10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission file number: 000-22052

PROXYMED, INC.

(Exact name of registrant as specified in its charter)

Florida	65-0202059
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1854 Shackleford Court, Suite 200, Atlanta, Georgia	30093
(Address of principal executive offices)	(Zip Code)

(770) 806-9918

(Registrant’s telephone number)

2555 Davie Road, Suite 110, Fort Lauderdale, Florida 33317

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act of 1934).
x Yes o No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $.001 Par Value
12,625,181 Shares as of May 7, 2004

TABLE OF CONTENTS

PART 1 — FINANCIAL INFORMATION
	ITEM 1 — FINANCIAL STATEMENTS
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements (unaudited)
	ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.
	Item 4. Submission of Matters to a Vote of Security Holders.
	Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
Employment Agreement w/ David E. Oles
Section 302 Certification CEO
Section 302 Certification CFO
Section 906 Certification CEO
Section 906 Certification CFO

PART 1 — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

PROXYMED, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(amounts in thousands except for share and per share data)

	March 31,			December 31,
	2004			2003
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	10,381		$	5,333
Accounts receivable — trade, net		20,411			10,434
Notes and other receivables		274			187
Inventory		3,574			3,347
Other current assets		1,565			1,908
Total current assets		36,205			21,209
Property and equipment, net		5,364			4,772
Goodwill		100,382			30,775
Purchased technology, capitalized software and other intangible assets, net		57,158			15,884
Restricted cash		250			291
Other assets		512			199
Total assets	$	199,871		$	73,130
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable and current portion of long-term debt	$	5,850		$	1,712
Accounts payable and accrued expenses		11,208			8,264
Deferred revenue and other current liabilities		1,646			721
Total current liabilities		18,704			10,697
Convertible notes		13,137			13,137
Other long-term debt		21,269			2,057
Long-term deferred revenue and other long-term liabilities		104			1,461
Total liabilities		53,214			27,352
Stockholders’ equity:
Series C 7% Convertible preferred stock — $.01 par value Authorized 300,000 shares; issued 253,265 shares; outstanding 2,000 shares; liquidation preference $13,333		—			—
Common stock — $.001 par value. Authorized 30,000,000 and 13,333,333 shares respectively; issued and outstanding 12,624,624 and 6,782,938 shares respectively		13			7
Additional paid-in capital		247,734			146,230
Accumulated deficit		(100,700	)		(100,273	)
Unearned compensation		(204	)		—
Note receivable from stockholder		(186	)		(186	)
Total stockholders’ equity		146,657			45,778
Total liabilities and stockholders’ equity	$	199,871		$	73,130

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

2

PROXYMED, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)
(amounts in thousands except for share and per share data)

	Three Months Ended March 31,
	2004			2003
Revenues:
Transaction fees, cost containment services and license fees	$	15,886		$	12,560
Communication devices and other tangible goods		4,618			4,870
		20,504			17,430
Costs and expenses:
Cost of transaction fees, cost containment services and license fees		4,270			4,258
Cost of tangible goods		4,019			3,954
Selling, general and administrative expenses		10,405			10,041
Depreciation and amortization		1,849			1,330
Loss on disposal of assets		4			125
		20,547			19,708
Operating loss		(43	)		(2,278	)
Interest (income) expense, net		334			174
Provision for income taxes		50			—
Net loss	$	(427	)	$	(2,452	)
Basic and diluted loss per share	$	(0.05	)	$	(0.36	)
Basic and diluted weighted average shares outstanding		8,570,731			6,782,938

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

3

PROXYMED, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)
(amounts in thousands except for share and per share data)

	Three Months Ended March 31,
	2004			2003
Cash flows from operating activities:
Net loss	$	(427	)	$	(2,452	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization		1,849			1,330
Provision for doubtful accounts		207			54
Provision for obsolete inventory		15			10
Loss on disposal of fixed assets		4			125
Non-cash interest (income) expense		(27	)		—
Stock option compensation charges		106			—
Changes in assets and liabilities, net of effect of acquisitions and dispositions:
Accounts and other receivables		(641	)		(984	)
Inventory		(241	)		(148	)
Other current assets		56			(262	)
Accounts payable and accrued expenses		(51	)		1,797
Accrued expenses of PlanVista paid by ProxyMed		(4,011	)		—
Deferred revenue		53			(38	)
Other, net		(137	)		74
Net cash used in operating activities		(3,245	)		(494	)
Cash flows from investing activities:
Net cash aqcuired in acquisition		782			—
Capital expenditures		(705	)		(910	)
Capitalized software		(380	)		(276	)
Collection of notes receivable		45			81
Proceeds from sale of fixed assets		—			64
(Increase) decrease in restricted cash		40			(326	)
Payments for acquisition-related costs		(776	)		(3,860	)
Net cash used in investing activities		(994	)		(5,227	)
Cash flows from financing activities:
Net proceeds from sale of common stock		24,100			—
Proceeds from exercise of warrants		8,750			—
Draws on line of credit		4,900			—
Repayment of line of credit		(4,400	)		—
Payment of notes payable, capital leases and long-term debt		(24,063	)		(310	)
Net cash provided by (used in) financing activities		9,287			(310	)
Net increase (decrease) in cash and cash equivalents		5,048			(6,031	)
Cash and cash equivalents at beginning of period		5,333			16,378
Cash and cash equivalents at end of period	$	10,381		$	10,347

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

4

PROXYMED, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(1) Summary of Significant Accounting Policies

(a) Basis of Presentation — The accompanying unaudited consolidated financial statements of ProxyMed, Inc. and subsidiaries (“ProxyMed” or the “Company”) and the notes thereto have been prepared in accordance with the instructions of Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”) and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim periods.

On March 2, 2004, the Company acquired PlanVista Corporation (“PlanVista”), a publicly held company providing cost containment services to the healthcare industry for 3,600,000 shares of its common stock (see Note 2). In conjunction with that transaction the Company also sold 1,691,227 shares of its common stock in a private transaction to partially reduce PlanVista’s debt (see Note 6(a)) and to pay for certain expenses of the transaction. The results of PlanVista have been included in the consolidated financial statements since March 2, 2004 in the Company’s Transaction Services segment.

The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the full year. The unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 as filed with the SEC on March 30, 2004.

(b) Revenue Recognition — Transaction fee revenue is recorded in the period the service is rendered. Certain transaction fee revenue is subject to revenue sharing pursuant to agreements with resellers, vendors or gateway partners and are recorded as gross revenues. Revenues from cost containment services are recorded net of their estimated allowances. Revenue from sales of inventory and manufactured goods is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collectibility is probable. Revenue from certain up front fees is amortized ratably over the expected life of the customer. Revenue from hardware leases, software rentals and maintenance fees is recognized ratably over the applicable period.

5

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

(c) Bad Debt Estimates – We rely on estimates to determine the bad debt expense and the adequacy of the reserve for doubtful accounts receivable. These estimates are based on our historical experience and the industry in which we operate. If the financial condition of our customers was to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Additionally, in our cost containment business, we evaluate the collectibility of our accounts receivable based on a combination of factors.

In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on past write-off history, average percentage of receivables written off historically, and the length of time the receivables are past due. To the extent historical credit experience is not indicative of future performance or other assumptions used by management do not prevail, loss experience could differ significantly, resulting in either higher or lower future provision for losses.

(d) Net loss per share — Basic net loss per share of common stock is computed by dividing net loss by the weighted average shares of common stock outstanding during the period. Diluted loss per share reflects the potential dilution from the exercise or conversion of securities into common stock; however, the following shares were excluded from the calculation of net loss per share because their effects would have been antidilutive: (i) stock options and warrants totaling 2,588,222 shares and 1,753,153 shares at March 31, 2004 and 2003, respectively; (ii) common shares issuable on conversion of Series C preferred stock (13,333 shares, if converted on both March 31, 2004 and 2003); and (iii) 239,028 shares issuable upon conversion of $4.4 million in convertible notes issued in connection with the Company’s acquisition of MedUnite in December 2002.

6

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

(e) Stock Based Compensation — ProxyMed applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations in accounting for its stock-based compensation plans. The Company measures compensation expense related to the grant of stock options and stock-based awards to employees (including independent directors) in accordance with the provisions of APB No. 25. In accordance with APB No. 25, compensation expense, if any, is generally based on the difference between the exercise price of an option, or the amount paid for an award, and the market price or fair value of the underlying common stock at the date of the award or at the measurement date for variable awards. Stock-based compensation arrangements involving non-employees are accounted for under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”) as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS No. 148”), under which such arrangements are accounted for based on the fair value of the option or award.

Under SFAS No. 123, as amended by SFAS No. 148, compensation cost for the Company’s stock-based compensation plans would be determined based on the fair value at the grant dates for awards under those plans. Had the Company adopted SFAS No. 123 in accounting for its stock option plans, the Company’s consolidated net loss and net loss per share for the three months ended March 31, 2004 and 2003 would have been adjusted to the pro forma amounts indicated as follows:

In thousands except for per share data	Three Months Ended March 31,
	2004			2003
Net loss, as reported	$	(427	)	$	(2,452	)
Total stock-based employee pro forma compensation expense determined under fair value based method for all awards		(376	)		(150	)
Addback charges already taken for intrinsic value of options		14			—
Pro forma net loss	$	(789	)	$	(2,602	)
Basic and diluted net loss per common share:
As reported	$	(0.05	)	$	(0.36	)
Pro forma	$	(0.09	)	$	(0.38	)

7

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

(f) New Accounting Pronouncements — In April 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”). SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except for certain provisions that relate to SFAS No. 133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003 and for hedging relationships designated after June 30, 2003. Since currently the Company does not have derivative instruments, the Company does not believe that the implementation of SFAS No. 149 will have a material effect on the Company’s consolidated financial statements and related disclosures.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS No 150”). SFAS No. 150 specifies that instruments within its scope embody obligations of the issuer and that, therefore, the issuer must classify them as liabilities. SFAS No. 150 requires issuers to classify as liabilities the following three types of freestanding financial instruments: (1) mandatory redeemable financial instruments; (2) obligations to repurchase the issuer’s equity shares by transferring assets; and (3) certain obligations to issue a variable number of shares. SFAS No. 150 defines a freestanding financial instrument as a financial instrument that (1) is entered into separately and apart from any of the entity’s other financial instruments or equity transactions; or (2) is entered into in conjunction with some other transaction and can be legally detached and exercised on a separate basis. For all financial instruments entered into or modified after May 31, 2003, SFAS No. 150 is effective immediately. For all other instruments of public companies, SFAS No. 150 went into effect at the beginning of the first interim period beginning after June 15, 2003. For contracts that were created or modified before May 31, 2003 and still exist at the beginning of the first interim period beginning after June 15, 2003, entities should record the transition to SFAS No. 150 by reporting the cumulative effect of a change in an accounting principle. SFAS No. 150 prohibits entities from restating financial statements for earlier years presented. The Company does not expect the adoption of SFAS No. 150 to have a material impact on its financial statements.

(g) Reclassifications – Certain prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications include the movement of direct labor and manufacturing overhead from selling, general and administrative expenses to cost of tangible products sold in the Laboratory Communications Solutions segment to better reflect the production of tangible products in this segment.

8

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

(2) Acquisition of PlanVista

On March 2, 2004, the Company acquired all of the capital stock of PlanVista Corporation, a publicly-held company located in Tampa, Florida and Middletown, New York that provides medical cost containment and business process outsourcing solutions, including claims repricing services, for the medical insurance and managed care industries, as well as services for healthcare providers, including individual providers, preferred provider organizations and other provider groups for 3,600,000             shares of ProxyMed common stock (valued at $68.4 million based on the closing price of ProxyMed’s common stock on March 2, 2004) issued to PlanVista’s shareholders, assumed debt and other liabilities of PlanVista, and incurred $1.3 million in acquisition related expenses. Additionally, ProxyMed raised $24.1 million in a private placement sale of its common stock to various entities affiliated with General Atlantic Partners and Commonwealth Associates to partially fund repayment of PlanVista’s debts and other obligations outstanding at the time of the acquisition (see Note 5). The acquisition enables the Company to enter into a new line of business, provide new end-to-end services, increase sales opportunities with payers, strengthen business ties with certain customers, expand technological capabilities, reduce operating costs and enhance its public profile. The Company had previously entered into a joint marketing agreement with PlanVista for the sale of PlanVista’s services in June 2003.

Following consummation of the acquisition, PlanVista’s common stock was delisted from the Over the Counter Bulletin Board, and each share of PlanVista’s outstanding common stock was cancelled and converted into the right to receive 0.08271 of a share of the Company’s common stock and each holder of PlanVista series C preferred stock received 51.5292 shares of the Company’s common stock in exchange for each share of PlanVista series C preferred stock, representing approximately 23% of the Company’s common stock on a fully converted basis, and the holders of the Company’s outstanding stock, options and warrants retained approximately 77% of the Company.

9

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

A preliminary allocation of the purchase price is as follows:

In thousands
Common stock issued	$	68,400
Acquisition-related costs		1,328
Other adjustments		(642	)
Total purchase price		69,086
Allocation of purchase price:
Cash		(782	)
Accounts receivable		(9,470	)
Other current assets		(395	)
Property and equipment		(658	)
Customer relationships		(24,600	)
Provider network		(16,200	)
Technology platforms		(1,180	)
Other long-term assets		(360	)
Accounts payable and accrued expenses		7,834
Income taxes payable		562
Notes payable, debt and other obligations		44,889
Other long-term liabilities		881
Goodwill	$	69,607

The excess of the consideration paid over the estimated fair value of net assets acquired in the amount of $69.6 million was recorded as goodwill. The Company has not yet determined whether any or all of this goodwill will be deductible for income tax purposes. The weighted average useful life of the customer relationships is approximately 12.0 years, the weighted average useful life of the provider network is 10.0 years, and the weighted average useful life of the technology platforms is 4.5 years. The valuation of PlanVista’s provider network and technology platforms were based on an independent third-party appraisal of the assets utilizing a replacement cost methodology while the value of the customer relationships was calculated on a discounted cash flow model.

Additionally, the Company wrote-off against goodwill $0.6 million of unamortized liabilities related to the marketing agreement with PlanVista from June 2003. The results of PlanVista’s operations have been included in the Company’s consolidated financial statements since March 2, 2004 in its Transaction Services segment.

The issuance of the 3,600,000 shares of Company common stock to the PlanVista stockholders was registered under the Securities Act of 1933 pursuant to the Company’s registration statement on Form S-4 (File No. 333-111024) (the “Registration Statement”) filed with the SEC and declared effective on February 2, 2004.

10

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

In connection with this transaction, on March 1, 2004, the Company’s shareholders approved (1) an amendment to the Company’s articles of incorporation to increase the total number of authorized shares of the Company’s common stock from 13,333,333? shares to 30,000,000 shares; (2) the issuance of 1,691,227 shares of the Company’s common stock at $14.25 per share in a private equity offering valued at $24.1 million (to retire debt of PlanVista and pay certain expenses associated with the merger); (3) the issuance of 3,600,000 shares of the Company’s common stock in connection with the PlanVista merger; and (4) an amendment to the Company’s 2002 Stock Option Plan to increase the total number of shares available for issuance from 600,000 to 1,350,000. Additionally, one director of PlanVista was appointed to the Company’s board of directors.

All officers and employees of PlanVista, with the exception of PlanVista’s chief financial officer, continued employment with the Company.

Additionally, certain officers, directors and employees of PlanVista were granted options to purchase an aggregate of 200,000 shares of ProxyMed common stock at an exercise price of $17.74 per share. Of these options, 173,120 will vest two-thirds on the first anniversary date of the grant and one-third on the third anniversary date of the grant. Since the exercise price was less than the market price as of the date of issuance, the Company is recording periodic non-cash compensation charges over the vesting period of the options based on the intrinsic value method. For the three months ended March 31, 2004, the Company recorded a non-cash compensation charge of $14,000 for these options. The balance of 26,880 options was granted to PlanVista’s former chief financial officer in connection with a consulting arrangement with him. Fifty percent of these options vested immediately upon the change of control and 25% will each vest after three and six months. The Company recorded a compensation charge of approximately $0.1 million in compensation expense associated with this grant in the three months ended March 31, 2004 utilizing a Black-Scholes model using the following assumptions: risk-free interest rate of 1.2%, expected life of 9 months, expected volatility of 42% and no dividend yield.

11

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

The following unaudited pro forma summary presents the consolidated results of operations of ProxyMed and PlanVista as if the acquisitions of these businesses had occurred at the beginning of each period presented. These pro forma results do not necessarily represent results that would have occurred if the acquisition had taken place at those dates, or of results that may occur in the future.

In thousands (except for per share data)	Three Months Ended March 31,
	2004			2003
Revenues	$	26,172		$	25,484
Net loss	$	(91	)	$	(1,349	)
Basic and diluted net loss per share of common stock	$	(0.01	)	$	(0.11	)

(3) Inventory

Inventory consists of the following at March 31, 2004:

In thousands
Materials, supplies and component parts	$	1,951
Work in process		814
Finished goods		809
	$	3,574

12

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

(4) Goodwill and Other Intangible Assets

(a) Goodwill — The changes in the carrying amounts of goodwill for the three months ended March 31, 2004 by operating segment are as follows:

			Laboratory
	Transaction		Communication
In thousands	Services		Solutions		Total
Balance as of December 31, 2003	$	28,673	$	2,102	$	30,775
Goodwill acquired during the period		69,607		—		69,607
Balance as of March 31, 2004	$	98,280	$	2,102	$	100,382

(b) Other Intangible Assets — The carrying amounts of other intangible assets as of March 31, 2004 and December 31, 2003, by category, are as follows:

	March 31, 2004							December 31, 2003
	Carrying		Accumulated					Carrying		Accumulated
In thousands	Amount		Amortization			Net		Amount		Amortization			Net
Capitalized software	$	2,168	$	(315	)	$	1,853	$	1,788	$	(183	)	$	1,605
Purchased technology		10,306		(3,555	)		6,751		9,126		(3,194	)		5,932
Customer relationships		34,394		(1,905	)		32,489		9,793		(1,446	)		8,347
Provider network		16,200		(135	)		16,065		—		—			—
	$	63,068	$	(5,910	)	$	57,158	$	20,707	$	(4,823	)	$	15,884

Amortization expense of other intangible assets was $1.1 million and $0.7 million for the three months ended March 31, 2004 and 2003, respectively.

As of March 31, 2004, estimated future amortization expense of other intangible assets is as follows:

In thousands
2004 (remaining quarters)	$	1,685
2005		2,146
2006		1,974
2007		1,598
2008		1,088
	$	8,491

13

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

(5) Debt Obligations

(a) Senior debt — As a result of the acquisition of PlanVista, the Company guaranteed a $20.4 million secured obligation to PVC Funding Partners, LLC (an investment company related to Commonwealth Associates, LP). This obligation is payable in monthly installments of $0.2 million and matures on May 1, 2005. It currently bears an interest rate of 6%, payable monthly in cash, which increases to 10% on December 1, 2004. Under the covenants of the senior debt obligation, PlanVista (as a wholly-owned subsidiary) is limited in its ability to upstream cash to ProxyMed (as the parent company). Additionally, the assets of PlanVista are not eligible collateral for the Company’s asset-based line of credit due to covenants of the senior debt.

(b) Notes payable — In February 2003, the Company financed $0.3 million for a certain liability insurance policy required for the MedUnite acquisition over 24 months at 5.25% to a third-party. At March 31, 2004, the note has an outstanding balance of $0.1 million and is collateralized by a letter of credit in the amount of $0.2 million (supported with restricted cash).

In March 2003, the Company restructured $3.4 million in accounts payable and accrued expenses acquired from MedUnite and outstanding at December 31, 2002 to one vendor by paying $0.8 million in cash and financing the balance of $2.6 million with an unsecured note payable over 36 months at 8% commencing in March 2003. At March 31, 2004, the balance of this note payable is $1.8 million.

In April 2003, the Company financed a net total of $2.0 million ($2.8 million in accounts payable and accrued expenses offset by $0.8 million in accounts receivable) existing at December 31, 2002 from MedUnite to NDCHealth by issuing an unsecured note payable over 24 months at 6%. At March 31, 2004, the balance of this note payable is $1.3 million.

In January 2004, the Company financed $0.3 million of liability insurance policy premium with an unsecured note, payable over 9 months at 4.86% to a third-party. At March 31, 2004, the balance of this note is $0.3 million.

As a result of the acquisition of PlanVista, the Company also assumed notes payable to two former board members of PlanVista. The combined balance of these notes is $0.5 million at March 31, 2004. One of these board members has been appointed as director of ProxyMed as a result of the acquisition. These notes bear interest at prime plus 4% (which has been accrued through and totals $0.1 million at March 31, 2004). Both principal and interest are due on December 1, 2004.

14

PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

Additionally, the Company also assumed an unsecured note payable that financed a certain liability policy of PlanVista that was required as part of the acquisition. This note matures in November 2004 and bears interest at 8.5% payable to a third-party. At March 31, 2004, the balance of this note was $0.5 million.

(c) Revolving Credit Facility – In February 2004, the Company drew down $4.4 million on its revolving credit facility to provide bridge funding in its acquisition of PlanVista. This amount was repaid in March 2004. At March 31, 2004, there was $0.5 million drawn on this line of credit which was subsequently repaid in April 2004.

(6) Equity Transactions

(a) Sale of Common Stock – On March 2, 2004, the Company sold an aggregate of 1,691,227 shares of unregistered common stock at $14.25 per share in a private placement to General Atlantic Partners 77, L.P., GAP Coinvestments III, LLC, GAP Coinvestments IV, LLC, Gapstar, LLC, GAPCO GmbH & Co. KG., PVC Funding Partners, LLC, ComVest Venture Partners, L.P., Shea Ventures, LLC, and Robert Priddy (the “Purchasers”) resulting in net proceeds of $24.1 million. No placement agent was used in this transaction. The Company has agreed to grant the Purchasers certain demand and “piggy back” registration rights. The proceeds from this transaction were used with other available funds to retire certain debts of PlanVista and to fund certain costs associated with the Company’s acquisition of PlanVista.

(b) Stock Options – During the three months ended March 31, 2004, the Company granted 241,373 stock options at exercise prices between $17.74 and $19.25 per share to employees. Such options are for a ten-year term and vest equally over the three years following the date of the grant. However, of these options, 173,120 options granted to employees of PlanVista upon its acquisition by ProxyMed will vest two-thirds on the first anniversary date of the grant and one-third on the third anniversary date of the grant. As described in Note 2, since these options were granted at an exercise price of $17.74, which was below the $19.00 market price at the time of issuance, the Company will record periodic non-cash compensation charges over the vesting period of the options based on the intrinsic value method. For the three months ended March 31, 2004, the Company recorded a charge of $14,000 for these options.

In March 2004, 26,880 options at an exercise price of $17.74 per share were granted to PlanVista’s former chief financial officer in connection with a consulting arrangement with him. Fifty percent of these options vested immediately upon the change of control and 25% will each vest after three and six months. The Company recorded $0.1 million in compensation expense associated with this grant in the three months ended March 31, 2004 based on the Black-Scholes method of valuation.

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PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

Additionally, in March 2004, 15,000 stock options at an exercise price of $17.50 per share were granted to a new director upon appointment to the Company’s board of directors as result of the acquisition of PlanVista. Such options are for a ten-year term and vest equally over the three years following the date of the grant.

(c) Exercise of Warrants – On March 25, 2004, General Atlantic Partners exercised 549,279 warrants it received in April 2002 with an exercise price of $15.93 for $8.75 million in cash.

(7) Segment Information

ProxyMed operates in two reportable segments that are separately managed: Transaction Services (formerly known as Electronic healthcare transaction processing) and Laboratory Communication Solutions. Transaction Services includes transaction, cost containment and value-added services principally between physicians and insurance companies (Payer Services and Medical Cost Containment Services) and physicians and pharmacies (Prescription Services); and Laboratory Communication Solutions includes the sale, lease and service of communication devices principally to laboratories and the contract manufacturing of printed circuit boards (Laboratory Services). The results for the Transaction Services and Laboratory Communication Solutions segments do not include an allocation of Corporate overhead in assessing the operating performance of the respective segments. For financial reporting purposes, the assets of the Company’s Corporate segment have been combined with those of its Transaction Services Segment since they are intertwined with the operation of the other segment. Inter-segment sales are not material and there were no foreign sales for any periods presented.

In thousands	Three Months Ended March 31,
	2004			2003
Net revenues:
Transaction Services	$	14,594		$	11,291
Laboratory Communication Solutions		5,910			6,139
	$	20,504		$	17,430
Operating loss:
Transaction Services	$	797		$	(1,941	)
Laboratory Communication Solutions		257			587
Corporate		(1,097	)		(924	)
	$	(43	)	$	(2,278	)

	March 31,
	2004		2003
Total assets:
Transaction Services	$	187,853	$	72,043
Laboratory Communication Solutions		12,018		12,424
	$	199,871	$	84,467

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PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited), Continued

(8) Income Taxes

As of March 31, 2004, the Company had a net deferred tax asset of approximately $67.4 million, which was fully offset by a valuation allowance. Realization of the net deferred tax asset is dependent upon the Company generating sufficient taxable income prior to the expiration of the federal net operating loss carryforwards. The Company will adjust this valuation reserve if, during future periods, management believes the Company will generate sufficient taxable income to realize the net deferred tax asset. The provision for income taxes reported in the statement of operations for the three months ended March 31, 2004 reflect approximately $50,000 primarily for state income taxes.

(9) Loss on Disposal of Assets

As a result of the consolidation of the ProxyMed and MedUnite offices in Atlanta during the three months ended March 31, 2003, the Company recorded $0.1 million in losses primarily related to the disposition of certain assets owned and leased that were acquired in the acquisition of MDP Corporation in 2001.

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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to our consolidated financial statements on this Form 10-Q and notes thereto and those included in Part IV starting on Page F-7 of our Form 10-K for the year ended December 31, 2003 and to provide an understanding of our results of operations, financial condition, and changes in financial condition. Our MD&A is organized as follows:

• Introduction – This section provides a general description of our business, summarizes the significant acquisitions we completed in the last two years, and provides a brief overview of our operating segments.

• Results of Operations – This section provides our analysis and outlook for the line items on our consolidated statement of operations on both a company-wide and segment basis.

• Liquidity and Capital Resources – This section provides an analysis of our liquidity and cash flows, as well as our discussion of our debts and other commitments.

• Critical Accounting Policies and Estimates – This section discusses those accounting policies that are considered to be both important to our financial condition and results of operations, and require us to exercise subjective or complex judgments in their application. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 1 to our consolidated financial statements in this Form 10-Q and starting on Page F-7 in our Form 10-K for the year ended December 31, 2003.

• New Accounting Pronouncements – This section includes a discussion of recently published accounting authoritative literature that may have an impact on our historical or prospective results of operations or financial condition.

Introduction

     We are the nation’s second largest provider-based electronic healthcare transaction services company. We provide connectivity services and related value-added products to physicians, payers, pharmacies, medical laboratories, and other healthcare providers and suppliers. Our services support a broad range of financial, clinical and administrative transactions, and are HIPAA-certified through Claredi, an independent certification and testing services company specializing in HIPAA compliance. To facilitate these services, we operate PhoenixTM, our secure national electronic information platform, which provides physicians and other healthcare providers with direct connectivity to one of the industry’s largest list of payers, the industry’s largest list of chain and independent pharmacies and the largest list of clinical laboratories. Our

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corporate headquarters is located in Atlanta, Georgia, and our products and services are provided from various operational facilities located throughout the United States. We also operate our clinical computer network and portions of our financial and real-time production computer networks from a secure, third-party co-location site also located in Atlanta, Georgia. All of our revenues are generated domestically.

     Our primary strategy is focused on leveraging our leading position as an independent back-end connectivity provider to small physician offices. Through strategic relationships and partnerships with front-end solution providers, our goal is to drive more healthcare transactions through PhoenixTM while remaining neutral in the battle for the physician’s desktop. Additionally, we expect that there will be opportunities to increase revenues by cross-selling our existing products and services to our current customer base of physicians and other healthcare providers, as well as revenue opportunities from the development of new services from our development efforts, including Internet-based transaction services. We remain committed to developing additional capabilities and value-added products and services, and to expanding our back-end connectivity network. In conjunction with this philosophy, we have recently introduced ProxyMed.net, our new web portal for providers, and “PhoenixTM”, our new transaction processing platform which has been HIPAA-certified through Claredi. We have also added new services offerings for our payer customers through our acquisition of PlanVista Corporation (“PlanVista”) on March 2, 2004 for claims re-pricing services and First Data Corporation for a jointly marketed suite of services being offered under the brand name “FirstProxy.”

Acquisitions

     On December 31, 2002, we acquired all of the outstanding stock of MedUnite, Inc. (“MedUnite”) for $10 million in cash and an aggregate of $13.4 million principal amount of 4% convertible promissory notes. In addition, we paid approximately $6.7 million in transaction and exit related costs (which were originally estimated at $8.3 million). Interest on the convertible notes is payable in cash on a quarterly basis. The convertible promissory notes (now currently payable at a maturity value of $13.1 million after a claim setoff against the escrow in December 2003) are payable in full on December 31, 2008, and are convertible into an aggregate of 716,968 shares (originally 731,322 shares before the claim setoff) of our common stock if the former shareholders of MedUnite achieve certain revenue-based triggers over the next three and one-half year period. The shares of our common stock issuable upon conversion of the convertible notes will be registered by us promptly after a conversion trigger event is met. The first threshold trigger was reached during the fourth quarter of 2003 and the convertible notes were reduced to $13.1 million at December 31, 2003 as a result of a claim against the escrow. The operations of MedUnite are reflected with our operations for the twelve months ended December 31, 2003. Additionally, we spent much of the 2003 year integrating the operations of MedUnite into our existing operations, and currently the organizations are run and managed as one operating unit. As a result, meaningful separate results and statistics for MedUnite are no longer available.

     On March 2, 2004, we acquired PlanVista (a company that provides medical cost containment and business process outsourcing solutions for the medical insurance and managed care industries, as well as services for health care providers, including individual

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providers, preferred provider organizations and other provider groups) for 3,600,000 shares of our common stock issued to PlanVista shareholders valued at $68.4 million (based on the closing price of our common stock on March 2, 2004). We also assumed debt and other liabilities of PlanVista, and paid approximately $1.3 million in acquisition-related costs. Additionally, we raised $24.1 million in a private placement sale of our common stock to General Atlantic Partners, Commonwealth Associates and other parties to partially fund repayment of certain of PlanVista’s debts and other obligations outstanding at the time of the acquisition. The merger enables us to enter into a new line of business, provide new end-to-end services, increase sales opportunities with payers, strengthen business ties with certain customers, expand technological capabilities, reduce operating costs and enhance our public profile.

     Upon completion of the acquisition, each share of PlanVista’s outstanding common stock was cancelled and converted into the right to receive 0.08271 of a share of our common stock and each holder of PlanVista series C preferred stock received 51.5292 shares of our common stock in exchange for each share of PlanVista series C preferred stock, representing approximately 23% of our common stock on a fully converted basis, and the holders of our outstanding stock, options and warrants retained approximately 77% of ProxyMed. PlanVista’s operations are included in our Transaction Services segment commencing March 2004.

     In connection with this acquisition, our shareholders approved (1) an amendment to our articles of incorporation to increase the total number of authorized shares of the Company’s common stock from 13,333,333 1/3 shares to 30,000,000 shares, (2) the issuance of 1,691,229 shares of our common stock at $14.25 per share in a private equity offering valued at $24.1 million (to retire a portion of debt of PlanVista and pay certain expenses associated with the merger), (3) the issuance of 3,600,000 shares of our common stock in connection with the merger, and (4) an amendment to our 2002 Stock Option Plan to increase the total number of shares available for issuance from 600,000 to 1,350,000.

Operating Segments

     We operate in two reportable segments that are separately managed: Transaction Services (formerly known as Electronic healthcare transaction processing) and Laboratory Communication Solutions. Transaction Services includes transaction and value-added services principally between physicians and insurance companies (Payer Services) and physicians and pharmacies (Prescription Services); and Laboratory Communication Solutions includes the sale, lease and service of communication devices principally to laboratories and the contract manufacturing of printed circuit boards (Laboratory Services). The results for the Transaction Services and Laboratory Communication Solutions segments do not include an allocation of Corporate overhead in assessing the operating performance of the respective segments. Commencing in March 2004, the operations of PlanVista are included in our Transaction Services segment (Medical Cost Containment Services).

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Results of Operations

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003.

     Net Revenues. Consolidated net revenues for the three months ended March 31, 2004 increased by $3.1 million or 17.6% to $20.5 million from consolidated net revenues of $17.4 million for the three months ended March 31, 2003. Net revenues classified by our reportable segments are as follows:

In thousands	Three Months Ended March 31,
	2004		2003
Transaction Services	$	14,594	$	11,291
Laboratory Communication Solutions		5,910		6,139
	$	20,504	$	17,430

     Net revenues in our Transaction Services segment increased by 29.3% over the 2003 period. This increase is primarily due to the acquisition of PlanVista.

     For the 2004 period, approximately 71% of our revenues came from our Transaction Services segment compared to 65% from this segment for the 2003 period. For the remainder of 2004 and beyond, it is anticipated that our greatest growth will come from this segment.

     Laboratory Communication Solutions segment net revenues decreased by 3.7% from the 2003 period. While our revenues in this segment started the year slowly, most of our revenues in this segment comes from the sale of fixed assets to our lab and contract-manufacturing customers. We anticipate that a strengthening economy will help to improve revenue for our Laboratory Communications Solutions segment over the balance of the year.

     A summary of the number of transactions we processed for the periods presented is as follows:

In thousands	Three Months Ended March 31,
	2004		2003
Core transactions (1)		49,875		49,601
Encounters		9,967		6,878
Total transactions		59,842		56,479

(1) Includes 375,000 cost containment transactions in the 2004 period from ProxyMed’s acquisition of PlanVista

     “Core” transactions represent all transactions except for encounters. “Encounters” are an administrative reporting transaction for payers but do not generate revenue for the provider who must submit them. Accordingly, rather than submitting on a routine basis, most providers choose to periodically “catch up” on their submissions, creating monthly and quarterly swings in both the number of encounters we process and what percentage of our

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transaction mix they represent. Since encounters are at a significantly lower price point than claims, these swings make it difficult to easily analyze our quarter-over-quarter growth in our core business. In addition, we do not expect our encounter volume to grow on an annual basis, as payers are not expanding the capitated service model that is the foundation of encounters. Therefore, we believe that breaking out encounters shows more clearly our growth in core transactions, which are the growth engine for our Transaction Services segment.

     Cost containment transactions represent the number of claims sent by our payer clients to be re-priced through our provider network.

     Cost of sales. Consolidated cost of sales decreased as a percentage of net revenues to 40% for the three months ended March 31, 2004 from 47% for the three months ended March 31, 2003. Cost of sales classified by our reportable segments is as follows:

In thousands	Three Months Ended March 31,
	2004		2003
Transaction Services	$	4,260	$	4,266
Laboratory Communication Solutions		4,029		3,946
	$	8,289	$	8,212

     Cost of sales in our Transaction Services segment consists of transaction fees, provider network outsourcing (leasing) fees, services and license fees, third-party electronic transaction processing costs, certain telecommunication and co-location center costs, revenue sharing arrangements with our business partners, third-party database licenses, and certain travel expenses. Cost of sales as a percentage of revenues decreased to 29% in the 2004 period compared to 38% in the same period last year primarily due to a change in the mix of transaction types from higher cost patient statements to lower cost claim transactions, and the loss of business from a low margin gateway partner during the latter half of the 2003 year, offset by the addition of higher margin medical cost containment services from our acquisition of PlanVista.

     With the filing of our annual 2003 financial statements, we reclassified direct labor and manufacturing overhead from selling, general and administrative expenses to cost of tangible products sold to better reflect the production of tangible products. All prior periods have a similar reclassification. As a result, cost of sales in the Laboratory Communication Solutions segment includes hardware, third party software, consumable materials, direct manufacturing labor and indirect manufacturing overhead. Cost of sales as a percentage of revenues in this segment increased to 68% for the three months ended March 31, 2004 compared to 64% for three months ended March 31, 2003 primarily due to a change in the mix from lower cost leases to higher cost contract manufacturing and laboratory communication devices.

     Selling, General and Administrative Expenses. Consolidated SG&A increased for the three months ended March 31, 2004 by $0.4 million, or 4%, from consolidated SG&A of $10.0 million for the three months ended March 31, 2003. Consolidated SG&A expenses as a percentage of consolidated revenues decreased to 51% for the 2004 period compared to 58% in the same period last year. SG&A expenses classified by our reportable segments are as follows:

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In thousands	Three Months Ended March 31,
	2004		2003
Transaction Services	$	7,984	$	7,787
Laboratory Communication Solutions		1,360		1,374
Corporate		1,061		880
	$	10,405	$	10,041

     Transaction Services segment SG&A expenses for the three months March 31, 2004 increased 2% over the same period last year primarily due to reductions in expenses from our MedUnite acquisition, offset by costs related to our HIPAA compliance efforts, implementation staffing and sales/marketing programs implemented since the first quarter of last year and the addition of SG&A expenses from PlanVista for one month in the 2004 period.

     Laboratory Communication Solutions segment SG&A expenses for the three months ended March 31, 2004 decreased by 1% over the same period last year and segment SG&A expenses as a percentage of segment net revenues decreased to 23% for the 2004 period compared to 22% for the same period last year.

     Corporate SG&A expenses increased 21% for the three months ended March 31, 2004 compared to the same period last year primarily due to increased professional fees and personnel costs, and the cost of complying with the Sarbanes-Oxley Act of 2002.

     Depreciation and Amortization. Consolidated depreciation and amortization increased by $0.5 million to $1.8 million for the three months ended March 31, 2004 from $1.3 million for the same period last year. This increase was primarily due to approximately $0.4 million for the amortization of intangible assets acquired in the PlanVista acquisition. Depreciation and amortization classified by our reportable segments is as follows:

In thousands	Three Months Ended March 31,
	2004		2003
Transaction services	$	1,554	$	1,056
Laboratory communication solutions		259		230
Corporate		36		44
	$	1,849	$	1,330

     Operating Loss. As a result of the foregoing, consolidated operating loss for the three months ended March 31, 2004 was $43,000 compared to operating loss of $2.3 million for the same period last year. Operating loss classified by our reportable segments is as follows:

In thousands	Three Months Ended March 31,
	2004			2003
Transaction services	$	797		$	(1,941	)
Laboratory communication solutions		257			587
Corporate		(1,097	)		(924	)
	$	(43	)	$	(2,278	)

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     Interest expense, net. Consolidated net interest expense for the three months ended March 31, 2004 was $0.3 million compared to $0.2 million for the same period last year. This increase in expense is primarily due to the assumption of debt in conjunction with the PlanVista acquisition. Interest expense for the 2004 year is expected to be at levels above those in the prior year due to the senior debt acquired from PlanVista.

     Net Loss. As a result of the foregoing, consolidated net loss for the three months ended March 31, 2004 was $0.4 million compared to net loss of $2.5 million for the same period last year.

Liquidity and Capital Resources

     In the three months ended March 31, 2004, net cash used in operating activities totaled $3.2 million, and included $4.0 million to pay certain acquisition-related expenses of PlanVista outstanding as of the effective time of the acquisition. Cash used for investing activities totaled $1.0 million and consisted primarily of $0.8 million in net cash acquired from PlanVista offset by $0.8 million in costs related to the acquisitions of PlanVista and MedUnite and $1.1 million in capital expenditures and capitalized software. Cash provided by financing activities totaled $9.3 million and consisted of a private placement of our common stock, an exercise of warrants, a net draw on our asset-based line of credit, and repayments of notes payable, other long-term debt, and payments related to capital leases (including $23.4 million for the retirement of debts and other obligations and expenses).

     In the three months ended March 31, 2003, cash used by operating activities was $0.5 million. Cash used in investing activities was $5.2 million. During this period, we paid $3.9 million in costs related to our December 2002 acquisition of MedUnite, paid $1.2 million for fixed assets and capitalized software, and transferred $0.3 million to restricted cash as collateral for a note payable. Cash used in financing activities was $0.3 million for repayments of notes payable, other long-term debt, and payments related to capital leases. These activities were principally financed through available cash resources.

     We had cash and cash equivalents totaling $10.4 million as of March 31, 2004 compared to $10.3 million at March 31, 2003. These available funds will be used for operations, strategic acquisitions, the further development of our products and services, and other general corporate purposes. We continue to evaluate other acquisition opportunities and strategic alternatives that may add synergies to our product offerings and business strategy.

     On March 2, 2004, we acquired PlanVista through the issuance of 3,600,000 shares of our common stock (valued at $68.4 million). In addition, we raised an additional $24.1 million in a private placement sale of our common stock and drew down $4.4 million on our asset-based line of credit. These funds, along with available cash resources, were used to satisfy $27.4 million of PlanVista’s debt and other obligations outstanding as of the effective time of the acquisition.

     At the current time, we do not have any material commitments for capital expenditures.

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     We anticipate spending approximately $1.0 million for various development projects scheduled to be undertaken by us in 2004 (including $0.3 million related to projects at PlanVista). Additionally, we anticipate spending approximately $5.8 million (including $1.1 million at PlanVista) primarily for hardware and software costs related to enhancements to our technical infrastructure and administrative systems. Through March 31, 2004, we spent $1.1 million towards these projects. Furthermore, we expect to incur costs of approximately $1.5 million in 2004 in connection with the implementation of our internal control procedures mandated by the Sarbanes-Oxley Act of 2002 and with our financial system consolidation efforts.

     At the time we acquired MedUnite at the end of 2002, MedUnite had incurred significant losses since its inception and was utilizing cash significantly in excess of amounts it was generating primarily due to technical and research and development activities related to its various processing platforms. As a result, there were substantial liabilities and obligations as well as future commitments (both known and unknown at December 31, 2002) associated with the business in addition to the transaction and exit costs associated with the acquisition. In an effort to immediately curtail and reduce the expenditure levels, MedUnite’s senior management team was terminated along with approximately 20% of the general workforce, and in February 2003, we moved our Atlanta facility into MedUnite’s Norcross facility. While we did not achieve the expected reductions in MedUnite’s cost early in the first quarter of 2003, we did exit that quarter on an expense run rate in line with our expectations. Furthermore, during the second and third quarters of 2003, we continued expense reductions by successfully eliminating or renegotiating substantial telecommunication expenses and eliminating duplicative contact management, human resources and customer relationship management systems. Additionally, in April 2003, we terminated the San Diego facility lease effective July 1, 2003 in return for a $0.8 million letter of credit held by the current landlord and furniture at the facility.

     By December 31, 2003, we had paid all but $0.2 million of the transaction and exit costs associated with the MedUnite acquisition. As a result of our negotiations, the original $8.3 million in transaction and exit costs were ultimately settled for approximately $6.7 million, representing a savings of $1.6 million.

     Additionally, other MedUnite contractual obligations have been canceled or renegotiated with the respective vendors. We have entered into financing agreements with certain major vendors as a means of settling liabilities that existed at December 31, 2002, and have financed $3.4 million of liabilities to one vendor, $2.0 million in net liabilities to a former owner of MedUnite, and $0.4 million for a required insurance policy as part of the acquisition. Between these financing agreements, existing capital leases, and the convertible notes issued in the acquisition, we incurred significant interest expense charges in 2003.

     In December 2003, we closed on a $12.5 million asset-based line of credit with our commercial bank. Borrowing under such facility is subject to eligible cash, accounts receivable, and inventory and other conditions. Borrowings bear interest at the prime rate plus 0.5% or at LIBOR plus 2.25% (or LIBOR plus 0.75% in the case of borrowings against eligible cash only). As a result of our acquisition of PlanVista, we drew down $4.4 million against this line at the end of February 2004 (which was repaid in early March 2004) and had a $0.5 million draw outstanding as of March 31, 2004 that we repaid in April 2004. At this time, the assets of PlanVista are not eligible collateral for this line of credit due to covenants of the senior debt in place at PlanVista. Additionally, PlanVista (as a wholly-owned subsidiary) is limited in its ability to upstream cash to ProxyMed (as the parent company) due to additional covenants under this instrument.

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     As noted above, with our acquisition of PlanVista on March 2, 2004, we utilized the $24.1 million in proceeds raised from our private placement, drew $4.4 million on our line of credit and used available cash to satisfy $27.4 million of PlanVista’s debt and other obligations outstanding as of the effective time of the acquisition. As a result of the acquisition, we acquired a cash flow positive company with $20.4 million in senior debt due in May 2005 (at an interest rate of 6% until December 2004 when the interest rate increases to 10%). While it is our intent to satisfy this debt either through refinancing, obtaining a senior line of credit, or by raising equity capital, we will incur substantial additional cash interest charges until we do so. We may be unable to raise additional funds.

     The following table represents our contractual cash obligations due over the next several years (including obligations of PlanVista). Operating leases are shown net of any sublease agreements.

In thousands	2004(1)		2005		2006		2007		2008
Interest on convertible notes (2)	$	394	$	526	$	525	$	525	$	525
Interest on senior and other debt		1,044		744		—		—		—
Convertible notes (2)		—		—		—		—		13,137
Senior debt of PlanVista		2,000		18,395		—		—		—
Notes payable		2,849		1,758		354		—		—
Capital lease obligations		141		93		6		1		—
Operating leases		1,520		718		66		53		12
Total	$	7,948	$	22,234	$	951	$	579	$	13,674

(1)	Remaining quarters of 2004
(2)	Assumes no conversion of convertible notes

     We believe that we have sufficient cash and cash equivalents on hand to fund our future operational capital requirements and expenditures, and a sufficient level of capital in order to fund specific research and development projects or to pursue smaller additional strategic acquisitions. Even with the positive cash flow expected to be generated from our operations, we anticipate that we will need to refinance the PlanVista debt, by either obtaining a new senior line of credit or raising capital in order to satisfy this debt on or before maturity. However, if we require additional funding in the future to satisfy any of our outstanding future obligations, or further our strategic plans, there can be no assurance that any additional funding will be available to us, or if available, that it will be available on acceptable terms. If we are successful in obtaining additional financing, the terms of the financing may have the effect of significantly diluting or adversely affecting the holdings or the rights of the holders of our common stock. We believe that if we are not successful in obtaining additional financing for further product development or strategic acquisitions, such inability may adversely impact our ability to successfully execute our business plan and may put us at a competitive disadvantage.

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Critical Accounting Policies and Estimates

     Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, but we believe that any variation in results would not have a material effect on our financial condition. We evaluate our estimates on an ongoing basis.

     We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For a detailed discussion on the application of these and other accounting policies, see Note 1 in the Notes to Consolidated Financial Statements beginning on Page F-7 of our Form 10-K for the year ended December 31, 2003.

     Revenue Recognition – Transaction Services fee revenue is recorded in the period the service is rendered. Certain transaction fee revenue may be subject to revenue sharing per agreements with resellers, vendors or gateway partners and are recorded as gross revenues. Revenues on cost containment services are recorded net of their estimated allowances. Revenue from sales of inventory and manufactured goods is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collectibility is probable. Revenue from certain up-front fees is amortized ratably over the expected life of the customer or contract. Revenue from hardware leases, network access and maintenance fees is recognized ratably over the applicable period.

     Goodwill – We adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” effective January 1, 2002. Under SFAS No. 142, goodwill is reviewed at least annually for impairment. SFAS No. 142 requires that goodwill be tested for impairment at the reporting unit level at adoption and at least annually thereafter, utilizing a “fair value” methodology versus an undiscounted cash flow method required under previous accounting rules. In accordance with our adoption of SFAS No. 142, we completed our most recent annual test at December 31, 2003 and 2002 utilizing various valuation techniques including a market value analysis. No impairment charges were recorded as a result of these tests.

     Capitalized Software Development and Research and Development – Costs incurred internally and fees paid to outside contractors and consultants during the application development stage of our internally used software products are capitalized. Costs of upgrades and major enhancements that result in additional functionality are also capitalized. Costs incurred for maintenance and minor upgrades are expensed as incurred. All other costs are expensed as incurred as research and development expenses (which are included in “Selling, general and administrative expenses”). Application development stage costs generally include software configuration, coding, installation to hardware and testing. Once the project is

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completed, capitalized costs are amortized over their remaining estimated economic life. Our judgment is used in determining whether costs meet the criteria for immediate expense or capitalization. We periodically review projected cash flows and other criteria in assessing the impairment of any internal-use capitalized software and take impairment charges as needed.

     Bad Debt Estimates – We rely on estimates to determine the bad debt expense and the adequacy of the reserve for doubtful accounts receivable. These estimates are based on our historical experience and the industry in which we operate. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Additionally, in our cost containment business, we evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on past write-off history, average percentage of receivables written off historically, and the length of time the receivables are past due. To the extent historical credit experience is not indicative of future performance or other assumptions used by management do not prevail, loss experience could differ significantly, resulting in either higher or lower future provision for losses.

New Accounting Pronouncements

     In April 2003, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except for certain provision that relate to SFAS No. 133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003 and for hedging relationships designated after June 30, 2003. We do not believe that the implementation SFAS No. 149 will have a material effect on our consolidated financial statements and related disclosures.

     In May 2003, the Financial Accounting Standards Board issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. SFAS No. 150 specifies that instruments within its scope embody obligations of the issuer and that, therefore, the issuer must classify them as liabilities. SFAS No. 150 requires issuers to classify as liabilities the following three types of freestanding financial instruments: (1) mandatory redeemable financial instruments; (2) obligations to repurchase the issuer’s equity shares by transferring assets; and (3) certain obligations to issue a variable number of shares. SFAS No. 150 defines a freestanding financial instrument as a financial instrument that (1) is entered into separately and apart from any of the entity’s other financial instruments or equity transactions; or (2) is entered into in conjunction with some other transaction and can be legally detached and exercised on a separate basis. For all financial instruments entered into or modified after May 31, 2003, SFAS No. 150 is effective immediately. For all other instruments of public companies, SFAS No. 150 goes into effect at the beginning of the first interim period beginning

28

after June 15, 2003. For contracts that were created or modified before May 31, 2003 and still exist at the beginning of the first interim period beginning after June 15, 2003, entities should record the transition to SFAS No. 150 by reporting the cumulative effect of a change in an accounting principle. SFAS No. 150 prohibits entities from restating financial statements for earlier years presented. We do not expect the adoption of SFAS No. 150 to have a material impact on our financial statements.

Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

     Statements contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report may contain information that includes or is based upon forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Forward-looking statements present our expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They frequently are accompanied by words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. In particular, these include statements relating to: our ability to identify suitable acquisition candidates; our successful integration of PlanVista, MedUnite and any other future acquisitions; our ability to successfully develop, market, sell, cross-sell, install and upgrade our clinical and financial transaction services and applications to new and current physicians, payers, medical laboratories and pharmacies; our ability to compete effectively on price and support services; our ability to increase revenues and revenue opportunities; and our ability to meet expectations regarding future capital needs and the availability of credit and other financing sources.

     All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of earnings, revenues, synergies, accretion, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations, including the execution of integration and restructuring plans and the anticipated timing of filings, approvals and closings relating to the merger or other planned acquisitions; any statements concerning proposed new products, services, developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

     Actual results may differ significantly from projected results due to a number of factors, including, but not limited to, the soundness of our business strategies relative to perceived market opportunities; our assessment of the healthcare industry’s need, desire and ability to become technology efficient; market acceptance of our products and services; and our ability and that of our business associates to comply with various government rules regarding healthcare information and patient privacy. These and other risk factors are more fully discussed starting on Page 23 and elsewhere in our Form 10-K for the year ended December 31, 2003, which we strongly urge you to read.

     Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially

29

from those expressed in the forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. Shareholders are cautioned not to put undue reliance on any forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We expressly disclaim any intent or obligation to update any forward-looking statements.

Available Information

     Our Internet address is www.proxymed.com. We make available free of charge on or through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material was electronically filed with, or furnished to, the SEC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We own no derivative financial instruments or derivative commodity instruments. We derive no revenues from international operations and do not believe that we are exposed to material risks related to foreign currency exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

     As of the end of the period covered by this report, the Company evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)), under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer. Based upon such evaluation, management has concluded that the Company’s disclosure controls and procedures are effective to ensure that the information the Company is required to disclose in reports that it files or submits under the Exchange Act is communicated to management, including, the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the Commission rules and forms.

30

PART II — OTHER INFORMATION

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.

     On March 2, 2004, the Company sold an aggregate of 1,691,227 shares of unregistered common stock at $14.25 per share in a private placement to General Atlantic Partners 77, L.P., GAP Coinvestment III, LLC, GAP Coinvestments IV, LLC, Gapstar, LLC, GAPCO GmbH & Co. KG., PVC Funding Partners, LLC, ComVest Venture Partners, L.P., Shea Ventures, LLC, and Robert Priddy (the “Purchasers”) resulting in net proceeds to the Company of $24.1 million. No placement agent was used in this transaction. These shares were issued without registration in reliance upon the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, or Rule 506 of Regulation D promulgated thereunder. The Company has agreed to grant the Purchasers certain demand and “piggy back” registration rights. The proceeds from this transaction were used with other available funds to partially retire certain debts of PlanVista and to pay certain costs associated with the Company’s acquisition of PlanVista

Item 4. Submission of Matters to a Vote of Security Holders.

     During the quarter ended March 31, 2004, at the Company’s special meeting of shareholders held on March 1, 2004, the shareholders approved the following resolutions:

• Amendment to the Company’s Articles of Incorporation. The total number of votes cast for this proposal to approve an amendment to the Company’s articles of incorporation to increase the total number of authorized shares of the Company’s common stock from 13,333,333? shares to 30,000,000 shares was 4,296,832. Of these votes, 3,651,959 were in favor, 581,298 were against and 63,575 abstained.

• Ratification and approval of shares issued in connection with a private placement of the Company’s common stock. The total number of votes cast for this proposal which approves the issuance of 1,691,227 shares of the Company’s common stock at $14.25 per share in a private equity offering valued at $24.1 million to partially retire debt of PlanVista Corporation and pay certain expenses associated with the acquisition of PlanVista Corporation was 4,296,832. Of these votes, 4,269,668 were in favor, 22,662 were against and 4,502 abstained.

• Ratification and approval of shares issued to PlanVista Corporation Stockholders to acquire all of the outstanding stock of PlanVista Corporation. The total number of votes cast for this proposal which approves the issuance of 3,600,000 shares of the Company’s common stock in connection with the PlanVista merger was 4,296,832. Of these votes, 4,272,170 were in favor, 20,332 were against and 4,330 abstained.

• Ratification and approval of additional shares to be issued under the Company’s 2002 Stock Option Plan. The total number of votes cast for this proposal which approves an amendment to the Company’s 2002 Stock Option Plan to increase the total number of shares available for issuance from 600,000 to 1,350,000 was 4,296,832. Of these votes, 3,651,959 were in favor, 581,298 were against and 63,575 abstained.

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Item 6. Exhibits and Reports on Form 8-K.

     (a) Exhibits:

Exhibit
No.	Description
3.1	Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 of the Registration Statement on Form SB-2, File No. 333-2678).
3.2	Bylaws, as amended (incorporated by reference to Exhibit 3.1 of the Registration Statement on Form SB-2, File No. 333-2678).
3.3	Articles of Amendment to Restated Articles of Incorporation of the Registrant dated March 1, 2004 (incorporated by reference to Exhibit 3.1 of Form 8-K File No. 000-22052, reporting an event dated March 2, 2004).
3.4	Articles of Amendment to Articles of Incorporation of the Registrant effective August 22, 2002 (incorporated by reference to Exhibit 3.4 of Form 10-K for the period ended December 31, 2003).

32

Exhibit
No.	Description
3.5	Articles of Amendment to Articles of Incorporation of the Registrant dated December 21, 2001 (incorporated by reference to Exhibit 3.1 of Form 8-K File No. 000-22052, reporting an event dated December 13, 2001).
3.6	Articles of Amendment to Articles of Incorporation dated August 21, 2001 (incorporated by reference to Exhibit 2.2 of Form 8-K, File No. 000-22052, reporting an event dated August 17, 2001).
3.7	Articles of Amendment to Articles of Incorporation dated July 25, 2001 (incorporated by reference to Exhibit 2.1 of Form 8-K, File No. 000-22052, reporting an event dated August 17, 2001).
3.8	Articles of Amendment to Articles of Incorporation of the Registrant effective July 14, 2000 (incorporated by reference to Exhibit 3.8 of Form 10-K for the period ended December 31, 2003).
3.9	Articles of Amendment to Articles of Incorporation of the Registrant dated June 15, 2000 (incorporated by reference to Exhibit 3.4 of Form 10-Q/A for the period ended June 30, 2000).
4.1	Common Stock Purchase Warrants issued to First Data Corporation (incorporated by reference to Exhibit 10.1 of Form 8-K, File No. 000-22052, reporting an event dated July 8, 2003).
4.2	Form of 4% Convertible Promissory Notes dated December 31, 2002 issued in connection with the Agreement and Plan of Merger and Reorganization dated December 31, 2002 between ProxyMed, Inc., Davie Acquisition Corp., and MedUnite, Inc. (incorporated by reference to Exhibit 10.1 of Form 8-K File No. 000-22052, reporting an event dated December 31, 2002).
4.3	Form of Common Stock Purchase Warrants issued to General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GAPCO GmbH & Co., KG and GapStar, LLC (incorporated by reference to Exhibit 10.2 of Form 8-K, File No. 000-22052, reporting an event dated March 26, 2002).
4.4	Form of Exchanged Warrant to Purchase Common Stock of the Registrant dated May 4, 2000, issued to certain investors (incorporated by reference to Exhibit 4.1 of Form 8-K, File No. 000-22052, reporting an event dated May 4, 2000).
4.5	Form of New Warrant to Purchase Common Stock of the Registrant dated May 4, 2000, issued to certain investors (incorporated by reference to Exhibit 4.2 of Form 8-K, File No. 000-22052, reporting an event dated May 4, 2000).

33

Exhibit
No.	Description
4.6	Form of Warrant to Purchase Common Stock of the Registrant dated December 23, 1999, issued to certain investors (incorporated by reference to Exhibit 4.1 of Form 8-K, File No. 000-22052, reporting an event dated December 23, 1999).
10.1	Amended and Restated Registration Rights Agreement among the Registrant, General Atlantic Partners 77, L.P., General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GAP Coinvestments III, LLC, GAP Coinvestments IV, LLC, GapStar, LLC, GAPCO GmbH & Co. KG, PVC Funding Partners, LLC, ComVest Venture Partners, L.P., Shea Ventures, LLC, and Robert Priddy, dated March 2, 2004 (incorporated by reference to Exhibit 4.1 of Form 8-K, File No. 000-22052, reporting an event dated March 2, 2004).

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Exhibit
No.	Description
10.2	Employment Agreement between ProxyMed and David E. Oles effective April 26, 2004.*
31.1	Certification by Michael K. Hoover, Chief Executive Officer, pursuant to Exchange Act Rules 13a-14 and 15d-14.
31.2	Certification Gregory J. Eisenhauer, Chief Financial Officer, pursuant to Exchange Act Rules 13a-14 and 15d-14.
32.1	Certification by Michael K. Hoover, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Gregory J. Eisenhauer, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Denotes management contract or compensating plan or arrangement.

     (b) Reports on Form 8-K:

• March 4, 2004 – Pursuant to Regulation FD, the Company reported on the Company’s fourth quarter 2003 teleconference call held on March 3, 2004, including press release dated March 3, 2004.

• March 5, 2004 – Report on merger between the Company, Planet Acquisition Corp. and PlanVista Corporation on March 2, 2004.

• March 15, 2004 – Amendment to Item 7 of the Company’s Report of Form 8-K filed on March 5, 2004 to provide updated financial information in connection with the merger between the Company, Planet Acquisition Corp. and PlanVista Corporation on March 2, 2004.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PROXYMED, INC.
Date: May 10, 2004	By:	/s/ Michael K. Hoover
		Michael K. Hoover
		Chairman and Chief Executive Officer

Date: May 10, 2004	By:	/s/ Gregory J. Eisenhauer
		Gregory J. Eisenhauer
		EVP and Chief Financial Officer

36

EX-10.10

                                                                  Exhibit 10.10


                              EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered on April
14, 2004 by and between ProxyMed, Inc., a Florida corporation (the "Company"),
and David Edward Oles ("Associate").

         WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Associate, and Associate is willing
to accept such employment.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which are hereby acknowledged, the Company and the Associate
intending to be legally bound agree as follows:

1. TERM. The initial term of the Agreement shall commence on April 26, 2004 (the
"Effective Date"), and shall continue for three (3) years and shall be
automatically renewed from year to year thereafter (hereafter, the initial term
and any renewals thereof shall constitute the "Term"), unless either party
provides the other party with notice of its intent not to renew this Agreement
not less than ninety (90) days nor more than 120 days prior to the expiration of
the then-current term or unless this Agreement is earlier terminated in
accordance with its terms.

2. POSITION; DUTIES; LOYALTY.

         a) POSITION. Associate will be employed by Company and shall render
service to Company as its Vice President, Senior Corporate Counsel and corporate
Secretary, reporting to the Chief Executive Officer or his designees, pursuant
to the terms, provisions and conditions hereinafter set forth. Upon satisfactory
completion of certain criteria established by the Board of Directors or their
designee, six months following the Effective Date, Associate shall be appointed
Senior Vice President, Secretary and General Counsel for such salary and upon
such terms as the Board shall deem appropriate.

         b) DUTIES. Associate shall be employed by Company on a full-time,
exclusive basis and may be required to relocate as a condition of continued
employment. Associate will be required to travel on business, as is customary
and usual for Associate's position. Associate shall perform such duties and have
such authority and responsibilities customarily accompanying his/her position
and as reasonably directed by the Chief Executive Officer of the Company or his
designee consistent with the Associate's position. Associate shall perform the
duties and have the authority and responsibilities customarily accompanying
those of a general counsel of a public company, including without limitations,
those prescribed by the Company's By-laws or as may be assigned to the Associate
from time to time by the Company's Board of Directors.

         c) LOYALTY. Associate shall devote the full working time required for
Associate's position and shall give Associate's best efforts to the business of
the Company and to the performance of the duties and obligations described in
this Agreement. Except as maybe authorized in writing by the CEO of the Company,
Associate shall not, directly or indirectly, alone, or as a partner, officer,
director or shareholder of any other institution, be engaged in any other
commercial activities whatsoever, or continue or assume any other corporate
affiliations except for (i) an Affiliate; (ii) passive investments; and (iii)
minimal time utilized for business activities that do not compete with the
business of the Company or its subsidiaries. As used herein, the term
"Affiliate" shall refer to any entity that is owned or controlled by, under
common ownership or control with, or which owns or controls the Company or any
of its subsidiaries, now or in the future.





3. COMPENSATION AND EXPENSES.

         a) SALARY. In consideration for the services rendered by the Associate
under this Agreement, Company shall pay the Associate a monthly base salary of
$11,666 per month ("Base Salary") in accordance with the Company's customary
payroll practices. Associate performance reviews (with or without a wage
increase) will be conducted at least annually or as otherwise agreed to by the
parties in writing. The Company shall adjust associate's Base Salary for any
wage increases approved in writing by the Board of Directors or its Compensation
Committee in its sole discretion. As used herein, the term "Base Compensation"
shall refer collectively to (i) Associate's Base Salary, adjusted for any wage
increases, (ii) the Options (as defined in Section 3(b)), (iii) future options
granted pursuant to any Stock Option Plans (as defined in Section 3(b)), (iv)
any Bonuses, (v) any bonuses to which Associate may be entitled pursuant to any
Bonus Plan, (vi) Vacation; and (vii) Benefits.

         b) STOCK OPTIONS. Associate will receive an initial stock option
agreement, in the form attached hereto as Exhibit A and incorporated herein by
reference, which shall have a ten (10) year term, and which shall allow
Associate to purchase up to 4,000 shares of ProxyMed common stock (the "Stock
Options") at its fair market value defined as the price at which common stock is
reported to have traded on the NASDAQ System at the close of business on the
Effective Date. The options will vest over a three (3) year period as follows:
1/3 on the first anniversary, 1/3 on the second anniversary, and 1/3 on the day
before the third anniversary of Associate's employment. The Stock Options
granted hereunder shall be governed exclusively by and issued in accordance with
the terms of the applicable Company stock option plan attached hereto as Exhibit
B and incorporated herein by reference.

         c) BONUS OPPORTUNITY. The Associate may earn bonuses of up to
twenty-five per cent (25%) of Base Salary, and other bonuses as may be awarded
from time to time at the discretion of the Compensation Committee or the Board
of Directors of the Company or pursuant to an Incentive Compensation Plan (as
defined herein) (the "Bonuses"). As otherwise agreed to by the parties in
writing, the Company and Associate shall negotiate an incentive compensation
plan with objective performance criteria (the "Incentive Compensation Plan"),
which will be incorporated into this Agreement at the time it is placed into
effect. The Company reserves the right to pay Bonuses in cash, in ProxyMed
common stock, or in stock options of ProxyMed, or a combination of any or all of
the above.

         c) EXPENSES. Company shall promptly pay or reimburse the Associate for
all reasonable business expenses actually incurred or paid by the Associate in
the performance of Associate's services hereunder in accordance with the
policies and procedures of the Company, provided that Associate properly
accounts therefor.

         d) TAX WITHHOLDING. The Company shall have the right to deduct or
withhold from all compensation due Associate hereunder any and all sums
required, including without limitation for Federal income, social security and
Medicare taxes and all state and local taxes now applicable or that may be
enacted and become applicable in the future.

         e) SPECIAL EXPENSES. Should the Company relocate its Fort Lauderdale
headquarters out of the State of Florida, and the Company requires the Associate
to relocate, then the Company shall reimburse Associate the reasonable and
customary expenses or costs related to Associate's relocation thereto in
accordance with then-applicable Company policy or any other amount authorized in
writing in advance by either the Company's CEO, COO or CFO. Such relocation
expenses shall be capped at $5,000.00, net of a one time "gross up" of 30% for
estimated federal and/or state withholding and other payroll related taxes. In
addition to the foregoing, the Company shall reimburse the Associate for all of




                                       2


his fees directly related to the filing, preparing, taking, and maintaining
membership to the relevant state bar, including professional CLE requirements.

4. BENEFITS.

a) VACATION. The Associate shall be entitled to a yearly vacation of three (3)
weeks during the first year of this Agreement, and thereafter such additional
time as may be provided by the Company in writing in its then-current policies
or otherwise, at full pay to be accrued and taken in accordance with the
Company's policies in effect from to time ("Vacation"). Vacation shall accrue
ratably during each calendar year in accordance with Company policies. Vacation
not taken in one calendar year may be carried over to the following calendar
year subject to any limitations set forth in the Company policies in effect from
time to time. Associate shall not be entitled to receive any additional
compensation from the Company for Associate's failure to take all of Associate's
granted vacation time. In the event Associate's employment is terminated
pursuant to Section 5(b) below, any vacation time used but not earned at the
time of termination shall be deducted from any monies owed to Associate.

         b) PARTICIPATION IN BENEFIT PLANS. Associate shall be eligible for and
entitled to receive all other benefits and perquisites ("Benefits") offered or
extended to other Vice Presidents of the Company.

5. TERMINATION.

         a) INVOLUNTARY TERMINATION FOR DEATH OR DISABILITY. This Agreement
shall terminate immediately upon Associate's death. The Company may terminate
Associate's employment with the Company for Disability. For purposes of this
Agreement, "Disability" is defined to mean the inability of Associate due to
illness or physical or mental infirmity (as determined by a physician selected
by Associate and acceptable to the Company) to perform Associate's duties
hereunder on a full-time basis for six (6) consecutive months with reasonable
accommodation by the Company. Upon termination due to death or Disability,
Associate or Associate's beneficiary or estate or legal representative shall be
entitled to receive the amounts payable under Section 5(c).

         b) TERMINATION BY COMPANY FOR CAUSE. The Company may terminate
Associate's employment with the Company at any time "For Cause" effective
immediately, unless stated otherwise in writing, upon giving written notice
thereof to Associate, which notice shall state with reasonable specificity the
facts supporting the termination "For Cause." "For Cause" shall include the
following:

                  (i) Conviction of, or pleading guilty to, a felony or any
crime involving moral turpitude, fraud, dishonesty or theft or engaging in any
act which is a violation of any law or regulation protecting the rights of
employees or

                  (ii) Failure by Associate to satisfactorily perform the duties
stated herein or to substantially perform such duties in accordance with any
tasks, goals, and objectives as assigned from time to time by the Company in
writing, if Associate has not corrected or remedied, or has not commenced to
correct or remedy, such unsatisfactorily or non-substantial performance of such
specified duties within thirty (30) days (or such other time as may be provided
in writing by the Company) of Associate's actual receipt of such written notice;
or

                  (iii) Associate's gross negligence or willful misconduct
relating to the Company that is materially injurious to the Company; or



                                       3


                  (iv) Associate's excessive use of alcohol or illegal drugs
that (A) interferes with the performance of Associate's duties hereunder and (B)
continues even after written warning regarding such excessive use is actually
received by Associate; or

                  (v) Associate's abandonment of his position or termination of
this Agreement for "No Good Reason;" or

                  (vi) Any material breach by Associate of this Agreement or of
any of the Company's applicable written policies then in effect, including
without limitations, the Company's Code of Ethics for Officers and Directors
with written notice thereof by the Company, provided such notice is actually
received by Associate and an appropriate period to cure such material breach, if
such breach is curable, is given and has expired.

         Upon the Company's termination of this Agreement and Associate's
employment For Cause, the Associate shall be entitled to, and the Company shall
pay the Associate the following "For Cause Separation Pay": the Associate's Base
Salary and benefits through the effective date of termination at the Associate's
then current rate (including any applicable pro rated bonus and accrued vacation
pay). Except as provided for herein or in any other written agreement, the
Company shall have no other liabilities or obligations to Associate upon payment
in full of the For Cause Separation Pay.

         c) TERMINATION BY COMPANY WITHOUT CAUSE. The Company may terminate
"Without Cause" Associate's employment with the Company or this Agreement at any
time for any or no reason. Such termination by Company shall be deemed to be
"without cause" by the Company. In the event of termination by the Company
pursuant to this Section, Associate shall execute a full and complete release of
any and all claims against the Company in a form satisfactory to the Company, in
which event, for a period of three (3) months commencing from the effective date
of termination, the Associate shall be entitled to and shall receive, and the
Company shall pay the following "Without Cause Separation Pay": (i) An amount
equal to Associate's Base Salary as of the date of termination; plus (ii) a pro
rata portion of any accrued vacation not already taken and of any bonus that
would have been paid to Associate under any bonus plan which is adopted by the
Company's Compensation Committee or Board of Directors in such year if the
Company and Associate had met the targeted goals to the date of termination;
plus (iii) the continuation for three (3) months from the effective date of
termination of all of Associate's benefits including, without limitation, all
insurance plans, on the same terms and conditions as had been provided to
Associate prior to the termination, all of the foregoing which shall be payable
in accordance with the Company's customary payroll practices then in effect;
plus (iv) the immediate vesting of all granted options that have not already
expired. Associate shall also be entitled to receive Without Cause Separation
Pay if the Company terminates Associate's employment for taking action deemed
reasonably necessary by Associate under the Fair Labor Standards Act, the False
Claims Act, the Sarbanes Oxley Act of 2002, and any other law applicable to the
conduct of Company's business.

         d) TERMINATION BY ASSOCIATE FOR GOOD REASON. Associate may terminate
this Agreement for "Good Reason" by giving the Company thirty (30) days prior
written notice (the "Notice Period)] to that effect, specifically stating
Associate's Good Reason for terminating in sufficient detail to allow the
Company to respond effectively to the notice, with the termination becoming
effective on the 31st day after such notice is actually received by the Company
(the "Termination Date"), unless the Company at its option cures any alleged
breach, if curable, on or before the Termination Date, or if the breach is not
capable of being cured within the Notice Period, Company made good faith efforts
to cure any alleged breach prior to the Termination Date. The stated Good Reason
must be one or more of any of the reasons



                                       4


defined as a "Good Reason" herein. As used in this Agreement, a "Good Reason"
means termination by Associate only for any one or more of the following
reasons:

                  (i) Any reduction of Associate's then-current Base Salary
without Associate's prior written consent; or

                  (ii) Any material breach of this Agreement by the Company, not
cured or in the process of being cured by the Company as provided herein after
the Company receives not less than 30 days prior written notice by the
Associate.

                  An Associate's termination for any of the foregoing Good
Reasons shall be treated the same as a termination "Without Cause" by the
Company for purposes of calculating separation pay, entitling the Associate to
the Without Cause Separation Pay set forth in Section 5(c).

         e) TERMINATION BY ASSOCIATE FOR NO GOOD REASON. Associate may terminate
this Agreement for any reason (other than a Good Reason) or no reason at any
time with not less than thirty (30) days prior written notice to the Company
(such termination shall be called a termination for "No Good Reason"). After the
Company receives notice of a termination for No Good Reason, the Company may by
written notice to the Associate cause the effective date of any such termination
to be accelerated without causing such termination to be considered a
termination by the Company Without Cause. Associate's termination for No Good
Reason shall be treated the same as a termination "For Cause" by the Company for
purposes of calculating separation pay, entitling the Associate to the For Cause
Separation Pay set forth in Section 5(b). For avoidance of doubt, a termination
by Associate for any reason that is also a Good Reason shall be treated as a
termination by Associate for Good Reason as set forth in Section 5(d).

         f) RETURN OF COMPANY PROPERTY. Upon any termination of this Agreement,
Associate shall immediately return to the Company all property of the Company in
Associate's possession, including Confidential Information (as defined below).
Associate acknowledges that the Company may withhold any compensation and
benefits owed to Associate hereunder until all such property is returned in good
condition, normal wear and tear excepted.

         g) CHANGE IN CONTROL. If, within ninety (90) days prior to a Change of
Control, as defined in Associate's Stock Option Agreement, the Agreement
terminates for any reason (other than pursuant to Section 5(b) or (e) above),
then, (i) any unvested options shall vest as of the date of the Change of
Control and shall remain vested and exercisable as specified in Associate's
Stock Option Agreement, and (ii) Associate shall receive, and the Company shall
pay the Associate, the "Without Cause Separation Pay" set forth in Section 5(c)
above.

6. COVENANTS OF ASSOCIATE.

         a) Associate agrees that during the Term of this Agreement and for one
(1) year following its expiration or termination for any or no reason, including
without limitation, "For Cause", "Without Cause", "For Good Reason", or "No Good
Reason", Associate will not, directly or indirectly, without the prior written
consent of the Company, induce or solicit any person employed or hereafter
employed by the Company to leave the employ of the Company, or solicit, recruit,
hire or attempt to solicit, recruit or hire any person employed by the Company.

         b) Associate agrees that for a period of three (3) years after the
expiration or termination of this Agreement for any or no reason, including
without limitation, "For Cause", "Without Cause", "For



                                       5


Good Reason", or "No Good Reason", Associate will not, directly or indirectly,
without the prior written consent of the Company, solicit or attempt to solicit,
divert or take away, or attempt to divert or take away, Customers or their
laboratory business from the Company and/or the Company's then-current
Affiliates. As used in the preceding sentence, the term "Customer" shall
include, however known to Associate as of the date of such termination or
expiration, (i) any current end-user of the Company's or its then-current
Affiliates' products or services, or any potential end-user thereof with whom
the Company or its then-current Affiliates have had contact with within the
preceding six (6) months; (ii) any current suppliers of the Company's or its
then-current Affiliates; and/or (iii) vendor of the Company or its then-current
Affiliates or reseller of the Company or its then-current Affiliates; and/or
(iv) their Affiliates, successors or assigns.

         c) Associate agrees and acknowledges that Associate will disclose
promptly to the Company every discovery, improvement and invention made,
conceived or developed by Associate during the entire period of employment
(whether or not during working hours) which discoveries, improvements or
inventions are capable of use in any way in connection with the business of the
Company. To the fullest extent permitted by law, all such discoveries,
inventions and improvements will be deemed works made-for-hire. Associate grants
and agrees to convey to Company or its nominee the entire right, title and
interest, domestic and foreign, which Associate may have in such discoveries,
improvements or inventions, or a lesser interest therein, at the option of
Company. Associate further agrees to promptly, upon request, sign all
applications for patents, copyrights, assignments and other appropriate
documents, and to perform all acts and to do all things necessary and
appropriate to carry out the intent of this section, whether or not Associate is
still an employee of the Company at the time of such requests.

         d) Associate agrees and acknowledges that the Confidential Information
of the Company is valuable, special and unique to its business, that such
business depends on such Confidential Information, and that the Company wishes
to protect such Confidential Information by keeping it confidential for the
exclusive use and benefit of the Company. Based on the foregoing, Associate
agrees to undertake the following obligations with respect to such Confidential
Information:

                  (i) Associate agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company;

                  (ii) Associate agrees that, except as required by Associate's
duties or authorized in writing by the Company, Associate will not at any time
during and for a period of three (3) years after the termination of Associate's
employment with the Company, disclose, directly or indirectly, any Confidential
Information of the Company to any third party; except as may be required by
applicable law or court order, in which case Associate shall promptly notify
Company so as to allow it to seek a protective order if it so elects;

                  (iii) Associate agrees to take all reasonable steps necessary,
or reasonably requested by the Company, to ensure that all Confidential
Information of the Company is kept confidential for the use and benefit of the
Company and its subsidiaries; and

                  (iv) Associate agrees that, upon termination of Associate's
employment by the Company or at any other time the Company may in writing so
request, Associate will promptly deliver to the Company all materials
constituting Confidential Information (including all copies and derivatives
thereof) that are in the possession of or under the control of Associate.
Associate further agrees that, if requested by the Company to return any
Confidential Information pursuant to this Subsection (iv), Associate will not
make or retain any copy or extract from such materials.



                                       6


                  For the purposes of this Section 6(d), "Confidential
Information" means any and all information, including derivative works,
developed by or for the Company or entrusted to the Company in confidence by its
customers, of which Associate gained knowledge by reason of Associate's
employment by the Company, which is not generally known in any industry in which
the Company is or may become engaged, but does not apply to information which is
generally known to the public or the trade, unless such knowledge results from
an unauthorized disclosure by Associate. Confidential Information includes, but
is not limited to, any and all information developed by or for the Company
concerning plans, marketing and sales methods, materials, processes, business
forms, procedures, devices used by the Company, its suppliers and customers with
which the Company had dealt with prior to Associate's termination of employment
with the Company, plans for development of new products, services and expansion
into new areas or markets, internal operations, and any trade secrets,
proprietary information of any type owned by the Company, together with all
written, graphic and other materials relating to all or any part of the same.
The Company will receive all materials, including, software programs, source
code, object code, specifications, documents, abstracts and summaries developed
in connection with Associate's employment. Associate acknowledges that the
programs and documentation developed in connection with Associate's employment
with the Company shall be the exclusive property of the Company, and that the
Company shall retain all right, title and interest in such materials, including
without limitation patent and copyright interests. Nothing herein shall be
construed as a license from the Company to Associate to make, use, sell or copy
any inventions, ideas, trade secrets, trademarks, copyrightable works or other
intellectual property of the Company during the Term of this Agreement or
subsequent to its termination.

         e) Associate acknowledges that there is no general geographical
restriction contained in this Section 6(d) because the Company's and/or
Affiliates' Customers are not confined to one geographical area or operate on a
national level. Notwithstanding the foregoing, if a court of competent
jurisdiction were to determine that any of the foregoing covenants would be held
to be unreasonable in time or distance or scope, the time or distance or scope
may be reduced by appropriate order of the court to that deemed reasonable.

         f) Associate confirms that Associate is not bound by the terms of any
agreement with any previous Company or other party which restricts in any way
Associate's use or disclosure of information or Associate's engagement in any
business, except as Associate may disclose in a separate schedule attached to
this Agreement prior to Company's and Associate's execution of this Agreement.
Further, Associate represents that Associate has delivered to the Company prior
to executing this Agreement true and complete copies of any agreements disclosed
on such attached schedule. Associate represents to the Company that Associate's
execution of this Agreement, employment with the Company and the performance of
Associate's proposed duties for the Company will not violate any obligations
Associate may have to any such previous Company or other party. In any work for
the Company, Associate will not disclose or make use of any information in
violation of any agreements with or rights of any such previous Company or other
party, and will not bring to the premises of the Company any copies or other
tangible embodiments of non-public information belonging to or obtained from any
such previous employment or other party. In the event of breach of this
subsection (f) Associate hereby agrees to defend, indemnify and hold harmless
ProxyMed, its officers, directors, employees, agents (the "Indemnified Parties")
from any and all damages, suits, claims, liabilities, actions (individually and
collectively, the "Indemnity Event") arising or resulting from such breach. In
the event of any Indemnity Event, the Indemnified Parties shall provide
Associate with timely written notice of same, and thereafter Associate shall at
its own expense defend, protect and hold harmless the applicable Indemnified
Parties against said Indemnity Event. If the Associate shall fail to so defend
and/or indemnify and save harmless the Indemnified Parties, then in such
instance the Indemnified Parties shall have full rights to defend, pay



                                       7


or settle said Indemnity Event on their behalf without notice to Associate and
with full rights to recourse against Associate for all fees, costs, expenses and
payments made or agreed to be paid to discharge said Indemnity Event.

         g) ASSISTANCE IN LITIGATION. Associate shall upon reasonable notice,
furnish such information and proper assistance to the Company as it may
reasonably require in connection with any litigation in which the Company is, or
may become, a party either during or after Associate's employment with the
Company.

         h) INJUNCTIVE RELIEF.

i) Associate acknowledges and agrees that the covenants and obligations
contained in this Section 6 relate to special, unique and extraordinary matters
and that a violation of any of the terms of this Section will cause the Company
irreparable injury for which adequate remedies at law are not available.
Therefore, Associate agrees that the Company shall be entitled (without having
to post a bond or other surety) to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Associate from committing any violation of the covenants and obligations set
forth in this Section 6.

                  ii) The Company's rights and remedies under this Section 6 are
cumulative and are in addition to any other rights and remedies the Company may
have pursuant to the specific provisions of this Agreement and at law or in
equity.

7. MISCELLANEOUS.

         a) ATTORNEY'S FEES. In the event a proceeding is brought to enforce or
interpret any part of this Agreement or the rights or obligations of any party
to this Agreement, each party shall pay their own fees and expenses, including
reasonable attorney's fees and costs

         b) SUCCESSORS AND ASSIGNS. This Agreement and the benefits hereunder
are personal to the Company and are not assignable or transferable by the
Associate. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the Company and the Associate, and the Associate's heirs
and legal representatives, and the Company's successors and assigns.

         c) GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the law of the State of Florida, without regard to the
application of Florida's principles of conflict of laws.

         d) ARBITRATION. Except for disputes relating to Section 6(d) of this
Agreement or any injunctions, any and all disputes or controversies that shall
arise under or in connection with this Agreement or in any other way related to
Associate's employment by the Company, including termination of employment,
shall be submitted to a panel of three arbitrators under the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association
then in effect. The parties hereby acknowledge that the Federal Arbitration Act
takes precedence over any state arbitration statutes, rules and regulations.
Each of the arbitrators shall be qualified and experienced in employment related
matters with at least one arbitrator being a licensed attorney. The arbitrators
must base their determination solely on the terms and conditions of this
Agreement and the law in the State of Florida. The arbitrators shall have the
authority to award any remedies that a court may order or grant, except that
they will have no authority to award punitive damages or any other damages not
measured by the prevailing party's actual damages, and may not, in any event,
make any ruling, finding or award that does



                                       8


not conform to the terms and conditions of this Agreement. Arbitration shall be
held either in Fort Lauderdale, Florida, and the parties hereby agree to accept
service of process served in accordance with the Notices provision of this
Agreement and in the personal jurisdiction and venue as set out herein. Both
parties expressly covenant and agree to be bound by the decision of the
arbitrators as the final determination of the matter in dispute. Judgment upon
the award rendered by the arbitrators may be entered into any court having
jurisdiction thereof.

         e) NOTICES. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties to this Agreement addressed to the
Company's then-current CEO at its then principal office, as notified to
Associate, or to the Associate at Associate's most current address as shown in
Associate's personnel file, or to either party hereto at such other address or
addresses as Associate or it may from time to time specify for such purposes in
a notice similarly given.

         f) MODIFICATION; WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by a duly authorized officer of the Company and is agreed to in a
writing signed by the Associate and such officer. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.

         g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.

         h) VALIDITY. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

         i) SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and if any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid, this Agreement
shall be construed as if such invalid word or words, phrase or phrases, sentence
or sentences, clause or clauses, or section or sections had not been inserted.

         k) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         l) SURVIVING PROVISIONS. Any portion of this Agreement which by it
nature survives the termination of this Agreement, including Section 6, shall
survive the termination of this Agreement.

         m) ENTIRE AGREEMENT. Except as modified by this Agreement, all of
Associate's benefits and obligations are as set forth in the Company's policies
in effect from time to time. Other than the Company's policies in effect from
time to time, as modified herein, no agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party, which are not set forth expressly in this Agreement.
This Agreement constitute the final and entire agreement between the parties,
and supercedes all prior written and oral agreements, understandings, or
communications with respect to the subject matter of this Agreement.



                                       9


         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

PROXYMED, INC.                              ASSOCIATE



By: /s/ Nancy J. Ham                        By: /s/ David E. Oles
    -----------------------------------         --------------------------------
    SIGNATURE                                   SIGNATURE

Print Name: Nancy J. Ham                        Print Name: David E. Oles
            ---------------------------                     --------------------






                                       10

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
EXCHANGE ACT RULES 13A-14(a) AND 15D-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael K. Hoover, Chief Executive Officer of ProxyMed, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of ProxyMed, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2004

/s/ MICHAEL K. HOOVER

Michael K. Hoover
Chairman of the Board and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
EXCHANGE ACT RULES 13A-14(a) AND 15D-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory J. Eisenhauer, Chief Financial Officer of ProxyMed, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of ProxyMed, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2004

/s/ GREGORY J. EISENHAUER

Gregory J. Eisenhauer
Executive Vice President, and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ProxyMed, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael K. Hoover, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Michael K. Hoover

Michael K. Hoover
Chairman and Chief Executive Officer
May 10, 2004

A signed original of this written statement required by Section 906 has been provided to ProxyMed, Inc. and will be retained by ProxyMed, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ProxyMed, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory J. Eisenhauer, EVP and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Gregory J. Eisenhauer

Gregory J. Eisenhauer
EVP and Chief Financial Officer
May 10, 2004

A signed original of this written statement required by Section 906 has been provided to ProxyMed, Inc. and will be retained by ProxyMed, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.