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)     September 4, 2014

____________________

HEARTLAND PAYMENT SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-32594	22-3755714
(State or other jurisdiction	(Commission File No)	(I.R.S. Employer
of incorporation or organization)	File No)	Identification Number)

90 Nassau Street, Princeton, New Jersey 08542

(Address of principal executive offices) (Zip Code)

(609) 683-3831

(Registrant’s telephone number, including area code)

(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:

oWritten communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting 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))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

(17 CFR 240.13e-4(c))

This Current Report on Form 8-K/A is filed as an amendment to the Current Report on Form 8-K dated September 4, 2014, filed by Heartland Payment Systems, Inc. (“the Company”) with the Securities and Exchange Commission on September 8, 2014, announcing the completion of its acquisition of TouchNet Information Systems, Inc. (“TouchNet”). The information previously reported in the September 4, 2014 Form 8-K is hereby incorporated by reference into this Current Report on Form 8-K/A. This Current Report on Form 8-K/A amends Item 9.01 Financial Statements and Exhibits reported in the September 4, 2014 Form 8-K to provide the audited financial statements as of and for the years ended December 31, 2013 and 2012, and the interim financial statements as of and for the six months ended June 30, 2014 of TouchNet and the required unaudited pro forma combined financial information.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

• Unaudited financial statements of TouchNet Information Systems, Inc. as of and for the interim periods ended June 30, 2014 and 2013 are filed in Exhibit 99.1 to this Form 8-K/A and incorporated herein by reference.

• Audited financial statements of TouchNet Information Systems, Inc. as of and for the years ended December 31, 2013 and 2012, are filed in Exhibit 99.1 to this Form 8-K/A and incorporated herein by reference.

(b) Pro Forma Financial Information

• Unaudited pro forma condensed combined financial statements as of and for the interim period ended June 30, 2014 and for the year ended December 31, 2013 are filed in Exhibit 99.2 to this Form 8-K/A and incorporated herein by reference.

(c) Not applicable

(d) Exhibits

The following exhibits are furnished as part of this Form 8-K/A

Exhibit Number	Description
23.1	Consent of Accord Cox & Company relating to TouchNet Information Systems, Inc.'s financial statements.
99.1	Unaudited financial statements of TouchNet Information Systems, Inc. as of and for the interim periods ended June 30, 2014 and 2013 and audited financial statements of TouchNet Information Systems, Inc. as of and for the years ended December 31, 2013 and 2012.
99.2	Unaudited pro forma condensed combined financial statements as of and for the interim period ended June 30, 2014 and for the year ended December 31, 2013.

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.

	Heartland Payment Systems, Inc.
	(Registrant)
Dated: November 14, 2014	By:	/s/ Samir M. Zabaneh
		Samir M. Zabaneh
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement on Form S-8 (No 333-175533) of Heartland Payment Systems, Inc. of our report dated November 14, 2014 relating to the financial statements of TouchNet Information Systems, Inc., appearing in the Amendment No. 1 to the Current Report on Form 8-K of Heartland Payment Systems, Inc. dated November 14, 2014.

/s/ ACORD COX & COMPANY

Lenexa, KS

November 14, 2014

EX-99.1

EXHIBIT 99.1

TOUCHNET INFORMATION SYSTEMS, INC.

Index to Financial Statements

Financial Statements	Page
Unaudited Balance Sheets as of June 30, 2014 and December 31, 2013	F-2
Unaudited Statements of Income for the six months ended June 30, 2014 and 2013	F-3
Unaudited Statements of Cash Flows for the six months ended June 30, 2014 and 2013	F-4
Unaudited Notes to Financial Statements	F-5
Independent Auditors' Report	F-6
Balance Sheets as of December 31, 2013 and 2012	F-8
Statements of Income for the years ended December 31, 2013 and 2012	F-9
Statements of Stockholders' Equity for the years ended December 31, 2013 and 2012	F-10
Statements of Cash Flows for the years ended December 31, 2013 and 2012	F-11
Notes to Financial Statements	F-12

TOUCHNET INFORMATION SYSTEMS, INC.

BALANCE SHEETS

June 30, 2014 and December 31, 2013

(in thousands, except share data)

(unaudited)

	June 30, 2014			December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	27,867		$	18,625
Accounts receivable, net of allowance for doubtful accounts of $450 and $450, respectively	19,786			10,764
Inventory	82			127
Prepaid expenses and other assets	540			600
Current portion of investments	—			2,015
Total current assets	48,275			32,131
Property and equipment, net	2,997			2,590
Investments, less current portion	—			3,849
Intangible assets, net	5,614			5,256
Total assets	$	56,886		$	43,826
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,039		$	368
PayPath payable	647			1,858
Accrued expenses and other	1,310			2,362
Current portion of unearned revenue	34,364			29,445
Total current liabilities	38,360			34,033
Unearned revenue, less current portion	2,234			2,398
Total liabilities	40,594			36,431
Commitments and contingencies	—			—
Stockholders' Equity
Voting common stock, $0.001 stated value. Authorized 10,000,000 shares; 6,383,385 shares issued at June 30, 2014 and December 31, 2013	6			6
Nonvoting common stock, $0.001 stated value. Authorized 90,000,000 shares; 57,450,465 shares issued at June 30, 2014 and December 31, 2013	57			57
Additional paid-in capital	7,817			7,817
Retained earnings	10,465			1,568
Voting common stock held in treasury, at cost (726,941 shares at June 30, 2014 and December 31, 2013)	(213		)	(213		)
Nonvoting common stock held in treasury, at cost (6,542,469 at June 30, 2014 and December 31, 2013)	(1,840		)	(1,840		)
Total stockholders' equity	16,292			7,395
Total liabilities and stockholders' equity	$	56,886		$	43,826

See notes to unaudited financial statements.

F-2

TOUCHNET INFORMATION SYSTEMS, INC.

STATEMENTS OF INCOME

Six Months Ended June 30, 2014 and 2013

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2014			2013
Revenues	$	34,721		$	29,238
Costs and expenses
Cost of sales	8,089			6,075
Selling, general and administrative	10,516			10,017
Legal and professional fees	1,429			1,283
Depreciation and amortization	1,257			1,219
Total costs and expenses	21,291			18,594
Income from operations	13,430			10,644
Other income (expense):
Investment income	19			24
Other, net	(31		)	4
Total other income (expense)	(12		)	28
Net income	$	13,418		$	10,672

See notes to unaudited financial statements.

F-3

TOUCHNET INFORMATION SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2014 and 2013

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities
Net income	$	13,418		$	10,672
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,257			1,219
Changes in operating assets and liabilities:
Increase in accounts receivable	(8,964		)	(10,147		)
Decrease in inventory	45			37
Decrease (increase) in prepaid expenses and other assets	1			(111		)
(Decrease) increase in accounts payable	(9		)	220
Decrease in Paypath payable	(1,221		)	(1,363		)
Increase (decrease) in accrued expenses and other	639			(134		)
Increase in unearned revenue	4,756			5,676
Net cash provided by operating activities	9,922			6,069
Cash flows from investing activities
Purchase of leasehold improvements, furniture and equipment	(699		)	(275		)
Change in investment securities	5,864			(52		)
Capitalized development costs and other intangible assets	(1,323		)	(984		)
Net cash provided by (used in) investing activities	3,842			(1,311		)
Cash flows from financing activities
Distributions to shareholders	(4,522		)	(8,543		)
Net cash used in financing activities	(4,522		)	(8,543		)
Net increase (decrease) in cash	9,242			(3,785		)
Cash and cash equivalents at beginning of year	18,625			18,969
Cash and cash equivalents at end of period	$	27,867		$	15,184

See notes to unaudited financial statements.

F-4

TOUCHNET INFORMATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

June 30, 2014 and 2013

(unaudited)

1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Basis of Financial Statement Presentation— The accompanying financial statements include TouchNet Information Systems. Inc. ("TouchNet" or the "Company"). The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The accompanying financial statements are unaudited. In the opinion of TouchNet’s management, the unaudited financial statements include all normal recurring adjustments necessary for a fair presentation of TouchNet’s financial position at June 30, 2014, its results of operations and cash flows for the six months ended June 30, 2014 and 2013. Results of operations reported for interim periods are not necessarily indicative of the results to be expected for the year ended December 31, 2014. These unaudited financial statements should be read in conjunction with the audited financial statements for the years ended December 31, 2013 and 2012 included elsewhere in this document.

On July 29, 2014, Heartland Payment Systems, Inc. (the "Purchaser") and TouchNet Information Systems, Inc. ("TouchNet" or the "Seller"), entered into an Agreement and Plan of Merger (the "Agreement"), under which the Purchaser would acquire all of the shares of common stock of TouchNet (the "Acquisition") for a cash payment of $375.0 million plus or minus the net working capital of TouchNet on the closing date. The Acquisition closed as of September 4, 2014.

Description of the Business— TouchNet was incorporated under the laws of the state of Kansas on May 19, 1989. The Company develops, markets, and supports advanced e-commerce solutions to automate the delivery of business critical transactions primarily for colleges and universities.

F-5

INDEPENDENT AUDITORS' REPORT

Board of Directors

Touchnet Information Systems, Inc.

Lenexa, Kansas

We have audited the accompanying balance sheets (restated) of Touchnet Information Systems, Inc. (the “Company”) as of December 31, 2013 and 2012, and the related statements of income (restated), stockholders’ equity (restated) and cash flows (restated) for the years then ended, and the related notes (restated) to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements (restated) 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 financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements (restated) based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements (restated) are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the organization’s preparation and fair presentation of the financial statements 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 organization’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 financial statements.

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 financial statements (restated) referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

F-6

Emphasis of Matter - Restatement

The financial statements of the Company as of December 31, 2013 and 2012, were audited by us and our report dated May 10, 2014, expressed an unmodified opinion on those statements. As discussed in Note 9 to the financial statements, the Company has adjusted its 2013 and 2012 financial statements to retrospectively apply the change in the application of revenue recognition principles for certain revenue arrangements that include software elements. Our opinion is not modified with respect to that matter.

Other Matter - Subsequent Event

As discussed in Note 9 to the financial statements, on July 29, 2014, the Company entered into an Agreement and Plan of Merger with Heartland Payment Systems, Inc. (the “Purchaser”), under which the Purchaser would acquire all of the shares of common stock of the Company (the “Acquisition”). The Acquisition closed as of September 4, 2014. Our opinion is not modified with respect to that matter.

/s/ Acord Cox & Company

Lenexa, Kansas

November 14, 2014

F-7

TOUCHNET INFORMATION SYSTEMS, INC.

BALANCE SHEETS

December 31, 2013 and 2012

(in thousands, except share data)

	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	18,625		$	18,969
Accounts receivable, net of allowance for doubtful accounts of $450 and $450, respectively	10,764			9,173
Inventory	127			76
Prepaid expenses and other current assets	600			603
Current portion of investments	2,015			1,604
Total current assets	32,131			30,425
Property and equipment, net	2,590			2,323
Investments, less current portion	3,849			5,284
Intangible assets, net	5,256			4,776
Total assets	$	43,826		$	42,808
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	368		$	270
PayPath payable	1,858			2,015
Accrued expenses and other	2,362			3,146
Current portion of unearned revenue	29,445			27,558
Total current liabilities	34,033			32,989
Unearned revenue, less current portion	2,398			2,956
Total liabilities	36,431			35,945
Commitments and contingencies	—			—
Stockholders' Equity
Voting common stock, $0.001 stated value. Authorized 10,000,000 shares; 6,383,385 shares issued at June 30, 2014 and December 31, 2013	6			6
Nonvoting common stock, $0.001 stated value. Authorized 90,000,000 shares; 57,450,465 shares issued at June 30, 2014 and December 31, 2013	57			57
Additional paid-in capital	7,817			7,817
Retained earnings	1,568			575
Accumulated other comprehensive income - unrealized gain on available-for-sale equity securities	—			461
Voting common stock held in treasury, at cost (726,941 shares at December 31, 2013 and 2012)	(213		)	(213		)
Nonvoting common stock held in treasury, at cost (6,542,469 at December 31, 2013 and 2012)	(1,840		)	(1,840		)
Total stockholders' equity	7,395			6,863
Total liabilities and stockholders' equity	$	43,826		$	42,808

See notes to financial statements

F-8

TOUCHNET INFORMATION SYSTEMS, INC.

STATEMENTS OF INCOME

Years Ended December 31, 2013 and 2012

(in thousands)

	2013		2012
Revenues	$	64,480	$	57,453
Costs and expenses
Cost of sales	15,260		12,748
Selling, general and administrative	19,510		17,551
Legal and professional fees	2,362		1,516
Depreciation and amortization	2,437		2,388
Total costs and expenses	39,569		34,203
Income from operations	24,911		23,250
Other income:
Investment income	909		469
Other, net	6		7
Total other income	915		476
Net income	$	25,826	$	23,726

See notes to financial statements

F-9

TOUCHNET INFORMATION SYSTEMS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

Years Ended December 31, 2013 and 2012

(in thousands)

	Common Stock						Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Common Stock Held in Treasury										Notes Receivable From Officers			Comprehensive Income			Total Stockholders' Equity
	Voting			Nonvoting												Voting					Nonvoting
	Shares	Amount		Shares	Amount											Shares		Amount			Shares		Amount
Balances, January 1, 2012	6,383	$	6	57,450	$	57	$	7,829		$	8,301		$	307		742		$	(217	)	6,677		$	(1,878	)	$	(64	)				$	14,341
Comprehensive Income:
Net income	—	—		—	—		—			23,726			—			—		—			—		—			—			$	23,726		$	23,726
Unrealized gain on investments	—	—		—	—		—			—			154			—		—			—		—			—			154			$	154
Comprehensive income																													$	23,880
Sales of treasury stock	—	—		—	—		(12		)	—			—			(15	)	4			(135	)	38			—						$	30
Stockholder distributions	—	—		—	—		—			(31,452		)	—			—		—			—		—			—						$	(31,452	)
Notes receivable from officers	—	—		—	—		—			—			—			—		—			—		—			64						$	64
Balances, December 31, 2012	6,383	$	6	57,450	$	57	$	7,817		$	575		$	461		727		$	(213	)	6,542		$	(1,840	)	$	—					$	6,863
Comprehensive Income:
Net income	—	—		—	—		—			25,826			—			—		—			—		—			—			$	25,826		$	25,826
Unrealized gain on investments	—	—		—	—		—			—			(461		)	—		—			—		—			—			(461		)	$	(461	)
Comprehensive income																													$	25,365
Stockholder distributions	—	—		—	—		—			(24,833		)	—			—		—			—		—			—						$	(24,833	)
Balances, December 31, 2013	6,383	$	6	57,450	$	57	$	7,817		$	1,568		$	—		727		$	(213	)	6,542		$	(1,840	)	$	—					$	7,395

See notes to financial statements

F-10

TOUCHNET INFORMATION SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

Years Ended December 31, 2013 and 2012

(in thousands)

	2013			2012
Cash flows from operating activities
Net income	$	25,826		$	23,726
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,437			2,388
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(1,590		)	742
(Increase) decrease in inventory	(51		)	66
Decrease (increase) in prepaid expenses and other assets	4			(41		)
Increase in accounts payable	98			47
(Decrease) increase in PayPath payable	(157		)	131
(Decrease) increase in accrued expenses and other	(784		)	641
Increase in unearned revenue	1,328			1,057
Net cash provided by operating activities	27,111			28,757
Cash flows from investing activities
Purchase of leasehold improvements, furniture and equipment	(904		)	(359		)
Change in investment securities	563			4,563
Capitalized development costs and other intangible assets	(2,281		)	(2,035		)
Change in officer's notes receivable	—			64
Net cash (used in) provided by investing activities	(2,622		)	2,233
Cash flows from financing activities
Distributions to shareholders	(24,833		)	(31,452		)
Sale of treasury shares	—			30
Net cash used in financing activities	(24,833		)	(31,422		)
Net decrease in cash	(344		)	(432		)
Cash and cash equivalents at beginning of year	18,969			19,401
Cash and cash equivalents at end of year	$	18,625		$	18,969

See notes to financial statements

F-11

TOUCHNET INFORMATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2013 and 2012

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Organization and Nature of Operations - Touchnet Information Systems, Inc. (the “Company”), was incorporated under the laws of the state of Kansas on May 19, 1989. The Company develops, markets, and supports advanced e-commerce solutions to automate the delivery of business critical transactions primarily for colleges and universities.

On July 29, 2014, Heartland Payment Systems, Inc. (“the Purchaser”) and the Company entered into an Agreement and Plan of Merger (the “Agreement”), under which the Purchaser would acquire all of the shares of common stock of the Company (“the Acquisition”) for a cash payment of $375.0 million plus or minus the Company’s net working capital on the closing date. The Acquisition closed as of September 4, 2014. See Note 9 Subsequent Events/Restatement Adjustments.

b. Use of Estimates - In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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. Significant estimates made by management include, but are not limited to, estimates of the useful lives of property and equipment and estimates of allowance for doubtful accounts. Actual results could differ from those estimates.

c. Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, demand deposit accounts, and certificates of deposit with original maturities of less than 90 days.

d. Allowance for Doubtful Accounts - The allowance for doubtful accounts is the Company’s best estimate of the amount of probable losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience and specific customer information.

e. Inventory - Inventory consists of computer hardware and other materials utilized in the maintenance and support of the Company’s products, and are valued at the lower of cost (first-in, first-out method) or market.

f. Leasehold Improvements, Furniture, and Equipment - Leasehold improvements, furniture, and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, ranging from five to fifteen years.

g. Investments - The Company classifies its purchase of specific debt securities as held to maturity and records them at amortized cost as the Company has the positive intent and ability to hold these securities until maturity. Bond premiums and discounts are amortized using the effective-interest method.

The financial statements reflect the adoption of FASB Accounting Standards Codification (ASC 820), Fair Value Measurements and Disclosures. FASB ASC 820 is effective for financial statements issued for fiscal years beginning after November 15, 2007. FASB ASC 820 establishes a single authoritative definition of fair value, sets a framework for measuring the fair value, and requires additional disclosures about fair value measurement.

In accordance with FASB ASC 820, the Company classifies its investments into Level 1, which refers to valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access; Level 2, valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and Level 3 which refers to valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. As required by FASB ASC 820, at December 31, 2013 and 2012, the Company’s portfolio investments were classified as follows, based on fair values.

F-12

	2013		2012
	(in thousands)
Level 1	$	—	$	1,334
Level 2	—		99
Level 3	—		—
	$	—	$	1,433

h. Intangible Assets - Product development software costs incurred internally are expensed until technological feasibility has been established upon completion of a program design. Thereafter, development costs are capitalized and subsequently reported at the lower of amortized costs or estimated net realizable value. Capitalized costs are amortized based on current and future revenue for each product with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the product. The Company is amortizing capitalized development costs on a straight-line basis over five years.

Patents and trademark costs are amortized by the straight-line method over their estimated economic lives, ranging from 5 to 17 years

i. Revenue Recognition - Revenues are derived primarily from the sale and subscription of e-commerce solutions and integration to host computer systems under perpetual license and Application Subscription Program contracts. In addition, revenue is generated from support and maintenance contracts and custom applications development as well as transaction processing through a convenience fee service.

The Company recognizes license contract related revenue in accordance with the provisions of ASC 985-605, Software - Revenue Recognition and subscription contract related revenue in accordance with ASC 605-25, Revenue Recognition-Multiple Element Arrangements. ASC 985-605 requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of those elements. The Company allocates revenue to each element in a multiple element arrangement based on its respective stand alone fair value, as determined by the price charged when that element is sold separately. If evidence of the stand alone fair value cannot be established for the undelivered elements of a license agreement, the entire amount of revenue under the arrangement is deferred until these elements have been delivered or objective evidence can be established.

The Company provides implementation services related to its sales of licenses or subscriptions of e-commerce solution software. These implementation services do not possess stand-alone value, accordingly, implementation service fees and related license revenues are recognized over the software implementation period for license sales, and for subscription contracts, implementation service fees are recognized over the subscription contract term.

Revenue from the sale of software, when sold as the sole element in an arrangement, hardware, and other equipment, are recognized upon shipment. Fair value is determined based on prices when these elements are sold. Revenue from ongoing software support and maintenance is recognized ratably over the contracted maintenance term. Revenue on custom programming is recognized upon completion of the program. Revenue for subscription contracts are recognized ratably over the term of the contract.

Unearned revenue represents contractual obligations of the Company to provide software, services and support to customers in the future.

The Company also has a convenience fee service known as PayPath. PayPath enables campus customers to outsource credit card payments to the Company and not incur the costs of directly accepting credit card payments. A convenience fee is charged to the payer for using the service and this charge is used by the Company to cover various costs such as bank/processing fees, software and technology, operations, security and customer service. The Company recognizes revenue as the amount of the convenience fee paid by the end user on each transaction. Payment card processing and bank fees incurred by the Company are recorded as Cost of Sales.

F-13

j. Recently Adopted Accounting Pronouncements - In October 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2009-13 - Multiple Deliverable Revenue Arrangements (ASU 2009-13). ASU 2009-13 requires a vendor to allocate revenue to each unit of accounting in many arrangements involving multiple deliverables based on the relative selling price of each deliverable. It also changes the level of evidence of standalone selling price required to separate deliverables by allowing a vendor to make its best estimate of the standalone selling price of deliverables when more objective evidence of selling price is not available. We adopted the amendment provisions of ASU 2009-13 on January 2, 2011; the adoption of this standard did not result in a material change in the timing of revenue recognition.

In October 2009, the FASB issued ASU 2009-14 - Certain Revenue Arrangements That Include Software Elements (ASU 2009-14). Under ASU 2009-14, tangible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality are no longer within the scope of the software revenue guidance in ASC 985-605. We adopted the amendment provisions of ASU 2009-14 on January 2, 2011; the adoption of this standard did not result in a material change in the timing of revenue recognition.

k. Income Taxes - The Company elected to become a subchapter S-Corporation January 1, 2007. Therefore, all earnings of the Company are recognized ratably by the individual shareholders of the Company. Uncertain tax provisions, if any, are recorded in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Income Taxes, which require the recognition of a liability for tax positions taken that do not meet the more-likely-than-not standard that the position will be sustained upon examination by the taxing authorities. There is no liability for uncertain tax positions recorded at December 31, 2013 or 2012. The Company's income tax filings are subject to examination by various taxing authorities. The Company's open examination periods are 2010 and forward.

l. Research and Development - Research and development costs are expensed in the period incurred.

m. Subsequent Events - Subsequent events have been evaluated through the date of the Independent Auditors’ Report, the date which the financial statements were available for issue.

2.    INVESTMENTS

A summary of investments at December 31, 2013 and 2012 is as follows:

	2013			2012
	(in thousands)
Securities available-for-sale	$	—		$	1,433
Debt securities held-to-maturity	5,864			5,455
	5,864			6,888
Less current portion of investment	(2,015		)	(1,604		)
	$	3,849		$	5,284

A summary of marketable securities relating to quoted market values and unrealized holding gains (losses) at December 31, 2013 and 2012 is as follows (in thousands):

	Amortized cost		Unrealized gains		Unrealized losses		Fair value
2013
Available-for-sale equity securities	$	—	$	—	$	—	$	—
2012
Available-for-sale equity securities	$	972	$	461			$	1,433

The carrying value and fair value of debt securities held-to-maturity (HTM) at December 31, 2013 and 2012 were as follows:

F-14

	Amortized cost		Unrealized gains		Unrealized losses		Fair value
2013
Municipal bonds	$	5,864	$	8	$	—	$	5,872
2012
Municipal bonds	$	5,455	$	12	$	—	$	5,467

3.    LEASEHOLD IMPROVEMENTS, FURNITURE AND EQUIPMENT

A summary of leasehold improvements, furniture and equipment at December 31, 2013 and 2012, respectively, is as follows:

	2013		2012
	(in thousands)
Leasehold improvements	$	2,503	$	2,498
Furniture and equipment	1,177		1,112
Developmental assets and models	196		196
Construction in process	619		19
Computer equipment	4,360		4,127
Total leasehold improvements, furniture and equipment	8,855		7,952
Less accumulated depreciation	6,265		5,629
Net leasehold improvements, furniture and equipment	$	2,590	$	2,323

Depreciation expense for 2013 and 2012 was approximately $636,000 and $708,000, respectively.

4.    INTANGIBLE ASSETS

A summary of intangible assets at December 31, 2013 and 2012, respectively, is as follows:

	2013		2012
	(in thousands)
Product development costs	$	19,076	$	16,867
Trademarks and patents	990		918
Total intangible assets	20,066		17,785
Less accumulated amortization	14,810		13,009
Net intangible assets	$	5,256	$	4,776

Amortization expense for 2013 and 2012 was approximately $1,801,000 and $1,679,000, respectively. Estimated amortization expense for each of the next five years is $1,692,000, $1,362,000, $1,031,000, $667,000 and $257,000, respectively.

5.    DEFERRED COMPENSATION     

Effective January 1, 2008, the Company’s Board of Directors adopted the TouchNet Information Systems, Inc. Deferred Compensation Stock Plan (the “Plan”), which permits the Board, in its sole discretion, to grant “Stock Equivalent Units” to any employee of the Company. In this paragraph, and in the next two paragraphs, capitalized terms in quotes have the meanings set forth in the Plan.

A “Stock Equivalent Unit” means the right to receive an amount, determined as of the applicable “Valuation Date,” equal to the combined fair market value of nine (9) shares of nonvoting common stock and one (1) share of voting common stock of the Company. Each “Stock Equivalent Unit” granted with respect to a “Plan Year” vests at a rate of 20% for each “Year of Service” from the first day of the “Plan Year,” or immediately upon a “Change in Control.”

F-15

Vested amounts are payable to a “Participant” upon the “Participant’s” “Separation from Service” or upon a “Change in Control.” Generally, in the case of a “Separation from Service,” vested amounts are payable in three (3) equal, annual installments, with interest, if the “Separation from Service” is due to “Retirement,” “Death” or “Disability,” or in five (5) equal, annual installments, with interest, if the “Separation from Service” is due to any other reason. In the event of a “Change in Control,” vested amounts are payable in a lump sum within ninety (90) days after the “Change in Control.” See Note 9 Subsequent Events/Restatement Adjustments.

During the year ended December 31, 2013, the Board granted 18,000 “Stock Equivalent Units”. Previous “Stock Equivalent Units” of 17,622 were granted in 2008, 5,000 in 2010, 4,500 in 2011, 6,000 in 2012 with a total “Stock Equivalent Units” outstanding as of December 31, 2013 of 51,122.

6.    LEASES

The Company leases office facilities under an operating lease from a related party. On January 1, 2014, the Company renewed that operating lease agreement and extended the lease term to December of 2025. In connection with the Acquisition, the Company and the Purchaser renegotiated this lease shortening the lease term to December 31, 2020. In addition, the Company leases CRM Cloud Services under an operating lease that expires in 2015. Rent expense associated with all operating leases for 2013 and 2012 was approximately $507,993 and $460,269.

Future rental payments required under operating leases with non-cancellable lease terms in excess of one year are as follows:

	December 31,
	(in thousands)
2014	$	474
2015	439
2016	308
2017	308
2018	308
2019-2023	1,730
2024-2025	769
	$	4,336

7.    EMPLOYEE BENEFIT PLANS

401(k) Profit Sharing Plan - The Company has a defined contribution plan (the “401(k) Plan”) for all employees attaining 21 years of age. This plan matches employee contributions 50% up to 7% of an employees’ salary. In addition, the Employer may choose to make a year-end Profit Sharing contribution to all eligible employees. Employer Profit Sharing contributions under this plan are discretionary. The Company expensed matching contributions to the 401(k) Plan for 2013 and 2012 of approximately $349,388 and $192,245. The Company expensed Profit Sharing contributions under the 401(k) plan for 2013 and 2012 of approximately $449,736 and $413,489.

8. PENDING LITIGATION

On February 27, 2009, Higher One, Inc., a Delaware corporation, filed a lawsuit against the Company in the U.S. District Court in Connecticut, alleging that the Company is infringing one or more claims of U.S. Patent No. 7,496,536 issued to Higher One, Inc. by the U.S. Patent & Trademark Office on February 24, 2009. The Patent relates to systems and methods to be used by educational institutions for the making of refunds.

On September 8, 2010, Higher One, Inc. filed a second lawsuit against the Company in the U.S. District Court in Connecticut, alleging that the Company is infringing one or more claims of U.S. Patent No. 7,792,744 issued to Higher One, Inc. by the U.S. Patent & Trademark Office on September 7, 2010, involving systems and methods to facilitate a distribution of bank accounts by an educational institution.

F-16

In each case, Higher One, Inc. is seeking damages, costs, interest on damages, a preliminary and permanent injunction, and such other relief as the court deems just and proper. Management believes the suits are without merit and intends to vigorously defend its position.

The outcome in these cases cannot be predicted and therefore, no accrual for an estimated settlement has been recorded to the December 31, 2013 or 2012 financial statements. Future results of operations for any particular annual period could be affected by changes in the Company’s underlying assumptions related to these proceedings.

9. SUBSEQUENT EVENTS/RESTATEMENT ADJUSTMENTS

On July 29, 2014, Heartland Payment Systems, Inc. (“the Purchaser”) and the Company entered into an Agreement and Plan of Merger (the “Agreement”), under which the Purchaser would acquire all of the shares of common stock of the Company (“the Acquisition”) for a cash payment of $375.0 million plus or minus the Company’s net working capital on the closing date. The Acquisition closed as of September 4, 2014. In connection with the Acquisition, certain originally reported amounts have been restated.

The Company’s financial statements as of and for the years ended December 31, 2013 and 2012 as originally reported included amounts as long-term contracts receivable and long-term unearned revenue that related to unbilled receivables for services not rendered as of the balance sheet dates. These services represented contractual obligations of the Company to provide software, services and support to customers in the future. As a result of considering guidance preferable for publicly traded companies, long-term contracts receivable and the related amount of long-term unearned revenue have been removed from the Company’s balance sheets.

Additionally, the Company reviewed its methodology for establishing stand alone fair value on support and maintenance, hosting and implementation services and concluded that in some situations sufficient evidence did not exist to support the revenue recognition methods originally applied. As a result, amounts related to unearned revenue on the balance sheet and revenues in the income statement have been restated.

The result of the restatement decreased retained earnings and total equity by approximately $5,905,000 at January 1, 2012.

The tables below provide a summary of the significant effects of restatements to the Company’s financial statements:

	As of December 31,
	2013				2012
	(in thousands)
	As Originally Reported		As Restated		As Originally Reported		As Restated
Contracts receivable, less current portion	$	52,683	$	—	$	46,465	$	—
Total assets	96,509		43,826		89,273		42,808
Current portion of unearned revenues	28,061		29,445		25,510		27,558
Unearned revenues, less current portion	52,683		2,398		46,465		2,956
Total liabilities	85,331		36,431		77,406		35,945
Retained earnings	5,349		1,568		5,578		575
Total stockholder's equity	11,178		7,395		11,867		6,863

F-17

	For the Year Ended December 31,
	2013				2012
	As Originally Reported		As Restated		As Originally Reported		As Restated
Revenues	$	63,258	$	64,480	$	56,551	$	57,453
Income from operations	23,689		24,911		22,348		23,250
Net income	24,604		25,826		22,824		23,726
Comprehensive income	24,143		25,365		22,978		23,880
Increase in unearned revenue	2,551		1,328		1,959		1,057

F-18

EX-99.2

EXHIBIT 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On July 29, 2014, Heartland Payment Systems, Inc. (the "Company” or the "Purchaser”) and TouchNet Information Systems, Inc. (“TouchNet” or the "Seller”), entered into an Agreement and Plan of Merger (the “Agreement”), under which the Purchaser would acquire all of the shares of common stock of TouchNet (the "Acquisition”) for a cash payment of $375.0 million minus the net working capital of TouchNet on the closing date. The Acquisition closed as of September 4, 2014.

TouchNet was incorporated under the laws of the state of Kansas on May 19, 1989. The Company develops, markets, and supports advanced e-commerce solutions to automate the delivery of business critical transactions primarily for colleges and universities.

The following unaudited pro forma condensed combined balance sheet combines the historical condensed consolidated balance sheet of the Company and the historical balance sheet of TouchNet as of June 30, 2014, giving effect to the Acquisition as if it had been consummated on June 30, 2014. The following unaudited pro forma condensed combined statements of income and comprehensive income for the six-month period ended June 30, 2014 and the twelve-month period ended December 31, 2013 combine the condensed consolidated statement of income and comprehensive income of the Company and the statement of income and comprehensive income of TouchNet for the six-month period ended June 30, 2014 and the twelve-month period ended December 31, 2013, giving effect to the Acquisition as if it had occurred at January 1, 2013. The unaudited pro forma condensed combined financial statements do not include the realization of potential cost savings from operating efficiencies, synergies or other restructurings that may result from the acquisition.

The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Company’s historical financial statements, related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as filed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and quarterly report filed on Form 10-Q for the six months ended June 30, 2014, and the TouchNet audited and unaudited financial statements and related notes, and other financial information included elsewhere in this Current Report on Form 8-K/A. The unaudited pro forma condensed combined financial statements should be read in conjunction with the notes thereto.

The historical financial information has been adjusted to give pro forma effect to events that are directly attributable to the Acquisition, are factually supportable with respect to the income statement and are expected to have a continuing impact on the combined income statement. The pro forma adjustments are based upon information and assumptions available at the time of the filing of this document. The Company and TouchNet did not maintain direct historical relationships prior to the acquisition. Accordingly, no pro forma adjustments were required to eliminate activities among the Company and the TouchNet.

The acquisition will be accounted for under the purchase method of accounting. Under this method, the fair values of TouchNet’s assets acquired and the liabilities assumed are estimated at the Acquisition consummation date. The historical amounts of TouchNet’s assets and liabilities are then adjusted to such fair values and these fair values are added to the Company’s balance sheet. The pro forma fair value adjustments are preliminary, based on estimates, and may be adjusted as the Company analyzes what was known and knowable at the acquisition, including the finalization of valuations. Accordingly, the final fair value adjustments may be materially different from those presented in this document.

The unaudited pro forma condensed combined financial information is for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Acquisition had been consummated as of the dates indicated, nor is it necessarily indicative of future operating results or financial position.

F-1

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

June 30, 2014

(in thousands)

Assets	Heartland			TouchNet			Pro Forma Adjustments (See Note 2)				Pro Forma Combined
Current assets:
Cash and cash equivalents	$	53,839		$	27,867		$	(372,251	)	(a)	$	84,455
							375,000			(e)
Funds held for customers	131,448										131,448
Receivables, net	212,559			19,786							232,345
Investments	4,112										4,112
Inventory	10,351			82							10,433
Prepaid expenses	17,898			540							18,438
Current tax assets	17,789										17,789
Current deferred tax assets, net	7,715										7,715
Total current assets	455,711			48,275			2,749				506,735
Capitalized customer acquisition costs, net	66,433										66,433
Property and equipment, net	155,770			2,997			396			(b)	159,163
Goodwill	204,737						207,665			(b)	412,402
Intangible assets, net	50,103			5,614			(5,614		)	(c)	194,503
							144,400			(b)
Deposits and other assets, net	1,206										1,206
Total assets	$	933,960		$	56,886		$	349,596			$	1,340,442
Liabilities and Equity
Current liabilities:
Due to sponsor banks	$	58,774		$			$				$	58,774
Accounts payable	70,767			2,686							73,453
Customer fund deposits	131,448										131,448
Processing liabilities	107,108										107,108
Current portion of accrued buyout liability	12,901										12,901
Current portion of borrowings							18,750			(d)	18,750
Accrued expenses and other liabilities	23,758			1,310							25,068
Current portion of unearned revenue	5,183			34,364			(8,232		)	(b)	31,315
Total current liabilities	409,939			38,360			10,518				458,817
Deferred tax liabilities, net	43,910										43,910
Reserve for unrecognized tax benefits	6,739										6,739
Long-term borrowings	200,000						356,250			(d)	556,250
Long-term portion of unearned revenue				2,234			(880		)	(b)	1,354
Long-term portion of accrued buyout liability	28,367										28,367
Total liabilities	688,955			40,594			365,888				1,095,437
Commitments and contingencies	—
Equity
Common stock	36			63			(63		)	(f)	36
Additional paid-in capital	240,209			7,817			(7,817		)	(f)	240,209
Accumulated other comprehensive loss	(143		)								(143		)
Retained earnings	424			10,465			(10,465		)	(f)	424
Treasury stock	—			(2,053		)	2,053			(f)	—
Total stockholders’ equity	240,526			16,292			(16,292		)		240,526
Noncontrolling interests	4,479										4,479
Total equity	245,005			16,292			(16,292		)		245,005
Total liabilities and equity	$	933,960		$	56,886		$	349,596			$	1,340,442

See notes to unaudited pro forma condensed combined financial statements

F-2

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

Six Months Ended June 30, 2014

(in thousands, except per share data)

	Heartland			TouchNet			Pro Forma Adjustments (See Note 3)				Pro Forma Combined
Total revenues	$	1,106,142		$	34,721		$	(208	)	(g)	$	1,140,655
Costs of services:
Interchange	685,869										685,869
Dues, assessments and fees	105,354										105,354
Processing and servicing	135,657			8,089							143,746
Customer acquisition costs	22,618										22,618
Depreciation and amortization	12,491			1,257			4,363			(a)	17,170
							24			(b)
							(965		)	(c)
Total costs of services	961,989			9,346			3,422				974,757
General and administrative	87,860			11,945							99,805
Total expenses	1,049,849			21,291			3,422				1,074,562
Income from operations	56,293			13,430			(3,630		)		66,093
Other income (expense):
Interest income	62			19							81
Interest expense	(2,308		)				(4,393		)	(d)	(6,701		)
Other, net	288			(31		)					257
Total other expense	(1,958		)	(12		)	(4,393		)		(6,363		)
Income from continuing operations before income taxes	54,335			13,418			(8,023		)		59,730
Provision for income taxes	22,852						(3,374		)	(e)	25,122
							5,644			(f)
Net income	31,483			13,418			(10,293		)		34,608
Less: Net loss attributable to noncontrolling interests
Continuing operations	(1,709		)								(1,709		)
Net income attributable to Heartland	$	33,192		$	13,418		$	(10,293	)		$	36,317
Earnings per share:
Basic earnings per share	$	0.91									$	1.00
Diluted earnings per share	$	0.89									$	0.97
Weighted average number of common shares outstanding:
Basic	36,350										36,350
Diluted	37,250										37,250

See notes to unaudited pro forma condensed combined financial statements

F-3

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF COMPREHENSIVE INCOME

Six Months Ended June 30, 2014

(in thousands)

	Heartland			TouchNet		Pro Forma Adjustments			Pro Forma Combined
Net income	$	31,483		$	13,418	$	(10,293	)	$	34,608
Other comprehensive income (loss):
Reclassification of gains on investments, net of income tax	(164		)						(164		)
Unrealized gains on investments, net of tax of income tax	14								14
Unrealized gains on derivative financial instruments, net of income tax	95								95
Comprehensive income	31,428			13,418		(10,293		)	34,553
Less: Comprehensive loss attributable to noncontrolling interests	(1,709		)						(1,709		)
Comprehensive income attributable to Heartland	$	33,137		$	13,418	$	(10,293	)	$	36,262

See notes to unaudited pro forma condensed combined financial statements

F-4

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

Year Ended December 31, 2013

(in thousands, except per share data)

	Heartland			TouchNet		Pro Forma Adjustments (See Note 3)				Pro Forma Combined
Total revenues	$	2,135,372		$	64,480	$	(7,553	)	(g)	$	2,192,299
Costs of services:
Interchange	1,335,487									1,335,487
Dues, assessments and fees	200,903									200,903
Processing and servicing	237,232			15,260						252,492
Customer acquisition costs	42,109									42,109
Depreciation and amortization	19,975			2,437		8,725			(a)	29,384
						48			(b)
						(1,801		)	(c)
Total costs of services	1,835,706			17,697		6,972				1,860,375
General and administrative	173,568			21,872						195,440
Total expenses	2,009,274			39,569		6,972				2,055,815
Income from operations	126,098			24,911		(14,525		)		136,484
Other income (expense):
Interest income	124			52						176
Interest expense	(5,429		)			(9,207		)	(d)	(14,636		)
Other, net	(241		)	863						622
Total other income (expense)	(5,546		)	915		(9,207		)		(13,838		)
Income from continuing operations before income taxes	120,552			25,826		(23,732		)		122,646
Provision for income taxes	46,450					(9,153		)		47,258
						9,961
Net income from continuing operations	74,102			25,826		(24,540		)		75,388
Income from discontinued operations, net of income tax	3,970			—		—				3,970
Net income	78,072			25,826		(24,540		)		79,358
Less: Net (loss) income attributable to noncontrolling interests
Continuing operations	(610		)							(610		)
Discontinued operations	56									56
Net income attributable to Heartland	$	78,626		$	25,826	$	(24,540	)		$	79,912
Amounts attributable to Heartland:
Net income from continuing operations, net of noncontrolling interests	$	74,712		$	25,826	$	(24,540	)		$	75,998
Income from discontinued operations, net of income tax and noncontrolling interests	3,914			—		—				3,914
Net income attributable to Heartland	$	78,626		$	25,826	$	(24,540	)		$	79,912
Basic earnings per share:
Income from continuing operations	$	2.03								$	2.07
Income from discontinued operations	0.11									0.11
Basic earnings per share	$	2.14								$	2.18
Diluted earnings per share:
Income from continuing operations	$	1.96								$	2.00
Income from discontinued operations	0.10									0.10
Diluted earnings per share	$	2.06								$	2.10
Weighted average number of common shares outstanding:
Basic	36,791									36,791
Diluted	38,053									38,053

See notes to unaudited pro forma condensed combined financial statements

F-5

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF COMPREHENSIVE INCOME

Year Ended December 31, 2013

(in thousands)

	Heartland			TouchNet			Pro Forma Adjustments			Pro Forma Combined
Net income	$	78,072		$	25,826		$	(24,540	)	$	79,358
Other comprehensive income (loss):
Reclassification of gains on investments, net of income tax	—			(857		)				(857		)
Unrealized gains on investments, net of tax of income tax	12			396						408
Unrealized gains on derivative financial instruments, net of income tax	254									254
Foreign currency translation adjustment	(54		)							(54		)
Comprehensive income	78,284			25,365			(24,540		)	79,109
Less: Comprehensive loss attributable to noncontrolling interests	(570		)							(570		)
Comprehensive income attributable to Heartland	$	78,854		$	25,365		$	(24,540	)	$	79,679

See notes to unaudited pro forma condensed combined financial statements

F-6

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. GENERAL

The Company has accounted for the acquisition of TouchNet as a purchase business combination under the provisions of FASB Accounting Standards Codification Topic 850, Business Combinations. The accompanying unaudited pro forma condensed combined balance sheet reflects the acquisition price of TouchNet as outlined in Note 2(a) below. The purchase price allocation as outlined in Note 2(b) has not been finalized and is subject to change upon completion of appraisals of tangible and intangible assets. The purchase price allocation will be finalized when all necessary information is obtained which is expected to occur within one year of the consummation of the transaction.

2. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

The accompanying unaudited pro forma condensed combined balance sheet has been prepared as if the Acquisition was consummated on June 30, 2014 with respect to the unaudited pro forma condensed combined balance sheet. The following pro forma adjustments were made:

(a) To record cash consideration paid in the Acquisition (in thousands):

Cash - payment for base purchase price	$	375,000
Cash - received for estimated net working capital deficit	2,749
TouchNet acquisition consideration	$	372,251

(b) To reflect the allocation of the total acquisition consideration to the acquired assets and liabilities of TouchNet Information Systems, Inc. as of June 30, 2014 (in thousands):

	Allocation of Purchase Price			Carrying Value			Adjustments
Net fair value of assets acquired and liabilities assumed:
Cash	$	27,867		$	27,867		$
Receivables, net	19,786			19,786
Inventory	82			82
Prepaid expenses	540			540
Property and equipment, net	3,393			2,997			396
Intangible assets, net - pre-acquisition	—			5,614			(5,614	)
Accounts payable	(2,686		)	(2,686		)
Accrued expenses and other liabilities	(1,310		)	(1,310		)
Current unearned revenue	(26,132		)	(34,364		)	8,232
Long-term unearned revenue	(1,354		)	(2,234		)	880
Total net tangible assets acquired	20,186
Intangible assets acquired:
Customer relationships	101,300
Trademarks	5,000
Software	37,200
Non-competition agreement	900
Total intangible assets	144,400
Goodwill	207,665
Total acquisition consideration	$	372,251

The preliminary allocation of the purchase price was based upon a preliminary valuation and the Company’s estimates and assumptions which are subject to change upon the finalization of the valuation.

F-7

Of the total estimated purchase price, a preliminary estimate of approximately $20.2 million was allocated to net tangible assets acquired. Net assets were generally valued at their respective carrying amounts, which management believes approximate fair value, except for adjustments to receivables, property and equipment, accrued expenses, unearned revenue, and pre-acquisition intangible assets.

Approximately $144.4 million was allocated to acquired identifiable intangible assets. The value of identifiable intangible assets was derived from the present value of estimated future benefits from the various intangible assets acquired.

Of the total estimated purchase price, approximately $207.7 million was allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired, including intangible assets. Goodwill amounts are not amortized, but rather are tested for impairment at least annually. In the future, if the Company determines that the value of the goodwill has become impaired, an accounting charge for the amount of the impairment would be recorded in the quarter in which such determination is made.

(c) To eliminate TouchNet pre-acquisition intangible assets.

(d) To reflect borrowings incurred by the Company to finance the purchase price (in thousands):

Current portion of borrowings	$	18,750
Long-term portion of borrowings	356,250
	$	375,000

(e) To reflect cash inflow from proceeds of borrowings incurred by the Company to finance the purchase price.

(f) To eliminate TouchNet pre-acquisition net book value.

3. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

The accompanying unaudited pro forma condensed combined statements of income and comprehensive income have been prepared as if the Acquisition was consummated as January 1, 2013 with respect to the unaudited pro forma condensed combined statements of income and comprehensive income. Pro forma adjustments were made to reflect:

(a) Amortization of acquired intangible assets based on the straight-line method of amortization and using the amortization periods as follows (in thousands):

				Pro Forma Amortization Adjustment
	Intangible Asset Amount		Amortization Period (in months)	Six Months Ended June 30, 2014		Year Ended December 31, 2013
Customer relationships	$	101,300	240	$	2,533	$	5,065
Trademarks	5,000		60	500		1,000
Software	37,200		180	1,240		2,480
Non-competition agreement	900		60	90		180
Total intangible assets	$	144,400		$	4,363	$	8,725

In accordance with the provisions of ASC Topic 850, goodwill resulting from the Acquisition is not amortized.

(b) Adjustment to depreciation resulting from a net increase in the basis of property and equipment acquired based on estimated useful lives of 24 to 60 months.

(c) To eliminate TouchNet's historical amortization recorded on its pre-acquisition capitalized software development costs and patent and trademark intangible assets. These assets have been revalued and included in acquired intangible assets.

F-8

(d) This adjustment reflects an increase in interest expense resulting from financing the total estimated cash consideration of $375.0 million paid in the Acquisition, prior to reduction for a net working capital deficit. The $375.0 million was financed under an amortizing term credit facility. The interest expense adjustment assumes 50% of the term credit borrowing is borrowed at the average one-month LIBOR interest rate plus 200 basis points credit margin, and the remaining 50% of the term credit borrowing is borrowed at a five-year interest rate swap rate plus 200 basis points credit margin.

(e) To adjust income tax expense for pro forma income statement adjustments at the Company’s effective tax rate for the period.

(f) Adjustment to tax effect TouchNet's historical pretax income at the Company's effective tax rate for the period. Post acquisition, TouchNet becomes a C Corporation and member of the Company's consolidated tax group. TouchNet's historical tax provision reflects its pre-acquisition status as a Sub Chapter S Corporation.

(g) Adjustment to TouchNet's historical revenue to reflect the impact of the preliminary estimated fair value adjustment of $9.1 million to the carrying value of TouchNet's unearned revenue.

F-9