##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
   Form 10-K
   þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934   Commission file number
    000-29273
   Quovadx, Inc.
 (Exact name of registrant as
    specified in its charter)
   Delaware

85-0373486(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)7600 E. Orchard Rd.,
    Suite 300 S
    Greenwood Village, Colorado(Address of principal
    executive offices)

80111(Zip
    Code)   Registrants telephone number, including area code:
 (303) 488-2019
  Securities registered pursuant to Section 12(g) of the
    Act:
 None
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value
    $0.01 per share
    Preferred Stock Purchase Rights

NASDAQ Global Market
    NASDAQ Global Market   o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE
  Form 10-K




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##### 



TABLE OF
    CONTENTS
  ItemNumber



PagePART I1.


Business


31A.


Risk
    Factors


221B.


Unresolved Staff
    Comments


312.


Properties


313.


Legal
    Proceedings


314.


Submission of
    Matter to a Vote of Security Holders


355.


Market for
    Registrants Common Equity and Related Stockholder
    Matters


35PART II6.


Selected Financial
    Data


357.


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


387A.


Qualitative and
    Quantitative Disclosures About Market Risk


588.


Financial
    Statements and Supplementary Data


599.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


949A.


Controls and
    Procedures


949B.


Other
    Information


96PART III10.


Directors,
    Executive Officers and Corporate Governance


9611.


Executive
    Compensation


9612.


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


9613.


Certain
    Relationships, Related Transaction and Director
    Independence


9614.


Principal
    Accountant Fees and Services


96PART IV15.


Exhibits


96Signatures


97Stipulation of SettlementConsent of McGladrey & Pullen LLPConsent of Ernst & Young LLPCertification of CEOCertification of CFOCertification of CEOCertification of CFO   2




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##### Table of Contents



FORWARD-LOOKING
    STATEMENTS
  Form 10-K
  Trademarks
  and/or
 PART I  Item 1.
    Business  Overview
    www.quovadx.com. (303) 488-2019.
  Formation
    of the Company
   3




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##### Table of Contents



tm ®
  Restatements
      Form 10-Q, Form 10-Q class-action class-action
  New
    Management and New Direction
    
    Improve gross margins
    Generate cash from operations 4




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##### Table of Contents




    Stabilize revenue
    Expand international opportunities
    Develop Rogue Wave Softwares new service-oriented
    architecture (SOA) framework, Rogue Wave Hydra
    Deliver net income by the end of 2005    
    Exiting from fixed bid and unprofitable service contracts in the
    ISD segment
    Consolidating facilities, reducing workforces and completing
    restructuring of the direct sales and research and development
    staff
    Expanding selling relationships with key direct and indirect
    sales partners, both domestically and internationally
    Increasing investments in the Rogue Wave Software segment around
    the SOA product, Hydra
    Enhancing operational processes to improve financial reporting
    and cash collections
    Selling assets that were deemed by management as non-strategic.
    For example, in June 2004, we sold our minority equity
    investment in Royal Healthcare LLC. On December 31, 2004,
    we also sold the assets of our Albuquerque, New Mexico Data
    Center and its Management Care Transaction Manager
    (MCTM) system to Royal. The data service center and
    MCTM system no longer fit into our strategic plan. In the third
    quarter of 2004, we also sold the Healthcare.com domain name. A
    total gain of $2.0 million was recognized for these four
    asset dispositions.      QUOVADX
    Divisions
   5




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##### Table of Contents




    Maintaining high levels of customer satisfaction and retention
    Increasing market penetration of new products and solutions,
    including our Intelligent Health Broker (IHB)
    offering in ISD,
    CARESCIENCEtm
    Standards of Care, an enhanced solution for external public
    reporting in CareScience and our new SOA product and service
    suite called ROGUE
    WAVE®
    Hydra in Rogue Wave
    Expanding consulting and other services offerings, especially in
    our CareScience and Rogue Wave divisions
    Continuing to expand our business through indirect channels by
    continuing to cultivate new distributors, system integrators and
    technology partners, both in North America and internationally
    Delivering enhanced product and service functionality through
    new product releases and ongoing enhancements to our existing
    products, including
    Cloverleaf®
    Integration Suite, Intelligent Health Broker and related
    financial and clinical interoperability solutions in ISD,
    Standard of Care and Quality Manager in CareScience, and ROGUE
    WAVE®
    Hydra and related components in Rogue Wave
    Continuing focused advocacy efforts with various legislative,
    regulatory and standards development organizations throughout
    the healthcare and technology sectors to promote
    interoperability and data sharing across healthcare communities,
    improved patient safety, improved reporting and transparency to
    support consumer-oriented healthcare, and standards to
    streamline the development and adoption of Service Component
    Architectures  Integration
    Solutions Division
    Integration
    Solutions Division Products and Services
    
    Cloverleaf Integration Suite, which is used for standard-based
    message translation and facilitation data integration and
    enabling different legacy applications to work together and
    share information within existing workflows
    Cash Accelerator Suite, which provides direct connections
    between payers and clearinghouses for claims submission,
    eligibility verification and other functionality to improve
    operational efficiency and reduce claims denials
    Identity Services Suite, which integrates all patient records
    stored in different facilities into a single Enterprise Master
    Patient Index (EMPI) to reduce duplication of
    records. Our Identity Services Suite is based on core technology
    developed by
    Initiate®
    Systems, which we resell pursuant to an agreement with Initiate
    Intelligent Health Broker Suite, an interoperability enhancement
    tool to decrease cost of integration and enable Web service
    functionality in legacy healthcare applications 6




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
    Health Interoperability Solutions which represents new packaging
    and positioning of our products to offer specific business
    solutions to healthcare systems and to address the
    interoperability needs of local, regional and national
    healthcare organizations and consortiums  Cloverleaf®
    Integration Suite
  Cloverleaf Integration Suite, point-to-point
  
    Exchanging information among various software applications, data
    repositories and information technology systems within and
    outside an enterprise
    Sharing data in real-time regardless of the location of the data
    or format, such as patient history, prescriptions and formulary
    information
    Providing secure access to information through a single
    interface or a reduced number of interfaces, within existing
    application workflows
    Facilitating development of a Regional Healthcare Information
    Organization (RHIO) or National Health Information
    Network (NHIN)
    Complying with Health Insurance Portability and Accountability
    Act (HIPAA) and National Provider Identifier
    (NPI) standards and requirements  Cloverleaf Integration Suite
  
    Screen Rejuvenator
    Cloverleaf Integration Services
    Business Process Management Services (BPMS)  Screen Rejuvenator.
  Cloverleaf Integration Services.
    
    Data Integrator  an open database connectivity
    component that enables data level integration with industry
    leading database management systems such as Oracle, Sybase,
    Microsoft SQL Server and DB2
    Security Server  a user-based identification,
    authentication and authorization tool to protect against
    unauthorized access and facilitate HIPAA compliance
    Secure Messenger  message encryption and user
    authentication technology that ensures the privacy and
    confidentiality of sensitive data when shared among external
    partners
    Global Monitor  technology that provides the ability
    to monitor the Cloverleaf production environment, throughout all
    integrated Cloverleaf sites, with a single Web browser 7




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
    Secure Object Client  a small,
    lightweight application that can be deployed across
    multiple clients, with the ability to send and receive data to
    and from a centralized Cloverleaf Server  BPMS. BPMS
  Cash
    Accelerator Suite
    Functionality.
  
    Access, in real-time, over 2,000 commercial and government payer
    clearinghouses for multiple types of claims transactions
    Validate that claims submitted are compliant with HIPAA
    Automate patient eligibility verification for insurance coverage
    Direct HIPAA transactions with flexibility to target any
    clearinghouse or payer in our system
    Retroactively review and analyze HIPAA transactions stored in
    the system    Identity
    Services Suite
  Identity Services
    Suite tm
  Functionality. Identity Services
    Suite,
  
    Accurately identify an individual during clinical interactions
    Synchronize and share eligibility and claims information, which
    decreases manual intervention in the claim adjudication process
    Reduce administrative time correcting avoidable errors and
    duplication of records
    Comply with local, state and federal mandates for uniquely
    identifying members without relying on Social Security Numbers  Intelligent
    Health Broker Suite
   8




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##### Table of Contents




    Key standards-based technologies
    Formats and protocols
    Service-oriented integration  QUOVADX
    Health Interoperability Solutions
  QUOVADX Health Interoperability Solutions, day-to-day
    
    Diagnostic results including laboratory and pathology results
    Patient encounter summaries and other clinical notes including
    continuity of care records (CCRs), admit and
    discharge summaries, operative reports and transcribed notes
    Medication history, formulary, benefit and prescription data
    Patient demographics and registration data
    Patient financial and administrative data, including insurance
    eligibility and referral
    Aggregate data for population health and public health reporting    
    Clinical Interoperability Solutions
    Financial Interoperability Solutions, which includes our
    Cash Accelerator product offerings  Clinical Interoperability Solutions.
  
    MD Office Gateway, which enables physicians to connect to
    important partners such as hospitals, labs and pharmacies. In
    addition, MD Office Gateway allows physician offices to
    participate in local and regional health information exchange
    initiatives
    eRx Gateway and Medication History Hub, which delivers support
    for the receipt of medication history and other clinical data at
    the point of care and enables technology vendors to take
    advantage of
    e-prescribing
    standards such as the National Council for Prescription Drug
    Programs (NCPDP)
    RHIO Gateway, which provides the technology and infrastructure
    to facilitate participation in local and RHIOs. RHIO Gateway
    allows authorized healthcare professionals from large or small
    organizations to become members of local or region-wide clinical
    data sharing networks enabling access to clinical information at
    the point of patient care    
    Terminology Services, which includes 3M Data Modules, offered
    through a partnership agreement with 3M, enable healthcare
    providers to codify competing data values from various databases
    into one language in order to translate existing codes into
    HIPAA-compliant billing and clinical information standards 9




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
    As a supplement to the Medication History Hub, RxHub MEDS
    (Medication and Eligibility Delivery Solution), offered through
    a partnership agreement with RxHub LLC, which provides access to
    patient medication history at the point of care  Financial Interoperability Solutions.
  
    Self-pay Assessment, which is used to verify patient insurance
    eligibility and status, obtain correct patient demographic
    information, apply charity care and Medicaid qualifications
    rules and integrate this data into registration and patient
    accounting workflow
    National Provider ID, (NPI), which is a
    cross-indexing tool that allows for the creation of an
    enterprise view of key healthcare provider partners and their
    associated IDs and provides support to meet HIPAA requirements
    Payer-to-Provider
    Exchange, which is an advanced technology platform that enables
    connection to over 2,000 health plans in the United States via
    HIPAA compliant transactions to improve claims processing  Services
    Professional Services.
  
    Assist in the creation, evaluation and implementation of RHIO
    data models and architectures
    Facilitate efficient and effective direct transactional exchange
    between providers and health plans
    Provide recommendations and best practices for health plans to
    meet HIPAA requirements
    Aid in the implementation and ongoing use of our products
    through our implementation team which averages over ten years of
    healthcare specific interoperability experience  day-to-day
  Education. up-to-date
  Client Services Support.
  Integration
    Solutions Division Markets and Customers
   10




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Competition.
  Integration
    Solutions Division Sales and Marketing
        
    Providers (labs, pharmacy, ambulatory, acute, medical devices)
    Payers (health plans, pharmacy benefit management)
    Government (health and human services)  Integration
    Solutions Division Research and Development
    CareScience
    Division
    CareScience
    Division Products and Services
    
    CARESCIENCEtmQuality Manager, a detailed care data-mining and analytical
    application, which identifies clinical process variance,
    complications, medical errors and adverse events, as well as
    potential treatment issues that impact patient outcomes such as
    excessive patient length of stay, mortality and cost 11




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
    CARESCIENCE Standards of Care, a single-source quality reporting
    and benchmarking tool to support mandated and voluntary federal,
    state, and health agency public reporting requirements
    CARESCIENCE Data Manager, which is used to manage data
    integration
    CARESCIENCE National Comparatives, which compares clinical
    outcomes with a national database of acute care facilities
    CARESCIENCE Clinical Terminology Services, which provides access
    and mapping to common medical coding definitions  CareScience
    Quality Manager
    Functionality.
  
    Identifying the underlying causes of costly, avoidable patient
    events, such as complications during a hospital visit, excess
    length of stay and unnecessary readmissions, and identifying
    opportunities for care process improvement
    Pinpointing areas of care where process improvements will yield
    improved clinical and financial results
    Defining and implementing continuous improvement
    initiatives, and
    Monitoring a plan of action to measure results and report on
    performance.    Data Consolidation.
  
    Patient demographics
    Treatment patterns
    Patient flow
    Resource utilization
    Provider comparisons, and
    Events after admission.  Analysis Tools.
 12




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##### Table of Contents



Clinical Analytics and Modeling.
  Outcomes Tracking.
  Financial Analysis.
  Reporting. CareScience Quality Manager
  
    Acute myocardial infarction
    Heart failure
    Pneumonia    CareScience
    Standards of Care
  CareScience Standards of Care CareScience
    Standards of Care pay-for-performance
  Functionality.  CareScience Standards of Care
  
    Manage the influx of existing and new quality measures for
    public reporting
    Collect, analyze and submit data to organizations like Centers
    for Medicare and Medicaid Services (CMS), Joint
    Commission of Accredited Healthcare Organizations
    (JCAHO), The Leapfrog Group and the Institute for
    Healthcare Improvement (IHI)
    Preview data prior to public reporting, allowing the user to
    proactively implement improvement plans as well as develop a
    strategy for addressing areas of concern
    Reduce the resource drain on internal staff by providing a
    single chart review and point of data entry for all measure sets
    View organization specific reports to help pinpoint breakdowns
    in care processes and prioritize quality initiatives
    Benchmark against other hospitals and health systems 13




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
    Access real-time quality indicator scorecard reports to advise
    executive leadership on performance results.  CareScience Standards of Care
  Patient Entry.
  
    Status reports  show how much data has been entered
    and the amount of data that still needs to be uploaded
    Summary reports  show aggregated data entry by
    measure sets and external organizations
    Core measure reports  show an organizations
    data compared to the JCAHO comparatives and CareScience National
    Comparatives  Quality Indicator Scorecard.
  
    Measure set comparison report  allows the user to
    view the organizations composite scores for selected
    measure sets by external organizations and by facility, as well
    as compliance scores for individual measures
    Facility comparison report  allows the user to view
    multiple facility composite scores by external organization and
    compare it with national benchmarks, CareScience National
    Comparatives
    and/or
    customer defined benchmarks. This report is helpful for health
    systems with multiple hospitals to measure set performance
    across facilities.  CareScience
    Data Manager
  CareScience Data Manager CareScience Quality
    Manager
  CareScience
    National Comparatives
  CareScience National Comparatives
  CareScience
    Clinical Terminology Services
  CareScience Clinical Terminology Services
  Services
    
    Planning and design of clinical processes
    Evaluation of process improvement opportunities and
    implementation of improvement programs 14




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
    Evaluation of systems and staff and the development of change
    management strategies
    Implementation advisory services for large scale clinical
    systems initiatives
    System and process education and training  CareScience
    Division Markets and Customers
    Competition.
  CareScience
    Division Sales and Marketing
      
    C-level communication of clinical process opportunities and
    related financial, operational, and quality impact
    Clinical executive communication of process improvement,
    workflow improvement, and improved information and data sharing
    Information technology communication of simplified approach to
    integrating multiple disparate data sources to create cohesive
    and actionable information for clinical stakeholders    
    Targeted direct marketing to prospective buyers such as Chief
    Medical Officer, Chief Nursing Officer,
    Vice-President
    of Quality, and Chief Information Officer
    Web-based promotion, Webinars and hosting of forums
    Securing speaking engagements for our clinical executives and
    consulting experts at leading industry conferences attended by
    health industry leaders
    Hosting periodic conferences and seminars to provide clients,
    industry leaders and other targeted constituents with an
    opportunity for focused discussion and education on new trends
    in care management
    Exhibiting at leading industry conferences and trade shows in
    the care management and clinical information sectors
    Securing public relations opportunities to promote clients
    success and the success of the Companys solutions
    Conducting research about clinical decision making and other
    methodological frontiers and publishing research in academic
    journals    
    Expansion of product and service offerings to customers 15




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
    Expansion of distribution channels and indirect sales efforts to
    complement direct sales, and
    Increased access to technologies and content for development of
    more comprehensive solution offerings without the need to
    develop components internally.  CareScience
    Division Research and Development
        Rogue
    Wave Software Division
    ROGUE
    WAVE® ROGUE WAVE
  Rogue
    Wave Products and Services
    
    Rogue Wave
    Hydra®,
    a SOA development framework to enable development of
    high-performance applications in a flexible environment,
    allowing customers to capitalize on and re-use many of their
    existing software assets and components. The Suite now
    incorporates and extends our earlier Lightweight Enterprise
    Integration Framework (LEIF) product line. While
    LEIF was targeted exclusively at C++ applications, Rogue Wave
    Hydra addresses the high-performance needs of C++ and Java.
    SourcePro®
    C++ Suite, comprised of four enterprise C++ development modules
    that increase the productivity of the professional developer,
    facilitating the timely delivery of projects
    Stingray®
    Studio Suite, used to create graphical user interface
    (GUI) applications that provide the look and feel of
    Microsoft applications
    HostAccess®
    Suite, which provides secure access to over 35 types of legacy,
    host-based systems, with particular strength in emulation of
    character terminals used in Unix-based environments 16




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##### Table of Contents



Rogue
    Wave®
    Hydra
  ROGUE WAVE
    
    ROGUE WAVE HydraSCA, a service execution framework based on
    Software Pipelines, an architecture and methodology that enables
    the development and deployment of high performance, scaleable
    SOA-based applications.
    HYDRASDOtm
    for XML is a data access service for exceptionally fast parsing
    of XML data with in-memory shared data between Java and C++
    applications.
    HYDRASDO for Databases provides simple and easy access to
    relational databases in both conventional and Service Oriented
    Architectures.  Functionality. ROGUE WAVE
  
    Dissect an application into components, or services to run
    concurrently, capitalizing on new and existing software assets
    and components
    Leverage legacy applications to build new applications by
    transforming code into services components
    Allow multiple languages including C++ and Java to communicate
    directly or across a network
    Split workload by content-based criteria and execute processing
    order by first in first out (FIFO) logic when
    required
    Connect directly to popular messaging and middleware platforms
    Run components locally with native execution speed,
    or remotely over the network.  ROGUE WAVE
  ROGUE WAVE
  SourcePro®
    C++ Suite
  ® SourcePro
    C
  Functionality. SourcePro®
    C Suite
  
    Cross platform application development
    Writing database applications 17




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##### Table of Contents




    Creating applications that can easily be moved from any of the
    numerous operating system platforms and databases supported by
    the product  SourcePro C Suite
  
    SourcePro®
    Core.An extensive set of fundamental C++
    components that handle many of the intricacies of the C++
    language and provide a complete framework for
    internationalization and localization of applications.
    Additionally, SourcePro Core functions as a complete solution
    for multithreading applications and for streaming extensible
    markup language (XML), and data non-intrusively. By
    simplifying the complexities of working with XML, SourcePro Core
    helps developers create C++ applications that share data with
    diverse systems.
    SourcePro®
    DB.An object oriented interface that allows
    components to work across multiple databases. SourcePro DB
    simplifies the complexity of writing database applications, and
    allows developers to drill down to vendor-specific database
    libraries if needed. SourcePro DB supplies a consistent,
    high-level C++ interface to relational databases, speeding
    development and reducing complexity, all without sacrificing the
    performance of native access.
    SourcePro®
    Net.Allows developers to create secure and
    non-secure networked and Internet-enabled applications, handling
    the granular details of socket programming and Internet
    protocols to expedite the timely delivery of quality
    applications.
    SourcePro®
    Analysis.Contains a full range of C++ components
    for solving mathematical problems in business and research,
    encapsulating algorithms that can be relied upon for accurate,
    precise calculations and complex mathematical formulas.  Stingray®
    Studio Suite
  Stingray®
    Studio easy-to-use
    
    Objective Grid is an advanced grid component that mimics many of
    the features of Microsoft Excel, including support for database
    connectivity.
    Objective Toolkit is a broad library of drop-in components that
    address areas not covered by Microsoft Foundation Classes
    (MFC) and ActiveX libraries, which contain a set of
    basic C++ building blocks for creating Windows based
    applications.
    Objective Edit offers an advanced text editor component useful
    for implementing an interactive environment, similar to
    Microsoft Visual C++ editor, for viewing and editing source
    code, scripts and
    mark-up
    languages.
    Objective Chart delivers high-performance, advanced charting
    capabilities, including a variety of
    two-dimensional
    chart types.
    Object Views provides components for building
    drag-and-drop
    graphical interfaces that are Visio-like in functionality and
    for incorporating custom graphical objects and enhanced drawing
    capabilities.   18




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##### Table of Contents



HostAccess®
    Suite
  HostAccess® HostAccess
  Services
    
    Porting of ROGUE WAVE products and customer applications to
    specialized platforms and databases
    SOA design and analysis
    Product customization and enhancements
    Performance optimization
    Outsourcing of C++ development and application maintenance  Rogue
    Wave Software Division Sales, Markets and
    Customers
      
    Internet marketing, concentrating on our Web site, search engine
    optimization, Internet advertising and blogs,
    Increased public relations efforts to promote our early
    leadership in high-performance SOA products
    Participation in key events and industry trade shows such as
    JavaOne to collaborate with key partners and build credibility
    Participation in the Open SOA Collaboration, an industry
    consortium working to set standards for Service Component
    Architecture  ® ®
    Competition.
 19




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Rogue
    Wave Software Division Research and
    Development
    Quovadx
    Corporate Marketing Activities
    Seasonality
    Major
    Customers
    Year Ended December 31,

Integration Solutions


CareScience


Rogue Wave2006


46
%


40
%


13
%2005


43
%


44
%


16
%2004


51
%


45
%


12
%   Intellectual
    Property
       20




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Government
    Regulation
      HIPAA
    Administrative Simplification
    Privacy
    Regulation
    of Transaction Services
     21




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##### Table of Contents



Security
      Employees
    Available
    Information
  Form 10-K; Form 10-Q; Form 8-K;
  
  1-800-SEC-0330.
  Item 1A.
    Risk
    Factors  In evaluating our business, you should carefully consider the
    risks and uncertainties discussed in this section, in addition
    to the other information presented in this Annual Report on
    Form 10-K.
    The risks and uncertainties described below may not be the only
    risks we face. If any of these risks and uncertainties actually
    occurs, our business, operating results or financial condition
    could be materially adversely affected and the market price of
    our common stock may decline.
 22




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We have
    historically incurred losses and we may not be able to achieve
    or sustain profitability.
    We face
    risks related to the class action and derivative
    lawsuits.
  Special Situations
    Fund
      We face
    risks related to a formal investigation being conducted by the
    SEC.
    As we
    pursue our strategic initiatives, we are subject to risks that
    could impair our ability to maintain revenues or successfully
    implement our strategy.
  and/or
 23




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A
    contract with a major customer, the Medical University of South
    Carolina, expired on December 31, 2006. Failure to generate
    other sources of revenue to compensate for the resulting
    reduction in revenue and operating income, may adversely affect
    our future operating results.
    We
    operate in an industry with rapidly changing technology and, if
    we do not successfully modify our products to incorporate new
    technologies or introduce new products, we may not be able to
    increase revenue or our revenue may decline.
            We face
    increased competition in the marketplace and lengthening sales
    cycles in each of our divisions that could impact our operations
    negatively.
   24




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Goodwill,
    other intangible assets and capitalized software make up a
    significant portion of our total assets and are subject to
    recurring tests for impairment. We have a history of recording
    impairments for these assets and future impairments could
    adversely affect our operating results.
    forward-looking
  We face
    saturated or diminishing markets for some of our key
    products.
  ® ® ®
    A
    significant portion of our recurring revenue comes from
    maintenance agreements that require periodic renewals.
   25




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##### Table of Contents



ISD and
    Rogue Wave rely on the effectiveness of channel partners and
    third-party influencers to help achieve revenue goals. If we
    fail to maintain and expand these types of relationships, our
    business may suffer.
    We rely
    on third party distributors for ISD and Rogue Wave to report
    their sales of our software license products accurately and on a
    timely basis in order to report revenue accurately. If they do
    not report sales of our products to us accurately and in a
    timely manner our ability to recognize revenue in the
    appropriate period may be impacted and we risk fluctuations in
    our revenues.
    Revenue
    from our international operations in ISD and Rogue Wave has
    historically been significant and we hope to increase our
    international revenue going forward. As a result, we may become
    subject to additional uncertainties in the international
    marketplace which could adversely affect our operating
    results.
    
    Our core products contain strong encryption technology that is
    subject to export control regulation. These regulations prohibit
    us from selling in certain countries and to certain persons. Our
    inadvertent failure to properly restrict our sales could subject
    us and our management to fines and other sanctions and impair
    our financial condition and our reputation.
    We face increased uncertainty of enforcement of contractual
    provisions and enforcement of judgments in our dealings with
    non-U.S. persons.
    Our inability to properly defend or enforce our contract rights
    could materially impair our business prospects and financial
    condition.
    Our sales and marketing activities subject us to stringent
    privacy regulation that varies from jurisdiction to jurisdiction
    making compliance difficult. Our inability to comply with these
    regulations could subject us to sanctions that could impair our
    ability to effectively market our products and sell in the
    international marketplace. 26




---



##### Table of Contents



We are
    exposed to infringement risks.
    We rely
    on third parties for technology in our products.
  and/or
    Our
    products may be affected by unknown software defects.
     27




---



##### Table of Contents



non-compliance,
  We may be
    unable to recruit and retain key employees who are essential to
    our operations.
    We could
    incur liabilities related to the regulation, use and misuse of
    information.
    If
    security of our customer and patient information were to be
    compromised, we could be liable for damages and our reputation
    could suffer.
   28




---



##### Table of Contents



If
    compliance with government regulation of healthcare becomes more
    costly and difficult for our customers, we may be unable to
    increase revenue in ISD and CareScience.
      and/or and/or
  If we do
    not establish and maintain our brands, our reputation could be
    adversely affected.
  and/or
  We have
    risk in sustaining professional service revenue in our
    markets.
   29




---



##### Table of Contents



We are
    regulated by the federal and state governments and compliance
    with current and future labor laws may impact our
    earnings.
    Our stock
    price has traded well below the $5.00 per share minimum
    threshold established by many institutional investors as
    criteria for ownership.
    
    A relatively small float and low trading volume in our shares;
    A change in analyst coverage;
    Changes to the Companys plan
    and/or
    prospects;
    Sales of our common stock by large, institutional
    investors; and
    Ownership of our common stock by hedge funds with high turnover
    rates.    We have
    implemented anti-takeover provisions that may adversely impact
    the market price of our common stock.
     30




---



##### Table of Contents



Item 1B.Unresolved
    Staff Comments.



None  Item 2.
    Properties    2006Annual


Square


LeaseLocation

Primary Function

Rent


Footage


ExpirationPhiladelphia, PA

CareScience Headquarters

$
523,459



22,637


October 5, 2011Boulder, CO

Rogue Wave Headquarters


422,791



27,941


January 31, 2008Mountain View, CA

ISD R&D


218,962



4,797


June 30, 2010Hempstead, England

ISD International Operations


269,104



5,500


May 26, 2007Atlanta, Georgia

ISD Sales


264,547



10,113


August 31, 2008Greenwood Village, CO

Corporate Headquarters


236,191



16,271


November 30, 2008Dallas, TX

ISD Services


222,736



11,198


June 30, 2011Corvallis, Oregon

Rogue Wave R&D


173,775



10,500


July 31, 2009Woodland Hills, CA

ISD Headquarters


130,142



3,622


April 30, 2010   Item 3.
    Legal
    Proceedings  Contingencies
  Bartula v. XCare.net, Inc., et al. No. 01-CV-10075).
 31




---



##### Table of Contents



Rule 10b-5
  Smith v. Quovadx, Inc. et al, No. 04-M-0509, Heller v. Quovadx, Inc., et al No. 04-M-0665 Heller
   32




---



##### Table of Contents



Special Situations Fund Heller
  v. Brown et al, Thornton v. Brown, et al. Jaroslawicz v. Brown, et al. In re Quovadx, Inc. Derivative
    Litigation.
  Henderson v. Quovadx, Inc.
    et al, No. 04-M-1006 Heller Heller Special Situations
    Fund III, L.P., et al. v. Quovadx, Inc.,
    et al, No. 04-M-1006 .
 33




---



##### Table of Contents



prima facie
  Heller
  Special Situations Fund Heller
   34




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders    Item 5.
    Market
    for Registrants Common Equity and Related Stockholder
    Matters    High


Low2007First Quarter (January 2,
    2007 to March 6, 2007)

$
2.85


$
2.552006Fourth Quarter


2.90



2.51Third Quarter


2.88



2.23Second Quarter


3.18



2.50First Quarter


3.22



2.462005Fourth Quarter


3.03



2.37Third Quarter


3.13



2.59Second Quarter


3.30



2.56First Quarter


3.25



2.05      PART II  Item 6.
    Selected
    Financial Data   35




---



##### Table of Contents



Form 10-Q
  Year Ended December 31,2006


2005


2004


2003(6)


2002(6)(Amounts in thousands, except per share data)Consolidated Statement of
    Operations Data:Total revenue

$
84,120


$
83,103


$
82,801
(4)(5)

$
64,928


$
60,623Cost of revenue


33,856



36,869



53,294
(9)


40,263



37,671Gross Profit


50,264



46,234



29,507



24,665



22,952Operating expenses


64,320



49,633



56,530



42,242



36,519Loss from operations


(14,056
)


(3,399
)


(27,023
)


(17,577
)


(13,567
)Gain on sale of assets










1,535
(7)(8)






87
(1)Goodwill impairment


















(93,085
)(3)Interest and other income, net


986



832



355



694



1,035Loss before income taxes


(13,070
)


(2,567
)


(25,133
)


(16,883
)


(105,530
)Income tax expense, net


56



321



133







Loss from continuing operations


(13,126
)


(2,888
)


(25,266
)


(16,883
)


(105,530
)Income from discontinued operations










589
(10)


406
(10)


763
(10)Gain on sale of discontinued
    operations










446
(10)






Loss before cumulative effect of
    accounting change


(13,126
)


(2,888
)


(24,231
)


(16,477
)


(104,767
)Cumulative effect of accounting
    change


11















Net loss

$
(13,115
)

$
(2,888
)

$
(24,231
)

$
(16,477
)

$
(104,767
)Net loss per common
    share  basic and diluted

$
(0.32
)

$
(0.07
)

$
(0.61
)

$
(0.52
)

$
(3.49
)Shares used in computing net loss
    per share  basic and diluted


41,588



40,924



39,892



31,407



29,987   December 31,2006


2005


2004


2003


2002(In thousands)Consolidated Balance Sheet
    Data:Cash, cash equivalents and
    short-term investments

$
30,421


$
32,656


$
24,847


$
23,688
(4)(5)

$
47,621Current assets


48,629



49,269



42,708



50,647



66,076Current liabilities


38,845



32,159



32,508



42,900



15,536Working capital


9,784



17,110



10,200



7,747



50,540Software, net


7,238



7,409



11,333
(9)


29,221



20,465
(2)Other intangible assets, net


10,057



13,862



17,713



17,735
(4)(5)


6,266
(2)Goodwill


46,724



46,724



46,724



48,015
(4)(5)



(3)Total assets


121,974



121,143



123,945



155,190



104,384
(2)Accumulated deficit


(197,405
)


(184,290
)


(181,402
)


(157,171
)


(140,694
)Stockholders equity


78,571


$
88,187


$
90,398


$
111,975
(4)(5)

$
86,293
(2)(3)       (1)
    
    In March 2002, the Company completed the sale of certain assets
    of its Advica subsidiary to Royal Health Care of Long Island,
    LLC, d/b/a Royal Health Care (Royal) for $475,000 in
    cash and 4.6% of the 36




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##### Table of Contents



outstanding equity in Royal. In conjunction with the sale,
    Quovadx agreed to provide application service provider services
    to Royal under a seven year contract.(2)
    
    On March 27, 2002, the Company purchased all of the
    outstanding capital stock of Outlaw Technologies, Inc.
    (Outlaw). The purchase price, totaling
    $2.7 million, included 138,575 shares of Quovadx
    common stock and $1.8 million in cash and professional fees
    directly related to the acquisition. Assets acquired included
    $1.7 million in goodwill, $0.8 in software and
    $0.7 million in other intangible assets. The transaction
    was accounted for as a purchase. Outlaws balance sheet
    included $0.3 million in current assets and
    $0.6 million in liabilities upon acquisition.(3)
    
    In the third quarter of 2002, the Company performed an
    assessment of the carrying value of the Companys goodwill
    recorded in connection with its various acquisitions. The
    assessment was performed pursuant to SFAS No. 142
    because of the significant negative Company, industry and
    economic trends affecting the market value of the Companys
    common stock. As a result, the Company recorded a charge of
    $93.1 million to reduce goodwill during the third quarter
    of 2002, based on the amount by which the carrying amount of
    these assets exceeded their estimated fair value.(4)
    
    In the third quarter of 2003, Quovadx acquired the outstanding
    stock of CareScience, Inc. through merger with a wholly owned
    subsidiary of Quovadx. CareScience, Inc. was primarily a
    provider of care management services to hospitals and health
    systems. Its stockholders received a fixed exchange rate of
    $1.40 cash and 0.1818 shares of Quovadx common stock for
    each share of common stock owned. The purchase price totaling
    $30.1 million, included 2,415,900 shares of Quovadx
    common stock and $4.7 million in cash, net of acquired
    cash, in exchange for all outstanding shares of CareScience,
    Inc. and $2.3 million in merger-related fees.(5)
    
    In the fourth quarter of 2003, Quovadx acquired the outstanding
    stock of Rogue Wave Software, Inc. through merger with a wholly
    owned subsidiary of Quovadx. Rogue Wave Software, Inc.
    developed, marketed and supported object-oriented and
    infrastructure software technology. Its stockholders received a
    fixed exchange rate of $4.09 in cash and 0.5292 shares of
    Quovadx common stock for each share of common stock owned. The
    purchase price totaling $79.1 million, included
    5,656,670 million shares of Quovadx common stock and
    $8.0 million in cash, net of acquired cash, in exchange for
    all outstanding shares of Rogue Wave Software, Inc. and
    $3.9 million in merger-related fees.(6)
    
    On March 15, 2004, the Company announced that, due to
    collectability issues arising from third and fourth quarter
    contracts with Infotech Network Group (Infotech), it
    was necessary to restate third quarter 2003 financial results
    and revise fourth quarter 2003 financial results to reverse all
    previously recorded revenue associated with the Infotech
    transactions. In addition, the Company undertook a review of all
    accounting policies estimates, judgments and practices. As a
    result of this subsequent review, additional accounting
    inaccuracies were identified affecting the Companys
    financial results for the years ended December 31, 2003 and
    2002, and the Company restated its historical financial results
    for those years. The cumulative effect of these restated
    financial statement decreased the previously reported total
    revenue by $1.7 million in 2003 and $0.4 million in
    2002, and increased the previously reported net loss by
    $1.8 million in 2003 and $0.7 million in 2002.(7)
    
    In the second quarter of 2004, the Company sold its minority
    equity investment in Royal Health Care, LLC. Royal was a
    healthcare management services company in which Quovadx owned an
    equity position. The sale price of $3.1 million, paid in
    cash, was received on June 29, 2004. The Company recorded a
    $1.2 million gain on the sale of this asset.(8)
    
    In the third quarter of 2004, we sold the Healthcare.com domain
    name for a gain of $360,000.(9)
    
    In 2004, we incurred impairment charges totaling
    $7.2 million. We impaired $4.8 million of our
    internally developed and acquired capitalized software. Our
    decision to discontinue products resulted from our new
    managements effort to refocus our resources on products
    that would generate revenues in the near term and to conserve
    cash. We wrote off $1.7 million of the prepayments to
    Infotech for professional services. We also impaired
    $0.7 million of deferred costs related to our transaction
    business because the total balance of the assets was not
    recoverable due to the cancellation of certain contracts and
    lower than expected revenues on other contracts.(10)
    
    On December 31, 2004 the Company sold the assets of its
    Albuquerque, New Mexico data center and its Managed Care
    Transaction Manager (MCTM) system. This data center
    and MCTM system no longer fit 37




---



##### Table of Contents



into the Companys new business strategy because they
    represented a niche area of the healthcare payer segment that
    was not viewed as an area of strategic growth. The assets were
    sold to Royal Health Care Data Center, LLC, a subsidiary of
    Royal, for $1.9 million in cash. A gain of
    $0.4 million was recognized on the sale. The financial
    statements for the years ended December 31, 2003, 2002, and
    2001 have been restated to reflect the presentation of the New
    Mexico data center as a discontinued operation.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  FORWARD
    LOOKING STATEMENTS
  Form 10-K
  Executive
    Summary
      
    Launch new products in all three divisions;
    Continue to develop indirect sales channels;
    Strengthen the CareScience sales and marketing organization;
    Expand and actively market consulting services in both
    CareScience and Rogue Wave; and
    Bring our new product line, ROGUE WAVE Hydra, to market    
    Annual revenue growth of five to ten percent;
    Continued improvement in gross margins;
    Net loss in the range of $0.14 to $0.20 per share excluding
    any legal settlement expenses; and
    Net income beginning in the latter half of 2007.    
    We invested in our products and launched new products in all
    three divisions, including Intelligent Health Broker and related
    interoperability solutions in ISD, Standards of Care in
    CareScience and our new Hydra suite in Rogue Wave. 38




---



##### Table of Contents




    We added new customers, expanded implementations with existing
    customers, and maintained 90-plus percent customer renewal rates
    in all three divisions.
    We expanded our sales channels, both domestically and abroad. In
    Rogue Wave, we signed nine new partners to assist with sales of
    Rogue
    Wave®
    Hydra. In ISD, we signed partnership agreements with companies
    such as RxHub, 3M, SureScripts and xWave to help us broaden our
    offering, move into new markets and grow our domestic sales, we
    expanded international partner relationships in the U.K. and
    Canada, and developed new partner relationships in China, Greece
    and South Africa. As a result, we grew our indirect sales by
    23 percent, from $13.0 million in 2005 to
    $16.1 million in 2006.
    We brought new sales and clinical leadership to CareScience.
    We expanded our services offerings in CareScience and Rogue Wave.
    We continued to provide ongoing enhancements to our new and
    existing solutions.
    We made significant progress toward the final resolution of
    legacy lawsuits.  slower-than-expected
    
    While revenue growth for the year was only one percent, growth
    in the fourth quarter was up 11% sequentially and five percent
    year-over-year.
    We improved gross margins from 56% to 60%.
    We made the critical investments needed to support our growth
    initiatives yet still improve our gross margins, we held our net
    losses well below our expected limits and we delivered positive
    cash from operations.
    We were able meet our commitment to fund our growth initiatives
    with internally generated cash, ending the year with a cash
    balance of more than $30 million.      Integration
    Solutions Division
  year-over-year
  
    We sold clinical and financial interoperability solutions to
    both new and existing customers during 2006.
    We expanded our partner network domestically and internationally.
    We increased sales to existing partners in the United States.
    We continued our efforts related to the NHIN demonstration
    project.
    We completed product expansion efforts related to other new
    product and solution offerings including our MD Office Gateway
    and ePrescribing solutions. 39




---



##### Table of Contents




    We also continued to develop our international sales channels,
    opening new markets in South Africa, Greece and China.  e-prescribing
    
    Extending our offering to meet new needs of existing customers.
    Increased sales and marketing efforts related to our
    interoperability solutions.
    Continued expansion of direct and indirect sales channels.
    Additional investments in product development, working to
    enhance our solutions to further support XML, Web services and
    especially SOA  as well as international and other
    standards  to continue to anticipate and meet the
    evolving needs of customers.  CareScience
    Division
    
    Complete the restructuring of our sales force, with the addition
    of key management and staff that we believe positions us well
    for future benefits;
    Launch our Standards of Care offering, including sales to new
    and existing customers;
    Continue our industry advocacy efforts around patient safety,
    quality reporting and cost improvement. For example, we
    supported a key customer in recognizing their receipt of the
    2006 Malcolm Baldrige National Quality Award, the nations
    highest Presidential honor for organizational performance
    excellence. We also completed an agreement with The Leapfrog
    Group, which identifies CareScience as a certified data vendor.
    As such, we are now certified to submit quality and performance
    data on behalf of hospitals and healthcare systems to the
    Leapfrog Hospital Rewards Program, a
    pay-for-performance
    initiative that motivates hospital quality improvements through
    incentives and rewards.    
    Development of quality standards, to measure and compare the
    quality of care;
    Increased public reporting of comparable cost and quality
    metrics so that consumers can make informed choices about
    healthcare providers; and
    The expansion of provider incentives, also known as
    pay-for-performance,
    for both physicians and hospitals to drive improvements in
    healthcare delivery and to accelerate the adoption of healthcare
    IT.   40




---



##### Table of Contents



Rogue
    Wave Software Division
  year-over-year
  
    We launched our new SOA product offering, Hydra.
    We completed a select number of proof of concept
    Hydra projects, validating the product offering and the market
    that we see developing for this solution.
    We leveraged our installed base of C++ customers to expand our
    new Classic Consulting business. This service
    business is designed to help companies maintain and leverage
    existing mission-critical C++ applications. We believe there is
    a large, unmet need for this service, and we intend to exploit
    it as we go forward.
    We began to develop other indirect sales and distribution
    agreements for our Hydra product offering.  tm
  year-over-year
  proof-of-concept proof-of-concept
    
    customer requirements,
    hardware trends,
    Hydra product features,
    Rogue Wave market awareness,
    the adoption of SOA and related service component architecture,
    or SCA, standards, and
    the speed with which we can build and leverage an indirect sales
    channel.  Financial
    Summary
    Year Ended December 31,Revenue


PercentageDivision

2006


2005


2004


2006


2005


2004ISD

$
39,628


$
39,267


$
40,736



47
%


47
%


49
%CareScience


15,475



15,441



13,910



18
%


19
%


17
%Rogue Wave


29,017



28,395



28,155



35
%


34
%


34
%Total

$
84,120


$
83,103


$
82,801



100
%


100
%


100
%  41




---



##### Table of Contents



Income (Loss) fromContinuing OperationsDivision

2006


2005


2004ISD

$
4,742


$
3,519


$
(12,621
)CareScience


(108
)


(27
)


(1,249
)Rogue Wave


8,770



9,404



7,707Corporate


(27,460
)


(16,295
)


(20,860
)Total

$
(14,056
)

$
(3,399
)

$
(27,023
)   Background
    on class action lawsuits and SEC investigation into accounting
    practices
  SEC Proceedings.
  Legal Proceedings. class-action
  Critical
    Accounting Policies and Estimates
    Revenue
  97-2, Software Revenue Recognition, SOP 98-4; SOP 81-1, Accounting for Performance of Construction-Type and
    Certain Production-Type Contracts.
     42




---



##### Table of Contents



SOP 97-2,
  percentage-of-completion time-and-materials
  percentage-of-completion percentage-of-completion
      SOP 97-2 SOP 97-2
    Allowance
    for Doubtful Accounts
   43




---



##### Table of Contents



Purchase
    Accounting
    Software
    Development Costs
    Asset
    Impairments
      Accounting
    for the Impairment or Disposal of Long-Lived Assets
 44




---



##### Table of Contents



Accounting
    for Contingencies
  Legal Proceedings Accounting for Contingencies
  
    The period in which the underlying cause of the pending
    litigation occurred;
    The degree of probability of an unfavorable outcome; and
    The ability to make a reasonable estimate of the amount of loss.      Share-Based
    Compensation
  Share-Based Payment,
    Year Ended


Year Ended


Year EndedDecember 31, 2006


December 31, 2005


December 31, 2004Risk free interest rate


4.56
%


4.17
%


4.70
%Volatility factor


80
%


106
%


106
%Weighted average estimated option
    term in years


6.50



7.50



5.00    45




---



##### Table of Contents



Accounting for
    Stock Issued to Employees.
  and/or
  Deferred
    Taxes
  Accounting
    for Income Taxes.
 46




---



##### Table of Contents



Recently
    Issued Accounting Pronouncements
  New
    Accounting Standards
    Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109,
  Results
    of Operations
    2006


2005





2004% of





% of


2006-2005





% of


2005-2004Revenue





Revenue


Change





Revenue


ChangeRevenue:Software license

$
30,908



37
%

$
29,792



36
%

$
1,116


$
27,172



33
%

$
2,620Professional services


12,652



15



13,210



16



(558
)


14,540



17



(1,330
)Recurring services(a)


40,560



48



40,101



48



459



41,089



50



(988
)Total revenue


84,120



100



83,103



100



1,017



82,801



100



302Cost of revenue:Software license


7,112



8



9,308



11



(2,196
)


12,506



15



(3,198
)Professional services


7,477



9



9,534



11



(2,057
)


14,715



18



(5,181
)Recurring services(b)


19,267



23



18,027



22



1,240



18,878



23



(851
)Asset impairment






















7,195



8



(7,195
)Total cost of revenue


33,856



40



36,869



44



(3,013
)


53,294



64



(16,425
)Gross profit


50,264



60



46,234



56



4,030



29,507



36



16,727Operating expenses:Sales and marketing


21,709



26



17,364



21



4,345



19,597



24



(2,233
)General and administrative


18,019



22



17,498



21



521



19,832



24



(2,334
)Litigation settlements


10,375



12











10,375











Research and development


10,412



12



10,921



13



(509
)


13,383



16



(2,462
)Amortization of acquired intangible
    assets


3,805



5



3,850



5



(45
)


3,718



4



132Total operating expenses


64,320



77



49,633



60



14,687



56,530



68



(6,897
) 47




---



##### Table of Contents



2006


2005





2004% of





% of


2006-2005





% of


2005-2004Revenue





Revenue


Change





Revenue


ChangeLoss from operations


(14,056
)


(17
)


(3,399
)


(4
)


(10,657
)


(27,023
)


(32
)


23,624Gain on sale of assets






















1,535



2



(1,535
)Other (expense) income, net


(160
)






177







(337
)


45







132Interest income, net


1,146



1



655



1



491



310







345Loss before income taxes


(13,070
)


(16
)


(2,567
)


(3
)


(10,503
)


(25,133
)


(30
)


22,566Income tax expense, net


56







321







(265
)


133







188Net loss from continuing operations


(13,126
)


(16
)


(2,888
)


(3
)


(10,238
)


(25,266
)


(30
)


22,378Income from and gain on sale of
    discontinued operations






















1,035



1



(1,035
)Loss before cumulative effect of
    accounting change


(13,126
)


(16
)


(2,888
)


(3
)


(10,238
)


(24,231
)


(29
)


21,343Cumulative effect of accounting
    change


11















11











Net loss

$
(13,115
)


(16
)

$
(2,888
)


(3
)%

$
(10,227
)

$
(24,231
)


(29
)%

$
21,343     (a)
    
    Revenues from discontinued operations of $5.2 million for
    the years ended December 31, 2004 have been reclassified to
    income from discontinued operations.(b)
    
    Cost of sales from discontinued operations of $4.6 million
    for the years ended December 31, 2004 have been
    reclassified to income from discontinued operations.  The
    Companys Results for the Year Ended December 31, 2006
    Compared to Year Ended December 31, 2005
  Total revenue. ®
  Cost of revenue.
 48




---



##### Table of Contents



®
  Sales and marketing. ®
  General and administrative.
  
    Stock based compensation expense increased by $1.0 million
    due to the implementation of SFAS No. 123R and
    increases in restricted stock awards to employees. In total for
    all expense categories, share-based compensation expense in 2006
    was $1.9 million and $0.4 million in 2005.
    Bad debt expenses increased $0.3 million due to a decrease
    in recoveries of bad debt in 2006, compared to 2005.
    Costs associated with our strategic alternatives process
    announced in August 2006 were $1.1 million for the twelve
    months ended December 31, 2006.      Litigation settlement.
  Research and development.
  Other income (expense), net.
  Interest income, net.
  Income tax.
 49




---



##### Table of Contents



The
    Companys Results for the Year Ended December 31, 2005
    Compared to Year Ended December 31, 2004
  Total revenue.
  Cost of revenue.
  
    $2.5 million reduction in software amortization expenses
    resulting from the lower carrying amounts assigned to software
    assets in ISD based on the asset impairment described below.
    $1.2 million reduction in software amortization expenses
    associated with acquired technology assets in the Rogue Wave
    division. The lower amortization expenses in 2005 was
    attributable to a re-allocation of asset values completed at the
    end of 2004 resulting from the Companys third party
    valuation of acquired assets and goodwill. The re-allocation
    resulted in lower amounts assigned to capitalized software in
    Rogue Wave and higher amounts being assigned to goodwill,
    thereby resulting in lower overall amortization expense recorded
    in 2005 compared to 2004.
    Professional services costs decreased $5.2 million, or 35%,
    to $9.5 million primarily as a result of a decrease in
    salary and related expenses due to a decrease in headcount.
    Recurring services costs decreased $0.9 million, or 5%, to
    $18.0 million primarily as a result of lower outside
    consulting expenses and lower headcount and related costs in the
    ISD division.
    Asset impairment charges decreased $7.2 million. In the
    first quarter of 2004, we recorded asset impairment charges in
    ISD totaling $7.2 million. The Company wrote down
    $4.8 million of capitalized software in 2004 due to a
    decision to discontinue products that resulted from
    managements effort to refocus the Companys resources
    to products that will generate revenues in the near term and
    conserve cash flows. In the fourth quarter of 2003, the Company
    prepaid $0.9 million to Infotech Network Group (Infotech)
    for professional services. In March 2004, the Company paid
    Infotech an additional $2.1 million prepayment under an
    outsourcing agreement. Payments totaling $1.7 million were
    written off in the first quarter of 2004 when the asset was
    deemed not recoverable due to Infotechs inability to
    provide assurances that it could deliver services in the future.
    The Company also wrote down $0.7 million of deferred costs
    related to its transaction business in the first quarter of
    2004. The deferred costs were written down to their expected
    realizable value since the total balance of the asset was not
    recoverable due to the cancellation of certain contracts and
    lower than expected revenues on other contracts. There were no
    impairment charges recorded in 2005.
    Royalties to a third party vendor for sales of software licenses
    increased $0.6 million from 2004 to 2005.  Sales and marketing.
  General and administrative.
  
    The Company received $1.0 million in reimbursements from
    its primary D&O insurance provider for certain legal
    expenses incurred during the time period May 2004 to August 2005
    as part of the Companys defense of shareholder and
    derivative lawsuits. The reimbursements were recorded as a
    credit to legal expenses.
    Bad debt expenses decreased by $0.6 million as a result of
    improved collection processes and lower overall credit risk
    associated with the Companys receivable portfolio. 50




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##### Table of Contents




    Third party consulting costs decreased by $0.2 million as a
    result of lower costs associated with the Sarbanes Oxley 404
    internal control project and company efforts to perform
    compliance work internally.
    Insurance costs decreased by $0.5 million as a result of
    lower premiums and other consolidation of previously outstanding
    policies.
    Additionally, legal fees in 2005 compared to 2004 decreased
    $1.5 million. This decrease is a result of the higher level
    of expenditures incurred in 2004 at the onset of the internal
    investigations, class action lawsuits, and SEC investigation
    compared to current year activities.    Research and development.
  Amortization of acquired
    intangibles.
  Gain on sale of assets.
  Other income, net.
  Interest income, net.
  Income tax.
  Income from and gain on sale of discontinued
    operations.
 51




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##### Table of Contents



Integration
    Solutions Division
    2006


2005


2006-2005


2004


2005-2004% of Revenue








Change





% of Revenue


ChangeRevenue:Software license

$
8,393



21
%

$
8,994



23
%

$
(601
)

$
7,085



17
%

$
1,909Professional services


5,125



13



6,132



16



(1,007
)


8,229



20



(2,097
)Recurring services


26,110



66



24,141



61



1,969



25,422



63



(1,281
)Total revenue


39,628



100



39,267



100



361



40,736



100



(1,469
)Cost of revenue:Software license


2,583



7



4,876



12



(2,293
)


6,887



17



(2,011
)Professional services


3,749



9



6,181



16



(2,432
)


9,967



24



(3,786
)Recurring services


15,157



38



13,251



34



1,906



14,400



35



(1,149
)Asset impairment






















7,195



18



(7,195
)Total cost of revenue


21,489



54



24,308



62



(2,819
)


38,449



94



(14,141
)Gross profit


18,139



46



14,959



38



3,180



2,287



6



12,672Operating expenses:Sales and marketing


8,896



22



6,795



17



2,101



8,478



21



(1,683
)General and administrative


520



2



706



2



(186
)










706Research and development


3,233



8



3,146



8



87



5,103



13



(1,957
)Amortization of acquired intangible
    assets


748



2



793



2



(45
)


1,327



3



(534
)Total operating expenses


13,397



34



11,440



29



1,957



14,908



37



(3,468
)Net income (loss) from operations

$
4,742



12
%

$
3,519



9
%

$
1,223


$
(12,621
)


(31
)%

$
16,140   Results
    of Integration Solutions Division Operations for the Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
        
    Lower costs due to the closing of the fixed-bid contracts in
    2005 totaling $2.2 million,
    Lower software amortization expenses of $1.1 million due to
    completing the amortization for developed technology acquired in
    the Healthcare.com acquisition,
    Lower third-party license royalty expenses of $1.2 million,
    and
    Lower facility costs of $0.4 million. 52




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##### Table of Contents




    Increased recurring services costs of $1.0 million due to
    additional contractor costs to support implementation services
    provided to MUSC,
    Increased contractor costs of $0.3 million to support the
    increase in transaction revenue, and
    Increased royalties for Initiate of $0.4 million.    Results
    of Integration Solutions Division Operations for the Year
    Ended December 31, 2005 Compared to Year Ended
    December 31, 2004
       53




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##### Table of Contents



CareScience
    Division
    2006


2005


2006-2005


2004


2005-2004% of Revenue





% of Revenue


Change





% of Revenue


ChangeRevenue:Software license

$
5,976



39
%

$
5,354



35
%

$
622


$
5,136



37
%

$
218Professional services


6,544



42



6,022



39



522



5,158



37



864Recurring services


2,955



19



4,065



26



(1,110
)


3,616



26



449Total revenue


15,475



100



15,441



100



34



13,910



100



1,531Cost of revenue:Software license


2,580



17



2,719



17



(139
)


2,747



20



(28
)Professional services


2,605



17



2,599



17



6



3,659



26



(1,060
)Recurring services


3,137



20



3,831



25



(694
)


3,226



23



605Total cost of revenue


8,322



54



9,149



59



(827
)


9,632



69



(483
)Gross profit


7,153



46



6,292



41



861



4,278



31



2,014Operating expenses:Sales and marketing


2,394



15



1,990



13



404



1,685



12



305General and administrative


755



5



590



4



165



93



1



497Research and development


2,888



19



2,515



16



373



2,515



18



Amortization of acquired intangible
    assets


1,224



8



1,224



8







1,234



9



(10
)Total operating expenses


7,261



47



6,319



41



942



5,527



40



792Net income (loss) from operations

$
(108
)


(1
)%

$
(27
)


0
%

$
(81
)

$
(1,249
)


(9
)%

$
1,222   Results
    of the CareScience Division Operations for the Year Ended
    December 31, 2006 Compared to Year Ended December 31,
    2005
       54




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##### Table of Contents



Results
    of the CareScience Division Operations for the Year Ended
    December 31, 2005 Compared to Year Ended December 31,
    2004
        Rogue
    Wave Software Division
    2006


2005


2006-2005


2004


2005-2004% of Revenue





% of Revenue


Change





% of Revenue


ChangeRevenue:Software license

$
16,539



57
%

$
15,444



54
%

$
1,095


$
14,951



53
%

$
493Professional services


983



3



1,056



4



(73
)


1,153



4



(97
)Recurring services


11,495



40



11,895



42



(400
)


12,051



43



(156
)Total revenue


29,017



100



28,395



100



622



28,155



100



240Cost of revenue:Software license


1,949



7



1,713



6



236



2,872



10



(1,159
)Professional services


1,123



4



754



3



369



1,089



4



(335
)Recurring services


973



3



945



3



28



1,252



5



(307
)Total cost of revenue


4,045



14



3,412



12



633



5,213



19



(1,801
)Gross profit


24,972



86



24,983



88



(11
)


22,942



81



2,041Operating expenses:Sales and marketing


9,129



31



7,532



27



1,597



7,846



28



(314
)General and administrative


949



4



954



3



(5
)


466



2



488Research and development


4,291



15



5,260



19



(969
)


5,763



20



(503
)Amortization of acquired intangible
    assets


1,833



6



1,833



6







1,160



4



673Total operating expenses


16,202



56



15,579



55



623



15,235



54



344Net income from operations

$
8,770



30
%

$
9,404



33
%

$
(634
)

$
7,707



27
%

$
1,697   Results
    of the Rogue Wave Software Division Operations for the Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  ®
 55




---



##### Table of Contents



® proof-of-concept
  ® ®
  Results
    of the Rogue Wave Software Division Operations for the Year
    Ended December 31, 2005 Compared to Year Ended
    December 31, 2004
      Liquidity
    and Capital Resources
  Cash
    requirements
    2012 &Total


2007


2008


2009


2010


2011


Thereafter(Dollars in thousands)Operating leases

$
6,878


$
2,551


$
1,705


$
1,210


$
895


$
517


$
Litigation settlement


7,800



7,800



















Purchase obligations


3,318



3,318



















$
17,996


$
13,669


$
1,705


$
1,210


$
895


$
517


$
     
    Continue to fund ongoing operations, including the addition of
    sales, product and infrastructure support personnel;
    Continue to invest in new product development and market
    penetration strategies, including our Cloverleaf Suite in ISD,
    Standards of Care in CareScience and Rogue Wave Hydra;
    Invest in additional hardware and software to maintain and
    enhance our existing networks and software applications;
    Fund settlement of the remaining class action lawsuits; and
    Fund defense costs and fees for former officers in connection
    with the formal SEC investigation and any resulting lawsuits.   56




---



##### Table of Contents



Sources
    and Uses of Cash
    2006


2005


2004Operating activities

$
4,172


$
10,626


$
(4,150
)Investing activities


(7,730
)


(11,610
)


(2,646
)Financing activities


413



1,275



1,444              57




---



##### Table of Contents



Commitments
    Assessment
    of Future Liquidity
    
    Our consolidated cash, cash equivalents and short-term
    investments of $30.4 million as of December 31, 2006;
    The $7.8 million payment for litigation settlement paid in
    January 2007:
    The anticipated level of capital expenditures during
    2007; and
    Our expectation of realizing positive cash flow from operations
    in 2007. Item 7A.  Qualitative
    and Quantitative Disclosures About Market Risk     58




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
          Share-Based Payment
        59




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
               60




---



##### Table of Contents



QUOVADX,
    INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2006


2005(In thousands, except for share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
15,810


$
17,806Short-term investments


14,611



14,850Accounts receivable, net of
    allowance of $208 and $462, respectively


15,509



14,122Unbilled accounts receivable


1,145



720Prepaids and other


1,554



1,771Total current assets


48,629



49,269Property and equipment, net


4,516



3,220Software, net


7,238



7,409Other intangible assets, net


10,057



13,862Goodwill


46,724



46,724Restricted cash


135



175Other assets


4,675



484Total assets

$
121,974


$
121,143LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
4,160


$
3,383Accrued liabilities


17,602



11,175Deferred revenue


17,083



17,601Total current liabilities


38,845



32,159Other long term liabilities


4,558



797Total liabilities


43,403



32,956Commitments and
    contingencies  See note 7Stockholders equity:Preferred stock, $.01 par
    value, 5,000,000 shares authorized; no shares issued and
    outstanding






Common stock, $.01 par value;
    100,000,000 authorized and 42,250,290 and 41,641,606 shares
    issued and outstanding, respectively


422



416Accumulated other comprehensive
    income/(loss)


976



(199
)Additional paid-in capital


274,578



272,260Accumulated deficit


(197,405
)


(184,290
)Total stockholders equity


78,571



88,187Total liabilities and
    stockholders equity

$
121,974


$
121,143    61




---



##### Table of Contents



QUOVADX,
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2006


2005


2004(In thousands, except per share amounts)Revenue:Software license

$
30,908


$
29,792


$
27,172Professional services


12,652



13,210



14,540Recurring services


40,560



40,101



41,089Total revenue


84,120



83,103



82,801Cost of revenue:Software license


7,112



9,308



12,506Professional services


7,477



9,534



14,715Recurring services


19,267



18,027



18,878Asset impairment










7,195Total cost of revenue


33,856



36,869



53,294Gross profit


50,264



46,234



29,507Operating expenses:Sales and marketing


21,709



17,364



19,597General and administrative


18,019



17,498



19,832Litigation settlement


10,375







Research and development


10,412



10,921



13,383Amortization of acquired intangible
    assets


3,805



3,850



3,718Total operating expenses


64,320



49,633



56,530Loss from operations


(14,056
)


(3,399
)


(27,023
)Gain on sale of assets










1,535Other (expense) income, net


(160
)


177



45Interest income, net


1,146



655



310Loss before income taxes


(13,070
)


(2,567
)


(25,133
)Income tax expense


56



321



133Loss from continuing operations


(13,126
)


(2,888
)


(25,266
)Discontinued operations:Income from discontinued operations










589Gain on sale of discontinued
    operations










446Loss before cumulative effect of
    accounting change


(13,126
)


(2,888
)


(24,231
)Cumulative effect of accounting
    change


11







Net loss

$
(13,115
)

$
(2,888
)

$
(24,231
)Net loss from continuing operations
    per common share  basic and diluted

$
(0.32
)

$
(0.07
)

$
(0.63
)Income from and gain on sale of
    discontinued operations per common share   basic and
    diluted










0.02Loss before cumulative effect of
    accounting change per common share   basic and diluted


(0.32
)


(0.07
)


(0.61
)Cumulative effect of accounting
    change per common share  basic and diluted


0.00







Net loss per common
    share  basic and diluted

$
(0.32
)

$
(0.07
)

$
(0.61
)Shares used in computing net loss
    per share  basic and diluted


41,588



40,924



39,892    62




---



##### Table of Contents



QUOVADX,
    INC.
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
  AccumulatedOther


AdditionalCommon Stock


Comprehensive


Paid-in


AccumulatedShares


Amount


Income (Loss)


Capital


Deficit


Total(In thousands)Balance at January 1, 2004


38,938


$
389


$
131


$
268,626


$
(157,171
)

$
111,975Net loss


















(24,231
)


(24,231
)Currency translation adjustment










740











740Comprehensive loss






















(23,491
)Stock option exercises and
    issuances under employee stock purchase plan


1,586



16







1,428







1,444Deferred compensation from options
    exchanged in acquisition














470







470Deferred compensation from
    restricted stock awards


95



1







(1
)






Balance at December 31, 2004


40,619



406



871



270,523



(181,402
)


90,398Net loss


















(2,888
)


(2,888
)Currency translation adjustment










(1,070
)










(1,070
)Comprehensive loss






















(3,958
)Stock option exercises and
    issuances under employee stock purchase plan


747



7







1,268







1,275Deferred compensation from options
    exchanged in acquisition














20







20Deferred compensation from
    restricted stock awards


276



3







449







452Balance at December 31, 2005


41,642



416



(199
)


272,260



(184,290
)


88,187Net loss


















(13,115
)


(13,115
)Currency translation adjustment










1,175











1,175Comprehensive loss






















(11,940
)Stock option exercises and
    issuances under employee stock purchase plan


224



2







411







413Deferred compensation from
    restricted stock awards


384



4







1,907







1,911Balance at December 31, 2006


42,250


$
422


$
976


$
274,578


$
(197,405
)

$
78,571    63




---



##### Table of Contents



QUOVADX,
    INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2006


2005


2004(In thousands)CASH FLOWS FROM OPERATING
    ACTIVITIESNet loss

$
(13,115
)

$
(2,888
)

$
(24,231
)Adjustments to reconcile net loss
    to net cash used in operating activities Depreciation and
    amortization


6,769



7,570



11,108Amortization of acquired
    intangible assets


3,805



3,850



3,332Share based compensation


1,945



452



Amortization of deferred
    compensation






20



470Asset impairments










7,529Gain on sale of assets










(1,981
)Loss on retirement of fixed assets


86







(Recovery) provision for losses on
    accounts receivable


(217
)


(461
)


162Change in assets and liabilities
    (net of assets and liabilities acquired)Accounts receivable


(875
)


220



3,986Unbilled accounts receivable


(425
)


474



2,270Prepaids and other


(3,469
)


1,055



2,063Accounts payable


765



(120
)


(4,430
)Accrued liabilities


9,691



2,495



(5,139
)Deferred revenue


(788
)


(2,041
)


711Net cash provided by (used in)
    operating activities


4,172



10,626



(4,150
)CASH FLOWS FROM INVESTING
    ACTIVITIESPurchase of property and equipment


(3,491
)


(1,277
)


(1,010
)Purchased and capitalized software


(4,478
)


(1,508
)


(1,087
)Proceeds from sale of assets










5,476Purchase of short-term investments


(56,443
)


(38,240
)


(6,025
)Sale of short-term investments


56,682



29,415



Net cash used in investing
    activities


(7,730
)


(11,610
)


(2,646
)CASH FLOW FROM FINANCING ACTIVITIESProceeds from issuance of common
    stock and exercise of stock options


413



1,275



1,444Net cash provided by financing
    activities


413



1,275



1,444EFFECT OF FOREIGN CURRENCY
    EXCHANGE RATE CHANGES ON CASH


1,149



(1,307
)


486Net decrease in cash and cash
    equivalents


(1,996
)


(1,016
)


(4,866
)Cash and cash equivalents at
    beginning of period


17,806



18,822



23,688Cash and cash equivalents at end
    of period

$
15,810


$
17,806


$
18,822SUPPLEMENTAL DISCLOSURE OF
    NON-CASH INVESTING TRANSACTIONSRetirement of fixed
    asset  cost

$
12,369


$



$
Retirement of fixed
    asset  accumulated depreciation


(12,283
)






Net retirement of fixed assets

$
86


$



$
SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION:Cash paid for income taxes

$
521


$
(256
)

$
160Cash paid for interest

$
44


$



$
    64




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 For the
    three years ended December 31, 2006, 2005, and
    2004
  1.
    Organization
    and Summary of Significant Accounting Policies  Overview
    Basis
    of Presentation
    Reclassifications
    Use of
    Estimates
    Revenue
    Recognition
  97-2, Software Revenue Recognition, SOP 98-4; SOP 81-1, Accounting for Performance of Construction-Type and
    Certain Production-Type Contracts.
     65




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  SOP 97-2,
  percentage-of-completion time-and-materials
  percentage-of-completion percentage-of-completion
      97-2 SOP 97-2
    Cash
    and Cash Equivalents
    a)
    Readily convertible to known amounts of cash; andb)
    So near their maturity that they present insignificant risk of
    changes in value because of changes in interest rate. 66




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Short-Term
    Investments
    Historic Cost as of December 31,2006


2005Interest bearing investments

$
8,211


$
8,675Auction rate securities


6,400



6,175Total

$
14,611


$
14,850   Fair
    Value of Financial Instruments
    Unbilled
    Accounts Receivable
  time-and-material percentage-of-completion
  Allowance
    for Doubtful Accounts
      ReductionBalance at


(Credited)





in Sales


Balance atAllowance for Doubtful Accounts

Beginning


Charged to





Return


End ofand Sales Returns

of Period


Expense


Deduction


Allowance


Period(Dollars in thousands)2006

$
462


$
(217
)

$
(37
)(a)

$



$
2082005


1,067



(461
)


(144
)(a)






4622004


2,765



162



(1,555
)(a)


(305
)(b)


1,067     (a)
    
    Represents credit losses written off during the period, less
    collection of amounts previously written off.(b)
    
    Reduction in Rogue Wave sales allowance that is no longer needed
    as an adjustment to goodwill. 67




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Warranties
    Major
    Customers
    Year Ended December 31,Customer

2006

2005

2004Medical University of South
    Carolina


16
%


15
%


16
%       Year Ended December 31,

Integration Solutions


CareScience


Rogue Wave2006


46
%


40
%


13
%2005


43
%


44
%


16
%2004


51
%


45
%


12
%     Property
    and Equipment
    68




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31,2006


2005(In thousands)Property and
    EquipmentFurniture, fixtures and equipment

$
2,144


$
4,588Computer hardware


17,718



22,494Computer software


9,208



10,66429,070



37,746Less accumulated depreciation and
    amortization


(24,554
)


(34,526
)$
4,516


$
3,220     Purchase
    Accounting
    Capitalized
    Software Costs
   69




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2006


2005(In thousands)Capitalized
    SoftwareAcquired Software

$
27,098


$
27,098Capitalized Software


13,529



9,05140,627



36,149Accumulated Amortization


(33,389
)


(28,740
)$
7,238


$
7,409   Goodwill
      Acquired
    Intangible Assets
    2006


2005Accumulated


Net Book





Accumulated


Net BookCost


Amortization


Value


Cost


Amortization


ValueCustomer base

$
22,496


$
(12,648
)

$
9,848


$
22,496


$
(8,982
)

$
13,514Trade name


559



(350
)


209



559



(243
)


316Other


2,178



(2,178
)






2,178



(2,146
)


32$
25,233


$
(15,176
)

$
10,057


$
25,233


$
(11,371
)

$
13,862  70




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Long-Lived
    Assets and Impairments
  Accounting
    for the Impairment or Disposal of Long-Lived Assets
      Other
    Assets
      Research
    and Development
    Advertising
    Accounting
    for Contingencies
  Accounting for Contingencies
  
    The period in which the underlying cause of the pending
    litigation occurred;
    The degree of probability of an unfavorable outcome; and
    The ability to make a reasonable estimate of the amount of loss. 71




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Deferred
    Taxes
  Accounting
    for Income Taxes.
  Share-Based
    Compensation
  Share-Based Payment,
   72




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2006


2005


2004Risk free interest rate


4.56
%


4.17
%


4.70
%Volatility factor


80.00
%


106.00
%


106.00
%Weighted average estimated option
    term in years


6.50



7.50



5.00       Accounting for
    Stock Issued to Employees. Accounting for Stock-Based
    Compensation, Accounting for
    Stock-Based Compensation  Transition and
    Disclosure,
  Year Ended December 31,2005


2004(In thousands exceptper share data)Net loss:As reported

$
(2,888
)

$
(24,231
)Plus: stock based compensation
    recognized under intrinsic value method


472



470Less: stock based compensation
    under fair value method


(5,160
)


(1,821
)Pro forma net loss

$
(7,576
)

$
(25,582
)Net loss per common share:As reported

$
(0.07
)

$
(0.61
)Pro forma


(0.19
)


(0.64
)    73




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    and/or
  Net
    Loss Per Common Share
    Comprehensive
    Loss
    Foreign
    Currency Translations
   74




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   New
    Accounting Standards
    Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109,
  2.
    Acquisitions/Dispositions/Recapitalization  and/or
    Accounting for Costs
    Associated with Exit or Disposal Activities
 75




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Retention Incentive LiabilityLiability AccruedYear Ended


Estimated MaximumDecember 31, 2006


Liability($ in thousands)ISD

$
97


$
292CareScience


58



174Rogue Wave


84



251Corporate


116



348Total

$
355


$
1,065   3.
    Business/Asset
    Acquisitions and Dispositions  Acquisition-Related
    Restructuring
    Accrual at





Accrual at





Accrual atDecember 31,


Recorded in


December 31,


Recorded in


December 31,2004


2005


2005


2006


2006Lease abandonment costs

$
1,582


$
(242
)

$
1,340


$
(117
)

$
1,223Less: Sublease income


(301
)






(301
)






(301
)$
1,281


$
(242
)

$
1,039


$
(117
)

$
922   Business
    and Asset Dispositions
         76




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year EndedDecember 31, 2004(In thousands)Recurring services revenues

$
5,164Cost of recurring services revenue


4,575Income from discontinued operations

$
589   4.
    Balance
    Sheet Components    December 31,2006


2005Other Current AssetsPrepaid expenses

$
1,060


$
1,434Deferred costs


115



158Other


379



179$
1,554


$
1,771   December 31,2006


2005Accrued LiabilitiesAccrued litigation settlement

$
7,800


$
Accrued compensation


2,363



2,549Accrued bonuses and commissions


2,732



2,130Accrued taxes


1,047



1,215Accrued rent


542



408Accrued legal fees


200



838Accrued audit fees


232



508Option liability payout


105



110Other


2,581



3,417$
17,602


$
11,175  77




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Stockholders
    Equity and Benefit Plans  Stock
    Options
         78




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Outstanding


ExercisableWeightedAverage


Weighted





WeightedRemaining


Average





AverageRange of

Number


Contractual


Exercise


Number


ExerciseExercise Prices

of Shares


Life (Years)


Price


of Shares


Price$ 0.25  $ 1.12


1,068,304



7.3


$
1.03



897,311


$
1.021.14   1.83


882,123



7.7



1.82



692,702



1.821.88   2.67


588,754



7.0



2.45



431,678



2.402.70   2.87


462,806



6.1



2.80



312,158



2.812.89   3.15


681,595



7.4



2.96



199,584



2.993.16   5.94


392,715



6.5



4.43



367,715



4.526.02   6.20


560,750



6.3



6.10



560,750



6.106.40   8.70


309,276



4.8



7.58



309,276



7.589.29  10.34


381,036



4.3



10.01



381,036



10.0110.83  24.41


174,830



3.8



12.29



174,830



12.29$ 0.25  $24.41


5,502,189



6.6


$
3.80



4,327,040


$
4.18     WeightedWeighted


Average


AggregateWeighted





Average


Remaining


IntrinsicNumber of


Average


Options


Exercise


Contractual


Value ($ inShares


Exercise Price


Exercisable


Price


Life (Years)


thousands)Options outstanding,
    January 1, 2004


7,083,463


$
6.95



4,650,309


$
7.15Options granted


3,653,625



2.65Less: options exercised


(1,082,429
)


0.58Less: options forfeited


(3,968,516
)


6.94Options outstanding,
    December 31, 2004


5,686,143



4.47



2,794,653



6.01Options granted


1,390,505



2.90Less: options exercised


(210,007
)


1.29Less: options forfeited


(1,183,169
)


4.62Options outstanding,
    December 31, 2005


5,683,472



3.81



3,721,153



4.67Options granted


382,500



2.80Less: options exercised


(129,828
)


1.41Less: options forfeited


(433,955
)


3.68Options outstanding,
    December 31, 2006


5,502,189


$
3.80











6.6


$
3,028Vested and expected to vest


5,287,467


$
3.85











6.7


$
2,985Exercisable at December 31,
    2006


4,327,040


$
4.18











6.4


$
2,500  79




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Weighted AverageRemainingWeighted Average


ContractualUnits


Grant Date Fair Value


Life (Years)Unvested restricted stock awards
    at January 1, 2004


Granted


95,000


$
2.04Unvested restricted stock awards
    at December 31, 2004


95,000



2.04



0.5Granted


315,632



2.82Vested


(147,500
)


2.32Cancelled


(40,000
)


2.70Unvested restricted stock awards
    at December 31, 2005


223,132



2.84



1.5Granted


423,500



2.79Vested


(148,096
)


2.69Cancelled


(47,112
)


2.96Unvested restricted stock awards
    at December 31, 2006


451,424


$
2.85



1.4     Employee
    Stock Purchase Plan
    80




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  PurchaseDate

Shares


PriceAvailable at January 1, 2004


988,644Authorized 2004


500,000Issued April 2004


(264,355
)

$
2.01Issued October 2004


(238,411
)


1.49Available at December 31, 2004


985,878Authorized 2005


500,000Issued April 2005


(352,442
)


1.47Issued October 2005


(189,841
)


2.33Available at December 31, 2005


943,595Authorized 2006


500,000Issued April 2006


(51,864
)


2.58Reduction in authorized shares at
    July 1, 2006


(891,731
)Issued October 2006


(38,503
)

$
2.35Available at December 31, 2006


461,497   401(k)
    Plan
    Stockholders
    Rights Plan
   81




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Income
    Taxes    2006


2005


2004Domestic

$
(14,621
)

$
(3,988
)

$
(25,175
)International


1,551



1,421



42Total

$
(13,070
)

$
(2,567
)

$
(25,133
)     2006


2005


2004(In thousands)CurrentState and local

$
260


$
41


$
International


403



280



133Total Current


663



321



133DeferredState and local

$
(607
)

$



$
Total Deferred


(607
)






Income tax expense (benefit)

$
56


$
321


$
133     Years Ended December 312006


2005


2004(In thousands)Statutory income tax benefit

$
(4,574
)

$
(898
)

$
(8,799
)State income tax benefit, net of
    federal income tax benefit


(1,162
)


(368
)


(665
)Change in valuation allowance


5,588



(2,333
)


9,249Foreign tax rate differential


(48
)


45



111Other permanent items


252



3,875



237Income tax expense/(benefit)

$
56


$
321


$
133  82




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2006


2005(In thousands)Current deferred tax assets
    (liabilities):Deferred revenue

$
335


$
285Allowance for doubtful accounts


59



151Employee benefits


290



96Accrued liabilities


704



1,061Other


105



111Valuation allowance


(1,493
)


(1,292
)Current deferred tax asset
    (liability) net






412Non-current deferred tax asset
    (liability)Depreciation and amortization


(3,539
)


(5,908
)Investment impaired


195



195Tax credits


3,723



3,193U.S. net operating loss
    carryforwards


59,513



56,527Foreign net operating loss
    carryforwards


1,013



1,125Other


(685
)


Valuation allowance


(59,613
)


(55,544
)Non-current deferred tax asset
    (liability) net


607



(412
)Net deferred tax assets
    (liabilities)

$
607


$
      83




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        7.
    Commitments
    and Contingencies  Commitments
    2007

$
2,5512008


1,7052009


1,2102010


8952011


517Thereafter


Total

$
6,878        84




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Contingencies
  Bartula v. XCare.net, Inc., et al. No. 01-CV-10075). Rule 10b-5
  Smith v. Quovadx, Inc. et al, No. 04-M-0509, Heller v. Quovadx, Inc., et al No. 04-M-0665 Heller
 85




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Special Situations Fund Heller
  v. Brown et al, Thornton v. Brown, et al. Jaroslawicz v. Brown, et al. In re Quovadx, Inc. Derivative
    Litigation.
 86




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Henderson v. Quovadx, Inc.
    et al, No. 04-M-1006 Heller Heller Special Situations
    Fund III, L.P., et al. v. Quovadx, Inc.,
    et al, No. 04-M-1006 . prima facie
  Heller
 87




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Special Situations Fund Heller
      8.
    Related
    Party Transactions         88




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Segment
    Information  Disclosures about Segments of
    an Enterprise and Related Information.
      December 31, 2006

ISD


CareScience


Rogue Wave


Corporate


TotalRevenue:Software license

$
8,393


$
5,976


$
16,539






$
30,908Professional services


5,125



6,544



983







12,652Recurring services


26,110



2,955



11,495







40,560Total revenue


39,628



15,475



29,017







84,120Cost of revenue:Software license


2,583



2,580



1,949







7,112Professional services


3,749



2,605



1,123







7,477Recurring services


15,157



3,137



973







19,267Total cost of revenue


21,489



8,322



4,045







33,856Gross profit


18,139



7,153



24,972







50,264Operating expenses


13,397



7,261



16,202



27,460



64,320Income(loss) from operations

$
4,742


$
(108
)

$
8,770


$
(27,460
)


(14,056
)Other income, net


















986Loss before income taxes


















(13,070
)Income tax expense


















56Loss before cumulative effect of
    accounting change


















(13,126
)Cumulative effect of accounting
    change


















11Net loss

















$
(13,115
)   89




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2005

ISD


CareScience


Rogue Wave


Corporate


TotalRevenue:Software license

$
8,994


$
5,354


$
15,444






$
29,792Professional services


6,132



6,022



1,056







13,210Recurring services


24,141



4,065



11,895







40,101Total revenue


39,267



15,441



28,395







83,103Cost of revenue:Software license


4,876



2,719



1,713







9,308Professional services


6,181



2,599



754







9,534Recurring services


13,251



3,831



945







18,027Total cost of revenue


24,308



9,149



3,412







36,869Gross profit


14,959



6,292



24,983







46,234Operating expenses


11,440



6,319



15,579



16,295



49,633Income(loss) from operations

$
3,519


$
(27
)

$
9,404


$
(16,295
)


(3,399
)Other income, net


















832Loss before income taxes


















(2,567
)Income tax expense


















321Net loss

















$
(2,888
)   December 31, 2004

ISD


CareScience


Rogue Wave


Corporate


TotalRevenue:Software license

$
7,085


$
5,136


$
14,951






$
27,172Professional services


8,229



5,158



1,153







14,540Recurring services


25,422



3,616



12,051







41,089Total revenue


40,736



13,910



28,155







82,801Cost of revenue:Software license


6,887



2,747



2,872







12,506Professional services


9,967



3,659



1,089







14,715Recurring services


14,400



3,226



1,252







18,878Asset impairment


7,195















7,195Total cost of revenue


38,449



9,632



5,213







53,294Gross profit


2,287



4,278



22,942







29,507Operating expenses


14,908



5,527



15,235



20,860



56,530Income(loss) from operations

$
(12,621
)

$
(1,249
)

$
7,707


$
(20,860
)


(27,023
)Gain on sale of assets


















1,535Other income, net


















355Loss before income taxes


















(25,133
)Income tax expense


















133Net loss from continuing operations


















(25,266
)Income from and gain on
    discontinued operations


















1,035Net loss

















$
(24,231
)  90




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ISD


CareScience


Rogue Wave


TotalDecember 31,
    2006Software, net


2,097



1,200



3,941



7,238Other intangible assets, net


1,879



4,586



3,592



10,057Goodwill






12,742



33,982



46,724Depreciation


785



382



305



1,472Capitalized software amortization


2,582



255



1,812



4,649Intangible amortization


747



1,223



1,835



3,805December 31,
    2005Software, net


4,089



511



2,809



7,409Other intangible assets, net


2,626



5,810



5,426



13,862Goodwill






12,742



33,982



46,724Depreciation


1,265



536



337



2,138Capitalized software amortization


3,703



186



1,543



5,432Intangible amortization


793



1,224



1,833



3,850December 31,
    2004Software, net


7,349



697



3,287



11,333Other intangible assets, net


3,419



7,034



7,260



17,713Goodwill






12,742



33,982



46,724Depreciation


2,352



607



533



3,492Capitalized software amortization


5,048



136



2,432



7,616Intangible amortization


1,325



1,233



1,160



3,718     10.
    Quarterly
    Results (Unaudited)   91




---



##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months EndedMarch 31,


June 30,


September 30,


December 31,2006


2006


2006


2006(In thousands except for per share amounts)STATEMENT OF OPERATIONSTotal revenue

$
20,377


$
20,709


$
20,419


$
22,615Cost and expenses:Cost of revenue


8,755



8,567



8,218



8,316Sales and marketing


4,817



5,433



4,891



6,568General and administrative


7,966



4,416



1,396



4,241Litigation settlements


3,575







2,300



4,500Research and development


2,403



2,648



2,649



2,712Amortization of acquired
    intangibles


963



956



943



943Total costs and expenses


28,479



22,020



20,397



27,280Income (loss) from operations


(8,102
)


(1,311
)


22



(4,665
)Other income, net


383



138



171



294Net income (loss) before income
    taxes


(7,719
)


(1,173
)


193



(4,371
)Income tax (benefit) expense, net


58



137



202



(341
)Net loss before cumulative effect
    of accounting change


(7,777
)


(1,310
)


(9
)


(4,030
)Cumulative effect of accounting
    change


11











Net loss

$
(7,766
)

$
(1,310
)

$
(9
)

$
(4,030
)Net loss per common share-basic
    and diluted

$
(0.19
)

$
(0.03
)

$
(0.00
)

$
(0.10
)   92




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##### Table of Contents



QUOVADX,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Three Months EndedMarch 31,


June 30,


September 30,


December 31,2005


2005


2005


2005(In thousands except for per share amounts)STATEMENT OF OPERATIONSTotal revenue

$
20,776


$
20,499


$
20,186


$
21,642Cost and expenses:Cost of revenue


9,328



9,012



9,421



9,108Sales and marketing


4,382



4,038



3,865



5,079General and administrative


4,724



3,504



4,955



4,315Research and development


2,971



3,137



2,691



2,122Amortization of acquired
    intangibles


963



963



963



961Total costs and expenses


22,368



20,654



21,895



21,585Income (loss) from operations


(1,592
)


(155
)


(1,709
)


57Other income, net


156



145



114



417Net income (loss) before income
    taxes


(1,436
)


(10
)


(1,595
)


474Income tax expense


73



80



103



65Net income (loss)

$
(1,509
)

$
(90
)

$
(1,698
)

$
409Net Income (loss) per common
    share-basic and diluted

$
(0.04
)

$
(0.00
)

$
(0.04
)

$
0.01  93




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##### Table of Contents



Item 9.
    Changes
    In and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
      Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f). Rules 13a-15(e) 15d-15(e) Form 10-K
  Changes
    in Internal Control Over Financial Reporting
     94




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
    Managements Annual Report on Internal
    Control Over Financial Reporting
                95




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.    Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships, Related Transactions and Director
    Independence.    Item 14.
    Principal
    Accountant Fees and Services.   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  1.
    Financial Statements: See Financial Statements and
    Supplementary Data in Part II, Item 8 of this Form
    10K.2.
    Financial Statement Schedule: none3.
    Exhibits: This exhibits listed in the accompanying index to
    exhibits are filed or incorporated by reference as part of this
    Form 10-K. 96




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##### Table of Contents



SIGNATURES      By:
    /s/  Harvey
    A. Wagner   President and Chief Executive Officer
     Signature

Title

Date/s/  Harvey
    A. WagnerHarvey
    A. Wagner

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

March 9, 2007/s/  Matthew
    T. PullamMatthew
    T. Pullam

Executive Vice President,
    Chief Financial Officer and Treasurer
    (Principal Financial Officer)

March 9, 2007/s/  Juan
    C. PerezJuan
    C. Perez

Vice President and Controller
    (Principal Accounting Officer)

March 9, 2007/s/  Jeffrey
    M. KraussJeffrey
    M. Krauss

Chairman of the Board

March 9, 2007/s/  Fred
    L. BrownFred
    L. Brown

Director

March 9, 2007/s/  J.
    Andrew
    CowherdJ.
    Andrew Cowherd

Director

March 9, 2007/s/  James
    B. HooverJames
    B. Hoover

Director

March 9, 2007/s/  Charles
    J.
    RoessleinCharles
    J. Roesslein

Director

March 9, 2007/s/  James
    A. GilbertJames
    A. Gilbert

Director

March 9, 2007  97




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##### Table of Contents



EXHIBIT
    INDEX
  ExhibitNumber

Description of Document3
.1

Restated Certificate of
    Incorporation of the Registrant (incorporated by reference to
    Exhibit 3.1 to the Quarterly Report on
    Form 10-Q
    of the Registrant for the quarter ended March 31, 2003,
    filed on May 13, 2003).3
.2

Bylaws of the Registrant
    (incorporated by reference to Exhibit 3.3 to the
    Registration Statement on
    Form S-1
    of the Registrant, filed on November 2, 1999, Registration
    No. 333-90165).4
.1

Specimen stock certificate
    representing shares of Common Stock of the Registrant
    (incorporated by reference to Exhibit 4.1 to the Current
    Report on
    Form 8-K
    of the Registrant, filed on October 16, 2001).4
.2

Preferred Stock Rights Agreement,
    dated as of July 24, 2000, between the Registrant and
    ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
    including the Certificate of Designation, the form of Rights
    Certificate and the Summary of Rights attached thereto as
    Exhibits A, B, and C, respectively (incorporated by
    reference to Exhibit 1 to the Registration Statement on
    Form 8-A
    of the Registrant, filed on July 28, 2000).10
.1*

Healthcare.com Corporation
    Nonqualified Stock Option Plan (incorporated by reference to
    Exhibit 4.2 to the Post-Effective Amendment No. 1 to
    Form S-4
    on
    Form S-8
    Registration Statement of the Registrant, filed on
    August 16, 2001, Registration
    No. 333-64282).10
.2*

Rogue Wave Software, Inc. 1996
    Equity Incentive Plan (incorporated by reference to
    Exhibit 4.1 to the Post-Effective Amendment No. 1 to
    Form S-4
    on
    Form S-8
    Registration Statement of the Registrant, filed on
    January 8, 2004, Registration
    No. 333-110388).10
.3*

Rogue Wave Software, Inc. 1997
    Equity Incentive Plan (incorporated by reference to
    Exhibit 4.2 to the Post-Effective Amendment No. 1 to
    Form S-4
    on Form on January 8, 2004, Registration
    No. 333-110388).10
.4*

Asset Purchase Agreement, dated as
    of August 25, 2003, by and between CMI Corporate Marketing,
    Inc. (d/b/a Compuflex International) and the Registrant
    (incorporated by reference to Exhibit 10.14 to the
    Quarterly Report on
    Form 10-Q
    of the Registrant for the quarter ended March 31, 2004,
    filed on August 16, 2004).10
.5*

Separation Agreement, dated as of
    August 1, 2005, by and between the Registrant and Melvin L.
    Keating (incorporated by reference to Exhibit 99.3 to the
    Current Report on
    Form 8-K
    of the Registrant, filed on August 4, 2005).10
.6*

Form of Lockup Agreement, dated as
    of September 30, 2005 (incorporated by reference to
    Exhibit 10.1 to the Current Report on
    Form 8-K
    of the Registrant, filed on October 4, 2005).10
.7

Form of Indemnification Agreement
    entered into by the Registrant with each of its directors and
    executive officers (incorporated by reference to
    Exhibit 11.1 to the Annual Report on
    Form 10-K
    of the Registrant for the year ended December 31, 2001,
    filed on March 26, 2002).10
.8

Restated License Agreement, dated
    as of April 1, 1995, by and between the Trustees of the
    University of Pennsylvania and Care Management Science
    Corporation (filed under a confidential treatment request on
    March 14, 2000, as Exhibit 10.3 to the Registration
    Statement on
    Form S-1
    of CareScience, Inc., Registration
    No. 333-32376
    and incorporated by reference to Exhibit 10.15 to the
    Annual Report on
    Form 10-K
    of the Registrant for the year ended December 31, 2003,
    filed on March 18, 2004).10
.9

License Agreement, dated as of
    July 30, 2001, by and between 3550 University City Science
    Center Associates as licensor and CareScience, Inc., as
    licensee, for the license to use a portion of a building for a
    data center (incorporated by reference to Exhibit 10.16 to
    the Annual Report on
    Form 10-K
    of the Registrant for the year ended December 31, 2003,
    filed on March 18, 2004).10
.10

Master Services Agreement, dated
    September 30, 2005, by and between the Registrant and
    VeriCenter, Inc. (incorporated by reference to Exhibit 10.1
    to the Current Report on
    Form 8-K
    of the Registrant, filed under a confidential treatment request
    on October 6, 2005).10
.11*

Amended and Restated
    1999 Director Option Plan effective July 1, 2006
    (incorporated by reference to Exhibit 10.1 to the Current
    Report on
    Form 8-K
    of the Registrant, filed on July 21, 2006).10
.12*

Amended and Restated 1999 Employee
    Stock Purchase Plan effective July 1, 2006 (incorporated by
    reference to Exhibit 10.2 to the Current Report on
    Form 8-K
    of the Registrant, filed on July 21, 2006).10
.13*

Amended and Restated Quovadx, Inc.
    2006 Equity Incentive Plan effective July 1, 2006
    (incorporated by reference to Exhibit 10.3 to the Current
    Report on
    Form 8-K
    of the Registrant, filed on July 21, 2006). 98




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##### Table of Contents



ExhibitNumber

Description of Document10
.14*

Form of Stock Option Agreement for
    grants to Executive Officers under the Quovadx, Inc. 2006 Equity
    Incentive Plan (incorporated by reference to Exhibit 10.2
    to the Current Report on
    Form 8-K
    of the Registrant, filed on June 22, 2006).10
.15*

Form of Restricted Stock Award
    Agreement for grants to Executive Officers under the Quovadx,
    Inc. 2006 Equity Incentive Plan (incorporated by reference to
    Exhibit 10.3 to the Current Report on
    Form 8-K
    of the Registrant, filed on June 22, 2006).10
.16*

Form of Stock Option Agreement for
    grants to Directors under the Quovadx, Inc. 2006 Equity
    Incentive Plan (incorporated by reference to Exhibit 10.4
    to the Current Report on
    Form 8-K
    of the Registrant, filed on June 22, 2006).10
.17*

Form of Restricted Stock Award
    Agreement for grants to Directors under the Quovadx, Inc. 2006
    Equity Incentive Plan (incorporated by reference to
    Exhibit 10.5 to the Current Report on
    Form 8-K
    of the Registrant, filed on June 22, 2006).10
.18*

Employment Agreement, dated as of
    October 8, 2004, by and between the Registrant and Harvey
    A. Wagner (incorporated by reference to Exhibit 99.1 to the
    Current Report on
    Form 8-K
    of the Registrant, filed on October 12, 2004).10
.19*

Amendment to Employment Agreement
    between the Company and Harvey A. Wagner, dated as of
    August 29, 2006 (incorporated by reference to
    Exhibit 10.1 to the Current Report on
    Form 8-K
    of the Registrant, filed on August 31, 2006).10
.20*

Employment Agreement, dated as of
    August 15, 2005, by and between the Registrant and Matthew
    T. Pullam (incorporated by reference to Exhibit 99.2 to the
    Current Report on
    Form 8-K
    of the Registrant, filed on August 4, 2005).10
.21*

Amendment to Employment Agreement
    between the Company and Matthew T. Pullam, dated as of
    August 29, 2006 (incorporated by reference to
    Exhibit 10.2 to the Current Report on
    Form 8-K
    of the Registrant, filed on August 31, 2006).10
.22*

Employment Agreement, dated as of
    March 24, 2005, by and between the Registrant and Afshin
    Cangarlu (incorporated by reference to Exhibit 10.27 to the
    Annual Report on
    Form 10-K
    of the Registrant for the year ended December 31, 2005,
    filed on March 8, 2006).10
.23*

Amendment to Employment Agreement
    between the Company and Afshin Cangarlu, dated as of
    August 29, 2006 (incorporated by reference to
    Exhibit 10.3 to the Current Report on
    Form 8-K
    of the Registrant, filed on August 31, 2006).10
.24*

Employment Agreement, dated as of
    March 25, 2005, by and between the Registrant and Cory
    Isaacson (incorporated by reference to Exhibit 10.28 to the
    Annual Report on
    Form 10-K
    of the Registrant for the year ended December 31, 2005,
    filed on March 8, 2006).10
.25*

Amendment to Employment Agreement
    between the Company and Cory Isaacson, dated as of
    August 29, 2006 (incorporated by reference to
    Exhibit 10.4 to the Current Report on
    Form 8-K
    of the Registrant, filed on August 31, 2006).10
.26*

Employment Agreement, dated as of
    April 1, 2005, by and between the Registrant and Thomas
    Zajac (incorporated by reference to Exhibit 10.31 to the
    Annual Report on
    Form 10-K
    of the Registrant for the year ended December 31, 2005,
    filed on March 8, 2006).10
.27*

Amendment to Employment Agreement
    between the Company and Thomas Zajac, dated as of
    August 29, 2006 (incorporated by reference to
    Exhibit 10.5 to the Current Report on
    Form 8-K
    of the Registrant, filed on August 31, 2006).10
.28*

Employment Agreement, dated as of
    February 10, 2005, by and between the Registrant and Linda
    K. Wackwitz (incorporated by reference to Exhibit 10.30 to
    the Annual Report on
    Form 10-K
    of the Registrant for the year ended December 31, 2005,
    filed on March 8, 2006).10
.29*

Amendment to Employment Agreement
    between the Company and Linda K. Wackwitz, dated as of
    August 29, 2006 (incorporated by reference to
    Exhibit 10.6 to the Current Report on
    Form 8-K
    of the Registrant, filed on August 31, 2006).10
.30*

Employment Agreement, dated as of
    September 12, 2005, by and between the Registrant and Karen
    M. Wilcox (incorporated by reference to Exhibit 10.17 to
    the Annual Report on
    Form 10-K
    of the Registrant for the year ended December 31, 2005,
    filed on March 8, 2006). 99




---



##### Table of Contents



ExhibitNumber

Description of Document10
.31*

Amendment to Employment Agreement
    between the Company and Karen M. Wilcox, dated as of
    August 29, 2006 (incorporated by reference to
    Exhibit 10.7 to the Current Report on
    Form 8-K
    of the Registrant, filed on August 31, 2006).10
.32*

Executive Transaction Bonus Plan,
    effective as of August 31, 2006 (incorporated by reference
    to Exhibit 10.8 to the Current Report on
    Form 8-K
    of the Registrant, filed on August 31, 2006).10
.33*

Non-Executive Retention and Change
    in Control Plan, effective as of August 31, 2006
    (incorporated by reference to Exhibit 10.9 to the Current
    Report on
    Form 8-K
    of the Registrant, filed on August 31, 2006).10
.34*

Quovadx, Inc Executive Management
    2006 Annual Bonus Incentive Plan (incorporated by reference to
    Exhibit 99.1 to the Current Report on
    Form 8-K
    of the Registrant, filed on March 21, 2006).10
.35*

Consulting Agreement dated
    September 5, 2006 between Quovadx, Inc. and Mark S. Rangell
    (incorporated by reference to Exhibit 10.1 to the Current
    Report on
    Form 8-K
    of the Registrant, filed on September 8, 2006).10
.36**

Memorandum of Understanding, dated
    April 4, 2006, by and among representatives of the lead
    plaintiff, the Company and the individual defendants in
    Heller v. Quovadx et al. (incorporated by
    reference to Exhibit 10.1 to the Quarterly Report on
    Form 10-Q
    of the Registrant for the quarter ended March 31, 2006,
    filed on May 1, 2006).10
.37

Second Amended Stipulation of
    Settlement in re Heller v. Quovadx, Inc.,
    et al. dated November 20, 2006 (incorporated by
    reference to Exhibit 10.1 to the Current Report on
    Form 8-K
    of the Registrant, filed on November 21, 2006).10
.38

First Amendment to License
    Agreement dated October 4, 2006, between The
    Childrens Hospital of Philadelphia, successor in interest
    to University City Center, and CareScience, Inc., a wholly owned
    subsidiary of Quovadx, Inc. (incorporated by reference to
    Exhibit 10.14 to the Quarterly Report on
    Form 10-Q
    of the Registrant for the quarter ended September 30, 2006,
    filed on October 31, 2006).10
.39**

Master Services Agreement dated
    October 9, 2006, between Switch and Data Management Company
    L.L.C. and Quovadx, Inc. (incorporated by reference to
    Exhibit 10.15 to the Quarterly Report on
    Form 10-Q
    of the Registrant for the quarter ended September 30, 2006,
    filed on October 31, 2006).10
.40**

Memorandum of Understanding, dated
    December 26, 2006, re Special Situation Fund III,
    L.P., et al. V. Quovadx, Inc., et al.
    (incorporated by reference to Exhibit 10.1 to the Current
    Report on
    Form 8-K
    of the Registrant, filed on January 3, 2007).10
.41

Stipulation of Settlement in, re
    Special Situation Fund III, L.P., et al. V. Quovadx,
    Inc., et al dated January 26, 2007.16
.1

Letter from Ernst & Young
    LLP regarding change in certifying accounts (incorporated by
    reference to Exhibit 16.1 to the Current Report on
    Form 8-K
    of the Registrant, filed on April 3, 2006).23
.1

Consent of McGladrey &
    Pullen LLP Independent Registered Public Accounting Firm.23
.2

Consent of Ernst & Young
    LLP Independent Registered Public Accounting Firm.31
.1

Certification of Chief Executive
    Officer of the Registrant pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a),
    promulgated under the Securities Exchange Act of 1934, as
    amended.31
.2

Certification of Chief Financial
    Officer of the Registrant pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a),
    promulgated under the Securities Exchange Act of 1934, as
    amended.32
.1***

Certification of Chief Executive
    Officer of the Registrant pursuant to
    Rule 13a-14(b)
    and
    Rule 15d-14(b),
    promulgated under the Securities Exchange Act of 1934, as
    amended, and 18 U.S.C. § 1350.32
.2***

Certification of Chief Financial
    Officer of the Registrant pursuant to
    Rule 13a-14(b)
    and
    Rule 15d-14(b),
    promulgated under the Securities Exchange Act of 1934, as
    amended, and 18 U.S.C. § 1350.     *
    
    Identifies exhibit that consists of or includes a management
    contract or compensation plan or arrangement.**
    
    Confidential treatment has been requested with respect to
    certain portions of this exhibit. Omitted portions have been
    filed separately with the Securities and Exchange Commission.***
    
    This certification is furnished to, but not filed, with the
    Commission. This certification shall not be deemed to be
    incorporated by reference into any filing under the Securities
    Act of 1933 or the Securities Exchange Act of 1934, except to
    the extent that the Registrant specifically incorporates it by
    reference. 100