** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-K**

** **
| **(Mark One)**                                                                                                                                                                                                                                                            |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **ý**                                                                                                                                                                                                                                                                | ** ** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934** |
| **For the fiscal year ended December 31,  2005**                                                                                                                                                                                                                     |
| ** **                                                                                                                                                                                                                                                                |
| **OR**                                                                                                                                                                                                                                                                    |
| ** **                                                                                                                                                                                                                                                                |
| **o**                                                                                                                                                                                                                                                                     | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| **For the transition period from                     to                  ** |

 

**COMMISSION FILE NUMBER: 000-29678**

 

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** **

**INTRADO INC.**

(Exact name of registrant as specified in its charter)

 
| **Delaware**                                                   | ** ** | **84-0796285**                       |
|----------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |       | (I.R.S. Employer Identification No.) |
| ** **                                                     | ** ** | ** **                           |
| **1601 Dry Creek Drive, Longmont, Colorado**                   | ** ** | **80503**                            |
| (Address of principal executive offices)                       |       | (Zip Code)                           |

 

Registrant’s telephone number, including areacode:  **720-494-5800**

 

Securities registered pursuant to Section 12(b) ofthe Act: **None.**

 

Securities registered pursuant to section 12(g) ofthe Act:

**Common Stock, par value $0.001 per share**

(Title of Class)

 

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Indicateby check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act. Yes o No ý

 

Indicateby check mark if the Registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act. Yes o No ý

 

Indicateby check mark whether the Registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes ý No o

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to thebest of Registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. o

 

Indicateby check mark whether the Registrant is a large accelerated filer, an acceleratedfiler or a non-accelerated filer.  Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Act.  (Check one): 
| Large  accelerated filer o |   | Accelerated filer ý |   | Non-accelerated filer o |
|---------------------------------|--------|-------------------------------|--------|------------------------------|

 

Indicateby check mark whether the Registrant is a shell company (as defined in Rule 12b-2of the Act): Yes o  No ý

 

Theaggregate market value of voting common stock held by non-affiliates of theRegistrant was approximately $252,516,000 as of the end of the Registrant’ssecond fiscal quarter, based upon the closing sale price of the common stock asreported on the NASDAQ National Market on June 30, 2005.

 

Asof February 28, 2006, the registrant had 18,110,739 shares of common stock outstanding.

 

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**CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS**

 

This Annual Report on Form 10-K and the information incorporatedby reference contains “forward-looking statements” within the meaning of Section 27Aof the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934. In particular, we direct your attention to Item 1. Business, Item3. Legal Proceedings, Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations, Item 7A. Quantitative and QualitativeDisclosures About Market Risk and Item 9A. Controls and Procedures. We intendthe forward-looking statements throughout this Annual Report on Form 10-Kand the information incorporated by reference to be covered by the safe harborprovisions for forward-looking statements. All projections and statementsregarding our expected financial position and operating results, our businessstrategy, our financing plans and the outcome of any contingencies are forward-lookingstatements. These statements can sometimes be identified by our use of forward-lookingwords such as “may,” “believe,” “plan,” “will,” “anticipate,” “estimate,” “expect,”“intend” and other words and phrases of similar meaning. Known and unknownrisks, uncertainties and other factors could cause the actual results to differmaterially from those contemplated by the statements. The forward-lookinginformation is based on information available as of the date of this AnnualReport on Form 10-K and on numerous assumptions and developments that arenot within our control. Although we believe these forward-looking statementsare reasonable, we cannot assure you they will turn out to be correct. Actualresults could be materially different from our expectations due to a variety offactors, including the following:

 

•                  Our reliance on large contracts from alimited and potentially decreasing number of significant telecommunicationscustomers and their ability to pay for our services, especially in light ofcompetitive pressures in the telecommunications industry;

 

•                  Whether acquisitions, consolidations,bankruptcies and reorganizations among our telecommunications customers willresult in volume pricing discounts or otherwise have a material, adverse effecton our market share, revenue, liquidity and profitability;

 

•                  Competition in service, price and technologicalinnovation from entities with substantially greater resources, especially inlight of the fact that the increased use of Voice over Internet Protocol, orVoIP, technology has opened our traditional 9-1-1 data management servicesbusiness to new competition;

 

•                  Our ability to enter and renew wireline,wireless and VoIP contracts at prices that will allow us to maintain currentprofit margins;

 

•                  Whether our efforts to expand into European,Asian and other international markets will prove to be economically viable andwhether we will be able to generate revenue sufficient to recover ourinvestment in bmd wireless AG or other international investments;

 

•                  Adverse trends in the telecommunicationsindustry in general, including bankruptcy filings by our customers and otherfactors that are beyond our control;

 

•                  Whether our investments in research anddevelopment and capitalized software will expand our service offerings andprove to be economically viable;

 

•                  Constraints on our sales and marketing channelsbecause many of our customers compete with each other;

 

•                  Our ability to accurately predict, controland recoup the large amount of up-front expenditures necessary to serve newcustomers and possible delays in sales cycles;

 

•                  Our ability to expand beyond our traditionalbusiness and into highly competitive notification and data management sectors,including, but not limited to, our efforts to deploy IntelliCast®Target Notification services;

 

•                  The unpredictable rate of adoption ofwireless 9-1-1 services, including further delays in the Federal

 

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Communications Commission’s mandated deployment ofVoIP 9-1-1 services and Phase I and Phase II wireless location services;

 

•                  The potential for liability claims, includingproduct liability claims relating to our software and services;

 

•                  Technical difficulties and network downtime,including those caused by sabotage or unauthorized access to our systems;

 

•                  Changes in foreign currency exchange rates,and their potentially adverse effect on our results of operations and cashflows;

 

•                  The possibility that we will not generatetaxable income in an amount sufficient to allow us to utilize previouslygenerated research and development tax credits;

 

•                  Developments in telecommunications regulationand the unpredictable manner in which existing or new legislation andregulation may be applied to our business;

 

•                  The impact of recent accountingpronouncements related to share-based payments on our future financial statements;

 

•                  Developments in governance, accounting andfinancial regulations, and their impact on general and administrative expenses;and

 

•                  With respect to West Corporation’s proposedacquisition of Intrado: (1) the potential failure of the parties to satisfythe conditions to consummation of the merger and the possibility that we may berequired to pay a termination fee of $15.0 million to West Corporation ifthe merger agreement is terminated, (2) the effect of the announcement ofthe merger on our customer relationships, operating results and businessgenerally, including our ability to retain key employees, and (3) if themerger is consummated, our common stock will no longer be traded on The NasdaqNational Market and stockholders will no longer participate in our growth or inany synergies resulting from the merger.

 

This list is intended to identify some of the principal factors thatcould cause actual results to differ materially from those described in theforward-looking statements included elsewhere in this report. These factors arenot intended to represent a complete list of all risks and uncertaintiesinherent in our business and should be read in conjunction with the moredetailed cautionary statements included in this Annual Report on Form 10-Kunder the caption Item 1A. Risk Factors, our other Securities and ExchangeCommission filings and our press releases.

 

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**INTRADO INC.**

 

**2005 ANNUAL REPORT ON FORM 10-K**

 

**TABLE OF CONTENTS**

 
| **PART I**   |
|-------------------|
|              |   |   |
| Item 1.           | Business |   |
| Item 1A.          | Risk Factors |   |
| Item 1B.          | Unresolved Staff  Comments |   |
| Item 2.           | Properties |   |
| Item 3.           | Legal Proceedings |   |
| Item 4.           | Submission of  Matters to a Vote of Security Holders |   |
| Item  5.          | Market  for the Registrant’s Common Equity, Related Stockholder Matters and Issuer  Purchases of Equity Securities |   |
|              |   |   |
| **PART II**  |
|              |   |   |
| Item 6.           | Selected Financial Data |   |
| Item 7.           | Management’s Discussion and Analysis  of Financial Condition and Results of Operation |   |
| Item 7A.          | Quantitative and Qualitative Disclosures  About Market Risk |   |
| Item 8.           | Financial Statements and  Supplementary Data |   |
| Item 9.           | Changes in and Disagreements with  Accountants on Accounting and Financial Disclosure |   |
| Item 9A.          | Controls and Procedures |   |
| Item 9B.          | Other Information |   |
|              |   |   |
| **PART III** |
|              |   |   |
| Item 10.          | Directors and Executive Officers of  the Registrant |   |
| Item 11.          | Executive Compensation |   |
| Item 12.          | Security Ownership of Certain  Beneficial Owners and Management and Related Stockholder Matters |   |
| Item 13.          | Certain Relationships and Related  Transactions |   |
| Item 14.          | Principal Accountant Fees and  Services |   |
|              |   |   |
| **PART IV**  |
|              |   |   |
| Item 15.          | Exhibits and Financial Statement  Schedules |   |
|              |   |   |
| Signatures        |   |

 

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**ITEM 1.  BUSINESS**

 

**Overview**

 

For over 25 years, telecommunications providers, public safetyorganizations and government agencies have turned to Intrado Inc. for theiremergency communications needs. A global provider of integrated data andtelecommunications solutions, we provide the core of the United States’ 9-1-1infrastructure and a wide range of safety and mobility offerings. Our primarybusiness is the support of the nation’s 9-1-1 emergency response infrastructurefor wireline, wireless and Voice over Internet Protocol, or VoIP, networks. Thedata we manage enables a 9-1-1 call to be routed to the appropriate publicsafety answering point, or PSAP. We also provide the PSAP with callback dataand the caller’s location. This critical information enables public safetyorganizations to respond to calls quickly and efficiently. In addition, ourinfrastructure enables telecommunications carriers to meet state and federalregulatory mandates. Since we launched our 9-1-1 data management services in1994, our 9-1-1 data integrity infrastructure has provided robust and reliableservice to our telecommunications and public safety customers.

 

Our customers include all of the major incumbent local exchangecarriers, or ILECs, 41 competitive local exchange carriers, or CLECs, 32 VoIPproviders, 60 wireless service providers, and a variety of state, local andfederal government agencies. We directly manage more than 104 millionwireline subscriber data records and support another 130 million wirelinerecords under customer management with Intrado-provided licensed software. Inwireless, we provide 9-1-1 infrastructure and deployment services thatsupport nearly 100 million subscribers in the United States.

 

During 2005, we continued to strengthen and expand our 9-1-1 leadershipposition in our two primary business units: wireline and wireless. In ourwireline business, we renewed or extended certain long-term contracts withmajor ILECs and acquired new CLEC and VoIP customers. We continued to expandour wireless business as we added new customers and continued servicedeployments that enable wireless carriers to comply with Federal CommunicationsCommission, or FCC, Phase I and Phase II mandates.

 

We provide a location-positioning platform to support both Phase I andPhase II wireless deployments. Our internally-developed technology includes aMobile Positioning Center, or MPC, and a Gateway Mobile Location Center, orGMLC. The MPC and GMLC and the Intrado Wireless Gateway are essentialcomponents for the proper routing and processing of wireless emergency calls.The platform is also used for our VoIP solutions and Intrado®Enhanced Emergency Services.

 

We also operate IntelliCast® TargetNotification that enables city, state or federal governments to geographicallytarget and notify individuals of emergencies.

 

In 2005, we continued to invest in the Intelligent Emergency NetworkTM,or IEN, which will enable the next generation of emergency communicationsservices. IEN is a key element of our strategy to expand our existing 9-1-1services business. In 2005, we also continued global expansion plans with theformation of a joint venture in China and a new subsidiary in Singapore.  bmd wireless AG, or bmd, in Switzerlandcontinues to provide a suite of commercial services and access to importantcarrier relationships in Europe, and its capabilities and expertise have nowbeen fully integrated into our operations.

 

We continue to maintain ISO 9001 certification, which we first achievedin December 2001 and is an integral part of our corporate complianceprogram. This certification demonstrates our strong commitment to the qualityand continuous improvement of our products, services and internal processes inboth domestic and international markets.

 

We maintain a website with the address *www.intrado.com*.We are not including the information contained on our website as part of, orincorporating it by reference into, this report. Through our website, we makeavailable all of our filings with the Securities and Exchange Commission, orSEC.

 

We were founded and incorporated in July 1979 in Colorado underthe name Systems Concepts of Colorado, Inc. and reincorporated in September 1993in Delaware under the name SCC Communications Corp. We

 

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completed our initial public offering in June 1998. We acquiredLucent Public Safety Systems, or LPSS, in May 2001, after which we changedour name to Intrado Inc.

 

On January 29, 2006, we entered into an Agreement and Planof Merger with West Corporation, a Delaware corporation headquartered in Omaha,Nebraska. Under the terms of the agreement, West Corporation agreed to acquireall of the outstanding Intrado common stock for a purchase price of $26.00 pershare. If our stockholders approve the merger at a meeting expected to be heldduring the second quarter of 2006, we will become a wholly owned subsidiary ofWest Corporation.

 

Our corporate offices are located at 1601 Dry Creek Drive, Longmont,Colorado, and our telephone number is (720) 494-5800.

 

**Industry Background**

*** ***

***Wireline***

 

Most jurisdictions in the United States provide wireline Enhanced 9-1-1,or E9-1-1, which automatically allows the PSAP to receive the caller’s streetaddress and callback telephone number when a 9-1-1 call is made. When a callerdials 9-1-1, the call is routed through the network and the 9-1-1 data serveris queried. This data server associates the caller’s telephone number with thecaller’s location and identifies the appropriate primary and secondary PSAP.The data in the 9-1-1 database must be constantly updated to reflect bothchanges to telephone service and PSAP boundaries, such as the addition of astreet, the building of a new fire or police station, or city annexations ofnew territory. Delivery of 9-1-1 service requires coordination of data frommultiple sources, review and processing of the data, resolution of data errorsand delivery of data into mission-critical data servers. All local exchangecarriers currently are required to provide wireline 9-1-1 service.

 

During2005, the use of VoIP, a technology that enables voice traffic to be carriedover an Internet Protocol-based network, grew significantly. We expect thistrend to continue.  In a VoIP call, voiceis broken into packets at the transmitting end device and then reassembled atthe receiving end device. The location of the VoIP caller is not necessarilyfixed, presenting a challenge related to the handling and routing of emergencycalls. Regulators, industry trade groups, carriers and suppliers are workingtogether to address this issue. In May 2005, the FCC issued a rulingmaking E9-1-1 access mandatory for interconnected VoIP providers who offerfixed and nomadic services. This ruling requires VoIP providers toexpeditiously develop a solution to deliver VoIP placed 9-1-1 calls directlyinto the emergency services network and to provide the caller’s telephonenumber and address location in areas where E9-1-1 is available. The deadlinefor complying with this ruling was November 28, 2005.

 

***Wireless***

 

Wireless telecommunications created significant challenges for E9-1-1service delivery because the caller’s location is not fixed. Recognizing thepublic safety need for improved wireless E9-1-1 services, the FCC issued anorder in June 1996 mandating implementation of wireless E9-1-1 service intwo phases. Phase I requires wireless carriers to provide the PSAP with thecaller’s telephone number and the location of the cell sector from which thecall originated. Phase I also stipulates that the emergency call be routed toan assigned PSAP that is nearest to the caller. Since April 1998, wirelessservice providers have been required to comply with the Phase I mandate withinsix months of a valid PSAP request. Phase II requires carriers to locatewireless 9-1-1 callers within even more precise location parameters, asspecified by the FCC.

 

In addition to the FCC’s mandate, wireless service providers aremotivated to implement wireless E9-1-1 services because of increasing pressurefrom public safety agencies. In addition, the technology required for Phase IIservice can also be used by wireless carriers to provide additionallocation-based services to their customers. These services include location-basedtraffic reporting, emergency roadside assistance, location-based dispatch andother services.

 

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***Other Opportunities***

 

New technologies have increased the complexities and opportunitiesrelated to public safety services. The expansion of the Internet and thewidespread use of wireless Internet devices introduce multiple new points ofconnectivity and consumer interactivity with emergency services providers.These technologies also create the potential for enhanced public safetycoordination and support. For example, telematics devices, automobilecommunication devices that are used for location-based services such asemergency roadside assistance, are entering the market at a rapid pace.

 

The European Union’s, or EU’s, initiative to implement locationinformation for emergency services through their common emergency number, 1-1-2,was launched via the EU directive issued in July 2003.  Based on a formal review in 2005 of thestatus of 1-1-2 implementations, the EU will establish an expert group ofofficials from the 25 member states to seek practical solutions to thecontinuing challenges facing 1-1-2 implementations.

 

**Our Strategy**

 

Our objective is to expand our leadership position in emergencycommunications systems while pursuing additional opportunities that build uponour core competencies. Key elements of our strategy include:

 

*Maintain and extend our leadership in thewireline 9-1-1 data management market.* In wireline,our systems manage more than 234 million subscriber data records. We areseeking to add new CLEC and VoIP customers, increase the number of data recordsunder management, expand our existing 9-1-1 services and support the evolving telecommunicationsinfrastructure. In particular, we intend to continue to play a lead role in theevolving VoIP market and plan to offer more services to these carriers as theindustry better defines the E9-1-1 solution for Internet Telephony.

 

*Retain and grow our existing wireless 9-1-1-customerbase.* We have contracts to provide Phase I wireless 9-1-1services to 60 wireless customers. There is a significant opportunity toincrease our Phase I wireless 9-1-1 penetration by deploying service to alarger portion of the subscribers we have under contract and signing contractswith additional wireless service providers. We also have been deploying PhaseII wireless services since late 2001. The significant growth in the number ofwireless telephone users, wireless carrier consolidation and the increaseddemand for enhanced wireless service offerings present opportunities for growthin our wireless 9-1-1 services.

 

*Continue development and roll out of IEN.*As the leader in 9-1-1 infrastructure, systems and services, we are wellpositioned to deliver the next generation of emergency communications services.The IEN initiatives will encompass secure Internet Protocol, or IP, networkingand allow the industry to move away from relying solely on outdated analog technologies.We are designing and building the next generation of 9-1-1 networkinfrastructure, in which we plan to incorporate the latest technologies such asIP and message switching. We intend to use our expertise in providing highlyaccurate 9-1-1 data management services over the past two decades to ensurethat the same high standards are applied to future emergency managementsolutions.

 

We have been careful to develop IEN with significant input from manystakeholders in this important venture: our wireline and wireless customers,the public safety community, hardware suppliers and regulators. We believe thisprovides a solid foundation for the introduction and acceptance of IEN over thecoming years. As new products and services are introduced to carriers,consumers and the public safety community, we believe we have the potential toboth expand and garner a larger portion of the funding that is currentlyavailable for emergency services.

 

*Extend Our Emergency CommunicationsLeadership Beyond North America.* We continue to gainvisibility into the European emergency communications and notification market.We are actively involved with the European Telecommunications StandardsInstitute, or ETSI, in defining requirements for Enhanced 1-1-2, or E1-1-2,deployment. In addition, we have been active with the European Emergency NumberAssociation, or EENA, in advancing the development and implementation of E1-1-2.We are engaged in discussions with key European and Asian carriers, governmentorganizations and potential deployment partners.

 

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*Focus on Government Opportunities.* In 2005, we continued to focus attention inthe federal, state and local government markets through our Government MarketsGroup. This group acts as a cross business-unit marketing and sales resource inidentifying, analyzing and pursuing potential government market opportunitiesand developing and executing cohesive product portfolio plans, promotionalprograms and distribution strategies. The Government Markets Group focuses on the sale of Intrado’s productsand services as well as partner solutions, consulting, and system integrationservices to prospective public safety government buyers.

 

**Intrado Products and Services**

 

We provide a wide range of products and services for thetelecommunications, public safety and commercial markets. Our key products arelisted below.

 

***WirelineOfferings***

 

***Intrado***®***Data Management Services and Systems***

 

We provide wireline 9-1-1 solutions on both service-based andlicense-based models. In the service model, we house and maintain the customer’sdata; and the customer outsources virtually all of its 9-1-1 data managementoperations, including system activation, routine data administration, and eventtransaction processing and performance management. Our services are secure,reliable and easily interface with an individual carrier’s proprietary or opensystems. In the license model, we provide licensed software applicationsbundled with systems hardware that allows carriers to manage the data, at theirown facilities, with their own personnel.

 

***9-1-1 DataManagement Services—Outsourced Model***

 

*Customers: ILECs, CLECs, IndependentOperating Companies (IOCs), State and Local Governments, State of Texas, VoIPcarriers.*

 

Data Management Services ensure that hundreds of millions of complexrecords are current, accurate and available on demand. These services encompassthe processes that enable a 9-1-1 call to be routed to the appropriate PSAPalong with accurate and timely information about the caller’s identity,callback number and location. We receive daily service order updates from ourtelecommunications carrier customers, which reflect changes to subscriber data.We also receive updates to boundary and routing data needed to route 9-1-1calls to the appropriate PSAP. We screen this data for accuracy and analyze andresolve data discrepancies. Screened data is then inserted into the 9-1-1databases. When a 9-1-1 call occurs, it is routed to the 9-1-1 voice switch.The call is then routed to the appropriate PSAP, which queries our database,and the database then sends the caller’s location and callback number to thePSAP.

 

Our CLEC data management services provide a single point of contact toprocess and format 9-1-1 data for CLECs and independent telephone companies.These entities may be located in multiple communities that have diverserequirements for delivery of 9-1-1 information. CLECs and independent telephonecompanies electronically transmit subscriber information to us. We thenreformat the data to comply with the destination community’s local standards,test for detectable errors and deliver the data to the 9-1-1 data systems serving that community. These data systems may be operatedby us or by a carrier that does not use our services or products.

 

***Our VoIP services, including V9-1-1®Mobility Services, enable VoIP providers to support emergency calls over theirVoIP networks by providing a VoIP call interface to the Public SwitchedTelephone Network and call routing and call delivery to the appropriate PSAP. Ourproven solution helps VoIP service providers comply with regulatory mandates byenabling a comprehensive routing and call delivery solution for VoIP 9-1-1calls.  In addition to call deliverycapability through our network, our real-time provisioning system performsgeo-coding , data storage and file maintenance of our customers subscriber datato ensure that calls received by us can be delivered via our network to theappropriate selective router for 9-1-1 call termination.  The information delivered to the PSAP will beconsistent with current and existing wireline 9-1-1 data delivery, meaning avalidated Master Street Address Guide, or MSAG, and the call back number of theVoIP 9-1-1 caller will be displayed.***

 

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The individual components of our Data Management Services include thefollowing:

 

***Systems Preparationand Administration. ***Collect, organize and analyze thedata necessary to prepare our systems, including collecting information on PSAPjurisdictional boundaries, performing a full inventory of addresses located inan area and loading the subscriber information.

 

***Routine Data**Administration.***  Receiveand process daily service order updates from telecommunications carriers andperiodic boundary updates from PSAPs. The information received is verified andthen distributed throughout our network of geographically diverse servers.

 

***Event TransactionProcessing****.* Manage requests for information and routingfor 9-1-1 calls.

 

***PerformanceManagement****.*Provide performance metrics on service operations including response time,systems availability, data accuracy and error resolution intervals.

 

***Mapping Services****.* Document, review and analyze callrouting boundaries and specific address information for optimal management of 9-1-1call records. We also assist in system preparation and quality control programsto ensure that geographical information is current.

 

***Enhancements to 9-1-1Data Management Services***.  We also offer the followingenhancements to 9-1-1 Data Management Services:

 

•                  *9-1-1Net®* is a web-based tool formaintaining the MSAG and Automated Location Identification, or ALI, databases.Using 9-1-1Net®,users can view live address routing rules, send address updates, review inboundcall load, error statistics and ALI discrepancy reports and receive productupdates.

 

•                  *V9-1-1® Levelof Service* is a tool thatallows VoIP providers to verify their end subscriber’s level of 9-1-1 emergencyservice during the initial registration of their calling location.

 

•                  *Private Switch/ALI*, or PS/ALI, allows PBXsystem managers to create and transmit appropriate data records that identify acaller’s precise extension location within a facility.

 

•                  *Address Verification Manager* is aweb-based application linking Intrado to a local exchange carrier. AddressVerification Manager facilitates automated synchronization between the StreetAddress Guide, or SAG, and MSAG databases and provides a consistent method forresolving address discrepancies.

 

•                  *e-Bonding* provides full end-to-endelectronic confirmation of each E9-1-1 transaction. e-Bonding reports helpcustomers confirm records processed by carriers even when Intrado is not thedesignated ALI database manager.

 

•                  *Advanced Error Correction* identifies,investigates and resolves specific records that error at the E9-1-1 ServiceProvider.

 

***9-1-1 DataManagement Systems—Licensed Model***

 

*Customers: ILECs, PSAPs*

 

Data Management Systems include both hardware and software offerings.Our software offerings within Data Management Systems include DBMS and ALISA.

 

*DBMS* is a tool forprocessing service orders, maintaining MSAG records and validating serviceorders.

 

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*ALISA* is a databasethat uses automated number identification to recognize the number of the personcalling and associate this number with an address and emergency service number,or ESN, in the database. The ESN tells the PSAP the corresponding police, fire,or emergency medical dispatcher associated with the telephone number andaddress.

 

Add-on Data Management Systems offerings include the following:

 

*9-1-1 Information Manager*is a software tool for querying theMSAG and telephone number databases used to help maintain the records withinthese databases.

 

***ProfessionalServices***

 

*Customers: CLECs and IOCs*

 

The following professional service offerings enable customers toimprove their operations:

 

*9-1-1 Reconciliation.*Ensures data integrity between our transaction services system database and theE9-1-1 database provider’s database.

 

*9-1-1 Diagnostic Assessment.*Customized assessment conducted by one of our senior 9-1-1 subject matterexperts to evaluate efficiency of existing 9-1-1 processes.

 

*9-1-1 Training.*Customized training on a variety of 9-1-1-related topics.

 

*9-1-1Batch MSAG Translation.*Validates addresses against the Master Street Address Guide database.  This is a database of street names and housenumber ranges within their associated communities and Emergency Services Numbers(ESNs) to enable proper monitoring and routing of 9-1-1 calls.

 

***IntradoTarget Notification/Call List Services***

 

*Customers: Government (Federal/State/Local)and Commercial Enterprises*

 

The concept of public safety officials and police and fire departmentsusing the public telephone system to notify citizens of crisis situations hasmodernized emergency communications services. Our Intrado Target Notificationand Call List services provide a fast and efficient means of notifying thepublic and specialized groups during a crisis. Call events can be launched on ageographical basis or through the use of dedicated lists of telephone numbers.At the onset of an incident, target notification services can be used toprovide citizens and emergency personnel with critical information and ongoingupdates until the situation is resolved. In 2005, we completed a trial with theNational Weather Service to explore weather-based scenarios for targetednotification.  The trial validated theability to integrate all hazards threat modeling into emergency notification.

 

*Intrado Target Notification*is an emergency telephone notification tool used by local officials to rapidlyidentify, notify and instruct individuals and first responders in crisissituations. Target Notification is a fully redundant, hosted service, combininga high-capacity calling platform with in-house expertise in databasemanagement. A web-based application, it can be accessed via the Internet or anytelephone.

 

*Intrado Call List* isa telephone-based communications tool for reliably distributing information topublic safety officials, first responders and others who must rapidly mobilizein response to a crisis. Call list services are based on telephone number datasupplied by the customer. The list typically contains the name, title andtelephone number of specific individuals to be contacted. Call lists are builtand maintained via the Internet. Call lists may contain multiple wireline andwireless telephone numbers for each individual.

 

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***Intercarrier Information Exchange***

 

*Customers : VoIP Providers, ILECs, CLECs, Wireless Carriers, DataAggregators, Other Telecom Service Providers*

 

***Intrado’s IntercarrierInformation Exchange, or IIE, platform focuses on two broad areas of service: (1) dataservices, and (2) Operation Support Systems, or OSS, provisioningservices.  IIE services support manyaspects of carrier back office applications including billing reconciliation,call routing,***Customer Account Record Exchange, or CARE, compliance androuting, carrier identification, billing validity, private Caller Identification withName, or CNAM, functionality, Local Service Request, or LSRprocessing, Access Service Request, or ASR, processing, Line InformationDatabase, or LIDB, functionality, and Directory Assistance, or DA.  Several of the nation’s largest carriers usethe Intrado IIE services to solve complex and, in some cases, previouslyunsolvable issues.

*** ***

*IIE Data Services* include the following:

 

*National Repository Line Level Database* – Intrado maintains the National RepositoryLine Level Database, or NRLLDB, for the telecom industry.  An award from the Alliance forTelecommunications Industry Solutions, or ATIS, the database contains specificline level information that is CLEC specific and found no where else in theindustry, including unbundled network element, or UNE, and resale CLECinformation.

 

*Private CNAM Services* – Intrado maintains a private CNAM database service that allowscarriers to house data internally for completion of CNAM, rather than having tocontinually pay query charges to use the SS7 or IP networks to transport orobtain queries.

 

*IIE OSS Provisioning Services* are unique in the OSS field because they involve an outsourcedmodel.  Intrado handles all issuesassociated with LSRs, ASRs, service order activation (local numberportability), LIDB, CNAM, DA, and CARE population.  Some of the largest competitive carriers inthe country have found this model to be advantageous and are currently beingrewarded with lower costs of customer acquisition and reduced time between customerorder and customer payment.

***WirelessOfferings***

 

***Intrado®Wireless Services***

 

We are the leading provider of outsourced emergency response servicesand solutions for wireless service providers. We provide a range of productsand services, including outsourced transaction management, system integrationand a host of educational and professional services, all centered on ourscalable and redundant software platforms.

 

Intrado wireless network transaction services and systems routeinformation quickly and accurately, assuring that callers receive rapid andappropriate responses to their calls. These services provide a wide range ofapplications, including support of Phase I and Phase II E9-1-1 deployments,enhanced emergency services and wireless data services. We offer both serviceand licensed models. In the service model, we manage the entire E9-1-1 calldelivery to the local exchange carrier infrastructure, which in turn deliversthe calls to the PSAPs. We manage all of the wireless PSAP boundary data andprovisioning of all cell site information for our service customers. In thelicensed model, we deliver our location-positioning platform to our customersand provide professional services to implement, train and engineer the in-housesolution. We can also provide on-going remote provisioning and PSAP boundarydata access for our licensed customers. In either model, our wireless routingdata is utilized in the provision of emergency response services throughout theUnited States.

 

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***Enhanced 9-1-1Services***

 

*Customers: Wireless service providers*

 

Wehost wireless E9-1-1 services, and provide deployment and integration servicesto enable wireless service providers to comply with the FCC’s Phase I and PhaseII mandates. After a wireless service provider receives a valid activationrequest from a PSAP, our program managers develop a plan with the wirelessservice provider to activate the service the PSAP is requesting. This planincludes development of LEC network interconnections for both data and voicethat are specific to the local wireless network configuration and interfacerequirements. The program managers develop graphic cell site coverage area mapsthat are superimposed on current maps of public safety agency boundaries.Routing recommendations can then be made and coordinated with the appropriatePSAP. As a result, 9-1-1 calls are routed to the appropriate PSAP, and thecallback number and cell location of the caller are delivered to that PSAP.Wireless 9-1-1 offerings include the following:

 

*Intrado Wireless Gateway (IWG)* is a network and services solution forintegrating and maintaining connectivity to national and regional ALI systems.IWG has the flexibility to handle the real-time ALI exchange interfaces,messaging requirements, and data formats required by ILECs and PSAPs whileusing standards-based interfaces.

 

*Intrado Mobile Positioning Center and Gateway MobileLocation Center (MPC and GMLC)* serve as the core network element between a wireless network, locationdetermination equipment and the 9-1-1 network. The Intrado MPC and GMLC give wireless service providers the maximumlevel of flexibility and reliability required as they deploy emergencyservices.  The MPC and GMLC provide callrouting services to wireless switches in a wireless service provider’s networkand provide call-back number and caller location information to the PSAP, asrequired by the FCC mandate.

 

*Intrado Coordinate Routing Database (CRDB)* is the industry’s most comprehensive andaccurate PSAP database. Associated CRDB services include data provisioning,data collection, mapping, call routing facilitation, Emergency ServicesMessaging Entity and Emergency Services Network Entity provisioning.  Program management for CRDB services ishandled by experienced professionals who understand E9-1-1 infrastructure.

 

*Intrado Position Determination Entity (PDE)* offers wireless service providers access toa full-service hosted hardware and software application for their Phase IIhandset based location deployments. Our hosted PDE service utilizes third partyPDE software to locate the latitude and longitude of the wireless caller withremarkable precision without the need for expensive additions or changes to thewireless service provider’s network. Hosted PDE service provides access to acentralized PDE server as well as the necessary application software andengineering expertise for a complete PDE solution.

 

*Intrado Standalone ALI* connects PSAPs that utilize on-site ALIdatabases with IWG Services, enabling PSAPs to receive caller locationinformation when wireless 9-1-1 calls are initiated.

 

*Intrado Accuracy Compliance Testing Services* provide wireless carriers the opportunity tosatisfy the location testing and accuracy verification objectives of the FCC’sguidelines and industry standards. By providing the capabilities to monitor the“health” of the emergency services network with an automated solution, carriersminimize the amount of time, money and resources spent on repeated compliancetesting.

 

*9-1-1 for Mobile Satellite Services (MSS)*provides a highly reliable solution thatinterfaces between MSS subscribers and PSAPs to meet the FCC mandate for MSS 9-1-1service. MSS subscribers simply dial 9-1-1, and the call is routed to theIntrado Emergency Call Relay Center (ECRC) where experienced emergency calltakers determine the appropriate PSAP and transfer the call.

 

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***Professional Services***

 

*Customers: Wireless service providers*

 

Ourwireless professional services provide customers with the opportunity to meettheir unique E9-1-1 project management requirements as well as their need toallocate resources effectively.

 

*Intrado E9-1-1 Implementation Services* provide assessment of existing capabilitieswith the technical and operational requirements for successful deployment andmanagement of E9-1-1.

 

*Intrado E9-1-1 Infrastructure Services* provide drive testing, translations andmapping information.

 

*Intrado Cost Recovery Services* provides expertise in customized costrecovery and billing services.

 

*Intrado E9-1-1 Analytics* evaluate the on-going performance of your E9-1-1environment by accessing key data collected by Intrado. Intrado E9-1-1Analytics presents performance indicators in areas such as uncertainty(potential distance between wireless caller and calculated Phase II x,ycoordinates) and sector call counts that provide insight to E9-1-1 systemefficiency and integrity.

 

***Government Professional Services***

 

*Intrado E9-1-1 Consulting Services* provide states, counties and municipalitieswith technical and operational readiness assessments, facility reviews,personnel training and other services that enable government entities to meettheir unique E9-1-1 project management requirements.

 

***Integration Lab Services***

 

*Customers: Wireless service providers*

 

*Intrado Integration Lab Services* allow wireless service providers and vendorsto perform regression testing, verification testing and location testing of newhardware, software and applications and ensure efficient optimization andoperation of all technologies.

 

***Enhanced EmergencyServices***

 

*Customers: Telematics Service Providers,Automotive Manufacturers, Call Centers*

 

*Intrado Enhanced Emergency Services (EES)*allow commercial fleet operators, Telematics Service Providers and roadsideassistance call centers to receive emergency verbal or text messages from theirsubscribers. EES delivers vital information to call centers so that calls arequickly and correctly routed to the appropriate PSAP. After the PSAP dispatchesthe emergency first responders, EES is able to deliver critical, driver-approvedmedical and health care provider information to the emergency medical service vehicle.

 

***Location Services***

 

*Customers: Wireless service providers*

 

*Intrado Hosted User Plane PDE Services*providethe enhanced functionality needed to successfully launch location-basedapplications and increase the reliability and accuracy of location-basedservices while minimizing costs and reducing risks*.*

 

***Mobility Services***

 

*Customers: Wireless service providers*

 

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*Application-SMSC (A-SMSC*) is a scalable and resilient carrier-gradesolution for receiving, storing and forwarding short messages for mobileoriginated (MO) and mobile terminated (MT) application traffic.

 

*Direct Messaging Platform (DMP*) enables mobile originated (MO) shortmessage services (SMS) messages to be sent directly to a person or applicationand mobile terminated (MT) messages to bypass the SMSC and be delivereddirectly to the user’s handset, allowing existing messaging infrastructure tobe offloaded.

 

*High Speed Bulk Messaging (HSB)*enables wireless operators and serviceproviders the ability to send high volumes of SMS messages to a large base ofon-net or off-net mobile users with exceptional speed.

 

*The SMS Spam Filtering and Fraud ProtectionPlatform (SSF*)enables wireless operators to offer their subscribers a service for detecting,filtering and blocking unwanted SMS messages from different networks.

 

**Service and Product Pricing**

 

For revenue derived primarily from monthly data management andmaintenance services, we typically enter into long-term contracts with ourcustomers, ranging from two to ten years. Pricing is negotiated based on avariety of factors, including current and expected market conditions, scope ofwork and value of services provided.

 

For revenue derived from system, new product and professional servicessales, including sales of software enhancements, pricing is primarily based ona competitive proposal and acceptance process that takes into account a varietyof factors including our costs to acquire, develop, or produce the relatedsystem or software enhancement, recovery of overhead, profit and the relativevalue to the customer.

 

**Seasonality**

 

Although we do not consider our business to be highly seasonal, inrecent years, the timing of our customers’ internal capital budgeting processesoccasionally has resulted in higher revenue in the second half of the year,especially in the area of system and software sales and enhancements. While thebulk of our business is stable and recurring, customer buying patterns and ourability to deliver and obtain customer acceptance relative to our expectationscan create fluctuations in quarter-to-quarter results of operations.

 

**Customers**

 

We provide our products, services and systems to a range of customers,including ILECs, CLECs, VoIP carriers, Interexchange Carriers, or IXCs,wireless service providers, and federal, state and local government agencies.Although we license our software to ILECs and provide 9-1-1 data managementservices indirectly to a large number of independent telephone companies, weare primarily dependent upon large service contracts from a limited number ofsignificant customers. In 2005, we received approximately 54% of our revenuefrom four customers. See “Risk Factors.”

 

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Historically, we have entered into contracts with carriers and theiraffiliates to provide services to some or all of the carriers’ operatingentities, and we have contracts that govern the licensing of our proprietarysoftware. In 2005, we had two revenue-generating segments: wireless and wireline.Following is a partial list of carriers and government entities using ourservices or products within these segments. We believe this list isrepresentative of our overall customer base.

 
| ***Wireline Customers***   |
|----------------------------|
| *** ***               |
| ***ILECs***                |   | Alaska Communications, BellSouth, Cincinnati Bell, Frontier  Communications, Qwest, SBC, Verizon |
| *** ***               |   |   |
| ***CLECs/IXCs***           |   | Focal Communications, MCI, XO Communications |
| *** ***               |   |   |
| ***VoIP Providers***       |   | AT&T, Qwest, Verizon, Vonage |
| *** ***               |   |   |
| ***Government Entities***  |   | Texas Commission for State Emergency Communications |
|                       |   |   |
| ***IntelliCastCustomers*** |   | Chicago, Denver, Greater Harris County (Houston), Maricopa County  (Phoenix), Qwest, SBC, Virginia Beach |
| *** ***               |   |   |
| ***Wireless Customers***   |   | ALLTEL, Cingular, Nextel, Qwest Wireless, Sprint PCS, Verizon,  Western Wireless |

 

**Sales and Marketing**

 

Our marketing targets telecommunications carriers, government agenciesand PSAPs in each geographical market through advertising in industry andgovernment publications, participation in trade shows, presentations at keyevents, direct sales and marketing campaigns and other initiatives. Inaddition, our employees serve as the chairpersons and members of key standardscommittees related to emergency communications services and telecommunicationstechnology and operations. Although our sales strategy relies primarily on ourdirect channels of distribution, we also have an alliance program to jointlymarket our products and services with companies who sell complementary productsor address our target markets. Our account teams work directly with existingand potential customers in a consultative, problem-solving sales process, todetermine and fulfill their needs with appropriate offerings. Sales cyclesrange from one month to three years. Our indirect channel program team providesdistribution partners with a support program framework including channel salesrepresentative training, marketing collateral, product and process support andincentive campaigns.

 

**Research and Development**

 

We direct our research and development efforts toward providing highlyscalable, fault tolerant applications to the public safety, telecommunicationsand government markets. Development efforts in process are focused onintegrating Internet technology, spatial data mapping systems, advancedswitching and transport elements capable of interfacing with existing networksand enabling the more efficient E9-1-1 processes that improve data quality.

 

**Competition**

 

The market for wireline and wireless 9-1-1 solutions is competitive. Webelieve that the principal competitive factors affecting the market for 9-1-1solutions include: effectiveness of existing infrastructure, scalability,reliability, ease of use, price, technical features, scope of productofferings, customer service and support, ease of technical migration, usefullife of new technology and wireless support.

 

Although we believe that our solutions are competitive, we may not beable to maintain our competitive position, especially if companies withsignificantly greater financial, marketing, service support, technical andother competitive resources enter the market.

 

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In the 9-1-1 solutions market, encompassing virtually all of ourbusiness units, our principal competitors fall generally within one of fourcategories:

 

•                  Internaldevelopment departments of major carriers or consulting firms that support suchdepartments;

 

•                  Companiesthat offer applications featuring portions of our comprehensive set of E9-1-1solutions;

 

•                  Largercompanies that are either in the process of entering our market or have thepotential to develop comparable products and services; and

 

•                  Companiesthat attempt to integrate product components from a number of providers into atargeted customer solution.

 

In addition, a number of companies currently market or have underdevelopment software products and services to provide 9-1-1 administration. Inthe wireless market, we compete primarily with TeleCommunications Systems, Inc.for the provision of 9-1-1 data management services to wireless carriers. Inthe ILEC and CLEC markets, we compete primarily with internally developedsolutions of major carriers, as well as with HBF Group. However, thedevelopment of new technologies, including VoIP, may open the traditional 9-1-1data services to ****new competitors with substantially greaterresources****.

 

In the target notification market, our competitors include, amongothers, Dialogic Communications Corporation, Sigma Communications LLC,FirstCall Network, Inc., and Twenty First Century Communications, Inc.The Intrado Target Notification system is primarily designed for emergencywarning applications, which require high-volume, high-availability capabilitiesfor the mass notification of the general public within a dynamically definedgeographic area. Most of our competitors’ systems have been designed forworkforce mobilization applications, where a pre-defined list of individuals isnotified in the event of an incident. Intrado Target Notification and competingproducts can individually support both applications to some degree; however,the difference in application focus impacts features, system architecture andcost structure.

 

**Intellectual Property Rights**

 

Wehave patent rights to protect some of our innovations and proprietary productsand technology. We market our products and services under our own names andmarks, many of which are registered in our principal markets in the UnitedStates and Europe.  We own five issuedpatents. In addition, we have 24  patentapplications pending at the U.S. Patent and Trademark Office and patentapplications pending in numerous foreign patent offices for each of 11 separateinventions. We also have a limited exclusive license under 15 other issuedpatents and four other pending patent applications. The foreign patents and applicationsare, for the most part, counterparts to our U.S. patents and applications,although foreign patent rights might not be available or pursued in technologyareas for which U.S. patent rights are sought. We cannot assure you that thesepatent applications will result in issued patents, nor guarantee that, ifissued, such patents will be valid and enforceable.

 

Werely on patent, trademark, trade secret, and copyright laws both to protect ourintellectual property, including our proprietary technology, and to protect usagainst claims from others. We believe that we have direct intellectualproperty rights or rights under licensing arrangements covering substantiallyall of our material technologies. However, third parties may assertinfringement claims against us or against our customers in connection with theuse of our systems and products. If such a claim were to be made against ourcustomers or us, the outcome would be difficult to predict because of thetechnical complexity of our systems and products. Further, future claimsor litigation, regardless of their merit, could be time consuming and result incostly litigation or settlement efforts.

 

**Employees**

 

As of February 15, 2006, we employed 776 full-time employees in 16states and three countries. No employees are covered by any collectivebargaining agreements. We believe that our relationships with our employees aregood. The majority of our employees are located in our Longmont headquarters.We have several satellite locations, including

 

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our bmd wireless AG operations in Zug, Switzerland and sales,development and support staff in Texas, Washington, DC and Illinois.

 

**Facilities**

 

Our corporate headquarters and principal administrative, sales andmarketing, research and development and support facilities are located in:

 

•                  *Longmont, Colorado*, where we occupy 277,000square feet of office space under a lease expiring December 2011. As of December 31,2005, the annual base rent for this facility was approximately $2.8 million.

 

•                  *Lisle, Illinois*, where we occupy 29,000square feet of office and warehouse space under a lease that expires August 2014.As of December 31, 2005, the annual base rent for this facility wasapproximately $572,000.

 

•                  *Austin, Texas*, where we occupyapproximately 2,600 square feet of office space on a month-to month basis. Asof December 31, 2005, the annual base rent for this facility wasapproximately $35,000.

 

•                  *Zug, Switzerland*, where we occupy 6,500square feet of office space, with an annual base rent of approximately $148,515.

 

All of the above leases provide for periodic defined increases in rentover the life of the lease.

 

**Securities and Exchange Commission Filings**

 

We file the following reports with the SEC under Section 13(a) ofthe Securities Exchange Act of 1934: Annual Reports on Form 10-K;Quarterly Reports on Form 10-Q; Proxy Statements on Schedule 14A, CurrentReports on Form 8-K; and any amendments to these reports. We make thesereports available free of charge on or through our Internet website,www.intrado.com, as soon as reasonably practicable after we electronically filesuch material with, or furnish such material to, the SEC; however, informationon our website should not be considered to be a part of this report or anyother SEC filing. You may request a copy of these filings at no cost. Pleasedirect your requests to:

 

Michael D. Dingman, Jr.

Chief Financial Officer

Intrado Inc.

1601 Dry Creek Drive

Longmont, Colorado 80503

 

You can also read and copy any materials that we file with the SEC atthe SEC’s Public Reference Room at 100 “F” Street, N.E., WashingtonDC 20549. You can obtain information on the operation of the Public Reference Room bycalling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site(http://www.sec.gov) that contains our reports, proxy and informationstatements and other information that we file electronically with the SEC.

 

**ITEM 1A.****                    ****RISK FACTORS**

 

*In evaluating our business, you should carefully considerthe risks and uncertainties discussed in this section, in addition to the otherinformation presented in this Annual Report on Form 10-K. The risks anduncertainties described below may not be the only risks that we face. If any ofthese risks or uncertainties actually occurs, our business, operating resultsor financial condition could be materially adversely affected and the marketprice of our common stock may decline.*

 

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**We depend on large contracts from a limited number ofsignificant customers and the loss of any of those contracts would adverselyaffect our operating results.**

 

Wedepend on large contracts from a limited number of significant customers. Weprovide our services to a range of customers, including ILECs, CLECs, wirelesscarriers and state and local government agencies. During the year ended December 31,2005, we recognized approximately 46% of our total revenue from SBC, CingularWireless and Verizon, each of which accounted for approximately 10% or greater ofour revenue in 2005. During the year ended December 31, 2004, werecognized approximately 46% of our total revenue from BellSouth, SBC andVerizon, each of which accounted for greater than 10% of our revenue in 2004.  During the year ended December 31, 2003,we recognized approximately 55% of total revenue from BellSouth, Qwest, SBC andVerizon each of which accounted for greater than 10% of our revenue. No othercustomers accounted for more than 10% of our total revenue during thoseperiods.

 

Webelieve that these customers and others may continue to represent a substantialportion of our total revenue in the future. No ILEC contracts are scheduled to expire in 2006. Contracts for four ofour largest 14 wireless customers are scheduled to expire in 2006. As we enternegotiations to renew these contracts, our customers may demand price or othercontractual concessions. Our ILEC customers could decide to develop and utilizetheir own proprietary 9-1-1 software and to perform internally the services thatthey presently outsource to us. Our wireless customers may also choose to notrenew with us or to significantly decrease the amount of services theyoutsource to us in favor of competitors or their own in-house solutions.Moreover, existing contract provisions allow these customers and others toreceive contract concessions or to cancel their contracts in the event ofcustomer consolidations, changes in regulatory, legal, labor or businessconditions. Contract concessions, or the loss of a major customer, could have amaterial adverse effect on our business, financial condition, results ofoperations and cash flows.

 

**Acquisitions, consolidations, bankruptcies andreorganizations among our telecommunications customers may have a materialadverse effect on our market share, liquidity, financial position and operatingresults.**

 

Acquisitionsand consolidations among our telecommunications customers, especially in thewireless sector, involve integration risk and create uncertainties related toour pricing structure, ability to negotiate contracts and operating results.Although we believe that we are well positioned to maintain our market sharewithout significant price degradation or loss of customers, we cannot becertain that our financial forecasts and renewal and retention strategies willbe successful. Customer consolidations and merger activity may have a materialadverse effect on our ability to renew contracts as they expire and maintaincurrent price levels, especially where a consolidated customer base will beable to negotiate volume price discounts. Therefore, customer consolidationsand merger activity may have a material adverse effect on our market share,liquidity, financial position, cash flows and operating results.

 

Moreover,some of our customers have filed voluntary petitions for reorganization underChapter 11 of the U.S. Bankruptcy Code. Other telecommunications customers haveexperienced cash flow and operating difficulties and may also file forprotection from creditors under the federal bankruptcy laws. In addition to thefact that financially troubled customers may be more susceptible to industryconsolidations and merger activity, as discussed above, we may experiencedifficulty in collecting amounts due from these customers. Although we believethat we have provided adequate reserves for bad debt on existing receivables asof the date of this report, future bankruptcies, reorganizations andconsolidations in the telecommunications industry may have a material adverseeffect on our market share, liquidity, financial position, cash flows andoperating results.

 

**Our market is characterized by rapid technological change, asevidenced by the increased use of VoIP technology, and we could lose ourcompetitive position if we are not successful in developing new products thatachieve market acceptance.**

 

Themarket for our services is characterized by intense competition, rapidtechnological change, frequent new product or service introductions, evolvingindustry standards and changing customer needs. Existing products may becomeobsolete and unmarketable when products featuring new technologies areintroduced. To be successful, we must be able to enhance existing products andto develop new products that keep pace with technological changes, satisfy ourcustomers and achieve market acceptance. This is best evidenced by theincreasing use of VoIP in the traditional

 

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wirelinemarket during 2005. VoIP is an innovative technology that enables voicetraffic to be carried over an IP-based network. The location of the VoIP calleris not necessarily fixed, presenting a challenge related to the handling androuting of emergency 9-1-1 calls. Increased use of VoIP and other newtechnologies could open the traditional 9-1-1 data services market to newcompetition with substantially greater resources than us. We may not be able to maintain ourcompetitive position against current and potential competitors, especiallythose with significantly greater financial, marketing, support service,technical and other competitive resources.

 

**If we do not realize anticipated benefits from ourcapitalized software, we may be forced to record an impairment, therebyadversely affecting our operating results.**

 

Inassessing the recoverability of our existing capitalized software assets, werely on estimates and judgments to determine the net realizable value of eachproduct. When evaluating the net realizable value of a given product, weprepare a forward-looking business case that is comprised of an assessment offuture expected benefits to be generated. The expected benefits are compared tothe direct costs associated with supporting the product on an ongoing basis toarrive at a contribution margin, defined as expected benefits less directcosts. This contribution margin is compared to the carrying value of the assetat the reporting date to determine if the contribution margin exceeds the assetcarrying value plus any additional investments such as hardware or additionaldevelopment required to enhance or maintain the product. If the aggregatecontribution margin is less than the carrying value, an impairment is recorded.Our ability to estimate future expected revenue and benefits with a measureddegree of probability is the most significant factor in our estimate ofrecoverability. If our ability to estimate the expected benefits changessignificantly in any given period, we could record impairment charges forcertain assets and our operating results could be adversely affected.   In the second quarter of 2004, wedetermined that, due to the continued limited visibility regarding the timingof forecasted revenue opportunities for our Commercial Database productofferings, it was necessary to impair $1.7 million of software assets. We alsorecorded an impairment charge of $588,000 in the second quarter of 2004 relatedto a subset of our MPC product offerings based on limited revenue visibility.

 

**An economic slowdown and increased international political instabilitymay have a material adverse affect on our business and results of operations.**

 

Aneconomic slowdown or increased international political instability, asdemonstrated by terrorist threats, the conflict in Iraq, increasing tension inthe Middle East and Korea, and the resulting need for enhanced securitymeasures may have a detrimental effect on our business. An economic slowdown,for example, may impact our customers’ purchasing decisions. In addition,increased political instability may adversely affect our ability to obtainadequate insurance at reasonable rates or require us to take extra securityprecautions for our operations and computer database systems. If the economicslowdown or international political instability continues or increases, ourbusiness, results of operations and the market price of our common stock couldbe adversely affected.

 

 **If we areunable to retain key executives, our operating results and growth potential maybe adversely affected.**

 

Oursuccess greatly depends on our ability to attract and retain key technical,sales and executive personnel. We are especially dependent on the continuedservices of our senior management team. Although members of our executive teamare subject to non-competition agreements, they are not presently subject toemployment contracts. As a result, they can terminate their employment at anytime. The loss of any member of our senior management team could adverselyaffect our operating results and growth potential.

 

**Restrictionson state and local government budgets and other factors may cause our operatingresults to fluctuate and, as a result, our stock price may decline.**

 

Ourrevenue, operating results and cash flows are difficult to predict and mayfluctuate significantly from quarter to quarter as a result of restrictions onstate and local government budgets, adverse trends in the telecommunicationsindustry and other factors. Therefore, you should not rely on period-to-periodcomparisons of revenue or operating results as an indication of our futureperformance. If our revenue, operating results and cash flows fall below theexpectations of investors or securities analysts, the price of our common stockcould fall substantially.

 

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***Thevalue of your common stock may decrease if employees and other security holdersexercise their options and warrants.***

 

Asshown in the table below, as of February 15, 2006, we have reserved 3,253,678shares of common stock for future issuance upon exercise of outstanding optionsand redeemable warrants.

 
| ** **                                          | ** ** | **Number of Securities to be Issued  upon Exercise of Outstanding  Options, Warrants and Rights** | ** ** | **Weighted Average Exercise Price  of Outstanding Options and  Share Right Awards** | ** ** |
|-----------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| Equity compensation plans approved by  stockholders |       |                                                                                              |       |                                                                                |       |
| Stock Options                                       |       | 2,565,655                                                                                         |       | $                                                                                   | 11.27      |   |
| Share Right Awards(1)                               |       | 685,023                                                                                           |       | —                                                                              |       |
| Restricted Stock Units                              |       | 3,000                                                                                             |       | —                                                                              |       |
| Total                                               |       | 3,253,678                                                                                         |       |                                                                                |       |
|                                                     |            |                                                                                                   |            |                                                                                     |            |  |

 

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(1)          Representsthe maximum number of shares issuable upon vesting of share right awards.  Share right awards vest (i) upon theachievement of three performance goals (revenue, operating margin and return oninvested capital) during the 12-month period ending June 30, 2008; or (ii) upona change in control.  For eachperformance goal, there are four levels of achievement (less than 90%, 90%,100%, and 110%).  Upon a change incontrol, share right awards vest at the 100% performance level (in which caseonly 620,039 shares would be issued). For more information regarding share right awards, refer to thedisclosure in our Current Report on Form 8-K/A, as filed with the SEC on July 1,2005.

 

We may issue additional equity-based securities inthe future, including stock options, share right awards, restricted stock unitsand other securities that are convertible into common stock. Our 1998 Stock Incentive Plan, which wasapproved by stockholders, includes an evergreen provision in which the numberof shares issuable under the Plan automatically increases on the first tradingday in January of each calendar year by an amount equal to 3% of the totalnumber of shares of common stock outstanding on the last trading day in December ofthe preceding calendar year (but in no event in excess of 731,000 shares).Equity securities representing an additional 900,233 shares are presentlyissuable under the 1998 Stock Incentive Plan. As these securities areexercised or vest, you will experience dilution in the market value andearnings per share of your common stock.

 

**Substantially all of our revenue is derived from our 9-1-1data management solutions, and our operating results, financial position andcash flows may depend upon our ability to continue to sell these solutions.**

 

Wecurrently derive substantially all of our revenue from the provisioning of our 9-1-1data management solutions to ILECs, CLECs, wireless carriers and state andlocal government agencies. Accordingly, we are susceptible to adverse trendsaffecting this market segment, including government regulation, technologicalobsolescence and the entry of new competition. We expect that this market maycontinue to account for substantially all of our revenue in the near future. Asa result, our future success depends on our ability to continue to sell our 9-1-1solutions, maintain and increase our market share by providing other value-addedservices to the market, and successfully adapt our technology and services toother related markets. Markets for our existing services and products may notcontinue to expand and we may not be successful in our efforts to penetrate newmarkets.

 

**Our business is subject to government regulation and otherlegal uncertainties, which could adversely affect our operations.**

 

Themarket for our services and products has been influenced by various laws andregulations, including:

 

•                  The adoption of regulations under theTelecommunications Act of 1996;

 

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providersof interconnected VoIP service provide E9-1-1 capabilities to their customersin accordance with regulations imposed by the FCC in WC Docket Nos. 04-36 and 05-196;

 

•                  The duties imposed on us or on our wholly ownedsubsidiary, Intrado Communications Inc., as a result of its status as aregulated competitive local exchange carrier or as an inter-exchange carrier;

 

•                  The duties imposed on incumbent localexchange carriers by the Telecommunications Act of 1996, or other legislation,regulation or judicial or administrative determinations, to open localtelephone markets, including 9-1-1 service as a part of local exchange service,to competition;

 

•                  The responsibilities of local exchangecarriers to provide subscriber records to emergency service providers under theWireless Communications and Public Safety Act of 1999; and

 

•                  The impact of various federal and stateregulations on wireless carriers that provide E9-1-1 service, including, butnot limited to, regulations imposed by the FCC in C.C. Docket No. 94-102.

 

Anychanges to these legal requirements, including those caused by the adoption ofnew laws and regulations or by legal challenges, could have a material adverseeffect upon the market for our services and products. In particular, any delayin implementation of the newly imposed regulatory requirements imposed by theFCC on VoIP services could have a material adverse effect on our business,financial condition and results of operations.

 

**Our business is subject to reporting and governance requirementsthat have significantly increased our compliance costs in the impacted areas.**

 

Becauseour common stock is publicly traded, we are subject to certain rules andregulations of federal, state and financial market exchange entities chargedwith the protection of investors and the oversight of companies whosesecurities are publicly traded. These entities, including the Public CompanyAccounting Oversight Board, the Financial Accounting Standards Board, the SEC andthe NASDAQ Stock Market, have recently issued new regulations and requirementsand are currently developing additional regulations and requirements inresponse to laws enacted by Congress, most notably the Sarbanes-Oxley Act of2002. Our compliance with current and proposed rules, such as Section 404of the Sarbanes-Oxley Act, has required and is likely to continue to requirethe commitment of significant financial and managerial resources. Our Sarbanes-Oxleycompliance costs were approximately $500,000 in 2005 and exceeded $2 million in2004. We also cannot predict whether our compliance efforts will result inoperational efficiencies that will help to offset past or ongoing compliancecosts. The expenditures necessary to comply with new regulations and regulatoryrequirements may continue to have a material adverse impact on our financialcondition and results of operations.

 

**We could incur substantial costs from product liability,negligence, wrongful death and similar claims relating to our services and oursoftware.**

 

Becausecustomers utilize our services and licensed software products to providecritical 9-1-1 services, we are subject to product liability, negligence,wrongful death and related claims. Our agreements with customers typicallyrequire us to indemnify customers for our own acts of negligence andnon-performance. Product liability and other forms of insurance are expensiveand may not be available in the future. We cannot be sure that we will be ableto maintain or obtain insurance coverage at acceptable costs or in sufficientamounts or that our insurer may not disclaim coverage as to a future claim.Payments of material claims for product liability, negligence, wrongful deathor similar claims may adversely affect our business, operating results orfinancial condition.

 

**Our operating results, financial condition and cash flowscould be adversely affected by unauthorized access to our system or anyinterruption of our services or system failure.**

 

Ouroperations depend on our ability to maintain our computer andtelecommunications equipment and systems in effective working order, and toprotect our systems against unauthorized access to our system by third partiesor

 

17

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employeesand against damage from fire, natural disaster, power loss, telecommunicationsfailure, sabotage or other events. Any unauthorized access or unanticipatedinterruption or delay in our operations could have a material adverse effect onour financial condition, results of operations and cash flows. Furthermore, anyaddition or expansion of our facilities to increase capacity could increase ourexposure to damage from fire, natural disaster, power loss, telecommunicationsfailure, unauthorized access or similar events. Our property and businessinterruption insurance may not be adequate to compensate us for any losses thatmay occur in the event of a system failure or a breach of security.Furthermore, insurance may not be available to us at all or, if available, maynot be available on commercially reasonable terms.

 

***Toprotect our proprietary rights or to deal with claims that we infringe theproprietary rights of others, we may be forced to incur substantial costs andto divert valuable managerial resources away from our business operations.***

 

The success of our businessdepends on our ability to assert and defend our intellectual property rights.To protect our rights, we rely on a combination of copyright, trademark, patentand trade secret laws, and contractual restrictions. We cannot be sure thatthese steps will be adequate to prevent misappropriation or infringement of ourintellectual property. Nor can we be sure that competitors will notindependently develop technologies that are substantially equivalent orsuperior to our proprietary property and technology.

 

Inour industry, competitors often assert intellectual property claims against oneanother. As the functionality of our services and products increases andoverlaps with the products and services of other companies, we may be forced toassert our intellectual property rights or become subject to claims ofinfringement or misappropriation of the intellectual property rights of others.These claims could result in substantial costs and diversion of resources, evenif the claims are ultimately decided in our favor. In certain customeragreements, we agree to indemnify our customers for any expenses or liabilitiesresulting from claimed infringements of patents, trademarks or copyrights ofthird parties. In some instances, the amount of the indemnities may be greaterthan the revenue we received from the customer. Although we have notexperienced any material claims to date, future claims or litigation, with or withoutmerit, could be time consuming and expensive or require us to enter intoroyalty or licensing arrangements. We cannot be sure that such licenses wouldbe offered or obtained on commercially reasonable terms, if at all. Anylitigation or royalty or licensing arrangements, if required, may not beavailable on terms acceptable to us, if at all, and could have a materialadverse effect on our financial condition, results of operations and cashflows.

 

***If wedo not adequately anticipate and respond to the risks inherent in internationaloperations, our operating results and stock price could be adversely affected.***

 

***Although our consolidated financial statements are prepared in U.S.dollars, the operations of our foreign subsidiaries, bmd wireless AG, IntradoInternational Ltd., and Intrado***International Singapore Pte. Ltd.,and our China joint venture, Intrado (XieAn) Technology (China) Co. Ltd., are conducted primarily in Swissfrancs, euros, Singapore dollars, and Chinese yuan renminbi.Consequently, changes in exchangerates can unpredictably and adversely affect our consolidated operating resultsand could result in exchange losses. We do not currently hedge against therisks associated with fluctuations in exchange rates. Although we may usehedging techniques in the future, we may not be able to eliminate or reduce theeffects of currency fluctuations. Thus, exchange rate fluctuations could have amaterial adverse impact on our operating results and stock price.

 

Inaddition, our financial results may be adversely affected by otherinternational risks, such as:

 

•                  Changes ingovernment regulation in various countries;

 

•                  Trade barriers;

 

•                  Adverse taxconsequences;

 

•                  The absence orsignificant inadequacy of legal protection for intellectual property rights;

 

18

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•                  The adoption ofdata privacy laws or regulations;

 

•                  Political andeconomic instability; and

 

•                  Costs associatedwith expansion into new territories.

 

Although our international operations do notpresently represent a material portion of our business, we intend to seek otheropportunities in Europe and Asia. If we do not anticipate and respond to therisks associated with international operations, it could have a materialadverse effect on our operating results and stock price.

 

**The adoption of new accounting requirements relating toexpensing stock options is expected to significantly reduce our results ofoperations in future periods and may impact our ability to retain existingemployees and directors.**

 

Wecurrently account for the issuance of stock options under Accounting PrinciplesBoard, or APB, Opinion No. 25, *Accounting for StockIssued to Employees*(APB 25). With the adoption of new accounting requirements related to historicaland prospective stock awards and incentives, including Statement of FinancialAccounting Standards, or SFAS, No. 123R (revised 2004), *Share-Based Payment* (SFAS 123R), we will now be required totreat the value of the stock options granted to employees and directors ascompensation expense beginning in the first quarter of 2006. As a result, wemay decide to reduce the number of stock options granted to employees anddirectors or to grant other forms of equity-based compensation, includingrestricted stock, restricted stock units and stock appreciation rights. Thiscould adversely affect our ability to retain existing employees or directorsand attract qualified candidates. Moreover, this could force us to increase thecash compensation we would have to pay employees.

 

**The market price of our common stock may experience pricefluctuations for reasons over which we have no control, including trends thataffect the telecommunications industry as a whole.**

 

Themarket price of shares of our common stock has fluctuated greatly since ourinitial public offering in June 1998 and could continue to fluctuate dueto a variety of factors, some of which are not within our control. In the past,companies that have experienced volatility in the market price of their stockhave been the objects of securities class action litigation. If we were theobject of securities class action litigation, it could result in substantialcosts and a diversion of our management’s attention and resources.

 

**If our institutional investors sell large volumes of ourcommon stock within a short period of time, the market price of our commonstock may decline.**

 

Asof February 15, 2006, approximately 73.4% of our outstanding common stockis owned by large institutional investors. These institutions and others maysell their shares of common stock at any time, causing the market price of ourcommon stock to decline.

 

**If wefail to integrate businesses and assets that we may acquire, we may losecustomers and our liquidity, capital resources and profitability may beadversely affected.**

 

Weacquired bmd wireless AG in February 2004. In the past, we have alsoacquired product source code rights to help broaden and strengthen our productportfolio. We may continue to evaluate strategic acquisitions as a part of ourlong-term business strategy. Acquisitions often involve a number of specialrisks, including the following:

 

•                  We may encounter difficulties integratingacquired software, operations and personnel and our management’s attentioncould be diverted from other business concerns;

 

•                  We may not be able to successfullyincorporate acquired technology and rights into our service offerings andmaintain uniform standards, controls, procedures and policies;

 

19

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•                  The businesses or assets we acquire may failto achieve the revenue and earnings we anticipated, causing us to incuradditional debt to fund operations and to write down the value of acquisitionson our financial statements;

 

•                  We may assume product liability or intellectualproperty liability associated with the sale of the acquired company’s products;

 

•                  Our resources may be diverted in assertingand defending our legal rights and we may ultimately be liable for contingentand other liabilities, not previously disclosed to us, of the companies that weacquire;

 

•                  Acquisitions may disrupt our ongoing businessand dilute your ownership interest;

 

•                  Acquisitions may result in litigation fromformer employees or third parties; and

 

•                  Due diligence may fail to identifysignificant issues with product quality, product architecture, ownership rightsand legal contingencies, among other matters.

 

Anyof these factors could have a material adverse effect on our business and onthe market value of our common stock.

 

Withregard to our acquisition of bmd wireless AG, we expect significantly greatercompetitive pressure and a slower path for penetration of bmd’s technology intothe European and North American markets. We recorded a goodwill impairment charge of $14.0 million in the fourthquarter of 2004. There can be no assurance that we will realize the fullbenefits that we anticipated from our acquisition of bmd wireless AG or anyfuture acquisitions. Our failure to successfully gain market acceptance of theproducts acquired or to gain market share could seriously harm our business,operating results, cash flows and financial condition.

 

Inaddition, negotiation of potential acquisitions and the resulting integrationof acquired businesses, products, or technologies, could divert management’stime and resources. Future acquisitions could include the issuance of dilutiveequity securities or cause us to incur debt, contingent liabilities, additionalamortization charges from intangible assets, asset impairment charges, or write-offcharges for in-process research and development and other indefinite-livedintangible assets that could impact our financial condition, cash flows andoperating results.

 

**If our proposed merger with West Corporation isapproved by our stockholders, our common stock will no longer be traded on TheNasdaq Stock Market and you will not be able to participate in our growth or anysynergies resulting from the merger.**

** **

On January 29,2006, our Board of Directors announced that it had entered into a merger agreementwith West Corporation in which West had agreed to purchase all or ouroutstanding common stock for $26.00 per share. If the proposed merger is approved by our stockholders at an upcomingspecial meeting, then:

 

•                  we will be wholly owned by West Corporation;

•                  you will no longer participate in our growthand will not participate in any synergies resulting from the merger; and

•                  we will no longer be a public company, andour common stock will no longer be quoted on The Nasdaq National Market.

 

**If wefail to satisfy the conditions to consummation of the proposed merger, you maynot receive the offering price and we may have to pay a termination fee to WestCorporation.**

 

Ifwe or West Corporation fail to satisfy the conditions to consummation of the merger,you may not be entitled to receive the offering price of $26.00 per share andthe market price of our common stock may decline significantly. In certaincircumstances, we may be required to pay a termination fee of$15.0 million to West Corporation if the

 

20

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mergeragreement is terminated. Moreover, the announcement of the merger may have amaterial adverse effect on our customer relationships, operating results andbusiness generally, including our ability to retain key employees.

 

**ITEM 1B.       UNRESOLVED STAFFCOMMENTS**

 

Wehave not received any written comments regarding our periodic or currentreports from the staff of the Securities and Exchange Commission that wereissued 180 days or more preceding the end of our 2005 fiscal year and thatremain unresolved.

 

**ITEM 2.          PROPERTIES**

 

Please see the disclosure under the caption “Item 1.Business—Facilities.”

 

**ITEM 3.          LEGALPROCEEDINGS**

 

We are involved in disputes and legal actions that arise in theordinary course of our business. While it is not feasible to predict theoutcome of these proceedings, in our opinion, based on a review with legalcounsel, none of these disputes and legal actions is expected to have amaterial adverse effect on our consolidated financial or other position,results of operations or cash flows. However, litigation is subject to inherentuncertainties, and an adverse result in these matters could arise that may harmour business.

 

**ITEM 4.          SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

No matters were submitted for a vote of security holders during thefourth quarter of the fiscal year covered by this report.

 

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** **

**ITEM 5.****                             MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATEDSTOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

 

Our common stock is traded onthe NASDAQ National Market under the symbol “TRDO.” We commenced our initialpublic offering of the common stock on June 24, 1998 at a price of $12.00per share. Prior to this date, there was no public market for our common stock.The following table sets forth the high and low market prices for each fullquarterly period within the last two fiscal years and from January 1, 2006through February 23, 2006.

 
| ** **            | ** ** | **Stock Price** | ** ** |
|-----------------------|------------|----------------------|------------|
| ** **            | ** ** | **High**             | ** ** | **Low** | ** ** |
| **2006**              |       |                 |       |   |   |
| January 1-February 28 |       | $                    | 25.75      |   | $ | 22.37 |   |
|                  |       |                 |       |   |   |
| **2005**              |       |                 |       |   |   |
| Fourth Quarter        |       | $                    | 23.97      |   | $ | 16.76 |   |
| Third Quarter         |       | $                    | 18.08      |   | $ | 13.44 |   |
| Second Quarter        |       | $                    | 15.49      |   | $ | 10.62 |   |
| First Quarter         |       | $                    | 14.66      |   | $ | 11.24 |   |
| ** **            | ** ** | ** **           | ** ** | ** ** | ** ** |
| **2004**              | ** ** | ** **           | ** ** | ** ** | ** ** |
| Fourth Quarter        |       | $                    | 14.22      |   | $ | 10.06 |   |
| Third Quarter         |       | $                    | 16.21      |   | $ | 8.54 |   |
| Second Quarter        |       | $                    | 21.15      |   | $ | 15.33 |   |
| First Quarter         |       | $                    | 25.14      |   | $ | 18.69 |   |

 

As of February 28, 2006, there were 107stockholders of record.

 

We have not paid any cash dividends on ourcapital stock since our inception and do not expect to pay cash dividends onour common stock in the foreseeable future. Covenants contained in our line ofcredit agreement restrict the payment of dividends without the lender’s priorconsent. Payment of future dividends, if any, may be declared at the discretionof our board of directors, subject to the restrictions discussed above, aftertaking into account various factors, including our financial condition,operating results, cash needs and expansion plans.

 

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**PART II**

 

**ITEM 6.****          SELECTED FINANCIAL DATA**

 

The following selected financial data isqualified by reference to and should be read in conjunction with ourconsolidated financial statements and notes thereto and “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations.” Theconsolidated statement of operations data for the years ended December 31,2005, 2004 and 2003 and the consolidated balance sheet data atDecember 31, 2005 and 2004 are derived from the audited consolidatedfinancial statements and notes included in “Item 8. Financial Statements andSupplementary Data.” The consolidated statement of operations data for theyears ended December 31, 2002 and 2001 and the consolidated balance sheetdata at December 31, 2003, 2002 and 2001 are derived from consolidated financial statements not included inthis Annual Report on Form 10-K.

 
| ** **                                              | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------|------------|-----------------------|------------|
| ** **                                              | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                              | ** ** | ** **            | ** ** | **(Amounts in Thousands, Except Per Share Data)** | ** ** | ** ** | ** ** |
| **Consolidated Statement of Operations Data:**          |       |                  |       |   |   |   |   |   |   |   |   |
| Revenue                                                 |       | $                     | 146,317    |   | $ | 131,730 |   | $ | 120,855 |   | $ | 103,364 |   | $ | 75,796 |   |
| Costs and expenses:                                     |       |                  |       |   |   |   |   |   |   |   |   |
| Direct costs                                            |       | 79,145                |       | 70,652 | (1) | 62,779 |   | 52,711 |   | 44,116 |   |
| Goodwill impairment                                     |       | —                |       | 14,233 |   | — |   | — |   | — |   |
| Sales and marketing                                     |       | 22,670                |       | 19,753 |   | 16,748 |   | 16,753 |   | 12,891 |   |
| General and administrative                              |       | 21,299                |       | 21,665 |   | 22,242 |   | 25,052 | (2) | 16,682 |   |
| Research and development                                |       | 3,393                 |       | 2,909 |   | 2,322 |   | 2,769 |   | 6,423 |   |
| Total costs and expenses                                |       | 126,507               |       | 129,212 |   | 104,091 |   | 97,285 |   | 80,112 |   |
| Equity in loss from joint venture                       |       | (87                   | )          | — |   | — |   | — |   | — |   |
| Interest and other income (expense), net                |       | 845                   |       | (809 | ) | (1,118 | ) | (1,134 | ) | (579 | ) |
| Income tax expense (benefit)                            |       | 7,552                 |       | 5,312 | (3) | 5,100 |   | (6,046 | )(4) | — |   |
| Income (loss) from continuing operations                |       | 13,016                |       | (3,603 | ) | 10,546 |   | 10,991 |   | (4,895 | ) |
| Income (loss) from discontinued operations,  net of tax |       | (83                   | )          | (399 | ) | 168 |   | 71 |   | (931 | ) |
| Net income (loss)                                       |       | $                     | 12,933     |   | $ | (4,002 | ) | $ | 10,714 |   | $ | 11,062 |   | $ | (5,826 | ) |
| Net income (loss) per share:                            |       |                  |       |   |   |   |   |   |   |   |   |
| Basic (5):                                              |       |                  |       |   |   |   |   |   |   |   |   |
| Continuing operations                                   |       | $                     | 0.74       |   | $ | (0.21 | ) | $ | 0.67 |   | $ | 0.72 |   | $ | (0.36 | ) |
| Discontinued operations                                 |       | (0.01                 | )          | (0.02 | ) | $ | 0.01 |   | 0.00 |   | (0.07 | ) |
| Total                                                   |       | $                     | 0.73       |   | $ | (0.23 | ) | $ | 0.68 |   | $ | 0.72 |   | $ | (0.43 | ) |
| Diluted (5):                                            |       |                  |       |   |   |   |   |   |   |   |   |
| Continuing operations                                   |       | $                     | 0.70       |   | $ | (0.21 | ) | $ | 0.62 |   | $ | 0.67 |   | $ | (0.36 | ) |
| Discontinued operations                                 |       | 0.00                  |       | (0.02 | ) | 0.01 |   | 0.00 |   | (0.07 | ) |
| Total                                                   |       | $                     | 0.70       |   | $ | (0.23 | ) | $ | 0.63 |   | $ | 0.67 |   | $ | (0.43 | ) |
| Shares used in computing net income (loss)  per share:  |       |                  |       |   |   |   |   |   |   |   |   |
| Basic (5)                                               |       | 17,708                |       | 17,167 |   | 15,764 |   | 15,264 |   | 13,456 |   |
| Diluted (5)                                             |       | 18,500                |       | 17,167 |   | 16,924 |   | 16,551 |   | 13,456 |   |
|                                                         |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)   Includes asset impairmentcharges of $2.5 million: Commercial Database asset impairments of $1.9 million,and wireless MPC capitalized software impairment of $0.6 million (see Note 2 ofNotes to Consolidated Financial Statements for further information).

 

(2)   Includes a write-off of$4.7 million of inventory included in our acquisition of Lucent Public SafetySystems from Lucent in May 2001 (see Note 3 of Notes to ConsolidatedFinancial Statements for further information).

 

(3)   Income tax expense of$5.1 million was the result of an effective tax rate of 311% on consolidatedpre-tax income of $1.7 million in 2004. The disproportional tax expense wasattributable to a pre-tax loss of $14.8 million in our international bmdreporting unit and $500,000 at our Intrado International Ltd. subsidiary. Theeffective tax rate of 31.8% for domestic pre-tax income of $17.0 million wasprior to consolidation of the losses in the international subsidiaries.

 

(4)   Reversal of valuationallowance previously recorded for net operating loss carryforwards and fortemporary differences between book and tax (see Note 12 of Notes toConsolidated Financial Statements for further information).

 

(5)   See Note 2 of Notesto Consolidated Financial Statements for an explanation of the determination ofthe shares used in computing net income (loss) per share.

 

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| ** **                                                    | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                    | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                                    | ** ** | ** **            | ** ** | **(Amounts in Thousands)** | ** ** | ** ** | ** ** |
| **Consolidated Balance Sheet Data:**                          |       |                  |       |   |   |   |   |   |   |   |   |
| Cash, cash equivalents, short-term and  long-term investments |       | $                     | 65,616     |   | $ | 40,260 |   | $ | 37,981 |   | $ | 12,895 |   | $ | 15,716 |   |
| Current assets                                                |       | $                     | 93,959     |   | $ | 74,907 |   | $ | 72,214 |   | $ | 43,391 |   | $ | 44,161 |   |
| Current liabilities                                           |       | $                     | 33,522     |   | $ | 35,454 |   | $ | 38,259 |   | $ | 25,369 |   | $ | 31,816 |   |
| Working capital                                               |       | $                     | 60,437     |   | $ | 39,453 |   | $ | 33,955 |   | $ | 18,022 |   | $ | 12,345 |   |
| Goodwill and other intangibles, net                           |       | $                     | 32,343     |   | $ | 34,538 |   | $ | 30,103 |   | $ | 19,650 |   | $ | 22,148 |   |
| Total assets                                                  |       | $                     | 170,109    |   | $ | 151,548 |   | $ | 145,267 |   | $ | 117,380 |   | $ | 95,435 |   |
| Short-term notes payable                                      |       | $                     | —     |   | $ | — |   | $ | 4,250 |   | $ | 3,312 |   | $ | 4,393 |   |
| Mandatorily redeemable preferred stock  payable               |       | $                     | —     |   | $ | 4,431 |   | $ | 8,594 |   | $ | — |   | $ | — |   |
| Capital lease obligations, short-term and  long-term          |       | $                     | 3,033      |   | $ | 2,816 |   | $ | 4,423 |   | $ | 5,820 |   | $ | 7,441 |   |
| Total debt                                                    |       | $                     | 5,033      |   | $ | 9,247 |   | $ | 25,184 |   | $ | 18,965 |   | $ | 13,834 |   |
| Retained earnings (accumulated deficit)                       |       | $                     | 4,413      |   | $ | (8,520 | ) | $ | (4,518 | ) | $ | (15,232 | ) | $ | (26,294 | ) |
| Total stockholders’ equity                               |       | $                     | 122,064    |   | $ | 104,345 |   | $ | 84,442 |   | $ | 65,719 |   | $ | 49,030 |   |

 

**ITEM 7.****                             MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS**

 

**Background**

 

We provide 9-1-1 infrastructure, systems andservices, as well as innovative solutions for telecommunications providers andpublic safety organizations. Our core business is the support of the UnitedStates’ 9-1-1 emergency response infrastructure for wireline, wireless and VoIPnetworks. The data we manage enables a 9-1-1 call to be routed to theappropriate PSAP. We provide callback data and the caller’s location. Thiscritical information helps public safety organizations respond to calls forassistance. In addition, this data allows the telecommunications carriers tomeet state and federal regulatory mandates. Since we launched our 9-1-1 datamanagement services in 1994, our 9-1-1 data integrity infrastructure hasprovided virtually uninterrupted service to our telecommunications and publicsafety customers. Our customers include ILECs, CLECs, wireless carriers, IXCsand a wide variety of state, local and federal government agencies.

 

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**Segments**

 

Effective January 1, 2005, we realigned ouroperating units by aggregating offerings with common organizational supervisionand decision-making authorities into two business units: wireline andwireless.  Revenue and direct costs areclassified in the consolidated statements of operations by these two businesssegments. The change did not impact our revenue recognition policies. As aresult of this change, revenue and direct costs for the years endedDecember 31, 2004 and 2003 have been reclassified to conform to ourcurrent year presentation. This change had no effect on our financial position,total revenue, total direct costs, net income (loss) or cash flows for any ofthe periods presented.  The followingtable identifies the business unit alignments and the respective years in whichresults of operations have been reported:

 
| ** **      | ** ** | **2005 Business Components**                                                                                                                                                          | ** ** | **2004 Business Components**      |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------|
| **Wireline**    |       | ILEC, CLEC, Texas, ***IntelliCast***, VoIP  and ***CDB products***                                                                                                                              |       | ILEC, CLEC, Texas, Palladium and ***VoIP*** |
| **Wireless**    |       | Wireless, bmd wireless AG, Intrado  International Ltd., Intrado International Singapore Pte. Ltd., and a 49%  interest in Intrado (XieAn) Technology (China) Co. Ltd., a Chinese joint  venture |       | Wireless and ***bmd******wireless AG***     |
| **New Markets** |       | No longer reported separately                                                                                                                                                                   |       | IntelliCast and CDB                         |

 

Note: Components that were added to, or realigned to, the designated businessunit are depicted in bold italics in the year impacted. We acquired bmdwireless AG, a Swiss corporation, in February 2004. The VoIP product offeringbegan to generate revenue in 2004. IntelliCast and Commercial Database, or CDB,product offerings were transferred from the new markets segment to the wirelinesegment beginning January 1, 2005. The Palladium business was discontinued inFebruary 2005, and its historical results are reported under discontinuedoperations in the wireline results for all periods presented.  In addition, we have formed severalforeign subsidiaries to conduct certain international business developmentactivities:  Intrado International Ltd., a wholly owned Irish corporation,Intrado International Singapore Pte. Ltd., a Singaporean corporation and whollyowned subsidiary of Intrado International Ltd., and Intrado (XieAn) Technology(China) Co. Ltd., a 49%-owned Sino-foreign joint venture company of IntradoInternational Ltd. The results of operations for these subsidiaries, which havehad no revenue-generating activities to date, are included within the wirelessbusiness unit.

*** ***

**Executive Summary**

 

On January 29, 2006, we entered into an Agreement and Plan of Merger with WestCorporation, a Delaware corporation headquartered in Omaha, Nebraska. Under theterms of the agreement, West Corporation agreed to acquire all of theoutstanding Intrado common stock for a purchase price of $26.00 per share. Ifour stockholders approve the merger at a meeting expected to be held during thesecond quarter of 2006, we will become a wholly owned subsidiary of West Corporation.

 

Our revenue is derived from monthly datamanagement services, ongoing software and hardware maintenance, sales ofsoftware enhancements, sales of new products and systems and professionalservices. The majority of our revenue, which is derived from monthly datamanagement services and ongoing maintenance of existing systems, is “recurring.”In 2005, recurring revenue comprised $130 million, or 89%, of our totalrevenue of $146 million. In 2004, recurring revenue accounted for$119 million, or 90%, of our total revenue of $132 million. In 2003,recurring revenue represented $108 million, or 89%, of our total revenueof $121 million. The following is a summary level discussion of keybusiness drivers in our wireline and wireless segments. A more detaileddiscussion is contained in the analysis of the results of operations and ourliquidity and capital resources section.

 

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The following table represents total revenue amounts in thousands andpercentages by business unit:

 
| ** **             | ** ** | **Year Ended December 31,** | ** ** |
|------------------------|------------|--------------------------------------------|------------|
| ** **             | ** ** | **Revenue**                                | ** ** | **Percentage** | ** ** |
| **Business Unit** | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Wireline               |       | $                                          | 87,810     |   | $ | 80,221 |   | $ | 81,879 |   | 60 | % | 61 | % | 68 | % |
| Wireless               |       | 58,507                                     |       | 51,509 |   | 38,976 |   | 40 | % | 39 | % | 32 | % |
| Total                  |       | $                                          | 146,317    |   | $ | 131,730 |   | $ | 120,855 |   | 100 | % | 100 | % | 100 | % |

 

The following table represents totaloperating income (loss) amounts in thousands and percentages by business unit:

 
| ** **             | ** ** | **Year Ended December 31,** | ** **   |
|------------------------|------------|--------------------------------------------|--------------|
| ** **             | ** ** | **Operating Income (Loss)**      | ** **   | **Percentage** | ** ** |
| **Business Unit** | ** ** | **2005**                                   | ** **   | **2004** | ** ** | **2003** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Wireline               |       | $                                          | 6,551        |   | $ | 6,843 |   | $ | 11,530 |   | 33 | % | 272 | % | 69 | % |
| Wireless               |       | 13,172                                     |         | (4,325 | ) | 5,234 |   | 67 | % | (172 | )% | 31 | % |
| Total                  |       | $                                          |  19,723 |   | $ |  2,518 |   | $ |  16,764 |   | 100 | % | 100 | % | 100 | % |
|                        |            |                                            |              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

We have made additional investments infacilities and infrastructure and have incurred additional personnel costs tosupport new market and product opportunities. We have also reallocatedresources when necessary to support our initiatives.

 

## **Wireline**

 

The majority of our recurring revenue has been derivedfrom our wireline segment. We generally enjoy long-term contractualrelationships with our customers over terms up to 8 years. The revenuemodel in our wireline business unit is built on the basis of recurring fees andthe number of records we either manage or support indirectly through licensingagreements. We face limited competition in this segment. The primarycompetitive risk we face is the possibility that our customers may decide to nolonger outsource this service to us. Although we have long-term contracts, ourcustomers could decide to either not renew contracts or to cancel them prior tothe end date and perform the services internally. We have three primarycustomers in our ILEC license business, and five primary customers in our ILECservice business. All contracts have been recently signed or renewed and havefrom two to eight years remaining.  Ournon-recurring revenue for systems sales, software enhancements and sales of newproducts and services is dependent upon many factors, including length of salescycles, market acceptance and product viability. Due to these uncertainties andthe continued fiscal constraints facing customers, the frequency and magnitudeof this incremental license revenue (beyond recurring maintenance revenue) canbe difficult to predict. We also face internal execution risk to identify,build and gain customer acceptance for these product and service offerings. Weexpect the wireline segment to continue to provide the majority of ourforecasted revenue and operating cash flows for the foreseeable future.

 

**Wireless**

 

Wireless revenue grew from $51.5 million in2004 to $58.5 million in 2005, an increase of 14%. We have one primarycompetitor; Telecommunications Systems, Inc. Competitive pressures createpricing and execution risk to our existing business. However, we believe we arewell positioned to retain our existing customer base and acquire additionalmarket share. Contracts in our wireless segment are typically three years inlength. Given the uncertainty that exists in the wireless segment as a resultof recent mergers and consolidations, it is difficult to predict the long-termviability of our core products and services. In 2005, seven of our largest 13wireless customer contracts were renewed.

 

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On February 20, 2004, we completed the acquisition of bmd andthus, expanded our product offerings outside of the United States.  bmd provides core network messagingsolutions, enabling cross network mobile and application messaging traffic fora wide range of mobile operators and service providers. bmd focuses primarilyon designing, building and delivering messaging platforms, tools and solutionsfor wireless service providers. Due to competitive pressure in Europe and alonger sales cycle than expected at the time of the acquisition, the financialresults for bmd were lower than expected in 2004. As a result, we expect aslower path for bmd’s technology to penetrate the European and North Americanmarkets. Based on these trends, we lowered the five-year earnings forecast forbmd and recorded a goodwill impairment charge of $14.0 million in the fourthquarter of 2004. While the forecast for bmd is lower than originallyanticipated when acquired, we continue to believe there is a market for bmdtechnology in the growing wireless market and continue to support and pursuesales opportunities under a refined marketing and sales strategy.

 

**Critical AccountingPolicies, Estimates and Assumptions**

 

Our discussion and analysis of financial conditionand results of operations are based upon our consolidated financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States. While preparing these financial statements, wemade estimates and judgments that affect the reported amounts of assets,liabilities, revenue and expenses, and related disclosure of contingent assetsand liabilities. On an ongoing basis, we evaluate our estimates, includingthose related to bad debts, goodwill and intangible assets, capitalizedsoftware costs, income taxes, contingencies and litigation. We base ourestimates on historical experience and on various other assumptions that webelieve to be reasonable under the circumstances, the results of which form thebasis for making judgments about the carrying values of assets and liabilitiesthat are not readily apparent from other sources. Actual results may differfrom these estimates. We believe the following critical accounting policiesaffect our more significant judgments and estimates used in the preparation ofour consolidated financial statements.

 

*Revenue Recognition*

 

*Amortization periodson remaining deferred revenue and cost balances:*  As ofDecember 31, 2005, we had approximately $22.2 million in deferredrevenue and $6.3 million in deferred costs. Of these amounts, $13.5million of the deferred revenue balance and $3.2 million of the deferred costbalance was classified as short-term. The majority of these balances relate toservices previously provided to wireless customers and require deferral underStaff Accounting Bulletin 104, “Revenue Recognition” (“SAB 104”), since we haveremaining service obligations. It has been our policy to amortize thesebalances over the remaining future service period, which has historically beenthe remaining contractual life. In most cases, we engage in renewal strategieswell before the end of the contract. However, we cannot estimate with anycertainty which contracts will be extended and for how long. This is especiallyrelevant in the wireless segment, based on uncertainty that exists within theindustry due to potential consolidation of carriers and the financial decisionsour customers have made in the past or may make in the future related toutilizing our service offerings. Therefore, we have not extended theamortization periods for the remaining balances beyond the existing contractuallife. As there can be no assurances that the contracts will be extended, or, ifextended, for what period of time, we continue to believe that the bestestimate of the customer relationship period is the existing contractual life.

 

*Use of estimates andjudgment related to recognizing revenue for percentage of completion andmultiple element arrangements:* Revenue is accounted for as either software revenue and relatedpost-contract support, product revenue, or services revenue in accordance withthe guidelines provided by Statement of Position (“SOP”) 97-2, “SoftwareRevenue Recognition” (“SOP 97-2”), SAB 104, which superseded SAB 101,and Financial Accounting Standards Board (“FASB”) Technical Bulletin 90-1, “Accountingfor Separately Priced Extended Warranty and Product Maintenance Contracts.”  Our policy is to recognize revenue when theapplicable revenue recognition criteria have been met, which generally includethe following:

 

•      Persuasive evidence of an arrangement exists;

 

•      Price is fixed or determinable;

 

•      Delivery has occurred or services have been rendered; and

 

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•      Collectibility is reasonably assured.

 

We deliverproducts and services that are part of multiple element arrangements. Inaddition to the above criteria from SAB 104 and SOP 97-2, we alsoapply the guidance in Emerging Issues Task Force (“EITF”) 00-21, “RevenueArrangements with Multiple Deliverables” (“EITF 00-21”), which requires usto evaluate vendor specific objective evidence (“VSOE”) for contracts underSOP 97-2 and vendor objective evidence (“VOE”) for contracts underSAB 104 to determine the fair value of elements delivered in situationswhere multiple elements exist.

 

The majority of our revenue is generated frommonthly data management services, which include revenue from up-front fees andmonthly service fees.  Our up-frontservices consist primarily of the data cleansing of the customer’s 9-1-1records, engineering services to enable the customer’s legacy system tointerface with our platform, thereby establishing network connectivity, publicsafety boundary mapping, and customer training and testing. The charges forthese services are nonrefundable if the contract is cancelled after theservices are performed. After the initial up-front services, data managementcustomers often buy enhancements to these services, such as additional softwareengineering to improve system functionality or network services to make theirnetwork more effective. The fees received for up-front services and certainenhancements are deferred and recognized as revenue ratably over the term ofthe contract or the expected life of the customer relationship, whichever islonger, as these fees do not represent the culmination of a separate earningsprocess.  We also receive a monthlyservice fee to provide the ongoing data management services required to keepthe records current for all subscribers, to maintain and monitor networkcomponents and to support and maintain the software and systems required toprovide the services. The fees received for these monthly services arerecognized as revenue in the period in which all of the above criteria havebeen met, which is generally the month services are provided. For datamanagement services we perform under our outsourced or licensed model,customers do not have a contractual right to take possession of our software;therefore, we account for these arrangements as service contracts.

 

Maintenance contracts are sold to customersthat either purchase or possess database and call handling systems. The feesreceived for ongoing maintenance obligations are deferred and recognized asrevenue over the contractual term of the arrangement.

 

Systems and new products revenue representsrevenue recognized from the sales of new database and call handling systems aswell as customized solutions sold to existing customers. Software licenserevenue and related hardware sales are recognized upon execution of a contractand completion of delivery obligations, provided that no uncertainties existregarding customer acceptance and that collection of the related receivable isreasonably assured.

 

Professional services revenue is generated byproviding consulting services and is recognized in the period in which all ofthe above criteria have been met.

 

In certain situations involving the deliveryof products with significant customization or modification services, we alsorecognize revenue on a percentage-of-completion basis, as prescribed bySOP 81-1, “Accounting for Performance of Construction-Type and CertainProduction-Type Contracts.” In these situations, we develop and utilizeestimates to ratably recognize costs and revenue as work is completed relativeto the total estimated time and costs to complete projects. Delays incompleting projects or significant changes to original cost estimates couldadversely impact future periods in that additional costs or amortizationperiods for both revenue and expenses may be necessary. When reasonableestimates cannot be determined at the onset of an agreement due to uniqueacceptance criteria or other factors, revenue is recognized on a completedcontract basis.

 

*Software Capitalization*

 

As of December 31, 2005, we had$14.8 million in net capitalized software assets.

 

Capitalization of software under SOP 98-1, “Accountingfor the Costs of Computer Software Developed or Obtained for Internal Use,”requires judgment in determining:

 

•      When and if a project is in the applicationdevelopment stage;

 

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•      When the software is available for general releaseand its intended use;

 

•      The expected benefits to be derived from thesoftware product;

 

•      The useful life of the software product; and

 

•      The future recoverability of the capitalizedamounts.

 

Capitalization of software under Statement ofFinancial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs ofComputer Software to be Sold, Leased or Otherwise Marketed” (“SFAS 86”),requires judgment in determining:

 

•      When and if a project has reached technologicalfeasibility;

 

•      When the software is available for generalrelease;

 

•      The expected benefits to be derived from thesoftware product;

 

•      The useful life of the software product; and

 

•      The future recoverability of the capitalizedamounts.

 

In assessing the recoverability of ourexisting capitalized software assets, we rely on estimates and judgments todetermine the net realizable value of each product. When evaluating the netrealizable value of a given product, we prepare a forward-looking business casethat includes an assessment of future expected benefits to be derived from theasset. The expected benefits are compared to the direct costs associated withthe delivery and ongoing support of the product to arrive at a contributionmargin, defined as expected benefits less direct costs. This aggregatecontribution margin is compared to the current carrying value of the asset atthe reporting date. If the aggregate contribution margin exceeds the currentasset carrying value plus any additional investments, such as hardware oradditional development required to enhance or maintain the product, noimpairment is recorded. If the contribution margin is less than the carryingvalue, the asset carrying value is impaired to equal the expected contributionmargin. Our ability to estimate future expected benefits to be derived from theasset, with a measured degree of probability, is the most significant factor inour impairment analysis. If our ability to estimate the expected benefitschanges significantly in any given period, we could record impairment chargesfor certain assets.

 

Each quarter, we also assess the expectedbenefit period of the assets and amortize the related assets over the expectedbenefit period. If our estimate of benefit period is impacted, we could adjustour estimated amortization periods accordingly, having either a positive ornegative impact on earnings in the period the estimate is changed. In 2005, wedid not have any software impairment charges.

 

*Goodwill andLong-Lived Assets*

 

We assess the impairment of identifiableintangibles or long-lived assets, including property and equipment andgoodwill, annually or more frequently if events or changes in circumstancesindicate that the carrying value of the asset may not be recoverable. Factorswe consider important that could trigger an impairment review include thefollowing:

 

•      Significant under-performance relative tohistorical or projected future operating results;

 

•      Significant changes in the manner of our use ofthe acquired assets or the strategy of our overall business;

 

•      Significant negative industry or economic trends;

 

•      Significant decline in our stock price for asustained period; or

 

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•      Our market capitalization relative to net bookvalue.

 

We determine that the carrying value ofintangibles or long-lived assets may not be recoverable based on the existenceof one or more of the above indicators of impairment.  We measure any impairment of goodwill bycomparing the fair value of the reporting unit in which the goodwill resides tothe carrying value of the goodwill.  Weobtain a third-party appraisal to establish the fair value of the reportingunit.  For long-lived assets andamortizable intangibles, we measure any impairment of such an asset based onthe estimated undiscounted cash flows expected to result from the use of theasset and its eventual disposition and compare the result to the asset’scarrying amount. Any impairment loss recognized represents the excess of theasset’s carrying value over its estimated fair value.

 

*Allowances*

 

We maintain allowances and reserves fordoubtful accounts for estimated losses resulting from the inability of ourcustomers to make required payments and for credit memos, which may be grantedto customers in future periods that relate to revenue recognized in currentperiods. If the financial condition of our customers were to deteriorate, orconcessions or discounts are granted in future periods that exceed ourestimates, additional allowances and reserves may be required. Deterioration inthe financial condition of our current customers may cause our allowance fordoubtful accounts to increase and our future operating results to be adverselyaffected. In the normal course of our business, we may be involved in billingdisputes with certain customers. The resolution of these disputes may result inthe granting of credit memos to the customer.

 

*Deferred Tax Assets*

 

We follow SFASNo. 109, “Accounting for Income Taxes” (“SFAS 109”).  The current provision for income taxesrepresents actual or estimated amounts payable or refundable on tax returnsfiled each year. Deferred tax assets and liabilities are recognized for theestimated future tax effects attributable to the temporary differences betweenthe financial statement carrying amounts of existing assets and liabilities andtheir respective tax bases as well as operating loss and tax creditcarryforwards. Deferred tax assets and liabilities are measured using tax ratesexpected to apply to taxable income in the years in which those temporarydifferences are expected to be recovered or settled. Under SFAS 109, theeffect on deferred tax assets and liabilities of a change in enacted tax lawsis recognized as an adjustment to the tax provision or benefit in the period ofenactment. The overall change in deferred tax assets and liabilities during theperiod is equal to the deferred tax expense or benefit for the period. Thecarrying value of deferred tax assets may be reduced by a valuation allowanceif, based upon the judgmental assessment of available evidence, it is deemedmore likely than not that some or all of the deferred tax assets will not berealizable.

 

Weperiodically evaluate our estimates and judgments related to the recoverabilityof deferred tax assets as required by SFAS 109. We currently do not have areserve against our net deferred tax assets, with the exception of a valuationallowance of approximately $83,000 that has been recorded against deferred taxassets in our Intrado International Ltd. subsidiary and a valuation allowanceof approximately $177,000 that has been recorded against deferred tax assets inour bmd wireless AG subsidiary. If expected taxable income is not generated infuture years, it may be necessary to reverse some or all of the tax benefitrecorded, adversely impacting tax expense and net income in the future.

 

**Recent AccountingPronouncements**

 

InDecember 2004, the FASB issued SFAS 123R, which replaces SFAS No.123, “Accounting for Stock-Based Compensation,” (“SFAS 123”) andsupersedes APB 25.  SFAS 123Rrequires all share-based payments to employees, including grants of employeestock options, to be recognized in the financial statements based on their fairvalues.  The pro forma disclosurespreviously permitted under SFAS 123 and provided in Note 2 will no longerbe an alternative to financial statement recognition. In March 2005, the SECreleased Staff Accounting Bulletin 107, “Share-Based Payment” (“SAB 107”),which expresses views of the SEC staff about the application of SFAS 123R.  SFAS 123R was to be effective for all interimor annual reporting periods beginning on or after June 15, 2005, but in 

 

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April 2005 the SEC issueda rule that SFAS 123R will be effective for annual reporting periods beginningon or after June 15, 2005.  We arerequired to adopt SFAS 123R for the fiscal year beginning January 1, 2006.

 

UnderSFAS 123R, we must determine the appropriate fair value model to be usedfor valuing share-based payments, the amortization method for compensation costand the transition method to be used at date of adoption. The transitionmethods include the modified prospective and modified retrospective adoptionoptions. The modified prospective method requires that compensation expense berecorded for all unvested stock options and restricted stock over the remainingaward service period beginning on January 1, 2006, while the modifiedretrospective method requires that all prior periods presented be adjusted toreflect compensation expense under the fair value method of accounting forawards granted, modified or settled after December 31, 1994. We continue toevaluate the requirements of SFAS 123R and expect that the adoption ofSFAS 123R will have a material impact on our consolidated results ofoperations and earnings per share. We plan to use the modified prospective transitionmethod, and have concluded that the Black-Scholes valuation model is best forour circumstances.  We expect theadoption of SFAS 123R to result in amounts that are similar to the current proforma disclosures under SFAS 123.

 

**Results of Operations**

 

The following table sets forth, for theperiods indicated, our consolidated statements of operations reflected as apercentage of total revenue:

 
| ** **                                              | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Revenue                                                 |       | 100.0    | %          | 100.0    | %          | 100.0    | %          |
| Costs and expenses:                                     |       |     |       |     |       |     |       |
| Direct costs (1)                                        |       | 54.1     | %          | 64.5     | %          | 51.9     | %          |
| Sales and marketing                                     |       | 15.5     | %          | 15.0     | %          | 13.9     | %          |
| General and administrative                              |       | 14.6     | %          | 16.4     | %          | 18.4     | %          |
| Research and development                                |       | 2.3      | %          | 2.2      | %          | 1.9      | %          |
|                                                    |       |     |       |     |       |     |       |
| Total costs and expenses                                |       | 86.5     | %          | 98.1     | %          | 86.1     | %          |
| Equity in loss from joint venture                       |       | 0.0      | %          | 0.0      | %          | 0.0      | %          |
|                                                    |       |     |       |     |       |     |       |
| Income from operations                                  |       | 13.5     | %          | 1.9      | %          | 13.9     | %          |
| Interest and other income (expense), net                |       | 0.5      | %          | (0.6     | )%         | (0.9     | )%         |
| Income tax expense                                      |       | 5.2      | %          | 4.0      | %          | 4.2      | %          |
|                                                    |       |     |       |     |       |     |       |
| Income (loss) from continuing operations                |       | 8.8      | %          | (2.7     | )%         | 8.8      | %          |
|                                                    |       |     |       |     |       |     |       |
| Income (loss) from discontinued operations,  net of tax |       | 0.0      | %          | (0.3     | )%         | 0.1      | %          |
| Net income (loss)                                       |       | 8.8      | %          | (3.0     | )%         | 8.9      | %          |

 

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(1)   Direct costs includegoodwill and other asset impairment charges of $16.5 million, or 12.5%, in2004.

 

**Year EndedDecember 31, 2005 Compared to Year Ended December 31, 2004**

 

**Total Company**

 

**Revenue**

 

Total revenue increased $14.6 million to$146.3 million in 2005. The increase is attributable to increased revenuein the wireline unit of $7.6 million and increased revenue in the wirelessbusiness unit of $7.0 million.

 

*Wireline* revenue increased $7.6 million to$87.8 million in 2005:

 

•      Recurring data management services revenue increased $1.7 million dueprimarily to our new VoIP product revenue;

 

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•      Maintenance for software enhancements increased $3.5 million due toadditional maintenance and pricing increases for certain customers and therenewal of two key ILEC customer contracts with higher pricing; and

 

•      Sales of new software enhancements and systems increased $2.9 milliondue to an increase in the delivery of software enhancements during 2005.

 

These increases were partiallyoffset by a $490,000 decrease in professional services revenue primarily due toa reduction in professional services engagements in 2005.

 

*Wireless* revenue increased $7.0 million to$58.5 million in 2005 due to increased recurring data management servicesrevenue of $5.9 million attributable to increased deployments and $1.0 millionin professional services revenue.

 

**Costs**

 

Total costs decreased $2.7 million to $126.5million in 2005.

 

The significant areas where costs decreasedfrom 2004 include the following:

 

•      Goodwill and other asset impairment charges decreased $16.5 millionprimarily due to asset impairment charges incurred in 2004, including a $14.0million goodwill impairment charge in the bmd reporting unit, a $1.9 millionsoftware impairment charge related to our CDB product offerings, and a $588,000software impairment charge in our wireless unit; and

 

•      Consulting expenses decreased $2.6 million primarily due to a reductionin such costs associated with Sarbanes-Oxley compliance, corporate governance,internal control compliance efforts and related legal and financial consultingcosts.

 

The significant areas where costs increasedfrom 2004 include the following:

 

•      Salaries and fringe benefits expense, which includes payroll taxes,accrued vacation, costs to provide medical coverage, and 401(k) employermatching contributions, increased $6.5 million due to annual meritincreases and the hiring of additional staff to support revenue growth and newproduct initiatives such as VoIP and IEN;

 

•      Amortization of capitalized software assets increased $2.0 millionprimarily due to the general availability of significant capitalized softwareprojects during 2005, thereby triggering amortization expense;

 

•      Commission and bonus expenses increased $2.5 million primarily due tothe achievement of all bonus targets in 2005, and the payment of salescommissions for the execution of 30 new VoIP contracts in 2005;

 

•      Software development expenses, which increased approximately $4.4million as software development personnel spent more time on projects that werenot eligible for capitalization because the work was related to research anddevelopment, customer support or maintenance, or because the projects had notyet achieved technological feasibility; and

 

•      Telecommunication expenses increased $926,000 due primarily to thedeployment of our new VoIP peering network in 2005.

 

**Income FromContinuing Operations Before Income Taxes**

 

Income from continuingoperations before income taxes increased $18.9 million to $20.6 million in2005:

 

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•      Wireline income from continuing operations before income taxes increased$715,000 due to a $7.6 million increase in revenue and a $1.0 million increasein interest and other income, offset by a $7.3 million increase in direct costsattributable to delivery of new revenue and a $596,000 increase in indirectoverhead costs associated with additional product development and supportcosts.

 

•      Wireless income from continuing operations before income taxes increased$18.1 million due to a $14.6 million reduction in asset impairment charges, a$7.0 million increase in revenue, and a $647,000 increase in interest and otherincome, partially offset by a $1.7 million increase in other direct costs, anda $2.4 million increase in indirect overhead costs to support growth andproduct development initiatives.

 

**Income TaxExpense**

 

Income tax expense increased$2.2 million to $7.6 million in 2005 based on an effective tax rate of 36.7% onconsolidated pre-tax income from continuing operations of $20.6 million in2005.

 

**Loss from DiscontinuedOperations**

 

The loss from discontinued operationsdecreased $316,000 to $83,000 in 2005. In 2004, we wrote off approximately $322,000 of goodwill and otherintangible assets associated with the Palladium business, which wassubsequently sold in February 2005.

 

**Net Income (Loss)**

 

Net loss decreased $16.9 million from a netloss of $4.0 million in 2004 to net income of $12.9 million in 2005, primarilydue to a $16.7 million asset impairment charge related to goodwill and otherintangible assets in 2004.  There were nosuch asset impairment charges in 2005.

 

**Balance Sheet Items**

 

*Current assets* increased $19.1 million to $94.0 million atDecember 31, 2005, primarily as a result of the following factors:

 

•      *Cash and cash equivalents* increased $55.0 million to $65.6 million at December 31,2005. The increase is attributable to net cash provided by operating activitiesof $42.6 million, net cash provided by investing activities of $14.6 millionprimarily from the liquidation of investments of $38.7 million, partiallyoffset by net cash used in financing activities of $2.2 million.

 

•      *Short-term investments*decreased$28.7 million to $0 at December 31, 2005 due to the liquidation of allshort-term commercial paper, municipal tax-exempt bonds and certificates ofdeposits.

 

•      *Accounts receivable, net ofallowances*, decreased $4.4million to $13.2 million at December 31, 2005 due to collection ofoutstanding wireline customer account balances, which resulted in the reductionof days sales outstanding, defined as ending gross accounts receivable andunbilled revenue divided by the trailing 90-days average daily sales, from 48days at December 31, 2004 to 36 days at December 31, 2005.

 

•      *Unbilled revenue*increased$656,000 to $2.3 million**at December 31, 2005 dueto a major ILEC services customercontract that contains discount pricing. Based on the guidance of SAB 104 and**SOP 97-2, weare recognizing the discounts on a straight-line basis over the life of thecontract.  During the first half of thecontract, the revenue recognized exceeds the amounts billed to the customer;during the latter half of the contract, the balance in unbilled revenue will beamortized and will reduce revenue recognized as the amounts billed to thecustomer will exceed the revenue recognized.

 

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•      *Prepaids and other assets* increased $1.2 million to $4.2 million atDecember 31, 2005 due to increases in prepaid commissions associated withincreased revenue and bookings and an increase in advanced maintenance payments.

 

•      *Deferred contract costs—shortterm* decreased $2.5 million to$3.2 million at December 31, 2005 primarily due to the amortization ofsuch costs and to a proportional decreasein the amount of deferred revenue that was classified as a current liability.

 

•      *Deferred income taxes—short-term* decreased $2.1 million to $5.4 million atDecember 31, 2005 primarily due to the utilization of net operating losscarryforwards to offset taxable income.

 

*Non-current assets* decreased $491,000 to $76.2 million at December 31,2005 primarily due to the following:

 

•      *Goodwill*decreased $837,000 to $29.4 million at December 31, 2005, primarily due tofluctuations in the foreign currency exchange rates between the Swiss franc andthe U.S. dollar.

 

•      *Other intangibles, net* decreased $1.4 million to $2.9 million atDecember 31, 2005 due to current year amortization expense.

 

•      *Long-term investments*decreased $898,000 to $0 at December 31, 2005due to the liquidation of all long-term commercial paper, municipal tax-exemptbonds and certificates of deposits to cash.

 

•      *Software development costs, net* decreased $1.8 million to $14.8 million atDecember 31, 2005. This decrease is primarily due to current yearamortization of $7.2 million, partially offset by the capitalization of costsrelated to new software projects totaling $5.4 million.

 

These decreases in non-currentassets were partially offset by the following:

 

•      *Investment in joint venture*increased from $0 at December 31, 2004 to $913,000 at December 31, 2005 asa result of our investment in a 49% share of a Chinese joint venture.

 

•      *Property, plant and equipment, net* increased $2.2 million to $24.9 million atDecember 31, 2005 primarily due to investments in the new VoIP peeringnetwork and other infrastructure investments, partially offset by current yeardepreciation expense.

 

•      *Deferred contract costs* increased $1.5 million to $3.0 million atDecember 31, 2005 primarily due to deferral of costs related to new orextended contracts for certain software enhancements or with associatedup-front fees.

 

*Current liabilities* decreased $1.9 million to $33.5 million atDecember 31, 2005 primarily as a result of the following factors:

 

•      *Mandatorily redeemable preferred stock  payable—current* decreased $4.4 million to $0 at December 31,2005 as the preferred stock was redeemed in full in June 2005.

 

•      *Deferred contract revenue—short term* decreased $6.3 million to $13.5 million atDecember 31, 2005, primarily due to the realization of current yearrevenue related to software development projects during the first quarter of2005.

 

These decreases in currentliabilities were partially offset by the following:

 

•      *Accounts payable and accrued liabilities* increased $4.9 million to $14.6 million atDecember 31, 2005, as a result of timing differences in the payment ofobligations accrued at year-end, an increase in accrued

 

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bonuses due to the achievementof all annual bonus targets for the 2005, and an increase in accruedtelecommunication expenses related to the deployment of our new VoIP peeringnetwork.

 

•      *Income taxes payable*increasedfrom $0 at December 31, 2004 to $1.8 million at December 31, 2005 due to fullutilization of net operating loss carryforwards in 2005.

 

•      *Line of credit*increasedfrom $0 at December 31, 2004 to $2.0 million at December 31, 2005 due to the line’sreclassification to a current liability based on its maturity date of December31, 2006.

 

•      *Current portion of capital leaseobligations*increased $149,000 to$1.7 million at December 31, 2005 as a result of the reclassification oflong-term lease obligations into current liabilities, partially offset bypayments made during 2005.

 

*Long-termliabilities*increased $2.8 million to$14.5 million at December 31,2005 primarily as a result of the following factors:

 

•      *Deferred taxliability* increased $1.6 millionto $2.7 million at December 31, 2005 due to timing differences in therecognition of depreciation expense and software development costs.

 

•      *Deferred contract revenue—long-term* increased $3.1 million to $8.7 million atDecember 31, 2005, primarily due to the deferral of revenue for newcontracts in 2005, partially offset by the reclassification of a portion of thedeferred revenue to current liabilities.

 

These increases were partiallyoffset by the following:

 

•      *Line of credit*decreased$2.0 million to $0 atDecember 31, 2005, due to the line’s reclassification to acurrent liability based on its maturity date of December 31, 2006.

 

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**Results of Operationsby Business Unit**

 

**Year EndedDecember 31, 2005 Compared to Year Ended December 31, 2004**

 

The following table sets forth, for theperiods indicated, our consolidated statements of operations by businesssegment reflected as a percentage of total revenue:

 

| ** **                                               | ** ** | **Wireline** | ** ** | **Wireless** | ** ** |
|----------------------------------------------------------|------------|--------------|------------|--------------|------------|
| ** **                                               | ** ** | **2005**     | ** ** | **2004**     | ** ** | **2003** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Total revenue                                            |       | 100.0        | %     | 100.0        | %          | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| Direct costs                                             |       | 59.6         | %          | 56.2         | %          | 50.3 | % | 45.9 | % | 77.4 | % | 55.4 | % |
| Indirect business unit costs                             |       | 10.8         | %          | 12.7         | %          | 15.5 | % | 9.3 | % | 9.7 | % | 12.0 | % |
| Corporate overhead                                       |       | 22.2         | %          | 22.6         | %          | 20.1 | % | 22.2 | % | 21.3 | % | 19.2 | % |
|                                                     |       |         |       |         |       |   |   |   |   |   |   |   |   |
| Total costs and expenses                                 |       | 92.6         | %          | 91.5         | %          | 85.9 | % | 77.4 | % | 108.4 | % | 86.6 | % |
| Equity in loss from joint venture                        |       | 0.0          | %          | 0.0          | %          | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % |
| Income (loss) from operations                            |       | 7.4          | %          | 8.5          | %          | 14.1 | % | 22.6 | % | (8.4 | )% | 13.4 | % |
| Interest and other income                                |       | 0.9          | %          | 0.3          | %          | 0.2 | % | 0.9 | % | 0.3 | % | 0.2 | % |
| Interest and other expense                               |       | (0.3         | )%         | (0.9         | )%         | (1.1 | )% | (0.4 | )% | (0.9 | )% | (1.1 | )% |
|                                                     |       |         |       |         |       |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes.                       |       | 8.0          | %          | 7.9          | %          | 13.2 | % | 23.1 | % | (9.0 | )% | 12.5 | % |
| Income tax expense                                       |       | 3.0          | %          | 4.6          | %          | 4.4 | % | 8.5 | % | 3.1 | % | 3.9 | % |
|                                                     |       |         |       |         |       |   |   |   |   |   |   |   |   |
| Income (loss) from continuing operations                 |       | 5.0          | %     | 3.3          | %          | 8.8 | % | 14.6 | % | (12.1 | )% | 8.6 | % |
| Income (loss) from discontinued operations,  net of tax. |       | (0.0         | )%         | (0.5         | )%         | 0.2 | % | 0.0 | % | 0.0 | % | 0.0 | % |
| Net income (loss)                                        |       | 5.0          | %          | 2.8          | %          | 9.0 | % | 14.6 | % | (12.1 | )% | 8.6 | % |

 

*Direct costs* consist of all costs directlyattributable to a business unit’s operations and revenue-earning activities,including depreciation and amortization expense for those assets that can beidentified to a specific business unit or product (see Note 13 of the notes toour consolidated financial statements) and goodwill and other asset impairmentlosses.

 

*Indirect business unit costs* include the costsof business unit support functions, including sales and marketing, general andadministrative and research and development.

 

*Corporateoverhead* includesthese same costs allocated from corporate to business units based on a weighted-averagerevenue percentage.

 

##### **Wireline Business Unit**

 

Revenue increased $7.6 million to $87.8million in 2005 primarily due to the following:

 

•      Recurring data management services revenueincreased $1.7 million due primarily to our new VoIP product revenue;

 

•      Maintenance for software enhancements increased$3.5 million due to additional maintenance and pricing increases forcertain customers and the renewal of two key ILEC customer contracts withhigher pricing; and

 

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•      Sales of new software enhancements and systemsincreased $2.9 million due to an increase in the delivery of softwareenhancements during 2005.

 

These increases were partiallyoffset by a $490,000 decrease in professional services revenue primarily due toa reduction in professional services engagements in 2005.

 

Direct costs increased $7.3 million primarily due to an increase incapitalized software amortization, as well as an increase in operational coststo support our new VoIP product offering.

 

Indirect expenses and corporate overheadincreased $596,000 to $28.9 million in 2005. This change is primarily due toannual merit increases and bonuses resulting from the overachievement of alloperating goals in 2005.

 

**Wireless Business Unit**

 

Revenue increased$7.0 million to $58.5 million in 2005 due to a $5.9 million increasein recurring data management services revenue attributable to increaseddeployments as well as a $1.0 million increase in professional servicesrevenue.

 

Direct costs decreased $13.0 million to $26.8million in 2005. The decrease is due to a $14.0 million goodwill impairmentcharge in our bmd subsidiary and a $588,000 software impairment charge in 2004,partially offset by the hiring of additional operations staff to support cellsite implementations.

 

Indirect expenses and corporate overheadincreased $2.4 million to $18.4 million in 2005. The increase is attributableto the addition of product management and sales personnel to support growth, aswell as an increase in bonus expense due to the overachievement of alloperating goals in 2005.

 

**Year EndedDecember 31, 2004 Compared to Year Ended December 31, 2003**

 

**Total Company**

 

**Revenue**

 

Total revenue increased $10.9 million to$131.7 million in 2004. The increase is primarily attributable to a $12.5million increase in revenue in the wireless business unit.

 

*Wireline* revenue decreased $1.7 million to$80.2 million in 2004:

 

•      Recurring data management services revenuedecreased $3.2 million due to reduced pricing in our ILEC services unitassociated with contract extensions as well as consolidation of customers inour CLEC unit, which led to volume pricing discounts for certain customers; and

 

•      Sales of new software enhancements and systems decreased $1.6 milliondue to timing differences related to the delivery of software enhancementsbetween 2003 and 2004.

 

These decreases were partiallyoffset by the following:

 

•      Maintenance for software enhancements increased$1.9 million related to additional maintenance and pricing increasesrelated to certain customers; and

 

•      Professional services revenue increased $1.3million primarily due to VoIP and IEN products and services and the associatedintegration efforts with the sale of systems and software enhancements.

 

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* *

*Wireless* revenue increased $12.5 million to$51.5 million in 2004 due to increased recurring data management servicesrevenue of $12.2 million attributable to increased deployments and $2.0 millionin revenue from our bmd subsidiary, offset by a reduction in professionalservices revenue of $1.7 million.

 

**Costs**

 

Total costs increased $25.1 million to $129.2million in 2004. The significant areas where costs increased from 2003 includethe following:

 

•      Goodwill and other asset impairment chargesincreased by $16.5 million primarily due to a $14.0 million goodwill impairmentcharge in the bmd reporting unit, a $1.9 million software impairment chargerelated to our CDB product offerings, and a $588,000 software impairment chargein our wireless business unit.

 

•      Salaries and fringe expense, which includespayroll taxes, accrued vacation, costs to provide medical coverage, and 401(k)employer matching contributions, increased $4.4 million due to annualmerit increases and the hiring of additional staff to support revenue growthand new product initiatives, offset by a reduction in accrued vacation expensesof approximately $720,000 due to forfeited vacation time.

 

•      Amortization of capitalized software assetsincreased $1.3 million primarily due to the status of several largercapitalized software projects reaching the stage of available for generalrelease or intended use during 2004.

 

•      Consulting and contract labor expenses increased$3.5 million primarily to support IEN and 9-1-1 IM product development efforts,as well as to support compliance efforts associated with Sarbanes-Oxley compliance,corporate governance and internal control regulations.

 

•      Travel expenses increased by $720,000 primarily asa result of international business development activities and integrationefforts associated with our bmd reporting unit.

 

•      Maintenance and direct costs for cost of goodssold increased by $1.4 million due to increased sales of IEN products whichcarried significant hardware costs.

 

•      Accounting, audit and consulting fees increased by$1.2 million primarily due to audit fees associated with Section 404 of theSarbanes-Oxley Act of 2002.

 

•      Amortization of previously deferred costsassociated with deferred revenue increased by approximately $800,000. Also, theamount of period costs incurred in 2004 but deferred to future periodsdecreased by approximately $800,000 relative to 2003.

 

•      Commission and bonus expense increased by $1.2million primarily due to payments for renewals of existing contracts andbookings of future contracts.

 

•      Bad debt expenses increased by approximately$200,000 as a result of additional write-offs in our CLEC business unitresulting from customer bankruptcies, partially offset by the collection of a previouslyreserved-for bankruptcy claim.

 

The significant areas where costs decreasedfrom 2003 include the following:

 

•      Capitalized software development costs,representing 2004 period costs deferred to future periods that effectivelyreduces current period expenses, increased by $4.7 million as a result ofseveral large projects in 2004 reaching technological feasibility, includingIEN and VoIP, and increased spending related to delivery of our 9-1-1 IMsoftware product to meet customer delivery schedules in early 2005.

 

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•      Depreciation and amortization expenses decreasedby $1.3 million as a result of several assets being fully depreciated,including certain intangible assets originally acquired in the 2001 LPSSacquisition.

 

•      Telecommunication expenses decreased byapproximately $500,000 as a result of efficiencies associated with consolidatedprovisioning systems and reduced reliance on outsourced solutions in favor ofin-house platforms and networks.

 

•      Legal expenses decreased by approximately $500,000relative to 2003 as a result of a significant reduction in the use of outsidelegal resources.

 

**Income FromContinuing Operations Before Income Taxes**

 

Income from continuingoperations before income taxes decreased $13.9 million to $1.7 million in 2004:

 

•      Wireline income from continuing operations beforeincome taxes decreased $4.4 million due to a $1.7 million decrease in revenue,a $3.8 million increase in direct costs attributable to higher cost of goodssold and a $799,000 decrease in indirect overhead costs associated withadditional product development and support costs.

 

•      Wireless income from continuing operations beforeincome taxes decreased $9.5 million due to $14.6 million in asset impairmentcharges, a $3.6 million increase in other direct costs, and a $3.8 millionincrease in indirect overhead costs to support growth and product developmentinitiatives, offset by a $12.5 million increase in revenue.

 

**Income TaxExpense**

 

Income tax expense increasedfrom $5.1 million in 2003 to $5.3 million in 2004. The effective tax rate of311% on consolidated pre-tax income of $1.7 million in 2004 was a result of apre-tax loss of $14.8 million in our international bmd reporting unit relatedprimarily to a goodwill impairment charge of approximately $14.0 million. Oureffective tax rate was 31.8% for domestic pre-tax income of $17.0 million,prior to consolidation of net losses of $14.8 million at bmd and $500,000 atour Intrado International Ltd. subsidiary.

 

**Income (Loss) from DiscontinuedOperations**

 

Income from discontinued operations decreased$567,000 from income from discontinued operations of $168,000 in 2003 due to aloss from discontinued operations of $399,000 in 2004 related to our Palladiumbusiness unit.  In 2004, we wrote offapproximately $322,000 of goodwill and other intangible assets associated withthe Palladium business, which subsequently was sold in February 2005.

 

**Net Income (Loss)**

 

Net income decreased $14.7 million from netincome of $10.7 million in 2003 to a net loss of $4.0 million in 2004,primarily due to a $16.7 million asset impairment charge related to goodwilland other intangible assets in 2004.

 

**Results of Operationsby Business Unit**

 

**Year EndedDecember 31, 2004 Compared to Year Ended December 31, 2003**

##### ** **

##### **Wireline Business Unit**

 

Revenue decreased $1.7 million to $80.2million in 2004 primarily due to the following:

 

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•      Recurring data management services revenuedecreased $3.2 million due to reduced pricing in our ILEC services unitassociated with contract extensions as well as consolidation of customers inour CLEC unit that led to volume pricing discounts for certain customers; and

 

•      Sales of new software enhancements and systemsdecreased $1.6 million due to timing differences between year-end 2003 and 2004related to delivery of software enhancements.

 

These decreases were partiallyoffset by the following:

 

•      Maintenance for software enhancements increased $1.9 million relatedto additional maintenance and pricing increases related to certain customers;and

 

•      Professional services revenue increased $1.3million primarily due to VoIP and IEN products and services and the associatedintegration efforts with the above sale of systems and software enhancements.

 

Direct costs increased $3.8 million primarilydue to higher cost of goods sold for system sales related to our IEN productofferings.

 

Indirect expenses and corporate overheaddecreased $799,000 to $28.3 million in 2004. This decrease is primarily due tocost containment measures put into place.

 

**Wireless BusinessUnit**

 

Revenue increased $12.5 million to$51.5 million in 2004 due to increased recurring data management servicesrevenue of $12.2 million attributable to increased deployments and $2.0 millionin revenue from our bmd subsidiary, offset by a reduction in professionalservices revenue of $1.7 million.

 

Direct costs increased $18.3 million to $39.9million in 2004. Costs increased due to a $14.0 million goodwill impairmentcharge in our bmd subsidiary, a $588,000 software impairment charge, the hiringof additional operations staff to support cell site implementations, increasedsystems maintenance and $1.8 million of costs attributable to our bmdsubsidiary.

 

Indirect expenses and corporate overheadincreased $3.8 million to $16.0 million in 2004. The increase is due to theaddition of product management, sales and finance personnel to support growth,and $1.1 million of expenses in our bmd subsidiary.

 

**Liquidity and CapitalResources**

 

***CashRequirements***

 

The following information summarizes, as ofthe last fiscal year end and balance sheet date, our known significantcontractual obligations (in thousands):

 
| ** **        | ** ** | **December 31,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------|------------|-----------------------|------------|------------|------------|------------|------------|
| ** **        | ** ** | **2006**              | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
| Operating leases  |       | $                     | 3,926      |       | $          | 3,751      |       | $ | 3,712 |   | $ | 3,645 |   | $ | 3,914 |   | $ | 5,267 |   | $ | 24,215 |   |
| Debt interest     |       | 165                   |       | —     |       | —     |       | — |   | — |   | — |   | 165 |   |
| Capital leases    |       | 1,874                 |       | 1,068      |       | 385        |       | — |   | — |   | — |   | 3,327 |   |
| Line of credit    |       | 2,000                 |       | —     |       | —     |       | — |   | — |   | — |   | 2,000 |   |
| Total commitments |       | $                     | 7,965      |       | $          | 4,819      |       | $ | 4,097 |   | $ | 3,645 |   | $ | 3,914 |   | $ | 5,267 |   | $ | 29,707 |   |

 

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In addition to our contractual obligations,we estimate that we will require cash to:

 

•      Continue to fund ongoing operations, including theaddition of sales and product development personnel;

 

•      Complete existing product strategies, includingour IntelliCast, IEN and other major wireline and wireless product initiatives;

 

•      Complete market penetration strategies;

 

•      Invest in new product development;

 

•      Complete leasehold improvements to our existingfacilities;

 

•      Invest in additional hardware and software tomaintain and enhance our existing networks and software applications;

 

•      Increase research and development efforts todesign and implement our IEN initiative, which is focused on the design of aplatform to support future technological developments and to deliver the nextgeneration of emergency communications services;

 

•      Continue paying federal and state income taxes;

 

•      Pay interest on our existing debt obligations andany other future debt obligations that we may incur; and

 

•      Continue to comply with the provisions ofSection 404 of the Sarbanes-Oxley Act of 2002.

 

In 2006, we estimate that we will spendapproximately $5.0 million to $6.0 million related to capitalized softwareprojects and $8.0 million for capital expenditures to support the aboveinitiatives.  We expect to fund ourcapital obligations, ongoing operational activities and income taxes with cashprovided by operations and existing cash, cash equivalent and investmentbalances of $65.6 million at December 31, 2005. Based on the information available as of the date of thisreport, we estimate that we will spend approximately $50 million on our IENstrategic initiative over the next five years.  The actual timing andaggregate amount of such investment may fluctuate substantially, from quarterto quarter and from year to year, and will ultimately depend on numerousevolving factors, including but not limited to:

 

•      The near- and long-term demand for VoIP peering solutions,the timing of the FCC’s mandate for VoIP 9-1-1, and future connectivitynegotiations with carriers;

 

•      The pace of market development for IEN-related products andservices, outside of VoIP, and the demand for such services by alarm servicecompanies, Telematics service providers, wireless customers, federal, state andlocal public safety entities, and end users;

 

•      Engineering development cycles, go-to-market strategies andcontinuing refinement of product and service offerings in specific verticalmarkets;

 

•      The market for wireless connectivity to legacyinfrastructure, emergency first responder services, and consumer orientedservice offerings;

 

•      Negotiations with third-party suppliers of IEN-relatedhardware and software; and

 

•      The nature, capacity and topology of network architecture,and its evolution over the next several years.

 

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Moreover,we cannot yet predict how the total aggregate investment will be split betweencapital expenditures and operating expenses, but the amount apportioned tooperating expenses may be as high as 50%.

 

We cannot predict with certainty the cashrequirements for our proposed strategies and ongoing operational requirements,as technological requirements for new product strategies, contemplated marketconditions, competitive pressure and customer requirements change rapidly. Ifwe are unable to generate the cash from operations at a level we currentlyestimate, our efforts to complete existing products, enhance our platforms andenter new markets could be adversely impacted.

 

We estimate that we will not enter intoadditional capital leases in 2006 to finance major hardware and software purchases.  We may also require cash to completeadditional acquisitions. At present, we have no binding commitments with anythird parties to obtain any material amount of equity or debt financing otherthan the equity and debt financing arrangements described in this report.However, if business opportunities arise in the future, we may enter intodiscussions regarding potential equity and debt financing arrangements tosatisfy actual or anticipated capital needs.

 

***Sourcesand Uses of Cash***

 

Cashprovided by (used in) our operating, investing and financing activities issummarized as follows (dollars in thousands): 

 

| ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|----------------------|------------|----------|------------|----------|------------|----------|------------|
| Operating activities |       | $        | 42,603     |     | $          | 32,752   |       | $ | 36,831 |   |
| Investing activities |       | $        | 14,551     |     | $          | (26,222  | )          | $ | (29,369 | ) |
| Financing activities |       | $        | (2,145     | )        | $          | (13,178  | )          | $ | (3,076 | ) |

 

*Operating Activities*

 

Our ability to generate cash from operations is primarily a function ofour ability to continue to generate net income, improve our collection effortson outstanding accounts receivable and execute sound cash management related toaccounts payable.  Our ability togenerate operating income is primarily a function of increased revenue withouta corresponding increase in our cash expenses. From 2004 to 2005, our revenueincreased from $131.7 million to $146.3 million, an 11% increase. For the sameperiod, our total operating expenses decreased 2%, from $129.2 million in 2004to $126.5 million in 2005. However, our total operating expenses in 2004included $16.5 million in non-cash asset impairment charges. From 2003 to 2004,our revenue increased from $120.9 million to $131.7 million, a 9%increase. For the same period, our total operating expenses increased 24%, from$104.1 million in 2003 to $129.2 million in 2004. However, our totaloperating expenses in 2004 included $16.5 million in non-cash asset impairmentcharges.

 

Our days sales outstanding, or DSO, defined as ending gross accountsreceivable and unbilled revenue divided by the trailing 90 days averagedaily sales, decreased from 48 days at December 31, 2004 to 36 daysat December 31, 2005. Our ability to maintain our DSO is a result of ourconcerted efforts to work with our customers at the time of billing remittanceto improve payment processing and approvals and understanding of the billingcontent and services provided.

 

We cannot predict with certainty whether wewill be able to continue to maintain or improve our DSO. If our customers delaypayment to us in the future, our DSO, operating cash flow and cash balancescould be adversely impacted.

 

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*Investing Activities*

 

Our use of cash for investing activities in2005 included $13.8 million of investments in capital assets and softwaredevelopment projects, $1.0 million to invest a minority interest in anunconsolidated subsidiary, offset by $29.6 million of sales, net of purchases,of low-risk investment instruments such as commercial paper, municipal bondsand certificates of deposit. Our software development investments in 2005 totaled$5.4 million, compared to $10.1 million in 2004 and $5.1 million in 2003.The decline in 2005 of software development activities was primarily due toVoIP product reaching completion as well as a significantly lower investment inour 9-1-1 IM product for ILEC customers due to completion of project work. Thesignificant software development efforts in 2005 included IEN product offeringsand merged ALI project work. The increase in capitalized software investmentactivities from $5.1 million in 2003 to $10.1 million in 2004 was primarilydriven by our investment in our 9-1-1 IM product for ILEC customers, as well asinvestment in our VoIP and IEN products. Also, in 2003 development resourceswere re-allocated to support efforts related to customer support initiativesthat were not capitalized. In 2003, we also purchased $20.7 million in low-riskinvestment instruments such as commercial paper, municipal bonds andcertificates of deposit. The following table summarizes our cash investments incapitalized software development projects by segment in the respective years(amounts are in thousands):

 

**Cash Investments in Capitalized Software**

 

| ** **        | ** ** | **Year Ended December 31,** | ** ** | ** ** | ** ** |
|-------------------|------------|--------------------------------------------|------------|------------|------------|
| ** **        | ** ** | **2005**                                   | ** ** | **2004**   | ** ** | **2003** | ** ** | **Total** | ** ** |
| **Business Unit** |       |                                       |       |       |       |   |   |   |   |
| Wireline          |       | $                                          | 2,809      |       | $          | 7,556 |   | $ | 3,704 |   | $ | 14,069 |   |
| Wireless          |       | 1,214                                      |       | 1,977      |       | 747 |   | 3,938 |   |
| Corporate         |       | 1,398                                      |       | 615        |       | 645 |   | 2,658 |   |
| Total             |       | $                                          | 5,421      |       | $          | 10,148 |   | $ | 5,096 |   | $ | 20,665 |   |

 

Capital assetpurchases of $8.3 million in 2005 related primarily to additional hardware andsoftware investments to enhance our infrastructure and software applications,as well as investment in our new VoIP peering Network.

 

*Financing Activities*

 

In 2005, we paid $4.6 million for the last of three payments to NVP IIassociated with our contingent purchase obligation. We also repaid $1.8 millionon capital lease obligations.

 

An additional source of funds in 2005 was$4.1 million related to stock option exercises and stock sold through our 1998Employee Stock Purchase Plan. Given the volatility of our stock price relativeto the weighted average exercise price of the stock options we have issued inthe past, we cannot predict the level to which additional options will beexercised in future periods or whether they will be exercised at all. As such,the source of cash from future exercises should not be relied upon.

 

As of December 31, 2005, we have arevolving line of credit that is available to meet operating needs. Borrowingavailability may not exceed the lower of: (i) $20.0 million; or(ii) two times adjusted EBITDA (or $64.1 million at December 31,2005) as defined in the line of credit agreement. The interest rate on amountsborrowed under the line of credit is equal to the lower of the prime rate plus1.5%, which was 8.5% as of December 31, 2005, or LIBOR plus 3.75% perannum, which was 8.27% as of December 31, 2005. The line of credit matureson December 31, 2006, requires a $2.0 million minimum balance to bemaintained and is collateralized by accounts receivable and certain otherassets. As of December 31, 2005, $2.0 million was outstanding and$17.3 million was available for additional borrowings. An additional $665,000is being utilized to satisfy letter of credit obligations related to theoccupancy of our primary facilities in Longmont, Colorado and Lisle, Illinois.

 

We also have access to a maximum of $10.5million through capital lease lines with two entities. The interest rate isequal to the entities’ cost of funds plus an additional interest rate profit atthe time of each lease. Each lease 

 

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schedule is collateralized by the underlying assets and is subject toreview and approval by the lessor at the time of our application. Each leasehas either a 24-month or a 36-month termination date. As of December 31,2005, we have utilized approximately $3.0 million of the $10.5 millionavailable under the capital lease lines.

 

On February 19, 2004, we entered intothe Fifth Amendment to our Loan and Security Agreement with General ElectricCapital Corporation in order to ensure that we will have additional flexibilityin conducting domestic and international operations by eliminating therequirement to obtain the lender’s consent for:

 

•      Acquisitions that, individually or in aggregate,are valued at less than $15.0 million; or

 

•      Inter-company transfers of funds between us andany foreign subsidiary that, in aggregate, would exceed a $2.0 million balanceat any point in time.

 

***CovenantCompliance***

 

We were in compliance with all debt covenantsas of December 31, 2005.

 

***Assessmentof Future Liquidity***

 

Based on available cash resources,anticipated capital expenditures and projected operating cash flow, we believethat we will be able to adequately fund our operations through at least thenext twelve months. In making this assessment, we have considered:

 

•      Our consolidated cash, cash equivalents andshort-term investments of $65.6 million as of December 31, 2005;

 

•      The availability of funding under our revolvingcredit facility;

 

•      The anticipated level of capital expendituresduring 2006;

 

•      Presently scheduled debt service requirementsduring 2006; and

 

•      Our expectation of realizing positive cash flowfrom operations through 2006.

 

The availability of borrowings under ourcredit facility and lease line of credit is subject to covenants andlimitations that require us to maintain compliance with specified operating andfinancial parameters as described earlier. While we were in compliance with allcovenant ratios at December 31, 2005, there can be no assurance that wewill continue to be in compliance with these ratios over time, especially ifour debt borrowings increase or our operating results are not sufficient tocover our fixed financing payments.

 

**ITEM 7A.****       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Market risk represents the risk of loss thatmay impact our financial position, results of operations or cash flows due toadverse changes in financial and commodity market prices and rates. We areexposed to market risk to the extent that United States interest rates changedue to inflation or other factors. This exposure is directly related to ournormal operating and funding activities. The interest payable on our line ofcredit is determined based on the lower of prime rate plus 1.5% or LIBOR plus3.75% per annum, and, therefore, is affected by changes in market interestrates. Interest rates on our capital lease lines are dependent on interestrates in effect at the time the lease line is drawn upon. Total liabilitiesoutstanding at December 31, 2005 under the line of credit and capitallease lines were approximately $5.0 million. Based on amounts borrowed as ofDecember 31, 2005, we would have a resulting decline in future annualearnings and cash flows of approximately $50,000 for every 1% increase in primelending rates. We have no plans to use derivative instruments or engage inhedging activities.

 

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**ITEM 8.****          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

 

**INTRADO INC.**

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

 
|                                                                                                             | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                                             |       |
| Reports  of Independent Registered Public Accounting Firms                                                       |       |
| Consolidated Statements of Operations  for the Years Ended December 31, 2005, 2004 and 2003                 |       |
| Consolidated Balance Sheets as of  December 31, 2005 and 2004                                                    |       |
| Consolidated Statements of  Stockholders’ Equity for the Years Ended December 31, 2005, 2004  and 2003 |       |
| Consolidated Statements of Cash  Flows for the Years Ended December 31, 2005, 2004 and 2003                 |       |
| Notes to Consolidated Financial  Statements                                                                      |       |

 

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### **Reportof Independent Registered Public Accounting Firm**

 

Board of Directors andShareholders

of Intrado Inc.

 

Wehave audited the accompanying consolidated balance sheet of Intrado Inc. (aDelaware corporation) and subsidiaries as of December 31, 2005, and therelated consolidated statements of operations*,*stockholders’equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these financial statements based on our audit.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that our auditprovides a reasonable basis for our opinion.

 

Inour opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of Intrado Inc. andsubsidiaries as of December 31, 2005, and the results of their operations andtheir cash flows for the year then ended in conformity with accountingprinciples generally accepted in the United States of America.

 

Wealso have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the effectiveness ofIntrado Inc. and subsidiaries’ internal control over financial reportingas of December 31, 2005, based on criteria established in *InternalControl — Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO) and our report dated February24, 2006, expressed an unqualified opinion on management’s assessment of theeffectiveness of internal control over financial reporting and an unqualifiedopinion on the effectiveness of internal control over financial reporting.

 

/s/ Grant Thornton LLP

 

Grant Thornton LLP

Denver, Colorado

February 24, 2006

 

46

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**Report of Independent RegisteredPublic Accounting Firm**

 

Boardof Directors and Shareholders

of Intrado Inc.

 

Wehave audited management’s assessment, included in the accompanying Management’sReport on Internal Control Over Financial Reporting, appearing under Item 9A,that Intrado Inc. (a Delaware corporation) and its subsidiaries maintainedeffective internal control over financial reporting as of December 31,2005, based on criteria established in *InternalControl—Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO).  Intrado Inc.’s management is responsible formaintaining effective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financialreporting.  Our responsibility is toexpress an opinion on management’s assessment and an opinion on theeffectiveness of the Company’s internal control over financial reporting basedon our audit.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether effective internal control over financial reportingwas maintained in all material respects. Our audit included obtaining an understanding of internal control overfinancial reporting, evaluating management’s assessment, testing and evaluatingthe design and operating effectiveness of internal control, and performing suchother procedures as we considered necessary in the circumstances.  We believe that our audit provides areasonable basis for our opinions.

 

Acompany’s internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal control over financial reporting includes thosepolicies and procedures that (1) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements.  Also,projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate.

 

Inour opinion, management’s assessment that Intrado Inc. and subsidiariesmaintained effective internal control over financial reporting as of December 31,2005, is fairly stated, in all material respects, based on criteria establishedin *Internal Control – Integrated Framework*issued by COSO.  Also in our opinion,Intrado Inc. and subsidiaries maintained, in all material respects, effectiveinternal control over financial reporting as of December 31, 2005, basedon criteria established in *Internal Control –Integrated Framework*issued by COSO.

 

Wealso have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the consolidated balance sheet ofIntrado Inc. and subsidiaries as of December 31, 2005, and the relatedconsolidated statements of operations, stockholders’ equity, and cash flows forthe year then ended, and our report dated February 24, 2006 expressed anunqualified opinion on those financial statements.

 

/s/ Grant Thornton LLP

 

GrantThornton LLP

Denver,Colorado

February 24,2006

 

47

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**Report of Independent RegisteredPublic Accounting Firm**

 

To the Board of Directors and Stockholders of Intrado Inc.:

 

In our opinion, theaccompanying consolidated balance sheet and the related consolidated statementsof operations, stockholders’ equity and cash flows present fairly, in allmaterial respects, the financial position of Intrado Inc. and its subsidiariesat December 31, 2004, and the results of their operations and their cashflows for each of the two years in the period ended December 31, 2004 inconformity with accounting principles generally accepted in the United Statesof America.  These financial statementsare the responsibility of the Company’s management.  Our responsibility is to express an opinionon these financial statements based on our audits.  We conducted our audits of these statementsin accordance with the standards of the Public Company Accounting OversightBoard (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made bymanagement, and evaluating the overall financial statement presentation.  We believe that our audits provide areasonable basis for our opinion.

 

/s/PricewaterhouseCoopersLLP

PricewaterhouseCoopers LLPDenver, ColoradoMarch 16, 2005, except as to Note 5     and Note 13 which are as of March 3, 2006

 

48

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**INTRADO INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Dollarsin Thousands, Except Per Share Data)**

 
| ** **                                                      | ** ** | **Year Ended December 31,** | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                      | ** ** | **2005**                         | ** ** | **2004** | ** ** | **2003** | ** ** |
| Revenue:                                                        |       |                             |       |   |   |   |   |
| Wireline                                                        |       | $                                | 87,810     |   | $ | 80,221 |   | $ | 81,879 |   |
| Wireless                                                        |       | 58,507                           |       | 51,509 |   | 38,976 |   |
| Total revenue                                                   |       | 146,317                          |       | 131,730 |   | 120,855 |   |
| Costs and expenses:                                             |       |                             |       |   |   |   |   |
| Direct costs-Wireline                                           |       | 52,317                           |       | 45,032 |   | 41,205 |   |
| Direct costs-Wireless                                           |       | 26,828                           |       | 25,620 |   | 21,574 |   |
| Goodwill impairment                                             |       | —                           |       | 14,233 |   | — |   |
| Sales and marketing                                             |       | 22,670                           |       | 19,753 |   | 16,748 |   |
| General and administrative                                      |       | 21,299                           |       | 21,665 |   | 22,242 |   |
| Research and development                                        |       | 3,393                            |       | 2,909 |   | 2,322 |   |
| Total costs and expenses                                        |       | 126,507                          |       | 129,212 |   | 104,091 |   |
| Equity in loss from joint venture                               |       | (87                              | )          | — |   | — |   |
| Income from operations                                          |       | 19,723                           |       | 2,518 |   | 16,764 |   |
| Other income (expense):                                         |       |                             |       |   |   |   |   |
| Interest and other income                                       |       | 1,330                            |       | 438 |   | 290 |   |
| Interest and other expense                                      |       | (485                             | )          | (1,247 | ) | (1,408 | ) |
| Income before income taxes                                      |       | 20,568                           |       | 1,709 |   | 15,646 |   |
| Income tax expense                                              |       | 7,552                            |       | 5,312 |   | 5,100 |   |
| Income (loss) from continuing operations                        |       | 13,016                           |       | (3,603 | ) | 10,546 |   |
|                                                            |       |                             |       |   |   |   |   |
| Discontinued operations:                                        |       |                             |       |   |   |   |   |
| Income (loss) from discontinued operations  before income taxes |       | (134                             | )          | (631 | ) | 262 |   |
| Income tax benefit (expense)                                    |       | 51                               |       | 232 |   | (94 | ) |
| Income (loss) from discontinued operations                      |       | (83                              | )          | (399 | ) | 168 |   |
|                                                            |       |                             |       |   |   |   |   |
| Net income (loss)                                               |       | $                                | 12,933     |   | $ | (4,002 | ) | $ | 10,714 |   |
|                                                            |       |                             |       |   |   |   |   |
| Net income (loss) per share:                                    |       |                             |       |   |   |   |   |
| Basic:                                                          |       |                             |       |   |   |   |   |
| Continuing operations                                           |       | $                                | 0.74       |   | $ | (0.21 | ) | $ | 0.67 |   |
| Discontinued operations                                         |       | (0.01                            | )          | (0.02 | ) | 0.01 |   |
| Total                                                           |       | $                                | 0.73       |   | $ | (0.23 | ) | $ | 0.68 |   |
|                                                            |       |                             |       |   |   |   |   |
| Diluted:                                                        |       |                             |       |   |   |   |   |
| Continuing operations                                           |       | $                                | 0.70       |   | $ | (0.21 | ) | $ | 0.62 |   |
| Discontinued operations                                         |       | 0.00                             |       | (0.02 | ) | 0.01 |   |
| Total                                                           |       | $                                | 0.70       |   | $ | (0.23 | ) | $ | 0.63 |   |
|                                                            |       |                             |       |   |   |   |   |
| Shares used in computing net income (loss)  per share:          |       |                             |       |   |   |   |   |
| Basic                                                           |       | 17,707,537                       |       | 17,166,594 |   | 15,764,081 |   |
| Diluted                                                         |       | 18,499,654                       |       | 17,166,594 |   | 16,924,130 |   |

 

The accompanying notes to the consolidatedfinancial statements are an integral part of these consolidated statements.

 

49

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**INTRADO INC.CONSOLIDATED BALANCE SHEETS(Dollars in Thousands)**

 
| ** **                                                                                                            | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                            | ** ** | **2005**              | ** ** | **2004** | ** ** |
| **ASSETS**                                                                                                            |       |                  |       |   |   |
| Current assets:                                                                                                       |       |                  |       |   |   |
| Cash and cash equivalents                                                                                             |       | $                     | 65,616     |   | $ | 10,657 |   |
| Short-term investments                                                                                                |       | —                |       | 28,705 |   |
| Accounts receivable, net of allowance for  doubtful accounts of $75 and $190                                          |       | 13,168                |       | 17,556 |   |
| Unbilled revenue                                                                                                      |       | 2,331                 |       | 1,675 |   |
| Prepaids and other                                                                                                    |       | 4,200                 |       | 3,032 |   |
| Deferred contract costs                                                                                               |       | 3,228                 |       | 5,775 |   |
| Deferred income taxes                                                                                                 |       | 5,416                 |       | 7,507 |   |
| Total current assets                                                                                                  |       | 93,959                |       | 74,907 |   |
| Property and equipment, net of accumulated  depreciation of $54,119 and $46,591                                       |       | 24,935                |       | 22,703 |   |
| Goodwill                                                                                                              |       | 29,441                |       | 30,278 |   |
| Other intangibles, net of accumulated  amortization of $9,073 and $7,836                                              |       | 2,902                 |       | 4,260 |   |
| Long-term investments                                                                                                 |       | —                |       | 898 |   |
| Deferred contract costs                                                                                               |       | 3,042                 |       | 1,541 |   |
| Software development costs, net of  accumulated amortization of $15,144 and $8,875                                    |       | 14,777                |       | 16,551 |   |
| Investment in joint venture                                                                                           |       | 913                   |       | — |   |
| Other assets                                                                                                          |       | 140                   |       | 410 |   |
| Total assets                                                                                                          |       | $                     | 170,109    |   | $ | 151,548 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                         |       |                  |       |   |   |
| Current liabilities:                                                                                                  |       |                  |       |   |   |
| Accounts payable and accrued liabilities                                                                              |       | $                     | 14,636     |   | $ | 9,777 |   |
| Income taxes payable                                                                                                  |       | 1,778                 |       | — |   |
| Line of credit                                                                                                        |       | 2,000                 |       | — |   |
| Current portion of capital lease  obligations                                                                         |       | 1,653                 |       | 1,504 |   |
| Mandatorily redeemable preferred stock  payable                                                                       |       | —                |       | 4,431 |   |
| Deferred contract revenue                                                                                             |       | 13,455                |       | 19,742 |   |
| Total current liabilities                                                                                             |       | 33,522                |       | 35,454 |   |
| Capital lease obligations, net of current  portion                                                                    |       | 1,380                 |       | 1,312 |   |
| Line of credit                                                                                                        |       | —                |       | 2,000 |   |
| Deferred rent, net of current portion                                                                                 |       | 1,717                 |       | 1,643 |   |
| Deferred contract revenue                                                                                             |       | 8,695                 |       | 5,620 |   |
| Deferred tax liability—long term                                                                                 |       | 2,731                 |       | 1,174 |   |
| Total liabilities                                                                                                     |       | 48,045                |       | 47,203 |   |
|                                                                                                                  |       |                  |       |   |   |
| Commitments and contingencies (Note 11)                                                                               |       |                  |       |   |   |
|                                                                                                                  |       |                  |       |   |   |
| Stockholders’ equity:                                                                                            |       |                  |       |   |   |
| Preferred stock, $.001 par value;  15,000,000 shares authorized; 0 and 4,552 shares issued and  outstanding           |       | —                |       | — |   |
| Common stock, $.001 par value; 50,000,000  shares authorized; 18,001,793 and 17,473,860 shares issued and outstanding |       | 18                    |       | 17 |   |
| Additional paid-in capital                                                                                            |       | 117,976               |       | 112,192 |   |
| Accumulated other comprehensive income  (loss)                                                                        |       | (343                  | )          | 656 |   |
| Retained earnings (accumulated deficit)                                                                               |       | 4,413                 |       | (8,520 | ) |
| Total stockholders’ equity                                                                                       |       | 122,064               |       | 104,345 |   |
| Total liabilities and stockholders’ equity                                                                       |       | $                     | 170,109    |   | $ | 151,548 |   |

 

The accompanying notes to the consolidatedfinancial statements are an integral part of these consolidated statements.

 

50

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**INTRADO INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(Dollars in Thousands, Except Share Data)**

 
| ** **                                                                                 | ** ** | **Shares** | ** ** | **Amount** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Other  Comprehensive Income (Loss)** | ** ** | **Retained Earnings (Accumulated  Deficit)** | ** ** | **Total  Stockholders’  Equity** | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|----------------------------------|------------|----------------------------------------|------------|----------------------------------------------|------------|---------------------------------------|------------|
|                                                                                       |       |       |       |       |       |                             |       |                                   |       |                                         |       |                                  |       |
| Balances, at December 31, 2002                                                        |       | 15,442,140 |       | $          | 15         |                             | $          | 80,936                                 |       | $                                            | —     |                                  | $          | (15,232 | ) | $ | 65,719 |   |
| Issuance of common stock under compensation  arrangements                                  |       | 713,003    |       | 1          |       | 6,025                            |       | —                                 |       | —                                       |       | 6,026                                 |       |
| Issuance of common stock upon exercise of  warrants                                        |       | 8,864      |       | —     |       | 70                               |       | —                                 |       | —                                       |       | 70                                    |       |
| Tax benefit of stock option exercises                                                      |       | —     |       | —     |       | 1,913                            |       | —                                 |       | —                                       |       | 1,913                                 |       |
| Net income                                                                                 |       | —     |       | —     |       | —                           |       | —                                 |       | 10,714                                       |       | 10,714                                |       |
| Balances, at December 31, 2003                                                        |       | 16,164,007 |       | 16         |       | 88,944                           |       | —                                 |       | (4,518                                       | )          | 84,442                                |       |
| Issuance of common stock under compensation  arrangements                                  |       | 566,851    |       | —     |       | 5,073                            |       | —                                 |       | —                                       |       | 5,073                                 |       |
| Issuance of common stock upon exercise of  warrants                                        |       | 8,000      |       | —     |       | 63                               |       | —                                 |       | —                                       |       | 63                                    |       |
| Issuance of common stock for acquisition                                                   |       | 735,002    |       | 1          |       | 16,697                           |       | —                                 |       | —                                       |       | 16,698                                |       |
| Tax benefit of stock option exercises                                                      |       | —     |       | —     |       | 1,415                            |       | —                                 |       | —                                       |       | 1,415                                 |       |
| Comprehensive income (loss):                                                               |       |       |       |       |       |                             |       |                                   |       |                                         |       |                                  |       |
| Net loss                                                                                   |       | —     |       | —     |       | —                           |       | —                                 |       | (4,002                                       | )          | (4,002                                | )          |
| Foreign currency translation adjustment                                                    |       | —     |       | —     |       | —                           |       | 692                                    |       | —                                       |       | 692                                   |       |
| Unrealized loss from available-for-sale  securities (net of related tax effect)            |       | —     |       | —     |       | —                           |       | (36                                    | )          | —                                       |       | (36                                   | )          |
| Total comprehensive income (loss)                                                          |       |       |       |       |       |                             |       |                                   |       |                                         |       | (3,346                                | )          |
| Balances, at December 31, 2004                                                        |       | 17,473,860 |       | 17         |       | 112,192                          |       | 656                                    |       | (8,520                                       | )          | 104,345                               |       |
| Issuance of common stock under compensation  arrangements                                  |       | 469,850    |       | 1          |       | 4,385                            |       | —                                 |       | —                                       |       | 4,386                                 |       |
| Issuance of common stock upon exercise of  warrants                                        |       | 9,000      |       | —     |       | 71                               |       | —                                 |       | —                                       |       | 71                                    |       |
| Adjustment of common stock related to  acquisition                                         |       | 49,083     |       |       |       | (4                               | )          | —                                 |       | —                                       |       | (4                                    | )          |
| Tax benefit of stock option exercises                                                      |       | —     |       | —     |       | 1,332                            |       | —                                 |       | —                                       |       | 1,332                                 |       |
| Comprehensive income:                                                                      |       |       |       |       |       |                             |       |                                   |       |                                         |       |                                  |       |
| Net income                                                                                 |       | —     |       | —     |       | —                           |       | —                                 |       | 12,933                                       |       | 12,933                                |       |
| Foreign currency translation adjustment                                                    |       | —     |       | —     |       | —                           |       | (1,035                                 | )          | —                                       |       | (1,035                                | )          |
| Reclassification adjustment for losses  included in net income (net of related tax effect) |       | —     |       | —     |       | —                           |       | 36                                     |       | —                                       |       | 36                                    |       |
| Total comprehensive income                                                                 |       |       |       |       |       |                             |       |                                   |       |                                         |       | 11,934                                |       |
| Balances, at December 31, 2005                                                        |       | 18,001,793 |       | $          | 18         |                             | $          | 117,976                                |       | $                                            | (343       | )                                     | $          | 4,413 |   | $ | 122,064 |   |

 

The accompanying notes to theconsolidated financial statements are an integral part of these consolidatedstatements.

 

51

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**INTRADO INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in Thousands)**

 
| ** **                                                                                | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                | ** ** | **2005**                         | ** ** | **2004** | ** ** | **2003** | ** ** |
| Cash flows from operating activities:                                                     |       |                             |       |   |   |   |   |
| Net income (loss)                                                                         |       | $                                | 12,933     |   | $ | (4,002 | ) | $ | 10,714 |   |
| Adjustments to reconcile net income (loss)  to net cash provided by operating activities: |       |                             |       |   |   |   |   |
| Depreciation and amortization                                                             |       | 16,580                           |       | 15,540 |   | 15,450 |   |
| Stock-based compensation                                                                  |       | 287                              |       | 395 |   | 183 |   |
| Accretion of interest on mandatorily  redeemable preferred stock payable                  |       | 120                              |       | 389 |   | 483 |   |
| Loss from sale of discontinued operations,  net of tax                                    |       | 5                                |       | — |   | — |   |
| Equity in loss from joint venture                                                         |       | 87                               |       | — |   | — |   |
| Provision for doubtful accounts                                                           |       | (104                             | )          | 31 |   | (233 | ) |
| Asset impairment                                                                          |       | —                           |       | 16,868 |   | — |   |
| Loss on disposal of assets                                                                |       | 45                               |       | 96 |   | 26 |   |
| Tax benefit of stock option exercises                                                     |       | 1,332                            |       | 1,415 |   | 1,913 |   |
| Change in—                                                                           |       |                             |       |   |   |   |   |
| Accounts receivable and unbilled revenue                                                  |       | 3,747                            |       | (1,644 | ) | 4,059 |   |
| Prepaids and other                                                                        |       | (961                             | )          | (704 | ) | 170 |   |
| Deferred contract costs                                                                   |       | 1,008                            |       | (189 | ) | (1,153 | ) |
| Deferred income taxes, net                                                                |       | 3,648                            |       | 3,560 |   | 2,983 |   |
| Accounts payable and accrued liabilities                                                  |       | 4,920                            |       | (2,164 | ) | 2,774 |   |
| Income taxes payable                                                                      |       | 1,778                            |       | — |   | — |   |
| Deferred revenue                                                                          |       | (2,822                           | )          | 3,161 |   | (538 | ) |
| Net cash provided by operating activities                                                 |       | 42,603                           |       | 32,752 |   | 36,831 |   |
|                                                                                      |       |                             |       |   |   |   |   |
| Cash flows from investing activities:                                                     |       |                             |       |   |   |   |   |
| Acquisition of property and equipment                                                     |       | (8,341                           | )          | (2,767 | ) | (3,573 | ) |
| Purchases of investments                                                                  |       | (9,109                           | )          | (48,126 | ) | (20,700 | ) |
| Proceeds from sales of investments                                                        |       | 38,713                           |       | 39,193 |   | — |   |
| Acquisition, net of cash acquired                                                         |       | —                           |       | (4,374 | ) | — |   |
| Investment in joint venture                                                               |       | (1,000                           | )          | — |   | — |   |
| Cash paid on disposal of discontinued  operations                                         |       | (291                             | )          | — |   | — |   |
| Capitalized software development costs                                                    |       | (5,421                           | )          | (10,148 | ) | (5,096 | ) |
| Net cash provided by (used in) investing  activities                                      |       | 14,551                           |       | (26,222 | ) | (29,369 | ) |
| Cash flows from financing activities:                                                     |       |                             |       |   |   |   |   |
| Principal payments on capital lease  obligations                                          |       | (1,795                           | )          | (3,200 | ) | (3,322 | ) |
| Proceeds from notes payable                                                               |       | —                           |       | — |   | 3,900 |   |
| Repayment on payables to Lucent and notes  payable                                        |       | —                           |       | (10,167 | ) | (5,016 | ) |
| Payments on mandatorily redeemable  preferred stock payable                               |       | (4,552                           | )          | (4,552 | ) | (4,551 | ) |
| Proceeds from exercise of stock options                                                   |       | 4,066                            |       | 3,784 |   | 5,043 |   |
| Issuance of stock upon exercise of warrants                                               |       | 71                               |       | 63 |   | 70 |   |
| Proceeds from issuance of common stock  through employee stock purchase plan              |       | 65                               |       | 894 |   | 800 |   |
| Net cash used in financing activities                                                     |       | (2,145                           | )          | (13,178 | ) | (3,076 | ) |
| Effect of exchange rate changes on cash                                                   |       | (50                              | )          | 24 |   | — |   |
| Net increase (decrease) in cash and cash  equivalents                                     |       | 54,959                           |       | (6,624 | ) | 4,386 |   |
| Cash and cash equivalents, beginning of  period                                           |       | 10,657                           |       | 17,281 |   | 12,895 |   |
| Cash and cash equivalents, end of period                                                  |       | $                                | 65,616     |   | $ | 10,657 |   | $ | 17,281 |   |
| Supplemental disclosure of cash flow  information:                                        |       |                             |       |   |   |   |   |
| Cash paid during the period for interest                                                  |       | $                                | 518        |   | $ | 626 |   | $ | 347 |   |
| Cash paid during the period for federal and  state income taxes                           |       | $                                | 700        |   | — |   | — |   |
| Supplemental schedule of non-cash  financing and investing activities:               |       |                             |       |   |   |   |   |
| Property and equipment under capital leases                                               |       | $                                | 5,024      |   | $ | 3,027 |   | $ | 1,924 |   |

 

The accompanying notes to the consolidatedfinancial statements are an integral part of these consolidated statements.

 

52

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**INTRADO INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2005**

 

**(1)           ORGANIZATIONAND BUSINESS**

 

Intrado Inc., a Delaware corporation(the “Company”), provides emergency-telephony solutions that manage and delivermission-critical information for telecommunications providers, includingincumbent local exchange carriers (“ILECs”), competitive local exchangecarriers (“CLECs”), wireless carriers, state and local governments, and publicsafety organizations in the United States. The Company manages the data thatenables 9-1-1 calls to be routed to the appropriate public safety agency withaccurate and timely information about the caller’s identification, callbacknumber and location. In addition, the Company licenses its software to carriersthat wish to manage the delivery of 9-1-1 data management services in-house.

 

**(2)           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES**

 

**Use of Estimates**

 

The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesrequires management to make estimates and assumptions. These estimates affectthe reported amounts of assets and liabilities, disclosure of contingent assetsand liabilities at the date of the financial statements and the reportedamounts of revenue and expenses during the reporting period. Actual resultscould differ from those estimates.

 

**Reclassifications**

 

Certain reclassifications have been made inthe 2004 and 2003 financial statements to conform to the 2005presentation.  These reclassificationsincluded the Company’s segment reporting (see Note 13).

 

**Principles of Consolidation**

 

The consolidated financial statements includethe accounts of the Company and its wholly owned subsidiaries, bmd wireless AG(“bmd”), Intrado International Ltd., and Intrado International Singapore Pte.Ltd. All inter-company accounts and transactions have been eliminated in consolidation.

 

**Cash and Cash Equivalents**

 

All highly liquid investments with originalmaturity of three months or less when purchased are considered to be cashequivalents. All cash equivalents are carried at cost, which approximates fairvalue due to the short maturities of the underlying instruments. Cashequivalents are short-term, highly liquid investments that are both:

 

a)              Readily convertible to known amounts ofcash

b)             So near their maturity that they presentinsignificant risk of changes in value because of changes in interest rate.

 

##### **Accounts Receivable and Allowance forDoubtful Accounts**

#####  

Trade accounts receivable are recorded at theinvoiced amount and typically do not bear interest.  Such accounts receivable have been reduced byan allowance for doubtful accounts, which represents the Company’s bestestimate of the amount of probable uncollectible balances in the Company’sexisting accounts receivable.  TheCompany determines the allowance based on its historical write-off experienceand the aging of such receivables, among other factors.  The allowance has not been material for anyperiods presented.  The Company does nothave any off-balance-sheet credit exposure related to its customers.

 

53

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##### **Unbilled Revenue**

#####  

Unbilled revenue**relates to a major ILEC services customer contractthat contains discount pricing.  Based onthe guidance of Staff Accounting Bulletin 104, “Revenue Recognition” (“SAB104”), and**Statementof Position (“SOP”) 97-2, “Software Revenue Recognition” (“SOP 97-2”), the Company recognizes the discounts on astraight-line basis over the life of the contract.  During the first half of the contract, therevenue recognized exceeds the amounts billed to the customer; during the latterhalf of the contract, the balance in unbilled revenue will be amortized andwill reduce revenue recognized as the amounts billed to the customer willexceed the revenue recognized.

 

##### **Investments**

 

Investments are classified as eithershort-term or long-term depending on the underlying investment’s originalmaturity or “reset” date. Investments are classified as short-term if theirmaturity or “reset” date is less than twelve months, long-term for those with amaturity or “reset date” longer than twelve months. Auction rate securities (“ARS”)are considered “available-for-sale” securities using the criteria in Statementof Financial Accounting Standards (“SFAS”) No. 115, “Accounting forCertain Investments in Debt and Equity Securities”**(“SFAS115”), and are classified as either short-term or long-term investments basedupon the underlying “reset” date, if applicable, associated with eachindividual security. ARS are variable rate investments tied to short-terminterest rates generally with maturities on the face of the securities thatvary from 7, 28 or 35 days. The Company also held certain ARS with reset datesextending beyond one year. Interest paid during a given period is based uponthe interest rate determined during the prior auction period. Although thesesecurities are issued and rated as long-term investments, they are priced andtraded as short-term instruments because of the liquidity provided through theinterest rate reset. 

 

Investments are recorded at fair marketvalue. Unrealized gains or losses pertaining to auction rate securities arereported as part of Other Comprehensive Income (Loss). Purchases and sales ofavailable-for-sale investments are shown gross in the Statement of Cash Flows -Investing section. The following table summarizes the aggregate fair values ofall available-for-sale securities by major security types and the contractualmaturities of these securities as of December 31, 2005 and December 31,2004, respectively (amounts in thousands, except for maturity ranges):

 

| ** **               | ** ** | **Fair Value as of December 31, 2005** | ** **   | **Fair Value as of December 31, 2004** | ** ** | **Range of Contractual Maturities** | ** ** |
|--------------------------|------------|---------------------------------------------|--------------|---------------------------------------------|------------|-------------------------------------|------------|
| U.S.  government debt    |       | $                                           | —       |                                        | $          | 2,704                               |       | 15 to 75 days |   |
| Corporate  debt          |       | —                                      |         | 3,768                                       |       | 3 to 13 months                      |       |
| Auction rate  securities |       | —                                      |         | 31,042                                      |       | 5 days to 3 years                   |       |
| Total                    |       | $                                           |  — |                                        | $          |  37,514                        |       |   |   |

 

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**Valuation and Qualifying Accounts**

 

Valuation and qualifying accounts for each of the years inthe three year-period ended December 31, 2005 is detailed below (inthousands):

 

| **Fiscal  Year** | ** ** | **Description**                  | ** ** | **Balances at   Beginning of   Period** | ** ** | **Charged to   Bad Debt   Expense** | ** ** | **Write-Offs   Charged to   Allowance** | ** ** | **Balances   at End of   Period** | ** ** |
|------------------|------------|----------------------------------|------------|-----------------------------------------|------------|-------------------------------------|------------|-----------------------------------------|------------|-----------------------------------|------------|
| 2005             |       | Allowance  for doubtful accounts |       | $                                       | 190        |                                | $          | (61                                     | )          | $                                 | (54        | ) | $ | 75 |   |
| 2004             |       | Allowance  for doubtful accounts |       | $                                       | 357        |                                | $          | 28                                      |       | $                                 | (195       | ) | $ | 190 |   |
| 2003             |       | Allowance  for doubtful accounts |       | $                                       | 589        |                                | $          | (139                                    | )          | $                                 | (93        | ) | $ | 357 |   |

 

**Property and Equipment**

 

Property and equipment are carried athistorical cost.  The Company capitalizesproperty and equipment costs equal to or greater than $1,000.  Depreciation of property and equipment iscomputed using the straight-line method over estimated useful lives of three tofive years for computer hardware and equipment, seven years for furniture andfixtures and the lesser of the asset life or lease term for leaseholdimprovements. The costs of repairs and maintenance are expensed whileexpenditures that extend the useful physical or economic life of property andequipment are capitalized. Gains and losses on disposition of property andequipment are recognized in operations in the year of disposition.

 

**Goodwill and Other Intangibles**

 

The Company adopted SFAS No. 142, “Goodwilland Other Intangible Assets” (“SFAS 142”), on January 1, 2002.SFAS 142 states that goodwill is no longer subject to amortization overits useful life. Rather, goodwill will be subject to, at a minimum, an annualassessment for impairment and will be written down to its fair value only ifthe carrying amount is greater than the fair value. In addition, intangibleassets will be recognized separately if the benefit of the intangible asset isobtained through contractual or other legal rights, or if the intangible assetcan be sold, transferred, licensed, rented or exchanged, regardless of theacquirer’s intent to do so. Prior to 2002, the Company was amortizing goodwillover seven years. The Company has assigned goodwill to the lowest reportingunit identifiable, which are ILEC and bmd.

 

The Company hired an independent appraisalfirm, Quist Valuation Inc., to complete its annual impairment test as of December 31,2005 and 2004, as required under SFAS 142. The income approach was used todetermine the fair value of each reporting unit that had been assignedgoodwill. That approach involves discounting each reporting unit’s projectedfree cash flow at its weighted average cost of capital to ascertain whether thefair value of the reporting unit is higher than the book value, includinggoodwill. Using this method, the Company determined that the fair value of theILEC reporting unit exceeded its book value, and no impairment existed as of December 31,2005 and 2004. Therefore, in accordance with SFAS 142, no further testingwas necessary for the ILEC reporting unit.

 

Using this method for the year ended December 31,2005, the Company determined that the fair value of the bmd reporting unitexceeded its book value, and no impairment existed as of December 31,2005. Therefore, in accordance with SFAS 142, no further testing wasnecessary for the bmd reporting unit.

 

For the year ended December 31, 2004, theCompany determined that, based on the analysis, the carrying value of thegoodwill for the bmd reporting unit was impaired. As a result, the Companyrecorded an impairment charge of $14.0 million, lowering the carrying value ofgoodwill to $6.0 million. Included in the impairment charge was $593,907 ofadditional consideration related to the value of the earn-out shares recordedat December 31, 2004 (see Note 3). The value of the goodwill was impairedprimarily due to significantly lower performance of the bmd reporting unitsince the time of acquisition and a downward revision of the five-year earningsforecast for bmd. The Company determined that the downward revision wasnecessary due to competitive pressure in Europe and a longer sales cycle thanexpected at the time of the acquisition. As a result, the Company expects asignificantly slower path for bmd’s technology to penetrate the European andNorth American markets.

 

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The Company has recorded $2.9 million (netaccumulated amortization of $9.1 million) on its balance sheet relating toother acquired intangible assets as of December 31, 2005. The acquiredintangible assets include intellectual property and contracts acquired as partof the Lucent Public Safety Systems (“LPSS”) and bmd acquisitions. Inaccordance with SFAS 142, the Company reevaluated the carrying value andthe useful lives of these assets at December 31, 2005 and determined thatno adjustments were necessary. Accordingly, the Company continues to amortizethe amounts originally assigned to intellectual property and contracts. For theyear ended December 31, 2005, the Company recorded approximately $1.3million of amortization expense related to these separately identifiableintangible assets.

 

For the year ended December 31, 2005,the changes in the goodwill balance and the gross value of the customercontracts balance are attributed to foreign currency translation adjustmentsbetween the Swiss franc and the U.S. dollar.

 

The following table details the intangiblesat December 31, 2005 by class (dollars in thousands):

 
| ** **             | ** ** | **Gross Balance at December 31,  2005** | ** ** | **Accumulated Amortization at December 31,  2005** | ** ** | **Amortization expense  for the year ended December 31, 2005** | ** ** | **Amortization  Life** | ** ** |
|------------------------|------------|----------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------------------|------------|------------------------|------------|
| Goodwill               |       | $                                            | 29,441     |                                                    | N/A        |                                                                | N/A        |                   | N/A        |   |
| Customer  contracts    |       | 3,795                                        |       | $                                                       | 3,679      |                                                                | $          | 102                    |       | 3 years |   |
| Intellectual  property |       | 8,180                                        |       | 5,394                                                   |       | 1,153                                                               |       | 7 years                |       |
| Total                  |       | $                                            | 41,416     |                                                    | $          | 9,073                                                               |       | $                      | 1,255      |   |   |   |

 

The following table details the intangibles at December 31, 2004by class (dollars in thousands):

 
| ** **             | ** ** | **Gross Balance at December 31,  2004** | ** ** | **Accumulated Amortization at December 31,  2004** | ** ** | **Amortization expense  for the year ended December 31, 2004** | ** ** | **Amortization  Life** | ** ** |
|------------------------|------------|----------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------------------|------------|------------------------|------------|
| Goodwill               |       | $                                            | 30,278     |                                                    | N/A        |                                                                | N/A        |                   | N/A        |   |
| Customer  contracts    |       | 3,916                                        |       | $                                                       | 3,596      |                                                                | $          | 522                    |       | 3 years |   |
| Intellectual  property |       | 8,180                                        |       | 4,240                                                   |       | 1,142                                                               |       | 7 years                |       |
| Total                  |       | $                                            | 42,374     |                                                    | $          | 7,836                                                               |       | $                      | 1,664      |   |   |   |

 

For the separately identifiable intangibleassets above pertaining to contracts and intellectual property, the Companyestimates that it will record the following amortization amounts over the nextthree years upon which time all current intangible assets will be fullyamortized:

 

| 2006 |   | $ | 1.3 million |   |
|------|--------|---|-------------|--------|
| 2007 |   | $ | 1.2 million |   |
| 2008 |   | $ | 0.4 million |   |

 

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The changes in the carrying amount ofgoodwill for the year ended December 31, 2005 are as follows (dollars inthousands):

 
| ** **                         | ** ** | **ILEC**           | ** ** | **bmd**            | ** ** | ** ** | ** ** |
|------------------------------------|------------|--------------------|------------|--------------------|------------|------------|------------|
| ** **                         | ** ** | **Reporting Unit** | ** ** | **Reporting Unit** | ** ** | **Total**  | ** ** |
| Balance at  December 31, 2004 |       | $                  | 24,295     |               | $          | 5,983      |       | $ | 30,278 |   |
| Foreign  currency exchange loss    |       | —             |       | (837               | )          | (837       | )          |
| Balance at  December 31, 2005 |       | $                  | 24,295     |               | $          | 5,146      |       | $ | 29,441 |   |

 

The changes in the carrying amount ofgoodwill for the year ended December 31, 2004 are as follows (dollars inthousands):

 
| ** **                               | ** ** | **ILEC**           | ** ** | **Palladium**      | ** ** | **bmd**            | ** ** | ** ** | ** ** |
|------------------------------------------|------------|--------------------|------------|--------------------|------------|--------------------|------------|------------|------------|
| ** **                               | ** ** | **Reporting Unit** | ** ** | **Reporting Unit** | ** ** | **Reporting Unit** | ** ** | **Total**  | ** ** |
| Balance at  December 31, 2003       |       | $                  | 24,295     |               | $          | 222                |       | $          | —     |   | $ | 24,517 |   |
| Goodwill acquired during the year        |       | —             |       | —             |       | 18,938             |       | 18,938     |       |
| Foreign  currency translation adjustment |       | —             |       | —             |       | 1,056              |       | 1,056      |       |
| Impairments                              |       | —             |       | (222               | )          | (14,011            | )          | (14,233    | )          |
| Balance at  December 31, 2004       |       | $                  | 24,295     |               | $          | —             |       | $          | 5,983      |   | $ | 30,278 |   |

 

## **Software**

##  

The Company capitalizes certain internal andexternal software acquisition and development costs that benefit future yearsin accordance with SOP 98-1, “Accounting for the Costs of Computer SoftwareDeveloped or Obtained for Internal Use,” if for internal use, or SFAS No. 86,“Accounting for the Costs of Computer Software to be Sold, Leased or OtherwiseMarketed” (“SFAS 86”), if the software is to be sold.

 

For software developed for internal use, theCompany expenses the costs of developing computer software until the softwarehas reached the application development stage and capitalizes all costsincurred from that time until the software has been installed at which timeamortization of the capitalized costs begins. Determination of when thesoftware has reached the application development stage is based upon completionof conceptual designs, evaluation of alternative designs and performancerequirements. Costs of major enhancements to internal use software arecapitalized while routine maintenance of existing software is charged toexpense as incurred. The determination of when the software is in theapplication development stage and the ongoing assessment of the recoverabilityof capitalized computer software development costs requires considerablejudgment by management with respect to certain factors, including, but not limitedto estimated economic life and changes in software and hardware technology. TheCompany also contracts with third parties to help develop or test internal usesoftware and generally capitalizes these costs.

 

For software developed for external use, theCompany expenses the costs of developing computer software until technologicalfeasibility is established and capitalizes all costs incurred from that timeuntil the software is available for general customer release or ready for itsintended use, at which time amortization of the capitalized costs begins.Technological feasibility for the Company’s computer software products is basedupon the earlier of the achievement of: (a) a detailed program design freeof high-risk development issues; or (b) completion of a working model.Costs of major enhancements to existing products are capitalized while routinemaintenance of existing products is charged to expense as incurred. Theestablishment of the technological feasibility and the ongoing assessment of therecoverability of capitalized computer software development costs requireconsiderable judgment by management with respect to certain external factors,including, but not limited to, technological feasibility, anticipated futuregross revenue, estimated economic life and changes in software and hardwaretechnology. The Company also contracts with third parties to develop or testsoftware that will be sold to customers and generally capitalizes these costs.

 

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Internal- and external- use capitalizedsoftware costs are amortized on a product-by-product basis over their expecteduseful life, which is generally three to five years. The annual amortizationrelated to software to be sold is the greater of the amount computed using (a) theratio that current gross revenue for a product compares to the total of currentand anticipated future gross revenue for that product or (b) thestraight-line method over the remaining estimated economic life of the product,which is typically three years. Amortization expense related to capitalizedsoftware costs totaled approximately $7.2 million, $5.3 million and $3.9million for the years ended December 31, 2005, 2004 and 2003,respectively.

 

In the second quarter of 2004, the Companydetermined that, due to the continued limited visibility regarding the timingof forecasted revenue opportunities, it was necessary to impair $1.7 million ofsoftware assets related to the Company’s commercial database product offerings.The Company also recorded an impairment charge of $588,000 related tocapitalized software for an MPC product offering.  When the Company evaluated the net realizablevalue of each of these products, forward-looking business cases were preparedthat assessed the future expected benefits to be derived from the assetsagainst the direct costs associated with the delivery and ongoing support ofthe products to arrive at a contribution margin, defined as expected benefitsless direct costs. The contribution margins were then compared to the carryingvalue of the assets. The expected contribution margins were significantly lessthan the asset carrying values, resulting in the impairment charges.  There were no such software asset impairmentcharges during 2005.

 

**Revenue and Cost Recognition**

 

Revenue is accounted for as either softwarerevenue and related post-contract support, product revenue, or services revenuein accordance with the guidelines provided by SOP 97-2, “Software RevenueRecognition,” SAB 104,  and FTB 90-1“Accounting for Separately Priced Extended Warranty and Product MaintenanceContracts.”  The Company’s policy is torecognize revenue when the applicable revenue recognition criteria have beenmet, which generally include the following:

 

•         Persuasiveevidence of an arrangement exists;

 

•         Priceis fixed or determinable;

 

•         Deliveryhas occurred or services have been rendered; and

 

•         Collectibilityis reasonably assured.

 

The Company delivers products and servicesthat are part of multiple element arrangements. In addition to the abovecriteria from SAB 104 and SOP 97-2, the Company also applies theguidance in Emerging Issues Task Force (“EITF”) 00-21, “RevenueArrangements with Multiple Deliverables” (“EITF 00-21”), which requires usto evaluate vendor specific objective evidence (“VSOE”) for contracts underSOP 97-2 and vendor objective evidence (“VOE”) for contracts underSAB 104 to determine the fair value of elements delivered in situationswhere multiple elements exist.

 

The majority of the Company’s revenue isgenerated from monthly data management services, which includes revenue fromup-front fees and monthly service fees. The Company’s up-front services consist primarily of the data cleansingof the customer’s 9-1-1 records, engineering services to enable the customer’slegacy system to interface with the Company’s platform, thereby establishingnetwork connectivity, public safety boundary mapping, and customer training andtesting. The charges for these services are nonrefundable if the contract is cancelledafter the services are performed. After the initial up-front services, datamanagement customers often buy enhancements to these services, such asadditional software engineering to improve system functionality or networkservices to make their network more effective (“Enhancement Services”). Thefees received for up-front services and certain Enhancement Services aredeferred and recognized as revenue ratably over the term of the contract or theexpected life of the customer relationship, whichever is longer, as these feesdo not represent the culmination of a separate earnings process.  The Company also receives a monthly servicefee to provide the ongoing data management services required to keep the recordscurrent for all subscribers, to maintain and monitor network components and tosupport and maintain the software and systems required to provide the services.The fees received for these monthly services are recognized as

 

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revenue in the period in which all of the above criteria have been met,which is generally the month services are provided. For services the Companyperforms under its licensed model, customers do not have a contractual right totake possession of the Company’s software; therefore, the Company accounts forthese arrangements as service contracts.

 

Maintenance contracts are sold to customersthat license software enhancements and purchase systems.  The fees received for ongoing maintenanceobligations are deferred and recognized as revenue over the contractual term ofthe arrangement.

 

Systems and new products revenue representsrevenue recognized from the sales of new database and customized solutions soldto existing customers. Software license revenue and related hardware sales arerecognized upon execution of a contract and completion of delivery obligations,provided that no uncertainties exist regarding customer acceptance and thatcollection of the related receivable is reasonably assured.

 

Professional services revenue is generated byproviding consulting services and is recognized in the period in which all ofthe above criteria have been met.

 

In certain situations involving the deliveryof products with significant customization or modification services, theCompany also recognizes revenue on a percentage-of-completion basis, asprescribed by SOP 81-1, “Accounting for Performance of Construction-Typeand Certain Production-Type Contracts.” In these situations, the Companydevelops and utilizes estimates to ratably recognize costs and revenue as workis completed relative to the total estimated time and costs to completeprojects. Delays in completing projects or significant changes to original costestimates could adversely impact future periods in that additional costs oramortization periods for both revenue and expenses may be necessary. Whenreasonable estimates cannot be determined at the onset of an agreement due tounique acceptance criteria or other factors, revenue is recognized on acompleted contract basis.

 

As of December 31, 2005, the Company hadtotal deferred contract revenue of approximately $22.2 million anddeferred contract costs of approximately $6.3 million. Deferred contractrevenue represents fees for certain software enhancements and up-front fees thathave been billed but are yet to be delivered or that have been delivered butare required to be deferred under SAB 104. Of the total deferred contractrevenue at December 31, 2005, $20.4 million has already been received and$1.8 million is included in accounts receivable. The Company estimates thattotal deferred contract revenue, net of deferred contract costs, will berecognized as follows (in thousands):

 

| 2006                     |   | $      | 10,227 |   |
|--------------------------|--------|--------|--------|--------|
| 2007                     |   | 2,389  |   |
| 2008                     |   | 1,599  |   |
| 2009                     |   | 961    |   |
| 2010                     |   | 417    |   |
| 2011                     |   | 224    |   |
| 2012 through  2013 total |   | 63     |   |
|                     |   |   |   |
| Total                    |   | $      | 15,880 |   |

 

**Direct Costs**

 

Direct costs include costs related tomanaging the data, which enables 9-1-1 calls to be routed to the appropriatepublic safety agency with accurate and timely information about the caller’s identification,callback number and location. These direct costs include allocations offacility costs, corporate technical operations support costs and corporatesoftware engineering and maintenance costs, as well as depreciation expenserelated to equipment used to manage the data.

 

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**Research and Development**

 

Research and development efforts consist ofsalaries, supplies and other related costs incurred while the Company isdeveloping computer software prior to reaching technological feasibility or theapplication development phase. These costs are expensed as incurred.

 

**Income Taxes**

 

The Company follows SFAS No. 109, “Accountingfor Income Taxes” (“SFAS 109”). The current provision for income taxes representsactual or estimated amounts payable or refundable on tax returns filed eachyear. Deferred tax assets and liabilities are recognized for the estimatedfuture tax effects attributable to the temporary differences between thefinancial statement carrying amounts of existing assets and liabilities andtheir respective tax bases as well as operating loss and tax creditcarryforwards. Deferred tax assets and liabilities are measured using tax ratesexpected to apply to taxable income in the years in which those temporarydifferences are expected to be recovered or settled. Under SFAS 109, theeffect on deferred tax assets and liabilities of a change in enacted tax lawsis recognized as an adjustment to the tax provision or benefit in the period ofenactment. The carrying value of deferred tax assets may be reduced by avaluation allowance if, based upon the judgmental assessment of availableevidence, it is deemed more likely than not that some or all of the deferredtax assets will not be realizable.

 

**Advertising Costs**

 

Advertising costs are expensed as incurred.

 

**Concentration of Credit Risk**

 

Financial instruments, which potentiallysubject the Company to concentrations of credit risk, are primarily cash andcash equivalents and accounts receivable. The Company maintains its cashbalances in the form of bank demand deposits, money market accounts, treasurybonds and commercial paper with original maturities of less than ninety days.The Company’s deposits and investments are with financial institutions that managementbelieves are creditworthy and the investments are high-grade. The Company’saccounts receivable are from customers that are generally telecommunicationsservice providers; accordingly, the Company’s accounts receivable areconcentrated in the telecommunications industry. The Company’s major customers(see Note 16) accounted for 38% and 48% of the Company’s accountsreceivable as of December 31, 2005 and 2004, respectively. The Company hasno significant financial instruments with off-balance sheet risk of accountingloss, such as foreign exchange contracts, option contracts or other foreigncurrency hedging arrangements.

 

**Fair Value of Financial Instruments**

 

Financial instruments include cash and cashequivalents, accounts receivable and debt obligations. The carrying amounts forcash and cash equivalents and accounts receivable approximate fair market valuebecause of the short maturity of these instruments. The fair value of debtobligations with fixed interest rates is estimated based on current ratesavailable for debt with similar maturities and securities; the carrying valueapproximates fair value at December 31, 2005 and 2004.  The carrying value of the Company’s line ofcredit, which has a variable interest rate, approximates fair value at December 31,2005 and 2004.

 

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**Self-Insurance**

 

The Companyis self-insured for certain losses relating to employee medical and dentalbenefits.  The Company has purchasedindividual and aggregate stop-loss coverage in order to limit its exposure toany significant claims.  Self-insuredlosses are accrued based upon the Company’s estimates of the aggregateuninsured claims incurred using certain actuarial assumptions and the Company’sclaims history.

 

**Stock-Based Compensation Plans**

 

At December 31, 2005, the Company hastwo stock-based employee compensation plans, which are described more fully inNote 8. The Company accounts for these plans under the recognition andmeasurement principles of APB Opinion No. 25, “Accounting for Stock Issuedto Employees” (“APB 25”) and related Interpretations.   All options granted under these plans hadexercise prices equal to the market value of the underlying common stock on thedate of grant and, accordingly, no stock-based employee compensation cost isincluded in net income (loss) for these stock option issuances in 2005, 2004and 2003.  The stock-based employeecompensation shown in the table below is related to the issuance of the Company’scommon stock shares to certain board members in lieu of cash payment for theirservices, and the issuance of restricted stock units to certain employees.  The Company accounts for stock-basedcompensation awards to non-employees under the provisions of SFAS No. 123,“Accounting for Stock-Based Compensation” (“SFAS 123”) and recognizescompensation expense ratably over the vesting period of such awards. Thefollowing table illustrates the effect on net income (loss) and earnings (loss)per share if the Company had applied the fair value recognition provisions ofSFAS 123 to stock-based employee compensation (in thousands except pershare amounts):

 
| ** **                                                                                                          | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net income (loss), as reported                                                                                      |       | $        | 12,933     |     | $          | (4,002   | )          | $ | 10,714 |   |
| Add: Total stock-based employee  compensation, net of tax                                                           |       | 182      |       | 261      |       | 123      |       |
| Deduct: Total stock-based compensation  expense determined under fair value based method for all awards, net of tax |       | (3,929   | )          | (3,589   | )          | (3,657   | )          |
| Pro forma net income (loss)                                                                                         |       | $        | 9,186      |     | $          | (7,330   | )          | $ | 7,180 |   |
|                                                                                                                |       |     |       |     |       |     |       |
| Net income (loss) per share:                                                                                        |       |     |       |     |       |     |       |
| Basic—as reported                                                                                              |       | $        | 0.73       |     | $          | (0.23    | )          | $ | 0.68 |   |
| Basic—pro forma                                                                                                |       | $        | 0.52       |     | $          | (0. 43   | )          | $ | 0.46 |   |
|                                                                                                                |       |     |       |     |       |     |       |
| Diluted—as reported                                                                                            |       | $        | 0.70       |     | $          | (0.23    | )          | $ | 0.63 |   |
| Diluted—pro forma                                                                                              |       | $        | 0.50       |     | $          | (0.43    | )          | $ | 0.42 |   |

 

SFAS 123 defines a fair value basedmethod of accounting for employee stock options or similar equity instruments.However, SFAS 123 allows the continued measurement of compensation costfor such plans using the intrinsic value based method prescribed byAPB 25, provided that pro forma disclosures of net income or loss assumingthe fair value based method of SFAS 123 had been applied are provided inaccordance with SFAS 123 and SFAS No. 148, “Accounting for Stock-BasedCompensation” (“SFAS 148”).  The Companyhas elected and continues to account for its stock-based compensation plansunder APB 25 for stock-based awards issued to employees and directors; forawards issued to non-employees and consultants, the Company applies theprovisions of SFAS 123. Accordingly, for purposes of the pro formadisclosures presented above, the Company has computed the fair values of alloptions granted under the plans during 2005, 2004 and 2003, using the Black-Scholesoption pricing model and the following weighted average assumptions:

 
| ** **               | ** ** | **2005**  | ** ** | **2004**       | ** ** | **2003**       | ** ** |
|--------------------------|------------|-----------|------------|----------------|------------|----------------|------------|
| Estimated  life          |       | 4.2 years |       | 4.2 years |       | 4.2 years |       |
| Volatility               |       | 39.68     | %          | 60.39          | %          | 73.50          | %          |
| Risk-free  interest rate |       | 4.33      | %          | 3.65           | %          | 3.30           | %          |
| Dividend  yield          |       | 0         | %          | 0              | %          | 0              | %          |

 

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Certain assumptions were used in determiningthe stock-based compensation expense under the fair-value-based method. Toestimate lives of options for this valuation, it was assumed options would beexercised upon becoming fully vested and all options will eventually becomefully vested. Cumulative compensation costs recognized in pro forma net incomeor loss with respect to options that are forfeited prior to vesting is adjustedas a reduction of pro forma compensation expense in the period of forfeiture.The expected volatility refers to the volatility of the Company’s common stockover the expected life of a given option. In 2005, 2004 and 2003, the Companyused the actual volatility of its common stock over a one-year period. Theassumed risk-free interest rates were determined using government securitieswith original maturities similar to the respective expected option lives atdate of grant.

 

**Impairment of Long-Lived Assets**

 

The Company reviews its long-lived assets forimpairment, excluding goodwill, whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable fromfuture undiscounted cash flows. Impairment losses are recorded for the excess,if any, of the carrying value over the fair value of the long-lived assets.

 

**Foreign Currency Translation**

 

Assets and liabilities of foreign operations,where the local currency is the functional currency, are translated usingperiod-end exchange rates, and revenue and expenses are translated usingaverage exchange rates during each period. Translation gains and losses arereported in accumulated other comprehensive income as a component ofstockholders’ equity.

 

**Other Comprehensive Income**

 

Other comprehensive income includes all changes instockholders’ equity during a period from non-owner sources, includingunrealized holding gains and losses from available-for-sale securities, andcumulative translation adjustments related to the Company’s foreignsubsidiaries.

 

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**Earnings Per Share**

 

Basic earnings per share is determined bydividing net income (loss) available to common stockholders by the weightedaverage number of common shares outstanding during each period. Dilutedearnings per share includes the effects of potentially issuable common stock, butonly if dilutive (i.e., a loss per share is never reduced). The treasury stockmethod, using the average price of the Company’s common stock for the period,is applied to determine dilution from options and warrants. The computation ofbasic and diluted earnings per share was as follows (in thousands, except pershare amounts):

 
| ** **                                                                                                                          | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                                          | ** ** | **2005**                         | ** ** | **2004** | ** ** | **2003** | ** ** |
| Numerator:                                                                                                                          |       |                             |       |   |   |   |   |
| Net income (loss)                                                                                                                   |       | $                                | 12,933     |   | $ | (4,002 | ) | $ | 10,714 |   |
|                                                                                                                                |       |                             |       |   |   |   |   |
| Denominator:                                                                                                                        |       |                             |       |   |   |   |   |
| Basic income (loss) per share—weighted  average shares outstanding                                                             |       | 17,708                           |       | 17,167 |   | 15,764 |   |
| Dilutive effect of common stock equivalents                                                                                         |       | 792                              |       | — |   | 1,160 |   |
| Diluted income (loss) per share—adjusted  weighted-average shares outstanding, assuming conversion of common stock equivalents |       | 18,500                           |       | 17,167 |   | 16,924 |   |
| Basic net income (loss) per share                                                                                                   |       | $                                | 0.73       |   | $ | (0.23 | ) | $ | 0.68 |   |
| Diluted net income (loss) per share                                                                                                 |       | $                                | 0.70       |   | $ | (0.23 | ) | $ | 0.63 |   |
|                                                                                                                                |       |                             |       |   |   |   |   |
| Options not included in diluted shares  because of “out of the money” exercise prices                                     |       | 861                              |       | 731 |   | 425 |   |
| Options, restricted stock, and potential  shares not included in diluted shares because anti-dilutive due to net loss               |       | —                           |       | 893 |   | — |   |

 

**Recent Accounting Pronouncements**

 

In December 2004, the FASB issued SFAS No. 123(revised 2004), “Share-Based Payment” (“SFAS 123R”), which replaces SFAS 123and supersedes APB 25. SFAS 123R requires all share-based payments toemployees, including grants of employee stock options, to be recognized in thefinancial statements based on their fair values.  The pro forma disclosures previouslypermitted under SFAS 123 and provided in Note 2 will no longer be analternative to financial statement recognition. In March 2005, theSecurities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No. 107,“Share-Based Payment” (“SAB 107”), which expresses views of the SEC staff aboutthe application of SFAS 123R.  SFAS 123Rwas to be effective for all interim or annual reporting periods beginning on orafter June 15, 2005, but in April 2005 the SEC issued a rule thatSFAS 123R will be effective for annual reporting periods beginning on or after June 15,2005.  The Company is required to adoptSFAS 123R for the fiscal year beginning January 1, 2006.

 

Under SFAS 123R, the Company must determine theappropriate fair value model to be used for valuing share-based payments, theamortization method for compensation cost and the transition method to be usedat date of adoption. The transition methods include the modified prospectiveand modified retrospective adoption options. The modified prospective methodrequires that compensation expense be recorded for all unvested stock optionsand restricted stock over the remaining award service period beginning on January 1,2006, while the modified retrospective method requires that all prior periodspresented be adjusted to reflect compensation expense under the fair valuemethod of accounting for awards granted, modified or settled after December 31,1994. The Company continues to evaluate the requirements of SFAS 123R andexpects that the adoption of SFAS 123R will have a material impact on theCompany’s consolidated results of operations and earnings per share. TheCompany plans to use the modified prospective transition method, and hasconcluded that the Black-Scholes valuation model is best for the Company’scircumstances.  The Company expects theadoption of SFAS 123R to result in amounts that are similar to the current proforma disclosures under SFAS 123.

 

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In November 2005,the FASB issued Staff Position No. FAS 115-1, *The Meaning of Other-Than-Temporary Impairment and its Application toCertain Investments* (“FSP 115-1”). FSP 115-1 provides accountingguidance for determining and measuring other-than-temporary impairments of debtand equity securities, and confirms the disclosure requirements for investmentsin unrealized loss positions as outlined in EITF issue 03-01, *The Meaning of Other-Than-Temporary Impairments andits Application to Certain Investments*. The accounting requirementsof FSP 115-1 are effective for the Company on January 1, 2006 and will nothave a material impact on the Company’s consolidated financial position,results of operations or cash flows.

 

**(3)           ACQUISITIONS**

 

# **LPSSAcquisition – May 2001**

 

On May 11, 2001, the Company acquiredcertain assets and assumed certain liabilities associated with the callhandling and database divisions of LPSS, an internal venture of LucentTechnologies Inc. (“Lucent”). The Company accounted for this transactionusing the purchase method of accounting.

 

As part of the acquisition, the Company:

 

•                   Issued2,250,000 shares of its common stock to Lucent;

 

•                   Paidapproximately $4.8 million to Lucent for inventory; and

 

•                  Issued13,656 shares of mandatorily redeemable, non-voting, Series A preferredstock (“Preferred Stock”), with an original recorded value of$12.8 million as of May 31, 2003 and a face value of$13.7 million, based on the Company’s total combined revenue of$211.8 million over the 24-month period that began on June 1, 2001and ended on May 31, 2003 (“Total Revenue”).

 

*Inventory.*  The obligation to purchase inventory fromLucent was paid in four equal installments that began in August 2002 andended in May 2003. The inventory was written off during the second quarterof 2002 after management determined that there was a significant level ofuncertainty regarding the Company’s ability to use these assets internally orto sell the assets to its customer base, resulting in an impairment of theasset value. However, the obligation to pay Lucent remained and was fully paidby the second quarter of 2003.

 

*Common Stock.*  In January 2002, Lucent created a newpartnership named NV Partners II LP (“NVP II”) and transferred itsshares of Intrado common stock and its right to receive Intrado Preferred Stockto NVP II.

 

*Preferred Stock.*  Based on the Company’s Total Revenue of$211.8 million during the 24-month contingency period that commenced on June 1,2001 and ended on May 30, 2003, the Company was required, under the termsof the purchase agreement between Lucent and Intrado, to issue Preferred Stockto NVP II at a rate of $417,000 for each million dollars of totalrevenue in excess of $179 million (the “contingent consideration”). In July 2003,the Company issued approximately $12.8 million of Preferred Stock toNVP II. The Preferred Stock was recorded at a fair value of$12.8 million (defined as the present value of future redemption paymentsusing a 6.07% interest rate) and was structured to accrete to its face value of$13.7 million over the redemption period. The purchase agreement requiredthe Company to redeem the Preferred Stock in three increments:

 

•      Thefirst 33.3% was redeemed in August 2003 for $4.6 million;

 

•      Anadditional 33.3% was redeemed in June 2004 for $4.6 million; and

 

•      Theremaining 33.4% was redeemed on June 1, 2005 for $4.6 million.

 

Early redemption was available at the Company’soption. In addition, the Company was required to redeem shares of PreferredStock with 25% of the gross proceeds of any underwritten public offering after June 1,2003. No dividends have been or will be paid on the Preferred Stock.

 

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*Intangible Assets. *Exclusive of thecontingent consideration, the recorded purchase price of the gross assetsacquired in this transaction was approximately $30.1 million. The purchaseprice is comprised of 2,250,000 shares of common stock valued at $9.91 pershare, issuance of a commitment to purchase inventory from Lucent with a fairvalue of approximately $4.1 million, approximately $899,000 of liabilitiesrecognized in connection with the acquisition, acquisition fees ofapproximately $1.5 million paid to investment bankers and othertransaction costs of approximately $1.2 million. As part of theacquisition, the Company acquired net tangible assets consisting of inventoryvalued at approximately $4.1 million and property and equipment valued atapproximately $1.0 million. The $25.0 million of purchase price over theestimated fair value of net tangible assets acquired, was allocated tointangible assets as follows: $13.3 million to goodwill; $8.2 millionto intellectual property; and $3.5 million to customer contracts acquired.

 

The Company has recorded on its balance sheet$29.4 million of goodwill as of December 31, 2005. Of the $29.4 million ingoodwill, $24.3 million relates to the excess of the purchase price over theestimated fair value of net identifiable assets acquired in the May 2001LPSS acquisition and includes the additional $12.8 million of goodwill recordedduring the second quarter of 2003 in conjunction with the Company’s issuance ofmandatorily redeemable preferred stock as contingent consideration owed toLucent for the LPSS acquisition. All of the $24.3 million is associatedwith the ILEC reporting unit.

 

# **bmd wireless AG Acquisition – February 2004**

 

On February 3, 2004, the Company entered into a share purchaseagreement to acquire bmd, a Swiss corporation headquartered in Zug,Switzerland. bmd provides core network messaging solutions, enabling crossnetwork mobile and application messaging traffic for a wide range of mobileoperators and service providers. Upon closing the acquisition on February 20,2004, bmd became a wholly owned subsidiary of Intrado.

 

Under the terms of the agreement, the Companyacquired all of the outstanding common stock of bmd in exchange for:

 

•                  approximately$4.2 million of cash;

 

•                  700,002 sharesof common stock; and

 

•                  an obligation toissue up to 200,000 additional shares of common stock (the “Earn-out Shares”).

 

Under the earn-out provision, the Company wasrequired to issue 0.02 Earn-out Shares for each $1.00 of qualifying revenuefrom January 1 through December 31, 2004, as defined in the sharepurchase agreement, up to a maximum of 200,000 Earn-out Shares.  Based upon the qualifying revenue of $2.3million, the Company issued 49,083 Earn-out Shares at $12.02 per share,the closing price of Intrado’s common stock on March 21, 2005.  AtDecember 31, 2004, the value of these shares was estimated at $12.10 pershare (the closing price of the Company’s stock on December 31,2004).  In 2004, the Company had recorded approximately $594,000 for theEarn-out Shares as additional paid-in capital and as an additional goodwillimpairment charge in conjunction with its 2004 annual asset impairmentanalysis under SFAS 142. In conjunction with the acquisition of bmd, theCompany also paid $200,000, issued 35,000 shares of common stock and incurredan obligation to issue up to 10,000 Earn-out Shares to bmd’s representativeagent as a finder’s fee.

 

Under the purchase method of accounting at the date ofacquisition, the Company recorded an aggregate purchase price (excluding theearn-out provision) of approximately $20.9 million, which consisted of approximately$4.3 million in cash, $16.1 million in Intrado common stock, and $503,000in deal costs and other incurred liabilities, which primarily consisted of feespaid for legal, accounting and financial advisory services. A total of 735,002Intrado shares were issued in the transaction. The bmd shareholders tenderedall of the outstanding shares of bmd. The value of the stock issued by theCompany was calculated as $21.91, based upon the average closing price of theCompany’s common stock for the five trading days beginning on January 30,2004 and ending on February 5, 2004.

 

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In accordance with SFAS 141, the Company allocatedthe purchase price to the tangible assets, separately identifiable intangible assets,and liabilities acquired, including core technology (capitalized software) andcustomer relationships, based on their estimated fair values. The excesspurchase price over the fair values was recorded as goodwill. The fair valueassigned to separately identifiable intangible assets acquired was based on anindependent appraisal. The Company assigned the goodwill to the bmd reportingunit, part of the wireless segment. The amount of goodwill generated as aresult of the acquisition will not be deductible for tax purposes. Inaccordance with SFAS 142, goodwill acquired after June 30,2001 is not amortized but will be reviewed periodically for impairment.Purchased intangibles with finite lives are amortized on a straight-line basisover their respective useful lives. The total purchase price was allocated asfollows (in thousands):

 

| Current assets                                 |   | $      | 886    |   |
|------------------------------------------------|--------|--------|--------|--------|
| Property and  equipment                        |   | 202    |   |
| Goodwill                                       |   | 18,938 |   |
| Intangibles                                    |   | 1,363  |   |
| Total assets acquired                          |   | 21,389 |   |
| Current  liabilities                           |   | (210   | )      |
| Deferred  revenue – current               |   | (103   | )      |
| Deferred tax  liability – current portion |   | (25    | )      |
| Deferred tax  liability – long-term       |   | (170   | )      |
|                                           |   |   |   |
| Total purchase price                           |   | $      | 20,881 |   |

 

The Company acquired bmd to enhance thebreadth and depth of the Company’s commercial product offerings in domestic andinternational markets and to access new international distribution channels.Management believes that integration of bmd’s key development capabilities,products and resources with the Company’s platforms and business models willenable the Company to design and build messaging solutions that allow wirelessoperators and service providers to offer innovative new services to theirsubscribers.

 

In performing this purchase price allocation, theCompany considered, among other factors, its intention for future use of theacquired assets, analyses of historical financial performance and estimates offuture performance of bmd’s products. The fair value of intangible assets wasprimarily based on the replacement cost approach and the relief from royaltyapproach. The discount rates used were 20% for customer contracts and relatedrelationships, and 25% for core technology (capitalized software). Thesediscount rates were determined after consideration of the Company’s rate ofreturn on debt capital and equity, the weighted average return on investedcapital, and the risk associated with achieving forecasted sales related to thetechnology and assets acquired from bmd. At December 31, 2005,identifiable intangible assets purchased in the bmd acquisition consist of thefollowing (in thousands, except for useful life):

 
| **Identifiable Intangible Assets**            | ** ** | **Gross Value** | ** ** | **Accumulated Amortization** | ** ** | **Useful Life** | ** ** |
|-----------------------------------------------|------------|-----------------|------------|------------------------------|------------|-----------------|------------|
|                                          |       |            |       |                         |       |            |       |
| Capitalized  software                         |       | $               | 1,006      |                         | $          | 895             |       | 2 years |   |
| Customer  contracts and related relationships |       | 287             |       | 172                          |       | 3 years         |       |
| Balance,  December 31, 2005              |       | $               | 1,293      |                         | $          | 1,067           |       |   |   |

 

**(4)          ****INVESTMENT IN JOINT VENTURE**

 

During the third quarter of 2005, IntradoInternational Ltd., a wholly owned Irish subsidiary of Intrado, entered into ajoint venture with a Chinese company.  The limited liability companyestablished through the joint venture, Intrado (XieAn) Technology (China) Co.Ltd., was granted a business license by the Chinese government on August 18,2005.  The joint venture company plans to develop, market, and sell publicsafety-related

 

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telecommunicationssoftware products in China.  During the third quarter of 2005, IntradoInternational Ltd. invested $1.0 million of its total $2.0 million contributioncommitment in the joint venture company, which represents a 49% share of theregistered capital of the joint venture company.  The Company expects tofund the remaining $1.0 million of its required investment during or subsequentto 2006.  Intrado International Ltd. accounted for its investment in thejoint venture company under the equity method of accounting.  For the yearended December 31, 2005, Intrado International Ltd. recognized an $87,000loss on its investment in the joint venture company.

 

**(5)           DISCONTINUEDOPERATIONS**

 

OnFebruary 10, 2005, the Company sold its Palladium business, a reportingunit in the Company’s wireline business unit, to Tel-Control, Inc. (“TCI”).Under the terms of the Asset Purchase Agreement, the Company agreed to assignits maintenance contracts and certain intellectual property rights to TCI. TheCompany retained rescission rights if TCI fails to adequately perform futuremaintenance, or if TCI becomes insolvent. The Company wrote off $322,000 ofassets as of December 31, 2004, which included a goodwill impairmentcharge of $222,000 and the write-off of other intangible assets.

 

Thefollowing amounts related to the Palladium business have been segregated fromcontinuing operations and reported as discontinued operations (in thousands):

 

 
| ** **                         | ** ** | **For the Year Ended  December 31,** | ** ** |
|------------------------------------|------------|-------------------------------------------|------------|
| ** **                         | ** ** | **2005**                                  | ** ** | **2004** | ** ** | **2003** | ** ** |
|                               |       |                                      |       |   |   |   |   |
| Total  revenue                     |       | $                                         | 441        |   | $ | 4,796 |   | $ | 3,799 |   |
| Direct costs                       |       | 576                                       |       | 5,033 |   | 3,326 |   |
| Gross profit                       |       | (135                                      | )          | (237 | ) | 473 |   |
| Indirect  expenses (income)        |       | (1                                        | )          | 394 |   | 211 |   |
| Income  (loss) from operations     |       | (134                                      | )          | (631 | ) | 262 |   |
| Net interest  income               |       | —                                    |       | — |   | — |   |
| Income  (loss) before income taxes |       | (134                                      | )          | (631 | ) | 262 |   |
| Income tax  benefit (expense)      |       | 51                                        |       | 232 |   | (94 | ) |
| Net income  (loss)                 |       | $                                         | (83        | ) | $ | (399 | ) | $ | 168 |   |

 

Theassets and liabilities of the discontinued operations for all periods presentedwere considered to be immaterial to the Company’s consolidated balance sheet.

 

Forthe year ended December 31, 2005, and pursuant to the terms of the AssetPurchase Agreement, the Company paid TCI approximately $291,000 for amountspreviously billed to customers and collected by the Company that wereclassified as deferred revenue.  During 2005, and in accordance with theterms of the Asset Purchase Agreement, the Company also billed certain customerson TCI’s behalf and remitted approximately $1.1 million in related collectionsto TCI.

 

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**(6)           PROPERTYAND EQUIPMENT**

 

Property and equipment consist of thefollowing (in thousands):

 
| ** **                                      | ** ** | **December 31,** | ** ** |
|-------------------------------------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Computer  hardware and equipment                |       | $                     | 66,588     |   | $ | 56,849 |   |
| Furniture  and fixtures                         |       | 2,971                 |       | 2,825 |   |
| Leasehold  improvements                         |       | 9,495                 |       | 9,620 |   |
|                                            |       | 79,054                |       | 69,294 |   |
| Less  accumulated depreciation and amortization |       | (54,119               | )          | (46,591 | ) |
|                                            |       | $                     | 24,935     |   | $ | 22,703 |   |

 

Depreciation expense on property andequipment totaled approximately $8.2 million, $8.5 million and$9.2 million for the years ended December 31, 2005, 2004 and 2003,respectively.

 

**(7)           ACCOUNTSPAYABLE AND ACCRUED LIABILITIES**

 

Accounts payable and accrued liabilitiesconsist of the following (in thousands):

 
| ** **                 | ** ** | **December 31,** | ** ** |
|----------------------------|------------|-----------------------|------------|
| ** **                 | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Accounts  payable          |       | $                     | 6,500      |   | $ | 6,574 |   |
| Payroll-related  accruals  |       | 2,767                 |       | 1,113 |   |
| Other  accrued liabilities |       | 5,369                 |       | 2,090 |   |
|                       |       | $                     | 14,636     |   | $ | 9,777 |   |

 

**(8)           STOCKHOLDERS’EQUITY**

 

**Preferred Stock**

 

As discussed in Note 3, during 2003, theCompany issued 13,656 shares, or approximately $12.8 million, ofmandatorily redeemable, non-voting preferred stock to NVP II and redeemed4,552 of these shares for $4.6 million in each of the years ended December 31,2005, 2004 and 2003.   No shares ofpreferred stock were outstanding as of December 31, 2005.

 

The Company’s Board of Directors has theability to issue “blank check” preferred stock without stockholder approval asa mechanism to resist a corporate takeover.

 

**Stock Incentive Plan**

 

As of December 31, 2005, the Company hasa total of 900,223 shares of common stock available for issuance under the 1998Stock Incentive Plan (“1998 Plan”). Under the terms of the 1998 Plan, theshares reserved for issuance automatically increase on the first trading day ofeach calendar year by 3% of the number of shares of common stock outstanding onthe last trading day of the immediately preceding calendar year. The sharereserve was increased by 540,054, 524,358 and 485,062 shares under thisprovision in 2006, 2005 and 2004, respectively. The total number of sharesremaining eligible for issuance under the 1998 Plan as of January 3, 2006is 1,440,277 shares. The 1998 Plan allows for issuances of options toemployees, officers, non-employee board members and consultants. The total fairvalue of options granted under the 1998 Plan was computed to be approximately$52,000, $6.2 million and $5.4 million for the years ended December 31,2005, 2004 and 2003, respectively.

 

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The following table summarizes informationabout the options outstanding at December 31, 2005:

 

| ** **                                  | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**                                     | ** ** |
|---------------------------------------------|------------|------------------------------|------------|------------------------------------------------------------------|------------|
| **Range of Exercise Prices** | ** ** | **Number  Outstanding**      | ** ** | **Weighted  Average  Remaining  Contractual  Life (Years)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
| $ 3.00 - $6.75                         |       | 464,626                      |       | 4.29                                                             |       | $ | 6.17 |   | 464,626 |   | $ | 6.17 |   |
| $ 7.03 - $7.625                        |       | 4,540                        |       | 5.13                                                             |       | $ | 7.35 |   | 4,540 |   | $ | 7.35 |   |
| $ 7.66 - $7.66                         |       | 358,286                      |       | 7.12                                                             |       | $ | 7.66 |   | 225,271 |   | $ | 7.66 |   |
| $ 7.69 - $9.22                         |       | 236,093                      |       | 5.51                                                             |       | $ | 8.32 |   | 222,493 |   | $ | 8.29 |   |
| $ 9.75 - $9.75                         |       | 444,472                      |       | 6.81                                                             |       | $ | 9.75 |   | 316,992 |   | $ | 9.75 |   |
| $ 9.90 - $13.18                        |       | 296,230                      |       | 7.03                                                             |       | $ | 11.45 |   | 182,810 |   | $ | 10.45 |   |
| $ 14.10 - $16.32                       |       | 148,047                      |       | 6.57                                                             |       | $ | 15.41 |   | 116,597 |   | $ | 15.27 |   |
| $ 16.88 - $16.88                       |       | 565,272                      |       | 8.40                                                             |       | $ | 16.88 |   | 208,152 |   | $ | 16.88 |   |
| $ 17.40 - $29.85                       |       | 141,500                      |       | 5.87                                                             |       | $ | 20.54 |   | 136,280 |   | $ | 20.61 |   |
| $ 32.86 - $32.86                       |       | 2,000                        |       | 5.80                                                             |       | $ | 32.86 |   | 2,000 |   | $ | 32.86 |   |
| $ 3.00 - $32.86                        |       | 2,661,066                    |       | 6.59                                                             |       | $ | 11.32 |   | 1,879,761 |   | $ | 10.45 |   |

 

A summary of stock options under the 1998Plan as of December 31, 2005, 2004 and 2003 and changes during the yearsthen ended are presented below:

 

| ** **                                      | ** ** | **2005**   | ** ** | **2004**                               | ** ** | **2003**   | ** ** |
|-------------------------------------------------|------------|------------|------------|----------------------------------------|------------|------------|------------|
| ** **                                      | ** ** | **Shares** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Shares** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Shares** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
| Outstanding at beginning of year                |       | 3,259,290  |       | $                                      | 11.24      |       | 3,093,103  |   | $ | 9.71 |   | 3,374,741 |   | $ | 9.51 |   |
| Granted                                         |       | 6,000      |       | $                                      | 12.59      |       | 776,500    |   | $ | 15.79 |   | 542,500 |   | $ | 8.76 |   |
| Exercised                                       |       | (457,340   | )          | $                                      | 8.90       |       | (458,563   | ) | $ | 8.23 |   | (646,738 | ) | $ | 7.87 |   |
| Canceled                                        |       | (146,884   | )          | $                                      | 17.16      |       | (151,750   | ) | $ | 12.31 |   | (177,397 | ) | $ | 10.97 |   |
| Outstanding at end of year                      |       | 2,661,066  |       | $                                      | 11.32      |       | 3,259,290  |   | $ | 11.24 |   | 3,093,106 |   | $ | 9.65 |   |
| Options exercisable at year-end                 |       | 1,879,761  |       |                                   |       | 1,755,432  |       |   |   | 1,426,253 |   |   |   |
| Weighted average fair value of options  granted |       | $          | 8.73       |                                   |       |       | $          | 8.00 |   |   |   | $ | 9.16 |   |   |   |
|                                                 |            |            |            |                                        |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

During 2005, the Company also issued 674,000restricted stock units or share right awards. Share right awards vest (i) upon theachievement of three performance goals (revenue, operating margin and return oninvested capital) during the 12-month period ending June 30, 2008; or (ii) upona change in control. For each performance goal, there are three levels ofachievement (less than 90%, 90%, 100%, and 110%). A maximum of 682,047 sharesof common stock are issuable upon vesting of share right awards at the 110%performance level. Upon a change in control, share right awards vest at the100% performance level (in which case only 620,039 shares would be issued).

 

**Nonqualified Deferred Compensation Plan**

 

OnDecember 31, 2005, the Compensation Committee of Intrado’s Board ofDirectors adopted an Amended and Restated Nonqualified Deferred CompensationPlan.  The plan allows participants specified by the CompensationCommittee (presently Intrado’s directors and executive officers) to defersalary, bonus and equity-based compensation for calendar years ending on andafter December 31, 2005.  The amended plan is intended to comply withSection 409A of the Internal Revenue Code.

 

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**Employee Stock Purchase Plan**

 

On March 18, 1998, the Company adoptedan Employee Stock Purchase Plan, or ESPP, under which eligible employees maycontribute up to 10% of their salaries through payroll deductions to purchaseshares of the Company’s common stock. The offering periods are successivesix-month periods starting January 1 and July 1 of each year. At theend of each offering period, amounts contributed by employees will be used topurchase shares of the Company’s common stock at a price equal to 95% of theclosing price of the stock on the offering termination date or the nearestprior NASDAQ business day. The Company’s board of directors has authorized theissuance of up to 200,000 shares under the ESPP and may terminate the ESPP atany time. On March 1 of each year, the shares available under the ESPPwill be restored to 200,000, although the Company’s board of directors mayelect to restore a lesser number of shares. The Company issued 2,993, 77,827and 80,605 shares under the ESPP in 2005, 2004 and 2003, respectively.

 

On February 21, 2006, the Company’sBoard of Directors, based on the recommendation of the Compensation Committee,terminated the ESPP. All money contributed to this plan in 2006 will berefunded to employees.

 

**Warrants**

 

During 2005, 2004 and 2003, the Companyissued 9,000, 8,000 and 8,864 shares, respectively, of common stock uponexercise of warrants related to consulting services provided to the Company. Ofthese warrants, 720 remain outstanding at an exercise price of $7.91 atDecember 31, 2005. In February 2006, the warrant holder exercised all 720warrants.

 

**(9)****                                 CAPITALIZEDLEASE OBLIGATIONS**

 

The Company had capitalized lease obligationsfor equipment due on various dates through 2008 of $3.0 million and $2.8million as of December 31, 2005 and 2004, respectively. There isapproximately $262,000 of imputed interest on these leases at December 31,2005 and the interest rates range from 1.1% to 8.5% per annum. These leaseobligations are collateralized by the related assets with a net book value of$3.6 million and $3.3 million as of December 31, 2005 and 2004,respectively.

 

Maturities of capital lease obligations as ofDecember 31, 2005, are as follows (in thousands):

 

| 2006                                                                                                 |   | $      | 1,874  |   |
|------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| 2007                                                                                                 |   | 1,068  |   |
| 2008                                                                                                 |   | 385    |   |
| Total minimum lease payments                                                                         |   | 3,327  |   |
| Less—Amount representing estimated  executory costs (such as taxes, maintenance, and insurance) |   | (32    | )      |
| Less—amount related to interest                                                                 |   | (262   | )      |
| Principal portion of future obligations                                                              |   | 3,033  |   |
| Less—current portion                                                                            |   | (1,653 | )      |
|                                                                                                 |   | $      | 1,380  |   |

 

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The following table summarizes the assetsrecorded in property, plant and equipment in Note 4 that are recorded ascapital leases (in thousands):

 

| ** **                    | ** ** | **December 31,** | ** ** |
|-------------------------------|------------|-----------------------|------------|
| ** **                    | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Carrying value, gross         |       | $                     | 5,024      |   | $ | 5,018 |   |
| Less accumulated depreciation |       | (1,456                | )          | (1,711 | ) |
|                          |       | $                     | 3,568      |   | $ | 3,307 |   |

 

**(10)****                          LINE OFCREDIT AND NOTES PAYABLE**

 

As of December 31, 2005, the Companyowed $2.0 million on a revolving line of credit arrangement and an additionalamount of $665,000 was utilized to satisfy letter of credit obligations.Borrowing availability under the line of credit is not to exceed the lesser of$20 million or two times Adjusted EBITDA, as defined in the line of creditagreement. The interest rate on amounts borrowed under the line of credit isequal to the lower of the prime rate plus 1.5%, which was 8.5% at December 31,2005, or LIBOR plus 3.75% per annum, which was 8.27% as of December 31,2005. The line of credit matures on December 31, 2006, requires a$2.0 million minimum balance to be maintained and is collateralized byaccounts receivable and certain other assets. As of December 31, 2005,$2.0 million was outstanding and an additional $17.3 million was available foradditional borrowings.

 

The terms of the revolving line of credit,term loans and capital lease obligations require the Company to maintaincompliance with certain financial covenants, including current asset ratios andtotal indebtedness ratios. As of December 31, 2005, the Company was incompliance with all operating and financial debt covenants.

 

The Company paid principal of $10.2 millionin 2004 on notes payable, which included a pre-payment of $5.9 million for principalon two previous term notes payable to GE Capital. There were no pre-paymentpenalties incurred in 2004. However, the Company had previously been amortizingthe origination fees of $100,000 over the life of the term loans. The remainingamortization was accelerated at the time of pre-payment.

 

**(11)****                          COMMITMENTSAND CONTINGENCIES**

 

**Operating Leases**

 

The Company leases its office and researchfacilities and certain equipment under operating lease agreements, which expirethrough December 2011. Some lease terms contain escalation clauses and thetotal amount of rent is expensed on a straight-line basis over the term of thelease. Rent expense for the years ended December 31, 2005, 2004 and 2003was approximately $4.0 million, $4.1 million and $4.3 million,respectively. Future minimum lease obligations under these agreements are asfollows (in thousands):

 

| 2006       |   | $     | 3,926  |   |
|------------|--------|-------|--------|--------|
| 2007       |   | 3,751 |   |
| 2008       |   | 3,712 |   |
| 2009       |   | 3,645 |   |
| 2010       |   | 3,914 |   |
| Thereafter |   | 5,267 |   |
|       |   | $     | 24,215 |   |

 

**Litigation**

 

The Company is subject to various claims andbusiness disputes in the ordinary course of business, none of which areconsidered to be material to the financial position, operations or cash flowsof the Company.

 

71

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The Company provides wireline and wirelessE9-1-1 database management and related network services for the State of Texaspursuant to a service agreement (“Agreement”) that the Company entered inNovember 1998. On February 4, 2003, the Company filed suit in a TexasCounty District Court against the Texas Commission on State EmergencyCommunications (“CSEC”) and numerous other defendants for failure to payamounts due and payable to Intrado for certain wireless services renderedpursuant to the Agreement. During the quarter ended June 30, 2003, theCompany agreed to a settlement with CSEC related to this dispute. Under thesettlement, CSEC and the other defendants agreed to pay Intrado approximately$200,000 of the $500,000 that had previously been in dispute. The Company alsoprovided wireless services through August 2003 and agreed to continue toprovide wireline services through June 2004. The wireline servicesagreement was subsequently extended through June 2005.

 

**Indemnification**

 

The Company has agreements whereby it indemnifiesofficers and directors for certain events or occurrences while the officer ordirector is, or was, serving in such capacity at the Company’s request. Theterm of the indemnification period is for the officer’s or director’s lifetime.The maximum potential amount of future payments the Company could be requiredto make under these indemnification agreements is unlimited; however, theCompany has a director and officer insurance policy that limits exposure andthe Company believes that this policy would enable it to recover a portion, ifnot all, of any future indemnification payments. As a result of its insurancepolicy coverage, the Company believes that its estimated exposure on theseindemnification agreements is minimal.

 

The Company enters into standardindemnification agreements in the ordinary course of business. Pursuant tothese agreements, the Company indemnifies, holds harmless, and agrees toreimburse the indemnified party for losses suffered or incurred by theindemnified party in connection with any claim by any third party, includingcustomers, with respect to the Company’s products or services, including, butnot limited to, alleged negligence, breach of contract, or infringement of apatent, copyright or other intellectual property right. The term is any timeafter execution of the agreement. The maximum potential amount of futurepayments the Company could be required to make under these indemnificationagreements is unlimited. The Company has never incurred costs to defendlawsuits or settle claims related to these indemnification agreements. As aresult, the Company believes that its estimated exposure on these agreements isminimal.

 

**(12)****                          INCOMETAXES**

 

The Company has approximately $4.9 million ofresearch and development tax credit carryforwards available to offset futurefederal taxable income or federal tax liabilities in the United States. Thesecarryforwards expire at various dates through 2026. The Company also hasapproximately $664,000 and $1.2 million of net operating loss carryforwardsavailable to offset future taxable income in Ireland and Switzerland,respectively. The Irish net operating losses have no expiration period whilethe Swiss net operating losses expire in 2011.

 

72

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Deferredincome tax assets and liabilities at December 31, 2005 and 2004, were asfollows (in thousands):

 

| ** **                               | ** ** | **December 31,** | ** ** |
|------------------------------------------|------------|-----------------------|------------|
| ** **                               | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Deferred tax assets:                     |       |                  |       |   |   |
| Accrued liabilities and other            |       | $                     | 720        |   | $ | 1,015 |   |
| Amortization of goodwill and intangibles |       | 89                    |       | 562 |   |
| Equipment impairment                     |       | 502                   |       | 686 |   |
| Net operating loss carryforwards         |       | —                |       | 5,303 |   |
| Tax credit carryforwards                 |       | 5,391                 |       | 4,835 |   |
| Deferred revenue                         |       | 3,113                 |       | 2,845 |   |
| Deferred rent expense                    |       | 697                   |       | 651 |   |
| Foreign net operating loss carryforwards |       | 235                   |       | 87 |   |
| Total deferred tax assets                |       | 10,747                |       | 15,984 |   |
| Deferred tax liabilities:                |       |                  |       |   |   |
| Depreciation differences                 |       | (2,431                | )          | (3,546 | ) |
| Capitalized software                     |       | (5,356                | )          | (5,972 | ) |
| Foreign deferred tax liabilities         |       | (15                   | )          | (74 | ) |
| Total deferred tax liabilities           |       | (7,802                | )          | (9,592 | ) |
| Valuation allowance                      |       | (260                  | )          | (59 | ) |
| Net deferred tax assets                  |       | $                     | 2,685      |   | $ | 6,333 |   |

 

A reconciliation of income tax expensecomputed by applying the federal income tax rate of 35% to income fromcontinuing operations before income taxes as of December 31, 2005, 2004and 2003, were as follows (in thousands):

 
| ** **                                                           | ** ** | **December 31,** | ** **  |
|----------------------------------------------------------------------|------------|-----------------------|-------------|
| ** **                                                           | ** ** | **2005**              | ** **  | **2004** | ** ** | **2003** | ** ** |
| Computed statutory tax expense                        |       | $                     |  7,233 |   | $ |  590 |   | $ |  5,481 |   |
| Impairment of nondeductible goodwill                                 |       | —                |        | 4,904 |   | — |   |
| Tax effect of permanent differences and  other                       |       | 238                   |        | 129 |   | 137 |   |
| State tax, net of federal tax impact                                 |       | 746                   |        | 559 |   | 522 |   |
| Tax credit                                                           |       | (1,224                | )           | (1,220 | ) | (1,040 | ) |
| Impact of foreign tax rate differential                              |       | 367                   |        | 291 |   | — |   |
| Change in valuation allowance attributable  to continuing operations |       | 192                   |        | 59 |   | — |   |
| Income tax expense                                                   |       | $                     | 7,552       |   | $ | 5,312 |   | $ | 5,100 |   |

 

As of December 31, 2005, the Companyestablished a valuation allowance on certain foreign net operating losses basedon the Company’s estimate that it would not be more likely than not that itwould realize the benefits of these assets in the future. The domestic andforeign components of book income (loss) from continuing operations beforeincome taxes as of December 31, 2005, 2004 and 2003 were as follows (inthousands):

 
| ** ** | ** ** | **December 31,** | ** ** |
|------------|------------|-----------------------|------------|
| ** ** | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** |
| U.S.       |       | $                     | 22,241     |   | $ | 17,033 |   | $ | 15,646 |   |
| Foreign    |       | (1,673                | )          | (15,324 | ) | — |   |
| Total      |       | $                     | 20,568     |   | $ | 1,709 |   | $ | 15,646 |   |

 

73

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The componentsof the provision for income taxes attributable to income from continuingoperations as of December 31, 2005, 2004 and 2003, were as follows (inthousands):

 

| ** **           | ** ** | **December 31,** | ** ** |
|----------------------|------------|-----------------------|------------|
| ** **           | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** |
| Current:             |       |                  |       |   |   |   |   |
| U.S.                 |       | $                     | 3,407      |   | $ | 106 |   | $ | 105 |   |
| State                |       | 509                   |       | — |   | — |   |
| Foreign              |       | —                |       | — |   | — |   |
| Total current        |       | 3,916                 |       | 106 |   | 105 |   |
|                 |       |                  |       |   |   |   |   |
| Deferred:            |       |                  |       |   |   |   |   |
| U.S.                 |       | 3,166                 |       | 4,745 |   | 4,473 |   |
| State                |       | 476                   |       | 559 |   | 522 |   |
| Foreign              |       | (6                    | )          | (98 | ) | — |   |
| Total deferred       |       | 3,636                 |       | 5,206 |   | 4,995 |   |
| Income tax provision |       | $                     | 7,552      |   | $ | 5,312 |   | $ | 5,100 |   |

 

The Company does not currently intend to repatriate foreign earningsdue to such earnings being permanently reinvested in the foreign subsidiaries. TheCompany receives a tax deduction for certain compensation in excess of thatrecognized for financial purposes. Such benefit arises from an increase in themarket price of the stock under employee stock option agreements between themeasurement date (as defined in APB 25) and the date at which the compensationdeduction for income tax purposes is determinable. This benefit was recordeddirectly to additional paid-in capital in 2005, 2004 and 2003 was$1.3 million, $1.4 million and $1.9 million, respectively.

 

**(13)****                          REPORTABLESEGMENTS**

 

TheCompany manages its internal operating units by aggregating similar serviceofferings with organizational supervision and decision-making authorities. Effective January 1, 2005, the Company realigned its internaloperating units based on the economic characteristics of the operating unitsand their respective products, services and customers.  As a result, theCompany has two reportable segments: wireline and wireless. Wireline provides9-1-1 data management systems and services, IntelliCast®notification services and Commercial Database services to ILECs, CLECs,independent operating companies (“IOCs”), Voice over Internet Protocol (“VoIP”)carriers and the State of Texas. Wireless provides wireless E9-1-1 Phase I andPhase II and hosted Position Determination Entity (“PDE”) services to wirelesscarriers.

 

Direct costs in each business unit include all costsdirectly attributable to a business unit’s operations and revenue-earningactivities. Indirect business unit costs consist of the costs of business unitsupport functions, including sales and marketing, general and administrative,and research and development. Corporate overhead includes these same costsallocated from corporate to the wireline and wireless business units based onthe percentage of total Company revenue each unit generated in the reportedperiod. Included in the costs allocated from Corporate are depreciationand amortization expenses for assets that cannot be specifically identified toa business unit or product. Incometaxes are allocated to the business units based on the percentage of incomefrom continuing operations before taxes that each unit generated for the period.The Company believes this methodology improves its financial reporting as eachunit is fully burdened with an appropriate allocation of the Company’soperating expenses and income taxes if the segment was profitable in the periodreported. Corresponding items for segments in 2004 and 2003 have beenreclassified to conform to the Company’s new segments in 2005.

 

The Company does not segregate assets betweensegments as it is currently impractical to do so. On a geographical basis, thevast majority of the Company’s revenue are derived in the United States, andsegments are determined based on aggregation of customers and associatedproducts and services, not geographical regions. The Company operates its bmdsubsidiary in Zug, Switzerland, but bmd’s revenue and operating incomecontributions 

 

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are not material to the Company’sconsolidated results of operations. The Company included the results ofoperations for bmd within the wireless business unit for the periodFebruary 20, 2004 (date of acquisition) through December 31, 2005.  In addition, the Company has formed several foreign subsidiaries toconduct certain international business development activities:  Intrado InternationalLtd., a wholly owned Irish corporation, Intrado International Singapore Pte.Ltd., a Singaporean corporation and wholly owned subsidiary of IntradoInternational Ltd., and Intrado (XieAn) Technology (China) Co. Ltd., a49%-owned Sino-foreign joint venture company of Intrado International Ltd. Theresults of operations for these subsidiaries, which have had norevenue-generating activities to date, are included within the wirelessbusiness unit.

 
| ** **                                              | ** ** | **WIRELINE** | ** ** | **WIRELESS** | ** ** | **TOTAL** | ** ** |
|---------------------------------------------------------|------------|--------------|------------|--------------|------------|-----------|------------|
| ** **                                              | ** ** | **2005**     | ** ** | **2004**     | ** ** | **2003**  | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Data management                                         |       | $            | 55,055     |         | $          | 53,315    |       | $ | 56,530 |   | $ | 54,441 |   | $ | 48,568 |   | $ | 36,368 |   | $ | 109,496 |   | $ | 101,883 |   | $ | 92,898 |   |
| Maintenance                                             |       | 20,170       |       | 16,721       |       | 14,823    |       | 314 |   | 405 |   | — |   | 20,484 |   | 17,126 |   | 14,823 |   |
| Systems                                                 |       | 10,952       |       | 8,062        |       | 9,696     |       | 1,219 |   | 1,004 |   | — |   | 12,171 |   | 9,066 |   | 9,696 |   |
| Professional services                                   |       | 1,633        |       | 2,123        |       | 830       |       | 2,533 |   | 1,532 |   | 2,608 |   | 4,166 |   | 3,655 |   | 3,438 |   |
| Total revenue                                           |       | 87,810       |       | 80,221       |       | 81,879    |       | 58,507 |   | 51,509 |   | 38,976 |   | 146,317 |   | 131,730 |   | 120,855 |   |
| Direct costs                                            |       | 52,317       |       | 45,032       |       | 41,205    |       | 26,828 |   | 39,853 |   | 21,574 |   | 79,145 |   | 84,885 |   | 62,779 |   |
| Indirect business unit costs                            |       | 9,467        |       | 10,198       |       | 12,655    |       | 5,456 |   | 4,994 |   | 4,692 |   | 14,923 |   | 15,192 |   | 17,347 |   |
| Corporate overhead                                      |       | 19,475       |       | 18,148       |       | 16,489    |       | 12,964 |   | 10,987 |   | 7,476 |   | 32,439 |   | 29,135 |   | 23,965 |   |
| Total costs and expenses                                |       | 81,259       |       | 73,378       |       | 70,349    |       | 45,248 |   | 55,834 |   | 33,742 |   | 126,507 |   | 129,212 |   | 104,091 |   |
| Equity in loss from joint venture                       |       | —       |       | —       |       | —    |       | (87 | ) | — |   | — |   | (87 | ) | — |   | — |   |
| Income (loss) from operations                           |       | 6,551        |       | 6,843        |       | 11,530    |       | 13,172 |   | (4,325 | ) | 5,234 |   | 19,723 |   | 2,518 |   | 16,764 |   |
| Interest and other income                               |       | 800          |       | 273          |       | 199       |       | 530 |   | 165 |   | 91 |   | 1,330 |   | 438 |   | 290 |   |
| Interest and other expense                              |       | (293         | )          | (773         | )          | (965      | )          | (192 | ) | (474 | ) | (443 | ) | (485 | ) | (1,247 | ) | (1,408 | ) |
| Income (loss) before income taxes                       |       | 7,058        |       | 6,343        |       | 10,764    |       | 13,510 |   | (4,634 | ) | 4,882 |   | 20,568 |   | 1,709 |   | 15,646 |   |
| Income tax expense                                      |       | 2,592        |       | 3,701        |       | 3,591     |       | 4,960 |   | 1,611 |   | 1,509 |   | 7,552 |   | 5,312 |   | 5,100 |   |
| Income (loss) from discontinued operations,  net of tax |       | (83          | )          | (399         | )          | 168       |       | — |   | — |   | — |   | (83 | ) | (399 | ) | 168 |   |
| Net income (loss)                                       |       | $            | 4,383      |         | $          | 2,243     |       | $ | 7,341 |   | $ | 8,550 |   | $ | (6,245 | ) | $ | 3,373 |   | 12,933 |   | $ | (4,002 | ) | $ | 10,714 |   |
|                                                         |            |              |            |              |            |           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The following table depicts (a) the amount ofcapitalized software assets assigned to each reportable segment and (b) theamount of depreciation and amortization expenses recorded in each segment forthe respective periods used in determining the segment’s operating results bythe chief operating decision maker. Certain capitalized software and otherfixed assets, and intangibles as well as the resulting depreciation andamortization expense, are not assigned to reporting segments as they representassets not specifically identifiable to any given segment. Rather, these assetsare recorded in various corporate support units and allocated to segments via acorporate overhead allocation that is based on weighted revenue of the givensegment for the given period. These expenses are recorded in indirect costs forpurposes of determining segment profitability.

 

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| ** **                                                                                                     | ** ** | **WIRELINE** | ** ** | **WIRELESS** | ** ** | **TOTAL** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|--------------|------------|--------------|------------|-----------|------------|
| ** **                                                                                                     | ** ** | **2005**     | ** ** | **2004**     | ** ** | **2003**  | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Carrying value, continuing operations                                                                          |       | $            | 19,073     |         | $          | 16,287    |       | $ | 12,145 |   | $ | 6,535 |   | $ | 5,622 |   | $ | 4,172 |   | $ | 25,608 |   | $ | 21,909 |   | $ | 16,317 |   |
| Accumulated amortization                                                                                       |       | 9,094        |       | 4,273        |       | 3,655     |       | 4,287 |   | 3,106 |   | 1,323 |   | 13,381 |   | 7,379 |   | 4,978 |   |
| Net carrying  value, continuing operations                                                                     |       | 9,979        |       | 12,014       |       | 8,490     |       | 2,248 |   | 2,516 |   | 2,849 |   | 12,227 |   | 14,530 |   | 11,339 |   |
|                                                                                                           |       |         |       |         |       |      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Carrying value, discontinued operations                                                                        |       | —       |       | —       |       | 395       |       | — |   | — |   | — |   | — |   | — |   | 395 |   |
| Accumulated amortization, discontinued  operations                                                             |       | —       |       | —       |       | 197       |       | — |   | — |   | — |   | — |   | — |   | 197 |   |
| Net carrying  value, discontinued operations                                                                   |       | —       |       | —       |       | 198       |       | — |   | — |   | — |   | — |   | — |   | 198 |   |
|                                                                                                           |       |         |       |         |       |      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total net carrying value, less discontinued  operations                                                        |       | $            | 9,979      |         | $          | 12,014    |       | $ | 8,292 |   | $ | 2,248 |   | $ | 2,516 |   | $ | 2,849 |   | $ | 12,227 |   | $ | 14,530 |   | $ | 11,141 |   |
|                                                                                                           |       |         |       |         |       |      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total depreciation expense and software  amortization expense included in *direct  cost**s*, approximate       |       | $            | 9,070      |         | $          | 6,983     |       | $ | 6,207 |   | $ | 4,172 |   | $ | 4,800 |   | $ | 4,600 |   | $ | 13,242 |   | $ | 11,783 |   | $ | 10,807 |   |
| Total depreciation expense and software  amortization expense included in *indirect  costs*, approximate       |       | 1,292        |       | 1,089        |       | 1,494     |       | 783 |   | 706 |   | 627 |   | 2,075 |   | 1,795 |   | 2,121 |   |
| Total depreciation expense and software  amortization expense included in discontinued operations, approximate |       | 8            |       | 217          |       | 193       |       | — |   | — |   | — |   | 8 |   | 217 |   | 193 |   |
| Total depreciation expense and software  amortization expense                                                  |       | 10,370       |       | 8,289        |       | 7,894     |       | 4,955 |   | 5,506 |   | 5,227 |   | 15,325 |   | 13,795 |   | 13,121 |   |
| Intangibles amortization expense                                                                               |       | 694          |       | 1,004        |       | 1,614     |       | 561 |   | 688 |   | 734 |   | 1,255 |   | 1,692 |   | 2,348 |   |
| Total depreciation and amortization expense                                                                    |       | $            | 11,064     |         | $          | 9,293     |       | $ | 9,508 |   | $ | 5,516 |   | $ | 6,194 |   | $ | 5,961 |   | $ | 16,580 |   | $ | 15,487 |   | $ | 15,469 |   |

 

**(14)****                          EMPLOYEEBENEFIT PLAN**

 

The Company has a 401(k) plan under whicheligible employees may defer up to 15% of their compensation subject to amaximum annual amount of $14,000 in 2005; employees over 50 years of age cancontribute up to $18,000 in 2005. The Company may make matching contributionsand discretionary contributions if approved by the board of directors. The Companymatched 50% of employee contributions up to 6% of the employee’s salary to theextent these matching contributions did not exceed $2,000 in 2005, 2004 and2003. Matching contributions vest 35%, 70% and 100% for one, two and threeyears of service, respectively. The total expense related to the employer matchwas approximately $867,000, $835,000 and $792,000 for the years endedDecember 31, 2005, 2004 and 2003, respectively. Employee and employercontributions are not directly invested in Company stock.

 

**(15)****                          RELATEDPARTY TRANSACTIONS**

 

*TechnoCom Corporation*

 

Duringthe year ended December 31, 2002, the Company purchased 294,118 shares ofSeries A Preferred Stock of TechnoCom Corporation (“TechnoCom”) for$500,000, representing 2.9% of the aggregate dilutive voting power of TechnoComas of September 30, 2002. The Company did not exercise any control orinfluence over 

 

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TechnoCom and did not have boardrepresentation. As a result, the Company accounted for its investment on a costrather than equity basis.  Under a contract that expired during the thirdquarter of 2005, TechnoCom provided development, implementation andperformance-monitoring services to the wireless business unit in connectionwith the Company’s Position Determination Entity (“PDE”) productoffering.  TechnoCom also provided subcontracted services to the Company’sILEC customers.  For the years ended December 31, 2005, 2004 and 2003,TechnoCom provided total services to the Company of $745,000, $505,000, and$316,000, respectively.

 

OnMarch 25, 2004, TechnoCom redeemed the preferred stock by issuing a$500,000 promissory note to the Company, which bears interest at 4% per year.The Company has been receiving quarterly principal and interest installmentpayments of $27,000 and will continue to receive such payments throughMarch 2008.  The balance due on the note is $225,000 and is includedin other current and long-term assets in the consolidated balance sheet as ofDecember 31, 2005.

 

**(16)****                          MAJORCUSTOMERS**

 

Revenue from certain customers exceeded 10%of total revenue for the respective years as follows:

 

| ** **        | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-------------------|------------|----------|------------|----------|------------|----------|------------|
| BellSouth         |       | —   |       | 10       | %          | 11       | %          |
| Cingular Wireless |       | 10       | %          | —   |       | —   |       |
| Qwest             |       | —   |       | —   |       | 11       | %          |
| SBC               |       | 13       | %          | 16       | %          | 18       | %          |
| Verizon           |       | 23       | %          | 20       | %          | 15       | %          |

 

Accounts receivables from the above 10%revenue customers above represented the following percentage of overall companyreceivables as of December 31 for the respective years:

 

| ** **        | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-------------------|------------|----------|------------|----------|------------|----------|------------|
| BellSouth         |       | —   |       | 5        | %          | 7        | %          |
| Cingular Wireless |       | 22       | %          | —   |       | —   |       |
| Qwest             |       | —   |       | —   |       | 8        | %          |
| SBC               |       | 8        | %          | 3        | %          | 19       | %          |
| Verizon           |       | 8        | %          | 27       | %          | 7        | %          |

 

Contracts with certain of these customershave terms through 2012 and provide for fixed monthly fees based upon thenumber of subscriber records managed and upon the services selected by thecustomer.

 

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**(17)****                          QUARTERLYINFORMATION (UNAUDITED)**

 

The following summarizes selected unauditedquarterly financial information for each of the two years in the period endedDecember 31, 2005:

 
| ** **                                              | ** ** | **Three months ended,** | ** ** |
|---------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                              | ** ** | **March 31,**                | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
| ** **                                              | ** ** | **2005**                          | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                              | ** ** | ** **                        | ** ** | **(Amounts in thousands, except per share data)** | ** ** | ** ** | ** ** |
| Revenue                                                 |       | $                                 | 37,564     |   | $ | 29,555 |   | $ | 34,505 |   | $ | 31,537 |   | $ | 35,396 |   | $ | 35,311 |   | $ | 38,852 |   | $ | 35,327 |   |
| Direct costs                                            |       | $                                 | 20,809     |   | $ | 16,130 |   | $ | 19,209 |   | $ | 18,639 |   | $ | 18,481 |   | $ | 17,876 |   | $ | 20,646 |   | $ | 32,240 |   |
| Income (loss) from continuing operations                |       | $                                 | 2,984      |   | $ | 1,593 |   | $ | 2,231 |   | $ | 573 |   | $ | 3,449 |   | $ | 4,065 |   | $ | 4,352 |   | $ | (9,834 | ) |
| Income (loss) from discontinued operations,  net of tax |       | (82                               | )          | 328 |   | 17 |   | (402 | ) | 24 |   | (69 | ) | (42 | ) | (256 | ) |
| Net income (loss)                                       |       | $                                 | 2,902      |   | $ | 1,921 |   | $ | 2,248 |   | $ | 171 |   | $ | 3,473 |   | $ | 3,996 |   | $ | 4,310 |   | $ | (10,090 | ) |
| Net income (loss) per share:                            |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic:                                                  |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                                   |       | $                                 | 0.17       |   | $ | 0.10 |   | $ | 0.13 |   | $ | 0.03 |   | $ | 0.20 |   | $ | 0.23 |   | $ | 0.24 |   | $ | (0.57 | ) |
| Discontinued operations                                 |       | 0.00                              |       | 0.02 |   | 0.00 |   | (0.02 | ) | 0.00 |   | 0.00 |   | 0.00 |   | (0.01 | ) |
| Total                                                   |       | $                                 | 0.17       |   | $ | 0.12 |   | $ | 0.13 |   | $ | 0.01 |   | $ | 0.20 |   | $ | 0.23 |   | $ | 0.24 |   | $ | (0.58 | ) |
|                                                    |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted:                                                |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                                   |       | $                                 | 0.16       |   | $ | 0.09 |   | $ | 0.12 |   | $ | 0.03 |   | $ | 0.19 |   | $ | 0.22 |   | $ | 0.23 |   | $ | (0.57 | ) |
| Discontinued operations                                 |       | 0.00                              |       | 0.02 |   | 0.00 |   | (0.02 | ) | 0.00 |   | 0.00 |   | 0.00 |   | (0.01 | ) |
| Total                                                   |       | $                                 | 0.16       |   | $ | 0.11 |   | $ | 0.12 |   | $ | 0.01 |   | $ | 0.19 |   | $ | 0.22 |   | $ | 0.23 |   | $ | (0.58 | ) |
| Shares used in computing net income (loss)  per share:  |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                   |       | 17,529                            |       | 16,631 |   | 17,676 |   | 17,069 |   | 17,754 |   | 17,361 |   | 17,910 |   | 17,404 |   |
| Diluted                                                 |       | 18,147                            |       | 17,958 |   | 18,284 |   | 18,073 |   | 18,560 |   | 17,803 |   | 18,984 |   | 17,404 |   |
|                                                         |            |                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

See Note 5 regarding the Company’s sale of its Palladiumbusiness in February 2005 and the related amounts that have been segregatedfrom continuing operations and reported as discontinued operations.

 

****During thequarter ended December 31, 2005, the Company corrected an error related to theaccrual of “incurred but not reported” (“IBNR”) claims under the Company’sself-insured medical and dental program, which was established in 2002. Managementhad been recognizing the claims on an as-paid basis, rather than accruing anIBNR reserve for such claims. Thus, management established an IBNR reserve ofapproximately $574,000 as of December 31, 2005 and recognized expense, net of abonus accrual impact and income taxes, of $235,000 during the fourth quarter of2005. Management does not believe that this amount is material to any priorreported quarterly or annual financial statements, nor do they believe that theamount is material to the annual operating results for 2005.****

 

During the quarter ended September 30, 2005, the Company corrected anerror in revenue recognition************under************the Company’sfirst ILEC data management services contract, which was entered into in 1994(the “1994 Contract”). As a result, the Company recognized an additional$595,000 of data management services revenue during the quarter (with no impacton quarterly cash flow). Since the inception of the 1994 Contract, the Companyhas ****consistently************recognizedrevenue ****upon billing,****onemonth in arrears. ****This method was originally adopted****dueto uncertainties about customer acceptance and receivable collectibility. ****The revenue recognition approach related to the 1994 Contract came to theCompany’s attention in************July2005 when the Company entered into a new contract that superseded the 1994Contract. Under the new contract, the Company has begun to recognize revenue inthe month that the services are performed, ****consistent with the applicationof the Company’s revenue recognition policy to its other ILEC data managementcontracts****. Thus, the Company recognized anadditional $595,000 of base services revenue from the 1994 Contract during thethree months ended September 30, 2005. ****The revenue stream from thiscontract has been stable from month to month over the term of the 1994 Contract.Management does not believe that this amount is material to any prior reportedquarterly or annual financial statements prior to the quarter ended September30, 2005, nor do they believe that the amount is material to the Company’sannual operating results for 2005.****

 

During the quarter ended December 31, 2004,the Company recorded a $14.0 million goodwill impairment charge relating tobmd, and a credit to expenses of $720,000 related to certain forfeiture ofaccrued vacation, as well as a $282,000 credit to bad debt expenses related torecovery of previously reserved for receivables.

 

78

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**(18)****                          SUBSEQUENTEVENTS**

 

On January 29, 2006, the Company entered intoan Agreement and Plan of Merger with West Corporation, a Delawarecorporation headquartered in Omaha, Nebraska. Under the terms of the agreement,West Corporation agreed to acquire all of the Company’s outstanding commonstock for a purchase price of $26.00 per share. If the Company’s stockholdersapprove the merger at a meeting expected to be held during the second quarterof 2006, the Company will become a wholly owned subsidiary of West Corporation.

 

On February 21, 2006, the Company’sBoard of Directors, based on the recommendation of the Compensation Committee,terminated the ESPP. All money contributed to this plan in 2006 will berefunded to employees.

 

**ITEM 9.****                             CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

OurBoard of Directors, based on the recommendation of our Audit Committee,dismissed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as ourindependent registered accounting firm on June 16, 2005 and engaged GrantThornton LLP as our new independent registered accounting firm on July 14,2005. PricewaterhouseCooper’s reports on our consolidated financial statementsfor each of the years ended December 31, 2004 and December 31, 2003did not contain an adverse opinion or disclaimer of opinion, nor were theyqualified or modified as to uncertainty, audit scope or accounting principles.

 

Duringthe years ended December 31, 2004 and 2003 and the interim period endingJune 16, 2005, there were no disagreements with PricewaterhouseCoopers onany matter of accounting principles or practices, financial statementdisclosure or auditing scope or procedure which, if not resolved toPricewaterhouseCoopers’ satisfaction, would have caused them to make referenceto the subject matter of the disagreement in connection with their report forsuch years; and there were no reportable events as defined inItem 304(a)(1)(v) of Regulation S-K.

 

Duringthe years ended December 31, 2004 and 2003 and the interim period endingJune 16, 2005, neither we nor anyone acting on our behalf consulted GrantThornton LLP with respect to the application of accounting principles to aspecified transaction, either completed or proposed, or the type of auditopinion that might be rendered on our consolidated financial statements, or anyother matters or reportable events listed in Items 304(a)(2)(i) and (ii)of Regulation S-K.

 

**ITEM 9A.****                                            CONTROLSAND PROCEDURES**

 

**Evaluation of Disclosure Controls and Procedures**

 

Wecarried out an evaluation under the supervision and with the participation ofour management, including our Chief Executive Officer (“CEO”) and ChiefFinancial Officer (“CFO”), of the effectiveness of our disclosure controls andprocedures, as defined in Rules 13a-15(e) and 15d-15(e) of theSecurities Exchange Act of 1934, as amended (“Exchange Act”), as of the end ofthe period covered by this report. Based on that evaluation, our CEO and CFOhave concluded that our disclosure controls and procedures are effective toprovide reasonable assurance that information required to be disclosed by us inour periodic reports under the Exchange Act is recorded, processed, summarizedand reported within the time periods specified in Securities and ExchangeCommission rules and forms, and that such information is accumulated andcommunicated to our management, including our CEO and CFO, as appropriate, toallow timely decisions regarding required disclosure. It should be noted thatthe design of any system of controls is based in part upon certain assumptionsabout the likelihood of future events, and can therefore only providereasonable, not absolute, assurance that the design will succeed in achievingits stated goals.

 

Therehave been no changes in our internal control over financial reporting for theyear ended December 31, 2005 that have materially affected, or arereasonably likely to materially affect, our internal control 

 

79

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over financial reporting.

 

## **Management’s Report on Internal Control Over Financial Reporting**

##  

Our management is responsible forestablishing and maintaining adequate internal control over financialreporting, as such term is defined in Exchange Act Rule 13a-15(f). Under thesupervision and with the participation of our management, including our ChiefExecutive Officer and Chief Financial Officer, we conducted an evaluation ofthe effectiveness of our internal control over financial reporting based on theframework in “Internal Control – Integrated Framework” issued by the Committeeof Sponsoring Organizations of the Treadway Commission. Based on our evaluationunder the framework in “Internal Control – Integrated Framework,” ourmanagement concluded that our internal control over financial reporting waseffective as of December 31, 2005. Our management’s assessment of the effectivenessof our internal control over financial reporting as of December 31, 2005, hasbeen audited by Grant Thornton LLP, an independent registered public accountingfirm, as stated in their report which is included in Item 8, “FinancialStatements and Supplementary Data.”

 

**Changes in Internal Control**

 

Therewere no other changes in our internal control over financial reporting for theyear ended December 31, 2005, that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

 

**ITEM 9B.****                                            OTHERINFORMATION**

 

On February 21, 2006, our Board ofDirectors, based on the recommendation of the Compensation Committee,suspended/terminated the 1998 Employee Stock Purchase Plan. All moneycontributed to the Plan in 2006 will be returned to employees.

 

80

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**PART III**

 

**ITEM 10.****                                              DIRECTORSAND EXECUTIVE OFFICERS OF THE REGISTRANT**

 

Our executive officers and directors, and their ages as of February 15,2006, are as follows:

 
| **George Heinrichs**        |   | A co-founder of Intrado, Mr. Heinrichs has served as our President  and a director since 1979 and as our Chairman and Chief Executive Officer  since 1995. His current term as a director expires at the 2006 Annual Meeting  of Stockholders. Mr. Heinrichs is 48** **years old.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Michael D. Dingman, Jr.** |   | Mr. Dingman has  served as our Chief Financial Officer since September 2000. Mr. Dingman has  also served as a director of Wheeling Pittsburgh Corp. since October 2003.  From March 1999 to August 2000, he was Chief Financial Officer and Treasurer  of RMI.NET. In July 2001, 11 months after Mr. Dingman resigned his position  at RMI.NET, RMI.NET filed a voluntary petition for relief with the United  States Bankruptcy Court for the District of Colorado. From January 1997  through February 1999, Mr. Dingman was the President of Qwon Investment  Consultants, Inc. From March 1994 through December 1996, Mr. Dingman was  President of Owen-Joseph Companies. Mr. Dingman is 52 years old.                                                                                                       |
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Craig W. Donaldson**      |   | Mr. Donaldson has served as our General Counsel since August 1997 and  has also served as our Senior Vice President and Corporate Secretary since  January 2001. From 1988 to August 1997, Mr. Donaldson was in private law  practice. Mr. Donaldson is 54 years old.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Lawrence P. Jennings**    |   | Mr. Jennings has served  as our Chief Operating Officer since February 2002. Mr. Jennings joined  Intrado in June 1999 as our Vice President of Sales and served as our Senior  Vice President of Business Operations from December 1999 until February 2002.  From 1995 through June 1999, Mr. Jennings served as Vice President of  Operations and Vice President of Sales for Teletrac, Inc. Mr. Jennings is 51  years old.                                                                                                                                                                                                                                                                                                                                                                                          |
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Stephen M. Meer**         |   | A co-founder of Intrado, Mr. Meer has served as our Chief Technology  Officer since 1979. Mr. Meer is 49 years old.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Stephen O. James**   |   | Mr.  James has served as a director since October 1999. His current term as a  director expires at the 2007 Annual Meeting of Stockholders. Mr. James has  been an independent executive business consultant since 1993 and has served  as the Managing Partner of Boulder Telecom Partners since October 1999,  Boulder Telecom Partners II since March 2001, Boulder Telecom Partners III  since January 2004, Boulder Telcom Partners IV since January 2005, Boulder  Telecom Partners V since January 2005, and Boulder Bancshares since March  2003. He also serves as a director of two other companies: First Western Bank  Holding Company and LeftHand Networks, Inc.   Mr. James has also served as a director of Stratagene Holding Corp.  from January 1996 to August 2003. Mr. James is 61 years old. |
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **David Kronfeld**          |   | Mr. Kronfeld has served as a director since March 1998, and  previously served as a director from February 1992 to June 1996. His current  term as a director expires at the 2008 Annual Meeting of Stockholders.  Mr. Kronfeld has served as Manager of JK&B Capital LLC since he  founded the company in October 1995. Since 1989, Mr. Kronfeld has  been a general partner of Boston Capital Ventures Limited Partnership, Boston  Capital Ventures II Limited Partnership, Boston Capital Ventures III L.P. and  Boston Capital Ventures, all of which are venture capital funds.  Mr. Kronfeld is 58 years old.                                                                                                                                                                            |
| ** **                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Eric D. Sipf**            |   | Mr.  Sipf has served as director since June 2005 His current term as a  director expires at the 2007 Annual Meeting of Stockholders, after Mr. Sipf  was recommended to the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

 

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| ** **              |   | Corporate Governance Committee by a non-management director. He has  been a business consultant and private investor since  January 2001.  He also serves as a member of the Board of Directors  of two other companies: Northstar Exchange Corporation and First Western  Financial.  Mr. Sipf was the President and Chief Executive Officer of  PacifiCare of Colorado and the Regional Vice President of PacifiCare Health  Systems from February 1997 until his retirement in  December 2000.  From July 1985 to February 1997, Mr. Sipf  served as the President and Chief Executive Officer of three health care  services organizations, including FHP of Colorado, TakeCare of Colorado, and  Comprecare Inc.  Prior to 1985, Mr. Sipf was a certified public  accountant and served as the Chief Financial Officer of several health  management organizations.  Mr. Sipf is 57 years old. |
|-------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Winston J. Wade**     |   | Mr. Wade has served as a director since October 1999. His  current term as a director expires at the 2006 Annual Meeting of  Stockholders. Mr. Wade was the Chief Executive Officer of MediaOne  Malaysia from 1997 until his retirement in 1999 and the Managing Director of  MediaOne India, BPL/US West from 1996 to 1997. From 1981 through 1995,  Mr. Wade held several positions with US West, including Vice President–Network  Operations, Vice President–Network Infrastructure, Vice President–Technical  Services and President–Information Technologies Group. Mr. Wade currently  serves as a director of EFJ Inc. and of AmeritasAcacia Life Insurance  Company. Mr. Wade is 67 years old.                                                                                                                                                                                                      |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Darrell A. Williams** |   | Mr. Williams has served as a director since January 2000, and  previously served as a director from February 1998 to December 1999. His  current term as a director expires at the 2006 Annual Meeting of  Stockholders. Since January 2004, Mr. Williams has been the President and  founder of DuSable Capital Inc., a corporate financial advisory services  firm. From January 2000 to December 2003, Mr. Williams served as Chief  Investment Officer of the Telecommunications Development Fund, a  telecommunications investment fund. From 1992 to 1999, Mr. Williams was  with Ameritech Development Corporation, last serving as Vice President,  Venture Capital. Mr. Williams is 45 years old.                                                                                                                                                                                                                             |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Art Zeile**           |   | Mr. Zeile became a director in January 2004. His current  term as a director expires at the 2008 Annual Meeting of Stockholders.  Mr. Zeile co-founded Inflow, Inc., a provider of information technology  outsourcing, in September 1997 and served as its Chief Executive Officer  until January 2005, when Inflow was acquired by Sungard. Since January 2005,  Mr. Zeile has served as the Chief Executive Officer of 32points Inc. From  1994 to 1997, Mr. Zeile served as Vice President of Business Operations for  LINK-VTC, a global provider of videoconferencing services. Mr. Zeile is  42 years old.                                                                                                                                                                                                                                                                                                            |

 

**Code of Ethics**

 

Wehave adopted a *Code of Conduct and BusinessEthics*. The portion of the *Codeof Conduct and Business Ethics* that deals with financial andaccounting matters and that is specifically applicable to our principalexecutive officer, the principal financial officer and the principal accountingofficer, which we refer to as the *SarbanesOxley Financial Code of Ethics*, was filed as an exhibit to ourAnnual Report on Form 10-K for the year ended December 31, 2003. The full *Code of Conduct and Business Ethics*, whichis applicable to the Board and all of our employees, was filed as an exhibit tothe Form 10-Q for the quarter ended March 31, 2004. Among other things, the *Code of Conduct and Business Ethics* establishes proceduresfor: (i) the receipt, retention, and treatment of complaints regardingaccounting, internal accounting controls or auditing matters; and (ii) theconfidential, anonymous submission by employees of “good faith” concernsregarding questionable accounting or auditing matters without fear ofretaliation.

 

Investorsmay request a free copy of our Code of Conduct and Business Ethics by writingto our Director of Investor Relations, 1601 Dry Creek Drive, Longmont, Colorado80503. If we amend or waive any provision of the 

 

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*Code ofConduct and Business Ethics*, we will describe the amendment or waiver in a Current Reporton Form 8-K (which will be filed with the SEC).

 

**ITEM 11.****                                              EXECUTIVECOMPENSATION**

 

***The following table sets forththe compensation earned during each of last three calendar years by our “NamedExecutive Officers,” who consist of our Chief Executive Officer and four otherexecutive officers who served in the capacity of an executive officer onDecember 31, 2005 and earned more than $100,000 in combined salary and bonus in2005.***

 

**Summary Compensation Table**

** **
| ** **                                     | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **         | ** ** | **Long-Term Compensation** | ** ** | ** **     | ** ** |
|------------------------------------------------|------------|------------|------------|------------------------------|------------|--------------------|------------|---------------------------------|------------|----------------|------------|
| ** **                                     | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **         | ** ** | **Awards**                      | ** ** | ** **     | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **         | ** ** | **Restricted**                  | ** ** | **Securities** | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **         | ** ** | **Stock**                       | ** ** | **Underlying** | ** ** | **All Other** | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | **Annual Compensation** | ** ** | **Award**          | ** ** | **Options/**                    | ** ** | **Compensa-**  | ** ** |
| **Name and Principal Position** | ** ** | **Year**   | ** ** | **Salary**                   | ** ** | **Bonus (1)** | ** ** | **(SRAs) (2)**             | ** ** | **SRAs(3)**    | ** ** | **tion (4)** | ** ** |
|                                           |       |       |       |                         | ** ** |               |       |                            |       |           | ** ** |   |   |
| George Heinrichs                               |       | 2005       |       | $                            | 450,000    | ** **         | $          | 584,131                         |       | $              | 1,509,469  |   | 107,512 | ** ** | $ | 2,000 |   |
| Chairman of the Board, President,              |       | 2004       |       | 450,000                      | ** ** | 185,336            |       | —                          |       | 75,000         | ** ** | 4,865 | (5) |
| and Chief Executive Officer                    |       | 2003       |       | 412,694                      | ** ** | 151,018            |       | —                          |       | 75,000         | ** ** | 2,000 |   |
|                                           |       |       |       |                         | ** ** |               |       |                            |       |           | ** ** |   |   |
| Stephen M. Meer                                |       | 2005       |       | 325,000                      | ** ** | 208,827            |       | 880,519                         |       | 62,715         | ** ** | 28,780 | (6) |
| Vice President and Chief                       |       | 2004       |       | 325,000                      | ** ** | 98,537             |       | —                          |       | 57,000         | ** ** | 2,898 | (7) |
| Technology Officer                             |       | 2003       |       | 312,416                      | ** ** | 114,323            |       | —                          |       | 50,000         | ** ** | 2,000 |   |
|                                           |       |       |       |                         | ** ** |               |       |                            |       |           | ** ** |   |   |
| Michael D.  Dingman, Jr.                       |       | 2005       |       | 305,000                      | ** ** | 340,743            |       | 880,519                         |       | 62,715         | ** ** | 2,000 |   |
| Chief Financial Officer                        |       | 2004       |       | 305,000                      | ** ** | 118,349            |       | —                          |       | 57,000         | ** ** | 2,000 |   |
|                                           | ** ** | 2003       |       | 273,075                      | ** ** | 99,927             | ** ** | —                          |       | 50,000         | ** ** | 2,000 |   |
|                                           |       |       |       |                         | ** ** |               |       |                            |       |           | ** ** |   |   |
| Lawrence P. Jennings                           |       | 2005       |       | 315,000                      | ** ** | 369,950            |       | 880,519                         |       | 62,715         | ** ** | 30,243 | (8) |
| Chief Operating Officer                        |       | 2004       |       | 315,000                      | ** ** | 102,296            |       | —                          |       | 57,000         | ** ** | 2,000 |   |
|                                           |       | 2003       |       | 303,649                      | ** ** | 111,115            |       | —                          |       | 50,000         | ** ** | 2,000 |   |
|                                           |       |       |       |                         | ** ** |               |       |                            |       |           | ** ** |   |   |
| Craig W. Donaldson                             |       | 2005       |       | 215,000                      | ** ** | 138,147            |       | 586,998                         |       | 41,809         | ** ** | 25,599 | (9) |
| Senior Vice President, General                 |       | 2004       |       | 215,000                      | ** ** | 65,568             |       | —                          |       | 47,000         | ** ** | 2,000 |   |
| Counsel and Corporate Secretary                |       | 2003       |       | 208,000                      | ** ** | 41,884             |       | —                          |       | 35,000         | ** ** | 2,000 |   |
|                                                |            |            |            |                              |            |                    |            |                                 |            |                |            |  |  |  |  |  |  |

 

----

(1)     A portion of the bonuses included in each yearwere earned in that year, but not paid until the following year.

(2)     Represents the maximum value of Share Right Awards(SRAs) granted to executive officers during 2005 – equal to the product of$14.04 (the closing price of Intrado’s common stock on June 23, 2005, the dateof grant) and the maximum number of shares issuable upon vesting of such shareright awards. SRAs vest (i) upon the achievement of certain performance goals(revenue, operating margin and return on invested capital) during the 12-monthperiod ending June 30, 2008; or (ii) upon a change in control.

(3)     Options (granted in 2003 and 2004) and SRAs(granted in 2005) were granted under the 1998 Stock Incentive Plan.

(4)     Includes $2,000 of matching contributions underour 401(k) Plan ($2,000 per executive).

(5)     Includes the payment of travel expenses associatedwith a routine medical examination and gift commemorating Intrado’s 25thanniversary.

(6)     Includes $26,780 of travel expenses for executiveand executive’s spouse on company sponsored sales trip.

(7)     Includes gift commemorating Intrado’s 25thanniversary.

(8)     Includes $28,243 of travel expenses for executiveand executive’s spouse on company sponsored sales trip.

(9)     Includes $23,599 of travel expenses for executiveand executive’s spouse on company sponsored sales trip.

 

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**Option Exercises and Holdings**

 

The following table sets forth information regarding exercises of stockoptions during the year ended December 31, 2005 and exercisable andunexercisable options held as of December 31, 2005 by each of the NamedExecutive Officers.

 

**Aggregated Option Exercises in Last FiscalYear And Fiscal Year-End Option Values**

 
| ** **              | ** ** | **Shares  Acquired  on** | ** ** | **Value**    | ** ** | **Number of Securities  Underlying Unexercised  Options at Fiscal Year-End** | ** ** | **Value of Unexercised  In-the-Money Options   at Fiscal Year-End** | ** ** |
|-------------------------|------------|--------------------------|------------|--------------|------------|------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|
| **Name**                | ** ** | **Exercise**             | ** ** | **Realized** | ** ** | **Exercisable**                                                                                            | ** ** | **Unexercisable**                                                                                 | ** ** | **Exercisable** | ** ** | **Unexercisable** | ** ** |
| George Heinrichs        |       | —                   |       | —       |       | 130,139                                                                                                    |       | 89,700                                                                                            |       | $ | 1,630,330 |   | $ | 908,934 |   |
| Lawrence P. Jennings    |       | —                   |       | —       |       | 248,570                                                                                                    |       | 64,780                                                                                            |       | 3,672,322 |   | 641,096 |   |
| Stephen M. Meer         |       | —                   |       | —       |       | 100,100                                                                                                    |       | 66,300                                                                                            |       | 1,282,538 |   | 666,952 |   |
| Michael D. Dingman, Jr. |       | 50,000                   |       | $            | 310,727    |                                                                                                       | 144,420    |                                                                                              | 63,580     |   | 1,991,501 |   | 625,172 |   |
| Craig W. Donaldson      |       | —                   |       | —       |       | 80,566                                                                                                     |       | 52,315                                                                                            |       | 897,792 |   | 516,328 |   |
|                         |            |                          |            |              |            |                                                                                                            |            |                                                                                                   |            |  |  |  |  |  |  |  |

 

The value realized byeach option exercised equals the total market price of the shares purchased,based on the last sale price of the common stock on the NASDAQ National Marketon the exercise date, minus the total exercise price paid for those shares. Thevalue of each unexercised option is based on the excess, if any, of $23.02 pershare, the last sale price of the common stock on the NASDAQ National Market onDecember 31, 2005, over the per share exercise price of each outstandingoption.

 

**Long-TermIncentive Plans – Awards in Last Fiscal Year**

 
| ** **              | ** ** | ** **                | ** ** | **Performance  Period Until** | ** ** | **Estimated Future Payouts under Non-Stock  Price-Based Plans (1)** | ** ** |
|-------------------------|------------|---------------------------|------------|------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|
| **Name**                | ** ** | **Number  of Units** | ** ** | **Maturation or  Payout**     | ** ** | **Threshold  90%**                                                                                | ** ** | **Target  100%** | ** ** | **Maximum  110%** | ** ** |
| George Heinrichs        |       | 107,512                   |       | 06/23/2008                         |       | 87,964                                                                                            |       | 97,739 |   | 107,512 |   |
| Lawrence P. Jennings    |       | 62,715                    |       | 06/23/2008                         |       | 51,312                                                                                            |       | 57,013 |   | 62,715 |   |
| Stephen M. Meer         |       | 62,175                    |       | 06/23/2008                         |       | 51,312                                                                                            |       | 57,013 |   | 62,715 |   |
| Michael D. Dingman, Jr. |       | 62,715                    |       | 06/23/2008                         |       | 51,312                                                                                            |       | 57,013 |   | 62,715 |   |
| Craig W. Donaldson      |       | 41,809                    |       | 06/23/2008                         |       | 34,207                                                                                            |       | 38,009 |   | 41,809 |   |

 

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(1) Share right awards vest (i) upon the achievement of three performancegoals (revenue, operating margin and return on invested capital) during the12-month period ending June 30, 2008; or (ii) upon a change in control.  For each performance goal, there are threelevels of achievement (less than 90%, 90%, 100%, and 110%).  Upon a change in control, share right awardsvest at the 100% performance level.  Formore information regarding share right awards, refer to the disclosure in ourCurrent Report on Form 8-K/A, as filed with the SEC on July 1, 2005.

 

**2005 Non-Employee Director Compensation Plan**

 

Underthe 2005 Intrado Board of Directors Compensation Plan, each non-employeedirector received a quarterly service fee of $6,500. The lead director (thenon-employee director who presides over executive sessions of the Board ofDirectors) received an additional quarterly fee of $1,250. Each member of theAudit Committee received a quarterly fee of $2,000 and the chair of the AuditCommittee receives an additional quarterly fee of $2,500. Each member of theCompensation Committee received a quarterly fee of $1,000 and the chair of theCompensation Committee received an additional quarterly fee of $2,000. Eachmember of the Corporate Governance Committee received a quarterly fee of $1,000and the chair of the Corporate Governance Committee received an additionalquarterly fee of $2,000. Quarterly service and committee meeting fees arepayable in cash or stock at the director’s discretion. During 2005, each memberof the Board elected to have his quarterly fees paid in Intrado stock. Inaddition, Intrado reimbursed directors for all reasonable and necessary traveland other incidental expenses 

 

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incurred in connection with their attendanceat meetings of the Board and Committees of the Board and other company-relatedfunctions. Board members (other than members of the Audit Committee) may bepaid additional amounts for consulting services that extend beyond their normalBoard duties, although no such payments were made in 2005. Furthermore, membersof the Audit Committee are prohibited from accepting any consulting, advisory,or other compensatory fee from Intrado other than those fees paid in theircapacities as members of the Board of Directors or a Board committee.

 

##### ***Compensation Committee Report on Executive Compensation***

#####  

The Compensation Committee of Intrado’s Board ofDirectors consists exclusively of non-employee, independent directors, and isresponsible for establishing and administering the annual compensation andcompensation procedures for Intrado’s executive officers, which includes thefive executive officers named in this proxy statement. The CompensationCommittee also administers Intrado’s 1998 Stock Incentive Plan. It is theresponsibility of the Compensation Committee to determine whether in itsjudgment the executive compensation policies are reasonable and appropriate,meet their stated objectives and effectively serve the best interests ofIntrado and its stockholders.

 

***Compensation Philosophy, Objectivesand Policy***. The fundamental philosophy of the CompensationCommittee is to provide executive officers and key employees withperformance-based, competitive compensation opportunities that relate to theiroverall contribution to Intrado’s development and financial success. Committeeobjectives are:

 

•                  rewards should be closely linked tocompany-wide and individual performance;

 

•                  the interests of Intrado’s employees shouldbe aligned with those of its stockholders through potential stock ownership;and

 

•                  compensation and benefits should encourageteamwork and be set at competitive levels that enable Intrado to attract,retain and improve the loyalty of high quality employees.

 

Accordingly,current policy has the compensation package for each executive officercomprised of three elements:

 

•                  base salary, which principally reflects anexecutive officer’s individual performance;

 

•                  bonus, which principally reflectscompany-wide or business unit performance toward Intrado’s annual goals; and

 

•                  long-term stock-based incentive compensation,which strengthens the mutuality of interests between executive officers andstockholders.

 

The Committee exercises judgment and discretion in setting bothshort-term and long-term compensation incentives for executive officers. Italso reviews the annual compensation elements of the other key employees to becertain they reflect the Committee’s philosophy, objectives and policy withrespect to compensation.

 

***Committee Procedures***. The Compensation Committee periodically reviews executive compensation ofcompanies deemed comparable by industry, size and other factors. During thefourth quarter of each fiscal year, the Committee holds several meetings toreview the compensation practices of comparable companies, and considernumerous other factors, including Intrado’s financial performance, theindividual contribution of each executive officer and general economic factors,all of which are factors used to determine the compensation for Intrado’s ChiefExecutive Officer. In addition, the Committee considers the factors discussedabove, along with the annual compensation recommendations submitted by Intrado’sChief Executive Officer, to set the compensation for Intrado’s other executiveofficers. The Committee also reviews comparable information for Intrado’s otherkey employees, whose annual 

 

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compensation is determined by the ChiefExecutive Officer after consultation with the Committee. Committee consensus ofthe three elements of the executive officer compensation packages may be reachedat different Committee meetings. The Compensation Committee approved the 2005executive officer compensation packages in June 2005.

 

***Base Salary***. The base salary foreach executive officer is determined on the basis of experience, personalperformance, the salary levels in effect for comparable positions within andwithout the industry, and internal base salary comparability considerations. Theweight given to each of these factors differs from individual to individual, asthe Compensation Committee deems appropriate.

 

***Bonus Compensation***. The CompensationCommittee establishes potential bonus amounts for executive officers andreviews those for other key employees based on the bonus levels for comparablepositions and the achievement of specific quarterly performance targets thatare set early in each year. In 2005, the Compensation Committee set performancetargets based on the following business criteria:

 

•                  revenue;

 

•                  operating income; and

 

•                  free cash flow (cash from operations less cashused in acquisition of property and equipment and less capitalized softwaredevelopment costs).

 

Theweight given to each of these factors differs from individual to individual, asthe Compensation Committee deems appropriate. The Compensation Committee may,from time to time, exercise discretion to award additional cash bonuses or toreduce cash bonuses when it determines that such adjustments are in Intrado’sbest interest or that such adjustments up or down are equitable based onunforeseen factors during the year.

 

***Long-Term Incentive Compensation***. Long-term incentiveshave historically been provided primarily through grants of stock options underIntrado’s 1998 Stock Incentive Plan. In 2005, the Committee established theLong-Term Incentive Program (“LTIP”) in accordance with the terms andconditions of Article Four of Intrado’s 1998 Stock Incentive Plan, whichauthorizes the Compensation Committee to grant share right awards (“SRAs”). The SRAs entitle the LTIP participants, consisting of Intrado’s executive officers,other key employees and non-employee directors, to receive a specified numberof shares of Intrado common stock upon the attainment of one or moreperformance goals established by the Compensation Committee or upon a change incontrol.  Upon the attainment of such performance goals, Intrado willissue fully-vested shares of its common stock in satisfaction of those SRAs. TheSRA grants are designed to align the interests of each executive officer withthose of the stockholders and to provide each individual with a significantincentive to manage Intrado from the perspective of an owner with an equitystake.

 

***Vesting/Performance Goals for SRAs***.  The actual number of shares ofIntrado common stock that will be issued will depend on Intrado’s financial performanceover the 12 month period ending June 30, 2008 (the “Measurement Period”).Under the LTIP, the Compensation Committee established the following threeperformance measures:

 

•                  revenue;

 

•                  operating margin (defined as the sum ofincome from operations and compensation expense attributable to the issuance ofcommon stock upon vesting of the SRAs, divided by revenue); and

 

•                  rate of return on invested capital (definedas the sum of net income and compensation expense attributable to the issuanceof common stock upon vesting of the SRAs, divided by the sum of long-term debtand stockholders’ equity at the end of the Measurement Period).

 

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Thefinancial thresholds for each performance measure (i.e., the exact amount ofeach performance goal) are as follows:

 
| ** **                     | ** ** | **Performance Goals for the 12 Month Period  Ending June 30, 2008** | ** **  |
|--------------------------------|------------|------------------------------------------------------------------------------------------------------------------|-------------|
| **Performance Measures**  | ** ** | **90%  Minimum   Threshold**                                                                                | ** **  | **100%  Threshold** | ** ** | **110%  Maximum  Threshold** | ** ** |
| ** **                     | ** ** | ** **                                                                                                       | ** **  | ** ** | ** ** | ** ** | ** ** |
| Revenue                        |       | $                                                                                                                | 182,700,000 |   | $ | 203,000,000 |   | $ | 223,300,000 |   |
|                           |       |                                                                                                             |        |   |   |   |   |   |   |   |
| Operating Margin (1)           |       | 16.2                                                                                                             | %           | 18.0 | % | 19.8 | % |
|                           |       |                                                                                                             |        |   |   |   |   |
| Return on Invested Capital (2) |       | 12.6                                                                                                             | %           | 14.0 | % | 15.4 | % |

 

Theseperformance goals do not represent projections of anticipated financialresults, but are merely goals. The performance goals are weighted asfollows:  34% revenue, 33% operatingmargin, and 33% rate of return on invested capital.

 

Foreach performance criteria, there are four levels of achievement:

 

•                  110% of the performance goal (the maximumthreshold);

 

•                  100% of the performance goal (applicable onlyif there is a “change in control”);

 

•                  90% of the performance goal (the minimumthreshold); and

 

•                  Less than 90% of the performance goal.

 

Foreach performance measure, the SRAs will not vest unless Intrado attains atleast 90% of the performance goal (the “90% Minimum Threshold”) on at least twoof the three performance measures (the “Minimum Vesting Requirement”). IfIntrado does not achieve the Minimum Vesting Requirement, then all SRAs shallbe forfeited and cancelled. If Intrado attains the 90% Minimum Threshold fortwo of the three performance measures, then two categories of SRAs will vestand the remaining one category of SRAs will be forfeited and cancelled. IfIntrado achieves the 90% Minimum Threshold for each of the three performancemeasures, then all three categories of SRAs will vest.

 

Assumingthat Intrado achieves the Minimum Vesting Threshold (attains at least 90% ofthe performance goal (the “90% Minimum Threshold”) on at least two of the threeperformance measures, the actual number of shares of Intrado common stock thatwill be issued upon vesting of SRAs will depend on Intrado’s level ofperformance over the Measurement Period (i.e., 110%, 100%, 90%, and less than90% of the performance goal). If Intrado’s level of performance falls between90% and 110% of the performance goal for a particular performance measure, theactual number of shares of Intrado common stock to be issued will be determinedby interpolation and rounded down to the nearest whole number. In the event ofa “Change in Control” (as defined below under the caption “Definitions”) at anytime before the end of the Measurement Period, the SRAs will immediately vestas if Intrado had achieved 100% of the performance goal in each of the threeperformance measures, regardless of Intrado’s actual performance prior to theChange of Control.

 

EachSRA grant generally provides a return to the executive officer only if theexecutive officer remains employed by Intrado during the vesting period, andthen only if the performance goals are achieved. The number of shares subjectto each SRA grant is set at a level intended to create a meaningful opportunityfor stock ownership based on the executive officer’s current position andpotential contribution to Intrado’s objectives, the base salary associated withthat position and the executive officer’s personal performance in recentperiods. The Compensation Committee does not adhere to any specific guidelinesas to the relative equity or option holdings of executive 

 

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officers.

 

***Benefits and Compensation upon aChange in Control***.In the event of a “change in control” of Intrado, the Compensation Committeeprovided that each SRA would automatically vest at the 100% performance level. Inthe event of a “Change in Control” at any time before the end of theMeasurement Period, the SRAs will immediately vest as if Intrado had achieved100% of its performance goal in each of the three performance measures, regardlessof Intrado’s actual performance prior to the Change of Control.

 

Moreover,with regard to past stock options grants, the Compensation Committee hasauthority to provide for the automatic acceleration of vesting of one or moreoutstanding options issued under the 1998 Stock Incentive Plan so that eachaccelerated option becomes exercisable or non-forfeitable in full. In addition,the Compensation Committee has authority to condition the automaticacceleration of vesting upon the involuntary termination of an employee’sservice within a designated period (not to exceed 18 months) following a “changein control.”  “Involuntary termination”includes involuntary dismissal for reasons other than misconduct or voluntaryresignation following: (1) a change in employees position with Intrado whichmaterially reduces employees duties and responsibilities or the level ofmanagement to which the employee reports, (2) a reduction in employees level ofcompensation (including base salary, fringe benefits and target bonus under anycorporate-performance based bonus or incentive programs) by more than 15%; or(3) a relocation of the individual’s place of employment by more than 50 miles,provided and only if such change, reduction or relocation is effected byIntrado without the individual’s consent.

 

Furthermore,Intrado has entered Non-Competition Agreements with each of the Named ExecutiveOfficers. Under these agreements, the Named Executive Officers are entitled toseverance pay following a “change in control” if: (1) Intrado or the survivingcompany terminates the executive officer’s employment without cause or theexecutive officer terminates employment with us for any reason withintwelve months after a change in control or (2) the executive officer’semployment terminates for any reason later than 12 months after a changein control and Intrado or the surviving company invokes the agreement’snon-competition covenants.

 

Pursuantto the non-competition agreements:

 

•                   each of George Heinrichs and Stephen M. Meeris required to abide by non-competition provisions for a period of three yearsin exchange for payments in an amount equal to three times the highest annualsalary and bonus earned by him in the three-year period preceding termination;

 

•                    each of Michael D. Dingman, Jr. and LawrenceP. Jennings is required to abide by non-competition provisions for a period oftwo years in exchange for payments in an amount equal to two times thehighest annual salary and bonus earned by him in the three-year period precedingtermination; and

 

•                   Craig W. Donaldson is required to abide bynon-competition provisions for a period of one year in exchange for payments inan amount equal to the highest annual salary and bonus earned by the executiveofficer in the three-year period preceding termination.

 

Ifthe non-competition agreement obligations are triggered for any such executiveofficer after a merger or a change in control, Intrado will make requirednon-competition payments a non-qualified deferred compensation plan, under whichmonthly installments will accumulate and be paid six months after theexecutive officer’s termination of employment and then continue ratably overthe executive officer’s non-competition period. In addition, we will providethe executive officer with life insurance for a period of one year from theeffective date of the non-competition agreements and with and health carebenefits for the non-competition compliance period (which varies from one yearto three years, depending on the executive).

 

Inaddition, in January 2006, we entered into consulting agreements with StephenM. Meer and Lawrence P. Jennings. Each of these executive officers isrequired to provide consulting services, effective as of the first dayfollowing termination of the executive’s employment, relating to our businessoperations. In exchange for consulting services, Mr. Meer will be entitledto a fee of $8,160 per month and Mr. Jennings will be entitled to a fee of$9,200

 

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per month. Mr. Meer will be required toprovide consulting services for up to 20 hours per month for a base termof 36 months and Mr. Jennings will be required to provide consultingservices for up to 20 hours per month for a base term of 12 months.In each case, unless one of the parties notifies the other to the contrary, theterm will extend automatically for an additional 12 months.

 

***Chief Executive Officer Compensation***. Mr. Heinrichs’compensation in 2005, including base salary, bonus award and SRA grant, was determinedwithin the framework established for all executive officers and was intended toprovide a level of stability and certainty to Intrado and its security holders.In 2005, Mr. Heinrichs’ base salary was $450,000, the same as his 2004 basesalary. In determining Mr. Heinrichs’ 2005 compensation, the CompensationCommittee subjectively took into account Intrado’s performance in 2004, as wellas Intrado’s progress in establishing itself in its industry leading position. Mr.Heinrichs also received a 2005 bonus award in the amount of $584,131, anincrease of 215% from his 2004 bonus award of $185,336, which was determined inaccordance with the achievement of the quarterly performance targets (see “BonusCompensation” above), which were set during 2005. The increase in Mr. Heinrich’sbonus from 2004 resulted from  increasein Intrado’s performance in 2005 as compared to 2004.

 

Duringfiscal year 2005, the Compensation Committee granted Mr. Heinrichs 107,512 SRAs.Subject to its terms, the SRAs vest upon the achievement of the long-termperformance goals and measures described above or upon a change in control.

 

In2005, a contribution of $2,000 was made to Mr. Heinrich’s account under Intrado’s401(k) Plan.

 

***Review of All Componentsof CEO Compensation***. The Compensation Committee reviewed all components of Intrado’sChief Executive Officer and four other most highly compensated executiveofficers’ compensation, including salary, bonus, equity incentive compensation,accumulated realized and unrealized stock option gains, the dollar value to theexecutive and cost to Intrado of perquisites and other personal benefits, ifany, the accelerated vesting benefits and the payout obligations under the “changeof control” automatic vesting provisions and the Non-Competition Agreement,respectively.

 

***The Compensation Committee’sConclusion***.Based on this review, the Committee finds Mr. Heinrichs’ total compensation(and, in the case of the severance and change-in-control scenarios, thepotential payments and other benefits) in the aggregate to be reasonable andnot excessive and consistent with the Committee’s objectives and policies. Itshould be noted that when the Committee considers any component of Mr. Heinrich’stotal compensation, the aggregate amounts and mix of all the components,including accumulated (realized and unrealized) option gains are taken intoconsideration in the Committee’s decisions. In addition, as noted above, it isthe Committee’s policy to make most compensation decisions in a several-stepprocess and to approve Mr. Heinrich’s compensation package as a whole.

 

***Internal Pay Equity***. In the process of reviewingeach component separately, and in the aggregate, the Compensation Committeereceives from Intrado a report showing “internal pay equity” within Intrado. Thisreport shows the relationship between management levels of compensation withinIntrado (e.g., between the CEO and the CFO and other Named Executive Officers,and between the CEO and other Named Executive Officers).

 

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***Compliance with Internal RevenueCode Section 162(m)***. Under Section 162(m) of the Internal RevenueCode, Intrado may not deduct, for federal income tax purposes, compensationpaid to the chief executive officer and four other most highly paid executiveofficers to the extent that compensation exceeds $1,000,000 per officer in anyyear. This limitation applies to all compensation paid to the covered executiveofficers that is not considered to have been performance based. Intrado’s 1998Stock Incentive Plan contains provisions intended to ensure that anycompensation deemed paid in connection with the exercise of stock optionsgranted under the plan with an exercise price equal to the market price of thecommon stock on the grant date will qualify as performance-based compensation,but any compensation deemed paid in connection with the vesting of SRAs willnot qualify as performance-based compensation. However, the CompensationCommittee recognizes the need to retain flexibility to make compensationdecisions that may not meet Section 162(m) standards when necessary to enableIntrado to meet its overall objectives, even if Intrado may not deduct all ofthe compensation paid. Accordingly, the Compensation Committee reserves theauthority to approve non-deductible compensation in appropriate circumstances.

 

 

Membersof the Compensation Committee

 

*Winston J. Wade, Chairman*

*Stephen O. James*

*Darrell A. Williams*

 

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***Stock Performance Graph***

 

***The graph depicted belowcompares the performance of Intrado common stock with the performance of theNASDAQ Stock Market-US and the NASDAQ Computer and Data Processing Servicesindices over the period beginning on December 31, 2000 and ending on December31, 2005. The graph assumes that $100 was invested on December 31, 2000 in ourcommon stock and in each comparison index (the NASDAQ Stock Market-US Index andthe NASDAQ Computer and Data Services Index), and that all dividends werereinvested. We have not declared any dividends on our common stock.***

 

**Comparison of Cumulative Total Return**

 

Based on investment of $100 on December 31,2000

 
| ** **                                           | ** ** | **12/31/00** | ** ** | **12/31/01** | ** ** | **12/31/02** | ** ** | **12/31/03** | ** ** | **12/31/04** | ** ** | **12/31/05** | ** ** |
|------------------------------------------------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|
| Intrado (NASDAQ: TRDO)                               |       | $            | 100        |         | $          | 631          |       | $            | 231        |         | $          | 516          |       | $ | 285 |   | $ | 542 |   |
| NASDAQ US                                            |       | $            | 100        |         | $          | 79           |       | $            | 55         |         | $          | 82           |       | $ | 89 |   | $ | 91 |   |
| NASDAQ Computer and Data Processing  Services Stocks |       | $            | 100        |         | $          | 81           |       | $            | 56         |         | $          | 73           |       | $ | 80 |   | $ | 83 |   |

 

 

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**ITEM 12.****       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

***Security Ownership***.

 

***The table below sets forthinformation concerning beneficial ownership of our common stock by:***

 

**•**      each of our directors;

**•**      our chief executive officer and our other four mosthighly compensated executive officers; and

**•**      all of our directors and executive officers as agroup.

** **

Unless otherwise indicated in the footnotes to thetable, all information set forth in the table is as of February 15, 2006. Weare not aware of any stockholder that owns more than each stockholder we knowto own beneficially more than 5% of the outstanding shares of our common stockas of February 15, 2006. The number of shares beneficially owned by eachstockholder we identify below is determined under rules promulgated by the SEC.The information does not necessarily indicate ownership for any other purpose. Underthese rules, beneficial ownership includes any shares as to which the personhas sole or shared voting power or investment power and also any shares thatthe individual has the right to acquire within 60 days after *February 15*, 2006 through the exercise or conversion of anystock option or other right. The inclusion of those shares in the followingtable does not, however, constitute an admission that the named stockholder isa direct or indirect beneficial owner of those shares. Unless otherwiseindicated, to our knowledge based upon information provided by the stockholdersnamed in the table, each stockholder has sole investment and voting power, orshares voting and/or investment power with his or her spouse, with respect toall shares listed below as owned by that stockholder. The address of ourofficers and directors is in care of Intrado Inc., 1601 Dry Creek Dr*ive, Longmont, Colorado  80503.*

*** ***
| **Name and Address of Beneficial Owner** | ** ** | **Outstanding  Shares** | ** ** | **Shares Acquirable  Within 60 Days** | ** ** | **Total Beneficial  Ownership** | ** ** | **Percent of  Common Stock  Outstanding** | ** ** |
|-------------------------------------------------------------------|------------|-------------------------|------------|------------------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------------------|------------|
| George Heinrichs                                                  |       | 445,590                 |       | 147,039                                              |       | 589,529                              |       | 3.2                                                 | %          |
| Stephen M. Meer                                                   |       | 179,543                 |       | 112,280                                              |       | 288,883                              |       | 1.6                                                 | %          |
| Lawrence P. Jennings                                              |       | 8,853                   |       | 260,470                                              |       | 267,203                              |       | 1.5                                                 | %          |
| Michael D. Dingman, Jr.                                           |       | 7,000                   |       | 155,920                                              |       | 160,900                              |       |                                                | *          |
| Craig W. Donaldson                                                |       | 18,815                  |       | 89,366                                               |       | 106,686                              |       |                                                | *          |
| Stephen O. James                                                  |       | 15,910                  |       | 68,300                                               |       | 83,810                               |       |                                                | *          |
| David Kronfeld                                                    |       | 32,669                  |       | 81,500                                               |       | 113,769                              |       |                                                | *          |
| Eric D. Sipf                                                      |       | 820                     |       | —                                               |       | 820                                  |       |                                                | *          |
| Winston J. Wade                                                   |       | 25,124                  |       | 81,500                                               |       | 106,224                              |       |                                                | *          |
| Darrell A. Williams                                               |       | 28,458                  |       | 64,500                                               |       | 92,558                               |       |                                                | *          |
| Art Zeile                                                         |       | 4,692                   |       | 13,200                                               |       | 17,892                               |       |                                                | *          |
| All directors and executive officers as a  group (12 persons)     |       | 784,312                 |       | 1,160,647                                            |       | 1,931,244                            |       | 10.1                                                | %          |

 

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****Representsless than 1% of outstanding shares of common stock.***

 

***92***

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***Equity Compensation Plans***.

 

As shown in the table below, as of February15, 2006, we reserved 2,661,786 shares of common stock for future issuance uponexercise of outstanding options under equity compensation plans and warrants.

 
| ** **                                          | ** ** | **Number of Securities  to be Issued upon  Exercise of  Outstanding Options,  Warrants and Rights** | ** ** | **Weighted Average  Exercise Price of  Outstanding Options,  Warrants and Rights** | ** ** | **Number of Shares Remaining  Available for Issuance Under  Equity Compensation Plans,  Excluding Securities Available  in First Column** | ** ** |
|-----------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity compensation plans approved by  stockholders |       |                                                                                                                                             |       |                                                                                                             |       | 900,233                                                                                                                                                                                               |       |
| Stock Options                                       |       | 2,566,015                                                                                                                                        |       | $                                                                                                                | 11.21      |                                                                                                                                                                                                  |       |   |
| Share Right Awards                                  |       | 682,047                                                                                                                                          |       |                                                                                                             |       |                                                                                                                                                                                                  |       |
| Restricted Stock Units                              |       | 3,000                                                                                                                                            |       | $                                                                                                                | 7.91       |                                                                                                                                                                                                  |       |   |
|                                                |       |                                                                                                                                             |       |                                                                                                             |       |                                                                                                                                                                                                  |       |
| Total                                               |       | 3,251,062                                                                                                                                        |       | $                                                                                                                | 11.32      |                                                                                                                                                                                                  | 900,233    |   |

 

**ITEM 13.****               CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS**

 

Duringthe year ended December 31, 2002, we purchased 294,118 shares of TechnoComCorporation’s Series A Preferred Stock for $500,000, representing 2.9% ofthe aggregate dilutive voting power of TechnoCom as of September 30, 2002.We did not exercise any control or influence over TechnoCom and did not haveboard representation. As a result, we accounted for our investment on a costrather than equity basis.  Under a contract that expired during the thirdquarter of 2005, TechnoCom provided development, implementation andperformance-monitoring services to the wireless business unit in connectionwith our Position Determination Entity product offering.  TechnoCom alsoprovided subcontracted services our ILEC customers.  For the years endedDecember 31, 2005 and 2004, TechnoCom provided total services to us of $745,000and $505,000, respectively

 

OnMarch 25, 2004, TechnoCom redeemed our preferred stock investment byissuing a $500,000 promissory note, which bears interest at 4% per year. Wehave been receiving quarterly principal and interest installment payments of$27,000 and will continue to receive such payments throughMarch 2008.  The balance due on the note is $225,000 as ofDecember 31, 2005.

 

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**ITEM 14.****               PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

Asdisclosed under Item 9. above, the Audit Committee of our Board of Directorsdismissed PricewaterhouseCoopers LLP as our independent registered accountingfirm on June 16, 2005 and engaged Grant Thornton LLP as our new independentregistered accounting firm on July 14, 2005. The following table sets forth thefees we paid to Grant Thornton LLP and PricewaterhouseCoopers LLP forprofessional services provided in connection with the review and audit offinancial statements during the last two years. All fees paid to Grant ThorntonLLP and PricewaterhouseCoopers LLP were pre-approved by the Audit Committee,which concluded that the provision of such services was compatible with themaintenance of each firm’s independence in the conduct of such firm’s auditingfunctions.

 
| **Type of Fee** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------|------------|----------|------------|----------|------------|
| Audit Fees (1)            |       | $        | 552,000    |     | $          | 1,163,000 |   |
| Audit-Related Fees (2)    |       | 3,000    |       | 3,000    |       |
| Tax Fees (3)              |       | —   |       | 12,000   |       |
| All Other Fees (4)        |       | 16,000   |       | 15,000   |       |
|                      |       |     |       |     |       |
| Total fees                |       | $        | 571,000    |     | $          | 1,193,000 |   |

 

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(1)   Audit fees relate to professional services rendered inconnection with the: (i) audit of our annual financial statements included inour Annual Report on Form 10-K and services attendant to, or required by,statute or regulation, such as: (ii) quarterly review of financial statementsincluded in our quarterly reports on Form 10-Q; (iii) comfort letters, consentsand other audit services related to SEC and other regulatory filings; (iv)accounting consultation attendant to the audit; and (v) the audit of internalcontrols and management’s report on the effectiveness of internal controls, asrequired by Section 404 of the Sarbanes-Oxley Act of 2002.

(2)   Audit-related fees include professional services related tothe: (i) consultation on accounting standards or transactions; and (ii) auditsof employee benefit plans.

(3)   Tax fees include professional services rendered inconnection with tax compliance, tax advice, tax consulting and tax planning. Wedo not engage Grant Thornton LLP or PricewaterhouseCoopers LLP to performpersonal tax services for our executive officers.

(4)   All other fees include fees for due diligence proceduresassociated with mergers and acquisitions, and review of proposed incentiveprograms and employment agreements.

 

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**PART IV**

 

**ITEM 15.****               EXHIBITS AND FINANCIAL STATEMENTSCHEDULES**

 

**(a)****           (1)  Financial Statements**

 

The financial statements filed as part ofthis report are listed above in the Index to Consolidated Financial Statementsunder the caption “Item 8. Financial Statements and Supplementary Data.”

 

**(2)  Financial Statement Schedules**

 

All financial statement schedules have beenomitted because they are not required, are not applicable or the information isincluded in the Financial Statements or Notes thereto.

 

**(3)  Exhibits**

 

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                             |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.01(1)             |       | Agreement and Plan of Merger, dated as of January 29, 2006, by  and among Intrado Inc., West Corporation and West International Corp.                                                                                  |
| 3.01(2)             |       | Restated Certificate of Incorporation.                                                                                                                                                                                      |
| 3.02(3)             |       | Amended and Restated Bylaws.                                                                                                                                                                                                |
| 4.01(4)             |       | Specimen Certificate for SCC Communications Corp. Common Stock.                                                                                                                                                             |
| 4.02(5)             |       | Specimen Certificate for Intrado Inc. Common Stock.                                                                                                                                                                         |
| 4.03(4)             |       | Reference is made to Exhibits 3.01 and 3.02.                                                                                                                                                                                |
| 4.04(6)             |       | Certificate of Designation for Series A Preferred Stock.                                                                                                                                                               |
| 10.01(4)            |       | 1990 Stock Option Plan.                                                                                                                                                                                                     |
| 10.02(4)            |       | 1998 Stock Incentive Plan.                                                                                                                                                                                                  |
| 10.03(4)            |       | Form of Directors’ and Officers’ Indemnification Agreement.                                                                                                                                                       |
| 10.04(7)            |       | Genesis Select Corporation and SCC Communications Corp. Common Stock  Purchase Warrant Agreement, dated April 19, 2000.                                                                                                |
| 10.05(8)            |       | General Electric Capital Corporation Loan and Security Agreement,  dated as of July 31, 2001.                                                                                                                          |
| 10.06(3)            |       | First Amendment to General Electric Loan and Security Agreement,  dated July 1, 2002.                                                                                                                                  |
| 10.07(2)            |       | Second Amendment to General Electric Loan and Security Agreement,  dated September 26, 2002.                                                                                                                           |
| 10.08(6)            |       | Third Amendment to General Electric Loan and Security Agreement, dated  May 16, 2003.                                                                                                                                       |
| 10.09(9)            |       | Fourth Amendment to General Electric Loan and Security Agreement,  dated November 5, 2003.                                                                                                                                  |
| 10.10(9)            |       | Fifth Amendment to General Electric Loan and Security Agreement,  dated February 19, 2004.                                                                                                                                  |
| 10.11(10)           |       | Sixth Amendment to General Electric Loan and Security Agreement,  dated March 14, 2005.                                                                                                                                     |
| 10.12(9)            |       | Share Purchase Agreement (bmd wireless AG), dated February 3,  2004.                                                                                                                                                   |
| 10.13(12)           |       | Registration Rights Agreement (bmd wireless AG), dated February 20,  2004.                                                                                                                                                  |
| 10.14(10)           |       | 2004 Pay for Results Plan.                                                                                                                                                                                                  |
| 10.15(13)           |       | Long-Term Incentive Program.                                                                                                                                                                                                |
| 10.16(13)           |       | Form of 2005 Share Right Award Agreement.                                                                                                                                                                                   |
| 10.17(13)           |       | 2005 Tier One Variable  Compensation Plan.                                                                                                                                                                                  |
| 10.18(13)           |       | 2005 Non-Employee  Director Compensation Plan.                                                                                                                                                                              |
| 10.19(13)           |       | 1998 Employee Stock  Purchase Plan, as amended.                                                                                                                                                                             |
| 10.20(14)           |       | Nonqualified Deferred  Compensation Plan, as amended.                                                                                                                                                                       |
| 10.21(14)           |       | Form of  Non-Competition Agreement, as amended.                                                                                                                                                                             |
| 10.22(1)            |       | Consulting Agreement,  dated as of January 29, 2006, by and between Intrado Inc. and Stephen M.  Meer.                                                                                                                 |
| 10.23(1)            |       | Consulting Agreement,  dated as of January 29, 2006, by and between Intrado Inc. and Lawrence  P. Jennings.                                                                                                            |
| 14.01(9)            |       | Code of Ethics.                                                                                                                                                                                                             |
| 16.01(15)           |       | Letter from PricewaterhouseCoopers LLP regarding change in certifying  accountant.                                                                                                                                          |
| 21.01(11)           |       | List of Subsidiaries.                                                                                                                                                                                                       |
| 23.01(11)           |       | Consent of Grant Thornton LLP, Independent Registered Public  Accounting Firm.                                                                                                                                              |
| 23.02(11)           |       | Consent of PricewaterhouseCoopers LLP, Independent Registered Public  Accounting Firm.                                                                                                                                      |
| 31.01(11)           |       | Certification of President and Chief Executive Officer pursuant to  Rule 13a-14(a) under the Securities Exchange Act of 1934, as  amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002. |
| 31.02(11)           |       | Certification of Chief Financial Officer and Treasurer pursuant to  Rule 13a-14(a) under the Securities Exchange Act of 1934, as  amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002. |
| 32.01(11)           |       | Certification of President and Chief Executive Officer Pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.                                                          |
| 32.02(11)           |       | Certification of Chief Financial Officer and Treasurer Pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.                                                          |
| 99.01(11)           |       | Audit Committee Charter.                                                                                                                                                                                                    |

 

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(1)       Incorporated by reference to the Registrant’sCurrent Report on Form 8-K, as filed with the SEC on January 30, 2006.

(2)       Incorporated by reference to the Registrant’sForm 10-Q for the Quarter ended September 30, 2002.

(3)       Incorporated by reference to the Registrant’sForm 10-Q for the Quarter ended June 30, 2002.

 

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(4)       Incorporated by reference to the Registrant’sRegistration Statement on Form S-1 (File No. 333-49767), as amended.

(5)       Incorporated by reference to the Registrant’sCurrent Report on Form 8-K, as filed with the SEC on June 4, 2001.

(6)       Incorporated by reference to the Registrant’sForm 10-Q for the Quarter ended June 30, 2003.

(7)       Incorporated by reference to the Registrant’sForm 10-Q for the Quarter ended June 30, 2000.

(8)       Incorporated by reference to the Registrant’sForm 10-Q for the Quarter ended September 30, 2001.

(9)       Incorporated by reference to the Registrant’sForm 10-K for the Fiscal Year ended December 31, 2003.

(10)     Incorporated by reference to the Registrant’sForm 10-K for the Fiscal Year ended December 31, 2004.

(11)     Filed herewith.

(12)     Incorporated by reference to the Registrant’sRegistration Statement on Form S-3 (File No. 333-114141), as amended.

(13)     Incorporated by reference to the Registrant’sCurrent Report on Form 8-K, as filed with the SEC on June 27, 2005.

(14)     Incorporated by reference to the Registrant’sCurrent Report on Form 8-K, as filed with the SEC on January 6, 2006.

(15)     Incorporated by reference to the Registrant’sCurrent Report on Form 8-K, as filed with the SEC on June 28, 2005.

 

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**SIGNATURES**

 

Pursuant to the requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized, as of March 7, 2006.

 
|   |                   |                        |
|--------|------------------------|-----------------------------|
|   | INTRADO INC.           |
|   | a Delaware Corporation |
|   |                   |
|   | By:                    | /s/ Michael D. Dingman, Jr. |
|   | Name:                  | Michael D. Dingman, Jr.     |
|   | Title:                 | *Chief Financial Officer*   |
|        |                        |                             |  |

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below as ofMarch 7, 2006 by the following persons on behalf of the registrant and inthe capacities indicated.

 
| **Signature**                | ** ** | **Title**                                                     |
|------------------------------|------------|---------------------------------------------------------------|
|                         |       |                                                          |
| /s/ George  Heinrichs        |       | President, Chief Executive Officer and  Chairman of the Board |
| **George Heinrichs**         |       | *(Principal Executive Officer)*                               |
| ** **                   |       | * *                                                      |
| /s/ Michael  D. Dingman, Jr. |       | Chief Financial Officer                                       |
| **Michael D. Dingman, Jr.**  |       | *(Principal Financial and Accounting  Officer)*               |
| ** **                   |       | * *                                                      |
| /s/ Stephen  O. James        |       | Director                                                      |
| **Stephen O. James**         |       |                                                          |
| ** **                   |       |                                                          |
| /s/ David  Kronfeld          |       | Director                                                      |
| **David Kronfeld**           |       |                                                          |
| ** **                   |       |                                                          |
| /s/ Eric D.  Sipf            |       | Director                                                      |
| **Eric D. Sipf**             |       |                                                          |
| ** **                   |       |                                                          |
| /s/ Winston  J. Wade         |       | Director                                                      |
| **Winston J. Wade**          |       |                                                          |
| ** **                   |       |                                                          |
| /s/ Darrell  A. Williams     |       | Director                                                      |
| **Darrell A. Williams**      |       |                                                          |
| ** **                   |       |                                                          |
| /s/ Art  Zeile               |       | Director                                                      |
| **Art Zeile**                |       |                                                          |

 

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**EXHIBITINDEX**(1)

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                    |
|---------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **          | ** ** | ** **                                                                                                                                                         |
| 21.01               |       | List of Subsidiaries.                                                                                                                                              |
| 23.01               |       | Consent of Grant Thornton LLP, Independent  Registered Public Accounting Firm.                                                                                     |
| 23.02               |       | Consent of PricewaterhouseCoopers LLP,  Independent Registered Public Accounting Firm.                                                                             |
| 31.01               |       | Certification of President and Chief  Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange  Act of 1934, as amended.                         |
| 31.02               |       | Certification of Chief Financial Officer  and Treasurer pursuant to Rule 13a-14(a) under the Securities Exchange Act of  1934, as amended.                         |
| 32.01               |       | Certification of President and Chief  Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.02               |       | Certification of Chief Financial Officer  and Treasurer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |
| 99.01               |       | Audit Committee Charter.                                                                                                                                           |

 

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(1)           ThisExhibit Index only includes exhibits filed with this Annual Report on Form 10-Kand excludes exhibits incorporated by reference. For a list of exhibitsincorporated by reference, refer to “Item 15. Exhibits” above.

 

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