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): May 10, 2013

athenahealth, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-33689	04-3387530
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

311 Arsenal Street, Watertown, MA	02472
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 617-402-1000

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

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:
	[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
	[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
	[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
	[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

On May 16, 2013, athenahealth, Inc. (the "Company") filed a Current Report on Form 8-K with the United States Securities and Exchange Commission (the "Commission") reporting that on May 10, 2013, the Company, through its wholly owned subsidiary Athena Arsenal, LLC (“Athena Arsenal”), completed the acquisition of the real estate commonly known as the Arsenal on the Charles, located in Watertown, Massachusetts, (the "Property") pursuant to the terms of the Purchase and Sale Agreement with President and Fellows of Harvard College (“Harvard”), dated as of December 5, 2012, as amended by the First Amendment on March 12, 2013 (the “P&S”). Athena Arsenal acquired (i) the real property in Watertown, Massachusetts consisting of approximately 29 acres, together with all building improvements and fixtures located thereon and all right, title, and interest in and to the buildings and/or appurtenances belonging to such land; (ii) all tangible personal property owned by Harvard used in the ownership, operation, and maintenance of the real property; (iii) Harvard's interest as landlord in all leases for tenants of the real property, except for the lease associated with the solar panels; (iv) service, supply, maintenance, utility, and commission agreements, all equipment leases, and all other contracts relating to the property; and (v) any licenses, permits, and other written authorizations necessary or useful for the use, operation, or ownership of the Property. The purchase price for the Property was $168.5 million and is subject to certain adjustments and prorations. athenahealth borrowed funds from its senior credit facility to finance the purchase of the Property.

Prior to completion of the acquisition of the Property, athenahealth leased its headquarters located at 311 Arsenal Street, Watertown, Massachusetts, pursuant to a Lease dated November 8, 2004, as amended, between athenahealth and Harvard. Other than with respect to the Lease, there is no material relationship between athenahealth or any of its affiliates and Harvard.

This Current Report on Form 8-K/A amends the original Form 8-K to provide the historical financial statements of the Property required under Item 9.01(a) and the pro forma financial information required under Item 9.01(b).

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Real Estate Operations Acquired.

The audited statement of revenue and certain expenses of the Property for the year ended December 31, 2012, and the unaudited financial statements of the Property for the three months ended March 31, 2013, are filed as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K/A and are incorporated by reference herein. The consent of the Property's independent auditor is attached hereto as Exhibit 23.1.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed combined financial information of the Company and the Property, together with the notes thereto, with respect to the year ended December 31, 2012, and the three months ended March 31, 2013, are included as Exhibit 99.2 to this Current Report on Form 8-K/A and are incorporated by reference herein.

(d) Exhibits.

Exhibit No.	Description
2.1	Purchase and Sale Agreement, dated as of December 5, 2012, by and among, athenahealth, Inc. and President and Fellows of Harvard College (incorporated by reference to Exhibit 10.29 of athenahealth, Inc.'s Annual Report on Form 10-K, filed with the Commission on February 11, 2013).
10.1	First Amendment to Purchase and Sale Agreement by and between athenahealth, Inc. and President and Fellows of Harvard College, dated March 12, 2013 (incorporated by reference to Exhibit 10.1 of athenahealth, Inc.'s Current report on Form 8-K, filed with the Commission on March 18, 2013).
23.1	Consent of PricewaterhouseCoopers LLP.
99.1	Audited Statement of Revenue and Certain Expenses of the Property for the year ended December 31, 2012, and notes thereto.
99.2	Unaudited Statement of Revenue and Certain Expenses of the Property for the three months ended March 31, 2013, and notes thereto.
99.3	Unaudited Pro Forma Condensed Combined Financial Information for the year ended December 31, 2012, and the three months ended March 31, 2013, and notes thereto.

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.

	athenahealth, Inc.
	(Registrant)
July 26, 2013	/s/ DANIEL H. ORENSTEIN
	Daniel H. Orenstein
	SVP, General Counsel, and Secretary

EXHIBIT INDEX

Exhibit No.	Description
2.1	Purchase and Sale Agreement, dated as of December 5, 2012, by and among, athenahealth, Inc. and President and Fellows of Harvard College (incorporated by reference to Exhibit 10.29 of athenahealth, Inc.'s Annual Report on Form 10-K, filed with the Commission on February 11, 2013).
10.1	First Amendment to Purchase and Sale Agreement by and between athenahealth, Inc. and President and Fellows of Harvard College, dated March 12, 2013 (incorporated by reference to Exhibit 10.1 of athenahealth, Inc.'s Current report on Form 8-K, filed with the Commission on March 18, 2013).
23.1	Consent of PricewaterhouseCoopers LLP.
99.1	Audited Statement of Revenue and Certain Expenses of the Property for the year ended December 31, 2012, and notes thereto.
99.2	Unaudited Statement of Revenue and Certain Expenses of the Property for the three months ended March 31, 2013, and notes thereto.
99.3	Unaudited Pro Forma Condensed Combined Financial Information for the year ended December 31, 2012, and the three months ended March 31, 2013, and notes thereto.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 333-146340, 333-172619, 333-183053 and 333-187224) of athenahealth, Inc. of our report, dated April 5, 2013, relating to the financial statements of the real estate commonly known as Arsenal on the Charles, which appears in this Current Report on Form 8‑K/A of athenahealth, Inc. dated July 26, 2013.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

July 26, 2013

EX-99.1

Arsenal on the Charles

Index

For the Year Ended December 31, 2012

Page(s) Independent Auditor's Report ................................................................................................................ 1

Financial Statements

Statement of Revenue and Certain Expenses ........................................................................................... 2

Notes to the Statement of Revenue and Certain Expenses ..................................................................... 3-5

Independent Auditor's Report

To the Board of Overseers of Harvard College:

We have audited the accompanying statement of revenue and certain expenses (the “Statement”) of the Arsenal on the Charles (the “Property”), which is owned by Harvard University (the “University”), for the year ended December 31, 2012.

Management's Responsibility for the Statement

Management is responsible for the preparation and fair presentation of the Statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statement that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on the Statement 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 Statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statement. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the University's preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the University's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in Note 2, of the Property for the year ended December 31, 2012, in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

The accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in Note 2, and is not intended to be a complete presentation of the Property's revenue and expenses.

As described in Note 8, the Property receives rental income from and pays certain expenses to the University. Accordingly, the Property's revenue in excess of certain expenses may not be indicative of the revenues and expenses it may have realized or incurred if the Property were under different ownership.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

April 5, 2013

1

ARSENAL ON THE CHARLES

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2012

	2012
Revenue
Rental income	$	18,594,054
Tenant recoveries	1,877,421
Total revenue	$	20,471,475
Certain Expenses
Cost of rental operations	$	6,489,415
Real estate taxes and payment in lieu of taxes (Note 7)	5,183,487
Total certain expenses	$	11,672,902
Revenue in excess of certain expenses	$	8,798,573

The accompanying notes are an integral part of this Statement.

2

Arsenal on the Charles

Notes to the Statement of Revenue and Certain Expenses

For the Year Ended December 31, 2012

1.Organization

The Arsenal on the Charles (the “Property”) is not a legal entity, but rather an 11-building office park located in the greater Boston area of Massachusetts and is owned by Harvard University (the “University”). The buildings contain approximately 750,000 rental square feet of primarily class-A office space. Currently, 24 tenants occupy space at the Property. The accompanying statement of revenue and certain expenses (the “Statement”) relates to the operations of the Property.

2.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Statement relates to the Property and has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X, promulgated under the Securities Act of 1933, as amended, and accordingly, is not representative of the actual results of operations for the year ended December 31, 2012, due to the exclusion of the following revenue and expenses, which may not be comparable to the proposed future operations of the Property:

•Depreciation and amortization

•Interest income and expense

•Asset management fee paid to University

Revenue Recognition

Rental income is recognized on a straight-line basis over the term of the related leases. The impact of the straight-line rental revenue adjustment decreased rental income by approximately

$289,000 for the year ended December 31, 2012. Tenant recoveries represent additional revenue from expense reimbursements by tenants for insurance, real estate taxes, and certain other expenses, as stipulated by the leases, and are recognized in the period in which the related expenses are incurred.

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period, to prepare the Statement

in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

3

Arsenal on the Charles

Notes to the Statement of Revenue and Certain Expenses

For the Year Ended December 31, 2012

3.Description of Leasing Arrangements

The Property is leased to tenants primarily under non-cancelable operating leases, which vary in length. Future minimum base rentals on non-cancelable operating leases as of December 31,

2012, are as follows:

2013            $ 19,477,393

2014             19,918,008

2015 15,187,479

2016 10,530,100

2017 9,521,990

2018 and thereafter      $22,752,110

The future minimum lease payments exclude tenant reimbursements and the amortization of accrued rental revenue. The above table also includes payments associated with leases between the University and athenahealth, Inc. (see Note 4).

4.Transactions with athenahealth, Inc.

athenahealth, Inc. leases office space at the Property under an agreement terminating on

November 30, 2017. The Property recognized straight-line rental revenue of approximately

$4,347,000 and received cash payments of approximately $4,579,000 for the use of this space for the year ended December 31, 2012. In addition, tenant recoveries from athenahealth, Inc. totaled

$485,721 for the year ended December 31, 2012.

5.Concentration of Risk

As of December 31, 2012, three tenants comprise approximately 52% of total revenue, including athenahealth, Inc., which comprises 24%. The terms of these three lease agreements are through November 30, 2017 (athenahealth, Inc.), January 31, 2020 and December 31, 2020.

6.Commitments and Contingencies

Utility Purchase Commitment and Capital Lease

The University has entered into a Power Purchase Agreement (“PPA”) with a solar energy utility provider to purchase 100% of the electrical output from a solar panel system installed on the Property's premises. The PPA has been accounted for as a capital lease under the guidance in ASC 840-10-15-6 and as such has been capitalized by the Property. As a result, depreciation expense and interest income on the capital lease asset and amortization of the capital lease obligation are not reflected on the Statement. The University made cash payments of $106,108 for the year ending December 31, 2012, related to the PPA. The PPA expires on July 29, 2034. The estimated future obligations under the PPA are as follows as of December 31, 2012:

2013             $    109,000

2014 111,000

2015 114,000

2016 117,000

2017 120,000

2018 and thereafter      $ 2,567,000

4

Arsenal on the Charles

Notes to the Statement of Revenue and Certain Expenses

For the Year Ended December 31, 2012

In addition, the University received approximately $33,000 for the year ended December 31, 2012, from the sale of renewable energy credits associated with the solar panel system installed on the Property.

Site Lease

In conjunction with the PPA, the University also entered into a site lease with the solar energy utility provider (“lessor”), as the lessor requires access to the Property's premises to install, construct, maintain and operate the solar panels. This lease was entered into for consideration of $1 for the term of the lease. The lease commenced on July 29, 2009 and will terminate 180 days after July 29, 2034, or at an earlier date agreed to by both parties, which is subsequent to the termination of the PPA.

General

The University is a defendant in various legal actions arising from the normal course of the Property's operations. While it is not possible to predict accurately or determine the eventual outcome of such actions, management believes that the outcome of these proceedings will not have a material adverse effect on the Property's revenue and certain expenses.

7.Real Estate Taxes and Payments in Lieu of Taxes

The Property is owned by the University, which is a tax-exempt organization. The Property incurred both real estate taxes and a payment in lieu of taxes (“PILOT”) associated with the University's tax exempt status as a nonprofit institution and as defined in a Memorandum of Understanding (the “Agreement”) between Harvard University and the Town of Watertown. The amount of PILOT incurred for the year ended December 31, 2012, is based on the Agreement. This Agreement terminates upon sale of the Property. The future amount of real estate taxes and PILOT (if any) will be based on the tax status of the owner of the Property, the assessed value of the Property and the tax rates in effect at the time.

8.Related Party Transactions

The University leases office space at the Property and the Property recognized straight-line rental revenue of approximately $3,033,000 and received cash payments of approximately $3,206,000, for the use of this space for the year ended December 31, 2012. In addition, tenant recoveries from this related party totaled $203,095 for the year ended December 31, 2012. The lease agreement for this space will expire on January 31, 2020.

The University provides insurance on behalf of the Property, with expenses totaling approximately

$273,000 for the year ended December 31, 2012. As a result, the expenses incurred may not be indicative of the expenses that would have been incurred by the Property under different ownership.

Electricity and gas is provided to the Property under University-wide contracts. The Property is billed based on the Property's actual meter readings. Total electric and gas expenses for the year ended December 31, 2012, totaled approximately $1,733,000. As a result, the expenses incurred may not be indicative of the expenses that would have been incurred by the Property under different ownership.

9.Subsequent Events

Management has evaluated the events and transactions that have occurred through April 5, 2013, the date which the Statement was available to be issued, and noted no items requiring adjustment to the Statement or additional disclosure.

5

EX-99.2

Arsenal on the Charles

Index

For the Three Months Ended March 31, 2013 (unaudited)

Page(s)

Statement of Revenue and Certain Expenses.............................................................................................. 1

Notes to the Statement of Revenue and Certain Expenses....................................................................... 2-4

Arsenal on the Charles

Statement of Revenue and Certain Expenses For the Three Months Ended March 31, 2013 (unaudited)

	For the three months ended March 31, 2013 (unaudited)
Revenue
Rental income	$	4,737,938
Tenant recoveries	541,883
Total revenue	$	5,279,821
Certain Expenses
Cost of rental operations	$	1,570,574
Real estate taxes and payment in lieu of taxes (Note 7)	1,315,022
Total certain expenses	$	2,885,596
Revenue in excess of certain expenses	$	2,394,225

The accompanying notes are an integral part of this Statement.

1

1

Arsenal on the Charles

Notes to the Statement of Revenue and Certain Expenses

For the Three Months Ended March 31, 2013 (unaudited)

1. Organization

The Arsenal on the Charles (the “Property”) is not a legal entity, but rather an 11-building office park located in the greater Boston area of Massachusetts and is owned by Harvard University (the “University”). The buildings contain approximately 750,000 rental square feet of primarily class-A office space. Currently, 24 tenants occupy space at the Property. The accompanying statement of revenue and certain expenses (the “Statement”) relates to the operations of the Property.

2. Summary of Significant Accounting Policies Basis of Presentation

The accompanying Statement relates to the Property and has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X, promulgated under the Securities Act of 1933, as amended, and accordingly, is not representative of the actual results of operations for the three months ended March 31, 2013, due to the exclusion of the following revenue and expenses, which may not be comparable to the proposed future operations of the Property:

• Depreciation and amortization

• Interest income and expense

• Asset management fee paid to University

Revenue Recognition

Rental income is recognized on a straight-line basis over the term of the related leases. The impact of the straight-line rental revenue adjustment decreased rental income by approximately

$138,000 for the three months ended March 31, 2013. Tenant recoveries represent additional revenue from expense reimbursements by tenants for insurance, real estate taxes, and certain other expenses, as stipulated by the leases, and are recognized in the period in which the related expenses are incurred.

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period, to prepare the Statement in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

2

Arsenal on the Charles

Notes to the Statement of Revenue and Certain Expenses

For the Three Months Ended March 31, 2013 (unaudited)

3. Description of Leasing Arrangements

The Property is leased to tenants primarily under non-cancelable operating leases, which vary in length. Future minimum base rentals on non-cancelable operating leases, on a calendar year basis, are as follows as of March 31, 2013 (unaudited):

2013	$	13,487,419
2014	18,364,124
2015	15,101,089
2016	10,442,401
2017	9,495,578
2018 and thereafter	22,715,892

The future minimum lease payments exclude tenant reimbursements and the amortization of accrued rental revenue. The above table also includes payments associated with leases between the University and athenahealth, Inc. (see Note 4).

4. Transactions with athenahealth, Inc.

athenahealth, Inc. leases office space at the Property under an agreement terminating on November 30, 2017. The Property recognized straight-line rental revenue of approximately

$1,466,000 and received cash payments of approximately $1,509,000 for the use of this space for the three months ended March 31, 2013. In addition, tenant recoveries from athenahealth, Inc. totaled $156,342 for the three months ended March 31, 2013.

5. Concentration of Risk

As of March 31, 2013, three tenants comprise approximately 60% of total rental revenue, including athenahealth, Inc., which comprises 31%. The terms of these three lease agreements are through November 30, 2017 (athenahealth, Inc.), December 31, 2017 and December 31, 2020.

6. Commitments and Contingencies

Utility Purchase Commitment and Capital Lease

The University has entered into a Power Purchase Agreement (“PPA”) with a solar energy utility provider to purchase 100% of the electrical output from a solar panel system installed on the Property's premises. The PPA has been accounted for as a capital lease under the guidance in ASC 840-10-15-6 and as such has been capitalized by the Property. As a result, depreciation expense and interest income on the capital lease asset and amortization of the capital lease obligation are not reflected on the Statement. The University made cash payments of $27,182 for the three months ended March 31, 2013, related to the PPA. The PPA expires on July 29, 2034. The estimated future obligations under the PPA, on a calendar year basis, are as follows as of March 31, 2013 (unaudited):

2013	$	81,750
2014	111,000
2015	114,000
2016	117,000
2017	120,000
2018 and thereafter	2,567,000

3

Arsenal on the Charles

Notes to the Statement of Revenue and Certain Expenses

For the Three Months Ended March 31, 2013 (unaudited)

The University did not sell any renewable energy credits associated with the solar panel system installed on the Property during the three months ended March 31, 2013.

Site Lease

In conjunction with the PPA, the University also entered into a site lease with the solar energy utility provider (“lessor”), as the lessor requires access to the Property's premises to install, construct, maintain and operate the solar panels. This lease was entered into for consideration of $1 for the term of the lease. The lease commenced on July 29, 2009 and will terminate 180 days after July 29, 2034, or at an earlier date agreed to by both parties, which is subsequent to the termination of the PPA.

General

The University is a defendant in various legal actions arising from the normal course of the Property's operations. While it is not possible to predict accurately or determine the eventual outcome of such actions, management believes that the outcome of these proceedings will not have a material adverse effect on the Property's revenue and certain expenses.

7. Real Estate Taxes and Payments in Lieu of Taxes

The Property is owned by the University, which is a tax-exempt organization. The Property incurred both real estate taxes and a payment in lieu of taxes (“PILOT”) associated with the University's tax exempt status as a nonprofit institution and as defined in a Memorandum of Understanding (the “Agreement”) between Harvard University and the Town of Watertown. The amount of PILOT incurred for the three months ended March 31, 2013, is based on the Agreement. This Agreement terminates upon sale of the Property. The future amount of real estate taxes and PILOT (if any) will be based on the tax status of the owner of the Property, the assessed value of the Property and the tax rates in effect at the time.

8. Related Party Transactions

The University leases office space at the Property and the Property recognized straight-line rental revenue of approximately $758,000 and received cash payments of approximately $801,000, for the use of this space for the three months ended March 31, 2013. In addition, tenant recoveries from this related party totaled $75,000 for the three months ended March 31, 2013. The lease agreement for this space will expire on January 31, 2020.

The University provides insurance on behalf of the Property, with expenses totaling approximately

$63,000 for the three months ended March 31, 2013. As a result, the expenses incurred may not be indicative of the expenses that would have been incurred by the Property under different ownership.

Electricity and gas is provided to the Property under University-wide contracts. The Property is billed based on the Property's actual meter readings. Total electric and gas expenses for the three months ended March 31, 2013, totaled approximately $423,000. As a result, the expenses incurred may not be indicative of the expenses that would have been incurred by the Property under different ownership.

9. Subsequent Events

Management has evaluated the events and transactions that have occurred through July 25, 2013,

the date which the Statement was available to be issued, and noted no items requiring adjustment to the Statement or additional disclosure.

4

EX-99..3

Exhibit 99.3

athenahealth, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

athenahealth, Inc. and the Arsenal on the Charles

(amounts in thousands, unless otherwise noted)

On May 16, 2013, athenahealth, Inc. (the "Company") filed a Current Report on Form 8-K with the United States Securities and Exchange Commission (the "Commission") reporting that on May 10, 2013, the Company, through its wholly owned subsidiary Athena Arsenal, LLC (“Athena Arsenal”), completed the acquisition of the real estate commonly known as the Arsenal on the Charles, located in Watertown, Massachusetts, (the “Property” or the "Arsenal Acquisition") pursuant to the terms of the Purchase and Sale Agreement with President and Fellows of Harvard College (“Harvard”), dated as of December 5, 2012, as amended by the First Amendment on March 12, 2013 (the “P&S”). Athena Arsenal acquired (i) the real property in Watertown, Massachusetts consisting of approximately 29 acres, together with all building improvements and fixtures located thereon and all right, title, and interest in and to the buildings and/or appurtenances belonging to such land; (ii) all tangible personal property owned by Harvard used in the ownership, operation, and maintenance of the real property; (iii) Harvard's interest as landlord in all leases for tenants of the real property, except for the lease associated with the solar panels; (iv) service, supply, maintenance, utility, and commission agreements, all equipment leases, and all other contracts relating to the property; and (v) any licenses, permits, and other written authorizations necessary or useful for the use, operation, or ownership of the Property. The purchase price for the Property was $168.5 million and is subject to certain adjustments and prorations. athenahealth borrowed funds from its senior credit facility to finance the purchase of the Property.

On March 12, 2013, athenahealth completed its previously announced acquisition of Epocrates, Inc., a Delaware corporation (“Epocrates”), pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 7, 2013, among athenahealth, Echo Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of athenahealth (“MergerSub”), and Epocrates (the “Epocrates Acquisition”). Pursuant to the terms of the Merger Agreement, MergerSub merged with and into Epocrates (the “Merger”), with Epocrates surviving the Merger as a wholly-owned subsidiary of athenahealth.

The following unaudited pro forma condensed combined statement of income for the year ended December 31, 2012, and the three months ended March 31, 2013, is based on the historical financial statements of athenahealth, Epocrates, and the Property after giving effect to both acquisitions as if they had been completed on January 1, 2012. A pro forma consolidated balance sheet reflecting the acquisition of Epocrates and the Property (the "Acquisitions") is not required since both Acquisitions are included in athenahealth’s condensed consolidated balance sheet included in its Form 10-Q for the six months ended June 30, 2013, filed with the Securities and Exchange Commission (the “SEC”) on July 19, 2013.

The historical financial information has been adjusted to give effect to pro forma events that are (i) directly attributable to the Acquisitions, (ii) factually supportable, and (iii) expected to have a continuing impact on the consolidated results of athenahealth, Epocrates and the Property. The unaudited pro forma condensed combined statement of income does not reflect any operating efficiencies and cost savings that athenahealth may achieve, any additional expenses that it may incur unless factually supported, with respect to the combined companies, or certain other non-recurring expenses resulting from the Acquisitions, such as costs associated with the acceleration of stock options and restricted stock units, gain on termination of lease, severance and retention charges, and transaction costs incurred by athenahealth and Epocrates related to the Acquisition.

The pro forma adjustments are based on the preliminary information available at the time of the preparation of this Current Report on Form 8-K, as amended. athenahealth has made a preliminary allocation of the estimated purchase price to the tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates. The allocation of the estimated purchase price is preliminary pending the finalization of various estimates and analyses.

The unaudited pro forma condensed combined statements of income has been prepared by management for illustrative purposes only and is not necessarily indicative of the consolidated results of operations of athenahealth that would have been reported had the Acquisitions been completed as of the date presented, and should not be taken as representative of the future consolidated results of operations of athenahealth. The unaudited pro forma condensed combined financial information, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, athenahealth’s historical consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on February 11, 2013, and in its Form 10-Q for the six months ended June 30, 2013, filed with the SEC on

July 19, 2013,the Property's historical audited statement of revenue and certain expenses for the year ended December 31, 2012, attached as an exhibit to this Current Report on Form 8-K and exhibit 99.2 of the Company's 8-K/A filed May 20, 2013, associated with our acquisition of Epocrates, Inc.

athenahealth, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

(Amounts in thousands, except per-share amounts)

	Historical
	Year Ended December 31, 2012
	athenahealth			Arsenal on the Charles		Epocrates			Adjustments Arsenal				Adjustments Epocrates				Pro Forma combined
Revenue:
Business services	$	408,496		$	—	$	111,129		$	—			$	(11,494	)	(F)	$	508,131
Implementation and other	13,775			20,471		—			(4,833		)	(A)	—				29,413
Total revenue	422,271			20,471		111,129			(4,833		)		(11,494		)		537,544
Expense:
Direct operating	166,886			6,489		43,689			6,133			(B)	5,822			(G) (H) (I)	229,019
Selling and marketing	104,300			—		27,895			—				642			(G) (H)	132,837
Research and development	33,792			—		20,698			—				10			(G) (H)	54,500
General and administrative	57,025			5,183		18,949			(5,554		)	(A) (M)	2,624			(G) (H) (L)	78,227
Depreciation and amortization	25,641			—		—			3,234			(C)	1,813			(H)	30,688
Total expense	387,644			11,672		111,231			3,813				10,911				525,271
Operating income (loss)	34,627			8,799		(102		)	(8,646		)		(22,405		)		12,273
Other income (expense)	251			—		48			(3,945		)	(D)	(1,247		)	(J)	(4,893		)
Income (loss) before income tax (provision) benefit	34,878			8,799		(54		)	(12,591		)		(23,652		)		7,380
Income tax (provision) benefit	(16,146		)	—		(1,699		)	1,611			(E)	9,772			(K)	(6,462		)
Net income (loss)	$	18,732		$	8,799	$	(1,753	)	$	(10,980	)		$	(13,880	)		$	918
Net income (loss) per share - Basic	$	0.52															$	0.03
Net income (loss) per share - Diluted	$	0.50															$	0.02
Weighted average shares used in computing net income (loss) per share:
Basic	35,956																35,956
Diluted	37,133																37,133

See notes to unaudited pro forma condensed combined financial information.

athenahealth, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

(Amounts in thousands, except per-share amounts)

	Historical (unaudited)
	Three months ended March 31, 2013					January 1 through March 11, 2013
	athenahealth, Inc.			Arsenal on the Charles		Epocrates, Inc.			Adjustments Arsenal				Adjustments Epocrates				Pro Forma combined
Revenue:
Business services	$	121,463		$	—	$	17,044		$	—			$	(1,715	)	(F)	$	136,792
Implementation and other	4,133			5,280					(1,622		)	(A)	—				7,791
Total revenue	125,596			5,280		17,044			(1,622		)		(1,715		)		144,583
Expense:
Direct operating	53,185			1,571		8,750			1,533			(B)	2,937			(G) (H) (I)	67,976
Selling and marketing	32,922			—		4,952			—				(124		)	(G) (H)	37,750
Research and development	11,944			—		4,041			—				(43		)	(G) (H)	15,942
General and administrative	31,077			1,315		10,691			(2,614		)	(A) (M)	(7,248		)	(G) (H) (L)	33,221
Depreciation and amortization	8,341			—		—			809			(C)	355			(H)	9,505
Total expense	137,469			2,886		28,434			(272		)		(4,123		)		164,394
Operating income (loss)	(11,873		)	2,394		(11,390		)	(1,350		)		2,408				(19,811		)
Other income (expense)	(110		)	—		9			(973		)	(D)	(254		)	(J)	(1,328		)
Income (loss) before income tax (provision) benefit	(11,983		)	2,394		(11,381		)	(2,323		)		2,154				(21,139		)
Income tax (provision) benefit	12,683			—		4,002			368			(E)	2,318			(K)	19,371
Net income (loss)	$	700		$	2,394	$	(7,379	)	$	(1,955	)		$	4,472			$	(1,768	)
Net income (loss) per share - Basic	$	0.02															$	(0.05	)
Net income (loss) per share - Diluted	$	0.02															$	(0.05	)
Weighted average shares used in computing net income (loss) per share:
Basic	36,409																36,409
Diluted	37,744																36,409

See notes to unaudited pro forma condensed combined financial information.

athenahealth, Inc.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

(Amounts in thousands, except per-share amounts)

1. BASIS OF PRO FORMA PRESENTATION

Watertown, MA Corporate Headquarters – Arsenal on the Charles

On May 10, 2013, athenahealth, through its wholly owned subsidiary Athena Arsenal, LLC, acquired the Property pursuant to the terms of the Purchase and Sale Agreement.

The pro forma adjustments are based upon available information and certain assumptions that athenahealth believes are reasonable under the circumstances. A final determination of fair values relating to the Acquisition may differ materially from the preliminary estimates and will include management’s final valuation of the fair value of assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are considered preliminary and are based on the information that was available as of the date of the acquisition. The Company believes that the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but certain items may be subject to change as additional information is received and certain tax returns are finalized. Thus the provisional measurements of fair value set forth below are subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one-year from the acquisition date.

The Acquisition has been accounted for under the purchase method of accounting in accordance with applicable accounting guidance on business combinations. The total estimated purchase price, calculated as described below, was allocated to the net tangible assets and intangible assets of the Property acquired in connection with the Acquisition based on their estimated fair values as of the completion of the Acquisition.

The purchase price was $168.5 million, subject to working capital adjustments. athenahealth financed the Acquisition through its senior credit facility, from which it borrowed $125.0 million, net, to finance the Acquisition. The purpose of this acquisition is to allow for future expansion of the corporate headquarters to accommodate anticipated headcount growth. The fair value of the consideration paid was $167.3 million, all of which was paid in cash.

The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed as of the date of acquisition:

Prepaid expenses and other current assets	$	685
Property, equipment and buildings	144,071
Purchased intangible assets	25,545
Accrued expenses	(271		)
Deferred revenue	(789		)
Other long-term liabilities	(1,916		)
Total identifiable net assets	$	167,325

The following table sets forth the preliminary components of the identifiable intangible assets acquired by asset class and their preliminary estimated useful lives as of the date of acquisition:

	Fair value		Useful Life
Above market leases	$	3,298	5.2 years
Leases in place	22,247		5.5 years
Total intangible assets subject to amortization	$	25,545	5.5 years

The value of any in-place lease is estimated to be equal to the property owners’ avoidance of costs necessary to release the property for a lease term equal to the remaining primary in-place lease term and the value of investment grade tenancy. The cost avoidance to the property owners of vacancy/leasing costs necessary to lease the property for a lease term equal to the remaining in-place lease term is derived first by determining the in-place lease term on the subject lease. Then, based on the Company's review of the market, the costs to be borne by a property owner to replicate a market lease to the remaining in-place term was estimated. These costs consist of: (i) rent lost during downtime (i.e., assumed periods of vacancy), (ii) estimated expenses that would be incurred by the property owner during periods of vacancy, (iii) rent concessions (i.e., free rent), (iv) leasing commissions, and (v) tenant improvement allowances. The Company determines these values using its own

estimates along with third-party appraisals. The Company amortizes the capitalized value of in-place lease intangible assets to expense over the remaining initial term of each lease. The Company amortizes the capitalized value of above market leases to expense over the initial and expected renewal terms of the leases. No amortization period for intangible assets will exceed the remaining depreciable life of the building.

Preliminary estimated amortization expense, based upon the Company’s newly acquired intangible assets at May 10, 2013, is as follows:

Year ending December 31,	Amount
Remaining 2013	$	3,940
2014	5,718
2015	3,672
2016	2,510
2017	2,277
Thereafter	7,428
Total	$	25,545

Epocrates, Inc.

On March 12, 2013, athenahealth acquired Epocrates pursuant to the terms of the Merger Agreement. Pursuant to the terms of the Merger Agreement, MergerSub merged with and into Epocrates, with Epocrates surviving the Merger as a wholly-owned subsidiary of athenahealth.

The pro forma adjustments are based upon available information and certain assumptions that athenahealth believes are reasonable under the circumstances. A final determination of fair values relating to the Acquisition may differ materially from the preliminary estimates and will include management’s final valuation of the fair value of assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, the deferred tax amounts and the uncertain tax benefits included in other long-term liabilities are considered preliminary and are based on the information that was available as of the date of the acquisition. The Company believes that the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but certain items may be subject to change as additional information is received and certain tax returns are finalized. Thus the provisional measurements of fair value set forth below are subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one-year from the acquisition date.

The Acquisition has been accounted for under the purchase method of accounting in accordance with applicable accounting guidance on business combinations. The total estimated purchase price, calculated as described below, was allocated to the net tangible assets and intangible assets of Epocrates acquired in connection with the acquisition based on their estimated fair values as of the completion of the acquisition, and the excess is allocated to goodwill.

athenahealth acquired Epocrates for consideration consisting of 1) $11.75 per share in cash for all outstanding shares of Epocrates common stock and 2) the exchange of all outstanding options and restricted stock units to purchase or receive Epocrates’ common stock for options or restricted stock units to purchase or receive up to 470,404 shares of athenahealth common stock. athenahealth financed the Acquisition through existing cash and marketable securities on hand and from its existing credit facility, from which it borrowed $125.0 million, net, to finance the Acquisition.

The acquisition date fair value of the consideration transferred for Epocrates, less cash and short-term investments acquired, was approximately $237.6 million, which consisted of the following:

Fair value of consideration transferred
Cash payments	$	294,632
Fair value of vested stock options and restricted stock units assumed	13,028
Fair value of total consideration	307,660
Less cash acquired	(51,796		)
Less short-term investments acquired	(18,250		)
Total	$	237,614

The value of the consideration paid for the outstanding Epocrates common stock was based on the average closing sales prices per share of the Company’s common stock for the ten trading days ending on the second trading day prior to the closing of the acquisition. The fair value of the stock options and restricted stock units assumed by the Company was determined using the Black-Scholes option pricing model. The share conversion ratio of 0.1239 was applied to convert Epocrates options and restricted stock units to the Company’s options and restricted stock units.

The Company assumed options and restricted stock units with a fair value of $22.6 million. Of the total consideration, $13.0 million was allocated to the purchase consideration and $9.6 million was allocated to future services and will be expensed over the remaining service periods on a straight-line basis.

The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed as of the date of acquisition:

Accounts receivable	$	23,144
Other current and long-term assets	3,833
Property, equipment and capitalized software costs	4,168
Purchased intangible assets	139,900
Current liabilities	(11,054		)
Deferred tax liabilities, net	(39,811		)
Deferred revenue	(29,400		)
Other long-term liabilities	(1,259		)
Total identifiable net assets	$	89,521
Goodwill	148,093
	$	237,614

The following table sets forth the preliminary components of the identifiable intangible assets acquired by asset class and their preliminary estimated useful lives as of the date of acquisition:

	Fair Value		Useful Life
Doctor network	$	104,500	14 years
Drug information content	10,000		5 years
Trade name	11,500		10 years
Customer backlog	2,900		1.5 years
Non-compete agreement	4,500		1.5 years
Developed technology	6,500		3 years
Total intangible assets subject to amortization	$	139,900

The doctors network represents the fair value of the underlying doctor relationships. Drug information content represents the fair value of the cost to replace the drug information and interaction content used by the doctor network. The trade name represents the fair value of the brand and name recognition associated with the marketing of Epocrates’ service offerings. Developed technology represents the estimated fair value of Epocrates’ mobile device platform. All of the purchased intangible assets related to the Epocrates transaction have finite lives. For those purchased intangible assets where an income approach was used, we considered the projected undiscounted cash flows as the best indication of the pattern of economic benefit expected from the asset.

Preliminary estimated amortization expense, based upon the Company’s newly acquired intangible assets at March 12, 2013, is as follows:

Year ending December 31,	Amount
Remaining 2013	$	8,923
2014	17,908
2015	15,413
2016	13,674
2017	13,191
Thereafter	70,791
Total	$	139,900

The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities when integrating Epocrates’ mobile device platform with the athenahealth service offerings. We anticipate goodwill will be allocated among our operating segments once determined. The goodwill balance is not deductible for U.S. income tax purposes.

2. PRO FORMA ADJUSTMENTS

The following pro forma adjustments are included in the Company’s unaudited pro forma condensed combined financial information:

(A)	To reverse rental income to the Property from athenahealth of $4.8 million and $1.6 million for the year ended December 31, 2012, and the three months ended March 31, 2013, respectively. Additionally to reverse rent expense incurred to athenahealth of $4.8 million and $1.6 million for the year ended December 31, 2012, and the three months ended March 31, 2013, respectively.
(B)	To reflect the estimated amortization of acquired intangible assets of $6.1 million and $1.5 million for the year ended December 31, 2012, and the three months ended March 31, 2013.

(C)	To reflect the estimated depreciation of acquired tangible assets of $3.2 million and $0.8 million for the year ended December 31, 2012, and the three months ended March 31, 2013.
(D)	To record the increase in interest expense directly related to the borrowings made under the Company's senior credit facility to finance the Acquisition. The Company entered into the senior credit facility on May 10, 2013, which replaced the Company's previous revolving credit facility. The Company borrowed $125.0 million under its senior credit facility to finance the acquisition. The pro forma interest expense adjustment assumes an interest rate of 2%, which was the interest rate applicable on the senior credit facility upon the Company borrowing against this facility. The pro forma interest expense adjustment also includes an increase in interest expense for the amortization of the financing fee of $1.3 million incurred during the second quarter of 2013. This commitment fee is being amortized to interest expense over the remaining revolving credit facility term of 5 years at acquisition date. A variance of one-eighth of one percent (or 12.5 basis points) in the interest rate on the $125.0 million Acquisition financing would increase or decrease interest expense by approximately $0.3 millionfor the year ended December 31, 2012.
(E)	To record the income tax impact of the pro forma adjustment at the combined federal and state statutory tax rate. The pro forma combined provision for income taxes does not reflect the amounts that would have resulted had the Company filed consolidated income tax returns during the periods presented. The pro forma income tax adjustment also includes $3.7 million and $1.0 million of the year ended December 31, 2012, and March 31, 2013, respectively, on the historical Arsenal net income. Historically Arsenal was not required to pay income tax on its operations.

(F)

To recognize the pro forma impact of the preliminary estimated deferred revenue fair value adjustment as if the fair value adjustment of $14.5 million was recorded on January 1, 2012 and services contributing to $11.5 million and $1.7 million of the adjustment were delivered in the year ended Decemebr 31, 2012, and the three months ended March 31, 2013, respectively.

(G)

To reflect the incremental amortization of stock-based compensation expense associated with Epocrates unvested equity awards that were exchanged for athenahealth unvested equity awards as part of the Epocrates acquisition. Upon the closing of the acquisition, each outstanding option to purchase Epocrates common stock was exchanged for an option to purchase athenahealth common stock, and each Epocrates restricted stock unit was exchanged for an athenahealth restricted stock unit using the terms commensurate with such equity awards at the acquisition date.

	Increase in Stock-Based Compensation Expense
	Year ended December 31, 2012		Three Months ended March 31, 2013
Expense:
Direct operating	$	290	$	12
Selling and marketing	1,037		43
Research and development	870		35
General and administrative	3,574		139
	$	5,771	$	229

	A.A. The following awards and assumptions were used in determining the pro forma adjustment: (i)  In exchange for Epocrates’ restricted stock units outstanding at the acquisition date, the Company issued 48,997unvestedrestricted stock units with a weighted-average fair value of $44.94 per unit and a weighted-average vesting period of 2.4 years. The fair value per unit of these awards was determined based on a valuation methodology which uses a Black-Scholes option pricing model. (ii)  In exchange for Epocrates’ stock options outstanding at the acquisition date, the Company issued 421,407unvested stock options with a weighted-average exercise price of $80.45 per share, a weighted-average vesting period of 1.5 years, and weighted-average fair value per option of $42.46. The fair value per option was determined based on a valuation methodology which uses a Black-Scholes option pricing model.
	The weighted-average assumptions used in the Black-Scholes pricing model for the equity awards issued by the Company in the exchange were as follows:
	Risk-free interest rate 0.76%
	Expected volatility 45%
	Expected dividend yield -
	Expected term (in years) 4.4
(H)	To allocate historical depreciation, which Epocrates had allocated to direct operating, selling and marketing, research and development, and general and administrative expense, to depreciation and amortization expense as presented in the Company's statement of income.

	Epocrates Historical Depreciation
	Year ended December 31, 2012		Three Months ended March 31, 2013
Expense:
Direct operating	$	387	$	75
Selling and marketing	395		167
Research and development	860		78
General and administrative	171		35
Depreciation and amortization	$	1,813	$	355

(I)	To reflect the estimated amortization of acquired intangible assets of $12.1 million and $4.8 million for the year ended December 31, 2012, and the three months ended March 31, 2013, respectively. To reverse Epocrates’ previously recorded intangible asset amortization of $6.2 million and $1.8 million for the year ended December 31, 2012, and the three months ended March 31, 2013, respectively.
(J)	To record the increase in interest expense directly related to the borrowings made under the Company's revolving credit facility to finance the Acquisition. The Company borrowed $155.0 million under its revolving credit facility to finance the Acquisition but immediately repaid $30.0 million using cash acquired from Epocrates in the Acquisition. As such, the pro forma adjustment reflects net borrowings of $125.0 million to finance the Acquisition. The pro forma interest expense adjustment assumes an interest rate of 1%, which was the interest rate applicable to the revolving credit facility upon the Company borrowing against this facility. The pro forma interest expense adjustment also includes an increase in interest expense for the amortization of the commitment fee of $0.3 million incurred to increase the revolving credit facility to $155.0 million for the Acquisition financing. This commitment fee is being amortized to interest expense over the remaining revolving credit facility term of 4.8 years at acquisition date. A variance of one-eighth of one percent (or 12.5 basis points) in the interest rate on the $125.0 million Acquisition financing would increase or decrease interest expense by less than $0.1 millionfor the year ended December 31, 2012.
(K)	To record the pro forma income tax impact at the combined federal and state statutory tax rate. The pro forma combined provision for income taxes does not reflect the amounts that would have resulted had the Company and Epocrates filed consolidated income tax returns during the periods presented
(L)	To eliminate transaction costs incurred in direct association with the Epocrates Acquisition from the historical statements of operations of athenahealth and Epocrates of $0.8 million and $7.4 million for the year ended December 31, 2012, and three months ended March 31, 2013, respectively. These costs include fees for legal and accounting professional services and investment banker fees.
(M)	To eliminate transaction costs incurred in direct association with the Arsenal Acquisition from the historical statements of operations of athenahealth of $0.7 million and $1.0 million for the year ended December 31, 2012, and three months ended March 31, 2013, respectively. These costs include fees for legal and accounting professional services and consulting fees.

The above pro forma condensed combined statements of income for the year ended December 31, 2012, and for the three months ended March 31, 2013, does not include adjustments of i)$1.6 millionrelated to transaction costs incurred during the three months ended June 30, 2013, ii) $1.8 million related to the incremental fair value of vested awards, iii) $4.9 million related to the accelerated vesting of awards that vested upon the termination of certain Epocrates employees that had contractual change in control provisions, and iv) $2.5 million gain on termination of the lease between athenahealth and President and Fellows of Harvard College. These adjustments are considered non-recurring in nature and have been excluded from the adjustments above.

3. ACCOUNTING POLICIES

The Company is still in the process of evaluating Epocrates’ accounting policies and determining the appropriate classification of amortization of purchased intangibles. As a result of this review, it may become necessary to conform accounting policies for the combined entity. The unaudited pro forma condensed combined financial information does not assume adjustments for any remaining differences in accounting policies.