8-K/A

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

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 31, 2002

PROXYMED, INC.

(Exact name of registrant as specified in its charter)

FLORIDA	000-22052	65-0202059
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

2555 Davie Road
Suite 110
Ft. Lauderdale, Florida 33317

(Address of principal executive offices)

(954) 473-1001

(Registrant’s telephone number, including area code)

     This Form 8-K/A hereby amends Item 7 of the Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on January 9, 2003, by ProxyMed, Inc., a Florida Corporation (the “Company”), to provide the financial information required in connection with the merger of Davie Acquisition Corp., a Delaware Corporation and a wholly-owned subsidiary of the Company (the “Acquisition Subsidiary”) with and into MedUnite Inc. (“MedUnite”) upon the terms and conditions set forth in the Agreement and Plan of Merger and Reorganization, dated December 31, 2002, by and among the Company, the Acquisition Subsidiary and MedUnite.

Item 2. Acquisition or Disposition of Assets (Amended).

     On December 31, 2002, ProxyMed, Inc. (the “Company”) acquired all of the outstanding stock of MedUnite Inc. (“MedUnite”) by effecting a merger of Davie Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company (the “Acquisition Subsidiary”), with and into MedUnite upon the terms and conditions set forth in the Agreement and Plan of Merger and Reorganization, dated December 31, 2002, by and among the Company, the Acquisition Subsidiary and MedUnite, for $10.0 million in cash and an aggregate of $13.4 million principal amount of 4% Convertible Promissory Notes. The 4% Convertible Promissory Notes are convertible into an aggregate of 731,322 shares of the Company’s common stock if the founders of MedUnite achieve certain revenue based triggers with ProxyMed over the next three and one-half year period. The shares of the Company’s common stock issuable upon conversion of the convertible notes will be registered by the Company promptly after a stockholder achieves a conversion trigger event as set forth in the Indenture, which is attached hereto as Exhibit 10.3.

     Prior to the transaction, the Company was not related to or affiliated with MedUnite. The Company is using available cash to fund the acquisition.

Item 7. Financial Statements and Exhibits.

     The following financial statements required by such Item 7 are filed as part of this report:

(a)

The audited financial statements of MedUnite Inc. required by Item 7(a), including the balance sheets as of December 31, 2001 and 2002 and the statements of operations and cash flows for the years ended December 31, 2001 and 2002, are included as Exhibits 2.2 and 2.3 to this Form 8-K/A.

(b)

The pro forma financial information required by Item 7(b) is included as Exhibits 99.2, 99.3 and 99.4 to this Form 8-K/A. The pro forma financial information as of December 31, 2002 is derived from the unaudited balance sheet of ProxyMed, Inc. (just prior to its acquisition of MedUnite) and the audited balance sheet of MedUnite Inc. The proforma financial information for the years ended December 31, 2001 and 2002 have been derived from the financial statements of ProxyMed, Inc. and MedUnite Inc.

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(c) The following exhibits are included herein:

Exhibit 2.1*	Agreement and Plan of Merger and Reorganization dated December 31, 2002 between ProxyMed, Inc., Davie Acquisition Corp., and MedUnite Inc.
Exhibit 2.2	Audited Financial Statements for MedUnite Inc. as of December 31, 2001 and for the year ended December 31, 2001 and for the period from June 9, 2000 (Inception) through December 31, 2000.
Exhibit 2.3	Audited Financial Statements for MedUnite Inc. as of December 31, 2002 and for the year ended December 31, 2002.
Exhibit 10.1*	Form of 4% Convertible Promissory Notes dated December 31, 2002.
Exhibit 10.2*	Registration Rights Agreement dated December 31, 2002 among ProxyMed, Inc. and the holders of the 4% Convertible Promissory Notes.
Exhibit 10.3*	Indenture dated December 31, 2002 between ProxyMed, Inc. and LaSalle Bank National Association, a national banking association.
Exhibit 99.1*	Press release dated January 2, 2003 announcing the acquisition of MedUnite Inc. by ProxyMed, Inc.
Exhibit 99.2	Pro forma Combined Balance Sheet of ProxyMed, Inc. and MedUnite Inc. as of December 31, 2002.
Exhibit 99.3	Pro forma Combined Statement of Operations of ProxyMed, Inc. and MedUnite Inc. for the year ended December 31, 2001.
Exhibit 99.4	Pro forma Combined Statement of Operations of ProxyMed, Inc. and MedUnite Inc. for the year ended December 31, 2002.

* Incorporated by reference to exhibits in the Company’s Current Report on Form 8-K filed on January 9, 2003.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ProxyMed, Inc.
Date: March 17, 2003	/s/ Judson E. Schmid
	Judson E. Schmid, Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
Exhibit 2.1*	Agreement and Plan of Merger and Reorganization dated December 31, 2002 between ProxyMed, Inc., Davie Acquisition Corp., and MedUnite Inc.
Exhibit 2.2	Audited Financial Statements for MedUnite Inc. as of December 31, 2001 and for the year ended December 31, 2001 and for the period from June 9, 2000 (Inception) through December 31, 2000.
Exhibit 2.3	Audited Financial Statements for MedUnite Inc. as of December 31, 2002 and for the year ended December 31, 2002.
Exhibit 10.1*	Form of 4% Convertible Promissory Notes dated December 31, 2002.
Exhibit 10.2*	Registration Rights Agreement dated December 31, 2002 among ProxyMed, Inc. and the holders of the 4% Convertible Promissory Notes.
Exhibit 10.3*	Indenture dated December 31, 2002 between ProxyMed, Inc. and LaSalle Bank National Association, a national banking association.
Exhibit 99.1*	Press release dated January 2, 2003 announcing the acquisition of MedUnite Inc. by ProxyMed, Inc.
Exhibit 99.2	Pro forma Combined Balance Sheet of ProxyMed, Inc. and MedUnite Inc. as of December 31, 2002.
Exhibit 99.3	Pro forma Combined Statement of Operations of ProxyMed, Inc. and MedUnite Inc. for the year ended December 31, 2001.
Exhibit 99.4	Pro forma Combined Statement of Operations of ProxyMed, Inc. and MedUnite Inc. for the year ended December 31, 2002.

* Incorporated by reference to exhibits in the Company’s Current Report on Form 8-K filed on January 9, 2003.

5 EX-2.2 3 g81296exv2w2.txt EX-2.2 MEDUNITE FINANCIAL STATEMENTS OF 12/31/01 EXHIBIT 2.2 MEDUNITE INC. REPORT AND FINANCIAL STATEMENTS DECEMBER 31, 2001 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of MedUnite Inc. In our opinion, the accompanying balance sheet and the related statements of operations, of stockholders' equity (deficit) and of cash flows present fairly, in all material respects, the financial position of MedUnite Inc. at December 31, 2001 and the results of its operations and its cash flows for the year ended December 31, 2001 and for the period from June 9, 2000 (inception) through December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of $40,399,000 and generated negative cash flows from operations of $33,482,000 during 2001, and at December 31, 2001 had an accumulated deficit of $53,607,000. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. PricewaterhouseCoopers LLP San Diego, California December 17, 2002 MEDUNITE INC. BALANCE SHEET December 31, 2001 - -------------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 8,614,000 Investment in derivative securities -- Accounts receivable, net of allowances of $729,000 2,833,000 Prepaid expenses and other current assets 712,000 ------------ Total current assets 12,159,000 Property and equipment, net 22,286,000 Intangible assets, net 14,779,000 Other assets, including $825,000 of restricted cash at December 31, 2001 1,011,000 ------------ Total assets $ 50,235,000 ============ Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 3,465,000 Accrued expenses 7,614,000 Current portion of capital lease obligations 201,000 ------------ Total current liabilities 11,280,000 Notes payable 3,505,000 Deferred compensation 2,158,000 Capital lease obligations, less current portion 366,000 Other long-term liabilities 1,134,000 ------------ Total liabilities 18,443,000 ------------ Commitments and contingencies (Note 9) Stockholders' equity Preferred stock, $0.001 par value, 137,000,000 shares authorized: Series A preferred stock, 87,000,000 authorized, 85,270,402 issued and outstanding; liquidation value of $85,270,000 85,000 Common stock, $0.001 par value, 297,000,000 shares authorized: Class A common stock, 210,000,000 authorized, zero shares issued and outstanding -- Class B common stock, 87,000,000 authorized, zero shares issued and outstanding -- Additional paid-in capital 85,314,000 Accumulated deficit (53,607,000) ------------ Total stockholders' equity 31,792,000 ------------ Total liabilities and stockholders' equity $ 50,235,000 ============ The accompanying notes are an integral part of these financial statements. -2- MEDUNITE INC. STATEMENTS OF OPERATIONS For the Year Ended December 31, 2001 and for the Period from June 9, 2000 (Inception) to December 31, 2000 - -------------------------------------------------------------------------------- PERIOD FROM JUNE 9, 2000 YEAR ENDED (INCEPTION) TO DECEMBER 31, DECEMBER 31, 2001 2000 ------------ ------------ Revenue $ 7,085,000 $ -- ------------ ------------ Operating Expenses Cost of revenue 4,087,000 -- Engineering and development 27,874,000 2,171,000 Selling, general and administrative 16,617,000 11,730,000 Depreciation and amortization 3,036,000 23,000 ------------ ------------ Total operating expenses 51,614,000 13,924,000 ------------ ------------ Loss from operations (44,529,000) (13,924,000) Investment income 4,956,000 905,000 Interest income 425,000 306,000 Interest expense (1,251,000) (495,000) ------------ ------------ Net loss $(40,399,000) $(13,208,000) ============ ============ The accompanying notes are an integral part of these financial statements. -3- MEDUNITE INC. STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) For the Year Ended December 31, 2001 and for the Period from June 9, 2000 (Inception) to December 31, 2000 - --------------------------------------------------------------------------------

SERIES A COMMON STOCK PREFERRED STOCK ADDITIONAL ---------------- ---------------------- PAID-IN ACCUMULATED SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL ------ ------ ------ ------ ------- ------- ----- Issuance of common stock in June and August 2000 6,550 $ -- -- $ -- $ 6,000 $ -- $ 6,000 Net loss -- -- -- (13,208,000) (13,208,000) ------------ ---- ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2000 6,550 -- -- -- 6,000 (13,208,000) (13,202,000) Issuance of Series A preferred stock upon conversion of common stock (6,550) -- 6,550 -- -- -- -- Issuance of Series A preferred stock, including conversion of notes payable -- -- 85,263,852 85,000 85,179,000 -- 85,264,000 Recognition of discount on notes payable -- -- -- -- 129,000 -- 129,000 Net loss -- -- -- -- -- (40,399,000) (40,399,000) ------------ ---- ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2001 -- $ -- 85,270,402 $ 85,000 $ 85,314,000 $(53,607,000) $ 31,792,000 ============= ==== ============ ============ ============ ============ ============

The accompanying notes are an integral part of these financial statements. -4- MEDUNITE INC. STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2001 and for the Period from June 9, 2000 (Inception) to December 31, 2000 - --------------------------------------------------------------------------------

PERIOD FROM JUNE 9, 2000 YEAR ENDED (INCEPTION) TO DECEMBER 31, DECEMBER 31, 2001 2000 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(40,399,000) $(13,208,000) Adjustments to reconcile net loss to net cash used in operating activities Investment income -- (905,000) Non-cash interest expense 1,238,000 -- Depreciation and amortization 3,063,000 23,000 Gain on sale of investment (4,956,000) -- Changes in operating assets and liabilities, net of assets acquired Accounts receivable (589,000) -- Prepaid and other current assets (642,000) (70,000) Other assets 179,000 (176,000) Accounts payable 2,016,000 1,449,000 Accrued expenses and other long-term liabilities 5,208,000 3,155,000 Deferred compensation 1,400,000 758,000 ------------ ------------ Net cash used in operating activities (33,482,000) (8,974,000) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Investment in warrant (Note 4) (941,000) (2,113,000) Purchases of property and equipment (22,559,000) (300,000) Proceeds from sale of investment 8,915,000 -- Increase in restricted cash (825,000) -- Costs incurred in connection with business combination (1,043,000) -- ------------ ------------ Net cash used in investing activities (16,453,000) (2,413,000) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of common stock -- 6,000 Proceeds from issuance of Series A preferred stock 25,660,000 -- Proceeds from issuance of convertible notes payable 24,340,000 20,000,000 Payments on capital lease obligations (70,000) -- ------------ ------------ Net cash provided by financing activities 49,930,000 20,006,000 ------------ ------------ Net (decrease) increase in cash and cash equivalents (5,000) 8,619,000 Cash and cash equivalents at beginning of period 8,619,000 -- ------------ ------------ Cash and cash equivalents at end of period $ 8,614,000 $ 8,619,000 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Issuance of Series A preferred stock upon conversion of notes payable (Note 5) $ 44,340,000 $ -- ============ ============ Series A preferred stock issued in connection with acquisition $ 15,263,000 $ -- ============ ============ Issuance of long-term debt in connection with acquisition (Note 3) $ 1,966,000 $ -- ============ ============ Cash paid for interest $ 14,000 $ -- ============ ============

The accompanying notes are an integral part of these financial statements. -5- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND DESCRIPTION OF BUSINESS THE COMPANY MedUnite Inc. (the "Company") was incorporated in Delaware in June 2000. The Company was formed to develop and maintain an exchange that provides connectivity applications in the healthcare market that facilitates various business transactions, including claims submission, real-time claim status inquiry, eligibility and referral and authorization. The Company is subject to risks common to rapidly growing technology-based companies, including rapid technological change, dependence on principal products, new product development, new product introductions, other activities of competitors, and a limited operating history in Internet related e-commerce activities. The Company incurred a net loss of $40,399,000 and generated negative cash flows from operations of $33,482,000 during 2001. The Company has an accumulated deficit of $53,607,000 as of December 31, 2001. In February 2002 and August 2002, the Company issued notes payable to its founders in the aggregate amount of $23,975,000 (Note 12). Due to liquidity constraints in the second half of 2002, management implemented certain measures to conserve capital resources that included reducing its workforce and certain product development and marketing efforts. In addition, management has been engaged in efforts to raise additional resources through the issuance of additional capital or the sale of the Company. However, there can be no assurance that management will be successful in raising additional capital or in its efforts to sell the Company. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not reflect any adjustments that might result if the Company was unable to continue as a going concern. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The financial statements include the accounts of MedUnite Inc. and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with original maturities from the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include cash on hand and certificates of deposit with a financial institution. INVESTMENT IN DERIVATIVE SECURITIES Changes in the fair value of the Company's investment in derivative securities are recorded in investment income. The Company elected to adopt Statement on Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, upon the Company's inception. -6- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from two to three years. Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the term of the lease. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to income. Expenditures for repairs, maintenance and minor renewals and betterments are expensed as incurred. INTERNAL-USE SOFTWARE Internal and external costs incurred to develop internal-use computer software during the application development stage are capitalized. Application development stage costs generally include software configuration, coding, installation to hardware and testing. Costs of upgrades and major enhancements that result in additional functionality are also capitalized. Costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred. During the year ended December 31, 2001, the Company capitalized $9,876,000 of internal-use software development costs. Amortization expense, which is computed on a straight-line basis over estimated useful lives ranging from two to three years, was $293,000 for the year ended December 31, 2001. The Company did not capitalize any internal-use software development costs during the period ended December 31, 2000 (Note 5). LONG-LIVED ASSETS The Company assesses potential impairments of its long-lived assets when there is evidence that events or changes in circumstances have made recovery of an asset's carrying value unlikely. An impairment loss is recognized when the sum of the expected undiscounted future net cash flows expected to be generated by an asset (or group of assets) is less than its carrying value. Any required impairment loss would be measured as the amount by which the asset's carrying value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset and a charge to operations. The Company has not recorded any such impairment losses. INTANGIBLE ASSETS Intangible assets consist primarily of a software platform, non-compete agreement, customer related agreements and software and goodwill arising from the Company's acquisition of NDCHealth's physician network services business in 2001 (Note 3). Identifiable intangible assets with determinable lives are stated at their fair value and are being amortized using the straight-line method over their estimated useful lives as follows: Software platform 3 years Non-compete agreement 5 years Customer related agreements 3 to 5 years Other identifiable intangible assets 0.5 to 5 years Goodwill is not amortized, but is reviewed annually (or more frequently if impairment indicators arise) for impairment. Intangible assets that are not deemed to have indefinite lives are reviewed for impairment in accordance with the Company's policy for long-lived assets. As of December 31, 2001, no such impairment losses have been recognized. -7- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- REVENUE RECOGNITION The Company derives revenue from processing electronically submitted medical claims for insurance companies and health care providers. Revenue is recognized as services are provided according to the terms of the underlying contracts. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. ADVERTISING COSTS Advertising costs are expensed as incurred. Advertising expense was $481,000 and $0 for the year ended December 31, 2001 and the period ended December 31, 2000, respectively. INCOME TAXES Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and income tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credits and loss carryforwards. Deferred income tax expense or benefit represents the net change during the year in the deferred income tax asset or liability. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. CONCENTRATION OF CREDIT RISK The Company's financial instruments subject to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company's policy is to place its cash and cash equivalents with high quality financial institutions in order to limit its credit exposure. To date, the Company has not experienced any credit losses associated with these financial institutions. Accounts receivable are generally unsecured. The Company performs on-going credit evaluations of its customers and maintains an allowance for potential credit losses as considered necessary. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is defined as the change in the equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company presents other comprehensive income (loss) in its statements of stockholders' equity. For the year ended December 31, 2001 and the period ended December 31, 2000, the only component of comprehensive loss is net loss. 3. ACQUISITION In August 2001, the Company acquired NDCHealth's physician network services business (the "Acquisition"). The physician network services business connects physicians to payors to provide electronic processing for claims, eligibility, referrals and other health transactions. The Company acquired the physician network services business in exchange for 15,263,402 shares of Series A preferred stock, having an estimated fair value, as determined by management, of $15,263,000, and a promissory note with a principal amount of $2,300,000, having an estimated fair value of $1,966,000 (Note 6). In addition, the Company incurred acquisition costs of $1,043,000 related to the acquisition. -8- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- The acquisition was accounted for using the purchase method of accounting, and accordingly, the results of the acquired business have been included in the Company's financial statements from the date of acquisition. The aggregate purchase price was allocated as follows: Accounts receivable $ 2,214,000 Property and equipment 572,000 Identifiable intangibles 10,665,000 Goodwill 5,555,000 Other assets 52,000 Accrued liabilities (786,000) ------------ Total purchase price $ 18,272,000 ============ 4. INVESTMENT IN WARRANT OF QUOVADX, INC. In October 2000, the Company entered into a Software License and Services Agreement (the "Agreement") with Quovadx, Inc., formerly XCare.net, Inc. ("Quovadx") under which Quovadx provides software development and hosting services related to the Company's internet portal. The development services are invoiced to the Company on a time and materials basis and the hosting service fees are invoiced based on the number of servers hosted. In June 2001, the Company accepted and paid approximately $6,700,000 for a perpetual software license, which is included in property and equipment. In addition, the Company is committed to purchase software maintenance services from Quovadx from June 2002 through December 31, 2005, as follows: YEAR ENDING DECEMBER 31, 2002 $ 700,000 2003 700,000 2004 700,000 2005 408,000 ---------------- $ 2,508,000 ================ In connection with the Agreement, Quovadx issued warrants to the Company to purchase 1,350,000 shares of Quovadx's common stock at an exercise price of $4.06. The warrants were immediately vested, exercisable and non-forfeitable and had a contractual life of 18 months from the date of grant. The fair value of the warrants at the date of issuance was estimated to be $3,054,000, using the Black-Scholes option pricing model assuming a volatility factor of 120%, risk-free interest rate of 5.9%, dividend yield of 0%, a contractual life of 18 months and Quovadx's stock price of $4.06. The warrants are classified as an investment and are stated at fair value at December 31, 2000. Payments made to Quovadx up to the initial fair value of the warrant are considered payment for the purchase of the warrant. For the period ended December 31, 2000, the Company made payments of $2,113,000 to Quovadx. The remaining $941,000, which was included in accrued expenses at December 31, 2000, was offset against payments made during the year ended December 31, 2001. The difference between (i) the value of the development services provided on a time and materials basis and the software payment of $6,700,000 and (ii) the fair value of the warrant of $3,054,000 is being accounted for as internally developed software. In September 2001, the Company exercised these warrants and sold the underlying Quovadx common stock for a total of $8,915,000, recognizing a gain of $4,956,000, which is included in investment income for 2001. -9- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- In addition, under the terms of the Agreement, the Company has a put right with Quovadx that would require Quovadx to invest between $10 million and $20 million in a future financing, subject to certain conditions, if requested by Company's Board of Directors. The investment shall be on terms similar to other investors in the financing. However, there can be no assurance that the Board of Directors will exercise this right or that the conditions of the put right will be met. 5. COMPOSITION OF CERTAIN BALANCE SHEET COMPONENTS Property and equipment, net consists of the following: 2001 ------------ Computer equipment $ 2,124,000 Internal-use software 9,876,000 Software 10,003,000 Furniture and fixtures 1,051,000 Office equipment 585,000 Leasehold improvements 292,000 ------------ 23,931,000 Less accumulated depreciation and amortization (1,645,000) ------------ $ 22,286,000 ============ Depreciation and amortization expense related to property and equipment was $1,595,000 and $23,000 for the year ended December 31, 2001 and the period ended December 31, 2000, respectively. Intangible assets, net consists of the following: 2001 --------------- Intangible Assets Subject to Amortization: Software platform $ 8,325,000 Non-compete agreement 1,700,000 Customer related agreements 422,000 Other identifiable intangible assets 218,000 ------------ 10,665,000 Less accumulated amortization (1,441,000) ------------ Intangibles assets subject to amortization, net 9,224,000 Goodwill 5,555,000 ------------ $ 14,779,000 ============ -10- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- Amortization expense was $1,441,000 for the year ended December 31, 2001. Estimated amortization expense subsequent to the year ended December 31, 2001 is as follows: YEAR ENDING DECEMBER 31, 2002 $ 3,447,000 2003 3,253,000 2004 1,975,000 2005 347,000 2006 202,000 --------------- $ 9,224,000 =============== Restricted cash of $825,000 at December 31, 2001 includes a certificate of deposit of $750,000, which has been pledged as security for an outstanding letter of credit (Note 11). Accrued expenses consist of the following: 2001 Compensation related costs $ 2,666,000 Other 4,948,000 ---------------- $ 7,614,000 ================ 6. NOTES PAYABLE During 2001 and 2000, the Company received proceeds of $24,340,000 and $20,000,000, respectively, from its founders in connection with the issuance of convertible notes payable (the "Notes"), as amended. The Notes have annual interest rates ranging from 6.10% to 6.53%. The principal balance of the Notes automatically converted into 44,340,331 shares of Series A preferred stock at $1.00 per share upon the closing the Acquisition in August 2001. The outstanding accrued interest of $1,565,000 was converted into notes payable. The Company imputed an interest rate of 12% on these notes, which more accurately reflects the rate that the Company would pay to a third party lender. The resulting debt discount of $129,000 was recorded as additional paid-in capital because the notes were issued to the founders. The notes are repayable in four quarterly installments during 2003. Accrued interest related to this note at December 31, 2001 of $70,000 is included in other long-term liabilities. During 2001, the Company issued a promissory note in connection with the Acquisition. The note has a principal amount of $2,300,000 payable in full in August 2004, and was initially recorded at its estimated fair value of $1,996,000, representing an effective annual interest rate of 12%. Accrued interest related to this note at December 31, 2001 of $99,000 is included in other long-term liabilities. -11- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- Maturities of long-term debt and notes payable are as follows: YEAR ENDING DECEMBER 31, 2002 $ -- 2003 1,565,000 2004 2,300,000 --------------- 3,865,000 Less discount (360,000) --------------- $ 3,505,000 =============== 7. COMMON STOCK AND PREFERRED STOCK COMMON STOCK The rights and privileges of the common stock under the Company's Amended and Restated Certificate of Incorporation are as follows: Each holder of Class A common stock and Class B common stock is entitled to one vote per share. Holders of Class B common stock, voting as a separate class, are entitled to elect or remove from office the founders' members of the Company's Board of Directors. The holders of all outstanding shares of Company stock, voting together on an if-converted basis as a single class, are entitled to elect all remaining members of the Board of Directors. Each share of Class B common stock is convertible at any time into an equal number of shares of Class A common stock transferred to a non-founder. Class B common stock transferred to a non-founder will automatically convert into Class A common stock. In addition, Class B common stock owned by the founders will automatically convert into Class A common stock upon the earlier of a) the fifth anniversary of an initial public offering of the Company, or b) when the founders own, in aggregate, less than 50% of Class B common stock that would be issued upon conversion of the Series A preferred stock. PREFERRED STOCK The rights, preferences and privileges of the Series A preferred stock under the Company's Amended and Restated Certificate of Incorporation are as follows: DIVIDENDS - The holders of shares of the Series A preferred stock are entitled to receive dividends at the rate of 8% of the original issue price, which is $1.00 per share, per annum (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), payable when and as declared by the Board of Directors of the Company. The right to receive dividends shall be noncumulative; however the Company shall not declare or pay any distributions on shares of common stock until the preferred stockholders have received a cumulative distribution at the rate specified above. LIQUIDATION PREFERENCE - In certain events, including liquidation, dissolution or winding up of the Company, including a consolidation or merger and conveyance of substantially all of the assets of the Company, the holders of Series A preferred stock have a preference in liquidation over the common stockholders equal to the original issue price of $1.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar -12- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- recapitalization affecting such shares), plus any dividends declared but unpaid thereon. If the assets of the Company are not sufficient to fulfill the liquidation amount, the stockholders will share in the liquidation amount on a pro rata basis. SALE OF THE COMPANY - In the event the Board of Directors decides to pursue the sale of the Company, the founders shall be given the first right of refusal to acquire the Company. If none of the founders exercise this right, NDCHealth has the option to purchase the Company. VOTING RIGHTS - Each holder of preferred stock shall be entitled to the number of votes equal to the number of whole shares of common stock into which they are then convertible. Holders of Series A preferred stock, voting as a separate class, are entitled to elect or remove from office the founders' members of the Company's Board of Directors. CONVERSION - Each share of preferred stock is automatically convertible into one share of Class B common stock (subject to customary adjustments to protect against dilution) upon the closing of a public offering of the Company's common stock that results in gross proceeds of at least $50,000,000. 8. INCOME TAXES Deferred tax assets consist of the following: 2001 --------------- Net operating loss carryforwards $ 17,439,000 Capitalized start-up costs 5,282,000 Investment in warrant -- Deferred compensation 1,599,000 Developed internal-use software (3,729,000) Intangible assets (3,106,000) Other 342,000 ---------------- Net deferred tax assets 17,827,000 Deferred tax asset valuation allowance (17,827,000) ---------------- $ -- ================ Due to the uncertainty of the Company generating future taxable income, the Company has recorded a valuation allowance against its deferred tax assets. A reconciliation of income taxes to the amounts computed by applying the statutory federal income tax rate to the net loss is summarized as follows:

2001 2000 ------------ ------------ Amounts computed at statutory federal rate $(13,736,000) $ (4,491,000) State taxes (1,905,000) (771,000) Other 21,000 -- Intangible assets 3,055,000 -- Change in valuation allowance 12,565,000 5,262,000 ------------ ------------ $ -- $ -- ============ ============

-13- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- At December 31, 2001, the Company had $44,739,000 and $44,739,000 of federal and state net operating loss carryforwards, respectively. The federal and state net operating loss carryforwards begin to expire in 2020 and 2010, respectively. Management is currently exploring various strategic alternatives including the possible sale of the Company. Future changes in control may result in a limitation on the future utilization of the company's net operating loss carryforwards. 9. STOCK OPTIONS The Company has adopted the 2001 Equity Incentive Plan (the "Plan") providing for the granting of up to 10,280,374 shares of the Company's common stock. The Plan provides for the granting of stock options and restricted stock awards. Incentive stock options granted under the Plan must be granted with strike prices not less than the fair market value. Non-qualified stock options granted under the Plan must be granted with strike prices not less than 85% of fair market value. Options generally expire ten years from the date of grant. Option vesting is determined by the Board of Directors upon each grant and is generally a five-year period. In June 2000, the Company entered into a five-year employment agreement with an executive under which the Company issued stock options to purchase 2,803,738 shares of common stock and is obligated to issue 847,458 shares of restricted common stock to the executive. If the executive's employment terminates, other than for cause, prior to the fifth anniversary of the executive's hire date, the Company is obligated to repurchase all of the restricted common stock for an aggregate price equal to the greater of the then fair market value or $1,000,000. Commencing on the fifth anniversary of the executive's hire date, the executive has a right to sell all or some of his shares of restricted common stock and stock option shares to the Company for a guaranteed fixed pre-tax gain of $7,000,000 in the aggregate assuming all shares were repurchased. This amount is being recognized as compensation expense on a straight-line basis over the five-year service period. Through December 31, 2001, $2,158,000 has been recorded as deferred compensation. In 2002, this executive has asserted that if his employment is terminated following a change in control of the Company, the "guaranteed value" provision set forth in Section 7 of this employment agreement will be accelerated and become fully due and payable. He asserts that he would be entitled to receive $7,000,000 for his restricted stock and options. The Company believes the executive's "guaranteed value" provision does not accelerate upon a change of control of the Company and that the executive must be an employee of the Company on the fifth anniversary of his hire date in order to receive the $7,000,000 guaranteed value. The Company does not dispute that if the executive's employment terminates without cause as defined in the agreement prior to the fifth anniversary of his hire date, he would be entitled to put the shares to the Company for repurchase at an aggregate purchase price equal to the greater of the then fair market value or $1,000,000. The executive has requested that the Company agree to a binding arbitration to resolve this dispute. The Company has rejected this request for arbitration and intends to defend any claim vigorously. The accompanying financial statements do not include any adjustments that may result from this uncertainty. During 2001, the Company granted options to purchase 8,452,458 shares of common stock (including the options to purchase 2,803,738 shares of common stock granted to the executive referred to above) with a weighted average exercise price of $1.54. -14- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- The following table summarizes information regarding options outstanding as of December 31, 2001:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------- ------------------------------ WEIGHTED- WEIGHTED- WEIGHTED- RANGE OF AVERAGE AVERAGE AVERAGE EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE ------ ----------- ------------ ----- ----------- ----- $1.18 5,257,009 9.5 $1.18 1,051,402 $1.18 $1.74 to $2.30 3,195,449 9.7 $2.00 -- -- --------------- ------------ 8,452,458 1,051,402 =============== =============

At December 31, 2001, 980,458 shares (exclusive of the 897,458 shares of restricted stock to be issued to the executive referred to above) were available for future grants under the Plans. The weighted-average fair value of options granted during the year ended December 31, 2001 was $0.08. PRO FORMA EMPLOYEE COMPENSATION EXPENSE Had compensation cost for the Company's stock-based compensation been determined based on the fair value of the options at the date of grant, the Company's net loss would not have been materially different from the net loss reported for 2001. The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for grants during 2001: dividend yield of 0%, expected life of five years, expected volatility of 0%, and risk-free interest rate of 6%. 10. RELATED PARTY TRANSACTIONS The Company was founded by seven leading insurance companies who are expected to be among the Company's primary customers. In August 2001, the Company entered into service agreements with each of the founders under which the Company will facilitate specified business transactions for fees. These agreements have a term of two years and automatically renew for successive annual periods, if not cancelled by either party. At December 31, 2001, the Company has accounts receivable from its founders in the aggregate amount of $361,000. During 2001, the Company recognized revenue of $1,348,000 from its founders. At December 31, 2001, the Company has accounts receivable from NDCHealth of $506,000 and accounts payable and accrued liabilities due to NDCHealth of $1,642,000. During 2001, the Company recognized revenue of $2,157,000 from NDCHealth. -15- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- 11. COMMITMENTS AND CONTINGENCIES LEASES The Company leases facilities and equipment under non-cancelable operating and capital leases which expire on varying dates through 2006. In connection with a facilities lease, the Company entered into an irrevocable letter of credit in the amount of $750,000. The letter of credit expires September 30, 2004. The Company's future minimum payments under non-cancelable operating and capital leases are as follows:

CAPITAL OPERATING YEAR ENDING DECEMBER 31, LEASES LEASES ------------------------ -------------- ----------------- 2002 $ 229,000 $ 1,567,000 2003 233,000 1,471,000 2004 153,000 1,145,000 2005 55,000 2006 9,000 --------------- ---------------- 615,000 $ 4,247,000 ================ Less amounts representing interest 48,000 --------------- Future minimum lease obligation 567,000 Less current portion 201,000 --------------- $ 366,000 ===============

Assets under capital leases included in property and equipment at December 31, 2001 had a net book value of $542,000, which includes accumulated amortization of $95,000. Rent expense was $1,555,000 and $441,000 for the year ended December 31, 2001 and the period ended December 31, 2000, respectively. Certain facility operating leases contain escalation clauses. The Company recognizes rent expense on a straight-line basis over the related lease term. EMPLOYMENT AGREEMENTS The Company entered into employment agreements with certain executives that provide for cash severance payments if the executives are terminated without cause. The Company's aggregate commitment under these agreements is $2,335,000 at December 31, 2001. 12. SUBSEQUENT EVENTS In February 2002, the Company issued convertible promissory notes bearing interest at 2.74% per annum, pursuant to a note purchase agreement with its founders, under which the Company borrowed an aggregate amount of $18,160,000. In the event that the Company issues and sells shares of Series B Preferred Stock to new investors with total proceeds of not less than $30,000,000, including the $18,160,000 advanced, prior to February 2003, then the outstanding principal of the convertible promissory notes will automatically convert into shares of Series B Preferred Stock at the same price per share that the shares of Series B Preferred Stock are sold to the new investors. If a financing -16- MEDUNITE INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------- does not occur before February 2003, then the outstanding principal balance will automatically convert into shares of Series B Preferred Stock at the price per share equal to the then fair market value. The Series B Preferred Stock will have such rights, preferences and privileges as are approved by the required vote of the founders (as defined in the Company's amended and restated certificate of incorporation); provided that the rights of the Series B Preferred stockholders shall be pari passu to the rights of the Series A Preferred stockholders upon a liquidation of the Company. In April 2002, the Company entered into a non-cancellable operating lease for office space, which expires on April 30, 2005. The Company's future minimum payments under the lease for the years ending December 31, 2002, 2003, 2004 and 2005 are $327,652, $501,880, $517,483, and $174,228, respectively. In July 2002, the Company entered into a three-year information technology services agreement to outsource certain hosting, system maintenance and operation services. Actual service fees are based on the number of transactions processed by the software being supported; however, the Company is committed to pay a minimum annual service fee of $1,212,000. The Company has the option to cancel the agreement by providing 90 days notice and paying an early termination fee which will be equal to between one and three months' average transaction fees, depending upon when the agreement is terminated. In August 2002, the Company issued promissory notes bearing interest at 6% per annum, pursuant to a note purchase agreement with its founders, under which the Company subsequently borrowed the maximum amount available of $5,815,000. The outstanding principal amount of the loan is due and payable on the earliest of the following events: (a) December 31, 2002, (b) the date that the Company completes an equity financing for the minimum amount of $20,000,000 or (c) the effective date of a change of control of the Company. -17- EX-2.3 4 g81296exv2w3.txt EX-2.3 MEDUNITE FINANCIAL STATEMENTS OF 12/31/02 EXHIBIT 2.3 MEDUNITE INC. FINANCIAL STATEMENTS DECEMBER 31, 2002 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholder of MedUnite Inc. In our opinion, the accompanying balance sheet and the related statements of operations, stockholders' deficit and cash flows present fairly, in all material respects, the financial position of MedUnite Inc. at December 31, 2002, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As more fully discussed in Note 16, the Company was acquired on December 31, 2002. PricewaterhouseCoopers LLP Fort Lauderdale, Florida March 6, 2003 2 MEDUNITE INC. BALANCE SHEET DECEMBER 31, 2002 ASSETS Current assets: $ 879,000 Cash and cash equivalents Accounts receivable, net of allowance of $662,000 3,141,000 Prepaid expenses and other current assets 664,000 ------------- Total current assets 4,684,000 Property and equipment, net 9,977,000 Intangible assets, net 8,138,000 Other assets 1,033,000 ------------- Total assets $ 23,832,000 ============= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current portion of notes payable $ 25,443,000 Accounts payable 4,034,000 Accrued expenses 5,483,000 Deferred compensation 1,000,000 Deferred revenue 74,000 Current portion of capital lease obligations 314,000 ------------- Total current liabilities 36,348,000 Notes payable, less current portion 2,139,000 Capital lease obligations, less current portion 194,000 Other long-term liabilities 1,237,000 ------------- Total liabilities 39,918,000 ------------- Commitments and contingencies Stockholders' deficit: Preferred stock, $0.001 par value, 137,000,000 shares authorized: Series A preferred stock, 87,000,000 authorized, 85,270,402 shares issued and outstanding; liquidation value of $85,270,000 85,000 Common stock, $0.001 par value, 297,000 shares authorized: Class A common stock 210,000,000 authorized, zero shares issued and outstanding -- Class B common stock, 87,000,000 authorized, zero shares issued and outstanding -- Additional paid-in capital 86,295,000 Accumulated deficit (102,466,000) ------------- Total stockholders' deficit (16,086,000) ------------- Total liabilities and stockholders' deficit $ 23,832,000 ============= The accompanying notes are an integral part of these financial statements. 3 MEDUNITE INC. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002 Revenue $ 19,534,000 ------------ Operating expenses: Cost of revenue 7,946,000 Selling, general and administrative 37,322,000 Depreciation and amortization 12,276,000 Impairment of intangibles and other assets 11,670,000 Settlement of deferred compensation (2,558,000) ------------ Total operating expenses 66,656,000 ------------ Loss from operations (47,119,000) Interest income 169,000 Interest expense (1,906,000) ------------ Net loss $(48,859,000) ============ The accompanying notes are an integral part of these financial statements. 4 MEDUNITE INC. STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE YEAR ENDED DECEMBER 31, 2002

SERIES A COMMON STOCK PREFERRED STOCK ADDITIONAL ------------------ --------------------- PAID-IN ACCUMULATED SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL ------ ------ ------ ------ ------------ -------------- ----- Balance at December 31, 2001 $ -- -- 85,270,402 $ 85,000 85,314,000 $ (53,607,000) $ 31,792,000 Recognition of discount on notes payable -- -- -- -- 981,000 -- 981,000 Net loss -- -- -- -- -- (48,859,000) (48,859,000) ------ ----- ---------- -------- ----------- ------------- ------------- Balance at December 31, 2002 $ -- -- 85,270,402 $ 85,000 $86,295,000 $(102,466,000) $ (16,086,000) ====== ===== ========== ======== =========== ============= =============

The accompanying notes are an integral part of these financial statements. 5 MEDUNITE INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2002 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(48,859,000) Adjustments to reconcile net loss to net cash used in operating activities Impairment of intangibles and other assets 11,670,000 Amortization of debt discount 1,083,000 Depreciation and amortization 12,276,000 Provision for doubtful accounts 329,000 Changes in operating assets and liabilities: Accounts receivable (637,000) Prepaid expenses and other current assets 48,000 Other assets (22,000) Accounts payable 569,000 Accrued expenses (731,000) Deferred revenue 74,000 Deferred compensation (2,558,000) Other long-term liabilities 103,000 ------------ Net cash used in operating activities (26,655,000) ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (4,912,000) ------------ Net cash used in investing activities (4,912,000) ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of convertible debt and notes payable 23,975,000 Payments on capital lease obligations (143,000) ------------ Net cash provided by financing activities 23,832,000 ------------ Net decrease in cash and cash equivalents (7,735,000) Cash and cash equivalents at beginning of period 8,614,000 ------------ Cash and cash equivalents at end of period $ 879,000 ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest $ 65,000 ============ The accompanying notes are an integral part of these financial statements. 6 1. ORGANIZATION AND DESCRIPTION OF BUSINESS THE COMPANY MedUnite Inc. (the "Company") was incorporated in Delaware in June 2000. The Company was formed to develop and maintain an exchange that provides connectivity applications in the healthcare market that facilitates various business transactions, including claims submission, real-time claim status inquiry, eligibility and referral and authorization. The Company is subject to risks common to rapidly growing technology-based companies, including rapid technological change, dependence on principal products, new product development, new product introductions, other activities of competitors, and a limited operating history in Internet related e-commerce activities. During 2002, the Company incurred a net loss of $48,859,000 and generated negative cash flows from operations of $26,655,000. The Company has an accumulated deficit of $102,466,000 as of December 31, 2002. As a result of these losses and negative cash flow, management engaged in efforts to sell the Company. On December 31, 2002, the Company was sold to ProxyMed, Inc. ("ProxyMed'), a publicly held provider of healthcare transaction processing services based in Fort Lauderdale, Florida for $10.0 million in cash and $13.4 million in 4% Convertible Notes issued to the Company's founders (see Note 16). Without the sale of the Company to ProxyMed there would have been substantial doubt about the Company's ability to continue as a going concern. These financial statements reflect the financial position of the Company before the consummation of the acquisition by ProxyMed and do not reflect any adjustments that might have resulted from such transaction or if the Company was unable to continue as a going concern. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The financial statements include the accounts of MedUnite Inc. and represent the financial position of the Company immediately prior to its acquisition by ProxyMed on December 31, 2002 (see Note 16). USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION The Company derives revenue from processing electronically submitted medical claims for insurance companies and health care providers. Revenue is recognized as services are provided according to the terms of the underlying contracts. Certain transaction fee revenue may be subject to revenue sharing or rebates per agreements with resellers, vendors, other clearinghouses, one of the founders and other business partners. Revenue from maintenance fees is recognized ratably over the applicable period. COST OF REVENUE Cost of revenue includes third party hosting and support services of network connectivity, certain telecommunications costs, and revenue sharing and rebate arrangements with resellers, vendors, other clearinghouses, one of the founders and other business partners. 7 CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with original maturities from the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include cash on hand and certificates of deposit with a financial institution. Cash and cash equivalents used to support collateral instruments, such as letters of credit, are reclassified as either current or long-term assets depending upon the maturity date of the obligation they collateralize. PROPERTY AND EQUIPMENT Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the term of the lease. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to income. Expenditures for repairs, maintenance and minor renewals and betterments are expensed as incurred. Examination for obsolete, damaged and impaired fixed assets is periodically reviewed by management. INTERNAL-USE SOFTWARE Internal and external costs incurred to develop internal-use computer software during the application development stage are capitalized. Amortization is computed on a straight-line basis over the estimated useful lives of the assets. Application development stage costs generally include software configuration, coding, installation to hardware and testing. Costs of upgrades and major enhancements that result in additional functionality are also capitalized. Costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred. INTANGIBLE AND OTHER LONG-LIVED ASSETS The Company assesses potential impairments of its intangible and other long-lived assets when there is evidence that events or changes in circumstances have made recovery of an asset's carrying value unlikely. Goodwill is not amortized, but is reviewed annually (or more frequently if impairment indicators arise) for impairment. Intangible assets that are not deemed to have indefinite lives are reviewed for impairment in accordance with the Company's policy for long-lived assets. An impairment loss is recognized when the sum of the expected undiscounted future net cash flows expected to be generated by an asset (or group of assets) is less than its carrying value or when third-party evidence exists as to the value of the long-lived assets. Any required impairment loss would be measured as the amount by which the asset's carrying value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset and a charge to operations. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. ADVERTISING COSTS Advertising costs are expensed as incurred. Advertising expense was $112,000 for the year ended December 31, 2002. INCOME TAXES Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and income tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credits and loss carryforwards. Deferred income tax expense or benefit represents the net change during the year in the deferred income tax asset or liability. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. 8 CONCENTRATION OF CREDIT RISK The Company's financial instruments subject to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company's policy is to place its cash and cash equivalents with high quality financial institutions in order to limit its credit exposure. To date, the Company has not experienced any credit losses associated with these financial institutions. Accounts receivable are generally uncollateralized. The Company performs on-going credit evaluations of its customers and maintains an allowance for potential credit losses as considered necessary. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of financial instruments which are presented herein have been determined by management using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of amounts the Company could realize in a current market exchange. Cash and cash equivalents, accounts and notes receivable, net, and accounts payable are reflected in the accompanying Balance Sheets at amounts considered by management to reasonably approximate fair value due to their short-term nature. The Company estimates the fair value of its long-term debt generally using discounted cash flow analysis based on our current borrowing rates for similar types of debt. As of December 31, 2002, the carrying value of the long-term debt approximated the fair value of such instruments. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is defined as the change in the equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company presents other comprehensive income (loss) in its statement of stockholders' equity. For the year ended December 31, 2002 the only component of comprehensive loss is net loss. 3. ACQUISITION In August 2001, the Company acquired NDC Health's physician network services business (the "Acquisition"). The physician network services business connects physicians to payors to provide electronic processing for claims, eligibility, referrals and other health transactions. The Company acquired the physician network services business in exchange for 15,263,402 shares of Series A preferred stock, having an estimated fair value, as determined by management, of $15,263,000, and a promissory note with a principal amount of $2,300,000, having an estimated fair value of $1,966,000 (see Note 9). In addition, the Company incurred acquisition costs of $1,043,000 related to the acquisition. The acquisition was accounted for using the purchase method of accounting, and accordingly, the results of the acquired business have been included in the Company's financial statements from the date of acquisition. The aggregate purchase price was allocated as follows: Accounts receivable $ 2,214,000 Property and Equipment 572,000 Identifiable intangibles 10,665,000 Goodwill 5,555,000 Other assets 52,000 Accrued liabilities (786,000) ------------ Total purchase price $ 18,272,000 ============ As a result of an impairment review by management at December 31, 2002 prompted by the sale of the Company to ProxyMed (see Note 16), the Company incurred an impairment charge of $3,194,000 in relation to certain of the identifiable intangible assets from the Acquisition (see Note 6). The resulting fair values recorded were based on an independent third-party appraisal of the assets utilizing a replacement cost methodology. 9 4. INVESTMENT IN WARRANT OF QUOVADX, INC. In October 2000, the Company entered into a Software License and Services Agreement (the "Agreement") with Quovadx, Inc., formerly XCare.net, Inc. ("Quovadx") under which Quovadx provided software development and hosting services related to the Company's internet portal. The development services were invoiced to the Company on a time and materials basis and the hosting service fees were invoiced based on the number of servers hosted. In June 2001, the Company accepted and paid approximately $6,700,000 for a perpetual software license, which is included in property and equipment. However, as a result of an impairment review by management at December 31, 2002, the Company wrote down the remaining net book value of the license to its fair market value (see Note 5). While the Company has taken an impairment charge for the perpetual software license, it is evaluating whether it still may be liable to purchase software maintenance services from Quovadx through December 31, 2005. Such commitments, if paid, would be due as follows: YEAR ENDING DECEMBER 31, - ------------------------- 2003 $ 700,000 2004 700,000 2005 408,000 ----------- $ 1,808,000 =========== 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 2002:

ESTIMATED USEFUL LIVES ------------ Computer equipment $ 3,169,000 3 years Internal-use software 4,800,000 2 - 5 years Software 2,259,000 2 - 5 years Furniture and fixtures 1,357,000 5 years Office equipment 670,000 5 years Leasehold improvements 518,000 Life of lease ------------ 12,773,000 Less accumulated depreciation and amortization (2,796,000) ------------ $ 9,977,000 ============

During the year ended December 31, 2002, the Company capitalized $2,006,000 of internal-use software development costs. Depreciation and amortization expense related to property and equipment, including amortization of internal-use software development costs, was $8,829,000 for the year ended December 31, 2002. As a result of an impairment review by management at December 31, 2002 prompted by the sale of the Company to ProxyMed (see Note 16), the Company wrote-down certain software and license fees associated with its processing platforms and previously capitalized internal-use software resulting in impairment charges totaling $8,476,000. The resulting fair values recorded were based on an independent third-party appraisal of the assets utilizing a replacement cost methodology. 10 6. INTANGIBLE ASSETS Intangible assets consists of the following at December 31, 2002: Intangible Assets Subject to Amortization: Software platform $ 1,200,000 Non-compete agreement 1,700,000 Customer related agreements 422,000 Other identifiable intangible assets 218,000 ----------- 3,540,000 Less accumulated amortization (957,000) ----------- Intangible assets subject to amortization, net 2,583,000 Goodwill 5,555,000 ----------- $ 8,138,000 =========== Through December 31, 2002, intangible assets were being amortized using the straight-line method over their estimated useful lives as follows: Software platform 3 years Non-compete agreement 5 years Customer related agreements 2 to 5 years Other identifiable intangible assets 0.5 to 5 years Amortization expense was $3,447,000 for the year ended December 31, 2002. The software platform will now be amortized over one year through December 31, 2003. The estimated future aggregate amortization expense for intangible assets subject to amortization is as follows: YEAR ENDING DECEMBER 31, ------------------------ 2003 $1,678,000 2004 356,000 2005 347,000 2006 202,000 ---------- $2,583,000 ========== 7. RESTRICTED CASH Restricted cash of $825,000 at December 31, 2002 includes a certificate of deposit of $750,000, which has been pledged as security for an outstanding letter of credit (see Note 15). Restricted cash is included in other assets in the accompanying balance sheet. 8. ACCRUED EXPENSES Accrued expenses consist of the following at December 31, 2002: Compensation related costs $1,445,000 Severance 800,000 Interest 658,000 Other 2,580,000 ---------- $5,483,000 ========== 11 9. DEBT During 2001 and 2000, the Company received proceeds of $24,340,000 and $20,000,000, respectively, from its founders in connection with the issuance of convertible notes payable (the "Notes"), as amended. The Notes have annual interest rates ranging from 6.10% to 6.53%. The principal balance of the Notes automatically converted into 44,340,331 shares of Series A preferred stock at $1.00 per share upon the closing the Acquisition in August 2001. The outstanding accrued interest of $1,565,000 was converted into notes payable at 6% stated interest per year. The Company imputed an interest rate of 12% on these notes, which more accurately reflects the rate that the Company would pay to a third party lender. The resulting debt discount of $129,000 was recorded as additional paid-in capital because the notes were issued to the founders. The notes are repayable in four quarterly installments during 2003. Accrued interest related to these notes of $133,000 is included in accrued liabilities at December 31, 2002. During 2001, the Company issued a promissory note in connection with the Acquisition. The note has a principal amount of $2,300,000 payable in full in August 2004, and was initially recorded at its estimated fair value of $1,996,000, representing an effective annual interest rate of 12%. Accrued interest related to this note of $198,000 is included in other long-term liabilities at December 31, 2002. In February 2002, the Company issued convertible promissory notes bearing interest at 2.74% per annum, pursuant to a note purchase agreement with its founders, under which the Company borrowed an aggregate amount of $18,160,000. Under the terms of the promissory notes, in the event that the Company issues and sells shares of Series B Preferred Stock to new investors with total proceeds of not less than $30,000,000, including the $18,160,000 advanced, prior to February 2003, then the outstanding principal of the convertible promissory notes will automatically convert into shares of Series B Preferred Stock at the same price per share that the shares of Series B Preferred Stock are sold to the new investors. If a financing does not occur before February 2003, then the outstanding principal balance (except for $2,569,000 owed to NDCHealth representing NDCHealth's contribution in this financing in excess of its prorata ownership in the Company) will automatically convert into shares of Series B Preferred Stock at the price per share equal to the then fair market value. The Series B Preferred Stock will have such rights, preferences and privileges as are approved by the required vote of the founders (as defined in the Company's amended and restated certificate of incorporation); provided that the rights of the Series B Preferred stockholders shall be pari passu to the rights of the Series A Preferred stockholders upon a liquidation of the Company. The Company imputed an interest rate of 8% on these notes, which more accurately reflects the rate that the Company would pay to a third party lender. The resulting debt discount of $885,000 was recorded as additional paid-in capital because the notes were issued to the founders. Accrued interest related to these notes of $444,000 is included in accrued liabilities at December 31, 2002. In August 2002, the Company issued promissory notes bearing interest at 6% per annum, pursuant to a note purchase agreement with its founders, under which the Company subsequently borrowed the maximum amount available of $5,815,000. The outstanding principal amount of the loan is due and payable on the earliest of the following events: (a) December 31, 2002, (b) the date that the Company completes an equity financing for the minimum amount of $20,000,000 or (c) the effective date of a change of control of the Company. The Company imputed an interest rate of 12% on these notes, which more accurately reflects the rate that the Company would pay to a third party lender. The resulting debt discount of $96,000 was recorded as additional paid-in capital because the notes were issued to the founders. Accrued interest related to these notes of $81,000 is included in accrued liabilities at December 31, 2002. Maturities of long-term debt and notes payable are as follows (see Note 16): YEAR ENDING DECEMBER 31, ------------------------ 2003 $ 25,540,000 2004 2,300,000 ------------ 27,840,000 Less discount (258,000) ------------ $ 27,582,000 ============ 12 Accretion of the discount as interest expense recorded on the above debt was $1,083,000 for the year ended December 31, 2002. 10. COMMON STOCK AND PREFERRED STOCK COMMON STOCK The rights and privileges of the common stock under the Company's Amended and Restated Certificate of Incorporation are as follows: Each holder of Class A common stock and Class B common stock is entitled to one vote per share. Holders of Class B common stock, voting as a separate class, are entitled to elect or remove from office the founders' members of the Company's Board of Directors. The holders of all outstanding shares of Company stock, voting together on an if-converted basis as a single class, are entitled to elect all remaining members of the Board of Directors. Each share of Class B common stock is convertible at any time into an equal number of shares of Class A common stock transferred to a non-founder. Class B common stock transferred to a non-founder will automatically convert into Class A common stock. In addition, Class B common stock owned by the founders will automatically convert into Class A common stock upon the earlier of (a) the fifth anniversary of an initial public offering of the Company, or (b) when the founders own, in aggregate, less than 50% of Class B common stock that would be issued upon conversion of the Series A preferred stock. PREFERRED STOCK The rights, preferences and privileges of the Series A preferred stock under the Company's Amended and Restated Certificate of Incorporation are as follows: DIVIDENDS - The holders of shares of the Series A preferred stock are entitled to receive dividends at the rate of 8% of the original issue price, which is $1.00 per share, per annum (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), payable when and as declared by the Board of Directors of the Company. The right to receive dividends shall be noncumulative; however the Company shall not declare or pay any distributions on shares of common stock until the preferred stockholders have received a cumulative distribution at the rate specified above. LIQUIDATION PREFERENCE - In certain events, including liquidation, dissolution or winding up of the Company, including a consolidation or merger and conveyance of substantially all of the assets of the Company, the holders of Series A preferred stock have a preference in liquidation over the common stockholders equal to the original issue price of $1.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), plus any dividends declared but unpaid thereon. If the assets of the Company are not sufficient to fulfill the liquidation amount, the stockholders will share in the liquidation amount on a pro rata basis. SALE OF THE COMPANY - In the event the Board of Directors decides to pursue the sale of the Company, the founders shall be given the first right of refusal to acquire the Company. If none of the founders exercise this right, NDCHealth has the option to purchase the Company (see Note 16). VOTING RIGHTS - Each holder of preferred stock shall be entitled to the number of votes equal to the number of whole shares of common stock into which they are then convertible. Holders of Series A preferred stock, voting as a separate class, are entitled to elect or remove from office the founders' members of the Company's Board of Directors. CONVERSION - Each share of preferred stock is automatically convertible into one share of Class B common stock (subject to customary adjustments to protect against dilution) upon the closing of a public offering of the Company's common stock that results in gross proceeds of at least $50,000,000. 13 11. INCOME TAXES At December 31, 2002, deferred tax assets consist of the following: Net operating loss carryforwards $ 29,865,000 Capitalized start-up costs 9,789,000 Deferred compensation 293,000 Developed internal-use software (1,994,000) Intangible assets (609,000) Other (2,283,000) ------------ Net deferred tax assets 35,061,000 Deferred tax asset valuation allowance (35,061,000) ------------ $ -- ============ Due to the uncertainty of the Company generating future taxable income, the Company has recorded a valuation allowance against its deferred tax assets. A reconciliation of income taxes to the amounts computed by applying the statutory federal income tax rate to the net loss is summarized as follows: Amounts computed at statutory federal rate $(16,611,000) State taxes (2,430,000) Permanent differences 31,000 Other 1,859,000 Intangibles (83,000) Change in valuation allowance 17,234,000 ------------ $ -- ============ At December 31, 2002, the Company had $71,876,000 and $71,876,000 of federal and state net operating loss carryforwards, respectively, which will be limited under Internal Revenues Section 382 due to the change in ownership that occurred on December 31, 2002. The federal and state net operating loss carryforwards begin to expire in 2020 and 2010, respectively. 12. STOCK OPTIONS The Company has adopted the 2001 Equity Incentive Plan (the "Plan") providing for the granting of up to 10,280,374 shares of the Company's common stock. The Plan provides for the granting of stock options and restricted stock awards. Incentive stock options granted under the Plan must be granted with strike prices not less than the fair market value. Non-qualified stock options granted under the Plan must be granted with strike prices not less than 85% of fair market value. Options generally expire ten years from the date of grant. Option vesting is determined by the Board of Directors upon each grant and is generally a five-year period. In June 2000, the Company entered into a five-year employment agreement with an executive under which the Company issued stock options to purchase 2,803,738 shares of common stock and is obligated to issue 847,458 shares of restricted common stock to the executive. If the executive's employment terminates, other than for cause, prior to the fifth anniversary of the executive's hire date, the Company is obligated to repurchase all of the restricted common stock for an aggregate price equal to the greater of the then fair market value or $1,000,000. Commencing on the fifth anniversary of the executive's hire date, the executive has a right to sell all or some of his shares of restricted common stock and stock option shares to the Company 14 for a guaranteed fixed pre-tax gain of $7,000,000 in the aggregate assuming all shares were repurchased. This amount was being recognized as compensation expense on a straight-line basis over the five-year service period. Through December 31, 2002, $3,558,000 had been recorded as deferred compensation; however, this amount was adjusted to $1,000,000 pursuant to a separation agreement entered into with the executive on December 31, 2002 (see Note 16). As a result, the Company has recorded a gain of $2,558,000 pursuant to this event. During 2002, no options were granted or exercised and options for 3,738,318 shares (including those of the executive noted above) were forfeited/cancelled (with an average exercise price of $1.32). At December 31, 2002, 5,566,233 shares were available for future grants under the Plans. The following table summarizes information regarding options outstanding as of December 31, 2002 (see Note 16):

OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------- ------------------------------ WEIGHTED- WEIGHTED- WEIGHTED- RANGE OF AVERAGE AVERAGE AVERAGE EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE ------------- --------------- -------------- ------------ -------------- ------------ $1.18 2,453,271 8.5 $1.18 981,308 $1.18 $2.30 2,260,870 8.7 $2.30 452,174 $2.30 ------------- ----------- 4,714,141 1,433,482 $1.53 ============= ===========

PRO FORMA EMPLOYEE COMPENSATION EXPENSE Had compensation cost for the Company's stock-based compensation been determined based on fair value of the options at the date of the grant, the Company's net loss would not have been materially different from the net loss reported for 2002. The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for grants during 2001: dividend yield of 0%, expected life of five years, expected volatility of 0%, and risk-free interest rate of 6%. No options were granted during 2002. 13. EMPLOYEE BENEFIT PLANS The Company maintains a 401(k) retirement plan for substantially all employees who meet certain minimum lengths of employment and minimum age requirements. Contributions are made by employees based on the lesser of 60% of eligible compensation or the deferral limit set by the government ($11,000 in 2002). Non-discretionary employer matching contributions are made up to 100% of the employee's pretax contribution up to a maximum of 6% of eligible compensation. Matching contributions vest under a five-year schedule, based on completed full years of service, as follows: 20% after one year; 40% after two years; 60% after three years; 80% after four years; and 100% after five years. Matching contributions totaling $668,000 for the year ended December 31, 2002 have been expensed. 14. RELATED PARTY TRANSACTIONS The Company was founded by seven leading insurance companies who are expected to be among the Company's primary customers (the "Founders"). In August 2001, the Company entered into service agreements with each of the Founders under which the Company will facilitate specified business transactions for fees. These agreements have a term of two years and automatically renew for successive annual periods, if not cancelled by either party. At December 31, 2002 the Company has accounts receivable from its Founders in the aggregate amount of $419,000. During 2002, the Company recognized revenue of $1,983,000 from its Founders. At December 31, 2002, the Company has accounts receivable from NDCHealth of $1,315,000 and accounts payable and accrued liabilities due to NDCHealth of $2,053,000. During 2002, the Company transacted the following with NDCHealth (i) recognized revenue of $4,897,000; (ii) recognized the reimbursement of expenses of certain operating costs of $569,000; and (iii) incurred amounts payable to under revenue sharing, rebate and expense reimbursement agreements totaling $3,509,000. 15 15. COMMITMENTS AND CONTINGENCIES LEASES The Company leases facilities and equipment under non-cancelable operating and capital leases which expire on varying dates through 2006. The Company's future minimum payments under non-cancelable operating and capital leases are as follows: CAPITAL OPERATING YEAR ENDING DECEMBER 31, LEASES LEASES - ------------------------ ---------- ----------- 2003 $ 338,000 $ 1,987,000 2004 190,000 1,671,000 2005 28,000 230,000 2006 15,000 9,000 ----------- ----------- 571,000 $ 3,897,000 =========== Less amounts representing interest (63,000) ----------- Future minimum lease obligation 508,000 Less current portion (314,000) ----------- $ 194,000 =========== During 2002, the Company acquired assets under capital leases totaling $84,000. Assets under capital leases included in property and equipment at December 31, 2002 had a net book value of $374,000, which includes accumulated amortization of $215,900. Rent expense was $2,155,000 for the year ended December 31, 2002. Certain facility operating leases contain escalation clauses. The Company recognizes rent expense on a straight-line basis over the related lease term. In connection with its facilities lease in San Diego, California, the Company entered into an irrevocable letter of credit in the amount of $750,000. The letter of credit expires September 30, 2004. In an effort to control its operating costs, the Company has engaged a commercial real estate broker to assist the Company in subleasing or terminating its facilities lease in San Diego. As of December 31, 2002, gross rents of $2,509,000 remain on this property through September 2004 and are included in the table above. EMPLOYMENT AGREEMENTS The Company entered into employment agreements with certain executives that provide for cash severance payments if the executives are terminated without cause. The Company's aggregate commitment under these agreements is $1,535,000 at December 31, 2002. The Company has entered into retention agreements with several key management employees. The bonuses due under these retention agreements are payable in two parts: 50% upon a change of control of the Company and 50% upon the earlier to occur of (i) 90 days following the change in control event or (ii) involuntary termination of the employee. As of December 31, 2002, the Company's total potential commitment under these retention agreements was $257,000. SERVICES AGREEMENT In April 2002, the Company entered into a three-year information technology services agreement to outsource certain hosting, system maintenance and operation services. Actual service fees are based on the number of transactions processed by the software being supported; however, the Company is committed to pay a minimum annual service fee of $1,212,000. At December 31, 2002, $790,000 is accrued towards this minimum annual amount. The Company has the option to cancel the agreement by providing 90 days notice and paying an early termination fee which will be equal to between one and three months' average transaction fees, depending upon when the agreement is terminated. 16 16. ACQUISITION BY PROXYMED On December 31, 2002, the Company was sold to a wholly-owned subsidiary of ProxyMed for $10.0 million in cash and $13.4 million in 4% Convertible Notes paid to the founders due December 31, 2008. As a result of this transaction, the following events took place (i) all capital stock held by the Founders, including any restricted stock held by other parties as part of compensation-related plans, were cancelled; (ii) all notes payable, convertible notes and related accrued interest to the Founders (except for the $2,300,000 issued to NDC Health in the Acquisition, plus $198,000 of accrued interest on this note, and a $2,569,000 note payable issued to NDCHealth on December 31, 2002) were cancelled; (iii) all stock options outstanding under the Company's 2001 Equity Incentive Plan were cancelled; and (iv) NDC Health waived its right of first refusal to purchase the Company. Subsequent to the acquisition by ProxyMed, the Company's senior management team was terminated along with approximately 20% of the general workforce in an effort to control costs. Additionally, the Company has attempted to enter into financing agreements with certain major vendors and, as noted in Note 15, has attempted to sublease or terminate is facilities lease in San Diego as a means to curtail cash flow. 17 EX-99.2 5 g81296exv99w2.txt EX-99.2 BALANCE SHEET OF PROXYMED . . . EXHIBIT 99.2 PROXYMED, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET DECEMBER 31, 2002

Pro Forma Adjustments ---------------------- Pro Form ProxyMed, Inc.(a) MedUnite, Inc.(b) Total # Dr. (Cr.) Combined ------------- ---------------- ------------- ---------------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 25,499,000 $ 879,000 $ 26,378,000 (1) (10,000,000) $ 16,378,000 Accounts receivable, net 6,919,000 3,141,000 10,060,000 10,060,000 Notes and other receivables 503,000 -- 503,000 503,000 Inventory 2,758,000 -- 2,758,000 2,758,000 Other current assets 375,000 664,000 1,039,000 1,039,000 ------------- ------------- ------------- ------------- Total current assets 36,054,000 4,684,000 40,738,000 30,738,000 Property and equipment, net 3,926,000 9,977,000 13,903,000 (2) (3,285,000) 5,818,000 (5) (4,800,000) Goodwill, net 10,437,000 5,555,000 15,992,000 (1) 23,535,000 33,596,000 (2) 3,285,000 (3) (4,000,000) (4) (5,216,000) Purchased technology, capitalized software and other intangibles, net 5,620,000 2,583,000 8,203,000 (4) 5,216,000 18,219,000 (5) 4,800,000 Long-term notes receivable 144,000 -- 144,000 144,000 Other assets, including restricted cash 54,000 1,033,000 1,087,000 1,087,000 ------------- ------------- ------------- ------------- Total assets $ 56,235,000 $ 23,832,000 $ 80,067,000 $ 89,602,000 ============= ============= ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ -- $ 25,443,000 $ 25,443,000 (1) 22,874,000 $ -- (3) 2,569,000 Current capital leases payable 127,000 314,000 441,000 441,000 Accounts payable and accrued expenses 4,453,000 9,517,000 13,970,000 (1) (9,220,000) 22,799,000 (1) 658,000 (1) 800,000 (3) (1,067,000) Deferred compensation payable -- 1,000,000 1,000,000 (1) 1,000,000 -- Deferred revenue and other current liabilities 694,000 74,000 768,000 768,000 ------------- ------------- ------------- ------------- Total current liabilities 5,274,000 36,348,000 41,622,000 24,008,000 4% Convertible Notes -- -- -- (1) (13,400,000) 13,400,000 Long-term debt, less current portion -- 2,139,000 2,139,000 (1) (161,000) -- (3) 2,300,000 Long-term capital leases payable, less current portion 188,000 194,000 382,000 382,000 Long-term deferred revenue and other long-term liabilities 39,000 1,237,000 1,276,000 (3) 198,000 1,078,000 ------------- ------------- ------------- ------------- Total liabilities 5,501,000 39,918,000 45,419,000 38,868,000 ------------- ------------- ------------- ------------- Stockholders' equity: Preferred stock -- 85,000 85,000 (1) 85,000 -- Common stock 7,000 -- 7,000 (1) 7,000 Additional paid-in capital 146,187,000 86,295,000 232,482,000 (1) 86,295,000 146,187,000 Accumulated deficit (95,274,000) (102,466,000) (197,740,000) (1) (102,466,000) (95,274,000) Note receivable from stockholder (186,000) -- (186,000) (186,000) ------------- ------------- ------------- ------------- Total stockholders' equity 50,734,000 (16,086,000) 34,648,000 50,734,000 ------------- ------------- ------------- ------------- Total liabilities and stockholders' equity $ 56,235,000 $ 23,832,000 $ 80,067,000 $ 89,602,000 ============= ============= ============= =============

- ------------- (1) To record acquisition of MedUnite. (2) To record adjustment of fixed assets acquired to fair market value. (3) To reflect obligations of MedUnite waived by NDCHealth. (4) To record adjustment of intangible assets acquired to fair market value. (5) To reclass certain intangible assets for presentation purposes. (a) This column is derived from the unaudited consolidated financial statements of ProxyMed, Inc. as of December 31, 2002 (before the consummation of the MedUnite acquisition). (b) This column is derived from the audited financial statements of MedUnite, Inc. as of December 31, 2002. Amounts have been rounded to the nearest $1,000. EX-99.3 6 g81296exv99w3.txt EX-99.3 STATEMENT OF OPERATIONS OF PROXYMED, INC. Exhibit 99.3 PROXYMED, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2001

Pro Forma Adjustments ----------------- Pro Forma ProxyMed, Inc.(a) MedUnite, Inc(b) Total # Dr. (Cr.) Combined ------------ ------------ ------------- ----------------- ------------ Net revenues $ 43,230,000 $ 7,085,000 $ 50,315,000 $ 50,315,000 ------------ ------------ ------------- ------------ Costs and expenses: Cost of sales 20,408,000 1,818,000 22,226,000 22,226,000 Selling, general and adminstrative expenses 21,267,000 46,760,000 68,027,000 68,027,000 Depreciation and amortization 8,176,000 3,036,000 11,212,000 (3) (821,000) 10,672,000 (4) (2,539,000) (5) 2,820,000 Write-off of impaired assets 91,000 -- 91,000 91,000 ----------- ---------- ----------- ----------- 49,942,000 51,614,000 101,556,000 101,016,000 ----------- ---------- ----------- ----------- Income (loss) from continuing operations (6,712,000) (44,529,000) (51,241,000) (50,701,000) Other income (expense): Income from litigation settlement, net 40,000 -- 40,000 40,000 Investment income -- 4,956,000 4,956,000 4,956,000 Interest, net (126,000) (826,000) (952,000) (1) 536,000 (1,319,000) ------------ ------------ ------------- ------------- (2) (169,000) Income (loss) before income taxes (6,798,000) (40,399,000) (47,197,000) (47,024,000) Income tax benefit (expense) -- -- -- -- ------------ ------------ ------------- ------------- Net income (loss) (6,798,000) (40,399,000) (47,197,000) (47,024,000) Deemed dividends and other charges 12,262,000 -- 12,262,000 12,262,000 ------------ ------------ ------------- ------------- Net loss applicable to common shareholders $(19,060,000) $(40,399,000) $ (59,459,000) $ (59,286,000) ============ ============ ============= ============= Weighted average common shares outstanding 2,162,352 2,162,352 ============ ============= Basic and diluted loss per share of common stock from continuing operations $ (8.81) $ (27.42) ============ =============

(1) To record pro forma interest expense on 4% Convertible Notes issued for acquisition of MedUnite. (2) To record elimination of historical interest expense on MedUnite for Founder and NDCHealth debt cancelled. (3) To record estimated reduction of depreciation expense on MedUnite based on adjustment of fixed assets to fair market value. (4) To reverse historical amortization expense taken on intangible assets adjusted to fair market value on MedUnite. (5) To record pro forma amortization expense on intangible assets based on fair market values for MedUnite. (a) This column is derived from the audited consolidated financial statements of ProxyMed, Inc. and subsidiaries for the year ended December 31, 2001. (b) This column is derived from the audited financial statements of MedUnite Inc. for the year ended December 31, 2001. Amounts have been rounded to the nearest $1,000. EX-99.4 7 g81296exv99w4.txt EX-99.4 STATEMENT OF OPERATIONS OF MEDUNITE Exhibit 99.4 PROXYMED, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2002

Pro Forma Adjustments --------------------- Pro Forma ProxyMed, Inc.(a) MedUnite, Inc.(b) Total # Dr. (Cr.) Combined --------------- --------------- ------------- --------------------- ------------- Net revenues $ 50,182,000 $ 19,534,000 $ 69,716,000 $ 69,716,000 -------------- ------------- -------------- ------------- Costs and expenses: Cost of sales 23,024,000 7,946,000 30,970,000 30,970,000 Selling, general and adminstrative expenses 23,145,000 37,322,000 60,467,000 60,467,000 Depreciation and amortization 2,636,000 12,276,000 14,912,000 (4) (821,000) 6,895,000 (5) (10,016,000) (6) 2,820,000 Write-off of impaired assets 37,000 11,670,000 11,707,000 (3) (11,670,000) 37,000 Settlement of deferred compensation liability -- (2,558,000) (2,558,000) (2,558,000) -------------- ------------- -------------- ------------- 48,842,000 66,656,000 115,498,000 95,811,000 -------------- ------------- -------------- ------------- Income (loss) from continuing operations 1,340,000 (47,122,000) (45,782,000) (26,095,000) Other income (expense): Income from litigation settlement, net 265,000 -- 265,000 265,000 Interest, net 345,000 (1,737,000) (1,392,000) (1) 536,000 (87,900) -------------- ------------- -------------- ------------- (2) (1,840,100) Income (loss) before income taxes 1,950,000 (48,859,000) (46,909,000) (25,917,900) Income tax benefit (expense) -- -- -- -- -------------- ------------- -------------- ------------- Net income (loss) 1,950,000 (48,859,000) (46,909,000) (25,917,900) Deemed dividends and other charges 612,000 -- 612,000 612,000 -------------- ------------- -------------- ------------- Net loss applicable to common shareholders $ 1,338,000 $ (48,859,000) $ (47,521,000) $ (26,529,900) ============== ============= ============== ============= Weighted average common shares outstanding 6,396,893 6,396,893 ============== ============= Basic and diluted loss per share of common stock from continuing operations $ 0.21 $ (4.15) ============== =============

(1) To record pro forma interest expense ortible Notes issued for acquisition of MedUnite. (2) To record elimination of historical interest expense on MedUnite for Founder and NDCHealth debt cancelled. (3) To reverse historical impairment charges taken on MedUnite. (4) To record estimated reduction of depreciation expense on MedUnite based on adjustment of fixed assets to fair market value. (5) To reverse historical amortization expense taken on intangible assets adjusted to fair market value on MedUnite. (6) To record pro forma amortization expense on intangible assets based on fair market values for MedUnite. (a) This column is derived from the unaudited consolidated financial statements of ProxyMed, Inc. and subsidiaries for the year ended December 31, 2002. (b) This column is derived from the audited financial statements of MedUnite Inc. for the year ended December 31, 2002. Amounts have been rounded to the nearest $1,000. -----END PRIVACY-ENHANCED MESSAGE-----

EX-2.2

                                                                     EXHIBIT 2.2


MEDUNITE INC.
REPORT AND FINANCIAL STATEMENTS
DECEMBER 31, 2001









                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders of
MedUnite Inc.


In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity (deficit) and of cash flows present fairly,
in all material respects, the financial position of MedUnite Inc. at December
31, 2001 and the results of its operations and its cash flows for the year ended
December 31, 2001 and for the period from June 9, 2000 (inception) through
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company incurred a net loss of
$40,399,000 and generated negative cash flows from operations of $33,482,000
during 2001, and at December 31, 2001 had an accumulated deficit of $53,607,000.
These circumstances raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
described in Note 1 to the financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.



PricewaterhouseCoopers LLP
San Diego, California

December 17, 2002










MEDUNITE INC.
BALANCE SHEET
December 31, 2001
- --------------------------------------------------------------------------------

                                                                        
Assets
Current assets
    Cash and cash equivalents                                              $  8,614,000
    Investment in derivative securities                                              --
    Accounts receivable, net of allowances of $729,000                        2,833,000
    Prepaid expenses and other current assets                                   712,000
                                                                           ------------

           Total current assets                                              12,159,000

Property and equipment, net                                                  22,286,000
Intangible assets, net                                                       14,779,000
Other assets, including $825,000 of restricted cash
    at December 31, 2001                                                      1,011,000
                                                                           ------------
           Total assets                                                    $ 50,235,000
                                                                           ============

Liabilities and Stockholders' Equity
Current liabilities
    Accounts payable                                                       $  3,465,000
    Accrued expenses                                                          7,614,000
    Current portion of capital lease obligations                                201,000
                                                                           ------------
           Total current liabilities                                         11,280,000

Notes payable                                                                 3,505,000
Deferred compensation                                                         2,158,000
Capital lease obligations, less current portion                                 366,000
Other long-term liabilities                                                   1,134,000
                                                                           ------------
           Total liabilities                                                 18,443,000
                                                                           ------------

Commitments and contingencies (Note 9)

Stockholders' equity
    Preferred stock, $0.001 par value, 137,000,000 shares authorized:
      Series A preferred stock, 87,000,000 authorized, 85,270,402
        issued and outstanding; liquidation value of $85,270,000                 85,000
    Common stock, $0.001 par value, 297,000,000 shares authorized:
      Class A common stock, 210,000,000 authorized, zero shares
        issued and outstanding                                                       --
      Class B common stock, 87,000,000 authorized, zero shares
        issued and outstanding                                                       --
    Additional paid-in capital                                               85,314,000
    Accumulated deficit                                                     (53,607,000)
                                                                           ------------
           Total stockholders' equity                                        31,792,000
                                                                           ------------
           Total liabilities and stockholders' equity                      $ 50,235,000
                                                                           ============






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



                                      -2-





MEDUNITE INC.
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2001 and for the
Period from June 9, 2000 (Inception) to December 31, 2000
- --------------------------------------------------------------------------------


                                                                 PERIOD FROM
                                                                JUNE 9, 2000
                                              YEAR ENDED       (INCEPTION) TO
                                              DECEMBER 31,       DECEMBER 31,
                                                 2001               2000
                                             ------------       ------------

Revenue                                      $  7,085,000       $         --
                                             ------------       ------------

Operating Expenses
    Cost of revenue                             4,087,000                 --
    Engineering and development                27,874,000          2,171,000
    Selling, general and administrative        16,617,000         11,730,000
    Depreciation and amortization               3,036,000             23,000
                                             ------------       ------------

           Total operating expenses            51,614,000         13,924,000
                                             ------------       ------------

Loss from operations                          (44,529,000)       (13,924,000)

Investment income                               4,956,000            905,000
Interest income                                   425,000            306,000
Interest expense                               (1,251,000)          (495,000)
                                             ------------       ------------

Net loss                                     $(40,399,000)      $(13,208,000)
                                             ============       ============



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



                                      -3-



MEDUNITE INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Year Ended December 31, 2001 and for the
Period from June 9, 2000 (Inception) to December 31, 2000
- --------------------------------------------------------------------------------





                                                              SERIES A
                                      COMMON STOCK           PREFERRED STOCK           ADDITIONAL
                                     ----------------      ----------------------        PAID-IN      ACCUMULATED
                                     SHARES    AMOUNT       SHARES         AMOUNT        CAPITAL          DEFICIT          TOTAL
                                     ------    ------       ------         ------        -------          -------          -----
                                                                                                  
Issuance of common stock in
June and August 2000                    6,550    $ --             --   $         --    $      6,000    $         --    $      6,000

Net loss                                   --                                    --              --     (13,208,000)    (13,208,000)
                                 ------------    ----   ------------   ------------    ------------    ------------    ------------

Balance at December 31, 2000            6,550      --             --             --           6,000     (13,208,000)    (13,202,000)

Issuance of Series A preferred
stock upon conversion of
common stock                           (6,550)     --          6,550             --              --              --              --

Issuance of Series A preferred
stock, including conversion
of notes payable                           --      --     85,263,852         85,000      85,179,000              --      85,264,000

Recognition of discount on
notes payable                              --      --             --             --         129,000              --         129,000

Net loss                                   --      --             --             --              --     (40,399,000)    (40,399,000)
                                 ------------    ----   ------------   ------------    ------------    ------------    ------------
Balance at December 31, 2001               --    $ --     85,270,402   $     85,000    $ 85,314,000    $(53,607,000)   $ 31,792,000
                                =============    ====   ============   ============    ============    ============    ============



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



                                      -4-



MEDUNITE INC.
STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2001 and for the
Period from June 9, 2000 (Inception) to December 31, 2000
- --------------------------------------------------------------------------------




                                                                                         PERIOD FROM
                                                                                         JUNE 9, 2000
                                                                          YEAR ENDED    (INCEPTION) TO
                                                                         DECEMBER 31,    DECEMBER 31,
                                                                             2001           2000
                                                                         ------------    ------------
                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                             $(40,399,000)   $(13,208,000)
    Adjustments to reconcile net loss to net cash
      used in operating activities
        Investment income                                                          --        (905,000)
        Non-cash interest expense                                           1,238,000              --
        Depreciation and amortization                                       3,063,000          23,000
        Gain on sale of investment                                         (4,956,000)             --
        Changes in operating assets and liabilities,
           net of assets acquired
             Accounts receivable                                             (589,000)             --
             Prepaid and other current assets                                (642,000)        (70,000)
             Other assets                                                     179,000        (176,000)
             Accounts payable                                               2,016,000       1,449,000
             Accrued expenses and other long-term liabilities               5,208,000       3,155,000
             Deferred compensation                                          1,400,000         758,000
                                                                         ------------    ------------

               Net cash used in operating activities                      (33,482,000)     (8,974,000)
                                                                         ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Investment in warrant (Note 4)                                           (941,000)     (2,113,000)
    Purchases of property and equipment                                   (22,559,000)       (300,000)
    Proceeds from sale of investment                                        8,915,000              --
    Increase in restricted cash                                              (825,000)             --
    Costs incurred in connection with business combination                 (1,043,000)             --
                                                                         ------------    ------------

               Net cash used in investing activities                      (16,453,000)     (2,413,000)
                                                                         ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net proceeds from issuance of common stock                                     --           6,000
    Proceeds from issuance of Series A preferred stock                     25,660,000              --
    Proceeds from issuance of convertible notes payable                    24,340,000      20,000,000
    Payments on capital lease obligations                                     (70,000)             --
                                                                         ------------    ------------

               Net cash provided by financing activities                   49,930,000      20,006,000
                                                                         ------------    ------------

Net (decrease) increase in cash and cash equivalents                           (5,000)      8,619,000

Cash and cash equivalents at beginning of period                            8,619,000              --
                                                                         ------------    ------------

Cash and cash equivalents at end of period                               $  8,614,000    $  8,619,000
                                                                         ============    ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Issuance of Series A preferred stock upon conversion of notes
      payable (Note 5)                                                   $ 44,340,000    $         --
                                                                         ============    ============
    Series A preferred stock issued in connection
      with acquisition                                                   $ 15,263,000    $         --
                                                                         ============    ============
    Issuance of long-term debt in connection with acquisition (Note 3)   $  1,966,000    $         --
                                                                         ============    ============
    Cash paid for interest                                               $     14,000    $         --
                                                                         ============    ============





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


                                      -5-



MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


1.       ORGANIZATION AND DESCRIPTION OF BUSINESS

         THE COMPANY
         MedUnite Inc. (the "Company") was incorporated in Delaware in June
         2000. The Company was formed to develop and maintain an exchange that
         provides connectivity applications in the healthcare market that
         facilitates various business transactions, including claims submission,
         real-time claim status inquiry, eligibility and referral and
         authorization.

         The Company is subject to risks common to rapidly growing
         technology-based companies, including rapid technological change,
         dependence on principal products, new product development, new product
         introductions, other activities of competitors, and a limited operating
         history in Internet related e-commerce activities.

         The Company incurred a net loss of $40,399,000 and generated negative
         cash flows from operations of $33,482,000 during 2001. The Company has
         an accumulated deficit of $53,607,000 as of December 31, 2001. In
         February 2002 and August 2002, the Company issued notes payable to its
         founders in the aggregate amount of $23,975,000 (Note 12).

         Due to liquidity constraints in the second half of 2002, management
         implemented certain measures to conserve capital resources that
         included reducing its workforce and certain product development and
         marketing efforts. In addition, management has been engaged in efforts
         to raise additional resources through the issuance of additional
         capital or the sale of the Company. However, there can be no assurance
         that management will be successful in raising additional capital or in
         its efforts to sell the Company. These circumstances raise substantial
         doubt about the Company's ability to continue as a going concern. These
         financial statements do not reflect any adjustments that might result
         if the Company was unable to continue as a going concern.


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION
         The financial statements include the accounts of MedUnite Inc. and its
         wholly-owned subsidiary. All intercompany balances and transactions
         have been eliminated in consolidation.

         USE OF ESTIMATES
         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States of America requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and the disclosure of contingent
         assets and liabilities at the date of the financial statements and the
         reported amounts of revenues and expenses during the reporting period.
         Actual results could differ from those estimates.

         CASH AND CASH EQUIVALENTS
         The Company considers all highly liquid investments with original
         maturities from the date of purchase of three months or less to be cash
         equivalents. Cash and cash equivalents include cash on hand and
         certificates of deposit with a financial institution.

         INVESTMENT IN DERIVATIVE SECURITIES
         Changes in the fair value of the Company's investment in derivative
         securities are recorded in investment income. The Company elected to
         adopt Statement on Financial Accounting Standards No. 133, ACCOUNTING
         FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, upon the Company's
         inception.



                                      -6-



MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


         PROPERTY AND EQUIPMENT
         Property and equipment are stated at cost less accumulated
         depreciation. Depreciation is computed using the straight-line method
         over the estimated useful lives of the assets, which range from two to
         three years. Leasehold improvements are amortized using the
         straight-line method over the shorter of their estimated useful lives
         or the term of the lease. Upon retirement or sale, the cost of assets
         disposed of and the related accumulated depreciation are removed from
         the accounts and any resulting gain or loss is credited or charged to
         income. Expenditures for repairs, maintenance and minor renewals and
         betterments are expensed as incurred.

         INTERNAL-USE SOFTWARE
         Internal and external costs incurred to develop internal-use computer
         software during the application development stage are capitalized.
         Application development stage costs generally include software
         configuration, coding, installation to hardware and testing. Costs of
         upgrades and major enhancements that result in additional functionality
         are also capitalized. Costs incurred for maintenance and minor upgrades
         and enhancements are expensed as incurred. During the year ended
         December 31, 2001, the Company capitalized $9,876,000 of internal-use
         software development costs. Amortization expense, which is computed on
         a straight-line basis over estimated useful lives ranging from two to
         three years, was $293,000 for the year ended December 31, 2001. The
         Company did not capitalize any internal-use software development costs
         during the period ended December 31, 2000 (Note 5).

         LONG-LIVED ASSETS
         The Company assesses potential impairments of its long-lived assets
         when there is evidence that events or changes in circumstances have
         made recovery of an asset's carrying value unlikely. An impairment loss
         is recognized when the sum of the expected undiscounted future net cash
         flows expected to be generated by an asset (or group of assets) is less
         than its carrying value. Any required impairment loss would be measured
         as the amount by which the asset's carrying value exceeds its fair
         value and would be recorded as a reduction in the carrying value of the
         related asset and a charge to operations. The Company has not recorded
         any such impairment losses.

         INTANGIBLE ASSETS
         Intangible assets consist primarily of a software platform, non-compete
         agreement, customer related agreements and software and goodwill
         arising from the Company's acquisition of NDCHealth's physician network
         services business in 2001 (Note 3). Identifiable intangible assets with
         determinable lives are stated at their fair value and are being
         amortized using the straight-line method over their estimated useful
         lives as follows:



                Software platform                              3 years
                Non-compete agreement                          5 years
                Customer related agreements                  3 to 5 years
                Other identifiable intangible assets       0.5 to 5 years


         Goodwill is not amortized, but is reviewed annually (or more frequently
         if impairment indicators arise) for impairment. Intangible assets that
         are not deemed to have indefinite lives are reviewed for impairment in
         accordance with the Company's policy for long-lived assets. As of
         December 31, 2001, no such impairment losses have been recognized.




                                      -7-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


         REVENUE RECOGNITION
         The Company derives revenue from processing electronically submitted
         medical claims for insurance companies and health care providers.
         Revenue is recognized as services are provided according to the terms
         of the underlying contracts.

         RESEARCH AND DEVELOPMENT COSTS
         Research and development costs are expensed as incurred.

         ADVERTISING COSTS
         Advertising costs are expensed as incurred. Advertising expense was
         $481,000 and $0 for the year ended December 31, 2001 and the period
         ended December 31, 2000, respectively.

         INCOME TAXES
         Current income tax expense or benefit represents the amount of income
         taxes expected to be payable or refundable for the current year. A
         deferred income tax asset or liability is computed for the expected
         future impact of differences between the financial reporting and income
         tax bases of assets and liabilities and for the expected future tax
         benefit to be derived from tax credits and loss carryforwards. Deferred
         income tax expense or benefit represents the net change during the year
         in the deferred income tax asset or liability. Deferred tax assets are
         reduced by a valuation allowance when, in the opinion of management, it
         is more likely than not that some portion or all of the deferred tax
         assets will not be realized.

         CONCENTRATION OF CREDIT RISK
         The Company's financial instruments subject to concentrations of credit
         risk consist primarily of cash and cash equivalents and accounts
         receivable. The Company's policy is to place its cash and cash
         equivalents with high quality financial institutions in order to limit
         its credit exposure. To date, the Company has not experienced any
         credit losses associated with these financial institutions. Accounts
         receivable are generally unsecured. The Company performs on-going
         credit evaluations of its customers and maintains an allowance for
         potential credit losses as considered necessary.

         COMPREHENSIVE INCOME (LOSS)
         Comprehensive income (loss) is defined as the change in the equity of a
         business enterprise during a period from transactions and other events
         and circumstances from non-owner sources. The Company presents other
         comprehensive income (loss) in its statements of stockholders' equity.
         For the year ended December 31, 2001 and the period ended December 31,
         2000, the only component of comprehensive loss is net loss.


3.       ACQUISITION

         In August 2001, the Company acquired NDCHealth's physician network
         services business (the "Acquisition"). The physician network services
         business connects physicians to payors to provide electronic processing
         for claims, eligibility, referrals and other health transactions. The
         Company acquired the physician network services business in exchange
         for 15,263,402 shares of Series A preferred stock, having an estimated
         fair value, as determined by management, of $15,263,000, and a
         promissory note with a principal amount of $2,300,000, having an
         estimated fair value of $1,966,000 (Note 6). In addition, the Company
         incurred acquisition costs of $1,043,000 related to the acquisition.




                                      -8-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


         The acquisition was accounted for using the purchase method of
         accounting, and accordingly, the results of the acquired business have
         been included in the Company's financial statements from the date of
         acquisition. The aggregate purchase price was allocated as follows:

            Accounts receivable            $  2,214,000
            Property and equipment              572,000
            Identifiable intangibles         10,665,000
            Goodwill                          5,555,000
            Other assets                         52,000
            Accrued liabilities                (786,000)
                                           ------------
                 Total purchase price      $ 18,272,000
                                           ============

4.       INVESTMENT IN WARRANT OF QUOVADX, INC.

         In October 2000, the Company entered into a Software License and
         Services Agreement (the "Agreement") with Quovadx, Inc., formerly
         XCare.net, Inc. ("Quovadx") under which Quovadx provides software
         development and hosting services related to the Company's internet
         portal. The development services are invoiced to the Company on a time
         and materials basis and the hosting service fees are invoiced based on
         the number of servers hosted. In June 2001, the Company accepted and
         paid approximately $6,700,000 for a perpetual software license, which
         is included in property and equipment.

         In addition, the Company is committed to purchase software maintenance
         services from Quovadx from June 2002 through December 31, 2005, as
         follows:

             YEAR ENDING DECEMBER 31,

                  2002                                 $      700,000
                  2003                                        700,000
                  2004                                        700,000
                  2005                                        408,000
                                                       ----------------
                                                       $    2,508,000
                                                       ================

          In connection with the Agreement, Quovadx issued warrants to the
         Company to purchase 1,350,000 shares of Quovadx's common stock at an
         exercise price of $4.06. The warrants were immediately vested,
         exercisable and non-forfeitable and had a contractual life of 18 months
         from the date of grant. The fair value of the warrants at the date of
         issuance was estimated to be $3,054,000, using the Black-Scholes option
         pricing model assuming a volatility factor of 120%, risk-free interest
         rate of 5.9%, dividend yield of 0%, a contractual life of 18 months and
         Quovadx's stock price of $4.06. The warrants are classified as an
         investment and are stated at fair value at December 31, 2000. Payments
         made to Quovadx up to the initial fair value of the warrant are
         considered payment for the purchase of the warrant. For the period
         ended December 31, 2000, the Company made payments of $2,113,000 to
         Quovadx. The remaining $941,000, which was included in accrued expenses
         at December 31, 2000, was offset against payments made during the year
         ended December 31, 2001. The difference between (i) the value of the
         development services provided on a time and materials basis and the
         software payment of $6,700,000 and (ii) the fair value of the warrant
         of $3,054,000 is being accounted for as internally developed software.
         In September 2001, the Company exercised these warrants and sold the
         underlying Quovadx common stock for a total of $8,915,000, recognizing
         a gain of $4,956,000, which is included in investment income for 2001.



                                      -9-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


         In addition, under the terms of the Agreement, the Company has a put
         right with Quovadx that would require Quovadx to invest between $10
         million and $20 million in a future financing, subject to certain
         conditions, if requested by Company's Board of Directors. The
         investment shall be on terms similar to other investors in the
         financing. However, there can be no assurance that the Board of
         Directors will exercise this right or that the conditions of the put
         right will be met.


5.       COMPOSITION OF CERTAIN BALANCE SHEET COMPONENTS

         Property and equipment, net consists of the following:

                                                                    2001
                                                                ------------

            Computer equipment                                  $  2,124,000
            Internal-use software                                  9,876,000
            Software                                              10,003,000
            Furniture and fixtures                                 1,051,000
            Office equipment                                         585,000
            Leasehold improvements                                   292,000
                                                                ------------
                                                                  23,931,000
            Less accumulated depreciation and amortization        (1,645,000)
                                                                ------------
                                                                $ 22,286,000
                                                                ============

         Depreciation and amortization expense related to property and equipment
         was $1,595,000 and $23,000 for the year ended December 31, 2001 and the
         period ended December 31, 2000, respectively.

         Intangible assets, net consists of the following:

                                                                      2001
                                                                ---------------

            Intangible Assets Subject to Amortization:
                 Software platform                                $  8,325,000
                 Non-compete agreement                               1,700,000
                 Customer related agreements                           422,000
                 Other identifiable intangible assets                  218,000
                                                                  ------------
                                                                    10,665,000
                 Less accumulated amortization                      (1,441,000)
                                                                  ------------
                 Intangibles assets subject to amortization, net     9,224,000

            Goodwill                                                 5,555,000
                                                                  ------------
                                                                  $ 14,779,000
                                                                  ============


                                      -10-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


         Amortization expense was $1,441,000 for the year ended December 31,
         2001. Estimated amortization expense subsequent to the year ended
         December 31, 2001 is as follows:

             YEAR ENDING DECEMBER 31,

                  2002                                    $   3,447,000
                  2003                                        3,253,000
                  2004                                        1,975,000
                  2005                                          347,000
                  2006                                          202,000
                                                          ---------------
                                                          $   9,224,000
                                                          ===============
         Restricted cash of $825,000 at December 31, 2001 includes a certificate
         of deposit of $750,000, which has been pledged as security for an
         outstanding letter of credit (Note 11).

         Accrued expenses consist of the following:

                                                                  2001

                  Compensation related costs                 $   2,666,000
                  Other                                          4,948,000
                                                             ----------------
                                                             $   7,614,000
                                                             ================
6.       NOTES PAYABLE

         During 2001 and 2000, the Company received proceeds of $24,340,000 and
         $20,000,000, respectively, from its founders in connection with the
         issuance of convertible notes payable (the "Notes"), as amended. The
         Notes have annual interest rates ranging from 6.10% to 6.53%. The
         principal balance of the Notes automatically converted into 44,340,331
         shares of Series A preferred stock at $1.00 per share upon the closing
         the Acquisition in August 2001. The outstanding accrued interest of
         $1,565,000 was converted into notes payable. The Company imputed an
         interest rate of 12% on these notes, which more accurately reflects the
         rate that the Company would pay to a third party lender. The resulting
         debt discount of $129,000 was recorded as additional paid-in capital
         because the notes were issued to the founders. The notes are repayable
         in four quarterly installments during 2003. Accrued interest related to
         this note at December 31, 2001 of $70,000 is included in other
         long-term liabilities.

         During 2001, the Company issued a promissory note in connection with
         the Acquisition. The note has a principal amount of $2,300,000 payable
         in full in August 2004, and was initially recorded at its estimated
         fair value of $1,996,000, representing an effective annual interest
         rate of 12%. Accrued interest related to this note at December 31, 2001
         of $99,000 is included in other long-term liabilities.




                                      -11-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------



         Maturities of long-term debt and notes payable are as follows:


             YEAR ENDING DECEMBER 31,

                  2002                                      $          --
                  2003                                          1,565,000
                  2004                                          2,300,000
                                                            ---------------
                                                                3,865,000
                  Less discount                                  (360,000)
                                                            ---------------
                                                            $   3,505,000
                                                            ===============

7.       COMMON STOCK AND PREFERRED STOCK

         COMMON STOCK
         The rights and privileges of the common stock under the Company's
         Amended and Restated Certificate of Incorporation are as follows:

         Each holder of Class A common stock and Class B common stock is
         entitled to one vote per share. Holders of Class B common stock, voting
         as a separate class, are entitled to elect or remove from office the
         founders' members of the Company's Board of Directors. The holders of
         all outstanding shares of Company stock, voting together on an
         if-converted basis as a single class, are entitled to elect all
         remaining members of the Board of Directors.

         Each share of Class B common stock is convertible at any time into an
         equal number of shares of Class A common stock transferred to a
         non-founder. Class B common stock transferred to a non-founder will
         automatically convert into Class A common stock. In addition, Class B
         common stock owned by the founders will automatically convert into
         Class A common stock upon the earlier of a) the fifth anniversary of an
         initial public offering of the Company, or b) when the founders own, in
         aggregate, less than 50% of Class B common stock that would be issued
         upon conversion of the Series A preferred stock.

         PREFERRED STOCK
         The rights, preferences and privileges of the Series A preferred stock
         under the Company's Amended and Restated Certificate of Incorporation
         are as follows:

         DIVIDENDS - The holders of shares of the Series A preferred stock are
         entitled to receive dividends at the rate of 8% of the original issue
         price, which is $1.00 per share, per annum (subject to appropriate
         adjustment in the event of any stock dividend, stock split, combination
         or other similar recapitalization affecting such shares), payable when
         and as declared by the Board of Directors of the Company. The right to
         receive dividends shall be noncumulative; however the Company shall not
         declare or pay any distributions on shares of common stock until the
         preferred stockholders have received a cumulative distribution at the
         rate specified above.

         LIQUIDATION PREFERENCE - In certain events, including liquidation,
         dissolution or winding up of the Company, including a consolidation or
         merger and conveyance of substantially all of the assets of the
         Company, the holders of Series A preferred stock have a preference in
         liquidation over the common stockholders equal to the original issue
         price of $1.00 per share (subject to appropriate adjustment in the
         event of any stock dividend, stock split, combination or other similar


                                      -12-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


         recapitalization affecting such shares), plus any dividends declared
         but unpaid thereon. If the assets of the Company are not sufficient to
         fulfill the liquidation amount, the stockholders will share in the
         liquidation amount on a pro rata basis.

         SALE OF THE COMPANY - In the event the Board of Directors decides to
         pursue the sale of the Company, the founders shall be given the first
         right of refusal to acquire the Company. If none of the founders
         exercise this right, NDCHealth has the option to purchase the Company.

         VOTING RIGHTS - Each holder of preferred stock shall be entitled to the
         number of votes equal to the number of whole shares of common stock
         into which they are then convertible. Holders of Series A preferred
         stock, voting as a separate class, are entitled to elect or remove from
         office the founders' members of the Company's Board of Directors.

         CONVERSION - Each share of preferred stock is automatically convertible
         into one share of Class B common stock (subject to customary
         adjustments to protect against dilution) upon the closing of a public
         offering of the Company's common stock that results in gross proceeds
         of at least $50,000,000.

8.       INCOME TAXES

         Deferred tax assets consist of the following:

                                                                   2001
                                                              ---------------
             Net operating loss carryforwards                 $    17,439,000
             Capitalized start-up costs                             5,282,000
             Investment in warrant                                         --
             Deferred compensation                                  1,599,000
             Developed internal-use software                       (3,729,000)
             Intangible assets                                     (3,106,000)
             Other                                                    342,000
                                                              ----------------
             Net deferred tax assets                               17,827,000
             Deferred tax asset valuation allowance               (17,827,000)
                                                              ----------------
                                                              $            --
                                                              ================

         Due to the uncertainty of the Company generating future taxable income,
         the Company has recorded a valuation allowance against its deferred tax
         assets.

         A reconciliation of income taxes to the amounts computed by applying
         the statutory federal income tax rate to the net loss is summarized as
         follows:




                                                               2001               2000
                                                            ------------        ------------
                                                                         
            Amounts computed at statutory federal rate      $(13,736,000)      $ (4,491,000)
            State taxes                                       (1,905,000)          (771,000)
            Other                                                 21,000                 --
            Intangible assets                                  3,055,000                 --
            Change in valuation allowance                     12,565,000          5,262,000
                                                            ------------       ------------
                                                            $         --        $        --
                                                            ============       ============


                                      -13-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


         At December 31, 2001, the Company had $44,739,000 and $44,739,000 of
         federal and state net operating loss carryforwards, respectively. The
         federal and state net operating loss carryforwards begin to expire in
         2020 and 2010, respectively.

         Management is currently exploring various strategic alternatives
         including the possible sale of the Company. Future changes in control
         may result in a limitation on the future utilization of the company's
         net operating loss carryforwards.



9.       STOCK OPTIONS

         The Company has adopted the 2001 Equity Incentive Plan (the "Plan")
         providing for the granting of up to 10,280,374 shares of the Company's
         common stock. The Plan provides for the granting of stock options and
         restricted stock awards. Incentive stock options granted under the Plan
         must be granted with strike prices not less than the fair market value.
         Non-qualified stock options granted under the Plan must be granted with
         strike prices not less than 85% of fair market value. Options generally
         expire ten years from the date of grant. Option vesting is determined
         by the Board of Directors upon each grant and is generally a five-year
         period.

         In June 2000, the Company entered into a five-year employment agreement
         with an executive under which the Company issued stock options to
         purchase 2,803,738 shares of common stock and is obligated to issue
         847,458 shares of restricted common stock to the executive. If the
         executive's employment terminates, other than for cause, prior to the
         fifth anniversary of the executive's hire date, the Company is
         obligated to repurchase all of the restricted common stock for an
         aggregate price equal to the greater of the then fair market value or
         $1,000,000. Commencing on the fifth anniversary of the executive's hire
         date, the executive has a right to sell all or some of his shares of
         restricted common stock and stock option shares to the Company for a
         guaranteed fixed pre-tax gain of $7,000,000 in the aggregate assuming
         all shares were repurchased. This amount is being recognized as
         compensation expense on a straight-line basis over the five-year
         service period. Through December 31, 2001, $2,158,000 has been recorded
         as deferred compensation.

         In 2002, this executive has asserted that if his employment is
         terminated following a change in control of the Company, the
         "guaranteed value" provision set forth in Section 7 of this employment
         agreement will be accelerated and become fully due and payable. He
         asserts that he would be entitled to receive $7,000,000 for his
         restricted stock and options. The Company believes the executive's
         "guaranteed value" provision does not accelerate upon a change of
         control of the Company and that the executive must be an employee of
         the Company on the fifth anniversary of his hire date in order to
         receive the $7,000,000 guaranteed value. The Company does not dispute
         that if the executive's employment terminates without cause as defined
         in the agreement prior to the fifth anniversary of his hire date, he
         would be entitled to put the shares to the Company for repurchase at an
         aggregate purchase price equal to the greater of the then fair market
         value or $1,000,000.

         The executive has requested that the Company agree to a binding
         arbitration to resolve this dispute. The Company has rejected this
         request for arbitration and intends to defend any claim vigorously. The
         accompanying financial statements do not include any adjustments that
         may result from this uncertainty.

         During 2001, the Company granted options to purchase 8,452,458 shares
         of common stock (including the options to purchase 2,803,738 shares of
         common stock granted to the executive referred to above) with a
         weighted average exercise price of $1.54.




                                      -14-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


         The following table summarizes information regarding options
outstanding as of December 31, 2001:



                                                 OPTIONS OUTSTANDING                           OPTIONS EXERCISABLE
                                  ---------------------------------------------------    ------------------------------
                                                        WEIGHTED-         WEIGHTED-                          WEIGHTED-
               RANGE OF                                  AVERAGE           AVERAGE                            AVERAGE
               EXERCISE               NUMBER            REMAINING          EXERCISE          NUMBER           EXERCISE
                PRICES             OUTSTANDING         LIFE (YEARS)         PRICE          EXERCISABLE         PRICE
                ------             -----------         ------------         -----          -----------         -----
                                                                                              
                $1.18                 5,257,009              9.5             $1.18          1,051,402           $1.18
            $1.74 to $2.30            3,195,449              9.7             $2.00                 --              --
                                  ---------------                                         ------------

                                      8,452,458                                             1,051,402
                                  ===============                                         =============



         At December 31, 2001, 980,458 shares (exclusive of the 897,458 shares
         of restricted stock to be issued to the executive referred to above)
         were available for future grants under the Plans.

         The weighted-average fair value of options granted during the year
         ended December 31, 2001 was $0.08.

         PRO FORMA EMPLOYEE COMPENSATION EXPENSE
         Had compensation cost for the Company's stock-based compensation been
         determined based on the fair value of the options at the date of grant,
         the Company's net loss would not have been materially different from
         the net loss reported for 2001.

         The fair value of these options was estimated at the date of grant
         using the Black-Scholes option pricing model with the following
         weighted-average assumptions for grants during 2001: dividend yield of
         0%, expected life of five years, expected volatility of 0%, and
         risk-free interest rate of 6%.



10.      RELATED PARTY TRANSACTIONS

         The Company was founded by seven leading insurance companies who are
         expected to be among the Company's primary customers. In August 2001,
         the Company entered into service agreements with each of the founders
         under which the Company will facilitate specified business transactions
         for fees. These agreements have a term of two years and automatically
         renew for successive annual periods, if not cancelled by either party.

         At December 31, 2001, the Company has accounts receivable from its
         founders in the aggregate amount of $361,000. During 2001, the Company
         recognized revenue of $1,348,000 from its founders.

         At December 31, 2001, the Company has accounts receivable from
         NDCHealth of $506,000 and accounts payable and accrued liabilities due
         to NDCHealth of $1,642,000. During 2001, the Company recognized revenue
         of $2,157,000 from NDCHealth.






                                      -15-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


11.      COMMITMENTS AND CONTINGENCIES

         LEASES
         The Company leases facilities and equipment under non-cancelable
         operating and capital leases which expire on varying dates through
         2006. In connection with a facilities lease, the Company entered into
         an irrevocable letter of credit in the amount of $750,000. The letter
         of credit expires September 30, 2004. The Company's future minimum
         payments under non-cancelable operating and capital leases are as
         follows:




                                                                           CAPITAL            OPERATING
             YEAR ENDING DECEMBER 31,                                       LEASES             LEASES
             ------------------------                                  --------------    -----------------
                                                                                     
                  2002                                                  $     229,000      $    1,567,000
                  2003                                                        233,000           1,471,000
                  2004                                                        153,000           1,145,000
                  2005                                                                             55,000
                  2006                                                                              9,000
                                                                        ---------------    ----------------
                                                                              615,000      $    4,247,000
                                                                                           ================
                  Less amounts representing interest                           48,000
                                                                        ---------------
                  Future minimum lease obligation                             567,000
                  Less current portion                                        201,000
                                                                        ---------------
                                                                        $     366,000
                                                                        ===============


         Assets under capital leases included in property and equipment at
         December 31, 2001 had a net book value of $542,000, which includes
         accumulated amortization of $95,000.

         Rent expense was $1,555,000 and $441,000 for the year ended December
         31, 2001 and the period ended December 31, 2000, respectively. Certain
         facility operating leases contain escalation clauses. The Company
         recognizes rent expense on a straight-line basis over the related lease
         term.

         EMPLOYMENT AGREEMENTS
         The Company entered into employment agreements with certain executives
         that provide for cash severance payments if the executives are
         terminated without cause. The Company's aggregate commitment under
         these agreements is $2,335,000 at December 31, 2001.



12.      SUBSEQUENT EVENTS

         In February 2002, the Company issued convertible promissory notes
         bearing interest at 2.74% per annum, pursuant to a note purchase
         agreement with its founders, under which the Company borrowed an
         aggregate amount of $18,160,000. In the event that the Company issues
         and sells shares of Series B Preferred Stock to new investors with
         total proceeds of not less than $30,000,000, including the $18,160,000
         advanced, prior to February 2003, then the outstanding principal of the
         convertible promissory notes will automatically convert into shares of
         Series B Preferred Stock at the same price per share that the shares of
         Series B Preferred Stock are sold to the new investors. If a financing



                                      -16-


MEDUNITE INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------


         does not occur before February 2003, then the outstanding principal
         balance will automatically convert into shares of Series B Preferred
         Stock at the price per share equal to the then fair market value. The
         Series B Preferred Stock will have such rights, preferences and
         privileges as are approved by the required vote of the founders (as
         defined in the Company's amended and restated certificate of
         incorporation); provided that the rights of the Series B Preferred
         stockholders shall be pari passu to the rights of the Series A
         Preferred stockholders upon a liquidation of the Company.

         In April 2002, the Company entered into a non-cancellable operating
         lease for office space, which expires on April 30, 2005. The Company's
         future minimum payments under the lease for the years ending December
         31, 2002, 2003, 2004 and 2005 are $327,652, $501,880, $517,483, and
         $174,228, respectively.

         In July 2002, the Company entered into a three-year information
         technology services agreement to outsource certain hosting, system
         maintenance and operation services. Actual service fees are based on
         the number of transactions processed by the software being supported;
         however, the Company is committed to pay a minimum annual service fee
         of $1,212,000. The Company has the option to cancel the agreement by
         providing 90 days notice and paying an early termination fee which will
         be equal to between one and three months' average transaction fees,
         depending upon when the agreement is terminated.

         In August 2002, the Company issued promissory notes bearing interest at
         6% per annum, pursuant to a note purchase agreement with its founders,
         under which the Company subsequently borrowed the maximum amount
         available of $5,815,000. The outstanding principal amount of the loan
         is due and payable on the earliest of the following events: (a)
         December 31, 2002, (b) the date that the Company completes an equity
         financing for the minimum amount of $20,000,000 or (c) the effective
         date of a change of control of the Company.






                                      -17-

EX-2.3

                                                                     EXHIBIT 2.3



                                  MEDUNITE INC.
                              FINANCIAL STATEMENTS
                                DECEMBER 31, 2002








               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Stockholder of
MedUnite Inc.

In our opinion, the accompanying balance sheet and the related statements of
operations, stockholders' deficit and cash flows present fairly, in all material
respects, the financial position of MedUnite Inc. at December 31, 2002, and the
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

As more fully discussed in Note 16, the Company was acquired on December 31,
2002.


PricewaterhouseCoopers LLP


Fort Lauderdale, Florida
March 6, 2003




                                       2



MEDUNITE INC.
BALANCE SHEET
DECEMBER 31, 2002

                                                                      
ASSETS

Current assets:                                                          $     879,000
  Cash and cash equivalents
  Accounts receivable, net of allowance
      of $662,000                                                            3,141,000
  Prepaid expenses and other current assets                                    664,000
                                                                         -------------

         Total current assets                                                4,684,000

Property and equipment, net                                                  9,977,000
Intangible assets, net                                                       8,138,000
Other assets                                                                 1,033,000
                                                                         -------------
         Total assets                                                    $  23,832,000
                                                                         =============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Current portion of notes payable                                       $  25,443,000
  Accounts payable                                                           4,034,000
  Accrued expenses                                                           5,483,000
  Deferred compensation                                                      1,000,000
  Deferred revenue                                                              74,000
  Current portion of capital lease obligations                                 314,000
                                                                         -------------
         Total current liabilities                                          36,348,000

Notes payable, less current portion                                          2,139,000
Capital lease obligations, less current portion                                194,000
Other long-term liabilities                                                  1,237,000
                                                                         -------------
         Total liabilities                                                  39,918,000
                                                                         -------------

Commitments and contingencies

Stockholders' deficit:
  Preferred stock, $0.001 par value, 137,000,000 shares authorized:
    Series A preferred stock, 87,000,000 authorized, 85,270,402
      shares issued and outstanding; liquidation value
      of $85,270,000                                                            85,000
  Common stock, $0.001 par value, 297,000 shares authorized:
    Class A common stock 210,000,000 authorized, zero shares
      issued and outstanding                                                        --
    Class B common stock, 87,000,000 authorized, zero shares
      issued and outstanding                                                        --
  Additional paid-in capital                                                86,295,000
  Accumulated deficit                                                     (102,466,000)
                                                                         -------------

         Total stockholders' deficit                                       (16,086,000)
                                                                         -------------

         Total liabilities and stockholders' deficit                     $  23,832,000
                                                                         =============





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




                                       3



MEDUNITE INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002



Revenue                                           $ 19,534,000
                                                  ------------

Operating expenses:
  Cost of revenue                                    7,946,000
  Selling, general and administrative               37,322,000
  Depreciation and amortization                     12,276,000
  Impairment of intangibles and other assets        11,670,000
  Settlement of deferred compensation               (2,558,000)
                                                  ------------
         Total operating expenses                   66,656,000
                                                  ------------

         Loss from operations                      (47,119,000)

Interest income                                        169,000
Interest expense                                    (1,906,000)
                                                  ------------

         Net loss                                 $(48,859,000)
                                                  ============














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




                                       4



MEDUNITE INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2002




                                                             SERIES A
                                     COMMON STOCK         PREFERRED STOCK        ADDITIONAL
                                 ------------------     ---------------------     PAID-IN       ACCUMULATED
                                 SHARES      AMOUNT     SHARES         AMOUNT     CAPITAL         DEFICIT          TOTAL
                                 ------      ------     ------         ------   ------------  --------------       -----
                                                                                              
Balance at December 31, 2001      $  --        --      85,270,402    $ 85,000    85,314,000   $ (53,607,000)   $  31,792,000

Recognition of discount
  on notes payable                   --        --              --          --       981,000              --          981,000

Net loss                             --        --              --          --            --     (48,859,000)     (48,859,000)
                                  ------     -----     ----------    --------   -----------   -------------    -------------
Balance at December 31, 2002      $  --        --      85,270,402    $ 85,000   $86,295,000   $(102,466,000)   $ (16,086,000)
                                  ======     =====     ==========    ========   ===========   =============    =============





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



                                       5



MEDUNITE INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2002


CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                       $(48,859,000)
  Adjustments to reconcile net loss to net cash
     used in operating activities
       Impairment of intangibles and other assets                  11,670,000
       Amortization of debt discount                                1,083,000
       Depreciation and amortization                               12,276,000
       Provision for doubtful accounts                                329,000
       Changes in operating assets and liabilities:
        Accounts receivable                                          (637,000)
        Prepaid expenses and other current assets                      48,000
        Other assets                                                  (22,000)
        Accounts payable                                              569,000
        Accrued expenses                                             (731,000)
        Deferred revenue                                               74,000
        Deferred compensation                                      (2,558,000)
        Other long-term liabilities                                   103,000
                                                                 ------------

         Net cash used in operating activities                    (26,655,000)
                                                                 ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of property and equipment                              (4,912,000)
                                                                 ------------

         Net cash used in investing activities                     (4,912,000)
                                                                 ------------


CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of convertible debt and notes payable     23,975,000
  Payments on capital lease obligations                              (143,000)
                                                                 ------------

         Net cash provided by financing activities                 23,832,000
                                                                 ------------

Net decrease in cash and cash equivalents                          (7,735,000)

Cash and cash equivalents at beginning of period                    8,614,000
                                                                 ------------

Cash and cash equivalents at end of period                       $    879,000
                                                                 ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid for interest                                         $     65,000
                                                                 ============




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




                                       6



1. ORGANIZATION AND DESCRIPTION OF BUSINESS

   THE COMPANY

   MedUnite Inc. (the "Company") was incorporated in Delaware in June 2000. The
   Company was formed to develop and maintain an exchange that provides
   connectivity applications in the healthcare market that facilitates various
   business transactions, including claims submission, real-time claim status
   inquiry, eligibility and referral and authorization.

   The Company is subject to risks common to rapidly growing technology-based
   companies, including rapid technological change, dependence on principal
   products, new product development, new product introductions, other
   activities of competitors, and a limited operating history in Internet
   related e-commerce activities.

   During 2002, the Company incurred a net loss of $48,859,000 and generated
   negative cash flows from operations of $26,655,000. The Company has an
   accumulated deficit of $102,466,000 as of December 31, 2002.

   As a result of these losses and negative cash flow, management engaged in
   efforts to sell the Company. On December 31, 2002, the Company was sold to
   ProxyMed, Inc. ("ProxyMed'), a publicly held provider of healthcare
   transaction processing services based in Fort Lauderdale, Florida for $10.0
   million in cash and $13.4 million in 4% Convertible Notes issued to the
   Company's founders (see Note 16). Without the sale of the Company to ProxyMed
   there would have been substantial doubt about the Company's ability to
   continue as a going concern. These financial statements reflect the financial
   position of the Company before the consummation of the acquisition by
   ProxyMed and do not reflect any adjustments that might have resulted from
   such transaction or if the Company was unable to continue as a going concern.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   BASIS OF PRESENTATION

   The financial statements include the accounts of MedUnite Inc. and represent
   the financial position of the Company immediately prior to its acquisition by
   ProxyMed on December 31, 2002 (see Note 16).

   USE OF ESTIMATES

   The preparation of financial statements in conformity with accounting
   principles generally accepted in the United States of America requires
   management to make estimates and assumptions that affect the reported amounts
   of assets and liabilities and the disclosure of contingent assets and
   liabilities at the date of the financial statements and the reported amounts
   of revenues and expenses during the reporting period. Actual results could
   differ from those estimates.

   REVENUE RECOGNITION

   The Company derives revenue from processing electronically submitted medical
   claims for insurance companies and health care providers. Revenue is
   recognized as services are provided according to the terms of the underlying
   contracts. Certain transaction fee revenue may be subject to revenue sharing
   or rebates per agreements with resellers, vendors, other clearinghouses, one
   of the founders and other business partners. Revenue from maintenance fees is
   recognized ratably over the applicable period.

   COST OF REVENUE

   Cost of revenue includes third party hosting and support services of network
   connectivity, certain telecommunications costs, and revenue sharing and
   rebate arrangements with resellers, vendors, other clearinghouses, one of the
   founders and other business partners.



                                       7




   CASH AND CASH EQUIVALENTS

   The Company considers all highly liquid investments with original maturities
   from the date of purchase of three months or less to be cash equivalents.
   Cash and cash equivalents include cash on hand and certificates of deposit
   with a financial institution. Cash and cash equivalents used to support
   collateral instruments, such as letters of credit, are reclassified as either
   current or long-term assets depending upon the maturity date of the
   obligation they collateralize.

   PROPERTY AND EQUIPMENT

   Property and equipment are stated at cost less accumulated depreciation.
   Depreciation is computed using the straight-line method over the estimated
   useful lives of the assets. Leasehold improvements are amortized using the
   straight-line method over the shorter of their estimated useful lives or the
   term of the lease. Upon retirement or sale, the cost of assets disposed of
   and the related accumulated depreciation are removed from the accounts and
   any resulting gain or loss is credited or charged to income. Expenditures for
   repairs, maintenance and minor renewals and betterments are expensed as
   incurred. Examination for obsolete, damaged and impaired fixed assets is
   periodically reviewed by management.

   INTERNAL-USE SOFTWARE

   Internal and external costs incurred to develop internal-use computer
   software during the application development stage are capitalized.
   Amortization is computed on a straight-line basis over the estimated useful
   lives of the assets. Application development stage costs generally include
   software configuration, coding, installation to hardware and testing. Costs
   of upgrades and major enhancements that result in additional functionality
   are also capitalized. Costs incurred for maintenance and minor upgrades and
   enhancements are expensed as incurred.

   INTANGIBLE AND OTHER LONG-LIVED ASSETS

   The Company assesses potential impairments of its intangible and other
   long-lived assets when there is evidence that events or changes in
   circumstances have made recovery of an asset's carrying value unlikely.
   Goodwill is not amortized, but is reviewed annually (or more frequently if
   impairment indicators arise) for impairment. Intangible assets that are not
   deemed to have indefinite lives are reviewed for impairment in accordance
   with the Company's policy for long-lived assets. An impairment loss is
   recognized when the sum of the expected undiscounted future net cash flows
   expected to be generated by an asset (or group of assets) is less than its
   carrying value or when third-party evidence exists as to the value of the
   long-lived assets. Any required impairment loss would be measured as the
   amount by which the asset's carrying value exceeds its fair value and would
   be recorded as a reduction in the carrying value of the related asset and a
   charge to operations.

   RESEARCH AND DEVELOPMENT COSTS

   Research and development costs are expensed as incurred.

   ADVERTISING COSTS

   Advertising costs are expensed as incurred. Advertising expense was $112,000
   for the year ended December 31, 2002.

   INCOME TAXES

   Current income tax expense or benefit represents the amount of income taxes
   expected to be payable or refundable for the current year. A deferred income
   tax asset or liability is computed for the expected future impact of
   differences between the financial reporting and income tax bases of assets
   and liabilities and for the expected future tax benefit to be derived from
   tax credits and loss carryforwards. Deferred income tax expense or benefit
   represents the net change during the year in the deferred income tax asset or
   liability. Deferred tax assets are reduced by a valuation allowance when, in
   the opinion of management, it is more likely than not that some portion or
   all of the deferred tax assets will not be realized.



                                       8




   CONCENTRATION OF CREDIT RISK

   The Company's financial instruments subject to concentrations of credit risk
   consist primarily of cash and cash equivalents and accounts receivable. The
   Company's policy is to place its cash and cash equivalents with high quality
   financial institutions in order to limit its credit exposure. To date, the
   Company has not experienced any credit losses associated with these financial
   institutions. Accounts receivable are generally uncollateralized. The Company
   performs on-going credit evaluations of its customers and maintains an
   allowance for potential credit losses as considered necessary.

   FAIR VALUE OF FINANCIAL INSTRUMENTS

   The estimated fair values of financial instruments which are presented herein
   have been determined by management using available market information and
   appropriate valuation methodologies. However, considerable judgment is
   required in interpreting market data to develop estimates of fair value.
   Accordingly, the estimates presented herein are not necessarily indicative of
   amounts the Company could realize in a current market exchange.

   Cash and cash equivalents, accounts and notes receivable, net, and accounts
   payable are reflected in the accompanying Balance Sheets at amounts
   considered by management to reasonably approximate fair value due to their
   short-term nature.

   The Company estimates the fair value of its long-term debt generally using
   discounted cash flow analysis based on our current borrowing rates for
   similar types of debt. As of December 31, 2002, the carrying value of the
   long-term debt approximated the fair value of such instruments.

   COMPREHENSIVE INCOME (LOSS)

   Comprehensive income (loss) is defined as the change in the equity of a
   business enterprise during a period from transactions and other events and
   circumstances from non-owner sources. The Company presents other
   comprehensive income (loss) in its statement of stockholders' equity. For the
   year ended December 31, 2002 the only component of comprehensive loss is net
   loss.

3. ACQUISITION

   In August 2001, the Company acquired NDC Health's physician network services
   business (the "Acquisition"). The physician network services business
   connects physicians to payors to provide electronic processing for claims,
   eligibility, referrals and other health transactions. The Company acquired
   the physician network services business in exchange for 15,263,402 shares of
   Series A preferred stock, having an estimated fair value, as determined by
   management, of $15,263,000, and a promissory note with a principal amount of
   $2,300,000, having an estimated fair value of $1,966,000 (see Note 9). In
   addition, the Company incurred acquisition costs of $1,043,000 related to the
   acquisition.

   The acquisition was accounted for using the purchase method of accounting,
   and accordingly, the results of the acquired business have been included in
   the Company's financial statements from the date of acquisition. The
   aggregate purchase price was allocated as follows:

         Accounts receivable           $  2,214,000
         Property and Equipment             572,000
         Identifiable intangibles        10,665,000
         Goodwill                         5,555,000
         Other assets                        52,000
         Accrued liabilities               (786,000)
                                       ------------
            Total purchase price       $ 18,272,000
                                       ============

   As a result of an impairment review by management at December 31, 2002
   prompted by the sale of the Company to ProxyMed (see Note 16), the Company
   incurred an impairment charge of $3,194,000 in relation to certain of the
   identifiable intangible assets from the Acquisition (see Note 6). The
   resulting fair values recorded were based on an independent third-party
   appraisal of the assets utilizing a replacement cost methodology.




                                       9




4. INVESTMENT IN WARRANT OF QUOVADX, INC.

   In October 2000, the Company entered into a Software License and Services
   Agreement (the "Agreement") with Quovadx, Inc., formerly XCare.net, Inc.
   ("Quovadx") under which Quovadx provided software development and hosting
   services related to the Company's internet portal. The development services
   were invoiced to the Company on a time and materials basis and the hosting
   service fees were invoiced based on the number of servers hosted. In June
   2001, the Company accepted and paid approximately $6,700,000 for a perpetual
   software license, which is included in property and equipment. However, as a
   result of an impairment review by management at December 31, 2002, the
   Company wrote down the remaining net book value of the license to its fair
   market value (see Note 5).

   While the Company has taken an impairment charge for the perpetual software
   license, it is evaluating whether it still may be liable to purchase software
   maintenance services from Quovadx through December 31, 2005. Such
   commitments, if paid, would be due as follows:

YEAR ENDING DECEMBER 31,
- -------------------------
             2003                  $   700,000
             2004                      700,000
             2005                      408,000
                                   -----------
                                   $ 1,808,000
                                   ===========


5. PROPERTY AND EQUIPMENT

   Property and equipment consists of the following at December 31, 2002:




                                                                             ESTIMATED
                                                                           USEFUL LIVES
                                                                           ------------
                                                                        
   Computer equipment                                   $ 3,169,000           3 years
   Internal-use software                                  4,800,000         2 - 5 years
   Software                                               2,259,000         2 - 5 years
   Furniture and fixtures                                 1,357,000           5 years
   Office equipment                                         670,000           5 years
   Leasehold improvements                                   518,000       Life of lease
                                                       ------------
                                                         12,773,000
   Less accumulated depreciation and amortization        (2,796,000)
                                                       ------------
                                                        $ 9,977,000
                                                       ============


   During the year ended December 31, 2002, the Company capitalized $2,006,000
   of internal-use software development costs.

   Depreciation and amortization expense related to property and equipment,
   including amortization of internal-use software development costs, was
   $8,829,000 for the year ended December 31, 2002.

   As a result of an impairment review by management at December 31, 2002
   prompted by the sale of the Company to ProxyMed (see Note 16), the Company
   wrote-down certain software and license fees associated with its processing
   platforms and previously capitalized internal-use software resulting in
   impairment charges totaling $8,476,000. The resulting fair values recorded
   were based on an independent third-party appraisal of the assets utilizing a
   replacement cost methodology.



                                       10




6. INTANGIBLE ASSETS

   Intangible assets consists of the following at December 31, 2002:

   Intangible Assets Subject to Amortization:
           Software platform                                 $ 1,200,000
           Non-compete agreement                               1,700,000
           Customer related agreements                           422,000
           Other identifiable intangible assets                  218,000
                                                             -----------
                                                               3,540,000
         Less accumulated amortization                          (957,000)
                                                             -----------
         Intangible assets subject to amortization, net        2,583,000

         Goodwill                                              5,555,000
                                                             -----------
                                                             $ 8,138,000
                                                             ===========


   Through December 31, 2002, intangible assets were being amortized using the
   straight-line method over their estimated useful lives as follows:

                Software platform                             3 years
                Non-compete agreement                         5 years
                Customer related agreements                   2 to 5 years
                Other identifiable intangible assets          0.5 to 5 years

   Amortization expense was $3,447,000 for the year ended December 31, 2002. The
   software platform will now be amortized over one year through December 31,
   2003. The estimated future aggregate amortization expense for intangible
   assets subject to amortization is as follows:

                 YEAR ENDING DECEMBER 31,
                 ------------------------
                          2003                          $1,678,000
                          2004                             356,000
                          2005                             347,000
                          2006                             202,000
                                                        ----------
                                                        $2,583,000
                                                        ==========


7. RESTRICTED CASH

   Restricted cash of $825,000 at December 31, 2002 includes a certificate of
   deposit of $750,000, which has been pledged as security for an outstanding
   letter of credit (see Note 15). Restricted cash is included in other assets
   in the accompanying balance sheet.


8. ACCRUED EXPENSES

   Accrued expenses consist of the following at December 31, 2002:


         Compensation related costs      $1,445,000
         Severance                          800,000
         Interest                           658,000
         Other                            2,580,000
                                         ----------
                                         $5,483,000
                                         ==========



                                       11



9. DEBT

   During 2001 and 2000, the Company received proceeds of $24,340,000 and
   $20,000,000, respectively, from its founders in connection with the issuance
   of convertible notes payable (the "Notes"), as amended. The Notes have annual
   interest rates ranging from 6.10% to 6.53%. The principal balance of the
   Notes automatically converted into 44,340,331 shares of Series A preferred
   stock at $1.00 per share upon the closing the Acquisition in August 2001. The
   outstanding accrued interest of $1,565,000 was converted into notes payable
   at 6% stated interest per year. The Company imputed an interest rate of 12%
   on these notes, which more accurately reflects the rate that the Company
   would pay to a third party lender. The resulting debt discount of $129,000
   was recorded as additional paid-in capital because the notes were issued to
   the founders. The notes are repayable in four quarterly installments during
   2003. Accrued interest related to these notes of $133,000 is included in
   accrued liabilities at December 31, 2002.

   During 2001, the Company issued a promissory note in connection with the
   Acquisition. The note has a principal amount of $2,300,000 payable in full in
   August 2004, and was initially recorded at its estimated fair value of
   $1,996,000, representing an effective annual interest rate of 12%. Accrued
   interest related to this note of $198,000 is included in other long-term
   liabilities at December 31, 2002.

   In February 2002, the Company issued convertible promissory notes bearing
   interest at 2.74% per annum, pursuant to a note purchase agreement with its
   founders, under which the Company borrowed an aggregate amount of
   $18,160,000. Under the terms of the promissory notes, in the event that the
   Company issues and sells shares of Series B Preferred Stock to new investors
   with total proceeds of not less than $30,000,000, including the $18,160,000
   advanced, prior to February 2003, then the outstanding principal of the
   convertible promissory notes will automatically convert into shares of Series
   B Preferred Stock at the same price per share that the shares of Series B
   Preferred Stock are sold to the new investors. If a financing does not occur
   before February 2003, then the outstanding principal balance (except for
   $2,569,000 owed to NDCHealth representing NDCHealth's contribution in this
   financing in excess of its prorata ownership in the Company) will
   automatically convert into shares of Series B Preferred Stock at the price
   per share equal to the then fair market value. The Series B Preferred Stock
   will have such rights, preferences and privileges as are approved by the
   required vote of the founders (as defined in the Company's amended and
   restated certificate of incorporation); provided that the rights of the
   Series B Preferred stockholders shall be pari passu to the rights of the
   Series A Preferred stockholders upon a liquidation of the Company. The
   Company imputed an interest rate of 8% on these notes, which more accurately
   reflects the rate that the Company would pay to a third party lender. The
   resulting debt discount of $885,000 was recorded as additional paid-in
   capital because the notes were issued to the founders. Accrued interest
   related to these notes of $444,000 is included in accrued liabilities at
   December 31, 2002.

   In August 2002, the Company issued promissory notes bearing interest at 6%
   per annum, pursuant to a note purchase agreement with its founders, under
   which the Company subsequently borrowed the maximum amount available of
   $5,815,000. The outstanding principal amount of the loan is due and payable
   on the earliest of the following events: (a) December 31, 2002, (b) the date
   that the Company completes an equity financing for the minimum amount of
   $20,000,000 or (c) the effective date of a change of control of the Company.
   The Company imputed an interest rate of 12% on these notes, which more
   accurately reflects the rate that the Company would pay to a third party
   lender. The resulting debt discount of $96,000 was recorded as additional
   paid-in capital because the notes were issued to the founders. Accrued
   interest related to these notes of $81,000 is included in accrued liabilities
   at December 31, 2002.

   Maturities of long-term debt and notes payable are as follows (see Note 16):

       YEAR ENDING DECEMBER 31,
       ------------------------

                  2003                     $ 25,540,000
                  2004                        2,300,000
                                           ------------
                                             27,840,000
                  Less discount                (258,000)
                                           ------------
                                           $ 27,582,000
                                           ============

                                       12



    Accretion of the discount as interest expense recorded on the above debt was
    $1,083,000 for the year ended December 31, 2002.


10. COMMON STOCK AND PREFERRED STOCK

    COMMON STOCK

    The rights and privileges of the common stock under the Company's Amended
    and Restated Certificate of Incorporation are as follows:

    Each holder of Class A common stock and Class B common stock is entitled to
    one vote per share. Holders of Class B common stock, voting as a separate
    class, are entitled to elect or remove from office the founders' members of
    the Company's Board of Directors. The holders of all outstanding shares of
    Company stock, voting together on an if-converted basis as a single class,
    are entitled to elect all remaining members of the Board of Directors.

    Each share of Class B common stock is convertible at any time into an equal
    number of shares of Class A common stock transferred to a non-founder. Class
    B common stock transferred to a non-founder will automatically convert into
    Class A common stock. In addition, Class B common stock owned by the
    founders will automatically convert into Class A common stock upon the
    earlier of (a) the fifth anniversary of an initial public offering of the
    Company, or (b) when the founders own, in aggregate, less than 50% of Class
    B common stock that would be issued upon conversion of the Series A
    preferred stock.

    PREFERRED STOCK

    The rights, preferences and privileges of the Series A preferred stock under
    the Company's Amended and Restated Certificate of Incorporation are as
    follows:

    DIVIDENDS - The holders of shares of the Series A preferred stock are
    entitled to receive dividends at the rate of 8% of the original issue price,
    which is $1.00 per share, per annum (subject to appropriate adjustment in
    the event of any stock dividend, stock split, combination or other similar
    recapitalization affecting such shares), payable when and as declared by the
    Board of Directors of the Company. The right to receive dividends shall be
    noncumulative; however the Company shall not declare or pay any
    distributions on shares of common stock until the preferred stockholders
    have received a cumulative distribution at the rate specified above.

    LIQUIDATION PREFERENCE - In certain events, including liquidation,
    dissolution or winding up of the Company, including a consolidation or
    merger and conveyance of substantially all of the assets of the Company, the
    holders of Series A preferred stock have a preference in liquidation over
    the common stockholders equal to the original issue price of $1.00 per share
    (subject to appropriate adjustment in the event of any stock dividend, stock
    split, combination or other similar recapitalization affecting such shares),
    plus any dividends declared but unpaid thereon. If the assets of the Company
    are not sufficient to fulfill the liquidation amount, the stockholders will
    share in the liquidation amount on a pro rata basis.

    SALE OF THE COMPANY - In the event the Board of Directors decides to pursue
    the sale of the Company, the founders shall be given the first right of
    refusal to acquire the Company. If none of the founders exercise this right,
    NDCHealth has the option to purchase the Company (see Note 16).

    VOTING RIGHTS - Each holder of preferred stock shall be entitled to the
    number of votes equal to the number of whole shares of common stock into
    which they are then convertible. Holders of Series A preferred stock, voting
    as a separate class, are entitled to elect or remove from office the
    founders' members of the Company's Board of Directors.

    CONVERSION - Each share of preferred stock is automatically convertible into
    one share of Class B common stock (subject to customary adjustments to
    protect against dilution) upon the closing of a public offering of the
    Company's common stock that results in gross proceeds of at least
    $50,000,000.



                                       13




11. INCOME TAXES

    At December 31, 2002, deferred tax assets consist of the following:


         Net operating loss carryforwards            $ 29,865,000
         Capitalized start-up costs                     9,789,000
         Deferred compensation                            293,000
         Developed internal-use software               (1,994,000)
         Intangible assets                               (609,000)
         Other                                         (2,283,000)
                                                     ------------

         Net deferred tax assets                       35,061,000
         Deferred tax asset valuation allowance       (35,061,000)
                                                     ------------
                                                     $         --
                                                     ============

    Due to the uncertainty of the Company generating future taxable income, the
    Company has recorded a valuation allowance against its deferred tax assets.

    A reconciliation of income taxes to the amounts computed by applying the
    statutory federal income tax rate to the net loss is summarized as follows:


         Amounts computed at statutory federal rate      $(16,611,000)
         State taxes                                       (2,430,000)
         Permanent differences                                 31,000
         Other                                              1,859,000
         Intangibles                                          (83,000)
         Change in valuation allowance                     17,234,000
                                                         ------------
                                                         $         --
                                                         ============

    At December 31, 2002, the Company had $71,876,000 and $71,876,000 of federal
    and state net operating loss carryforwards, respectively, which will be
    limited under Internal Revenues Section 382 due to the change in ownership
    that occurred on December 31, 2002. The federal and state net operating loss
    carryforwards begin to expire in 2020 and 2010, respectively.


12. STOCK OPTIONS

    The Company has adopted the 2001 Equity Incentive Plan (the "Plan")
    providing for the granting of up to 10,280,374 shares of the Company's
    common stock. The Plan provides for the granting of stock options and
    restricted stock awards. Incentive stock options granted under the Plan must
    be granted with strike prices not less than the fair market value.
    Non-qualified stock options granted under the Plan must be granted with
    strike prices not less than 85% of fair market value. Options generally
    expire ten years from the date of grant. Option vesting is determined by the
    Board of Directors upon each grant and is generally a five-year period.

    In June 2000, the Company entered into a five-year employment agreement with
    an executive under which the Company issued stock options to purchase
    2,803,738 shares of common stock and is obligated to issue 847,458 shares of
    restricted common stock to the executive. If the executive's employment
    terminates, other than for cause, prior to the fifth anniversary of the
    executive's hire date, the Company is obligated to repurchase all of the
    restricted common stock for an aggregate price equal to the greater of the
    then fair market value or $1,000,000. Commencing on the fifth anniversary of
    the executive's hire date, the executive has a right to sell all or some of
    his shares of restricted common stock and stock option shares to the Company



                                       14


    for a guaranteed fixed pre-tax gain of $7,000,000 in the aggregate assuming
    all shares were repurchased. This amount was being recognized as
    compensation expense on a straight-line basis over the five-year service
    period. Through December 31, 2002, $3,558,000 had been recorded as deferred
    compensation; however, this amount was adjusted to $1,000,000 pursuant to a
    separation agreement entered into with the executive on December 31, 2002
    (see Note 16). As a result, the Company has recorded a gain of $2,558,000
    pursuant to this event.

    During 2002, no options were granted or exercised and options for 3,738,318
    shares (including those of the executive noted above) were
    forfeited/cancelled (with an average exercise price of $1.32).

    At December 31, 2002, 5,566,233 shares were available for future grants
    under the Plans.

    The following table summarizes information regarding options outstanding as
    of December 31, 2002 (see Note 16):




                                        OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
                          -------------------------------------------------    ------------------------------
                                               WEIGHTED-        WEIGHTED-                         WEIGHTED-
           RANGE OF                             AVERAGE          AVERAGE                           AVERAGE
           EXERCISE           NUMBER           REMAINING        EXERCISE          NUMBER          EXERCISE
            PRICES         OUTSTANDING       LIFE (YEARS)         PRICE         EXERCISABLE         PRICE
        -------------    ---------------    --------------    ------------    --------------    ------------
                                                                                      
            $1.18             2,453,271            8.5             $1.18           981,308           $1.18
            $2.30             2,260,870            8.7             $2.30           452,174           $2.30
                          -------------                                        -----------
                              4,714,141                                          1,433,482           $1.53
                          =============                                        ===========


    PRO FORMA EMPLOYEE COMPENSATION EXPENSE

    Had compensation cost for the Company's stock-based compensation been
    determined based on fair value of the options at the date of the grant, the
    Company's net loss would not have been materially different from the net
    loss reported for 2002.

    The fair value of these options was estimated at the date of grant using the
    Black-Scholes option pricing model with the following weighted-average
    assumptions for grants during 2001: dividend yield of 0%, expected life of
    five years, expected volatility of 0%, and risk-free interest rate of 6%. No
    options were granted during 2002.


13. EMPLOYEE BENEFIT PLANS

    The Company maintains a 401(k) retirement plan for substantially all
    employees who meet certain minimum lengths of employment and minimum age
    requirements. Contributions are made by employees based on the lesser of 60%
    of eligible compensation or the deferral limit set by the government
    ($11,000 in 2002). Non-discretionary employer matching contributions are
    made up to 100% of the employee's pretax contribution up to a maximum of 6%
    of eligible compensation. Matching contributions vest under a five-year
    schedule, based on completed full years of service, as follows: 20% after
    one year; 40% after two years; 60% after three years; 80% after four years;
    and 100% after five years. Matching contributions totaling $668,000 for the
    year ended December 31, 2002 have been expensed.

14. RELATED PARTY TRANSACTIONS

    The Company was founded by seven leading insurance companies who are
    expected to be among the Company's primary customers (the "Founders"). In
    August 2001, the Company entered into service agreements with each of the
    Founders under which the Company will facilitate specified business
    transactions for fees. These agreements have a term of two years and
    automatically renew for successive annual periods, if not cancelled by
    either party.

    At December 31, 2002 the Company has accounts receivable from its Founders
    in the aggregate amount of $419,000. During 2002, the Company recognized
    revenue of $1,983,000 from its Founders.

    At December 31, 2002, the Company has accounts receivable from NDCHealth of
    $1,315,000 and accounts payable and accrued liabilities due to NDCHealth of
    $2,053,000. During 2002, the Company transacted the following with NDCHealth
    (i) recognized revenue of $4,897,000; (ii) recognized the reimbursement of
    expenses of certain operating costs of $569,000; and (iii) incurred amounts
    payable to under revenue sharing, rebate and expense reimbursement
    agreements totaling $3,509,000.



                                       15




15. COMMITMENTS AND CONTINGENCIES

    LEASES

    The Company leases facilities and equipment under non-cancelable operating
    and capital leases which expire on varying dates through 2006. The Company's
    future minimum payments under non-cancelable operating and capital leases
    are as follows:


                                                CAPITAL         OPERATING
YEAR ENDING DECEMBER 31,                        LEASES            LEASES
- ------------------------                      ----------       -----------

      2003                                     $ 338,000       $ 1,987,000
      2004                                       190,000         1,671,000
      2005                                        28,000           230,000
      2006                                        15,000             9,000
                                             -----------       -----------
                                                 571,000       $ 3,897,000
                                                               ===========
      Less amounts representing interest         (63,000)
                                             -----------
      Future minimum lease obligation            508,000
      Less current portion                      (314,000)
                                             -----------
                                               $ 194,000
                                             ===========

    During 2002, the Company acquired assets under capital leases totaling
    $84,000. Assets under capital leases included in property and equipment at
    December 31, 2002 had a net book value of $374,000, which includes
    accumulated amortization of $215,900.

    Rent expense was $2,155,000 for the year ended December 31, 2002. Certain
    facility operating leases contain escalation clauses. The Company recognizes
    rent expense on a straight-line basis over the related lease term.

    In connection with its facilities lease in San Diego, California, the
    Company entered into an irrevocable letter of credit in the amount of
    $750,000. The letter of credit expires September 30, 2004. In an effort to
    control its operating costs, the Company has engaged a commercial real
    estate broker to assist the Company in subleasing or terminating its
    facilities lease in San Diego. As of December 31, 2002, gross rents of
    $2,509,000 remain on this property through September 2004 and are included
    in the table above.

    EMPLOYMENT AGREEMENTS

    The Company entered into employment agreements with certain executives that
    provide for cash severance payments if the executives are terminated without
    cause. The Company's aggregate commitment under these agreements is
    $1,535,000 at December 31, 2002.

    The Company has entered into retention agreements with several key
    management employees. The bonuses due under these retention agreements are
    payable in two parts: 50% upon a change of control of the Company and 50%
    upon the earlier to occur of (i) 90 days following the change in control
    event or (ii) involuntary termination of the employee. As of December 31,
    2002, the Company's total potential commitment under these retention
    agreements was $257,000.

    SERVICES AGREEMENT

    In April 2002, the Company entered into a three-year information technology
    services agreement to outsource certain hosting, system maintenance and
    operation services. Actual service fees are based on the number of
    transactions processed by the software being supported; however, the Company
    is committed to pay a minimum annual service fee of $1,212,000. At December
    31, 2002, $790,000 is accrued towards this minimum annual amount. The
    Company has the option to cancel the agreement by providing 90 days notice
    and paying an early termination fee which will be equal to between one and
    three months' average transaction fees, depending upon when the agreement is
    terminated.



                                       16




16. ACQUISITION BY PROXYMED

    On December 31, 2002, the Company was sold to a wholly-owned subsidiary of
    ProxyMed for $10.0 million in cash and $13.4 million in 4% Convertible Notes
    paid to the founders due December 31, 2008.

    As a result of this transaction, the following events took place (i) all
    capital stock held by the Founders, including any restricted stock held by
    other parties as part of compensation-related plans, were cancelled; (ii)
    all notes payable, convertible notes and related accrued interest to the
    Founders (except for the $2,300,000 issued to NDC Health in the Acquisition,
    plus $198,000 of accrued interest on this note, and a $2,569,000 note
    payable issued to NDCHealth on December 31, 2002) were cancelled; (iii) all
    stock options outstanding under the Company's 2001 Equity Incentive Plan
    were cancelled; and (iv) NDC Health waived its right of first refusal to
    purchase the Company.

    Subsequent to the acquisition by ProxyMed, the Company's senior management
    team was terminated along with approximately 20% of the general workforce in
    an effort to control costs. Additionally, the Company has attempted to enter
    into financing agreements with certain major vendors and, as noted in Note
    15, has attempted to sublease or terminate is facilities lease in San Diego
    as a means to curtail cash flow.


                                       17

EX-99.2

                                                                               .
                                                                               .
                                                                               .
                                                                    EXHIBIT 99.2


                                 PROXYMED, INC.
                   UNAUDITED PRO FORMA COMBINED BALANCE SHEET
                                DECEMBER 31, 2002




                                                                                            Pro Forma Adjustments
                                                                                            ----------------------    Pro Form
                                      ProxyMed, Inc.(a)  MedUnite, Inc.(b)     Total          #     Dr. (Cr.)          Combined
                                      -------------      ---------------- -------------     ----------------------  -------------
                                                                                                     
                    ASSETS
Current assets:
     Cash and cash equivalents        $  25,499,000      $     879,000    $  26,378,000      (1)     (10,000,000)   $  16,378,000
     Accounts receivable, net             6,919,000          3,141,000       10,060,000                                10,060,000
     Notes and other receivables            503,000                 --          503,000                                   503,000
     Inventory                            2,758,000                 --        2,758,000                                 2,758,000
     Other current assets                   375,000            664,000        1,039,000                                 1,039,000
                                      -------------      -------------    -------------                             -------------
        Total current assets             36,054,000          4,684,000       40,738,000                                30,738,000
Property and equipment, net               3,926,000          9,977,000       13,903,000      (2)      (3,285,000)       5,818,000
                                                                                             (5)      (4,800,000)
Goodwill, net                            10,437,000          5,555,000       15,992,000      (1)      23,535,000       33,596,000
                                                                                             (2)       3,285,000
                                                                                             (3)      (4,000,000)
                                                                                             (4)      (5,216,000)
Purchased technology, capitalized
     software and other intangibles,
     net                                  5,620,000          2,583,000        8,203,000      (4)       5,216,000       18,219,000
                                                                                             (5)       4,800,000
Long-term notes receivable                  144,000                 --          144,000                                   144,000
Other assets, including restricted
     cash                                    54,000          1,033,000        1,087,000                                 1,087,000
                                      -------------      -------------    -------------                             -------------
        Total assets                  $  56,235,000      $  23,832,000    $  80,067,000                             $  89,602,000
                                      =============      =============    =============                             =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Notes payable and current
       portion of long-term debt      $          --      $  25,443,000    $  25,443,000      (1)      22,874,000    $          --
                                                                                             (3)       2,569,000
     Current capital leases payable         127,000            314,000          441,000                                   441,000
     Accounts payable and accrued
       expenses                           4,453,000          9,517,000       13,970,000      (1)      (9,220,000)      22,799,000
                                                                                             (1)         658,000
                                                                                             (1)         800,000
                                                                                             (3)      (1,067,000)
     Deferred compensation payable               --          1,000,000        1,000,000      (1)       1,000,000               --
     Deferred revenue and other
       current liabilities                  694,000             74,000          768,000                                   768,000
                                      -------------      -------------    -------------                             -------------
        Total current liabilities         5,274,000         36,348,000       41,622,000                                24,008,000

4% Convertible Notes                             --                 --               --      (1)     (13,400,000)      13,400,000
Long-term debt, less current portion             --          2,139,000        2,139,000      (1)        (161,000)              --
                                                                                             (3)       2,300,000
Long-term capital leases payable,
  less current portion                      188,000            194,000          382,000                                   382,000
Long-term deferred revenue and other
  long-term liabilities                      39,000          1,237,000        1,276,000      (3)         198,000        1,078,000
                                      -------------      -------------    -------------                             -------------
        Total liabilities                 5,501,000         39,918,000       45,419,000                                38,868,000
                                      -------------      -------------    -------------                             -------------

Stockholders' equity:
     Preferred stock                             --             85,000           85,000      (1)          85,000               --
     Common stock                             7,000                 --            7,000      (1)                            7,000
     Additional paid-in capital         146,187,000         86,295,000      232,482,000      (1)      86,295,000      146,187,000
     Accumulated deficit                (95,274,000)      (102,466,000)    (197,740,000)     (1)    (102,466,000)     (95,274,000)
     Note receivable from
       stockholder                         (186,000)                --         (186,000)                                 (186,000)
                                      -------------      -------------    -------------                             -------------
        Total stockholders' equity       50,734,000        (16,086,000)      34,648,000                                50,734,000
                                      -------------      -------------    -------------                             -------------

        Total liabilities and
          stockholders' equity        $  56,235,000      $  23,832,000    $  80,067,000                             $  89,602,000
                                      =============       =============    =============                             =============


- -------------
(1)  To record acquisition of MedUnite.

(2)  To record adjustment of fixed assets acquired to fair market value.

(3)  To reflect obligations of MedUnite waived by NDCHealth.

(4)  To record adjustment of intangible assets acquired to fair market value.

(5)  To reclass certain intangible assets for presentation purposes.

(a)  This column is derived from the unaudited consolidated financial statements
     of ProxyMed, Inc. as of December 31, 2002 (before the consummation of the
     MedUnite acquisition).

(b)  This column is derived from the audited financial statements of MedUnite,
     Inc. as of December 31, 2002.

     Amounts have been rounded to the nearest $1,000.

EX-99.3

                                                                    Exhibit 99.3


                                 PROXYMED, INC.
              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 2001


                                                                                                    Pro Forma
                                                                                                   Adjustments
                                                                                                -----------------     Pro Forma
                                               ProxyMed, Inc.(a)  MedUnite, Inc(b)   Total       #    Dr. (Cr.)        Combined
                                                ------------      ------------   -------------  -----------------    ------------
                                                                                                        
Net revenues                                    $ 43,230,000      $ 7,085,000     $ 50,315,000                       $ 50,315,000
                                                ------------      ------------   -------------                       ------------
Costs and expenses:
    Cost of sales                                 20,408,000         1,818,000      22,226,000                         22,226,000
    Selling, general and adminstrative expenses   21,267,000        46,760,000      68,027,000                         68,027,000
    Depreciation and amortization                  8,176,000         3,036,000      11,212,000  (3)     (821,000)      10,672,000
                                                                                                (4)   (2,539,000)
                                                                                                (5)    2,820,000
    Write-off of impaired assets                      91,000                --          91,000                             91,000
                                                 -----------        ----------     -----------                        -----------
                                                  49,942,000        51,614,000     101,556,000                        101,016,000
                                                 -----------        ----------     -----------                        -----------

       Income (loss) from continuing operations   (6,712,000)      (44,529,000)    (51,241,000)                       (50,701,000)

Other income (expense):
    Income from litigation settlement, net            40,000                --          40,000                             40,000
    Investment income                                     --         4,956,000       4,956,000                          4,956,000
    Interest, net                                   (126,000)         (826,000)       (952,000) (1)      536,000       (1,319,000)
                                                ------------      ------------   -------------                      -------------
                                                                                                (2)     (169,000)

       Income (loss) before income taxes          (6,798,000)      (40,399,000)    (47,197,000)                       (47,024,000)

Income tax benefit (expense)                              --                --              --                                 --
                                                ------------      ------------   -------------                      -------------

       Net income (loss)                          (6,798,000)      (40,399,000)    (47,197,000)                       (47,024,000)

Deemed dividends and other charges                12,262,000                --      12,262,000                         12,262,000
                                                ------------      ------------   -------------                      -------------

       Net loss applicable
            to common shareholders              $(19,060,000)     $(40,399,000)  $ (59,459,000)                     $ (59,286,000)
                                                ============      ============   =============                      =============

Weighted average common shares outstanding         2,162,352                                                            2,162,352
                                                ============                                                        =============

Basic and diluted loss per share of common
    stock from continuing operations            $      (8.81)                                                       $      (27.42)
                                                ============                                                        =============


(1) To record pro forma interest expense on 4% Convertible Notes issued for
    acquisition of MedUnite.

(2) To record elimination of historical interest expense on MedUnite for Founder
    and NDCHealth debt cancelled.

(3) To record estimated reduction of depreciation expense on MedUnite based on
    adjustment of fixed assets to fair market value.

(4) To reverse historical amortization expense taken on intangible assets
    adjusted to fair market value on MedUnite.

(5) To record pro forma amortization expense on intangible assets based on fair
    market values for MedUnite.

(a) This column is derived from the audited consolidated financial statements of
    ProxyMed, Inc. and subsidiaries for the year ended December 31, 2001.

(b) This column is derived from the audited financial statements of MedUnite
    Inc. for the year ended December 31, 2001.

    Amounts have been rounded to the nearest $1,000.

EX-99.4

                                                                    Exhibit 99.4


                                 PROXYMED, INC.
              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 2002




                                                                                               Pro Forma Adjustments
                                                                                               ---------------------    Pro Forma
                                          ProxyMed, Inc.(a)  MedUnite, Inc.(b)      Total       #      Dr. (Cr.)        Combined
                                           ---------------   ---------------     ------------- ---------------------  -------------
                                                                                                         
Net revenues                                $   50,182,000     $  19,534,000   $   69,716,000                        $  69,716,000
                                            --------------     -------------   --------------                        -------------

Costs and expenses:
     Cost of sales                              23,024,000         7,946,000       30,970,000                           30,970,000
     Selling, general and adminstrative
       expenses                                 23,145,000        37,322,000       60,467,000                           60,467,000
     Depreciation and amortization               2,636,000        12,276,000       14,912,000   (4)       (821,000)      6,895,000
                                                                                                (5)    (10,016,000)
                                                                                                (6)      2,820,000
     Write-off of impaired assets                   37,000        11,670,000       11,707,000   (3)    (11,670,000)         37,000
     Settlement of deferred compensation
       liability                                        --        (2,558,000)      (2,558,000)                          (2,558,000)
                                            --------------     -------------   --------------                        -------------
                                                48,842,000        66,656,000       115,498,000                          95,811,000
                                            --------------     -------------   --------------                        -------------

        Income (loss) from continuing
          operations                             1,340,000       (47,122,000)     (45,782,000)                         (26,095,000)

Other income (expense):
     Income from litigation settlement,
       net                                         265,000                --          265,000                               265,000
     Interest, net                                 345,000        (1,737,000)      (1,392,000)  (1)       536,000          (87,900)
                                            --------------     -------------   --------------                        -------------
                                                                                                (2)    (1,840,100)

        Income (loss) before income taxes        1,950,000       (48,859,000)     (46,909,000)                         (25,917,900)

Income tax benefit (expense)                            --                --               --                                   --
                                            --------------     -------------   --------------                        -------------

        Net income (loss)                        1,950,000       (48,859,000)     (46,909,000)                         (25,917,900)

Deemed dividends and other charges                 612,000                --          612,000                              612,000
                                            --------------     -------------   --------------                        -------------

        Net loss applicable
             to common shareholders         $    1,338,000     $ (48,859,000)  $  (47,521,000)                       $ (26,529,900)
                                            ==============     =============   ==============                        =============

Weighted average common shares
  outstanding                                    6,396,893                                                               6,396,893
                                            ==============                                                           =============

Basic and diluted loss per share of
  common stock from continuing
  operations                                        $ 0.21                                                           $       (4.15)
                                            ==============                                                           =============



(1)  To record pro forma interest expense ortible Notes issued for acquisition
     of MedUnite.

(2)  To record elimination of historical interest expense on MedUnite for
     Founder and NDCHealth debt cancelled.

(3)  To reverse historical impairment charges taken on MedUnite.

(4)  To record estimated reduction of depreciation expense on MedUnite based on
     adjustment of fixed assets to fair market value.

(5)  To reverse historical amortization expense taken on intangible assets
     adjusted to fair market value on MedUnite.

(6)  To record pro forma amortization expense on intangible assets based on fair
     market values for MedUnite.

(a)  This column is derived from the unaudited consolidated financial statements
     of ProxyMed, Inc. and subsidiaries for the year ended December 31, 2002.

(b)  This column is derived from the audited financial statements of MedUnite
     Inc. for the year ended December 31, 2002.

     Amounts have been rounded to the nearest $1,000.