FORM 8-K/A

0001193125-12-255528.txt : 20120531 0001193125-12-255528.hdr.sgml : 20120531 20120531161855 ACCESSION NUMBER: 0001193125-12-255528 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20120330 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20120531 DATE AS OF CHANGE: 20120531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Verisk Analytics, Inc. CENTRAL INDEX KEY: 0001442145 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 262994223 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-34480 FILM NUMBER: 12880696 BUSINESS ADDRESS: STREET 1: 545 WASHINGTON BOULEVARD CITY: JERSEY CITY STATE: NJ ZIP: 07310-1686 BUSINESS PHONE: 201-469-2000 MAIL ADDRESS: STREET 1: 545 WASHINGTON BOULEVARD CITY: JERSEY CITY STATE: NJ ZIP: 07310-1686 8-K/A 1 d352454d8ka.htm FORM 8-K/A FORM 8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No.1)

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 30, 2012

VERISK ANALYTICS, INC.

(Exact name of registrant as specified in its charter)


Delaware	001-34480	26-2994223
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

545 Washington Boulevard, Jersey City, NJ		07310
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (201) 469-2000

(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 March 30, 2012, Verisk Analytics, Inc. (the “Company”) filed a Current Report on Form 8-K disclosing that the Company completed its acquisition of MediConnect Global, Inc. (“MediConnect”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) dated March 23, 2012 by and among the Company, its wholly-owned indirect subsidiary MI6 Acquisition, Inc. (“Merger Sub”), MediConnect and MCG Securityholders Representative, LLC, as the securityholders’ representative.

Item 9.01(a) and (b) of the Current Report on Form 8-K dated March 30, 2012 did not include the historical financial statements of MediConnect or the unaudited pro forma information of the Company and instead contained an undertaking to subsequently file the historical financial statements of MediConnect and furnish the unaudited consolidated pro forma information of the Company. The Company hereby amends Item 9.01 of its Current Report on Form 8-K filed on March 30, 2012 to include the historical financial statements of MediConnect and certain unaudited pro forma financial information giving effect to the acquisition of MediConnect by the Company.

Item 9.01

Financial Statements and Exhibits

(a)

Financial Statements of Business Acquired

The following financial statements of MediConnect Global, Inc. are filed as exhibits hereto:

99.1	Audited consolidated financial statements of MediConnect Global, Inc. for the years ended March 31, 2011 and 2010

99.2	Unaudited reviewed consolidated financial statements of MediConnect Global, Inc. for the period ended December 31, 2011

(b)

Pro Forma Financial Information

The following pro forma financial information of Verisk Analytics, Inc. giving effect to its acquisition of MediConnect Global, Inc. is furnished as an exhibit hereto:

99.3	Unaudited pro forma condensed consolidated financial statements of Verisk Analytics, Inc. for the year ended December 31, 2011

(d)

Exhibits


Exhibit No.		Description
23.1		Consent of Independent Auditors dated May 31, 2012

99.1		Audited consolidated financial statements of MediConnect Global, Inc. for the years ended March 31, 2011 and 2010

99.2		Unaudited reviewed consolidated financial statements of MediConnect Global, Inc. for the period ended December 31, 2011

99.3		Unaudited pro forma condensed consolidated financial statements of Verisk Analytics, Inc. for the year ended December 31, 2011

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.


	VERISK ANALYTICS, INC.

Date: May 31, 2012	By:	/s/ Kenneth E. Thompson
		Name:	Kenneth E. Thompson
		Title:	Executive Vice President,
			General Counsel and Corporate Secretary

EX-23.1 2 d352454dex231.htm EX-23.1 EX-23.1

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in Registration Statements on Form S-8 No. 333-165912 and Form S-3 No. 333-173135 of Verisk Analytics, Inc. of our (i) report dated June 8, 2011 with respect to the consolidated financial statements of MediConnect Global, Inc. and subsidiaries for the years ended March 31, 2011 and 2010, and (ii) report dated March 20, 2012 with respect to the consolidated financial statements of MediConnect Global, Inc. and subsidiaries for the period ended December 31, 2011, each as included in this Current Report on Form 8-K/A.

/s/ Ehrhardt Keefe Steiner & Hottman PC

Denver, Colorado

May 31, 2012

EX-99.1 3 d352454dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

MEDICONNECT GLOBAL, INC.

Consolidated Financial Statements

and

Independent Auditors’ Report

March 31, 2011 and 2010

MEDICONNECT GLOBAL, INC.

Table of Contents


	Page

Independent Auditors’ Report		1

Consolidated Financial Statements

Consolidated Balance Sheets		2

Consolidated Statements of Income		3

Consolidated Statement of Changes in Stockholders’ Equity		4

Consolidated Statements of Cash Flows		5

Notes to Consolidated Financial Statements		7

INDEPENDENT AUDITORS’ REPORT

Board of Directors and Stockholders

MediConnect Global, Inc.

South Jordan, Utah

We have audited the accompanying consolidated balance sheets of MediConnect Global, Inc. and subsidiaries (the “Company”) as of March 31, 2011 and 2010, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements 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 consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MediConnect Global, Inc. and subsidiaries as of March 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The 2010 results have been restated to correct the effects of overstating the March 31, 2010 deferred tax liability. See Note 2 to the consolidated financial statements.

LOGO

Ehrhardt Keefe Steiner & Hottman PC

June 8, 2011

Boulder, Colorado

MEDICONNECT GLOBAL, INC.

Consolidated Balance Sheets


	March 31,
	2011			2010
				(Restated)
Assets
Current assets
Cash and cash equivalents	$	13,946,718		$	6,873,185
Accounts receivable, net of allowance for doubtful accounts of $395,792 (2011) and $397,032 (2010)		5,161,944			8,145,018
Prepaid expenses and other current receivables		564,918			681,996
Unbilled revenue		398,204			513,000
Deferred tax assets		284,234			323,501

Total current assets		20,356,018			16,536,700

Non-current assets
Goodwill and intangible assets, net		10,299,016			11,026,379
Property and equipment, including capitalized software costs, net		3,827,164			3,552,338
Other assets		96,438			131,420

Total non-current assets		14,222,618			14,710,137

Total assets	$	34,578,636		$	31,246,837

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable—trade	$	1,359,695		$	2,864,728
Accrued expenses		1,039,036			1,068,789
Current income taxes payable		711,383			16,609
Accrued compensation		485,274			439,619
Customer deposits		114,318			114,341
Current portion of long-term debt		1,514,266			1,000,000
Current portion of capital lease obligations		103,624			102,246

Total current liabilities		5,327,596			5,606,332

Non-current liabilities
Deferred rent		302,486			368,171
Deferred tax liability		1,098,429			708,195
Capital lease obligations, less current portion		87,873			191,497
Long-term debt, less current portion		4,249,206			—

Total non-current liabilities		5,737,994			1,267,863

Total liabilities		11,065,590			6,874,195

Commitments and contingencies

Stockholders’ equity
Common stock, $0.001 par value, 20,000,000 authorized, 8,508,124 (2011) and 12,302,118 (2010) shares issued and outstanding		8,508			12,302
Additional paid-in capital		22,672,666			22,451,425
Treasury stock, cost of 3,800,870 shares		(8,355,760	)		—
Retained earnings		9,187,632			1,688,914
Foreign currency translation adjustment		—			220,001

Total stockholders’ equity		23,513,046			24,372,642

Total liabilities and stockholders’ equity	$	34,578,636		$	31,246,837

See notes to consolidated financial statements.

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MEDICONNECT GLOBAL, INC.

Consolidated Statements of Income


	For the Years Ended
	March 31,
	2011			2010
				(Restated)
Service fee revenue	$	31,481,068		$	28,858,610

Provider fee revenue		13,995,515			17,466,615

Total revenues		45,476,583			46,325,225

Operating expenses
Provider fees		13,738,587			17,146,162
Cost of revenues		12,228,629			12,220,154
Administrative costs and supplies		6,128,552			6,344,195
Sales and marketing		1,305,888			1,142,446
Research and development		796,874			720,441

Total operating expenses		34,198,530			37,573,398

Income from operations		11,278,053			8,751,827

Other income (expense)
Interest expense		(198,895	)		(625,363	)
Interest income		17,206			13,007
Gain (loss) on foreign currency translation		205,694			(220,620	)
Other expenses		(432,905	)		(1,472,502	)
Other income		691,888			203,207
Loss on disposal of assets		—			(178,050	)

Total other income (expense)		282,988			(2,280,321	)

Income before taxes		11,561,041			6,471,506

Income tax expense		4,062,323			673,502

Net income		7,498,718			5,798,004

Other comprehensive income
Foreign currency translation adjustment		(220,001	)		180,179

Comprehensive income available to common stockholders	$	7,278,717		$	5,978,183

See notes to consolidated financial statements.

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MEDICONNECT GLOBAL, INC.

Consolidated Statement of Changes in Stockholders’ Equity

For the Years Ended March 31, 2011 and 2010 (Restated)


	Common Stock						Additional Paid-in		Retained			Accumulated Other Comprehensive			Treasury Stock					Total Stockholders’
	Shares			Amount			Capital		Earnings			Income			Shares		Amount			Equity
Balance—March 31, 2009		11,309,157		$	11,309		$	19,166,434	$	(4,109,090	)	$	39,822			—	$	—		$	15,108,475

Stock-based compensation		—			—			148,629		—			—			—		—			148,629

Accretion of restricted stock issued to employees for service		9,167			9			27,768		—			—			—		—			27,777

Conversion of convertible debt		895,709			896			2,841,785		—			—			—		—			2,842,681

Issuance of common stock for acquisition		88,085			88			266,809		—			—			—		—			266,897

Foreign currency translation adjustment		—			—			—		—			180,179			—		—			180,179

Net income		—			—			—		5,798,004			—			—		—			5,798,004

Balance—March 31, 2010		12,302,118			12,302			22,451,425		1,688,914			220,001			—		—			24,372,642

Stock-based compensation		—			—			198,481		—			—			—		—			198,481

Accretion of restricted stock issued to employees for service		6,876			7			18,959		—			—			—		—			18,966

Purchase of treasury stock		(3,800,870	)		(3,801	)		3,801		—			—			3,800,870		(8,355,760	)		(8,355,760	)

Foreign currency translation adjustment		—			—			—		—			(220,001	)		—		—			(220,001	)

Net income		—			—			—		7,498,718			—			—		—			7,498,718

Balance—March 31, 2011		8,508,124		$	8,508		$	22,672,666	$	9,187,632		$	—			3,800,870	$	(8,355,760	)	$	23,513,046

See notes to consolidated financial statements.

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MEDICONNECT GLOBAL, INC.

Consolidated Statements of Cash Flows


	For the Years Ended
	March 31,
	2011			2010
				(Restated)
Cash flows from operating activities
Net income	$	7,498,718		$	5,798,004
Adjustments to reconcile net income to net cash provided by operating activities
Stock option expense		198,481			148,629
Depreciation and amortization		2,245,095			2,166,922
Stock issued for services		18,966			27,777
Bad debt expense		217,542			311,133
Loss on disposal of assets		—			178,050
Deferred taxes		429,501			931,656
Non-cash interest expense		126,586			345,754
Changes in assets and liabilities
Accounts receivable		2,765,532			(3,276,877	)
Prepaid expenses and other current receivables		117,078			(18,619	)
Unbilled revenue		114,796			(52,200	)
Accounts payable—trade		(1,505,033	)		153,389
Accrued expenses and other		679,950			2,672

Net cash provided by operating activities		12,907,212			6,716,290

Cash flows from investing activities
Purchases of property and equipment, including capitalized software costs		(1,370,409	)		(1,438,760	)
Proceeds from sale of equipment		50,000			—
Acquisition of Passport MD		—			(245,311	)

Net cash used in investing activities		(1,320,409	)		(1,684,071	)

Cash flows from financing activities
Proceeds from debt		54,404			—
Purchase of treasury stock		(2,716,177	)		—
Principal payments on long-term debt		(1,529,250	)		(3,949,070	)
Payments on capital lease obligations		(102,246	)		(53,538	)
Deferred financing expenses		—			446,924

Net cash used in financing activities		(4,293,269	)		(3,555,684	)

Effects of exchange rate changes on cash		(220,001	)		180,179

Net increase in cash and cash equivalents		7,073,533			1,656,714

Cash and cash equivalents—beginning of year		6,873,185			5,216,471

Cash and cash equivalents—end of year	$	13,946,718		$	6,873,185

(Continued on the following page)

See notes to consolidated financial statements.

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MEDICONNECT GLOBAL, INC.

Consolidated Statements of Cash Flows

(Continued from the previous page)

Supplemental disclosure of cash flow information:

Cash paid for interest for the years ended March 31, 2011 and 2010 was $72,309 and $346,782, respectively.

Cash paid for income taxes was $2,865,569 and $331,000 for the years ended March 31, 2011 and 2010, respectively.

Supplemental disclosure of non-cash activity:

During the year ended March 31, 2011, the Company purchased 3,800,870 shares of Treasury stock in exchange for $2,716,177 of cash and a note payable of $5,639,583, net of the related debt discount of $828,562.

For the year ended March 31, 2011, the Company acquired $472,149 of equipment under a term loan and for the year ended March 31, 2010, the Company acquired $159,712 of equipment under capital lease obligations.

During the year ended March 31, 2010, $2,842,681 of convertible promissory notes and interest were converted into common stock, respectively.

In 2010, the Company issued 88,085 shares of its common stock at $3.03 per share, or a total of $266,897, in conjunction with its acquisition of Passport MD.

See notes to consolidated financial statements.

- 6 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 1—Description of Business and Summary of Significant Accounting Policies

MediConnect Global, Inc. (the “Company”), a Delaware corporation, was established on June 26, 2006. The Company provides data retrieval and transmission services for customers, which primarily consist of retrieving and transmitting medical records worldwide for insurance companies, law firms, and medical service providers. The Company’s operations are primarily located in the United States, with some outsourced operations located in India.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, MediConnect.Net, Globerian, and Globerian Pvt. Ltd. The operations of Globerian Pvt. Ltd. were shut down in March 2010 and the legal ownership of the entity was sold to an existing stockholder in October 2010 for an immaterial amount.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. As of the balance sheet date, and periodically throughout the year, the Company has maintained balances in various operating accounts in excess of federally insured limits.

Receivables and Concentrations of Credit Risk

The Company grants credit in the normal course of business to customers in the United States. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk. The Company uses historical experience coupled with a review of current status of existing receivables to establish an allowance for doubtful accounts. The allowance for doubtful accounts is continually reviewed and adjusted to maintain the allowance at an amount considered adequate to cover future losses.

The Company had two customers that together comprised 26% of the Company’s accounts receivable at March 31, 2011. Three customers accounted for 59% of the Company’s revenues for the year ended March 31, 2011. Three customers together comprised 58% of the Company’s accounts receivable at March 31, 2010. Three customers accounted for 56% of the Company’s revenues for the year ended March 31, 2010.

Revenue/Unbilled Revenue

The Company charges customers a minimum fee if the order is not canceled within a 24-hour period. After this period has expired, the Company records revenue on the minimum fee as i) the fee is fixed or determinable; ii) evidence of an arrangement exists; iii) service has occurred; and iv) collectibility is reasonably assured. The Company records revenue which has been earned but not billed as unbilled revenue in the accompanying consolidated balance sheets.

- 7 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 1—Description of Business and Summary of Significant Accounting Policies (continued)

Revenue/Unbilled Revenue (continued)

The Company passes fees charged by medical service providers directly on to its clients. Management has determined that the Company acts as a principal, therefore recording the provider fees and revenue on a gross basis. This is principally due to the fact that the Company maintains the credit risk with the providers and the Company has determined that they are the primary obligor. The fees and related expenses are recorded as incurred.

Property and Equipment, including Capitalized Software Costs

Property and equipment are stated at cost. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets, ranging from three to seven years, or the shorter of the useful life or related lease term for leasehold improvements.

The Company accounts for costs incurred in the development of computer software as software research and development costs until the preliminary project stage is completed. Direct costs incurred in the development of software are capitalized once the preliminary project stage is completed, management has committed to funding the project, and completion and use of the software for its intended use is probable. The Company ceases capitalization of development costs once the software has been substantially completed and is ready for its intended use. During the years ended March 31, 2011 and 2010, the Company capitalized approximately $1,366,000 and $1,172,000, respectively.

Goodwill and Intangible Assets

Goodwill represents the excess of fair value over the net assets of the business acquired. Goodwill is not amortized, but rather, evaluated for impairment annually. Intangible assets are amortized over their estimated useful lives ranging from one to thirteen years. In addition, amortized intangible assets are reviewed for impairment when indicators of impairment exist. No impairment expense was recognized during the years ended March 31, 2011 or 2010.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to the undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. No impairment expense was recognized during the years ended March 31, 2011 or 2010.

Deferred Charges

Deferred financing charges represent capitalized third-party fees incurred by the Company related to financing efforts in 2009. As the financing efforts were indefinitely postponed, the deferred charges of $446,924 were expensed in 2010.

- 8 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 1—Description of Business and Summary of Significant Accounting Policies (continued)

Use of Estimates

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

Stock-Based Compensation

The Company accounts for stock-based compensation arrangements for employees and non-employees. The Company recognizes expenses for employee services received in exchange for share-based awards on the grant-date fair value of the shares awarded and recognizes compensation expense over the vesting periods of such awards, net of estimated forfeitures. The Company accounts for share-based awards to non-employees based on the fair value at the commitment date and recognizes the expense over the related service period.

Income Taxes

The Company uses the liability method of accounting for income taxes. Under this method, the Company recognizes deferred tax liabilities and assets based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. The Company establishes a valuation allowance for all deferred tax assets for which there is uncertainty regarding realization.

The Company accounts for any uncertainty in income taxes by recognizing the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and often ambiguous. AS such, the Company is required to make many subjective assumptions and judgments surrounding income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to its subjective assumptions and judgments, which can materially affect amounts recognized in its consolidated balance sheets and consolidated statements of income. As of March 31, 2011, the Company has determined that there are not any uncertain tax positions taken. Tax years subject to review are 2008 through 2011 for federal returns and 2007 through 2011 for state returns.

Reclassifications

Certain amounts in the 2010 consolidated financial statements have been reclassified to conform to the 2011 presentation.

- 9 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 1—Description of Business and Summary of Significant Accounting Policies (continued)

Fair Value

Beginning January 1, 2009, the Company accounts for certain assets and liabilities that are required to be recorded at fair value on a recurring basis under a framework for measuring fair value which requires enhanced disclosures about fair value measurements. This framework requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

Level 1:

Quoted prices in active markets for identical assets or liabilities;

Level 2:

Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

Level 3:

Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Comprehensive Income

The Company reports and displays comprehensive income and its components in a full set of general-purpose consolidated financial statements. All items that are required to be recognized under accounting standards as components of comprehensive income are disclosed in the consolidated financial statements. Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner sources. Comprehensive income is the total of net income and other comprehensive income. The functional currency of the Globerian Pvt. Ltd subsidiary is the Indian rupee. All assets and liabilities of this subsidiary are translated into U.S. dollars as of the balance sheet date, other than those determined to be long-term investments, which are translated at historical rates. Revenues and expenses are translated at the average exchange rate for the period. Translation gains and losses are reflected in consolidated stockholders’ equity as part of accumulated other comprehensive income. As the Company sold Globerian Pvt. Ltd. in October 2010, all currency translation adjustments were realized. As of March 31, 2011 and 2010, the accumulated comprehensive income from foreign currency translation was $0 and $220,001, respectively.

- 10 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 2—Restatement

The Company’s March 31, 2010 consolidated financial statements have been restated to correct the effects of overstating the March 31, 2010 deferred tax liability as it related to certain intangible assets. The following consolidated financial statement line items for fiscal year 2010 were affected by the restatement:


	As Previously				Effect of
	Reported		As Restated		Restatement
Deferred tax liability	$	1,170,088	$	708,195	$	(461,893	)
Total stockholders’ equity	$	23,910,749	$	24,372,642	$	461,893
Income tax expense	$	1,135,395	$	673,502	$	(461,893	)
Net income	$	5,336,111	$	5,798,004	$	461,893

Note 3—Acquisition of Businesses

On October 28, 2009, the Company purchased the assets and assumed certain liabilities of Passport MD for cash payments of $245,311 and stock payments of $266,897. The Company made the acquisition to acquire a developed web portal that provides synergies with the Company’s current business. Results of operations have been included from the date of acquisition forward.

The purchase was accounted for under the purchase method. The purchase price was as follows:


Cash paid	$	245,311
Common stock		266,897

Total purchase price	$	512,208

The following fair values were assigned to the assets at the date of the acquisition:


Software	$	508,885
Property		9,990
Other assets		1,500
Liabilities assumed and paid		(8,167	)

	$	512,208

- 11 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 4—Purchase of Treasury Shares

In October 2010, the Company repurchased, and placed into treasury, 3,800,870 common shares from existing stockholders for $9,184,322. The Company paid $2,716,177 in cash at closing, and signed two three-year, non-interest bearing promissory notes totaling $6,468,145 for the remaining balance. A portion of the treasury shares are held as collateral for the notes, and, if the Company defaults, the creditors have the right to sell the designated treasury shares in an effort to satisfy the note obligation. The notes have imputed interest (using a discount rate of 7%) of $828,562 that was recorded as a debt discount and that will be expensed using the effective interest method over the life of the notes.

Note 5—Property and Equipment

Property and equipment consist of the following:


	March 31,
	2011			2010
Software	$	5,195,140		$	3,780,866
Computer hardware		1,931,842			1,555,028
Furniture and equipment		912,262			918,665
Leasehold improvements		246,108			238,236
Vehicles		17,990			17,990

		8,303,342			6,510,785
Less accumulated depreciation		(4,476,178	)		(2,958,447	)

	$	3,827,164		$	3,552,338

Depreciation expense for the years ended March 31, 2011 and 2010 was $1,517,732 and $1,347,891, respectively. During fiscal 2011, the Company disposed of certain fixed assets with a book value of $50,000, for which the Company recorded proceeds of $50,000. During fiscal 2010, the Company disposed of and recorded a loss on the disposal of certain fixed assets with a book value of $178,050. As a result of the transaction, the Company removed $1,551,639 in assets and $1,373,589 in accumulated depreciation from its books.

- 12 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 6—Goodwill and Intangible Assets

As of March 31, 2011 and 2010, the Company has goodwill of $6,851,681. The following table represents intangible assets subject to amortization as of March 31, 2011:


	Estimated Life		Gross Amount		Accumulated Amortization			Net Carrying Amount
Technology		10 years	$	5,300,000	$	(2,517,500	)	$	2,782,500
Non-compete agreement		1-3 years		1,696,121		(1,696,121	)		—
Brand name		5 years		600,000		(570,000	)		30,000
Customer relationships		13 years		1,000,000		(365,385	)		634,615
Other		1-5 years		142,198		(141,978	)		220

			$	8,738,319	$	(5,290,984	)	$	3,447,335

The following table represents intangible assets subject to amortization as of March 31, 2010:


	Estimated Life		Gross Amount		Accumulated Amortization			Net Carrying Amount
Technology		10 years	$	5,300,000	$	(1,987,500	)	$	3,312,500
Non-compete agreement		1-3 years		1,696,121		(1,696,121	)		—
Brand name		5 years		600,000		(450,000	)		150,000
Customer relationships		13 years		1,000,000		(288,462	)		711,538
Other		1-5 years		142,198		(141,538	)		660

			$	8,738,319	$	(4,563,621	)	$	4,174,698

Amortization expense for the years ended March 31, 2011 and 2010 was $727,363 and $819,031, respectively. Future amortization expense for the years ended March 31, 2011 through 2015 is approximately $600,000 each year.

- 13 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 7—Borrowings

Borrowings on long-term debt are summarized as follows:


	March 31,
	2011			2010
Master loan security agreement for the purchase of capital equipment. All draws are secured by the equipment purchased. Payable in 36 monthly installments of $15,675. The loan accrues interest at an annual rate of 4.55%.	$	401,562		$	—

Note payable to a former shareholder in quarterly installments of $404,259, including imputed interest of 7.23%, maturing in October, 2013, at which time all outstanding principle comes due.		5,361,910			—

Convertible promissory note payable—related party		—			1,000,000

Total borrowings		5,763,472			1,000,000
Less current portion		(1,514,266	)		(1,000,000	)

	$	4,249,206		$	—


Year Ending March 31,
2012	$	1,514,266
2013		1,522,323
2014		2,726,883

	$	5,763,472

The convertible promissory note payable—related party was payable to two investors in the Company. The promissory note accrued interest at a simple interest rate of 10%. The notes matured on February 28, 2010 at which time all principal and interest were to be converted into shares of the Company’s common stock at a price per share equal to 1.5 times net revenue (revenue less provider direct pass through fees less long-term borrowed debt less unrestricted cash and cash equivalents) divided by 12,571,157 shares of the Company’s common stock. In February 2010, $2,600,000 of the convertible promissory note payable plus accrued interest of $242,681 was converted into 895,709 shares of common stock. In April 2010, the remaining $1,000,000 was paid in full with cash. Interest on this note was paid in full as of March 31, 2010.

In June 2010, the Company’s revolving line-of-credit was renewed with a borrowing capacity of 80% of eligible accounts receivable as defined by the loan agreement up to a maximum borrowing capacity of $8,000,000. As of March 31, 2011, the amount available to borrow under the line-of-credit was approximately $2,100,000. Amounts drawn under the line-of-credit will accrue interest at the Prime rate, but not less than 2.5%, plus 0.75%. The line-of-credit matures in June 2012 and is subject to certain financial and non-financial covenants. As of March 31, 2011, there were no borrowings against the line-of-credit.

- 14 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 8—Capital Leases

The Company has acquired assets under the provisions of long-term leases. For financial reporting purposes, minimum lease payments relating to the assets have been capitalized. The leases expire between August 31, 2011 and August 31, 2013. Amortization of the leased property is included in depreciation expense.

The assets under capital lease have cost and accumulated amortization as follows:


	March 31,
	2011			2010
Computer hardware	$	318,214		$	318,214
Furniture and equipment		38,136			38,136
Software		16,054			16,054
Less accumulated depreciation		(234,495	)		(115,446	)

	$	137,909		$	256,958

Maturities of capital lease obligations are as follows:


Year Ending March 31,
2012	$	122,303
2013		85,581
2014		7,638

Total minimum lease payments		215,522
Amount representing interest		(24,025	)

Present value of net minimum lease payments		191,497
Less current portion		(103,624	)

Long-term capital lease obligation	$	87,873

Note 9—Stockholders’ Equity

Stock Options

Under the Company’s 2006 Stock Plan (the “Plan”), as amended June 5, 2007, the Company is authorized to issue up to 1,750,000 shares of stock options. Options issued generally vest ratably over a four-year period. The Company estimates the value of options issued using the Black-Scholes option pricing model. The volatility rate for its common stock at the date of the grant is based on the historical volatility of comparable publicly-traded companies. The Company factors in expected retention rates combined with vesting periods to determine the average expected life. The risk-free interest rate is based on the U.S. Treasury Yield curve in effect at the time of the grant. Accordingly, the Company has computed the fair value of all options granted using the following weighted average assumptions.

- 15 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 9—Stockholders’ Equity (continued)

Stock Options (continued)


	March 31,
	2011		2010
Approximate risk-free rate		1.59%		2.28%
Expected dividend yield		0.00%		0.00%
Expected weighted average volatility		30%		39%
Expected weighted average life in years		6 years		6 years

During the years ended March 31, 2011 and 2010, the Company estimated the options granted to have a value of $864,294 and $8,815, respectively, and the Company recognized total compensation expense during the years ended March 31, 2011 and 2010 of $198,481 and $148,629, respectively. The Company will true-up total expense based upon actual vested options. The Company will recognize compensation expense relating to nonvested options after April 1, 2011 of approximately $630,000 over the next four years.

The following table presents the activity for options outstanding:


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding—March 31, 2009		1,000,749		$	2.84		8
Granted		7,000			3.03		10
Forfeited/canceled		(129,779	)		2.78		7

Outstanding—March 31, 2010		877,970			2.82		7
Granted		902,783			3.05		10
Forfeited/canceled		(340,138	)		2.81		6

Outstanding—March 31, 2011		1,440,615		$	2.97		8

The weighted average grant-date fair value of options granted during the years ended March 31, 2011 and 2010 was $0.97 and $1.26, respectively.

- 16 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 9—Stockholders’ Equity (continued)

Stock Options (continued)

The following table presents the composition of options outstanding and exercisable:


	Options Outstanding						Options Exercisable
Exercise Prices	Number		Price*		Life*		Number		Price*
$2.78		424,999	$	2.78		5.25		424,999	$	2.78
$3.03		122,833		3.03		7.18		118,886		3.03
$3.05		892,783		3.05		9.23		86,091		3.05

Total—March 31, 2011		1,440,615	$	2.97		7.88		629,976	$	2.86

*	Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, respectively.

Phantom Stock

As of March 31, 2011, the Company had 50,000 phantom stock options outstanding to certain key contractors at a threshold price per share of $3.03 for 30,000 shares and at $3.05 for 20,000 shares. In the event of a change in control, each phantom stock option holder is able to receive the difference in cash value of the per share exercise price of the award and the consideration received. The phantom stock options vest after four years and expire once employment services cease or change in control occurs. The phantom shares are accounted for as liabilities on the consolidated balance sheets and are subject to re-measurement at each balance sheet date. Any change in estimated fair value is recognized in the consolidated statement of income. Due to its immateriality, the Company had not recorded the expense for these shares in prior periods. Accordingly, during the year ended March 31, 2011, the Company recognized the associated cumulative expense of $15,088. Valuation of the phantom shares is based upon Level 3 inputs under the fair value hierarchy.

Warrants

In conjunction with the issuance of convertible promissory notes in December 2007, the Company issued warrants to purchase 11,765 shares of common stock at $8.50 per share. These warrants expire after five years. Management has determined that these warrants have an insignificant value. Valuation of the warrants is based upon Level 3 inputs under the fair value hierarchy.

- 17 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 9—Stockholders’ Equity (continued)

Restricted Stock Grants

The Company has a restricted stock plan which enables shares to be issued to employees for future services. Restricted stock grants generally vest over a three-year period.

On July 1, 2006, the Company issued 539,462 shares of fully vested restricted stock to employees. These shares are restricted for a period of three years, during which time the Company could repurchase the shares for the lesser of fair market value or $2.78 per share if the employee was terminated for cause, as defined by the agreement.

On December 7, 2007, the Company issued 257,000 shares of restricted stock to employees for future services. At the time of grant, these shares were valued at $3.03 per share. These shares cliff vest after a 30 to 48-month period from the date of grant. Prior to vesting, the Company may repurchase the shares from the employee at par value, if the employee ceases to work for the Company. The Company recognizes the related compensation expense over the vesting period net of estimated forfeitures. During the year ended March 31, 2010, the Company exercised its repurchase option on 3,668 of restricted shares at the repurchase price of $0.001, which were granted to an officer and employee of the Company who are both no longer employed by the Company. The Company did not exercise its repurchase option on restricted shares during the year ended March 31, 2011. The Company recorded compensation expense in the amount of $18,966 and $27,777 for the years ended March 31, 2011 and 2010, respectively, for the remaining grants outstanding. As of March 31, 2011, compensation expense related to the restricted stock grants had been fully recorded.

Note 10—Income Taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the differences between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized based on available evidence. The Company’s temporary differences result primarily from net operating losses, reserves, and stock-based compensation. The Company has approximately $1,500,000 of federal net operating losses that will begin to expire in 2021. The net operating losses are subject to an annual limitation under Code Section 382 of $193,000. The main difference between the federal statutory rate of 34% and the Company’s effective rate relates primarily to stock-based compensation and research tax credits.

- 18 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 10—Income Taxes (continued)

Accounting Standards Codification (“ASC”) Topic 740-10 clarifies the accounting for reporting uncertainties in income tax law. This guidance prescribes a comprehensive model for financial recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The Company adopted the provisions of ASC Topic 740-10 on April 1, 2009. Under this guidance, companies may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company did not record any adjustments to its tax accounts as a result of the implementation of ASC Topic 740-10, and, as of March 31, 2011, the Company did not have any unrecognized tax benefits.

The Company recognizes accrued interest and penalties related to uncertain tax positions as part of income tax expense. As of March 31, 2011 and 2010, the Company has no accrued interest and penalties. It is not expected that the amount of the unrecognized tax benefits will change in the next 12 months.

Temporary differences and carryforwards giving rise to a significant portion of deferred tax assets and liabilities are as follows:


	March 31,
	2011			2010
				(Restated)
Deferred tax assets
Net operating losses	$	510,663		$	741,337
Stock compensation		451,207			480,858
Reserve and accruals		284,234			323,501
Depreciation		154,055			171,829
Tax credits		80,430			197,560

Total deferred tax assets		1,480,589			1,915,085

Deferred tax liability
Purchased intangibles		1,248,736			1,521,575
Software development costs		1,046,048			778,204

Total deferred tax liability		2,294,784			2,299,779

Total net deferred tax liabilities	$	(814,195	)	$	(384,694	)

- 19 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 10—Income Taxes (continued)

Components reflected in the consolidated statements of income are as follows:


	For the Years Ended March 31,
	2011		2010
Current
Federal	$	3,629,171	$	284,172
State and local		3,652		4,636

		3,632,823		288,808

Deferred
Federal		344,268		510,205
State and local		85,232		(125,511	)

		429,500		384,694

	$	4,062,323	$	673,502

The net current and long-term deferred tax assets and liabilities in the accompanying consolidated balance sheets include the following:


	March 31,
	2011			2010
Current deferred tax asset	$	284,234		$	323,501
Long-term deferred tax liability		(1,098,429	)		(708,195	)

Net long-term deferred tax liability	$	(814,195	)	$	(384,694	)

Note 11—Commitments and Contingencies

Operating Leases

The Company leases facilities and equipment under non-cancelable operating leases. Rent expense for the years ended March 31, 2011 and 2010 was approximately $800,000 and $1,500,000, respectively, net of amounts received from a sublease agreement the Company has with another party for a portion of the facility space.

- 20 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 11—Commitments and Contingencies (continued)

Operating Leases (continued)

Future minimum lease payments under these leases are as follows:


Year Ending March 31,	Third-Party Leases		Less Anticipated Sublease Rentals			Total
2012	$	1,009,662	$	(194,429	)	$	815,233
2013		981,392		(200,262	)		781,130
2014		750,092		(153,941	)		596,151
2015		183		—			183

	$	2,741,329	$	(548,632	)	$	2,192,697

Litigation

In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company. As of the date of this report, the Company is not involved in any litigation.

Note 12—Employee Benefit Plan

The Company has established a 401(k) profit sharing plan (the “401(k) Plan”) whereby employees meeting certain requirements may participant in the 401(k) Plan. The Company, at its discretion, may make matching contributions. For the year ended March 31, 2011, the Company contributed $23,663 to the 401(k) Plan. The Company did not make any contributions to the 401(k) Plan for the year ended March 31, 2010.

Note 13—Related Party Transactions

As of March 31, 2011 and 2010, an officer and stockholder of the Company owed $227,594 to the Company for the exercise of options for which the exercise price has not been received. This receivable has been netted in stockholders’ equity.

During the year ended March 31, 2011, a related party provided consulting services to the Company in the amount of $67,923.

- 21 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

Note 14—Subsequent Events

The Company has evaluated all subsequent events through June 8, 2011, which is the date the consolidated financial statements were available to be issued.

- 22 -

EX-99.2 4 d352454dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

MEDICONNECT GLOBAL, INC.

Consolidated Financial Statements

and

Accountants’ Review Report

December 31, 2011

MEDICONNECT GLOBAL, INC.

Table of Contents


	Page
Accountants’ Review Report		1

Consolidated Financial Statements Consolidated Balance Sheet		2

Consolidated Statement of Income		3

Consolidated Statement of Changes in Stockholders’ Equity		4

Consolidated Statement of Cash Flows		5

Notes to Consolidated Financial Statements		6

ACCOUNTANTS’ REVIEW REPORT

Board of Directors and Stockholders

MediConnect Global, Inc.

South Jordan, Utah

We have reviewed the accompanying consolidated balance sheet of MediConnect Global, Inc. (the “Company”) as of December 31, 2011 and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the nine months then ended. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of Company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the consolidated financial statements as a whole. Accordingly, we do not express such an opinion.

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements.

Our responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the consolidated financial statements. We believe that the results of our procedures provide a reasonable basis for our report.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

LOGO

Ehrhardt Keefe Steiner & Hottman PC

March 20, 2012

Denver, Colorado

MEDICONNECT GLOBAL, INC.

Consolidated Balance Sheet

December 31, 2011

(See Accountants’ Review Report)


Assets
Current assets
Cash and cash equivalents	$	26,122,868
Accounts receivable, net of allowance for doubtful accounts of $534,727		7,411,396
Prepaid expenses and other current receivables		609,586
Unbilled revenue		393,011
Deferred tax assets		155,030

Total current assets		34,691,891

Non-current assets
Goodwill and intangible assets, net		9,813,604
Property and equipment, including capitalized software costs, net		4,274,933
Other assets		89,438

Total non-current assets		14,177,975

Total assets	$	48,869,866

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable—trade	$	1,520,059
Accrued expenses		1,573,112
Deferred revenue		3,100,000
Current income taxes payable		607,224
Accrued compensation		597,487
Customer deposits		59,423
Current portion of deferred rent		107,086
Current portion of long-term debt		1,578,587
Current portion of capital lease obligations		98,422

Total current liabilities		9,241,400

Non-current liabilities
Deferred rent, less current portion		131,085
Deferred tax liability		1,396,019
Capital lease obligations, less current portion		14,464
Long-term debt, less current portion		3,215,982

Total non-current liabilities		4,757,550

Total liabilities		13,998,950

Commitments and contingencies

Stockholders’ equity
Common stock, $0,001 par value, 20,000,000 authorized, 8,554,615 shares issued and outstanding		8,555
Additional paid-in capital		22,967,481
Treasury stock, cost of 3,800,870 shares		(8,355,760	)
Retained earnings		20,250,640

Total stockholders’ equity		34,870,916

Total liabilities and stockholders’ equity	$	48,869,866

See notes to consolidated financial statements.

- 2 -

MEDICONNECT GLOBAL, INC.

Consolidated Statement of Income

For the Nine Months Ended December 31, 2011

(See Accountants’ Review Report)


Service fee revenue	$	36,488,715

Provider fee revenue		11,852,205

Total revenues		48,340,920

Operating expenses
Provider fees		11,488,878
Cost of revenues		12,420,063
Administrative costs and supplies		4,716,956
Sales and marketing		1,412,853
Research and development		831,649

Total operating expenses		30,870,399

Income from operations		17,470,521

Other income (expense)
Interest expense		(235,598	)
Interest income		35,494
Other income		136,462

Total other income (expense)		(63,642	)

Income before taxes		17,406,879

Income tax expense		6,343,871

Net income	$	11,063,008

See notes to consolidated financial statements.

- 3 -

MEDICONNECT GLOBAL, INC.

Consolidated Statement of Changes in Stockholders’ Equity

For the Nine Months Ended December 31, 2011

(See Accountants’ Review Report)


	Common Stock						Additional Paid-in Capital			Retained Earnings		Treasury Stock					Total Stockholders’
	Shares			Amount			Additional Paid-in Capital			Retained Earnings		Shares		Amount			Equity
Balance—March 31, 2011 (audited)		8,508,124		$	8,508		$	22,672,666		$	9,187,632		3,800,870	$	(8,355,760	)	$	23,513,046

Stock-based compensation		—			—			153,045			—		—		—			153,045

Exercise of stock options		52,336			53			159,475			—		—		—			159,528

Escrowed shares returned to the Company		(5,845	)		(6	)		(17,705	)		—		—		—			(17,711	)

Net income		—			—			—			11,063,008		—		—			11,063,008

Balance—December 31, 2011 (reviewed)		8,554,615		$	8,555		$	22,967,481		$	20,250,640		3,800,870	$	(8,355,760	)	$	34,870,916

See notes to consolidated financial statements.

- 4 -

MEDICONNECT GLOBAL, INC.

Consolidated Statement of Cash Flows

For the Nine Months Ended December 31, 2011

(See Accountants’ Review Report)


Cash flows from operating activities
Net income	$	11,063,008
Adjustments to reconcile net income to net cash provided by operating activities
Stock option expense		153,045
Depreciation and amortization		1,685,948
Bad debt expense		145,314
Deferred taxes		129,204
Non-cash interest expense		207,140
Changes in assets and liabilities
Accounts receivable		(2,394,767	)
Prepaid expenses and other current receivables		(44,668	)
Unbilled revenue		5,193
Accounts payable—trade		160,365
Accrued expenses and other		3,827,511

Net cash provided by operating activities		14,937,293

Cash flows from investing activities
Purchases of property and equipment, including capitalized software costs		(1,509,315	)

Net cash used in investing activities		(1,509,315	)

Cash flows from financing activities
Proceeds from debt		27,655
Principal payments on long-term debt		(1,356,326	)
Issuance of common stock		155,455
Payments on capital lease obligations		(78,612	)

Net cash used in financing activities		(1,251,828	)

Net increase in cash and cash equivalents		12,176,150

Cash and cash equivalents—beginning of year		13,946,718

Cash and cash equivalents—end of year	$	26,122,868

Supplemental disclosure of cash flow information:

Cash paid for interest for the nine-month period ended December 31, 2011 was $28,525.

Cash paid for income taxes for the nine-month period ended December 31, 2011 was $6,021,636.

Supplemental disclosure of non-cash activity:

For the nine months ended December 31, 2011, the Company acquired $152,628 of equipment under a term loan.

During the nine months ended December 31, 2011, the Company received 5,845 shares from escrow to offset $17,711 in amounts due from the seller of Passport MD.

See notes to consolidated financial statements.

- 5 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 1—Description of Business and Summary of Significant Accounting Policies

MediConnect Global, Inc. (the “Company”), a Delaware corporation, was established on June 26, 2006. The Company provides data retrieval and transmission services for customers, which primarily consist of retrieving and transmitting medical records worldwide for health insurance companies, life insurance companies, law firms, and medical service providers. The Company’s operations are primarily located in the United States, with some outsourced operations located in India.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, MediConnect.Net, Inc. and Globerian, Inc.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. As of the balance sheet date, and periodically throughout the nine-month period, the Company has maintained balances in various operating accounts in excess of federally insured limits.

Receivables and Concentrations of Credit Risk

The Company had two customers that together comprised 38% of the Company’s accounts receivable at December 31, 2011. Two customers accounted for 63% of the Company’s revenues for the nine months ended December 31, 2011.

Revenue/Unbilled Revenue

The Company charges customers a minimum fee if an order is canceled. Therefore, the Company records the minimum fee as revenue once an order is placed as i) the fee is fixed or determinable; ii) evidence of an arrangement exists; iii) service has occurred; and iv) collectibility is reasonably assured. The Company records revenue which has been earned but not billed as unbilled revenue in the accompanying consolidated balance sheet.

- 6 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 1—Description of Business and Summary of Significant Accounting Policies (continued)

Revenue/Unbilled Revenue (continued)

The Company passes fees charged by medical service providers directly on to its clients. Management has determined that the Company acts as a principal, therefore, recording the provider fees and revenue on a gross basis. This is principally due to the fact that the Company maintains the credit risk with the providers and the Company has determined that they are the primary obligor. The fees and related expenses are recorded as incurred.

Property and Equipment, Including Capitalized Software Costs

The Company accounts for costs incurred in the development of computer software as software research and development costs until the preliminary project stage is completed. Direct costs incurred in the development of software are capitalized once the preliminary project stage is completed, management has committed to funding the project, and completion and use of the software for its intended use is probable. The Company ceases capitalization of development costs once the software has been substantially completed and is ready for its intended use. During the nine months ended December 31, 2011, the Company capitalized approximately $1,083,000.

Goodwill and Intangible Assets

Long-Lived Assets

- 7 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 1—Description of Business and Summary of Significant Accounting Policies (continued)

Use of Estimates

Stock-Based Compensation

Income Taxes

The Company accounts for any uncertainty in income taxes by recognizing the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and often ambiguous. As such, the Company is required to make many subjective assumptions and judgments surrounding income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to its subjective assumptions and judgments, which can materially affect amounts recognized in its consolidated balance sheet and consolidated statement of income. As of December 31, 2011, the Company has determined that there are not any uncertain tax positions taken. Tax years subject to review are 2009 forward for both federal and state returns.

- 8 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 1—Description of Business and Summary of Significant Accounting Policies (continued)

Fair Value

The Company accounts for certain assets and liabilities that are required to be recorded at fair value on a recurring basis under a framework for measuring fair value, which requires enhanced disclosures about fair value measurements. This framework requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

Level 1:

Quoted prices in active markets for identical assets or liabilities;

Level 2:

Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

Level 3:

Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Note 2—Property and Equipment

Property and equipment consist of the following at December 31, 2011:


Software	$	6,333,826
Computer hardware		2,286,753
Furniture and equipment		1,043,330
Leasehold improvements		269,755
Vehicles		17,990

		9,951,654
Less accumulated depreciation		(5,676,721	)

	$	4,274,933

Depreciation expense for the nine months ended December 31, 2011 was $1,200,536.

- 9 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 3—Goodwill and Intangible Assets

As of December 31, 2011, the Company has goodwill of $6,851,681. The following table represents intangible assets subject to amortization as of December 31, 2011:


	Estimated Life		Gross Amount		Accumulated Amortization			Net Carrying Amount
Technology		10 years	$	5,300,000	$	(2,915,000	)	$	2,385,000
Non-compete agreement		1-3 years		1,696,121		(1,696,121	)		—
Brand name		5 years		600,000		(600,000	)		—
Customer relationships		13 years		1,000,000		(423,077	)		576,923
Other		1-5 years		142,198		(142,198	)		—

			$	8,738,319	$	(5,776,396	)	$	2,961,923

Amortization expense for the nine months ended December 31, 2011 was $485,412.

Note 4—Borrowings

Borrowings on long-term debt are summarized as follows at December 31, 2011:


Master loan security agreement for the purchase of capital equipment. All draws are secured by the equipment purchased. Payable in 36 monthly installments of $15,675. The loan accrues interest at an annual rate of 4.55% and matures in June 2013.	$	272,240

Master loan security agreement for the purchase of capital equipment. All draws are secured by the equipment purchased. Payable in 36 monthly installments of $5,319. The loan accrues interest at an annual rate of 3.95% and matures in September 2014.		166,061

Note payable, net of debt discount of $494,835 at December 31, 2011, to a former stockholder in quarterly installments of $404,259, including imputed interest of 7.23%, maturing in October, 2013, at which time all outstanding principle comes due.		4,356,268

Total borrowings		4,794,569
Less current portion		(1,578,587	)

	$	3,215,982

- 10 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 4—Borrowings (continued)

Future maturities of long-term debt are summarized as follows:


Year Ending December 31,	Future Cash Payments		Less Debt Discount			Net Total
2012	$	1,854,774	$	(276,187	)	$	1,578,587
2013		3,387,540		(218,648	)		3,168,892
2014		47,090		—			47,090

	$	5,289,404	$	(494,835	)	$	4,794,569

In June 2010, the Company’s revolving line-of-credit was renewed with a borrowing capacity of 80% of eligible accounts receivable as defined by the loan agreement up to a maximum borrowing capacity of $8,000,000. As of December 31, 2011, the amount available to borrow under the line-of-credit was approximately $4,400,000. The line-of-credit matures in June 2012 and is subject to certain financial and non-financial covenants. As of December 31, 2011, there were no borrowings against the line-of-credit.

In February 2012, the Company terminated the revolving line-of-credit. There was no fee for early termination of the agreement.

Note 5—Capital Leases

The Company has acquired assets under the provisions of long-term leases. For financial reporting purposes, minimum lease payments relating to the assets have been capitalized. The leases expire between August 31, 2012 and August 31, 2013. Amortization of the leased property is included in depreciation expense.

The assets under capital lease have cost and accumulated amortization as follows December 31, 2011:


Computer hardware	$	318,214
Furniture and equipment		38,136
Software		16,054
Less accumulated depreciation		(308,125	)

	$	64,279

- 11 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 5—Capital Leases (continued)

Maturities of capital lease obligations are as follows:


Year Ending March 31,
2013	$	106,813
2014		14,825

Total minimum lease payments		121,638
Amount representing interest		(8,752	)

Present value of net minimum lease payments		112,886
Less current portion		(98,422	)

Long-term capital lease obligation	$	14,464

Note 6—Stockholders’ Equity

Stock Options

The Company has computed the fair value of certain options granted using the following weighted average assumptions during the nine months ended December 31, 2011;


Approximate risk-free rate		1.44	%
Expected dividend yield		0.00	%
Expected weighted average volatility		25.81	%
Expected weighted average life in years		6 years
Weighted average stock price	$	3.63

The Company has not determined the value of 20,000 options granted in December 2011, but estimates that any expense related to these options would be insignificant.

- 12 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 6—Stockholders’ Equity (continued)

Stock Options (continued)

The following table presents the activity for options outstanding:


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding—March 31, 2011		1,440,615		$	2.97		8
Granted		115,000			3.63		10
Forfeited/canceled		(35,000	)		3.46		10
Exercised		(52,336	)		3.05		9

Outstanding—December 31, 2011		1,468,279		$	3.22		8

The weighted average grant-date fair value of options granted during the nine months ended December 31, 2011 was $1.03.

The following table presents the composition of options outstanding and exercisable:


	Options Outstanding						Options Exercisable
Exercise Prices	Number		Price*		Life*		Number		Price*
$2.78		424,999	$	2.78		4.50		424,999	$	2.78
$3.03		117,883		3.03		6.37		117,883		3.03
$3.05		835,397		3.05		8.61		299,614		3.05
$3.63		90,000		3.63		7.89		—		3.63

Total—December 31, 2011		1,468,279	$	2.97		7.20		842,496	$	2.91

*	Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, respectively.

- 13 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 6—Stockholders’ Equity (continued)

Phantom Stock Bonus

As of December 31, 2011, the Company had 50,000 phantom bonus stock options outstanding to certain key contractors at a threshold price per share of $3.03 for 30,000 shares and at $3.05 for 20,000 shares. In the event of a change in control, each phantom stock bonus option holder is able to receive a cash bonus equal to the difference in cash value of the per share exercise price of the award and the consideration received. The phantom stock bonus options vest over four years and expire once employment services cease. As the phantom options require payment and vest only upon a contingent event or change of control, which is outside the control of the Company, a liability has not been recorded.

Warrants

In conjunction with the issuance of convertible promissory notes in December 2007, the Company issued warrants to purchase 11,765 shares of common stock at $8.50 per share. These warrants expire after five years. Management determined that these warrants have an insignificant value at the time of issuance. Valuation of the warrants was based upon Level 3 inputs under the fair value hierarchy.

Restricted Stock Grants

The Company has a restricted stock plan that enables shares to be issued to employees for future services. Restricted stock grants generally vest over a three-year period.

- 14 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 7—Income Taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the differences between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized based on available evidence. The Company’s temporary differences result primarily from net operating losses, reserves, and stock-based compensation. The Company has approximately $1,357,000 of federal net operating losses that will begin to expire in 2021. The net operating losses are subject to an annual limitation of $193,000 under Internal Revenue Code Section 382. The main difference between the federal statutory rate of 35% and the Company’s effective rate relates primarily to stock-based compensation and research tax credits.

Accounting Standards Codification (“ASC”) Topic 740-10 prescribes a comprehensive model for financial recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. Under this guidance, companies may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company did not record any adjustments to its tax accounts as a result of the implementation of ASC Topic 740-10, and as of December 31, 2011, the Company did not have any uncertain tax liabilities.

The Company recognizes accrued interest and penalties related to uncertain tax positions as part of income tax expense. As of December 31, 2011, the Company has no accrued interest and penalties. It is not expected that the amount of the unrecognized tax benefits will change in the next 12 months.

Temporary differences and carryforwards giving rise to a significant portion of deferred tax assets and liabilities are as follows at December 31, 2011:


Deferred tax assets
Total deferred tax assets	$	1,246,219

Deferred tax liability		(2,487,208	)

Total net deferred tax liabilities	$	(1,240,989	)

- 15 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 7—Income Taxes (continued)

Components reflected in the consolidated statement of income are as follows at December 31, 2011:


Current
Federal	$	5,815,894
State and local		101,183

		5,917,077

Deferred
Federal		338,846
State and local		87,948

		426,794

	$	6,343,871

The net current and long-term deferred tax assets and liabilities in the accompanying consolidated balance sheet include the following at December 31, 2011:


Current deferred tax asset	$	155,030
Long-term deferred tax liability		(l,396,019	)

Net long-term deferred tax liability	$	(1, 240,989	)

Note 8—Commitments and Contingencies

Operating Leases

The Company leases facilities, equipment, and vehicles under non-cancelable operating leases. Rent expense for the nine months ended December 31, 2011 was approximately $800,000.

Future minimum lease payments under these leases are as follows:


Year Ending December 31,	Third-Party Leases		Less Anticipated Sublease Rentals			Total
2012	$	1,153,185	$	(22,022	)	$	1,131,163
2013		1,101,266		—			1,101,266

	$	2,254,451	$	(22,022	)	$	2,232,429

- 16 -

MEDICONNECT GLOBAL, INC.

Notes to Consolidated Financial Statements

(See Accountants’ Review Report)

Note 8—Commitments and Contingencies (continued)

Litigation

Note 9—Employee Benefit Plan

The Company has established a 401(k) profit sharing plan (the “401(k) Plan”) whereby employees meeting certain requirements may participant in the 401(k) Plan. The Company, at its discretion, may make matching contributions. For the nine months ended December 31, 2011, the Company contributed $105,236 to the 401(k) Plan.

Note 10—Related Party Transactions

During the nine months ended December 31, 2011, a related party provided consulting services to the Company in the amount of $36,603.

Note 11—Subsequent Events

The Company has evaluated all subsequent events through March 20, 2012, which is the date the consolidated financial statements were available to be issued. No events require disclosure based on this evaluation.

- 17 -

EX-99.3 5 d352454dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited pro forma condensed consolidated financial statements (the “pro forma financial statements”) present the pro forma results of operations and financial position of Verisk Analytics, Inc. (the “Company”) and MediConnect Global, Inc. (“MediConnect”) on a consolidated basis, giving effect to the acquisition, which was accounted for under the purchase method of accounting, as well as the assumptions and adjustments described in the accompanying notes to the pro forma financial statements. The unaudited pro forma condensed consolidated balance sheet gives effect to the acquisition as if it had occurred on December 31, 2011. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2011 is presented as if the acquisition had occurred on January 1, 2011. The pro forma financial statements are based on the audited and unaudited historical consolidated financial statements of the Company and MediConnect, respectively, as of and for the year ended December 31, 2011. The unaudited results of operations of MediConnect for the year ended December 31, 2011 was derived from the unaudited results of operations for the nine months ended December 31, 2011, included in Exhibit 99.2, plus the unaudited results of operations for the three months ended March 31, 2011.

The pro forma financial statements are based on currently available information and assumptions and estimates, which the Company believes are reasonable. These assumptions and estimates, however, are subject to change. The Company believes that all necessary adjustments have been made to fairly present the pro forma information.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of December 31, 2011

(In thousands)


	Verisk Analytics			MediConnect		Pro Forma Adjustments			Pro Forma Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	191,603		$	26,123	$	(26,123	)a1	$	191,603
Accounts receivable, net		153,339			7,804		—			161,143
Other current assets		108,712			765		14,159	a7		123,636

Total current assets		453,654			34,692		(11,964	)		476,382
Noncurrent assets:
Intangible assets, net		226,424			2,962		154,943	a3		384,329
Goodwill		709,944			6,851		220,679	a4		937,474
Other assets		151,084			4,364		13,800	a2		169,248

Total assets	$	1,541,106		$	48,869	$	377,458		$	1,967,433


LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	162,992		$	4,463	$	—		$	167,455
Fees received in advance		176,842			3,100		—			179,942
Other current liabilities		9,816			1,677		(1,356	)a5		10,137

Total current liabilities		349,650			9,240		(1,356	)		357,534
Noncurrent liabilities:
Long-term debt		1,100,332			3,230		344,693	a1		1,448,255
Other liabilities		189,614			1,528		68,992	a6		260,134

Total liabilities		1,639,596			13,998		412,329			2,065,923
Commitments and contingencies
Stockholders’ (deficit)/equity		(98,490	)		34,871		(34,871	)a5		(98,490	)

Total liabilities and stockholders’ (deficit)/equity	$	1,541,106		$	48,869	$	377,458		$	1,967,433

(a1)

The unaudited pro forma condensed consolidated balance sheet assumes that the purchase price, net of cash of $26.1 million, for this acquisition was assumed to be funded entirely through uncommitted senior notes with a fixed interest rate of 5.75% (average cost of debt of Verisk). Differences between the assumed financing, as presented in the pro forma financial statements as of December 31, 2011, and the actual financing of this acquisition that occurred on March 30, 2012 could have a significant impact on the pro forma financial statements. The pro forma adjustment also reflects the payoff of MediConnect’s existing long-term outstanding debt obligations.

(a2)	To reflect preliminary purchase accounting adjustments, including indemnity escrow funded.

(a3)	To reflect preliminary purchase accounting adjustments for fair value of acquired definite-lived intangible assets, offset by the removal of MediConnect’s existing balance of $3.0 million.

(a4)

To reflect the fair value of acquired goodwill based on assets acquired and liabilities assumed as if the acquisition occurred on December 31, 2011. The difference between the amount recorded on a pro forma basis and the actual balance as of the effective date of the acquisition is the result of changes in the assets and liabilities of MediConnect between December 31, 2011 and the closing date of March 30, 2012.

(a5)	To reflect the preliminary purchase accounting adjustments.

(a6)	To reflect preliminary purchase accounting adjustments for deferred tax liabilities and indemnity escrow funded.

(a7)	To reflect preliminary purchase accounting adjustments for deferred tax assets.

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

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2011

(In thousands, except for share and per share data)


							Pro Forma			Pro Forma
	Verisk Analytics			MediConnect			Adjustments			Consolidated
Revenues	$	1,331,840		$	58,567		$	—		$	1,390,407
Expenses:
Cost of revenues (exclusive of items shown separately below)		533,735			30,135			—			563,870
Selling, general and administrative		209,469			6,774			—			216,243
Depreciation and amortization of fixed assets		43,827			1,603			—			45,430
Amortization of intangible assets		34,792			667			13,880	b1		49,339
Acquisition related liabilities adjustment		(3,364	)		—			—			(3,364	)

Total expenses		818,459			39,179			13,880			871,518

Operating income		513,381			19,388			(13,880	)		518,889
Other income/(expense):
Investment income		201			589			—			790
Realized gain on securities, net		686			—			—			686
Interest expense		(53,847	)		(312	)		(19,697	)a1		(73,856	)

Total other (expense)/income, net		(52,960	)		277			(19,697	)		(72,380	)

Income before income taxes		460,421			19,665			(33,577	)		446,509
Provision for income taxes		(177,663	)		(7,160	)		13,116	b2		(171,707	)

Net income	$	282,758		$	12,505		$	(20,461	)	$	274,802

Basic net income per share	$	1.70								$	1.66

Diluted net income per share	$	1.63								$	1.59

Weighted average shares outstanding:
Basic		166,015,238									166,015,238

Diluted		173,325,110									173,325,110

(b1)	To reflect amortization expense related to the acquired definite-lived intangible assets.

(b2)	To reflect estimated adjustment to tax provision from pro forma adjustments using a statutory tax rate of 40.0%.

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

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	Basis of Pro Forma Presentation

The pro forma financial statements and explanatory notes give effect to the combination of the Company and MediConnect. The acquisition was accounted for under the purchase method of accounting.

For the purposes of the pro forma financial statements, the acquisition of MediConnect, net of cash of $26.1 million, was assumed to be funded entirely with $347.8 million of uncommitted senior notes with a fixed interest rate of 5.75% (average cost of debt of the Company), and not funded with cash on hand as of December 31, 2011, as the cash was to be utilized to fund working capital and capital expenditure needs, as well as share repurchases. A hypothetical 1/8% increase or decrease in the assumed interest rate on the borrowings used to fund the acquisition would have resulted in a $0.4 million increase or decrease, respectively, in annual interest expense. These assumptions are based on prevailing circumstances existing during the period covered by the pro forma financial statements.

The amount of certain assets and liabilities presented are based on preliminary valuations and are subject to adjustment as additional information is obtained and valuations are reviewed and finalized. The areas of the purchase price allocation that are considered preliminary are the fair values of accounts receivable, fixed assets, intangible assets, indemnity escrow, fees received in advance, goodwill and the related tax impact of adjustments to these areas. However, as indicated in note (a4) above, the Company has made certain adjustments to the December 31, 2011 historical book values of the assets and liabilities of MediConnect to reflect certain preliminary estimates of the fair values necessary to prepare the pro forma financial statements. Any excess purchase price over the historical net assets of MediConnect, as adjusted to reflect estimated fair values, has been recorded as goodwill. Actual results may differ from the pro forma financial statements once the Company has completed the valuations necessary to finalize the required purchase price allocation. Such finalization could result in material changes to the pro forma financial statements. The allocation of the purchase price will be finalized once all information is obtained, but not to exceed one year from the acquisition date.

The pro forma financial statements are not intended to represent or be indicative of the consolidated results of operations or financial position of the Company that would have been reported had the acquisition been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial position of the Company. This information should be read in conjunction with the accompanying notes to the pro forma financial statements, the historical consolidated financial statements and accompanying notes to the Company’s annual report filed on Form 10-K for the year ended December 31, 2011, filed on February 28, 2012, and the audited and unaudited financial statements of MediConnect included as Exhibit 99.1 and 99.2, respectively, in this Current Report on Form 8-K/A.

2.	Preliminary Purchase Price Allocation

The preliminary purchase price allocation, net of cash acquired of $29.4 million, as of the acquisition effective date and giving effect to the purchase price allocation adjustments similar to those made in the pro forma financial statements, resulted in the following:


	MediConnect
Accounts receivable	$	7,077
Current assets		14,918
Fixed assets		1,075
Intangible assets		157,905
Goodwill		223,354
Other assets		17,087

Total assets acquired		421,416
Current liabilities		3,005
Other liabilities		70,634

Total liabilities assumed		73,639

Net assets acquired	$	347,777

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The preliminary amounts assigned to intangible assets by category are summarized in the table below:


	Weighted
	Average
	Useful Life		MediConnect
Technology-based		10 years	$	43,110
Marketing-related		4 years		14,782
Customer-related		10 years		100,013

Total intangible assets		9 years	$	157,905

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