------------------------------------- | --------------------------------- | ------------------------------------- | ------ | ----- | ---- | - | ------ | ------- | - | - | ------- | ----- | - | ---- | ------ | ------ | - | - | ------ | ------ | -
|                                                                                    |                                   | Year Ended December 31,               |       
|                                                                                    |                                   |                                       |       
|                                                                                    |                                   | 2001                                  |        |       | 2002 |   |        | 2003(4) |   |   | 2004(5) |       |   | 2005 |       
|                                                                                    |                                   |                                       |        |       |      |   |        |         |   |   |         |       |   |      |       
|                                                                                    |                                   | (In thousands, except per share data) |       
|Consolidated Statement of Operations:                                               |                                   |                                       |        |       |      |   |        |         |   |   |         |       |   |      |        |        |   |   |        |       
|Revenues(1)                                                                         |                                   | $                                     | 7,946  |       |      | $ | 11,524 |         |   | $ | 15,434  |       |   | $    | 20,393 |        |   | $ | 28,062 |       
|Cost of revenues(2)                                                                 |                                   |                                       | 2,562  |       |      |   | 2,679  |         |   |   | 3,244   |       |   |      | 4,368  |        |   |   | 6,537  |       
|Accelerated amortization of prepaid royalty fees and contract
    termination costs |                                   |                                       |       |       |      |   |       |         |   |   |        |       |   |      |       |        |   |   | 1,399  |       
|                                                                                    |                                   |                                       |        |       |      |   |        |         |   |   |         |       |   |      |       
|Gross profit                                                                        |                                   |                                       | 5,384  |       |      |   | 8,845  |         |   |   | 12,190  |       |   |      | 16,025 |        |   |   | 20,126 |       
|Operating expenses:(3)                                                              |                                   |                                       |        |       |      |   |        |         |   |   |         |       |   |      |        |        |   |   |        |       
|                                                                                    | Sales and marketing               |                                       |        | 8,015 |      |   |        | 6,755   |   |   |         | 8,285 |   |      |        | 11,708 |   |   |        | 14,837 |  
|                                                                                    | Research and development          |                                       |        | 1,387 |      |   |        | 1,487   |   |   |         | 2,201 |   |      |        | 2,064  |   |   |        | 2,515  |  
|                                                                                    | General and administrative        |                                       |        | 3,998 |      |   |        | 3,886   |   |   |         | 4,493 |   |      |        | 3,942  |   |   |        | 6,051  |  
|                                                                                    | Amortization of intangible assets |                                       |        | 39    |      |   |        | 78      |   |   |         | 788   |   |      |        | 976    |   |   |        | 1,605  |  
|                                                                                    |                                   |                                       |        |       |      |   |        |         |   |   |         |       |   |      |       
|Total operating expenses                                                            |                                   |                                       | 13,439 |       |      |   | 12,206 |         |   |   | 15,767  |       |   |      | 18,690 |        |   |   | 25,008 |       
|Loss from operations                                                                |                                   |                                       | (8,055 | )     |      |   | (3,361 | )       |   |   | (3,577  | )     |   |      | (2,665 | )      |   |   | (4,882 | )     
|Other income (expense):                                                             |                                   |                                       |        |       |      |   |        |         |   |   |         |       |   |      |        |        |   |   |        |       
|                                                                                    | Interest and other income         |                                       |        | 169   |      |   |        | 78      |   |   |         | 12    |   |      |        | 99     |   |   |        | 177    |  
|                                                                                    | Interest and other expense        |                                       |        | (66   | )    |   |        | (85     | ) |   |         | (41   | ) |      |        | (35    | ) |   |        | (359   | )
|                                                                                    |                                   |                                       |        |       |      |   |        |         |   |   |         |       |   |      |       
|Total other income (expense)                                                        |                                   |                                       | 103    |       |      |   | (7     | )       |   |   | (29     | )     |   |      | 64     |        |   |   | (182   | )     

26



---



##### 



|                                                                              |  |                                       |        |   |      |   |        |         |  |   |         |   |  |      |        |   |  |   |        |  
|----------------------------------------------------------------------------- |  | ------------------------------------- | ------ | - | ---- | - | ------ | ------- |  | - | ------- | - |  | ---- | ------ | - |  | - | ------ | -
|                                                                              |  | Year Ended December 31,               |       
|                                                                              |  |                                       |       
|                                                                              |  | 2001                                  |        |   | 2002 |   |        | 2003(4) |  |   | 2004(5) |   |  | 2005 |       
|                                                                              |  |                                       |        |   |      |   |        |         |  |   |         |   |  |      |       
|                                                                              |  | (In thousands, except per share data) |       
|Loss before cumulative effect of a change in accounting principle             |  |                                       | (7,952 | ) |      |   | (3,368 | )       |  |   | (3,606  | ) |  |      | (2,601 | ) |  |   | (5,064 | )
|Cumulative effect of a change in accounting principle(1)                      |  |                                       |       |   |      |   |       |         |  |   | 896     |   |  |      |       |   |  |   |       |  
|                                                                              |  |                                       |        |   |      |   |        |         |  |   |         |   |  |      |       
|Net loss                                                                      |  |                                       | (7,952 | ) |      |   | (3,368 | )       |  |   | (2,710  | ) |  |      | (2,601 | ) |  |   | (5,064 | )
|Accretion of preferred stock                                                  |  |                                       | (1,122 | ) |      |   | (1,316 | )       |  |   | (1,547  | ) |  |      | (1,582 | ) |  |   | (1,900 | )
|                                                                              |  |                                       |        |   |      |   |        |         |  |   |         |   |  |      |       
|Net loss attributable to common stockholders                                  |  | $                                     | (9,074 | ) |      | $ | (4,684 | )       |  | $ | (4,257  | ) |  | $    | (4,183 | ) |  | $ | (6,964 | )
|                                                                              |  |                                       |        |   |      |   |        |         |  |   |         |   |  |      |       
|Net loss attributable to common stockholders per share, basic
    and diluted |  | $                                     | (2.30  | ) |      | $ | (1.18  | )       |  | $ | (1.07   | ) |  | $    | (1.04  | ) |  | $ | (1.43  | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2001, our revenues would have increased, and
    our net loss would have decreased $136 in 2001 and $194 in 2002.
    See Note 2 to the notes to the consolidated financial
    statements.
|   
|(2) | Cost of revenues includes amortization of intangible assets in
    the following amounts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                  |  |                         |     |  |      |   |     |      |  |   |      |  |  |      |     |  |  |   |     | 
|--------------------------------- |  | ----------------------- | --- |  | ---- | - | --- | ---- |  | - | ---- |  |  | ---- | --- |  |  | - | --- | 
|                                  |  | Year Ended December 31, |    
|                                  |  |                         |    
|                                  |  | 2001                    |     |  | 2002 |   |     | 2003 |  |   | 2004 |  |  | 2005 |    
|                                  |  |                         |     |  |      |   |     |      |  |   |      |  |  |      |    
|Amortization of intangible assets |  | $                       | 146 |  |      | $ | 292 |      |  | $ | 478  |  |  | $    | 397 |  |  | $ | 402 | 



|    |                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------
|(3) | Operating expenses include stock-based compensation related to
    purchases of our common stock in the following amounts:

|                           |  |                         |   |      |  |      |   |  |      |   |      |  |  |   |   |  |  |   |       | 
|-------------------------- |  | ----------------------- | - | ---- |  | ---- | - |  | ---- | - | ---- |  |  | - | - |  |  | - | ----- | 
|                           |  | Year Ended December 31, |  
|                           |  |                         |  
|                           |  | 2001                    |   | 2002 |  | 2003 |   |  | 2004 |   | 2005 | 
|                           |  |                         |   |      |  |      |   |  |      |   |      | 
|Research and development   |  | $                       |  |      |  | $    |  |  |      | $ | 247  |  |  | $ |  |  |  | $ |      | 
|General and administrative |  |                         |  |      |  |      |  |  |      |   | 246  |  |  |   |  |  |  |   | 1,006 | 



|    |                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | 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.
|   
|(5) | 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.                          

27



---



##### 



Selected Quarterly
Financial Data




|                                                                                    |                             |                                   |       |       |          |   |       |               |       |   |              |       |       |           |       |       |          |   |       |               |       |   |              |       |       |   |        |       |       |   |       |       |       | 
|----------------------------------------------------------------------------------- | --------------------------- | --------------------------------- | ----- | ----- | -------- | - | ----- | ------------- | ----- | - | ------------ | ----- | ----- | --------- | ----- | ----- | -------- | - | ----- | ------------- | ----- | - | ------------ | ----- | ----- | - | ------ | ----- | ----- | - | ----- | ----- | ----- | 
|                                                                                    |                             | Three Months Ended                |      
|                                                                                    |                             |                                   |      
|                                                                                    |                             | March 31,                         |       |       | June 30, |   |       | September 30, |       |   | December 31, |       |       | March 31, |       |       | June 30, |   |       | September 30, |       |   | December 31, |      
|                                                                                    |                             | 2004                              |       |       | 2004     |   |       | 2004          |       |   | 2004         |       |       | 2005      |       |       | 2005     |   |       | 2005          |       |   | 2005         |      
|                                                                                    |                             |                                   |       |       |          |   |       |               |       |   |              |       |       |           |       |       |          |   |       |               |       |   |              |      
|                                                                                    |                             | (In thousands)                    |      
|Revenues                                                                            |                             | $                                 | 4,612 |       |          | $ | 5,034 |               |       | $ | 5,162        |       |       | $         | 5,585 |       |          | $ | 6,100 |               |       | $ | 6,794        |       |       | $ | 7,297  |       |       | $ | 7,871 |      
|Cost of revenues(1)                                                                 |                             |                                   | 947   |       |          |   | 1,032 |               |       |   | 1,087        |       |       |           | 1,302 |       |          |   | 1,457 |               |       |   | 1,531        |       |       |   | 1,699  |       |       |   | 1,850 |      
|Accelerated amortization of prepaid royalty fees and contract
    termination costs |                             |                                   |      |       |          |   |      |               |       |   |             |       |       |           |      |       |          |   |      |               |       |   |             |       |       |   | 1,449  |       |       |   | (50   | )    
|                                                                                    |                             |                                   |       |       |          |   |       |               |       |   |              |       |       |           |       |       |          |   |       |               |       |   |              |      
|Gross profit                                                                        |                             |                                   | 3,665 |       |          |   | 4,002 |               |       |   | 4,075        |       |       |           | 4,283 |       |          |   | 4,643 |               |       |   | 5,263        |       |       |   | 4,149  |       |       |   | 6,071 |      
|Operating expenses:                                                                 |                             |                                   |       |       |          |   |       |               |       |   |              |       |       |           |       |       |          |   |       |               |       |   |              |       |       |   |        |       |       |   |       |      
|                                                                                    | Sales and marketing         |                                   |       | 2,678 |          |   |       | 2,830         |       |   |              | 3,048 |       |           |       | 3,152 |          |   |       | 3,354         |       |   |              | 3,766 |       |   |        | 3,689 |       |   |       | 4,028 |      
|                                                                                    |                             | Research and development          |       |       | 471      |   |       |               | 471   |   |              |       | 454   |           |       |       | 668      |   |       |               | 596   |   |              |       | 603   |   |        |       | 667   |   |       |       | 649   | 
|                                                                                    |                             | General and administrative        |       |       | 936      |   |       |               | 1,037 |   |              |       | 890   |           |       |       | 1,079    |   |       |               | 1,228 |   |              |       | 1,153 |   |        |       | 2,295 |   |       |       | 1,375 | 
|                                                                                    |                             | Amortization of intangible assets |       |       | 215      |   |       |               | 215   |   |              |       | 213   |           |       |       | 333      |   |       |               | 394   |   |              |       | 402   |   |        |       | 405   |   |       |       | 404   | 
|                                                                                    |                             |                                   |       |       |          |   |       |               |       |   |              |       |       |           |       |       |          |   |       |               |       |   |              |      
|                                                                                    |                             | Total operating expenses(2)       |       |       | 4,300    |   |       |               | 4,553 |   |              |       | 4,605 |           |       |       | 5,232    |   |       |               | 5,572 |   |              |       | 5,924 |   |        |       | 7,056 |   |       |       | 6,456 | 
|Loss from operations                                                                |                             |                                   | (635  | )     |          |   | (551  | )             |       |   | (530         | )     |       |           | (949  | )     |          |   | (929  | )             |       |   | (661         | )     |       |   | (2,907 | )     |       |   | (385  | )    
|                                                                                    | Other income (expense), net |                                   |       | (25   | )        |   |       | (2            | )     |   |              | 19    |       |           |       | 72    |          |   |       | (22           | )     |   |              | (67   | )     |   |        | (63   | )     |   |       | (30   | )    
|                                                                                    |                             |                                   |       |       |          |   |       |               |       |   |              |       |       |           |       |       |          |   |       |               |       |   |              |      
|Net loss                                                                            |                             | $                                 | (660  | )     |          | $ | (553  | )             |       | $ | (511         | )     |       | $         | (877  | )     |          | $ | (951  | )             |       | $ | (728         | )     |       | $ | (2,970 | )     |       | $ | (415  | )    
|                                                                                    |                             |                                   |       |       |          |   |       |               |       |   |              |       |       |           |       |       |          |   |       |               |       |   |              |      






|    |                                                                       
|--- | ----------------------------------------------------------------------
|(1) | Cost of revenues includes amortization of purchased technology
    of:

|                                  |  |                    |    |  |          |   |    |               |  |   |              |  |  |           |     |  |          |   |     |               |  |   |              |  |  |   |    |  |  |   |    | 
|--------------------------------- |  | ------------------ | -- |  | -------- | - | -- | ------------- |  | - | ------------ |  |  | --------- | --- |  | -------- | - | --- | ------------- |  | - | ------------ |  |  | - | -- |  |  | - | -- | 
|                                  |  | Three Months Ended |   
|                                  |  |                    |   
|                                  |  | March 31,          |    |  | June 30, |   |    | September 30, |  |   | December 31, |  |  | March 31, |     |  | June 30, |   |     | September 30, |  |   | December 31, | 
|                                  |  | 2004               |    |  | 2004     |   |    | 2004          |  |   | 2004         |  |  | 2005      |     |  | 2005     |   |     | 2005          |  |   | 2005         | 
|                                  |  |                    |    |  |          |   |    |               |  |   |              |  |  |           |     |  |          |   |     |               |  |   |              | 
|Amortization of intangible assets |  | $                  | 91 |  |          | $ | 90 |               |  | $ | 92           |  |  | $         | 124 |  |          | $ | 132 |               |  | $ | 93           |  |  | $ | 88 |  |  | $ | 89 | 



|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes stock-based compensation related to purchases of our
    common stock of $1,006 in general and administrative for the
    quarter ended September 30, 2005.

28



---



##### 



|                                                                                    |                                   |                    |     |    |          |  |     |               |   |  |              |    |   |           |     |    |          |  |     |               |   |  |              |    |   |  |     |    |   |  |     |    |  
|----------------------------------------------------------------------------------- | --------------------------------- | ------------------ | --- | -- | -------- |  | --- | ------------- | - |  | ------------ | -- | - | --------- | --- | -- | -------- |  | --- | ------------- | - |  | ------------ | -- | - |  | --- | -- | - |  | --- | -- | -
|                                                                                    |                                   | Three Months Ended |    
|                                                                                    |                                   |                    |    
|                                                                                    |                                   | March 31,          |     |    | June 30, |  |     | September 30, |   |  | December 31, |    |   | March 31, |     |    | June 30, |  |     | September 30, |   |  | December 31, |   
|                                                                                    |                                   | 2004               |     |    | 2004     |  |     | 2004          |   |  | 2004         |    |   | 2005      |     |    | 2005     |  |     | 2005          |   |  | 2005         |   
|As a percentage of total revenues                                                   |                                   |                    |     |    |          |  |     |               |   |  |              |    |   |           |     |    |          |  |     |               |   |  |              |   
|Revenues                                                                            |                                   |                    | 100 | %  |          |  | 100 | %             |   |  | 100          | %  |   |           | 100 | %  |          |  | 100 | %             |   |  | 100          | %  |   |  | 100 | %  |   |  | 100 | % 
|Cost of Revenues                                                                    |                                   |                    | 20  | %  |          |  | 20  | %             |   |  | 21           | %  |   |           | 23  | %  |          |  | 24  | %             |   |  | 23           | %  |   |  | 23  | %  |   |  | 24  | % 
|Accelerated amortization of prepaid royalty fees and contract
    termination costs |                                   |                    |    |    |          |  |    |               |   |  |             |    |   |           |    |    |          |  |    |               |   |  |             |    |   |  | 20  | %  |   |  | (1  | )%
|                                                                                    |                                   |                    |     |    |          |  |     |               |   |  |              |    |   |           |     |    |          |  |     |               |   |  |              |   
|Gross profit                                                                        |                                   |                    | 80  | %  |          |  | 80  | %             |   |  | 79           | %  |   |           | 77  | %  |          |  | 76  | %             |   |  | 77           | %  |   |  | 57  | %  |   |  | 77  | % 
|Operating expenses:                                                                 |                                   |                    |     |    |          |  |     |               |   |  |              |    |   |           |     |    |          |  |     |               |   |  |              |    |   |  |     |    |   |  |     |   
|                                                                                    | Sales and marketing               |                    |     | 58 | %        |  |     | 57            | % |  |              | 59 | % |           |     | 57 | %        |  |     | 55            | % |  |              | 55 | % |  |     | 51 | % |  |     | 51 | %
|                                                                                    | Research and development          |                    |     | 10 | %        |  |     | 9             | % |  |              | 9  | % |           |     | 12 | %        |  |     | 10            | % |  |              | 9  | % |  |     | 9  | % |  |     | 8  | %
|                                                                                    | General and administrative        |                    |     | 20 | %        |  |     | 21            | % |  |              | 17 | % |           |     | 19 | %        |  |     | 20            | % |  |              | 17 | % |  |     | 31 | % |  |     | 17 | %
|                                                                                    | Amortization of intangible assets |                    |     | 5  | %        |  |     | 4             | % |  |              | 4  | % |           |     | 6  | %        |  |     | 7             | % |  |              | 6  | % |  |     | 6  | % |  |     | 5  | %
|                                                                                    |                                   |                    |     |    |          |  |     |               |   |  |              |    |   |           |     |    |          |  |     |               |   |  |              |   
|Total operating expenses                                                            |                                   |                    | 93  | %  |          |  | 91  | %             |   |  | 89           | %  |   |           | 94  | %  |          |  | 92  | %             |   |  | 87           | %  |   |  | 97  | %  |   |  | 81  | % 
|Loss from operations                                                                |                                   |                    | (13 | )% |          |  | (11 | )%            |   |  | (10          | )% |   |           | (17 | )% |          |  | (16 | )%            |   |  | (10          | )% |   |  | (40 | )% |   |  | (4  | )%
|Other income (expense)                                                              |                                   |                    | (1  | )% |          |  |    |               |   |  |             |    |   |           | 1   | %  |          |  |    |               |   |  | (1           | )% |   |  | (1  | )% |   |  | 0   | % 
|                                                                                    |                                   |                    |     |    |          |  |     |               |   |  |              |    |   |           |     |    |          |  |     |               |   |  |              |   
|Net loss                                                                            |                                   |                    | (14 | )% |          |  | (11 | )%            |   |  | (10          | )% |   |           | (16 | )% |          |  | (16 | )%            |   |  | (11          | )% |   |  | (41 | )% |   |  | (4  | )%
|                                                                                    |                                   |                    |     |    |          |  |     |               |   |  |              |    |   |           |     |    |          |  |     |               |   |  |              |   






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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










29



---



##### 









Sources of Revenues








Cost of Revenues and Operating Expense


Cost of Revenues.




Sales and Marketing.


30



---



##### 







Research and Development.


General and Administrative.


Repurchase of Common Stock and Stock-Based Compensation.




Amortization of Intangible Assets.


Critical Accounting Policies






31



---



##### 



Revenue Recognition.






00-21, Revenue Arrangements with Multiple Deliverables, 00-21, 00-21, 00-21 00-21


Accounting for Royalty Fees.




Impairment of Long-Lived Assets.




32



---



##### 





Stock-Based Compensation. Accounting for Stock
Issued to Employees.


Accounting for Stock-Based
Compensation, Accounting for
Stock-Based Compensation  Transition and
Disclosure.


Share-Based
Payment,


Results of Operations




|                                                                                    |                                   |              |     |    |      |  |     |      |  |  |     |    | 
|----------------------------------------------------------------------------------- | --------------------------------- | ------------ | --- | -- | ---- |  | --- | ---- |  |  | --- | -- | 
|                                                                                    |                                   | Year Ended   |    
|                                                                                    |                                   | December 31, |    
|                                                                                    |                                   |              |    
|                                                                                    |                                   | 2003         |     |    | 2004 |  |     | 2005 | 
|                                                                                    |                                   |              |     |    |      |  |     |      | 
|Revenues                                                                            |                                   |              | 100 | %  |      |  | 100 | %    |  |  | 100 | % 
|Cost of revenues                                                                    |                                   |              | 21  |    |      |  | 21  |      |  |  | 23  |   
|Accelerated amortization of prepaid royalty fees and contract
    termination costs |                                   |              |    |    |      |  |    |      |  |  | 5   |   
|                                                                                    |                                   |              |     |    |      |  |     |      | 
|Gross profit                                                                        |                                   |              | 79  |    |      |  | 79  |      |  |  | 72  |   
|Operating expenses:                                                                 |                                   |              |     |    |      |  |     |      |  |  |     |   
|                                                                                    | Sales and marketing               |              |     | 54 |      |  |     | 58   |  |  |     | 53 | 
|                                                                                    | Research and development          |              |     | 14 |      |  |     | 10   |  |  |     | 9  | 
|                                                                                    | General and administrative        |              |     | 29 |      |  |     | 19   |  |  |     | 21 | 
|                                                                                    | Amortization of intangible assets |              |     | 5  |      |  |     | 5    |  |  |     | 6  | 
|                                                                                    |                                   |              |     |    |      |  |     |      | 
|Total operating expenses                                                            |                                   |              | 102 |    |      |  | 92  |      |  |  | 89  |   
|Loss from operations                                                                |                                   |              | (23 | )  |      |  | (13 | )    |  |  | (17 | ) 
|Other income (expense), net                                                         |                                   |              |    |    |      |  |    |      |  |  | (1  | ) 
|                                                                                    |                                   |              |     |    |      |  |     |      | 
|Loss before cumulative effect of a change in accounting principle                   |                                   |              | (23 | )  |      |  | (13 | )    |  |  | (18 | ) 
|Cumulative effect of a change in accounting principle                               |                                   |              | 6   |    |      |  |    |      |  |  |    |   
|                                                                                    |                                   |              |     |    |      |  |     |      | 
|Net loss                                                                            |                                   |              | (17 | )% |      |  | (13 | )%   |  |  | (18 | )%
|                                                                                    |                                   |              |     |    |      |  |     |      | 

33



---



##### 





|                                                                       |  |                         |        |   |      |   |        |      |  |   |        | 
|---------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | 
|                                                                       |  | Year Ended December 31, |       
|                                                                       |  |                         |       
|                                                                       |  | 2003                    |        |   | 2004 |   |        | 2005 | 
|                                                                       |  |                         |        |   |      |   |        |      | 
|Total deferred revenue (in thousands at period end)                    |  | $                       | 12,393 |   |      | $ | 16,052 |      |  | $ | 20,696 | 
|Net cash (used in) provided by operating activities (in
    thousands) |  | $                       | (448   | ) |      | $ | 2,067  |      |  | $ | 1,736  | 
|Active customers                                                       |  |                         | 766    |   |      |   | 1,140  |      |  |   | 1,384  | 



| |                                       
| | --------------------------------------
| | Years Ended December 31, 2005 and 2004

Revenues. on-demand


Cost of Revenues. third-party full-time


Accelerated Amortization of Prepaid Royalty Fees and Contract
Termination Costs.


Sales and Marketing Expenses.


Research and Development Expenses.


34



---



##### 





General and Administrative Expenses.


Amortization of Intangible Assets.


Other Income (Expense).


Provision for Income Taxes.




| |                                       
| | --------------------------------------
| | Years Ended December 31, 2004 and 2003

Revenues.


Cost of Revenues.


Sales and Marketing Expenses.


35



---



##### 





Research and Development Expenses.


General and Administrative Expenses.


Amortization of Intangible Assets.


Other Income (Expense).


Liquidity and Capital Resources
















36



---



##### 















|                                   |  |                |       |                        |      |   |     |             |           |   |             |  |  |         |     |  |  |   |     | 
|---------------------------------- |  | -------------- | ----- | ---------------------- | ---- | - | --- | ----------- | --------- | - | ----------- |  |  | ------- | --- |  |  | - | --- | 
|                                   |  |                |       | Payments Due by Period |     
|                                   |  |                |       |                        |     
|                                   |  |                |       | Less Than 1            |      |   |     |             | More Than |  
|Contractual Obligations            |  | Total          |       |                        | Year |   |     | 1 - 3 Years |           |   | 3 - 5 Years |  |  | 5 Years |    
|                                   |  |                |       |                        |      |   |     |             |           |   |             |  |  |         |    
|                                   |  | (In thousands) |      
|Operating leases                   |  | $              | 2,418 |                        |      | $ | 590 |             |           | $ | 899         |  |  | $       | 766 |  |  | $ | 163 | 
|Contractual commitments            |  |                | 489   |                        |      |   | 383 |             |           |   | 106         |  |  |         |    |  |  |   |    | 
|Long-term debt under notes payable |  |                | 1,291 |                        |      |   | 615 |             |           |   | 674         |  |  |         | 2   |  |  |   |    | 
|Interest on long-term debt         |  |                | 83    |                        |      |   | 57  |             |           |   | 26          |  |  |         |    |  |  |   |    | 
|Capital lease obligations          |  |                | 135   |                        |      |   | 34  |             |           |   | 58          |  |  |         | 43  |  |  |   |    | 








|         |                                                           
|-------- | ----------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency
Exchange Risk




37



---



##### 





Interest Rate
Sensitivity









|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

10-K.







|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on Accounting
    and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedure.

Evaluation of Disclosure
Controls and Procedures


13a-15 13a-15 15d-15


Changes in Internal
Controls




Limitations on the
Effectiveness of Controls






38



---



##### 








|         |                   
|-------- | ------------------
|Item 9B. | Other Information.






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

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

(a) Documents filed as part of this report:




| |    |                                   
| | -- | ----------------------------------
| | 1. | Consolidated Financial Statements:



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | Report of Independent Registered Public Accounting Firm;                                                 
|
| |  | Consolidated balance sheets as of December 31, 2004 and
    2005;                                        
|
| |  | Consolidated statements of operations for the years ended
    December 31, 2003, 2004 and 2005;          
|
| |  | Consolidated statements of stockholders equity for the
    years ended December 31, 2003, 2004 and 2005;
|
| |  | Consolidated statements of cash flows for the years ended
    December 31, 2003, 2004 and 2005; and      
|
| |  | Notes to consolidated financial statements.                                                              



| |    |                                           
| | -- | ------------------------------------------
| | 2. | Consolidated Financial Statement Schedule:



| |   |                                                 
| | - | ------------------------------------------------
| |  | Schedule II  Valuation and Qualifying Accounts.



(b) Exhibits




39



---



##### 



SIGNATURES






| |            
| | -----------
| | VOCUS, INC.



| |     |                   
| | --- | ------------------
| | By: | /s/ Richard Rudman

| |                                                
| | -----------------------------------------------
| |                                                
| | Richard Rudman                                 
| | Chief Executive Officer, President and Chairman



POWER OF ATTORNEY


attorney-in 10-K, attorney-in attorneys-in




|                                     |  |                                                                                        |  |                |  | 
|------------------------------------ |  | -------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                            |  | Title                                                                                  |  | Date          
|                                     |  |                                                                                        |  |               
|                                    
|/s/ Richard RudmanRichard Rudman     |  | Chief Executive Officer, President and Chairman (Principal
    Executive Officer)      |  | March 13, 2006
|                                    
|/s/ Stephen VintzStephen Vintz       |  | Chief Financial Officer and Treasurer (Principal Financial and
    Accounting Officer) |  | March 13, 2006
|                                    
|/s/ Robert LentzRobert Lentz         |  | Chief Technology Officer and Director                                                  |  | March 13, 2006
|                                    
|/s/ Michael BronfeinMichael Bronfein |  | Director                                                                               |  | March 13, 2006
|                                    
|/s/ Kevin BurnsKevin Burns           |  | Director                                                                               |  | March 13, 2006
|                                    
|/s/ Gary GoldingGary Golding         |  | Director                                                                               |  | March 13, 2006
|                                    
|/s/ Ronald KaiserRonald Kaiser       |  | Director                                                                               |  | March 13, 2006
|                                    
|/s/ Richard MooreRichard Moore       |  | Director                                                                               |  | March 13, 2006

40



---



##### 



Vocus, Inc. and Subsidiaries


Index to Financial Statements


|                                                                                                         |  |  |     | 
|-------------------------------------------------------------------------------------------------------- |  |  | --- | 
|Report of Independent Registered Public
    Accounting Firm                                              |  |  | F-2 | 
|Consolidated Balance Sheets as of
    December 31, 2004 and 2005                                         |  |  | F-3 | 
|Consolidated Statements of Operations for
    years ended December 31, 2003, 2004 and 2005               |  |  | F-4 | 
|Consolidated Statements of
    Stockholders Equity for years ended December 31,
    2003, 2004 and 2005 |  |  | F-5 | 
|Consolidated Statements of Cash Flows for
    years ended December 31, 2003, 2004 and 2005               |  |  | F-6 | 
|Notes to Consolidated Financial
    Statements                                                           |  |  | F-7 | 

F-1



---



##### 






Report of Independent Registered Public Accounting Firm


















F-2



---



##### 



Vocus, Inc. and Subsidiaries





Consolidated Balance Sheets


|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |   |        |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | ------- | ------- | ---- | - | ------ | ------- | -
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         | December 31,           |        
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |        
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         | 2004                   |         |         | 2005 |  
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         | (Dollars in thousands, |        
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         | except per share data) |        
|Assets                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                         |                        |         |         |      |   |        |        
|Current assets:                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                         |                        |         |         |      |   |        |        
|                                                                                                                                                                                                                                                                                                                                                             | Cash and cash equivalents                                                                                                                                                                                                                               |                        | $       | 7,554   |      |   | $      | 40,027  |  
|                                                                                                                                                                                                                                                                                                                                                             | Short-term investments                                                                                                                                                                                                                                  |                        |         |        |      |   |        | 1,400   |  
|                                                                                                                                                                                                                                                                                                                                                             | Accounts receivable, net of allowance for doubtful accounts of
    $199 and $193 at December 31, 2004 and 2005, respectively                                                                                                                            |                        |         | 4,401   |      |   |        | 6,012   |  
|                                                                                                                                                                                                                                                                                                                                                             | Prepaid royalty fees                                                                                                                                                                                                                                    |                        |         | 1,153   |      |   |        | 493     |  
|                                                                                                                                                                                                                                                                                                                                                             | Other current assets                                                                                                                                                                                                                                    |                        |         | 233     |      |   |        | 695     |  
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  
|Total current assets                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                         |                        | 13,341  |         |      |   | 48,627 |        
|Property, equipment and software, net                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                         |                        | 1,212   |         |      |   | 4,161  |        
|Intangible assets, net:                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                         |                        |         |         |      |   |        |        
|                                                                                                                                                                                                                                                                                                                                                             | Customer relationships, net                                                                                                                                                                                                                             |                        |         | 3,728   |      |   |        | 2,217   |  
|                                                                                                                                                                                                                                                                                                                                                             | Purchased technology, net                                                                                                                                                                                                                               |                        |         | 696     |      |   |        | 294     |  
|                                                                                                                                                                                                                                                                                                                                                             | Other intangible assets, net                                                                                                                                                                                                                            |                        |         | 102     |      |   |        | 8       |  
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  
|Total intangible assets, net                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                         |                        | 4,526   |         |      |   | 2,519  |        
|Other assets                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                         |                        | 539     |         |      |   | 529    |        
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  
|Total assets                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                         | $                      | 19,618  |         |      | $ | 55,836 |        
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  
|Liabilities, redeemable stock, and stockholders
    (deficit) equity                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                         |                        |         |         |      |   |        |        
|Current liabilities:                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                         |                        |         |         |      |   |        |        
|                                                                                                                                                                                                                                                                                                                                                             | Accounts payable                                                                                                                                                                                                                                        |                        | $       | 488     |      |   | $      | 268     |  
|                                                                                                                                                                                                                                                                                                                                                             | Accrued compensation                                                                                                                                                                                                                                    |                        |         | 1,408   |      |   |        | 1,451   |  
|                                                                                                                                                                                                                                                                                                                                                             | Accrued expenses                                                                                                                                                                                                                                        |                        |         | 1,490   |      |   |        | 1,333   |  
|                                                                                                                                                                                                                                                                                                                                                             | Current portion of notes payable and capital lease obligations                                                                                                                                                                                          |                        |         | 115     |      |   |        | 642     |  
|                                                                                                                                                                                                                                                                                                                                                             | Current portion of deferred revenue                                                                                                                                                                                                                     |                        |         | 15,282  |      |   |        | 20,018  |  
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  
|Total current liabilities                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                         |                        | 18,783  |         |      |   | 23,712 |        
|Revolving line of credit                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                         |                        | 2,389   |         |      |   |       |        
|Notes payable and capital lease obligations, net of current
    portion                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                         |                        | 497     |         |      |   | 765    |        
|Other liabilities                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                         |                        | 87      |         |      |   | 105    |        
|Deferred revenue, net of current portion                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                         |                        | 770     |         |      |   | 678    |        
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  
|Total liabilities                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                         |                        | 22,526  |         |      |   | 25,260 |        
|Series A redeemable convertible preferred stock,
    $.01 par value, 5,158,628 shares authorized,
    1,719,542 shares issued and outstanding at
    December 31, 2004; liquidation preference of $4,993 at
    December 31, 2004                                                                                                                            |                                                                                                                                                                                                                                                         |                        | 2,992   |         |      |   |       |        
|Series B redeemable convertible preferred stock,
    $.01 par value, 10,754,021 shares authorized,
    3,378,655 shares issued and outstanding at
    December 31, 2004; liquidation preference of $37,503 at
    December 31, 2004; and warrants to purchase 206,016
    shares of Series B redeemable convertible preferred stock
    at December 31, 2004 |                                                                                                                                                                                                                                                         |                        | 21,064  |         |      |   |       |        
|Series C redeemable convertible preferred stock,
    $.01 par value, 5,245,392 shares authorized,
    728,471 shares issued and outstanding at December 31,
    2004; liquidation preference of $5,012 at December 31, 2004                                                                                                                                  |                                                                                                                                                                                                                                                         |                        | 4,591   |         |      |   |       |        
|Redeemable common stock, $.01 par value, 29,128 shares
    issued and outstanding at December 31, 2004 and 2005                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                         |                        | 183     |         |      |   | 189    |        
|Commitments and contingencies                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                         |                        |         |         |      |   |        |        
|Stockholders (deficit) 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, 4,693,330 and 15,805,018 shares issued at
    December 31, 2004 and 2005, respectively; 4,075,284 and
    14,794,241 shares outstanding at December 31, 2004 and
    2005, respectively |                        |         | 47      |      |   |        | 158     |  
|                                                                                                                                                                                                                                                                                                                                                             | Additional paid-in capital                                                                                                                                                                                                                              |                        |         |        |      |   |        | 70,470  |  
|                                                                                                                                                                                                                                                                                                                                                             | Treasury stock, 618,046 and 1,010,777 shares at
    December 31, 2004 and 2005, respectively, at cost                                                                                                                                                   |                        |         | (1,520  | )    |   |        | (3,283  | )
|                                                                                                                                                                                                                                                                                                                                                             | Deferred compensation                                                                                                                                                                                                                                   |                        |         | (34     | )    |   |        | (19     | )
|                                                                                                                                                                                                                                                                                                                                                             | Accumulated other comprehensive income                                                                                                                                                                                                                  |                        |         | 27      |      |   |        | 52      |  
|                                                                                                                                                                                                                                                                                                                                                             | Accumulated deficit                                                                                                                                                                                                                                     |                        |         | (30,258 | )    |   |        | (36,991 | )
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  
|Total stockholders (deficit) equity                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                         |                        | (31,738 | )       |      |   | 30,387 |        
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  
|Total liabilities, redeemable stock, and stockholders
    (deficit) equity                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                         | $                      | 19,618  |         |      | $ | 55,836 |        
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                         |                        |         |         |      |  

See accompanying notes.


F-3



---



##### 



Vocus, Inc. and Subsidiaries





Consolidated Statements of Operations


|                                                                                                                                                      |                                   |                                   |        |           |      |   |        |           |   |   |        |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | --------------------------------- | ------ | --------- | ---- | - | ------ | --------- | - | - | ------ | --------- | -
|                                                                                                                                                      |                                   | Year Ended December 31,           |       
|                                                                                                                                                      |                                   |                                   |       
|                                                                                                                                                      |                                   | 2003                              |        |           | 2004 |   |        | 2005      |  
|                                                                                                                                                      |                                   |                                   |        |           |      |   |        |           |  
|                                                                                                                                                      |                                   | (Dollars in thousands, except per |       
|                                                                                                                                                      |                                   | share data)                       |       
|Revenues                                                                                                                                              |                                   | $                                 | 15,434 |           |      | $ | 20,393 |           |   | $ | 28,062 |          
|Cost of revenues, including amortization expense of $478, $397,
    and $402 for the years ended December 31, 2003, 2004, and
    2005, respectively. |                                   |                                   | 3,244  |           |      |   | 4,368  |           |   |   | 6,537  |          
|Accelerated amortization of prepaid royalty fees and contract
    termination costs                                                                   |                                   |                                   |       |           |      |   |       |           |   |   | 1,399  |          
|                                                                                                                                                      |                                   |                                   |        |           |      |   |        |           |  
|Gross profit                                                                                                                                          |                                   |                                   | 12,190 |           |      |   | 16,025 |           |   |   | 20,126 |          
|Operating expenses:                                                                                                                                   |                                   |                                   |        |           |      |   |        |           |   |   |        |          
|                                                                                                                                                      | Sales and marketing               |                                   |        | 8,285     |      |   |        | 11,708    |   |   |        | 14,837    |  
|                                                                                                                                                      | Research and development          |                                   |        | 2,201     |      |   |        | 2,064     |   |   |        | 2,515     |  
|                                                                                                                                                      | General and administrative        |                                   |        | 4,493     |      |   |        | 3,942     |   |   |        | 6,051     |  
|                                                                                                                                                      | Amortization of intangible assets |                                   |        | 788       |      |   |        | 976       |   |   |        | 1,605     |  
|                                                                                                                                                      |                                   |                                   |        |           |      |   |        |           |  
|Total operating expenses                                                                                                                              |                                   |                                   | 15,767 |           |      |   | 18,690 |           |   |   | 25,008 |          
|Loss from operations                                                                                                                                  |                                   |                                   | (3,577 | )         |      |   | (2,665 | )         |   |   | (4,882 | )        
|Other income (expense):                                                                                                                               |                                   |                                   |        |           |      |   |        |           |   |   |        |          
|                                                                                                                                                      | Interest and other income         |                                   |        | 12        |      |   |        | 99        |   |   |        | 177       |  
|                                                                                                                                                      | Interest and other expense        |                                   |        | (41       | )    |   |        | (35       | ) |   |        | (359      | )
|                                                                                                                                                      |                                   |                                   |        |           |      |   |        |           |  
|Total other income (expense)                                                                                                                          |                                   |                                   | (29    | )         |      |   | 64     |           |   |   | (182   | )        
|Loss before cumulative effect of a change in accounting principle                                                                                     |                                   |                                   | (3,606 | )         |      |   | (2,601 | )         |   |   | (5,064 | )        
|Cumulative effect of a change in accounting principle                                                                                                 |                                   |                                   | 896    |           |      |   |       |           |   |   |       |          
|                                                                                                                                                      |                                   |                                   |        |           |      |   |        |           |  
|Net loss                                                                                                                                              |                                   |                                   | (2,710 | )         |      |   | (2,601 | )         |   |   | (5,064 | )        
|Accretion of preferred stock                                                                                                                          |                                   |                                   | (1,547 | )         |      |   | (1,582 | )         |   |   | (1,900 | )        
|                                                                                                                                                      |                                   |                                   |        |           |      |   |        |           |  
|Net loss attributable to common stockholders                                                                                                          |                                   | $                                 | (4,257 | )         |      | $ | (4,183 | )         |   | $ | (6,964 | )        
|                                                                                                                                                      |                                   |                                   |        |           |      |   |        |           |  
|Net loss attributable to common stockholders per share:                                                                                               |                                   |                                   |        |           |      |   |        |           |   |   |        |          
|                                                                                                                                                      | Basic and diluted                 |                                   | $      | (1.07     | )    |   | $      | (1.04     | ) |   | $      | (1.43     | )
|Weighted average shares outstanding used in computing per share
    amounts:                                                                          |                                   |                                   |        |           |      |   |        |           |   |   |        |          
|                                                                                                                                                      | Basic and diluted                 |                                   |        | 3,970,588 |      |   |        | 4,032,572 |   |   |        | 4,867,710 |  

See accompanying notes.


F-4



---



##### 



Vocus, Inc. and Subsidiaries





Consolidated Statements of Stockholders Equity


|                             |                                                         |                                               |            |           |            |   |     |          |   |             |          |        |   |               |        |        |               |   |     |           |   |   |        |   |    |   |         |        |        |   |         |        |        |  
|---------------------------- | ------------------------------------------------------- | --------------------------------------------- | ---------- | --------- | ---------- | - | --- | -------- | - | ----------- | -------- | ------ | - | ------------- | ------ | ------ | ------------- | - | --- | --------- | - | - | ------ | - | -- | - | ------- | ------ | ------ | - | ------- | ------ | ------ | -
|                             |                                                         |                                               |            |           |            |   |     |          |   | Accumulated |          |        |   |               | Total  |       
|                             |                                                         | Common Stock                                  |            |           | Additional |   |     |          |   |             |          | Other  |   |               |        |        | Stockholders |  
|                             |                                                         |                                               |            |           | Paid-In    |   |     | Treasury |   |             | Deferred |        |   | Comprehensive |        |        | Accumulated   |   |     | (Deficit) |  
|                             |                                                         | Shares                                        |            |           | Amount     |   |     | Capital  |   |             | Stock    |        |   | Compensation  |        |        | Income        |   |     | Deficit   |   |   | Equity |  
|                             |                                                         |                                               |            |           |            |   |     |          |   |             |          |        |   |               |        |        |               |   |     |           |   |   |        |  
|                             |                                                         | (Dollars in thousands, except per share data) |           
|Balance at January 1, 2003   |                                                         |                                               | 4,388,988  |           |            | $ | 44  |          |   | $           |         |        |   | $             | (1,013 | )      |               | $ |    |           |   | $ |       |   |    | $ | (22,989 | )      |        | $ | (23,958 | )     
|                             | Issuance of common stock in connection with acquisition |                                               |            | 185,556   |            |   |     | 2        |   |             |          | 455    |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         |       |        |   |         | 457    |       
|                             | Exercise of stock options                               |                                               |            | 46,953    |            |   |     |         |   |             |          | 38     |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         |       |        |   |         | 38     |       
|                             | Repurchase of 206,016 shares of common stock            |                                               |            |          |            |   |     |         |   |             |          |       |   |               |        | (507   | )             |   |     |          |   |   |        |  |    |   |         |       |        |   |         | (507   | )     
|                             | Accretion of preferred stock                            |                                               |            |          |            |   |     |         |   |             |          | (493   | ) |               |        |       |               |   |     |          |   |   |        |  |    |   |         | (1,054 | )      |   |         | (1,547 | )     
|                             | Net loss                                                |                                               |            |          |            |   |     |         |   |             |          |       |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         | (2,710 | )      |   |         | (2,710 | )     
|                             |                                                         |                                               |            |           |            |   |     |          |   |             |          |        |   |               |        |        |               |   |     |           |   |   |        |  
|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    |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         |       |        |   |         | 139    |       
|                             | Issuance of warrants                                    |                                               |            |          |            |   |     |         |   |             |          | 398    |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         |       |        |   |         | 398    |       
|                             | Exercise of stock options                               |                                               |            | 42,705    |            |   |     |         |   |             |          | 92     |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         |       |        |   |         | 92     |       
|                             | Deferred compensation related to stock option grants    |                                               |            |          |            |   |     |         |   |             |          | 50     |   |               |        |       |               |   |     | (50       | ) |   |        |  |    |   |         |       |        |   |         |       |       
|                             | Amortization of deferred compensation                   |                                               |            |          |            |   |     |         |   |             |          |       |   |               |        |       |               |   |     | 16        |   |   |        |  |    |   |         |       |        |   |         | 16     |       
|                             | Accretion of preferred stock                            |                                               |            |          |            |   |     |         |   |             |          | (678   | ) |               |        |       |               |   |     |          |   |   |        |  |    |   |         | (904   | )      |   |         | (1,582 | )     
|                             | Comprehensive loss:                                     |                                               |            |           |            |   |     |          |   |             |          |        |   |               |        |        |               |   |     |           |   |   |        |   |    |   |         |        |        |   |         |        |       
|                             |                                                         | Foreign currency translation                  |            |           |           |   |     |          |  |             |          |        |  |               |        |        |              |   |     |           |  |   |        |   | 27 |   |         |        |       |   |         |        | 27     |  
|                             |                                                         | Net 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    |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         |       |        |   |         | 241    |       
|                             | Deferred compensation related to stock-option grants    |                                               |            |          |            |   |     |         |   |             |          |       |   |               |        |       |               |   |     | 1         |   |   |        |  |    |   |         | (1     | )      |   |         |       |       
|                             | Amortization of deferred compensation                   |                                               |            |          |            |   |     |         |   |             |          |       |   |               |        |       |               |   |     | 14        |   |   |        |  |    |   |         |       |        |   |         | 14     |       
|                             | Repurchase 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 |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         |       |        |   |         | 40,021 |       
|                             | Conversion of preferred stock                           |                                               |            | 5,826,668 |            |   |     | 58       |   |             |          | 30,489 |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         |       |        |   |         | 30,547 |       
|                             | Issuance of stock options to non-employee               |                                               |            |          |            |   |     |         |   |             |          | 10     |   |               |        |       |               |   |     |          |   |   |        |  |    |   |         |       |        |   |         | 10     |       
|                             | Comprehensive loss:                                     |                                               |            |           |            |   |     |          |   |             |          |        |   |               |        |        |               |   |     |           |   |   |        |   |    |   |         |        |        |   |         |        |       
|                             |                                                         | Foreign currency translation                  |            |           |           |   |     |          |  |             |          |        |  |               |        |        |              |   |     |           |  |   |        |   | 25 |   |         |        |       |   |         |        | 25     |  
|                             |                                                         | Net 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 | )      |        | $ | 30,387  |       
|                             |                                                         |                                               |            |           |            |   |     |          |   |             |          |        |   |               |        |        |               |   |     |           |   |   |        |  

See accompanying notes.


F-5



---



##### 



Vocus, Inc. and Subsidiaries





Consolidated Statements of Cash Flows


|                                                                                                         |                                                         |                         |        |       |        |   |        |       |       |   |        |        |        |  
|-------------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------- | ------ | ----- | ------ | - | ------ | ----- | ----- | - | ------ | ------ | ------ | -
|                                                                                                         |                                                         | Year Ended December 31, |       
|                                                                                                         |                                                         |                         |       
|                                                                                                         |                                                         | 2003                    |        |       | 2004   |   |        | 2005  |      
|                                                                                                         |                                                         |                         |        |       |        |   |        |       |      
|                                                                                                         |                                                         | (Dollars in thousands)  |       
|Cash flows from operating activities                                                                     |                                                         |                         |        |       |        |   |        |       |       |   |        |       
|Net loss                                                                                                 |                                                         | $                       | (2,710 | )     |        | $ | (2,601 | )     |       | $ | (5,064 | )     
|Adjustments to reconcile net loss to net cash (used in) provided
    by operating activities:            |                                                         |                         |        |       |        |   |        |       |       |   |        |       
|                                                                                                         | Cumulative effect of a change in accounting principle   |                         |        | (896  | )      |   |        |      |       |   |        |       |       
|                                                                                                         | Depreciation and amortization of property and equipment |                         |        | 520   |        |   |        | 397   |       |   |        | 784    |       
|                                                                                                         | Amortization of intangible assets                       |                         |        | 1,266 |        |   |        | 1,373 |       |   |        | 2,007  |       
|                                                                                                         | Loss on disposal of assets                              |                         |        |      |        |   |        | 5     |       |   |        |       |       
|                                                                                                         | Stock-based compensation                                |                         |        | 493   |        |   |        | 16    |       |   |        | 1,030  |       
|                                                                                                         | Provision for doubtful accounts                         |                         |        | 116   |        |   |        | (54   | )     |   |        | 51     |       
|                                                                                                         | Changes in operating assets and liabilities:            |                         |        |       |        |   |        |       |       |   |        |        |       
|                                                                                                         |                                                         | Accounts receivable     |        |       | (2,073 | ) |        |       | (343  | ) |        |        | (1,691 | )
|                                                                                                         |                                                         | Prepaid royalty fees    |        |       | (578   | ) |        |       | (575  | ) |        |        | 660    |  
|                                                                                                         |                                                         | Other current assets    |        |       | 113    |   |        |       | (210  | ) |        |        | (462   | )
|                                                                                                         |                                                         | Other assets            |        |       |       |   |        |       | (165  | ) |        |        | 7      |  
|                                                                                                         |                                                         | Accounts payable        |        |       | (334   | ) |        |       | 196   |   |        |        | (214   | )
|                                                                                                         |                                                         | Accrued compensation    |        |       | 368    |   |        |       | 427   |   |        |        | 53     |  
|                                                                                                         |                                                         | Accrued expenses        |        |       | 551    |   |        |       | 321   |   |        |        | (144   | )
|                                                                                                         |                                                         | Deferred revenue        |        |       | 2,694  |   |        |       | 3,265 |   |        |        | 4,701  |  
|                                                                                                         |                                                         | Other liabilities       |        |       | 22     |   |        |       | 15    |   |        |        | 18     |  
|                                                                                                         |                                                         |                         |        |       |        |   |        |       |      
|Net cash (used in) provided by operating activities                                                      |                                                         |                         | (448   | )     |        |   | 2,067  |       |       |   | 1,736  |       
|Cash flows from investing activities                                                                     |                                                         |                         |        |       |        |   |        |       |       |   |        |       
|Cash paid for acquisitions                                                                               |                                                         |                         | (1,914 | )     |        |   | (2,613 | )     |       |   |       |       
|Purchases of property and equipment                                                                      |                                                         |                         | (331   | )     |        |   | (417   | )     |       |   | (1,391 | )     
|Software development and information database costs                                                      |                                                         |                         | (71    | )     |        |   | (312   | )     |       |   | (2,241 | )     
|Purchases of short-term investments                                                                      |                                                         |                         |       |       |        |   |       |       |       |   | (1,400 | )     
|                                                                                                         |                                                         |                         |        |       |        |   |        |       |      
|Net cash used in investing activities                                                                    |                                                         |                         | (2,316 | )     |        |   | (3,342 | )     |       |   | (5,032 | )     
|Cash flows from financing activities                                                                     |                                                         |                         |        |       |        |   |        |       |       |   |        |       
|Proceeds from issuance of redeemable convertible preferred stock
    and warrants, net of offering costs |                                                         |                         | 2,974  |       |        |   | 4,975  |       |       |   |       |       
|Proceeds from initial public offering, net of offering costs                                             |                                                         |                         |       |       |        |   |       |       |       |   | 40,021 |       
|Repurchase of common stock                                                                               |                                                         |                         | (1,000 | )     |        |   |       |       |       |   | (2,769 | )     
|Proceeds from exercise of stock options                                                                  |                                                         |                         | 38     |       |        |   | 92     |       |       |   | 241    |       
|Proceeds from borrowings under revolving line of credit                                                  |                                                         |                         |       |       |        |   | 2,389  |       |       |   | 4,416  |       
|Payments under revolving line of credit                                                                  |                                                         |                         |       |       |        |   |       |       |       |   | (6,805 | )     
|Proceeds from notes payable                                                                              |                                                         |                         | 182    |       |        |   | 95     |       |       |   | 972    |       
|Payments on notes payable and capital lease obligations                                                  |                                                         |                         | (268   | )     |        |   | (238   | )     |       |   | (284   | )     
|Deferred financing costs                                                                                 |                                                         |                         |       |       |        |   | (72    | )     |       |   |       |       
|                                                                                                         |                                                         |                         |        |       |        |   |        |       |      
|Net cash provided by financing activities                                                                |                                                         |                         | 1,926  |       |        |   | 7,241  |       |       |   | 35,792 |       
|Effect of exchange rate changes on cash and cash equivalents                                             |                                                         |                         |       |       |        |   | 15     |       |       |   | (23    | )     
|                                                                                                         |                                                         |                         |        |       |        |   |        |       |      
|Net (decrease) increase in cash and cash equivalents                                                     |                                                         |                         | (838   | )     |        |   | 5,981  |       |       |   | 32,473 |       
|Cash and cash equivalents at beginning of year                                                           |                                                         |                         | 2,411  |       |        |   | 1,573  |       |       |   | 7,554  |       
|                                                                                                         |                                                         |                         |        |       |        |   |        |       |      
|Cash and cash equivalents at end of year                                                                 |                                                         | $                       | 1,573  |       |        | $ | 7,554  |       |       | $ | 40,027 |       
|                                                                                                         |                                                         |                         |        |       |        |   |        |       |      
|Supplemental disclosure of cash flow information:                                                        |                                                         |                         |        |       |        |   |        |       |       |   |        |       
|Cash paid for interest                                                                                   |                                                         | $                       | 42     |       |        | $ | 24     |       |       | $ | 288    |       
|Supplemental disclosure of non-cash investing and financing
    activities:                              |                                                         |                         |        |       |        |   |        |       |       |   |        |       
|                                                                                                         | Assets acquired under capital leases                    |                         | $      |      |        |   | $      | 16    |       |   | $      | 107    |       
|                                                                                                         | Conversion of preferred stock into common stock         |                         | $      |      |        |   | $      |      |       |   | $      | 30,547 |       

See accompanying notes.


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




Allowances for Doubtful Accounts




F-7



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)


Deferred Financing Costs




Software Development and Information Database Costs






Property and Equipment




Intangible Assets




Impairment of Long-Lived Assets




Redeemable Stock




F-8



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)


Foreign Currency and Operations




Comprehensive Loss




Revenue Recognition and Accounting Change






00-21, Revenue Arrangements with Multiple Deliverables 00-21), 00-21 00-21, 00-21 00-21






F-9



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)




Deferred Revenue


12-month


Royalty Fees






Sales Commissions




Advertising Costs




Stock-Based Compensation


Accounting for Stock
Issued to Employees. Accounting for Stock-Based
Compensation,




F-10



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)








|                                |  |              |     |   |                  |  |     |              |  |  |      |   |  |  |        |  
|------------------------------- |  | ------------ | --- | - | ---------------- |  | --- | ------------ |  |  | ---- | - |  |  | ------ | -
|                                |  | Year Ended   |     |   | Six Months Ended | 
|                                |  | December 31, |     |   |                  | 
|                                |  |              |     |   | June 30,         |  |     | December 31, | 
|                                |  | 2003         |     |   | 2004             |  |     | 2005         |  |  | 2005 |  
|                                |  |              |     |   |                  |  |     |              |  |  |      |  
|Dividend yield                  |  |              | 0   | % |                  |  | 0   | %            |  |  | 0    | % |  |  | 0      | %
|Average risk-free interest rate |  |              | 3.2 | % |                  |  | 4.2 | %            |  |  | 4.2  | % |  |  | 4.4    | %
|Expected life (years)           |  |              | 4   |   |                  |  | 4   |              |  |  | 4    |   |  |  | 4-6    |  
|Stock price volatility          |  |              | (*  | ) |                  |  | (*  | )            |  |  | (*   | ) |  |  | 52%-53 | %






|    |                                                     
|--- | ----------------------------------------------------
|(*) | Assumption is not applicable to minimum value method





|                                                          |             |                         |        |       |      |   |        |       |   |   |        |       |  
|--------------------------------------------------------- | ----------- | ----------------------- | ------ | ----- | ---- | - | ------ | ----- | - | - | ------ | ----- | -
|                                                          |             | Year Ended December 31, |       
|                                                          |             |                         |       
|                                                          |             | 2003                    |        |       | 2004 |   |        | 2005  |  
|                                                          |             |                         |        |       |      |   |        |       |  
|Net loss attributable to common stockholders, as reported |             | $                       | (4,257 | )     |      | $ | (4,183 | )     |   | $ | (6,964 | )    
|Stock-based compensation expense as reported              |             |                         |       |       |      |   | 16     |       |   |   | 1,030  |      
|Pro forma stock-based compensation expense                |             |                         | (49    | )     |      |   | (57    | )     |   |   | (231   | )    
|                                                          |             |                         |        |       |      |   |        |       |  
|Pro forma net loss attributable to common stockholders    |             | $                       | (4,306 | )     |      | $ | (4,224 | )     |   | $ | (6,165 | )    
|                                                          |             |                         |        |       |      |   |        |       |  
|Net loss attributable to common stockholders per share:   |             |                         |        |       |      |   |        |       |   |   |        |      
|                                                          | As reported |                         | $      | (1.07 | )    |   | $      | (1.04 | ) |   | $      | (1.43 | )
|                                                          | Pro forma   |                         | $      | (1.08 | )    |   | $      | (1.05 | ) |   | $      | (1.27 | )

Concentrations of Credit Risk






F-11



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)




Fair Value of Financial Instruments




Income Taxes




Net Loss Attributable to Common Stockholders Per Share






|                                                                                              |  |              |           |  |      |  |           |      |  |  |           | 
|--------------------------------------------------------------------------------------------- |  | ------------ | --------- |  | ---- |  | --------- | ---- |  |  | --------- | 
|                                                                                              |  | December 31, |          
|                                                                                              |  |              |          
|                                                                                              |  | 2003         |           |  | 2004 |  |           | 2005 | 
|                                                                                              |  |              |           |  |      |  |           |      | 
|Options to purchase common stock                                                              |  |              | 1,092,071 |  |      |  | 1,100,082 |      |  |  | 2,468,351 | 
|Warrants to purchase common or preferred stock                                                |  |              | 232,534   |  |      |  | 361,446   |      |  |  | 361,446   | 
|Shares of common stock into which outstanding preferred stock is
    convertible              |  |              | 5,098,197 |  |      |  | 5,826,668 |      |  |  |          | 
|                                                                                              |  |              |           |  |      |  |           |      | 
|Total options, warrants, and preferred stock exercisable or
    convertible into common stock |  |              | 6,422,802 |  |      |  | 7,288,196 |      |  |  | 2,829,797 | 
|                                                                                              |  |              |           |  |      |  |           |      | 





Segment Data




Recent Accounting Pronouncements


Share-Based
Payment


F-12



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)




Stock-Based
Compensation.






|   |                                                                    
|-- | -------------------------------------------------------------------
|3. | Initial Public Offering of Common Stock and Reverse Stock
    Split

Initial Public Offering of Common Stock


one-for-one




Reverse Stock Split






|   |             
|-- | ------------
|4. | Acquisitions

Gnossos




F-13



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)






|                                |  |   |       | 
|------------------------------- |  | - | ----- | 
|Cash paid to seller             |  | $ | 2,500 | 
|Common stock                    |  |   | 139   | 
|Redeemable common stock         |  |   | 183   | 
|Deferred payments due to seller |  |   | 400   | 
|Transaction costs               |  |   | 112   | 
|                                |  |   |      
|                                |  | $ | 3,334 | 
|                                |  |   |      



|                                                        |  |   |       |  
|------------------------------------------------------- |  | - | ----- | -
|Customer relationships (amortization period of 4 years) |  | $ | 3,015 |  
|Purchased technology (amortization period of 2 years)   |  |   | 701   |  
|Property and equipment                                  |  |   | 18    |  
|Assumed liabilities                                     |  |   | (400  | )
|                                                        |  |   |      
|Total                                                   |  | $ | 3,334 |  
|                                                        |  |   |      





|                                                                                       |  |              |        |   |      |   |        |  
|-------------------------------------------------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                                                       |  | Year Ended   |       
|                                                                                       |  | December 31, |       
|                                                                                       |  |              |       
|                                                                                       |  | 2003         |        |   | 2004 |  
|                                                                                       |  |              |        |   |      |  
|Pro forma revenues                                                                     |  | $            | 17,044 |   |      | $ | 21,600 |  
|                                                                                       |  |              |        |   |      |  
|Pro forma net loss                                                                     |  | $            | (3,822 | ) |      | $ | (3,674 | )
|Attention of preferred stock                                                           |  |              | (1,547 | ) |      |   | (1,582 | )
|                                                                                       |  |              |        |   |      |  
|Pro forma net loss attributable to common stockholders                                 |  | $            | (5,369 | ) |      | $ | (5,256 | )
|                                                                                       |  |              |        |   |      |  
|Pro forma basic and diluted net loss attributable to common
    stockholders per share |  | $            | (1.33  | ) |      | $ | (1.29  | )
|                                                                                       |  |              |        |   |      |  



PR Solutions




F-14



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)




Public Affairs Technologies






|                    |  |   |       | 
|------------------- |  | - | ----- | 
|Cash paid to seller |  | $ | 1,837 | 
|Common stock        |  |   | 457   | 
|Transaction costs   |  |   | 77    | 
|                    |  |   |      
|                    |  | $ | 2,371 | 
|                    |  |   |      



|                                                          |  |   |       |  
|--------------------------------------------------------- |  | - | ----- | -
|Customer relationships (amortization period of 3 years)   |  | $ | 2,296 |  
|Purchased technology (amortization period of 2 years)     |  |   | 725   |  
|Covenants not to compete (amortization period of 3 years) |  |   | 282   |  
|Assumed liabilities                                       |  |   | (932  | )
|                                                          |  |   |      
|Total                                                     |  | $ | 2,371 |  
|                                                          |  |   |      





5. Short-Term Investments




|                          |  |      |        |            |       |        |        |  |               |   |   |             |  |   |             |  |  |   |        |  |  |   |       | 
|------------------------- |  | ---- | ------ | ---------- | ----- | ------ | ------ |  | ------------- | - | - | ----------- |  | - | ----------- |  |  | - | ------ |  |  | - | ----- | 
|                          |  |      |        | Unrealized |       | Fair   |        |  |               |   |  
|                          |  |      |        |            |       | Market |        |  | Cash and Cash |   |   | Short-term  | 
|                          |  | Cost |        |            | Gains |        | Losses |  | Value         |   |   | Equivalents |  |   | Investments | 
|                          |  |      |        |            |       |        |        |  |               |   |   |             |  |   |             | 
|Cash                      |  | $    | 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       |  |  |   |       |  |  |   | 1,400 | 
|                          |  |      |        |            |       |        |        |  |               |   |   |             |  |   |             |  |  |  
|Total                     |  | $    | 41,427 |            |       | $      |       |  |               | $ |  |             |  | $ | 41,427      |  |  | $ | 40,027 |  |  | $ | 1,400 | 
|                          |  |      |        |            |       |        |        |  |               |   |   |             |  |   |             |  |  |  

F-15



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)






6. Property, Equipment and Software




|                                                  |  |              |        |   |      |   |        |  
|------------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                  |  | December 31, |       
|                                                  |  |              |       
|                                                  |  | 2004         |        |   | 2005 |  
|                                                  |  |              |        |   |      |  
|Purchased software, computer and office equipment |  | $            | 1,448  |   |      | $ | 2,463  |  
|Office furniture                                  |  |              | 237    |   |      |   | 344    |  
|Leasehold improvements                            |  |              | 385    |   |      |   | 646    |  
|Equipment under capital lease obligations         |  |              | 911    |   |      |   | 1,018  |  
|Capitalized software development costs            |  |              | 111    |   |      |   | 297    |  
|Information database costs                        |  |              | 272    |   |      |   | 2,327  |  
|                                                  |  |              |        |   |      |  
|                                                  |  |              | 3,364  |   |      |   | 7,095  |  
|Less accumulated depreciation and amortization    |  |              | (2,152 | ) |      |   | (2,934 | )
|                                                  |  |              |        |   |      |  
|Property, equipment and software, net             |  | $            | 1,212  |   |      | $ | 4,161  |  
|                                                  |  |              |        |   |      |  



7. Intangible Assets




|                         |  |                |       |       |          |   |       |              |  |   |              |   |  |   |       | 
|------------------------ |  | -------------- | ----- | ----- | -------- | - | ----- | ------------ |  | - | ------------ | - |  | - | ----- | 
|                         |  |                |       | Gross |          |   |       |              | 
|                         |  | Useful Life in |       |       | Carrying |   |       | Accumulated  |  |   | Net Carrying |  
|                         |  | Years          |       |       | Amount   |   |       | Amortization |  |   | Amount       |  
|                         |  |                |       |       |          |   |       |              |  |   |              |  
|Customer relationships   |  |                | 3 - 4 |       |          | $ | 5,545 |              |  | $ | (1,817       | ) |  | $ | 3,728 | 
|Purchased technology     |  |                | 2     |       |          |   | 2,011 |              |  |   | (1,315       | ) |  |   | 696   | 
|Covenants not-to-compete |  |                | 3     |       |          |   | 282   |              |  |   | (180         | ) |  |   | 102   | 
|                         |  |                |       |       |          |   |       |              |  |   |              |  
|Total                    |  |                |       |       |          | $ | 7,838 |              |  | $ | (3,312       | ) |  | $ | 4,526 | 
|                         |  |                |       |       |          |   |       |              |  |   |              |  



|                         |  |                |       |       |          |   |       |              |  |   |              |   |  |   |       | 
|------------------------ |  | -------------- | ----- | ----- | -------- | - | ----- | ------------ |  | - | ------------ | - |  | - | ----- | 
|                         |  |                |       | Gross |          |   |       |              | 
|                         |  | Useful Life in |       |       | Carrying |   |       | Accumulated  |  |   | Net Carrying |  
|                         |  | Years          |       |       | Amount   |   |       | Amortization |  |   | Amount       |  
|                         |  |                |       |       |          |   |       |              |  |   |              |  
|Customer relationships   |  |                | 3 - 4 |       |          | $ | 5,545 |              |  | $ | (3,328       | ) |  | $ | 2,217 | 
|Purchased technology     |  |                | 2     |       |          |   | 2,011 |              |  |   | (1,717       | ) |  |   | 294   | 
|Covenants not-to-compete |  |                | 3     |       |          |   | 282   |              |  |   | (274         | ) |  |   | 8     | 
|                         |  |                |       |       |          |   |       |              |  |   |              |  
|Total                    |  |                |       |       |          | $ | 7,838 |              |  | $ | (5,319       | ) |  | $ | 2,519 | 
|                         |  |                |       |       |          |   |       |              |  |   |              |  



|     |  |   |       | 
|---- |  | - | ----- | 
|2006 |  | $ | 1,126 | 
|2007 |  |   | 760   | 
|2008 |  |   | 633   | 
|     |  |   |      
|     |  | $ | 2,519 | 
|     |  |   |      

F-16



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)


8. Debt


Revolving Line of Credit




Term Loans and Equipment Line of Credit






|                                        |  |   |       |  
|--------------------------------------- |  | - | ----- | -
|2006                                    |  | $ | 615   |  
|2007                                    |  |   | 551   |  
|2008                                    |  |   | 123   |  
|2009                                    |  |   | 2     |  
|                                        |  |   |      
|Total future minimum principal payments |  | $ | 1,291 |  
|Less current portion                    |  |   | (615  | )
|                                        |  |   |      
|Long-term portion                       |  | $ | 676   |  
|                                        |  |   |      



|   |                                       
|-- | --------------------------------------
|9. | Redeemable Convertible Preferred Stock





F-17



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)










|                             |                               |          |           |            |          |   |       |          |   |  |           |            |   |        |        |         |        |  |         |          |   |   |       |        |   |   |        |         |  
|---------------------------- | ----------------------------- | -------- | --------- | ---------- | -------- | - | ----- | -------- | - |  | --------- | ---------- | - | ------ | ------ | ------- | ------ |  | ------- | -------- | - | - | ----- | ------ | - | - | ------ | ------- | -
|                             |                               | Series A |           |            | Series B |   |       | Series C |   |  |          
|                             |                               |          |           |            |          |   |       |          |   |  |          
|                             |                               | Shares   |           |            | Amount   |   |       | Shares   |   |  | Amount    |            |   | Shares |        |         | Amount |  |         | Total    |  
|                             |                               |          |           |            |          |   |       |          |   |  |           |            |   |        |        |         |        |  |         |          |  
|Balance at January 1, 2003   |                               |          | 1,719,542 |            |          | $ | 2,568 |          |   |  | 2,760,607 |            |   | $      | 15,399 |         |        |  |        |          |   | $ |      |        |   | $ | 17,967 |        
|                             | Issuance of Series B          |          |           |           |          |   |       |         |   |  |           | 618,048    |   |        |        | 2,368   |        |  |         |         |   |   |       |       |   |   |        | 2,368   |  
|                             | Issuance of Series B warrants |          |           |           |          |   |       |         |   |  |           |           |   |        |        | 606     |        |  |         |         |   |   |       |       |   |   |        | 606     |  
|                             | Accretion                     |          |           |           |          |   |       | 211      |   |  |           |           |   |        |        | 1,336   |        |  |         |         |   |   |       |       |   |   |        | 1,547   |  
|                             |                               |          |           |            |          |   |       |          |   |  |           |            |   |        |        |         |        |  |         |          |  
|Balance at December 31, 2003 |                               |          | 1,719,542 |            |          |   | 2,779 |          |   |  | 3,378,655 |            |   |        | 19,709 |         |        |  |        |          |   |   |      |        |   |   | 22,488 |        
|                             | Issuance of Series C          |          |           |           |          |   |       |         |   |  |           |           |   |        |        |        |        |  |         | 728,471  |   |   |       | 4,577  |   |   |        | 4,577   |  
|                             | Accretion                     |          |           |           |          |   |       | 213      |   |  |           |           |   |        |        | 1,355   |        |  |         |         |   |   |       | 14     |   |   |        | 1,582   |  
|                             |                               |          |           |            |          |   |       |          |   |  |           |            |   |        |        |         |        |  |         |          |  
|Balance at December 31, 2004 |                               |          | 1,719,542 |            |          |   | 2,992 |          |   |  | 3,378,655 |            |   |        | 21,064 |         |        |  | 728,471 |          |   |   | 4,591 |        |   |   | 28,647 |        
|                             | Accretion                     |          |           |           |          |   |       | 187      |   |  |           |           |   |        |        | 1,257   |        |  |         |         |   |   |       | 456    |   |   |        | 1,900   |  
|                             | Conversion                    |          |           | (1,719,542 | )        |   |       | (3,179   | ) |  |           | (3,378,655 | ) |        |        | (22,321 | )      |  |         | (728,471 | ) |   |       | (5,047 | ) |   |        | (30,547 | )
|                             |                               |          |           |            |          |   |       |          |   |  |           |            |   |        |        |         |        |  |         |          |  
|Balance at December 31, 2005 |                               |          |          |            |          | $ |      |          |   |  |          |            |   | $      |       |         |        |  |        |          |   | $ |      |        |   | $ |       |        
|                             |                               |          |           |            |          |   |       |          |   |  |           |            |   |        |        |         |        |  |         |          |  



|    |         
|--- | --------
|10. | Warrants







F-18



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)






|    |                       
|--- | ----------------------
|11. | Employee Benefit Plans

Stock Option Plans


10-year three- four-year




|                             |                        |                   |           |           |        |  |                    |             |  |  |      |      | 
|---------------------------- | ---------------------- | ----------------- | --------- | --------- | ------ |  | ------------------ | ----------- |  |  | ---- | ---- | 
|                             |                        |                   |           | Range of  |        |  | Weighted-Average   |            
|                             |                        |                   |           | Exercise  |        |  | Exercise Price Per |            
|                             |                        | Number of Options |           |           | Prices |  |                    | Share       | 
|                             |                        |                   |           |           |        |  |                    |             | 
|Balance at January 1, 2003   |                        |                   | 1,002,357 |           |        |  | 0.30  2.46        |             |  |  | 1.02 |     
|                             | Granted                |                   |           | 174,818   |        |  |                    | 2.46        |  |  |      | 2.46 | 
|                             | Exercised              |                   |           | (46,953   | )      |  |                    | 0.30  2.46 |  |  |      | 0.82 | 
|                             | Forfeited or cancelled |                   |           | (38,151   | )      |  |                    | 0.30  2.46 |  |  |      | 2.20 | 
|                             |                        |                   |           |           |        |  |                    |             | 
|Balance at December 31, 2003 |                        |                   | 1,092,071 |           |        |  | 2.46  2.46        |             |  |  | 1.22 |     
|                             | Granted                |                   |           | 102,540   |        |  |                    | 2.46  4.77 |  |  |      | 3.36 | 
|                             | Exercised              |                   |           | (42,705   | )      |  |                    | 0.30  2.46 |  |  |      | 2.16 | 
|                             | Forfeited or cancelled |                   |           | (51,824   | )      |  |                    | 0.30  3.99 |  |  |      | 2.55 | 
|                             |                        |                   |           |           |        |  |                    |             | 
|Balance at December 31, 2004 |                        |                   | 1,100,082 |           |        |  | 0.30  4.77        |             |  |  | 1.32 |     
|                             | Granted                |                   |           | 1,703,047 |        |  |                    | 4.77  9.00 |  |  |      | 7.96 | 
|                             | Exercised              |                   |           | (285,020  | )      |  |                    | 0.30  2.99 |  |  |      | 0.85 | 
|                             | Forfeited or cancelled |                   |           | (49,758   | )      |  |                    | 0.30  9.00 |  |  |      | 3.11 | 
|                             |                        |                   |           |           |        |  |                    |             | 
|Balance at December 31, 2005 |                        |                   | 2,468,351 |           |        |  | 0.30  9.00        |             |  |  | 5.92 |     
|                             |                        |                   |           |           |        |  |                    |             | 

F-19



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)




|              |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |         |  |  |   |      | 
|------------- |  | ------------------- | --------- | --------- | ------------------- |  | --------- | -------- |  | - | ----------- | --------- |  | -------- | ------- |  |  | - | ---- | 
|              |  | Options Outstanding |           |           | Options Exercisable | 
|              |  |                     |           |           |                     | 
|              |  |                     |           | Weighted- |                     |  |           |          | 
|              |  |                     |           | Average   |                     |  | Weighted- |          |  |   |             | Weighted- | 
|Range of      |  | Outstanding         |           |           | Remaining           |  |           | Average  |  |   | Exercisable |           |  | Average  |        
|Exercise      |  | as of               |           |           | Contractual         |  |           | Exercise |  |   | as of       |           |  | Exercise |        
|Price         |  | 12/31/05            |           |           | Life                |  |           | Price    |  |   | 12/31/05    |           |  | Price    |        
|              |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |        
|$0.30  $1.50 |  |                     | 404,158   |           |                     |  | 4.0       |          |  | $ | 0.30        |           |  |          | 404,158 |  |  | $ | 0.30 | 
|$1.51  $3.00 |  |                     | 326,925   |           |                     |  | 6.4       |          |  |   | 2.46        |           |  |          | 233,603 |  |  |   | 2.46 | 
|$3.01  $4.50 |  |                     | 35,656    |           |                     |  | 8.7       |          |  |   | 3.99        |           |  |          | 7,781   |  |  |   | 3.99 | 
|$4.51  $6.00 |  |                     | 404,706   |           |                     |  | 9.0       |          |  |   | 4.77        |           |  |          | 2,677   |  |  |   | 4.77 | 
|$6.01  $7.50 |  |                     | 19,656    |           |                     |  | 9.4       |          |  |   | 6.54        |           |  |          |        |  |  |   |     | 
|$7.51  $9.00 |  |                     | 1,277,250 |           |                     |  | 9.9       |          |  |   | 9.00        |           |  |          | 1,937   |  |  |   | 9.00 | 
|              |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |        
|              |  |                     | 2,468,351 |           |                     |  | 8.3       |          |  | $ | 5.92        |           |  |          | 650,156 |  |  | $ | 1.16 | 
|              |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |        







Common Stock Repurchases




Employee Savings Plan






|    |             
|--- | ------------
|12. | Income Taxes



F-20



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)




|                                   |                                 |              |        |         |      |   |        |         |  
|---------------------------------- | ------------------------------- | ------------ | ------ | ------- | ---- | - | ------ | ------- | -
|                                   |                                 | December 31, |       
|                                   |                                 |              |       
|                                   |                                 | 2004         |        |         | 2005 |  
|                                   |                                 |              |        |         |      |  
|Deferred tax assets (liabilities): |                                 |              |        |         |      |   |        |        
|                                   | NOLs                            |              | $      | 6,795   |      |   | $      | 8,505   |  
|                                   | Allowance for doubtful accounts |              |        | 76      |      |   |        | 74      |  
|                                   | Deferred revenue                |              |        | 2,028   |      |   |        | 2,468   |  
|                                   | Depreciation                    |              |        | 337     |      |   |        | 350     |  
|                                   | Intangible asset amortization   |              |        | 630     |      |   |        | 352     |  
|                                   | Accrued expenses                |              |        | 223     |      |   |        | 254     |  
|                                   | Other                           |              |        | (69     | )    |   |        | (66     | )
|                                   |                                 |              |        |         |      |  
|                                   |                                 |              | 10,020 |         |      |   | 11,937 |        
|                                   | Valuation allowance             |              |        | (10,020 | )    |   |        | (11,937 | )
|                                   |                                 |              |        |         |      |  
|Net deferred tax asset             |                                 | $            |       |         |      | $ |       |        
|                                   |                                 |              |        |         |      |  





|    |                              
|--- | -----------------------------
|13. | Commitments and Contingencies

Purchase Commitments




Leases




F-21



---



##### 



Vocus, Inc. and Subsidiaries


Notes to Consolidated Financial
Statements (continued)




|                                    |  |           |       |  |         |   |     |  
|----------------------------------- |  | --------- | ----- |  | ------- | - | --- | -
|                                    |  | Operating |       |  | Capital |  
|                                    |  | Leases    |       |  | Leases  |  
|                                    |  |           |       |  |         |  
|2006                                |  | $         | 590   |  |         | $ | 34  |  
|2007                                |  |           | 486   |  |         |   | 32  |  
|2008                                |  |           | 413   |  |         |   | 26  |  
|2009                                |  |           | 379   |  |         |   | 25  |  
|2010                                |  |           | 387   |  |         |   | 18  |  
|2011 and thereafter                 |  |           | 163   |  |         |   |    |  
|                                    |  |           |       |  |         |  
|Total future minimum payments       |  | $         | 2,418 |  |         |   | 135 |  
|                                    |  |           |       |  |         |  
|Less amount representing interest   |  |           |       |  |         |   | (19 | )
|Less current portion                |  |           |       |  |         |   | (27 | )
|                                    |  |           |       |  |         |  
|Long-term capital lease obligations |  |           |       |  |         | $ | 89  |  
|                                    |  |           |       |  |         |  

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, |          
|                                                                             |                   | 2004                                             |        |           | 2004     |   |       | 2004          |   |   | 2004         |           |   | 2005      |        |           | 2005     |   |        | 2005          |   |   | 2005         |          
|                                                                             |                   |                                                  |        |           |          |   |       |               |   |   |              |           |   |           |        |           |          |   |        |               |   |   |              |          
|                                                                             |                   | (Dollars in thousands, except per share amounts) |       
|Summary consolidated statement of operations data:                           |                   |                                                  |        |           |          |   |       |               |   |   |              |           |   |           |        |           |          |   |        |               |   |   |              |           |   |   |        |           |   |   |       |          
|Revenues                                                                     |                   | $                                                | 4,612  |           |          | $ | 5,034 |               |   | $ | 5,162        |           |   | $         | 5,585  |           |          | $ | 6,100  |               |   | $ | 6,794        |           |   | $ | 7,297  |           |   | $ | 7,871 |          
|Gross profit(1)                                                              |                   |                                                  | 3,665  |           |          |   | 4,002 |               |   |   | 4,075        |           |   |           | 4,283  |           |          |   | 4,643  |               |   |   | 5,263        |           |   |   | 4,149  |           |   |   | 6,071 |          
|Net loss attributable to common stockholders                                 |                   |                                                  | (1,052 | )         |          |   | (943  | )             |   |   | (906         | )         |   |           | (1,282 | )         |          |   | (1,457 | )             |   |   | (1,237       | )         |   |   | (3,485 | )         |   |   | (785  | )        
|Net loss attributable to common stockholders per share:                      |                   |                                                  |        |           |          |   |       |               |   |   |              |           |   |           |        |           |          |   |        |               |   |   |              |           |   |   |        |           |   |   |       |          
|                                                                             | Basic and diluted |                                                  | $      | (0.26     | )        |   | $     | (0.23         | ) |   | $            | (0.22     | ) |           | $      | (0.31     | )        |   | $      | (0.35         | ) |   | $            | (0.29     | ) |   | $      | (0.86     | ) |   | $     | (0.11     | )
|Weighted average shares outstanding used in computing per share
    amounts: |                   |                                                  |        |           |          |   |       |               |   |   |              |           |   |           |        |           |          |   |        |               |   |   |              |           |   |   |        |           |   |   |       |          
|                                                                             | Basic and diluted |                                                  |        | 4,004,813 |          |   |       | 4,016,558     |   |   |              | 4,028,894 |   |           |        | 4,079,547 |          |   |        | 4,168,621     |   |   |              | 4,327,914 |   |   |        | 4,031,908 |   |   |       | 6,921,331 |  



|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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-22



---



##### 



Vocus, Inc.


Schedule II  Valuation and Qualifying
Accounts


(Dollars in thousands)


|                                                                        |  |            |        |  |            |   |       |            |  |            |               |      |  |   |        | 
|----------------------------------------------------------------------- |  | ---------- | ------ |  | ---------- | - | ----- | ---------- |  | ---------- | ------------- | ---- |  | - | ------ | 
|                                                                        |  | Balance at |        |  |            |   |       |            | 
|                                                                        |  | Beginning  |        |  | Charged to |   |       |            |  | Balance at |              
|                                                                        |  | of Period  |        |  | Expense    |   |       | Deductions |  |            | End of Period |     
|                                                                        |  |            |        |  |            |   |       |            |  |            |               |     
|Allowance for doubtful accounts (deducted from accounts
    receivable) |  |            |        |  |            |   |       |            |  |            |               |      |  |   |        | 
|Year ended December 31, 2003                                            |  | $          | 215    |  |            | $ | 116   |            |  | $          | (51           | )(1) |  | $ | 280    | 
|Year ended December 31, 2004                                            |  |            | 280    |  |            |   | (54   | )          |  |            | (27           | )(1) |  |   | 199    | 
|Year ended December 31, 2005                                            |  |            | 199    |  |            |   | 51    |            |  |            | (57           | )(1) |  |   | 193    | 
|                                                                       
|Deferred tax valuation allowance (deducted from net deferred
    taxes) |  |            |        |  |            |   |       |            |  |            |               |      |  |   |        | 
|Year ended December 31, 2003                                            |  | $          | 6,573  |  |            | $ | 1,939 |            |  | $          |              |      |  | $ | 8,512  | 
|Year ended December 31, 2004                                            |  |            | 8,512  |  |            |   | 1,508 |            |  |            |              |      |  |   | 10,020 | 
|Year ended December 31, 2005                                            |  |            | 10,020 |  |            |   | 1,917 |            |  |            |              |      |  |   | 11,937 | 



|    |                                                       
|--- | ------------------------------------------------------
|(1) | Uncollectible accounts written-off, net of recoveries.

II-1



---



##### 



Index to Exhibits


|                |    |        |          |                                                                                                                                                                                                                                  
|--------------- | -- | ------ | -------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Numbers |    |        | Exhibits
|                |    |        |         
|                | 3  | .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)  |          | Warrant to purchase common stock issued to PNC Bank, dated as of
    August 24, 2001                                                                                                                                             
|                | 10 | .2(1)  |          | Warrant to purchase common stock issued to Comerica
    Bank  California dated as of November 19, 2002.                                                                                                                         
|                | 10 | .3(1)  |          | Form of warrant to purchase common stock and schedule of details
    omitted therefrom.                                                                                                                                          
|                | 10 | .4(1)  |          | Form of warrant to purchase Series B preferred stock and
    schedule of details omitted therefrom.                                                                                                                              
|                | 10 | .5(1)  |          | 1999 Stock Option Plan.                                                                                                                                                                                                          
|                | 10 | .6(1)  |          | Form of Option Agreement under Registrants 1999 Stock
    Option Plan.                                                                                                                                                          
|                | 10 | .7(5)  |          | 2005 Stock Award Plan.                                                                                                                                                                                                           
|                | 10 | .8(5)  |          | Form of Option Agreement under Registrants 2005 Stock
    Award Plan.                                                                                                                                                           
|                | 10 | .9(1)  |          | Third Amended and Restated Registration Rights Agreement among
    the Registrant and the other parties named therein, dated as of
    December 20, 2004.                                                                        
|                | 10 | .10(1) |          | Agreement of Lease, dated December 21, 2000, between MOR
    FORBES LLLP and Registrant as amended.                                                                                                                              
|                | 10 | .11(1) |          | Loan Agreement between the Registrant and Mercantile-Safe
    Deposit and Trust Company, dated as of November 8, 2004.                                                                                                           
|                | 10 | .12(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 | .13(5) |          | Form of Indemnification Agreement entered into by the Registrant
    and each of its executive officers and directors.                                                                                                           
|                | 10 | .14(2) |          | Data Distribution License Agreement between the Registrant and
    Gale Group, Inc., dated October 15, 2004.                                                                                                                     
|                | 10 | .15(2) |          | Data Distribution License Agreement between the Registrant and
    Gale Group, Inc., dated December 13, 2004.                                                                                                                    
|                | 10 | .16(2) |          | Agreement between the Registrant and PR Newswire Association,
    Inc., dated March 14, 2001.                                                                                                                                    
|                | 10 | .17(2) |          | License Agreement between the Registrant and PR Newswire
    Association LLC, dated August 1, 2003, as amended.                                                                                                                  
|                | 10 | .18(2) |          | Agreement between the Registrant and PR Newswire Association,
    Inc., dated August 1, 2003, as amended.                                                                                                                        
|                | 10 | .19(2) |          | Development and Support License Agreement between the Registrant
    and Moreover Technologies, Inc., dated July 30, 2004.                                                                                                       
|                | 10 | .20(2) |          | Reseller Agreement between the Registrant and Moreover
    Technologies, Inc., dated July 30, 2004.                                                                                                                              
|                | 10 | .21(2) |          | Redemption Agreement between the Registrant and Robert
    Lentz, dated July 1, 2005.                                                                                                                                            
|                | 10 | .22(2) |          | Qwest Master Internet Market Service Agreement between the
    Registrant and Quest Communications Corporation, dated
    September 15, 2004.                                                                                    
|                | 10 | .23(3) |          | Call Agreement executed by Lazard Technology Partners II
    LP, Sterling Venture Partners, L.P. and Sterling SVP Executive
    Fund, L.P. for the benefit of Mercantile-Safe Deposit and Trust
    Company, dated November 2004.
|                | 10 | .24(7) |          | Form of Employment Agreement for Richard Rudman, Robert Lentz
    and Stephen Vintz, and schedule of details omitted therefrom.                                                                                                  
|                | 10 | .25(7) |          | Form of Employment Agreement for William Donnelly and Norman
    Weissberg, and schedule of details omitted therefrom.                                                                                                           
|                | 10 | .26(5) |          | Summary of board of directors compensation.                                                                                                                                                                                      
|                | 21 | .1(1)  |          | List of subsidiaries.                                                                                                                                                                                                            
|                | 23 | .1*    |          | Consent of Ernst & Young LLP                                                                                                                                                                                                     
|                | 24 | .1*    |          | Power of Attorney (included on the signature page to this
    report).                                                                                                                                                           



---



##### 



|                |    |      |          |                                                                                                                                            
|--------------- | -- | ---- | -------- | -------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Numbers |    |      | Exhibits
|                |    |      |         
|                | 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 Amendment No. 3
    to the Registration Statement on
    Form S-1 of Vocus,
    Inc. (Registration
    No. 333-125834)
    filed with the Securities and Exchange Commission on
    September 9, 2005.
|   
|(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.