##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-K/A
 (Amendment No. 1)
 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the fiscal year ended December 31, 2004
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the transition period from            to
 Commission file number: 000-21319
 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
    
    01803Burlington, Massachusetts
    
    (Zip Code)(Address of Principal Executive Offices)
 (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
 þ o
 þ
 o þ
 o þ
 þ o
   DOCUMENTS INCORPORATED BY REFERENCE




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EXPLANATORY NOTE
 RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
     2




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##### 



TABLE OF CONTENTS
 PagePART IIItem 6.
    
    Selected Financial Data
    
    
    4Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    5Item 8.
    
    Financial Statements and Supplementary Data
    
    
    34Item 9A.
    
    Controls and Procedures
    
    
    34PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    38Signatures
    
    
    43Ex-23.1 Consent of Deloitte & Touche LLPEx-31.1 Sect. 302  Certification of the C.E.O.Ex-31.2 Sect. 302 Certification of the C.F.O.Ex-32.1 Sect. 906 Certification of the C.E.O. & C.F.O.
   3




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##### Table of Contents



PART II
 
 Item 6. Selected Financial Data
   Years Ended Dec. 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Restated (1)(In thousands, except per share amounts)Statement of Operations Data:Revenues
    
    $
    133,055
    
    
    $
    119,978
    
    
    $
    133,438
    
    
    $
    176,616
    
    
    $
    186,644Cost of revenues
    
    
    67,890
    
    
    
    61,949
    
    
    
    65,943
    
    
    
    80,811
    
    
    
    81,732Gross profit
    
    
    65,165
    
    
    
    58,029
    
    
    
    67,495
    
    
    
    95,805
    
    
    
    104,912Operating expenses:Engineering and development costs
    
    
    29,000
    
    
    
    28,426
    
    
    
    29,269
    
    
    
    32,259
    
    
    
    29,256Sales and marketing
    
    
    22,541
    
    
    
    14,239
    
    
    
    13,270
    
    
    
    20,460
    
    
    
    22,159General and administrative
    
    
    15,987
    
    
    
    14,143
    
    
    
    18,170
    
    
    
    19,517
    
    
    
    17,955Restructuring costs
    
    
    4,346
    
    
    
    5,079
    
    
    
    3,616
    
    
    
    4,000
    
    
    
    Impairment of goodwill and other
intangible assets
    
    
    2,263
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchased in-process research and
development
    
    
    679
    
    
    
    
    
    
    
    1,618
    
    
    
    
    
    
    
    Gain on sale of Fraud Centurion assets
    
    
    (2,673
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of goodwill and acquired
workforce
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    502Merger related costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,999
    
    
    
    Total operating expenses
    
    
    72,143
    
    
    
    61,887
    
    
    
    65,943
    
    
    
    82,235
    
    
    
    69,872Income (loss) from operations
    
    
    (6,978
    )
    
    
    (3,858
    )
    
    
    1,552
    
    
    
    13,570
    
    
    
    35,040Interest income
    
    
    1,185
    
    
    
    1,778
    
    
    
    2,439
    
    
    
    4,233
    
    
    
    5,446Equity in loss of partnership investment
    
    
    
    
    
    
    (471
    )
    
    
    (464
    )
    
    
    
    
    
    
    Income (loss) before income taxes
    
    
    (5,793
    )
    
    
    (2,551
    )
    
    
    3,527
    
    
    
    17,803
    
    
    
    40,486Provision for (benefit from) income
taxes
    
    
    9,612
    
    
    
    (1,102
    )
    
    
    (103
    )
    
    
    3,848
    
    
    
    9,974Net income (loss)
    
    $
    (15,405
    )
    
    $
    (1,449
    )
    
    $
    3,630
    
    
    $
    13,955
    
    
    $
    30,512Basic earnings (loss) per share
    
    $
    (0.58
    )
    
    $
    (0.05
    )
    
    $
    0.13
    
    
    $
    0.50
    
    
    $
    1.12Diluted earnings (loss) per share
    
    $
    (0.58
    )
    
    $
    (0.05
    )
    
    $
    0.13
    
    
    $
    0.48
    
    
    $
    1.04
 4




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December 31,2004
    
    2003
    
    2002
    
    2001
    
    2000Restated (1)(In thousands)Balance Sheet Data:Cash, cash equivalents
and short-term
investments
    
    $
    51,625
    
    
    $
    133,488
    
    
    $
    133,470
    
    
    $
    118,570
    
    
    $
    98,743Working capital
    
    $
    42,997
    
    
    $
    137,684
    
    
    $
    136,501
    
    
    $
    127,129
    
    
    $
    109,672Total assets
    
    $
    170,486
    
    
    $
    177,836
    
    
    $
    180,672
    
    
    $
    188,882
    
    
    $
    187,680Long-term obligations,
less current portion
    
    $
    149
    
    
    $
    33
    
    
    $
    259
    
    
    $
    667
    
    
    $
    963Stockholders equity
    
    $
    135,667
    
    
    $
    154,503
    
    
    $
    159,641
    
    
    $
    161,522
    
    
    $
    144,986
 
 (1)
    
    The financial statements as of December 31, 2004 and for the fiscal year ended December
31, 2004, have been restated. During the fiscal 2005 year end close process, the Company
determined that, historically, the deferred income tax liability for the book and income
tax basis difference in goodwill and trademarks as a result of the Authorize.Net
acquisition in 2004 was incorrectly offset against deferred income tax assets. As a result
Company has recorded additional deferred tax expense of $1.3 million to increase its
deferred tax liability as of December 31, 2004. See Note 2, Restatement of Financial
Statements in the Notes to Financial Statements for further details. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Restatement of Financial Statements
   December 31, 2004As previouslyreported
    

As restatedBALANCE SHEET DATA:Deferred tax liability
    
    $
    
    
    
    $
    1,261Total liabilities
    
    
    33,558
    
    
    
    34,819Accumulated deficit
    
    
    (10,072
    )
    
    
    (11,333
    )Total stockholders equity
    
    
    136,928
    
    
    
    135,667STATEMENT OF OPERATIONS DATA:Income tax expense
    
    $
    8,351
    
    
    $
    9,612Net income (loss)
    
    
    (14,144
    )
    
    
    (15,405
    )Net income (loss) per common share:Basic and Diluted
    
    $
    (0.53
    )
    
    $
    (0.58
    )DEFERRED TAX VALUATION ALLOWANCE
    
    
    (24,703
    )
    
    
    (25,964
    )
  5




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Critical Accounting Policies and Estimates
   Revenue Recognition.
 Allowance for Doubtful Accounts.
 Income Taxes and Deferred Taxes.
 Restructuring Estimates.
 Goodwill and Acquired Intangible Assets.
 6




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Overview
         7




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Operating Segments
  tm tm
  8




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##### Table of Contents



Customer Concentration
  Years Ended Dec. 31,2004
    
    2003
    
    2002Sprint
    
    
    21
    %
    
    
    28
    %
    
    
    30
    %AT&T
    
    
    16
    
    
    
    21
    
    
    
    21Ericsson
    
    
    *
    
    
    
    14
    
    
    
    15Nextel
    
    
    11
    
    
    
    12
    
    
    
    11Total
    
    
    48
    %
    
    
    75
    %
    
    
    77
    %
 
 *
    
     Represents less than 10% of total revenues in 2004.  9




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Results of Operations
 Year Ended December 31, 2004 Compared with Year Ended December 31, 2003
 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
    
    
    19,898
    
    
    
    28,666
    
    
    
    (8,768
    )
    
    
    (30.6
    )Software licensing and hardware
    
    
    9,509
    
    
    
    10,760
    
    
    
    (1,251
    )
    
    
    (11.6
    )Total
    
    $
    133,055
    
    
    $
    119,978
    
    
    $
    13,077
    
    
    
    10.9
    %
      10




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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
    
    $
    54,831
    
    
    $
    45,667
    
    
    $
    9,164
    
    
    
    20.1
    %Consulting and maintenance services
    
    
    9,930
    
    
    
    12,741
    
    
    
    (2,811
    )
    
    
    (22.1
    )Software licensing and hardware
    
    
    3,129
    
    
    
    3,541
    
    
    
    (412
    )
    
    
    (11.6
    )Total cost of revenues
    
    $
    67,890
    
    
    $
    61,949
    
    
    $
    5,941
    
    
    
    9.6
    %Gross profit:Transaction services
    
    $
    48,817
    
    
    $
    34,885
    
    
    $
    13,932
    
    
    
    39.9
    %Transaction services %
    
    
    47.1
    %
    
    
    43.3
    %Consulting and maintenance services $
    
    $
    9,968
    
    
    $
    15,925
    
    
    $
    (5,957
    )
    
    
    (37.4
    )%Consulting and maintenance services %
    
    
    50.1
    %
    
    
    55.6
    %Software licensing and hardware $
    
    $
    6,380
    
    
    $
    7,219
    
    
    $
    (839
    )
    
    
    (11.6
    )%Software licensing and hardware %
    
    
    67.1
    %
    
    
    67.1
    %Total gross profit
    
    $
    65,165
    
    
    $
    58,029
    
    
    $
    7,136
    
    
    
    12.3
    %Total gross profit %
    
    
    49.0
    %
    
    
    48.4
    %
  11




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Operating Expenses.
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    $
    
    
    %2004
    
    
    2003
    
    
    Difference
    
    
    Difference(Dollars in thousands)Engineering and development
    
    $
    29,000
    
    
    $
    28,426
    
    
    $
    574
    
    
    
    2.0
    %Sales and marketing
    
    
    22,541
    
    
    
    14,239
    
    
    
    8,302
    
    
    
    58.3General and administrative
    
    
    15,987
    
    
    
    14,143
    
    
    
    1,844
    
    
    
    13.0Restructuring
    
    
    4,346
    
    
    
    5,079
    
    
    
    (733
    )
    
    
    (14.4
    )Impairment of goodwill
    
    
    1,664
    
    
    
    
    
    
    
    1,664
    
    
    
    Impairment of other intangible assets
    
    
    599
    
    
    
    
    
    
    
    599
    
    
    
    Purchased in-process research and
development
    
    
    679
    
    
    
    
    
    
    
    679
    
    
    
    Gain on sale of Fraud Centurion assets
    
    
    (2,673
    )
    
    
    
    
    
    
    (2,673
    )
    
    
    Total
    
    $
    72,143
    
    
    $
    61,887
    
    
    $
    10,256
    
    
    
    16.6
    %
 Engineering and Development.
  Sales and Marketing.
  12




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General and Administrative.
  Restructuring.
 Impairment of Intangible Assets.
 Purchased In-Process Research and Development (IPR&D).
   Gain on Sale of Fraud Centurion Assets.
 Interest Income.
 13




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Equity in Loss of Partnership Investment.
 Provision
for (Benefit from) Income Taxes.
   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
    
    
    
    INS
    
    
    17,540
    
    
    
    20,955
    
    
    
    (3,415
    )
    
    
    (16.3
    )Instant Conferencing
    
    
    382
    
    
    
    
    
    
    
    382
    
    
    
    Total
    
    $
    133,055
    
    
    $
    119,978
    
    
    $
    13,077
    
    
    
    10.9
    %Gross Profit (Loss):TDS $
    
    $
    37,020
    
    
    $
    46,399
    
    
    $
    (9,379
    )
    
    
    (20.2
    )%TDS %
    
    
    41.9
    %
    
    
    46.9
    %Payment Processing $
    
    $
    19,580
    
    
    $
    
    
    
    $
    19,580
    
    
    
    
    %Payment Processing %
    
    
    73.0
    %
    
    
    
    %INS $
    
    $
    8,790
    
    
    $
    11,630
    
    
    $
    (2,840
    )
    
    
    (24.4
    )%INS %
    
    
    50.1
    %
    
    
    55.5
    %Instant Conferencing $
    
    $
    (225
    )
    
    $
    
    
    
    $
    (225
    )
    
    
    
    %Instant Conferencing %
    
    
    (58.9
    )%
    
    
    
    %Total gross profit $
    
    $
    65,165
    
    
    $
    58,029
    
    
    $
    7,136
    
    
    
    12.3
    %Total gross profit %
    
    
    49.0
    %
    
    
    48.4
    %Operating Income (Loss):TDS
    
    $
    16,188
    
    
    $
    22,025
    
    
    $
    (5,837
    )
    
    
    (26.5
    )%Payment Processing
    
    
    3,560
    
    
    
    
    
    
    
    3,560
    
    
    
    INS
    
    
    (4,014
    )
    
    
    (2,541
    )
    
    
    (1,473
    )
    
    
    (58.0
    )Instant Conferencing
    
    
    (4,309
    )
    
    
    (3,536
    )
    
    
    (773
    )
    
    
    (21.9
    )
 14




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Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    $
    
    
    %2004
    
    
    2003
    
    
    Difference
    
    
    Difference(Dollars in thousands)Total segment operating income
    
    $
    11,425
    
    
    $
    15,948
    
    
    $
    (4,523
    )
    
    
    (28.4
    )%Reconciling items(1)
    
    
    (18,403
    )
    
    
    (19,806
    )Total operating loss
    
    $
    (6,978
    )
    
    $
    (3,858
    )
 
 (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.
 INS.
 Instant Conferencing.
 Gross Profit (Loss) by Operating Segment
 TDS.
 Payment Processing.
 INS.
 Instant Conferencing.
 Operating Income (Loss) by Operating Segment.
 TDS.
 15




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Payment Processing.
 INS.
 Instant Conferencing.
 Year Ended December 31, 2003 Compared with Year Ended December 31, 2002
 Revenues.
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    $
    
    
    %2003
    
    
    2002
    
    
    Difference
    
    
    Difference(Dollars in thousands)Transaction services
    
    $
    80,552
    
    
    $
    88,376
    
    
    $
    (7,824
    )
    
    
    (8.9
    )%Consulting and maintenance services
    
    
    28,666
    
    
    
    32,491
    
    
    
    (3,825
    )
    
    
    (11.8
    )Software licensing and hardware
    
    
    10,760
    
    
    
    12,571
    
    
    
    (1,811
    )
    
    
    (14.4
    )Total
    
    $
    119,978
    
    
    $
    133,438
    
    
    $
    (13,460
    )
    
    
    (10.1
    )%
    Cost of Revenues and Gross Profit.
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    $
    
    
    %2003
    
    
    2002
    
    
    Difference
    
    
    Difference(Dollars in thousands)Cost of revenues:Transaction services
    
    $
    45,667
    
    
    $
    49,194
    
    
    $
    (3,527
    )
    
    
    (7.2
    )%Consulting and maintenance services
    
    
    12,741
    
    
    
    13,663
    
    
    
    (922
    )
    
    
    (6.7
    )Software licensing and hardware
    
    
    3,541
    
    
    
    3,086
    
    
    
    455
    
    
    
    14.7Total cost of revenues
    
    $
    61,949
    
    
    $
    65,943
    
    
    $
    (3,994
    )
    
    
    (6.1
    )%
 16




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##### Table of Contents



Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    $
    
    
    %2003
    
    
    2002
    
    
    Difference
    
    
    Difference(Dollars in thousands)Gross profit:Transaction services $
    
    $
    34,885
    
    
    $
    39,182
    
    
    $
    (4,297
    )
    
    
    (11.0
    )%Transaction services %
    
    
    43.3
    %
    
    
    44.3
    %Consulting and maintenance services $
    
    $
    15,925
    
    
    $
    18,828
    
    
    $
    (2,903
    )
    
    
    (15.4
    )%Consulting and maintenance services %
    
    
    55.6
    %
    
    
    57.9
    %Software licensing and hardware $
    
    $
    7,219
    
    
    $
    9,485
    
    
    $
    (2,266
    )
    
    
    (23.9
    )%Software licensing and hardware %
    
    
    67.1
    %
    
    
    75.5
    %Total gross profit $
    
    $
    58,029
    
    
    $
    67,495
    
    
    $
    (9,466
    )
    
    
    (14.0
    )%Total gross profit %
    
    
    48.4
    %
    
    
    50.6
    %
    Operating Expenses.
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    $
    
    
    %2003
    
    
    2002
    
    
    Difference
    
    
    Difference(Dollars in thousands)Engineering and development
    
    $
    28,426
    
    
    $
    29,269
    
    
    $
    (843
    )
    
    
    (2.9
    )%Sales and marketing
    
    
    14,239
    
    
    
    13,270
    
    
    
    969
    
    
    
    7.3General and administrative
    
    
    14,143
    
    
    
    18,170
    
    
    
    (4,027
    )
    
    
    (22.2
    )Restructuring
    
    
    5,079
    
    
    
    3,616
    
    
    
    1,463
    
    
    
    40.5Purchased in-process research
and development
    
    
    
    
    
    
    1,618
    
    
    
    (1,618
    )
    
    
    (100.0
    )Total
    
    $
    61,887
    
    
    $
    65,943
    
    
    $
    (4,056
    )
    
    
    (6.2
    )%
 Engineering and Development.
 Sales and Marketing.
 General and Administrative.
 Restructuring.
 17




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##### Table of Contents



In-Process Research and Development (IPR&D).
  Interest Income.
 Equity in Loss of Partnership Investment.
 Provision for (Benefit from) Income Taxes.
 Results by Operating Segment.
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    $
    
    
    %2003
    
    
    2002
    
    
    Difference
    
    
    Difference(Dollars in thousands)Revenues:TDS
    
    $
    99,023
    
    
    $
    107,121
    
    
    $
    (8,098
    )
    
    
    (7.6
    )%INS
    
    
    20,955
    
    
    
    26,045
    
    
    
    (5,090
    )
    
    
    (19.5
    )Instant Conferencing
    
    
    
    
    
    
    272
    
    
    
    (272
    )
    
    
    (100.0
    )Total
    
    $
    119,978
    
    
    $
    133,438
    
    
    $
    (13,460
    )
    
    
    (10.1
    )%Gross Profit (Loss):TDS $
    
    $
    46,399
    
    
    $
    51,251
    
    
    $
    (4,852
    )
    
    
    (9.5
    )%TDS %
    
    
    46.9
    %
    
    
    47.8
    %INS $
    
    $
    11,630
    
    
    $
    15,972
    
    
    $
    (4,342
    )
    
    
    (27.2
    )%INS %
    
    
    55.5
    %
    
    
    61.3
    %Instant Conferencing $
    
    $
    
    
    
    $
    272
    
    
    $
    (272
    )
    
    
    (100.0
    )%Instant Conferencing %
    
    
    
    %
    
    
    100.0
    %Total gross profit $
    
    $
    58,029
    
    
    $
    67,495
    
    
    $
    (9,466
    )
    
    
    (14.0
    )%
 18




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##### Table of Contents



Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    $
    
    
    %2003
    
    
    2002
    
    
    Difference
    
    
    Difference(Dollars in thousands)Total gross profit %
    
    
    48.4
    %
    
    
    50.6
    %Operating Income (Loss):TDS
    
    $
    22,025
    
    
    $
    25,749
    
    
    $
    (3,724
    )
    
    
    (14.5
    )%INS
    
    
    (2,541
    )
    
    
    (1,986
    )
    
    
    (555
    )
    
    
    (27.9
    )Instant Conferencing
    
    
    (3,536
    )
    
    
    (4,711
    )
    
    
    1,175
    
    
    
    24.9Total segment operating income
    
    $
    15,948
    
    
    $
    19,052
    
    
    $
    (4,056
    )
    
    
    (6.2
    )%Reconciling items(1)
    
    
    (19,806
    )
    
    
    (17,500
    )Total operating income (loss)
    
    $
    (3,858
    )
    
    $
    1,552
 
 (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.
 INS.
 Instant Conferencing.
 Gross Profit (Loss) by Operating Segment
 TDS.
 INS.
 Instant Conferencing.
 Operating Income (Loss) by Operating Segment
 TDS.
 INS.
 19




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##### Table of Contents



Instant Conferencing.
 Liquidity and Capital Resources
         MoreLess than
    
    
    
    
    
    
    
    
    
    thanTotal
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 Years(Dollars in thousands)Operating leases
    
    $
    20,065
    
    
    $
    4,840
    
    
    $
    6,833
    
    
    $
    4,866
    
    
    $
    3,526Letters of credit
    
    $
    1,600
    
    
    $
    1,600
    
    
    $
    1,600
    
    
    
    
    
    
    
    
 20




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##### Table of Contents



Off-Balance Sheet Arrangements
  Restructurings
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Employee severance and termination benefits
    
    $
    
    
    
    $
    1,410
    
    
    $
    46
    
    
    $
    1,364Facility closing and related costs
    
    
    
    
    
    
    178
    
    
    
    178
    
    
    
    Total
    
    $
    
    
    
    $
    1,588
    
    
    $
    224
    
    
    $
    1,364
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Employee severance and termination benefits
    
    $
    
    
    
    $
    172
    
    
    $
    147
    
    
    $
    25
 21




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##### Table of Contents



Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Employee severance and termination benefits
    
    $
    
    
    
    $
    2,090
    
    
    $
    1,255
    
    
    $
    835
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Employee severance and termination benefits
    
    $
    
    
    
    $
    488
    
    
    $
    483
    
    
    $
    5
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Employee severance and termination benefits
    
    $
    253
    
    
    $
    (93
    )
    
    $
    160
    
    
    $
    Facility closing and related costs
    
    
    1,396
    
    
    
    137
    
    
    
    665
    
    
    
    868Total
    
    $
    1,649
    
    
    $
    44
    
    
    $
    825
    
    
    $
    868
 22




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##### Table of Contents



Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Facility closing and related costs
    
    $
    363
    
    
    $
    (36
    )
    
    $
    324
    
    
    $
    3
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Facility closing and related costs
    
    $
    622
    
    
    $
    
    
    
    $
    339
    
    
    $
    283
 Inflation
  Recent Accounting Pronouncements
  23




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##### Table of Contents



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.
  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.
   Our Revenues Are Concentrated in the Wireless Telecommunications Industry, Which Is
Experiencing Declining Growth Rates, Consolidation and Increasing Pressure to Control Costs.
  
    
    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;
 24




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##### Table of Contents




    
    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;
    
    the number of carriers seeking to implement prepaid billing services; and
    
    our ability to increase sales of our products and services internationally.
 Our Future Revenues May Be Uncertain Because of Reliance on Third Parties for Marketing and
Distribution.
    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 Authorize.Net significantly reduced 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. In addition, we may assume contingent
liabilities that may be difficult to estimate.
    
    Acquisitions may divert managements attention from our
existing business and may damage our relationships with our
key clients and employees.
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##### Table of Contents



The Success of Our Growth Strategy Is Dependent on Our Ability to Expand into New or
Complementary Markets.
  
    
    growth in our 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 and Our Clients Must Comply with Complex and Changing Laws and Regulations.
   26




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##### Table of Contents



On-Demand Voice Conferencing Services May Become Subject to Traditional Telecommunications
Carrier Regulation by Federal and State Authorities, Which Would Increase the Cost of Providing Our
Services, Require Us to Suspend Services to Existing Clients, and May Subject Us to Penalties.
  We Need to Continue to Improve or Implement our Procedures and Controls.
  27




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##### Table of Contents



Changes to Credit Card Association 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.
     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.
   28




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##### Table of Contents



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.
     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.
 29




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##### Table of Contents



Our Initiatives to Improve Our Software Design and Development Processes May Not Be
Successful.
  Our Success Is Dependent in Part on PrePay, Which May Not Achieve Market Penetration.
  If We Are Unable to Make Successful Acquisitions , Our Future Growth Will Be Limited.
  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
twenty-four months. The length of the sales process makes
our revenues difficult to predict. The delay of one or more
large orders, particularly orders for software, which
typically result in a substantial amount of non-recurring
revenue, could cause our quarterly revenues to fall
substantially below expectations.
 30




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##### Table of Contents




    
    We ship our software products within a short period after
receipt of an order, and we usually do not have a material
backlog of unfilled orders of software products.
Consequently, our revenues from software licenses in any
quarter depend substantially on the orders booked and
shipped in that quarter. As a result, a delay in the
consummation of a license agreement may cause our revenues
to fall below expectations for that quarter.
    
    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.
    Our Foreign Sales and Operations Subject Us to Risks and Concerns Which Could Negatively
Affect Our Business Overall.
  
    
    the imposition of financial and operational controls and regulatory restrictions by foreign governments;
    
    the need to comply with a wide variety of complex U.S. and foreign import and export laws and treaties;
    
    political and economic instability that may lead to reduced demand for our products and services;
    
    changes in tariffs, taxes and other barriers that may reduce our ability to sell our solutions or may
reduce the profitability of those solutions;
    
    longer payment cycles and increased difficulties in collecting accounts receivable;
    
    fluctuations in interest and currency exchange rates, which may reduce our earnings if we denominate
arrangements with international clients in the currency of the country in which our products or
services are provided, or with respect to arrangements with international clients that are U.S.
dollar-denominated, which may make our systems less price-competitive;
    
    changes in technology standards, such as interfaces between products, that are developed by foreign
groups and may require additional development efforts on our part or change the buying behavior of some
of our clients;
    
    reduced protection for intellectual property rights in some countries;
    
    difficulties in managing a global network of distributors or representatives and in staffing and
managing foreign subsidiary operations;
    
    costs and risks of localizing systems in foreign countries;
    
    additional complications and expenses related to supporting products internationally; and
    
    the possibility that our purchase agreements may be governed by foreign laws that differ significantly
from U.S. laws, which may limit our ability to enforce our rights under these agreements.
 31




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##### Table of Contents



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
VeriSign, CyberSource Corporation, Plug & Pay Technologies,
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. (TSI), Fair Isaac
Corporation, Magnum Software Systems, Inc., American
Management Systems, Incorporated and SLP Infoware;
    
    telecommunications equipment vendors that market
software-based solutions to complement their hardware
offerings, such as Hewlett-Packard Company and Ericsson;
    
    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 Oracle Corporation,
Microsoft Corporation and International Business Machine
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 retention or risk
management, such as American Management Systems,
Incorporated, Accenture Ltd., BearingPoint, Inc.,
PeopleSoft, Inc., Siebel Systems, Inc. and Cap Gemini Ernst
& Young;
    
    software vendors of prepaid wireless billing products,
including Boston Communications Group, Inc., Intervoice,
Inc., Comverse Technology, Inc., Glenayre Technologies,
Inc., VeriSign Telecommunications Services, Telemac
Cellular Corporation, Fair, Isaac & Co. Inc., ORGA
Kartensysteme GmbH, Schlumberger Sema plc, Alcatel USA,
Priority Call Management, Lucent Technologies, Inc.,
Hewlett-Packard Company (Tandem Division), Telcordia
Technologies, Inc. and Sixbell;
    
    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;
 32




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##### Table of Contents




    
    vendors that provide products and services in the wireless
data market, such as Bridgewater Systems Corporation,
OracleMobile, a division of Oracle Corporation, 4thPass,
Inc., TSI, Seven Networks, Inc. and Openwave Systems Inc.;
and
    
    vendors that provide or resell products and services in the
voice conferencing market such as Spectel, Inc., Polycom
Inc., Raindance Communications, Inc., Ptek Holdings, Inc.,
and the major worldwide telecommunications providers such
as AT&T, Sprint, and Global Crossing Limited.
   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.
  Our Success Depends in Part on Our Ability to Obtain Patents for, or Otherwise Protect, Our
Proprietary Technologies.
     33




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##### Table of Contents



We May Become a Party to Intellectual Property Infringement Claims, Which Could Harm Our
Business.
 Net
MoneyIN, Inc. v. VeriSign, Inc., et al
  Our Business Could Require Additional Financing.
  
 Item 8. Financial Statements and Supplementary Data
  
 Item 9A. Controls and Procedures
 (a)
    
    Evaluation of disclosure controls and procedures
  (b)
    
    Managements Annual Report on Internal Control Over Financial Reporting (as revised)
  34




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##### Table of Contents



(c)
    
    Changes in internal control over financial reporting
   (d)
    
    Inherent Limitations of Disclosure Controls and Internal Control Over Financial Reporting
  35




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      36




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##### Table of Contents



DELOITTE & TOUCHE LLP
 37




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    Documents filed as part of this report(1)
    
    Consolidated Financial Statements
 Report of Independent Registered Public Accounting Firm  Deloitte & Touche LLPConsolidated Balance Sheets as of December 31, 2004 (Restated) and 2003Consolidated Statements of Operations for the years ended December 31, 2004 (Restated), 2003 and 2002Consolidated Statements of Stockholders Equity for the years ended December 31, 2004 (Restated), 2003 and 2002Consolidated Statements of Cash Flows for the years ended December 31, 2004 (Restated), 2003 and 2002Notes to Consolidated Financial Statements
 (2)
    
    Consolidated Financial Statement SchedulesAll schedules have been omitted because the required information
either is not applicable or is shown in the financial statements or
notes thereto.
 38




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##### Table of Contents



(3)
    
    Exhibits
 ExhibitNo.
    
    Description2.1(1)
    
    Amended and Restated Agreement and Plan of Reorganization dated November 8, 2000 among the
Company, Lightning Merger Corporation and Corsair Communications, Inc.2.2(2)
    
    Stock Sale Agreement by and among InfoSpace, Inc., Go2Net, Inc., Authorize.Net Corporation and
Lightbridge, Inc. dated as of February 29, 2004.3.1(3)
    
    Amended and Restated Certificate of Incorporation of the Company3.2(3)
    
    Amended and Restated By-Laws of the Company3.3(4)
    
    Amendment to Amended and Restated By-Laws of the Company, adopted October 29, 19984.1(3)
    
    Specimen Certificate for Common Stock of the Company4.2(5)
    
    Rights Agreement dated as of November 14, 1997, between Lightbridge, Inc. and American Stock
Transfer and Trust Company, as Rights Agent4.3(5)
    
    Form of Certificate of Designation of Series A Participating Cumulative Preferred Stock of
Lightbridge, Inc.4.4(5)
    
    Form of Right Certificate10.1(3)
    
    1991 Registration Rights Agreement dated February 11, 1991, as amended, between the Company and
the persons named therein10.2(3)
    
    Subordinated Note and Warrant Purchase Agreement dated as of August 29, 1994 between the Company
and the Purchasers named therein, including form of Subordinated 14% Promissory Notes and form of
Common Stock Purchase Warrants10.3(3)
    
    Form of Common Stock Purchase Warrants issued August 199510.4(3)
    
    Settlement Agreement dated February 2, 1996 between the Company, BEB, Inc., BEB Limited
Partnership I, BEB Limited Partnership II, BEB Limited Partnership III, BEB Limited Partnership
IV, certain related parties and Brian Boyle10.5(3)
    
    1990 Incentive and Nonqualified Stock Option Plan10.6(3)
    
    1996 Employee Stock Purchase Plan10.7(3)
    
    Employment Agreement dated August 16, 1996 between the Company and Pamela D.A. Reeve10.8(3)
    
    Letter Agreement, dated August 26, 1996, between the Company and Brian E. Boyle, including form
of Common Stock Purchase Warrant and Registration Rights Agreement10.9(3)
    
    Office Lease dated September 30, 1994, as amended, between the Company and Hobbs Brook Office Park10.10(6)
    
    Office Lease dated March 5, 1997, between the Company and Sumitomo Life Realty (N.Y.), Inc.10.11(7)
    
    First and Second Amendments dated July 22, 1997 and October 6, 1997, respectively, to the Office
Lease included as Item 10.1010.12(8)
    
    Office Building Lease, dated March 12, 1998, between 8900 Grantline Road Investors and the Company10.13(9)
    
    Third and Fourth Amendments dated March 15, 1999 and July 16, 1999, respectively, to the office
lease included as Item 10.10
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##### Table of Contents



ExhibitNo.
    
    Description10.14(9)
    
    Office Lease dated October 4, 1999, between the Company and New Alliance Properties, Inc.10.15(9)
    
    First Amendment dated September 20, 1999 to the Office Lease included as Item 10.910.16(10)
    
    Fifth and Sixth Amendments dated March 10, 2000 to the office lease included as Item 10.1010.17(11)
    
    Employment Agreement dated May 25, 2000 between the Company and Harlan Plumley10.18(11)
    
    1996 Incentive and Non-Qualified Stock Option Plan (as amended)10.19(11)
    
    1998 Non-Statutory Stock Option Plan (as amended)10.20(12)
    
    Office lease dated August 15, 2000 between the Company and Arthur Pappathanasi, trustee of 330
Scangas Nominee Trust10.21(13)
    
    Amendment to 1998 Non-Statutory Stock Option Plan adopted on November 16, 200010.22(14)
    
    Amendment to 1996 Incentive and Non-Qualified Stock Option Plan10.23(15)
    
    Amendment to 1996 Employee Stock Purchase Plan10.24(16)
    
    Memorandum Agreement between Harlan Plumley and the Company dated April 23, 200210.25(17)
    
    Separation Agreement and Release between Carla Marcinowski and the Company dated June 28, 200210.26(17)
    
    Letter Agreement between Thomas Reynolds and the Company dated July 19, 200210.27(18)
    
    Amendment to the Companys 1996 Employee Stock Purchase Plan, as amended10.28(18)
    
    Memorandum Agreement dated August 5, 2002 by and between the Company and Pamela D.A. Reeve10.29(18)
    
    Memorandum Agreement dated August 5, 2002 by and between the Company and Judith Dumont10.30(19)
    
    Foreign Exchange Master Agreement dated March 31, 2003 by and among Citizens Bank of
Massachusetts, the Company, Corsair Communications, Inc., Coral Systems, Inc., and Lightbridge
Security Corporation.10.31(20)
    
    Separation agreement and release dated July 8,2003 between Christine Cournoyer and the Company10.32(21)
    
    Office Building Lease, dated December 23, 2003 between Corporate Drive Corporation, as Trustee
of Corporate Drive Nominee Realty Trust, and the Company10.33(2)
    
    Separation Agreement and Release between Michael Mitsock and the Company dated January 26, 200410.34(2)
    
    Separation Agreement and Release between Stefan Gladyszewski and the Company dated January 26,
200410.35(24)
    
    Lease between Region of Queens Municipality, LTBG TeleServices ULC and Lightbridge, Inc. dated
February 10, 200410.36(22)
    
    Separation Agreement and Release between Harlan Plumley and the Company dated May 20, 200410.37(22)
    
    Amendment to the 1996 Stock Purchase Plan10.38(22)
    
    2004 Stock Incentive Plan10.39(20)
    
    Separation Agreement and Release between Pamela D.A. Reeve and the Company dated August 2, 200410.40(20)
    
    Employment Agreement between Robert E. Donahue and the Company dated August 2, 2004
 40




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##### Table of Contents



ExhibitNo.
    
    Description10.41(20)
    
    Office Lease Agreement between EOP Operating Limited Partnership and the Company dated as of
August 10, 200410.42(20)
    
    Terms and Conditions of Stock Options Granted Under the Lightbridge, Inc. 2004 Stock Incentive Plan10.43(20)
    
    Form of Notice of Grant of Stock Options Under the Lightbridge, Inc. 2004 Stock Incentive Plan10.44(23)
    
    Separation Agreement and Release between Edward DeArias and the Company dated October 28, 200423.1
    
    Consent of Independent Registered Public Accounting Firm  Deloitte & Touche LLP31.1
    
    Certification of Robert E. Donahue
dated February 17, 200631.2
    
    Certification of Timothy C.
OBrien dated February 17, 200632.1
    
    Certification of Robert E. Donahue
and Timothy C. OBrien dated February 17, 2006 (furnished but
not filed with the Securities and Exchange Commission).
 
 (1)
    
    Incorporated by reference to the Companys Registration Statement on Form S-4 (Registration Number 333-50196), as filed with the Securities and Exchange Commission on November
17, 2000.(2)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.(3)
    
    Incorporated by reference to the Companys Registration Statement on Form S-1, as amended (File No. 333-6589).(4)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.(5)
    
    Incorporated by reference to the Companys Registration Statement on Form 8-A, as filed with the Securities and Exchange Commission on November 21, 1997.(6)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1996.(7)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1997.(8)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.(9)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1999.(10)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.(11)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.(12)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.(13)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2000.(14)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.(15)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.(16)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.(17)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.(18)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2002.(19)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. 41




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##### Table of Contents



(20)
    
    Incorporated by reference to the Companys Quarterly Report of Form 10-Q for the quarter ended September 30, 2004.(21)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2003.(22)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.(23)
    
    Incorporated by reference to the Companys Current Report on Form 8-K dated November 8, 2004. 42




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##### Table of Contents



SIGNATURES
  Lightbridge, Inc.By:
    /s/ Robert E. DonahueRobert E. DonahuePresident and Chief Executive Officer   Name
    
    Title
    
    Date/s/ Timothy C. OBrien
Timothy C. OBrien
    
    Vice President,
Finance and
Administration, Chief
Financial Officer and
Treasurer (Principal
Financial and
Accounting Officer)
    
    February 17, 2006/s/ Robert E. Donahue
Robert E. Donahue
    
    President, Chief
Executive Officer and
Director (Principal
Executive Officer)
    
    February 17, 2006/s/ Rachelle B. Chong *
Rachelle B. Chong
    
    Director
    
    February 17, 2006/s/ Gary Haroian *
Gary Haroian
    
    Director
    
    February 17, 2006/s/ Kevin C. Melia *
Kevin C. Melia
    
    Director
    
    February 17, 2006/s/ Andrew G. Mills *
Andrew G. Mills
    
    Director
    
    February 17, 2006/s/ David G. Turner *
David G. Turner
    
    Director
    
    February 17, 2006
 
 *
    
    Executed on behalf of the identified individuals by Timothy C. OBrien, attorney-in-fact. 43




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
 F-1




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Amounts in thousands except share and per share amounts)
 December 31,2004
    
    
    2003(As Restated,see Note 2)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    39,036
    
    
    $
    69,685Short-term investments
    
    
    12,589
    
    
    
    63,803Accounts receivable, net
    
    
    18,940
    
    
    
    20,071Deferred tax assets
    
    
    
    
    
    
    3,267Other current assets
    
    
    3,132
    
    
    
    4,158Total current assets
    
    
    73,697
    
    
    
    160,984Property and equipment, net
    
    
    16,978
    
    
    
    9,408Deferred tax assets
    
    
    
    
    
    
    4,553Other assets, net
    
    
    336
    
    
    
    362Restricted cash
    
    
    600
    
    
    
    Goodwill
    
    
    57,628
    
    
    
    1,664Intangible assets, net
    
    
    21,247
    
    
    
    865Total assets
    
    $
    170,486
    
    
    $
    177,836LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    7,300
    
    
    $
    6,825Accrued compensation and benefits
    
    
    5,073
    
    
    
    4,493Other accrued liabilities
    
    
    4,113
    
    
    
    3,887Deferred rent
    
    
    1,592
    
    
    
    Deferred revenues
    
    
    3,681
    
    
    
    5,461Funds due to merchants
    
    
    5,558
    
    
    
    Reserves for restructuring
    
    
    3,383
    
    
    
    2,634Total current liabilities
    
    
    30,700
    
    
    
    23,300Deferred rent, less current portion
    
    
    2,709
    
    
    
    Deferred tax liability
    
    
    1,261Other long-term liabilities
    
    
    149
    
    
    
    33Total liabilities
    
    
    34,819
    
    
    
    23,333Commitments and contingencies (Note 8)Stockholders equity:Preferred stock; $0.01 par value, 5,000,000 shares authorized; no shares
issued or outstanding at December 31, 2004 and 2003
    
    
    
    
    
    
    Common stock; $0.01 par value, 60,000,000 shares authorized; 29,951,826 and
29,647,795 shares issued; 26,512,783 and 26,843,352 shares outstanding at
December 31, 2004 and 2003, respectively
    
    
    300
    
    
    
    298Additional paid-in capital
    
    
    167,465
    
    
    
    166,882Warrants
    
    
    206
    
    
    
    206Foreign currency translation
    
    
    (184
    )
    
    
    (Accumulated
deficit) retained earnings
    
    
    (11,333
    )
    
    
    4,072Less treasury stock; 3,439,043 and 2,804,443 shares at cost at December 31,
2004 and 2003, respectively
    
    
    (20,787
    )
    
    
    (16,955
    )Total stockholders equity
    
    
    135,667
    
    
    
    154,503Total liabilities and stockholders equity
    
    $
    170,486
    
    
    $
    177,836
  F-2




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Amounts in thousands except per share amounts)
 Years Ended December 31,2004
    
    
    2003
    
    
    2002(As Restated,see Note 2)Revenues:Transaction services
    
    $
    103,648
    
    
    $
    80,552
    
    
    $
    88,376Consulting and maintenance services
    
    
    19,898
    
    
    
    28,666
    
    
    
    32,491Software licensing and hardware
    
    
    9,509
    
    
    
    10,760
    
    
    
    12,571Total revenues
    
    
    133,055
    
    
    
    119,978
    
    
    
    133,438Cost of revenues:Transaction services
    
    
    54,831
    
    
    
    45,667
    
    
    
    49,194Consulting and maintenance services
    
    
    9,930
    
    
    
    12,741
    
    
    
    13,663Software licensing and hardware
    
    
    3,129
    
    
    
    3,541
    
    
    
    3,086Total cost of revenues
    
    
    67,890
    
    
    
    61,949
    
    
    
    65,943Gross profit:Transaction services
    
    
    48,817
    
    
    
    34,885
    
    
    
    39,182Consulting and maintenance services
    
    
    9,968
    
    
    
    15,925
    
    
    
    18,828Software licensing and hardware
    
    
    6,380
    
    
    
    7,219
    
    
    
    9,485Total gross profit
    
    
    65,165
    
    
    
    58,029
    
    
    
    67,495Operating expenses:Engineering and development
    
    
    29,000
    
    
    
    28,426
    
    
    
    29,269Sales and marketing
    
    
    22,541
    
    
    
    14,239
    
    
    
    13,270General and administrative
    
    
    15,987
    
    
    
    14,143
    
    
    
    18,170Restructuring
    
    
    4,346
    
    
    
    5,079
    
    
    
    3,616Impairment of goodwill
    
    
    1,664
    
    
    
    
    
    
    
    Impairment of other intangible assets
    
    
    599
    
    
    
    
    
    
    
    Purchased in-process research and development
    
    
    679
    
    
    
    
    
    
    
    1,618Gain on sale of Fraud Centurion assets
    
    
    (2,673
    )
    
    
    
    
    
    
    Total operating expenses
    
    
    72,143
    
    
    
    61,887
    
    
    
    65,943Income (loss) from operations
    
    
    (6,978
    )
    
    
    (3,858
    )
    
    
    1,552Other income (expense):Interest income
    
    
    1,185
    
    
    
    1,778
    
    
    
    2,439Equity in loss of partnership investment
    
    
    
    
    
    
    (471
    )
    
    
    (464
    )Total other income, net
    
    
    1,185
    
    
    
    1,307
    
    
    
    1,975Income (loss) before provision for income taxes
    
    
    (5,793
    )
    
    
    (2,551
    )
    
    
    3,527Provision for (benefit from) income taxes
    
    
    9,612
    
    
    
    (1,102
    )
    
    
    (103
    )Net income (loss)
    
    $
    (15,405
    )
    
    $
    (1,449
    )
    
    $
    3,630Basic earnings (loss) per share (Note 13)
    
    $
    (0.58
    )
    
    $
    (0.05
    )
    
    $
    0.13Diluted earnings (loss) per share (Note 13)
    
    $
    (0.58
    )
    
    $
    (0.05
    )
    
    $
    0.13
  F-3




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 (Amounts in thousands)
 RetainedAdditional
    
    
    Foreign
    
    
    Receivable
    
    
    
    
    
    
    Earnings
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Currency
    
    
    From
    
    
    
    
    
    
    (Accumulated
    
    
    Treasury Stock
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Gain/Loss
    
    
    Stockholder
    
    
    Warrants
    
    
    Deficit)
    
    
    Shares
    
    
    Amount
    
    
    Equity(As Restated,
    
    
    
    
    
    
    
    
    
    
    (As Restated,see Note 2)
    
    
    
    
    
    
    
    
    
    
    see Note 2)Balance, January 1,
2002
    
    
    29,093
    
    
    
    291
    
    
    
    162,367
    
    
    
    
    
    
    
    (115
    )
    
    
    206
    
    
    
    1,891
    
    
    
    1,091
    
    
    
    (3,118
    )
    
    
    161,522Issuance of common
stock for cash
    
    
    72
    
    
    
    1
    
    
    
    584
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    585Exercise of common
stock options
    
    
    394
    
    
    
    4
    
    
    
    2,118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,122Retirement of
treasury stock
    
    
    (158
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (158
    )
    
    
    
    
    
    
    Repurchase of
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,186
    
    
    
    (8,505
    )
    
    
    (8,505
    )Tax benefit from
disqualifying
dispositions of stock
options
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172Shareholder note
written off as
uncollectible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,630
    
    
    
    
    
    
    
    
    
    
    
    3,630Balance,
December 31, 2002
    
    
    29,401
    
    
    
    296
    
    
    
    165,241
    
    
    
    
    
    
    
    
    
    
    
    206
    
    
    
    5,521
    
    
    
    2,119
    
    
    
    (11,623
    )
    
    
    159,641Issuance of common
stock for cash
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,449
    )
    
    
    
    
    
    
    
    
    
    
    (1,449
    )Balance,
December 31, 2003
    
    
    29,648
    
    
    $
    298
    
    
    $
    166,882
    
    
    $
    
    
    
    $
    
    
    
    $
    206
    
    
    $
    4,072
    
    
    
    2,804
    
    
    $
    (16,955
    )
    
    $
    154,503Issuance of common
stock for cash
    
    
    84
    
    
    
    
    
    
    
    395
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395Exercise of common
stock options
    
    
    220
    
    
    
    2
    
    
    
    148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150Repurchase of
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    635
    
    
    
    (3,832
    )
    
    
    (3,832
    )Foreign currency
gain/loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (184
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (184
    )Tax benefit from
disqualifying
dispositions of stock
options
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Net loss (As
Restated, see Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,405
    )
    
    
    
    
    
    
    
    
    
    
    (15,405
    )Balance,
December 31, 2004
(As Restated, see
Note 2)
    
    
    29,952
    
    
    $
    300
    
    
    $
    167,465
    
    
    $
    (184
    )
    
    $
    
    
    
    $
    206
    
    
    $
    (11,333
    )
    
    
    3,439
    
    
    $
    (20,787
    )
    
    $
    135,667
  F-4




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts in thousands)
 Years Ended December 31,2004
    
    
    2003
    
    
    2002(As Restated,see Note 2)Cash flows from operating activities:Net income (loss)
    
    $
    (15,405
    )
    
    $
    (1,449
    )
    
    $
    3,630Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Deferred income taxes
    
    
    9,081
    
    
    
    (1,095
    )
    
    
    1,732Purchased in-process research and development
    
    
    679
    
    
    
    
    
    
    
    1,618Depreciation and amortization
    
    
    10,909
    
    
    
    10,398
    
    
    
    15,326Loss on disposal of property and equipment
    
    
    63
    
    
    
    1,511
    
    
    
    735Gain on sale of Fraud Centurion assets
    
    
    (2,673
    )
    
    
    
    
    
    
    Impairment of goodwill and intangibles
    
    
    2,263
    
    
    
    
    
    
    
    Tax benefit from disqualifying dispositions of stock options
    
    
    40
    
    
    
    211
    
    
    
    172Changes in assets and liabilities:Accounts receivable
    
    
    2,967
    
    
    
    (2,392
    )
    
    
    9,964Inventories
    
    
    
    
    
    
    
    
    
    
    263Other assets
    
    
    1,316
    
    
    
    (699
    )
    
    
    2,298Accounts payable and accrued liabilities
    
    
    528
    
    
    
    1,359
    
    
    
    (3,361
    )Funds due to merchants
    
    
    (839
    )
    
    
    
    
    
    
    Other long-term liabilities
    
    
    116
    
    
    
    (226
    )
    
    
    (408
    )Deferred rent
    
    
    4,301
    
    
    
    
    
    
    
    Deferred revenues
    
    
    (1,252
    )
    
    
    1,169
    
    
    
    (1,952
    )Net cash provided by operating activities
    
    
    12,094
    
    
    
    8,787
    
    
    
    30,017Cash flows from investing activities:Purchases of property and equipment
    
    
    (14,743
    )
    
    
    (4,869
    )
    
    
    (4,370
    )Purchase of investments
    
    
    (33,490
    )
    
    
    (179,385
    )
    
    
    (119,539
    )Restricted cash
    
    
    (600
    )Net cash proceeds from the sale of Fraud Centurion assets
    
    
    2,374
    
    
    
    
    
    
    
    Proceeds from sales and maturities of short-term investments
    
    
    84,705
    
    
    
    158,388
    
    
    
    87,804Acquisition of Authorize.Net, net of cash acquired
    
    
    (77,510
    )
    
    
    
    
    
    
    Acquisition of Altawave
    
    
    
    
    
    
    
    
    
    
    (4,949
    )Net cash provided by (used in) investing activities
    
    
    (39,264
    )
    
    
    (25,866
    )
    
    
    (41,054
    )Cash flows from financing activities:Repurchases of common stock
    
    
    (3,832
    )
    
    
    (5,332
    )
    
    
    (8,505
    )Proceeds from issuance of common stock
    
    
    545
    
    
    
    1,432
    
    
    
    2,707Net cash provided by (used in) financing activities
    
    
    (3,287
    )
    
    
    (3,900
    )
    
    
    (5,798
    )Effects of foreign exchange rate changes on cash and cash equivalents
    
    
    (192
    )
    
    
    
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    (30,649
    )
    
    
    (20,979
    )
    
    
    (16,835
    )Cash and cash equivalents, beginning of year
    
    
    69,685
    
    
    
    90,664
    
    
    
    107,499Cash and cash equivalents, end of year
    
    $
    39,036
    
    
    $
    69,685
    
    
    $
    90,664
  F-5




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Business and Acquisition Activity
 Business
 Asset Purchase
  EstimatedFair Values($ in millions)Acquired technology
    
    $
    1.3Fixed assets
    
    
    0.3Goodwill
    
    
    1.7In-process research and development
    
    
    1.6Acquisition costs accrued
    
    
    (0.6
    )Operating liabilities assumed
    
    
    (0.3
    )Total cash purchase price
    
    $
    4.0
    F-6




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Asset Purchase
  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
    
    
    679ISO network
    
    
    9,300Merchant customer base
    
    
    7,000Trademarks
    
    
    3,600Existing technology
    
    
    3,162Processor relationships
    
    
    300Goodwill
    
    
    57,629Total allocated purchase price
    
    $
    83,607
    F-7




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     Pro forma financial information
   December 31,
    
    
    December 31,2004
    
    
    2003(Amounts in thousands, exceptper share amounts)Pro forma net revenues
    
    $
    141,307
    
    
    $
    147,803Pro forma net loss
    
    $
    (13,570
    )
    
    $
    (1,677
    )Pro forma net loss per basic and diluted share
    
    $
    (0.51
    )
    
    $
    (0.06
    )Shares used for basic and diluted computation
    
    
    26,643
    
    
    
    27,015
 Asset Sale
  F-8




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2.
    
    Restatement of Financial Statements
   December 31, 2004As previouslyreported
    
    As restatedBALANCE SHEET DATA:Deferred tax liability
    
    $
    
    
    
    $
    1,261Total liabilities
    
    
    33,558
    
    
    
    34,819(Accumulated
deficit) retained earnings
    
    
    (10,072
    )
    
    
    (11,333
    )Total stockholders equity
    
    
    136,928
    
    
    
    135,667STATEMENT OF OPERATIONS DATA:Income tax expense
    
    $
    8,351
    
    
    $
    9,612Net income (loss)
    
    
    (14,144
    )
    
    
    (15,405
    )Net income (loss) per common share:Basic and Diluted
    
    $
    (0.53
    )
    
    $
    (0.58
    )DEFERRED TAX VALUATION ALLOWANCE
    
    
    (24,703
    )
    
    
    (25,964
    )
  F-9




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 3.
    
    Summary of Significant Accounting Policies
 Basis of Presentation and Principles of Consolidation
 Significant Estimates
 Financial Instruments
 Cash and Cash Equivalents
 Short-Term Investments
  Restricted
Cash
 Property and Equipment
 Deferred rent
 Revenue Recognition and Concentration of Credit Risk
  F-10




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
      Years Ended Dec. 31,2004
    
    2003
    
    2002Sprint Spectrum L.P.
    
    
    21
    %
    
    
    28
    %
    
    
    30
    %AT&T Wireless Services, Inc.
    
    
    16
    
    
    
    21
    
    
    
    21Ericsson AB
    
    
    *
    
    
    
    14
    
    
    
    15Nextel Operations, Inc.
    
    
    11
    
    
    
    12
    
    
    
    11Total
    
    
    48
    %
    
    
    75
    %
    
    
    77
    %
 
 *
    
     Represents less than 10% of total revenues in 2004. F-11




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Export Sales
 2004
    
    
    2003
    
    
    2002Latin America
    
    $
    10,079
    
    
    $
    9,240
    
    
    $
    10,436Mexico
    
    
    4,084
    
    
    
    6,191
    
    
    
    9,299Africa
    
    
    465
    
    
    
    1,476
    
    
    
    803Canada
    
    
    485
    
    
    
    604
    
    
    
    748Asia
    
    
    12
    
    
    
    79
    
    
    
    273Russia
    
    
    38
    
    
    
    947
    
    
    
    169Europe
    
    
    60
    
    
    
    120
    
    
    
    157Total
    
    $
    15,223
    
    
    $
    18,657
    
    
    $
    21,885
 Goodwill and Acquired Intangible Assets
    2004
    
    
    2003Intangible Assets:Existing technology
    
    $
    3,162
    
    
    $
    1,330Reseller network
    
    
    9,300
    
    
    
    Merchant customer base
    
    
    7,000
    
    
    
    Trademarks
    
    
    3,600
    
    
    
    Processor relationships
    
    
    300
    
    
    
    23,362
    
    
    
    1,330Accumulated amortization
    
    
    (2,115
    )
    
    
    (465
    )Net
    
    $
    21,247
    
    
    $
    865
 F-12




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Amortization2005
    
    $
    2,8322006
    
    
    2,8322007
    
    
    2,8322008
    
    
    2,8322009
    
    
    1,319Thereafter
    
    
    5,000Total future amortization expense
    
    $
    16,647
 Income Taxes
 Warranty Reserve
 Development Costs
 Foreign Currency Translation
 Supplemental Cash Flow Information
 Years Ended December 31,2004
    
    
    2003
    
    
    2002(In thousands)Supplemental Item:Cash paid for income taxes
    
    $
    2,004
    
    
    $
    373
    
    
    $
    3,925
 Impairment of Long-Lived Assets
 F-13




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Stock-Based Compensation
   2004
    
    
    2003
    
    
    2002(In thousands, exceptper share amounts)Net income (loss) as reported
    
    $
    (15,405
    )
    
    $
    (1,449
    )
    
    $
    3,630Stock based compensation recorded in net income (loss)
    
    
    
    
    
    
    
    
    
    
    Stock based compensation measured using the fair
value method (net of tax)
    
    
    3,272
    
    
    
    2,156
    
    
    
    2,350Net income (loss) pro forma
    
    $
    (18,677
    )
    
    $
    (3,605
    )
    
    $
    1,280Basic earnings (loss) per share pro forma
    
    $
    (0.70
    )
    
    $
    (0.13
    )
    
    $
    0.05Diluted earnings (loss) per share pro forma
    
    $
    (0.70
    )
    
    $
    (0.13
    )
    
    $
    0.05
  Years Ended December 31,2004
    
    
    2003
    
    
    2002Risk-free interest rate
    
    
    1.9% - 3.4
    %
    
    
    2.9% - 4.7
    %
    
    
    2.9% - 4.7
    %Expected life of options grants
    
    
    1 - 5
    years
    
    
    1 - 5
    years
    
    
    1 - 5
    yearsExpected volatility of underlying stock
    
    
    82
    %
    
    
    86
    %
    
    
    90
    %Expected dividend payment rate, as a
percentage of the stock price on the
date of grant
    
    
    
    
    
    
    
    
    
    
    
 Comprehensive Income
 2004
    
    
    2003
    
    
    2002Net income (loss) as reported
    
    $
    (15,405
    )
    
    $
    (1,449
    )
    
    $
    3,630Other comprehensive income:Foreign currency loss
    
    
    (184
    )
    
    
    
    
    
    
    Comprehensive income (loss)
    
    $
    (15,589
    )
    
    $
    (1,449
    )
    
    $
    3,630
 F-14




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Recent Accounting Pronouncements 
  4.
    
    Disclosures About Segments of an Enterprise and Related Information
  tm tm
   Sub-totalPayment
    
    
    
    
    
    Instant
    
    Reportable
    
    Reconciling
    
    ConsolidatedDecember 31, 2004
    
    TDS
    
    Processing
    
    INS
    
    Conferencing
    
    Segments
    
    Items
    
    TotalRevenues
    
    $
    88,297
    
    
    $
    26,836
    
    
    $
    17,540
    
    
    $
    382
    
    
    $
    133,055
    
    
    $
    
    
    
    $
    133,055Gross profit (loss)
    
    
    37,020
    
    
    
    19,580
    
    
    
    8,790
    
    
    
    (225
    )
    
    
    65,165
    
    
    
    
    
    
    
    65,165Operating income (loss)
    
    
    16,188
    
    
    
    3,560
    
    
    
    (4,014
    )
    
    
    (4,309
    )
    
    
    11,425
    
    
    
    (18,403
    )(1)
    
    
    (6,978
    )Depreciation and
amortization
    
    
    5,760
    
    
    
    3,086
    
    
    
    631
    
    
    
    555
    
    
    
    10,032
    
    
    
    877
    (2)
    
    
    10,909
 F-15




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Sub-totalPayment
    
    
    
    
    
    Instant
    
    Reportable
    
    Reconciling
    
    ConsolidatedDecember 31, 2003
    
    TDS
    
    Processing
    
    INS
    
    Conferencing
    
    Segments
    
    Items
    
    TotalRevenues
    
    $
    99,023
    
    
    $
    
    
    
    $
    20,955
    
    
    $
    
    
    
    $
    119,978
    
    
    $
    
    
    
    $
    119,978Gross profit (loss)
    
    
    46,399
    
    
    
    
    
    
    
    11,630
    
    
    
    
    
    
    
    58,029
    
    
    
    
    
    
    
    58,029Operating income (loss)
    
    
    22,025
    
    
    
    
    
    
    
    (2,541
    )
    
    
    (3,536
    )
    
    
    15,948
    
    
    
    (19,806
    )(1)
    
    
    (3,858
    )Depreciation and
amortization
    
    
    7,918
    
    
    
    
    
    
    
    1,255
    
    
    
    536
    
    
    
    9,709
    
    
    
    689
    (2)
    
    
    10,398
 Sub-totalPayment
    
    
    
    
    
    Instant
    
    Reportable
    
    Reconciling
    
    ConsolidatedDecember 31, 2002
    
    TDS
    
    Processing
    
    INS
    
    Conferencing
    
    Segments
    
    Items
    
    TotalRevenues
    
    $
    107,121
    
    
    $
    
    
    
    $
    26,045
    
    
    $
    272
    
    
    $
    133,438
    
    
    $
    
    
    
    $
    133,438Gross profit (loss)
    
    
    51,251
    
    
    
    
    
    
    
    15,972
    
    
    
    272
    
    
    
    67,495
    
    
    
    
    
    
    
    67,495Operating income (loss)
    
    
    25,749
    
    
    
    
    
    
    
    (1,986
    )
    
    
    (4,711
    )
    
    
    19,052
    
    
    
    (17,500
    )(1)
    
    
    1,552Depreciation and
amortization
    
    
    11,327
    
    
    
    
    
    
    
    2,761
    
    
    
    407
    
    
    
    14,495
    
    
    
    831
    (2)
    
    
    15,326
 
 (1)
    
    Reconciling items from segment operating income (loss) to consolidated operating income (loss) include the following: 2004
    
    
    2003
    
    
    2002Restructuring costs
    
    $
    4,346
    
    
    $
    5,079
    
    
    $
    3,616Gain on sale of Fraud Centurion assets
    
    
    (2,673
    )
    
    
    
    
    
    
    Impairment of intangible assets
    
    
    2,263
    
    
    
    
    
    
    
    Unallocated corporate and centralized
marketing, general and administrative
expenses
    
    
    14,467
    
    
    
    14,727
    
    
    
    13,884Total
    
    $
    18,403
    
    
    $
    19,806
    
    
    $
    17,500
 (2)
    
    Represent depreciation and amortization included in the
unallocated corporate or centralized marketing, general and
administrative expenses. 5.
    
    Investment
  F-16




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 6.
    
    Property and Equipment
  2004
    
    
    2003Furniture and fixtures
    
    $
    3,593
    
    
    $
    2,430Leasehold improvements
    
    
    10,558
    
    
    
    8,209Computer equipment
    
    
    19,688
    
    
    
    23,411Computer software
    
    
    9,464
    
    
    
    11,26243,303
    
    
    
    45,312Less accumulated depreciation and amortization
    
    
    (26,325
    )
    
    
    (35,904
    )Property and equipment, net
    
    $
    16,978
    
    
    $
    9,408
  7.
    
    Letters of Credit
   8.
    
    Restructuring Costs
  F-17




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Employee severance and termination benefits
    
    $
    
    
    
    $
    1,410
    
    
    $
    46
    
    
    $
    1,364Facility closing and related costs
    
    
    
    
    
    
    178
    
    
    
    178
    
    
    
    Total
    
    $
    
    
    
    $
    1,588
    
    
    $
    224
    
    
    $
    1,364
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Employee severance and termination benefits
    
    $
    
    
    
    $
    172
    
    
    $
    147
    
    
    $
    25
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Employee severance and termination benefits
    
    $
    
    
    
    $
    2,090
    
    
    $
    1,255
    
    
    $
    835
  F-18




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004(In thousands)Employee severance and termination benefits
    
    $
    
    
    
    $
    488
    
    
    $
    483
    
    
    $
    5
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember
    
    
    
    
    
    
    
    
    
    
    December
    
    
    
    
    
    
    
    
    
    
    December31,
    
    
    
    
    
    
    
    
    
    
    31,
    
    
    
    
    
    
    
    
    
    
    31,2002
    
    
    Accrued
    
    
    Utilized
    
    
    2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004Employee severance and
termination benefits
    
    $
    
    
    
    $
    1,795
    
    
    $
    1,542
    
    
    $
    253
    
    
    $
    (93
    )
    
    $
    160
    
    
    $
    Facility closing and related costs
    
    
    
    
    
    
    1,743
    
    
    
    347
    
    
    
    1,396
    
    
    
    137
    
    
    
    665
    
    
    
    868Capital equipment write-offs
    
    
    
    
    
    
    497
    
    
    
    497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    4,035
    
    
    $
    2,386
    
    
    $
    1,649
    
    
    $
    44
    
    
    $
    825
    
    
    $
    868
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember
    
    
    
    
    
    
    
    
    
    
    December
    
    
    
    
    
    
    
    
    
    
    December31,
    
    
    
    
    
    
    
    
    
    
    31,
    
    
    
    
    
    
    
    
    
    
    31,2002
    
    
    Accrued
    
    
    Utilized
    
    
    2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004Employee severance and
termination benefits
    
    $
    
    
    
    $
    77
    
    
    $
    77
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Facility closing and related costs
    
    
    
    
    
    
    548
    
    
    
    185
    
    
    
    363
    
    
    
    (36
    )
    
    
    324
    
    
    
    3Capital equipment write-offs
    
    
    
    
    
    
    378
    
    
    
    378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    1,003
    
    
    $
    640
    
    
    $
    363
    
    
    $
    (36
    )
    
    $
    324
    
    
    $
    3
 F-19




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Balance at
    
    
    
    
    
    
    
    
    
    
    Balance at
    
    
    
    
    
    
    
    
    
    
    Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember
    
    
    
    
    
    
    
    
    
    
    December
    
    
    
    
    
    
    
    
    
    
    December
    
    
    
    
    
    
    
    
    
    
    December31,
    
    
    
    
    
    
    
    
    
    
    31,
    
    
    
    
    
    
    
    
    
    
    31,
    
    
    
    
    
    
    
    
    
    
    31,2001
    
    
    Accrued
    
    
    Utilized
    
    
    2002
    
    
    Accrued
    
    
    Utilized
    
    
    2003
    
    
    Accrued
    
    
    Utilized
    
    
    2004Employee
severance and
termination
benefits
    
    $
    
    
    
    $
    1,580
    
    
    $
    1,237
    
    
    $
    343
    
    
    $
    (158
    )
    
    $
    185
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Facility closing
and related costs
    
    
    
    
    
    
    1,312
    
    
    
    320
    
    
    
    992
    
    
    
    199
    
    
    
    569
    
    
    
    622
    
    
    
    
    
    
    
    339
    
    
    
    283Capital equipment
write-offs
    
    
    
    
    
    
    724
    
    
    
    724
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    3,616
    
    
    $
    2,281
    
    
    $
    1,335
    
    
    $
    41
    
    
    $
    754
    
    
    $
    622
    
    
    $
    
    
    
    $
    339
    
    
    $
    283
 9.
    
    Commitments and Contingencies
    F-20




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Leases
  OperatingLeases2005
    
    $
    4,8402006
    
    
    3,8202007
    
    
    3,0132008
    
    
    2,7582009
    
    
    2,108Thereafter
    
    
    3,526Total minimum lease payments
    
    $
    20,065
   Warranties and Indemnities
  Litigation Net MoneyIN, Inc. v. VeriSign, Inc., et al
 F-21




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##### 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
 1990 Incentive and Nonqualified Stock Option Plan
 1996 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. 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, 2004, 194,624
shares were available for purchase and reserved for
issuance under the 1996 Employee Stock Purchase Plan.
 1997 Stock Incentive Plan and Restricted Stock Purchase Plan
 1998 Non-Statutory Stock Option Plan
 2004 Stock Incentive Plan
 F-22




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Weighted-AverageWeighted-
    
    
    FairAverage
    
    
    Value ofNumber of
    
    
    Exercise
    
    
    OptionsOptions
    
    
    Price
    
    
    Granted(In thousands)Outstanding at January 1, 2002
    
    
    4,645
    
    
    $
    13.17Granted
    
    
    1,260
    
    
    
    9.44
    
    
    $
    5.56Exercised
    
    
    (394
    )
    
    
    5.39Forfeited
    
    
    (1,605
    )
    
    
    16.34Outstanding at December 31, 2002
    
    
    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
    
    
    $
    8.00
  Weighted-AverageOptions
    
    ExerciseExercisable
    
    Price(In thousands)December 31, 2002
    
    
    2,278
    
    
    $
    11.76December 31, 2003
    
    
    2,335
    
    
    $
    10.12December 31, 2004
    
    
    2,502
    
    
    $
    10.05
 F-23




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##### 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)369
    
    $
    0.46
    
    
    
    
    
    
    $
    4.44
    
    
    
    52
    
    
    $
    3.85
    
    
    
    8.5
    
    
    $
    3.52889
    
    
    
    
    
    
    
    
    
    
    4.67
    
    
    
    137
    
    
    
    4.67
    
    
    
    9.7
    
    
    
    4.67659
    
    
    4.69
    
    
    
    
    
    
    
    5.90
    
    
    
    120
    
    
    
    5.56
    
    
    
    9.2
    
    
    
    5.45482
    
    
    6.02
    
    
    
    
    
    
    
    7.63
    
    
    
    258
    
    
    
    6.63
    
    
    
    8.1
    
    
    
    6.67541
    
    
    7.69
    
    
    
    
    
    
    
    7.94
    
    
    
    375
    
    
    
    7.76
    
    
    
    8.7
    
    
    
    7.79421
    
    
    8.04
    
    
    
    
    
    
    
    9.92
    
    
    
    302
    
    
    
    9.03
    
    
    
    6.1
    
    
    
    8.99279
    
    
    10.06
    
    
    
    
    
    
    
    10.91
    
    
    
    228
    
    
    
    10.77
    
    
    
    6.6
    
    
    
    10.78558
    
    
    11.25
    
    
    
    
    
    
    
    12.13
    
    
    
    553
    
    
    
    11.93
    
    
    
    5.1
    
    
    
    11.93226
    
    
    12.49
    
    
    
    
    
    
    
    12.88
    
    
    
    226
    
    
    
    12.57
    
    
    
    6.1
    
    
    
    12.57180
    
    
    12.90
    
    
    
    
    
    
    
    18.31
    
    
    
    174
    
    
    
    15.30
    
    
    
    5.7
    
    
    
    15.3480
    
    
    19.00
    
    
    
    
    
    
    
    42.97
    
    
    
    77
    
    
    
    23.98
    
    
    
    5.3
    
    
    
    23.564,683
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,502
    
    
    $
    8.00
    
    
    
    
    
    
    $
    10.05
 Stock Repurchases
  MaximumTotal Number of

    
    
    NumberTotal
    
    
    Average
    
    
    Shares Purchased
    
    
    of Shares thatNumber
    
    
    Price
    
    
    as
    
    
    Mayof Shares
    
    
    Paid per
    
    
    Part of Publicly
    
    
    yet be PurchasedPeriod
    
    Purchased
    
    
    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
 F-24




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Common Stock Warrants
 Stockholder Rights Plan
 11.
    
    Income Taxes
  2004
    
    
    2003
    
    
    2002Current:Federal
    
    $
    (777
    )
    
    $
    (83
    )
    
    $
    (1,933
    )Foreign
    
    
    1,562
    
    
    
    
    
    
    
    State
    
    
    (254
    )
    
    
    76
    
    
    
    98Deferred:Federal
    
    
    7,909
    
    
    
    (1,053
    )
    
    
    1,697State
    
    
    1,172
    
    
    
    (42
    )
    
    
    35Income tax provision (benefit)
    
    $
    9,612
    
    
    $
    (1,102
    )
    
    $
    (103
    )
 F-25




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2004
    
    
    2003
    
    
    2002Current Items:Assets:Allowance for doubtful accounts
    
    $
    786
    
    
    $
    1,024
    
    
    $
    1,182Capital loss carryforwards
    
    
    192
    
    
    
    
    
    
    
    Accrued expenses
    
    
    1,482
    
    
    
    1,178
    
    
    
    1,327Restructuring reserve
    
    
    1,353
    
    
    
    1,065
    
    
    
    503Less valuation allowance
    
    
    (3,813
    )
    
    
    
    
    
    
    Net current deferred tax assets
    
    $
    
    
    
    $
    3,267
    
    
    $
    3,012Long-Term Items:Assets:Depreciation and amortization
    
    $
    4,014
    
    
    $
    1,894
    
    
    $
    1,218Acquisition costs
    
    
    357
    
    
    
    649
    
    
    
    942Intangible assets
    
    
    325
    
    
    
    625
    
    
    
    1,461Loss carryforwards
    
    
    9,934
    
    
    
    11,676
    
    
    
    10,383Foreign tax credit carry-forward
    
    
    1,822
    
    
    
    
    
    
    
    R&D tax credit carry-forward
    
    
    5,699
    
    
    
    1,840
    
    
    
    Valuation allowance
    
    
    (22,151
    )
    
    
    (12,131
    )
    
    
    (10,291
    )Long-term deferred tax assets
    
    
    
    
    
    
    4,553
    
    
    
    3,713Liabilities:Tax amortization of non-lived intangibles
    
    
    (1,261
    )
    
    
    
    
    
    
    Long-term deferred tax liabilities
    
    
    (1,261
    )
    
    
    
    
    
    
    Total net long-term deferred tax assets/(liabilities)
    
    $
    (1,261
    )
    
    $
    4,553
    
    
    $
    3,713
    F-26




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2004
    
    2003
    
    2002Statutory federal income tax rate
    
    
    34
    %
    
    
    34
    %
    
    
    34
    %State taxes, net of federal benefit
    
    
    (1
    )
    
    
    (1
    )
    
    
    2Foreign taxes
    
    
    (27
    )
    
    
    
    
    
    
    Foreign tax credits
    
    
    31
    
    
    
    
    
    
    
    Change in valuation allowance
    
    
    (239
    )
    
    
    72
    
    
    
    (14
    )Research & development credits
    
    
    (52
    )
    
    
    (62
    )
    
    
    (23
    )Change in tax contingency reserves
    
    
    16
    
    
    
    
    
    
    
    Effect of liquidation of a subsidiary on tax attributes
    
    
    69
    
    
    
    
    
    
    
    Other, net
    
    
    3
    
    
    
    (1
    )
    
    
    (2
    )Effective tax rate
    
    
    (166
    )%
    
    
    42
    %
    
    
    (3
    )%
  12.
    
    Retirement Plan
  13.
    
    Earnings Per Share (EPS)
   2004
    
    
    2003
    
    
    2002Shares for basic computation
    
    
    26,643
    
    
    
    27,015
    
    
    
    28,030Options and warrants (treasury stock method)
    
    
    
    
    
    
    
    
    
    
    403Shares for diluted computation
    
    
    26,643
    
    
    
    27,015
    
    
    
    28,433
   F-27




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##### Table of Contents



LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 14.
    
    Worldcom, Inc. Settlement
  15.
    
    Subsequent Events
   16.
    
    Quarterly Financial Data (Unaudited)
 Q1
    
    Q2
    
    Q3
    
    Q4(In thousands, except per share amounts)2004Revenues
    
    $
    29,625
    
    
    $
    36,685
    
    
    $
    34,273
    
    
    $
    32,472Gross profit
    
    $
    13,559
    
    
    $
    19,201
    
    
    $
    16,814
    
    
    $
    15,591Income (loss) from operations
    
    $
    (1,863
    )
    
    $
    827
    
    
    $
    (3,975
    )
    
    $
    (1,967
    )Net income (loss) (Q4 restated)
    
    $
    (741
    )
    
    $
    573
    
    
    $
    (4,300
    )
    
    $
    (10,937
    )(a)Basic and diluted earnings (loss) per share (Q4 restated)
    
    $
    (0.03
    )
    
    $
    0.02
    
    
    $
    (0.16
    )
    
    $
    (0.41
    )(a)2003Revenues
    
    $
    28,423
    
    
    $
    31,299
    
    
    $
    29,566
    
    
    $
    30,690Gross profit
    
    $
    13,591
    
    
    $
    15,953
    
    
    $
    14,152
    
    
    $
    14,333Income (loss) from operations
    
    $
    (916
    )
    
    $
    (493
    )
    
    $
    (2,743
    )
    
    $
    294Net income (loss)
    
    $
    (357
    )
    
    $
    (83
    )
    
    $
    (1,893
    )
    
    $
    884Basic and diluted earnings (loss) per share
    
    $
    (0.01
    )
    
    $
    (0.00
    )
    
    $
    (0.07
    )
    
    $
    0.03
   F-28