Allscripts

Historical

(a)

HealthMEDX

Historical

HealthMEDX Pro Forma Adjustments

Pro Forma Allscripts and HealthMEDX Combined

ASSETS

Current assets:

Cash and cash equivalents

$

77,251

$

4,869

$

82,120

Accounts receivable, net

400,101

3,759

403,860

Prepaid expenses and other current assets

112,416

1,054

(73

)

(e)

113,397

Total current assets

589,768

9,682

(73

)

599,377

Long-term marketable securities

197,250

0

197,250

Fixed assets, net

144,804

1,895

(1,257

)

(b)

145,442

Intangible assets and capitalized software

   development costs, net

870,800

8,379

12,561

(c)

891,740

Goodwill

1,882,244

8,401

1,007

(d)

1,891,652

Deferred taxes, net

2,974

0

2,974

Other assets

122,297

-

122,297

Total assets

$

3,810,137

$

28,357

$

12,238

$

3,850,732

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

93,236

467

$

93,703

Accrued expenses

85,336

2,236

(1,125

)

(f)(i)

86,447

Accrued compensation and benefits

52,773

0

52,773

Deferred revenue

370,821

4,365

(2,930

)

(g)

372,256

Current maturities of long-term debt - Allscripts

12,051

0

12,051

Non-recourse current maturities of long-term debt  - Netsmart

1,337

0

1,337

Current maturities of capital lease obligations

9,957

836

10,793

Total current liabilities

625,511

7,904

(4,055

)

629,360

Long-term debt - Allscripts

663,089

0

663,089

Non-recourse long-term debt  - Netsmart

533,589

0

36,195

(h)

569,784

Related party note payable

0

10,400

(10,400

)

(i)

-

Long-term capital lease obligations

13,096

551

13,647

Deferred revenue

18,155

0

18,155

Deferred taxes, net

155,860

0

155,860

Other liabilities

52,928

0

52,928

Total liabilities

2,062,228

18,855

21,740

2,102,823

Redeemable convertible non-controlling interest - Netsmart

377,494

0

377,494

Stockholders’ equity (deficit)

1,370,415

9,502

(9,502

)

(l)

1,370,415

Total liabilities and stockholders’ equity

$

3,810,137

$

28,357

$

12,238

$

3,850,732

Allscripts

Historical

Netsmart

Historical

Netsmart Pro Forma Adjustments

(a)

HealthMEDX

Historical

HealthMEDX Pro Forma Adjustments

Pro Forma Allscripts, Netsmart and HealthMEDX Combined

Revenue

$

1,386,393

$

205,344

$

(23,677

)

(g)

$

26,546

$

(1,866

)

(g)

$

1,579,848

(12,892

)

(m)

Costs and expenses:

Cost of revenue

805,828

103,419

(12,797

)

(m)

10,899

2,138

(c)

930,419

8,301

(c)

12,631

(n)

Research and development

184,791

23,230

(12,631

)

(n)

5,270

200,660

Selling, general and administrative expenses

363,891

83,932

(5,711

)

(b)

17,987

(575

)

(b)

457,162

565

(c)

(7,216

)

(c)

(1,029

)

(o)

(86

)

(o)

5,404

(p)

Total costs and expenses

1,354,510

210,581

(5,267

)

34,156

(5,739

)

1,588,241

Income (loss) from operations

31,883

(5,237

)

(31,302

)

(7,610

)

3,873

(8,393

)

Interest expense

(31,396

)

(28,917

)

(26,554

)

(q)

(335

)

(2,332

)

(q)

(89,534

)

Goodwill impairment loss

0

0

(23,367

)

(23,367

)

Other income, net

83

0

52

135

Income (loss) before income taxes

570

(34,154

)

(57,856

)

(31,260

)

1,541

(121,159

)

Income tax (provision) benefit

(2,626

)

13,102

23,142

(r)

0

(616

)

(r)

33,002

Net (loss) income

(2,056

)

(21,052

)

(34,714

)

(31,260

)

925

(88,157

)

Net income attributable to

   non-controlling interest

(170

)

0

0

0

0

(170

)

Accretion of redemption preference

   on redeemable convertible

   non-controlling interest - Netsmart

0

0

(40,764

)

(j)

0

0

(40,764

)

Net loss attributable to Allscripts

   Healthcare Solutions, Inc.

   stockholders

$

(2,226

)

$

(21,052

)

$

(75,478

)

$

(31,260

)

$

925

$

(129,091

)

Loss per share - basic attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.01

)

$

(0.70

)

Loss per share - diluted attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.01

)

$

(0.70

)

Weighted-average shares outstanding:

Basic

185,082

185,082

Diluted

185,082

185,082

Allscripts

Historical

Netsmart

Historical for Period 1/1/16 to 4/19/16

Netsmart Pro Forma Adjustments

(a)

HealthMEDX

Historical

HealthMEDX Pro Forma Adjustments

Pro Forma Allscripts, Netsmart and HealthMEDX Combined

Revenue

$

1,124,463

$

62,302

$

19,943

(g)

$

20,765

$

(61

)

(g)

$

1,218,892

(8,520

)

(m)

Costs and expenses:

Cost of revenue

639,722

33,554

(8,450

)

(m)

7,078

1,518

(c)

678,405

3,083

(c)

1,900

(n)

Research and development

140,070

5,984

(1,900

)

(n)

3,245

147,399

Selling, general and administrative expenses

297,327

72,708

(2,784

)

(b)

9,227

(766

)

(b)

321,163

6,041

(c)

(2,496

)

(c)

(52,627

)

(o)

(63

)

(o)

(5,404

)

(p)

Total costs and expenses

1,077,119

112,246

(60,141

)

19,550

(1,807

)

1,146,967

Income (loss) from operations

47,344

(49,944

)

71,564

1,215

1,746

71,925

Interest expense

(42,757

)

(17,363

)

4,268

(q)

(266

)

(1,672

)

(q)

(57,790

)

Other (expense) income, net

(7,035

)

0

0

(7,035

)

(Loss) income before income taxes

(2,448

)

(67,307

)

75,832

949

74

7,100

Income tax benefit (provision)

2,596

20,818

(30,333

)

(r)

-

(30

)

(r)

(6,949

)

Net income (loss)

148

(46,489

)

45,499

949

44

151

Net income attributable to

   non-controlling interest

(142

)

0

0

0

0

(142

)

Accretion of redemption preference

   on redeemable convertible

   non-controlling interest - Netsmart

(18,344

)

0

(15,535

)

(j)

0

0

(33,879

)

Net loss attributable to Allscripts

   Healthcare Solutions, Inc.

   stockholders

$

(18,338

)

$

(46,489

)

$

29,964

$

949

$

44

$

(33,870

)

Loss per share - basic attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.10

)

$

(0.18

)

Loss per share - diluted attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.10

)

$

(0.18

)

Weighted-average shares outstanding:

Basic

187,190

187,190

Diluted

187,190

187,190

Purchase amount paid at closing and financed through

   incremental term loan - Netsmart

$

36,195

Contingent consideration payable to former HealthMEDX owners (k)

2,889

Purchase price Holdback amount

100

Aggregate purchase price of HealthMEDX, LLC

$

39,184

Cash and cash equivalents

$

489

Accounts receivable, net

3,109

Prepaid expenses and other current assets

773

Fixed assets

603

Intangible assets and capitalized software development costs, net

20,940

Goodwill

18,423

Other assets

45

Accounts payable

(668

)

Accrued expenses

(1,427

)

Deferred revenue

(1,792

)

Current maturities of capital lease obligations

(808

)

Long-term maturities of debt and capital lease obligations

(503

)

Total consideration

$

39,184

(a)

Represents the consolidated balance sheets of Allscripts and Netsmart as reflected in Allscripts Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016. The pro forma adjustments related to Netsmart’s unaudited historical results for the year ended December 31, 2015 and the period from January 1, 2016 to April 19, 2016 that are reflected in the Unaudited Pro Forma Condensed Combined Statement of Operations have been updated to include measurement period adjustments recorded subsequent to the filing of Form 8-K/A on July 5, 2016. These measurement period adjustments were disclosed in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016. The Form 8-K/A filed on July 5, 2016 contained pro-forma disclosure for the Netsmart acquisition completed on April 19, 2016.

(b)

Reflects the adjustment to decrease the basis in the acquired HealthMEDX fixed assets to estimated fair value. The estimated remaining weighted-average useful life is 1.5 years. The following table summarizes the changes in the estimated HealthMEDX depreciation expense: 

Year ended December 31, 2015

Nine Months ended September 30, 2016

Estimated depreciation expense

$

412

$

190

Less: Historical depreciation expense

(987

)

(956

)

Pro forma adjustments to depreciation expense

$

(575

)

$

(766

)

Year ended December 31, 2015

Nine Months ended September 30, 2016

Estimated depreciation expense

$

5,964

$

4,473

Less: Historical depreciation expense

(11,675

)

(7,257

)

Pro forma adjustments to depreciation expense

$

(5,711

)

$

(2,784

)

(c)

Reflects the adjustment of HealthMEDX’s historical intangible assets acquired to their estimated fair values. As part of the preliminary valuation analysis, we identified intangible assets, including technology, product trademark and customer relationships. The fair value of identifiable intangible assets is determined primarily using the “income approach,” which requires a forecast of all of the expected future cash flows. The following table summarizes the estimated fair values of HealthMEDX’s identifiable intangible assets and their estimated useful lives:

Estimated Fair Value

Estimated Useful Life in Years

Year ended

December 31, 2015 Amortization Expense

Nine Months ended September 30, 2016 Amortization Expense

Technology

$

11,410

10 years

$

2,272

$

1,518

Product Trademark

680

10 years

78

57

Customer Relationships

8,850

14 years

-

303

Total

$

20,940

$

2,350

$

1,878

Less: Historical amortization expense - Cost of Sales

(134

)

-

Less: Historical amortization expense - Operating expenses

(7,294

)

(2,856

)

Pro forma adjustments to amortization expense - Technology

$

2,138

$

1,518

Pro forma adjustments to amortization expense - Customer Relationships and Trademark

$

(7,216

)

$

(2,496

)

Year ended December 31,

Year 2 after acquisition

$

2,023

Year 3 after acquisition

1,817

Year 4 after acquisition

1,598

Year 5 after acquisition

1,338

Year 6 after acquisition

1,039

Total

$

7,815

Estimated Fair Value

Estimated Useful Life in Years

Year ended

December 31, 2015 Amortization Expense

Nine Months ended September 30, 2016 Amortization Expense

Technology

$

144,000

10-12 years

$

20,932

$

16,011

Corporate Trademark

27,000

indefinite

-

-

Product Trademarks

8,500

10 years

757

597

Customer Relationships

230,000

12-20 years

8,038

10,677

Total

$

409,500

$

29,727

$

27,285

Less: Historical amortization expense - Technology

(12,631

)

(12,928

)

Less: Historical amortization expense - Customer Relationships and Other

(8,230

)

(5,233

)

Pro forma adjustments to amortization expense - Technology

$

8,301

$

3,083

Pro forma adjustments to amortization expense - Customer Relationships

   and Product Trademarks

$

565

$

6,041

Year ended December 31,

Year 2 after acquisition

$

35,732

Year 3 after acquisition

41,573

Year 4 after acquisition

41,311

Year 5 after acquisition

40,198

Year 6 after acquisition

36,587

Total

$

195,401

(d)

Reflects adjustment to remove HealthMEDX’s historical goodwill and record goodwill associated with the HealthMEDX acquisition in the amount of $9 million. This amount is different from the goodwill amount shown in Note 3 above, since it is based on the assumption that the HealthMEDX acquisition occurred on September 30, 2016 for purposes of the pro forma presentation.

(e)

Adjustment to write-off capitalized future financing fees.

(f)

Adjustment to write-off accrued interest associated with HealthMEDX related party note payable, which was repaid at the time of acquisition, partly offset by the recognition of unfavorable lease liability obligation.

(g)

Represents the estimated adjustment to decrease the assumed deferred revenue obligations to fair value. The fair value was determined based on the estimated costs to fulfill the remaining performance obligations plus a normal profit margin. After the acquisition, this adjustment will have a continuing impact and will reduce revenue related to the assumed performance obligations as these obligations are satisfied.

(h)

Reflects the new debt incurred to finance the acquisition of HealthMEDX. The new borrowings incurred by Netsmart are non-recourse to Allscripts and its wholly-owned subsidiaries.

(i)

Adjustment to write-off HealthMEDX related party note payable and accrued interest, which were paid at the time of acquisition.

(j)

The redeemable convertible non-controlling interest represents preferred units of Netsmart issued to GI Partners in exchange for a cash contribution and preferred units issued to Netsmart’s management as part of the management rollover. The preferred units provide for a liquidation preference equal to the greater of (i) a return of the original issue price plus a preferred return (accruing on a daily basis at the rate of 11% per annum and compounding annually on the last day of each calendar year) or (ii) the as-converted value of the units. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the interim nine-month period ended September 30, 2016, give effect to the accretion of the 11% redemption preference as part of the calculation of net income (loss) attributable to Allscripts stockholders.

(k)

The HealthMEDX unitholders are entitled to earn up to an additional $3,500,000 based on HealthMEDX achieving certain revenue milestones in 2017. This amount represents the present value of this contingent obligation.

(l)

Represents the elimination of the historical equity of HealthMEDX.

(m)

Reflects the elimination of the impact of historical transactions between Allscripts and Netsmart.

(n)

Reflects the reclassification of the historical Netsmart amortization of technology from research and development expenses to cost of revenue in order to conform to Allscripts presentation.

(o)

The Netsmart pro-forma adjustment reflects the elimination of the impact of the annual management fee paid by Netsmart to its former parent, plus direct expenses incurred, since such fee was terminated following the acquisition of Netsmart. In addition, the Netsmart pro-forma adjustment includes the elimination of accelerated stock-based compensation expense recognized upon the settlement of Netsmart outstanding equity-based awards at the time of acquisition. The HealthMEDX pro-forma adjustment reflects the amortization of the unfavorable lease liability obligation.

(p)

Adjustment to reflect transaction-related costs incurred in connection with the Netsmart acquisition as if such acquisition occurred on January 1, 2015.

(q)

The net increase to interest expense resulting from interest on the new debt incurred to finance the acquisition of HealthMEDX and the amortization of related debt issuance costs is as follows:

Year ended December 31, 2015

Nine Months ended September 30, 2016

Elimination of historical debt-related interest expense - HealthMEDX

$

279

$

213

Interest expense on new incremental term loan - Netsmart

(1,983

)

(1,474

)

Amortization of new deferred debt issuance costs - Netsmart

(88

)

(66

)

Pro forma adjustments to move expensed debt issuance costs from

   October 2016 to January 2015 - Netsmart

(80

)

-

Incremental interest expense accretion related to contingent consideration

(460

)

(345

)

Pro forma adjustments to interest expense

$

(2,332

)

$

(1,672

)

Year ended December 31, 2015

Nine Months ended September 30, 2016

Elimination of historical debt-related interest expense and

   amortization of net debt issuance costs - Netsmart

$

26,721

$

29,645

Interest expense on new first lien term loan - Netsmart

(22,628

)

(16,821

)

Interest expense on new second lien term loan - Netsmart

(17,536

)

(13,152

)

Interest expense on revolver borrowings - Allscripts

(956

)

(717

)

Amortization of new discount and debt issuance costs - Netsmart

(3,919

)

(2,923

)

Pro forma adjustments to move debt issuance costs write-off from April 2016

   to January 2015

(8,236

)

8,236

Pro forma adjustments to interest expense

$

(26,554

)

$

4,268

(r)

Reflects the income tax effect of pro forma adjustments based on the estimated blended federal and state statutory rate of 40%.