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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

(Amendment No. 1)

(Mark One)

|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2006

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------

For the transition period from  to
.

Commission
file number 333-118754

Language Line Holdings, Inc.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-0997806                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)

One Lower Ragsdale Drive

Monterey, CA 93940

(877) 886-3885

(Address, zip code, and telephone number, including

area code, of registrants principal executive office.)

Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ̈No  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ̈No  x

Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.

Language Line Holdings, LLC owns 100% of the registrants common stock.



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EXPLANATORY NOTE

This amendment on Form 10-Q/A amends the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2006, as initially filed with the Securities and Exchange Commission on May 15, 2006.

This amendment removes the Explanatory Note A - Basis of Presentation, as it is no longer applicable. Also, the disclosures over Stock-Based Compensation
in Footnote 1 of the Notes to Condensed Consolidated Financial Statements have been enhanced to include all disclosure requirements set forth in Financial Accounting Standards Board Statement of Financial Accounting Standard (SFAS) No.
123R, Share-Based Payments. In addition, the Contractual and Commercial Commitments Summary table has been expanded to include long-term contractual cash obligations with respect to interest payments. Other minor disclosures have been
added.

There have been no changes to the Condensed Consolidated Statements of Operations or the Condensed Consolidated Statements of Cash
Flows. There have been no changes to the Condensed Consolidated Balance Sheets, except for the March 31, 2006 Condensed Consolidated Balance Sheets, where deferred stock compensation related to awards issued prior to the adoption of SFAS 123R was
reduced to zero with a corresponding decrease to additional paid-in capital.

There have been no other changes to this Form 10-Q.

FORWARD LOOKING STATEMENTS

Statements in this document that are not historical facts are hereby identified as forward looking statements for the purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 (the
Exchange Act) and Section 27A of the Securities Act of 1933 (the Securities Act). Language Line Holdings, Inc. (LLHI, we, us, or the Company) cautions readers that such
forward looking statements, including without limitation, those relating to the Companys future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, wherever they occur in this document
or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Companys senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from
those suggested by the forward looking statements. Such forward looking statements should, therefore, be considered in light of the factors set forth in Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations.

The forward looking statements contained in this report are made under the caption
Managements Discussion and Analysis of Financial Condition and Results of Operations. Moreover, the Company, through its senior management, may from time to time make forward looking statements about matters described
herein or other matters concerning the Company.

The Company disclaims any intent or obligation to update forward looking
statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.



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LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings, LLC)

TABLE OF CONTENTS



|                              |  |                                                                                                        |  |      
|----------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | -----
|                              |  |                                                                                                        |  | Page 
|Part 1. Financial Information |  |                                                                                                       
|                              |  |                                                                                                       
|Item 1.                       |  | Financial Statements (Unaudited)                                                                       |  | 1 -11
|                              |  |                                                                                                       
|                              |  | Condensed Consolidated Balance Sheets  December 31, 2005 and March 31, 2006                           |  |      
|                              |  |                                                                                                       
|                              |  | Condensed Consolidated Statements of Operations  Three months ended March 31, 2005 and March 31, 2006 |  |      
|                              |  |                                                                                                       
|                              |  | Condensed Consolidated Statements of Cash Flows  Three months ended March 31, 2005 and March 31, 2006 |  |      
|                              |  |                                                                                                       
|                              |  | Notes to Condensed Consolidated Financial Statements                                                   |  |      
|                              |  |                                                                                                       
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                  |  | 12   
|                              |  |                                                                                                       
|Item 3.                       |  | Quantitative and Qualitative Disclosures of Market Risk                                                |  | 15   
|                              |  |                                                                                                       
|Item 4.                       |  | Controls and Procedures                                                                                |  | 15   
|                              | 
|Part 2. Other Information     |  |                                                                                                       
|                              |  |                                                                                                       
|Item 1.                       |  | Legal Proceedings                                                                                      |  | 16   
|                              |  |                                                                                                       
|Item 1A.                      |  | Risk Factors                                                                                           |  | 16   
|                              |  |                                                                                                       
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                            |  | 16   
|                              |  |                                                                                                       
|Item 3.                       |  | Defaults upon Senior Securities                                                                        |  | 16   
|                              |  |                                                                                                       
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                    |  | 16   
|                              |  |                                                                                                       
|Item 5.                       |  | Other Information                                                                                      |  | 16   
|                              |  |                                                                                                       
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                       |  | 16   
|                              |  |                                                                                                       
|Signatures                    |  |                                                                                                        |  | 17   
|                              |  |                                                                                                       
|Certifications                |  | Exhibit 31.1                                                                                           |  |      
|                              |  | Exhibit 31.2                                                                                           |  |      
|                              |  | Exhibit 32.1                                                                                           |  |      
|                              |  | Exhibit 32.2                                                                                           |  |      



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PART 1. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings,
LLC)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)

(Unaudited)



|                                                                                           |  |                  |         |   |               |   |         |  
|------------------------------------------------------------------------------------------ |  | ---------------- | ------- | - | ------------- | - | ------- | -
|                                                                                           |  | December 31,2005 |         |   | March 31,2006 |  
|Assets                                                                                     |  |                  |         |   |               |   |         |  
|Current assets:                                                                            |  |                  |         |   |               |   |         |  
|Cash and cash equivalents                                                                  |  | $                | 13,991  |   |               | $ | 17,976  |  
|Accounts receivable, net                                                                   |  |                  | 22,329  |   |               |   | 23,447  |  
|Prepaid expenses and other current assets                                                  |  |                  | 2,681   |   |               |   | 2,299   |  
|Deferred taxes on income                                                                   |  |                  | 621     |   |               |   | 712     |  
|                                                                                           |  |                  |         |   |               |   |         |  
|Total current assets                                                                       |  |                  | 39,622  |   |               |   | 44,434  |  
|Property and equipment, net                                                                |  |                  | 4,991   |   |               |   | 5,418   |  
|Goodwill                                                                                   |  |                  | 408,793 |   |               |   | 408,793 |  
|Intangible assets, net                                                                     |  |                  | 403,056 |   |               |   | 393,872 |  
|Deferred financing costs, net                                                              |  |                  | 13,173  |   |               |   | 12,628  |  
|Other assets                                                                               |  |                  | 96      |   |               |   | 328     |  
|                                                                                           |  |                  |         |   |               |   |         |  
|Total assets                                                                               |  | $                | 869,731 |   |               | $ | 865,473 |  
|                                                                                           |  |                  |         |   |               |   |         |  
|Liabilities and Stockholders Equity                                                       |  |                  |         |   |               |   |         |  
|Current liabilities:                                                                       |  |                  |         |   |               |   |         |  
|Accounts payable                                                                           |  | $                | 1,208   |   |               | $ | 457     |  
|Accrued interest                                                                           |  |                  | 4,848   |   |               |   | 9,403   |  
|Accrued payroll and related benefits                                                       |  |                  | 817     |   |               |   | 838     |  
|Accrued cost of interpreters                                                               |  |                  | 1,288   |   |               |   | 1,214   |  
|Other accrued liabilities                                                                  |  |                  | 1,786   |   |               |   | 2,467   |  
|Income taxes payable                                                                       |  |                  | 2,341   |   |               |   | 3,747   |  
|Current portion of long-term debt                                                          |  |                  | 18,638  |   |               |   | 15,025  |  
|                                                                                           |  |                  |         |   |               |   |         |  
|Total current liabilities                                                                  |  |                  | 30,926  |   |               |   | 33,151  |  
|Long-term debt                                                                             |  |                  | 236,431 |   |               |   | 232,892 |  
|Senior subordinated notes                                                                  |  |                  | 161,315 |   |               |   | 161,414 |  
|Senior discount notes                                                                      |  |                  | 67,996  |   |               |   | 70,383  |  
|Deferred taxes on income                                                                   |  |                  | 159,643 |   |               |   | 156,897 |  
|                                                                                           |  |                  |         |   |               |   |         |  
|Total liabilities                                                                          |  |                  | 656,311 |   |               |   | 654,737 |  
|                                                                                           |  |                  |         |   |               |   |         |  
|Stockholders equity:                                                                      |  |                  |         |   |               |   |         |  
|Common stock, $.01 par value per share and 1,000 shares authorized, issued and outstanding |  |                  |        |   |               |   |        |  
|Additional paid-in capital                                                                 |  |                  | 228,015 |   |               |   | 226,857 |  
|Accumulated deficit                                                                        |  |                  | (13,343 | ) |               |   | (16,121 | )
|Deferred stock compensation                                                                |  |                  | (1,252  | ) |               |   |        |  
|                                                                                           |  |                  |         |   |               |   |         |  
|Total stockholders equity                                                                 |  |                  | 213,420 |   |               |   | 210,736 |  
|                                                                                           |  |                  |         |   |               |   |         |  
|Total liabilities and stockholders equity                                                 |  | $                | 869,731 |   |               | $ | 865,473 |  
|                                                                                           |  |                  |         |   |               |   |         |  

See notes to condensed consolidated financial statements.



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LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings,
LLC)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)



|                                    |  |                                |        |   |                                |   |        |  
|----------------------------------- |  | ------------------------------ | ------ | - | ------------------------------ | - | ------ | -
|                                    |  | Three monthsendedMarch 31,2005 |        |   | Three monthsendedMarch 31,2006 |  
|Revenues                            |  | $                              | 35,922 |   |                                | $ | 40,046 |  
|Cost of services                    |  |                                | 12,202 |   |                                |   | 14,097 |  
|                                    |  |                                |        |   |                                |   |        |  
|Gross margin                        |  |                                | 23,720 |   |                                |   | 25,949 |  
|                                    |  |                                |        |   |                                |   |        |  
|Other expenses:                     |  |                                |        |   |                                |   |        |  
|Selling, general and administrative |  |                                | 6,553  |   |                                |   | 7,185  |  
|Interest - net                      |  |                                | 12,067 |   |                                |   | 13,073 |  
|Depreciation and amortization       |  |                                | 9,834  |   |                                |   | 9,766  |  
|                                    |  |                                |        |   |                                |   |        |  
|Total other expenses                |  |                                | 28,454 |   |                                |   | 30,024 |  
|                                    |  |                                |        |   |                                |   |        |  
|Loss before income taxes            |  |                                | (4,734 | ) |                                |   | (4,075 | )
|Income tax benefit                  |  |                                | (1,654 | ) |                                |   | (1,297 | )
|                                    |  |                                |        |   |                                |   |        |  
|Net loss                            |  | $                              | (3,080 | ) |                                | $ | (2,778 | )
|                                    |  |                                |        |   |                                |   |        |  

See notes to condensed consolidated financial statements.



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LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings,
LLC)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                |  |                                |         |   |                                |   |        |  
|------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ------------------------------ | - | ------ | -
|                                                                                |  | Three monthsendedMarch 31,2005 |         |   | Three monthsendedMarch 31,2006 |  
|Cash flows from operating activities:                                           |  |                                |         |   |                                |   |        |  
|Net loss                                                                        |  | $                              | (3,080  | ) |                                | $ | (2,778 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                |         |   |                                |   |        |  
|Depreciation and amortization                                                   |  |                                | 9,834   |   |                                |   | 9,766  |  
|Amortization of deferred financing costs                                        |  |                                | 532     |   |                                |   | 545    |  
|Deferred taxes on income                                                        |  |                                | (2,604  | ) |                                |   | (2,837 | )
|Stock based compensation expense                                                |  |                                | 92      |   |                                |   | 95     |  
|Accretion of discount on long-term debt                                         |  |                                | 2,172   |   |                                |   | 2,486  |  
|Effect of changes in operating assets and liabilities:                          |  |                                |         |   |                                |   |        |  
|Accounts receivable                                                             |  |                                | 93      |   |                                |   | (1,117 | )
|Prepaid expenses and other current assets                                       |  |                                | (762    | ) |                                |   | 381    |  
|Other assets                                                                    |  |                                | (1      | ) |                                |   | (232   | )
|Accounts payable                                                                |  |                                | 360     |   |                                |   | (752   | )
|Income taxes payable/refundable                                                 |  |                                | (1,887  | ) |                                |   | 1,406  |  
|Accrued payroll and other liabilities                                           |  |                                | 4,162   |   |                                |   | 5,185  |  
|                                                                                |  |                                |         |   |                                |   |        |  
|Net cash provided by operating activities                                       |  |                                | 8,911   |   |                                |   | 12,148 |  
|                                                                                |  |                                |         |   |                                |   |        |  
|Cash flows from investing activities :                                          |  |                                |         |   |                                |   |        |  
|Purchase of property                                                            |  |                                | (82     | ) |                                |   | (1,009 | )
|                                                                                |  |                                |         |   |                                |   |        |  
|Cash flows from financing activities :                                          |  |                                |         |   |                                |   |        |  
|Long-term debt repayments                                                       |  |                                | (14,768 | ) |                                |   | (7,153 | )
|Repurchase of restricted stock units                                            |  |                                |        |   |                                |   | (1     | )
|                                                                                |  |                                |         |   |                                |   |        |  
|Net cash used in financing activities                                           |  |                                | (14,768 | ) |                                |   | (7,154 | )
|Net increase (decrease) in cash and cash equivalents                            |  |                                | (5,939  | ) |                                |   | 3,985  |  
|Cash and cash equivalents - beginning of period                                 |  |                                | 12,164  |   |                                |   | 13,991 |  
|                                                                                |  |                                |         |   |                                |   |        |  
|Cash and cash equivalents - end of period                                       |  | $                              | 6,225   |   |                                | $ | 17,976 |  
|                                                                                |  |                                |         |   |                                |   |        |  
|Supplemental cash flow disclosures:                                             |  |                                |         |   |                                |   |        |  
|Cash paid for interest                                                          |  | $                              | 4,893   |   |                                | $ | 5,495  |  
|                                                                                |  |                                |         |   |                                |   |        |  
|Cash paid for income taxes                                                      |  | $                              | 2,838   |   |                                | $ | 134    |  
|                                                                                |  |                                |         |   |                                |   |        |  

See notes to condensed consolidated financial statements.



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LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings,
LLC)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

|1. | Organization and Significant Accounting Policies
|-- | ------------------------------------------------

The accompanying unaudited condensed consolidated financial information has been prepared in accordance with the Securities and Exchange Commission (SEC) regulations for interim financial reporting. In the opinion of management,
the condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, that are considered necessary for a fair statement of the Companys financial position, results of operations and cash
flows for the interim periods. Operating results for the three months ended March 31, 2006 are not necessarily indicative of results that may be expected for the entire year. This financial information should be read in conjunction with the
audited consolidated financial statements and notes thereto for the year ended December 31, 2005 of Language Line Holdings, Inc., which are included in the Form 10-K filed with the SEC on April 12, 2006.

In accordance with the rules and regulations of the SEC, unaudited condensed consolidated financial statements may omit or condense certain information
and disclosures normally required for a complete set of financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Accordingly, certain information and disclosures
normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. We believe that the notes to the condensed consolidated financial statements contain disclosures
adequate to make the information presented not misleading.

Organization - Language Line Holdings, Inc. (the
Predecessor) was a Delaware corporation formed in December 1999 as a holding company for Language Line, LLC (LLC) and its subsidiaries. LLC was incorporated during February 1999 as a Delaware limited liability company. The
Predecessor was acquired on June 11, 2004 by Language Line, Inc. (LLI) in a transaction accounted for under the purchase method of accounting (the Merger). LLI, a wholly-owned subsidiary of Language Line Acquisition,
Inc., is a Delaware corporation formed in April 2004. LLI had no significant operations prior to the acquisition of Predecessor. Language Line Acquisition, Inc. is a Delaware corporation formed in April 2004 and also had no significant operations
prior to LLIs acquisition of Predecessor. Subsequent to the Merger, Language Line Acquisition, Inc., an indirect wholly-owned subsidiary of Language Line Holdings, LLC, was renamed Language Line Holdings, Inc. (LLHI or the
Company).

The Company provides over-the-phone interpretation services, from English into over 150 different languages 24 hours
a day, seven days a week. Such services are provided mainly to the non-English speaking business population in the U.S. and Canada covering various industries such as insurance, healthcare, financial, utilities and government, providing a cost
effective alternative to staffing in-house multilingual capabilities or using face-to-face interpretation.

Cash
equivalents - Cash equivalents are short-term, highly liquid investments with original or remaining maturities of three months or less when purchased.

Principles of Consolidation - The condensed consolidated financial statements include the accounts of LLHI, LLI, LLC and LLCs wholly-owned subsidiaries as of December 31, 2005 and
March 31, 2006, and for the three months ended March 31, 2005 and 2006. All significant intercompany accounts and transactions have been eliminated in consolidation.

Comprehensive Income - SFAS No. 130, Reporting Comprehensive Income, requires that the Company report comprehensive income, which
includes net income as well as other changes in assets and liabilities recorded directly to equity, in its financial statements. There were no components of comprehensive income other than net income for all periods presented.

Stock-Based Compensation - Under the Companys restricted stock unit plan, officers, employees and outside directors have received or
may receive grants of restricted stock units. Effective January 1, 2006, the Company adopted the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standard (SFAS) No. 123(R), Share-Based
Payments, which establishes the accounting for employee stock-based awards. Under the provisions of SFAS No. 123(R), stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as
an expense over the requisite employee service period (generally the vesting period of the grant). The Company adopted SFAS No. 123(R) using the modified prospective method and, as a result, periods prior to January 1, 2006 have not been restated.
The Company recognizes stock-based compensation for grants of restricted stock units in the Selling, General and Administrative line item of the Condensed Consolidated Statement of Operations. Additionally, no modifications were made to outstanding
restricted stock units prior to the adoption of SFAS No. 123(R), and no cumulative adjustments were recorded in the Companys financial statements.

Prior to January 1, 2006, the Company accounted for the plans under the measurement and recognition provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25), and related Interpretations as permitted by SFAS No. 123 (SFAS 123), Accounting for Stock Based Compensation. Under APB 25, the Company recorded stock-based compensation expense for restricted stock and restricted
stock units in its Financial Statements. Stock-based compensation expense was included as a pro forma disclosure in the financial statement footnotes.



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The following table illustrates the effect on net income (loss) if the Predecessor and the Company had
applied the fair value recognition provisions of SFAS No. 123 and in accordance with SFAS No. 148, Accounting of Stock-Based Compensation - Transition and Disclosure, An amendment of FASB Statement No. 123, to stock-based employee
compensation prior to January 1, 2006 (in thousands):



|                                                                                                                                           |  |                                  |        |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | ------ | -
|                                                                                                                                           |  | Three MonthsEnded March 31, 2005 |       
|Net income (loss), as reported                                                                                                             |  | $                                | (3,080 | )
|Add total stock-based employee compensation expense included in reported net income (loss), net of related tax effects                     |  |                                  | 57     |  
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                  | (57    | )
|                                                                                                                                           |  |                                  |        |  
|Pro forma net income (loss)                                                                                                                |  | $                                | (3,080 | )
|                                                                                                                                           |  |                                  |        |  

Under both SFAS 123 and SFAS 123(R), the Company determines the fair value of restricted stock
units from the probability-weighted expected return method. Under this method, the value of an enterprises common stock is estimated from an analysis of the future values for the Company assuming various possible future liquidity events. SFAS
123(R) requires that the Company recognize compensation expense for only the portion of restricted stock units that are expected to vest, rather than recording forfeitures when they occur. If the actual number of forfeitures differs from those
estimated by management, additional adjustments to compensation expense may be required in future periods.

On January 1, 2006, deferred
compensation related to awards issued prior to the adoption of SFAS 123(R) was reduced to zero with a corresponding decrease to capital surplus. SFAS 123(R) will require the Company to reflect the tax savings resulting from tax deductions in excess
of expense reflected in its Financial Statements as a financing cash flow, which will impact the Companys future reported cash flows from operating activities.

Stock-based compensation expense related to restricted stock units of Language Line Holdings, LLC, the Companys ultimate parent, recognized under SFAS 123(R) for the three months ended March 31, 2006 was
$95,000. As of March 31, 2006, total unrecognized compensation cost, net of estimated forfeitures, was $1.5 million related to restricted stock units. The unrecognized compensation cost is expected to be recognized over a weighted-average period of
approximately 3.52 years.

The restricted stock units will vest according to a specified schedule and will be expensed to compensation over
the vesting period of five years. Vesting will accelerate upon a change of control of Language Line Holdings, LLC and upon certain types of sales. Vesting will cease if the individual ceases to be employed by Language Line Holdings, LLC or any of
its subsidiaries. If the individual ceases to be employed by Language Line Holdings, LLC or any of its subsidiaries, Language Line Holdings, LLC will have the option to purchase all or any portion of the vested and/or the unvested restricted stock
units. The aggregate purchase price for all unvested units will be $1.00, and the purchase price for each vested unit will be the fair market value for such unit as of the date of individuals termination. If, however, the Company terminates
the individuals employment for cause, the aggregate purchase price of all vested units will be $1.00. Language Line Holdings, LLCs right to repurchase the individuals units will terminate upon a change of control (as
such term is defined in their incentive unit agreement), provided that the individual is employed by Language Line Holdings, LLC or any of its subsidiaries at the time of the change of control.

The following table reflects activity under the restricted stock unit plan from December 31, 2005 through March 31, 2006 (in thousands, except per share
amounts):

|                               |  |                      |   |  |                                      |      |                                         |     
|------------------------------ |  | -------------------- | - |  | ------------------------------------ | ---- | --------------------------------------- | ----
|                               |  | Number ofUnits (000) |   |  | WeightedAverage GrantDate Fair Value |      | WeightedAverageRemainingContractualTerm
|Outstanding, December 31, 2005 |  | 19,405               |   |  | $                                    | 0.09 |                                         |     
|Granted                        |  | 4,225                |   |  | $                                    | 0.09 |                                         |     
|Repurchased                    |  | (10                  | ) |  | $                                    | 0.09 |                                         |     
|Forfeited                      |  | (140                 | ) |  | $                                    | 0.09 |                                         |     
|                               |  |                      |   |  |                                      |      |                                         |     
|Outstanding, March 31, 2006    |  | 23,480               |   |  | $                                    | 0.09 |                                         | 3.52
|                               |  |                      |   |  |                                      |      |                                         |     



A summary of the status
of the Companys nonvested shares as of March 31, 2006 and changes during the period is presented below:



|                               |  |                      |   |  |                                    |     
|------------------------------ |  | -------------------- | - |  | ---------------------------------- | ----
|Nonvested Units                |  | Number ofUnits (000) |   |  | WeightedAverageGrantDate FairValue
|Outstanding, December 31, 2005 |  | 17,464               |   |  | $                                  | 0.09
|Granted                        |  | 4,225                |   |  | $                                  | 0.09
|Repurchased                    |  | (9                   | ) |  | $                                  | 0.09
|Forfeited                      |  | (81                  | ) |  | $                                  | 0.09
|                               |  |                      |   |  |                                    |     
|Outstanding, March 31, 2006    |  | 21,599               |   |  | $                                  | 0.09
|                               |  |                      |   |  |                                    |     

Restricted stock units granted vest over a 5 year cliff vesting schedule. During the three months
ended March 31, 2006 no units vested. Recipients of restricted stock units do not pay any cash consideration for the units, do not have the right to vote, and do not receive dividends with respect to such units. Compensation expense for restricted
stock units is recognized on a straight-line basis over the vesting period, using the restricted stock units fair value on the grant date.



|2. | Guarantor and Non-Guarantor Subsidiaries
|-- | ----------------------------------------

LLIs $165 million of Senior Subordinated Notes due 2012 (the Notes) are guaranteed by each of LLIs domestic subsidiaries. The Notes are fully and unconditionally guaranteed on a joint and several basis by LLIs
wholly-owned direct and indirect domestic subsidiaries (the Guarantor Subsidiaries). The Notes are not guaranteed by LLHI. The Notes are guaranteed by each Guarantor Subsidiary on an unsecured senior subordinated basis.

The indenture governing the Notes contains covenants limiting, among other things, LLIs liability and the ability of LLIs Guarantor
Subsidiaries to incur additional indebtedness, make restricted payments, make investments, create certain liens, sell assets, restrict payments by the subsidiaries to LLI, guarantee indebtedness, enter into transactions with affiliates and merge or
consolidate or transfer and sell assets.

The following information sets forth, on a condensed consolidating basis, balance sheet
information as of December 31, 2005 and March 31, 2006, statements of operations and comprehensive income (loss) information for the three months ended March 31, 2005 and 2006, and statement of cash flow information for the three
months ended March 31, 2005 and 2006 for LLHI (the Registrant), LLI, the Guarantor Subsidiaries and foreign subsidiaries of LLI that are not guaranteeing the Notes (the Non-Guarantor Subsidiaries). Income tax expense
(benefit) is allocated among entities based upon taxable income (loss) by jurisdiction within each group.



5



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##### Table of Contents

Condensed Consolidated Balance Sheets

as of December 31, 2005 (In thousands)



|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|------------------------------------------------------------ |  | ---- | ------- | - | ------------- | - | ------- | --------------------- |  | ------------------------- | ------- | ----- | - | ----- | ------------ | - | --------- | ------------ |  | - | ---------- | - |  | - | ------- | -
|                                                             |  | LLHI |         |   | CompanyIssuer |   |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |         | Total |   |       | Eliminations |   |           | Consolidated | 
|Assets                                                       |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Current assets:                                              |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Cash and cash equivalents                                    |  | $    |        |   |               | $ |        |                       |  | $                         | 13,436  |       | $ | 555   |              | $ | 13,991    |              |  | $ |           |   |  | $ | 13,991  |  
|Accounts receivable - net                                    |  |      |        |   |               |   |        |                       |  |                           | 21,944  |       |   | 385   |              |   | 22,329    |              |  |   |           |   |  |   | 22,329  |  
|Intercompany receivable                                      |  |      |        |   |               |   |        |                       |  |                           | 78,719  |       |   |      |              |   | 78,719    |              |  |   | (78,719    | ) |  |   |        |  
|Prepaid expenses and other current assets                    |  |      |        |   |               |   |        |                       |  |                           | 2,073   |       |   | 608   |              |   | 2,681     |              |  |   |           |   |  |   | 2,681   |  
|Refundable income taxes                                      |  |      | 147     |   |               |   |        |                       |  |                           |        |       |   |      |              |   | 147       |              |  |   | (147       | ) |  |   |        |  
|Deferred taxes on income                                     |  |      | (5      | ) |               |   | 626     |                       |  |                           |        |       |   |      |              |   | 621       |              |  |   |           |   |  |   | 621     |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total current assets                                         |  |      | 142     |   |               |   | 626     |                       |  |                           | 116,172 |       |   | 1,548 |              |   | 118,488   |              |  |   | (78,866    | ) |  |   | 39,622  |  
|Property and equipment - net                                 |  |      |        |   |               |   |        |                       |  |                           | 3,283   |       |   | 1,708 |              |   | 4,991     |              |  |   |           |   |  |   | 4,991   |  
|Goodwill                                                     |  |      |        |   |               |   |        |                       |  |                           | 408,793 |       |   |      |              |   | 408,793   |              |  |   |           |   |  |   | 408,793 |  
|Intangible assets - net                                      |  |      |        |   |               |   |        |                       |  |                           | 403,056 |       |   |      |              |   | 403,056   |              |  |   |           |   |  |   | 403,056 |  
|Deferred financing costs - net                               |  |      | 1,748   |   |               |   | 11,425  |                       |  |                           |        |       |   |      |              |   | 13,173    |              |  |   |           |   |  |   | 13,173  |  
|Investment in subsidiaries                                   |  |      | 277,397 |   |               |   | 748,117 |                       |  |                           | 857     |       |   |      |              |   | 1,026,371 |              |  |   | (1,026,371 | ) |  |   |        |  
|Other assets                                                 |  |      |        |   |               |   |        |                       |  |                           | 9       |       |   | 87    |              |   | 96        |              |  |   |           |   |  |   | 96      |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total assets                                                 |  | $    | 279,287 |   |               | $ | 760,168 |                       |  | $                         | 932,170 |       | $ | 3,343 |              | $ | 1,974,968 |              |  | $ | (1,105,237 | ) |  | $ | 869,731 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Liabilities, Members Capital and Stockholders Equity       |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Current liabilities:                                         |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Accounts payable                                             |  | $    |        |   |               | $ |        |                       |  | $                         | 1,208   |       | $ |      |              | $ | 1,208     |              |  | $ |           |   |  | $ | 1,208   |  
|Intercompany payable                                         |  |      | 164     |   |               |   | 76,554  |                       |  |                           |        |       |   | 2,001 |              |   | 78,719    |              |  |   | (78,719    | ) |  |   |        |  
|Accrued interest                                             |  |      |        |   |               |   | 4,821   |                       |  |                           | 27      |       |   |      |              |   | 4,848     |              |  |   |           |   |  |   | 4,848   |  
|Accrued payroll and related benefits                         |  |      |        |   |               |   |        |                       |  |                           | 779     |       |   | 38    |              |   | 817       |              |  |   |           |   |  |   | 817     |  
|Accrued cost of interpreters                                 |  |      |        |   |               |   |        |                       |  |                           | 986     |       |   | 302   |              |   | 1,288     |              |  |   |           |   |  |   | 1,288   |  
|Other accrued liabilities                                    |  |      |        |   |               |   |        |                       |  |                           | 1,641   |       |   | 145   |              |   | 1,786     |              |  |   |           |   |  |   | 1,786   |  
|Income taxes payable                                         |  |      |        |   |               |   | (2,816  | )                     |  |                           | 5,304   |       |   |      |              |   | 2,488     |              |  |   | (147       | ) |  |   | 2,341   |  
|Current portion of long-term debt                            |  |      |        |   |               |   | 17,703  |                       |  |                           | 935     |       |   |      |              |   | 18,638    |              |  |   |           |   |  |   | 18,638  |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total current liabilities                                    |  |      | 164     |   |               |   | 96,262  |                       |  |                           | 10,880  |       |   | 2,486 |              |   | 109,792   |              |  |   | (78,866    | ) |  |   | 30,926  |  
|Long-term debt                                               |  |      |        |   |               |   | 236,431 |                       |  |                           |        |       |   |      |              |   | 236,431   |              |  |   |           |   |  |   | 236,431 |  
|Senior subordinated notes                                    |  |      |        |   |               |   | 161,315 |                       |  |                           |        |       |   |      |              |   | 161,315   |              |  |   |           |   |  |   | 161,315 |  
|Senior discount notes                                        |  |      | 67,996  |   |               |   |        |                       |  |                           |        |       |   |      |              |   | 67,996    |              |  |   |           |   |  |   | 67,996  |  
|Deferred income taxes                                        |  |      | (3,545  | ) |               |   | (11,237 | )                     |  |                           | 174,425 |       |   |      |              |   | 159,643   |              |  |   |           |   |  |   | 159,643 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total liabilities                                            |  |      | 64,615  |   |               |   | 482,771 |                       |  |                           | 185,305 |       |   | 2,486 |              |   | 735,177   |              |  |   | (78,866    | ) |  |   | 656,311 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Members capital                                             |  |      |        |   |               |   |        |                       |  |                           | 746,865 |       |   | 857   |              |   | 747,722   |              |  |   | (747,722   | ) |  |   |        |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Stockholders equity:                                        |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Common stock                                                 |  |      |        |   |               |   |        |                       |  |                           |        |       |   |      |              |   |          |              |  |   |           |   |  |   |        |  
|Additional paid-in-capital                                   |  |      | 228,015 |   |               |   | 281,064 |                       |  |                           |        |       |   |      |              |   | 509,079   |              |  |   | (281,064   | ) |  |   | 228,015 |  
|Accumulated deficit                                          |  |      | (13,343 | ) |               |   | (3,667  | )                     |  |                           |        |       |   |      |              |   | (17,010   | )            |  |   | 3,667      |   |  |   | (13,343 | )
|Deferred stock compensation                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |      |              |   |          |              |  |   | (1,252     | ) |  |   | (1,252  | )
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total stockholders equity                                   |  |      | 214,672 |   |               |   | 277,397 |                       |  |                           |        |       |   |      |              |   | 492,069   |              |  |   | (278,649   | ) |  |   | 213,420 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total liabilities, members capital and stockholders equity |  | $    | 279,287 |   |               | $ | 760,168 |                       |  | $                         | 932,170 |       | $ | 3,343 |              | $ | 1,974,968 |              |  | $ | (1,105,237 | ) |  | $ | 869,731 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  



6



---

##### Table of Contents

Condensed Consolidated Balance Sheets

as of March 31, 2006 (In thousands)



|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|------------------------------------------------------------ |  | ---- | ------- | - | ------------- | - | ------- | --------------------- |  | - | ------------------------- | - | ----- | - | ----- | ------------ | - | --------- | ------------ |  | - | ---------- | - |  | - | ------- | -
|                                                             |  | LLHI |         |   | CompanyIssuer |   |         | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   | Total |   |       | Eliminations |   |           | Consolidated | 
|Assets                                                       |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Current assets:                                              |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Cash and cash equivalents                                    |  | $    |        |   |               | $ |        |                       |  | $ | 17,072                    |   |       | $ | 904   |              | $ | 17,976    |              |  | $ |           |   |  | $ | 17,976  |  
|Accounts receivable - net                                    |  |      |        |   |               |   |        |                       |  |   | 22,961                    |   |       |   | 486   |              |   | 23,447    |              |  |   |           |   |  |   | 23,447  |  
|Intercompany receivable                                      |  |      |        |   |               |   |        |                       |  |   | 81,381                    |   |       |   |      |              |   | 81,381    |              |  |   | (81,381    | ) |  |   |        |  
|Prepaid expenses and other current assets                    |  |      |        |   |               |   |        |                       |  |   | 1,744                     |   |       |   | 555   |              |   | 2,299     |              |  |   |           |   |  |   | 2,299   |  
|Refundable income taxes                                      |  |      | 166     |   |               |   |        |                       |  |   |                          |   |       |   |      |              |   | 166       |              |  |   | (166       | ) |  |   |        |  
|Deferred taxes on income                                     |  |      | (1      | ) |               |   | 713     |                       |  |   |                          |   |       |   |      |              |   | 712       |              |  |   |           |   |  |   | 712     |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total current assets                                         |  |      | 165     |   |               |   | 713     |                       |  |   | 123,158                   |   |       |   | 1,945 |              |   | 125,981   |              |  |   | (81,547    | ) |  |   | 44,434  |  
|Property and equipment - net                                 |  |      |        |   |               |   |        |                       |  |   | 3,503                     |   |       |   | 1,915 |              |   | 5,418     |              |  |   |           |   |  |   | 5,418   |  
|Goodwill                                                     |  |      |        |   |               |   |        |                       |  |   | 408,793                   |   |       |   |      |              |   | 408,793   |              |  |   |           |   |  |   | 408,793 |  
|Intangible assets - net                                      |  |      |        |   |               |   |        |                       |  |   | 393,872                   |   |       |   |      |              |   | 393,872   |              |  |   |           |   |  |   | 393,872 |  
|Deferred financing costs - net                               |  |      | 1,690   |   |               |   | 10,938  |                       |  |   |                          |   |       |   |      |              |   | 12,628    |              |  |   |           |   |  |   | 12,628  |  
|Investment in subsidiaries                                   |  |      | 275,232 |   |               |   | 752,438 |                       |  |   | 1,004                     |   |       |   |      |              |   | 1,028,674 |              |  |   | (1,028,674 | ) |  |   |        |  
|Other assets                                                 |  |      |        |   |               |   |        |                       |  |   | 240                       |   |       |   | 88    |              |   | 328       |              |  |   |           |   |  |   | 328     |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total assets                                                 |  | $    | 277,087 |   |               | $ | 764,089 |                       |  | $ | 930,570                   |   |       | $ | 3,948 |              | $ | 1,975,694 |              |  | $ | (1,110,221 | ) |  | $ | 865,473 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Liabilities, Members Capital and Stockholders Equity       |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Current liabilities                                          |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Accounts payable                                             |  | $    |        |   |               | $ |        |                       |  | $ | 457                       |   |       | $ |      |              | $ | 457       |              |  | $ |           |   |  | $ | 457     |  
|Intercompany payable                                         |  |      | 164     |   |               |   | 78,516  |                       |  |   |                          |   |       |   | 2,700 |              |   | 81,380    |              |  |   | (81,380    | ) |  |   |        |  
|Accrued interest                                             |  |      |        |   |               |   | 9,314   |                       |  |   | 89                        |   |       |   |      |              |   | 9,403     |              |  |   |           |   |  |   | 9,403   |  
|Accrued payroll and related benefits                         |  |      |        |   |               |   |        |                       |  |   | 838                       |   |       |   |      |              |   | 838       |              |  |   |           |   |  |   | 838     |  
|Accrued cost of interpreters                                 |  |      |        |   |               |   |        |                       |  |   | 1,142                     |   |       |   | 72    |              |   | 1,214     |              |  |   |           |   |  |   | 1,214   |  
|Other accrued liabilities                                    |  |      |        |   |               |   |        |                       |  |   | 2,295                     |   |       |   | 172   |              |   | 2,467     |              |  |   |           |   |  |   | 2,467   |  
|Income taxes payable                                         |  |      |        |   |               |   | 4,047   |                       |  |   | (134                      | ) |       |   |      |              |   | 3,913     |              |  |   | (166       | ) |  |   | 3,747   |  
|Current portion of long-term debt                            |  |      |        |   |               |   | 14,108  |                       |  |   | 917                       |   |       |   |      |              |   | 15,025    |              |  |   |           |   |  |   | 15,025  |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total current liabilities                                    |  |      | 164     |   |               |   | 105,985 |                       |  |   | 5,604                     |   |       |   | 2,944 |              |   | 114,697   |              |  |   | (81,546    | ) |  |   | 33,151  |  
|Long-term debt                                               |  |      |        |   |               |   | 232,892 |                       |  |   |                          |   |       |   |      |              |   | 232,892   |              |  |   |           |   |  |   | 232,892 |  
|Senior subordinated notes                                    |  |      |        |   |               |   | 161,414 |                       |  |   |                          |   |       |   |      |              |   | 161,414   |              |  |   |           |   |  |   | 161,414 |  
|Senior discount notes                                        |  |      | 70,383  |   |               |   |        |                       |  |   |                          |   |       |   |      |              |   | 70,383    |              |  |   |           |   |  |   | 70,383  |  
|Deferred income taxes                                        |  |      | (4,196  | ) |               |   | (11,436 | )                     |  |   | 172,529                   |   |       |   |      |              |   | 156,897   |              |  |   |           |   |  |   | 156,897 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total liabilities                                            |  |      | 66,351  |   |               |   | 488,855 |                       |  |   | 178,133                   |   |       |   | 2,944 |              |   | 736,283   |              |  |   | (81,546    | ) |  |   | 654,737 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Members capital                                             |  |      |        |   |               |   |        |                       |  |   | 752,437                   |   |       |   | 1,004 |              |   | 753,441   |              |  |   | (753,441   | ) |  |   |        |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Stockholders equity:                                        |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Common stock                                                 |  |      |        |   |               |   |        |                       |  |   |                          |   |       |   |      |              |   |          |              |  |   |           |   |  |   |        |  
|Additional paid-in-capital                                   |  |      | 226,857 |   |               |   | 279,906 |                       |  |   |                          |   |       |   |      |              |   | 506,763   |              |  |   | (279,906   | ) |  |   | 226,857 |  
|Accumulated deficit                                          |  |      | (16,121 | ) |               |   | (4,672  | )                     |  |   |                          |   |       |   |      |              |   | (20,793   | )            |  |   | 4,672      |   |  |   | (16,121 | )
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total stockholders equity                                   |  |      | 210,736 |   |               |   | 275,234 |                       |  |   |                          |   |       |   |      |              |   | 485,970   |              |  |   | (275,234   | ) |  |   | 210,736 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total liabilities, members capital and stockholders equity |  | $    | 277,087 |   |               | $ | 764,089 |                       |  | $ | 930,570                   |   |       | $ | 3,948 |              | $ | 1,975,694 |              |  | $ | (1,110,221 | ) |  | $ | 865,473 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  



7



---

##### Table of Contents

Condensed Consolidated Statements of

Operations for the Three Months Ended

March 31, 2005 (In thousands)



|                                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|------------------------------------------------- |  | ---- | ------ | - | ------------- | - | ------ | --------------------- |  | ------------------------- | ------ | ----- | - | ----- | ------------ | - | ------ | ------------ |  | - | ------ | - |  | - | ------ | -
|                                                  |  | LLHI |        |   | CompanyIssuer |   |        | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |        | Total |   |       | Eliminations |   |        | Consolidated | 
|Revenues                                          |  | $    |       |   |               | $ |       |                       |  | $                         | 35,751 |       | $ | 4,176 |              | $ | 39,927 |              |  | $ | (4,005 | ) |  | $ | 35,922 |  
|Cost of services                                  |  |      |       |   |               |   |       |                       |  |                           | 9,273  |       |   | 2,929 |              |   | 12,202 |              |  |   |       |   |  |   | 12,202 |  
|                                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Gross Margin                                      |  |      |       |   |               |   |       |                       |  |                           | 26,478 |       |   | 1,247 |              |   | 27,725 |              |  |   | (4,005 | ) |  |   | 23,720 |  
|                                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Other expenses:                                   |  |      |        |   |               |   |        |                       |  |                           |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Selling, general and administrative               |  |      |       |   |               |   |       |                       |  |                           | 9,705  |       |   | 853   |              |   | 10,558 |              |  |   | (4,005 | ) |  |   | 6,553  |  
|Interest - net                                    |  |      | 2,141  |   |               |   | 9,907  |                       |  |                           | 19     |       |   |      |              |   | 12,067 |              |  |   |       |   |  |   | 12,067 |  
|Depreciation and amortization                     |  |      |       |   |               |   |       |                       |  |                           | 9,608  |       |   | 226   |              |   | 9,834  |              |  |   |       |   |  |   | 9,834  |  
|                                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Total other expenses                              |  |      | 2,141  |   |               |   | 9,907  |                       |  |                           | 19,332 |       |   | 1,079 |              |   | 32,459 |              |  |   | (4,005 | ) |  |   | 28,454 |  
|                                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Income (loss) from operations                     |  |      | (2,141 | ) |               |   | (9,907 | )                     |  |                           | 7,146  |       |   | 168   |              |   | (4,734 | )            |  |   |       |   |  |   | (4,734 | )
|Equity earnings (losses) from subsidiaries        |  |      | (2,593 | ) |               |   | 7,314  |                       |  |                           | 168    |       |   |      |              |   | 4,889  |              |  |   | (4,889 | ) |  |   |       |  
|                                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Income (loss) before income taxes                 |  |      | (4,734 | ) |               |   | (2,593 | )                     |  |                           | 7,314  |       |   | 168   |              |   | 155    |              |  |   | (4,889 | ) |  |   | (4,734 | )
|Income tax provision (benefit)                    |  |      | (1,654 | ) |               |   | (1,054 | )                     |  |                           | 2,969  |       |   | 69    |              |   | 330    |              |  |   | (1,984 | ) |  |   | (1,654 | )
|                                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Net income (loss) and comprehensive income (loss) |  | $    | (3,080 | ) |               | $ | (1,539 | )                     |  | $                         | 4,345  |       | $ | 99    |              | $ | (175   | )            |  | $ | (2,905 | ) |  | $ | (3,080 | )
|                                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  



8



---

##### Table of Contents

Condensed Consolidated Statements of

Operations for the Three Months Ended

March 31, 2006 (In thousands)



|                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |       |   |              |   |        |              |  |   |        |   |  |   |        |  
|------------------------------------------------- |  | ---- | ------ | - | ------------- | - | ------- | --------------------- |  | - | ------------------------- | - |  | ----- | ----- | - | ------------ | - | ------ | ------------ |  | - | ------ | - |  | - | ------ | -
|                                                  |  | LLHI |        |   | CompanyIssuer |   |         | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Total |       |   | Eliminations |   |        | Consolidated | 
|Revenues                                          |  | $    |       |   |               | $ |        |                       |  | $ | 39,794                    |   |  | $     | 5,072 |   |              | $ | 44,866 |              |  | $ | (4,820 | ) |  | $ | 40,046 |  
|Cost of services                                  |  |      |       |   |               |   |        |                       |  |   | 10,443                    |   |  |       | 3,654 |   |              |   | 14,097 |              |  |   |       |   |  |   | 14,097 |  
|                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |       |   |              |   |        |              |  |   |        |   |  |   |        |  
|Gross margin                                      |  |      |       |   |               |   |        |                       |  |   | 29,351                    |   |  |       | 1,418 |   |              |   | 30,769 |              |  |   | (4,820 | ) |  |   | 25,949 |  
|                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |       |   |              |   |        |              |  |   |        |   |  |   |        |  
|Other expenses:                                   |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |       |   |              |   |        |              |  |   |        |   |  |   |        |  
|Selling, general and administrative               |  |      |       |   |               |   |        |                       |  |   | 11,016                    |   |  |       | 989   |   |              |   | 12,005 |              |  |   | (4,820 | ) |  |   | 7,185  |  
|Interest - net                                    |  |      | 2,446  |   |               |   | 10,673  |                       |  |   | (43                       | ) |  |       | (3    | ) |              |   | 13,073 |              |  |   |       |   |  |   | 13,073 |  
|Depreciation and amortization                     |  |      |       |   |               |   |        |                       |  |   | 9,574                     |   |  |       | 192   |   |              |   | 9,766  |              |  |   |       |   |  |   | 9,766  |  
|                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |       |   |              |   |        |              |  |   |        |   |  |   |        |  
|Total other expenses                              |  |      | 2,446  |   |               |   | 10,673  |                       |  |   | 20,547                    |   |  |       | 1,178 |   |              |   | 34,844 |              |  |   | (4,820 | ) |  |   | 30,024 |  
|                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |       |   |              |   |        |              |  |   |        |   |  |   |        |  
|Income (loss) from operations                     |  |      | (2,446 | ) |               |   | (10,673 | )                     |  |   | 8,804                     |   |  |       | 240   |   |              |   | (4,075 | )            |  |   |       |   |  |   | (4,075 | )
|Equity earnings (losses) from subsidiaries        |  |      | (1,629 | ) |               |   | 9,044   |                       |  |   | 240                       |   |  |       |      |   |              |   | 7,655  |              |  |   | (7,655 | ) |  |   |       |  
|                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |       |   |              |   |        |              |  |   |        |   |  |   |        |  
|Income (loss) before income taxes                 |  |      | (4,075 | ) |               |   | (1,629  | )                     |  |   | 9,044                     |   |  |       | 240   |   |              |   | 3,580  |              |  |   | (7,655 | ) |  |   | (4,075 | )
|Income tax provision (benefit)                    |  |      | (1,297 | ) |               |   | (624    | )                     |  |   | 3,476                     |   |  |       | 92    |   |              |   | 1,647  |              |  |   | (2,944 | ) |  |   | (1,297 | )
|                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |       |   |              |   |        |              |  |   |        |   |  |   |        |  
|Net income (loss) and comprehensive income (loss) |  | $    | (2,778 | ) |               | $ | (1,005  | )                     |  | $ | 5,568                     |   |  | $     | 148   |   |              | $ | 1,933  |              |  | $ | (4,711 | ) |  | $ | (2,778 | )
|                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |       |   |              |   |        |              |  |   |        |   |  |   |        |  



9



---

##### Table of Contents

Condensed Consolidated Statements of Cash

Flows for the Three Months Ended

March 31, 2005 (In thousands)



|                                                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ---- | ------ | - | ------------- | - | ------- | --------------------- |  | - | ------------------------- | - |  | ----- | ---- | - | ------------ | - | ------- | ------------ |  | - | ------ | - |  | - | ------- | -
|                                                                                  |  | LLHI |        |   | CompanyIssuer |   |         | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Total |      |   | Eliminations |   |         | Consolidated | 
|Cash flows from operating activities                                              |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Net income (loss)                                                                 |  | $    | (3,080 | ) |               | $ | (1,539  | )                     |  | $ | 4,345                     |   |  | $     | 99   |   |              | $ | (175    | )            |  | $ | (2,905 | ) |  | $ | (3,080  | )
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Depreciation and amortization                                                     |  |      |       |   |               |   |        |                       |  |   | 9,608                     |   |  |       | 226  |   |              |   | 9,834   |              |  |   |       |   |  |   | 9,834   |  
|Amortization of deferred financing costs                                          |  |      | 58     |   |               |   | 474     |                       |  |   |                          |   |  |       |     |   |              |   | 532     |              |  |   |       |   |  |   | 532     |  
|Deferred taxes on income                                                          |  |      | (579   | ) |               |   | (2,025  | )                     |  |   |                          |   |  |       |     |   |              |   | (2,604  | )            |  |   |       |   |  |   | (2,604  | )
|Stock based compensation expense                                                  |  |      |       |   |               |   |        |                       |  |   | 92                        |   |  |       |     |   |              |   | 92      |              |  |   |       |   |  |   | 92      |  
|Accretion of discount on long-term debt                                           |  |      | 2,083  |   |               |   | 89      |                       |  |   |                          |   |  |       |     |   |              |   | 2,172   |              |  |   |       |   |  |   | 2,172   |  
|Equity in earnings (losses) of subsidiaries                                       |  |      | 1,539  |   |               |   | (4,345  | )                     |  |   | (99                       | ) |  |       |     |   |              |   | (2,905  | )            |  |   | 2,905  |   |  |   |        |  
|Effect of changes in operating assets and liabilities:                            |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Accounts receivable                                                               |  |      |       |   |               |   |        |                       |  |   | 96                        |   |  |       | (3   | ) |              |   | 93      |              |  |   |       |   |  |   | 93      |  
|Prepaid expenses and other current assets                                         |  |      |       |   |               |   |        |                       |  |   | (127                      | ) |  |       | (635 | ) |              |   | (762    | )            |  |   |       |   |  |   | (762    | )
|Other assets                                                                      |  |      |       |   |               |   |        |                       |  |   | 9                         |   |  |       | (10  | ) |              |   | (1      | )            |  |   |       |   |  |   | (1      | )
|Accounts payable                                                                  |  |      |       |   |               |   |        |                       |  |   | 360                       |   |  |       |     |   |              |   | 360     |              |  |   |       |   |  |   | 360     |  
|Intercompany receivable, net of payable                                           |  |      |       |   |               |   | 15,057  |                       |  |   | (15,528                   | ) |  |       | 471  |   |              |   |        |              |  |   |       |   |  |   |        |  
|Income taxes payable/refundable                                                   |  |      | (21    | ) |               |   | 2,774   |                       |  |   | (4,640                    | ) |  |       |     |   |              |   | (1,887  | )            |  |   |       |   |  |   | (1,887  | )
|Accrued liabilities                                                               |  |      |       |   |               |   | 4,267   |                       |  |   | (9                        | ) |  |       | (96  | ) |              |   | 4,162   |              |  |   |       |   |  |   | 4,162   |  
|                                                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Net cash provided by operating activities                                         |  |      |       |   |               |   | 14,752  |                       |  |   | (5,893                    | ) |  |       | 52   |   |              |   | 8,911   |              |  |   |       |   |  |   | 8,911   |  
|                                                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Cash flows from investing activities - Purchase of property                       |  |      |       |   |               |   |        |                       |  |   | (82                       | ) |  |       |     |   |              |   | (82     | )            |  |   |       |   |  |   | (82     | )
|                                                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Cash flows from financing activities - Long-term debt repayments                  |  |      |       |   |               |   | (14,752 | )                     |  |   | (16                       | ) |  |       |     |   |              |   | (14,768 | )            |  |   |       |   |  |   | (14,768 | )
|                                                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |      |       |   |               |   |        |                       |  |   | (5,991                    | ) |  |       | 52   |   |              |   | (5,939  | )            |  |   |       |   |  |   | (5,939  | )
|Cash and cash equivalents - beginning of period                                   |  |      |       |   |               |   |        |                       |  |   | 11,983                    |   |  |       | 181  |   |              |   | 12,164  |              |  |   |       |   |  |   | 12,164  |  
|                                                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Cash and cash equivalents - end of period                                         |  | $    |       |   |               | $ |        |                       |  | $ | 5,992                     |   |  | $     | 233  |   |              | $ | 6,225   |              |  | $ |       |   |  | $ | 6,225   |  
|                                                                                  |  |      |        |   |               |   |         |                       |  |   |                           |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  



10



---

##### Table of Contents

Condensed Consolidated Statements of Cash

Flows for the Three Months Ended

March 31, 2006 (In thousands)



|                                                                                  |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------------------- |  | ---- | ------ | - | ------------- | - | ------ | --------------------- |  | - | ------------------------- | - |  | ----- | ---- | - | ------------ | - | ------ | ------------ |  | - | ------ | - |  | - | ------ | -
|                                                                                  |  | LLHI |        |   | CompanyIssuer |   |        | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Total |      |   | Eliminations |   |        | Consolidated | 
|Cash flows from operating activities                                              |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|Net income (loss)                                                                 |  | $    | (2,778 | ) |               | $ | (1,005 | )                     |  | $ | 5,568                     |   |  | $     | 148  |   |              | $ | 1,933  |              |  | $ | (4,711 | ) |  | $ | (2,778 | )
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|Depreciation and amortization                                                     |  |      |       |   |               |   |       |                       |  |   | 9,574                     |   |  |       | 192  |   |              |   | 9,766  |              |  |   |       |   |  |   | 9,766  |  
|Amortization of deferred financing costs                                          |  |      | 59     |   |               |   | 486    |                       |  |   |                          |   |  |       |     |   |              |   | 545    |              |  |   |       |   |  |   | 545    |  
|Deferred taxes on income                                                          |  |      | (654   | ) |               |   | (285   | )                     |  |   | (1,898                    | ) |  |       |     |   |              |   | (2,837 | )            |  |   |       |   |  |   | (2,837 | )
|Stock based compensation expense                                                  |  |      |       |   |               |   |       |                       |  |   | 95                        |   |  |       |     |   |              |   | 95     |              |  |   |       |   |  |   | 95     |  
|Accretion of discount on long-term debt                                           |  |      | 2,387  |   |               |   | 99     |                       |  |   |                          |   |  |       |     |   |              |   | 2,486  |              |  |   |       |   |  |   | 2,486  |  
|Equity in earnings (losses) of subsidiaries                                       |  |      | 1,005  |   |               |   | (5,568 | )                     |  |   | (148                      | ) |  |       |     |   |              |   | (4,711 | )            |  |   | 4,711  |   |  |   |       |  
|Effect of changes in operating assets and liabilities:                            |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|Accounts receivable                                                               |  |      |       |   |               |   |       |                       |  |   | (1,016                    | ) |  |       | (101 | ) |              |   | (1,117 | )            |  |   |       |   |  |   | (1,117 | )
|Prepaid expenses and other current assets                                         |  |      |       |   |               |   |       |                       |  |   | 330                       |   |  |       | 51   |   |              |   | 381    |              |  |   |       |   |  |   | 381    |  
|Other assets                                                                      |  |      |       |   |               |   |       |                       |  |   | (232                      | ) |  |       |     |   |              |   | (232   | )            |  |   |       |   |  |   | (232   | )
|Accounts payable                                                                  |  |      |       |   |               |   |       |                       |  |   | (752                      | ) |  |       |     |   |              |   | (752   | )            |  |   |       |   |  |   | (752   | )
|Intercompany receivable, net of payable                                           |  |      |       |   |               |   | 2,051  |                       |  |   | (2,751                    | ) |  |       | 700  |   |              |   |       |              |  |   |       |   |  |   |       |  
|Income taxes payable/refundable                                                   |  |      | (19    | ) |               |   | 6,863  |                       |  |   | (5,438                    | ) |  |       |     |   |              |   | 1,406  |              |  |   |       |   |  |   | 1,406  |  
|Accrued liabilities                                                               |  |      |       |   |               |   | 4,494  |                       |  |   | 933                       |   |  |       | (242 | ) |              |   | 5,185  |              |  |   |       |   |  |   | 5,185  |  
|                                                                                  |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|Net cash provided by operating activities                                         |  |      |       |   |               |   | 7,135  |                       |  |   | 4,265                     |   |  |       | 748  |   |              |   | 12,148 |              |  |   |       |   |  |   | 12,148 |  
|                                                                                  |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|Cash flows from investing activities - Purchase of property                       |  |      |       |   |               |   |       |                       |  |   | (610                      | ) |  |       | (399 | ) |              |   | (1,009 | )            |  |   |       |   |  |   | (1,009 | )
|                                                                                  |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|Cash flows from financing activities - Long-term debt repayments                  |  |      |       |   |               |   | (7,135 | )                     |  |   | (18                       | ) |  |       |     |   |              |   | (7,153 | )            |  |   |       |   |  |   | (7,153 | )
|Purchase of treasury stock                                                        |  |      |       |   |               |   |       |                       |  |   | (1                        | ) |  |       |     |   |              |   | (1     | )            |  |   |       |   |  |   | (1     | )
|                                                                                  |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|Net cash used in financing activities                                             |  |      |       |   |               |   | (7,135 | )                     |  |   | (19                       | ) |  |       |     |   |              |   | (7,154 | )            |  |   |       |   |  |   | (7,154 | )
|                                                                                  |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|Net increase in cash and cash equivalents                                         |  |      |       |   |               |   |       |                       |  |   | 3,636                     |   |  |       | 349  |   |              |   | 3,985  |              |  |   |       |   |  |   | 3,985  |  
|Cash and cash equivalents - beginning of period                                   |  |      |       |   |               |   |       |                       |  |   | 13,436                    |   |  |       | 555  |   |              |   | 13,991 |              |  |   |       |   |  |   | 13,991 |  
|                                                                                  |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  
|Cash and cash equivalents - end of period                                         |  | $    |       |   |               | $ |       |                       |  | $ | 17,072                    |   |  | $     | 904  |   |              | $ | 17,976 |              |  | $ |       |   |  | $ | 17,976 |  
|                                                                                  |  |      |        |   |               |   |        |                       |  |   |                           |   |  |       |      |   |              |   |        |              |  |   |        |   |  |   |        |  



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following Managements Discussion and Analysis of our Financial Condition and Results of Operations should be read in conjunction with the
condensed consolidated financial statements and notes thereto included as part of this Form 10-Q. This report contains forward-looking statements that are based upon current expectations. We sometimes identify forward-looking statements with such
words as may, will, expect, anticipate, estimate, seek, intend, believe or similar words concerning future events. The forward-looking statements
contained herein, include, without limitation, statements concerning future revenue sources and concentration, gross profit margins, selling and marketing expenses, research and development expenses, general and administrative expenses, capital
resources, additional financings or borrowings and additional losses and are subject to risks and uncertainties including, but not limited to, those discussed below and elsewhere in this Form 10-Q that could cause actual results to differ materially
from the results contemplated by these forward-looking statements. We also urge you to carefully review the risk factors set forth in other documents we file from time to time with the SEC.

Introduction

We are the leading global provider of
over-the-phone interpretation (OPI) services from English into more than 150 different languages, 24 hours a day, seven days a week. Our specially-trained, proprietary base of interpreters perform value-added OPI services which
facilitate critical business transactions and delivery of emergency and government services between our customers and limited English proficiency (LEP) speakers throughout the world. In 2005, we helped more than 19 million people
communicate across linguistic and cultural barriers, providing over 90 million billed minutes of OPI services to our customers. We offer our customers a high-quality, cost-effective alternative to staffing in-house multilingual employees or
using face-to-face interpretation. Through our OPI services, we improve our customers revenue potential, customer service and competitiveness by enhancing their ability to effectively serve the growing population of current and prospective LEP
speakers.

Overview of Operations

Our
operating revenues are derived primarily from per minute fees charged to our customers for our interpretation services. Generally, customers are charged based on the product of actual billed minutes of service and the customers contractual
rate per billed minute of service. In addition, the Company generates revenue from membership and enrollment fees, as well as fees for other OPI-related services, such as document translation.

Expenses consist primarily of cost of services, selling, general and administrative expenses, depreciation and amortization and interest expense. Cost of
services primarily include the cost of our interpreters and telecommunications related costs.



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##### Table of Contents

Results of Operations

The following table sets forth the percentages of revenue that certain items of operating data constitute for the periods indicated:



|                                    |  |                                |    |  |                                 |   
|----------------------------------- |  | ------------------------------ | -- |  | ------------------------------- | --
|                                    |  | Three MonthsEndedMarch 31,2005 |    |  | Three Months EndedMarch 31,2006 |   
|Statement of Operations data:       |  |                                |    |  |                                 |   
|Revenues                            |  | 100.0                          | %  |  | 100.0                           | % 
|                                    |  |                                |    |  |                                 |   
|Cost of services                    |  | 34.0                           | %  |  | 35.2                            | % 
|                                    |  |                                |    |  |                                 |   
|Gross margin                        |  | 66.0                           | %  |  | 64.8                            | % 
|                                    |  |                                |    |  |                                 |   
|Other expenses:                     |  |                                |    |  |                                 |   
|Selling, general and administrative |  | 18.2                           | %  |  | 17.9                            | % 
|Interest, net                       |  | 33.6                           | %  |  | 32.6                            | % 
|Depreciation and amortization       |  | 27.4                           | %  |  | 24.4                            | % 
|                                    |  |                                |    |  |                                 |   
|Total other expenses                |  | 79.2                           | %  |  | 74.9                            | % 
|                                    |  |                                |    |  |                                 |   
|Income (loss) before income taxes   |  | (13.2                          | )% |  | (10.1                           | )%
|Income tax provision (benefit)      |  | (4.6                           | )% |  | (3.2                            | )%
|                                    |  |                                |    |  |                                 |   
|Net income (loss)                   |  | (8.6                           | )% |  | (6.9                            | )%
|                                    |  |                                |    |  |                                 |   

Three Months Ended March 31, 2006 Compared to the Three Months Ended March 31, 2005.

Revenues for the three months ended March 31, 2006 were $40.0 million as compared to $35.9 million for the three months ended March 31, 2005,
an increase of $4.1 million or 11.4%. The majority of the increase in revenue is driven by a 19% increase in OPI billed minutes offset by a 6.4% decline in the average rate per billed minute.

Cost of services consists primarily of costs associated with interpretation services and customer support. Significant cost components include
compensation of interpreters and telecommunication charges. For the three months ended March 31, 2006, cost of services were $14.1 million as compared to $12.2 million for the three months ended March 31, 2005, an increase of $1.9 million
or 15.6%. This increase was primarily due to increased interpretation minutes.

Selling, general and administrative expenses for the three
months ended March 31, 2006 were $7.2 million as compared to $6.6 million for the three months ended March 31, 2005, an increase of $0.6 million or 9.1%. This increase was primarily due to the results of an increase in sales initiatives,
in addition to increased audit and tax related fees.

Interest expense for the three months ended March 31, 2006 was $13.1 million as
compared to $12.1 million for the three months ended March 31, 2005. This increase was primarily the result of an increase in interest rates.

Depreciation and amortization was $9.8 million for the three months ended March 31, 2006 which was the same as compared to $9.8 million for the three months ended March 31, 2005.

The tax benefit on loss for the three months ended March 31, 2006 was $1.3 million as compared to $1.7 million of tax benefit on loss for the three
months ended March 31, 2005.

As a result of the factors described above, net loss was $2.8 million for the three months ended
March 31, 2006 as compared to a net loss of $3.1 million for the three months ended March 31, 2005.



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##### Table of Contents

Liquidity and Capital Resources

Operating Activities. Net cash provided by operating activities for the three months ended March 31, 2006 was $12.1 million compared with net cash provided by operating activities during the three months
ended March 31, 2005 of $8.9 million. This increase is mainly attributable to the timing of tax payments, accrued payroll and other liabilities.

Investing Activities. Net cash used in investing activities was $1 million for the three months ended March 31, 2006, compared to $82,000 for the three months ended March 31, 2005. This increase was
attributable to capital expenditures spending.

Financing Activities. Net cash used in financing activities during the three months
ended March 31, 2006 was $7.2 million, compared to $14.8 million during the three months ended March 31, 2005. The decrease of $7.6 million is the result of a decrease in principal payments made on our senior secured debt.

Our principal sources of liquidity are cash flow from operations and borrowings under our senior secured credit facilities. We believe that these funds
will provide us with sufficient liquidity and capital resources for us to meet our current and future financial obligations, including our scheduled principal and interest payments, as well as to provide funds for working capital, capital
expenditures, and other needs. Our principal uses of cash are debt service requirements, capital expenditures, and working capital requirements.

Debt Service. As of March 31, 2006, we had total indebtedness of $479.7 million and $40.0 million of borrowings available under our revolver credit facility, as defined in our loan agreement and subject to customary conditions.

The senior secured credit facilities consist of a six-year $40.0 million revolving credit facility and a seven-year amortizing $285.0
million term loan facility. Borrowings under the senior credit facilities generally bear interest based on a margin over, at our option, the base rate or the reserve-adjusted LIBOR. The applicable margin for revolving credit loans will vary based
upon our leverage ratio as defined in the senior credit facilities. The senior credit facilities are secured by first priority interests in, and mortgages on, substantially all of our tangible and intangible assets and first priority pledges of all
the equity interests owned by us in our existing and future domestic subsidiaries.

Our senior subordinated notes mature in 2012 and are
guaranteed by each of our existing domestic subsidiaries on a senior subordinated basis. Interest on the notes will be payable semi-annually in cash.

Our senior discount notes mature in 2013 and rank senior to all subordinated indebtedness.

Capital
Expenditures. We expect to spend approximately $3.0 million in 2006 and approximately $3.0 million in 2007 to fund our capital expenditures as well as normal investments in telecommunications and company equipment. We plan to fund these
expenditures through net cash flows from operations.

Contractual and Commercial Commitments Summary

The following tables present our long-term contractual cash obligations as of March 31, 2006 (dollars in thousands):



|
|
|



|
|
|



|                                                         |  |       |         |      |   |        |  |      |        |      |   |        |  |            |        |  |   |        |  |   |        
|-------------------------------------------------------- |  | ----- | ------- | ---- | - | ------ |  | ---- | ------ | ---- | - | ------ |  | ---------- | ------ |  | - | ------ |  | - | -------
|                                                         |  | Total |         | 2006 |   | 2007   |  | 2008 |        | 2009 |   | 2010   |  | Thereafter
|Senior secured credit facilities                         |  | $     | 247,000 |      | $ | 10,568 |  | $    | 14,158 |      | $ | 14,158 |  | $          | 14,158 |  | $ | 14,158 |  | $ | 179,800
|Senior subordinated notes offered by Language Line, Inc. |  |       | 165,000 |      |   |       |  |      |       |      |   |       |  |            |       |  |   |       |  |   | 165,000
|Senior discount notes                                    |  |       | 108,993 |      |   |       |  |      |       |      |   |       |  |            |       |  |   |       |  |   | 108,993
|Interest payments                                        |  |       | 288,704 |      |   | 35,725 |  |      | 40,867 |      |   | 39,488 |  |            | 45,807 |  |   | 52,125 |  |   | 74,692 
|Existing subordinated promissory notes                   |  |       | 917     |      |   | 917    |  |      |       |      |   |       |  |            |       |  |   |       |  |   |       
|Operating leases                                         |  |       | 10,502  |      |   | 2,520  |  |      | 3,862  |      |   | 2,434  |  |            | 863    |  |   | 750    |  |   | 73     
|                                                         |  |       |         |      |   |        |  |      |        |      |   |        |  |            |        |  |   |        |  |   |        
|Total cash contractual obligations                       |  | $     | 821,116 |      | $ | 49,730 |  | $    | 58,887 |      | $ | 56,080 |  | $          | 60,828 |  | $ | 67,033 |  | $ | 528,558
|                                                         |  |       |         |      |   |        |  |      |        |      |   |        |  |            |        |  |   |        |  |   |        

Interest payments with respect to the senior secured credit facilities assume a variable rate of
9.74%, which represents the most recent rate applicable to these facilities. Both the senior subordinated notes offered by Language Line, Inc. and the senior discount notes are 11 1/8% and 14 1/8% fixed rate notes, respectively.



14



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##### Table of Contents

Critical Accounting Policies

In preparing the consolidated financial statements, GAAP requires management to select and apply accounting policies that involve estimates and judgment. The following accounting policies may require a higher degree
of judgment or involve amounts that could have a material impact on the consolidated financial statements.

Allowance for Doubtful Accounts
-We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make payments. We determine the allowance based upon an evaluation of individual accounts, aging of the portfolio, issues raised by
customers that may suggest non-payment, historical experience and/or the current economic environment. We might not continue to experience the same loss rates that we have in the past. If the financial condition of individual customers or the
general worldwide economy were to vary materially from the estimates and assumptions made by us, the allowance may require adjustment in the future. We evaluate the adequacy of the allowance on a regular basis, modifying, as necessary, its
assumptions, updating its record of historical experience and adjusting reserves as appropriate.

Impairment of Long-Lived Assets - We assess
the impairment of long-lived assets at least annually or when or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Customer relationships, internally developed technology,
tradenames and trademarks, and goodwill are our most significant long-lived assets and are tested annually. Impairment is measured by the difference between the carrying amount and the respective fair values, based on the best information available,
including market prices or a discounted cash flow analysis. Estimates are made on the useful lives or economic values of assets and could change base on changes in the economy or industry trends.

Claims and Legal Proceedings

In the normal course of
business, we are party of various claims and legal proceedings. We record a reserve for these matters when an adverse outcome is probable and we can reasonably estimate our potential liability. We are not currently involved in any material legal
proceedings.



|Item 3. | Quantitative and Qualitative Disclosure About Market Risk
|------- | ---------------------------------------------------------

We are exposed to certain market risks as part of our on-going business operations. Primary exposure includes changes in interest rates as borrowings under our senior credit facilities bear interest at floating rates
based on LIBOR or the prime rate, in each case plus an applicable borrowing margin. We will manage our interest rate risk by balancing the amount of fixed-rate and floating-rate debt. For fixed-rate debt, interest rate changes affect the fair market
value but do not affect earnings or cash flows. Conversely, for floating-rate debt, interest rate changes generally do not affect the fair market value but do impact our earnings and cash flows, assuming other factors are held constant.

We may use derivative financial instruments, where appropriate, to manage our interest rate risks. However, as a matter of policy we will not enter
into derivative or other financial investments for trading or speculative purposes. We do not have any speculative or leveraged derivative transactions. Most of our revenue is denominated in U.S. dollars; thus our financial results are not subject
to any material foreign currency exchange risks.



|Item 4. | Controls and Procedures.
|------- | ------------------------

The
Companys Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)
as of the end of the period covered by this quarterly report, have concluded that the Companys disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files
under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC.

There have not been any changes in the Companys internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this
report relates that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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##### Table of Contents

PART 2. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

Language
Line Holdings, Inc. is not currently involved in any material legal proceedings.



|Item 1A. | Risk Factors
|-------- | ------------

For a more
detailed explanation of the factors affecting our business, please refer to the Risk Factors section in our Form 10-K for the fiscal year ended December 31, 2005.

There have been no material changes from Risk Factors previously disclosed in our Form 10-K.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

The following table provides information about the restricted stock units repurchased by the Company during the first quarter of fiscal year 2006:



|                                  |  |                                                |  |                                           |     
|--------------------------------- |  | ---------------------------------------------- |  | ----------------------------------------- | ----
|Fiscal Period                     |  | Total Number ofRestricted StockUnits Purchased |  | Average PricePaid perRestricted StockUnit
|Three Months Ended March 31, 2006 |  | 10,000                                         |  | $                                         | 0.09



|Item 3. | Defaults upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None.



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------

(a) Exhibits



|     |  |                                                                                                                                                  
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification by Dennis G. Dracup pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                     
|     | 
|31.2 |  | Certification by Matthew T. Gibbs II pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                  
|     | 
|32.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Chief Executive Officer.
|     | 
|32.2 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Chief Financial Officer.

(b) Reports of Form 8-K

None.



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this Amendment No. 1 on Form 10-Q/A to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Monterey, California on September 19, 2006.



LANGUAGE LINE HOLDINGS, INC./s/ Dennis G. DracupDennis G. DracupChief Executive Officer and Director/s/ Matthew T. Gibbs IIMatthew T. Gibbs IIChief Financial Officer and Director




17