##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, DC
    20549
  Form 10-K
   FOR ANNUAL AND TRANSITION
    REPORTS PURSUANT TO
    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934.
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.For the fiscal year ended
    December 31, 2005ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.For the transition period
    from          to   Commission file number:
    000-21319
   Lightbridge, Inc. (Exact Name of
    Registrant as Specified in Its Charter)
  Delaware

04-3065140(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)30 Corporate Drive
    Burlington, Massachusetts(Address of Principal
    Executive Offices)

01803(Zip Code)    (781) 359-4000 (Registrants Telephone
    Number, Including Area Code)
   Securities registered pursuant
    to Section 12(b) of the Act:
    None
   Securities registered pursuant
    to Section 12(g) of the Act:
    common stock, $.01 par value per share
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 



TABLE OF
    CONTENTS
  
  PagePART IItem 1.

Business


4Item 1A.

Risk Factors


17Item 1B.

Unresolved Staff
    Comments


29Item 2.

Properties


29Item 3.

Legal
    Proceedings


29Item 4.

Submission of
    Matters to a Vote of Security Holders


30PART IIItem 5.

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


30Item 6.

Selected Financial
    Data


31Item 7.

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


32Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


50Item 8.

Financial
    Statements and Supplementary Data


51Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


51Item 9A.

Controls and
    Procedures


51Item 9B.

Other
    Information


55PART IIIItem 10.

Directors and
    Executive Officers of the Registrant


55Item 11.

Executive
    Compensation


55Item 12.

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


55Item 13.

Certain
    Relationships and Related Transactions


55Item 14.

Principal
    Accountant Fees and Services


55PART IVItem 15.

Exhibits and
    Financial Statement Schedules


55Signatures


60EX-23.1 Consent of Deloitte & Touche LLPEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of the C.E.O and C.F.O.   2




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FORM 10-K
  Form 10-K
 3




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##### Table of Contents



PART I  Item 1.
    Business  Overview
      IP-based (e-commerce point-of-sale
  point-of-sale point-of-sale,
       4




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® Limited-NJ ®
    Form 10-K
  Discontinued
    Operations
  Form 10-K,
  Products
    and Services
  PAYMENT
    PROCESSING
  IP-enabled
  Solutions Groups

FunctionsCore Solutions

The payment gateway allows
    IP-enabled
    merchants to accept credit card payments via web sites and
    mobile devices or from retail storefronts with integrated point
    of sale solutions and MOTO merchants.The Virtual Terminal and Batch
    Upload allow merchants to authorize, process, and manage credit
    card transactions manually from any computer that has an
    Internet connection and a web browser.The Merchant Interface is a secure
    web site that allows merchants to view and manage transactions
    and other details of their accounts, including activity reports
    and authorizations for purchases, credits and returns. 5




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Solutions Groups

FunctionsThe Advanced Integration Method
    (AIM) is a merchant-initiated
    server-to-server
    connection for submitting CNP transactions to the payment
    gateway.The Simple Integration Method
    (SIM) provides a solution for CNP merchants with basic
    customization needs where the payment gateway handles all steps
    in the secure transaction process.Card Present (CP) retail and
    mobile merchants may purchase third-party POS solutions or
    devices that are integrated to the Authorize.Net payment
    gateway. Merchants or solution providers integrate directly to
    the payment gateway using the CP application programming
    interface (API).Additional Services

eCheck.Net®
    allows merchants to process electronic check transactions
    directly from a web site or through the Virtual Terminal.Integrated Payment Solution
    (IPS)  IPS is a service that offers merchants
    both an Authorize.Net Payment Gateway account and Wells Fargo
    credit card processing account through an integrated payment
    system.Fraud Detection
    Suitetm(FDS) allows web merchants to detect, manage, and reduce
    potentially fraudulent credit card transactions with a
    customizable, rules and filter-based solution.Automated Recurring
    Billingtm(ARB) provides a system for CNP and eCheck.Net merchants to
    automatically handle regularly recurring billings or
    subscriptions according to a specific billing interval and
    duration.Support for Cardholder
    Authentication Programs, provided under agreement with Visa and
    MasterCard, for the benefit of merchants that sell products or
    services online, including the Verified by
    Visa®
    and
    MasterCard®
    SecureCodetmprograms for reducing liabilities and expenses of merchants
    arising from unauthorized use of credit cards.SalesBoost.Net, provided under
    agreement with eBoz, Inc., is an integrated suite of fifty web
    promotion tools designed to boost CNP merchants sales by
    attracting shoppers to their web sites.AmbironTrustwave PCI Scanning and
    Compliance Tools, provided under agreement with
    AmbironTrustWave, are leading information security and
    compliance management solutions that offer convenient and
    affordable Payment Card Industry (PCI) tools.   Core
    Solutions
  IP-enabled
    point-of-sale
 6




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Account Management
    Connection
    Methods
    
    AIM is a merchant-initiated
    server-to-server
    connection for submitting transactions to the payment gateway.
    AIM provides merchants with control over each phase of the
    customers online transaction experience, including the
    payment form and receipt page. AIM employs industry standard
    secure data encryption technology  128-bit SSL
    protocol. Additional features include: transaction key
    authentication, merchant control over all phases of the
    customers online transaction experience, and configurable
    transaction response that integrate with merchant enterprise
    applications.
    SIM is a solution for web merchants with basic customization
    needs. The Authorize.Net payment gateway handles all the steps
    in the secure transaction process  payment data
    collection, data submission and the response to the customer.
    Additional features of SIM include: a payment gateway hosted
    payment form employing 128-bit SSL data encryption, transaction
    digital fingerprints to enhance security, and a customizable
    payment gateway hosted payment form
    and/or
    receipt page.
    The Company has certified approximately 85 shopping cart
    solutions providers that have integrated their
    e-commerce
    shopping carts with the payment gateway. Certified shopping
    carts are Internet companies that provide merchants with
    easy-to-implement
    checkout page solutions or software that are already integrated
    to the payment processing gateway.
    In most cases, for CP merchants, technical integration is
    handled by the merchants POS system provider (hardware or
    software). CP merchants interested in integrating directly to
    the payment gateway can use a CP API.  Additional
    Services
  eCheck.Net® e-commerce
  Integrated Payment Solution
 7




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Fraud Detection
    Suite tm
  
    Amount Filter allows merchants to set upper and lower
    transaction amount limits
    Velocity Filter allows merchants to limit the total volume of
    transactions received per hour, which is designed to help combat
    high-volume attacks common with fraudulent transactions
    Shipping-Billing Mismatch Filter helps identify high-risk and
    potentially fraudulent transactions containing an address
    mismatch
    Transaction IP Velocity Filter helps identify excessive
    transactions received from the same IP address, isolating
    suspicious activity from a single source
    Suspicious Transaction Filter helps detect suspicious
    transactions using proprietary identification criteria and
    transaction behavior analysis
    Authorized AIM IP Address feature allows merchants connected via
    the AIM feature to list server IP addresses that are
    authorized to submit transactions
    IP Address Blocking feature, allows merchants to block
    transactions from selected IP addresses  Automated Recurring
    Billing tm
  Support for Cardholder Authentication Programs ® ® tm
  SalesBoost.Net
  AmbironTrustwave PCI Scanning and Compliance Tools
  set-up
 8




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TDS
    Solutions Groups

FunctionsCustomer Qualification
    and Acquisition

Online, real-time transaction
    processing services and contact center services to help carriers
    qualify applicants and activate service.Transaction processing services
    include applicant qualification and service activation, as well
    as risk management.Transaction processing interfaces
    include interfaces that support the processing of data at a
    variety of distribution channels, including retail stores,
    contact centers and Internet applications, and voice recognition
    systems.TeleServices

TeleServices include qualification
    and activation, analyst reviews, telemarketing to existing and
    new subscribers,
    back-up and
    disaster recovery for acquisition and activation services,
    porting support and customer care.Authentication
    Services

Services that provide screening
    and authentication of identity data for users engaged in online
    transactions.Risk Management

A suite of services that make
    online, real-time inquiries into proprietary databases, industry
    databases and processing modules to screen applicants for
    potential fraud.Consulting Services

Solution Development and
    Deployment Services include requirements planning, systems
    integration, custom software development, project management,
    and training services. Business Advisory Consulting encompasses
    management consulting services designed to leverage best
    practices in telecommunications, online commerce and allied
    industries.   Customer
    Qualification and Acquisition
  Lightbridge ® Customer Acquisition
    System tm tm (CAS tm )
    point-of-sale
    
    InSighttm
    is a database containing information about a carriers
    current accounts, previous accounts, previous applicants and
    preapproved applicants. InSight can decrease a carriers
    costs for evaluating a prospective subscriber by using
    carrier-controlled data points such as subscriber payment
    histories rather than third-party data points, such as credit
    bureau reports, or manual review processes.
    Small Business Exchange, a database of credit information
    on small businesses provided under agreement with Equifax
    Information Services LLC, screens businesses for credit risk. 9




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
    CAS interfacesdeliver data from the point of sale
    directly to CAS for decisioning. If manual intervention is
    required, data is presented to the appropriate person. Once the
    decision is made, CAS communicates it to the
    point-of-sale
    agent.  Lightbridge ® Point of Purchase
    System tm (POPS tm point-of-sale dial-up
  Lightbridge ® Retail Management
    System tm (RMS tm ) point-of-sale
  Lightbridge ® Speech Interface point-of-sale
  Credit Workstation
  Browser Interface
  Activation Workstation
  Fulfillment Workstation
    TeleServices tm
  Lightbridge TeleServices back-up
    Authentication
    Services
    
    Lightbridge®Authenticate
    Nowtm:  A
    service that allows clients to authenticate the identities of
    users involved in online transactions. 10




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
    Lightbridge®FraudBridgetm:  A
    service that allows clients to screen users involved in online
    transactions for potential fraud.    Risk
    Management
    
    AirWaves OneScore:  A risk management score
    provided under agreement with RiskWise, L.L.C. that is designed
    to identify the most profitable customers, even among consumers
    whose financial history is non-existent or too thin
    for traditional risk assessment tools.
    Fraud
    Sentinel®:A
    suite of subscription fraud management tools, offered separately
    or in combination. Fraud Sentinel includes the following
    components:  ®
                    Consulting
    Services
  Lightbridge Consulting Services (LCS)
 11




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
    Solution Development and Deployment Servicesincludes
    systems installation, integration, custom software development,
    project management and training services.
    Business Advisory Consultingincludes management
    consulting services in customer acquisition, distribution and
    retention, and risk management.    Clients
    and Client Concentration
    Years Ended
    December 31,2005


2004


2003Sprint/Nextel(1)


33
%


37
%


48
%AT&T Wireless Services,
    Inc.



*


18



25Total % of Revenues from
    greater-than-10% customers


33
%


55
%


73
%     (1)
    
    Sprint Spectrum L.P. and Nextel Operations, Inc. merged on
    August 12, 2005.*
    
    Represents less than 10% of total revenues.  Payment
    Processing
    TDS
     12




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Sales and
    Marketing
  Payment
    Processing
  IP-enabled
 13




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TDS
        On-site
  Engineering,
    Research and Development
    Competition
     14




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Government
    and Industry-Specific Regulation
  e.g.
      e-commerce
   15




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e-commerce,
        Proprietary
    Rights
           16




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Employees
      Additional
    Available Information
  www.lightbridge.com. www.sec.gov.
  Item 1A.
    Risk
    Factors  If One
    or More of Our Major Clients Stops Using Our Products or
    Services or Changes the Combination of Products and Services It
    Uses, Our Operating Results Would Suffer
    Significantly.
   17




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Certain
    of Our Future Revenues Are Uncertain Because Our Clients May
    Reduce the Amounts of or Change the Combination of Our Products
    or Services They Purchase.
      Historically,
    A Majority of Our Revenues Have Been Concentrated in the
    Wireless Telecommunications Industry, Which Have Experienced
    Declining Growth Rates, Consolidation and Increasing Pressure to
    Control Costs.
   18




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
    our ability to maintain our profit margins on sales of products
    and services to companies in the wireless telecommunications
    industry;
    the financial condition of our clients and their continuing
    ability to pay us for services and products;
    our ability to develop and market new or enhanced products and
    services to new and existing clients;
    continued growth of the domestic wireless telecommunications
    markets; and
    our ability to increase market penetration in the wireless
    telecommunications market.  We and
    Our Clients Must Comply with Complex and Changing Laws and
    Regulations.
  e-commerce,
      e-commerce
 19




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We May
    Become a Party to Intellectual Property Infringement Claims,
    Which Could Harm Our Business.
      Our
    Future Revenues May Be Uncertain Because of Reliance on Third
    Parties for Marketing and Distribution.
       20




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Changes
    to Credit Card Association and ACH Rules or Practices Could
    Adversely Impact Our Authorize.Net Business.
        We
    Could Be Subject to Liability as a Result of Security Breaches,
    Service Interruptions by Cyber Terrorists or Fraudulent or
    Illegal Use of Our Services.
  e-commerce,
       21




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A
    Failure of, Error in or Damage to Our Computer and
    Telecommunications Systems Would Impair Our Ability to Conduct
    Transactions, Payment Processing and Support Services and Harm
    Our Business Operations.
    The
    Demand for Our Payment Processing Products and Services Could Be
    Negatively Affected by a Reduced Growth of
    e-Commerce
    or Delays in the Development of the Internet
    Infrastructure.
      Our
    Reliance on Suppliers and Vendors Could Adversely Affect Our
    Ability to Provide Our Services and Products to Our Clients on a
    Timely and Cost-Efficient Basis.
   22




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We
    Have Made and May Continue to Make Acquisitions, Which Involve
    Risks.
    
    We may experience difficulty in integrating and managing
    acquired businesses successfully and in realizing anticipated
    economic, operational and other benefits in a timely manner. The
    need to retain existing clients, employees, and sales and
    distribution channels of an acquired company and to integrate
    and manage differing corporate cultures can also present
    significant risks. If we are unable to successfully integrate
    and manage acquired businesses, we may incur substantial costs
    and delays or other operational, technical or financial problems.
    Our acquisition of other businesses could significantly reduce
    our available cash and liquidity. In other future acquisitions,
    we may issue equity securities that could be dilutive to our
    shareholders or we may use our remaining cash, which may have an
    adverse effect on our liquidity. We also may incur additional
    debt and amortization expense related to intangible assets as a
    result of acquisitions. This additional debt and amortization
    expense, as well as the potential impairment of any purchased
    goodwill, may materially and adversely affect our business and
    operating results. We may also be required to make continuing
    investments in acquired products or technologies to bring them
    to market, which may negatively affect our cash flows and net
    income.    
    Acquisitions may divert managements attention from our
    existing business and may damage our relationships with our key
    clients and employees.
    Acquisitions may also result in liabilities for claims not known
    at the time of acquisition as well as for assumed obligations.  The
    Success of Our Business Strategy Is Dependent on Our Ability to
    Further Penetrate into Existing Markets and to Expand into New
    or Complementary Markets.
   23




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
    growth in our existing and targeted markets;
    our ability to provide products and services to address the
    needs of those markets; and
    competition in those markets.  If We
    Do Not Continue to Enhance Our Existing Products and Services,
    and Develop or Acquire New Ones, We Will Not Be Able to Compete
    Effectively.
    
    identify and anticipate emerging technological and market trends
    affecting the markets in which we do business;
    enhance our current products and services in order to increase
    their functionality, features and cost-effectiveness to clients
    that are seeking to control costs and to meet regulatory
    requirements;
    develop or acquire new products and services that meet emerging
    client needs, such as products and services for the online
    market;
    modify our products and services in response to changing
    business practices and technical requirements of our clients, as
    well as to new regulatory requirements;
    integrate our current and future products with third-party
    products; and
    create and maintain interfaces to changing client and third
    party systems.    We
    Need to Continue to Improve or Implement our Procedures and
    Controls.
   24




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Our
    Business May Be Harmed by Errors in Our Software.
      
    we may suffer a loss of revenue if, due to software errors, we
    are temporarily unable to provide products or services to our
    clients;
    we may not be paid for the products or services provided to a
    client that contain errors, or we may be liable for losses or
    damages sustained by a client or its subscribers as a result of
    such errors;
    we may incur additional unexpected expenses to correct errors in
    our software, or to fund product development projects that we
    may undertake to minimize the occurrences of such errors in the
    future;
    we may damage our relationships with clients or suffer a loss of
    reputation within our industry;
    we may become subject to litigation or regulatory
    scrutiny; and
    our clients may terminate or fail to renew their agreements with
    us or reduce the products and services they purchase from us.    Our
    Initiatives to Improve Our Software Design and Development
    Processes May Not Be Successful.
   25




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We May
    Not Be Able to Successfully Manage Operational
    Changes.
    Our
    Quarterly Operating Results May Fluctuate.
      
    Seasonal and retail trends affect our transaction revenues, in
    both our Payment Processing and TDS businesses, as well as
    our other products and services. Transaction revenues
    historically have represented the majority of our total
    revenues. As a result, our revenues can fluctuate. For example,
    our revenues generally have been highest in the fourth quarter
    of each calendar year, particularly in the holiday shopping
    season between Thanksgiving and Christmas. In addition,
    marketing initiatives undertaken by our clients or their
    competitors may significantly affect the number of transactions
    we process.
    The sales process for our products and services offered to
    telecommunications clients is lengthy, sometimes exceeding
    eighteen months. The length of the sales process makes our
    revenues difficult to predict. The delay of one or more large
    orders could cause our quarterly revenues to fall substantially
    below expectations.
    Our consulting services revenues can fluctuate based on the
    timing of product sales and projects we perform for our clients.
    Many of our consulting engagements are of a limited duration, so
    it can be difficult for us to forecast consulting services
    revenues or staffing requirements accurately more than a few
    months in advance.
    The factors described above under the headings If One or
    More of Our Major Clients Stops Using Our Products or Services
    or Changes the Combination of Products and Services It Uses, Our
    Operating Results Would Suffer Significantly,
    Certain of Our Revenues Are Uncertain Because Our Clients
    May Reduce the Amounts of or Change the Combination of Our
    Products or Services They Purchase, and Historically
    A Majority of Our Revenues Have Been Concentrated in the
    Wireless Telecommunications Industry, Which Has Experienced
    Declining Growth Rates, Consolidation and Increasing Pressure to
    Control Costs.       26




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quarter-to-quarter
  We
    Face Significant Competition for a Limited Supply of Qualified
    Software Engineers, Consultants and Sales and Marketing
    Personnel.
    Changes
    in Management Could Affect Our Ability to Operate Our
    Business.
    We
    Face Competition from a Broad and Increasing Range of
    Vendors.
    
    providers of online payment processing services, including
    CyberSource Corporation, Plug & Pay Technologies, Inc.,
    PayPal, Inc., Google, Inc. and LinkPoint International, Inc.
    software vendors that provide one or more customer acquisition,
    customer relationship management and retention or risk
    management solutions, including ECtel Ltd., TSI
    Telecommunications Services Inc., Fair Isaac Corporation, Magnum
    Software Systems, Inc., CGI Group, Inc. and SLP Infoware;
    service providers that offer customer acquisition, customer
    relationship management and retention, risk management or
    authentication services in connection with other services,
    including Choicepoint Inc., Visa U.S.A., Experian Information
    Solutions, Inc., Equifax, Inc., Lexis Nexis, Trans Union,
    L.L.C., Schlumberger Sema plc and Amdocs Ltd;
    information technology departments within larger carriers that
    have the ability to provide products and services that are
    competitive with those we offer;
    information technology vendors that offer wireless and internet
    software applications such as CGI Group, Inc, Oracle
    Corporation, Microsoft Corporation and International Business
    Machines Corporation;
    consulting firms or systems integrators that may offer
    competitive services or the ability to develop customized
    solutions for customer acquisition and qualification, customer
    relationship management and 27




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retention or risk management, such as CGI Group, Inc., Accenture
    Ltd., BearingPoint, Inc., PeopleSoft, Inc., Siebel Systems, Inc.
    and Cap Gemini Ernst & Young; and  
    a number of alternative technologies, including profilers,
    personal identification numbers and authentication, provided by
    companies such as Verizon Communications, Inc., Authentix
    Network Inc. and Fair Isaac Corporation.      Our
    Success Depends in Part on Our Ability to Obtain Patents for, or
    Otherwise Protect, Our Proprietary Technologies.
          Our
    Foreign Operations Subject Us to Risks and Concerns Which Could
    Negatively Affect Out Business Overall.
    
    the imposition of financial and operational controls and
    regulatory restrictions by foreign governments; 28




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
    the need to comply with a wide variety of complex U.S. and
    foreign laws including, without limitation, import and export
    laws and treaties;
    fluctuations in interest and currency exchange rates;
    security risks; and
    difficulties in managing staffing and managing foreign
    subsidiary operations.  Our
    Business Could Require Additional Financing.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties        Item 3.
    Legal
    Proceedings  Net MoneyIN, Inc. v. VeriSign, Inc.,
    et al. E-Commerce
  E-Commerce
 29




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##### Table of Contents



Net MoneyIN
      Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    High


Low2005First Quarter

$
6.35


$
5.74Second Quarter

$
6.79


$
5.73Third Quarter

$
8.10


$
6.50Fourth Quarter

$
9.95


$
7.532004First Quarter

$
9.06


$
5.90Second Quarter

$
6.62


$
5.16Third Quarter

$
5.54


$
3.74Fourth Quarter

$
6.04


$
4.44  30




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Item 6.
    Selected
    Financial Data  Form 10-K. Form 10-K.
    Years Ended Dec. 31,2005


2004


2003


2002


2001(In thousands, except per share
    amounts)Statement of Operations
    Data:Revenues

$
108,278


$
115,133


$
99,023


$
107,120


$
122,373Cost of revenues


49,803



58,533



52,624



55,853



62,890Gross profit


58,475



56,600



46,399



51,267



59,483Operating expenses:Engineering and development costs


14,375



18,002



17,150



15,389



14,325Sales and marketing


18,072



17,705



8,960



6,848



8,478General and administrative


15,974



15,758



12,991



15,569



14,103Restructuring costs


1,259



4,069



1,227



3,154



173Purchased in-process research and
    development






679











Merger related costs


















5,999Total operating expenses


49,680



56,213



40,328



40,960



43,078Income from operations


8,795



387



6,071



10,307



16,405Interest income


1,937



935



1,778



2,439



4,233Equity in loss of partnership
    investment










(471
)


(464
)


Income from continuing operations
    before provision for income taxes


10,732



1,322



7,378



12,282



20,638Provision for income taxes


1,976



8,677



1,889



2,591



4,913Income (loss) from continuing
    operations


8,756



(7,355
)


5,489



9,691



15,725 31




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Years Ended Dec. 31,2005


2004


2003


2002


2001(In thousands, except per share
    amounts)Discontinued operations, net of
    income taxes:Gain on sale of INS business


12,689















Discontinued operations


(2,433
)


(8,050
)


(6,938
)


(6,061
)


(1,770
)Total discontinued operations, net
    of income taxes


10,256



(8,050
)


(6,938
)


(6,061
)


(1,770
)Net income (loss)

$
19,012


$
(15,405
)

$
(1,449
)

$
3,630


$
13,955Net income (loss) per common share
    (basic):From continuing operations

$
0.33


$
(0.28
)

$
0.20


$
0.35


$
0.56From discontinued operations


0.38



(0.30
)


(0.25
)


(0.22
)


(0.06
)Net income (loss) per common share
    (basic)

$
0.71


$
(0.58
)

$
(0.05
)

$
0.13


$
0.50Net income (loss) per common share
    (diluted):From continuing operations

$
0.32


$
(0.28
)

$
0.20


$
0.34


$
0.54From discontinued operations


0.38



(0.30
)


(0.25
)


(0.21
)


(0.06
)Net income (loss) per common share
    (diluted)

$
0.70


$
(0.58
)

$
(0.05
)

$
0.13


$
0.48Basic weighted average shares


26,670



26,643



27,015



28,030



27,987Diluted weighted average shares


27,282



26,643



27,416



28,433



28,791   December 31,2005


2004


2003


2002


2001(In thousands)Balance Sheet Data:Cash, cash equivalents and
    short-term investments

$
84,808


$
51,625


$
133,488


$
133,470


$
118,570Working capital

$
74,156


$
42,997


$
137,684


$
136,501


$
127,129Total assets

$
189,535


$
170,486


$
177,836


$
180,672


$
188,882Long-term obligations, less
    current portion

$
965


$
149


$
33


$
259


$
667Stockholders equity

$
156,953


$
135,667


$
154,503


$
159,641


$
161,522   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
       32




---



##### Table of Contents



e-commerce
    Set-up
    Operating
    Segments
    ®
 33




---



##### Table of Contents



Results
    of Operations
  Year
    Ended December 31, 2005 Compared with Year Ended
    December 31, 2004
  Revenues.
  Year Ended


Year EndedDecember 31,


December 31,


$


%2005


2004


Difference


Difference(Dollars in thousands)Transaction services

$
102,821


$
103,648


$
(827
)


(0.8
)%Consulting and maintenance services


5,457



9,851



(4,394
)


(44.6
)Software licensing and hardware






1,634



(1,634
)


(100.0
)Total

$
108,278


$
115,133


$
(6,855
)


(6.0
)%          34




---



##### Table of Contents



Cost of Revenues and Gross Profit.
    Year Ended


Year EndedDecember 31,


December 31,


$


%2005


2004


Difference


Difference(Dollars in thousands)Cost of revenues:Transaction services

$
47,263


$
54,127


$
(6,864
)


(12.7
)%Consulting and maintenance services


2,540



4,393



(1,853
)


(42.2
)Software licensing and hardware






13



(13
)


(100.0
)Total cost of revenues

$
49,803


$
58,533


$
(8,730
)


(14.9
)%Gross profit:Transaction services $

$
55,558


$
49,521


$
6,037



12.2
%Transaction services %


54.0
%


47.8
%Consulting and maintenance
    services $

$
2,917


$
5,458


$
(2,541
)


(46.6
)%Consulting and maintenance
    services %


53.5
%


55.4
%Software licensing and hardware $

$



$
1,621


$
(1,621
)


(100.0
)%Software licensing and hardware %



%


99.2
%Total gross profit $

$
58,475


$
56,600


$
1,875



3.3
%Total gross profit %


54.0
%


49.2
%      35




---



##### Table of Contents



Operating Expenses.
  Year Ended


Year EndedDecember 31,


December 31,


$


%2005


2004


Difference


Difference(Dollars in thousands)Engineering and development

$
14,375


$
18,002


$
(3,627
)


(20.1
)%Sales and marketing


18,072



17,705



367



2.1General and administrative


15,974



15,758



216



1.4Restructuring


1,259



4,069



(2,810
)


(69.1
)Purchased in-process research and
    development






679



(679
)


(100.0
)Total

$
49,680


$
56,213


$
(6,533
)


(11.6
)%   Engineering and Development.
    Sales and Marketing.
   36




---



##### Table of Contents



General and Administrative.
    Restructuring.
  Purchased In-Process Research and Development
    (IPR&D).
      Interest Income.
  Provision for Income Taxes.
   37




---



##### Table of Contents



Results by Operating Segment.
  Year Ended


Year EndedDecember 31,


December 31,


$


%2005


2004


Difference


Difference(Dollars in thousands)Revenues:TDS

$
62,950


$
88,297


$
(25,347
)


(28.7
)%Payment Processing


45,328



26,836



18,492



68.9Total

$
108,278


$
115,133


$
(6,855
)


(6.0
)%Gross Profit:TDS $

$
23,049


$
37,020


$
(13,971
)


(37.7
)%TDS %


36.6
%


41.9
%Payment Processing $

$
35,426


$
19,580


$
15,846



80.9
%Payment Processing %


78.2
%


73.0
%Total gross profit $

$
58,475


$
56,600


$
1,875



3.3
%Total gross profit %


54.0
%


49.2
%Operating Income:TDS

$
11,275


$
16,118


$
(4,843
)


(30.0
)%Payment Processing


11,378



3,560



7,818



219.6Total segment operating income

$
22,653


$
19,678


$
2,975



15.1
%Reconciling items(1)


(13,858
)


(19,291
)Total operating income

$
8,795


$
387     (1)
    
    Reconciling items consist of certain corporate or centralized
    marketing and general and administrative expenses not allocated
    to our business unit segments, because these activities are
    managed separately from the business units. Also, we do not
    allocate restructuring expenses and other non-recurring gains or
    charges to our business unit segments because our Chief
    Executive Officer evaluates the segment results exclusive of
    these items. 38




---



##### Table of Contents



Revenues
    by Operating Segment
  TDS.
  Payment Processing.
  Gross
    Profit by Operating Segment
  TDS.
    Payment Processing.
  Operating
    Income by Operating Segment
  TDS.
  Payment Processing.
  Year
    Ended December 31, 2004 Compared with Year Ended
    December 31, 2003 (Adjusted to exclude operations
    discontinued during 2005)
  Revenues.
  Year Ended


Year EndedDecember 31,


December 31,


$


%2004


2003


Difference


Difference(Dollars in thousands)Transaction services

$
103,648


$
80,552


$
23,096



28.7
%Consulting and maintenance services


9,851



15,370



(5,519
)


(35.9
)Software licensing and hardware


1,634



3,101



(1,467
)


(47.3
)Total

$
115,133


$
99,023


$
16,110



(16.3
)%  39




---



##### Table of Contents



Cost of Revenues and Gross Profit.
  Year Ended


Year EndedDecember 31,


December 31,


$


%2004


2003


Difference


Difference(Dollars in thousands)Cost of revenues:Transaction services

$
54,127


$
45,574


$
8,553



18.8
%Consulting and maintenance services


4,393



6,331



(1,938
)


(30.6
)Software licensing and hardware


13



719



(706
)


(98.2
)Total cost of revenues

$
58,533


$
52,624


$
5,909



11.2
%Gross profit:Transaction services $

$
49,521


$
34,978


$
14,543



41.6
%Transaction services %


47.8
%


43.4
%Consulting and maintenance
    services $

$
5,458


$
9,039


$
(3,581
)


(39.6
)%Consulting and maintenance
    services %


55.4
%


58.8
%Software licensing and hardware $

$
1,621


$
2,382


$
(761
)


(31.9
)%Software licensing and hardware %


99.2
%


76.8
%Total gross profit $

$
56,600


$
46,399


$
10,201



22.0
%Total gross profit %


49.2
%


46.9
%    40




---



##### Table of Contents



Operating Expenses.
  Year Ended


Year EndedDecember 31,


December 31,


$


%2004


2003


Difference


Difference(Dollars in thousands)Engineering and development

$
18,002


$
17,150


$
852



5.0
%Sales and marketing


17,705



8,960



8,745



97.6General and administrative


15,758



12,991



2,767



21.3Restructuring


4,069



1,227



2,842



231.6Purchased in-process research and
    development


679







679



100
%Total

$
56,213


$
40,328


$
15,885



39.4
%   Engineering and Development.
  Sales and Marketing.
  General and Administrative.
  Restructuring.
  Purchased In-Process Research and Development
    (IPR&D).
 41




---



##### Table of Contents



Interest Income.
  Equity in Loss of
    Partnership Investment.
  Provision for Income Taxes.
 42




---



##### Table of Contents



Results by Operating Segment.
  Year Ended


Year EndedDecember 31,


December 31,


$


%2004


2003


Difference


Difference(Dollars in thousands)Revenues:TDS

$
88,297


$
99,023


$
(10,726
)


(10.8
)%Payment Processing


26,836







26,836



100.0Total

$
115,133


$
99,023


$
16,110



16.3
%Gross Profit:TDS $

$
37,020


$
46,399


$
(9,379
)


(20.2
)%TDS %


41.9
%


46.9
%Payment Processing $

$
19,580


$



$
19,580



100.0
%Payment Processing %


73.0
%



%Total gross profit $

$
56,600


$
46,399


$
10,201



22.0
%Total gross profit %


49.2
%


46.9
%Operating Income:TDS

$
16,118


$
22,025


$
(5,907
)


(26.8
)%Payment Processing


3,560







3,560



100.0Total segment operating income

$
19,678


$
22,025


$
(2,347
)


(10.7
)%Reconciling items(1)


(19,291
)


(15,954
)Total operating income

$
387


$
6,071     (1)
    
    Reconciling items consist of certain corporate or centralized
    marketing and general and administrative expenses not allocated
    to our business unit segments, because these activities are
    managed separately from the business units. Also, we do not
    allocate restructuring expenses and other non-recurring gains or
    charges to our business unit segments because our Chief
    Executive Officer evaluates the segment results exclusive of
    these items.  Revenues
    by Operating Segment
  TDS.
  Payment Processing.
  Gross
    Profit by Operating Segment
  TDS.
 43




---



##### Table of Contents



Payment Processing.
  Operating
    Income by Operating Segment
  TDS.
  Payment Processing.
  Discontinued
    Operations
  INS Segment
      Instant Conferencing Segment
   44




---



##### Table of Contents



Liquidity
    and Capital Resources
           45




---



##### Table of Contents



Less Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 Years(Dollars in thousands)Operating leases

$
17,156


$
3,957


$
6,927


$
4,586


$
1,686       Off-Balance
    Sheet Arrangements
   46




---



##### Table of Contents



Restructurings
    Employee Severanceand Termination


Facility Closing


AssetBenefits


and Related Costs


Impairment


TotalAccrued restructuring balance at
    January 1, 2003

$
343


$
992


$



$
1,335Restructuring
    accrual  March 2003 and June 2003


77



548



378



1,003Disposal of assets










(378
)


(378
)Cash payments


(262
)


(754
)






(1,016
)Restructuring charges






199







199Restructuring adjustments


(158
)










(158
)Accrued restructuring balance at
    December 31, 2003

$



$
985


$



$
985Restructuring
    accrual  January 2004


488











488Restructuring
    accrual  September 2004


2,090











2,090Restructuring
    accrual  December 2004


1,410



178







1,588Cash payments


(1,784
)


(841
)






(2,625
)Restructuring adjustments






(36
)






(36
)Accrued restructuring balance at
    December 31, 2004

$
2,204


$
286


$



$
2,490Restructuring
    accrual  January 2005


70



302







372Restructuring
    accrual  September 2005






1,037



654



1,691Disposal of assets










(654
)


(654
)Cash payments


(2,082
)


(650
)






(2,732
)Restructuring adjustments


(175
)


(3
)






(178
)Accrued restructuring balance at
    December 31, 2005

$
17


$
972


$



$
989      47




---



##### Table of Contents



Inflation
    Critical
    Accounting Policies and Estimates
  Form 10-K
 48




---



##### Table of Contents



Revenue Recognition.
  Allowance for Doubtful Accounts.
  Income Taxes and Deferred Taxes.
  Restructuring Estimates.
  Goodwill and Acquired Intangible Assets, Impairment of
    Long-lived Assets.
    New
    Accounting Pronouncement Not Yet Adopted
   49




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk      available-for-sale available-for-sale
   50




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  Form 10-K.
  Item 9.
    Changes
    In and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  (a)
    Evaluation
    of Disclosure Controls and Procedures  Rules 13a-15(e) 15d-15(e)
  (b)
    Managements
    Annual Report on Internal Control Over Financial
    Reporting  Rules 13a-15(f).
         51




---



##### Table of Contents



(c)
    Changes
    in Internal Control Over Financial Reporting      (d)
    Inherent
    Limitations of Disclosure Controls and Internal Control Over
    Financial Reporting   52




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        Internal
    Control  Integrated Framework
          Accounting for Income Taxes:
 53




---



##### Table of Contents



Form 10-K/A
  Accounting for Complex Transactions:
    Internal Control  Integrated Framework Internal Control  Integrated Framework
    /s/  Deloitte & Touche LLP
     54




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Documents filed as part of this report
    Report of Independent Registered
    Public Accounting FirmConsolidated Balance Sheets as of
    December 31, 2005 and 2004Consolidated Statements of
    Operations for the years ended December 31, 2005, 2004 and
    2003Consolidated Statements of
    Stockholders Equity and Comprehensive Income (Loss) for
    the years ended December 31, 2005, 2004 and 2003Consolidated Statements of Cash
    Flows for the years ended December 31, 2005, 2004 and 2003Notes to Consolidated Financial
    Statements   Consolidated Financial Statement Schedules
   55




---



##### Table of Contents



Exhibits
  Filed with

Incorporated by
    Referencethis





ExhibitExhibit No.

Description

Form 10-K

Form

Filing Date

No.2
.1

Stock Sale Agreement dated
    February  29, 2004 with InfoSpace, Inc., Go2Net, Inc.,
    Authorize.Net Corporation



8-K

March 9, 2004


2
.12
.2

Asset Purchase Agreement dated
    April  25, 2005 with VeriSign, Inc.



8-K

June 20, 2005


10
.13
.1

Amended and Restated Certificate
    of Incorporation



S-1

August 27, 1996


3
.23
.2

Amended and Restated By-Laws



S-1

June 21, 1996


3
.43
.3

Amendment to Amended and Restated
    By-Laws, adopted October 29, 1998



10-Q

November 13, 1998


3
.14
.1

Specimen Common Stock Certificate



S-1

August 27, 1996


4
.14
.2

Rights Agreement dated
    November 14, 1997 with American Stock Transfer and Trust
    Company as Rights Agent



8-A

November 21, 1997


14
.3

Form of Certificate of Designation
    of Series A Participating Cumulative Preferred Stock



8-A

November 21, 1997


A4
.4

Form of Rights Certificate



8-A

November 21, 1997


B10
.1*

1990 Incentive and Nonqualified
    Stock Option Plan



S-1

August 9, 1996


10
.610
.2*

1996 Incentive and Non-Qualified
    Stock Option Plan



S-1

August 9, 1996


10
.710
.3*

Amendment to 1996 Incentive and
    Non-Qualified Stock Option Plan



S-8

August 11, 2000


4
.810
.4*

Amendment to 1996 Incentive and
    Non-Qualified Stock Option Plan



10-Q

May 15, 2001


10
.110
.5*

1996 Employee Stock Purchase Plan



S-1

August 9, 1996


10
.810
.6*

Amendments to 1996 Stock Purchase
    Plan, as amended



10-Q

August 14, 2001


10
.110
.7*

Amendment to 1996 Stock Purchase
    Plan, as amended



10-Q

November 14, 2002


10
.110
.8*

Amendment to 1996 Stock Purchase
    Plan, as amended



10-Q

August 9, 2004


10
.210
.9*

1998 Non-Statutory Stock Option
    Plan



10-Q

August 14, 2000


10
.510
.10*

Amendment to 1998 Non-Statutory
    Stock Option Plan, as amended, effective November 16, 2000



10-K

April 2, 2001


10
.2210
.11*

2004 Stock Incentive Plan



Def.14A

April 29, 2004


10
.12*

Terms and Conditions of Stock
    Options Granted under the 2004 Stock Incentive Plan



10-Q

November 9, 2004


10
.410
.13*

Form of Notice of Grant of Stock
    Options Granted under the 2004 Stock Incentive Plan



10-Q

November 9, 2004


10
.510
.14*

Form of Notice of Stock Option
    Grants to Directors



8-K

February 22, 2005


10
.2 56




---



##### Table of Contents



Filed with

Incorporated by
    Referencethis





ExhibitExhibit No.

Description

Form 10-K

Form

Filing Date

No.10
.15*

2005 Executive Incentive Plan for
    Robert E. Donahue, Eugene J. DiDonato and Timothy C.
    OBrien and MBOs for Eugene J. DiDonato and Timothy C.
    OBrien



8-K

February 22, 2005


10
.310
.16*

2005 Business Unit Executive
    Inventive Plan and MBOs for Roy Banks



8-K

February 22, 2005


10
.410
.17*

2005 MBOs for Robert Donahue



8-K

March 17, 2005


10
.110
.18*

Corporate Executive Incentive Plan
    for People Managers and Senior Individual Contributors Grade 9
    and above dated January 1, 2006



8-K

February 21, 2006


99
.110
.19*

Business Unit Incentive Plan for
    People Managers and Senior Individual Contributors Grade 9 and
    above dated January 1, 2006



8-K

February 21, 2006


99
.210
.20*

Form of Executive Retention
    Agreement dated May 23, 2005 with each of
    Timothy C. OBrien, Eugene J. DiDonato and Roy
    Banks



8-K

May 25, 2005


10
.110
.21*

Separation Agreement and Release
    dated August 2, 2004 with Pamela D.A. Reeve



10-Q

November 9, 2004


10
.110
.22*

Separation Agreement and Release
    dated October 28, 2004 with Edward DeArias



8-K

November 10, 2004


10
.110
.23*

Separation Agreement and Release
    dated December 30, 2004 with Judith Dumont



8-K

January 13, 2005


10
.410
.24*

Employment Agreement dated
    August 2, 2004 with Robert E. Donahue



10-Q

November 9, 2004


10
.210
.25*

Employment Agreement dated
    January  7, 2005 with Robert E. Donahue



8-K

January 13, 2005


10
.110
.26*

Letter Agreement dated
    April 27, 2005 with Eugene J. DiDonato for conditional
    bonus payment



10-Q

May 10, 2005


10
.1110
.27*

Notice of Stock Option Grant for
    250,000 shares of common stock to
    Robert E. Donahue dated January 7, 2005



8-K

January 13, 2005


10
.210
.28*

Notice of Stock Option Grant for
    150,000 shares of common stock to Robert E. Donahue dated
    January 7, 2005



8-K

January 13, 2005


10
.310
.29*

Notice of Stock Option Grant for
    25,000 shares of common stock to Gary Haroian dated
    February 16, 2005



8-K

February 22, 2005


10
.110
.30*

Notice of Stock Option Grant for
    50,000 shares of common stock to
    Timothy C. OBrien dated April 27, 2005



10-Q

May 10, 2005


10
.1010
.31

Settlement Agreement dated
    May 19, 2005 with Lucent Technologies, Inc.



8-K

May 25, 2005


10
.210
.32

Office Lease dated March 5,
    1997 with Sumitomo Life Realty (NY), Inc.



10-K

March 25, 1997


10
.14 57




---



##### Table of Contents



Filed with

Incorporated by
    Referencethis





ExhibitExhibit No.

Description

Form 10-K

Form

Filing Date

No.10
.33

First Amendment dated
    July 22, 1997 and Second Amendment dated
    October  6, 1997 to Office Lease dated
    March  5, 1997 with Sumitomo Life Realty (NY),
    Inc.



10-K

March 31, 1998


10
.1610
.34

Third Amendment dated
    March 15, 1999 to Office Lease dated March 5, 1997
    with Sumitomo Life Realty (NY), Inc.



10-K

March 23, 2000


10
.18110
.35

Fourth Amendment dated
    July 16, 1999 to Office Lease dated March 5, 1997 with
    Sumitomo Life Realty (NY), Inc.



10-K

March 23, 2000


10
.18210
.36

Fifth Amendment dated
    March 10, 2000 to Office Lease dated March 5, 1997
    with Sumitomo Life Realty (NY), Inc.



10-Q

May 11, 2000


10
.1A10
.37

Sixth Amendment dated
    March 10, 2000 to Office Lease dated March 5, 1997
    with Sumitomo Life Realty (NY), Inc.



10-Q

May 11, 2000


10
.1B10
.38

Office Building Lease dated
    March  12, 1998 with 8900 Grantline Road Investors



10-Q

May 1, 1998


10
.110
.39

Office Lease dated October 4,
    1999 with New Alliance Properties, Inc.



10-K

March 23, 2000


10
.1910
.40

Office Lease dated August 15,
    2000 with Arthur Pappathanasi, trustee of 330 Scangus Nominee
    Trust



10-Q

November 8, 2000


10
.110
.41

Second Amendment of Office Lease
    dated September 7, 2005 with Arthur Pappathanasi, trustee
    of 330 Scangus Nominee Trust



8-K

September 12, 2005


10
.110
.42

Office Building Lease dated
    December  23, 2003 with Corporate Drive Corporation,
    as trustee of Corporate Drive Nominee Realty Trust



10-K

March 15, 2004


10
.3210
.43

Lease dated February 10, 2004
    with Region of Queens Municipality, LTBG TeleServices ULC



10-Q

May 10, 2004


10
.310
.44

Office Lease dated August 10,
    2004 with EOP Operating Limited Partnership



10-Q

November 9, 2004


10
.310
.45

First Amendment to Office Lease
    dated May 3, 2005 with EOP Operating Limited Partnership



10-Q

November 4, 2005


99
.110
.46

Utah Commercial Lease dated
    October  27, 2005 between Authorize.Net Corp. and
    Scarborough Building LLC



8-K

November 1, 2005


10
.110
.47

Sublease Agreement with Oracle
    USA, Inc. dated November 7, 2005



8-K

November 15, 2005


10
.123
.1

Consent of Independent Registered
    Public Accounting Firm

X24
.1

Power of Attorney (on signature
    page)

X 58




---



##### Table of Contents



Filed with

Incorporated by
    Referencethis





ExhibitExhibit No.

Description

Form 10-K

Form

Filing Date

No.31
.1

Certification of the chief
    executive officer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002

X31
.2

Certification of the chief
    financial officer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002

X32
.1

Certification of the chief
    executive officer and the chief financial officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002

X     *
    
    Management contract or compensatory plan. 59




---



##### Table of Contents



SIGNATURES      By:
    /s/  Robert
    E. Donahue   President and Chief Executive Officer
  attorney-in-fact Form 10-K Form 10-K attorney-in-fact
    Name

Title

Date/s/  Timothy
    C. OBrienTimothy
    C. OBrien

Vice President, Finance and
    Administration, Chief Financial Officer and Treasurer (Principal
    Financial and Accounting Officer)

March 24, 2006/s/  Robert
    E. DonahueRobert
    E. Donahue

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

March 24, 2006/s/  Rachelle
    B. ChongRachelle
    B. Chong

Director

March 24, 2006/s/  Gary
    HaroianGary
    Haroian

Director

March 24, 2006/s/  Kevin
    C. MeliaKevin
    C. Melia

Director

March 24, 2006/s/  Andrew
    G. MillsAndrew
    G. Mills

Director

March 24, 2006/s/  David
    G. TurnerDavid
    G. Turner

Director

March 24, 2006  60




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                  F-1




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  December 31,2005


2004(Amounts in thousands except
    share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
83,120


$
39,036Short-term investments


1,688



12,589Accounts receivable, net


11,911



14,368Other current assets


3,432



2,189Current assets of discontinued
    operations






5,515Total current assets


100,151



73,697Property and equipment, net


10,804



15,819Other assets, net


438



197Restricted cash


2,100



600Goodwill


57,628



57,628Intangible assets, net


18,414



21,247Non-current assets of discontinued
    operations






1,298Total assets

$
189,535


$
170,486LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
3,448


$
4,530Accrued compensation and benefits


5,724



4,697Other accrued liabilities


5,203



3,861Deferred rent


656



1,592Deferred revenues


2,863



2,331Funds due to merchants


7,112



5,558Accrued restructuring


989



2,490Current liabilities of discontinued
    operations






5,641Total current liabilities


25,995



30,700Deferred rent, less current portion


2,548



2,709Deferred tax liability


3,074



1,261Other long-term liabilities


965



149Total liabilities


32,582



34,819Commitments and contingencies
    (Note 9)Stockholders equity:Preferred stock, $.01 par
    value; 5,000,000 shares authorized; no shares issued or
    outstanding at December 31, 2005 and 2004






Common stock, $.01 par value;
    60,000,000 shares authorized; 30,259,882 and
    29,951,826 shares issued and 26,820,839 and
    26,512,783 shares outstanding at December 31, 2005 and
    2004, respectively


303



300Additional paid-in capital


169,648



167,465Warrants






206Accumulated other comprehensive
    income (loss)


110



(184
)Retained earnings (accumulated
    deficit)


7,679



(11,333
)Less: treasury stock, at cost;
    3,439,043 shares


(20,787
)


(20,787
)Total stockholders equity


156,953



135,667Total liabilities and
    stockholders equity

$
189,535


$
170,486    F-2




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
  Years Ended
    December 31,2005


2004


2003(Amounts in thousandsexcept per share
    amounts)Revenues:Transaction services

$
102,821


$
103,648


$
80,552Consulting and maintenance services


5,457



9,851



15,370Software licensing and hardware






1,634



3,101Total revenues


108,278



115,133



99,023Cost of revenues:Transaction services


47,263



54,127



45,574Consulting and maintenance services


2,540



4,393



6,331Software licensing and hardware






13



719Total cost of revenues


49,803



58,533



52,624Gross profit:Transaction services


55,558



49,521



34,978Consulting and maintenance services


2,917



5,458



9,039Software licensing and hardware






1,621



2,382Total gross profit


58,475



56,600



46,399Operating expenses:Engineering and development


14,375



18,002



17,150Sales and marketing


18,072



17,705



8,960General and administrative


15,974



15,758



12,991Purchased in-process research and
    development






679



Restructuring charges and related
    asset impairments


1,259



4,069



1,227Total operating expenses


49,680



56,213



40,328Income from operations


8,795



387



6,071Other income (expense):Interest income


1,937



935



1,778Equity in loss of partnership
    investment










(471
)Total other income, net


1,937



935



1,307Income from continuing operations
    before provision for income taxes


10,732



1,322



7,378Provision for income taxes


1,976



8,677



1,889Income (loss) from continuing
    operations


8,756



(7,355
)


5,489Discontinued operations, net of
    income taxes:Gain on sale of Fraud Centurion
    assets






2,673



Gain on sale of INS business


12,689







Loss from discontinued operations


(2,433
)


(10,723
)


(6,938
)Total discontinued operations, net
    of income taxes


10,256



(8,050
)


(6,938
)Net income (loss)

$
19,012


$
(15,405
)

$
(1,449
)Net income (loss) per common shares
    (basic):From continuing operations

$
0.33


$
(0.28
)

$
0.20From discontinued operations


0.38



(0.30
)


(0.25
)Net income (loss) per common share
    (basic)

$
0.71


$
(0.58
)

$
(0.05
)Net income (loss) per common share
    (diluted):From continuing operations

$
0.32


$
(0.28
)

$
0.20From discontinued operations


0.38



(0.30
)


(0.25
)Net income (loss) per common share
    (diluted):

$
0.70


$
(0.58
)

$
(0.05
)Basic weighted average shares


26,670



26,643



27,015Diluted weighted average shares


27,282



26,643



27,416    F-3




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
    AND COMPREHENSIVE INCOME (LOSS)
  Accumulated


RetainedAdditional





Other


Earnings








TotalCommon Stock


Paid-in





Comprehensive


(Accumulated


Treasury Stock


StockholdersShares


Amount


Capital


Warrants


Income/(Loss)


Deficit)


Shares


Amount


Equity(Amounts in thousands)Balance January 1,
    2003


29,401


$
296


$
165,241


$
206


$



$
5,521



2,119


$
(11,623
)

$
159,641Net loss and comprehensive loss






















(1,449
)










(1,449
)Issuance of common stock under
    employee stock purchase plan


84







435























435Exercise of common stock options


163



2



995























997Repurchase of common stock


























685



(5,332
)


(5,332
)Tax benefit from disqualifying
    dispositions of stock options










211























211Balance, December 31,
    2003


29,648



298



166,882



206







4,072



2,804



(16,955
)


154,503Net loss






















(15,405
)










(15,405
)Foreign currency loss


















(184
)














(184
)Total comprehensive loss


































(15,589
)Issuance of common stock under
    employee stock purchase plan


84







395























395Exercise of common stock options


220



2



148























150Repurchase of common stock


























635



(3,832
)


(3,832
)Tax benefit from disqualifying
    dispositions of stock options










40























40Balance, December 31,
    2004


29,952



300



167,465



206



(184
)


(11,333
)


3,439



(20,787
)


135,667Net income






















19,012











19,012Foreign currency gain


















314















314Unrealized loss on short-term
    investments


















(20
)














(20
)Total comprehensive income


































19,306Issuance of common stock under
    employee stock purchase plan


73







290























290Exercise of common stock options


235



3



1,273























1,276Expiration of warrants










206



(206
)


















Stock compensation










414























414Balance, December 31,
    2005


30,260


$
303


$
169,648


$



$
110


$
7,679



3,439


$
(20,787
)

$
156,953    F-4




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Years Ended
    December 31,2005


2004


2003(Amounts in thousands)Cash flows from operating
    activities:Net income (loss)

$
19,012


$
(15,405
)

$
(1,449
)Income (loss) from discontinued
    operations


10,256



(8,050
)


(6,938
)Income (loss) from continuing
    operations


8,756



(7,355
)


5,489Adjustments to reconcile net income
    to net cash provided by operating activities for continuing
    operations:Purchased in-process research and
    development






679



Depreciation and amortization


8,968



9,859



8,607Deferred income taxes


1,813



9,081



(1,095
)Loss on disposal of property and
    equipment


671



63



541Tax benefit from disqualifying
    dispositions of stock options






40



211Stock compensation expense


414







Changes in assets and liabilities:Accounts receivable


2,457



5,281



(996
)Other assets


(1,485
)


248



(56
)Accounts payable and accrued
    liabilities


(342
)


1,648



488Funds due to merchants


1,554



(839
)


Deferred rent


404



4,301



Deferred revenues


532



353



51Other liabilities


816



116



(226
)Net cash provided by operating
    activities of continuing operations


24,558



23,475



13,014Cash flows from investing
    activities of continuing operations:Purchases of property and equipment


(3,139
)


(13,764
)


(3,980
)Restricted cash


(1,500
)


(600
)


Purchase of short-term investments


(3,928
)


(33,490
)


(179,385
)Proceeds from sales and maturities
    of short-term investments


14,829



84,705



158,388Acquisition of Authorize.Net, less
    cash received






(77,510
)


Net cash provided by (used in)
    investing activities for continuing operations


6,262



(40,659
)


(24,977
)Cash flows from financing
    activities of continuing operations:Proceeds from issuance of common
    stock


1,566



545



1,432Repurchase of common stock






(3,832
)


(5,332
)Net cash provided by (used in)
    financing activities of continuing operations


1,566



(3,287
)


(3,900
)Effects of foreign exchange rate
    changes on cash and cash equivalents


270



(192
)


Net cash used in operating
    activities of discontinued operations


(3,589
)


(12,360
)


(5,116
)Net cash provided by investing
    activities of discontinued operations


15,017



2,374



Net increase (decrease) in cash and
    cash equivalents


44,084



(30,649
)


(20,979
)Cash and cash equivalents,
    beginning of period


39,036



69,685



90,664Cash and cash equivalents, end of
    period

$
83,120


$
39,036


$
69,685    F-5




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Business
    and Acquisition Activity  Business
  Asset Purchase IP-enabled IP-enabled
    Tangible assets acquired:Cash and cash equivalents

$
6,097Accounts receivable


1,815Property and equipment


1,655Other assets


265Liabilities assumed:Accounts payable and accrued
    expenses


(1,498
)Funds due to merchants


(6,397
)Identifiable intangible assets:In-process research and development


679Outside sales partner network


9,300Merchant customer base


7,000Trademarks


3,600Existing technology


3,162Processor relationships


300Goodwill


57,628Total allocated purchase price

$
83,606    F-6




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              2.
    Summary
    of Significant Accounting Policies  Basis of Presentation and Principles of
    Consolidation
    Significant Estimates
 F-7




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Financial Instruments
  Cash and Cash Equivalents
  Short-Term Investments available-for-sale. available-for-sale
  Property and Equipment
  Deferred rent
 F-8




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Revenue Recognition and Concentration of Credit
    Risk
  set-up Set-up
  project-by-project
   F-9




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Years Ended
    December 31,2005


2004


2003Sprint Spectrum L.P. /Nextel
    Operations. Inc.(1)


33
%


37
%


48
%AT&T Wireless Services,
    Inc.



*


18



25Total % of Revenues from
    greater-than-10% customers


33
%


55
%


73
%     (1)
    
    Sprint Spectrum L.P. and Nextel Operations, Inc. merged on
    August 12, 2005.  *
    
    Represents less than 10% of total revenue.  Goodwill and Acquired Intangible
    Assets
      2005


2004Intangible Assets:Existing technology

$
3,162


$
3,162Reseller network


9,300



9,300Merchant customer base


7,000



7,000Trademarks


3,600



3,600Processor relationships


300



30023,362



23,362Accumulated amortization


(4,948
)


(2,115
)Net

$
18,414


$
21,247    F-10




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Amortization2006

$
2,8322007


2,8322008


2,8332009


1,3172010


800Thereafter


4,200Total future amortization expense

$
14,814   Income Taxes
  Development Costs
  Foreign Currency Translation
  Supplemental
    Cash Flow Information
  Years Ended
    December 31,2005


2004


2003(In thousands)Supplemental Item:Cash paid for income taxes

$
1,481


$
2,004


$
373   Impairment of Long-Lived Assets
  Stock-Based Compensation
 F-11




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       2005


2004


2003(In thousands, except per share
    amounts)Income (loss) from continuing
    operations as reported

$
8,756


$
(7,355
)

$
5,489Add: Stock-based compensation
    included in (loss) income


414







Deduct: Total stock-based employee
    compensation expense determined under fair value method (no tax
    effects included)


(2,331
)


(2,754
)


(1,785
)Pro forma income (loss) from
    continuing operations

$
6,839


$
(10,109
)

$
3,704Income (loss) from continuing
    operations per common share  basic as reported

$
0.33


$
(0.28
)

$
0.20Income (loss) from continuing
    operations per common share  diluted as reported

$
0.32


$
(0.28
)

$
0.20Income (loss) from continuing
    operations per common share  basic pro forma

$
0.26


$
(0.38
)

$
0.14Income (loss) from continuing
    operations per common share  diluted proforma

$
0.25


$
(0.38
)

$
0.14Net income (loss) as reported

$
19,012


$
(15,405
)

$
(1,449
)Add: Stock-based compensation
    included in (loss) income


414







Deduct: Total stock-based employee
    compensation expense determined under fair value method (no tax
    effects included)


(2,520
)


(3,272
)


(2,156
)Pro forma net income (loss)

$
16,906


$
(18,677
)

$
(3,605
)Net income (loss) per common
    share  basic as reported

$
0.71


$
(0.58
)

$
(0.05
)Net income (loss) per common
    share  diluted as reported

$
0.70


$
(0.58
)

$
(0.05
)Net income (loss) per common
    share  basic pro forma

$
0.63


$
(0.70
)

$
(0.13
)Net income (loss) per common
    share  diluted pro forma

$
0.62


$
(0.70
)

$
(0.13
)     Years Ended
    December 31,2005


2004


2003Risk-free interest rate


3.68% - 4.47%



1.9% - 3.4%



2.9% - 4.7%Expected life of options grants


1- 5 years



1 - 5 years



1 - 5 yearsExpected volatility of underlying
    stock


55% - 68%



82%



86%Expected dividend payment rate, as
    a percentage of the stock price on the date of grant










  F-12




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Comprehensive Income (Loss)
  Recent
    Accounting Pronouncements 
    3.
    Discontinued
    Operations  Intelligent
    Network Solutions (INS) Business
    18-month
 F-13




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Instant
    Conferencing Business
      Years Ended
    December 31,2005


2004


2003Results of operations:Total gross profit

$
4,336


$
8,565


$
11,630Total operating expenses(1)


6,769



19,288



18,568Losses from operation of
    discontinued operations


(2,433
)


(10,723
)


(6,938
)     (1)
    
    2004 includes approximately $2.3 million of goodwill and
    intangible asset impairment charges.  4.
    Disclosures
    About Segments of an Enterprise and Related
    Information   F-14




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ®
      Sub-TotalPayment


Reportable


Reconciling


ConsolidatedDecember 31, 2005

TDS


Processing


Segments


Items


TotalRevenues

$
62,950


$
45,328


$
108,278


$



$
108,278Gross profit


23,049



35,426



58,475







58,475Operating income (loss)


11,275



11,378



22,653



(13,858
)(1)


8,795Depreciation and amortization


3,982



4,246



8,228



740
(2)


8,968   Sub-TotalPayment


Reportable


Reconciling


ConsolidatedDecember 31, 2004

TDS


Processing


Segments


Items


TotalRevenues

$
88,297


$
26,836


$
115,133


$



$
115,133Gross profit


37,020



19,580



56,600







56,600Operating income (loss)


16,118



3,560



19,678



(19,291
)(1)


387Depreciation and amortization


5,760



3,086



8,846



1,013
(2)


9,859   Sub-TotalPayment


Reportable


Reconciling


ConsolidatedDecember 31, 2003

TDS


Processing(3)


Segments


Items


TotalRevenues

$
99,023


$



$
99,023


$



$
99,023Gross profit


46,399







46,399







46,399Operating income (loss)


22,025







22,025



(15,954
)(1)


6,071Depreciation and amortization


7,918







7,918



689
(2)


8,607     (1)
    
    Reconciling items from segment operating income (loss) to
    consolidated operating income (loss) include the following:  2005


2004


2003Restructuring costs

$
1,259


$
4,069


$
1,227Unallocated corporate and
    centralized sales and marketing, general and administrative
    expenses


12,599



15,222



14,727Total

$
13,858


$
19,291


$
15,954  F-15




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (2)
    
    Represents depreciation and amortization included in the
    unallocated corporate or centralized marketing, general and
    administrative expenses.(3)
    
    On March 31, 2004 the Company acquired all of the
    outstanding stock of Authorize.Net (See Note 1).  5.
    Investment    6.
    Property
    and Equipment    2005


2004Furniture and fixtures

$
2,685


$
2,959Leasehold improvements


6,917



8,810Computer equipment


18,000



17,538Computer software


7,265



8,07434,867



37,381Less accumulated depreciation and
    amortization


(24,063
)


(21,562
)Property and equipment, net

$
10,804


$
15,819     7.
    Letter of
    Credit   F-16




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Restructuring
    Costs    Employee Severanceand Termination


Facility Closing


AssetBenefits


and Related Costs


Impairment


TotalAccrued restructuring balance at
    January 1, 2003

$
343


$
992


$



$
1,335Restructuring
    accrual  March 2003 and June 2003


77



548



378



1,003Disposal of assets










(378
)


(378
)Cash payments


(262
)


(754
)






(1,016
)Restructuring charges






199







199Restructuring adjustments


(158
)










(158
)Accrued restructuring balance at
    December 31, 2003

$



$
985


$



$
985Restructuring
    accrual  January 2004


488











488Restructuring
    accrual  September 2004


2,090











2,090Restructuring
    accrual  December 2004


1,410



178







1,588Cash payments


(1,784
)


(841
)






(2,625
)Restructuring adjustments






(36
)






(36
)Accrued restructuring balance at
    December 31, 2004

$
2,204


$
286


$



$
2,490Restructuring
    accrual  January 2005


70



302







372Restructuring
    accrual  September 2005






1,037



654



1,691Disposal of assets










(654
)


(654
)Cash payments


(2,082
)


(650
)






(2,732
)Restructuring adjustments


(175
)


(3
)






(178
)Accrued restructuring balance at
    December 31, 2005

$
17


$
972


$



$
989      F-17




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
             F-18




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Commitments
    and Contingencies  Funds Due to Merchants ®
    Letter of Credit
  Operating Leases and/or
    Restructured LeaseNet Lease Obligations


ObligationsGross Lease


Sublease


Net Lease


Included in GrossObligations


Income


Obligations


Lease Obligations2006

$
3,957


$
957


$
3,000


$
8522007


3,763



949



2,814



8722008


3,164



669



2,495



8312009


2,511







2,511



7792010


2,075







2,075



798Thereafter


1,686







1,686



732Total minimum lease payments

$
17,156


$
2,575


$
14,581


$
4,864      F-19




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Warranties and Indemnities
      Litigation Net MoneyIN,
    Inc. v. VeriSign, Inc., et al. E-Commerce
  E-Commerce Net
    MoneyIN
   F-20




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      10.
    Common
    Stock Option Plans, Warrants, Stockholder Rights Plan  Stock
    Option Plans
  996 Employee Stock Plans
  
    1996 Incentive and Nonqualified Stock Option
    Plan  The 1996 Incentive and Nonqualified Stock
    Option Plan (the 1996 Plan) provided for the issuance of options
    to purchase up to 4,350,000 shares of the Companys
    common stock. Options could be either qualified incentive stock
    options or nonqualified stock options at the discretion of the
    Board. Exercise prices must be greater than or equal to the fair
    market value on the date of grant, in the case of incentive
    stock options and nonqualified options. No further grants can be
    made under the 1996 Incentive and Nonqualified Stock Option Plan.
    1996 Employee Stock Purchase Plan  The 1996
    Employee Stock Purchase Plan provides for the sale of up to
    600,000 shares of the Companys common stock to
    employees. Employees are allowed to purchase shares at a
    discount from the lower of fair value at the beginning or end of
    the purchase periods through payroll deductions. At
    December 31, 2005, 121,104 shares were available for
    purchase and reserved for issuance under the 1996 Employee Stock
    Purchase Plan. The 1996 Employee Stock Purchase Plan was
    terminated upon expiration of the offering period ended
    January 31, 2006.  997 Stock Incentive Plan and Restricted Stock Purchase
    Plan
 F-21




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   998 Non-Statutory Stock Option Plan
  004 Stock Incentive Plan
    Weighted-AverageWeighted-


FairAverage


Value ofNumber of


Exercise


OptionsOptions


Price


Granted(In thousands)Outstanding at January 1, 2003


3,906


$
11.41Granted


393



7.27


$
3.86Exercised


(163
)


6.11Forfeited


(807
)


16.46Outstanding at December 31,
    2003


3,329



10.12Granted


2,905



5.71


$
3.12Exercised


(220
)


0.68Forfeited


(1,331
)


9.15Outstanding at December 31,
    2004


4,683



8.00Granted


1,243



6.26


$
3.20Exercised


(235
)


7.25Forfeited


(1,870
)


8.74Outstanding at December 31,
    2005


3,821


$
7.23     Weighted-AverageOptions


ExerciseExercisable


Price(In thousands)December 31, 2003


2,335


$
10.12December 31, 2004


2,502


$
10.05December 31, 2005


2,012


$
8.51  F-22




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Weighted

WeightedAverage

AverageWeighted

Remaining

ExerciseNumber

Average

Contractual

Price forNumber of

Range of Exercise

Currently

Exercise

Life

CurrentlyOptions

Prices

Exercisable

Price

(Years)

Exercisable(In thousands)



(In thousands)352


$2.00 - $4.44


240


$
3.64



7.83


$
3.58435


4.67


117



4.67



8.71



4.67568


4.82 - 5.90


210



5.57



8.38



5.58516


5.92 - 6.11


131



6.09



8.86



6.07426


6.16


87



6.16



9.04



6.16583


6.17 - 7.88


365



7.20



8.19



7.47236


8.08 - 9.95


164



8.92



6.77



8.95144


10.25  -  11.92


137



10.88



5.45



10.89451


12.12  -  12.56


451



12.27



3.29



12.27110


12.88  -  37.32


110



18.08



4.45



18.083,821





2,012


$
7.23






$
8.51   Stock Repurchases
    Total Number of

Maximum NumberShares

of SharesTotal Number



Purchased as

that Mayof Shares

Average Price

Part of Publicly

Yet be PurchasedPeriod

Purchased

Paid per Share

Announced Plan

under the PlanJanuary 1, 2004 to
    January 31, 2004














2,087,462February 1, 2004 to
    February 29, 2004














2,087,462March 1, 2004 to
    March 31, 2004


114,600


$
6.69



114,600



1,972,862April 1, 2004 to
    April 30, 2004














1,972,862May 1, 2004 to May 31,
    2004


520,000


$
5.83



520,000



1,452,862June 1, 2004 to
    December 31, 2004














1,452,862Total


634,600


$
5.99



634,600   Common Stock Warrants
  Stockholder Rights Plan
 F-23




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    11.
    Income
    Taxes    2005


2004


2003Current:Federal

$



$
(777
)

$
(83
)Foreign


113



627



State


50



(254
)


76Deferred:Federal


1,509



7,909



1,938State


304



1,172



(42
)Provision for income taxes

$
1,976


$
8,677


$
1,889  F-24




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2005


2004Current Items:Assets:Allowance for doubtful accounts

$
589


$
786Capital loss carryforwards






192Accrued expenses


1,724



1,482Restructuring reserves


507



1,353Less valuation allowance


(2,820
)


(3,813
)Net current deferred tax assets

$



$
Long-Term Items:Assets:Depreciation and amortization

$
4,394


$
4,014Acquisition costs


604



357Intangible assets


743



325Capital loss carryforwards


198



Equity compensation


170



Loss carryforwards


13,546



9,934Foreign tax credit carry-forward


817



1,822R&D tax credit carry-forward


6,907



5,699Valuation allowance


(27,379
)


(22,151
)Long-term deferred tax assets






Liabilities:Tax amortization of non-lived
    intangibles


(3,074
)


(1,261
)Long-term deferred tax liabilities


(3,074
)


(1,261
)Total net long-term deferred tax
    assets/(liabilities)

$
(3,074
)

$
(1,261
)    F-25




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     paid-in-capital
    2005


2004


2003Statutory federal income tax rate


35
%


34
%


34
%State taxes, net of federal benefit






4



1Foreign taxes






48



Foreign tax credits






(136
)


Change in valuation allowance


(12
)


864



(25
)Research & development
    credits


(5
)


228



21Change in tax exposure reserves






(70
)


Effect of liquidation of a
    subsidiary on tax attributes






(302
)


Other, net


1



(14
)


(5
)Effective tax rate


19
%


656
%


26
%     12.
    Retirement
    Plan    13.
    Earnings
    Per Share (EPS)   F-26




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2005


2004


2003Shares for basic computation


26,670



26,643



27,015Options and warrants (treasury
    stock method)


612







401Shares for diluted computation


27,282



26,643



27,416       14.
    Worldcom,
    Inc. Settlement    15.
    Subsequent
    Events   F-27




---



##### Table of Contents



LIGHTBRIDGE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   16.
    Quarterly
    Financial Data (Unaudited  Restated for
    Discontinued Operations)  Q1


Q2


Q3


Q4(In thousands, except per share
    amounts)2005Revenues

$
27,174


$
26,563


$
27,232


$
27,309Gross profit

$
13,677


$
14,548


$
14,944


$
15,306Income from operations

$
1,371


$
2,466


$
1,324


$
3,634Discontinued operations

$
(2,254
)

$
12,859


$
(268
)

$
(81
)Net income (loss)

$
(1,100
)

$
15,212


$
987


$
3,913Basic earnings (loss) per share

$
(0.04
)

$
0.57


$
0.04


$
0.15Diluted earnings (loss) per share

$
(0.04
)

$
0.56


$
0.04


$
0.142004Revenues

$
23,808


$
31,744


$
30,421


$
29,160Gross profit

$
10,433


$
16,568


$
15,169


$
14,430Income (loss) from operations

$
(740
)

$
2,670


$
(2,031
)

$
488Discontinued operations

$
(634
)

$
(1,087
)

$
(3,055
)

$
(3,274
)Net income (loss)

$
(741
)

$
573


$
(4,300
)

$
(10,937
)Basic and diluted earnings (loss)
    per share

$
(0.03
)

$
0.02


$
(0.16
)

$
(0.41
)   Forms 10-Q
    Six months ended


Nine months endedJune 30, 2005


September 30, 2005As





Aspreviously


As


previously


Asreported


restated


reported


restatedNet cash provided by (used in)
    operating activities of continuing operations

$
(5,524
)

$
7,165


$
2,780


$
15,469Net cash provided by investing
    activities of continuing operations

$
18,912


$
3,895


$
20,818


$
5,801Net cash provided by (used in)
    operating activities of discontinued operations

$
11,070


$
(1,619
)

$
11,422


$
(1,267
)Net cash provided by investing
    activities of discontinued operations

$



$
15,017


$



$
15,017   Form 10-Q
 F-28