##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2006
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 0-51838
 Global Traffic Network, Inc.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    33-1117834
(I.R.S. Employer Identification No.)
 800 Second Avenue, 5 th Floor
New York, New York 10017
 (212) 896-1255
  Title of Each Class:
    
    Name of Each Exchange
on which Registered:Common Stock, $.001 par value
    
    The Nasdaq Stock Market
 o þ
 o þ
 þ o
 o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filerþ
 o þ
   Documents Incorporated By Reference




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TABLE OF CONTENTS  Part IItem. 1 BusinessItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPart IIItem 5. Market for Registrants Common Equity and Related Stockholder Matters.Item 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Qualitative and Quantitative Disclosures about Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes In and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESEXHIBIT INDEXCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification Pursuant to Section 906    Table of Contents  
 Part I
 
 Item. 1 Business
  
    
    The Australia Traffic Network Pty Limited, an Australian proprietary company organized
on June 20, 1997 and registered under the Corporations Act of Australia (Australia
Traffic Network); and
    
    Global Traffic Canada, Inc., a Delaware corporation incorporated on May 20, 2005
(Global Canada), which operates through its wholly-owned subsidiary, Canadian Traffic
Network ULC, an Alberta business corporation that was formed on July 5, 2005 (Canada
Traffic Network).
  Overview of the Business and Its History
  Australia Traffic Network.
 1




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##### Table of Contents



Canada Traffic Network.
  The Services    Radio Traffic Reports, Radio News Reports and TV Reports
  
    
    Radio traffic reports:Through our information-gathering infrastructure, including
aircraft, and the use of external traffic information services, daily scheduled customized
traffic reports are provided to radio stations.
    
    Radio news reports:Effective July 1, 2005, we began building upon the radio traffic
reports platform by providing general news reports to radio stations in Australia that
complement our customized traffic reports. Currently, we obtain the majority of our news
information and radio news report inventory from Austereo Pty Limited, the largest
broadcaster in Australia (Austereo) under a News Report Broadcast Agreement. Although we
intend to utilize this information to provide news reporting services to other Australian
radio stations, we do not currently do so. We will, also on occasion, reimburse or
compensate other network affiliates for the costs associated with their news department in
order to gain access to their radio news reports inventory.
    
    TV reports:In early 2005, we began providing regularly scheduled video traffic reports
to television stations in Australia. In addition, because our aircraft are often already in
the air covering traffic conditions, they are often first to arrive at the scene of a
breaking news story. In a strategic effort to expand our reach into the television markets,
we have been using this on-the-scene presence to compile video footage of such breaking
news, which we presently provide to certain of the television stations that we provide with
regularly scheduled TV reports.
  2




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Preparation of Information Reports
     Delivery of Our Information Reports
  3




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Our Radio and TV Networks
  Australia.
 Australia
    
    Number of Affiliate Stations
    
    Number of MarketsRadio traffic reports
    
    
    65
    
    
    
    17Radio news reports
    
    
    11
    
    
    
    5TV reports
    
    
    10
    
    
    
    7
  4




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Canada.
 Canada
    
    Number of Affiliate Stations
    
    Number of MarketsRadio traffic reports
    
    
    34
    
    
    
    7
 Potential Additional Markets.
 Generating Revenue Through Advertising Sales
   5




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Imbedded Nature of Advertising.
 Advertising on a Network Basis.
 Sales of Our Commercial Airtime Inventory.
 6




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Significant Suppliers
  7




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Our Operating Strategy
  Expand Geographically.
 Increase the Number of Network Affiliates Using the Radio Traffic Reports within Existing
Markets.
 Expand our Provision of Radio News Reports.
 8




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Expand our Provision of TV Reports.
 Continue to Strengthen Marketing, Sales and Inventory Management Operations.
 Corporate Structure
  9




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Radio and Television Industry
  Competition
  10




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Environmental Regulation
  Intellectual Property
  Employees
  11




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##### Table of Contents



Properties
  Legal Matters
  Item 1A. Risk Factors
   
    
    our inability to compete successfully with current or future competitors within our
industry;
    
    our inability to retain members of our executive management or other key employees;
 12




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
    
    the termination or impairment of our relationships with key network affiliates;
    
    the termination or impairment of our advertiser relationships;
    
    our inability to manage our growth effectively;
    
    our inability to expand successfully into international markets;
    
    potential adverse affects of fluctuations in foreign currency exchange rates and
results of hedging transactions, if any;
    
    our inability to obtain additional financing, if required; and
    
    the occurrence of unforeseen litigation.
  Our past operating results may not be indicative of our future performance and we may be unable to
continue operating successfully in Australia or to establish successful operations in Canada.
  We have incurred operating losses in connection with the introduction of radio news reports in
Australia and we may be unable to conduct our expanded operations profitably.
  13




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We have limited experience in delivering news information reporting services and in the television
broadcast market which may hinder our ability to perform these services and expand into the
television market successfully.
  We have incurred operating losses in connection with our expansion of operations into Canada and
may be unable to operate profitably in Canada.
  14




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Our financial success depends on our ability to compete successfully in obtaining contracts with
radio and television stations and we may be unable to acquire or renew such contracts.
   Our financial success depends on our ability to compete successfully in selling commercial airtime
inventory to advertisers and we may be unable to sell such inventory.
  15




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Our ability to sell commercial advertising and generate revenue is subject to economic and
industry fluctuations beyond our control.
  Potential consolidation of radio and television stations in the markets in which we operate and
will operate in the future may result in reduction of our negotiating leverage for affiliate
contracts and, subsequently, may increase costs and risk of loss with respect to our Affiliate
Contracts.
  16




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The loss of Austereo Pty Ltd. as one of our network affiliates in Australia would significantly
decrease the amount of our commercial airtime inventory, which could have an adverse effect on our
results of operations and our stock price.
  The loss of Corus Entertainment, Inc. as one of our network affiliates in Canada would
significantly decrease the amount of our commercial airtime inventory in Canada, which could have
an adverse effect on our results of operations and our stock price.
  17




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Our business is subject to risks related to international operations.
  Our revenue may be adversely affected by fluctuations in currency exchange rates.
  We intend to expand into additional international markets and our inexperience in those markets
increases the risk that our international expansion efforts will not be successful.
  18




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##### Table of Contents




    
    Challenges caused by distance, language and cultural differences;
    
    Increased labor costs as a result of the existence or prevalence of collective
bargaining arrangements, prevailing compensation structures and other employment-related
matters;
    
    Legal, legislative and regulatory restrictions;
    
    Foreign exchange controls that might prevent us from repatriating cash earned in
countries outside the United States;
    
    Economic instability and export restrictions;
    
    Longer payment cycles in some countries;
    
    Potentially adverse tax consequences;
    
    Nationalization or seizure of private assets; and
    
    Higher costs associated with doing business internationally.
  19




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If we fail to secure adequate financing in the future, our continued growth and financial
performance will suffer.
  If we fail to manage our growth effectively by investing in the necessary infrastructure, the
quality of our products and services may suffer, negatively impacting our affiliate contracts.
  If we fail to expand into new markets, we may be unable to increase our revenue and expand our
profits in the future.
  20




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We may be liable for our traffic information which may expose us to significant unforeseen
litigation expenses.
  Aircraft operations involve risks that may not be covered by our insurance or may increase our
operating costs.
   21




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The loss of the services of our Chairman, Chief Executive Officer and President or other key
employees, or the failure to attract additional key individuals, would materially adversely affect
our business.
   Our broadcasts in Australia and Canada are subject to regulatory bodies whose rules and
regulations may adversely affect our business.
  22




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We will be required to implement additional finance and accounting systems, procedures and
controls in order to satisfy requirements under the Sarbanes-Oxley Act of 2002 , which will
increase our costs and divert managements time and attention.
   
 Item 1B. Unresolved Staff Comments
  23




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Item 2. Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Part II
 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters.
   2006
    
    High
    
    LowQuarter Ended March 31, 2006
    
    $
    6.00
    
    
    $
    5.20Quarter Ended June 30, 2006
    
    $
    6.28
    
    
    $
    4.90
  Dividends
  24




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Securities Authorized for Issuance under Equity Compensation Plans
  25




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Weighted-
    
    Number of SecuritiesNumber of Securities
    
    Average
    
    Remaining Availableto be Issued Upon
    
    Exercise Price
    
    for Future IssuanceExercise of
    
    of Outstanding
    
    Under EquityPlan category
    
    Outstanding Options
    
    Options
    
    Compensation PlansEquity compensation
plans approved by
security holders:2005 Stock Incentive Plan
    
    
    325,000
    
    
    $
    5.22
    
    
    
    875,000Total:
    
    
    325,000
    
    
    $
    5.22
    
    
    
    875,000Equity compensation
plans not approved by
stockholders:None
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
 Use of Proceeds
    
 Item 6. Selected Financial Data
  26




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In thousands except per share data
 2006
    
    2005
    
    2004
    
    2003
    
    2002(unaudited)Income statement
data for the year
ended June 30:Net revenues
    
    $
    19,502
    
    
    $
    15,380
    
    
    $
    11,154
    
    
    $
    5,709
    
    
    $
    3,482Operating expenses
    
    
    15,309
    
    
    
    8,708
    
    
    
    7,871
    
    
    
    2,369
    
    
    
    1,580Selling, general
and administrative
expenses
    
    
    6,415
    
    
    
    4,175
    
    
    
    2,750
    
    
    
    2,003
    
    
    
    1,344Depreciation and
amortization
    
    
    587
    
    
    
    282
    
    
    
    205
    
    
    
    117
    
    
    
    60Operating (loss)
income
    
    
    (2,809
    )
    
    
    2,215
    
    
    
    328
    
    
    
    1,220
    
    
    
    498Interest expense
    
    
    319
    
    
    
    99
    
    
    
    93
    
    
    
    23
    
    
    
    93Other (income)
expense
    
    
    (220
    )
    
    
    (18
    )
    
    
    29
    
    
    
    17
    
    
    
    69Net (loss) income
before taxes
    
    
    (2,908
    )
    
    
    2,134
    
    
    
    206
    
    
    
    1,180
    
    
    
    336Income tax expense
    
    
    88
    
    
    
    698
    
    
    
    74
    
    
    
    348
    
    
    
    105Net (loss) income
    
    
    (2,996
    )
    
    
    1,436
    
    
    
    132
    
    
    
    832
    
    
    
    231(Loss) income per
common share:Basic and diluted
    
    $
    (0.31
    )
    
    $
    0.17
    
    
    $
    0.02
    
    
    $
    0.10
    
    
    $
    0.03Cash dividends
declared
    
    
    233
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    
 27




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In thousands
 Balance sheet data at June 30:
 2006
    
    2005
    
    2004
    
    2003
    
    2002(unaudited)
    
    (unaudited)Cash and cash
equivalents
    
    $
    14,649
    
    
    $
    51
    
    
    $
    318
    
    
    $
    649
    
    
    $
    9Total assets
    
    
    24,288
    
    
    
    6,616
    
    
    
    3,848
    
    
    
    3,373
    
    
    
    1,529Long-term
obligations
    
    
    1,508
    
    
    
    1,911
    
    
    
    1,044
    
    
    
    808
    
    
    
    573Total liabilities
    
    
    8,680
    
    
    
    5,420
    
    
    
    3,535
    
    
    
    2,503
    
    
    
    1,447Stockholders equity
    
    
    15,608
    
    
    
    1,196
    
    
    
    313
    
    
    
    870
    
    
    
    82
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 EXECUTIVE OVERVIEW
   28




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The Services We Provide  Radio Traffic Reports, Radio News Reports and TV Reports.
  
    
    Radio traffic reports:Through our information-gathering infrastructure and the use of
external traffic information services, we provide daily scheduled customized traffic
reports to radio stations that contract to receive our services.
    
    Radio news reports:We have recently commenced building upon our radio traffic reports
platform to provide general news reports to radio stations that complement our customized
traffic reports.
    
    TV reports:In early 2005, we began providing regularly scheduled video traffic reports
to television stations. In addition, because our aircraft are often already in the air
covering traffic conditions, they are often first to arrive at the scene of a breaking news
story. In a strategic effort to expand our reach into the television markets, we have been
using this on-the-scene presence to compile video footage of such breaking news, which we
provide to television stations that receive our regularly scheduled TV reports in those
markets where we produce video.
 29




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Our Sources of Revenue  Sale of Commercial Airtime Inventory
   30




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Our Expenses
   31




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Basis of Presentation
  Australia
 Exchange
    
    BalanceIncome Statement Period
    
    Rate
    
    Sheet Date
    
    Exchange RateThree month period ended June 30, 2006
    
    
    0.7467
    
    
    June 30, 2006
    
    
    0.7423Three month period ended March 31, 2006
    
    
    0.7394Three month period ended December 31, 2005
    
    
    0.7437Three month period ended September 30, 2005
    
    
    0.7593Three month period ended June 30, 2005
    
    
    0.7691
    
    
    June 30, 2005
    
    
    0.7624Three month period ended March 31, 2005
    
    
    0.7781Three month period ended December 31, 2004
    
    
    0.7578Three month period ended September 30, 2004
    
    
    0.7099Three month period ended June 30, 2004
    
    
    0.7148Three month period ended March 31, 2004
    
    
    0.7656Three month period ended December 31, 2003
    
    
    0.7167Three month period ended September 30, 2003
    
    
    0.6589
 Canada
 Exchange
    
    BalanceIncome Statement Period
    
    Rate
    
    Sheet Date
    
    Exchange RateThree month period ended June 30, 2006
    
    
    0.8907
    
    
    June 30, 2006
    
    
    0.8958Three month period ended March 31, 2006
    
    
    0.8693Three month period ended December 31, 2005
    
    
    0.8521Three month period ended September 30, 2005
    
    
    0.8315
 32




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Seasonality of Business
  Results of Operations
 Year Ended June 30, 2006 Compared With Year Ended June 30, 2005
  Revenue.
 Operating expenses.
 33




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Calgary
    
    December 19, 2005Toronto
    
    January 16, 2006Hamilton
    
    January 30, 2006Vancouver
    
    February 13, 2006Montreal
    
    February 27, 2006Winnipeg
    
    March 2, 2006Edmonton
    
    April 12, 2006
  Selling, general and administrative expenses.
 34




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Depreciation and amortization expenses.
 Interest expense.
 Income tax expense.
 Net income (loss)
 35




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Changes in Key Operating Statistics in Local Currencies.
 Year
    
    Year
    
    PercentageEnded
    
    Ended
    
    IncreaseKey operating statistic
    
    June 30, 2006
    
    June 30, 2005
    
    (Decrease)(In thousands)
    
    (In thousands)Revenue
    
    $
    25,447
    
    
    $
    20,402
    
    
    
    24.7
    %Operating expenses
    
    
    17,943
    
    
    
    11,513
    
    
    
    55.8
    %Selling, general and administrative
expenses
    
    
    6,201
    
    
    
    5,363
    
    
    
    15.6
    %Depreciation and amortization expense
    
    
    711
    
    
    
    374
    
    
    
    90.1
    %Interest expense
    
    
    259
    
    
    
    132
    
    
    
    96.2
    %Other (income)
    
    
    (12
    )
    
    
    (24
    )
    
    
    (50.0
    %)Income tax expense
    
    
    122
    
    
    
    925
    
    
    
    (86.8
    %)Net income
    
    
    223
    
    
    
    2,119
    
    
    
    (89.5
    %)
 Fiscal Year Ended June 30, 2005 Compared to the Fiscal Year Ended June 30, 2004
 Revenue.
 Operating expenses.
 Selling, general and administrative expenses.
 36




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Depreciation and amortization expense.
 Interest expense.
 Income tax expense.
 Net income
 Changes in Key Operating Statistics in Local Currencies.
 37




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Fiscal Year
    
    Fiscal Year
    
    PercentageEnded
    
    Ended
    
    IncreaseKey operating statistic
    
    June 30, 2005
    
    June 30, 2004
    
    (Decrease)(In thousands)
    
    (In thousands)Revenue
    
    
    20,402
    
    
    
    15,622
    
    
    
    30.6
    %Operating expenses
    
    
    11,513
    
    
    
    11,024
    
    
    
    4.4
    %Selling, general and administrative
expenses
    
    
    5,363
    
    
    
    3,852
    
    
    
    39.2
    %Depreciation and amortization expense
    
    
    374
    
    
    
    287
    
    
    
    30.3
    %Interest expense
    
    
    132
    
    
    
    130
    
    
    
    1.5
    %Other (income) expense
    
    
    (24
    )
    
    
    41
    
    
    
    (158.5
    )%Income tax expense
    
    
    925
    
    
    
    104
    
    
    
    789.4
    %Net income
    
    
    2,119
    
    
    
    184
    
    
    
    1,151.6
    %
 Liquidity and Capital Resources
  Operating activities.
 Investing activities.
 Financing activities.
 38




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Income Taxes.
  Contractual Commitments
  Payments due by periodLessthan
    
    
    1-3
    
    
    4-5
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years(in thousands)Long-Term Debt Obligations
including shareholder note
    
    
    3,843
    
    
    
    2,557
    
    
    
    913
    
    
    
    373
    
    
    
    Interest on Long-Term Debt Obligations
    
    
    392
    
    
    
    265
    
    
    
    110
    
    
    
    17
    
    
    
    Operating Lease Obligations
    
    
    1,984
    
    
    
    463
    
    
    
    509
    
    
    
    488
    
    
    
    524Station Obligations
    
    
    12,850
    
    
    
    6,312
    
    
    
    6,538
    
    
    
    
    
    
    
    Total
    
    $
    19,069
    
    
    $
    9,597
    
    
    $
    8,070
    
    
    $
    878
    
    
    $
    524
 Related Party Transactions
  41




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Critical Accounting Policies
  42




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Revenue Recognition:
 Cash and cash equivalents
 Accounts Receivable:
 Income taxes:
 43




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Recent Accounting Pronouncements
  
 Item 7A. Qualitative and Quantitative Disclosures about Market Risk
  Interest Rate Risk
  44




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Foreign Currency Exchange Risk
  Accounts receivable
  Off-Balance Sheet Arrangements
  
 Item 8. Financial Statements and Supplementary Data
    45




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Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of disclosure controls and procedures
  Changes in internal control over financial reporting
  
 Item 9B. Other Information
  
 Part III
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  46




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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
  47




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Part IV
 
 Item 15. Exhibits and Financial Statement Schedules
 Documents filed as part of this Form 10-K:
 Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets at June 30, 2006 and 2005Consolidated Statements of Income for the years ended June 30, 2006, 2005 and 2004Consolidated Statements of Shareholders Equity for the period May 16, 2005 (inception) to June 30, 2005 and the year ended June 30, 2006Consolidated Statements of Cash Flows for the years ended June 30, 2006, 2005 and 2004Notes to Consolidated Financial Statements
 Financial Statement Schedule:
  Exhibits:
 Exhibit No.
    
    Description3.1
    
    Certificate of Incorporation of Global Traffic Network, Inc.**3.2
    
    Bylaws of Global Traffic Network, Inc.**4.1
    
    Form of Specimen Stock Certificate.**10.1
    
    Global Traffic Network, Inc. 2005 Stock Incentive Plan.**10.2
    
    Senior Note Purchase Agreement dated November 9, 2005 by and
between Canadian Traffic Network ULC and Metro Networks
Communications, Inc.**10.3
    
    Senior Secured Note dated November 9, 2005 by Canadian Traffic
Network ULC in favor of Metro Networks Communications, Inc.**10.4
    
    Security Agreement dated November 9, 2005 by and between
Canadian Traffic Network ULC and Metro Networks Communications,
Inc.**10.5
    
    Guaranty Agreement dated November 9, 2005 by and among Global
Traffic Network, Inc., Global Traffic Canada, Inc., The
Australia Traffic Network Pty Limited and Metro Networks
Communications, Inc.**10.6
    
    Mutual Sales Representation Agreement dated November 9, 2005 by
and between Metro Networks Communications, Limited Partnership
and Canadian Traffic Network ULC.**
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Exhibit No.
    
    Description10.7
    
    Traffic Data Agreement dated November 9, 2005 by and between
Metro Networks Communications, Limited Partnership and Canadian
Traffic Network ULC.**10.8
    
    Aircraft Traffic Report Supply Agreement dated October 21, 2005
by and between Canadian Traffic Network ULC and Corus
Entertainment Inc.**10.9
    
    Traffic Report Supply Agreement commencing July 1, 2006 by and
between The Australia Traffic Network Pty Limited and Austereo
Pty Limited.**10.10
    
    News Report Broadcasting Agreement dated July 1, 2005 by and
between The Australia Traffic Network Pty Limited and Austereo
Pty Limited.**10.11
    
    Securities Exchange Agreement dated December 13, 2005 by and
among Global Traffic Network, Inc., The Australia Traffic
Network Pty Limited, William L. Yde III, Dale C. Arfman, Thomas
M. Gilligan, Donald R. Bussell, Questcom Media Brokerage, Inc.
and Metro Networks Communications, Inc.**10.12
    
    Employment Agreement dated November 18, 2005 by and between
Global Traffic Network, Inc. and William L. Yde III.**10.13
    
    Employment Agreement dated November 18, 2005 by and between
Global Traffic Network, Inc. and Dale C. Arfman.**10.14
    
    Form of Global Traffic Network, Inc. Stock Option Agreement
(2005 Stock Incentive Plan  Employee Non-Qualified).**10.15
    
    Form of Global Traffic Network, Inc. Stock Option Agreement
(2005 Stock Incentive Plan  Director).**10.16
    
    Employment Agreement dated February 14, 2006 by and between
Global Traffic Network, Inc. and Scott E. Cody.**10.17
    
    Management Agreement dated August 1, 2002 by and between The
Australia Traffic Network Pty Limited and Wisconsin Information
Systems dba Milwaukee Traffic Network.**21.1
    
    Subsidiaries of Global Traffic Network, Inc.**31.1
    
    Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive
Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 **
    
    Incorporated by reference to the corresponding exhibit to the
Form S-l registration statement of the registrant (File No.
333-130417).
    
    Confidential treatment has been requested as to certain
portions of this exhibit pursuant to Rule 406 of the Securities
Act of 1933, as amended. 49




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##### Table of Contents



SIGNATURES
  GLOBAL TRAFFIC NETWORK, INC.Date: September 27, 2006
    
    By:
    
    /S/ Scott E. CodyScott E. CodyChief Financial Officer andChief Operating Officer
  Signature
    
    Title
    
    Date/S/ William L. Yde III
    
    Chairman of Board of Directors,
    
    September 27, 2006William L. Yde III
    
    President and Chief ExecutiveOfficer (Principal Executive Officer)/S/ Scott E. Cody
    
    Chief Financial Officer and
    
    September 27, 2006Scott E. Cody
    
    Chief Operating Officer(Principal Financial Officer andPrincipal Accounting Officer)/S/ Robert L. Johander
    
    Vice Chairman of the Board
    
    September 27, 2006Robert L. Johander
    
    of Directors/S/ Dale C. Arfman
    
    Director
    
    September 27, 2006Dale C. Arfman/S/ Gary O. Benson
    
    Director
    
    September 27, 2006Gary O. Benson/S/ Shane E. Coppola
    
    Director
    
    September 27, 2006Shane E. Coppola
 50




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##### Table of Contents



Global Traffic Network, Inc.
Index to Consolidated Financial Statements
And Financial Statement Schedule
 1. Consolidated Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets at June 30, 2006 and 2005
    
    
    F-2Consolidated Statements of Income for the years ended June 30, 2006, 2005 and 2004
    
    
    F-3Consolidated
Statements of Shareholders Equity for the years ended
June 30, 2006, 2005 and 2004
    
    
    F-4Consolidated Statements of Cash Flows for the years ended June 30, 2006, 2005 and 2004
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6
 2. Financial Statement Schedules:




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    BDO
   F-1




---



##### Table of Contents



GLOBAL TRAFFIC NETWORK, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
 June 30,
    
    
    June 30,2006
    
    
    2005ASSETS:Current Assets:Cash and cash equivalents
    
    $
    14,649
    
    
    $
    51Accounts receivable net of allowance for doubtful
accounts of $11 and $0 at June 30, 2006 and June 30,
2005
    
    
    4,715
    
    
    
    3,391Prepaids and other current assets
    
    
    350
    
    
    
    54Taxes receivable
    
    
    26
    
    
    
    Deferred tax assets
    
    
    134
    
    
    
    112Total current assets
    
    
    19,874
    
    
    
    3,608Property and equipment, net
    
    
    4,188
    
    
    
    2,724Intangibles
    
    
    29
    
    
    
    21Deferred offering costs
    
    
    
    
    
    
    83Deferred tax assets
    
    
    87
    
    
    
    73Other assets
    
    
    110
    
    
    
    107Total assets
    
    $
    24,288
    
    
    $
    6,616LIABILITIES AND SHAREHOLDERS EQUITY:Current Liabilities:Bank overdraft line of credit
    
    $
    611
    
    
    $
    184Accounts payable and accrued expenses
    
    
    3,872
    
    
    
    2,510Deferred revenue
    
    
    
    
    
    
    111Income taxes payable
    
    
    132
    
    
    
    383Due to related parties
    
    
    
    
    
    
    4Current portion of long term debt
    
    
    557
    
    
    
    295Current portion of shareholder notes payable
    
    
    2,000
    
    
    
    22Total current liabilities
    
    
    7,172
    
    
    
    3,509Bank overdraft line of credit
    
    
    
    
    
    
    1,097Long term debt, less current portion
    
    
    1,286
    
    
    
    639Other liabilities
    
    
    222
    
    
    
    175Total liabilities
    
    
    8,680
    
    
    
    5,420Common stock, $.001 par value; 100,000,000 shares
authorized; 12,870,000 shares issued and outstanding as
of June 30, 2006 and 8,500,000 shares issued and
outstanding as of June 30, 2005
    
    
    13
    
    
    
    4Preferred stock, $.001 par value; 10,000,000 authorized;
0 issued and outstanding as of June 30, 2006 and 2005
    
    
    
    
    
    
    Additional paid in capital
    
    
    18,169
    
    
    
    531Accumulated other comprehensive income
    
    
    314
    
    
    
    320(Accumulated deficit) retained earnings
    
    
    (2,888
    )
    
    
    341Total shareholders equity
    
    
    15,608
    
    
    
    1,196Total liabilities and shareholders equity
    
    $
    24,288
    
    
    $
    6,616
  F-2




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##### Table of Contents



GLOBAL TRAFFIC NETWORK, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except share and per share amounts)
 Year Ended June 30,2006
    
    
    2005
    
    
    2004Revenues
    
    $
    19,502
    
    
    $
    15,380
    
    
    $
    11,154Operating expenses
    
    
    15,309
    
    
    
    8,708
    
    
    
    7,871Selling, general and administrative expenses
    
    
    6,415
    
    
    
    4,175
    
    
    
    2,750Depreciation and amortization expense
    
    
    587
    
    
    
    282
    
    
    
    205Net operating (loss) income
    
    
    (2,809
    )
    
    
    2,215
    
    
    
    328Interest expense
    
    
    319
    
    
    
    99
    
    
    
    93Other (income) expense
    
    
    (220
    )
    
    
    (18
    )
    
    
    29Net (loss) income before income taxes
    
    
    (2,908
    )
    
    
    2,134
    
    
    
    206Income tax expense
    
    
    88
    
    
    
    698
    
    
    
    74Net (loss) income
    
    $
    (2,996
    )
    
    $
    1,436
    
    
    $
    132(Loss) income per common share:Basic and diluted
    
    $
    (0.31
    )
    
    $
    0.17
    
    
    $
    0.02Weighted average common shares outstanding:Basic and diluted
    
    
    9,621,260
    
    
    
    8,500,000
    
    
    
    8,500,000
  F-3




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##### Table of Contents



GLOBAL TRAFFIC NETWORK, INC.
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the years ended June 30, 2006, 2005 and 2004
(Amounts in thousands except share amounts)
 Retained
    
    
    AccumulatedCommon Stock
    
    
    Additional
    
    
    Earnings
    
    
    Other
    
    
    TotalPaid In
    
    
    (Accumulated
    
    
    Comprehensive
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    Income (Loss)
    
    

Income
(Loss)
    
    
    TotalBalance, June 30, 2003
    
    
    4,022,891
    
    
    $
    94
    
    
    $
    531
    
    
    $
    21
    
    
    $
    224
    
    
    
    
    
    
    $
    870Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132
    
    
    
    
    
    
    
    132
    
    
    
    132Shares repurchased and retired
    
    
    (13,029
    )
    
    
    (51
    )
    
    
    
    
    
    
    (693
    )
    
    
    
    
    
    
    
    
    
    
    (744
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    55
    
    
    
    55Comprehensive net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187Balance, June 30, 2004
    
    
    4,009,862
    
    
    
    43
    
    
    
    531
    
    
    
    (540
    )
    
    
    279
    
    
    
    
    
    
    
    313Shares repurchased and retired
    
    
    (9,862
    )
    
    
    (39
    )
    
    
    
    
    
    
    (555
    )
    
    
    
    
    
    
    
    
    
    
    (594
    )Shares issued
    
    
    4,500,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,436
    
    
    
    
    
    
    
    1,436
    
    
    
    1,436Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    41
    
    
    
    41Comprehensive net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,477
    
    
    
    Balance, June 30, 2005
    
    
    8,500,000
    
    
    
    4
    
    
    
    531
    
    
    
    341
    
    
    
    320
    
    
    
    
    
    
    
    1,196Share subscriptions received
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Issuance of
shareholder notes payable
    
    
    
    
    
    
    
    
    
    
    (1,400
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,400
    )Initial public offering of stock
    
    
    4,370,000
    
    
    
    5
    
    
    
    18,985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,990Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (233
    )
    
    
    
    
    
    
    
    
    
    
    (233
    )Stock option compensation
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,996
    )
    
    
    
    
    
    
    (2,996
    )
    
    
    (2,996
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
    
    
    (6
    )Comprehensive net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (3,002
    )
    
    
    Balance, June 30, 2006
    
    
    12,870,000
    
    
    $
    13
    
    
    $
    18,169
    
    
    $
    (2,888
    )
    
    $
    314
    
    
    
    
    
    
    $
    15,608
 See accompanying notes to
the consolidated financial statements F-4




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##### Table of Contents



GLOBAL TRAFFIC NETWORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
 Year ended June 30,2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net (loss) income
    
    $
    (2,996
    )
    
    $
    1,436
    
    
    $
    132Adjustments to reconcile net (loss) income to net cash
provided by operating activities:Depreciation and amortization
    
    
    587
    
    
    
    282
    
    
    
    205Allowance for doubtful accounts
    
    
    11
    
    
    
    
    
    
    
    Non-cash compensation expense
    
    
    53
    
    
    
    
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (1,335
    )
    
    
    (1,230
    )
    
    
    (950
    )Deferred taxes, net
    
    
    (36
    )
    
    
    (90
    )
    
    
    (51
    )Prepaid and other current assets and other assets
    
    
    (276
    )
    
    
    (5
    )
    
    
    186Accounts payable and accrued expenses and other liabilities
    
    
    1,451
    
    
    
    1,000
    
    
    
    799Deferred revenue
    
    
    (111
    )
    
    
    3
    
    
    
    8Income taxes payable
    
    
    (277
    )
    
    
    379
    
    
    
    (320
    )Net cash (used in) provided by operating activities
    
    
    (2,929
    )
    
    
    1,775
    
    
    
    9Cash flows from investing activities:Purchase of property and equipment
    
    
    (1,988
    )
    
    
    (534
    )
    
    
    (193
    )Intangibles
    
    
    (8
    )
    
    
    (7
    )
    
    
    Net cash used in investing activities
    
    
    (1,996
    )
    
    
    (541
    )
    
    
    (193
    )Cash flows from financing activities:Proceeds from issuance of long term debt
    
    
    
    
    
    
    
    
    
    
    577Repayment of long term debt
    
    
    (549
    )
    
    
    (181
    )
    
    
    (234
    )Net proceeds (repayments) of bank overdraft line of credit
    
    
    702
    
    
    
    (440
    )
    
    
    349Repayment of shareholder notes payable
    
    
    (22
    )
    
    
    (208
    )
    
    
    (107
    )Borrowings from shareholders
    
    
    2,000
    
    
    
    
    
    
    
    Dividends paid
    
    
    (275
    )
    
    
    (44
    )
    
    
    (39
    )Repayment of shareholder promissory notes
    
    
    (1,400
    )
    
    
    
    
    
    
    Deferred offering costs
    
    
    
    
    
    
    (83
    )
    
    
    Proceeds from issuance of stock
    
    
    4
    
    
    
    
    
    
    
    Proceeds from initial public offering of stock, net
    
    
    19,073
    
    
    
    
    
    
    
    Due (from) to related parties, net
    
    
    (4
    )
    
    
    8
    
    
    
    (4
    )Shares repurchased and retired
    
    
    
    
    
    
    (594
    )
    
    
    (744
    )Net cash provided by (used in) financing activities
    
    
    19,529
    
    
    
    (1,542
    )
    
    
    (202
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (6
    )
    
    
    41
    
    
    
    55Net increase (decrease) in cash and cash equivalents
    
    
    14,598
    
    
    
    (267
    )
    
    
    (331
    )Cash and cash equivalents at beginning of fiscal year
    
    
    51
    
    
    
    318
    
    
    
    649Cash and cash equivalents at end of fiscal year
    
    $
    14,649
    
    
    $
    51
    
    
    $
    318Supplemental disclosures of cash flow information:Cash paid during fiscal year for:Interest
    
    $
    274
    
    
    $
    129
    
    
    $
    143Income taxes
    
    $
    396
    
    
    $
    409
    
    
    $
    479Non-cash financing and investing activities:Property acquired under long-term debt
    
    $
    63
    
    
    $
    1,372
    
    
    $
    
  F-5




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##### Table of Contents



GLOBAL TRAFFIC NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share amounts)
 NOTE 1  Description of the Companys Business
  NOTE 2  Basis of Presentation
   NOTE 3  Summary of Significant Accounting Policies
 a) Use of Estimates
  b) Revenue recognition
  c) Operating expenses
  F-6




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##### Table of Contents



d) Station compensation and reimbursement
   June 30,
    
    June 30,2006
    
    2005Year 1
    
    $
    6,312
    
    
    $
    8,859Year 2
    
    
    5,655
    
    
    
    3,611Year 3
    
    
    883
    
    
    
    3,477Year 4
    
    
    
    
    
    
    Year 5
    
    
    
    
    
    
    Thereafter
    
    
    
    
    
    
    
  June 30,2006Year 1
    
    $
    10,712Year 2
    
    
    10,055Year 3
    
    
    883Year 4
    
    
    Year 5
    
    
    Thereafter
    
    
    
 e) Cash and cash equivalents
  F-7




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##### Table of Contents



f) Accounts Receivable
  Allowance for Doubtful Accounts
 Additions
    
    DeductionsBalance atbeginning of
    
    
    
    
    
    
    
    
    
    Balance at end ofperiod
    
    Expense
    
    Write-offs
    
    periodYear ended June 30, 2006
    
    $
    
    
    
    $
    63
    
    
    $
    (52
    )
    
    $
    11Year ended June 30, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Year ended June 30, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 g) Property and Equipment
  Recording, broadcasting and studio equipment
    
    5 yearsFurniture, and equipment and other
    
    5 yearsMotor
vehicles
    
    7 yearsHelicopters and fixed wing aircraft
    
    8 years
  h) Intangible assets
  i) Income taxes
  F-8




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##### Table of Contents



j) Per share data
  k) Fair value of financial instruments
  l) Foreign currency translation
  m) Recent Accounting Pronouncements
   F-9




---



##### Table of Contents



n) Concentration of Credit Risk
  o) Major Supplier
   p) Deferred offering costs
  NOTE 4  Related Party Transactions
     F-10




---



##### Table of Contents



NOTE 5  Property and Equipment, Net
  Year Ended
    
    
    Year EndedJune 30,
    
    
    June 30,2006
    
    
    2005Helicopters and fixed wing aircraft
    
    $
    3,588
    
    
    $
    2,169Recording, broadcasting and studio equipment
    
    
    1,304
    
    
    
    880Furniture and equipment and other
    
    
    666
    
    
    
    481Less: Accumulated depreciation and amortization
    
    
    1,370
    
    
    
    806Property and equipment, net
    
    $
    4,188
    
    
    $
    2,724Plant and equipment held as security under specific loans:
    
    $
    1,773
    
    
    $
    637
 NOTE 6  Accounts Payable and Accrued Expenses
  June 30,
    
    
    June 30,2006
    
    
    2005Trade payables
    
    $
    2,936
    
    
    $
    1,644Accrued payroll expenses
    
    
    640
    
    
    
    595Accrued expenses and other liabilities
    
    
    296
    
    
    
    226Dividends payable
    
    
    
    
    
    
    45Total
    
    $
    3,872
    
    
    $
    2,510
 F-11




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##### Table of Contents



NOTE 7  Long Term Debt
  June 30,
    
    
    June 30,2006
    
    
    2005Term loan with bank, bearing variable
interest rate of ANZ Mortgage Index rate plus .33%
(8.25% at June 30, 2006), monthly principal and
interest payments of $13 secured by all ATN
assets, matures on June 30, 2008
    
    $
    309
    
    
    $
    470Financial leases with financing company, bearing
fixed interest of 7.67% and 6.99%, monthly
principal and interest payments of $2 and $2,
secured by automobiles, matures August 25, 2010
and April 16, 2008
    
    
    108
    
    
    
    58Note payable to bank, bearing fixed interest of
8.43%, monthly principal and interest payments of
$12, secured by a Helicopter, matures November 6,
2008
    
    
    288
    
    
    
    406Notes payable to bank bearing fixed interest of
6.97%, Monthly principal and interest payments of
$27, secured by 2 helicopters, matures September
6, 2010
    
    
    1,138
    
    
    
    1,843
    
    
    
    934Less current portion
    
    
    557
    
    
    
    295Long term debt less current portion
    
    
    1,286
    
    
    
    639
   F-12




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##### Table of Contents



June 30,
    
    June 30,2006
    
    2005Year 1
    
    $
    557
    
    
    $
    479Year 2
    
    
    570
    
    
    
    542Year 3
    
    
    343
    
    
    
    567Year 4
    
    
    320
    
    
    
    332Year 5
    
    
    53
    
    
    
    295
 NOTE 8  Shareholder Notes Payable
      F-13




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##### Table of Contents



NOTE 9  Income Taxes
  Year
    
    
    
    
    
    
    
    
    
    Yearended
    
    
    
    
    
    
    
    
    
    endedJune 30,
    
    
    
    
    
    
    
    
    
    June 30,2006

    
    2005Domestic
    
    Foreign
    
    Total
    
    Domestic
    
    Foreign
    
    TotalIncome tax provision
    
    $
    
    
    
    $
    128
    
    
    $
    128
    
    
    $
    
    
    
    $
    788
    
    
    $
    788Current deferred tax
asset (liability), net
    
    
    78
    
    
    
    (22
    )
    
    
    56
    
    
    
    
    
    
    
    (62
    )
    
    
    (62
    )Non-current deferred tax
asset (liability), net
    
    
    24
    
    
    
    6
    
    
    
    30
    
    
    
    
    
    
    
    (28
    )
    
    
    (28
    )Tax carried forward losses
    
    
    235
    
    
    
    864
    
    
    
    1,099
    
    
    
    55
    
    
    
    
    
    
    
    55Less: Valuation allowance
    
    
    (337
    )
    
    
    (888
    )
    
    
    (1,225
    )
    
    
    (55
    )
    
    
    
    
    
    
    (55
    )Income tax expense
    
    $
    
    
    
    $
    88
    
    
    $
    88
    
    
    $
    
    
    
    $
    698
    
    
    $
    698
  Year ended
    
    
    Year endedJune 30,
    
    
    June 30,2006
    
    
    2005Deferred tax assets:Depreciation
    
    $
    43
    
    
    $
    21Deferred rent
    
    
    43
    
    
    
    37Capital losses
    
    
    4
    
    
    
    4Foreign tax credit
    
    
    132
    
    
    
    Stock option expense
    
    
    18
    
    
    
    Accrued expenses and other
    
    
    161
    
    
    
    134Tax carried forward losses
    
    
    1,154
    
    
    
    55Total deferred tax assets
    
    
    1,555
    
    
    
    251Deferred tax liabilitiesPrepaid expenses
    
    
    54
    
    
    
    11Total deferred tax liabilities
    
    
    54
    
    
    
    11Net deferred tax assets before valuation allowance
    
    
    1,501
    
    
    
    240Valuation allowance
    
    
    (1,280
    )
    
    
    (55
    )Net deferred tax assets
    
    
    221
    
    
    
    185
 F-14




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##### Table of Contents



Year ended
    
    Year ended
    
    Year endedJune 30,
    
    June 30,
    
    June 30,2006
    
    2005
    
    2004Income tax expense consists of
the following:Domestic
    
    $
    
    
    
    $
    
    
    
    $
    Foreign
    
    
    88
    
    
    
    698
    
    
    
    74Income tax expense
    
    $
    88
    
    
    $
    698
    
    
    $
    74
  Year ended
    
    Year ended
    
    Year endedJune 30,
    
    June 30,
    
    June 30,2006
    
    2005
    
    2004Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State taxes net of federal benefit
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Differences between
U.S. and foreign tax rates
    
    
    1.1
    
    
    
    (5.7
    )
    
    
    (4.9
    )Permanent differences between
book and tax income
    
    
    2.8
    
    
    
    0.6
    
    
    
    5.6Impact of valuation allowance
    
    
    (42.1
    )
    
    
    2.6
    
    
    
    Effective tax rate
    
    
    (3.0
    %)
    
    
    32.7
    %
    
    
    35.9
    %
  NOTE 10  Commitments and Contingencies
  June 30,
    
    June 30,2006
    
    2005Year 1
    
    $
    463
    
    
    $
    236Year 2
    
    
    253
    
    
    
    219Year 3
    
    
    256
    
    
    
    227Year 4
    
    
    265
    
    
    
    234Year 5
    
    
    223
    
    
    
    241Thereafter
    
    
    524
    
    
    
    591
 F-15




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##### Table of Contents



Vacation of premises prior to: September 8, 2006
    
    $
    115September 8, 2007
    
    $
    90September 8, 2008
    
    $
    66September 8, 2009
    
    $
    41September 8, 2010
    
    $
    16
  NOTE 11  Capital Stock
   NOTE 12  Stock based compensation
   F-16




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##### Table of Contents



June 30,2006Risk-free interest rate
    
    
    4.95-5.12
    %Volatility factor
    
    
    32.52
    %Dividend yield
    
    
    Option price
    
    $
    6.28-5.00Weighted average expected life of options
    
    6 yearsWeighted average grant date fair value
    
    $
    702
  WeightedAverageWeighted
    
    RemainingAverage Exercise
    
    Contractual
    
    Aggregate FairShares
    
    Price
    
    Term
    
    ValueBalance, June 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Grants
    
    
    375,000
    
    
    $
    5.19
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeitures/expirations
    
    
    (50,000
    )
    
    $
    5.00
    
    
    
    
    
    
    
    Balance, June 30, 2006
    
    
    325,000
    
    
    $
    5.22
    
    
    
    9.79
    years
    
    $
    702Exercisable, June 30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   F-17




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##### Table of Contents



NOTE 13  Warrant
  NOTE 14  Segment Reporting
  Australia
    
    Canada
    
    All Other
    
    TotalRevenues
    
    
    19,007
    
    
    
    495
    
    
    
    
    
    
    
    19,502Interest expense
    
    
    193
    
    
    
    126
    
    
    
    
    
    
    
    319Depreciation/amortization
    
    
    530
    
    
    
    57
    
    
    
    
    
    
    
    587Income tax expense
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    88Segment profit (loss)
    
    
    165
    
    
    
    (2,601
    )
    
    
    (560
    )
    
    
    (2,996
    )Segment assets
    
    
    8,037
    
    
    
    1,597
    
    
    
    14,654
    
    
    
    24,288Deferred tax assets, net
    
    
    221
    
    
    
    
    
    
    
    
    
    
    
    221Expenditure for segment assets
    
    
    1,023
    
    
    
    965
    
    
    
    
    
    
    
    1,988
 F-18




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##### Table of Contents



NOTE 15  Quarterly Results of Operations (unaudited)
 Fiscal 2006
 First
    
    Second
    
    Third
    
    Fourth
    
    For theQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    YearNet Revenues
    
    $
    4,181
    
    
    $
    5,155
    
    
    $
    4,537
    
    
    $
    5,629
    
    
    $
    19,502Operating (loss) income
    
    
    (673
    )
    
    
    81
    
    
    
    (1,105
    )
    
    
    (1,112
    )
    
    
    (2,809
    )Net loss
    
    
    (600
    )
    
    
    (102
    )
    
    
    (1,108
    )
    
    
    (1,186
    )
    
    
    (2,996
    )Net loss per share:Basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    (0.13
    )
    
    $
    (0.09
    )
    
    $
    (0.31
    )
 Fiscal 2005
 First
    
    Second
    
    Third
    
    Fourth
    
    For theQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    YearNet Revenues
    
    $
    3,605
    
    
    $
    4,237
    
    
    $
    3,715
    
    
    $
    3,823
    
    
    $
    15,380Operating income
    
    
    683
    
    
    
    1,066
    
    
    
    445
    
    
    
    21
    
    
    
    2,215Net income (loss)
    
    
    450
    
    
    
    730
    
    
    
    303
    
    
    
    (47
    )
    
    
    1,436Net income (loss) per share:Basic and diluted
    
    $
    0.05
    
    
    $
    0.09
    
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    0.17
 NOTE 16  Subsequent Events
    F-19




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant to
Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to
Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.32.1
    
    Certification of Chief Executive
Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.