##### Table of Contents



SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ  ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF
    1934
  For the Fiscal Year ended
    December 31, 2006
  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
    No. 0-29100
  eResearchTechnology,
    Inc.
    Delaware

22-3264604(State of Incorporation)

(I.R.S. Employer Identification No.)30 South 17th Street
    Philadelphia, PA

19103(Address of Principal Executive
    Offices)

(Zip Code)   (215) 972-0420
   Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Class

Name of Each Exchange on Which
    RegisteredCommon Stock, $.01 par value

The Nasdaq Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large
    accelerated filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o  Rule 12b-2 o þ
      Class

Outstanding at February 27,
    2007Common Stock, $.01 par value
    per share

58,476,951 shares   DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 



TABLE OF
    CONTENTS
  ItemNumberPART I1

Business

3General

3Product
    and Service Offerings

3Technology

5Research
    and Development

6Our
    Clients

6Sales
    and Marketing

6Partnerships

6Competition

7Government
    Regulation

7Potential
    Liability and Insurance

8Intellectual
    Property

8Employees

9Website

91A

Risk
    Factors

91B

Unresolved Staff
    Comments

172

Properties

173

Legal
    Proceedings

174

Submission of
    Matters to a Vote of Security Holders

17Special

Executive
    Officers of Registrant

17PART II5

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities

196

Selected
    Financial Data

207

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

21Cautionary
    Statement for Forward-Looking Information

21Overview

21Results
    of Operations

22Executive
    Overview

22Year
    Ended December 31, 2006 Compared to the Year Ended
    December 31, 2005

24Year
    Ended December 31, 2005 Compared to the Year Ended
    December 31, 2004

27Liquidity
    and Capital Resources

29Inflation

32Recent
    Pronouncements

32Critical
    Accounting Policies

327A

Quantitative and
    Qualitative Disclosures About Market Risk

34Interest
    Rate Risk

34Foreign
    Currency Risk

348

Financial
    Statements and Supplementary Data

359

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure

359A

Controls and
    Procedures

359B

Other
    Information

35PART III10

Directors,
    Executive Officers and Corporate Governance

3611

Executive
    Compensation

3612

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

3613

Certain
    Relationships and Related Transactions, and Director
    Independence

3614

Principal
    Accountant Fees and Services

36PART IV15

Exhibits and
    Financial Statement Schedules

37Signatures

40Index to
    Consolidated Financial Statements and Schedule

F-1Subsidiaries of RegistrantConsent of Independent Registered Public Accounting FirmCertification of CEO Under Section 302Certification of CFO Under Section 302Certification of Michael J. McKelvey Pursuant to 18 U.S.C. Section 1350Certification of Richard A. Baron Pursuant to 18 U.S.C. Section 1350   2




---



##### Table of Contents



PART I  ITEM 1.
    BUSINESS General  ®
  set-up,
   Product
    and Service Offerings  Product/Services

DescriptionEXPeRT®
    Cardiac Safety

Diagnostic tests are employed in
    clinical trials to measure the effect of the product on certain
    body organs and systems in order to determine the products
    safety. Cardiac Safety testing is a critical component of
    diagnostic testing. eRT provides a highly scalable set of
    Cardiac Safety products and services centered on our regulatory
    compliant (Title 21 CFR,
    Part 11) EXPeRT® Cardiac
    Safety Intelligent Data Management System.
    EXPeRT® provides
    for workflow enabled cardiac safety data collection,
    interpretation and distribution of electrocardiographic (ECG)
    data and images.
    EXPeRT® also
    enables analysis and cardiologist interpretation of ECGs
    performed on research subjects in connection with our
    clients clinical trials. The ECG provides an electronic
    map of the hearts rhythm and structure, and typically is
    performed in most clinical trials. This service permits
    assessments of the safety of therapies by documenting the
    occurrence of cardiac electrical change.EXPeRT®
    is designed specifically to address global regulatory guidance
    and technical standards for digital ECG processing to include
    digital collection, waveform measurements and annotations,
    review and output to the regulatory standard file format.
    EXPeRT® includes
    the ability for ECGs to be viewed as side-by-side ECG images for
    comparison, supplemented by the ability to review prior patient
    ECG tracings. 3




---



##### Table of Contents



EXPeRT® further
    enhances our ECG services by permitting cardiologists, with
    training in our ECG interpretation guidelines and proper
    security access, to perform telecardiology, which is the ability
    to access and evaluate ECGs electronically in remote locations.
    We also establish rules for standardized, semi-automated and
    automated workflow management, allowing audit trail accounting
    and generating safety and operational metrics reports for
    sponsors and investigators.We provide the following
    centralized ECG testing services as part of our
    EXPeRT® Cardiac
    Safety services:   Digital ECG
    Services. Allows the investigator to transmit, via modem,
    12-lead ECG data directly to us for interpretation and rapid
    return of results to the investigator and the sponsor. ECGs are
    measured by our cardiac safety specialists utilizing an on
    screen, high-resolution caliper placement system, and are then
    interpreted by a cardiologist. We also offer cardiac safety
    specialist and cardiologist adjudication of software algorithm
    placed measurements where appropriate and as desired by our
    clients.   Continuous Digital
    12-lead ECG Recording. The 12-lead ECG signals are recorded for
    up to 24 hours onto compact flash memory cards and
    submitted to us. From these recordings, 12-lead ECGs can be
    evaluated at specific time points. These ECGs are measured by a
    cardiac safety specialist and then interpreted by a
    cardiologist. Continuous digital 12- lead ECG recordings can
    also be used for studies assessing the incidence of arrhythmias,
    cardiac ischemia
    and/or heart
    rate variability findings.   Holter Recording.
    This is a 24- or
    48-hour
    continuous ECG recording of the hearts rhythm on a flash
    card or cassette tape that is reviewed by a cardiac safety
    specialist and then by a cardiologist. Holter data reported by
    us is provided for studies assessing the incidence of
    arrhythmias, cardiac ischemia
    and/or heart
    rate variability.   Paper ECG Services.
    Paper ECGs are measured by our cardiac safety specialists
    utilizing a high-resolution digitizing system, and are then
    interpreted by a cardiologist. Alternatively, paper ECGs may be
    scanned to a digital format, where appropriate.   FDA XML ECG Service.
    This service provides our clients with electronic versions of
    each ECG processed by
    EXPeRT®. The
    ECGs processed by
    EXPeRT® are
    rendered in a format compliant with the United States Food and
    Drug Administrations XML standard for digital ECGs.   The Digital ECG
    Community. This is a hosted solution, which delivers near real
    time Cardiac Safety feedback at the program, trial, center and
    patient level, along with related metrics, such as trial
    enrollment, as well as the ability to organize and publish a
    variety of study-specific information and the ability to link
    data points in reports direct to digital ECG waveforms.   Cardiac Safety
    Equipment. We provide ECG equipment to clients to perform the
    ECG and Holter recordings and give them the means to send such
    recordings to eRT. The service comprises equipment rental and
    sales, along with related supplies and freight.eClinical

The process of designing,
    implementing and managing a clinical trial requires a well
    defined process and set of supporting products to effectively
    handle the 4




---



##### Table of Contents



variety of tasks and information
    comprising a clinical trial. eRT provides a suite of products to
    address the capture, management and dissemination of clinical
    trial data. Our integrated suite is comprised of the following:   eResearch
    Communitytm(eRCtm) is an easy
    to use portal application enabling clinical trial researchers
    and staff to gain real-time access to study dashboards, progress
    reports, folders and forums enabling efficient management and
    communication of study progress.
    eRCtmalso
    includes a web-based training environment, eHealth
    Educationtm, which
    enables clinical research professionals to learn about
    technology developments, new products, clinical protocols, and
    other educational matters.   eData
    Entrytm(eDEtm) uses the
    latest technology to provide a comprehensive electronic data
    capture (EDC) system delivering rapid
    time-to-benefit
    for electronic trial initiatives.   eData
    Managementtmis a
    clinical data management application for collecting, cleaning
    and managing clinical trial data.   eSafety
    Nettmis an
    adverse event management system enabling the generation of key
    regulatory reports, including CIOMS and Medwatch.   eStudy
    Conducttmis a
    clinical trial management technology that can be used to set up
    clinical trials, establish standards, track study activities,
    plan resources, distribute supplies, manage the financial
    aspects of a trial and electronically view clinical trial data.Our eClinical solution is
    available for license over a renewable term (subscription
    license) in addition to a traditional perpetual license with
    annual maintenance. Our eClinical offerings may be hosted by
    eRT, by one of our third- party hosting partners, or installed
    on our clients computing infrastructure.Project Assurance/
     Implementation Assurance

We provide a full spectrum of
    consulting services for all of our products that augment the
    study management and implementation efforts of clients in
    support of their clinical research requirements. The
    methodologies (Project Assurance for Cardiac Safety and
    Implementation Assurance for eClinical Applications) provide a
    consistent framework through which we can effectively manage the
    delivery of all products and services. Such methodologies
    provide the standards, guidelines and services that allow us to
    effectively anticipate our clients needs and assure
    proactive communication and implementation in order to meet and
    exceed our clients goals. The services include study
    initiation, project management, education, site qualification,
    configuration, technology and regulatory review, research
    dashboards and electronic reporting, data management, uniform
    standards and standard operating procedures, and migration
    services. In addition, we provide
    on-site
    research and technology advisory services, support services
    including online and help desk support, and software
    maintenance.  Technology  ®
 5




---



##### Table of Contents



Research
    and Development    ® ® ® ®
  ® up-to-date
   Our
    Clients   Sales and
    Marketing       Partnerships   6




---



##### Table of Contents



Competition        
    client service;
    a significant base of reference clients;
    breadth and depth of solution, including the ability to
    accommodate both electronic forms and manual, paper-based
    research methods of data collection, management and analysis;
    product quality and performance;
    core technology and product features;
    ability to implement solutions;
    capacity;
    price;
    financial and organizational stability; and
    ability to adapt to changing regulatory guidance.   Government
    Regulation       7




---



##### Table of Contents



QT/QTc
   Potential
    Liability and Insurance   Intellectual
    Property   8




---



##### Table of Contents



®
  ®
 Employees       Website  Form 10-K, Form 10-Q, Form 8-K
 ITEM 1A. RISK
    FACTORS  Form 10-K.
  Our
    future operating results are uncertain and may fluctuate. If we
    fail to meet the expectations of securities analysts and
    investors, our stock price would likely decline.
    
    we generate a significant percentage of our revenues from a
    limited number of clients;
    our sales cycles can be lengthy and variable;
    Thorough QTc studies are typically of large volume and of short
    duration; and
    sponsors and CROs may unexpectedly cancel, postpone or reduce
    the size of clinical trials. 9




---



##### Table of Contents



We depend
    entirely on the clinical trial market and a downturn in this
    market could cause our revenues and profitability to
    decrease.
    Extensive
    governmental regulation of the clinical trial process could
    require costly modifications to our products, adversely affect
    prospective clients willingness to use our products and
    services and increase competition and reduce our market
    share.
     10




---



##### Table of Contents



The FDA
    may recommend a different approach to measure drug effects on
    the QT interval of an ECG which could make our systems and
    processes obsolete and adversely affect revenue and
    profitability.
  ®
  We have
    several large clients from whom we derive substantial revenue
    and therefore the loss of even a few of our clients could
    significantly reduce our revenues and profitability.
    Consolidation
    among our clients could cause us to lose clients, decrease the
    market for our products and result in a reduction of our
    revenues and profitability.
     11




---



##### Table of Contents



Our
    failure to expand our business or manage growth successfully
    could disrupt our business operations, increase our costs and
    delay implementation of our business strategies.
    Our
    failure to establish and maintain strategic alliances may delay
    the development of our products and services, cause us to lose
    clients and prevent us from growing our business, any of which
    could also cause our stock price to decline.
    We may
    not be successful in competing against others providing similar
    products and services, which could reduce our revenues,
    profitability and market share.
    We may
    incur liability as a result of providing Cardiac Safety analysis
    and interpretation services.
   12




---



##### Table of Contents



The
    cardiac safety equipment that we own and lease could become
    obsolete due to technological advances or we may not be able to
    provide the quantity of equipment needed to service our
    clients.
    Capacity
    constraint or system failures could result in the loss of or
    liability to clients, which could reduce our revenues, increase
    our expenses and reduce profitability.
      
    software or hardware malfunctions that interrupt operation of
    our applications or cause loss of data integrity;
    power loss or telecommunications failures;
    overloaded systems;
    human error; and
    natural disasters.    Our
    software products are complex and may contain undetected
    software errors, which could lead to an increase in our costs or
    a reduction in our revenues and profitability.
    
    cause sales of our solutions to decrease and our revenues and
    profitability to decline;
    cause us to incur significant warranty and repair costs;
    divert the attention of our technical personnel away from
    product development efforts; and
    cause significant client relations problems.   13




---



##### Table of Contents



Rapidly
    changing technology may impair our ability to develop and market
    our solutions and cause us to become less competitive.
      
    rapid technological change;
    changing client needs;
    frequent new product introductions; and
    evolving industry standards.    If
    clinical trial sponsors and CROs do not shift from their
    existing paper-based methods of collecting and managing clinical
    trial data at investigator sites to an electronic system with
    centralization, we may not achieve the market penetration
    necessary to grow the business at expected levels.
    If
    general economic conditions worsen, potential clients may be
    unwilling to make large capital software purchases or
    commitments, which could affect our ability to maintain
    and/or
    increase license revenues and overall profitability.
   14




---



##### Table of Contents



We depend
    on certain key executives. If we lose the services of any of
    these executives, our operations could be disrupted, we could
    incur additional expenses and our ability to expand our
    operations could be impeded, particularly if we are not able to
    recruit a suitable replacement in a timely manner.
    If we are
    unable to protect our proprietary technology or maintain our
    technological advantages, we may lose our intellectual property
    rights and become less competitive.
  ® continuation-in-part ® ®
  Third
    parties may claim that we infringe upon their intellectual
    property rights, which could result in the loss of our rights,
    subject us to liability and divert management
    attention.
      
    stop using the challenged intellectual property or selling our
    products or services that incorporate it;
    obtain a license to use the challenged intellectual property or
    to sell products or services that incorporate it, which could be
    costly or unavailable; and
    redesign those products or services that are based on or
    incorporate the challenged intellectual property, which could be
    costly and time consuming or could adversely affect the
    functionality and market acceptance of our products.   15




---



##### Table of Contents



Third
    parties have made claims for damages against the Company and may
    continue to do so, which could result in an unfavorable
    settlement or judgment against us.
    Our
    international operations expose us to additional
    risks.
    
    government regulations;
    trade restrictions;
    burdensome foreign taxes;
    exchange rate controls and currency exchange rate fluctuations;
    political and economic instability;
    varying technology standards; and
    difficulties in staffing and managing foreign operations.        In the
    event we are unable to satisfy regulatory requirements relating
    to internal control over financial reporting, or if these
    internal controls are not effective, our business and financial
    results may suffer.
   16




---



##### Table of Contents



ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    ITEM 3.
    LEGAL
    PROCEEDINGS  predecessor-in-interest
  ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS  Form 10-K.
 SPECIAL
    ITEM. EXECUTIVE OFFICERS OF REGISTRANT    Name

Age

PositionMichael J. McKelvey


54


President, Chief Executive Officer
    and DirectorJoel Morganroth, MD


61


Chairman of the Board of Directors
    and Chief Scientific OfficerRichard A. Baron


51


Executive Vice President, Chief
    Financial Officer and SecretaryThomas P. Devine


54


Executive Vice President and Chief
    Development OfficerAmy Furlong


34


Executive Vice President, Cardiac
    SafetyJeffrey S. Litwin, MD


49


Executive Vice President and Chief
    Medical OfficerJohn M. Blakeley


39


Senior Vice President,
    International Operations and SalesRobert S. Brown


51


Senior Vice President, Strategic
    Marketing, Planning & PartnershipsGeorge Tiger


47


Senior Vice President, Americas
    Sales  17




---



##### Table of Contents



18




---



##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    Calendar Period

High


Low2005First Quarter

$
16.80


$
10.01Second Quarter


13.92



10.11Third Quarter


16.25



12.86Fourth Quarter


16.23



12.762006First Quarter

$
18.54


$
13.59Second Quarter


14.99



8.11Third Quarter


9.46



6.83Fourth Quarter


8.67



5.88       Stockholder
    Return Performance Graph
    
 19




---



##### Table of Contents



Form 10-K
  ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K.
  Consolidated
    Statements of Operations Data (in thousands, except per share
    data)
  Year Ended December 31,2002


2003


2004


2005


2006Net revenues:Licenses

$
2,119


$
5,738


$
9,803


$
6,063


$
3,017Services


31,344



46,791



76,340



59,712



55,309Site support


8,063



14,313



23,250



21,072



28,042Total net revenues


41,526



66,842



109,393



86,847



86,368Costs of revenues:Cost of licenses


896



658



664



436



286Cost of services


12,816



17,473



24,124



24,337



25,431Cost of site support


4,301



6,610



11,486



13,965



18,821Total costs of revenues


18,013



24,741



36,274



38,738



44,538Gross margin


23,513



42,101



73,119



48,109



41,830Operating expenses:Selling and marketing


6,719



7,763



9,391



9,122



11,051General and administrative


5,695



6,804



10,276



11,458



14,668Research and development


4,256



4,564



4,090



4,093



4,146Total operating expenses


16,670



19,131



23,757



24,673



29,865Operating income


6,843



22,970



49,362



23,436



11,965Other income, net


868



310



863



936



1,250Gain on sale of domestic CRO
    operation


35















Income before income taxes


7,746



23,280



50,225



24,372



13,215Income tax provision


1,596



8,817



20,501



9,007



4,905Net income

$
6,150


$
14,463


$
29,724


$
15,365


$
8,310Basic net income per share

$
0.13


$
0.29


$
0.58


$
0.31


$
0.17Diluted net income per share

$
0.12


$
0.27


$
0.54


$
0.29


$
0.16  20




---



##### Table of Contents



Consolidated
    Balance Sheet Data (in thousands)
  December 31,2002


2003


2004


2005


2006Cash, cash equivalents and
    short-term investments

$
26,750


$
51,922


$
64,964


$
52,001


$
56,913Working capital


24,693



45,777



53,492



45,795



61,320Total assets


53,392



91,978



116,895



104,766



115,064Treasury stock


(3,229
)


(3,390
)


(31,555
)


(56,387
)


(62,190
)Total stockholders equity


40,580



69,259



86,854



79,973



93,622   ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS Cautionary
    Statement for Forward-Looking Information  Form 10-K. Form 10-K.
 Overview  ®
  set-up,
   21




---



##### Table of Contents



Results
    of Operations Executive
    Overview       22




---



##### Table of Contents



®
  year-to-year
    Year Ended December 31,2004


2005


2006Net revenues:Licenses


9.0
%


7.0
%


3.5
%Services


69.8



68.8



64.0Site support


21.2



24.2



32.5Total net revenues


100.0



100.0



100.0Costs of revenues:Cost of licenses


0.6



0.5



0.3Cost of services


22.1



28.0



29.5Cost of site support


10.5



16.1



21.8Total costs of revenues


33.2



44.6



51.6Gross margin


66.8



55.4



48.4Operating expenses:Selling and marketing


8.6



10.5



12.7General and administrative


9.4



13.2



17.0Research and development


3.7



4.7



4.8Total operating expenses


21.7



28.4



34.5Operating income


45.1



27.0



13.9Other income, net


0.8



1.1



1.4Income before income taxes


45.9



28.1



15.3Income tax provision


18.7



10.4



5.7Net income


27.2
%


17.7
%


9.6
%  23




---



##### Table of Contents



Year
    Ended December 31, 2006 Compared to the Year Ended
    December 31, 2005    Year Ended December 31,2005


2006


Increase (Decrease)Licenses:Net revenues

$
6,063


$
3,017


$
(3,046
)


(50.2
%)Costs of revenues


436



286



(150
)


(34.4
%)Gross margin

$
5,627


$
2,731


$
(2,896
)


(51.5
%)Services:Cardiac SafetyNet revenues

$
52,533


$
48,139


$
(4,394
)


(8.4
%)Costs of revenues


21,420



22,478



1,058



4.9
%Gross margin

$
31,113


$
25,661


$
(5,452
)


(17.5
%)Technology consulting and trainingNet revenues

$
2,429


$
3,184


$
755



31.1
%Costs of revenues


1,874



1,939



65



3.5
%Gross margin

$
555


$
1,245


$
690



124.3
%Software maintenanceNet revenues

$
4,750


$
3,986


$
(764
)


(16.1
%)Costs of revenues


1,043



1,014



(29
)


(2.8
%)Gross margin

$
3,707


$
2,972


$
(735
)


(19.8
%)Total servicesNet revenues

$
59,712


$
55,309


$
(4,403
)


(7.4
%)Costs of revenues


24,337



25,431



1,094



4.5
%Gross margin

$
35,375


$
29,878


$
(5,497
)


(15.5
%)Site support:Net revenues

$
21,072


$
28,042


$
6,970



33.1
%Costs of revenues


13,965



18,821



4,856



34.8
%Gross margin

$
7,107


$
9,221


$
2,114



29.7
%TotalNet revenues

$
86,847


$
86,368


$
(479
)


(0.6
%)Costs of revenues


38,738



44,538



5,800



15.0
%Gross margin


48,109



41,830



(6,279
)


(13.1
%)Operating expenses:Selling and marketing


9,122



11,051



1,929



21.1
%General and administrative


11,458



14,668



3,210



28.0
%Research and development


4,093



4,146



53



1.3
%Total operating expenses


24,673



29,865



5,192



21.0
%Operating income


23,436



11,965



(11,471
)


(48.9
%)Other income, net


936



1,250



314



33.5
%Income before income taxes


24,372



13,215



(11,157
)


(45.8
%)Income tax provision


9,007



4,905



(4,102
)


(45.5
%)Net income

$
15,365


$
8,310


$
(7,055
)


(45.9
%)  24




---



##### Table of Contents



Year Ended December 31,


Increase2005


2006


(Decrease)Cost of licenses


7.2
%


9.5
%


2.3
%Cost of services:Cardiac Safety


40.8
%


46.7
%


5.9
%Technology consulting and training


77.2
%


60.9
%


(16.3
%)Software maintenance


22.0
%


25.4
%


3.4
%Total cost of services


40.8
%


46.0
%


5.2
%Cost of site support


66.3
%


67.1
%


0.8
%Total costs of revenues


44.6
%


51.6
%


7.0
%Operating expenses:Selling and marketing


10.5
%


12.7
%


2.2
%General and administrative


13.2
%


17.0
%


3.8
%Research and development


4.7
%


4.8
%


0.1
%       set-up
         25




---



##### Table of Contents



®
             26




---



##### Table of Contents



Year
    Ended December 31, 2005 Compared to the Year Ended
    December 31, 2004    Year Ended December 31,2004


2005


Increase (Decrease)Licenses:Net revenues

$
9,803


$
6,063


$
(3,740
)


(38.2
%)Costs of revenues


664



436



(228
)


(34.3
%)Gross margin

$
9,139


$
5,627


$
(3,512
)


(38.4
%)Services:Cardiac SafetyNet revenues

$
68,270


$
52,533


$
(15,737
)


(23.1
%)Costs of revenues


20,316



21,420



1,104



5.4
%Gross margin

$
47,954


$
31,113


$
(16,841
)


(35.1
%)Technology consulting and trainingNet revenues

$
3,628


$
2,429


$
(1,199
)


(33.0
%)Costs of revenues


2,692



1,874



(818
)


(30.4
%)Gross margin

$
936


$
555


$
(381
)


(40.7
%)Software maintenanceNet revenues

$
4,442


$
4,750


$
308



6.9
%Costs of revenues


1,116



1,043



(73
)


(6.5
%)Gross margin

$
3,326


$
3,707


$
381



11.5
%Total servicesNet revenues

$
76,340


$
59,712


$
(16,628
)


(21.8
%)Costs of revenues


24,124



24,337



213



0.9
%Gross margin

$
52,216


$
35,375


$
(16,841
)


(32.3
%)Site support:Net revenues

$
23,250


$
21,072


$
(2,178
)


(9.4
%)Costs of revenues


11,486



13,965



2,479



21.6
%Gross margin

$
11,764


$
7,107


$
(4,657
)


(39.6
%)TotalNet revenues

$
109,393


$
86,847


$
(22,546
)


(20.6
%)Costs of revenues


36,274



38,738



2,464



6.8
%Gross margin


73,119



48,109



(25,010
)


(34.2
%)Operating expenses:Selling and marketing


9,391



9,122



(269
)


(2.9
%)General and administrative


10,276



11,458



1,182



11.5
%Research and development


4,090



4,093



3



0.1
%Total operating expenses


23,757



24,673



916



3.9
%Operating income


49,362



23,436



(25,926
)


(52.5
%)Other income, net


863



936



73



8.5
%Income before income taxes


50,225



24,372



(25,853
)


(51.5
%)Income tax provision


20,501



9,007



(11,494
)


(56.1
%)Net income

$
29,724


$
15,365


$
(14,359
)


(48.3
%)  27




---



##### Table of Contents



Year Ended December 31,


Increase2004


2005


(Decrease)Cost of licenses


6.8
%


7.2
%


0.4
%Cost of services:Cardiac Safety


29.8
%


40.8
%


11.0
%Technology consulting and training


74.2
%


77.2
%


3.0
%Software maintenance


25.1
%


22.0
%


(3.1
%)Total cost of services


31.6
%


40.8
%


9.2
%Cost of site support


49.4
%


66.3
%


16.9
%Total costs of revenues


33.2
%


44.6
%


11.4
%Operating expenses:Selling and marketing


8.6
%


10.5
%


1.9
%General and administrative


9.4
%


13.2
%


3.8
%Research and development


3.7
%


4.7
%


1.0
%                28




---



##### Table of Contents



Liquidity
    and Capital Resources   29




---



##### Table of Contents



® 98-1, ® ® ® ® ® ®
  ® ® ® ® ® ® ®
   30




---



##### Table of Contents



Related


TotalLabor and


Direct Costs


Capitalized


Monthly


AccumulatedAmortization Period

Consulting


of Materials


Costs


Amortization


AmortizationEXPeRT®Initial costs

August 2002-July 2006

$
2,618


$
1,413


$
4,031


$



$
4,031Additional costs

April 2003-July 2006


1,003



50



1,053







1,053Additional enhancements

October 2005-September 2007


463







463



20



288Semi-automated ECG processing
    softwareInitial costs

February 2004-January 2008


449



361



810



17



591Enhancements

October 2004-September 2008


380







380



8



214Additional enhancements

April 2005-March 2009


376







376



8



165EXPeRT®
    2

January 2007-December 2011


9,412



1,139



10,551







Data warehouse

January 2007-December 2011


722







722







Total



$
15,423


$
2,963


$
18,386


$
53


$
6,342            31




---



##### Table of Contents



Payments due by periodLess than


1-3


3-5


More thanContractual Obligations

Total


1 year


years


years


5 yearsCapital lease obligations

$
41


$
41


$



$



$
Operating leases


12,085



5,150



4,348



1,982



605Total

$
12,126


$
5,191


$
4,348


$
1,982


$
605  Inflation   Recent
    Pronouncements         Critical
    Accounting Policies     32




---



##### Table of Contents



Revenue
    Recognition
    SOP 97-2, SOP 98-9, SOP 97-2,
        Accounting
    for Income Taxes
     33




---



##### Table of Contents



Depreciation
    and Amortization of Long-lived Assets
    Stock-Based
    Compensation
    page F-1 Form 10-K,
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   Interest
    Rate Risk   Foreign
    Currency Risk  year-to-year
   34




---



##### Table of Contents



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  Conclusions
    regarding disclosure controls and procedures
  Rule 13a-15(e) Rule 13a-15,
  Managements
    annual report on internal control over financial
    reporting
  page F-2.
  Report of
    the independent registered public accounting firm
  page F-3.
  Changes
    in internal control over financial reporting
  Rule 13a-15
  ITEM 9B.
    OTHER
    INFORMATION   35




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Form 10-K.
  ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   36




---



##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Form 10-K:
  1.
    The consolidated financial statements of eResearchTechnology,
    Inc. (the Company) filed as a part of this
    Form 10-K
    are listed on the attached Index to Consolidated Financial
    Statements and Financial Statement Schedule at F-1.2.
    The financial statement schedule of the Company filed as a part
    of this
    Form 10-K
    is listed in the attached Index to Consolidated Financial
    Statements and Financial Statement Schedule at F-1.3.
    Exhibits.  3
.1

Restated Certificate of
    Incorporation, as amended.(9)3
.2

Bylaws.(1)3
.3

Amendment to Bylaws.(2)3
.4

Certificate of Merger between the
    Company and eRT Operating Company.(6)4
.1

Form of Stock Certificate.(6)10
.1

Registration Rights Agreement
    dated August 27, 1999.(3)10
.3

2003 Stock Option Plan, as
    amended.(13)*10
.7

1996 Stock Option Plan, as
    amended.(6)*10
.9

2005 Bonus Plan.(10)*10
.10

2005 Amended Bonus Plan.(11)*10
.11

2006 Bonus Plan.(12)*10
.23

Sublease Agreement between the
    Company and Raytheon Engineers & Constructors, Inc.(2)10
.25

Amendment to the Sublease
    Agreement between the Company and 17th Ludlow Property,
    L.L.C.(7)10
.26

Amendment to the Sublease
    Agreement between the Company and 17th Ludlow Property,
    L.L.C.(8)10
.30

Promissory Note to Wachovia Bank,
    National Association.(14)10
.31

Loan Agreement with Wachovia Bank,
    National Association.(14)10
.40

Management Employment Agreement
    effective February 7, 2006 between Joseph Esposito and the
    Company.(12)*10
.41

Amendment to Management Employment
    Agreement effective August 16, 2004 between Dr. Joel
    Morganroth and the Company.(9)* 37




---



##### Table of Contents



10
.42

Amendment to Management Consulting
    Agreement effective January 1, 2005 between Dr. Joel
    Morganroth and the Company.(10)*10
.44

Management Employment Agreement
    effective August 20, 2004 between Dr. Jeffrey Litwin
    and the Company.(9)*10
.45

Management Employment Agreement
    effective August 20, 2004 between Vincent Renz and the
    Company.(9)*10
.46

Management Employment Agreement
    effective August 20, 2004 between Scott Grisanti and the
    Company.(9)*10
.47

Amendment to Management Consulting
    Agreement effective January 1, 2006 between Dr. Joel
    Morganroth and the Company.(12)*10
.48

Management Employment Agreement
    effective June 23, 2006 between Michael J. McKelvey and the
    Company.(13)*10
.49

Management Employment Agreement
    effective May 17, 2006 between Richard A. Baron and the
    Company.(13)*10
.50

Amendment to Management Employment
    Agreement effective June 12, 2006 between Richard A. Baron
    and the Company.(13)*10
.52

Lease Agreement dated
    August 18, 2000 between Advance/GLD 2 L.L.C. and the
    Company.(4)10
.54

Lease Agreement dated
    September 28, 2004 between Royal and Sun Alliance Insurance
    PLC and the Companys subsidiary, eResearchTechnology
    Limited.(10)10
.56

Management Employment Agreement
    effective May 21, 2001 between Dr. Joel Morganroth and
    the Company.(5)*10
.57

Management Consulting Agreement
    effective May 21, 2001 between Dr. Joel Morganroth and
    the Company.(5)*10
.59

Attornment Agreement between
    17th Ludlow Property, L.L.C. and the Company.(6)21
.1

Subsidiaries of the Registrant.23
.1

Consent of KPMG LLP.31
.1

Certification of Chief Executive
    Officer.31
.2

Certification of Chief Financial
    Officer.32
.1

Statement of Chief Executive
    Officer Pursuant to Section 1350 of Title 18 of the
    United States Code.32
.2

Statement of Chief Financial
    Officer Pursuant to Section 1350 of Title 18 of the
    United States Code.   *
    
    Management contract or compensatory plan or arrangement.(1)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys Registration
    Statement on
    Form S-1,
    File
    No. 333-17001,
    declared effective by the Securities and Exchange Commission on
    February 3, 1997. 38




---



##### Table of Contents



(2)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-K
    on March 31, 1999.(3)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 8-K
    on September 9, 1999.(4)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on November 13, 2000.(5)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on August 10, 2001.(6)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-K
    on March 12, 2002.(7)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on November 7, 2003.(8)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on May 3, 2004.(9)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on November 4, 2004.(10)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-K
    on March 11, 2005.(11)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on November 3, 2005.(12)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-K
    on March 10, 2006.(13)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on August 4, 2006.(14)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on November 9, 2006. 39




---



##### Table of Contents



SIGNATURES    eResearchTechnology, Inc.
  By:
    Michael J.
    McKelvey   President and Chief Executive Officer, Director
    Signature

Title

DateMichael
    J. McKelveyMichael
    J. McKelvey

President and Chief Executive
    Officer, Director (Principal executive officer)

March 9, 2007Joel
    Morganroth, MDJoel
    Morganroth, MD

Chairman of the Board of Directors

March 9, 2007Richard
    A. BaronRichard
    A. Baron

Executive Vice President, Chief
    Financial Officer and Secretary (Principal financial and
    accounting officer)

March 9, 2007Sheldon
    M. BonovitzSheldon
    M. Bonovitz

Director

March 9, 2007Gerald
    A. Faich, MD, MPHGerald
    A. Faich, MD, MPH

Director

March 9, 2007David
    D. GathmanDavid
    D. Gathman

Director

March 9, 2007Elam
    M. HitchnerElam
    M. Hitchner

Director

March 9, 2007John
    H. ParkJohn
    H. Park

Director

March 9, 2007Stephen
    S. PhillipsStephen
    S. Phillips

Director

March 9, 2007Stephen
    M. ScheppmannStephen
    M. Scheppmann

Director

March 9, 2007  40




---



##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
    SCHEDULE  Report of
    Management


F-2Reports of
    Independent Registered Public Accounting Firm


F-3Consolidated
    Balance Sheets


F-5Consolidated
    Statements of Operations


F-6Consolidated
    Statements of Stockholders Equity and Comprehensive
    Income


F-7Consolidated
    Statements of Cash Flows


F-8Notes to
    Consolidated Financial Statements


F-9Financial Statement Schedule:II. Valuation and
    Qualifying Accounts


F-26  F-1




---



##### Table of Contents



Report of
    Management  Managements
    Report on Financial Statements
    Managements
    Report on Internal Control Over Financial Reporting
      
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect our transactions and
    dispositions of our assets;
    provide reasonable assurance that our transactions are recorded
    as necessary to permit preparation of our consolidated financial
    statements in accordance with accounting principles generally
    accepted in the United States of America, and that our receipts
    and expenditures are being made only in accordance with
    authorizations of our management and our directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use, or disposition of
    our assets that could have a material effect on the consolidated
    financial statements.    Internal Control  Integrated
    Framework
  Audit
    Committee Oversight
  Form 10-K.
 F-2




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm     Internal Control  Integrated Framework
        Internal Control  Integrated Framework Internal Control  Integrated Framework
    
    F-3




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
           Share-Based Payment.
  Internal Control 
    Integrated Framework
  
    F-4




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Consolidated Balance Sheets
    (In thousands, except share and per share amounts)  December 31,2005


2006AssetsCurrent Assets:Cash and cash equivalents

$
18,432


$
15,497Short-term investments


33,569



41,416Accounts receivable, net


15,178



17,866Prepaid income taxes


27



2,819Prepaid expenses and other


2,501



2,761Deferred income taxes


841



912Total current assets


70,548



81,271Property and equipment, net


28,670



31,129Goodwill


1,212



1,212Long-term investments


3,008



928Deferred income taxes


335



Other assets


993



524Total assets

$
104,766


$
115,064Liabilities and
    Stockholders EquityCurrent Liabilities:Accounts payable

$
2,332


$
4,360Accrued expenses


5,155



3,445Income taxes payable


1,041



781Current portion of capital lease
    obligations


153



40Deferred revenues


16,072



11,325Total current liabilities


24,753



19,951Capital lease obligations,
    excluding current portion


40



Deferred income taxes






1,491Total liabilities


24,793



21,442Commitments and contingencies
    (Note 10)Stockholders Equity:Preferred stock 
    $10.00 par value, 500,000 shares authorized,
    none issued and outstanding






Common stock 
    $.01 par value, 175,000,000 shares authorized,
    56,871,010 and 58,356,546 shares issued, respectively


569



584Additional paid-in capital


73,290



83,493Accumulated other comprehensive
    income


586



1,510Retained earnings


61,915



70,225Treasury stock, 7,847,119 and
    8,247,119 shares at cost, respectively


(56,387
)


(62,190
)Total stockholders equity


79,973



93,622Total liabilities and
    stockholders equity

$
104,766


$
115,064    F-5




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Consolidated Statements of Operations
    (In thousands, except per share amounts)  Year Ended December 31,2004


2005


2006Net revenues:Licenses

$
9,803


$
6,063


$
3,017Services


76,340



59,712



55,309Site support


23,250



21,072



28,042Total net revenues


109,393



86,847



86,368Costs of revenues:Cost of licenses


664



436



286Cost of services


24,124



24,337



25,431Cost of site support


11,486



13,965



18,821Total costs of revenues


36,274



38,738



44,538Gross margin


73,119



48,109



41,830Operating expenses:Selling and marketing


9,391



9,122



11,051General and administrative


10,276



11,458



14,668Research and development


4,090



4,093



4,146Total operating expenses


23,757



24,673



29,865Operating income


49,362



23,436



11,965Other income, net


863



936



1,250Income before income taxes


50,225



24,372



13,215Income tax provision


20,501



9,007



4,905Net income

$
29,724


$
15,365


$
8,310Basic net income per share

$
0.58


$
0.31


$
0.17Diluted net income per share

$
0.54


$
0.29


$
0.16Shares used to calculate basic net
    income per share


51,375



50,114



49,474Shares used to calculate diluted
    net income per share


55,133



52,905



51,485    F-6




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Consolidated Statements of Stockholders Equity and
    Comprehensive Income
    (In thousands, except share amounts)  AccumulatedAdditional


OtherCommon Stock


Paid-in


Comprehensive


Retained


TreasuryShares


Amount


Capital


Income


Earnings


Stock


TotalBalance, January 1, 2004


54,735,914


$
547


$
54,238


$
1,038


$
16,826


$
(3,390
)

$
69,259Comprehensive incomeNet income


















29,724







29,724Currency translation adjustment,
    net of tax














563











563Total comprehensive income


























30,287Purchase of treasury stock






















(28,165
)


(28,165
)Tax benefit from exercise of stock
    options










12,170















12,170Share adjustment related to stock
    splits


1,363























Exercise of stock options


1,659,419



17



3,286















3,303Balance, December 31, 2004


56,396,696



564



69,694



1,601



46,550



(31,555
)


86,854Comprehensive incomeNet income


















15,365







15,365Currency translation adjustment,
    net of tax














(1,015
)










(1,015
)Total comprehensive income


























14,350Purchase of treasury stock






















(24,832
)


(24,832
)Tax benefit from exercise of stock
    options










2,105















2,105Exercise of stock options


474,314



5



1,491















1,496Balance, December 31, 2005


56,871,010



569



73,290



586



61,915



(56,387
)


79,973Comprehensive incomeNet income


















8,310







8,310Currency translation adjustment,
    net of tax














924











924Total comprehensive income


























9,234Purchase of treasury stock






















(5,803
)


(5,803
)Share-based compensation










2,970















2,970Tax benefit from exercise of stock
    options










3,397















3,397Exercise of stock options


1,485,536



15



3,836















3,851Balance, December 31, 2006


58,356,546


$
584


$
83,493


$
1,510


$
70,225


$
(62,190
)

$
93,622    F-7




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Consolidated Statements of Cash Flows
    (In thousands)  Year Ended December 31,2004


2005


2006Operating activities:Net income

$
29,724


$
15,365


$
8,310Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation and amortization


8,706



10,741



11,253Cost of sales of equipment


1,152



1,018



3,722Provision for uncollectible
    accounts


171



87



111Non-cash share-based compensation










2,975Stock option income tax benefit


12,173



2,107



Investment impairment charge






284



226Changes in operating assets and
    liabilities:Accounts receivable


(815
)


(696
)


(2,567
)Prepaid expenses and other


(1,541
)


671



132Accounts payable


(1,093
)


(72
)


950Accrued expenses


(524
)


806



(1,779
)Income taxes


3,856



(10
)


(2,104
)Deferred revenues


7,812



(4,109
)


(4,897
)Net cash provided by operating
    activities


59,621



26,192



16,332Investing activities:Purchases of property and equipment


(17,355
)


(16,145
)


(15,181
)Purchases of investments


(23,351
)


(38,193
)


(46,425
)Proceeds from sales of investments


13,967



24,558



40,658Net cash used in investing
    activities


(26,739
)


(29,780
)


(20,948
)Financing activities:Repayment of capital lease
    obligations


(720
)


(233
)


(153
)Proceeds from exercise of stock
    options


3,303



1,495



3,851Stock option income tax benefit










3,400Repurchase of common stock for
    treasury


(28,165
)


(24,832
)


(5,803
)Net cash (used in) provided by
    financing activities


(25,582
)


(23,570
)


1,295Effect of exchange rate changes on
    cash


142



(216
)


386Net increase (decrease) in cash
    and cash equivalents


7,442



(27,374
)


(2,935
)Cash and cash equivalents,
    beginning of period


38,364



45,806



18,432Cash and cash equivalents, end of
    period

$
45,806


$
18,432


$
15,497    F-8




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements  1.
    Background
    and Summary of Significant Accounting Policies:  Background
  ®
  set-up,
  Principles
    of Consolidation
    Reclassifications
    Use of
    Estimates
    Revenues
    97-2, SOP 98-9, SOP 97-2,
 F-9




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
      out-of-pocket No. 01-14, Out-of-Pocket
  Cash and
    Cash Equivalents
    Short-term
    and Long-term Investments
  available-for-sale available-for-sale.
  Property
    and Equipment
  SOP 98-1, and/or
 F-10




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
    Goodwill
      Long-lived
    Assets
    Software
    Development Costs
    Advertising
    Costs
    Stock-Based
    Compensation
  Accounting
    for Stock-Based Compensation
   F-11




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
      Fair
    Value Disclosures  Prior to SFAS No. 123R
    Adoption
    Year Ended December 31,2004


2005Net income, as reported

$
29,724


$
15,365Deduct:Net stock-based employee
    compensation expense determined under the fair value based
    method, net of related tax effects


(3,262
)


(2,817
)Net stock-based employee
    compensation expense related to acceleration of certain unvested
    stock options, net of related tax effects






(876
)Pro forma net income

$
26,462


$
11,672Earnings per share:Basic  as reported

$
0.58


$
0.31Basic  pro forma

$
0.52


$
0.23Diluted  as reported

$
0.54


$
0.29Diluted  pro forma

$
0.48


$
0.22  F-12




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
    2004


2005Risk-free interest rate


2.23%



3.55%Expected dividend yield


0.00%



0.00%Expected life


3 years



3.5 yearsExpected volatility


66.14%



62.92%     Valuation
    Assumptions for Options Granted during Fiscal 2006
    Risk-free interest rate


4.82%Expected dividend yield


0.00%Expected life


3.5 yearsExpected volatility


59.68%     Income
    Taxes
    Other
    Income, Net
   F-13




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
   Supplemental
    Cash Flow Information
      Concentration
    of Credit Risk and Significant Clients
    Translation
    of Foreign Financial Statements
    Stock
    Split
  3-for-2
  Net
    Income per Common Share
   F-14




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
     Net





Per ShareYear Ended December 31,

Income


Shares


Amount2004Basic net income

$
29,724



51,375


$
0.58Effect of dilutive shares






3,758



(0.04
)Diluted net income

$
29,724



55,133


$
0.542005Basic net income

$
15,365



50,114


$
0.31Effect of dilutive shares






2,791



(0.02
)Diluted net income

$
15,365



52,905


$
0.292006Basic net income

$
8,310



49,474


$
0.17Effect of dilutive shares






2,011



(0.01
)Diluted net income

$
8,310



51,485


$
0.16     Comprehensive
    Income
  paid-in-capital
  Recent
    Pronouncements
     F-15




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
       2.
    Accounts
    Receivable    December 31,2005


2006Billed

$
14,499


$
17,710Unbilled


1,145



709Allowance for doubtful accounts


(466
)


(553
)$
15,178


$
17,866   3.
    Property
    and Equipment    December 31,2005


2006Computer and other equipment

$
34,533


$
39,922Furniture and fixtures


2,807



3,121Leasehold improvements


3,809



4,007System development costs


13,688



18,38654,837



65,436Less-Accumulated depreciation


(26,167
)


(34,307
)$
28,670


$
31,129   4.
    Line of
    Credit  liabilities-to-tangible
 F-16




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
   5.
    Income
    Taxes    Year Ended December 31,2004


2005


2006Current provision:Federal

$
11,798


$
5,934


$
3,023State and local


4,547



607



102Foreign


830



1,060



83517,175



7,601



3,960Deferred provision (benefit):Federal


2,744



909



847State and local


444



428



500Foreign


138



69



(402
)3,326



1,406



945$
20,501


$
9,007


$
4,905       Year Ended December 31,2004


2005


2006Tax at federal statutory rate

$
17,579


$
8,530


$
4,625Increase in valuation allowance


354



122



47State and local taxes, net of
    federal


3,244



672



391Federal tax credits


(307
)


(200
)


(115
)Tax-free interest income


(37
)


(77
)


(425
)Share-based compensation expense










483Other


(332
)


(40
)


(101
)$
20,501


$
9,007


$
4,905    F-17




---



##### Table of Contents



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


2006Goodwill amortization

$
1,520


$
1,197Capitalized R&D expenses


2,115



1,799Tax credit carryforwards


366



290Net operating loss carryforwards


452



429Investment impairment


2,384



2,431Reserves and accruals


784



883Share-based compensation expense






411Gross deferred tax assets


7,621



7,440Repatriation of UK earnings


(642
)


(1,433
)Depreciation


(3,419
)


(4,155
)Gross deferred tax liabilities


(4,061
)


(5,588
)Deferred tax assets valuation
    allowance


(2,384
)


(2,431
)Net deferred tax assets
    (liabilities)

$
1,176


$
(579
)        F-18




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
   6.
    Accrued
    Expenses    2005


2006Accrued compensation

$
2,804


$
1,425Accrued outside services


620



750Deferred rent


840



710Other accrued liabilities


891



560Total accrued expenses

$
5,155


$
3,445   7.
    Employee
    Retirement Plan    8.
    Related
    Party Transactions      9.
    Stock
    Option Plans     F-19




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
  3-for-2
        Weighted


RemainingAverage


Contractual


IntrinsicShares


Exercise Price


Term


Value(In thousands)Outstanding as of January 1,
    2006


5,347,020


$
6.61Granted


753,900



13.00Exercised


(1,485,536
)


2.59Cancelled/forfeited


(228,351
)


16.39Outstanding as of
    December 31, 2006


4,387,033



8.56



5.5


$
9,312Options exercisable or expected to
    vest at December 31, 2006


4,202,746



8.40



5.4


$
9,293Options exercisable at
    December 31, 2006


3,158,454



7.19



5.2


$
9,184   in-the-money
   F-20




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
   Tax
    Effect Related to Share-Based Compensation Expense
      10.
    Commitments
    and Contingencies  Leases
        GrossCapital


Operating


SubleaseLeases


Leases


Income2007

$
41


$
5,150


$
2008






2,756



2009






1,592



2010






1,468



2011






514



2012 and thereafter






605



41


$
12,085


$
Less imputed interest


(1
)Net present value of capital lease
    obligations


40Less current installments


(40
)Long-term capital lease
    obligations, excluding current installments

$
  F-21




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
  Indemnification
    Agreements
    with the Companys Management
    his/her
   F-22




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
  his/her
  his/her
    Contingencies
    Potential
    Liability and Insurance
   F-23




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
    11.
    Fair
    Value of Financial Instruments    12.
    Operating
    Segments and Geographic Information      Year Ended December 31, 2004NorthAmerica


Europe


TotalLicense revenues

$
9,803


$



$
9,803Service revenues


61,104



15,236



76,340Site support revenues


18,446



4,804



23,250Net revenues from external
    customers

$
89,353


$
20,040


$
109,393Operating income

$
42,080


$
7,282


$
49,362Long-lived assets

$
16,510


$
8,694


$
25,204Identifiable assets

$
102,032


$
14,863


$
116,895   Year Ended December 31, 2005NorthAmerica


Europe


TotalLicense revenues

$
6,063


$



$
6,063Service revenues


47,612



12,100



59,712Site support revenues


15,790



5,282



21,072Net revenues from external
    customers

$
69,465


$
17,382


$
86,847Operating income

$
20,523


$
2,913


$
23,436Long-lived assets

$
19,225


$
9,445


$
28,670Identifiable assets

$
90,531


$
14,235


$
104,766   F-24




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements 
    (Continued)
  Year Ended December 31, 2006NorthAmerica


Europe


TotalLicense revenues

$
3,017


$



$
3,017Service revenues


44,377



10,932



55,309Site support revenues


20,438



7,604



28,042Net revenues from external
    customers

$
67,832


$
18,536


$
86,368Operating income

$
10,497


$
1,468


$
11,965Long-lived assets

$
22,340


$
8,789


$
31,129Identifiable assets

$
97,716


$
17,348


$
115,064   13.
    Quarterly
    Financial Data (Unaudited)    March 31,


June 30,


September 30,


December 31,2005


2006


2005


2006


2005


2006


2005


2006Net revenues:Licenses

$
1,663


$
638


$
1,746


$
1,096


$
1,009


$
602


$
1,645


$
681Services


15,902



14,725



11,245



12,822



15,037



14,493



17,528



13,269Site support


5,349



6,036



4,586



8,900



4,880



7,131



6,257



5,975Total net revenues


22,914



21,399



17,577



22,818



20,926



22,226



25,430



19,925Costs of revenues:Cost of licenses


133



76



104



77



82



75



117



58Cost of services


6,490



6,156



5,576



6,300



6,108



6,674



6,163



6,301Cost of site support


3,183



4,153



3,148



5,791



3,455



4,548



4,179



4,329Total costs of revenues


9,806



10,385



8,828



12,168



9,645



11,297



10,459



10,688Gross margin


13,108



11,014



8,749



10,650



11,281



10,929



14,971



9,237Operating income


6,883



2,823



3,100



2,464



5,307



3,533



8,146



3,145Net income


4,072



1,924



1,966



1,677



4,027



2,465



5,300



2,244Basic net income per share

$
0.08


$
0.04


$
0.04


$
0.03


$
0.08


$
0.05


$
0.11


$
0.04Diluted net income per share

$
0.08


$
0.04


$
0.04


$
0.03


$
0.08


$
0.05


$
0.10


$
0.04    F-25




---



##### Table of Contents



SCHEDULE II
  eResearchTechnology,
    Inc. and Subsidiaries
    VALUATION AND QUALIFYING ACCOUNTSAllowance
    for Doubtful Accounts
    (In thousands)  Balance





BalanceBeginning of

Charges to

Deductions

EndPeriod

Expense

from Reserve

of PeriodDecember 31, 2004

$
367


$
171


$
126
(a)

$
412December 31, 2005

$
412


$
88


$
34
(a)

$
466December 31, 2006

$
466


$
111


$
24
(a)

$
553     (a)
    
    Write-off of individual accounts receivable. F-26