8-K/A

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): June 11, 2002

Commission File No. 001-12392

NDCHealth Corporation

(Exact name of registrant as specified in its charter)

DELAWARE	58-0977458
(State or other jurisdiction of incorporation)	(IRS Employer Identification Number)

NDC Plaza, Atlanta, Georgia	30329-2010
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (404) 728-2000

None

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

Item 2.    Acquisition or Disposition of Assets

NDCHealth Corporation previously reported its acquisition of a controlling interest in TechRx Incorporated. The purpose of this filing is to file the required financial statements of TechRx and the pro forma financial information.

Item 7.    Financial Statements and Exhibits

Exhibit 99.1

(a) Pro Forma Financial Information

1) Introduction to the Pro Forma Combined Financial Statements

2) Pro Forma Combined Balance Sheet as of March 1, 2002

3) Pro Forma Combined Statement of Income for the Year ended May 31, 2001

4) Pro Forma Combined Statement of Income for the Nine Months ended March 1, 2002

5) Notes to Pro Forma Combined Financial Statements

(b) Financial Statements of TechRx Incorporated—2002 and 2001

1) Report of Independent Auditors

2) Consolidated Balance Sheets as of May 31, 2002 and June 30, 2001

3) Consolidated Statements of Operations for the Eleven Months ended May 31, 2002 and the Year ended June 30, 2001

4) Statements of Cash Flows for the Eleven Months ended May 31, 2002 and the Year ended June 30, 2001

5) Consolidated Statements of Stockholders’ Equity for the Eleven Months ended May 31, 2002 and the Year ended June 30, 2001

6) Notes to Consolidated Financial Statements

7) Consent of Independent Auditors

(c) Financial Statements of TechRx Incorporated—2000 and 1999

1) Notice regarding consent of Arthur Andersen LLP

2) Report of Independent Public Accountants

3) Consolidated Balance Sheets as of June 30, 2000 and June 30, 1999

4) Consolidated Statements of Income for the Years ended June 30, 2000 and 1999

5) Consolidated Statements of Cash Flows for the Years ended June 30, 2000 and 1999

6) Consolidated Statements of Stockholders’ Equity for the Years ended June 30, 2000 and 1999

7) Notes to Consolidated Financial Statements

1

As a result of the pro forma adjustments discussed in Exhibit 99.1 (a) 1 and 5 above, which are the basis of our presentation of the financial schedules filed in Exhibit 99.1 (a) 2, 3 and 4, please note that these financial schedules do not reflect our historical financial statements. This pro forma information is not necessarily indicative of the results that would have occurred if the acquisition had occurred on the dates indicated or the expected financial position or results of operations in the future.

When used in this report and the exhibits hereto, the words “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions and statements that are necessarily dependent on future events are intended to identify forward-looking statements concerning the Company’s business operations, economic performance and financial condition. These include, but are not limited to, statements regarding the Company’s business strategy and means to implement the strategy, the Company’s objectives, future capital expenditures, and sources and cost of future financing. For such statements, the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 is applicable and invoked. Such statements are based on a number of assumptions, estimates, projections or plans that are inherently subject to significant risks, uncertainties and contingencies that are subject to change. Actual revenues, revenue growth and margins will be dependent upon all such factors and results subject to risks including those related to the performance of our various investments and alliances, the implementation of changes by the Company, the failure to implement changes, customer acceptance of such changes or lack of change and the availability and cost of necessary financing. Actual results of events could differ materially from those anticipated in the Company’s forward-looking statements as a result of a variety of factors, including: (a) those set forth in the Company’s Annual Report on Form 10-K for the year ended May 31, 2001 which are incorporated herein by this reference; (b) those set forth elsewhere herein; (c) those set forth from time to time in the Company’s press releases and reports and other filings made with the Securities and Exchange Commission; and (d) those set forth from time to time in the Company’s analyst calls and discussions. In addition, the Company is currently unable to assess the impact, if any, on its financial performance that may result from the economic effects of the September 11, 2001 or any future terrorist attacks on the United States. The Company cautions that such factors are not exclusive. Consequently, all of the forward-looking statements made herein are qualified by these cautionary statements and readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update forward-looking or other statements or to publicly release the results of any revisions of such forward-looking statements that may be made to reflect events or circumstances after the date hereof, or thereof, as the case may be, or to reflect the occurrence of unanticipated events.

2

SIGNATURE

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.

NDCHEALTH CORPORATION (Registrant)
By:	/s/    DAVID H. SHENK
	David H. Shenk Vice President & Corporate Controller (Chief Accounting Officer)

Date: August 12, 2002

3

EX-99.1(A)1

Exhibit 99.1 (a) 1

Introduction to Pro Forma Financial Information

On May 28, 2002, NDCHealth Corporation acquired a controlling interest in TechRx Incorporated, a systems and technology provider to pharmacies. Previously a minority shareholder, we acquired a controlling interest through the purchase of stock for an additional investment of approximately $51 million, consisting of approximately $39 million in cash and approximately $12 million in unregistered shares of our common stock. As we are now the controlling shareholder, TechRx’s results will be consolidated into our financial statements going forward.

The following pro forma combined financial statements have been prepared as if the acquisition of a controlling interest had taken place on March 1, 2002 for the pro forma combined balance sheet and June 1, 2000 for the pro forma combined statements of income. For the periods presented, NDCHealth had a fiscal year end of May 31. TechRx previously had a fiscal year end of June 30. For the purposes of the pro forma combined financial statements for the period ended May 31, 2001, TechRx information for their year ended June 30, 2001 is combined with NDCHealth information for their year ended May 31, 2001. Because of our acquisition of a controlling interest, TechRx has changed their fiscal year to coincide with ours. As a result, TechRx’s most recent interim results are for the eight months ended February 28, 2002. For the purposes of the pro forma combined statement of income for the nine months ended March 1, 2002, TechRx’s results for the month of June 2001 have been combined with their results for the eight months ended February 28, 2002. During the month of June 2001, TechRx recorded significant restructuring and impairment charges. Thus, these unusual items are included in the combined statements of income for both the year ended May 31, 2001 and nine months ended March 1, 2002.

The pro forma combined financial statements are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the dates indicated or the expected financial position or results of operations in the future. The pro forma combined financial statements should be read in conjunction with the separate historical financial statements and notes thereto of TechRx Incorporated contained in Exhibit 99.1 (b) and (c) to this report, and in conjunction with the related notes to these pro forma combined financial statements.

Forward Looking Results of Operations

During fiscal 2002, TechRx determined that its T-Rex One product and certain enhancements to existing products had reached technological feasibility and began capitalizing costs related to the development of these products. Accordingly, approximately $5.0 million of TechRx’s development expense incurred in fiscal 2002, prior to technological feasibility being reached, is not expected to recur. Additionally, as a result of integrating TechRx’s operation into our own, we expect to achieve synergies resulting in savings of approximately $2.0 million in fiscal 2003. Also, due to the expected successful roll-out of T-Rex One, we expect TechRx to experience revenue growth, net of inter-company eliminations, of approximately $5.0 million in fiscal 2003.

EX-99.1(A)2

Exhibit 99.1 (a) 2

Pro Forma Combined Balance Sheet

March 1, 2002

Unaudited

(in thousands)

	NDCHealth			TechRx			Pro Forma Adjustments (a)				Pro Forma NDCHealth
Assets
Current assets:
Cash and cash equivalents	$	81,107		$	5,871		$	(29,000	)	(1)	$	57,978
Accounts receivable, net		61,935			6,476			(2,393	)	(3)		66,018
Income tax receivable		1,605			—			272		(4)		1,877
Deferred income taxes		16,736			—			—				16,736
Prepaid expenses and other		21,534			1,192			(272	)	(4)		22,454
Total current assets		182,917			13,539			(31,393	)			165,063
Property and equipment, net		86,231			3,505			—				89,736
Intangible assets, net		190,828			46,020			67,286		(2,3,5)		304,134
Deferred income taxes		14,070			—			(14,070	)	(5)		—
Investments		77,741			—			(23,632	)	(1,2)		54,109
Other		16,626			—			(6,391	)	(3)		10,235
Total Assets	$	568,413		$	63,064		$	(8,200	)		$	623,277
Liabilities and Shareholders’ Equity
Current liabilities:
Short-term borrowings	$	50,000		$	11,906		$	—			$	61,906
Current portion of long-term debt		178			1,827			—				2,005
Obligations under capital leases		1,189			—			—				1,189
Accounts payable and accrued liabilities		55,009			14,214			(5,850	)	(3)		63,373
Deferred income		18,520			6,727			—				25,247
Total current liabilities		124,896			34,674			(5,850	)			153,720
Long-term debt		151,433			—			—				151,433
Deferred income taxes		—			—			1,481		(5)		1,481
Obligations under capital leases		2,647			—			31		(4)		2,678
Other long-term liabilities		18,995			14,365			(14,365	)	(3,4)		18,995
Total liabilities		297,971			49,039			(18,703	)			328,307
Commitments and contingencies
Redeemable preferred stock		—			3,207			(3,207	)	(1)		—
Minority interest in equity of subsidiaries		10,858			—			12,528		(2)		23,386
Shareholders’ equity:
Preferred stock		—			33,870			(33,870	)	(1,2)		—
Common stock		4,269			15			35		(1,3)		4,319
Warrants		—			3,295			(3,295	)	(2)		—
Capital in excess of par		194,638			15,164			(3,214	)	(1,2)		206,588
Retained earnings		71,449			(41,469	)		41,469		(2)		71,449
Deferred compensation and other		(6,076	)		(38	)		38		(2)		(6,076	)
Other comprehensive income		(4,696	)		(19	)		19		(2)		(4,696	)
Total shareholders’ equity		267,699			10,818			(1,182	)			271,584
Total Liabilities and Shareholders’ Equity	$	576,528		$	63,064		$	(8,200	)		$	623,277

The accompanying notes are an integral part of this Pro Forma Combined Balance Sheet.

1

EX-99.1(A)3

Exhibit 99.1 (a) 3

Pro Forma Combined Statement of Income

For the Year Ended May 31, 2001

Unaudited

(in thousands, except per share data)

	NDCHealth			TechRx			Pro Forma Adjustments (b)				Pro Forma NDCHealth
Revenues:
Information management	$	136,616		$	—		$	—			$	136,616
Network services and systems		176,015			45,053			(10,222	)	(1)		210,846
Divested businesses		24,421			—			—				24,421
		337,052			45,053			(10,222	)			371,883
Operating expenses:
Cost of service		168,691			36,964			(7,870	)			197,785
Sales, general and administrative		77,640			14,323			—				91,963
Depreciation and amortization		34,745			11,166			(304	)	(1,5)		45,607
Restructuring and impairment charges		2,156			9,082			—				11,238
		283,232			71,535			(8,174	)			346,593
Operating income (loss)		53,820			(26,482	)		(2,048	)			25,290
Other income (expense):
Interest and other income		755			686			(235	)	(1)		1,206
Interest and other expense		(8,038	)		(671	)		(1,129	)	(1,4)		(9,838	)
Valuation adjustment in Medscape investment		(6,953	)		—			—				(6,953	)
Minority interest in losses		1,137			—			9,817		(2)		10,954
		(13,099	)		15			8,453				(4,631	)
Income (loss) before income taxes, equity in losses of affiliated companies, and discontinued operations		40,721			(26,467	)		6,405				20,659
Provision for income taxes		15,753			60			2,466		(6)		18,279
Income (loss) before equity in losses of affiliated companies and discontinued operations		24,968			(26,527	)		3,939				2,380
Equity in losses of affiliated companies		(751	)		—			751		(3)		—
Income before discontinued operations		24,217			(26,527	)		4,690				2,380
Discontinued operations, net of income taxes		8,323			—			—				8,323
Net income (loss)	$	32,540		$	(26,527	)	$	4,690			$	10,703
Basic earnings per share	$	0.99									$	0.32
Number of shares		33,009										33,411
Diluted earnings per share	$	0.95									$	0.31
Number of shares		34,153										34,555

The accompanying notes are an integral part of this Pro Forma Combined Statement of Income.

EX-99.1(A)4

Exhibit 99.1 (a) 4

Pro Forma Combined Statement of Income

For the Nine Months Ended March 1, 2002

Unaudited

(in thousands, except per share data)

	NDCHealth			TechRx			Pro Forma Adjustments (b)				Pro Forma NDCHealth
Revenues:
Information management	$	110,226		$	—		$	—			$	110,226
Network services and systems		144,291			34,702			(6,329	)	(1)		172,664
Divested businesses		4,360			—			—				4,360
		258,877			34,702			(6,329	)			287,250
Operating expenses:
Cost of service		127,356			30,967			(4,744	)	(1)		153,579
Sales, general and administrative		57,592			8,822			—				66,414
Depreciation and amortization		18,426			5,997			(2,564	)	(1,5)		21,859
Restructuring and impairment charges		—			9,082			—				9,082
		203,374			54,868			(7,308	)			250,934
Operating income (loss)		55,503			(20,166	)		979				36,316
Other income (expense):
Interest and other income		1,140			126			(264	)	(1)		1,002
Interest and other expense		(7,156	)		(1,044	)		(572	)	(1,4)		(8,772	)
Minority interest in losses		1,680			—			7,842		(2)		9,522
		(4,336	)		(918	)		7,006				1,752
Income (loss) before income taxes and equity in losses of affiliated companies		51,167			(21,084	)		7,985				38,068
Provision for income taxes		18,420			60			2,874		(6)		21,354
Income (loss) before equity in losses of affiliated companies		32,747			(21,144	)		5,111				16,714
Equity in losses of affiliated companies		(1,750	)		—			1,410		(3)		(340	)
Net income (loss)	$	30,997		$	(21,144	)	$	6,521			$	16,374
Basic earnings per share	$	0.91									$	0.48
Number of shares		34,045										34,447
Diluted earnings per share	$	0.87									$	0.45
Number of shares		39,735										35,997

The accompanying notes are an integral part of this Pro Forma Combined Statement of Income.

EX-99.1(A)5

Exhibit 99.1 (a) 5

Notes to Pro Forma Combined Financial Statements

a) Pro Forma Combined Balance Sheet Adjustments

The following Pro Forma adjustments were made to the historical combined balance sheet of the Company to reflect the acquisition of TechRx as if it had occurred on March 1, 2002.

(1) To record NDCHealth’s acquisition of controlling interest in TechRx. NDCHealth purchased additional common and preferred shares in TechRx for $29 million, exercised $10 million in warrants for additional preferred shares and issued $12 million in NDCHealth common stock for a total purchase price of $51 million. Concurrent with the acquisition of controlling interest, NDCHealth converted its shares of TechRx preferred stock into common stock of TechRx.

Assets:
Cash and cash equivalents	$	(29,000	)
Investments		51,000
Total Assets	$	22,000
Liabilities and Shareholders’ Equity:
Redeemable preferred stock	$	(3,207	)
Preferred stock		(30,800	)
Common stock		66
Capital in excess of par		55,941
Total Liabilities and Shareholders’ Equity	$	22,000

(2) Consolidation of TechRx requires eliminating NDCHealth’s equity method investment and recording the minority owners’ interest in TechRx equity. The incremental intangible of $63,135 in NDCHealth’s investment in TechRx is allocated to customer list, software and goodwill.

Assets:
Intangible assets, net	$	63,135
Investments		(74,632	)
Total Assets	$	(11,497	)
Liabilities and Shareholders’ Equity:
Minority interest in equity of subsidiaries	$	12,528
Preferred stock		(3,070	)
Common stock		(31	)
Warrants		(3,295	)
Capital in excess of par		(59,155	)
Retained earnings		41,469
Deferred compensation and other		38
Other comprehensive income		19
Total Liabilities and Shareholders’ Equity	$	(11,497	)

(3) To eliminate certain inter-company transactions. NDCHealth and TechRx provide services to one another and therefore have related assets and liabilities. These balances are eliminated so that the Combined Balance Sheet reflects assets and liabilities associated only with other non-related entities.

Assets:
Accounts receivable, net	$	(2,393	)
Intangible assets, net		(11,400	)
Other		(6,391	)
Total Assets	$	(20,184	)
Liabilities and Shareholders’ Equity:
Accounts payable and accrued liabilities	$	(5,850	)
Other long-term liabilities		(14,334	)
Total Liabilities and Shareholders’ Equity	$	(20,184	)

(4) To conform TechRx’s presentation to NDCHealth’s presentation. $272 of Income tax receivable is presented by TechRx as a component of Prepaid expenses and other. $31 of Obligations under capital leases is presented by TechRx as a component of Other long-term liabilities.

(5) To record deferred tax assets and liabilities associated with NDCHealth’s consolidation of TechRx. The acquisition created differences in NDCHealth’s book and tax assets therefore deferred tax liabilities have been created.

b) Pro Forma Combined Statement of Income Adjustments

The following Pro Forma adjustments were made to the historical combined statements of income of the Company for the year ended May 31, 2001 and the nine months ended March 1, 2002 to reflect the acquisition of TechRx as if it had occurred on June 1, 2000.

(1) To eliminate inter-company transactions. NDCHealth and TechRx provide services to one another and therefore have related revenues and expenses. TechRx has recorded amounts related to its Market Development Agreement with NDCHealth as amortization expense. These inter-company transactions have been eliminated so that the Combined Statement of Income reflects revenues and expenses associated only with other non-related entities.

(2) To reflect the minority partners’ interest in the losses of TechRx. Because NDCHealth does not have complete ownership of TechRx, this amount reflects the minority partners’ interest in TechRx’s operating losses.

(3) To eliminate NDCHealth’s equity in TechRx’s losses. NDCHealth previously accounted for its investment in TechRx under the cost method. Due to NDCHealth’s additional investment in TechRx in the fourth quarter of fiscal 2002, Accounting Principles Board Opinion No. 18 requires TechRx to be treated as if NDCHealth had accounted for TechRx as an equity investment since the inception of the initial investment.

(4) To reflect the incremental interest costs of $1,364 for the year ended May 31, 2001 and $836 for the nine months ended March 1, 2002 associated with borrowing the cash portion of the acquisition price.

(5) To reflect the amortization of acquired intangibles of $5,696 for the year ended May 31, 2001 and $1,904 for the nine months ended March 1, 2002. NDCHealth’s acquisition of a controlling interest in TechRx has resulted in acquired intangibles and goodwill.

(6) To reflect the income tax effect of the above adjustments.

EX-99.1(B)1

Exhibit 99.1 (b) 1

Report of Independent Auditors

Shareholders

TechRx Incorporated

We have audited the accompanying consolidated balance sheets of TechRx Incorporated as of May 31, 2002 and June 30, 2001, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the eleven-month period and year then ended, respectively. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TechRx Incorporated at May 31, 2002 and June 30, 2001, and the results of its operations and its cash flows for the eleven-month period and year then ended, respectively, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

July 2, 2002

EX-99.1(B)2

Exhibit 99.1 (b) 2

TechRx Incorporated

Consolidated Balance Sheets

May 31, 2002 and June 30, 2001

	2002			2001
	(Dollars in Thousands)
Assets
Current assets:
Cash	$	7,349		$	11,513
Accounts receivable:
(including amounts due from NDCHealth)—net of an allowance for doubtful accounts of $741 in 2002 and $832 in 2001		7,687			6,587
Prepaid expenses and other		1,444			1,239
Total current assets		16,480			19,339
Property and equipment:
Furniture		984			1,518
Office equipment		722			790
Leasehold improvements		641			628
Computer software and hardware		5,292			3,206
Construction in progress		571			—
		8,210			6,142
Less accumulated depreciation/amortization		(2,087	)		(2,239	)
Total fixed assets		6,123			3,903
Other assets:
Software development costs		6,401			—
Market development costs—net of accumulated amortization of $11,500 in 2002 and $6,000 in 2001		6,500			12,000
Goodwill—net of accumulated amortization of $3,172 in 2001		34,011			34,011
Other		151			109
Total assets	$	69,666		$	69,362

Exhibit 99.1 (b) 2

TechRx Incorporated

Consolidated Balance Sheets

May 31, 2002 and June 30, 2001

	2002			2001
	(Dollars in Thousands)
Liabilities and stockholders' equity
Current liabilities:
Accounts payable (including NDCHealth)	$	4,032		$	4,118
Accrued expenses		5,221			6,669
Accrued restructuring costs		2,059			1,938
Dividends payable to NDCHealth		646			—
Deferred revenue		8,216			8,767
Notes payable—chain customer		11,906			—
Current portion of long-term obligations (including NDCHealth)		7,118			7,665
Total current liabilities		39,198			29,157
Long-term obligations (including NDCHealth)		7,681			15,675
Total liabilities		46,879			44,832
Redeemable Convertible Series B preferred stock at $.001     par value, 3,000,000 shares authorized, issued     and outstanding in 2001		—			3,207
Stockholders’ equity:
Convertible Series A preferred stock at $.001 par value,     17,033,500 shares authorized, 6,973,500 shares issued and     outstanding, liquidation value of $3,070,000		3,070			3,070
Convertible Series C preferred stock at $.001 par value,     19,669,500 shares authorized, 9,203,540 shares issued     and outstanding in 2001		—			30,800
Common stock at $.001 par value; 90,000,000 shares     authorized; 32,098,671 and 15,123,205 shares issued     and outstanding, respectively		32			15
Additional paid-in capital		64,676			15,172
Warrants outstanding		1,928			3,295
Accumulated deficit		(46,693	)		(31,017	)
Cumulative translation adjustment		(49	)		26
Notes receivable from stockholders		(177	)		(38	)
Total stockholders’ equity		22,787			21,323
Total liabilities and stockholders’ equity	$	69,666		$	69,362

See accompanying notes.

EX-99.1(B)3

Exhibit 99.1 (b) 3

TechRx Incorporated

Consolidated Statements of Operations

	Eleven Months Ended May 31 2002			Year Ended June 30 2001
	(Dollars in Thousands)
Revenues (including $996 and $1,020 in 2002 and 2001, respectively, from NDCHealth)
Retail independent pharmacies	$	23,642		$	25,395
Retail chain pharmacies		8,453			9,272
Mail order and institutional pharmacies		6,607			6,925
Canadian pharmacies		2,738			3,461
Total revenues		41,440			45,053
Cost of revenues (including $4,811 and $6,850 in 2002 and 2001, respectively, from NDCHealth)		26,189			30,113
Gross profit		15,251			14,940
Operating expenses:
Sales and marketing (including $5,500 and $6,000 in 2002 and 2001, respectively, to NDCHealth)		10,787			13,254
Software development		9,138			10,725
General and administrative		6,629			8,361
Restructuring charge		1,406			1,980
Impairment of assets		—			7,102
Total operating expenses		27,960			41,422
Loss from operations		(12,709	)		(26,482	)
Other income (expense):
Interest income		154			686
Interest expense (including $323 and $235 in 2002 and 2001, respectively, to NDCHealth)		(1,084	)		(581	)
Other expense		(125	)		(90	)
Total other (expense) income		(1,055	)		15
Loss before income tax expense		(13,764	)		(26,467	)
Income tax expense		—			60
Net loss	$	(13,764	)	$	(26,527	)

See accompanying notes.

EX-99.1(B)4

Exhibit 99.1 (b) 4

TechRx Incorporated

Consolidated Statements of Cash Flows

	Eleven Months Ended May 31 2002			Year ended June 30 2001
	(Dollars in Thousands)
Operating activities
Net loss	$	(13,764	)	$	(26,527	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization		7,330			11,166
Impairment of assets		—			7,102
Other noncash charges		—			174
Stock compensation expense		696			—
Working capital items:
Accounts receivable (including NDCHealth)		(1,100	)		2,985
Prepaid expenses and other		(205	)		378
Accounts payable (including NDCHealth)		(86	)		3,784
Accrued expenses		(1,448	)		4,136
Deferred revenues		(551	)		(3,165	)
Accrued restructuring		121			1,980
Net cash (used) provided by operating activities		(9,007	)		2,013
Investing activities
Acquisitions (including NDC Pharmacy Systems)		—			(28,206	)
Purchase of furniture, fixtures, and equipment		(2,458	)		(3,044	)
Capitalized software		(6,401	)		—
Net cash used by investing activities		(8,859	)		(31,250	)
Financing activities
Repayment of long-term obligations (including NDCHealth)		(8,302	)		(5,895	)
Proceeds from borrowings		11,906			5,534
Proceeds from stock issuance activities—net		10,170			37,410
Other		(72	)		(38	)
Net cash provided by financing activities		13,702			37,011
Net (decrease) increase in cash		(4,164	)		7,774
Cash—beginning of year		11,513			3,739
Cash—end of year	$	7,349		$	11,513

See accompanying notes.

EX-99.1(B)5

Exhibit 99.1(b)5

TechRx Incorporated

Consolidated Statements of Stockholders' Equity

Eleven months ended May 31, 2002 and year ended June 30, 2001

(Dollars in Thousands, except share data)

						Common Stock
	Convertible Series A Preferred Stock		Convertible Series C Preferred Stock			Shares		Value		Additional Paid-In Capital		Warrants Outstanding			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Notes Receivable from Stockholders			Total
Balance June 30, 2000	$	3,070	$	—		11,308,268		$	11	$	3,941	$	740		$	(4,184	)	$	—		$	—		$	3,578
Net loss		—		—		—			—		—		—			(26,527	)		—			—			(26,527	)
Cumulative translation adjustment		—		—		—			—		—		—			—			26			—			26
Comprehensive loss		—		—		—			—		—		—			—			—			—			(26,501	)
Issuance of preferred and common stock to NDC		—		28,300		2,166,667			2		6,498		—			—			—			—			34,800
Conversion of bridge loan		—		—		1,500,002			2		4,498		—			—			—			—			4,500
Exercise of stock options		—		—		148,268			—		110		—			—			—			(38	)		72
Exercise of warrants		—		2,500		—			—		125		(125	)		—			—			—			2,500
Warrants issued in conjunction with NDC acquisition		—		—		—			—		—		2,648			—			—			—			2,648
Warrants issued in conjunction with debt		—		—		—			—		—		32			—			—			—			32
Accretion of Series B preferred stock and related
dividends		—		—		—			—		—		—			(306	)		—			—			(306	)
Balance June 30, 2001		3,070		30,800		15,123,205			15		15,172		3,295			(31,017	)		26			(38	)		21,323
Net loss		—		—		—			—		—		—			(13,764	)		—			—			(13,764	)
Cumulative translation adjustment		—		—		—			—		—		—			—			(75	)		—			(75	)
Comprehensive loss		—		—		—			—		—		—			—			—			—			(13,839	)
Exercise of stock options		—		—		243,974			—		170		—			—			—			(139	)		31
Exercise of warrants		—		11,367		—			—		—		(1,367	)		—			—			—			10,000
Accretion of Series B preferred stock and related
dividends		—		—		—			—		—		—			(427	)		—			—			(427	)
Capital contributions from stockholders—
transaction cost reimbursement		—		—		—			—		2,015		—			—			—			—			2,015
Treasury shares contributed from stockholder		—		—		(80,000	)		—		—		—			—			—			—			—
Issuance of common stock		—		—		80,000			—		—		—			—			—			—			—
Preferred Series C dividends		—		1,485		—			—		—		—			(1,485	)		—			—			—
Conversion of Preferred Series C stock		—		(43,652	)	13,731,492			14		43,638		—			—			—			—			—
Conversion of Preferred Series B stock		—		—		3,000,000			3		2,985		—			—			—			—			2,988
Stock-based compensation		—		—		—			—		696		—			—			—			—			696
Balance May 31, 2002	$	3,070	$	—		32,098,671		$	32	$	64,676	$	1,928		$	(46,693	)	$	(49	)	$	(177	)	$	22,787

See accompanying notes.

EX-99.1(B)6

Exhibit 99.1 (b) 6

TechRx Incorporated

Notes to Consolidated Financial Statements

May 31, 2002

1.    Business and Significant Accounting Policies

Nature of Business

TechRx Incorporated (TechRx or the Company) was incorporated in 1992. The Company was in the business of providing software solutions to high volume pharmacies including providing central processing and central fill software, a product that enables retail pharmacies to integrate with a high-volume environment and process prescriptions in a more cost-efficient manner. In fiscal 2000, the Company completed a series of acquisitions to gain a presence in the retail pharmacy systems market in order to better integrate its service offerings to the market.

The Company is currently the leading pharmacy software systems provider in the United States and Canada serving all segments of the pharmacy market including: 1) retail pharmacy chains; 2) retail independent pharmacies; and 3) high-volume pharmacies such as mail service and institution-based pharmacies. In response to industry needs including a severe shortage of pharmacists, the Company is in the process of developing T-Rex One, a new host-based software product that will eventually replace all existing store-based systems and provide retail chains, retail independents and high-volume pharmacies with a single integrated solution.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated.

The Company changed its year-end to May 31, 2002 from its previous year-end of June 30 of each year. Accordingly, the statements of operations, stockholders’ equity and cash flows and the information in the footnotes for 2002 represent the
eleven-month period ended May 31, 2002 and a full year ended June 30, 2001.

Use of Estimates

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

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

1.    Business and Significant Accounting Policies (continued)

Foreign Currency Translation

The functional currency of the Company’s foreign subsidiary is its local currency. The assets and liabilities are translated at the period-end exchange rate, and statements of operations are translated at the average exchange rate during the year.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value. The amounts held by major financial institutions may exceed the amount of insurance provided on such deposits. These deposits may generally be redeemed upon demand and, therefore, are subject to minimal use.

Receivables

Unbilled receivables of $829,000 and $996,000 in 2002 and 2001 are included in accounts receivable and represent recorded revenue that is billed by the Company immediately subsequent to each month-end.

Credit is extended after an evaluation of the customer’s financial condition and generally collateral is not required. The provision for bad debt expense recognized in 2002 and 2001 was $618,000 and $413,000, respectively. During 2002 and 2001, $709,000 and $579,000, respectively, of receivables were charged against the allowance.

Inventories

Inventories (included in prepaid expenses and other current assets) consist of replacement parts and supplies for customer installed systems. Inventories are recorded at cost or market (net realizable value), if lower. At May 31, 2002 and June 30, 2001, the Company has an allowance for obsolescence of $562,000 and $791,000, respectively. The allowance is based upon historical experience and management’s estimate of future demand for the on-hand parts and supplies.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

1.    Business and Significant Accounting Policies (continued)

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets (generally three to ten years). Leasehold improvements are amortized over the lesser of their useful lives or the remaining lease term of the lease. Amortization of assets under capital leases is included in depreciation and was not material to the Company’s operating results.

Construction in progress in 2002 represents equipment direct costs of approximately $560,000 and capitalized interest of approximately $11,000 in 2002 incurred in connection with the Company’s new hosting location. Depreciation on this asset will be recorded over five years after it is placed into service, which is expected to be in fiscal 2003.

Upon disposal, assets and related accumulated depreciation are moved from the Company’s accounts and the resulting gains or losses are reflected in the statement of operations. Repairs and maintenance are expensed as incurred.

Intangible Assets

Goodwill is related to our acquisitions and is discussed in Note 3. Amortization is recorded on a straight-line basis over the estimated useful lives of 15 years for goodwill in 2001.

Effective July 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, goodwill and certain indefinite-lived intangible assets are no longer amortized but are subject to annual impairment tests or more frequently when events or circumstances occur indicating that goodwill might be impaired. Other intangible assets will continue to be amortized over their useful lives. The effect of this accounting change as of July 1, 2001 is reflected prospectively in the financial statements.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

1.    Business and Significant Accounting Policies (continued)

Supplemental comparative disclosure as if the change had been retroactively applied to the prior year ended June 30, 2001 is as follows (in thousands):

	2002			2001
Net loss:
As reported	$	(13,764	)	$	(26,527	)
Goodwill amortization		—			3,172
Adjusted net loss	$	(13,764	)	$	(23,355	)

For the year ended June 30, 2001, the Company evaluated impairment of goodwill and other long-lived assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. An impairment review is performed whenever events or changes in circumstances indicated that the carrying amount of an asset may not be recoverable. In accordance with this Statement, when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, an impairment loss would be measured based on the discounted cash flows compared to the carrying amount. During 2001, the Company recorded an impairment charge of $7,102,000 (Note 12).

At May 31, 2002, the Company determined that the fair value applicable to goodwill and other intangible assets exceeded recorded values and, accordingly, these assets are believed to be recoverable.

Additionally, Intangible assets consists of market development costs payable for sales and marketing support including sales and marketing assistance and transition support with major chain customers provided by NDCHealth Corporation (NDCHealth or NDC) under a long-term fixed contractual commitment negotiated concurrently with the Company’s acquisition of NDC’s Pharmacy Systems business.

Amortization is recorded on a straight-line basis over the estimated useful lives of 3 years for market development costs. Market development costs are scheduled to be fully amortized by June 30, 2003 with corresponding amortization estimated to be $6,000,000 and $500,000 for fiscal 2003 and 2004, respectively.

4

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

1.    Business and Significant Accounting Policies (continued)

Stock-Based Compensation

The Company has adopted the disclosure only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). SFAS No. 123 permits the Company to continue accounting for stock-based compensation as set forth in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB Opinion No. 25), provided the Company discloses the pro forma effect on net income of adopting the full provisions of SFAS No. 123. Accordingly, the Company continues to account for stock-based compensation under APB Opinion No. 25 and has provided the required pro forma disclosures (Note 11).

Software Development Costs

Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized in accordance with Statement of Financial Accounting Standards (SFAS) No. 86, Computer Software to be Sold, Leased or Otherwise Marketed. The Company’s practice is that technological feasibility is generally determined at the completion of detail software design or the completion of a working model, whichever is more appropriate in each circumstance. Amortization of capitalized software development costs begins when the related product is available for general release to clients and is provided for each product based on the greater of the relationship of current year revenues of the product to anticipated total revenues or the straight-line amortization of such costs over their estimated useful lives (generally a five-year period). In 2002, in accordance with this policy, the Company determined that its T-Rex One product and certain major enhancements to existing products had reached technological feasibility based upon completion of detailed software design and, accordingly, the Company capitalized $6,401,000 (including interest of $124,000) for the development of these products. Prior to the current period, the Company had not capitalized any software development costs, other than acquired software, as costs incurred subsequent to determination of technological feasibility were not material. During 2001, all previously acquired software was written off in conjunction with a restructuring (Note 12).

Fair Value of Financial Instruments

For certain financial instruments, including cash and cash equivalents, accounts receivable, accounts receivable—related party, notes receivable, and accounts payable, recorded amounts approximate fair value due to the relatively short maturity period. Additionally, at May 31, 2002

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

1.    Business and Significant Accounting Policies (continued)

and June 30, 2001, the carrying amount of the Company’s fixed rate debt approximates market based upon recent quotes for debt instruments with similar terms, degrees of risk and remaining maturities. The estimated fair values may not be representative of the actual values of these financial instruments that could have been realized as of the period-end or that will be realized in the future.

Revenue Recognition

In October 1997, the American Institute of Certified Public Accountants issued SOP No. 97-2, Software Revenue Recognition, which was effective for the Company’s fiscal year beginning July 1, 1998. This SOP provides guidance on applying accounting principles generally accepted in the United States for software revenue recognition transactions.

Revenues from the sale of software licenses and implementation services are recognized upon the date that the software is in operation at the customer site where vendor specific objective evidence (VSOE) has been established for the undelivered elements of the customer contract, which typically is maintenance. In these cases, the maintenance revenue and associated costs are recognized over the term of the maintenance contract. Where VSOE cannot be established for undelivered elements within the contract, the revenue and associated costs for implementation services are deferred and recognized upon acceptance over the remaining term of the contract, typically two or three years. The revenue and related costs associated with the sale of hardware is recognized upon delivery.

Revenues from transaction-based fees are recognized as customer transactions occur at the transaction rate applicable to the estimated volumes as setforth in the contracts.

Revenues from data sales are recognized as the data is transferred to the customer, typically straight line; over the term of the data supply agreement.

Advertising

Advertising and promotion costs are expensed as incurred and for 2002 and 2001 totaled approximately $1,033,000 and $1,005,000, respectively. In addition, certain advertising and promotional costs are included in the market development obligations paid to NDC (Note 2).

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

1.    Business and Significant Accounting Policies (continued)

Income Taxes

The Company follows the liability method of accounting for income taxes pursuant to Statement of Financial Accounting Standards No. 109 (SFAS No. 109), Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax laws and rates applicable to the periods in which the differences are expected to reverse. The Company provides for a valuation allowance to reduce deferred tax assets to their estimated realizable value.

2.    Related Party Transactions

Merger with NDC

On May 28, 2002, the Company entered into an Agreement and Plan of Merger (Merger Agreement) with NDCHealth and NDC Acquisition Corp. (together, NDC) under which NDC agreed to acquire the Company in a two-step transaction. Under the first step, which closed on May 28, 2002, NDC exercised warrants to purchase 3,097,893 shares of Series C Nonvoting Convertible Preferred Stock (Series C Stock) (convertible into 3,333,333 shares of common stock) for $10 million and acquired 5,748,400 shares of common stock and 3,000,000 shares of Series B Convertible Preferred Stock (Series B Stock) from certain shareholders. The effect of these transactions resulted in NDC owning 24,579,892 shares of common stock or a 62.9% controlling interest in the outstanding shares of Company capital stock. Under the second step, which is expected to close on or about May 31, 2003, subject to certain conditions being met, NDC will acquire the remaining shares in the Company from minority shareholders for cash, NDC shares or a combination of cash and NDC shares. The amount of the payment to shareholders will be determined based upon the satisfaction of certain milestones by the Company as set forth in the Merger Agreement. Under the terms of the Merger Agreement, NDC agreed to pay or reimburse the Company for transaction costs associated with the Plan of Merger ($566,000) and personnel related restructuring costs caused as a result of combining certain activities with NDC ($1,449,000) . These costs totaled approximately $2,015,000 (including $300,000 of costs paid directly by NDC) and have been included as expenses within the Company’s financial statements. At May 31, 2002, the reimbursable portion of these costs were included in accounts receivable and paid-in capital.

Additionally, upon entering into the Merger Agreement on May 28, 2002, NDC agreed to fund the cash needs of the Company through the expected closing date of the second step of the

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

2.    Related Party Transactions (continued)

transaction. NDC further agreed to fund the Company’s operations for a period not to exceed six months from the date of termination should the second step of the transaction not close.

Immediately following the signing of the Merger Agreement, NDC converted its Series B Stock and Series C Stock to common stock. Pursuant to the Company’s Articles of Incorporation, the Series A Convertible Preferred Stock (Series A Stock) automatically converted into common stock twenty days after notice to shareholders of the Series B Stock conversion. Accordingly, as of July 1, 2002, 39,072,171 shares of common stock represented the remaining outstanding capital of the Company.

Transactions with NDC

In conjunction with the acquisition of NDC’s pharmacy systems business (Note 3), the Company entered into several agreements with NDC. Activity under these agreements was as follows:

The Company agreed to supply pharmaceutical prescription data to NDC under a Data Supply Agreement. The agreement covers a ten-year period beginning July 1, 2000. The Company receives $1 million per year, payable quarterly, under this agreement.

Transition services for the entities acquired by TechRx from NDC were provided by NDC during 2001 under a Transition Service Agreement. Additionally during 2002 and 2001, NDC has provided certain computer services to the Company, which approximates $45,000 per month.

The Company purchases network claims processing services from NDC and provides these services as part of its product and service offering to independent pharmacies. The Company is obligated to renew network claims processing contracts with NDC for customers acquired in the NDC pharmacy systems business acquisition at rates in place at the acquisition date until the customers are transitioned from the NDC legacy products to the Company’s new T-Rex One product.

Under its Market Development Agreement with NDC, the Company is committed to pay NDC certain fixed and variable amounts over a ten-year period for sales and marketing assistance and support with major chain customers. Fees under this agreement are fixed at $5.5 million, $6.0 million, and $6.5 million for the periods ending June 30, 2001, 2002, and 2003, respectively, and variable amounts thereafter based on transaction volumes processes through the

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

2.    Related Party Transactions (continued)

Company’s systems. The fixed value of these costs was capitalized as market development costs and is being amortized over three years.

In November 2001, the Company entered into an ASP Hosting Agreement with NDC under which NDC agreed to host the Company’s data center at its facility. Under this agreement, NDC agreed to acquire hardware and certain third party software required to operate the Company’s software products and lease them to the Company (Note 5). The total leased amount was $1,592,000 with a 48-month term. The equipment acquired under capital leases with NDC had not been placed in service as of May 31, 2002. In addition, the Company pays NDC certain fees for data center facilities, communication costs and technical services.

For the eleven-month period ended May 31, 2002 and the year ended June 30, 2001, material transactions with NDC, in addition to various investment and debt transactions disclosed in Notes 5, 6 and 7, included the following (in thousands):

	2002		2001
Income Statement
Revenue from sale of data to NDC	$	996	$	1,020
Network claims processing purchased from NDC	$	4,268	$	5,927
Sales and marketing costs to NDC	$	5,500	$	6,000
Computer and transition services purchased from NDC	$	543	$	923
Interest expense to NDC	$	323	$	235
Balance Sheet
Accounts receivable from NDC	$	1,962	$	270
Accounts payable for claims processing to NDC	$	2,124	$	1,765
Dividends payable to NDC	$	646	$	–
Long-term obligations due to NDC (Note 5)	$	13,418	$	18,275

Notes Receivable—Employees

During 2002 and 2001, promissory notes in the amount of $139,000 and $38,000, respectively, were received by the Company from employees in conjunction with the issuance of 184,000 common shares and 38,000 common shares, respectively, by the Company pursuant to option exercises. The notes bear interest at the annual rate of 7% and are due from September 22, 2002 to June 1, 2003. Notes in the amount of $150,000 are full recourse and $27,000 of the notes have security limited to the underlying stock. The nonrecourse notes with a fixed interest rate result in

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

2.    Related Party Transactions (continued)

variable accounting for the stock purchased until the related note is repaid. As a result, $349,000 of stock-based compensation was recorded during fiscal 2002.

3.    Acquisitions

On March 30, 2001, the Company acquired the Renlar Systems business (Renlar) from Cardinal Health Systems, Inc. for an aggregate purchase price of $4,562,000 consisting of $1,500,000 in cash, a $3,000,000 note payable, and $62,000 of transaction costs. This transaction was accounted for as a purchase in accordance with APB No. 16. The excess of the purchase price over the fair value of assets acquired and liabilities assumed of $4,617,000 is classified as goodwill and was being amortized over 15 years beginning with the acquisition date. During 2001, a portion of the goodwill related to Renlar was impaired (Note 12). In accordance with SFAS No. 142, amortization of the remaining goodwill ceased on June 30, 2001.

On October 31, 2000, the Company acquired a worldwide exclusive license to the pharmacy system developed by DCH Technologies, Inc. (DCH) for $2,262,000 (including a $1,000,000 advance payment against future license fees), forgiveness of an $800,000 note receivable and ongoing royalties based on revenues derived from the license and/or sale of products using the DCH developed technology for five years. Concurrent with the acquisition of this license, the Company acquired all of the outstanding stock of Flux Technologies, Inc. (Flux) for approximately $1,369,000 (including $21,000 of transaction costs), which had certain rights in the DCH technology. In December 2000, the Company permitted DCH to license its product to a single customer in Europe in consideration for DCH waiving any future license fees owed by the Company, which may have been due under the original agreement. This transaction was accounted for as a purchase in accordance with APB No. 16. The excess of the purchase price over the fair value of tangible assets, and liabilities assumed of $1,363,000 was assigned to goodwill and was being amortized over 15 years beginning with the acquisition date. The value of the acquired technology from DCH and goodwill associated with Flux was impaired and written off during 2001 (Note 12).

On July 1, 2000, the Company acquired the assets of the NDC pharmacy systems business from NDC. The aggregate purchase price of $25,661,000 (including transaction costs of $513,000) consisted of $22,500,000 in cash plus warrants to purchase up to 7,000,000 shares of Series C Stock (Note 7). This transaction was accounted for as a purchase in accordance with APB No. 16. The excess of the purchase price over the fair value of assets acquired and liabilities assumed of $27,689,000 is classified as goodwill and was being amortized over 15 years beginning with the acquisition date. In accordance with SFAS No. 142, amortization ceased on June 30, 2001. In

10

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

3.    Acquisitions (continued)

conjunction with the acquisition, the Company signed various other agreements with NDC (Note 2).

On February 1, 2000, the Company entered into an agreement to purchase all of the stock of Condor Corporation (Condor). The aggregate purchase price of $9,097,000 (including transaction costs of $92,000), consisted of $5,005,000 in cash, and 4,000,000 shares of the Company’s common stock. This transaction was accounted for as a purchase in accordance with APB No. 16. The excess of the purchase price over the fair value of assets acquired and liabilities assumed of $7,560,000 is classified as goodwill and was being amortized over 15 years beginning with the acquisition date. In accordance with SFAS No. 142, amortization ceased on June 30, 2001.

Had these acquisitions taken place at the beginning of fiscal 2001, the unaudited pro forma results of operations would have been as follows (in thousands):

	Year ended June 30, 2001
Revenue	$	48,671
Operating loss	$	(26,908	)
Net loss	$	(27,135	)

4.    Line of Credit

In September 1999, the Company entered into a borrowing arrangement with Silicon Valley Bank (SVB), which was amended in October 2000, March 2001 and April 2002 (SVB Borrowing). Under the SVB Borrowing, the Company may borrow up to $3,000,000 for working capital needs at the bank’s prime rate plus 1%, and up to an additional $2,000,000 for equipment purchases at a rate equal to the 36-month treasury yield plus 300 basis points plus a final payment equal to 5% of the amount borrowed. Borrowings under the equipment facility portion of the SVB Borrowing totaling approximately $1.3 million were converted into 36-month term loans. The SVB Borrowing contains affirmative covenants, including the obligation to provide regular reports to SVB, negative covenants and financial covenants, including a debt service coverage requirement. Total amounts available under the SVB Borrowing are limited by a borrowing base consisting of qualified accounts receivable and are secured by all tangible assets and a negative

11

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

4.    Line of Credit (continued)

pledge on the intellectual property assets of the Company. The working capital facility expires in April 2003. At May 31, 2002 and June 30, 2001, borrowings under the SVB Borrowing were as follows (dollars in thousands):

	2002			2001
Maximum borrowings	$	1,873		$	2,114
Average outstanding balance	$	1,573		$	1,168
Average interest rate		8.83	%		8.84	%

5.    Long-Term Obligations

Term Debt

NDC

In October 2000, the Company borrowed $4,400,000 from NDC under a convertible subordinated note payable at the end of three years (October 2003). The note carries an interest rate of 8% and, at NDC’s option, is payable in cash or stock at the time of retirement. If NDC elects to receive stock, it can convert the note into common stock at the lower of $9.00 per share or 85% of the offering price if the Company undertakes an initial public offering.

Other

In April 2001, the Company issued a three-year note to Cardinal Health Systems, Inc. (Cardinal) for $3,000,000 in conjunction with the acquisition of the Renlar Systems business (Note 3). The note carried an interest rate of 10% and was payable in equal semiannual installments of principal plus accrued interest beginning October 2001. The acquired fixed and intangible assets of the Renlar Systems business were pledged as collateral under this note. In addition, Cardinal shared a security interest in 50% of accounts receivable from Renlar customers with SVB. The note was repaid in full on May 28, 2002.

On October 31, 2001, the Company entered into a loan agreement with a chain customer for up to $22.75 million. Tranche A, consisting of $11.375 million of the loan amount, was advanced on October 31, 2001 with the remainder (Tranche B) to be advanced upon completion of certain development milestones with respect to a contract related to the T-Rex One software.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

5.    Long-Term Obligations (continued)

The loan carries an interest rate of 8%. In conjunction with this loan, the Company issued contingently exercisable warrants to purchase 4,550,000 shares of its common stock at $5 per share. The loan can be converted at the option of the holder into prepayment credits for the Company’s T-Rex One product upon implementation. If the loan is converted to prepayment credits, the warrant will become exercisable. In addition, the warrant contains a put feature that becomes operative two years from the conversion date. If the put feature is exercised, the redemption price for the warrant is the greater of the intrinsic value of the warrant or $41 million. The obligation of the chain customer to make Tranche B of the loan expires on September 30, 2002, subject to the customer’s right to extend, at its sole discretion. The customer has the option, subject to certain requirements, not to make Tranche B of the loan and to require mandatory repayment on the Tranche A loan with six months notice. Interest and principal are payable in a single installment on the maturity date of February 1, 2003. The loan is subordinated to the SVB Borrowing but senior to all other loans not defined as senior indebtedness.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

5.    Long-Term Obligations (continued)

Debt and obligations to NDC (including capital leases) outstanding as of May 31, 2002 and June 30, 2001 are as follows (in thousands):

	2002		2001
Term debt
Equipment notes—SVB	$	1,256	$	1,931
Note payable chain customer		11,906		–
Cardinal Health Systems note		–		3,000
Other		125		134
Total term debt		13,287		5,065
Less current portion		12,737		1,790
Long-term debt	$	550	$	3,275
Obligations to NDC (including capital leases)
Capital leases—NDC (Note 8)	$	1,476	$	–
Subordinated notes—NDC		4,400		4,400
Market development obligations (Note 2)		7,542		13,875
Total long term obligations—NDC		13,418		18,275
Less current portion		6,287		5,875
Long-term portion of obligations—NDC	$	7,131	$	12,400

Principal payments due under the above agreements are as follows:

Fiscal year ending May 31:
2003	$	19,024
2004		6,971
2005		417
2006		293
	$	26,705

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

6.    Stockholders’ Equity

Preferred and Common Stock

In July 2000, the Board of Directors adopted, and the Company’s shareholders approved, an amendment to the Company’s Articles to create the Series C Preferred Stock, as discussed below, with 19,669,500 shares authorized.

Effective February 8, 2001, the Board of Directors adopted, and the Company’s shareholders approved, an amendment to the Company’s Articles to increase the number of shares of common stock that the Company is authorized to issue from 60,000,000 to 90,000,000 and to increase the number of shares of preferred stock that the Company is authorized to issue from 30,000,000 to 37,500,000.

At May 31, 2002, the number of authorized shares of common stock and preferred stock was 90,000,000 shares and 37,500,000 shares, respectively. The common and preferred stock is designated as follows:

	Number of Shares Authorized	Number of Shares Outstanding	Shares Reserved for Future Issuance
Convertible preferred stock:
Series A—voting	7,033,500	6,973,500	—
Series C—nonvoting	19,669,500	—	5,938,007
Redeemable convertible preferred stock:
Series B—voting	3,000,000	—	—
Common stock	90,000,000	32,098,671	26,988,501

In September 1999, pursuant to a recapitalization transaction approved by shareholders, 6,973,500 shares of common stock were converted to Series A Stock. 6,973,500 shares of Series A Stock, representing all the outstanding shares of this class, were converted into 6,973,500 shares of common stock effective July 1, 2002.

In September 1999, the Company issued 3,000,000 shares of Redeemable Convertible Series B Stock (Series B Stock) at a purchase price of $1 per share for an aggregate consideration of $3,000,000 (less $217,000 in fees and expenses). 3,000,000 shares of Series B Stock, representing all the outstanding shares of this class, were converted into 3,000,000 shares of common stock on May 29, 2002.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

6.    Stockholders’ Equity (continued)

In July 2000, convertible debt in the amount of $4,500,000 was converted into 1,500,002 shares of common stock.

In July 2000, the Company issued 7,728,614 and 2,100,000 shares of Series C Convertible Preferred Stock (Series C Stock) and common stock, respectively, to NDC for consideration of $32,500,000. In connection with this issuance of stock, the Company incurred $400,000 in transaction costs, which included the issuance of 66,667 shares of common stock valued at $200,000. The Series C Stock purchase agreement also included a call option exercisable by the Company. The Company exercised its call option in January 2001, and NDC acquired an additional 1,666,666 shares of Series C Stock for $5,000,000.

On May 28, 2002, NDC acquired all outstanding shares of the Series B Stock (3,000,000 shares) from the previous shareholder. In addition, NDC exercised warrants for 3,097,893 shares of the Series C Stock for $10,000,000. Thereafter, as discussed above, NDC converted all Series B Stock (3,000,000 shares) and Series C stock (12,761,610 shares with a conversion ratio of 1.076:1) into 16,731,492 shares of common stock. In addition, under the terms of the Company’s Certificate of Designation for the Series A Stock and Series B Stock, the conversion of Series B Stock caused the 6,973,500 shares of Series A Stock to be automatically converted into 6,973,500 shares of common stock effective July 1, 2002.

Dividends

The holders of Series A Stock are entitled to receive dividends as, if and when declared by the Board of Directors. No dividends were declared on Series A Stock.

The holders of Series B Stock were entitled to receive dividends at a rate of $.08 per share (adjusted to reflect any stock splits, stock dividends, combinations, recapitalization or reorganization). Dividends accrued from the original issuance date September 1999, but were only to be paid when and if determined by the Board of Directors or upon liquidation of the Company or conversion of the Series B Stock to common stock. Dividends on Series B Stock were cumulative. The Series B Stock was converted by NDC into common stock on May 29, 2002; therefore, accumulated dividends of $646,000 are due and payable to NDC in cash or additional shares of common stock, at the option of NDC.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

6.    Stockholders’ Equity (continued)

The holders of Series C Stock are entitled to receive an annual dividend, payable only in additional shares of Series C Stock, in an amount equal to 5% of the outstanding shares of the Series C Stock. Dividends are payable on the 27^th day of July of each year, commencing July 27, 2001. In 2002, the Company issued 460,177 shares of Series C Preferred stock as payment of $1,485,000 of dividends.

Liquidation and Redemption

In the event of liquidation of the Company, holders of Series B Stock, prior to the payment on any other outstanding class of capital stock, were entitled to receive an amount equal to $1.00 per share plus any accrued but unpaid dividends. After payment on the Series B Stock, and prior to the payment on any other outstanding class, holders of Series A Stock were entitled to receive an amount equal to $1.00 per share. After payment on the Series B Stock and Series A Stock, the holders of Series C Stock are entitled to receive an amount equal to $3.39 per share prior to any payment on the common stock. Any remaining assets would then be distributed on a pro rata basis among the holders of the common stock.

The Series A Stock, Series C Stock and common stock have no redemption features. The Series B Stock was redeemable at the option of the holders of a majority of the Series B Stock at any time after June 30, 2002. During 2002 and 2001, $206,000 and $66,000, respectively, were accreted as dividends utilizing the interest method so that, at the redemption date, the accreted amount will equal the redemption amount.

All applicable liquidation preferences and redemption features of the Series A Stock and Series B Stock expired upon conversion of those classes into common stock.

Conversion

Each share of Series A Stock and Series B Stock was convertible into one share of common stock (subject to adjustment in the case of a stock dividend, stock split, reverse stock split or recapitalization transaction).

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

6.    Stockholders’ Equity (continued)

Each share of Series C Stock was convertible into shares of common stock at any time prior to January 27, 2003 as follows:

Prior to July 27, 2001	1.13 shares of common stock
After July 27, 2001 and prior to July 27, 2002	1.076 shares of common stock
After July 27, 2002 and prior to July 27, 2003	1.025 shares of common stock
July 27, 2003 and thereafter	1 share of common stock

As discussed above, all outstanding Series C Stock was converted to common stock during 2002.

Mandatory Conversion

Each share of Series A Stock will automatically convert into common stock upon any event, which results in mandatory conversion of Series B Stock or at such a time as all the shares of Series B Stock then outstanding have voluntarily converted into common stock. Pursuant to this provision, upon NDC’s voluntary conversion of the Series B Stock in May 2002, all shares of Series A Stock automatically converted to common stock on July 1, 2002.

7.    Warrants

Debt

In conjunction with certain bridge loans in January 2000, the Company issued 450,000 warrants to purchase common stock at an exercise price of $1.00 per share. These warrants are immediately exercisable and expire five years from the date of issuance. The fair value of these warrants of $140,000 was initially recorded as a debt discount and then amortized as interest expense over a 12-month period. During fiscal 2001, the remaining debt discount of $82,000 was amortized as interest expense.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

7.    Warrants (continued)

In connection with the SVB Borrowing (Note 4), in September 1999 and October 2000, the Company issued 60,000 and 35,000 warrants to purchase common stock at an exercise price of $1.00 and $3.00 per share, respectively. These warrants are immediately exercisable and expire five years from the date of issuance. The fair value of the warrants issued in September 1999 was not significant. The fair value of warrants issued in October 2000 was $32,000. This amount was amortized into interest expense over 12 months (term of SVB Borrowing).

In conjunction with a debt agreement with a third party (Note 5), the Company issued 4,550,000 warrants to purchase shares of its common stock at $5 per share in October 2001. These warrants become exercisable only upon the effective date of a service agreement under which the third party licenses the use of the Company’s T-Rex One product. The warrants carry certain guarantees of value and provide the holder a put option which is payable as credits against future license and service fees once they become exercisable. No value was assigned to these warrants at May 31, 2002, because the exercisability of the warrants is contingent upon a future event.

Equity

In May, June and September 1999, management completed private placement offerings. In connection with these offerings, the Company issued warrants to purchase 1,844,700 shares of common stock. These warrants vested immediately and expire seven years from the date of grant or three years after the date of an initial public offering, as defined in the warrant agreement, whichever is later. These warrants have an exercise price of $1.00 per share. The fair value of warrants issued in May, June and September 1999 was $600,000. These amounts were recorded as transaction costs related to the issuance of the Series A Stock and Series B Stock in the amounts of $460,000 and $140,000, respectively.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

7.    Warrants (continued)

In connection with the acquisition of the NDC pharmacy systems business (Note 2), the Company issued a total of 7,000,000 warrants to NDC to purchase Series C Stock. The fair value of these warrants of $2,648,000 was recorded as additional purchase price. These warrants expire five years from the date of issuance. Vesting and exercise prices are as follows:

	Maximum Number of Warrants	Exercise Price Per Share
Prior to July 27, 2002	6,505,576	$	3.228
Prior to July 27, 2003	6,829,268	$	3.075
July 27, 2003 and thereafter	7,000,000	$	3.000

At May 31, 2002, warrants to purchase 2,633,210 shares of Series C Stock remained outstanding (Notes 2 and 6). However, the number of Series C warrants will increase to 2,764,228 (at a conversion ratio of 1.025:1) after July 27, 2002.

Fair Value

The fair values of all the warrants described above, where a measurement date has been reached, were estimated using the Black-Scholes option valuation model with the following assumptions: dividend yield of 0.0%, average risk-free interest rate of 5.8%, 6.06% and 5.27%, volatility of 18%, and an estimated life of two to five years.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

7.    Warrants (continued)

The following table summarizes common stock warrant activity for the eleven months ended May 31, 2002 and the year ended June 30, 2001:

	Warrants Outstanding	Warrant Price Range Per Share
Balance, June 30, 2000	2,354,700	$1.00
Warrants granted	35,000	$3.00
Warrants exercised	—	—
Warrants forfeited	—	—
Balance, June 30, 2001	2,389,700	$1.00–$3.00
Warrants granted	4,550,000	$5.00
Warrants exercised	—	—
Warrants forfeited	—	—
Balance, May 31, 2002	6,939,700	$1.00–$5.00

At May 31, 2002, 2,389,700 warrants to purchase common stock were exercisable at prices ranging from $1.00 to $3.00 per share.

8.    Leases

The Company’s operating lease obligations are for office space and office equipment. The related party capital lease obligations relate to a NDC hosting facility, which has not been placed into service as of May 31, 2002. Other capital lease obligations relate to equipment purchases. These capital and operating leases expire in various years through 2007 and may be renewed for periods ranging from one to five years. Future minimum payments and other amounts under capital leases are included in the maturity tables in Note 5.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

8.    Leases (continued)

Noncancelable operating leases with initial terms of one year or more consisted of the following at May 31, 2002 (in thousands):

	Operating Leases
Year ending May 31:
2003	$	1,835
2004		1,666
2005		1,536
2006		815
2007		190
Thereafter		—
Total minimum lease payments	$	6,042

Rent expense in 2002 and 2001 was $1,606,000 and $2,436,000, respectively. Amortization of leased assets will be included in depreciation and amortization expense once the assets are placed in service.

9.    Deferred Taxes

The Company conforms to the accounting policies of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which requires use of an asset and liability method of accounting for income taxes.

For the eleven months ended May 31, 2002, loss before income taxes for the U.S. and Canadian operations was $12,944,000 and $820,000, respectively.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

9.    Deferred Taxes (continued)

The 2001 provision for income tax expense includes $51,000 and $9,000 of deferred federal and state taxes, respectively.

The reconciliation of the Company’s effective tax rate to the federal statutory rate is as follows:

	2002		2001
Income tax provision at the statutory rate	34	%	34	%
Increases (decreases):
State income taxes	6	%	6	%
Nondeductible items	(.5	)%	(2.6	)%
Change in valuation allowance	(39.5	)%	(37.4	)%
Total income tax expense	—	%	—	%

Components of deferred income taxes are comprised of the following as of May 31, 2002 and June 30, 2001 (in thousands):

	2002			2001
Deferred tax assets:
Net operating loss carryforwards	$	12,273		$	5,169
Temporary difference for amortization of intangibles		4,597			4,098
Temporary difference for depreciation of fixed assets		103			137
Financial statement accruals and reserves not currently deductible for tax purposes		2,684			4,326
Other		13			11
Total deferred tax assets		19,670			13,741
Deferred tax liabilities:
Difference in accounting for capitalized software		(2,712	)		—
Difference in accounting method cash and accrual		(33	)		(67	)
Total deferred tax liabilities		(2,745	)		(67	)
Valuation allowance		(16,925	)		(13,674	)
Net deferred tax asset	$	—		$	—

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

9.    Deferred Taxes (continued)

The Company has provided for a valuation allowance of $16,925,000 and $13,674,000 on the deferred tax assets in fiscal years 2002 and 2001, respectively, as it is uncertain if any of the deferred tax assets may be realized.

The net operating losses can be utilized to offset future taxable income. If not used, these federal carryforwards will begin to expire in 2020. State net operating losses can be utilized to the extent of $2,000,000 per year in Pennsylvania. If not utilized, these carryforwards will begin to expire in 2010.

10.    Retirement Plans

The Company sponsors a defined contribution profit sharing plan covering substantially all of its employees. Company contributions are determined at the discretion of management with a limit of 15% of each covered employee’s salary. The plan also contains a 401(k) provision that allows for employees to elect to contribute a portion of their salary to the retirement plan. There were no discretionary profit sharing contributions declared for 2002 or 2001. The Company contributed a discretionary 401(k) match in 2002 and 2001 of $316,000 and $256,000, respectively.

11.    Stock Option Plan

During 1999, the Company adopted a stock incentive compensation plan (the Plan), which provides for the issuance of common stock options for officers, directors, employees, and consultants. A total of 6,686,005 shares of the Company’s common stock may be issued pursuant to the Plan. Options under the Plan will generally expire ten years from the date of grant. Options granted under the Plan vest over three years and become immediately vested and exercisable upon a change of control, as defined in the Plan. A change of control occurred on May 28, 2002, at the time that NDC became the majority shareholder of the Company (Note 2). Accordingly, all options outstanding prior to May 28, 2002 immediately vested on that date. Additionally, during 2002 a stock compensation charge of $347,000 was recorded as a result of a new measurement date created by extending the option exercise periods for individuals terminated or to be terminated in conjunction with a restructuring (Note 12).

The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations in accounting for its plans. Had compensation cost for the Company’s stock option plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under Statement of

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

11.    Stock Option Plan (continued)

Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), the Company’s net loss would have been increased by approximately $253,000 and $363,000 in fiscal 2002 and 2001, respectively. The effects of applying SFAS No. 123 in this pro forma disclosure are not likely to be representative of the effects on reported net income for future years. The following weighted average assumptions were used in the Black-Scholes pricing model: volatility of 47.0% and 18.0% in 2002 and 2001, respectively, dividend yield of 0.0%, an expected life of three and four years, and average risk-free interest rates of 3.48% and 5.80% for fiscal 2002 and 2001, respectively.

	Options	Option Price Range Per Share		Weighted Average Exercise Price
Options outstanding, June 30, 2000	3,090,833			$	.69
Granted	1,911,500	$	1.00-$3.00	$	2.93
Exercised	148,268	$	0.20-$3.00	$	.74
Forfeited	259,501	$	0.20-$3.00	$	2.26
Options outstanding, June 30, 2001	4,594,564			$	1.54
Granted	1,975,825	$	3.00-$4.00	$	3.33
Exercised	243,974	$	0.20-$3.00	$	.73
Forfeited	722,068	$	0.20-$3.00	$	2.15
Options outstanding, May 31, 2002	5,604,347			$	2.12

As of May 31, 2002, the weighted average remaining contractual life on the plan options outstanding was 8.4 years. As of May 31, 2002, 5,604,347 options were exercisable under this plan.

12.    Restructuring of Operations

In December 2000, the Company changed its product strategy from pursuing an integration of retail systems to its central fill/central processing software to a broader strategy. The new strategy included an all-encompassing product, T-Rex One, which by design would eliminate the need for store-centric software and would include all the benefits of central processing and fill. As a result of this decision, the Company embarked on an aggressive new product development program and announced that legacy products (including all those acquired) would eventually no longer be supported. Management believes that its new strategy has had a significant effect on some of its

25

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

12.    Restructuring of Operations (continued)

existing products and business because customers will be required to eventually implement T- Rex One or be on an unsupported platform. As a result, in accordance with SFAS No. 121, the Company recorded a charge to impair $2,660,000 of acquired software and $4,442,000 of goodwill to more appropriately reflect the value of future cash flows from the existing customer base. As a result of the charge, all goodwill related to the acquisition of Flux was eliminated (Note 3). Goodwill related to the Renlar acquisition was reduced to $1,313,000 and the software license and prepaid royalty for the DCH technology were also eliminated (Note 3). Management determined the impairment charge using an independent valuation.

In conjunction with its decision to replace the existing product set, the Company announced a plan to consolidate legacy systems (existing and acquired) operations and development activities and to focus its resources on the development and deployment of T-Rex One. The plan of restructuring approved by the Board of Directors included a restructuring charge of $1,980,000. The restructuring charge consisted primarily of severance benefits and costs related to the termination of 110 employees during the period from June 2001 through April 2002. As of June 30, 2001, $42,000 of the severance benefits or costs had been paid. During the period ended May 28, 2002, $938,000 of the severance benefits and costs were paid to 107 terminated employees. Approximately $325,000 of the accrual was reversed as a reduction of restructuring charge in fiscal 2002. The balance of this portion of the accrual at May 31, 2002 is $675,000.

In May 2002, in conjunction with its Agreement and Plan of Merger with NDC, the Company reorganized certain sales, operations and administrative functions. As a result of this plan, which the Board of Directors approved, the Company recorded a restructuring charge of $1,731,000.

The restructuring charge consisted primarily of stock-based compensation, severance benefits and costs related to the termination of 72 employees during the period from June 2002 through March 2003. Approximately $347,000 of the expense related to stock compensation which was recorded as a credit to paid-in capital. As of May 31, 2002, none of the restructuring costs with respect to the 2002 charge have been paid.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

13.    Supplemental Disclosure of Cash Flow Information

Supplemental disclosure of cash flow information
Cash paid for income taxes	$	—	$	29
Cash paid for interest	$	406	$	199
Supplemental disclosure of noncash flow information
Capital leases (including NDC)	$	1,592	$	161
Conversion of Preferred Series B stock to common stock		2,988		—
Conversion of Preferred Series C stock to common stock		43,652		—
Preferred Series B dividends		221		240
Preferred Series C dividends		1,485		—
Accretion of redeemable preferred stock		206		66
Unpaid transaction costs reimbursable by shareholder		1,692		—

EX-99.1(B)7

Exhibit 99.1 (b) 7

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement on Form S-8 Nos. 33-55057, 333-05449, 333-05427, and 333-50474 of our report dated July 2, 2002, with respect to the TechRx Incorporated consolidated financial statements included in this Form 8-K of NDCHealth Corporation.

/s/    Ernst & Young LLP

Pittsburgh, Pennsylvania

August 8, 2002

EX-99.1(C)1

Exhibit 99.1 (c) 1

NOTICE REGARDING CONSENT OF ARTHUR ANDERSEN LLP

Section 11(a) of the Securities Act of 1933, as amended (the “Securities Act”) provides that if part of a registration statement at the time it becomes effective contains an untrue statement of a material fact, or omits a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration statement (unless it is proved that at the time of such acquisition such person knew of such untruth or omission) may assert a claim against, among others, an accountant who has consented to be named as having certified any part of the registration statement or as having prepared any report for use in connection with the registration statement.

On May 22, 2001, TechRx dismissed Arthur Andersen LLP as its independent auditors. Prior to the date of this Form 8-K, the Arthur Andersen Pittsburgh, Pennsylvania office closed and did not renew their license to practice effective July 31, 2002. As a result, after reasonable efforts, we have not been able to obtain a consent related to the Arthur Andersen opinion for the fiscal years ended June 30, 2000 and 1999. Therefore, we have been unable to obtain Arthur Andersen’s written consent to the incorporation by reference into the Company’s registration statements on Form S-8 Nos. 33-55057, 333-05449, 333-05427, and 333-50474 of Arthur Andersen’s audit report for the TechRx financial statements for the fiscal years ended June 30, 2000 and 1999. Under these circumstances, Rule 437a under the Securities Act permits the Company to file this Form 8-K, which is incorporated by reference into the Company’s registration statements on Form S-8 Nos. 33-55057, 333-05449, 333-05427, and 333-50474, without a written consent from Arthur Andersen. However, as a result, Arthur Andersen will not have any liability under Section 11(a) of the Securities Act for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen or any omissions of a material fact required to be stated therein. Accordingly, you would not be able to assert a claim against Arthur Andersen under Section 11(a) of the Securities Act.

EX-99.1(C)2

Exhibit 99.1 (c) 2

{This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with consolidated balance sheets of TechRx Incorporated as of June 30, 2000 and 1999, and the related consolidated statements of income, stockholders’ equity and cash flows for the years then ended. This audit report has not been reissued by Arthur Andersen in connection with this filing on
Form 8-K. See Exhibit 99.1(c) 1 for further discussion.}

Report of Independent Public Accountants

To the Shareholders of TechRx Incorporated

We have audited the accompanying consolidated balance sheets of TechRx Incorporated as of June 30, 2000 and 1999 (as revised—see Note 13), and the related consolidated statements of income, 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 TechRx Incorporated as of June 30, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

/s/ Arthur Andersen LLP            

Pittsburgh, Pennsylvania

September 3, 2000

EX-99.1(C)3

Exhibit 99.1 (c) 3

TechRx Incorporated

Consolidated Balance Sheets

	June 30
	2000			1999
Assets
Current assets:
Cash	$	3,739,464		$	3,019,823
Accounts receivable:
Trade, net of an allowance of $497,000 and $95,000, respectively		1,883,098			1,050,796
Other		7,311			14,364
Unbilled receivables		277,565			608,724
Income tax receivable		345,992			284,856
Prepaid expenses and other		291,614			60,423
Inventory		85,529			—
Deferred costs		613,638			354,000
Deferred tax assets		158,341			—
Total current assets		7,402,552			5,392,986
Fixed assets:
Furniture		53,223			29,038
Office equipment		71,294			20,999
Leasehold improvements		117,328			87,025
Computer software and hardware		522,761			99,141
Capitalized software development costs		25,182			—
		789,788			236,203
Less accumulated depreciation/amortization		(267,668	)		(151,398	)
Total fixed assets		522,120			84,805
Other assets:
Goodwill, net of accumulated amortization of $157,495 and $0, respectively		7,587,423			—
Deposits		155,657			11,802
Total assets	$	15,667,752		$	5,489,593

Exhibit 99.1 (c) 3

TechRx Incorporated

Consolidated Balance Sheets

	June 30
	2000			1999
Liabilities and stockholders’ equity
Current liabilities:
Bridge loan, net of debt discount of $81,751 and $0, respectively	$	4,418,249		$	—
Equipment line of credit		364,892			—
Accounts payable		584,202			490,726
Accrued expenses		1,248,880			290,908
Interest payable		69,750			10,959
Due to shareholder		—			38,679
Deferred revenue		2,404,836			938,000
Lease payable, current		—			2,533
Total current liabilities		9,090,809			1,771,805
Lease payable, long-term		—			4,181
Deferred income taxes		97,618			324,912
Total liabilities		9,188,427			2,100,898
Stockholders’ equity:
Preferred stock, 10,033,500 shares authorized, issued and outstanding		6,111,558			—
Common stock at $.001 par value; authorized 30,000,000 shares; issued and outstanding 11,308,268 and 14,168,500 shares, respectively		11,309			14,169
Additional paid-in capital		4,400,681			3,442,958
Warrants outstanding		140,145			—
Retained earnings (deficit)		(4,184,368	)		(68,432	)
Total stockholders’ equity		6,479,325			3,388,695
Total liabilities and stockholders’ equity	$	15,667,752		$	5,489,593

See accompanying notes.

EX-99.1(C)4

Exhibit 99.1 (c) 4

TechRx Incorporated

Consolidated Statements of Income

	Years ended June 30
	2000			1999
Revenues	$	8,077,057		$	5,246,533
Cost of revenues		4,552,340			4,467,437
Gross profit		3,524,717			779,096
Selling, general and administrative expenses		7,830,188			2,146,744
Loss from operations		(4,305,471	)		(1,367,648	)
Other income and expenses, net		984			41,831
Loss before income tax benefit		(4,304,487	)		(1,325,817	)
Income tax benefit:
Current		(258,829	)		(284,856	)
Deferred		(187,942	)		(7,545	)
Total income tax benefit		(446,771	)		(292,401	)
Net loss	$	(3,857,716	)	$	(1,033,416	)

See accompanying notes.

EX-99.1(C)5

Exhibit 99.1 (c) 5

TechRx Incorporated

Consolidated Statements of Cash Flows

	Years ended June 30
	2000			1999
Operating activities
Net loss	$	(3,857,716	)	$	(1,033,416	)
Adjustments to reconcile net loss to net cash used by operating activities:
Noncash compensation expense		83,257			18,000
Depreciation and amortization		260,475			36,483
Deferred income taxes		(385,635	)		(7,545	)
Loss on disposal of assets		—			10,023
Working capital items:
Accounts receivable		595,809			(74,621	)
Prepaid expenses and other		(145,560	)		(18,640	)
Inventory		(37,365	)		—
Income tax receivable		(61,136	)		(284,856	)
Deferred costs		(259,638	)		(354,000	)
Accounts payable		(102,834	)		368,757
Income tax payable		—			(426,042	)
Accrued expenses		745,591			107,942
Interest payable		58,791			(18,725	)
Deferred revenues		1,141,510			869,187
Net cash used by operating activities		(1,964,451	)		(807,453	)
Investing activities
Net cash used in purchase of Condor		(4,118,093	)		—
Deferred acquisition costs		(189,194	)		—
Purchase of furniture, fixtures, and equipment		(467,603	)		(60,620	)
Change in deposits		(143,855	)		(7,457	)
Net cash used by investing activities		(4,918,745	)		(68,077	)
Financing activities
Repayment of capital lease payable		—			(2,359	)
Repayment of loans from shareholder		(38,679	)		—
Net proceeds from equipment line of credit		358,178			—
Proceeds from issuance of stock, net of expenses		2,783,338			3,437,356
Proceeds from bridge loan		4,500,000			—
Net cash provided by financing activities		7,602,837			3,434,997
Net increase in cash		719,641			2,559,467
Cash, beginning of year		3,019,823			460,356
Cash, end of year	$	3,739,464		$	3,019,823
Supplemental disclosures of cash flow information
Cash paid for income taxes	$	—		$	333,049
Cash paid for interest	$	109,387		$	10,888

See accompanying notes.

EX-99.1(C)6

Exhibit 99.1 (c) 6

TechRx Incorporated

Consolidated Statements of Stockholders' Equity

Years ended June 30, 2000 and 1999

	Common Stock						Preferred		Additional Paid-In			Warrants		Retained
	Shares			Value			Stock		Capital			Outstanding		Earnings			Total
Balance June 30, 1998		1,771		$	1,771		$	—	$	—		$	—	$	964,984		$	966,755
Reverse stock split		(771	)		(771	)		—		771			—		—			—
Nine Thousand-to-one stock split effected in the form of a stock dividend, paid February 1, 2000		8,999,000			8,000			—		(8,000	)		—		—			—
Issuance of common stock		1,195,000			1,195			—		383,805			—		—			385,000
Net proceeds from private placement		3,973,500			3,974			—		3,066,382			—		—			3,070,356
Net loss		—			—			—		—			—		(1,033,416	)		(1,033,416	)
Balance June 30, 1999, as restated		14,168,500			14,169			—		3,442,958			—		(68,432	)		3,388,695
Shares issued in conjunction with Condor acquisition		4,000,000			4,000			—		3,996,000			—		—			4,000,000
Conversion of common stock to preferred stock		(6,973,500	)		(6,974	)		3,070,000		(3,063,026	)		—		—			—
Issuance of preferred stock		—			—			2,783,338		—			—		—			2,783,338
Accretion of preferred stock issuance costs		—			—			72,220		—			—		(72,220	)		—
Exercise of stock options		113,268			114			—		24,749			—		—			24,863
Warrants issued		—			—			—		—			140,145		—			140,145
Preferred dividends		—			—			186,000		—			—		(186,000	)		—
Net loss		—			—			—		—			—		(3,857,716	)		(3,857,716	)
Balance June 30, 2000	$	11,308,268		$	11,309		$	6,111,558	$	4,400,681		$	140,145	$	(4,184,368	)	$	6,479,325

See accompanying notes.

EX-99.1(C)7

Exhibit 99.1 (c) 7

TechRx Incorporated

Notes to Consolidated Financial Statements

June 30, 2000 and 1999

1.    Organization

TechRx Incorporated (the Company) was incorporated in 1992. The Company develops and markets best-of-breed software solutions to automate order processing in retail store pharmacies and high volume pharmacies such as mail service, and Internet pharmacies. The Company’s installed base (after considering the acquisition of the NDC pharmacy systems business (see Note 17) includes approximately 16,000 retail store systems including some of the nation’s leading chains such as Eckerd Drug and Kroger, approximately 750 hospitals, clinics and nursing homes, as well as twelve leading mail service pharmacies including WalMart, RxAmerica, and CVS Pharmacare.

In response to a severe shortage of pharmacists, the Company recently introduced a central processing and fill application, a new software product to enable retail store systems to integrate with a high volume application allowing prescriptions to be processed in a more cost efficient environment.

In fiscal 1999 the Company was also engaged in the Programmer Placement business that it phased out beginning January 1999.

2.    Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All material intercompany accounts and transactions have been eliminated.

Cash

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.

Fixed Assets

Furniture and equipment are recorded at cost. Depreciation and amortization is provided on a straight-line method over a three- to ten-year life.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

2.    Accounting Policies (continued)

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. In accordance with this accounting standard, the Company has provided deferred income taxes for temporary differences between book and tax income.

Revenue Recognition

In October 1997, the American Institute of Certified Public Accountants issued SOP No. 97-2, Software Revenue Recognition, which was effective for the Company’s fiscal year beginning July 1, 1998. This SOP provides guidance on applying generally accepted accounting principles for software revenue recognition transactions. In addition, the Company implemented Staff Accounting Bulletin No. 101 on Revenue Recognition effective July 1, 1999.

Revenues from the sale of direct labor contracts, which include core licensed software with substantial enhancements, are recognized under the percentage-of-completion method of accounting. The revenue and related costs associated with the sale of hardware is recognized upon delivery. Maintenance revenue is recognized ratably over the term of the maintenance agreement.

Revenues from the sale of software licenses and implementation services are recognized upon the date that the software is in operation at the customer site where vendor specific objective evidence (VSOE) has been established for the undelivered elements, typically maintenance. In these cases, the maintenance revenue and associated costs are recognized over the term of the maintenance contract. Where VSOE cannot be established for undelivered elements within the contract, the revenue and associated costs for implementation services are deferred and recognized over the term of the contract, typically 2 or 3 years.

Use of Estimates

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

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

2.    Accounting Policies (continued)

Disclosures About Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:

Cash—The carrying value amount approximates fair value because of the short maturity of those instruments.

Revolving loans—The carrying amount approximates the fair value of the revolving loans as these borrowings are variable interest rates reset each quarter

Other assets and liabilities—The Company believes that the carrying value of its other assets and liabilities represents their fair value as of the reporting date as a result of the short maturity for such financial instruments.

Capitalized Software Development Costs

The Company believes that a rapid increase in product version updates has led to an almost continuous product development cycle and has reduced the time between establishing technological feasibility and general release to the public. Based on the continuous product life cycles noted, the period between establishing technological feasibility and the general availability of such software is short, and software costs qualifying for capitalization are insignificant. Accordingly, the Company has capitalized only those software development costs relating to products that have a longer period of time between technological feasibility and general release to the public during the fiscal year ended June 30, 2000 or 1999.

3.    Deferred Taxes

The Company conforms to the accounting policies of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which requires use of an asset and liability method of accounting for income taxes.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

3.    Deferred Taxes (continued)

The provision for income tax expense includes current and deferred taxes for the years ended June 30,2000 and 1999 is as follows:

	2000			1999
Current taxes:
Federal	$	(258,829	)	$	(214,694	)
Deferred		—			(70,162	)
		(258,829	)		(284,856	)
Deferred taxes (benefit):
Federal		(178,226	)		(5,687	)
State		(9,716	)		(1,858	)
		(187,942	)		(7,545	)
Total	$	(446,771	)	$	(292,401	)

Components of deferred income taxes are comprised of the following as of June 30:

	2000			1999
Deferred income tax assets	$	158,341		$	55,845
Deferred income tax liabilities		(97,618	)		(380,757	)
	$	60,723		$	(324,912	)
Consisting of:
Difference in accounting method cash and accrual method	$	(130,323	)	$	(380,757	)
Temporary difference for amortization of goodwill		(21,313	)		—
Financial reserves not currently deductible for tax purposes		201,782			—
Temporary difference for depreciation of fixed assets		10,577			54,235
Net operating loss carryforwards		—			1,610
	$	60,723		$	(324,912	)

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

3.    Deferred Taxes (continued)

The Company has provided for a valuation allowance of $1,313,139 on net operating loss carryforwards as it is likely that some portion of the deferred tax asset will not be realized. Prior to fiscal 2000, the Company reported its taxable income on the cash basis of accounting. Effective July 1, 1999, the Company changed to an accrual basis taxpayer.

4.    Retirement Plans

The Company sponsors a defined contribution profit sharing plan covering substantially all of its employees. Company contributions are determined at the discretion of management with a limit of fifteen percent of each covered employee’s salary. The plan also contains a 401(k) provision which allows for each employee to elect to contribute a portion of their salary to the retirement plan. There were no discretionary profit sharing contributions declared for the year ended June 30, 2000 or June 30, 1999. The Company contributed a discretionary 401(k) match of $56,818 for the year ending June 30, 2000 and $25,075 for the year ending June 30, 1999.

5.    Operating Lease Commitments

The Company has lease obligations for office space and office equipment. The following is a schedule of future lease reimbursements and other obligations:

Year ending June 30
2001	$   483,135
2002	478,228
2003	459,660
2004	450,147
2005	450,147
Thereafter	75,025
	$2,396,342

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

6.    Contingencies

The Company has been named as a defendant in a lawsuit brought by a former customer of a related party. The claims in this lawsuit are directed to alleged insufficiencies in computer software design work performed by a former related company, CDS Technologies, Inc. However, the Company is a named defendant because of its relationship with CDS Technologies, Inc. In the opinion of management, the ultimate outcome of the matter discussed above will not have a material adverse effect on the financial position or results of operations of the Company.

7.    Major Customers

Revenues from the Company’s three largest customers comprised 18%, 8% and 5%, respectively, of total revenues for the year ended June 30, 2000. Revenues from the three largest customers comprise 17%, 8% and 8%, respectively, of total revenue for the year ended June 30,1999.

8.    Amendment to Articles of Incorporation

Effective February 1, 1999, the Board of Directors adopted and the Company’s shareholders approved an amendment to the Company’s Articles of Incorporation so that authorized shares of Common Stock increased from 100,000 to 30,000,000 and the par value of the Common Stock was reduced from $1 to $.001.

9.    Stock Spilt and Stock Dividend

On January 2,1999, the Board of Directors declared a reverse stock split whereby each issued and outstanding share of the Company’s $1 par value Common Stock was reduced to .56545 shares.

On February 1, 1999, the Board of Directors declared a stock split in the form of a dividend of 9,000 shares of Common Stock for each outstanding share of Common Stock. The stock dividend was distributed to all shareholders as of the record date (February 1, 1999).

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

10.    Employment and Stock Agreements

The Company adopted a Stock Option Plan effective February 9, 1999 which permits the Company to award options to acquire its common stock to employees, directors, consultants and advisors. The Company may award a maximum of 2,000,000 options under the plan. During 2000 and 1999, options for shares were issued at exercise prices of $1 and $.20 per share, respectively which are the Company’s estimate of the fair market value of the options at the date of grant. As of June 30, 2000 and 1999, the status of the 1999 Stock Option Plan was:

Year	Granted	Forfeited	Outstanding	Exercised
1999	1,065,000	—	1,060,000	5,000
2000	3,381,000	(186,453)	3,194,547	118,268

The Company accounts for the Plan under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Had compensation costs for the Plan been determined consistent with Statement of Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), using the Black-Scholes model, the net loss for the year ended June 30, 2000 and 1999 would have been increased by $362,841 and $6,978, respectively.

Summary of Assumptions	2000	1999
Risk-free interest rate	5.73%-6.68%	4.75%-5.27%
Expected dividend yield	0%	0%
Expected life of options	5 years	5 years
Expected volatility rate	41.5%	25%

On February 10, 1999, the Company entered into an agreement with a former consultant (now CEO) whereby in exchange for the consulting services, the consultant received 100,000 shares of the Company’s Common Stock. As a result, the Company recognized $9,000 in compensation expense. This consulting agreement terminated with the final closing of the Company’s Private Placement Offering on May 6, 1999 (Note 12).

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

11.    Discontinuation of Contract Services

In January of 1999, the Company decided to phase out the Programmer Placement business (Note 1). In conjunction with the phase-out, the Company paid approximately $440,000 to a current shareholder to assume all such contracts of that business. As of June 30, 1999, all of the contracts were transferred to the shareholder’s company and all expenses related to the transaction are included in the income statement.

12.    Equity Transactions

Issuance of Common and Preferred Stock

In February 1999, the Company sold 1,000,000 shares of Common Stock to two investors, including the current CEO, at $.33 per share.

In May and June of 1999, management completed a private placement offering (completed in two tranches) to secure additional equity. The Company issued 3,973,500 shares of Common Stock at a purchase price of $1 per share less $903,144 in fees and expenses. As additional compensation to the Placement Agent, the Company issued warrants to purchase shares of Common Stock equal to 20% of the aggregate number of shares sold in the offering (1,394,700). The warrants have an exercise price of $1 per share and are exercisable for seven years from the date of issue or three years after the date of an initial public offering, whichever is later.

In September 1999, subject to a clause in the shareholder agreement, 6,973,500 shares of common stock was converted to Preferred Stock—Series A.

In September 1999, the Company issued 3,000,000 shares of Preferred Stock—Series B at a purchase price of $1 per share less $216,662 in fees and expenses. These shares carry a preferred stock dividend of $.08 per share that is to be accrued each year and is payable when determined by the Board of Directors or upon liquidation or conversion of the shares. The Company accrued $186,000 in dividends as of June 30, 2000.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

12.    Equity Transactions (continued)

Bridge Loan and Warrants

On January 29, 2000, the Company entered into a Bridge Loan with four of the equity partners in the amount of $4,500,000. The loan was provided in contemplation of a long term permanent financing of the Company and the notes are convertible at the option of each lender into shares of the Company’s common stock. This loan is at an interest rate of 9% and is payable in arrears at April 28, 2000, July 28, 2000 and October 28, 2000. The note was converted into common stock in fiscal 2001 (Note 16).

In January 2000, the Company issued 450,000 warrants to purchase Common Stock at an exercise price of $1 per share in conjunction with the Bridge Loan. The Company recorded the fair value of the warrants of $140,145 as a debt discount. This amount is being amortized into interest expense over 12 months and as of June 30, 2000, $58,394 was included in interest expense for this amortization.

Summary of Assumptions
Risk-free interest rate	6.06	%
Expected dividend yield	0	%
Expected life of warrants	2 years
Expected volatility rate	48	%

13.    Correction of Error

In December 2000, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 on Revenue Recognition (SAB 101). SAB 101 did not change the rules relating to recognition of revenue but further clarified previous pronouncements. As a result of SAB 101, the Company reviewed the position that they had taken in recognizing revenue on their contracts and determined that certain revenue and costs of sales should have been deferred and recognized at a later date (see Note 2 for revenue recognition policies). Therefore, the Company recorded a correction of an error for fiscal year 1999, which decreased revenues by $938,000 and increased the net loss by $584,000.

TechRx Incorporated

Notes to Consolidated Financial Statements (continued)

14.    Condor Acquisition

Effective February 1, 2000, the Company entered into an agreement to purchase all of the stock of Condor Corporation in exchange for $5,005,000 and 4 million shares of the Company’s Common Stock. The excess of purchase price over net assets was recorded in goodwill at $7,559,693. Goodwill is being amortized over a 15 year life. The Company recognized $157,495 of amortization expense in fiscal 2000. In connection with this purchase, the Company incurred $92,249 of related costs.

15.    Debt

Effective September 15, 1999, the Company has a $500,000 line of credit to purchase equipment with Silicon Valley Bank. The line of credit bears interest at a rate of 1 % plus Prime rate. At June 30, 2000, the Company has $361,015 outstanding under this arrangement. At June 30, 2000, the following applied to this line of credit:

Weighted average outstanding balance	$	132,765
Maximum borrowings		370,903
Weighted average interest rate		8.96	%

16.    Subsequent Event

On July 27, 2000, National Data Corp (NDC) purchased 7,728,614 shares of Preferred Stock and 2,100,000 shares of Common Stock in the Company for $32,500,000 in cash.

Effective July 1, 2000, the Company acquired the assets of the NDC Pharmacy Systems business for $22,500,000 in cash, warrants to purchase 7,000,000 shares of Company stock at $3 per share, assumed approximately $2,900,000 in liabilities, and agreed to make certain minimum and variable payments to NDC over a 10-year period. The Company recognized the present value of expected future payments (approximately $40,000,000) as part of the purchase price for the NDC Pharmacy Systems Business.

The amount of purchase price in excess of the fair value of net assets acquired was recorded as goodwill.