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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

OR

FOR THE TRANSITION PERIOD FROM                              TO                             

COMMISSION FILE NUMBER: 000-29678

INTRADO INC.
(Exact name of registrant as specified in its charter)

Registrant's Telephone Number, Including Area Code: (720) 494-5800

6285 Lookout Road, Boulder, Colorado 80301
(Former name or former address, if changed since last report)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        As of November 1, 2002, there were 15,348,131 shares of common stock outstanding.

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

        This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements throughout the Quarterly Report on Form 10-Q and the information incorporated by reference to be covered by the safe harbor provisions for forward-looking statements. All projections and statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect," "intend," and other words and phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on information available as of the date of this report on Form 10-Q and on numerous assumptions and developments that are not within our control. Although we believe these forward-looking statements are reasonable, we cannot assure you they will turn out to be correct. Actual results could be materially different from our expectations due to a variety of factors, including the following:

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our reliance on large contracts from a limited number of significant telecommunications customers and, especially in light of recent competitive pressures in the telecommunications industry, their ability to pay for our services;



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fluctuations in quarterly operating results, including those that are due to adverse trends in the telecommunications industry, bankruptcy filings by WorldCom and other customers, and other factors that are beyond our control;



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whether our investments in research and development and capitalized software will expand our service offerings and prove to be economically viable;



•

our ability to retain key executives, particularly George K. Heinrichs, our co-founder, President, Chief Executive Officer and Chairman of the Board;



•

service and price competition from entities with substantially greater resources than us;



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our ability to integrate businesses and assets that we may acquire;



•

constraints on our sales and marketing channels due to the fact that many of our customers compete with each other;



•

our ability to accurately predict and recoup the large amount of up-front expenditures necessary to serve new customers and possible delays in sales cycles;



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our ability to expand our services beyond our traditional business and into the highly competitive data management industry, such as our proposed IntelliBase^SM National Repository Line Level Database and IntelliCast^SM Target Notification services (formerly EWE®);



•

the unpredictable rate of adoption of wireless 9-1-1 services, including further delays in the Federal Communications Commission's mandated deployment of Phase I and Phase II wireless location services;



•

the potential for liability claims, including product liability claims relating to our software;



•

technical difficulties and network downtime, including that caused by sabotage or unauthorized access to our systems; and



•

developments in telecommunications regulation and the unpredictable manner in which existing or new legislation and regulation may be applied to our business.

This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our Annual Report on Form 10-K under the caption "Item 1. Business—Risk Factors," our other Securities and Exchange Commission filings, and our press releases.

INDEX

PART I—FINANCIAL INFORMATION

INTRADO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data; Unaudited)

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

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INTRADO INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands; Unaudited)

The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets.

2

INTRADO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands; Unaudited)

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1—BASIS OF PRESENTATION

        The unaudited consolidated financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly present the consolidated financial position, results of operations and cash flows of Intrado Inc. (the "Company") for the periods presented. Certain information and footnote disclosures normally included in audited financial information prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. The results of operations for the period ended September 30, 2002 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2002. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Reclassifications

        Certain prior period amounts have been reclassified to conform with the current period's presentation.

Deferred Contract Costs

        Deferred contract costs represent computer equipment purchased specifically for a customer's existing system, inventory shipped to a customer site, or up-front implementation costs. These costs will be recognized over the related contract period as the revenue is recognized.

Revenue and Cost Recognition

        The Company generates revenue from monthly data management and maintenance services, systems upgrades, new products and professional services. Payments received in advance are deferred until the applicable revenue recognition criteria are met. Up front fees received, such as implementation fees and non-recurring engineering fees (NRE fees), are deferred and recognized over the longer of the contractual period or the expected customer's relationship. In accordance with Staff Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition in Financial Statements," and, in certain circumstances, Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue Recognition," the Company's policy is to recognize revenue when the applicable revenue recognition criteria have been met, which generally include the following:

•

persuasive evidence of an arrangement exists;



•

the price is fixed or determinable;



•

delivery has occurred or services have been rendered; and



•

collectibility is reasonably assured.

        The majority of the Company's revenue is derived from long-term contracts with its customers and is recognized ratably over the term of the contract as services are performed. The Company also sells software enhancements and professional services to its customer base that may not be subject to deferral under SAB 101. For the three months and nine months ended September 30, 2002, the Company recognized $3.1 million and $9.4 million, respectively, in revenue from certain sales of software enhancements and licenses, and certain professional services that were not deferred under SAB 101.

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        As of September 30, 2002, the Company had total deferred contract revenue of approximately $18.9 million and deferred contract costs of approximately $7.9 million. Of the total deferred contract revenue at September 30, 2002, the Company anticipates that approximately $3.7 million will be recognized in the fourth quarter of 2002 when all the revenue recognition criteria have been met. Of the $10.2 million of current deferred contract revenue, approximately $8.9 million has already been received and approximately $1.3 million is included in accounts receivable as of September 30, 2002. As of September 30, 2002, the total deferred contract revenue balance of approximately $18.9 million represents NRE fees and certain enhancements as services are delivered. The total deferred contract revenue, net of deferred contract costs (in thousands), is estimated to be recognized as follows:

Software

        The Company capitalizes certain internal and external software acquisition and development costs that benefit future periods. Amortization commences when the software is either available for general release (for software sold externally) or when the software is ready for its intended use (for internally developed software). Amortization expense is calculated on a product-by-product basis using the straight-line method over the software's economic useful life, generally not to exceed three years. For software sold externally, or for dual-purpose software that is both sold externally and used internally, amortization expense is calculated as the greater of: (a) the ratio that current revenue bears to expected revenue for that product; or (b) straight-line amortization of the product over its economic useful life. Amortization expense is generally included in direct costs for the benefiting business segment. Amortization expense for products that do not benefit a specific business segment are included in the Corporate business unit. Capitalized costs include payments to outside firms for direct services related to the development of proprietary software and salaries and wages of individuals dedicated to the development of software.

Income Taxes

        For the period January 1, 2000 through September 30, 2002, the Company did not record an income tax benefit for any generated net operating loss ("NOL") carryforwards or net increases in deferred tax assets because the Company believed the criteria for recognition had not been met. As of September 30, 2002, the Company had NOL carryforwards of approximately $21.2 million available to offset current and future net income for U.S. federal income tax purposes. During the nine months ended September 30, 2002, no income tax expense was recorded due to utilization of the Company's previously generated NOLs.

NOTE 2—INCOME (LOSS) PER SHARE

        The Company presents basic and diluted earnings or loss per share in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share," which establishes standards for computing and presenting basic and diluted income (loss) per share. Under this statement, basic income (loss) per share is determined by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted income

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(loss) per share includes the effects of potentially issuable common stock, but only if dilutive. Potentially dilutive common stock options that were excluded from the calculation of diluted income (loss) per share because their effect was antidilutive totaled 2,155,755 and 859,629 for the three months and nine months ended September 30, 2001, respectively. The treasury stock method, using the average price of the Company's common stock for the period, is applied to determine dilution from options and warrants. The as-if-converted method is used for convertible securities.

        A reconciliation of the numerators and denominators used in computing per share net income (loss) from continuing operations is as follows:

NOTE 3—REPORTABLE SEGMENTS

        The Company has five reportable segments, or "business units," based on the type of customer each business unit serves: ILEC, CLEC, Wireless, Direct, and Corporate. The first four business units generate the vast majority of the Company's revenues. The Corporate business unit captures costs that are not directly related to the other business units, but does generate a small amount of revenue from our IntelliBase^SM National Repository Line Level Database ("NRLLDB") service, a new commercial data management offering. Substantially all of the Company's customers are in the United States. Each unit is managed separately because the resources used for each segment are unique. Revenue and costs are segregated in the following Statements of Operations for the reportable segments. The Company does not segregate assets between the segments as it is impractical to do so.

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For the Three Months Ended September 30
(dollars in thousands)

For the Nine Months Ended September 30
(dollars in thousands)

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NOTE 4—RELATED PARTY TRANSACTIONS

Lucent and NV Partners II L.P.

        In May 2001, the Company acquired certain assets, and assumed certain liabilities, associated with the call handling and database divisions of LPSS, an internal venture of Lucent Technologies Inc. ("Lucent"). As part of the acquisition, we:

•

issued 2,250,000 shares of common stock to Lucent;



•

agreed to pay approximately $4.8 million to Lucent for inventory; and



•

agreed to issue, 24 months from the date of closing, up to $32.9 million of mandatorily redeemable, non-voting, preferred stock ("Preferred Stock"), subject to the attainment of specific total combined revenue ("Total Revenue") targets.

        The Company also provides maintenance services to Lucent customers on database and call handling contracts on a subcontracted basis. Because these contracts were not assigned directly to the Company under the asset purchase agreement, the Company bills Lucent for services rendered and Lucent, in turn, bills the customer. In effect, Lucent serves as a pass-through entity for billing purposes. During the three months and nine months ended September 30, 2002, the Company recognized approximately $3.1 million and $8.3 million, respectively, in revenue under the subcontracted services agreement with Lucent. As of September 30, 2002, Lucent owes the Company approximately $1.0 million. The payable to Lucent of approximately $3.6 million at September 30, 2002, represents the obligation to pay for the inventory acquired in the LPSS acquisition, including interest.

        The obligation to purchase inventory from Lucent is payable in four equal installments beginning in August 2002 and ending in May 2003. As discussed in Note 6—Asset Impairment Charge, the inventory was written off during the three months ended June 30, 2002 after management determined that the asset value was impaired. However, the cash obligation to pay Lucent going forward remains. In August 2002, the Company remitted the first of four $1.2 million payments to Lucent. The second of four $1.2 million payments will be made in November 2002.

        The Company issued 2,250,000 shares of common stock in connection with its May 2001 acquisition of LPSS. As of September 30, 2002, 1,792,079 of these shares are held by NV Partners II L.P ("NVP II"), formerly a wholly owned subsidiary of Lucent, and 457,921 shares continue to be held by Lucent. NVP II remains the Company's largest shareholder as of the date of this filing.

        The actual amount of the Preferred Stock to be issued, if any, will be determined after a 24-month contingency period that commenced on June 1, 2001. If Total Revenue, as defined in the purchase agreement, meets or exceeds $258 million for that 24-month period, then NVP II is entitled to the full issuance of $32.9 million in Preferred Stock. If Total Revenue is greater than $179 million, but less than $258 million, NVP II will be entitled to a pro rata issuance of Preferred Stock at a rate of $417,000 for each million dollars of Total Revenue in excess of $179 million. Over the sixteen-month period beginning on June 1, 2001 and ending on September 30, 2002, the Company recorded approximately $133.3 million in total revenue.

        The commitment to issue Preferred Stock will not be recorded until the targets are met beyond a reasonable doubt, if at all, and would be treated as an increase in the purchase price by increasing goodwill. The Preferred Stock, if issued, would be recorded at its fair value (defined as the present value of future payments) and accreted to its face value over the redemption period. The accretion would be treated as a dividend, reducing the income available to common stockholders. No dividends will be paid on the Preferred Stock and the Preferred Stock is not convertible to common stock.

        The mandatory redemption of the Preferred Stock, if any, commences 30 days from initial issuance with 33% due, followed by an additional 33% due on June 1, 2004 and the remaining 34% due on

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June 1, 2005. Early redemption is available at the Company's option. The Company must redeem shares of Preferred Stock with 25% of the gross proceeds of any underwritten public offering after June 1, 2003.

Ameritech

        The Company provides data management and consulting services pursuant to a service agreement dated August 31, 1994 with Ameritech Information Systems. Under a master lease agreement dated March 11, 1996, the Company leases personal property from Ameritech Credit Corporation. Ameritech Information Systems, Ameritech Credit Corporation and Ameritech Mobile Communications are affiliates of Ameritech Development Corp., which beneficially owned approximately 1.6 million shares of the Company's common stock until June 2000. A member of the Company's board of directors was a representative of Ameritech Development Corp. at the time the service and master lease agreements were executed.

        Ameritech is also one of the Company's most significant customers, as evidenced by the fact that the Company recognized revenue from Ameritech for the three months and nine months ended September 30, 2002 of $2.8 million and $8.2 million, respectively, and $2.4 million and $7.4 million for the three and nine months ended September 31, 2001. These amounts represented approximately 10% of total revenue for the three- and nine-month periods ended September 30, 2002. As of September 30, 2002 and 2001, Ameritech owed the Company approximately $450,000 and $2.6 million, respectively, for services provided. During the three months ended September 30, 2002 and 2001, the Company paid Ameritech approximately $440,000 and $500,000, respectively, pursuant to lease schedules to the master lease agreement. As of September 30, 2002 and 2001, the Company owed approximately $3.8 million and $2.1 million, respectively, pursuant to lease schedules to the master lease agreement. The leases have interest rates ranging from 6.27% to 9.5%, require monthly payments and have expiration dates varying through June 2005.

TechnoCom Corporation

        During the nine months ended September 30, 2002, the Company purchased 294,118 shares of TechnoCom Corporation's Series A Preferred Stock for $500,000, representing 2.9% of the aggregate dilutive voting power of TechnoCom as of September 30, 2002. The Company does not exercise any control over TechnoCom and does not have any board representation. As a result, the Company has accounted for its investment on a cost rather than equity basis. TechnoCom is under contract to provide development and implementation services to the Wireless business unit in connection with the Company's recently announced PDE (Position Determining Equipment) service offering. TechnoCom also provides subcontracted services to the Company's ILEC customers. During the three and nine months ended September 30, 2002, the Company paid TechnoCom $53,000 and $330,000 for their services, respectively. During the three and nine months ended September 30, 2001, the Company made no payments to TechnoCom.

NOTE 5—GOODWILL AND INTANGIBLES

        The Company adopted SFAS No. 141 ("SFAS 141"), "Business Combinations," on July 1, 2001 and SFAS No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," on January 1, 2002. SFAS 141 requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase accounting method. SFAS 142 states that goodwill is no longer subject to amortization over its useful life. Rather, goodwill will be subject to an annual assessment for impairment and will be written down to its fair value only if the carrying amount is greater than the fair value. In addition, intangible assets will be recognized separately if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented or exchanged,

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regardless of the acquirer's intent to do so. The amount and timing of non-cash charges related to intangibles acquired in business combinations will change significantly from prior practice.

        The Company has recorded on its balance sheet $11.7 million of goodwill, net of previously accumulated amortization, which relates to the excess of the purchase price over the estimated fair value of net identifiable assets acquired in the May 2001 LPSS acquisition. As part of the adoption of SFAS 142, the Company combined the workforce intangible of $1.3 million with goodwill. Approximately $11.3 million of the goodwill is associated with the ILEC business unit and $400,000 is associated with the Direct business unit. As a result of the adoption of SFAS 142, no goodwill was amortized during the nine months ended September 30, 2002. Prior to 2002, the Company amortized approximately $600,000 of goodwill on a quarterly basis.

        The following table presents the impact of SFAS 142 on net loss as if the standard had been in effect for the three months and nine months ended September 30, 2001 (dollars in thousands, except per share data; unaudited):

        The Company retained an independent firm to complete an initial impairment test during the second quarter of 2002. The income approach was used to determine the fair value of each business unit that had been assigned goodwill. The income approach involved discounting each business unit's projected free cash flow at its weighted average cost of capital to ascertain whether the fair value was higher than the book value, including goodwill. The Company determined that the fair value of each business unit with goodwill exceeded its book value based on the analysis completed by the independent third party. Therefore, per SFAS 142, if the fair value of a business unit exceeds its carrying amount, the goodwill of the business unit is not considered impaired and no further impairment testing is necessary.

        The Company has recorded $8.5 million (net of accumulated amortization of $3.2 million) on its balance sheet relating to acquired intangible assets (other than goodwill) as of September 30, 2002. The acquired intangible assets include intellectual property and contracts acquired as part of the LPSS acquisition. In accordance with SFAS 142, the Company reevaluated the book value and the useful lives and determined that no adjustments were necessary. For the three months and nine months ended September 30, 2002, the Company recorded approximately $600,000 and $1.8 million, respectively, of amortization expense related to these separately identifiable intangible assets. For the three months and nine months ended September 30, 2001, the Company recorded approximately $600,000 and $800,000, respectively, of amortization expense related to these separately identifiable intangible assets.

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        The following table details the intangibles as of September 30, 2002 by class:

        For the separately identifiable intangible assets above pertaining to contracts and intellectual property, the Company estimates that it will record the following amortization expense over the next five years:

NOTE 6—ASSET IMPAIRMENT CHARGE

        As mentioned in Note 5—Related Party Transactions, as part of the May 2001 acquisition of Lucent Public Safety Systems, the Company acquired a purchase obligation of $4.8 million for inventory. The inventory consisted of eight high-capacity, high-speed UNIX servers and software licenses. The obligation to purchase the inventory requires four equal quarterly installment payments of $1.2 million beginning in August 2002. At the time of each quarterly payment, title for 25% of the inventory transfers from Lucent to the Company. The August 2002 payment was made to Lucent and the next payment is due to Lucent in November 2002.

        In the second quarter of 2002, management determined that the value of the inventory was impaired and wrote off the entire value of the asset. Analysis revealed that there was a significant level of uncertainty regarding the Company's ability to use these assets internally or to sell the assets to its customer base. On April 30, 2002, the original equipment manufacturer, IBM, announced they were discontinuing production of this equipment and would no longer provide underlying support and maintenance after December 31, 2007. While management made concerted efforts to sell this inventory since the acquisition date, the "end of life" announcement by IBM had a material adverse impact on various sales channels the Company was pursuing. When the IBM announcement was made, management had already begun to evaluate the potential utility this inventory would provide if deployed internally. The analysis of the potential benefits that could be generated by internal deployment of this inventory was completed in July 2002, but contained a significant amount of uncertainty and risk. Other factors considered by management in making the impairment determination were the historically long sale cycles for this type of equipment and reduced overall capital expenditure forecasts within the Company's customer base.

        Based on the above factors, and the significant level of uncertainty that exists regarding the utility and market value of this equipment, the Company determined that the fair market value was minimal and limited to the value of the software licenses acquired as part of the inventory purchase. As a result, the Company wrote off the entire remaining balance of the inventory.

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NOTE 7—LINE OF CREDIT AMENDMENT AND TERM LOAN

        On September 26, 2002 the Company renegotiated its revolving line of credit with GE Capital to increase maximum borrowing availability from $15 million to $20 million and to reduce the interest rate from prime plus 2.0% to prime plus 1.5%. Maximum borrowing availability may not exceed the lower of: (i) $20 million; or (ii) 85% of eligible accounts receivable, as defined in the line of credit agreement. The interest rate was 6.25% as of September 30, 2002. The line of credit matures on July 31, 2004 and is collateralized by accounts receivable and certain other assets. As of September 30, 2002, $8 million was outstanding on the line of credit and an additional $1.8 million was available for future borrowings. On October 4, 2002 the Company repaid $3 million of the outstanding line of credit balance and had approximately $6.5 million available for future borrowing.

        On September 30, 2002 the Company also secured a term loan for $3.0 million with GE Capital. The interest rate on this term loan is equal to the prime rate plus 1.5% per annum. The $3 million term loan does not factor into the Company's maximum borrowing capability on the revolving line of credit of $20 million. Payments on the term loan, consisting of 1/36th of the principal and accrued interest, began on November 1, 2002 and continue monthly through the date of the last payment, October 1, 2005.

NOTE 8—RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

        In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations." SFAS 143 establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. SFAS 143 requires an entity to recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate can be made. The Company is required to adopt SFAS 143 in fiscal year 2003. The Company does not believe that SFAS 143 will have a material impact on its prospective financial statements.

        In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"),"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 supersedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS 144 applies to recognized long-lived assets of an entity to be held and used or to be disposed of and does not apply to goodwill, intangible assets not being amortized, financial instruments and deferred tax assets. SFAS 144 requires an impairment loss to be recorded for assets to be held and used when the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. An asset that is classified as held for sale shall be recorded at the lower of its carrying amount or fair value less cost to sell. Although no adjustments were made in the nine months ended September 30, 2002 as a result of SFAS 144, the Company believes that SFAS 144 may have a prospective effect on its financial statements in the determination of impairment charges and presentation of any future dispositions of business components.

        In April 2002, the FASB issued SFAS No. 145 ("SFAS 145"), "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS 145 rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements"; SFAS 145 also rescinds SFAS No. 44, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their

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applicability under changed conditions. The provision of SFAS 145 related to the rescission of SFAS 4 shall be applied in fiscal years beginning after May 15, 2002; the provisions related to SFAS No. 13 shall be effective for transactions occurring after May 15, 2002; all other provisions of SFAS 145 shall be effective for financial statements issued on or after May 15, 2002. Early adoption of SFAS 145 is encouraged. The adoption of SFAS 145 has not had, nor does the Company believe it will have, a material impact on its current or prospective financial statements.

        In June 2002, the FASB issued SFAS No. 146 ("SFAS 146"), "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and replaces Emerging Issues Task Force (EITF) No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs in a Restructuring)." The provisions of SFAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The Company believes that SFAS 146 may have a prospective effect on its financial statements for costs associated with future exit or disposal activities it may undertake after December 31, 2002.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

        We are a leading provider of solutions that manage and deliver mission-critical information for telecommunications providers and public safety organizations. Our customers include incumbent local exchange carriers ("ILECs"), competitive local exchange carriers ("CLECs"), wireless carriers and state and local governments in North America. We manage the data that enables a 9-1-1 call to be routed to the appropriate public safety agency with accurate and timely information about the caller's originating telephone number and location. We also provide 9-1-1 supporting hardware and software technology. A number of telecommunications companies manage their 9-1-1 infrastructure with our hardware and software systems. In addition, public safety answering points (PSAPs) across the nation use our Palladium® call center and data-management systems to receive and respond to wireline and wireless E9-1-1 calls.

        We generate the vast majority of our revenue from four of our five segments, or "business units." ILEC, CLEC, Wireless and Direct. The revenue from these business units is derived from monthly data management services, maintenance, sales of systems and new products and professional services. The Corporate business unit captures costs that are not directly related to the other business units, but does generate a small amount of revenue from our new IntelliBase^SM NRLLDB service.

        The following table represents revenue amounts and percentages by business unit: