8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

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

Date of Report (Date of earliest event reported):  December 28, 2011

EPIQ SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Missouri	000-22081	48-1056429
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

501 Kansas Avenue

Kansas City, Kansas 66105

(Address of principal executive offices, including zip code)

(913) 621-9500

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

Explanatory Note

This Amendment No. 1 on Form 8-K/A (“Amendment”) is being filed to amend and supplement Item 9.01 of the Current Report on Form 8-K filed by Epiq Systems, Inc. (“Epiq”) with the Securities and Exchange Commission on December 29, 2011 (the “December Form 8-K”) relating to the completion of the acquisition by Epiq Systems Holdings, LLC (“Purchaser”) of De Novo Legal LLC and its subsidiaries (“De Novo”).  This Amendment provides the audited historical financial statements of De Novo as required by Item 9.01(a) of Form 8-K and the unaudited pro forma financial information required by Item 9.01(b) of Form 8-K, which financial statements and information were omitted from the December Form 8-K as permitted by Form 8-K.  The information contained in this Amendment amends and supplements the information contained in Item 9.01 of the December Form 8-K.  Except as described above, all other information in and the exhibits to the December Form 8-K remain unchanged.

Epiq reported under Item 2.01 of the December Form 8-K that on December 28, 2011, it completed the acquisition of De Novo.  The acquisition was made pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”), dated December 28, 2011, by and among Purchaser, De Novo, Epiq (for the limited purposes as set forth therein) and the Sellers, the Seller Guarantors and the Seller Representative each as defined in the Purchase Agreement.

Upon the closing of the Purchase Agreement, Purchaser paid approximately $67.9 million and an additional $5.0 million is being held by Epiq and deferred for 18 months following the closing as security for potential indemnification claims.  Net closing consideration will also include any post-closing adjustments as defined in the Purchase Agreement related to working capital and other adjustments.  In addition to the net closing consideration, the Sellers have the right to receive contingent earn-out payments of up to $33.6 million based on future operating revenue growth and the continued employment of certain of De Novo’s employees.  Contingent consideration payments to the Sellers under the earn-out opportunity, if any, will be based on operating revenue for calendar years 2012 and 2013 and the continued employment of certain of De Novo’s employees.

The total preliminary purchase price transferred to effect the acquisition of De Novo was as follows (in thousands):

Cash paid at closing	$	67,866
Fair value of deferred cash consideration	4,870
Fair value of contingent consideration	16,226
Working capital adjustment	(1,720		)
Total preliminary purchase price	$	87,242

2

Item 9.01  Financial Statements and Exhibits.

a) Financial statements of businesses acquired.

The required audited consolidated financial statements of De Novo Legal LLC and Subsidiary for the year ended December 31, 2010 are attached hereto as Exhibit 99.1 and incorporated in their entirety herein by reference.The required unaudited interim consolidated financial statements of De Novo Legal LLC and Subsidiary for the nine months ended September 30, 2011 and 2010 are attached hereto as Exhibit 99.2 and incorporated in their entirety herein by reference.

b) Pro forma financial information.

The required pro forma financial information for the year ended December 31, 2011 is attached hereto as Exhibit 99.3 and is incorporated in its entirety herein by reference.

d) Exhibits.

The following exhibits are filed as part of this Amendment.

Exhibit No.	Exhibit Description
23.1	Consent of Cornick Garber Sandler, LLP Independent Auditors
99.1	Audited consolidated financial statements of De Novo Legal LLC and Subsidiary as of and for the year ended December 31, 2010 and Report of Independent Auditors therein.
99.2	Unaudited consolidated financial statements of De Novo Legal LLC and Subsidiary as of and for the nine months ended September 30, 2011 and 2010.
99.3	Unaudited pro forma pro forma combined condensed statement of income for the year ended December 31, 2011.

3

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.

	EPIQ SYSTEMS, INC.
Date: March 6, 2012
	By:	/s/ Tom W. Olofson
	Name:	Tom W. Olofson
	Title:	Chairman of the Board, Chief Executive Officer and Director

4

EXHIBIT INDEX

Exhibit No.	Exhibit Description
23.1	Consent of Cornick Garber Sandler, LLP Independent Auditors
99.1	Audited consolidated financial statements of De Novo Legal LLC and Subsidiary as of and for the year ended December 31, 2010 and Report of Independent Auditors therein.
99.2	Unaudited consolidated financial statements of De Novo Legal LLC and Subsidiary as of and for the nine months ended September 30, 2011 and 2010.
99.3	Unaudited pro forma combined condensed statement of income for the year ended December 31, 2011.

5

EX-23.1

Exhibit 23.1

Consent of Independent Auditors

We hereby consent to the inclusion in the Current Report on Form 8-K/A of Epiq Systems, Inc. dated March 1, 2012 and the incorporation by reference into the previously filed Registration Statements on Form S-3 (File No. 333-169753) and Form S-8 (File Nos. 333-30847, 333-57952, 333-101233, 333-107111, 333-119042 and 333-145218), of our report dated March 29, 2011 relating to the consolidated financial statements of De Novo Legal LLC and Subsidiary as of and for the year ended December 31, 2010.

/s/ Cornick, Garber and Sandler, LLP

New York, New York

March 1, 2012

EX-99.1

Exhibit 99.1

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC
AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010

Cornick Garber Sandler

Certified Public Accountants & Advisors

Independent Auditors’ Report

De Novo Legal, LLC

New York, New York

We have audited the accompanying consolidated balance sheet of DE NOVO LEGAL, LLC AND SUBSIDIARY as at December 31, 2010 and the related consolidated statements of operations and members’ capital and cash flows for the year then ended. 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 generally accepted auditing standards in the United States. 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 above present fairly, in all material respects, the financial position of De Novo Legal, LLC and Subsidiary as at December 31, 2010 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles in the United States.

/s/ Cornick, Garber & Sandler, LLP

CERTIFIED PUBLIC ACCOUNTANTS

New York, New York

March 29, 2011

Cornick, Garber & Sandler, LLP
825 Third Avenue, New York, NY 10022-9524 T 212.557.3900 F 212.557.3936
50 Charles Lindbergh Blvd., Uniondale, NY 11553-3600 T 516.542.9030 F 516.542.9035	cgscpa.com

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

AS AT DECEMBER 31, 2010

ASSETS
Current assets:
Cash and cash equivalents	$	316,989
Accounts receivable	11,627,017
Prepaid taxes	188,613
Prepaid expenses and other current assets	910,635
Total current assets	13,043,254
Equipment, furniture and improvements, net of accumulated depreciation	2,773,657
Due from members	7,363,281
Other assets	228,509
TOTAL	$	23,408,701
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses	$	1,451,952
Notes payable bank	5,845,000
Equipment leases payable (current portion)	829,189
Deferred income taxes	487,000
Total current liabilities	8,613,141
Deferred rent payable	58,556
Deferred income taxes	45,000
Equipment leases payable (less current portion included above)	723,918
Total liabilities	9,440,615
Commitments and contingencies
MEMBERS’ CAPITAL
De Novo Legal, LLC	12,927,397
Noncontrolling interest in subsidiary	1,040,689
Total members’ capital	13,968,086
TOTAL	$	23,408,701

The notes to financial statements are made a part hereof.

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

CONSOLIDATED STATEMENT OF MEMBERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2010

							Noncontrolling
				De Novo			Interest in
	Combined			Legal, LLC			Subsidiary
Members’ capital - January 1, 2010	$	9,359,126		$	8,915,496		$	443,630
Net income	5,808,960			5,211,901			597,059
Less: Distributions	(1,200,000		)	(1,200,000		)
MEMBERS’ CAPITAL - DECEMBER 31, 2010	$	13,968,086		$	12,927,397		$	1,040,689

The notes to financial statements are made a part hereof.

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2010

Net service revenues			$	41,814,905
Direct cost of services			24,878,283
Gross profit			16,936,622
Expenses:
Salaries	$	4,761,425
Payroll taxes	388,988
Payroll processing	39,851
Professional fees	719,657
Rent and utilities	1,760,165
Repairs and maintenance	25,838
Depreciation	882,060
Insurance	553,390
Advertising	101,751
Telephone	248,591
Computer expense	201,621
Bad debt expense	293,061
Office expense	143,606
Postage and messenger	16,841
Travel and entertainment	330,546
Bank fees	25,918
Interest	318,626
Contributions	37,890
Dues and subscriptions	10,678
Miscellaneous	11,359
Total expenses			10,871,862
Income before income taxes and noncontrolling interest in subsidiary			6,064,760
Income tax expense			255,800
INCOME BEFORE NONCONTROLLING INTEREST IN SUBSIDIARY			5,808,960
Less: Net income attributable to noncontrolling interest in subsidiary			(597,059		)
NET INCOME ATTRIBUTABLE TO DE NOVO LEGAL, LLC			$	5,211,901

The notes to financial statements are made a part hereof.

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2010

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Cash flows from operating activities:
Income before noncontrolling interest in subsidiary	$	5,808,960
Adjustments to reconcile results of operations to net cash effect of operating activities:
Depreciation expense	882,060
Deferred income taxes	170,000
Bad debt expense	293,061
Net change in asset and liability accounts:
Accounts receivable	(3,561,390		)
Prepaid expenses and other current assets	(67,751		)
Security deposits	(17,896		)
Accounts payable and accrued expenses	875,949
Deferred rent payable	(44,609		)
Prepaid taxes	(293,888		)
Net cash provided by operating activities	4,044,496
Cash flows from investing activities:
Purchase of fixed assets	(423,281		)
Loans to members	(3,875,092		)
Net cash used for investing activities	(4,298,373		)
Cash flows from financing activities:
Repayments - capital leases payable	(876,629		)
Distributions to members	(1,200,000		)
Proceeds from bank note payable, net	2,565,000
Net cash provided by financing activities	488,371
NET INCREASE IN CASH	234,494
Cash and cash equivalents - January 1, 2010	82,495
CASH AND CASH EQUIVALENTS - DECEMBER 31, 2010	$	316,989
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	320,477
Income taxes	$	342,088
Fixed assets acquired through capital leases	$	676,494

The notes to financial statements are made a part hereof.

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

NOTE A -  Summary of Significant Accounting Policies

Operations

The consolidated financial statements include the accounts of De Novo Legal, LLC and De Novo Legal Electronic Discovery, LLC, which is 85% owned by De Novo Legal, LLC and 15% owned by an individual member of De Novo Legal, LLC. All significant intercompany transactions and balances have been eliminated in combination.

De Novo Legal, LLC is in the business of providing temporary legal staffing to local and regional law firms and corporations in New York, Atlanta, Houston, San Francisco, Los Angeles, Boston and the District of Columbia.

De Novo Electronic Discovery, LLC is in the business of providing electronic discovery services which include processing and hosting legal data from two co-locations in Hawthorne, New York and San Jose, California.

Three clients represented approximately 50% of revenues and approximately 24% of accounts receivable at December 31, 2010, with the largest client representing approximately 21% and 12% of the respective totals.

Noncontrolling Interest in Subsidiary

The Company presents the 15% interest in De Novo Electronic Discovery, LLC., which is not directly owned by De Novo Legal LLC, in accordance with the provisions of the Financial Accounting Standards Board standard on “Noncontrolling Interests in Consolidated Financial Statements” which requires that the portion of net income attributable to noncontrolling interests for subsidiaries be presented separately as net income (loss) applicable to noncontrolling interests on the consolidated statement of operations, and the portion of the members’ equity of such subsidiaries be presented as noncontrolling interests on the consolidated balance sheet.

Revenue Recognition

Revenue is recognized when the services are performed and there are no significant uncertainties concerning collection of the related receivables. At December 31, 2010, the Company has not recorded revenues of approximately $177,000 related to services performed but whose collectability is contingent on the successful outcome of certain litigation related to a client of one of the Company’s customers which is not scheduled to commence until the Fall of 2011.

(Continued)

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

NOTE A -  Summary of Significant Accounting Policies (Continued)

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents. The Company maintains its cash balances at one financial institution.

Accounts Receivable

The Company extends credit based on a valuation of its clients’ financial condition. Management believes that all accounts at December 31, 2010 are fully collectable. Therefore, no allowance for doubtful accounts is deemed required at December 31, 2010.

Depreciation

Depreciation of equipment, furniture and leasehold improvements is computed on a straight-line basis for financial accounting purposes. Leasehold improvements are amortized over the remaining life of the lease and equipment and furniture are depreciated over their estimated useful life. For income tax purposes, depreciation is computed by accelerated methods.

Advertising

Advertising costs are expensed as incurred. For the year ended December 31, 2010, advertising expense approximated $96,000.

Use of Estimates and Subsequent Events

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company has considered subsequent events occurring through March 29, 2011, the date the financial statements became available for distribution, in evaluating its estimates and in the preparation of its financial statements.

(Continued)

2

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

NOTE B -  Equipment, Furniture and Improvements

At December 31, 2010, equipment, furniture, computer software and improvements consist of the following:

				Estimated
				Useful Lives
				(Years)
Equipment	$	4,274,392		5
Furniture	66,428			7
Leasehold improvements	259,517			2-4
Computer software	67,563			3
Total	4,667,900
Accumulated depreciation	(1,894,243		)
Net equipment, furniture and improvements	$	2,773,657

The above includes equipment under capital leases with a cost of approximately $3,182,000 (Note F).

NOTE C -  Income Taxes

The Company is treated in the same manner as a partnership for federal and state income tax purposes but reports its operations on a cash basis for income tax purposes. Under this election, the cash basis taxable earnings or losses of the Company are reportable on the personal income tax returns of the members and any federal and state income taxes thereon are payable by them. However, the Company is subject to New York City, West Virginia, Texas, Georgia and Washington, D.C. unincorporated business taxes and, therefore, records deferred taxes on the difference between accrual basis and cash basis earnings in these jurisdictions. Accordingly, the Company has recorded the following income tax expense for the year ended December 31, 2010:

Currently payable	$	146,800
Net increase in deferred tax assets	170,000
Total	316,800
Less: Prior years’ net overaccruals	(61,000		)
Total	$	255,800

(Continued)

3

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

NOTE C -  Income Taxes (Continued)

The Company’s federal income tax returns have not been examined by the Treasury Department or local jurisdictions in recent years.

NOTE D -  Commitments and Contingencies

Rent

The Company’s principal premises are sublet from an unrelated party to October 31, 2011 at an annual rental of approximately $392,000 plus overtime charges.

In addition, the Company sublets or leases space from unrelated parties in various other locations (Note A).

Certain of the above-mentioned leases have rentals which increase over their term. The rentals under these leases are recorded for financial accounting purposes on a straight-line basis. At December, 31, 2010, future rentals of approximately $59,000 have been reflected as a noncurrent liability in the attached balance sheet. This noncurrent liability for rent payable will be reduced in future years to the extent that the minimum rentals payable in those years exceeds the average net expense recorded on a straight-line basis.

The aggregate minimum rental commitments for premises under lease agreements with noncancelable terms at December 31, 2010 are as follows:

Year ending December 31:
2011	$	1,493,126
2012	843,978
2013	77,181
Total	$	2,414,285

Rent expense was approximately $1,760,000 for the year ended December 31, 2010.

Guaranteed Payments

An employment agreement with the Company’s chief executive officer, who is also a 20% member, provides for a guaranteed minimum annual compensation of $300,000.

(Continued)

4

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

NOTE D -  Commitments and Contingencies (Continued)

Guaranteed Payments (Continued)

In addition, an employment agreement with a managing director of the Company, who is also a 5% member, and holds the minority interest in De Novo Electronic Discovery, LLC provides for a guaranteed minimum annual compensation of $200,000 and a bonus based on certain results of De Novo Legal, LLC.

Software License Agreement

In December 2010, the Company entered into a software license agreement for a period of three years, commencing January 1, 2011, requiring a minimum annual payment of $680,000 plus monthly fees for usage in excess of stipulated amounts. As at December 31, 2010, the Company has prepaid approximately $535,000 of the fee due under the license agreement.

NOTE E -  Bank Loans Payable

Outstanding loans at December 31, 2010 are comprised of borrowings under a $7,000,000 revolving credit agreement which expires on June 30, 2011. Borrowings are limited to eligible accounts receivable and bear interest at various interest rates pegged to either the prime rate or LIBOR as defined at the dates of the various borrowings. The interest rate at December 31, 2010 was 4.25%. The advances are collateralized by the Company’s assets not otherwise pledged. The loans contain a subjective acceleration clause, which allows the bank to call the loans if a material adverse change occurs.

NOTE F -  Equipment Leases Payable

The Company leases certain equipment under capital leases, with interest at rates ranging from approximately 1.3 % to 20.6% a year, payable in monthly installments through November 2014. The remaining payments at December 31, 2010 are due as follows:

Year ending December 31:
2011	$	933,343
2012	574,402
2013	160,840
2014	36,986
Total	1,705,571
Less amount representing interest	152,464
Net	$	1,553,107

(Continued)

5

Cornick Garber Sandler

Certified Public Accountants & Advisors

DE NOVO LEGAL, LLC AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

NOTE G -  Due From Members

Interest on outstanding loans is being charged at a rate based on the applicable “federal rate” for the year. Interest income for the year ended December 31, 2010 was $22,122. The loans are due not later than December 30, 2013.

6

EX-99.2

Exhibit 99.2

DE NOVO LEGAL, LLC AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AND ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

DE NOVO LEGAL, LLC AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

AS OF SEPTEMBER 30, 2011 and 2010

(Dollars in thousands)

	September 30,		September 30,
	2011		2010
ASSETS
Current assets:
Cash and cash equivalents	$	344	$	1,331
Accounts receivable	18,984		10,428
Prepaid expenses and other current assets	2,039		688
Total current assets	21,367		12,447
Equipment, furniture and improvements, net of accumulated depreciation	3,537		2,783
Due from members	7,363		3,488
Other assets	378		226
TOTAL	$	32,645	$	18,944
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses	$	2,827	$	1,336
Notes payable - bank	7,770		5,605
Equipment leases payable (current portion)	1,223		815
Total current liabilities	11,820		7,756
Deferred rent payable	59		103
Deferred income taxes	532		362
Equipment leases payable (less current portion included above)	1,277		674
Total liabilities	13,688		8,895
Commitments and contingencies
MEMBERS’ CAPITAL
De Novo Legal, LLC	16,681		9,186
Noncontrolling interest in subsidiary	2,276		863
Total members’ capital	18,957		10,049
TOTAL	$	32,645	$	18,944

See accompanying Notes to Condensed Consolidated Financial Statements.

1

DE NOVO LEGAL, LLC AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(UNAUDITED)

(Dollars in thousands)

	2011			2010
Net service revenues		$	47,369		$	30,776
Direct cost of services		24,333			19,146
Gross profit		23,036			11,630
Expenses:
Payroll and payroll related	5,198			3,905
Rent, utilities, repairs and maintenance	1,485			1,371
Depreciation	1,270			562
Office expense	752			492
Insurance	432			385
Professional fees	398			338
Advertising, travel and entertainment	188			192
Other operating expenses	31			28
Bank fees	33			23
Interest	283			208
Total expenses		10,070			7,504
Income before income taxes and non controlling interest in subsidiary		12,966			4,126
Income tax expense		511			240
INCOME BEFORE NONCONTROLLING INTEREST IN SUBSIDIARY		12,455			3,886
Less: Net income attributable to noncontrolling interest in subsidiary		1,235			420
NET INCOME ATTRIBUTABLE TO DE NOVO LEGAL, LLC		$	11,220		$		3,466

See accompanying Notes to Condensed Consolidated Financial Statements.

2

DE NOVO LEGAL, LLC AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 and 2010

(Dollars in thousands)

	2011			2010
Cash flows from operating activities:
Income before noncontrolling interest in subsidiary	$	12,455		$	3,886
Adjustments to reconcile results of operations to net cash effect of operating activities:
Depreciation expense	1,270			562
Deferred income taxes	—			(105		)
Net change in asset and liability accounts:
Accounts receivable	(7,357		)	(2,069		)
Other assets	(149		)	(15		)
Prepaid expenses and other current assets	(940		)	155
Accounts payable and accrued expenses	1,375			760
Net Cash provided by operating activities	6,654			3,174
Investing Activities
Purchase of fixed assets	(10		)	(260		)
Net Cash used by investing activities	(10		)	(260		)
Financing Activities
Distributions to members	(7,466		)	(3,196		)
Payments under capital lease obligations	(1,076		)	(794		)
Proceeds from bank note payable, net	1,925			2,325
Net Cash used by Financiang activities	(6,617		)	(1,665		)
Net increase in cash	27			1,249
Cash, beginning balance	317			82
Cash, ending balance	$	344		$	1,331

See accompanying Notes to Condensed Consolidated Financial Statements.

3

DE NOVO LEGAL, LLC AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS’ CAPITAL (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 and 2010

(Dollars in thousands)

							Noncontrolling
				De Novo			Interest in
	Combined			Legal, LLC			Subsidiary
Members’ capital - January 1, 2010	$	13,968		$	12,927		$	1,041
Net income	12,455			11,220			1,235
Less: distributions	(7,466		)	(7,466		)	—
Members’ capital - September 30, 2011	$	18,957		$	16,681		$	2,276

							Noncontrolling
				De Novo			Interest in
	Combined			Legal, LLC			Subsidiary
Members’ capital - January 1, 2009	$	9,359		$	8,916		$	443
Net income	3,886			3,466			420
Less: distributions	(3,196		)	(3,196		)	—
Members’ capital - September 30, 2010	$	10,049		$	9,186		$	863

See accompanying Notes to Condensed Consolidated Financial Statements

4

De Novo Legal, LLC and Subsidiary

Notes to Condensed Consolidated Financial Statements

Unaudited

(Dollars in thousands)

Note A — Summary of Significant Accounting Policies

Operations

The condensed consolidated financial statements include the accounts of De Novo Legal, LLC and De Novo Legal Electronic Discovery, LLC, which is 85% owned by De Novo Legal, LLC and 15% owned by an individual member of De Novo Legal, LLC.  All significant intercompany transactions and balances have been eliminated in combination.  These unaudited financial statements should be read in conjunction with the consolidated financial statements and related notes included in the 2010 audited financial statements of De Novo Legal, LLC and Subsidiary.

De Novo Legal, LLC is in the business of providing temporary legal staffing to local and regional law firms and corporations in New York, Atlanta, Houston, San Francisco, Los Angeles, Boston and the District of Columbia.

De Novo Electronic Discovery, LLC is in the business of providing electronic discovery services which include processing and hosting legal data from two co-locations in Hawthorne, New York and San Jose, California.

Noncontrolling Interest in Subsidiary

The Company presents the 15% interest in De Novo Electronic Discovery, LLC, which is not directly owned by De Novo Legal, LLC, in accordance with the provisions of the Financial Accounting Standards Board’s Accounting Standards Codification Topic 810 — “Consolidation” which requires that the portion of net income attributable to noncontrolling interests for subsidiaries be presented separately as net income (loss) attributable to non controlling interests on the consolidated statement of operations, and the portion of the members’ equity of such subsidiaries be presented as noncontrolling interests on the consolidated balance sheet.

Revenue Recognition

Revenue is recognized when the services are performed and there are no significant uncertainties concerning collection of the related receivables.

5

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents.  The Company maintains its cash balances at one financial institution.

Accounts Receivable

The Company extends credit based on a valuation of its clients’ financial condition.  Management believes that all accounts as of September 30, 2011 and 2010 are fully collectable.  Therefore, no allowance for doubtful accounts was deemed required as of September 30, 2011 or 2010.

Depreciation

Depreciation of equipment, furniture and leasehold improvements is computed on a straight-line basis for financial accounting purposes.  Leasehold improvements are amortized over the remaining life of the lease and equipment and furniture are depreciated over their estimated useful life.

Advertising

Advertising costs are expensed as incurred.  For the nine months ended September 30, 2011 and 2010, advertising expense was approximately $93 and $66 , respectively.

Use of Estimates

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

NOTE B — Commitments and Contingencies

Rent

The Company’s principle premises are sublet from an unrelated party to October 31, 2011, at an annual rental of approximately $415 plus overtime charges.

In addition, the Company sublets or leases space from unrelated parties in various other locations.  See Note A for further discussion of Company locations.

Certain of the above-mentioned leases have rentals which increase over their term.  The rentals under these leases are recorded for financial accounting purposes on a straight-line basis.  As of September 30, 2011 and 2010, future rentals of approximately $59 and $103, respectively, have been reflected as a noncurrent liability in the attached balance sheets.  This noncurrent liability

6

for rent payable will be reduced in future periods to the extent that the minimum rentals payable in those years exceeds the average net expense recorded on a straight-line basis.

Rent expense was approximately $1,311 and $1,239 for the nine months ended September 30, 2011 and 2010, respectively.

Software License Agreement

In December 2010, the Company entered into a software license agreement for a period of three years, commencing January 1, 2011, requiring a minimum annual payment of $680 plus monthly fees for usage in excess of stipulated amounts.  As of September 30, 2011, the Company has prepaid approximately $162 of the fee due under the license agreement.

NOTE C — Bank Loans Payable

Outstanding loans as of September 30, 2011 are comprised of borrowings under a $10,000 line of credit which expires in June 2012.  Borrowings are limited based on a defined borrowing base calculation.  The note bears interest at various interest rates linked to either the prime rate or LIBOR as defined at the dates of the various borrowings.  The weighted-average interest rate at September 30, 2011 was 3.78%.  The advances are collateralized by the Company’s assets not otherwise pledged.  The loans contain a subjective acceleration clause, which allows the bank to call the loans if a material adverse change occurs.

NOTE D — Equipment Leases Payable

The Company leases certain equipment under capital leases, with interest rates ranging from approximately 1.3% to 20.6% a year, payable in monthly install

7

EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

The following unaudited pro forma combined condensed statement of operations for the year ended December 31, 2011, is based on the historical financial statements of Epiq Systems, Inc. (“Epiq”), Encore Intermediate Holdco, Inc. and its wholly-owned subsidiary, Encore Legal Solutions, Inc. (collectively, “Encore”) and De Novo Legal LLC (“De Novo”) after giving effect to Epiq’s acquisition of Encore on April 4, 2011, and De Novo on December 28, 2011, as more fully described in the Explanatory Note of this Form 8-K/A and applying the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined condensed financial statements.

An unaudited pro forma combined condensed balance sheet as of December 31, 2011 is not presented herein due to the fact that the acquisitions of Encore and De Novo are reflected in Epiq’s Consolidated Balance Sheet as of December 31, 2011, filed in Epiq’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission (“SEC”) on March 1, 2012.

The unaudited pro forma combined condensed income statement, including the notes thereto, is qualified in its entirety by reference to, and should be read in conjunction with, Epiq’s historical consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2011, as well as De Novo’s historical financial statements for the year ended December 31, 2010, which are included as Exhibit 99.1 to this Form 8-K/A.  This pro forma information should also be read in conjunction with our Form 8-K/A related to our acquisition of Encore, filed with the SEC on June 10, 2011.

The unaudited pro forma combined condensed statement of operations for the year ended December 31, 2011, is presented as if the Encore and De Novo acquisitions had occurred on January 1, 2011 and include all adjustments that give effect to events that are directly attributable to the transaction, are expected to have a continuing impact, and that are factually supportable.

These acquisitions have been accounted for under the acquisition method of accounting.  Under the acquisition method of accounting, the total estimated purchase price, calculated as described in Note 1 to these unaudited pro forma combined condensed income statements, is allocated to the net tangible and intangible assets acquired and liabilities assumed based on various estimates.

The unaudited pro forma combined condensed income statement has been prepared by management for illustrative purposes only in accordance with Article 11 of SEC Regulation S-X and is not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had Epiq, Encore and De Novo been a combined company during the specified period. The pro forma financial information does not include the effects of expected synergies related to the acquisitions.  The pro forma financial information also does not include costs for integrating Epiq, Encore and De Novo.

NOTES TO PRO FORMA

COMBINED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

EPIQ SYSTEMS, INC.

PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

For the year ended December 31, 2011 (Unaudited)

(In thousands, except per share data)

	Epiq As Reported			Historical Encore			Encore Pro Forma Adjustments			Pro Forma Combined including Encore			Historical De Novo			De Novo Pro Forma Adjustments			Pro Forma Combined including De Novo
REVENUE:
Case management services	$	214,886		$	11,524		$	—		$	226,410		$	62,104		$	—		$	288,514
Case management bundled products and services	16,643			—			—			16,643			—			—			16,643
Document management services	29,736			—			—			29,736			—			—			29,736
Operating revenue before reimbursed direct costs	261,265			11,524			—			272,789			62,104			—			334,893
Operating revenue from reimbursed direct costs	22,061			—			—			22,061			—			—			22,061
Total Revenue	283,326			11,524			—			294,850			62,104			—			356,954
OPERATING EXPENSE:
Direct cost of services (exclusive of depreciation and amortization shown separately below)	87,753			2,913			—			90,666			32,813			—			123,479
Direct cost of bundled products and services (exclusive of depreciation and amortization shown separately below)	3,201			—			—			3,201			—			—			3,201
Reimbursed direct costs	21,773			—			—			21,773			—			—			21,773
General and administrative	97,779			5,166			—			102,945			14,107			—			117,052
Depreciation and software and leasehold amortization	23,081			342			—			23,423			1,448			—			24,871
Amortization of identifiable intangible assets	21,323			—			1,916		[A]	23,239			—			6,428		[A]	29,667
Fair value adjustment to contingent consideration	(7,166		)							(7,166		)							(7,166		)
Acquisition related expense	7,681			—			—			7,681			—			—			7,681
Intangible asset impairment expense	1,278									1,278									1,278
Other operating expense	—			2,438			—			2,438			—			—			2,438
Total Operating Expense	256,703			10,859			1,916			269,478			48,368			6,428			324,274
INCOME (LOSS) FROM OPERATIONS	26,623			665			(1,916		)	25,372			13,736			(6,428		)	32,680
INTEREST EXPENSE (INCOME):
Interest expense	5,844			70			650		[B]	6,564			222			1,812		[B]	8,598
Interest income	(128		)	(8		)	—			(136		)	(32		)	—			(168		)
Net Interest Expense	5,716			62			650			6,428			190			1,812			8,430
INCOME (LOSS) BEFORE INCOME TAXES	20,907			603			(2,566		)	18,944			13,546			(8,240		)	24,250
PROVISION (BENEFIT) FOR INCOME TAXES	8,827			288			(1,052		)[C]	8,063			1,190			(3,378		)[C]	5,875
NET INCOME (LOSS)	$	12,080		$	315		$	(1,514	)	$	10,881		$	12,356		$	(4,862	)	$	18,375
NET INCOME PER SHARE INFORMATION:
Basic	$	0.34								$	0.31								$	0.52
Diluted	$	0.33								$	0.29								$	0.50
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic	35,186									35,186									35,186
Diluted	36,506									36,506									36,506

Note 1 — Basis of Presentation

De Novo

Preliminary Purchase Price

The total preliminary purchase price transferred to effect the acquisition of De Novo is as follows (in thousands):

	(in thousands)
Cash paid at closing	$	67,866
Fair value of deferred cash consideration	4,870
Fair value of contingent consideration	16,226
Working capital adjustment	(1,720		)
Total preliminary purchase price	$	87,242

In connection with this acquisition $5.0 million of the purchase price is being held by Epiq and deferred for 18 months following the closing date of the acquisition as security for any potential indemnification claims.  This holdback has been discounted using an appropriate imputed interest rate and recognized at a fair value of approximately $4.9 million.  Also, as a result of an earn-out opportunity based on future revenue growth that is part of this acquisition, Epiq also has recorded contingent consideration. The potential undiscounted amount of all future payments that Epiq could be required to make under the earn-out opportunity is between $0 and $33.6 million over a two-year period. Approximately one-third of the value of the De Novo earn-out opportunity is contingent upon certain of the sellers remaining employees of Epiq.  The portion of the contingent consideration that is not tied to employment is considered to be part of the total consideration transferred for the purchase of De Novo and has been measured and recognized at a fair value of approximately $16.2 million

Preliminary Purchase Price Allocation

Total purchase consideration has been allocated to the tangible and identifiable intangible assets and to liabilities assumed based on their respective fair values on the acquisition date. The measurement period for purchase price allocations ends as soon as information on the facts and circumstances becomes available, but does not exceed 12 months. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized for assets acquired and liabilities assumed, Epiq will retrospectively adjust the amounts recognized as of the acquisition date. The preliminary purchase price allocations are summarized in the following table (in thousands):

	(in thousands)
Tangible assets and liabilities
Current assets, including cash acquired	$	11,546
Non-current assets	4,247
Current liabilities	(2,103		)
Non-current liabilities	(500		)
Intangible assets	34,400
Goodwill	39,652
Net assets acquired	$	87,242

Based on the preliminary results of an independent valuation, Epiq has allocated approximately $34.4 million of the purchase price to acquired intangible assets. The following table summarizes the major classes of acquired intangible assets, as well as the respective weighted-average amortization periods:

	Amount (in thousands)		Weighted Average Amortization Period (Years)
Identifiable Intangible Assets
Trade name	$	850	5.0
Non-compete agreement	2,900		5.0
Customer relationships	30,650		8.0
Total identifiable intangible assets	$	34,400

The amounts shown above may change in the near term as management continues to assess the fair value of acquired assets and liabilities and evaluate the income tax implications of this acquisition.

The excess of purchase consideration over net assets assumed was recorded as goodwill, which represents the strategic value assigned to De Novo, including the expected benefits from the synergies resulting from the transaction, as well as the knowledge and experience of the workforce in place.  In accordance with applicable accounting standards, goodwill will not be amortized but instead will be tested for impairment at least annually, or more frequently, if certain indicators are present.  In the event that management determines that the value of goodwill becomes impaired, the combined company will incur an accounting charge for the amount of the impairment during the fiscal quarter in which the determination is made.  The goodwill and intangible assets related to this acquisition are deductible for tax purposes.

Encore

The total preliminary purchase price transferred to effect the acquisition of Encore was as follows (in thousands):

	(in thousands)
Cash paid at closing	$	103,385
Other consideration	844
Working capital adjustment	98
Total preliminary purchase price	$	104,327

Total purchase consideration has been allocated to the tangible and identifiable intangible assets and to liabilities assumed based on their respective fair values on the acquisition date.  The measurement period for purchase price allocations ends as soon as information on the facts and circumstances becomes available, but does not exceed 12 months. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized for assets acquired and liabilities assumed, Epiq will retrospectively adjust the amounts recognized as of the acquisition date.  The preliminary purchase price allocations are summarized in the following table:

	(in thousands)
Tangible assets and liabilities
Current assets, including cash acquired	$	20,044
Non-current assets	2,669
Current liabilities	(6,646		)
Non-current liabilities	(15,115		)
Intangible assets	32,578
Software	2,498
Goodwill	68,299
Net assets acquired	$	104,327

Based on the preliminary results of an independent valuation, Epiq has allocated approximately $32.6 million of the purchase price to acquired intangible assets and $2.5 million of the purchase price to software. The following table summarizes the major classes of acquired intangible assets and software, as well as the respective weighted-average amortization periods:

	Amount (in thousands)		Weighted Average Amortization Period (Years)
Identifiable Intangible Assets
Trade name	$	1,617	5.0
Non-compete agreement	1,362		2.0
Customer relationships	29,599		7.0
Total identifiable intangible assets	$	32,578
Software internally developed	$	2,498	5.0

The amounts shown above may change in the near term as management continues to assess the fair value of acquired assets and liabilities.  Epiq is also continuing to gather information necessary to evaluate the income tax implications on the opening balance sheet.  The income tax related accounts and goodwill may be affected once this evaluation is complete.  The Encore transaction was structured as a stock purchase and therefore, the goodwill and acquired intangible assets are not amortizable for tax purposes.

The excess of purchase consideration over net assets assumed was recorded as goodwill, which represents the strategic value assigned to Encore, including the expected benefits from the synergies resulting from the transaction as well as the knowledge and experience of the workforce in place.

Note 2 — Pro Forma Adjustments

The accompanying unaudited pro forma combined condensed income statement has been prepared as if the acquisitions of De Novo and Encore were completed on January 1, 2011, and reflect the following pro forma adjustment (in thousands):

[A]To record amortization for intangible assets and software for the fiscal year ended December 31, 2011 (in thousands):

	Amount		Year ended December 31, 2011 Amortization
Encore
Identifiable Intangible Assets:
Trade name	$	1,617	$	83
Non-compete agreement	1,362		175
Customer relationships	29,599		1,556
Total identifiable intangible assets	$	32,578	$	1,814
Internally developed software	$	2,498	$	102
De Novo
Identifiable Intangible Assets
Trade name	$	850	$	169
Non-compete agreement	2,900		575
Customer relationships	30,650		5,684
Total identifiable intangible assets	$	34,400	$	6,428

The following table outlines the estimated future amortization expense at December 31, 2011 related to the amortizing intangible assets and software that were acquired in the Encore and De Novo acquisitions (in thousands):

Year Ending December 31,
2012	$	16,062
2013	11,724
2014	8,762
2015	6,905
2016 and thereafter	16,365

[B]To adjust for the assumed interest expense resulting from the senior revolving loan incurred as part of this acquisition.  A 1/8% increase in interest rates on the senior revolving loan would result in approximately a $0.2 million increase in Epiq’s pro forma interest expense of $2.5 million for the year ended December 31, 2011.  Conversely, a 1/8% decrease in interest rates on the senior revolving loan would result in an immaterial change in Epiq’s pro forma interest expense for the year ended December 31, 2011.

[C]Adjustment to record tax benefit to reflect the pro forma income tax impact at the statutory income tax rate.  The pro forma combined provision for income taxes does not reflect the amounts that would have resulted had Epiq and De Novo filed consolidated income tax returns during the period presented.