8-K/A

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) December 23, 2003

IMPAC Medical Systems, Inc.

(Exact name of registrant as specified in its charter)

Delaware	000-50082	94-3109238
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

100 West Evelyn Avenue, Mountain View, CA	94041
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (650) 623-8800

(Former name or former address if changed since last report)

Item 2. Acquisition or Disposition of Assets.

On December 23, 2003, IMPAC Medical Systems, Inc. (“IMPAC” or the “Company”) completed the acquisition of certain assets and certain liabilities of Tamtron Corporation (“Tamtron”) and Medical Registry Services, Inc. (“MRS”), the PowerPath^® pathology information management and cancer registry information system businesses of IMPATH Inc. (“IMPATH”) (the “Tamtron/MRS Acquisition”), for total cash consideration of $22.0 million and approximately $430,000 of acquisition costs. IMPAC intends to continue to operate each of the acquired businesses. The Tamtron/MRS Acquisition was made pursuant to an asset purchase agreement, dated as of November 24, 2003, by and among Tamtron, MRS and IMPAC. The source of the cash payment was the proceeds from IMPAC’s initial public offering. The cash consideration in the acquisition was arrived at through arms’ length negotiations.

On January 6, 2004, IMPAC filed a Current Report on Form 8-K related to the Tamtron/MRS Acquisition. As permitted under Items 7(a)(4) and (b)(2) of Form 8-K, IMPAC indicated that it would file the financial statements and pro forma financial information required under Item 7 as soon as such information was available. This Amendment No. 1 of Current Report on Form 8-K provides the required financial information, and amends Item 7 of the Current Report on Form 8-K filed by IMPAC on January 6, 2004.

Item 7. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The following financial information for Tamtron has been filed as Exhibit 99.1 and is incorporated by reference herein.

Independent Auditors’ Report;

Balance Sheet as of September 30, 2003 and December 31, 2002;

Statement of Operations for the nine months ended September 30, 2003 and for the period from January 18, 2002 through December 31, 2002;

Statement of Stockholder’s Deficit for the nine months ended September 30, 2003 and for the period from January 18, 2002 through December 31, 2002;

Statement of Cash Flows for the nine months ended September 30, 2003 and for the period from January 18, 2002 through December 31, 2002; and

Notes to Financial Statements

2

The following financial information for MRS has been filed as Exhibit 99.2 and is incorporated by reference herein.

Independent Auditors’ Report;

Balance Sheet as of September 30, 2003 and December 31, 2002;

Statement of Operations for the nine months ended September 30, 2003 and for the year ended December 31, 2002;

Statement of Stockholder’s Equity (Deficit) for the nine months ended September 30, 2003 and for the year ended December 31, 2002;

Statement of Cash Flows for the nine months ended September 30, 2003 and for the year ended December 31, 2002; and

Notes to Financial Statements

(b) Pro Forma Financial Information.

The following pro forma financial information has been filed as Exhibit 99.3 and is incorporated by reference herein.

Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2003;

Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended September 30, 2003;

Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements

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(c) Exhibits.

Exhibit Number	Description
2.1	Asset Purchase Agreement, dated as of November 24, 2003, by and among Tamtron Corporation, Medical Registry Services, Inc. and IMPAC Medical Systems, Inc. (incorporated by reference to Exhibit 99.2 to IMPAC’s Current Report on Form 8-K dated November 24, 2003).*
23.1	Consent of Ireland San Filippo, LLP, independent public accountants for Tamtron Corporation.
23.2	Consent of Ireland San Filippo, LLP, independent public accountants for Medical Registry Services, Inc.
99.1	Tamtron Corporation audited financial statements at September 30, 2003 and December 31, 2002.
99.2	Medical Registry Services, Inc. audited financial statements at September 30, 2003 and December 31, 2002.
99.3	Unaudited pro forma condensed combined consolidated financial statements at and for the year ended September 30, 2003.

* The schedules to this agreement, as set forth on page (v) of the Table of Contents, have not been filed herewith, pursuant to Item 601(b)(2) of Regulation S-K. IMPAC agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

4

SIGNATURES

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

IMPAC MEDICAL SYSTEMS, INC.
By:	/s/ KENDRA A. BORREGO
	Kendra A. Borrego Chief Financial Officer

Date: April 23, 2004

5

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the inclusion of our report dated December 6, 2003, with respect to the financial statements of Tamtron Corporation as of September 30, 2003 and December 31, 2002, and for the periods then ended, in this Form 8-K/A of IMPAC Medical Systems, Inc., dated December 23, 2003.

IRELAND SAN FILIPPO, LLP

April 23, 2004

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the inclusion of our report dated December 6, 2003, with respect to the financial statements of Medical Registry Services, Inc. as of September 30, 2003 and December 31, 2002, and for the periods then ended, in this Form 8-K/A of IMPAC Medical Systems, Inc., dated December 23, 2003.

IRELAND SAN FILIPPO, LLP

April 23, 2004

EX-99.1

Exhibit 99.1

To the Stockholder of

Tamtron Corporation:

We have audited the accompanying balance sheet of Tamtron Corporation, a Delaware corporation, (the “Company”) as of September 30, 2003 and December 31, 2002, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the nine months ended September 30, 2003 and the period from January 18, 2002 through December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the Company at September 30, 2003 and December 31, 2002, and the results of its operations and its cash flows for the periods then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 to the financial statements, as of September 30, 2003, the Company has suffered significant losses during 2003 and has filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Southern District of New York. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans in regard to these matters are also described in Note 8. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

San Jose, California

December 6, 2003

TAMTRON CORPORATION

(Debtor-in-Possession)

Balance Sheet

ASSETS

	September 30, 2003		December 31, 2002
Current assets:
Cash	$	1,799	$	51,982
Accounts receivable, net		1,198,112		1,209,702
Unbilled accounts receivable		215,051		180,601
Prepaid expenses and deposits		9,211		19,849
Total current assets		1,424,173		1,462,134
Fixed assets:
Furniture and equipment		614,385		600,087
Purchased software		141,585		141,498
Capitalized software		1,529,537		902,180
		2,285,507		1,643,765
Less accumulated depreciation and amortization		431,364		193,757
		1,854,143		1,450,008
Other assets:
Goodwill		6,395,340		22,552,815
Intangibles, net		8,328,710		9,498,710
Deposits		32,144		32,144
		14,756,194		32,083,669
	$	18,034,510	$	34,995,811

The accompanying notes are an integral part of these financial statements

TAMTRON CORPORATION

(Debtor-in-Possession)

Balance Sheet

LIABILITIES AND STOCKHOLDER'S DEFICIT

	September 30, 2003			December 31, 2002
Liabilities subject to compromise:
Current liabilities:
Obligations under capital leases		57,018			57,018
Accounts payable		327,926			65,575
Accrued liabilities		502,860			423,770
		887,804			546,363
Non-current liabilities:
Payable to parent company		29,730,932			31,251,450
Obligations under capital leases		10,643			73,267
Total liabilities subject to compromise		30,629,379			31,871,080
Liabilities not subject to compromise:
Current liabilities:
Post-petition accounts payable		8,227			—
Deferred revenue		2,638,162			2,637,580
		2,646,389			2,637,580
Non-current liabilities:
Deferred income taxes		2,161,949			2,176,072
Total liabilities not subject to compromise		4,808,338			4,813,652
Commitments
Stockholder's deficit:
Common stock		286,106			286,106
Accumulated deficit		(17,689,313	)		(1,975,027	)
		(17,403,207	)		(1,688,921	)
	$	18,034,510		$	34,995,811

The accompanying notes are an integral part of these financial statements

TAMTRON CORPORATION

(Debtor-in-Possession)

Statement of Operations

	Nine Months Ended September 30, 2003			January 18, 2002 through December 31, 2002
Revenues	$	6,841,932		$	6,554,297
Operating expenses:
Cost of revenues		2,702,545			3,364,734
Selling, general, and administrative expenses		2,274,108			2,965,162
Depreciation and amortization		1,407,606			1,695,048
Acquired in-process R&D		—			900,000
		6,384,259			8,924,944
Income (loss) from operations		457,673			(2,370,647	)
Other income (expense):
Interest expense		(8,950	)		(20,641	)
Goodwill impairment		(16,157,474	)		—
		(16,166,424	)		(20,641	)
Loss before reorganization items and income tax provision (benefit)		(15,708,751	)		(2,391,288	)
Reorganization items:
Professional fees		—			—
Provision for rejected executory contracts		—			—
		—			—
Loss before income tax provision (benefit)		(15,708,751	)		(2,391,288	)
Provision for (benefit from) income taxes:
Current		19,658			2,601
Deferred		(14,123	)		(418,862	)
		5,535			(416,261	)
Net loss	$	(15,714,286	)	$	(1,975,027	)

The accompanying notes are an integral part of these financial statements

TAMTRON CORPORATION

(Debtor-in-Possession)

Statement of Stockholder’s Deficit

	Common stock			Retained earnings			Total
	Shares	Amount
Balance, January 18, 2002	—	$	286,106	$	—		$	286,106
Net loss	—		—		(1,975,027	)		(1,975,027	)
Balance, December 31, 2002	—		286,106		(1,975,027	)		(1,688,921	)
Net loss	—		—		(15,714,286	)		(15,714,286	)
Balance, September 30, 2003	—	$	286,106	$	(17,689,313	)	$	(17,403,207	)

The accompanying notes are an integral part of these financial statements

TAMTRON CORPORATION

(Debtor-in-Possession)

Statement of Cash Flows

Increase (Decrease) in Cash

	Nine Months Ended September 30, 2003			January 18, 2002 through December 31, 2002
Cash flows from operating activities:
Net loss	$	(15,714,286	)	$	(1,975,027	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Goodwill impairment		16,157,474			—
Depreciation and amortization		1,407,606			1,695,048
Write-off of purchased R&D		—			900,000
Deferred income taxes		(14,123	)		(418,862	)
Decrease (increase) in operating assets:
Accounts receivable, net		11,590			(302,418	)
Unbilled accounts receivable		(34,450	)		(180,601	)
Prepaid expenses and deposits		10,638			99,413
Increase (decrease) in operating liabilities:
Accounts payable		262,351			(157,543	)
Accrued liabilities		79,092			224,038
Customer deposits		—			(433,328	)
Post-petition accounts payable		8,227			—
Deferred revenue		582			(1,168,323	)
Net cash provided (used) by operating activities		2,174,701			(1,717,603	)
Cash flows used by investing activities:
Acquisition of fixed assets		(14,385	)		(186,341	)
Software development costs		(627,357	)		(902,180	)
Net cash used by investing activities		(641,742	)		(1,088,521	)
Cash flows from financing activities:
Increase (decrease) in payable to parent company		(1,520,518	)		2,333,497
Principal payments on capital lease obligation		(62,624	)		(55,729	)
Net cash provided (used) by financing activities		(1,583,142	)		2,277,768
Net decrease in cash		(50,183	)		(528,356	)
Cash, beginning of year		51,982			580,338
Cash, end of year	$	1,799		$	51,982

The accompanying notes are an integral part of these financial statements

Tamtron Corporation (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 1 – Organization and Operations and Petition for Relief Under Chapter 11:

Tamtron Corporation (“Tamtron”) was acquired by Impath, Inc. (“Impath”) on January 18, 2002, in a transaction accounted for as a purchase. Subsequent to the acquisition, Tamtron, a wholly owned subsidiary of Impath, operated as part of the Impath Information Services division. Tamtron generates its revenues principally from the licensing of its proprietary software. This software is designed to assist companies that provide surgical pathology, cytology and autopsy services (e.g. anatomic pathology) in streamlining operations and supporting multi-site or multi-entity healthcare networks. Tamtron also provides maintenance and support services under contracts with most of its software licensees.

On September 29, 2003, Impath and its subsidiaries, including Tamtron, filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Southern District of New York (the “Court”). Under Chapter 11, certain claims against Tamtron in existence prior to the filing of the petitions for relief under the federal bankruptcy laws are stayed while Tamtron continues business operations as Debtor-in-possession. These claims are reflected in the September 30, 2003, balance sheet as “liabilities subject to compromise.” Additional claims (liabilities subject to compromise) may arise subsequent to the filing date resulting from rejection of executory contracts, including leases, and from the determination by the court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against Tamtron’s assets (“secured claims”) are also stayed, although the holders of such claims have the right to move the court for relief from the stay. Secured claims are secured primarily by liens on Tamtron’s property, plant and equipment.

Tamtron received approval from the Court to pay or otherwise honor certain of its prepetition obligations, including employee wages.

Impath has received an offer to purchase certain assets and to assume certain liabilities of both Tamtron and another wholly-owned subsidiary, Medical Registry Services, Inc., for a total cash consideration of approximately $22 million. The purchase price and the related terms and conditions of the purchase agreement are subject to the approval of the Court.

Tamtron Corporation (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 2 – Summary of Significant Accounting Policies:

Use of estimates – The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates made by management involve the evaluation of recoverability of goodwill, intangible assets, equipment, and leasehold improvements. Actual results could differ from these estimates.

Revenue recognition – The sale and installation of Tamtron’s software requires an installation and acceptance testing effort that generally extends several months in duration. Revenue from these services is recognized using the percentage of completion method of accounting. The percentage of completion is determined by the relationship of the installation effort incurred to date to the total installation effort estimated at completion. Revenue from maintenance and support contracts is recognized ratably over the period during which the related services are provided.

Fixed assets – Fixed assets are stated at cost. Depreciation of equipment, furniture and fixtures is provided over their estimated useful lives (which range from three to seven years) using the straight-line method, and leasehold improvements are being amortized over the shorter of the related lease term or the lives of the improvements using the straight-line method.

Capitalized software development costs – The costs of planning, designing and establishing technological feasibility of computer software products are expensed as incurred to research and development expense. Once technological feasibility of the software has been established, costs of producing a marketable product are capitalized until the related software is available for commercial release, at which time amortization of the capitalized costs commences. The amortization period is generally equal to the lesser of 36 months or the related software’s estimated economic useful life.

Accounting for income taxes – The results of Tamtron’s operations are included in the consolidated income tax return for Impath, Inc. and subsidiaries. For the periods ended December 31, 2002 and September 30, 2003, in accordance with the requirements of Statement of Financial Accounting Standards No. 109, a portion of the consolidated current and deferred income tax expenses of Impath, Inc. has been allocated to Tamtron as if Tamtron were filing a separate income tax return.

Tamtron Corporation (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 2 – Summary of Significant Accounting Policies (continued):

Goodwill and other intangible assets – The acquisition of Tamtron by Impath was accounted for under the provisions of Statement of Financial Accounting Standards No. 141, which requires that intangible assets acquired in a purchase method business combination meet certain criteria to be recognized and reported apart from goodwill. Accordingly, Tamtron allocated $6,400,000 to customer lists that is being amortized over 120 months, $4,600,000 to acquired software that is being amortized over 60 months, and approximately $88,000 to purchased software. Approximately $22,600,000 was allocated to goodwill that, in accordance with the requirements of Statement of Financial Accounting Standards No. 142 (“SFAS 142”), is not being amortized. SFAS 142 requires Tamtron to evaluate at least annually whether the carrying amount of goodwill is impaired. At September 30, 2003, Tamtron has determined that goodwill is impaired and has written off approximately $16,200,000, resulting in a net carrying amount of goodwill of approximately $6,400,000.

Note 3 – Software Development Costs:

During the periods ended December 31, 2002, and September 30, 2003, software development costs have been capitalized and amortized as follows:

	Capitalized Costs		Accumulated Amortization
Balance, January 18, 2002	$	—	$	—
Development costs capitalized		902,180		—
Amortization of capitalized costs		—		(19,028	)
Balance, December 31, 2002		902,180		(19,028	)
Development costs capitalized		627,357		—
Amortization of capitalized costs		—		(165,346	)
Balance, September 30, 2003	$	1,529,537	$	(184,374	)

Note 4 –Purchased Intangible Assets:

As discussed at Note 2, Impath allocated a total of $11,000,000 to certain identified intangible assets in connection with the purchase of Tamtron in January 2002. Amortization expense related to these costs was approximately $1,500,000 in 2002 and $1,170,000 in 2003.

Tamtron Corporation (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 5 – Income Taxes:

The Company is a member of a group that files a consolidated federal income tax return. The current and deferred income tax provisions in the accompanying statements of operations have been calculated as if the Company filed a separate income tax return. No formal tax sharing agreement has been executed among the members of the consolidated group.

The components of the provision (benefit) for income taxes for 2003 and 2002 are as follows:

	2003			2002
Current:
Federal	$	0		$	0
State and local		19,658			2,601
		19,658			2,601
Deferred:
Federal		(12,239	)		(145,807	)
State and local		(1,884	)		(273,055	)
		(14,123	)		(418,862	)
	$	5,535		$	(416,261	)

A reconciliation of the Federal statutory income tax rate to the effective tax rate for the Period ended September 30, 2003, and the year ended December 31, 2002, is as follows:

	2003		2002
Federal statutory income tax rate	(34.0	)%	(34.0	)%
State and local taxes, net of Federal income tax benefit	0.0		13.8
Effect of nondeductible goodwill writeoff	34.0		—
Other	—		(0.7	)
Net effective book tax rate	0.0	%	(20.9	)%

Tamtron Corporation (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 5 – Income Taxes (continued):

Deferred tax components at December 31, 2002 and September 30, 2003 are as follows:

	2003			2002
Assets:
Net operating loss carryforward	$	1,464,514		$	1,568,393
General business credit carryforward		480,543			480,543
		1,945,057			2,048,936
Liabilities:
Intangible assets – acquisitions		(3,363,575	)		(3,837,718	)
Depreciation		(743,431	)		(387,290	)
		(4,107,006	)		(4,225,008	)
	$	(2,161,949	)	$	(2,176,072	)

At September 30, 2003, for federal income tax reporting purposes, the Company has approximately $3,800,000 of net operating loss carryforwards available to offset future taxable income. These loss carryforwards expire in 2021 and 2022. Additionally, the company has approximately $340,000 of tax credit carryforwards available to offset future federal tax liabilities. These credit carryforwards expire in 2021. For state income tax reporting purposes, the Company has approximately $1,500,000 of net operating loss carryforwards available to offset future taxable income. These loss carryforwards expire in 2012. Additionally, the company has approximately $220,000 of tax credit carryforwards available to offset future state tax liabilities. These credit carryforwards expire in 2005 with respect to approximately $50,000 and in 2012 with respect to the balance.

The Internal Revenue Code provides that limitations on a company’s ability to utilize tax attribute carryforwards may apply whenever ownership changes aggregating 50% or more occur within a period of three consecutive years.

Tamtron Corporation (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 6 – Commitments and Contingencies:

Commitments – Tamtron occupies its facilities under a lease agreement expiring March 31, 2004, at a monthly rent of approximately $28,000. Rent expense under this agreement was approximately $255,000 in 2003 and $288,000 in 2002.

Contingencies - The Securities and Exchange Commission has announced that it is commencing an investigation of Impath for alleged violations of federal securities laws and regulations. Management of Tamtron does not believe that any such alleged violations have occurred at Tamtron.

Note 7 – Related Party Transactions:

During 2003, Tamtron sold software to Impath for approximately $470,000. Additionally, during 2002 and 2003, Tamtron received certain administrative and financial support from Impath for which Tamtron paid no fees.

Note 8– Going Concern:

As shown in the accompanying statements of operations, the Company has incurred losses totaling approximately $16.1 million in 2003, principally resulting from the write-off of acquisition goodwill. Additionally, at September 30, 2003, the Company has filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Southern District of New York. These conditions raise substantial doubt about the Company’s ability to continue in existence. Management is negotiating the sale of the Company with a prospective purchaser.

EX-99.2

Exhibit 99.2

To the Stockholder of

Medical Registry Services, Inc.:

We have audited the accompanying balance sheet of Medical Registry Services, Inc., a Delaware corporation, (the “Company”) as of September 30, 2003 and December 31, 2002, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the nine months ended September 30, 2003 and the year ended December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the Company at September 30, 2003 and December 31, 2002, and the results of its operations and its cash flows for the periods then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 to the financial statements, as of September 30, 2003, the Company has suffered significant losses during 2003 and has filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Southern District of New York. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans in regard to these matters are also described in Note 8. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

San Jose, California

December 6, 2003

MEDICAL REGISTRY SERVICES

(Debtor-in-Possession)

Balance Sheet

ASSETS

	September 30, 2003		December 31, 2002
Current assets:
Cash	$	135,269	$	398,004
Accounts receivable, net		573,154		774,533
Prepaid expenses and deposits		20,667		46,648
Deferred income taxes		129,511		118,815
Total current assets		858,601		1,338,000
Fixed assets:
Furniture and equipment		330,742		321,787
Software		208,878		208,878
		539,620		530,665
Less accumulated depreciation		414,114		336,492
		125,506		194,173
Other assets:
Goodwill		5,986,243		10,486,223
Intangibles, net		2,828,555		3,094,921
Deposits and other		4,855		10,629
		8,819,653		13,591,773
	$	9,803,760	$	15,123,946

The accompanying notes are an integral part of these financial statements

MEDICAL REGISTRY SERVICES

(Debtor-in-Possession)

Balance Sheet

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

	September 30, 2003			December 31, 2002
Liabilities subject to compromise:
Current liabilities:
Accounts payable		115,646			6,758
Accrued liabilities		180,057			221,253
Income taxes payable		927,040			383,832
		1,222,743			611,843
Non-current liabilities:
Payable to parent company		9,004,100			11,027,656
Total liabilities subject to compromise		10,226,843			11,639,499
Liabilities not subject to compromise:
Current liabilities:
Deferred revenue		2,376,202			2,339,069
Non-current liabilities:
Deferred income taxes		1,008,744			1,129,011
Total liabilities not subject to compromise		3,384,946			3,468,080
Commitments
Stockholder's equity (deficit):
Common stock		10,000			10,000
Retained earnings (accumulated deficit)		(3,818,029	)		6,367
		(3,808,029	)		16,367
	$	9,803,760		$	15,123,946

The accompanying notes are an integral part of these financial statements

MEDICAL REGISTRY SERVICES

(Debtor-in-Possession)

Statement of Operations

	Nine Months Ended September 30, 2003			Year ended December 31, 2002
Revenues	$	3,809,141		$	5,037,464
Operating expenses:
Cost of revenues		598,886			892,832
Selling, general, and administrative expenses		1,805,114			2,606,014
Depreciation and amortization		343,987			473,043
		2,747,987			3,971,889
Income from operations		1,061,154			1,065,575
Other income (expense):
Interest expense		(301	)		(2,565	)
Interest income and others		162			1,496
Goodwill impairment		(4,499,980	)		—
		(4,500,119	)		(1,069	)
Income (loss) before reorganization items and provision for (benefit from) income taxes		(3,438,965	)		1,064,506
Reorganization items:
Professional fees		—			—
Provision for rejected executory contracts		—			—
		—			—
Income (loss) before provision for (benefit from) income taxes		(3,438,965	)		1,064,506
Provision for (benefit from) income taxes:
Current		516,394			569,599
Deferred		(130,963	)		(117,040	)
		385,431			452,559
Net income (loss)	$	(3,824,396	)	$	611,947

The accompanying notes are an integral part of these financial statements

MEDICAL REGISTRY SERVICES

(Debtor-in-Possession)

Statement of Stockholder’s Equity (Deficit)

	Common stock			Retained earnings (accumulated deficit)			Total
	Shares	Amount
Balance, December 31, 2001	1,000	$	10,000	$	(605,580	)	$	(595,580	)
Net income	—		—		611,947			611,947
Balance, December 31, 2002	1,000		10,000		6,367			16,367
Net loss	—		—		(3,824,396	)		(3,824,396	)
Balance, September 30, 2003	1,000	$	10,000	$	(3,818,029	)	$	(3,808,029	)

The accompanying notes are an integral part of these financial statements

MEDICAL REGISTRY SERVICES

(Debtor-in-Possession)

Statement of Cash Flows

Increase (Decrease) in Cash

	Nine Months Ended September 30, 2003			Year ended December 31, 2002
Cash flows from operating activities:
Net income (loss)	$	(3,824,396	)	$	611,947
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Goodwill impairment		4,499,980			—
Depreciation and amortization		343,987			473,043
Deferred income taxes		(130,963	)		(117,040	)
Decrease (increase) in operating assets:
Accounts receivable, net		201,379			(133,543	)
Prepaid expenses and deposits		25,981			(7,222	)
Refundable income taxes		—			138,105
Increase (decrease) in operating liabilities:
Accounts payable		108,887			6,757
Accrued liabilities		(41,194	)		221,256
Income taxes payable		543,208			383,832
Deferred revenue		37,133			62,507
Net cash provided (used) by operating activities		1,764,002			1,639,642
Cash flows from investing activities:
Acquisition of fixed assets		(8,955	)		(26,910	)
Deposits and other		5,774			(5,782	)
Net cash used by investing activities		(3,181	)		(32,692	)
Cash flows used by financing activities:
Decrease in payable to parent company		(2,023,556	)		(1,422,751	)
Net increase (decrease) in cash		(262,735	)		184,199
Cash, beginning of year		398,004			213,805
Cash, end of year	$	135,269		$	398,004

The accompanying notes are an integral part of these financial statements

Medical Registry Services, Inc. (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 1 – Organization and Operations and Petition for Relief Under Chapter 11:

Medical Registry Services, Inc. (“MRS” or the “Company”) was acquired by Impath, Inc. (“Impath”) in 1998, in a transaction accounted for as a purchase. Subsequent to the acquisition, MRS, a wholly owned subsidiary of Impath, operated as part of the Impath Information Services division. MRS generates its revenues principally from the licensing of its proprietary cancer registry software. This software is used by hospitals to generate, analyze and present information that helps manage their cancer programs and track their patients. MRS also provides maintenance and support services under contracts with most of its software licensees.

On September 29, 2003, Impath and its subsidiaries, including MRS, filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Southern District of New York (the “Court”). Under Chapter 11, certain claims against MRS in existence prior to the filing of the petitions for relief under the federal bankruptcy laws are stayed while MRS continues business operations as Debtor-in-possession. These claims are reflected in the September 30, 2003, balance sheet as “liabilities subject to compromise.” Additional claims (liabilities subject to compromise) may arise subsequent to the filing date resulting from rejection of executory contracts, including leases, and from the determination by the Court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against MRS’s assets (“secured claims”) are also stayed, although the holders of such claims have the right to move the court for relief from the stay. Secured claims are secured primarily by liens on MRS’s property, plant and equipment.

MRS received approval from the Court to pay or otherwise honor certain of its prepetition obligations, including employee wages.

Impath has received an offer to purchase certain assets and to assume certain liabilities of both MRS and another wholly-owned subsidiary, Tamtron Corporation, for a total cash consideration of approximately $22 million. The purchase price and the related terms and conditions of the purchase agreement are subject to the approval of the Court.

Medical Registry Services, Inc. (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 2 – Summary of Significant Accounting Policies:

Use of estimates – The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates made by management involve the evaluation of recoverability of goodwill, intangible assets, equipment, and leasehold improvements. Actual results could differ from these estimates.

Revenue recognition – The Company generally enters into concurrent software license and support agreements with its customers. License and support revenues from these agreements are recognized on a straight-line basis over the term of the agreements, which are typically on an annual renewal basis.

Fixed assets – Fixed assets are stated at cost. Depreciation of equipment, furniture and fixtures is provided over their estimated useful lives (which range from three to seven years) using the straight-line method, and leasehold improvements are being amortized over the shorter of the related lease term or the lives of the improvements using the straight-line method.

Capitalized software development costs – The costs of planning, designing and establishing technological feasibility of computer software products are expensed as incurred to research and development expense. Once technological feasibility of the software has been established, costs of producing a marketable product are capitalized until the related software is available for commercial release, at which time amortization of the capitalized costs commences. The amortization period is generally equal to the lesser of a period of 60 to 84 months or the related software’s estimated economic useful life.

Accounting for income taxes – The results of MRS’s operations are included in the consolidated income tax return for Impath, Inc. and subsidiaries. For the periods ended December 31, 2002 and September 30, 2003, in accordance with the requirements of Statement of Financial Accounting Standards No. 109, a portion of the consolidated current and deferred income tax expenses of Impath, Inc. has been allocated to MRS as if MRS were filing a separate income tax return.

Medical Registry Services, Inc. (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 2 – Summary of Significant Accounting Policies (continued):

Goodwill and other intangible assets – The acquisition of MRS by Impath was accounted for under the provisions of Accounting Principles Board Opinion No. 16, which required that the excess of the purchase price paid over the fair value of the tangible and identifiable intangible assets acquired, net of liabilities assumed, be accounted for as goodwill. Accounting Principles Board Opinion No. 17 requires that intangible assets be amortized over their estimated useful lives, not to exceed 40 years. In connection with the acquisition, approximately $12,600,000 of goodwill was recorded and was being amortized over a 20-year life. Additionally, a total of approximately $4,700,000 of identifiable intangible assets were recorded, and are being amortized over lives ranging from five to 20 years.

Effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142 (“SFAS 142”). SFAS 142 required, among other things, that the Company assess, as of January 1, 2002, whether or not goodwill is impaired. At that date, the Company had approximately $10,500,000 of unamortized goodwill that it determined was unimpaired. SFAS further requires that amortization of goodwill cease as of January 1, 2002. At December 31, 2002, the Company performed its required annual test for goodwill impairment and concluded that no goodwill impairment existed as of that date. At September 30, 2003, MRS has determined that goodwill is impaired and has written off approximately $4,200,000.

Note 3 – Software Development Costs:

During the year ended December 31, 2002 and the period ended September 30, 2003, software development costs have been capitalized and amortized as follows:

	Capitalized Costs		Accumulated Amortization
Balance, December 31, 2001	$	208,878	$	(85,777	)
Amortization of capitalized costs		—		(41,777	)
Balance, December 31, 2002		208,878		(127,554	)
Amortization of capitalized costs		—		(31,331	)
Balance, September 30, 2003	$	208,878	$	(158,885	)

Medical Registry Services, Inc. (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 4 – Goodwill and Intangible Assets:

At December 31, 2001, goodwill totaled $12,580,701 and accumulated goodwill amortization totaled $2,094,078. No additional goodwill was capitalized subsequent to that date and, in accordance with the requirements of SFAS 142, no additional amortization was recorded. At September 30, 2003, in connection with its filing for bankruptcy protection, and in consideration of the offer to purchase the Company for approximately $7,000,000, MRS has determined that goodwill is impaired and has written off approximately $4,200,000, resulting in a net carrying amount of goodwill of approximately $6,300,000. Other identified intangible assets and their related amortization periods are as follows:

Workforce	$	330,000	7 years
Noncompetition agreement		200,000	5 years
Trade name		241,328	20 years
Customer list		3,430,000	20 years
Acquired software		500,000	5 years
Total	$	4,701,328

Changes in the carrying amounts and accumulated amortization of other identified intangible assets are summarized as follows:

	Cost		Accumulated Amortization
Balance, December 31, 2001	$	4,701,328	$	(1,235,697	)
Amortization		—		(370,710	)
Balance, December 31, 2002		4,701,328		(1,606,407	)
Amortization		—		(266,366	)
Balance, September 30, 2003	$	4,701,328	$	(1,872,773	)

Note 5 – Income Taxes:

The Company is a member of a group that files a consolidated federal income tax return. The current and deferred income tax provisions in the accompanying statements of operations have been calculated as if the Company filed a separate income tax return. No formal tax sharing agreement has been executed among the members of the consolidated group.

Medical Registry Services, Inc. (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 5 – Income Taxes (continued):

The components of the provision (benefit) for income taxes for 2003 and 2002 are as follows:

	2003			2002
Current:
Federal	$	415,751		$	457,811
State and local		100,643			111,788
		516,394			569,599
Deferred:
Federal		(104,365	)		(118,256	)
State and local		(26,598	)		1,216
		(130,963	)		(117,040	)
	$	385,431		$	452,559

A reconciliation of the Federal statutory income tax rate to the effective tax rate for the Period ended September 30, 2003, and the year ended December 31, 2002, is as follows:

	2003		2002
Federal statutory income tax rate	(34.0	)%	34.0	%
State and local taxes, net of Federal income tax benefit	1.5		6.6
Effect of nondeductible goodwill writeoff	45.7		—
Other	(1.3	)	0.1
Net effective book tax rate	11.9	%	40.7	%

Deferred tax components at December 31, 2002 and September 30, 2003 are as follows:

	2003			2002
Assets:
Deferred revenue	$	129,511		$	118,815
Liabilities:
Depreciation and amortization		(1,008,744	)		(1,129,011	)
	$	(879,233	)	$	(1,010,196	)

Medical Registry Services, Inc. (Debtor-in-Possession)

Notes to Financial Statements

September 30, 2003

Note 6 – Commitments and Contingencies:

Commitments – MRS occupies its facilities under a lease agreement expiring July 31, 2005, at a present monthly rent of approximately $8,200. Rent expense under this agreement was approximately $73,000 in 2003 and $91,000 in 2002.

Contingencies - The Securities and Exchange Commission has announced that it is commencing an investigation of Impath for alleged violations of federal securities laws and regulations. Management of MRS does not believe that any such alleged violations have occurred at MRS.

Note 7 – Related Party Transactions:

During 2002 and 2003, MRS received certain administrative and financial support from Impath for which MRS paid no fees.

Note 8– Going Concern

As shown in the accompanying statements of operations, the Company has incurred losses totaling approximately $3.5 million in 2003, resulting from the write-off of acquisition goodwill. Additionally, at September 30, 2003, the Company has filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Southern District of New York. These conditions raise substantial doubt about the Company’s ability to continue in existence. Management is negotiating the sale of the Company with a prospective purchaser.

EX-99.3

Exhibit 99.3

INDEX TO FINANCIAL STATEMENTS

IMPAC Medical Systems, Inc.
Unaudited Pro Forma Financial Information	2
Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet as of September 30, 2003	3
Unaudited Pro Forma Condensed Combined Consolidated Statements of Operations for the Year Ended September 30, 2003	4
Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements	5

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information has been prepared to give effect to the combination of the Company, Tamtron and MRS using the purchase method of accounting and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined consolidated financial statements. The unaudited pro forma condensed combined consolidated balance sheet was prepared as if the Tamtron/MRS Acquisition had taken place on September 30, 2003. The unaudited pro forma condensed combined consolidated statement of operations was prepared as if the Tamtron/MRS Acquisition had taken place on October 1, 2002.

The Company’s fiscal year end is September 30, whereas Tamtron’s and MRS’ fiscal year ends are December 31. The following pro forma condensed combined statement of operations data for the year ended September 30, 2003 combines the results of operations of the Company, Tamtron and MRS for the twelve months ended September 30, 2003. Tamtron’s and MRS’ results of operations for the twelve months ended September 30, 2003 were calculated by combining the results of operations for the nine months ended September 30, 2003 and the results of operations for the three months ended December 31, 2002.

The unaudited pro forma adjustments are based on preliminary estimates, available information and certain assumptions and may be revised as additional information becomes available. The unaudited pro forma financial information is not intended to represent what the Company’s financial position or results of operations actually would have been if the acquisition had occurred on those dates or to project the Company’s financial position or results of operations for any future period. The unaudited pro forma condensed combined financial results may not be comparable to, or indicative of, future performance.

The unaudited pro forma condensed combined financial statements include adjustments, which are based upon preliminary estimates, to reflect the allocation of the purchase price to the acquired assets and assumed liabilities of Tamtron and MRS. The preliminary purchase price allocation has been completed (see Note 2). The final allocation of the purchase price will be determined after the completion of the integration and will be based upon actual net tangible and intangible assets acquired as well as liabilities assumed. The preliminary purchase price allocation for Tamtron and MRS is subject to revision as more detailed analysis is completed and additional information on the fair values of Tamtron’s and MRS’ assets and liabilities becomes available. Any change in the fair value of the net assets of Tamtron or MRS will change the amount of the purchase price allocable to goodwill. Final purchase accounting adjustments may differ materially from the pro forma adjustments presented here.

The unaudited pro forma financial information is based upon the respective historical consolidated financial statements of the Company, Tamtron and MRS and should be read in conjunction with the historical consolidated financial statements of the Company, Tamtron and MRS and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s annual report, quarterly reports and other information on file with the SEC.

2

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET

(in thousands)

	Historical									Pro Forma
	IMPAC As of September 30, 2003			Tamtron As of September 30, 2003			MRS As of September 30, 2003			Adjustments			Combined
Assets
Current assets:
Cash and cash equivalents	$	57,979		$	2		$	135		$	(22,137	)(a),(c)	$	35,979
Available-for-sale securities		7,052			—			—			—			7,052
Accounts receivable, net		12,100			1,198			573			—			13,871
Unbilled accounts receivable		—			215			—			—			215
Inventories		66			—			—			—			66
Deferred income taxes, net		6,334			—			130			(130	)(a)		6,334
Income tax refund receivable		339			—			—			—			339
Prepaid expenses and other current assets		4,667			9			21			—			4,697
Total current assets		88,537			1,424			859			(22,267	)		68,553
Available-for-sale securities		2,719			—			—			—			2,719
Property and equipment, net		3,573			1,854			126			(1,395	)(b)		4,158
Deferred income taxes		1,137			—			—			—			1,137
Goodwill		654			6,396			5,986			1,766	(b),(e)		14,802
Other intangible assets, net		918			8,329			2,828			(2,518	)(b),(e)		9,557
Other assets		459			32			5			—			496
Total assets	$	97,997		$	18,035		$	9,804		$	(24,414	)	$	101,422
Liabilities, Redeemable Convertible Preferred Stock, Common Stock Subject to Rescission Rights and Stockholders’ Equity
Current liabilities:
Customer deposits	$	10,900		$	—		$	—		$	—		$	10,900
Accounts payable		864			336			116			(452	)(a)		864
Accrued liabilities		4,758			503			180			(253	)(a),(c)		5,188
Income taxes payable		2,353			—			927			(927	)(a)		2,353
Deferred revenue		27,079			2,638			2,376			(1,530	)(d)		30,563
Capital lease obligations, current portion		74			57			—			—			131
Total current liabilities		46,028			3,534			3,599			(3,162	)		49,999
Payable to parent company (IMPATH Inc.)		—			29,731			9,004			(38,735	)(a)		—
Customer deposits		232			—			—			—			232
Capital lease obligations, less current portion		41			11			—			—			52
Deferred income taxes		—			2,162			1,009			(3,171	)(a)		—
Total liabilities		46,301			35,438			13,612			(45,068	)		50,283
Common stock subject to rescission rights		98			—			—			—			98
Stockholders’ equity:
Preferred stock		—			—			—			—			—
Common stock		10			286			10			(296	)(a)		10
Additional paid-in capital		47,792			—			—			—			47,792
Accumulated other comprehensive loss		(16	)		—			—			—			(16	)
Retained earnings (accumulated deficit)		3,812			(17,689	)		(3,818	)		20,950	(a),(e)		3,255
Total stockholders’ equity		51,598			(17,403	)		(3,808	)		20,654			51,041
Total liabilities, redeemable convertible preferred stock, common stock subject to rescission rights and stockholders’ equity	$	97,997		$	18,035		$	9,804		$	(24,414	)	$	101,422

The accompanying notes are an integral part of these unaudited pro forma condensed combined consolidated financial statements.

3

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except per share amounts)

	Historical									Pro Forma
	IMPAC Year Ended September 30, 2003			Tamtron Twelve Months Ended September 30, 2003(1)			MRS Twelve Months Ended September 30, 2003(1)			Adjustments			Combined
Sales, net	$	54,880		$	8,146		$	4,950		$	—		$	67,976
Cost of sales		17,606			3,476			858			—			21,940
Gross profit		37,274			4,670			4,092			—			46,036
Operating expenses:
Research and development		9,898			—			—			—			9,898
Sales and marketing		14,265			2,956			2,561			—			19,782
General and administrative		5,348			—			—			—			5,348
Amortization of goodwill and other intangible assets		345			1,861			443			(81	)(a),(b)		2,568
Goodwill impairment		—			16,157			4,500			(20,657	)(a)		—
Total operating expenses		29,856			20,974			7,504			(20,738	)		37,596
Operating income		7,418			(16,304	)		(3,412	)		20,738			8,440
Interest expense		(35	)		(14	)		(1	)		—			(50	)
Interest and other income		572			—			1			(271	)(c)		302
Income (loss) before provision for income taxes		7,955			(16,318	)		(3,412	)		20,467			8,692
Provision for income taxes		(2,780	)		(6	)		(385	)		133	(d)		(3,038	)
Net income (loss)		5,175			(16,324	)		(3,797	)		20,600			5,654
Accretion of redeemable convertible preferred stock		(2,229	)		—			—			—			(2,229	)
Net income (loss) available for common stockholders	$	2,946		$	(16,324	)	$	(3,797	)	$	20,600		$	3,425
Net income per common share:
Basic	$	0.33											$	0.38
Diluted	$	0.30											$	0.35
Weighted-average shares used in computing net income per common share:
Basic		9,010												9,010
Diluted		9,741												9,741

(1) Tamtron and MRS’ results of operations for the year ended September 30, 2003 were calculated by combining the results for the nine months ended September 30, 2003 and the results for the three months ended December 31, 2002.

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

4

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading.

1. BASIS OF PRO FORMA PRESENTATION

On December 23, 2003, the Company completed the acquisition of certain assets and certain liabilities of Tamtron Corporation (“Tamtron”) and Medical Registry Services, Inc. (“MRS”), the PowerPath^® pathology information management and cancer registry information system businesses of IMPATH Inc. (“IMPATH”) for total cash consideration of $22.0 million and approximately $430,000 of direct acquisition costs (the “Tamtron/MRS Acquisition”). The Tamtron/MRS Acquisition was made pursuant to an asset purchase agreement, dated November 24, 2003, by and among Tamtron, MRS and the Company. The Tamtron/MRS Acquisition was accounted for in accordance with SFAS No. 141 “Business Combinations” using the purchase method of accounting. The Company intends to continue to operate each of the acquired businesses.

The unaudited pro forma condensed combined consolidated statement of operations for the year ended September 30, 2003 combines the results of operations of the Company, Tamtron and MRS for the twelve months ended September 30, 2003, to give effect to the acquisition as if the acquisition had occurred on October 1, 2002. Tamtron’s and MRS’ results of operations for the twelve months ended September 30, 2003 were calculated by combining the results of operations for the nine months ended September 30, 2003 and the results of operations for the three months ended December 31, 2002.

Certain reclassifications have been made to conform Tamtron’s and MRS’ historical amounts to the Company’s financial statement presentation.

2. PURCHASE PRICE

The unaudited pro forma condensed combined consolidated financial statements reflect a total purchase price of $22.4 million, which is comprised of total cash payments to IMPATH of $22.0 million and approximately $430,000 in direct acquisition costs.

5

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Tamtron/MRS Acquisition was accounted for in accordance with SFAS No. 141 “Business Combinations” using the purchase method of accounting. The purchase price was allocated to the net tangible and identifiable intangible assets acquired and the liabilities assumed based on their estimated fair values as of September 30, 2003 as determined by management. The excess of the purchase price over the fair value of the net identifiable assets was allocated to goodwill. The pro forma purchase price allocation as of September 30, 2003 is as follows (in thousands):

Tangible assets	$	2,638
Deferred revenue		(3,484	)
Other liabilities		(68	)
Developed/core technology		5,138
Customer base		3,032
Tradename		469
In-process research and development		557
Goodwill		14,148
	$	22,430

The Company is amortizing the developed/core technology, the customer base and tradename acquired from Tamtron on a straight line basis over five years, seven years and six years, respectively. The Company is amortizing the developed/core technology, the customer base and tradename acquired from MRS on a straight line basis over two years, five years and two years, respectively. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” no amortization has been recorded on the goodwill. As a result of the Tamtron/MRS Acquisition, the Company expects to recognize amortization expense of $2.1 million, $2.0 million, $1.6 million, $1.4 million, $1.4 million and $638,000 during fiscal years 2004, 2005, 2006, 2007, 2008 and thereafter, respectively.

The fair value of the identifiable assets, including the portion of the purchase price attributed to the developed/core technology, acquired in-process research and development, the customer base and the tradename was determined by management. The income approach was used to value the developed/core technology, the customer base, the tradename and the acquired in-process research and development, which includes an analysis of the completion costs, cash flows, other required assets and risk associated with achieving such cash flows. Gross margins were estimated to be stable and operating expense ratios were estimated to slightly improve over the years. The present value of the cash flows for MRS was calculated with a discount rate of 15% for the developed/core technology, customer base and tradename, and 20% for the in-process research and development. The present value of the cash flows for Tamtron was calculated with a discount rate of 15% for the developed/core technology and customer base, 17.5% for the tradename and 20% for the in-process research and development.

The in-process research and development projects relate primarily to the development of additional modules to the pathology information system and additional features for the registry

6

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

system and are expected to be completed over the next twelve months. The purchased in-process technology was not considered to have reached technological feasibility and it has no alternative future use. Accordingly, it was recorded as a component of operating expense. The revenues, expenses, cash flows and other assumptions underlying the estimated fair value of the acquired in-process research and development involve significant risks and uncertainties. The risks and uncertainties associated with completing the acquired in-process projects include retaining key personnel and being able to successfully and profitably produce, market and sell related products. The Company does not know of any developments which would lead it to significantly change its original estimate of the expected timing and commercial viability of these projects.

The pro forma Goodwill of approximately $14.1 million represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired. The Company believes that its existing registry product offering along with the assets of MRS positions it as a leader in the market for data aggregation of cancer care information. The Company also believes that the addition of assets from Tamtron in the area of pathology information systems creates a more relevant and comprehensive product offering to its customers. The combination of both acquisitions allows the Company to better achieve its goal to provide a total solution that manages the complexity of cancer care throughout the spectrum of detection, diagnosis, treatment and follow-up.

3. PRO FORMA ADJUSTMENTS

The following unaudited pro forma condensed combined financial information gives effect to the acquisition by the Company of Tamtron and MRS. The unaudited pro forma condensed combined balance sheet is based on the historical balance sheets of the Company, Tamtron and MRS at September 30, 2003 and has been prepared to reflect the acquisition as if the acquisition was consummated on September 30, 2003. The unaudited pro forma condensed combined statement of operations combines the results of operations of the Company, Tamtron and MRS for the year ended September 30, 2003 as if the acquisition had occurred on October 1, 2002.

The unaudited pro forma condensed combined balance sheet gives effect to the following pro forma adjustments:

(a) Adjustment to eliminate the assets and liabilities that were not acquired by the Company, as defined in the asset purchase agreement. This consists principally of intercompany payable balances due to IMPATH, other operating liabilities and cash. This adjustment also eliminates the historical equity of Tamtron and MRS.

(b) Adjustment to eliminate recorded goodwill of $12.4 million, net other intangible assets of $11.2 million and net capitalized software development costs of $1.4 million.

(c) Adjustment to record the $22.0 million cash payment for the Tamtron/MRS Acquisition and the accrual of direct transaction costs of approximately $430,000.

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(d) Adjustment to reduce Tamtron’s and MRS’ deferred revenue by $1.5 million to the estimated fair value.

(e) Adjustment to record estimated $14.1 million of cost in excess of fair value of net assets acquired, $8.6 million of other intangible assets and the write-off of purchased in-process research and development of $557,000.

The unaudited pro forma condensed combined statement of operations gives effect to the following pro forma adjustments:

(a) Adjustment to eliminate amortization of $2.1 million of pre-acquisition intangible assets and capitalized software costs and goodwill impairment charges of $20.7 million recorded by Tamtron and MRS. Capitalized software development costs, goodwill and other intangible assets were all revalued at the time of the Tamtron/MRS Acquisition.

(b) Adjustment to increase amortization expense by $2.0 million to amortize (i) the developed/core technology intangible assets resulting from the transaction for Tamtron and MRS over 60 and 24 months, respectively, (ii) the customer base intangible assets resulting from the transaction for Tamtron and MRS over 84 and 60 months, respectively; and (iii) the tradename intangible assets resulting from the transaction for Tamtron and MRS over 72 and 24 months, respectively.

(c) Adjustment to reflect the estimated decrease in interest income of $271,000 related to the cash payment for the Tamtron/MRS Acquisition.

(d) Adjustment of $133,000 to the provision for income taxes to apply the Company’s effective tax rate.

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