The press release includes the following non-GAAP financial measures: (i) non-GAAP net income (net income adjusted for amortization of acquisition intangibles, share-based compensation, acquisition expense, capitalized loan fee amortization, litigation expense/settlement, non-cash embedded option charges, and the effect of tax adjustments that are outside of the company's anticipated effective tax rate, all net of tax), (ii) non-GAAP earnings per share, calculated as non-GAAP net income on a fully diluted per share basis, and (iii) non-GAAP adjusted EBITDA (net income adjusted for depreciation, amortization, share-based compensation, acquisition expense, net expenses related to financing, litigation expense/settlement, and provision for income taxes). Income taxes represent a complex element of a company's income statement and effective tax rates can vary widely between different periods. Epiq Systems uses a statutory tax rate of 40% to reflect income tax adjustments in presentation of its non-GAAP net income and non-GAAP earnings per share. Utilization of a statutory tax rate for presentation of the non-GAAP measures is done to allow a consistent basis for investors to understand financial performance across historical periods and to allow a comparison with other companies, many of whom use similar non-GAAP financial measures to supplement their GAAP results.

     These non-GAAP financial measures are intended to supplement the GAAP financial information included in the press release by providing additional insight regarding results of operations. These non-GAAP financial measures are reconciled in the press release to the most directly comparable measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, such comparable financial measures.

     Management of Epiq Systems uses these non-GAAP financial measures, together with GAAP results, as it assesses current and prospective operating results and for assessing anticipated operating results for potential acquisitions. The compensation committee has used non-GAAP financial measures in evaluating the performance of management and in determining executive bonuses. Management of Epiq Systems believes these non-GAAP measures may be useful to investors by comparing the results of operations of the company without the effect of these items. Certain items are excluded from these non-GAAP financial measures to provide additional comparability measures from period-to-period. These non-GAAP financial measures will not be defined in the same manner by all companies and may not be comparable to other companies.

     The information in Item 2.02 of this report and in the exhibit attached hereto is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing with the Securities and Exchange Commission made by Epiq Systems, whether made before or after the date hereof, except as otherwise expressly stated by specific reference in such filing.