----

----

| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| Delaware                                                       |   | 39-1600938                             |
|----------------------------------------------------------------|--------|----------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I. R. S. Employer Identification No.) |

| Title of Each Class                     |   | Name of Each Exchange on Which Registered |
|-----------------------------------------|--------|-------------------------------------------|
| Common Stock, $0.01 par value per share |   | The NASDAQ Global Select Market           |

| Large accelerated filer o | Accelerated filer x | Non-accelerated filer o | Smaller reporting company o |
|---------------------------------|---------------------------|-------------------------------|-----------------------------------|

----

----

----

INDEX

| PART I   |                                                                                                               |   |
|----------|--------------------------------------------------------------------------------------------------------------------|--------|
| Item 1.  | Business                                                                                                           | 2      |
| Item 1A. | Risk Factors                                                                                                       | 6      |
| Item 1B. | Unresolved Staff Comments                                                                                          | 18     |
| Item 2.  | Properties                                                                                                         | 18     |
| Item 3.  | Legal Proceedings                                                                                                  | 18     |
| Item 4.  | Mine Safety Disclosures                                                                                            | 19     |
| PART II  |                                                                                                               |   |
| Item 5.  | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 20     |
| Item 6.  | Selected Financial Data                                                                                            | 21     |
| Item 7.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 21     |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                                                         | 34     |
| Item 8.  | Financial Statements and Supplementary Data                                                                        | 35     |
| Item 9.  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                               | 98     |
| Item 9A. | Controls and Procedures                                                                                            | 98     |
| Item 9B. | Other Information                                                                                                  | 99     |
| PART III |                                                                                                               |   |
| Item 10. | Directors, Executive Officers and Corporate Governance                                                             | 99     |
| Item 11. | Executive Compensation                                                                                             | 100    |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                     | 100    |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence                                          | 100    |
| Item 14. | Principal Accountant Fees and Services                                                                             | 100    |
| PART IV  |                                                                                                               |   |
| Item 15. | Exhibits, Financial Statement Schedules                                                                            | 100    |

----

INDEX

| Item  1. | BUSINESS |
|---------------|----------|

----

INDEX

|                  |   | Year Ended December 31, |   |
|-----------------------|--------|-------------------------|--------|
|                  |   | 2011                    |   |   | 2010 |   |   | 2009 |   |
| Net sales:            |   |                    |   |   |   |   |   |   |   |
| Software and other    |   |                    | 34.8   | % |   |   | 30.2 | % |   |   | 49.4 | % |
| Professional services |   |                    | 18.0   | % |   |   | 16.5 | % |   |   | 17.7 | % |
| Maintenance and EDI   |   |                    | 47.2   | % |   |   | 53.3 | % |   |   | 32.9 | % |
| Total net sales       |   |                    | 100.0  | % |   |   | 100.0 | % |   |   | 100.0 | % |
|                  |   |                    |   |   |   |   |   |   |   |   |   |   |
| Recurring revenue     |   |                    | 60.0   | % |   |   | 67.5 | % |   |   | 60.0 | % |

----

INDEX

|   | · | Image Interoperability Platform |
|--------|--------|---------------------------------|

|   | o | iConnect. This interoperability and connectivity platform enables hospitals, imaging centers, Integrated Delivery Networks and Health Information Exchanges to create information exchanges within their environments and with other entities.  This platform provides access to imaging and diagnostic data across disparate sites, geographies, specialties and providers.  This solution enables providers to expedite care, reduce duplicate exams, consolidate infrastructure and limit the expenses associated with moving, managing and storing diagnostic content and results. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Clinical and Financial Information Systems |
|--------|--------|--------------------------------------------|

|   | o | Digital Imaging Solutions:  Picture Archiving and Communication Systems (PACS), specialty workstations and related applications manage the image workflow of a medical enterprise. PACS can be used by any medical imaging provider at a hospital or outpatient imaging site. We offer PACS solutions for general image review and management, specialty solutions for cardiology, orthopaedics, ophthalmology, mammography and oncology, and add-on modules like referring physician portals and critical test results reporting. We also offer our eFilm Workstation for general radiology reading and CADstream workstations for specialty reading of magnetic resonance imaging (MRI) breast, liver and prostate studies. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Clinical information systems. These systems provide a complete electronic record of a medical procedure across a variety of specialties – including Merge OrthoEMR for orthopaedics, Merge Anesthesia Information Management System for surgery, and Merge RIS for radiology. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Revenue Cycle Management. We offer software and services for the revenue cycle management of physician practices. These solutions can be used across a many physician specialties, but our solutions are most commonly used by radiology practices, imaging centers and billing services. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Software Development Toolkits, Technologies and Platforms. |
|--------|--------|------------------------------------------------------------|

|   | o | Merge toolkits, technologies and platforms provide software developers with the necessary resources to assist in the timely development of new products and enhance existing products. They can be used by any original equipment manufacturer (OEM), medical device manufacturer, RIS/PACS or general healthcare IT vendors. We offer development toolkits in the basic standards of medical imaging and information interoperability, as well as advanced toolkits and unfinished applications for specialized medical image review and distribution. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Hosted Software Solutions for Clinical Trial Data Management. |
|--------|--------|---------------------------------------------------------------|

|   | o | We provide hosted software solutions for the collection, aggregation, analysis, reporting and overall management of clinical trials information. These solutions can be sold to sponsors of clinical trials, including pharmaceutical companies, contract research organizations (CRO) or imaging core labs.  Our solutions include electronic data capture (EDC), interactive voice/web response (IVR/IWR) and electronic patient reported outcomes (ePRO) software and devices. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

----

INDEX

| Item 1A.      | RISK FACTORS |
|---------------------------------------------|--------------|

|   | · | We must use a substantial portion of our cash flow from operations to pay interest on our indebtedness, which will reduce the funds available to us for operations and other purposes; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our high level of indebtedness could place us at a competitive disadvantage compared to our competitors that may have proportionately less indebtedness; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

|   | · | Our high level of indebtedness may make us more vulnerable to economic downturns and adverse developments in our business. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | · | Incur additional indebtedness and issue preferred stock; |
|--------|--------|----------------------------------------------------------|

|   | · | Pay dividends on or make distributions in respect of capital stock; |
|--------|--------|---------------------------------------------------------------------|

|   | · | Make certain investments or certain other restricted payments; |
|--------|--------|----------------------------------------------------------------|

|   | · | Issue dividends and enter into other payment restrictions affecting certain subsidiaries; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | Enter into transactions with stockholders or affiliates; |
|--------|--------|----------------------------------------------------------|

|   | · | Create or incur liens; |
|--------|--------|------------------------|

|   | · | Enter into certain sale-leaseback transactions; |
|--------|--------|-------------------------------------------------|

|   | · | Guarantee indebtedness; |
|--------|--------|-------------------------|

|   | · | Merge or consolidate without meeting certain conditions; and |
|--------|--------|--------------------------------------------------------------|

|   | · | Issue or sell stock of certain subsidiaries. |
|--------|--------|----------------------------------------------|

|   | · | Acceptance of and demand for our products; |
|--------|--------|--------------------------------------------|

----

INDEX

|   | · | The extent to which we invest in new technology and product development; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | The costs of developing new products, services or technologies; |
|--------|--------|-----------------------------------------------------------------|

|   | · | Our interest and principal payment obligations; |
|--------|--------|-------------------------------------------------|

|   | · | The number and method of financing of acquisitions and other strategic transactions; and |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | The costs associated with the growth of our business. |
|--------|--------|-------------------------------------------------------|

|   | · | Demand for our software solutions and services; |
|--------|--------|-------------------------------------------------|

|   | · | Our sales cycle; |
|--------|--------|------------------|

|   | · | Economic cycles; |
|--------|--------|------------------|

|   | · | The level of reimbursements to our end-user customers from government sponsored healthcare programs (principally, Medicare and Medicaid); |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Accounting policy changes mandated by regulating entities; |
|--------|--------|------------------------------------------------------------|

|   | · | Delays due to customers’ internal budgets and procedures for approving capital expenditures, by competing needs for other capital expenditures and the deployment of new technologies and personnel resources; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our ability to retain and increase sales to existing customers, attract new customers and satisfy our customers’ demands; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our ability to fulfill orders; |
|--------|--------|--------------------------------|

----

INDEX

|   | · | The introduction of competitive products and services; |
|--------|--------|--------------------------------------------------------|

|   | · | Price decreases; |
|--------|--------|------------------|

|   | · | Changes to regulatory approval processes and/or requirements; |
|--------|--------|---------------------------------------------------------------|

|   | · | Timing, effectiveness and costs of expansion and changes in our systems and infrastructure; |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | The outcomes of legal proceedings and claims involving us; and |
|--------|--------|----------------------------------------------------------------|

|   | · | Variations in the mix of products and services offered by us. |
|--------|--------|---------------------------------------------------------------|

----

INDEX

|   | · | Identifying suitable candidates, performing appropriate due diligence, identifying potential liabilities and negotiating acceptable terms; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The potential distraction of our management, diversion of our resources and disruption to our business; |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | · | Retaining and motivating key employees of the acquired companies; |
|--------|--------|-------------------------------------------------------------------|

|   | · | Managing operations that are distant from our current headquarters and operational locations; |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | Entering into industries or geographic markets in which we have little or no prior experience; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | Competing for acquisition opportunities with competitors that are larger or have greater financial and other resources than us; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | Accurately forecasting the financial impact of a transaction; |
|--------|--------|---------------------------------------------------------------|

|   | · | Assuming liabilities of acquired companies, including existing or potential litigation related to the operation of the business prior to the acquisition; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Reducing our working capital and hindering our ability to expand or maintain our business, if acquisitions are made using cash; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | Maintaining good relations with the customers and suppliers of the acquired company; and |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | Effectively integrating acquired companies and achieving expected synergies. |
|--------|--------|------------------------------------------------------------------------------|

----

INDEX

----

INDEX

|   | · | Local economic and political conditions; |
|--------|--------|------------------------------------------|

|   | · | Foreign government regulation of healthcare and government reimbursement of health services; |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | Local restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products and services; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Local import, export or other business licensing requirements; |
|--------|--------|----------------------------------------------------------------|

|   | · | Local limitations on the repatriation and investment of funds and foreign currency exchange restrictions; |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | Shorter payable and longer receivable cycles and the resultant negative impact on cash flow; |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | Local laws and regulations regarding data protection, privacy, network security and restrictions on pricing; |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | Difficulty in staffing, developing and managing foreign operations as a result of distance, language and cultural differences; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------|

|   | · | Different employee/employer relationships and the existence of workers’ councils and labor unions; |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | Laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans and taxes; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | Geopolitical events, including war and terrorism. |
|--------|--------|---------------------------------------------------|

|   | · | Our existing products and services; |
|--------|--------|-------------------------------------|

|   | · | Our new products and services, and |
|--------|--------|------------------------------------|

|   | · | Enhancements to existing products, support and services. |
|--------|--------|----------------------------------------------------------|

----

INDEX

----

INDEX

|   | · | Requiring us to receive FDA clearance of a pre-market notification submission demonstrating substantial equivalence to a device already legally marketed, or to obtain FDA approval of a pre-market approval application establishing the safety and effectiveness of the software; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Requiring us to comply with rigorous regulations governing the pre-clinical and clinical testing, manufacture, distribution, labeling and promotion of medical devices; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Requiring us to comply with the FDCA Act regarding general controls, including establishment registration, device listing, compliance with good manufacturing practices, reporting of specified malfunctions and adverse device events. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

----

INDEX

|   | · | The integration of an acquired business is unsuccessful or takes longer or is more disruptive than anticipated; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | We do not achieve the expected synergies or other benefits of the acquisition as rapidly or to the extent anticipated, if at all; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | · | The effect of the acquisition on our financial results does not meet the expectations of Merge, financial analysts or investors; or |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | · | After the acquisition, the business does not perform as anticipated. |
|--------|--------|----------------------------------------------------------------------|

----

INDEX

|   | · | Our ability to meet or exceed the expectations of analysts or investors; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | Changes in our forecasts or earnings estimates by analysts; |
|--------|--------|-------------------------------------------------------------|

|   | · | Quarter-to-quarter variations in our operating results; |
|--------|--------|---------------------------------------------------------|

|   | · | Announcements regarding clinical activities or new products by us or our competitors; |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | General conditions in the healthcare IT industry; |
|--------|--------|---------------------------------------------------|

|   | · | Governmental regulatory action and healthcare reform measures, including changes in reimbursement rates for imaging procedures; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | Rumors about our performance or software solutions; |
|--------|--------|-----------------------------------------------------|

|   | · | Announcements regarding acquisitions; |
|--------|--------|---------------------------------------|

|   | · | Uncertainty regarding our ability to service existing debt; |
|--------|--------|-------------------------------------------------------------|

|   | · | Price and volume fluctuations in the overall stock market, which have particularly affected the market prices of many software, healthcare and technology companies; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | General economic conditions. |
|--------|--------|------------------------------|

|   | · | Require that any action required or permitted to be taken by our stockholders be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Provide an advance written notice procedure with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of our board of directors or a committee of our board of directors; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | State that special meetings of our stockholders may be called only by the chairman of our board of directors, our chief executive officer or by a majority of our board of directors then in office; and   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Allow our directors to fill vacancies on our board of directors, including vacancies resulting from removal or enlargement of the board of directors. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

| Item 1B.  | UNRESOLVED STAFF COMMENTS |
|---------------------|---------------------------|

| Item  2. | PROPERTIES |
|---------------|------------|

| Location                    |   | Square Footage |   |   | Annual Lease Payments (millions of $) |   |
|-----------------------------|--------|----------------|--------|--------|---------------------------------------|--------|
| Chicago, Illinois           |   |           | 28,000 |   |                                  | $      | 0.5 |   |
| Daytona Beach, Florida      |   |           | 36,000 |   |                                  |   | 0.3 |   |
| Hartland, Wisconsin         |   |           | 81,000 |   |                                  |   | 0.7 |   |
| Mississauga, Ontario        |   |           | 24,000 |   |                                  |   | 0.6 |   |
| Morrisville, North Carolina |   |           | 17,000 |   |                                  |   | 0.3 |   |

| Item   3. | LEGAL PROCEEDINGS |
|---------------------|-------------------|

----

INDEX

| Item  4. | MINE SAFETY DISCLOSURES |
|---------------|-------------------------|

----

INDEX

| Item 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
|---------|--------------------------------------------------------------------------------------------------------------------|

| 2011   |   | 4th Quarter |   |   | 3rd Quarter |   |   | 2nd Quarter |   |   | 1st Quarter |   |
|--------|--------|-------------|--------|--------|-------------|--------|--------|-------------|--------|--------|-------------|--------|
| High   |   | $           | 7.16   |   |        | $      | 7.23   |        |   | $      | 6.19        |   |   | $ | 5.36 |   |
| Low    |   | $           | 4.32   |   |        | $      | 4.86   |        |   | $      | 4.55        |   |   | $ | 3.39 |   |
|   |   |        |   |   |        |   |   |        |   |   |        |   |   |   |   |   |
| 2010   |   | 4th Quarter |   |   | 3rd Quarter |   |   | 2nd Quarter |   |   | 1st Quarter |   |
| High   |   | $           | 4.25   |   |        | $      | 3.38   |        |   | $      | 3.16        |   |   | $ | 3.44 |   |
| Low    |   | $           | 2.84   |   |        | $      | 2.46   |        |   | $      | 1.92        |   |   | $ | 1.95 |   |

----

INDEX

| Date       | Merge Healthcare Incorporated (Nasdaq: MRGE) | Nasdaq Computer Index (^IXCO) | Russell 2000 Index (^RUT) |
|------------|----------------------------------------------|-------------------------------|---------------------------|
| 12/31/2006 | $100                                         | $100                          | $100                      |
| 12/31/2007 | $18                                          | $122                          | $97                       |
| 12/31/2008 | $20                                          | $65                           | $63                       |
| 12/31/2009 | $51                                          | $111                          | $79                       |
| 12/31/2010 | $57                                          | $130                          | $99                       |
| 12/31/2011 | $74                                          | $131                          | $94                       |

| Item 6. | SELECTED FINANCIAL DATA |
|--------------|-------------------------|

|                                               |   | Years Ended December 31,                                                     |       |
|----------------------------------------------------|--------|---------------------------------------------------------------------------------------------|------------|
|                                               |   | 2011                                                                                        |       |   | 2010(1) |   |   | 2009(2) |   |   | 2008 |   |   | 2007 |   |
|                                               |   | (in thousands, except for share and per share data) |       |
| Statement of Operations Data:                      |   |                                                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                          |   | $                                                                                           | 232,428    |   |   | $ | 140,332 |   |   | $ | 66,841 |   |   | $ | 56,735 |   |   | $ | 59,572 |   |
| Operating income (loss)(3)                         |   |                                                                                        | 29,155     |   |   |   | (8,524 | ) |   |   | 8,963 |   |   |   | (21,697 | ) |   |   | (171,238 | ) |
| Income (loss) before income taxes                  |   |                                                                                        | (1,866     | ) |   |   | (25,162 | ) |   |   | 150 |   |   |   | (23,743 | ) |   |   | (171,808 | ) |
| Income tax expense (benefit)                       |   |                                                                                        | 3,665      |   |   |   | (13,646 | ) |   |   | (135 | ) |   |   | (60 | ) |   |   | (240 | ) |
| Net income (loss)                                  |   |                                                                                        | (5,531     | ) |   |   | (11,516 | ) |   |   | 285 |   |   |   | (23,683 | ) |   |   | (171,568 | ) |
| Net income (loss) attributable to Merge            |   |                                                                                        | (5,521     | ) |   |   | (11,516 | ) |   |   | 285 |   |   |   | (23,683 | ) |   |   | (171,568 | ) |
| Net income (loss) available to common shareholders |   |                                                                                        | (8,674     | ) |   |   | (30,592 | ) |   |   | 285 |   |   |   | (23,683 | ) |   |   | (171,568 | ) |
| Earnings (loss) per share:                         |   |                                                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                              |   | $                                                                                           | (0.10      | ) |   | $ | (0.38 | ) |   | $ | 0.00 |   |   | $ | (0.51 | ) |   | $ | (5.06 | ) |
| Diluted                                            |   |                                                                                        | (0.10      | ) |   |   | (0.38 | ) |   |   | 0.00 |   |   |   | (0.51 | ) |   |   | (5.06 | ) |
| Weighted average shares outstanding:               |   |                                                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                              |   |                                                                                        | 86,647,097 |   |   |   | 80,231,427 |   |   |   | 60,910,268 |   |   |   | 46,717,546 |   |   |   | 33,913,379 |   |
| Diluted                                            |   |                                                                                        | 86,647,097 |   |   |   | 80,231,427 |   |   |   | 62,737,821 |   |   |   | 46,717,546 |   |   |   | 33,913,379 |   |
|                                               |   |                                                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   | December 31,                                                                           |       |
|                                               |   |                                                                                        | 2011       |   |   |   | 2010 |   |   |   | 2009 |   |   |   | 2008 |   |   |   | 2007 |   |
|                                               |   | (in thousands)                                                                         |       |
| Balance Sheet Data:                                |   |                                                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Working capital                                    |   | $                                                                                           | 46,020     |   |   | $ | 28,357 |   |   | $ | 18,231 |   |   | $ | 8,254 |   |   | $ | 878 |   |
| Total assets                                       |   |                                                                                        | 450,387    |   |   |   | 396,645 |   |   |   | 100,249 |   |   |   | 54,737 |   |   |   | 61,635 |   |
| Long-term debt obligations                         |   |                                                                                        | 249,438    |   |   |   | 195,077 |   |   |   | - |   |   |   | 14,230 |   |   |   | - |   |
| Shareholders’ equity                         |   |                                                                                        | 92,471     |   |   |   | 104,806 |   |   |   | 68,137 |   |   |   | 8,841 |   |   |   | 24,405 |   |

| (1) | Includes the results of AMICAS from April 28, 2010, the date of the business combination. |
|-----|-------------------------------------------------------------------------------------------|

| (2) | Includes the results of etrials and Confirma from July 20, 2009 and September 1, 2009, the respective dates of the business combinations. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | For the year ended December 31, 2007, we incurred a charge of $122.4 million related to the impairment of goodwill.  |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

| Item 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|--------------|---------------------------------------------------------------------------------------------|

----

INDEX

|   | · | Overview |
|--------|--------|----------|

|   | · | Revenues and Expenses |
|--------|--------|-----------------------|

|   | · | Results of Operations |
|--------|--------|-----------------------|

|   | · | Liquidity and Capital Resources |
|--------|--------|---------------------------------|

|   | · | Material Off Balance Sheet Arrangements |
|--------|--------|-----------------------------------------|

|   | · | Critical Accounting Policies |
|--------|--------|------------------------------|

|   | · | AMICAS, Inc. (AMICAS), an image and information management solutions provider, which we acquired on April 28, 2010; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | Confirma, Inc. (Confirma), a provider of computer systems for processing and presenting data from magnetic resonance imaging (MRI) studies, which we acquired on September 1, 2009; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | etrials Worldwide, Inc. (etrials), a provider of clinical trials software and services, which we acquired on July 20, 2009; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | Ophthalmic Imaging Systems (OIS), one of the top providers of digital imaging and informatics solutions for ophthalmology and other medical specialties, which we acquired on August 4, 2011. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

|   | · | Software and other sales, net of estimated returns and allowances, including software and purchased component revenue recognized in sales to OEM customers, healthcare facilities and other providers; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Professional services, including hosted clinical trial SaaS offerings, installation, custom engineering services, training, consulting and project management; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Maintenance and EDI, including software maintenance and support and EDI revenues. |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | Software and other cost of sales, including purchased components and third-party royalties included in software and hardware sales to our customers; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Professional services cost of sales, including headcount and related costs and direct third-party costs incurred in our performance of SaaS offerings, installation, custom engineering services, training, consulting and project management; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Maintenance and EDI cost of sales, including headcount and related costs and direct third-party costs incurred to fulfill our maintenance and support obligations and to deliver EDI services; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Depreciation and amortization, including any impairment, for amounts assessed on capital equipment used to fulfill contract obligations as well as our purchased and developed software and backlog assets.  Depreciation and amortization are recorded over the respective assets’ useful life.  Each quarter we test our purchased and developed software for impairment by comparing its net realizable value (estimated using undiscounted future cash flows) to the carrying value of the software.  If the carrying value of the software exceeds its net realizable value, we record an impairment charge in the period in which the impairment is incurred equal to the amount of the difference between the carrying value and estimated undiscounted future cash flows. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

|   | · | In 2010 and 2011, we expanded our product offerings through the acquisitions of AMICAS and OIS, which we acquired on April 28, 2010 and August 4, 2011, respectively.  As a result of the timing of the completion of these acquisitions, the comparability of the results of operations for the year ended December 31, 2011 differ significantly from the year ended December 31, 2010.   |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2009, we completed the acquisitions of Confirma and etrials, which we acquired on September 1, 2009 and July 20, 2009, respectively.  The results of operations of Confirma and etrials are included in our consolidated statements of operations since the respective dates of acquisition.  Together with AMICAS, we refer to these as the Significant Acquisitions.  As result of the timing of the Significant Acquisitions, the results of operations for the year ended December 31, 2010 differ significantly from the year ended December 31, 2009.   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We completed restructuring initiatives in August 2011 concurrent with the acquisition of OIS, in April 2010 concurrent with the acquisition of AMICAS and in July 2009 concurrent with the acquisition of etrials.  These initiatives assisted in providing operational rigor to a combined, larger organization and enabled us to decrease costs as a percentage of revenue (most notably general and administrative costs). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We issued $200.0 million of Notes in April 2010 as part of the financing for the acquisition of AMICAS.  The Notes were issued at 97.266% of the principal amount, are due in 2015 and bear interest at 11.75% of principal (payable on May 1st and November 1st of each year).  In connection with the Notes, we incurred issuance costs of $9.0 million.  The years ended December 31, 2011 and 2010 include 12 months and eight months, respectively, of interest expense and amortization of the original issuance discount and costs of the Notes, whereas the year ended December 31, 2009 includes no such expenses. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We issued additional Notes in June 2011 to redeem and retire our Series A Preferred Stock (which had been issued as part of the financing for the acquisition of AMICAS).  We issued these additional $52.0 million of Notes at 103.0% of the principal amount with terms identical to the Notes issued in April 2010.  We used these proceeds to retire all 41,750 outstanding shares of our Series A Preferred Stock at the face value of $41.8 million and paid cumulative dividends of $7.3 million (which were accruing at a 15% annual compounded rate).  The year ended December 31, 2011 includes seven months of interest expense and amortization of the premium and certain issuance costs, whereas the years ended December 31, 2010 and 2009 include no such expenses.  Also, in the year ended December 31, 2011 we incurred $3.2 million in costs related to the issuance of the additional Notes, including $1.7 million which was expensed in “other expense, net” of our statement of operations and $1.5 million which was capitalized and is being amortized into interest expense over the remaining term of the Notes. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In November 2009, we sold 9.1 million shares of common stock in a registered direct offering for aggregate net proceeds of $25.2 million which we used to repay a then-existing $15.0 million note payable (at 13% interest).  This note payable was originally issued at a discount and had issuance costs, both of which were being amortized over the life of the note payable.  We recorded a $3.3 million loss on early extinguishment of the $15.0 million note payable, including a prepayment penalty of $2.7 million and write-off of $0.4 million of remaining debt issuance costs and note discount. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

|                                      |   | Years Ended December 31, |    |   |   | Change |   |
|-------------------------------------------|--------|--------------------------|---------|--------|--------|--------|--------|
|                                      |   | 2011                     |    |   | %      |   | (1     | ) |   | 2010 |   |   | % |   | (1 | ) | $ |   |   |   | % |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales:                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Software and other                        |   | $                        | 80,948  |   |   |   | 34.8   | % |   |   | $ | 42,420 |   |   |   | 30.2 | % |   |   | $ | 38,528 |   |   |   | 90.8 | % |
| Professional services                     |   |                     | 41,905  |   |   |   | 18.0   | % |   |   |   | 23,175 |   |   |   | 16.5 | % |   |   |   | 18,730 |   |   |   | 80.8 | % |
| Maintenance and EDI                       |   |                     | 109,575 |   |   |   | 47.2   | % |   |   |   | 74,737 |   |   |   | 53.3 | % |   |   |   | 34,838 |   |   |   | 46.6 | % |
| Total net sales                           |   |                     | 232,428 |   |   |   | 100.0  | % |   |   |   | 140,332 |   |   |   | 100.0 | % |   |   |   | 92,096 |   |   |   | 65.6 | % |
| Cost of sales:                            |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Software and other                        |   |                     | 29,090  |   |   |   | 35.9   | % |   |   |   | 13,762 |   |   |   | 32.4 | % |   |   |   | 15,328 |   |   |   | 111.4 | % |
| Professional services                     |   |                     | 21,134  |   |   |   | 50.4   | % |   |   |   | 15,411 |   |   |   | 66.5 | % |   |   |   | 5,723 |   |   |   | 37.1 | % |
| Maintenance and EDI                       |   |                     | 29,090  |   |   |   | 26.5   | % |   |   |   | 24,418 |   |   |   | 32.7 | % |   |   |   | 4,672 |   |   |   | 19.1 | % |
| Depreciation, amortization and impairment |   |                     | 9,340   |   |   |   | 4.0    | % |   |   |   | 10,972 |   |   |   | 7.8 | % |   |   |   | (1,632 | ) |   |   | -14.9 | % |
| Total cost of sales                       |   |                     | 88,654  |   |   |   | 38.1   | % |   |   |   | 64,563 |   |   |   | 46.0 | % |   |   |   | 24,091 |   |   |   | 37.3 | % |
| Total gross margin                        |   |                     | 143,774 |   |   |   | 61.9   | % |   |   |   | 75,769 |   |   |   | 54.0 | % |   |   |   | 68,005 |   |   |   | 89.8 | % |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross margin by net sales category (2)    |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Software and other                        |   |                     | 51,858  |   |   |   | 64.1   | % |   |   |   | 28,658 |   |   |   | 67.6 | % |   |   |   | 23,200 |   |   |   | 81.0 | % |
| Professional services                     |   |                     | 20,771  |   |   |   | 49.6   | % |   |   |   | 7,764 |   |   |   | 33.5 | % |   |   |   | 13,007 |   |   |   | 167.5 | % |
| Maintenance and EDI                       |   |                     | 80,485  |   |   |   | 73.5   | % |   |   |   | 50,319 |   |   |   | 67.3 | % |   |   |   | 30,166 |   |   |   | 59.9 | % |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                       |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing                       |   |                     | 38,800  |   |   |   | 16.7   | % |   |   |   | 20,697 |   |   |   | 14.7 | % |   |   |   | 18,103 |   |   |   | 87.5 | % |
| Product research and development          |   |                     | 27,542  |   |   |   | 11.8   | % |   |   |   | 20,064 |   |   |   | 14.3 | % |   |   |   | 7,478 |   |   |   | 37.3 | % |
| General and administrative                |   |                     | 32,579  |   |   |   | 14.0   | % |   |   |   | 22,012 |   |   |   | 15.7 | % |   |   |   | 10,567 |   |   |   | 48.0 | % |
| Acquisition-related expenses              |   |                     | 1,614   |   |   |   | 0.7    | % |   |   |   | 9,674 |   |   |   | 6.9 | % |   |   |   | (8,060 | ) |   |   | -83.3 | % |
| Restructuring and other expenses          |   |                     | 1,216   |   |   |   | 0.5    | % |   |   |   | 5,006 |   |   |   | 3.6 | % |   |   |   | (3,790 | ) |   |   | -75.7 | % |
| Depreciation, amortization and impairment |   |                     | 12,868  |   |   |   | 5.5    | % |   |   |   | 6,840 |   |   |   | 4.9 | % |   |   |   | 6,028 |   |   |   | 88.1 | % |
| Total operating costs and expenses        |   |                     | 114,619 |   |   |   | 49.3   | % |   |   |   | 84,293 |   |   |   | 60.1 | % |   |   |   | 30,326 |   |   |   | 36.0 | % |
| Operating income (loss)                   |   |                     | 29,155  |   |   |   | 12.5   | % |   |   |   | (8,524 | ) |   |   | -6.1 | % |   |   |   | 37,679 |   |   |   | -442.0 | % |
| Other expense, net                        |   |                     | (31,021 | )      |   |   | -13.3  | % |   |   |   | (16,638 | ) |   |   | -11.9 | % |   |   |   | (14,383 | ) |   |   | 86.4 | % |
| Loss before income taxes                  |   |                     | (1,866  | )      |   |   | -0.8   | % |   |   |   | (25,162 | ) |   |   | -17.9 | % |   |   |   | 23,296 |   |   |   | -92.6 | % |
| Income tax expense (benefit)              |   |                     | 3,665   |   |   |   | 1.6    | % |   |   |   | (13,646 | ) |   |   | -9.7 | % |   |   |   | 17,311 |   |   |   | -126.9 | % |
| Net loss                                  |   | $                        | (5,531  | )      |   |   | -2.4   | % |   |   | $ | (11,516 | ) |   |   | -8.2 | % |   |   | $ | 5,985 |   |   |   | -52.0 | % |

|   | (1) | Percentages are of total net sales, except for cost of sales and gross margin, which are based upon related net sales. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Depreciation, amortization and impairment expenses are excluded from these gross margin calculations. |
|--------|-----|-------------------------------------------------------------------------------------------------------|

----

INDEX

----

INDEX

|                                      |   | Years Ended December 31, |    |   |   | Change |   |   |   |
|-------------------------------------------|--------|--------------------------|---------|--------|--------|--------|--------|--------|--------|
|                                      |   | 2010                     |    |   | %      |   | (1     | )      |   | 2009 |   |   | % |   | (1 | ) | $ |   |   |   | % |   |   |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales:                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Software and other                        |   | $                        | 42,420  |   |   |   | 30.2   | %      |   |   | $ | 33,037 |   |   |   | 49.4 | % |   |   | $ | 9,383 |   |   |   | 28.4 | % |   |   |
| Professional services                     |   |                     | 23,175  |   |   |   | 16.5   | %      |   |   |   | 11,830 |   |   |   | 17.7 | % |   |   |   | 11,345 |   |   |   | 95.9 | % |   |   |
| Maintenance and EDI                       |   |                     | 74,737  |   |   |   | 53.3   | %      |   |   |   | 21,974 |   |   |   | 32.9 | % |   |   |   | 52,763 |   |   |   | 240.1 | % |   |   |
| Total net sales                           |   |                     | 140,332 |   |   |   | 100.0  | %      |   |   |   | 66,841 |   |   |   | 100.0 | % |   |   |   | 73,491 |   |   |   | 109.9 | % |   |   |
| Cost of sales:                            |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Software and other                        |   |                     | 13,762  |   |   |   | 32.4   | %      |   |   |   | 3,730 |   |   |   | 11.3 | % |   |   |   | 10,032 |   |   |   | 269.0 | % |   |   |
| Professional services                     |   |                     | 15,411  |   |   |   | 66.5   | %      |   |   |   | 6,731 |   |   |   | 56.9 | % |   |   |   | 8,680 |   |   |   | 129.0 | % |   |   |
| Maintenance and EDI                       |   |                     | 24,418  |   |   |   | 32.7   | %      |   |   |   | 5,593 |   |   |   | 25.5 | % |   |   |   | 18,825 |   |   |   | 336.6 | % |   |   |
| Depreciation, amortization and impairment |   |                     | 10,972  |   |   |   | 7.8    | %      |   |   |   | 3,323 |   |   |   | 5.0 | % |   |   |   | 7,649 |   |   |   | 230.2 | % |   |   |
| Total cost of sales                       |   |                     | 64,563  |   |   |   | 46.0   | %      |   |   |   | 19,377 |   |   |   | 29.0 | % |   |   |   | 45,186 |   |   |   | 233.2 | % |   |   |
| Total gross margin                        |   |                     | 75,769  |   |   |   | 54.0   | %      |   |   |   | 47,464 |   |   |   | 71.0 | % |   |   |   | 28,305 |   |   |   | 59.6 | % |   |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross margin by net sales category (3)    |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Software and other                        |   |                     | 28,658  |   |   |   | 67.6   | %      |   |   |   | 29,307 |   |   |   | 88.7 | % |   |   |   | (649 | ) |   |   | -2.2 | % |   |   |
| Professional services                     |   |                     | 7,764   |   |   |   | 33.5   | %      |   |   |   | 5,099 |   |   |   | 43.1 | % |   |   |   | 2,665 |   |   |   | 52.3 | % |   |   |
| Maintenance and EDI                       |   |                     | 50,319  |   |   |   | 67.3   | %      |   |   |   | 16,381 |   |   |   | 74.5 | % |   |   |   | 33,938 |   |   |   | 207.2 | % |   |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                       |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing                       |   |                     | 20,697  |   |   |   | 14.7   | %      |   |   |   | 9,203 |   |   |   | 13.8 | % |   |   |   | 11,494 |   |   |   | 124.9 | % |   |   |
| Product research and development          |   |                     | 20,064  |   |   |   | 14.3   | %      |   |   |   | 10,689 |   |   |   | 16.0 | % |   |   |   | 9,375 |   |   |   | 87.7 | % |   |   |
| General and administrative                |   |                     | 22,012  |   |   |   | 15.7   | %      |   |   |   | 13,005 |   |   |   | 19.5 | % |   |   |   | 9,007 |   |   |   | 69.3 | % |   |   |
| Acquisition-related expenses              |   |                     | 9,674   |   |   |   | 6.9    | %      |   |   |   | 1,225 |   |   |   | 1.8 | % |   |   |   | 8,449 |   |   | NM |   | (2 | ) |
| Restructuring and other expenses          |   |                     | 5,006   |   |   |   | 3.6    | %      |   |   |   | 1,613 |   |   |   | 2.4 | % |   |   |   | 3,393 |   |   |   | 210.4 | % |   |   |
| Depreciation and amortization             |   |                     | 6,840   |   |   |   | 4.9    | %      |   |   |   | 2,766 |   |   |   | 4.1 | % |   |   |   | 4,074 |   |   |   | 147.3 | % |   |   |
| Total operating costs and expenses        |   |                     | 84,293  |   |   |   | 60.1   | %      |   |   |   | 38,501 |   |   |   | 57.6 | % |   |   |   | 45,792 |   |   |   | 118.9 | % |   |   |
| Operating income (loss)                   |   |                     | (8,524  | )      |   |   | -6.1   | %      |   |   |   | 8,963 |   |   |   | 13.4 | % |   |   |   | (17,487 | ) |   |   | -195.1 | % |   |   |
| Other expense, net                        |   |                     | (16,638 | )      |   |   | -11.9  | %      |   |   |   | (8,813 | ) |   |   | -13.2 | % |   |   |   | (7,825 | ) |   |   | 88.8 | % |   |   |
| Income (loss) before income taxes         |   |                     | (25,162 | )      |   |   | -17.9  | %      |   |   |   | 150 |   |   |   | 0.2 | % |   |   |   | (25,312 | ) |   | NM |   | (2 | ) |
| Income tax benefit                        |   |                     | (13,646 | )      |   |   | -9.7   | %      |   |   |   | (135 | ) |   |   | -0.2 | % |   |   |   | (13,511 | ) |   | NM |   | (2 | ) |
| Net income (loss)                         |   | $                        | (11,516 | )      |   |   | -8.2   | %      |   |   | $ | 285 |   |   |   | 0.4 | % |   |   | $ | (11,801 | ) |   | NM |   | (2 | ) |

|   | (1) | Percentages are of total net sales, except for cost of sales and gross margin, which are based upon related net sales. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------|

|   | (2) | NM denotes percentage is not meaningful. |
|--------|-----|------------------------------------------|

|   | (3) | Depreciation, amortization and impairment expenses are excluded from these gross margin calculations. |
|--------|-----|-------------------------------------------------------------------------------------------------------|

----

INDEX

----

INDEX

|                                                   |   | Year Ended December 31, |   |
|--------------------------------------------------------|--------|-------------------------|--------|
| (unaudited)                                            |   | 2011                    |   |   | 2010 |   |   | 2009 |   |
|                                                   |   | (in millions)           |   |
| Cash received from (paid for):                         |   |                    |   |   |   |   |   |   |   |
| Issuance of debt and equity                            |   | $                       | 53.6   |   |   | $ | 236.3 |   |   | $ | 25.2 |   |
| Principal payments on notes                            |   |                    | (4.6   | ) |   |   | - |   |   |   | (19.6 | ) |
| Interest paid, net                                     |   |                    | (25.7  | ) |   |   | (11.9 | ) |   |   | (1.9 | ) |
| Early retirement penalty on debt                       |   |                    | -      |   |   |   | - |   |   |   | (2.7 | ) |
| Debt and equity issuance costs                         |   |                    | (3.2   | ) |   |   | (9.9 | ) |   |   | - |   |
| Redemption of preferred stock                          |   |                    | (41.8  | ) |   |   | - |   |   |   | - |   |
| Payment of preferred stock dividends                   |   |                    | (7.3   | ) |   |   | - |   |   |   | - |   |
| Acquisitions, net of cash acquired                     |   |                    | (2.9   | ) |   |   | (216.2 | ) |   |   | (2.8 | ) |
| Restructuring initiatives                              |   |                    | (1.9   | ) |   |   | (3.5 | ) |   |   | (1.9 | ) |
| Acquisition related expenses                           |   |                    | (1.8   | ) |   |   | (9.6 | ) |   |   | (1.2 | ) |
| Property and equipment purchases                       |   |                    | (1.9   | ) |   |   | (1.5 | ) |   |   | (1.1 | ) |
| Sale of property                                       |   |                    | -      |   |   |   | 6.1 |   |   |   | - |   |
| Settlements with former officers                       |   |                    | (0.9   | ) |   |   | - |   |   |   | - |   |
| Other non-operating cash flows                         |   |                    | 0.4    |   |   |   | 0.6 |   |   |   | 0.9 |   |
| Business operations                                    |   |                    | 36.2   |   |   |   | 31.0 |   |   |   | 6.9 |   |
| Increase (decrease) in cash, including restricted cash |   | $                       | (1.8   | ) |   | $ | 21.4 |   |   | $ | 1.8 |   |

----

INDEX

|                                |   |   |    |   | Payment due by period |   |
|-------------------------------------|--------|--------|---------|--------|--------------------------------------|--------|
| Contractual Obligations        |   | Total  |    |   | Less than1 Year            |   |   | 1 – 3 Years |   |   | 3 – 5 Years |   |   | More than5 Years |   |
| Operating leases                    |   | $      | 20,457  |   |                                 | $      | 4,667 |   |   | $ | 4,263 |   |   | $ | 3,214 |   |   | $ | 8,313 |   |
| Capital leases (including interest) |   |   | 438     |   |                                 |   | 157 |   |   |   | 281 |   |   |   | - |   |   |   | - |   |
| Acquisition obligation              |   |   | 9,706   |   |                                 |   | 4,651 |   |   |   | 4,782 |   |   |   | 273 |   |   |   | - |   |
| Notes payable (including interest)  |   |   | 355,728 |   |                                 |   | 29,642 |   |   |   | 59,250 |   |   |   | 266,836 |   |   |   | - |   |
| Total                               |   | $      | 386,329 |   |                                 | $      | 39,117 |   |   | $ | 68,576 |   |   | $ | 270,323 |   |   | $ | 8,313 |   |

----

INDEX

|   | · | The determination of deliverables specified in a multiple-element arrangement and treatment as separate units of accounting; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | Whether separate arrangements with the same customer executed within a short time frame of each other are a single arrangement; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | The assessment of the probability of collection and the current credit worthiness of each customer since we generally do not request collateral from customers; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The determination of whether the fees are fixed and determinable; |
|--------|--------|-------------------------------------------------------------------|

|   | · | Whether or not installation, engineering or consulting services are significant to the software licensed; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

|   | · | The amount of total estimated labor hours, based on management’s best estimate, to complete a project we account for under the input method of percentage of completion accounting.  We review our contract estimates periodically to assess revisions in contract values and estimated labor hours, and reflect changes in estimates in the period that such estimates are revised under the cumulative catch-up method.   |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

|   | · | Expected volatility, which we base on the historical volatility of our stock and other factors; and |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | Estimated option life, which represents the period of time the options granted are expected to be outstanding and is based, in part, on historical data. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

----

INDEX

| Item 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|----------|------------------------------------------------------------|

----

INDEX

| Item 8.   | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
|---------------------|---------------------------------------------|

|              |   | /s/ BDO USA, LLP |   |
|-------------------|--------|-----------------------|--------|
| Chicago, Illinois |   |                  |   |
| February 27, 2012 |   |                  |   |

----

INDEX

|                                                                                                                                                                                                                                                                                 |   | December 31, |     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|
|                                                                                                                                                                                                                                                                                 |   | 2011         |     |   | 2010 |   |
| ASSETS                                                                                                                                                                                                                                                                               |   |         |     |   |   |   |
| Current assets:                                                                                                                                                                                                                                                                      |   |         |     |   |   |   |
| Cash and cash equivalents, including restricted cash of $707 and $1,647 at December 31, 2011 and 2010, respectively                                                                                                                                                                  |   | $            | 39,272   |   |   | $ | 41,029 |   |
| Accounts receivable, net of allowance for doubtful accounts and sales returns of $4,080 and $1,322 at December 31, 2011 and 2010, respectively                                                                                                                                       |   |         | 71,014   |   |   |   | 53,254 |   |
| Inventory                                                                                                                                                                                                                                                                            |   |         | 4,718    |   |   |   | 3,486 |   |
| Prepaid expenses                                                                                                                                                                                                                                                                     |   |         | 5,678    |   |   |   | 4,191 |   |
| Deferred income taxes                                                                                                                                                                                                                                                                |   |         | 3,393    |   |   |   | 2,545 |   |
| Other current assets                                                                                                                                                                                                                                                                 |   |         | 20,199   |   |   |   | 11,258 |   |
| Total current assets                                                                                                                                                                                                                                                                 |   |         | 144,274  |   |   |   | 115,763 |   |
| Property and equipment:                                                                                                                                                                                                                                                              |   |         |     |   |   |   |   |   |
| Computer equipment                                                                                                                                                                                                                                                                   |   |         | 10,183   |   |   |   | 9,859 |   |
| Office equipment                                                                                                                                                                                                                                                                     |   |         | 2,262    |   |   |   | 2,007 |   |
| Leasehold improvements                                                                                                                                                                                                                                                               |   |         | 1,220    |   |   |   | 1,055 |   |
|                                                                                                                                                                                                                                                                                 |   |         | 13,665   |   |   |   | 12,921 |   |
| Less accumulated depreciation                                                                                                                                                                                                                                                        |   |         | 9,274    |   |   |   | 7,149 |   |
| Net property and equipment                                                                                                                                                                                                                                                           |   |         | 4,391    |   |   |   | 5,772 |   |
| Purchased and developed software, net of accumulated amortization of $9,283 and $9,811 at December 31, 2011 and 2010, respectively                                                                                                                                                   |   |         | 23,924   |   |   |   | 26,619 |   |
| Other intangible assets, net of accumulated amortization of $14,907 and $8,419 at December 31, 2011 and 2010, respectively                                                                                                                                                           |   |         | 45,152   |   |   |   | 48,957 |   |
| Goodwill                                                                                                                                                                                                                                                                             |   |         | 209,829  |   |   |   | 169,533 |   |
| Deferred income taxes                                                                                                                                                                                                                                                                |   |         | 9,209    |   |   |   | 17,006 |   |
| Other assets                                                                                                                                                                                                                                                                         |   |         | 13,608   |   |   |   | 12,995 |   |
| Total assets                                                                                                                                                                                                                                                                         |   | $            | 450,387  |   |   | $ | 396,645 |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                                                                                 |   |         |     |   |   |   |   |   |
| Current liabilities:                                                                                                                                                                                                                                                                 |   |         |     |   |   |   |   |   |
| Accounts payable                                                                                                                                                                                                                                                                     |   | $            | 22,114   |   |   | $ | 18,370 |   |
| Interest payable                                                                                                                                                                                                                                                                     |   |         | 4,935    |   |   |   | 3,917 |   |
| Accrued wages                                                                                                                                                                                                                                                                        |   |         | 6,972    |   |   |   | 4,304 |   |
| Restructuring accrual                                                                                                                                                                                                                                                                |   |         | 1,407    |   |   |   | 1,707 |   |
| Other current liabilities                                                                                                                                                                                                                                                            |   |         | 11,580   |   |   |   | 6,875 |   |
| Deferred revenue                                                                                                                                                                                                                                                                     |   |         | 51,246   |   |   |   | 52,233 |   |
| Total current liabilities                                                                                                                                                                                                                                                            |   |         | 98,254   |   |   |   | 87,406 |   |
| Notes payable                                                                                                                                                                                                                                                                        |   |         | 249,438  |   |   |   | 195,077 |   |
| Deferred income taxes                                                                                                                                                                                                                                                                |   |         | 1,891    |   |   |   | - |   |
| Deferred revenue                                                                                                                                                                                                                                                                     |   |         | 1,679    |   |   |   | 1,709 |   |
| Income taxes payable                                                                                                                                                                                                                                                                 |   |         | 727      |   |   |   | 5,683 |   |
| Other                                                                                                                                                                                                                                                                                |   |         | 5,927    |   |   |   | 1,964 |   |
| Total liabilities                                                                                                                                                                                                                                                                    |   |         | 357,916  |   |   |   | 291,839 |   |
| Shareholders' equity:                                                                                                                                                                                                                                                                |   |         |     |   |   |   |   |   |
| Series A Non-voting Preferred Stock, $0.01 par value: 50,000 shares authorized; zero and 41,750 shares issued and outstanding at December 31, 2011 and 2010, respectively. Aggregate liquidation preference: zero and $54,275 at December 31, 2011 and 2010, respectively. |   |         | -        |   |   |   | 41,750 |   |
| Series B Preferred Stock, $0.01 par value: 1,000,000 shares authorized; zero shares issued and outstanding at December 31, 2011 and 2010.                                                                                                                                            |   |         | -        |   |   |   | - |   |
| Common stock, $0.01 par value: 150,000,000 shares authorized: 90,939,053 shares and 83,258,123 shares issued and outstanding at December 31, 2011 and 2010, respectively.                                                                                                       |   |         | 909      |   |   |   | 833 |   |
| Common stock subscribed, 195,116 shares and 991,053 shares at December 31, 2011 and 2010, respectively                                                                                                                                                                               |   |         | 1,311    |   |   |   | 3,323 |   |
| Additional paid-in capital                                                                                                                                                                                                                                                           |   |         | 563,563  |   |   |   | 527,228 |   |
| Accumulated deficit                                                                                                                                                                                                                                                                  |   |         | (475,393 | ) |   |   | (469,872 | ) |
| Accumulated other comprehensive income                                                                                                                                                                                                                                               |   |         | 1,613    |   |   |   | 1,544 |   |
| Total Merge Healthcare Incorporated shareholders' equity                                                                                                                                                                                                                             |   |         | 92,003   |   |   |   | 104,806 |   |
| Non controlling interest                                                                                                                                                                                                                                                             |   |         | 468      |   |   |   | - |   |
| Total shareholders' equity                                                                                                                                                                                                                                                           |   |         | 92,471   |   |   |   | 104,806 |   |
| Total liabilities and shareholders' equity                                                                                                                                                                                                                                           |   | $            | 450,387  |   |   | $ | 396,645 |   |

----

INDEX

|                                                                               |   | Years Ended December 31, |       |
|------------------------------------------------------------------------------------|--------|--------------------------|------------|
|                                                                               |   | 2011                     |       |   | 2010 |   |   | 2009 |   |
| Net sales:                                                                         |   |                     |       |   |   |   |   |   |   |
| Software and other                                                                 |   | $                        | 80,948     |   |   | $ | 42,420 |   |   | $ | 33,037 |   |
| Professional services                                                              |   |                     | 41,905     |   |   |   | 23,175 |   |   |   | 11,830 |   |
| Maintenance and EDI                                                                |   |                     | 109,575    |   |   |   | 74,737 |   |   |   | 21,974 |   |
| Total net sales                                                                    |   |                     | 232,428    |   |   |   | 140,332 |   |   |   | 66,841 |   |
| Cost of sales:                                                                     |   |                     |       |   |   |   |   |   |   |   |   |   |
| Software and other                                                                 |   |                     | 29,090     |   |   |   | 13,762 |   |   |   | 3,730 |   |
| Professional services                                                              |   |                     | 21,134     |   |   |   | 15,411 |   |   |   | 6,731 |   |
| Maintenance and EDI                                                                |   |                     | 29,090     |   |   |   | 24,418 |   |   |   | 5,593 |   |
| Depreciation, amortization and impairment                                          |   |                     | 9,340      |   |   |   | 10,972 |   |   |   | 3,323 |   |
| Total cost of sales                                                                |   |                     | 88,654     |   |   |   | 64,563 |   |   |   | 19,377 |   |
| Gross margin                                                                       |   |                     | 143,774    |   |   |   | 75,769 |   |   |   | 47,464 |   |
| Operating costs and expenses:                                                      |   |                     |       |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                                                |   |                     | 38,800     |   |   |   | 20,697 |   |   |   | 9,203 |   |
| Product research and development                                                   |   |                     | 27,542     |   |   |   | 20,064 |   |   |   | 10,689 |   |
| General and administrative                                                         |   |                     | 32,579     |   |   |   | 22,012 |   |   |   | 13,005 |   |
| Acquisition-related expenses                                                       |   |                     | 1,614      |   |   |   | 9,674 |   |   |   | 1,225 |   |
| Restructuring and other expenses                                                   |   |                     | 1,216      |   |   |   | 5,006 |   |   |   | 1,613 |   |
| Depreciation, amortization and impairment                                          |   |                     | 12,868     |   |   |   | 6,840 |   |   |   | 2,766 |   |
| Total operating costs and expenses                                                 |   |                     | 114,619    |   |   |   | 84,293 |   |   |   | 38,501 |   |
| Operating income (loss)                                                            |   |                     | 29,155     |   |   |   | (8,524 | ) |   |   | 8,963 |   |
| Other income (expense):                                                            |   |                     |       |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                   |   |                     | (29,421    | ) |   |   | (17,218 | ) |   |   | (2,716 | ) |
| Interest income                                                                    |   |                     | 506        |   |   |   | 58 |   |   |   | 50 |   |
| Other, net                                                                         |   |                     | (2,106     | ) |   |   | 522 |   |   |   | (6,147 | ) |
| Total other income (expense)                                                       |   |                     | (31,021    | ) |   |   | (16,638 | ) |   |   | (8,813 | ) |
| Income (loss) before income taxes                                                  |   |                     | (1,866     | ) |   |   | (25,162 | ) |   |   | 150 |   |
| Income tax expense (benefit)                                                       |   |                     | 3,665      |   |   |   | (13,646 | ) |   |   | (135 | ) |
| Net income (loss)                                                                  |   |                     | (5,531     | ) |   |   | (11,516 | ) |   |   | 285 |   |
| Less:  noncontrolling interest's share                                   |   |                     | (10        | ) |   |   | - |   |   |   | - |   |
| Net income (loss) attributable to Merge                                            |   |                     | (5,521     | ) |   |   | (11,516 | ) |   |   | 285 |   |
| Less:  preferred stock dividends                                         |   |                     | 3,153      |   |   |   | 19,076 |   |   |   | - |   |
| Net income (loss) attributable to common shareholders of Merge                     |   | $                        | (8,674     | ) |   | $ | (30,592 | ) |   | $ | 285 |   |
| Net income (loss) per share attributable to common shareholders of Merge - basic   |   | $                        | (0.10      | ) |   | $ | (0.38 | ) |   | $ | 0.00 |   |
| Weighted average number of common shares outstanding - basic                       |   |                     | 86,647,097 |   |   |   | 80,231,427 |   |   |   | 60,910,268 |   |
|                                                                               |   |                     |       |   |   |   |   |   |   |   |   |   |
| Net income (loss) per share attributable to common shareholders of Merge - diluted |   | $                        | (0.10      | ) |   | $ | (0.38 | ) |   | $ | 0.00 |   |
| Weighted average number of common shares outstanding - diluted                     |   |                     | 86,647,097 |   |   |   | 80,231,427 |   |   |   | 62,737,821 |   |

----

INDEX

|                                                                 |   | Preferred Stock |    |   | Common Stock |   |    |       |   |   | Accumulated |   |   |   |   |   |   |   |       |       |   |
|----------------------------------------------------------------------|--------|-----------------|---------|--------|-------------------|--------|---------|------------|--------|--------|-------------|--------|--------|--------|--------|--------|--------|--------|------------|------------|--------|
|                                                                 |   |            |    |   |              |   |    |       |   |   |        |   |   |   |   |   |   |   |       | Additional |   |   |   |   |   | Other |   |   | Total Merge |   |   | Non- |   |   | Total |   |
|                                                                 |   | Shares          |    |   | Issued            |   |    | Shares     |   |   | Subscribed  |   |   | Shares |   |   | Issued |   |       | Paid-in    |   |   | Accumulated |   |   | Comprehensive |   |   | Shareholders’ |   |   | controlling |   |   | Shareholders’ |   |
|                                                                 |   | Issued          |    |   | Amount            |   |    | Subscribed |   |   | Amount      |   |   | Issued |   |   | Amount |   |       | Capital    |   |   | Deficit |   |   | Income |   |   | Equity |   |   | Interest |   |   | Equity |   |
|                                                                 |   |            |    |   |              |   |    |       |   |   |        |   |   |   |   |   |   |   |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2008                                    |   |            | 1       |   |              | $      | -       |       |   |   | 30,271      |   |   | $      | 37     |   |   |   | 55,506,702 |       |   | $ | 555 |   |   | $ | 465,083 |   |   | $ | (458,641 | ) |   | $ | 1,807 |   |   | $ | 8,841 |   |   | $ | - |   |   | $ | 8,841 |   |
| Exchange of exchangeable share rights into Common Stock              |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | 719,412    |       |   |   | 7 |   |   |   | (7 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Retirement of preferred share                                        |   |            | (1      | )      |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Stock issued for acquisitions                                        |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | 9,364,849  |       |   |   | 93 |   |   |   | 32,155 |   |   |   | - |   |   |   | - |   |   |   | 32,248 |   |   |   | - |   |   |   | 32,248 |   |
| Stock issued under registered direct offering, net of issuance costs |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | 9,084,032  |       |   |   | 91 |   |   |   | 25,084 |   |   |   | - |   |   |   | - |   |   |   | 25,175 |   |   |   | - |   |   |   | 25,175 |   |
| Stock issued under ESPP                                              |   |            | -       |   |              |   | -       |       |   |   | (20,293     | )      |   |   | (5     | )      |   |   | 63,425     |       |   |   | 1 |   |   |   | 114 |   |   |   | - |   |   |   | - |   |   |   | 110 |   |   |   | - |   |   |   | 110 |   |
| Vesting of restricted stock                                          |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | 53,333     |       |   |   | 1 |   |   |   | (1 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Share-based compensation expense                                     |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | 1,686 |   |   |   | - |   |   |   | - |   |   |   | 1,686 |   |   |   | - |   |   |   | 1,686 |   |
| Net income                                                           |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | - |   |   |   | 285 |   |   |   | - |   |   |   | 285 |   |   |   | - |   |   |   | 285 |   |
| Other comprehensive loss                                             |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (208 | ) |   |   | (208 | ) |   |   | - |   |   |   | (208 | ) |
| Balance at December 31, 2009                                    |   |            | -       |   |              | $      | -       |       |   |   | 9,978       |   |   | $      | 32     |   |   |   | 74,791,753 |       |   | $ | 748 |   |   | $ | 524,114 |   |   | $ | (458,356 | ) |   | $ | 1,599 |   |   | $ | 68,137 |   |   | $ | - |   |   | $ | 68,137 |   |
| Issuance of stock                                                    |   |            | 41,750  |   |              |   | 26,850  |       |   |   | -           |   |   |   | -      |   |   |   | 7,515,000  |       |   |   | 75 |   |   |   | 14,825 |   |   |   | - |   |   |   | - |   |   |   | 41,750 |   |   |   | - |   |   |   | 41,750 |   |
| Deemed dividend                                                      |   |            | -       |   |              |   | 14,900  |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | (14,900 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Stock issuance costs                                                 |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | (882 | ) |   |   | - |   |   |   | - |   |   |   | (882 | ) |   |   | - |   |   |   | (882 | ) |
| Stock issued for acquisitions                                        |   |            | -       |   |              |   | -       |       |   |   | 974,701     |   |   |   | 3,265  |   |   |   | 500,000    |       |   |   | 5 |   |   |   | 1,345 |   |   |   | - |   |   |   | - |   |   |   | 4,615 |   |   |   | - |   |   |   | 4,615 |   |
| Stock issued under ESPP                                              |   |            | -       |   |              |   | -       |       |   |   | 6,374       |   |   |   | 26     |   |   |   | 51,388     |       |   |   | 1 |   |   |   | 133 |   |   |   | - |   |   |   | - |   |   |   | 160 |   |   |   | - |   |   |   | 160 |   |
| Vesting of restricted stock                                          |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | 408,531    |       |   |   | 4 |   |   |   | (4 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Share-based compensation expense                                     |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | 2,623 |   |   |   | - |   |   |   | - |   |   |   | 2,623 |   |   |   | - |   |   |   | 2,623 |   |
| Treasury stock repurchase and retirement                             |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | (8,549     | )          |   |   | - |   |   |   | (26 | ) |   |   | - |   |   |   | - |   |   |   | (26 | ) |   |   | - |   |   |   | (26 | ) |
| Net loss                                                             |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | - |   |   |   | (11,516 | ) |   |   | - |   |   |   | (11,516 | ) |   |   | - |   |   |   | (11,516 | ) |
| Other comprehensive loss                                             |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (55 | ) |   |   | (55 | ) |   |   | - |   |   |   | (55 | ) |
| Balance at December 31, 2010                                    |   |            | 41,750  |   |              | $      | 41,750  |       |   |   | 991,053     |   |   | $      | 3,323  |   |   |   | 83,258,123 |       |   | $ | 833 |   |   | $ | 527,228 |   |   | $ | (469,872 | ) |   | $ | 1,544 |   |   | $ | 104,806 |   |   | $ | - |   |   | $ | 104,806 |   |
| Redemption and cancellation of Series A Preferred Stock              |   |            | (41,750 | )      |              |   | (41,750 | )          |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   | (41,750 | ) |   |   | - |   |   |   | (41,750 | ) |
| Stock issued for charitable contribution                             |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | 485,232    |       |   |   | 5 |   |   |   | 1,846 |   |   |   | - |   |   |   | - |   |   |   | 1,851 |   |   |   | - |   |   |   | 1,851 |   |
| Stock issued for acquisitions                                        |   |            | -       |   |              |   | -       |       |   |   | (798,835    | )      |   |   | (2,043 | )      |   |   | 6,843,733  |       |   |   | 68 |   |   |   | 36,777 |   |   |   | - |   |   |   | - |   |   |   | 34,802 |   |   |   | - |   |   |   | 34,802 |   |
| Stock issued under ESPP                                              |   |            | -       |   |              |   | -       |       |   |   | 2,898       |   |   |   | 31     |   |   |   | 56,465     |       |   |   | - |   |   |   | 263 |   |   |   | - |   |   |   | - |   |   |   | 294 |   |   |   | - |   |   |   | 294 |   |
| Exercise of stock options                                            |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | 295,500    |       |   |   | 3 |   |   |   | 869 |   |   |   | - |   |   |   | - |   |   |   | 872 |   |   |   | - |   |   |   | 872 |   |
| Share-based compensation expense                                     |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | 3,908 |   |   |   | - |   |   |   | - |   |   |   | 3,908 |   |   |   | - |   |   |   | 3,908 |   |
| Preferred stock dividends paid                                       |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | (7,328 | ) |   |   | - |   |   |   | - |   |   |   | (7,328 | ) |   |   | - |   |   |   | (7,328 | ) |
| Net loss                                                             |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | - |   |   |   | (5,521 | ) |   |   | - |   |   |   | (5,521 | ) |   |   | (10 | ) |   |   | (5,531 | ) |
| Other comprehensive loss                                             |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 69 |   |   |   | 69 |   |   |   | - |   |   |   | 69 |   |
| Noncontrolling interest acquired                                     |   |            | -       |   |              |   | -       |       |   |   | -           |   |   |   | -      |   |   |   | -          |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 478 |   |   |   | 478 |   |
| Balance at December 31, 2011                                    |   |            | -       |   |              | $      | -       |       |   |   | 195,116     |   |   | $      | 1,311  |   |   |   | 90,939,053 |       |   | $ | 909 |   |   | $ | 563,563 |   |   | $ | (475,393 | ) |   | $ | 1,613 |   |   | $ | 92,003 |   |   | $ | 468 |   |   | $ | 92,471 |   |

----

INDEX

|                                                                                                    |   | Year Ended December 31, |    |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|
|                                                                                                    |   | 2011                    |    |   | 2010 |   |   | 2009 |   |
| Cash flows from operating activities:                                                                   |   |                    |    |   |   |   |   |   |   |
| Net income (loss)                                                                                       |   | $                       | (5,531  | ) |   | $ | (11,516 | ) |   | $ | 285 |   |
| Adjustments to reconcile net income (loss) to net cash used in operating activities:                    |   |                    |    |   |   |   |   |   |   |   |   |   |
| Depreciation, amortization and impairment                                                               |   |                    | 22,208  |   |   |   | 17,812 |   |   |   | 6,089 |   |
| Share-based compensation                                                                                |   |                    | 3,908   |   |   |   | 2,623 |   |   |   | 1,686 |   |
| Amortization of note payable issuance costs & discount                                              |   |                    | 2,393   |   |   |   | 1,445 |   |   |   | 1,533 |   |
| Realized (gain) loss on investment                                                                      |   |                    | (405    | ) |   |   | (506 | ) |   |   | 3,624 |   |
| Change in contingent consideration for acquisitions                                                     |   |                    | 345     |   |   |   | 113 |   |   |   | - |   |
| Provision for doubtful accounts receivable, sales returns, and non-trade receivables, net of recoveries |   |                    | 2,766   |   |   |   | 880 |   |   |   | 416 |   |
| Deferred income taxes                                                                                   |   |                    | 8,108   |   |   |   | (14,056 | ) |   |   | - |   |
| Stock issued for charitable contribution                                                                |   |                    | 1,851   |   |   |   | - |   |   |   | - |   |
| Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:           |   |                    |    |   |   |   |   |   |   |   |   |   |
| Accounts receivable                                                                                     |   |                    | (19,031 | ) |   |   | (13,962 | ) |   |   | (1,768 | ) |
| Inventory                                                                                               |   |                    | 888     |   |   |   | (2,184 | ) |   |   | 494 |   |
| Prepaid expenses                                                                                        |   |                    | (768    | ) |   |   | 3,269 |   |   |   | 441 |   |
| Accounts payable                                                                                        |   |                    | 1,329   |   |   |   | 4,934 |   |   |   | (3,986 | ) |
| Accrued wages                                                                                           |   |                    | 1,489   |   |   |   | (2,223 | ) |   |   | (780 | ) |
| Restructuring accrual                                                                                   |   |                    | (782    | ) |   |   | 1,310 |   |   |   | (294 | ) |
| Other accrued liabilities                                                                               |   |                    | (4,866  | ) |   |   | 2,399 |   |   |   | (646 | ) |
| Deferred revenue                                                                                        |   |                    | (4,524  | ) |   |   | 15,810 |   |   |   | (7,830 | ) |
| Other                                                                                                   |   |                    | (7,689  | ) |   |   | (143 | ) |   |   | (234 | ) |
| Net cash provided by (used in) operating activities                                                     |   |                    | 1,689   |   |   |   | 6,005 |   |   |   | (970 | ) |
|                                                                                                    |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cash paid for acquisitions, net of cash acquired                                                        |   |                    | (1,277  | ) |   |   | (216,212 | ) |   |   | (2,752 | ) |
| Purchases of property, equipment, and leasehold improvements                                            |   |                    | (1,976  | ) |   |   | (1,492 | ) |   |   | (1,121 | ) |
| Cash received on sale of fixed assets                                                                   |   |                    | -       |   |   |   | 6,124 |   |   |   | - |   |
| Change in restricted cash                                                                               |   |                    | 940     |   |   |   | (1,088 | ) |   |   | 188 |   |
| Proceeds from sale of equity investment                                                                 |   |                    | 405     |   |   |   | 606 |   |   |   | 886 |   |
| Net cash used in investing activities                                                                   |   |                    | (1,908  | ) |   |   | (212,062 | ) |   |   | (2,799 | ) |
|                                                                                                    |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Proceeds from issuance of term notes                                                                    |   |                    | 53,560  |   |   |   | 194,532 |   |   |   | - |   |
| Proceeds from issuance of stock                                                                         |   |                    | -       |   |   |   | 41,750 |   |   |   | 25,175 |   |
| Note and stock issuance costs paid                                                                      |   |                    | (1,528  | ) |   |   | (9,897 | ) |   |   | - |   |
| Proceeds from exercise of stock options and employee stock purchase plan                                |   |                    | 1,166   |   |   |   | 160 |   |   |   | 110 |   |
| Principal payments on notes                                                                             |   |                    | (4,591  | ) |   |   | - |   |   |   | (19,570 | ) |
| Redemption and retirement of preferred stock                                                            |   |                    | (41,750 | ) |   |   | - |   |   |   | - |   |
| Principal payments on capital leases                                                                    |   |                    | (4      | ) |   |   | (142 | ) |   |   | (111 | ) |
| Stock repurchases                                                                                       |   |                    | -       |   |   |   | (26 | ) |   |   | - |   |
| Preferred stock dividends                                                                               |   |                    | (7,328  | ) |   |   | - |   |   |   | - |   |
| Net cash provided by (used in) financing activities                                                     |   |                    | (475    | ) |   |   | 226,377 |   |   |   | 5,604 |   |
| Effect of exchange rates on cash and cash equivalents                                                   |   |                    | (123    | ) |   |   | - |   |   |   | - |   |
|                                                                                                    |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                    |   |                    | (817    | ) |   |   | 20,320 |   |   |   | 1,835 |   |
| Cash and cash equivalents (net of restricted cash), beginning of period (1)                             |   |                    | 39,382  |   |   |   | 19,062 |   |   |   | 17,227 |   |
| Cash and cash equivalents (net of restricted cash), end of period (2)                                   |   | $                       | 38,565  |   |   | $ | 39,382 |   |   | $ | 19,062 |   |
|                                                                                                    |   |                    |    |   |   |   |   |   |   |   |   |   |
| Supplemental Disclosures of Cash Flow Information:                                                      |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cash paid for interest                                                                                  |   | $                       | 25,723  |   |   | $ | 11,956 |   |   | $ | 1,858 |   |
| Cash paid for income taxes, net of refunds                                                              |   | $                       | 934     |   |   | $ | (123 | ) |   | $ | 87 |   |
|                                                                                                    |   |                    |    |   |   |   |   |   |   |   |   |   |
| Non-Cash Investing and Financing Activities                                                             |   |                    |    |   |   |   |   |   |   |   |   |   |
| Value of Common Stock issued for acquisitions                                                           |   | $                       | 34,802  |   |   | $ | 4,615 |   |   | $ | 32,248 |   |
| Assets acquired under capital lease obligations                                                         |   | $                       | 190     |   |   | $ | - |   |   | $ | - |   |

|   | (1) Net of restricted cash of $1,647, $559, and $621 at December 31, 2010, 2009and 2008, respectively. |
|--------|--------------------------------------------------------------------------------------------------------|

|   | (2) Net of restricted cash of $707, $1,647, and $559 at December 31, 2011, 2010and 2009, respectively. |
|--------|--------------------------------------------------------------------------------------------------------|

----

INDEX

|                                                                 |   | Years Ended December 31, |   |
|----------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                 |   | 2011                     |   |   | 2010 |   |   | 2009 |   |
|                                                                 |   |                     |   |   |   |   |   |   |   |
| Net income (loss)                                                    |   | $                        | (5,531 | ) |   | $ | (11,516 | ) |   | $ | 285 |   |
| Translation adjustment                                               |   |                     | 25     |   |   |   | - |   |   |   | - |   |
| Unrealized gain (loss) on marketable securities, net of income taxes |   |                     | 44     |   |   |   | (55 | ) |   |   | (208 | ) |
| Comprehensive income (loss)                                          |   | $                        | (5,462 | ) |   | $ | (11,571 | ) |   | $ | 77 |   |
| Less:  noncontrolling interest's share                     |   |                     | (10    | ) |   |   | - |   |   |   | - |   |
| Comprehensive loss attributable to Merge Healthcare Incorporated     |   | $                        | (5,452 | ) |   | $ | (11,571 | ) |   | $ | 77 |   |

----

INDEX

| (1) | Basis of Presentation and Significant Accounting Policies |
|-----|-----------------------------------------------------------|

----

INDEX

|                                     |   | December 31, |   |
|------------------------------------------|--------|-------------------|--------|
|                                     |   | 2011              |   |   | 2010 |   |
| Revenue recognized in excess of billings |   | $                 | 18,064 |   |   | $ | 8,382 |   |
| Acquired unbilled A/R                    |   |              | 1,769  |   |   |   | 1,877 |   |
| Taxes receivable                         |   |              | -      |   |   |   | 848 |   |
| Other non-trade receivables              |   |              | 366    |   |   |   | 151 |   |
|                                     |   | $                 | 20,199 |   |   | $ | 11,258 |   |

----

INDEX

|                   |   | December 31, |   |
|------------------------|--------|-------------------|--------|
|                   |   | 2011              |   |   | 2010 |   |
| Leases Payable         |   | $                 | 473    |   |   | $ | 679 |   |
| Deferred Tax Liability |   |              | -      |   |   |   | 732 |   |
| Accrued Taxes          |   |              | 782    |   |   |   | 1,296 |   |
| Customer deposits      |   |              | 2,469  |   |   |   | 655 |   |
| Acquisition obligation |   |              | 4,651  |   |   |   | - |   |
| Other liabilities      |   |              | 3,205  |   |   |   | 3,513 |   |
|                   |   | $                 | 11,580 |   |   | $ | 6,875 |   |

----

INDEX

----

INDEX

|   | · | Software licenses and hardware are recognized upon delivery, while installation, engineering services, training, and consulting services are recognized as performed and maintenance and support is recognized ratably over the period in which the services are performed.  This is the primary method used for sales of software products which are typically fully functional upon delivery and do not require significant modification or alteration.  Any subsequent software royalties associated with such contracts are generally recognized as reported by the customer.  Revenue is also recognized in this manner for the majority of sales of additional modules to existing customers.   |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Software licenses sold through annual contracts that include software maintenance and support are deferred and recognized ratably over the one-year period.    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Revenues derived from SaaS offerings are generally recognized ratably as we provide software application-hosting and are recognized using the proportional performance method for services provided to customers under fixed-price contracts.  Such contracts are entered into by certain customers with clinical trial products comprising the vast majority.  These contracts consist of master agreements containing general terms and conditions and separately negotiated addendums (called task orders) which include services, software subscription and usage fees, and hosting fees.  Customers generally have the ability to terminate contracts upon 30 days notice.  However, these contracts typically require payment of fees earned from all services provided through the termination date.  In the event that a customer cancels a task order, all deferred revenue is recognized and certain termination related fees may be charged. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If services are considered essential to the functionality of the software, revenue is recognized based on service hours expended through project completion and maintenance and support is recognized thereafter ratably over the applicable period.   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | EDI revenues are typically recognized monthly based on transactional volumes. |
|--------|--------|-------------------------------------------------------------------------------|

----

INDEX

----

INDEX

| (2) | Acquisitions |
|-----|--------------|

----

INDEX

|                             |   | Estimated Fair Value |    |
|----------------------------------|--------|----------------------|---------|
| Cash                             |   | $                    | 15,125  |   |
| Other tangible assets            |   |                 | 46,081  |   |
| Liabilities assumed              |   |                 | (32,080 | ) |
| Purchased and developed software |   |                 | 19,200  |   |
| Customer relationships           |   |                 | 30,400  |   |
| Backlog                          |   |                 | 8,100   |   |
| Trade names                      |   |                 | 3,600   |   |
| Non-competes                     |   |                 | 3,100   |   |
| Goodwill                         |   |                 | 130,384 |   |
| Total consideration              |   | $                    | 223,910 |   |

|                             |   | Years      |   | Amortization Method |
|----------------------------------|--------|------------|--------|---------------------|
| Purchased and developed software |   |       | 8.0    |                | Straight-line |
| Customer relationships           |   |       | 9.7    |                | Other |
| Backlog                          |   |       | 4.7    |                | Other |
| Trade names                      |   |       | 12.0   |                | Straight-line |
| Non-competes                     |   |       | 7.0    |                | Straight-line |
| Goodwill                         |   | Indefinite |   | N/A                 |

----

INDEX

|                                      |   | Year Ended December 31, |    |
|-------------------------------------------|--------|-------------------------|---------|
|                                      |   | 2010                    |    |   | 2009 |   |
| Revenue                                   |   | $                       | 177,019 |   |   | $ | 172,497 |   |
| Net loss available to common shareholders |   |                    | (48,893 | ) |   |   | (63,514 | ) |
| Loss per share:                           |   |                    |    |   |   |   |   |   |
| Basic                                     |   | $                       | (0.59   | ) |   | $ | (0.86 | ) |
| Diluted                                   |   | $                       | (0.59   | ) |   | $ | (0.86 | ) |

| (3) | Accounts Receivable |
|-----|---------------------|

|                         |   | Balance at Beginning of Period |   |   | Net Additions Charged to Revenue and Expenses |   |   | Deductions |   |   | Balance at End of Period |   |
|------------------------------|--------|--------------------------------|--------|--------|-----------------------------------------------|--------|--------|------------|--------|--------|--------------------------|--------|
| For year ended December 31,: |   |                           |   |   |                                          |   |   |       |   |   |                     |   |
| 2011                         |   | $                              | 1,322  |   |                                          | $      | 2,766  |       |   | $      | (8                       | )      |   | $ | 4,080 |   |
| 2010                         |   |                           | 1,287  |   |                                          |   | 593    |       |   |   | (558                     | )      |   |   | 1,322 |   |
| 2009                         |   |                           | 1,378  |   |                                          |   | 416    |       |   |   | (507                     | )      |   |   | 1,287 |   |

| (4) | Goodwill and Other Intangible Assets |
|-----|--------------------------------------|

|                                      |   | Total  |    |
|-------------------------------------------|--------|--------|---------|
| Balance at January 1, 2010                |   | $      | 28,749  |   |
| Increase due to AMICAS acquisition        |   |   | 130,384 |   |
| Increase due to other acquisitions        |   |   | 10,400  |   |
| Balance at December 31, 2010              |   |   | 169,533 |   |
| Increase due to other acquisitions        |   |   | 40,333  |   |
| Changes due to effect of foreign currency |   |   | (37     | ) |
| Balance at December 31, 2011              |   | $      | 209,829 |   |

----

INDEX

|                   |   | Weighted-Average                      |   |   | December 31, 2011     |   |   | December 31, 2010        |   |
|------------------------|--------|---------------------------------------|--------|--------|-----------------------|--------|--------|--------------------------|--------|
|                   |   | Remaining Amortization Period (Years) |   |   | Gross Carrying Amount |   |   | Accumulated Amortization |   |   | Gross Carrying Amount |   |   | Accumulated Amortization |   |
| Purchased software     |   |                                  | 5.4    |   |                  | $      | 31,382 |                     |   | $ | (7,955 | ) |   | $ | 34,606 |   |   | $ | (8,681 | ) |
| Capitalized software   |   |                                  | 2.7    |   |                  |   | 1,825  |                     |   |   | (1,328 | ) |   |   | 1,825 |   |   |   | (1,130 | ) |
| Customer relationships |   |                                  | 7.3    |   |                  |   | 45,068 |                     |   |   | (7,576 | ) |   |   | 41,635 |   |   |   | (5,535 | ) |
| Backlog                |   |                                  | 2.5    |   |                  |   | 9,680  |                     |   |   | (6,127 | ) |   |   | 8,110 |   |   |   | (2,245 | ) |
| Trade names            |   |                                  | 7.7    |   |                  |   | 2,081  |                     |   |   | (413 | ) |   |   | 4,530 |   |   |   | (344 | ) |
| Non-competes           |   |                                  | 5.3    |   |                  |   | 3,230  |                     |   |   | (791 | ) |   |   | 3,100 |   |   |   | (295 | ) |
| Total                  |   |                                  |   |   |                  | $      | 93,266 |                     |   | $ | (24,190 | ) |   | $ | 93,806 |   |   | $ | (18,230 | ) |

| For the year ended December 31: | 2012       |   | $      | 14,963 |   |
|---------------------------------|------------|--------|--------|--------|--------|
|                            | 2013       |   |   | 13,691 |   |
|                            | 2014       |   |   | 12,037 |   |
|                            | 2015       |   |   | 9,764  |   |
|                            | 2016       |   |   | 7,627  |   |
|                            | Thereafter |   |   | 10,994 |   |

----

INDEX

|                                                       |   | Year Ended December 31, |   |
|------------------------------------------------------------|--------|-------------------------|--------|
|                                                       |   | 2011                    |   |   | 2010 |   |   | 2009 |   |
| Amortization and impairment included in cost of sales      |   |                    |   |   |   |   |   |   |   |
| Purchased technology                                       |   | $                       | 4,915  |   |   | $ | 7,100 |   |   | $ | 2,462 |   |
| Capitalized software                                       |   |                    | 189    |   |   |   | 583 |   |   |   | 600 |   |
| Backlog                                                    |   |                    | 3,745  |   |   |   | 2,245 |   |   |   | - |   |
| Total                                                      |   | $                       | 8,849  |   |   | $ | 9,928 |   |   | $ | 3,062 |   |
|                                                       |   |                    |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |                    |   |   |   |   |   |   |   |   |   |   |
| Amortization and impairment included in operating expenses |   |                    |   |   |   |   |   |   |   |   |   |   |
| Customer relationships                                     |   | $                       | 5,667  |   |   | $ | 3,183 |   |   | $ | 1,197 |   |
| Trade names                                                |   |                    | 3,241  |   |   |   | 315 |   |   |   | 29 |   |
| Non-competes                                               |   |                    | 496    |   |   |   | 295 |   |   |   | - |   |
| Total                                                      |   |                    | 9,404  |   |   |   | 3,793 |   |   |   | 1,226 |   |
| Total amortization and impairment                          |   | $                       | 18,253 |   |   | $ | 13,721 |   |   | $ | 4,288 |   |

| (5) | Fair Value of Investments |
|-----|---------------------------|

|                                            |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Balance at December 31, 2011 |   |
|-------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|----------------------------------------|--------|
| Recurring                                       |   |    |   |   |    |   |   |    |   |   |                                   |   |
| Investment in publicly traded equity securities |   | $       | 106    |   |    | $      | -      |    |   | $      | -                                      |   |   | $ | 106 |   |
| Total                                           |   | $       | 106    |   |    | $      | -      |    |   | $      | -                                      |   |   | $ | 106 |   |
|                                            |   |    |   |   |    |   |   |    |   |   |                                   |   |   |   |   |   |
|                                            |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Balance at December 31, 2010           |   |
| Recurring                                       |   |    |   |   |    |   |   |    |   |   |                                   |   |   |   |   |   |
| Investment in publicly traded equity securities |   | $       | 55     |   |    | $      | -      |    |   | $      | -                                      |   |   | $ | 55 |   |
| Total                                           |   | $       | 55     |   |    | $      | -      |    |   | $      | -                                      |   |   | $ | 55 |   |

| Rollforward of Level 1 Investments |   |   |   |
|------------------------------------|--------|--------|--------|
|                               |   | 2011   |   |   | 2010 |   |
| Balance at January 1               |   | $      | 55     |   |   | $ | 110 |   |
| Unrealized gain (loss)             |   |   | 51     |   |   |   | (55 | ) |
| Balance at December 31             |   | $      | 106    |   |   | $ | 55 |   |

----

INDEX

|                                                       |   | December 31, |   |
|------------------------------------------------------------|--------|-------------------|--------|
|                                                       |   | 2011              |   |   | 2010 |   |
| Cumulative translation adjustment                          |   | $                 | 1,961  |   |   | $ | 1,936 |   |
| Unrealized loss on available-for-sale security, net of tax |   |              | (348   | ) |   |   | (392 | ) |
| Total accumulated other comprehensive income               |   | $                 | 1,613  |   |   | $ | 1,544 |   |

| (6) | Restructuring |
|-----|---------------|

----

INDEX

|                         |   | Employee Termination Costs |              |   | Lease & Contract Exit Costs |   |   | Relocation |   |   | Total  |   |
|------------------------------|--------|---------------------------------|-------------------|--------|-------------------------------------------|--------|--------|------------|--------|--------|--------|--------|
|                         |   | Prior year initiatives          |              |
| Balance at December 31, 2008 |   | $                               | 533               |   |                                      | $      | 655    |       |   | $      | -      |   |   | $ | 1,188 |   |
| Charges to expense           |   |                            | 1,719             |   |                                      |   | (174   | )          |   |   | -      |   |   |   | 1,545 |   |
| Payments                     |   |                            | (1,641            | )      |                                      |   | (279   | )          |   |   | -      |   |   |   | (1,920 | ) |
| Foreign exchange             |   |                            | 51                |   |                                      |   | 15     |       |   |   | -      |   |   |   | 66 |   |
| Balance at December 31, 2009 |   |                            | 662               |   |                                      |   | 217    |       |   |   | -      |   |   |   | 879 |   |
| Charges to expense           |   |                            | 2,116             |   |                                      |   | 2,225  |       |   |   | 505    |   |   |   | 4,846 |   |
| Payments                     |   |                            | (2,339            | )      |                                      |   | (744   | )          |   |   | (463   | )      |   |   | (3,546 | ) |
| Foreign Exchange             |   |                            | 10                |   |                                      |   | -      |       |   |   | -      |   |   |   | 10 |   |
| Balance at December 31, 2010 |   |                            | 449               |   |                                      |   | 1,698  |       |   |   | 42     |   |   |   | 2,189 |   |
| Charges to expense           |   |                            | (30               | )      |                                      |   | 104    |       |   |   | (25    | )      |   |   | 49 |   |
| Payments                     |   |                            | (104              | )      |                                      |   | (1,365 | )          |   |   | (17    | )      |   |   | (1,486 | ) |
| Foreign Exchange             |   |                            | (4                | )      |                                      |   | -      |       |   |   | -      |   |   |   | (4 | ) |
| Balance at December 31, 2011 |   | $                               | 311               |   |                                      | $      | 437    |       |   | $      | -      |   |   | $ | 748 |   |
|                         |   |                            | 2011 Intiative    |   |                                      |   |   |       |   |   |   |   |   |   |   |   |
| Balance at December 31, 2010 |   | $                               | -                 |   |                                      | $      | -      |       |   |   | -      |   |   | $ | - |   |
| Charges to expense           |   |                            | 1,167             |   |                                      |   | -      |       |   |   | -      |   |   |   | 1,167 |   |
| Payments                     |   |                            | (508              | )      |                                      |   | -      |       |   |   | -      |   |   |   | (508 | ) |
| Balance at December 31, 2011 |   | $                               | 659               |   |                                      | $      | -      |       |   | $      | -      |   |   | $ | 659 |   |
|                         |   |                            | Total Initiatives |   |                                      |   |   |       |   |   |   |   |   |   |   |   |
| Balance at December 31, 2008 |   | $                               | 533               |   |                                      | $      | 655    |       |   | $      | -      |   |   | $ | 1,188 |   |
| Charges to expense           |   |                            | 1,719             |   |                                      |   | (174   | )          |   |   | -      |   |   |   | 1,545 |   |
| Payments                     |   |                            | (1,641            | )      |                                      |   | (279   | )          |   |   | -      |   |   |   | (1,920 | ) |
| Foreign Exchange             |   |                            | 51                |   |                                      |   | 15     |       |   |   | -      |   |   |   | 66 |   |
| Balance at December 31, 2009 |   |                            | 662               |   |                                      |   | 217    |       |   |   | -      |   |   |   | 879 |   |
| Charges to expense           |   |                            | 2,116             |   |                                      |   | 2,225  |       |   |   | 505    |   |   |   | 4,846 |   |
| Payments                     |   |                            | (2,339            | )      |                                      |   | (744   | )          |   |   | (463   | )      |   |   | (3,546 | ) |
| Foreign Exchange             |   |                            | 10                |   |                                      |   | -      |       |   |   | -      |   |   |   | 10 |   |
| Balance at December 31, 2010 |   |                            | 449               |   |                                      |   | 1,698  |       |   |   | 42     |   |   |   | 2,189 |   |
| Charges to expense           |   |                            | 1,137             |   |                                      |   | 104    |       |   |   | (25    | )      |   |   | 1,216 |   |
| Payments                     |   |                            | (612              | )      |                                      |   | (1,365 | )          |   |   | (17    | )      |   |   | (1,994 | ) |
| Foreign Exchange             |   |                            | (4                | )      |                                      |   | -      |       |   |   | -      |   |   |   | (4 | ) |
| Balance at December 31, 2011 |   | $                               | 970               |   |                                      | $      | 437    |       |   | $      | -      |   |   | $ | 1,407 |   |

| (7) | Debt and Operating Leases |
|-----|---------------------------|

----

INDEX

|   | · | Incur additional indebtedness or issue preferred stock; |
|--------|--------|---------------------------------------------------------|

|   | · | Pay dividends or make distributions with respect to capital stock; |
|--------|--------|--------------------------------------------------------------------|

|   | · | Make certain investments or certain other restricted payments; |
|--------|--------|----------------------------------------------------------------|

|   | · | Issue dividends or enter into other payment restrictions affecting certain subsidiaries; |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | Enter into certain sale-leaseback transactions; |
|--------|--------|-------------------------------------------------|

|   | · | Enter into transactions with stockholders or affiliates; |
|--------|--------|----------------------------------------------------------|

|   | · | Guarantee debt; |
|--------|--------|-----------------|

|   | · | Sell assets; |
|--------|--------|--------------|

|   | · | Create liens; |
|--------|--------|---------------|

|   | · | Issue or sell stock of certain subsidiaries; and |
|--------|--------|--------------------------------------------------|

|   | · | Merge or consolidate without meeting certain conditions. |
|--------|--------|---------------------------------------------------------------|

----

INDEX

| Location                    |   | Square Footage |   |   | Annual Lease Payments |   | End of Term |
|-----------------------------|--------|---------------------|--------|--------|----------------------------|--------|-------------|
| Chicago, Illinois           |   |                | 28,000 |   |                       | $      | 521         |   | December 2013 |
| Daytona Beach, Florida      |   |                | 36,000 |   |                       |   | 324         |   | December 2012 |
| Hartland, Wisconsin         |   |                | 81,000 |   |                       |   | 694         |   | November 2025 |
| Mississauga, Ontario        |   |                | 24,000 |   |                       |   | 615         |   | February 2020 |
| Morrisville, North Carolina |   |                | 17,000 |   |                       |   | 253         |   | September 2016 |

| 2012                         |   | $      | 4,667  |   |
|------------------------------|--------|--------|--------|--------|
| 2013                         |   |   | 2,658  |   |
| 2014                         |   |   | 1,605  |   |
| 2015                         |   |   | 1,636  |   |
| 2016                         |   |   | 1,578  |   |
| Thereafter                   |   |   | 8,313  |   |
| Total minimum lease payments |   | $      | 20,457 |   |

| (8) | Shareholders’ Equity |
|-----|----------------------------|

----

INDEX

| (9) | Share-Based Compensation |
|-----|--------------------------|

|                                                                      |   | Years Ended December 31, |   |
|---------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                      |   | 2011                     |   |   | 2010 |   |   | 2009 |   |
| Share-based compensation expense included in the statement of operations: |   |                     |   |   |   |   |   |   |   |
| Professional services                                                     |   | $                        | 45     |   |   | $ | 69 |   |   | $ | 33 |   |
| Maintenance                                                               |   |                     | 186    |   |   |   | 96 |   |   |   | 17 |   |
| Sales and marketing                                                       |   |                     | 1,460  |   |   |   | 442 |   |   |   | 407 |   |
| Product research and development                                          |   |                     | 36     |   |   |   | 231 |   |   |   | 335 |   |
| General and administrative                                                |   |                     | 2,181  |   |   |   | 1,785 |   |   |   | 894 |   |
| Total                                                                     |   | $                        | 3,908  |   |   | $ | 2,623 |   |   | $ | 1,686 |   |

----

INDEX

|                                         |   | Years Ended December 31, |       |
|----------------------------------------------|--------|--------------------------|------------|
|                                         |   | 2011                     |       |   | 2010 |   |   | 2009 |   |
| Dividend yield                               |   |                     | 0          | % |   |   | 0 | % |   |   | 0 | % |
| Expected volatility                          |   |                     | 100        | % |   |   | 100 | % |   |   | 100 | % |
| Risk–free interest rate                |   |                     | 0.6% - 1.8 | % |   |   | 0.8% - 2.1 | % |   |   | 1.7% - 2.3 | % |
| Expected term (in years)                     |   |                     | 4.0        |   |   |   | 4.0 |   |   |   | 4.0 |   |
| Weighted–average grant date fair value |   | $                        | 3.37       |   |   | $ | 1.97 |   |   | $ | 2.36 |   |

|                                   |   |    NumberofOptions |      |   |    Weighted-AverageExercise Price |   |   | Weighted-AverageRemainingContractualTerm(In Years) |   |   |    AggregateIntrinsicValue |   |
|----------------------------------------|--------|------------------------------|-----------|--------|--------------------------------------------------|--------|--------|---------------------------------------------------------|--------|--------|--------------------------------------|--------|
| Options outstanding, December 31, 2010 |   |                         | 7,959,110 |   |                                             | $      | 2.94   |                                                    |   |   | 5.5                                  |   |   | $ | 10,720 |   |
| Options granted                        |   |                         | 2,134,786 |   |                                             |   | 4.96   |                                                    |   |   |                                 |   |   |   |   |   |
| Options exercised                      |   |                         | (295,500  | )      |                                             |   | 2.95   |                                                    |   |   |                                 |   |   |   |   |   |
| Options forfeited and expired          |   |                         | (607,362  | )      |                                             |   | 6.91   |                                                    |   |   |                                 |   |   |   |   |   |
| Options outstanding, December 31, 2011 |   |                         | 9,191,034 |   |                                             | $      | 3.14   |                                                    |   |   | 5.2                                  |   |   | $ | 17,860 |   |
|                                   |   |                         |      |   |                                             |   |   |                                                    |   |   |                                 |   |   |   |   |   |
| Options exercisable, December 31, 2011 |   |                         | 4,215,920 |   |                                             | $      | 2.78   |                                                    |   |   | 4.6                                  |   |   | $ | 10,381 |   |
| Options exercisable, December 31, 2010 |   |                         | 2,795,937 |   |                                             | $      | 3.75   |                                                    |   |   | 4.8                                  |   |   | $ | 4,226 |   |
| Options exercisable, December 31, 2009 |   |                         | 2,076,212 |   |                                             | $      | 5.77   |                                                    |   |   | 4.7                                  |   |   | $ | 2,044 |   |

|                                               |   | Years Ended December 31, |   |
|----------------------------------------------------|--------|--------------------------|--------|
|                                               |   | 2011                     |   |   | 2010 |   |   | 2009 |   |
| Total fair value of stock options vested           |   | $                        | 6,719  |   |   | $ | 4,585 |   |   | $ | 5,419 |   |
| Total fair value of restricted stock awards vested |   |                     | -      |   |   |   | 613 |   |   |   | 80 |   |

----

INDEX

| Options Outstanding |                                    |   | Options Exercisable |   |
|--------------------------|-----------------------------------------|--------|--------------------------|--------|
|                     | Range of exercise prices |   |                     |   | Number ofshares |   |   |   | Weighted–averageremainingcontractual lifein years |   |   |   | Weighted–averageexercise price |   |   |   | Number ofshares |   |   |   | Weighted–averageexercise price |   |
| $                        | 0.57 - $1.47                            |   |                     |   | 2,645,000 |   |   |   | 4.7 |   |   | $ | 1.05 |   |   |   | 2,113,125 |   |   | $ | 1.07 |   |
| $                        | 1.99 - $3.23                            |   |                     |   | 2,085,000 |   |   |   | 5.7 |   |   |   | 2.68 |   |   |   | 550,937 |   |   |   | 2.69 |   |
| $                        | 3.24 - $4.50                            |   |                     |   | 2,638,352 |   |   |   | 5.7 |   |   |   | 3.62 |   |   |   | 894,384 |   |   |   | 3.51 |   |
| $                        | 4.51 - $24.88                           |   |                     |   | 1,822,682 |   |   |   | 4.7 |   |   |   | 6.01 |   |   |   | 657,474 |   |   |   | 7.36 |   |
|                     |                                    |   |                     |   | 9,191,034 |   |   |   | 5.2 |   |   | $ | 3.14 |   |   |   | 4,215,920 |   |   | $ | 2.78 |   |

| (10) | Commitments and Contingencies |
|------|-------------------------------|

----

INDEX

----

INDEX

| (11) | Transactions with Related Party |
|------|---------------------------------|

| (12) | Income Taxes |
|------|--------------|

----

INDEX

|          |   | Years Ended December 31, |   |
|---------------|--------|--------------------------|--------|
|          |   | 2011                     |   |   | 2010 |   |   | 2009 |   |
| United States |   | $                        | (7,976 | ) |   | $ | (31,282 | ) |   | $ | (5,435 | ) |
| Foreign       |   |                     | 6,110  |   |   |   | 6,120 |   |   |   | 5,585 |   |
|          |   | $                        | (1,866 | ) |   | $ | (25,162 | ) |   | $ | 150 |   |

|            |   | Years Ended December 31, |   |
|-----------------|--------|--------------------------|--------|
|            |   | 2011                     |   |   | 2010 |   |   | 2009 |   |
| Current:        |   |                     |   |   |   |   |   |   |   |
| Federal         |   | $                        | (4,191 | ) |   | $ | (111 | ) |   | $ | (238 | ) |
| State           |   |                     | (287   | ) |   |   | 320 |   |   |   | 65 |   |
| Foreign         |   |                     | 35     |   |   |   | 201 |   |   |   | 38 |   |
| Total current   |   |                     | (4,443 | ) |   |   | 410 |   |   |   | (135 | ) |
| Deferred:       |   |                     |   |   |   |   |   |   |   |   |   |   |
| Federal         |   |                     | 5,636  |   |   |   | (2 | ) |   |   | - |   |
| State           |   |                     | 425    |   |   |   | - |   |   |   | - |   |
| Foreign         |   |                     | 2,047  |   |   |   | (14,054 | ) |   |   | - |   |
| Total deferred  |   |                     | 8,108  |   |   |   | (14,056 | ) |   |   | - |   |
| Total provision |   | $                        | 3,665  |   |   | $ | (13,646 | ) |   | $ | (135 | ) |

|                                                            |   | Years Ended December 31, |   |
|-----------------------------------------------------------------|--------|--------------------------|--------|
|                                                            |   | 2011                     |   |   | 2010 |   |   | 2009 |   |
|                                                            |   |                     |   |   |   |   |   |   |   |
| Expected tax expense (benefit)                                  |   | $                        | (653   | ) |   | $ | (8,807 | ) |   | $ | 51 |   |
| Total increase (decrease) in income taxes resulting from:       |   |                     |   |   |   |   |   |   |   |   |   |   |
| Change in valuation allowance allocated to income tax expense   |   |                     | 10,641 |   |   |   | (9,673 | ) |   |   | (377 | ) |
| Research and experimentation credit                             |   |                     | -      |   |   |   | (78 | ) |   |   | (63 | ) |
| Share-based compensation                                        |   |                     | 24     |   |   |   | 83 |   |   |   | 168 |   |
| Acquisition costs                                               |   |                     | (684   | ) |   |   | 3,386 |   |   |   | 411 |   |
| State and local income taxes, net of federal income tax benefit |   |                     | (212   | ) |   |   | 435 |   |   |   | (296 | ) |
| Foreign income tax rate differential                            |   |                     | (463   | ) |   |   | (212 | ) |   |   | 24 |   |
| Change in unrecognized tax benefits                             |   |                     | (4,669 | ) |   |   | 241 |   |   |   | 56 |   |
| Other                                                           |   |                     | (319   | ) |   |   | 979 |   |   |   | (109 | ) |
| Actual income tax expense (benefit)                             |   | $                        | 3,665  |   |   | $ | (13,646 | ) |   | $ | (135 | ) |

----

INDEX

|                                                  |   | December 31, |     |
|-------------------------------------------------------|--------|-------------------|----------|
|                                                  |   | 2011              |     |   | 2010 |   |
| Deferred tax assets:                                  |   |              |     |   |   |   |
| Accrued compensation                                  |   | $                 | 611      |   |   | $ | 1,559 |   |
| Depreciation                                          |   |              | 2,775    |   |   |   | 5,774 |   |
| Research and experimentation credit carryforwards     |   |              | 7,324    |   |   |   | 7,051 |   |
| Other credit carryforwards                            |   |              | 1,476    |   |   |   | 2,260 |   |
| Domestic loss carryforwards                           |   |              | 113,459  |   |   |   | 120,493 |   |
| Foreign loss carryforwards                            |   |              | 9,652    |   |   |   | 10,799 |   |
| Nonqualified stock options                            |   |              | 3,450    |   |   |   | 2,112 |   |
| Other                                                 |   |              | 5,821    |   |   |   | 3,655 |   |
| Total gross deferred tax assets                       |   |              | 144,568  |   |   |   | 153,703 |   |
| Less: asset valuation allowance                       |   |              | (105,743 | ) |   |   | (101,385 | ) |
| Net deferred tax asset                                |   |              | 38,825   |   |   |   | 52,318 |   |
| Deferred tax liabilities:                             |   |              |     |   |   |   |   |   |
| Software development costs and intangible assets      |   |              | (8,439   | ) |   |   | (9,647 | ) |
| Intangibles—customer contracts & tradenames |   |              | (14,223  | ) |   |   | (18,013 | ) |
| Other                                                 |   |              | (5,452   | ) |   |   | (5,839 | ) |
| Total gross deferred liabilities                      |   |              | (28,114  | ) |   |   | (33,499 | ) |
| Net deferred tax asset                                |   | $                 | 10,711   |   |   | $ | 18,819 |   |
| Included on balance sheet:                            |   |              |     |   |   |   |   |   |
| Current assets: deferred income taxes                 |   | $                 | 3,393    |   |   | $ | 2,545 |   |
| Non–current asset: deferred income taxes        |   |              | 9,209    |   |   |   | 17,006 |   |
| Current liabilities: deferred income taxes            |   |              | -        |   |   |   | (732 | ) |
| Non–current liabilities: deferred income taxes  |   |              | (1,891   | ) |   |   | - |   |
| Net deferred income taxes                             |   | $                 | 10,711   |   |   | $ | 18,819 |   |

----

INDEX

|                                            |   | December 31, |   |
|-------------------------------------------------|--------|--------------|--------|
|                                            |   | 2011         |   |   | 2010 |   |   | 2009 |   |
| Balance at January 1                            |   | $            | 6,703  |   |   | $ | 6,506 |   |   | $ | 6,485 |   |
| Gross increases - tax positions in current year |   |         | -      |   |   |   | 19 |   |   |   | 21 |   |
| Gross increases - tax positions in prior year   |   |         | -      |   |   |   | 178 |   |   |   | - |   |
| Gross decreases - tax positions in prior year   |   |         | (12    | ) |   |   | - |   |   |   | - |   |
| Decreases due to statute expirations            |   |         | (4,829 | ) |   |   | - |   |   |   | - |   |
| Balance at December 31                          |   | $            | 1,862  |   |   | $ | 6,703 |   |   | $ | 6,506 |   |

| (13) | Earnings Per Share |
|------|--------------------|

----

INDEX

|                    |   | December 31, |      |
|-------------------------|--------|--------------|-----------|
|                    |   | 2011         |      |   | 2010 |   |   | 2009 |   |
| Stock options           |   |         | 9,191,034 |   |   |   | 7,959,110 |   |   |   | 5,021,995 |   |
| Restricted stock awards |   |         | -         |   |   |   | - |   |   |   | 426,664 |   |
|                    |   |         | 9,191,034 |   |   |   | 7,959,110 |   |   |   | 5,448,659 |   |

| (14) | Employee Benefit Plan |
|------|-----------------------|

| (15) | Segment Information and Concentrations of Risk |
|------|------------------------------------------------|

----

INDEX

|                     |   | Net Sales for the Years Ended December 31, |    |
|--------------------------|--------|--------------------------------------------|---------|
|                     |   | 2011                                       |    |   | 2010 |   |   | 2009 |   |
| United States of America |   | $                                          | 211,907 |   |   | $ | 125,974 |   |   | $ | 51,318 |   |
| Europe                   |   |                                       | 8,767   |   |   |   | 7,730 |   |   |   | 7,216 |   |
| Japan                    |   |                                       | 5,312   |   |   |   | 2,853 |   |   |   | 3,407 |   |
| Korea                    |   |                                       | 1,449   |   |   |   | 718 |   |   |   | 1,534 |   |
| Canada                   |   |                                       | 1,598   |   |   |   | 491 |   |   |   | 1,361 |   |
| Other                    |   |                                       | 3,395   |   |   |   | 2,566 |   |   |   | 2,005 |   |
| Total net sales          |   | $                                          | 232,428 |   |   | $ | 140,332 |   |   | $ | 66,841 |   |

|                     |   | Long-Lived Assets at December 31, |   |
|--------------------------|--------|-----------------------------------|--------|
|                     |   | 2011                              |   |   | 2010 |   |
| United States of America |   | $                                 | 3,866  |   |   | $ | 5,105 |   |
| Canada                   |   |                              | 520    |   |   |   | 606 |   |
| Europe                   |   |                              | 3      |   |   |   | 56 |   |
| Other                    |   |                              | 2      |   |   |   | 5 |   |

| (16) | Guarantor Subsidiaries |
|------|------------------------|

----

INDEX

|                                                  |   | December 31, 2011 |    |
|-------------------------------------------------------|--------|-------------------|---------|
|                                                  |   | Parent            |    |   | Guarantors |   |   | Non-Guarantors |   |   | Eliminations |   |   | Consolidated |   |
| ASSETS                                                |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Current assets:                                       |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents (including restricted cash) |   | $                 | 5,451   |   |   | $ | 28,003 |   |   | $ | 5,818 |   |   | $ | - |   |   | $ | 39,272 |   |
| Accounts receivable, net                              |   |              | -       |   |   |   | 63,487 |   |   |   | 7,527 |   |   |   | - |   |   |   | 71,014 |   |
| Intercompany receivables                              |   |              | -       |   |   |   | 29,108 |   |   |   | 635 |   |   |   | (29,743 | ) |   |   | - |   |
| Other current assets                                  |   |              | 595     |   |   |   | 29,579 |   |   |   | 3,814 |   |   |   | - |   |   |   | 33,988 |   |
| Total current assets                                  |   |              | 6,046   |   |   |   | 150,177 |   |   |   | 17,794 |   |   |   | (29,743 | ) |   |   | 144,274 |   |
| Net property and equipment                            |   |              | 113     |   |   |   | 3,753 |   |   |   | 525 |   |   |   | - |   |   |   | 4,391 |   |
| Purchased and developed software, net                 |   |              | -       |   |   |   | 23,309 |   |   |   | 615 |   |   |   | - |   |   |   | 23,924 |   |
| Other intangible assets, net                          |   |              | -       |   |   |   | 44,483 |   |   |   | 669 |   |   |   | - |   |   |   | 45,152 |   |
| Goodwill                                              |   |              | -       |   |   |   | 207,799 |   |   |   | 2,030 |   |   |   | - |   |   |   | 209,829 |   |
| Investment in and advances to subsidiaries            |   |              | 340,637 |   |   |   | (338 | ) |   |   | - |   |   |   | (340,299 | ) |   |   | - |   |
| Other assets                                          |   |              | 8,013   |   |   |   | 4,597 |   |   |   | 9,835 |   |   |   | 372 |   |   |   | 22,817 |   |
| Total assets                                          |   | $                 | 354,809 |   |   | $ | 433,780 |   |   | $ | 31,468 |   |   | $ | (369,670 | ) |   | $ | 450,387 |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                  |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                                  |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts payable                                      |   | $                 | 3,124   |   |   | $ | 17,647 |   |   | $ | 1,343 |   |   | $ | - |   |   | $ | 22,114 |   |
| Deferred revenue                                      |   |              | -       |   |   |   | 49,678 |   |   |   | 1,568 |   |   |   | - |   |   |   | 51,246 |   |
| Intercompany payables                                 |   |              | 2,176   |   |   |   | 8,580 |   |   |   | 24,086 |   |   |   | (34,842 | ) |   |   | - |   |
| Other accrued liabilities                             |   |              | 4,921   |   |   |   | 18,729 |   |   |   | 1,244 |   |   |   | - |   |   |   | 24,894 |   |
| Total current liabilities                             |   |              | 10,221  |   |   |   | 94,634 |   |   |   | 28,241 |   |   |   | (34,842 | ) |   |   | 98,254 |   |
| Notes payable                                         |   |              | 249,371 |   |   |   | 67 |   |   |   | - |   |   |   | - |   |   |   | 249,438 |   |
| Other long-term liabilities                           |   |              | 2,746   |   |   |   | 6,381 |   |   |   | 725 |   |   |   | 372 |   |   |   | 10,224 |   |
| Total liabilities                                     |   |              | 262,338 |   |   |   | 101,082 |   |   |   | 28,966 |   |   |   | (34,470 | ) |   |   | 357,916 |   |
| Total shareholders' equity                            |   |              | 92,471  |   |   |   | 332,698 |   |   |   | 2,502 |   |   |   | (335,200 | ) |   |   | 92,471 |   |
| Total liabilities and shareholders' equity            |   | $                 | 354,809 |   |   | $ | 433,780 |   |   | $ | 31,468 |   |   | $ | (369,670 | ) |   | $ | 450,387 |   |

----

INDEX

|                                                  |   | December 31, 2010 |    |
|-------------------------------------------------------|--------|-------------------|---------|
|                                                  |   | Parent            |    |   | Guarantors |   |   | Non-Guarantors |   |   | Eliminations |   |   | Consolidated |   |
| ASSETS                                                |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Current assets:                                       |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents (including restricted cash) |   | $                 | 870     |   |   | $ | 35,877 |   |   | $ | 4,282 |   |   | $ | - |   |   | $ | 41,029 |   |
| Accounts receivable, net                              |   |              | -       |   |   |   | 48,201 |   |   |   | 5,053 |   |   |   | - |   |   |   | 53,254 |   |
| Intercompany receivables                              |   |              | 14,170  |   |   |   | 14,168 |   |   |   | 961 |   |   |   | (29,299 | ) |   |   | - |   |
| Other current assets                                  |   |              | 791     |   |   |   | 16,766 |   |   |   | 3,923 |   |   |   | - |   |   |   | 21,480 |   |
| Total current assets                                  |   |              | 15,831  |   |   |   | 115,012 |   |   |   | 14,219 |   |   |   | (29,299 | ) |   |   | 115,763 |   |
| Net property and equipment                            |   |              | 156     |   |   |   | 4,949 |   |   |   | 667 |   |   |   | - |   |   |   | 5,772 |   |
| Purchased and developed software, net                 |   |              | 601     |   |   |   | 25,210 |   |   |   | 808 |   |   |   | - |   |   |   | 26,619 |   |
| Other intangible assets, net                          |   |              | 395     |   |   |   | 48,053 |   |   |   | 509 |   |   |   | - |   |   |   | 48,957 |   |
| Goodwill                                              |   |              | -       |   |   |   | 167,957 |   |   |   | 1,576 |   |   |   | - |   |   |   | 169,533 |   |
| Investment in and advances to subsidiaries            |   |              | 284,893 |   |   |   | 1,830 |   |   |   | - |   |   |   | (286,723 | ) |   |   | - |   |
| Other assets                                          |   |              | 13,615  |   |   |   | 7,164 |   |   |   | 12,101 |   |   |   | (2,879 | ) |   |   | 30,001 |   |
| Total assets                                          |   | $                 | 315,491 |   |   | $ | 370,175 |   |   | $ | 29,880 |   |   | $ | (318,901 | ) |   | $ | 396,645 |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                  |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                                  |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts payable                                      |   | $                 | 2,054   |   |   | $ | 14,155 |   |   | $ | 2,161 |   |   | $ | - |   |   | $ | 18,370 |   |
| Deferred revenue                                      |   |              | -       |   |   |   | 50,573 |   |   |   | 1,660 |   |   |   | - |   |   |   | 52,233 |   |
| Intercompany payables                                 |   |              | -       |   |   |   | 13,767 |   |   |   | 25,580 |   |   |   | (39,347 | ) |   |   | - |   |
| Other accrued liabilities                             |   |              | 4,965   |   |   |   | 10,902 |   |   |   | 936 |   |   |   | - |   |   |   | 16,803 |   |
| Total current liabilities                             |   |              | 7,019   |   |   |   | 89,397 |   |   |   | 30,337 |   |   |   | (39,347 | ) |   |   | 87,406 |   |
| Notes payable                                         |   |              | 195,077 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 195,077 |   |
| Other long-term liabilities                           |   |              | 8,589   |   |   |   | 2,785 |   |   |   | 861 |   |   |   | (2,879 | ) |   |   | 9,356 |   |
| Total liabilities                                     |   |              | 210,685 |   |   |   | 92,182 |   |   |   | 31,198 |   |   |   | (42,226 | ) |   |   | 291,839 |   |
| Total shareholders' equity                            |   |              | 104,806 |   |   |   | 277,993 |   |   |   | (1,318 | ) |   |   | (276,675 | ) |   |   | 104,806 |   |
| Total liabilities and shareholders' equity            |   | $                 | 315,491 |   |   | $ | 370,175 |   |   | $ | 29,880 |   |   | $ | (318,901 | ) |   | $ | 396,645 |   |

|                                                                   |   | Year Ended December 31, 2011 |    |
|------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                   |   | Parent                       |    |   | Guarantor |   |   | Non-Guarantor |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                              |   | $                            | -       |   |   | $ | 206,144 |   |   | $ | 26,284 |   |   | $ | - |   |   | $ | 232,428 |   |
| Cost of sales                                                          |   |                         | -       |   |   |   | 83,782 |   |   |   | 4,872 |   |   |   | - |   |   |   | 88,654 |   |
| Gross margin                                                           |   |                         | -       |   |   |   | 122,362 |   |   |   | 21,412 |   |   |   | - |   |   |   | 143,774 |   |
| Selling, research and development, general and administrative expenses |   |                         | 3,455   |   |   |   | 80,130 |   |   |   | 15,336 |   |   |   | - |   |   |   | 98,921 |   |
| Acquisition-related expenses                                           |   |                         | 1,614   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,614 |   |
| Restructuring and other expenses                                       |   |                         | -       |   |   |   | 1,061 |   |   |   | 155 |   |   |   | - |   |   |   | 1,216 |   |
| Depreciation and amortization                                          |   |                         | 279     |   |   |   | 12,251 |   |   |   | 338 |   |   |   | - |   |   |   | 12,868 |   |
| Total operating costs and expenses                                     |   |                         | 5,348   |   |   |   | 93,442 |   |   |   | 15,829 |   |   |   | - |   |   |   | 114,619 |   |
| Operating income (loss)                                                |   |                         | (5,348  | ) |   |   | 28,920 |   |   |   | 5,583 |   |   |   | - |   |   |   | 29,155 |   |
| Equity in net income of subsidiaries                                   |   |                         | 30,476  |   |   |   | (1,546 | ) |   |   | - |   |   |   | (28,930 | ) |   |   | - |   |
| Other, net                                                             |   |                         | (30,889 | ) |   |   | (398 | ) |   |   | 266 |   |   |   | - |   |   |   | (31,021 | ) |
| Other income (expense)                                                 |   |                         | (413    | ) |   |   | (1,944 | ) |   |   | 266 |   |   |   | (28,930 | ) |   |   | (31,021 | ) |
| Income (loss) before income taxes                                      |   |                         | (5,761  | ) |   |   | 26,976 |   |   |   | 5,849 |   |   |   | (28,930 | ) |   |   | (1,866 | ) |
| Income tax expense (benefit)                                           |   |                         | (230    | ) |   |   | 1,830 |   |   |   | 2,065 |   |   |   | - |   |   |   | 3,665 |   |
| Net income (loss)                                                      |   | $                            | (5,531  | ) |   | $ | 25,146 |   |   | $ | 3,784 |   |   | $ | (28,930 | ) |   | $ | (5,531 | ) |

----

INDEX

|                                                                   |   | Year Ended December 31, 2010 |    |
|------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                   |   | Parent                       |    |   | Guarantor |   |   | Non-Guarantor |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                              |   | $                            | -       |   |   | $ | 122,001 |   |   | $ | 18,331 |   |   | $ | - |   |   | $ | 140,332 |   |
| Cost of sales                                                          |   |                         | -       |   |   |   | 59,511 |   |   |   | 5,052 |   |   |   | - |   |   |   | 64,563 |   |
| Gross margin                                                           |   |                         | -       |   |   |   | 62,490 |   |   |   | 13,279 |   |   |   | - |   |   |   | 75,769 |   |
| Selling, research and development, general and administrative expenses |   |                         | 5,819   |   |   |   | 50,634 |   |   |   | 6,320 |   |   |   | - |   |   |   | 62,773 |   |
| Acquisition-related expenses                                           |   |                         | 9,638   |   |   |   | 36 |   |   |   | - |   |   |   | - |   |   |   | 9,674 |   |
| Restructuring and other expenses                                       |   |                         | 418     |   |   |   | 4,575 |   |   |   | 13 |   |   |   | - |   |   |   | 5,006 |   |
| Depreciation, amortization and impairment                              |   |                         | 858     |   |   |   | 5,665 |   |   |   | 317 |   |   |   | - |   |   |   | 6,840 |   |
| Total operating costs and expenses                                     |   |                         | 16,733  |   |   |   | 60,910 |   |   |   | 6,650 |   |   |   | - |   |   |   | 84,293 |   |
| Operating income (loss)                                                |   |                         | (16,733 | ) |   |   | 1,580 |   |   |   | 6,629 |   |   |   | - |   |   |   | (8,524 | ) |
| Equity in net income of subsidiaries                                   |   |                         | 22,502  |   |   |   | (138 | ) |   |   | - |   |   |   | (22,364 | ) |   |   | - |   |
| Other, net                                                             |   |                         | (17,097 | ) |   |   | 106 |   |   |   | 353 |   |   |   | - |   |   |   | (16,638 | ) |
| Other income (expense)                                                 |   |                         | 5,405   |   |   |   | (32 | ) |   |   | 353 |   |   |   | (22,364 | ) |   |   | (16,638 | ) |
| Income (loss) before income taxes                                      |   |                         | (11,328 | ) |   |   | 1,548 |   |   |   | 6,982 |   |   |   | (22,364 | ) |   |   | (25,162 | ) |
| Income tax expense (benefit)                                           |   |                         | 188     |   |   |   | 200 |   |   |   | (14,034 | ) |   |   | - |   |   |   | (13,646 | ) |
| Net income (loss)                                                      |   | $                            | (11,516 | ) |   | $ | 1,348 |   |   | $ | 21,016 |   |   | $ | (22,364 | ) |   | $ | (11,516 | ) |

|                                                                   |   | Year Ended December 31, 2009 |   |
|------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                   |   | Parent                       |   |   | Guarantor |   |   | Non-Guarantor |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                              |   | $                            | -      |   |   | $ | 36,359 |   |   | $ | 30,482 |   |   | $ | - |   |   | $ | 66,841 |   |
| Cost of sales                                                          |   |                         | -      |   |   |   | 12,629 |   |   |   | 6,748 |   |   |   | - |   |   |   | 19,377 |   |
| Gross margin                                                           |   |                         | -      |   |   |   | 23,730 |   |   |   | 23,734 |   |   |   | - |   |   |   | 47,464 |   |
| Selling, research and development, general and administrative expenses |   |                         | (1,695 | ) |   |   | 21,021 |   |   |   | 13,571 |   |   |   | - |   |   |   | 32,897 |   |
| Acquisition-related expenses                                           |   |                         | 1,212  |   |   |   | 13 |   |   |   | - |   |   |   | - |   |   |   | 1,225 |   |
| Restructuring and other expenses                                       |   |                         | (180   | ) |   |   | 1,039 |   |   |   | 754 |   |   |   | - |   |   |   | 1,613 |   |
| Depreciation and amortization                                          |   |                         | 884    |   |   |   | 1,477 |   |   |   | 405 |   |   |   | - |   |   |   | 2,766 |   |
| Total operating costs and expenses                                     |   |                         | 221    |   |   |   | 23,550 |   |   |   | 14,730 |   |   |   | - |   |   |   | 38,501 |   |
| Operating income (loss)                                                |   |                         | (221   | ) |   |   | 180 |   |   |   | 9,004 |   |   |   | - |   |   |   | 8,963 |   |
| Equity in net income of subsidiaries                                   |   |                         | 5,770  |   |   |   | (65 | ) |   |   | - |   |   |   | (5,705 | ) |   |   | - |   |
| Other, net                                                             |   |                         | (5,437 | ) |   |   | (149 | ) |   |   | (3,227 | ) |   |   | - |   |   |   | (8,813 | ) |
| Other income (expense)                                                 |   |                         | 333    |   |   |   | (214 | ) |   |   | (3,227 | ) |   |   | (5,705 | ) |   |   | (8,813 | ) |
| Income (loss) before income taxes                                      |   |                         | 112    |   |   |   | (34 | ) |   |   | 5,777 |   |   |   | (5,705 | ) |   |   | 150 |   |
| Income tax expense (benefit)                                           |   |                         | (173   | ) |   |   | - |   |   |   | 38 |   |   |   | - |   |   |   | (135 | ) |
| Net income (loss)                                                      |   | $                            | 285    |   |   | $ | (34 | ) |   | $ | 5,739 |   |   | $ | (5,705 | ) |   | $ | 285 |   |

----

INDEX

|                                                                                          |   | Year Ended December 31, 2011 |    |   |
|----------------------------------------------------------------------------------------------------|--------|------------------------------|---------|--------|
|                                                                                               |   | Parent                       |    |   | Guarantor |   |   | Non-Guarantor |   |   | Eliminations |   |   | Consolidated |   |   |
| Cash flows from operating activities:                                                              |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                  |   | $                            | (5,531  | )      |   | $ | 25,146 |   |   | $ | 3,784 |   |   | $ | (28,930 | ) |   | $ | (5,531 | ) |   |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred income taxes                                                                              |   |                         | 3,368   |   |   |   | 2,693 |   |   |   | 2,048 |   |   |   | - |   |   |   | 8,109 |   |   |
| Depreciation, amortization and impairment                                                          |   |                         | 1,038   |   |   |   | 20,793 |   |   |   | 377 |   |   |   | - |   |   |   | 22,208 |   |   |
| Share-based compensation                                                                           |   |                         | 1,837   |   |   |   | 1,987 |   |   |   | 84 |   |   |   | - |   |   |   | 3,908 |   |   |
| Change in contingent consideration for acquisitions                                                |   |                         | -       |   |   |   | 345 |   |   |   | - |   |   |   | - |   |   |   | 345 |   |   |
| Amortization of notes payable issuance costs and discount                                          |   |                         | 2,393   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,393 |   |   |
| Realized (gain) loss on investment                                                                 |   |                         | -       |   |   |   | - |   |   |   | (405 | ) |   |   | - |   |   |   | (405 | ) |   |
| Provision for doubtful accounts receivable and sales returns, net of recoveries                    |   |                         | -       |   |   |   | 2,102 |   |   |   | 664 |   |   |   | - |   |   |   | 2,766 |   |   |
| Stock issued for charitable contribution                                                           |   |                         | 1,851   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,851 |   |   |
| Net change in assets and liabilities (net of effects of acquisitions)                              |   |                         | (43,694 | )      |   |   | (13,393 | ) |   |   | (5,798 | ) |   |   | 28,930 |   |   |   | (33,955 | ) |   |
| Net cash provided by (used in) operating activities                                                |   |                         | (38,738 | )      |   |   | 39,673 |   |   |   | 754 |   |   |   | - |   |   |   | 1,689 |   |   |
| Cash flows from investing activities:                                                              |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid for acquisitions, net of cash acquired                                                   |   |                         | -       |   |   |   | (1,277 | ) |   |   | - |   |   |   | - |   |   |   | (1,277 | ) |   |
| Purchases of property, equipment, and leasehold improvements                                       |   |                         | -       |   |   |   | (1,952 | ) |   |   | (24 | ) |   |   | - |   |   |   | (1,976 | ) |   |
| Intercompany advances                                                                              |   |                         | -       |   |   |   | (39,723 | ) |   |   | - |   |   |   | 39,723 |   |   |   | - |   |   |
| Change in restricted cash                                                                          |   |                         | 140     |   |   |   | 800 |   |   |   | - |   |   |   | - |   |   |   | 940 |   |   |
| Distribution from equity investment                                                                |   |                         | -       |   |   |   | - |   |   |   | 405 |   |   |   | - |   |   |   | 405 |   |   |
| Net cash provided by (used in) investing activities                                                |   |                         | 140     |   |   |   | (42,152 | ) |   |   | 381 |   |   |   | 39,723 |   |   |   | (1,908 | ) |   |
| Cash flows from financing activities:                                                              |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intercompany advances                                                                              |   |                         | 39,199  |   |   |   | - |   |   |   | 524 |   |   |   | (39,723 | ) |   |   | - |   |   |
| Proceeds from issuance of term notes                                                               |   |                         | 53,560  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 53,560 |   |   |
| Redemption and retirement of preferred stock                                                       |   |                         | (41,750 | )      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (41,750 | ) |   |
| Preferred stock dividends paid                                                                     |   |                         | (7,328  | )      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (7,328 | ) |   |
| Notes payable issuance costs paid                                                                  |   |                         | (1,528  | )      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,528 | ) |   |
| Proceeds from exercise of options and employee stock purchase plan                                 |   |                         | 1,166   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,166 |   |   |
| Principal payments on notes                                                                        |   |                         | -       |   |   |   | (4,591 | ) |   |   | - |   |   |   | - |   |   |   | (4,591 | ) |   |
| Principal payments on capital leases                                                               |   |                         | -       |   |   |   | (4 | ) |   |   | - |   |   |   | - |   |   |   | (4 | ) |   |
| Net cash provided by (used in) financing activities                                                |   |                         | 43,319  |   |   |   | (4,595 | ) |   |   | 524 |   |   |   | (39,723 | ) |   |   | (475 | ) |   |
| Effect of exchange rates on cash and cash equivalents                                              |   |                         | -       |   |   |   | - |   |   |   | (123 | ) |   |   | - |   |   |   | (123 | ) |   |
| Net increase (decrease) in cash and cash equivalents                                               |   |                         | 4,721   |   |   |   | (7,074 | ) |   |   | 1,536 |   |   |   | - |   |   |   | (817 | ) |   |
| Cash and cash equivalents (net of restricted cash), beginning of period                            |   |                         | 186     |   |   |   | 34,914 |   |   |   | 4,282 |   |   |   | - |   |   |   | 39,382 |   | (1) |
| Cash and cash equivalents (net of restricted cash), end of period                                  |   | $                            | 4,907   |   |   | $ | 27,840 |   |   | $ | 5,818 |   |   | $ | - |   |   | $ | 38,565 |   | (2) |

|   | (1) | Net of restricted cash of $1,647 at December 31, 2010. |
|--------|-----|--------------------------------------------------------|

|   | (2) | Net of restricted cash of $707 at December 31, 2011.                                                                                                                                                |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

|                                                                                                   |   | Year Ended December 31, 2010 |     |   |
|--------------------------------------------------------------------------------------------------------|--------|------------------------------|----------|--------|
|                                                                                                   |   | Parent                       |     |   | Guarantor |   |   | Non-Guarantor |   |   | Eliminations |   |   | Consolidated |   |   |
| Cash flows from operating activities:                                                                  |   |                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                      |   | $                            | (11,516  | )      |   | $ | 1,348 |   |   | $ | 21,016 |   |   | $ | (22,364 | ) |   | $ | (11,516 | ) |   |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:     |   |                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred income taxes                                                                                  |   |                         | (2       | )      |   |   | - |   |   |   | (14,054 | ) |   |   | - |   |   |   | (14,056 | ) |   |
| Depreciation, amortization and impairment                                                              |   |                         | 2,221    |   |   |   | 14,762 |   |   |   | 829 |   |   |   | - |   |   |   | 17,812 |   |   |
| Share-based compensation                                                                               |   |                         | 1,350    |   |   |   | 1,121 |   |   |   | 152 |   |   |   | - |   |   |   | 2,623 |   |   |
| Change in contingent consideration for acquisitions                                                    |   |                         | -        |   |   |   | 113 |   |   |   | - |   |   |   | - |   |   |   | 113 |   |   |
| Amortization of notes payable issuance costs and discount                                              |   |                         | 1,445    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,445 |   |   |
| Realized (gain) loss on investment                                                                     |   |                         | -        |   |   |   | - |   |   |   | (506 | ) |   |   | - |   |   |   | (506 | ) |   |
| Provision for doubtful accounts receivable, sales returns and non-trade receivables, net of recoveries |   |                         | -        |   |   |   | 400 |   |   |   | 480 |   |   |   | - |   |   |   | 880 |   |   |
| Net change in assets and liabilities (net of effects of acquisitions)                                  |   |                         | (21,541  | )      |   |   | 11,487 |   |   |   | (3,100 | ) |   |   | 22,364 |   |   |   | 9,210 |   |   |
| Net cash provided by (used in) operating activities                                                    |   |                         | (28,043  | )      |   |   | 29,231 |   |   |   | 4,817 |   |   |   | - |   |   |   | 6,005 |   |   |
| Cash flows from investing activities:                                                                  |   |                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid for acquisitions, net of cash acquired                                                       |   |                         | (211,367 | )      |   |   | (4,845 | ) |   |   | - |   |   |   | - |   |   |   | (216,212 | ) |   |
| Purchases of property, equipment, and leasehold improvements                                           |   |                         | (139     | )      |   |   | (1,220 | ) |   |   | (133 | ) |   |   | - |   |   |   | (1,492 | ) |   |
| Proceeds from sale of property and equipment                                                           |   |                         | -        |   |   |   | 6,124 |   |   |   | - |   |   |   | - |   |   |   | 6,124 |   |   |
| Intercompany advances                                                                                  |   |                         | 8,518    |   |   |   | - |   |   |   | - |   |   |   | (8,518 | ) |   |   | - |   |   |
| Change in restricted cash                                                                              |   |                         | (415     | )      |   |   | (673 | ) |   |   | - |   |   |   | - |   |   |   | (1,088 | ) |   |
| Distribution from equity investment                                                                    |   |                         | -        |   |   |   | - |   |   |   | 606 |   |   |   | - |   |   |   | 606 |   |   |
| Net cash provided by (used in) investing activities                                                    |   |                         | (203,403 | )      |   |   | (614 | ) |   |   | 473 |   |   |   | (8,518 | ) |   |   | (212,062 | ) |   |
| Cash flows from financing activities:                                                                  |   |                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intercompany advances                                                                                  |   |                         | -        |   |   |   | (2,353 | ) |   |   | (6,165 | ) |   |   | 8,518 |   |   |   | - |   |   |
| Proceeds from issuance of notes payable, net of discount of $5,468                                     |   |                         | 194,532  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 194,532 |   |   |
| Proceeds from issuance of stock                                                                        |   |                         | 41,750   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 41,750 |   |   |
| Note and stock issuance costs paid                                                                     |   |                         | (9,897   | )      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (9,897 | ) |   |
| Proceeds from exercise of options and employee stock purchase plan                                     |   |                         | 160      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 160 |   |   |
| Repurchases of stock                                                                                   |   |                         | (26      | )      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (26 | ) |   |
| Principal payments on capital leases                                                                   |   |                         | -        |   |   |   | (142 | ) |   |   | - |   |   |   | - |   |   |   | (142 | ) |   |
| Net cash provided by (used in) financing activities                                                    |   |                         | 226,519  |   |   |   | (2,495 | ) |   |   | (6,165 | ) |   |   | 8,518 |   |   |   | 226,377 |   |   |
| Net increase (decrease) in cash and cash equivalents                                                   |   |                         | (4,927   | )      |   |   | 26,122 |   |   |   | (875 | ) |   |   | - |   |   |   | 20,320 |   |   |
| Cash and cash equivalents (net of restricted cash), beginning of period                                |   |                         | 5,113    |   |   |   | 8,792 |   |   |   | 5,157 |   |   |   | - |   |   |   | 19,062 |   | (1) |
| Cash and cash equivalents (net of restricted cash), end of period                                      |   | $                            | 186      |   |   | $ | 34,914 |   |   | $ | 4,282 |   |   | $ | - |   |   | $ | 39,382 |   | (2) |

|   | (1) | Net of restricted cash of $559 at December 31, 2009.                                                                                                                             |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Net of restricted cash of $1647 at December 31, 2010.                                                                                                                             |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

|                                                                                 |   | Year Ended December 31, 2009 |    |   |
|--------------------------------------------------------------------------------------|--------|------------------------------|---------|--------|
|                                                                                 |   | Parent                       |    |   | Guarantors |   |   | Non-Guarantors |   |   | Eliminations |   |   | Consolidated |   |   |
| Cash flows from operating activities:                                                |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                    |   | $                            | 285     |   |   | $ | (34 | ) |   | $ | 5,739 |   |   | $ | (5,705 | ) |   | $ | 285 |   |   |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation, amortization and impairment                                            |   |                         | 884     |   |   |   | 3,530 |   |   |   | 1,675 |   |   |   | - |   |   |   | 6,089 |   |   |
| Share-based compensation                                                             |   |                         | 654     |   |   |   | 680 |   |   |   | 352 |   |   |   | - |   |   |   | 1,686 |   |   |
| Amortization of note payable issuance costs & discount                           |   |                         | 1,533   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,533 |   |   |
| Realized loss on investment                                                          |   |                         | -       |   |   |   | - |   |   |   | 3,624 |   |   |   | - |   |   |   | 3,624 |   |   |
| Provision for doubtful accounts receivable and sales returns, net of recoveries      |   |                         | -       |   |   |   | 410 |   |   |   | 6 |   |   |   | - |   |   |   | 416 |   |   |
| Net change in assets and liabilities (net of effects of acquisitions)                |   |                         | (14,241 | )      |   |   | 4,054 |   |   |   | (10,121 | ) |   |   | 5,705 |   |   |   | (14,603 | ) |   |
| Net cash provided by (used in) operating activities                                  |   |                         | (10,885 | )      |   |   | 8,640 |   |   |   | 1,275 |   |   |   | - |   |   |   | (970 | ) |   |
|                                                                                 |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid for acquisitions, net of cash acquired                                     |   |                         | (1,502  | )      |   |   | (1,250 | ) |   |   | - |   |   |   | - |   |   |   | (2,752 | ) |   |
| Purchases of property, equipment, and leasehold improvements                         |   |                         | -       |   |   |   | (583 | ) |   |   | (538 | ) |   |   | - |   |   |   | (1,121 | ) |   |
| Intercompany advances                                                                |   |                         | (3,039  | )      |   |   | - |   |   |   | - |   |   |   | 3,039 |   |   |   | - |   |   |
| Change in restricted cash                                                            |   |                         | 338     |   |   |   | (150 | ) |   |   | - |   |   |   | - |   |   |   | 188 |   |   |
| Proceeds from sale of equity investment                                              |   |                         | -       |   |   |   | - |   |   |   | 886 |   |   |   | - |   |   |   | 886 |   |   |
| Net cash provided by (used in) investing activities                                  |   |                         | (4,203  | )      |   |   | (1,983 | ) |   |   | 348 |   |   |   | 3,039 |   |   |   | (2,799 | ) |   |
|                                                                                 |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intercompany advances                                                                |   |                         | -       |   |   |   | 4,119 |   |   |   | (1,080 | ) |   |   | (3,039 | ) |   |   | - |   |   |
| Proceeds from issuance of Common Stock                                               |   |                         | 25,175  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 25,175 |   |   |
| Proceeds from exercise of options and employee stock purchase plan                   |   |                         | 110     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 110 |   |   |
| Principal payments on notes                                                          |   |                         | (15,000 | )      |   |   | (4,570 | ) |   |   | - |   |   |   | - |   |   |   | (19,570 | ) |   |
| Principal payments in capital leases                                                 |   |                         | -       |   |   |   | (111 | ) |   |   | - |   |   |   | - |   |   |   | (111 | ) |   |
| Net cash provided by (used in) financing activities                                  |   |                         | 10,285  |   |   |   | (562 | ) |   |   | (1,080 | ) |   |   | (3,039 | ) |   |   | 5,604 |   |   |
|                                                                                 |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                 |   |                         | (4,803  | )      |   |   | 6,095 |   |   |   | 543 |   |   |   | - |   |   |   | 1,835 |   |   |
| Cash and cash equivalents (net of restricted cash), beginning of period              |   |                         | 9,916   |   |   |   | 2,697 |   |   |   | 4,614 |   |   |   | - |   |   |   | 17,227 |   | (1) |
| Cash and cash equivalents (net of restricted cash), end of period                    |   | $                            | 5,113   |   |   | $ | 8,792 |   |   | $ | 5,157 |   |   | $ | - |   |   | $ | 19,062 |   | (2) |

|   | (1) | Net of restricted cash of $621 at December 31, 2008.                                                                                                                              |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Net of restricted cash of $559 at December 31, 2009.                                                                                                                                |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (17) | Quarterly Results (unaudited) |
|------|-------------------------------|

|                                               |   | 2011 Quarterly Results |   |
|----------------------------------------------------|--------|------------------------|--------|
|                                               |   | March 31               |   |   | June 30 |   |   | September 30 |   |   | December 31 |   |
| Net sales                                          |   | $                      | 52,672 |   |   | $ | 55,592 |   |   | $ | 60,077 |   |   | $ | 64,087 |   |
| Gross margin                                       |   |                   | 30,569 |   |   |   | 36,861 |   |   |   | 36,128 |   |   |   | 40,216 |   |
| Income (loss) before income taxes                  |   |                   | (744   | ) |   |   | 341 |   |   |   | (1,255 | ) |   |   | 92 |   |
| Net income (loss)                                  |   |                   | (1,589 | ) |   |   | (1,685 | ) |   |   | (1,013 | ) |   |   | (944 | ) |
| Net income (loss) attributable to Merge            |   |                   | (1,589 | ) |   |   | (1,685 | ) |   |   | (995 | ) |   |   | (952 | ) |
| Net income (loss) available to common shareholders |   |                   | (3,155 | ) |   |   | (3,272 | ) |   |   | (995 | ) |   |   | (952 | ) |
| Basic income (loss) per share                      |   | $                      | (0.04  | ) |   | $ | (0.04 | ) |   | $ | (0.01 | ) |   | $ | (0.01 | ) |
| Diluted income (loss) per share                    |   |                   | (0.04  | ) |   |   | (0.04 | ) |   |   | (0.01 | ) |   |   | (0.01 | ) |
|                                               |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   | 2010 Quarterly Results |   |
|                                               |   | March 31               |   |   | June 30 |   |   | September 30 |   |   | December 31 |   |
| Net sales                                          |   | $                      | 19,970 |   |   | $ | 29,003 |   |   | $ | 45,189 |   |   | $ | 46,170 |   |
| Gross margin                                       |   |                   | 13,554 |   |   |   | 12,989 |   |   |   | 24,451 |   |   |   | 24,775 |   |
| Income (loss) before income taxes                  |   |                   | (3,104 | ) |   |   | (14,903 | ) |   |   | (3,459 | ) |   |   | (3,696 | ) |
| Net income (loss)                                  |   |                   | (3,152 | ) |   |   | (14,961 | ) |   |   | (3,446 | ) |   |   | 10,043 |   |
| Net income (loss) available to common shareholders |   |                   | (3,152 | ) |   |   | (30,905 | ) |   |   | (5,012 | ) |   |   | 8,477 |   |
| Basic income (loss) per share                      |   | $                      | (0.04  | ) |   | $ | (0.39 | ) |   | $ | (0.06 | ) |   | $ | 0.10 |   |
| Diluted income (loss) per share                    |   |                   | (0.04  | ) |   |   | (0.39 | ) |   |   | (0.06 | ) |   |   | 0.10 |   |

----

INDEX

|              | /s/ BDO USA, LLP |
|-------------------|------------------|
| Chicago, Illinois |             |
| February 27, 2012 |             |

----

INDEX

|                                                                                                                                                                                   |   | (Successor Company) |          |   | (Successor Company) |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|---------------|--------|---------------------|--------|
|                                                                                                                                                                                   |   | December 31,        |          |   | December 31,        |   |
|                                                                                                                                                                                   |   | 2011                |          |   | 2010                |   |
| ASSETS                                                                                                                                                                                 |   |                |          |   |                |   |
| Current assets:                                                                                                                                                                        |   |                |          |   |                |   |
|                                                                                                                                                                                   |   |                |          |   |                |   |
| Cash and cash equivalents, including restricted cash of $163 and $963 at December 31, 2011 and 2010, respectively                                                                      |   | $                   | 17,297        |   |                | $      | 27,838 |   |
| Accounts receivable, net of allowance for doubtful accounts and sales returns of $2,726 and $1,011 at December 31, 2011 and 2010, respectively                                         |   |                | 51,468        |   |                |   | 41,809 |   |
| Inventory                                                                                                                                                                              |   |                | 2,977         |   |                |   | 2,555 |   |
| Prepaid expenses and other current assets                                                                                                                                              |   |                | 23,178        |   |                |   | 9,763 |   |
| Advances to parent                                                                                                                                                                     |   |                | 46,618        |   |                |   | - |   |
| Total current assets                                                                                                                                                                   |   |                | 141,538       |   |                |   | 81,965 |   |
| Property and equipment:                                                                                                                                                                |   |                |          |   |                |   |   |   |
| Computer equipment and software                                                                                                                                                        |   |                | 5,565         |   |                |   | 4,824 |   |
| Furniture and other                                                                                                                                                                    |   |                | 1,482         |   |                |   | 1,023 |   |
|                                                                                                                                                                                   |   |                | 7,047         |   |                |   | 5,847 |   |
| Less accumulated depreciation                                                                                                                                                          |   |                | 4,371         |   |                |   | 2,433 |   |
| Property and equipment, net                                                                                                                                                            |   |                | 2,676         |   |                |   | 3,414 |   |
| Purchased and developed software, net of accumulated amortization of $6,260 and $2,966 at December 31, 2011 and 2010, respectively                                                     |   |                | 17,502        |   |                |   | 20,636 |   |
| Other intangibles, net of accumulated amortization of $13,018 and $4,774 at December 31, 2011 and 2010, respectively                                                                   |   |                | 32,985        |   |                |   | 43,916 |   |
| Goodwill                                                                                                                                                                               |   |                | 154,218       |   |                |   | 152,334 |   |
| Other assets                                                                                                                                                                           |   |                | 9,287         |   |                |   | 12,622 |   |
| Total assets                                                                                                                                                                           |   | $                   | 358,205       |   |                | $      | 314,887 |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                   |   |                |          |   |                |   |   |   |
| Current liabilities:                                                                                                                                                                   |   |                |          |   |                |   |   |   |
| Accounts payable and accrued expenses                                                                                                                                                  |   |                | 20,075        |   |                | $      | 18,905 |   |
| Accrued employee compensation and benefits                                                                                                                                             |   |                | 4,033         |   |                |   | 3,171 |   |
| Advances from parent                                                                                                                                                                   |   |                | -             |   |                |   | 5,147 |   |
| Interest payable                                                                                                                                                                       |   |                | 4,935         |   |                |   | 3,917 |   |
| Leases payable, current portion                                                                                                                                                        |   |                | 500           |   |                |   | 639 |   |
| Deferred revenue, current portion                                                                                                                                                      |   |                | 41,611        |   |                |   | 41,712 |   |
| Total current liabilities                                                                                                                                                              |   |                | 71,153        |   |                |   | 73,491 |   |
| Notes payable, long-term                                                                                                                                                               |   |                | 249,371       |   |                |   | 195,077 |   |
| Deferred revenue and other long term liabilities                                                                                                                                       |   |                | 7,000         |   |                |   | 5,849 |   |
| Total liabilities                                                                                                                                                                      |   |                | 327,524       |   |                |   | 274,417 |   |
| Shareholders' equity:                                                                                                                                                                  |   |                |          |   |                |   |   |   |
| Preferred Stock, $0.001 par value: 2,000,000 shares authorized; zero shares issued and outstanding at December 31, 2011 and 2010                                                       |   |                | -             |   |                |   | - |   |
| Common stock, $0.001 par value: 1,000 and 1,000 shares authorized and 100 and 100 shares issued and outstanding at December 31, 2011 and 2010, respectively Additional paid-in capital |   |                |  113,652 |   |                |   |  111,565 |   |
| Accumulated deficit                                                                                                                                                                    |   |                | (82,971       | )      |                |   | (71,095 | ) |
| Total shareholders' equity                                                                                                                                                             |   |                | 30,681        |   |                |   | 40,470 |   |
| Total liabilities and shareholders' equity                                                                                                                                             |   | $                   | 358,205       |   |                | $      | 314,887 |   |

----

INDEX

|                                                           |   | Year Ended          |    |   | Periods Ended       |   |    | Year Ended            |   |
|----------------------------------------------------------------|--------|---------------------|---------|--------|---------------------|--------|---------|-----------------------|--------|
|                                                           |   | (Successor Company) |    |   | (Successor Company) |   |    | (Predecessor Company) |   |   | (Predecessor Company) |   |
|                                                           |   | December 31,        |    |   | December 31,        |   |    | April 27,             |   |   | December 31, |   |
|                                                           |   | 2011                |    |   | 2010                |   |    | 2010                  |   |   | 2009 |   |
|                                                           |   |                |    |   |                |   |    |                  |   |   |   |   |
| Net sales:                                                     |   |                |    |   |                |   |    |                  |   |   |   |   |
| Software licenses and system sales                             |   | $                   | 50,153  |   |                | $      | 20,983  |                  |   | $ | 7,525 |   |   | $ | 17,120 |   |
| Maintenance and services                                       |   |                | 112,423 |   |                |   | 64,645  |                  |   |   | 29,191 |   |   |   | 72,022 |   |
| Total net sales                                                |   |                | 162,576 |   |                |   | 85,628  |                  |   |   | 36,716 |   |   |   | 89,142 |   |
| Cost of sales:                                                 |   |                |    |   |                |   |    |                  |   |   |   |   |   |   |   |   |
| Software licenses and system sales                             |   |                | 27,843  |   |                |   | 13,863  |                  |   |   | 3,411 |   |   |   | 11,467 |   |
| Maintenance and services                                       |   |                | 35,089  |   |                |   | 25,645  |                  |   |   | 12,753 |   |   |   | 31,469 |   |
| Depreciation, amortization and impairment                      |   |                | 7,032   |   |                |   | 7,115   |                  |   |   | 1,403 |   |   |   | 3,157 |   |
| Total cost of sales                                            |   |                | 69,964  |   |                |   | 46,623  |                  |   |   | 17,567 |   |   |   | 46,093 |   |
| Gross margin                                                   |   |                | 92,612  |   |                |   | 39,005  |                  |   |   | 19,149 |   |   |   | 43,049 |   |
| Operating costs and expenses:                                  |   |                |    |   |                |   |    |                  |   |   |   |   |   |   |   |   |
| Selling, general and administrative                            |   |                | 47,928  |   |                |   | 22,708  |                  |   |   | 15,798 |   |   |   | 25,056 |   |
| Research and development                                       |   |                | 13,365  |   |                |   | 9,468   |                  |   |   | 6,486 |   |   |   | 14,562 |   |
| Acquisition costs                                              |   |                | -       |   |                |   | 36      |                  |   |   | 8,439 |   |   |   | 3,028 |   |
| Depreciation and amortization                                  |   |                | 10,505  |   |                |   | 4,514   |                  |   |   | 787 |   |   |   | 2,859 |   |
| Restructuring, severance and impairment charges                |   |                | 68      |   |                |   | 4,565   |                  |   |   | - |   |   |   | 3,824 |   |
| Total operating costs and expenses                             |   |                | 71,866  |   |                |   | 41,291  |                  |   |   | 31,510 |   |   |   | 49,329 |   |
| Operating income (loss)                                        |   |                | 20,746  |   |                |   | (2,286  | )                     |   |   | (12,361 | ) |   |   | (6,280 | ) |
| Other income (expense):                                        |   |                |    |   |                |   |    |                  |   |   |   |   |   |   |   |   |
| Interest expense                                               |   |                | (29,349 | )      |                |   | (17,211 | )                     |   |   | (8 | ) |   |   | (37 | ) |
| Interest income                                                |   |                | 488     |   |                |   | 31      |                  |   |   | 13 |   |   |   | 769 |   |
| Loss on sale of investments                                    |   |                | -       |   |                |   | -       |                  |   |   | - |   |   |   | (9 | ) |
| Other, net                                                     |   |                | (2,172  | )      |                |   | (38     | )                     |   |   | (28 | ) |   |   | (23 | ) |
| Total other income (expense)                                   |   |                | (31,033 | )      |                |   | (17,218 | )                     |   |   | (23 | ) |   |   | 700 |   |
| Loss before income taxes                                       |   |                | (10,287 | )      |                |   | (19,504 | )                     |   |   | (12,384 | ) |   |   | (5,580 | ) |
| Income tax expense (benefit)                                   |   |                | 1,589   |   |                |   | 591     |                  |   |   | 46 |   |   |   | (1,570 | ) |
| Net loss                                                       |   | $                   | (11,876 | )      |                | $      | (20,095 | )                     |   | $ | (12,430 | ) |   | $ | (4,010 | ) |
|                                                           |   |                |    |   |                |   |    |                  |   |   |   |   |   |   |   |   |
| Net loss per share - basic                                     |   | NM                  | (1)     |   | NM                  | (1)    |    |                  | (0.34  | ) |   |   | (0.11 | ) |
| Weighted average number of common shares outstanding - basic   |   | NM                  | (1)     |   | NM                  | (1)    |    |                  | 37,010 |   |   |   | 35,489 |   |
|                                                           |   |                |    |   |                |   |    |                  |   |   |   |   |   |   |   |   |
| Net loss per share - diluted                                   |   | NM                  | (1)     |   | NM                  | (1)    |    | $                     | (0.34  | ) |   | $ | (0.11 | ) |
| Weighted average number of common shares outstanding - diluted |   | NM                  | (1)     |   | NM                  | (1)    |    |                  | 37,010 |   |   |   | 35,489 |   |

|   | (1) |   Amount is not meaningful as a result of the acquisition by Merge Healthcare Incorporated |
|--------|-----|------------------------------------------------------------------------------------------------------|

----

INDEX

|                                                       |   | Common Stock |       |   |   |   |   |       |   |   | Accumulated |   |   |          |     |   |           |   |   |     |   |   |                |   |
|------------------------------------------------------------|--------|--------------|------------|--------|--------|--------|--------|------------|--------|--------|-------------|--------|--------|---------------|----------|--------|----------------|--------|--------|----------|--------|--------|---------------------|--------|
|                                                       |   |         |       |   |   |   |   | Additional |   |   |        |   |   | Other         |     |   |           |   |   |     |   |   | Total               |   |   |   |   |
|                                                       |   | Shares       |       |   | Issued |   |   | Paid-in    |   |   | Accumulated |   |   | Comprehensive |     |   | Treasury Stock |   |   | Treasury |   |   | Shareholders’ |   |   | Comprehensive |   |
|                                                       |   | Issued       |       |   | Amount |   |   | Capital    |   |   | Deficit     |   |   | Income        |     |   | Shares         |   |   | Stock    |   |   | Equity              |   |   | Loss |   |
| (Predecessor Company)                                      |   |         |       |   |   |   |   |       |   |   |        |   |   |          |     |   |           |   |   |     |   |   |                |   |   |   |   |
| Balance at December 31, 2008                          |   |         | 51,473,965 |   |   |   | 51     |       |   |   | 230,905     |   |   |          | (128,549 | )      |           |   | 100    |     |   |   | (16,270,088         | )      |   |   | (47,212 | ) |   |   | 55,295 |   |   | $ | (30,031 | ) |
| Issuance of restricted stock                               |   |         | 60,690     |   |   |   | -      |       |   |   | 118         |   |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 118 |   |   |   |   |   |
| Exercise of stock options and issuance of shares under the |   |         |       |   |   |   |   |       |   |   |        |   |   |          |     |   |           |   |   |     |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Employee Stock Purchase Plan                               |   |         | 1,259,451  |   |   |   | 1      |       |   |   | 2,397       |   |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 2,398 |   |   |   |   |   |
| Share-based compensation expense                           |   |         | -          |   |   |   | -      |       |   |   | 1,920       |   |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 1,920 |   |   |   |   |   |
| Repurchase of treasury stock                               |   |         | -          |   |   |   | -      |       |   |   | -           |   |   |          | -        |   |           |   | -      |     |   |   | (87,766             | )      |   |   | (141 | ) |   |   | (141 | ) |   |   |   |   |
| Unrealized loss on marketable securities                   |   |         | -          |   |   |   | -      |       |   |   | -           |   |   |          | -        |   |           |   | (131   | )        |   |   | -                   |   |   |   | - |   |   |   | (131 | ) |   |   | (131 | ) |
| Foreign currency translation adjustment                    |   |         | -          |   |   |   | -      |       |   |   | -           |   |   |          | -        |   |           |   | 6      |     |   |   | -                   |   |   |   | - |   |   |   | 6 |   |   |   | 6 |   |
| Net loss                                                   |   |         | -          |   |   |   | -      |       |   |   | -           |   |   |          | (4,010   | )      |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | (4,010 | ) |   |   | (4,010 | ) |
| Balance at December 31, 2009                          |   |         | 52,794,106 |   |   |   | 52     |       |   |   | 235,340     |   |   |          | (132,559 | )      |           |   | (25    | )        |   |   | (16,357,854         | )      |   |   | (47,353 | ) |   |   | 55,455 |   |   | $ | (4,135 | ) |
| Stock issued under ESPP                                    |   |         | 75,899     |   |   |   | -      |       |   |   | 189         |   |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 189 |   |   |   |   |   |
| Exercise of stock options                                  |   |         | 590,084    |   |   |   | 1      |       |   |   | 1,331       |   |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 1,332 |   |   |   |   |   |
| Share-based compensation expense                           |   |         | -          |   |   |   |   |       |   |   | 1,423       |   |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 1,423 |   |   |   |   |   |
| Payments made to stock option and restricted stock holders |   |         | (92,245    | )      |   |   | -      |       |   |   | (22,906     | )      |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | (22,906 | ) |   |   |   |   |
| Net loss                                                   |   |         | -          |   |   |   | -      |       |   |   | -           |   |   |          | (12,430  | )      |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | (12,430 | ) |   |   | (12,430 | ) |
| Other comprehensive income                                 |   |         | -          |   |   |   | -      |       |   |   | -           |   |   |          | -        |   |           |   | 31     |     |   |   | -                   |   |   |   | - |   |   |   | 31 |   |   |   | 31 |   |
| Balance at April 27, 2010                                  |   |         | 53,367,844 |   |   | $      | 53     |       |   | $      | 215,377     |   |   | $             | (144,989 | )      |           | $      | 6      |     |   |   | (16,357,854         | )      |   | $ | (47,353 | ) |   | $ | 23,094 |   |   | $ | (12,399 | ) |
| (Successor Company, as adjusted, see Note B)               |   |         |       |   |   |   |   |       |   |   |        |   |   |          |     |   |           |   |   |     |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment by Merge                                        |   |         | 100        |   |   | $      | -      |       |   | $      | 39,743      |   |   | $             | -        |   |           | $      | -      |     |   |   | -                   |   |   | $ | - |   |   | $ | 39,743 |   |   |   |   |   |
| Entities merged                                            |   |         | -          |   |   |   | -      |       |   |   | 71,202      |   |   |          | (51,000  | )      |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 20,202 |   |   |   |   |   |
| Share-based compensation expense                           |   |         | -          |   |   |   | -      |       |   |   | 620         |   |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 620 |   |   |   |   |   |
| Net loss                                                   |   |         | -          |   |   |   | -      |       |   |   | -           |   |   |          | (20,095  | )      |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | (20,095 | ) |   |   | (20,095 | ) |
| Balance at December 31, 2010                               |   |         | 100        |   |   |   | -      |       |   |   | 111,565     |   |   |          | (71,095  | )      |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 40,470 |   |   |   | (20,095 | ) |
| Merge investment in insignificant acquisition              |   |         | -          |   |   |   | -      |       |   |   | 326         |   |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 326 |   |   |   |   |   |
| Share-based compensation expense                           |   |         | -          |   |   |   | -      |       |   |   | 1,761       |   |   |          | -        |   |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | 1,761 |   |   |   |   |   |
| Net loss                                                   |   |         | -          |   |   |   | -      |       |   |   | -           |   |   |          | (11,876  | )      |           |   | -      |     |   |   | -                   |   |   |   | - |   |   |   | (11,876 | ) |   |   | (11,846 | ) |
| Balance at December 31, 2011                               |   |         | 100        |   |   | $      | -      |       |   | $      | 113,652     |   |   | $             | (82,971  | )      |           | $      | -      |     |   | $      | -                   |   |   | $ | - |   |   | $ | 30,681 |   |   | $ | (11,846 | ) |

----

INDEX

|                                                                                                   |   | Year Ended          |    |   | Periods Ended       |   |     | Year Ended           |   |
|--------------------------------------------------------------------------------------------------------|--------|---------------------|---------|--------|---------------------|--------|----------|----------------------|--------|
|                                                                                                   |   | (Successor Company) |    |   | (Successor Company) |   |     | Predecessor Company) |   |   | Predecessor Company) |   |
|                                                                                                   |   | December 31,        |    |   | December 31,        |   |     | April 27,            |   |   | December 31, |   |
|                                                                                                   |   | 2011                |    |   | 2010                |   |     | 2010                 |   |   | 2009 |   |
|                                                                                                   |   |                |    |   |                |   |     |                 |   |   |   |   |
| Cash flows from operating activities:                                                                  |   |                |    |   |                |   |     |                 |   |   |   |   |
| Net loss                                                                                               |   | $                   | (11,876 | )      |                | $      | (20,095  | )                    |   | $ | (12,430 | ) |   | $ | (4,010 | ) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities:              |   |                |    |   |                |   |     |                 |   |   |   |   |   |   |   |   |
| Depreciation, amortization and impairment                                                              |   |                | 17,537  |   |                |   | 11,629   |                 |   |   | 2,178 |   |   |   | 6,022 |   |
| Provision for bad debts and sales returns, net of recoveries                                           |   |                | 1,715   |   |                |   | 439      |                 |   |   | 2,032 |   |   |   | 319 |   |
| Loss on disposal of property and equipment                                                             |   |                | -       |   |                |   | -        |                 |   |   | - |   |   |   | 923 |   |
| Non-cash stock based payments                                                                          |   |                | 1,761   |   |                |   | 620      |                 |   |   | 1,423 |   |   |   | 2,038 |   |
| Amortization of notes payable issuance costs and discount                                              |   |                | 2,393   |   |                |   | 1,445    |                 |   |   | - |   |   |   | - |   |
| Deferred income taxes                                                                                  |   |                | 749     |   |                |   | 406      |                 |   |   | - |   |   |   | - |   |
| Change in contingent consideration for acquisitions                                                    |   |                | 345     |   |                |   | (52      | )                    |   |   | - |   |   |   | - |   |
| Changes in operating assets and liabilities, net of effects of acquisitions, mergers and dispositions: |   |                |    |   |                |   |     |                 |   |   |   |   |   |   |   |   |
| Accounts receivable                                                                                    |   |                | (11,373 | )      |                |   | (13,226  | )                    |   |   | (320 | ) |   |   | 180 |   |
| Prepaid expenses, inventory and other current assets                                                   |   |                | (7,174  | )      |                |   | (2,791   | )                    |   |   | (453 | ) |   |   | 1,919 |   |
| Accounts payable and accrued expenses                                                                  |   |                | 903     |   |                |   | 7,659    |                 |   |   | (1,425 | ) |   |   | (3,343 | ) |
| Deferred revenue                                                                                       |   |                | (2,900  | )      |                |   | 15,466   |                 |   |   | (2,029 | ) |   |   | 9,315 |   |
| Unrecognized tax benefits                                                                              |   |                | -       |   |                |   | -        |                 |   |   | - |   |   |   | (1,379 | ) |
| Net cash provided by (used in) operating activities                                                    |   |                | (7,920  | )      |                |   | 1,500    |                 |   |   | (11,024 | ) |   |   | 11,984 |   |
|                                                                                                   |   |                |    |   |                |   |     |                 |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                  |   |                |    |   |                |   |     |                 |   |   |   |   |   |   |   |   |
| Cash paid for acquisitions, net of cash acquired                                                       |   |                | (1,726  | )      |                |   | (3,191   | )                    |   |   | - |   |   |   | (20,698 | ) |
| Purchases of property, equipment, and leasehold improvements                                           |   |                | (1,352  | )      |                |   | (434     | )                    |   |   | (144 | ) |   |   | (729 | ) |
| Sale of facility                                                                                       |   |                | -       |   |                |   | 6,124    |                 |   |   | - |   |   |   | - |   |
| Change in restricted cash, net of effects of mergers                                                   |   |                | 800     |   |                |   | (800     | )                    |   |   | - |   |   |   | - |   |
| Advances to parent                                                                                     |   |                | (51,575 | )      |                |   | -        |                 |   |   | - |   |   |   | - |   |
| Purchases of held-to-maturity securities                                                               |   |                | -       |   |                |   | -        |                 |   |   | - |   |   |   | (60,534 | ) |
| Maturities of held-to-maturity securities                                                              |   |                | -       |   |                |   | -        |                 |   |   | 7,964 |   |   |   | 126,833 |   |
| Purchases of available-for-sale securities                                                             |   |                | -       |   |                |   | -        |                 |   |   | - |   |   |   | (106,335 | ) |
| Sales of available-for-sale securities                                                                 |   |                | -       |   |                |   | -        |                 |   |   | 30,924 |   |   |   | 48,641 |   |
| Net cash provided by (used in) investing activities                                                    |   |                | (53,853 | )      |                |   | 1,699    |                 |   |   | 38,744 |   |   |   | (12,822 | ) |
|                                                                                                   |   |                |    |   |                |   |     |                 |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                  |   |                |    |   |                |   |     |                 |   |   |   |   |   |   |   |   |
| Principal payments on capital leases                                                                   |   |                | -       |   |                |   | (92      | )                    |   |   | - |   |   |   | - |   |
| Exercise of stock options and ESPP                                                                     |   |                | -       |   |                |   | -        |                 |   |   | 1,526 |   |   |   | 2,398 |   |
| Repurchase of Common Stock                                                                             |   |                | -       |   |                |   | -        |                 |   |   | (22,906 | ) |   |   | (141 | ) |
| Proceeds from issuance of notes, net of discount                                                       |   |                | 53,560  |   |                |   | 194,532  |                 |   |   | - |   |   |   | - |   |
| Note issuance costs                                                                                    |   |                | (1,528  | )      |                |   | (9,015   | )                    |   |   | - |   |   |   | - |   |
| Capital contribution by Merge                                                                          |   |                | -       |   |                |   | 39,743   |                 |   |   | - |   |   |   | - |   |
| Payments to acquire outstanding shares                                                                 |   |                | -       |   |                |   | (223,910 | )                    |   |   | - |   |   |   | - |   |
| Net cash provided by (used in) financing activities                                                    |   |                | 52,032  |   |                |   | 1,258    |                 |   |   | (21,380 | ) |   |   | 2,257 |   |
|                                                                                                   |   |                |    |   |                |   |     |                 |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                   |   |                | (9,741  | )      |                |   | 4,457    |                 |   |   | 6,340 |   |   |   | 1,419 |   |
| Cash and cash equivalents, beginning of period                                                         |   |                | 26,875  |   |                |   | 22,418   |                 |   |   | 8,785 |   |   |   | 7,366 |   |
| Cash and cash equivalents, end of period (1)                                                           |   | $                   | 17,134  | (1)    |                | $      | 26,875   | (2)                  |   | $ | 15,125 |   |   | $ | 8,785 |   |

|   | (1) | Cash net of restricted cash of $163 as of December 31, 2011                                                                                                                                      |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Cash net of restricted cash of $963 as of December 31, 2010                                                                                                                                  |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

| A. | Nature of Operations |
|----|----------------------|

| B.  | Change in Reporting Entity |
|----------|----------------------------|

| C.  | Segment Reporting |
|----------|-------------------|

| D.  | Summary of Significant Accounting Policies |
|----------|--------------------------------------------|

----

INDEX

| Notes, net of discount          |   | $      | 194,532 |   |
|---------------------------------|--------|--------|---------|--------|
| Debt issuance costs             |   |   | (9,015  | )      |
| Investment by Merge             |   |   | 38,393  |   |
| Total acquisition consideration |   | $      | 223,910 |   |

|   | · | Interest expense on the Notes, as well as the applicable amortization of discount and debt issuance costs; |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | Share-based compensation expense for Merge stock options issued to MHSI employees; |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | Income tax expense calculated as if MHSI were to file income tax returns as a stand-alone company; and |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | Corporate administration costs of Merge (excluding public company stewardship costs), which are allocated to MHSI based on revenues.  The Company believes this allocation reasonably reflects the usage of resources of MHSI. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

----

INDEX

|                                    |   | Year Ended          |   |   | Periods Ended       |   |   | Year Ended            |   |
|-----------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|-----------------------|--------|
|                                    |   | (Successor Company) |   |   | (Successor Company) |   |   | (Predecessor Company) |   |   | (Predecessor Company) |   |
|                                    |   | December 31,        |   |   | December 31,        |   |   | April 27,             |   |   | December 31, |   |
|                                    |   | 2011                |   |   | 2010                |   |   | 2010                  |   |   | 2009 |   |
|                                    |   |                |   |   |                |   |   |                  |   |   |   |   |
| Balance at beginning of period          |   | $                   | 1,011  |   |                | $      | 1,082  |                  |   | $ | 335 |   |   | $ | 158 |   |
| Additions charged to costs and expenses |   |                | 1,715  |   |                |   | 439    |                  |   |   | 2,032 |   |   |   | 319 |   |
| Reductions (a)                          |   |                | -      |   |                |   | (510   | )                     |   |   | (2,367 | ) |   |   | (142 | ) |
|                                    |   |                |   |   |                |   |   |                  |   |   |   |   |   |   |   |   |
| Balance at end of period                |   | $                   | 2,726  |   |                | $      | 1,011  |                  |   | $ | - |   |   | $ | 335 |   |

| (a)  | Write-offs, returns and discounts, net of recoveries.                                                                                                                                               |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

| Rollforward of Level 2 Investments           |   |   |    |
|----------------------------------------------|--------|--------|---------|
|                                         |   | 2010   |    |
| (Predecessor Company)                        |   |   |    |
| Balance at January 1                         |   | $      | 26,018  |   |
| Sales of state and municipal obligations     |   |   | (26,018 | ) |
| Balance at April 27                          |   | $      | -       |   |
| (Successor Company, as adjusted, see Note B) |   |   |    |   |
| Balance at December 31                       |   | $      | -       |   |

| Items Measured at Fair Value on a Nonrecurring Basis |
|------------------------------------------------------|

| Inventories |
|-------------|

|              |   | (Successor Company) |   |   | (Successor Company) |   |
|-------------------|--------|---------------------|--------|--------|---------------------|--------|
|              |   | December 31,        |   |   | December 31,        |   |
|              |   | 2011                |   |   | 2010                |   |
|              |   |                |   |   |                |   |
| Raw materials     |   | $                   | 1,696  |   |                | $      | 948 |   |
| Work-in-process   |   |                | 157    |   |                |   | 58 |   |
| Completed systems |   |                | 1,124  |   |                |   | 1,549 |   |
|              |   |                |   |   |                |   |   |   |
| Total inventories |   | $                   | 2,977  |   |                | $      | 2,555 |   |

----

INDEX

----

INDEX

|                                        |   |    | Year Ended          |   |   |   |    | Periods Ended       |   |   | Year Ended |   |
|---------------------------------------------|--------|---------|---------------------|--------|--------|--------|---------|---------------------|--------|--------|------------|--------|
|                                        |   |    | (Successor Company) |   |   |   |    | (Successor Company) |   |   |       |   | (Predecessor Company) |   |   | (Successor Company) |   |
|                                        |   |    | December 31,        |   |   |   |    | December 31,        |   |   |       |   | April 28, |   |   | December 31, |   |
|                                        |   |    | 2011                |   |   |   |    | 2010                |   |   |       |   | 2010 |   |   | 2009 |   |
|                                        |   |    |                |   |   |   |    |                |   |   |       |   |   |   |   |   |   |
|                                        |   |    |                |   |   |   |    |                |   |   |       |   |   |   |   |   |   |
| Numerator — net loss:            |   | $  | (11,876             | )      |   |   | $  | (20,095             | )      |   |       |   | $ | (12,430 | ) |   | $ | (4,010 | ) |
|                                        |   |    |                |   |   |   |    |                |   |   |       |   |   |   |   |   |   |   |   |
| Denominator:                                |   |    |                |   |   |   |    |                |   |   |       |   |   |   |   |   |   |   |   |
| Basic weighted-average shares outstanding   |   |    | NM                  |   | (1     | )      |    | NM                  |   | (1     | )          |   |   | 37,010 |   |   |   | 35,489 |   |
| Effect of dilutive securities               |   |    | NM                  |   | (1     | )      |    | NM                  |   | (1     | )          |   |   | - |   |   |   | - |   |
|                                        |   |    |                |   |   |   |    |                |   |   |       |   |   |   |   |   |   |   |   |
| Diluted weighted-average shares outstanding |   |    | NM                  |   | (1     | )      |    | NM                  |   | (1     | )          |   |   | 37,010 |   |   |   | 35,489 |   |
|                                        |   |    |                |   |   |   |    |                |   |   |       |   |   |   |   |   |   |   |   |
| Loss per share — basic           |   |    | NM                  |   | (1     | )      |    | NM                  |   | (1     | )          |   | $ | (0.34 | ) |   | $ | (0.11 | ) |
| Loss per share — diluted         |   |    | NM                  |   | (1     | )      |    | NM                  |   | (1     | )          |   | $ | (0.34 | ) |   | $ | (0.11 | ) |
|                                        |   |    |                |   |   |   |    |                |   |   |       |   |   |   |   |   |   |   |   |

| (1)  | Not meaningful |
|-----------|----------------|

----

INDEX

| E.  | Recent Accounting Pronouncements |
|----------|----------------------------------|

----

INDEX

| F. | Acquisition |
|----|-------------|

| (amounts in thousands, other than per share info) |   | Year Ended        |    |
|---------------------------------------------------|--------|-------------------|---------|
|                                              |   | December 31, 2009 |    |
| Pro forma revenue                                 |   | $                 | 106,169 |   |
| Pro forma net income (loss)                       |   |              | 2,366   |   |
| Pro forma net income (loss) per share             |   |              |    |   |
| Basic:                                            |   | $                 | 0.07    |   |
| Diluted:                                          |   | $                 | 0.06    |   |
| Weighted average number of shares outstanding     |   |              |    |   |
| Basic:                                            |   |              | 35,489  |   |
| Diluted:                                          |   |              | 36,588  |   |

| G. | Marketable Securities |
|----|-----------------------|

| H.  | Goodwill, Acquired or Developed Software and Other Intangible Assets |
|----------|----------------------------------------------------------------------|

----

INDEX

| (amounts in thousands)                                        |   | Total  |    |
|---------------------------------------------------------------|--------|--------|---------|
| (Predecessor Company)                                         |   |   |    |
| Balance at January 1, 2010                                    |   | $      | 1,213   |   |
| Balance at April 27, 2010                                     |   | $      | 1,213   |   |
|                                                          |   |   |    |   |
| (Successor Company)                                           |   |   |    |   |
| Carrying amounts of the transferring entity at April 28, 2010 |   | $      | 17,049  |   |
| Increase due to AMICAS acquisition                            |   |   | 130,384 |   |
| Increase due to insignificant acquisitions                    |   |   | 4,901   |   |
| Balance at December 31, 2010                                  |   |   | 152,334 |   |
| Increase due to an insignificant acquisition                  |   |   | 1,884   |   |
| Balance at December 31, 2011                                  |   | $      | 154,218 |   |

|                    |   |      |   |   | As of December 31,  |    |
|-------------------------|--------|-----------|--------|--------|---------------------|---------|
|                    |   |      |   |   | 2011                |    |   | 2010 |   |
|                    |   |      |   |   | (Successor Company) |    |   | (Successor Company) |   |
|                    |   | Estimated |   |   | Gross               |    |   |   |   |   | Net |   |   | Gross |   |   |   |   |   | Net |   |
|                    |   | Remaining |   |   | Carrying            |    |   | Accumulated |   |   | Carrying |   |   | Carrying |   |   | Accumulated |   |   | Carrying |   |
|                    |   | Life      |   |   | Amount              |    |   | Amortization |   |   | Value |   |   | Amount |   |   | Amortization |   |   | Value |   |
|                    |   | (Years)   |   |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    |   |      |   |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Goodwill                |   |      |   |   | $                   | 154,218 |   |   | $ | - |   |   | $ | 154,218 |   |   | $ | 152,334 |   |   | $ | - |   |   | $ | 152,334 |   |
|                    |   |      |   |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Developed software      |   |      | 2.0    |   |                | $       | 312 |   |   | $ | (303 | ) |   | $ | 9 |   |   | $ | 312 |   |   | $ | (294 | ) |   | $ | 18 |   |
| Purchased software      |   |      | 6.7    |   |                |    | 23,450 |   |   |   | (5,957 | ) |   |   | 17,493 |   |   |   | 23,290 |   |   |   | (2,672 | ) |   |   | 20,618 |   |
|                    |   |      |   |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    |   |      |   |   |                | $       | 23,762 |   |   | $ | (6,260 | ) |   | $ | 17,502 |   |   | $ | 23,602 |   |   | $ | (2,966 | ) |   | $ | 20,636 |   |
|                    |   |      |   |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Trade names             |   |      | 10.9   |   |                | $       | 1,133 |   |   | $ | (203 | ) |   | $ | 930 |   |   | $ | 4,050 |   |   | $ | (264 | ) |   | $ | 3,786 |   |
| Customer related assets |   |      | 8.9    |   |                |    | 33,580 |   |   |   | (6,084 | ) |   |   | 27,496 |   |   |   | 33,430 |   |   |   | (1,970 | ) |   |   | 31,460 |   |
| Backlog                 |   |      | 4.0    |   |                |    | 8,100 |   |   |   | (5,980 | ) |   |   | 2,120 |   |   |   | 8,110 |   |   |   | (2,245 | ) |   |   | 5,865 |   |
| Non-compete agreements  |   |      | 6.3    |   |                |    | 3,190 |   |   |   | (751 | ) |   |   | 2,439 |   |   |   | 3,100 |   |   |   | (295 | ) |   |   | 2,805 |   |
|                    |   |      |   |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    |   |      |   |   |                | $       | 46,003 |   |   | $ | (13,018 | ) |   | $ | 32,985 |   |   | $ | 48,690 |   |   | $ | (4,774 | ) |   | $ | 43,916 |   |

----

INDEX

| (amounts in thousands)           |   | 2012   |   |   | 2013   |   |   | 2014   |   |   | 2015   |   |   | Thereafter |   |   | Total  |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|--------|--------|
|                             |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |   |   |
| Purchased and developed software |   | $      | 3,296  |   |   | $      | 3,296  |   |   | $      | 3,296  |   |   | $          | 2,372  |   |   | $      | 5,242 |   |   | $ | 17,502 |   |
| Trade names                      |   |   | 98     |   |   |   | 98     |   |   |   | 98     |   |   |       | 98     |   |   |   | 538 |   |   |   | 930 |   |
| Customer related assets          |   |   | 5,339  |   |   |   | 5,239  |   |   |   | 4,489  |   |   |       | 3,685  |   |   |   | 8,744 |   |   |   | 27,496 |   |
| Backlog                          |   |   | 1,334  |   |   |   | 554    |   |   |   | 232    |   |   |       | -      |   |   |   | - |   |   |   | 2,120 |   |
| Non-compete agreements           |   |   | 461    |   |   |   | 461    |   |   |   | 461    |   |   |       | 461    |   |   |   | 595 |   |   |   | 2,439 |   |
|                             |   | $      | 10,528 |   |   | $      | 9,648  |   |   | $      | 8,576  |   |   | $          | 6,616  |   |   | $      | 15,119 |   |   | $ | 50,487 |   |

| I.  | Accounts Payable and Accrued Expenses |
|----------|---------------------------------------|

|                                        |   | December 31,        |   |
|---------------------------------------------|--------|---------------------|--------|
|                                        |   | (Successor Company) |   |   | (Successor Company) |   |
| (amounts in thousands)                      |   | 2011                |   |   | 2010 |   |
|                                        |   |                |   |   |   |   |
| Accounts payable                            |   | $                   | 13,865 |   |   | $ | 4,640 |   |
| Accrued expenses                            |   |                | 5,177  |   |   |   | 12,780 |   |
| Taxes payable                               |   |                | 372    |   |   |   | 119 |   |
| Restructuring accrual                       |   |                | 661    |   |   |   | 1,366 |   |
|                                        |   |                |   |   |   |   |   |   |
| Total accounts payable and accrued expenses |   | $                   | 20,075 |   |   | $ | 18,905 |   |

| J.  | Debt and Operating Leases |
|----------|---------------------------|

----

INDEX

|   | · | Incur additional indebtedness or issue preferred stock; |
|--------|--------|---------------------------------------------------------|

|   | · | Pay dividends or make distributions with respect to capital stock; |
|--------|--------|--------------------------------------------------------------------|

|   | · | Make certain investments or certain other restricted payments; |
|--------|--------|----------------------------------------------------------------|

|   | · | Issue dividends or enter into other payment restrictions affecting certain subsidiaries; |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | Enter into certain sale-leaseback transactions; |
|--------|--------|-------------------------------------------------|

|   | · | Enter into transactions with stockholders or affiliates; |
|--------|--------|----------------------------------------------------------|

|   | · | Guarantee debt; |
|--------|--------|-----------------|

|   | · | Sell assets; |
|--------|--------|--------------|

|   | · | Create liens; |
|--------|--------|---------------|

|   | · | Issue or sell stock of certain subsidiaries; and |
|--------|--------|--------------------------------------------------|

|   | · | Merge or consolidate without meeting certain conditions. |
|--------|--------|----------------------------------------------------------|

| Location               |   | Square Footage |   |   | Annual Lease Payments (in thousands) |   | End of Term |
|------------------------|--------|----------------|--------|--------|-------------------------------------------|--------|-------------|
| Hartland, Wisconsin    |   |           | 81,000 |   |                                      | $      | 694         |   | November 2025 |
| Daytona Beach, Florida |   |           | 36,000 |   |                                      |   | 324         |   | December 2012 |

----

INDEX

| 2012                         |   | $      | 2,467  |   |
|------------------------------|--------|--------|--------|--------|
| 2013                         |   |   | 912    |   |
| 2014                         |   |   | 694    |   |
| 2015                         |   |   | 694    |   |
| 2016                         |   |   | 694    |   |
| Thereafter                   |   |   | 6,189  |   |
| Total minimum lease payments |   | $      | 11,650 |   |

| K.  | Commitments and Contingencies |
|----------|-------------------------------|

----

INDEX

| L.  | Restructuring and Related Costs |
|----------|---------------------------------|

----

INDEX

| (amounts in thousands)                       |   | Severance         |   |   | Facilities |   |   | Relocation |   |   | Total  |   |
|----------------------------------------------|--------|-------------------|--------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
| (Predecessor Company)                        |   | Total Initiatives |   |
| Balance at December 31, 2008                 |   | $                 | -      |   |       | $      | -      |       |   | $      | -      |   |   | $ | - |   |
| Charges to expense                           |   |              | 902    |   |       |   | 951    |       |   |   | -      |   |   |   | 1,853 |   |
| Payments                                     |   |              | (606   | )      |       |   | (440   | )          |   |   | -      |   |   |   | (1,046 | ) |
| Reversed                                     |   |              | (86    | )      |       |   | -      |       |   |   | -      |   |   |   | (86 | ) |
| Balance at December 31, 2009                 |   |              | 210    |   |       |   | 511    |       |   |   | -      |   |   |   | 721 |   |
| Charges to expense                           |   |              | -      |   |       |   | -      |       |   |   | -      |   |   |   | - |   |
| Payments                                     |   |              | (180   | )      |       |   | (158   | )          |   |   | -      |   |   |   | (338 | ) |
| Balance at April 27, 2010                    |   |              | 30     |   |       |   | 353    |       |   |   | -      |   |   |   | 383 |   |
| (Successor Company, as adjusted, see Note B) |   |              |   |   |       |   |   |       |   |   |   |   |   |
| Charges to expense                           |   |              | 1,872  |   |       |   | 1,853  |       |   |   | 505    |   |   |   | 4,230 |   |
| Payments                                     |   |              | (1,667 | )      |       |   | (636   | )          |   |   | (463   | )      |   |   | (2,766 | ) |
| Balance at December 31, 2010                 |   | $                 | 235    |   |       | $      | 1,570  |       |   | $      | 42     |   |   | $ | 1,847 |   |
| Charges to expense                           |   |              | (11    | )      |       |   | 104    |       |   |   | (25    | )      |   |   | 68 |   |
| Payments                                     |   |              | -      |   |       |   | (1,365 | )          |   |   | (17    | )      |   |   | (1,382 | ) |
| Adjustments                                  |   |              | -      |   |       |   | 128    |       |   |   | -      |   |   |   | 128 |   |
| Balance at December 31, 2011                 |   | $                 | 224    |   |       | $      | 437    |       |   | $      | -      |   |   | $ | 661 |   |

| M. | Stockholders’ Equity |
|----|----------------------------|

----

INDEX

|                                                                      |   | Year Ended          |   |   | Periods Ended       |   |   | Year Ended            |   |   |                  |   |
|---------------------------------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|-----------------------|--------|--------|-----------------------|--------|
|                                                                      |   | (Successor Company) |   |   | (Successor Company) |   |   | (Predecessor Company) |   |   | (Predecessor Company) |   |   | (Predecessor Company) |   |
|                                                                      |   | December 31,        |   |   | December 31,        |   |   | April 27,             |   |   | December 31,          |   |   |   |   |
| (amounts in thousands)                                                    |   | 2011                |   |   | 2010                |   |   | 2010                  |   |   | 2009                  |   |   | 2008 |   |
|                                                                      |   |                |   |   |                |   |   |                  |   |   |                  |   |   |   |   |
| Share-based compensation expense included in the statement of operations: |   |                |   |   |                |   |   |                  |   |   |                  |   |   |   |   |
| Cost of revenues, maintenance and service                                 |   | $                   | 207    |   |                | $      | 131    |                  |   | $      | 133                   |   |   | $ | 298 |   |   | $ | 138 |   |
| Research and development                                                  |   |                | (19    | )      |                |   | 80     |                  |   |   | 232                   |   |   |   | 466 |   |   |   | 413 |   |
| Selling, general and administrative                                       |   |                | 1,573  |   |                |   | 409    |                  |   |   | 1,058                 |   |   |   | 1,274 |   |   |   | 973 |   |
| Total                                                                     |   | $                   | 1,761  |   |                | $      | 620    |                  |   | $      | 1,423                 |   |   | $ | 2,038 |   |   | $ | 1,524 |   |

|                                      |   | (Successor Company) |         |   | (Successor Company) |   |         | (Predecessor Company) |   |   | (Predecessor Company) |   |
|-------------------------------------------|--------|---------------------|--------------|--------|---------------------|--------|--------------|-----------------------|--------|--------|-----------------------|--------|
|                                      |   | Year Ended          |         |   | Period Ended        |   |         | Period Ended          |   |   | Year Ended            |   |
|                                      |   | December 31, 2011   |         |   | December 31, 2010   |   |         | April 27, 2010        |   |   | December 31, 2009     |   |
|                                      |   | Merge Stock Option  |         |   | Merge Stock Option  |   |         | Stock Option          |   |   | Employee Stock        |   |   | Stock Option |   |   | Employee Stock |   |
|                                      |   | Plan                |         |   | Plan                |   |         | Plan                  |   |   | Purchase Plan         |   |   | Plan |   |   | Purchase Plan |   |
| Average risk-free interest rate           |   |                | 0.56% - 1.81 | %      |                |   | 0.81% - 2.13 | %                     |   |   | 1.77                  | %      |   |   | 0.28 | % |   |   | 2.03 | % |   |   | 0.28 | % |
| Expected dividend yield                   |   |                | 0.00         | %      |                |   | 0.00         | %                     |   |   | 0.00                  | %      |   |   | 0.00 | % |   |   | 0.00 | % |   |   | 0.00 | % |
| Expected stock price volatility           |   |                | 100.00       | %      |                |   | 100.00       | %                     |   |   | 51.0% - 51.8          | %      |   |   | 72.2 | % |   |   | 51.0% - 55.5 | % |   |   | 72.2 | % |
| Weighted-average expected life (in years) |   |                | 4.0          |   |                |   | 4.0          |                  |   |   | 5.4                   |   |   |   | 0.5 |   |   |   | 5.3 |   |   |   | 0.5 |   |
| Weighted-average fair value               |   | $                   | 3.38         |   |                | $      | 1.75         |                  |   | $      | 1.10                  |   |   | $ | 1.17 |   |   | $ | 1.02 |   |   | $ | 1.17 |   |

----

INDEX

|                                                          |   |      |   |   |   |   |   |           |   |   | Weighted         |   |   |       |   |
|---------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|----------------|--------|--------|------------------|--------|--------|------------|--------|
|                                                          |   | Shares    |   |   |   |   |   | Weighted       |   |   | Average          |   |   | Aggregate  |   |
| (shares in thousands)                                         |   | Available |   |   |   |   |   | Average        |   |   | Remaining        |   |   | Instrinsic |   |
|                                                          |   | for Grant |   |   | Shares |   |   | Exercise Price |   |   | Contractual Term |   |   | Value (1)  |   |
| (Predecessor Company)                                         |   |      |   |   |   |   |   |           |   |   | (Years)          |   |   |       |   |
| Outstanding at December 31, 2008                              |   |      | 3,720  |   |   |   | 8,309  |           |   | $      | 2.88             |   |   |       | 5.65   |   |   | $ | 241 |   |
|                                                          |   |      |   |   |   |   |   |           |   |   |             |   |   |       |   |   |   |   |   |   |
| Granted                                                       |   |      |   |   |   |   | 1,422  |           |   |   | 2.12             |   |   |       |   |   |   |   |   |   |
| Exercised                                                     |   |      |   |   |   |   | (1,059 | )              |   |   | 2.08             |   |   |       |   |   |   |   | 801 |   |
| Forfeited                                                     |   |      |   |   |   |   | (780   | )              |   |   | 6.09             |   |   |       |   |   |   |   |   |   |
| Outstanding at December 31, 2009                              |   |      | 3,077  |   |   |   | 7,892  |           |   | $      | 2.57             |   |   |       | 6.14   |   |   | $ | 22,704 |   |
|                                                          |   |      |   |   |   |   |   |           |   |   |             |   |   |       |   |   |   |   |   |   |
| Granted                                                       |   |      |   |   |   |   | -      |           |   |   | -                |   |   |       |   |   |   |   |   |   |
| Exercised                                                     |   |      |   |   |   |   | -      |           |   |   | -                |   |   |       |   |   |   |   |   |   |
| Forfeited                                                     |   |      |   |   |   |   | (7,892 | )              |   | $      | 2.57             |   |   |       |   |   |   |   |   |   |
| Outstanding at April 27, 2010                                 |   |      | -      |   |   |   | -      |           |   | $      | -                |   |   |       | -      |   |   | $ | - |   |
|                                                          |   |      |   |   |   |   |   |           |   |   |             |   |   |       |   |   |   |   |   |   |
| (Successor Company, as adjusted, see Note B)                  |   |      |   |   |   |   |   |           |   |   |             |   |   |       |   |   |
| Carrying amounts of the transferring entity at April 28, 2010 |   |      |   |   |   |   | 1,107  |           |   | $      | 5.32             |   |   |       | 3.76   |   |   | $ | 366 |   |
| Granted                                                       |   |      |   |   |   |   | 1,765  |           |   |   | 1.74             |   |   |       |   |   |   |   |   |   |
| Exercised                                                     |   |      |   |   |   |   | -      |           |   |   | -                |   |   |       |   |   |   |   |   |   |
| Forfeited                                                     |   |      |   |   |   |   | (614   | )              |   |   | 3.07             |   |   |       |   |   |   |   |   |   |
| Outstanding at December 31, 2010                              |   |      | -      |   |   |   | 2,258  |           |   | $      | 3.44             |   |   |       | 6.09   |   |   | $ | 2,252 |   |
| Transfers                                                     |   |      |   |   |   |   | (211   | )              |   |   |             |   |   |       |   |   |   |   |   |   |
| Granted                                                       |   |      |   |   |   |   | 1,610  |           |   |   | 4.89             |   |   |       |   |   |   |   |   |   |
| Exercised                                                     |   |      |   |   |   |   | (151   | )              |   |   | 3.46             |   |   |       |   |   |   |   |   |   |
| Forfeited                                                     |   |      |   |   |   |   | (375   | )              |   |   | 5.51             |   |   |       |   |   |   |   |   |   |
| Outstanding at December 31, 2011                              |   |      | -      |   |   |   | 3,131  |           |   | $      | 3.90             |   |   |       | 6.21   |   |   | $ | 3,691 |   |
|                                                          |   |      |   |   |   |   |   |           |   |   |             |   |   |       |   |   |   |   |   |   |
| (Predecessor Company)                                         |   |      |   |   |   |   |   |           |   |   |             |   |   |       |   |   |   |   |   |   |
| Options exercisable at December 31, 2009                      |   |      |   |   |   |   | 4,857  |           |   | $      | 2.77             |   |   |       | 4.84   |   |   | $ | 13,010 |   |
| Options exercisable at                                        |   |      |   |   |   |   |   |           |   |   |             |   |   |       |   |   |   |   |   |   |
| April 27, 2010                                                |   |      |   |   |   |   | -      |           |   | $      | -                |   |   |       | -      |   |   | $ | - |   |
| (Successor Company, as adjusted, see Note B)                  |   |      |   |   |   |   |   |           |   |   |             |   |   |       |   |   |
| Options exercisable at April 28, 2010                         |   |      |   |   |   |   | 446    |           |   | $      | 8.73             |   |   |       | 2.37   |   |   | $ | 91 |   |
| Options exercisable at December 31, 2010                      |   |      |   |   |   |   | 495    |           |   | $      | 6.12             |   |   |       | 3.17   |   |   | $ | 334 |   |
| Options exercisable at December 31, 2011                      |   |      |   |   |   |   | 740    |           |   | $      | 3.36             |   |   |       | 4.65   |   |   | $ | 1,369 |   |

| (1) | The aggregate intrinsic value on this table was calculated based on the positive difference between the closing market value of the Company’s common stock on the dates indicated and the exercise price of the underlying options. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

|                                                          |   |       |     |   | Weighted   |   |
|---------------------------------------------------------------|--------|------------|----------|--------|------------|--------|
|                                                          |   | Shares of  |     |   | Average    |   |
|                                                          |   | Restricted |     |   | Grant Date |   |
|                                                          |   | Stock      |     |   | Fair Value |   |
| (Predecessor Company)                                         |   |       |     |   |       |   |
| Restricted at December 31, 2008                               |   |       | 36,269   |   |       | $      | 2.79 |   |
| Granted                                                       |   |       | 60,690   |   |       |   | 2.62 |   |
| Unrestricted                                                  |   |       | (36,269  | )      |       |   | 2.79 |   |
| Restricted at December 31, 2009                               |   |       | 60,690   |   |       |   | 2.62 |   |
| Granted                                                       |   |       | -        |   |       |   | - |   |
| Unrestricted                                                  |   |       | -        |   |       |   | - |   |
| Cancelled                                                     |   |       | (60,690  | )      |       |   | 2.62 |   |
| Restricted at April 27, 2010                                  |   |       | -        |   |       | $      | - |   |
| (Successor Company, as adjusted, see Note B)                  |   |       |     |   |       |
| Carrying amounts of the transferring entity at April 28, 2010 |   |       | 213,332  |   |       | $      | 1.50 |   |
| Granted                                                       |   |       | -        |   |       |   | - |   |
| Unrestricted                                                  |   |       | (213,332 | )      |       |   | 1.50 |   |
| Restricted at December 31, 2010                               |   |       | -        |   |       | $      | - |   |
| Granted                                                       |   |       | -        |   |       |   | - |   |
| Unrestricted                                                  |   |       | -        |   |       |   | - |   |
| Restricted at December 31, 2011                               |   |       | -        |   |       | $      | - |   |

----

INDEX

| N. | Income Taxes |
|----|--------------|

|                                      |   | Year Ended          |   |   | Periods Ended       |   |   | Year Ended            |   |
|-------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|-----------------------|--------|
|                                      |   | (Successor Company) |   |   | (Successor Company) |   |   | (Predecessor Company) |   |   | (Predecessor Company) |   |
|                                      |   | December 31,        |   |   | December 31,        |   |   | April 27,             |   |   |   |   |
| (amounts in thousands)                    |   | 2011                |   |   | 2010                |   |   | 2010                  |   |   | 2009 |   |
|                                      |   |                |   |   |                |   |   |                  |   |   |   |   |
| Income tax (benefit) provision            |   |                |   |   |                |   |   |                  |   |   |   |   |
| Current federal                           |   | $                   | -      |   |                | $      | (83    | )                     |   | $ | - |   |   | $ | (362 | ) |
| Current state                             |   |                | 840    |   |                |   | 268    |                  |   |   | 46 |   |   |   | (1,208 | ) |
| Total current (benefit) provision         |   |                | 840    |   |                |   | 185    |                  |   |   | 46 |   |   |   | (1,570 | ) |
| Deferred federal                          |   |                | 6,926  |   |                |   | 283    |                  |   |   | - |   |   |   | 820 |   |
| Deferred state                            |   |                | 351    |   |                |   | 123    |                  |   |   | - |   |   |   | 197 |   |
| Valuation allowance                       |   |                | (6,528 | )      |                |   | -      |                  |   |   | - |   |   |   | (1,017 | ) |
| Total deferred (benefit) provision        |   |                | 749    |   |                |   | 406    |                  |   |   | - |   |   |   | - |   |
| Total provision (credit) for income taxes |   | $                   | 1,589  |   |                | $      | 591    |                  |   | $ | 46 |   |   | $ | (1,570 | ) |

|                                                            |   | Year Ended          |   |   | Periods Ended       |   |   | Year Ended            |   |
|-----------------------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|-----------------------|--------|
|                                                            |   | (Successor Company) |   |   | (Successor Company) |   |   | (Predecessor Company) |   |   | (Predecessor Company) |   |
|                                                            |   | December 31,        |   |   | December 31,        |   |   | April 27,             |   |   |   |   |
|                                                            |   | 2011                |   |   | 2010                |   |   | 2010                  |   |   | 2009 |   |
| (amounts in thousands)                                          |   |                |   |   |                |   |   |                  |   |   |   |   |
|                                                            |   |                |   |   |                |   |   |                  |   |   |   |   |
| Benefit computed at statutory rates                             |   | $                   | (3,600 | )      |                | $      | (6,826 | )                     |   | $ | (4,351 | ) |   | $ | (2,013 | ) |
| States taxes, net of federal benefit                            |   |                | 987    |   |                |   | 1,121  |                  |   |   | 30 |   |   |   | 226 |   |
| Permanent differences including nondeductible acquisition costs |   |                | 705    |   |                |   | 55     |                  |   |   | 2,953 |   |   |   | 947 |   |
| Nondeductible interest                                          |   |                | 10,197 |   |                |   | 6,058  |                  |   |   | - |   |   |   | - |   |
| AMT refund, net of current payable                              |   |                | -      |   |                |   | (79    | )                     |   |   | - |   |   |   | (362 | ) |
| Change in valuation allowances and other                        |   |                | (6,700 | )      |                |   | 262    |                  |   |   | 1,414 |   |   |   | 1,014 |   |
| Actual income tax benefit                                       |   | $                   | 1,589  |   |                | $      | 591    |                  |   | $ | 46 |   |   | $ | (188 | ) |

----

INDEX

|                                                            |   | December 31,   |    |
|-----------------------------------------------------------------|--------|---------------------|---------|
|                                                            |   | (Successor Company) |    |   | (Successor Company) |   |
| (amounts in thousands)                                          |   | 2011                |    |   | 2010 |   |
|                                                            |   |                |    |   |   |   |
| Deferred income tax assets:                                     |   |                |    |   |   |   |
| Allowance for doubtful accounts                                 |   | $                   | 517     |   |   | $ | 256 |   |
| Accrued expenses                                                |   |                | 179     |   |   |   | 1,413 |   |
| Net operating loss carry forwards                               |   |                | 54,283  |   |   |   | 73,369 |   |
| Credit carry forwards                                           |   |                | 4,781   |   |   |   | 5,430 |   |
| Share-based payment                                             |   |                | 644     |   |   |   | 49 |   |
| Difference between book and tax bases of property and equipment |   |                | 831     |   |   |   | 1,328 |   |
| Other                                                           |   |                | 61      |   |   |   | 244 |   |
|                                                            |   |                | 61,296  |   |   |   | 82,089 |   |
| Less:  Valuation allowance                            |   |                | (41,631 | ) |   |   | (55,423 | ) |
|                                                            |   |                | 19,665  |   |   |   | 26,666 |   |
|                                                            |   |                |    |   |   |   |   |   |
| Deferred income tax liabilities:                                |   |                |    |   |   |   |   |   |
| Acquired/developed software                                     |   |                | 5,139   |   |   |   | 7,032 |   |
| Deferred revenue                                                |   |                | 1,825   |   |   |   | 3,584 |   |
| Intangible assets                                               |   |                | 13,856  |   |   |   | 16,456 |   |
|                                                            |   |                | 20,820  |   |   |   | 27,072 |   |
| Net deferred income tax liability                               |   | $                   | (1,155  | ) |   | $ | (406 | ) |

----

INDEX

| O. | Quarterly Results of Operations (Unaudited) |
|----|---------------------------------------------|

|                                              |   | 2011 Quarterly Results |   |   |    |
|---------------------------------------------------|--------|------------------------|--------|--------|---------|
| (amounts in thousands, except for per share data) |   | (Successor Company)    |   |   |    | (Successor Company) |   |   |   | (Successor Company) |   |   |   | (Successor Company) |   |   |   |
|                                              |   | March 31               |   |   |    | June 30 |   |   |   | September 30 |   |   |   | December 31 |   |   |   |
| Net sales                                         |   | $                      | 38,954 |   |    |   | $ | 38,588 |   |   |   | $ | 42,394 |   |   |   | $ | 42,640 |   |   |   |
| Gross margin                                      |   |                   | 20,665 |   |    |   |   | 23,435 |   |   |   |   | 22,858 |   |   |   |   | 25,654 |   |   |   |
| Income (loss) before income taxes                 |   |                   | (2,277 | )      |    |   |   | (3,902 | ) |   |   |   | (2,759 | ) |   |   |   | (1,349 | ) |   |   |
| Net income (loss )                                |   |                   | (2,449 | )      |    |   |   | (4,146 | ) |   |   |   | (2,539 | ) |   |   |   | (2,742 | ) |   |   |
| Basic income (loss) per share                     |   | NM                     |   | (3     | )  | NM |   | (3 | )  | NM |   | (3 | )  | NM |   | (3 | ) |
| Diluted income (loss) per share                   |   | NM                     |   | (3     | )  | NM |   | (3 | )  | NM |   | (3 | )  | NM |   | (3 | ) |
|                                              |   |                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                              |   | 2010 Quarterly Results |   |
|-----------------------------------|--------|------------------------|--------|
|                              |   | (Predecessor Company)  |   |   | (Predecessor Company) |   |   | (Successor Company) |   |   |   |   | (Successor Company) |   |   |   |   | (Successor Company) |   |
|                              |   | March 31               |   |   | April 27 (1) |   |   | June 30 (2) |   |   |   |   | September 30 |   |   |   |   | December 31 |   |
|                              |   |                   |   |   |   |   |   |   |   | (As adjusted, see Note B) |   |   |   |   | (As adjusted, see Note B) |   |   |   |   | (As adjusted, see Note B) |   |
| Net sales                         |   | $                      | 29,434 |   |   | $ | 7,282 |   |   | $ | 19,233 |   |   |   |   | $ | 33,239 |   |   |   |   | $ | 33,156 |   |
| Gross margin                      |   |                   | 15,953 |   |   |   | 3,196 |   |   |   | 6,539 |   |   |   |   |   | 15,678 |   |   |   |   |   | 16,788 |   |
| Income (loss) before income taxes |   |                   | (1,705 | ) |   |   | (10,679 | ) |   |   | (10,015 | ) |   |   |   |   | (4,778 | ) |   |   |   |   | (4,711 | ) |
| Net income (loss)                 |   |                   | (1,751 | ) |   |   | (10,679 | ) |   |   | (9,966 | ) |   |   |   |   | (4,778 | ) |   |   |   |   | (5,351 | ) |
| Basic income (loss) per share     |   | $                      | (0.05  | ) |   | $ | (0.34 | ) |   | NM |   | (3 | ) |   | NM |   | (3 | ) |   | NM |   |
| Diluted income (loss) per share   |   |                   | (0.05  | ) |   |   | (0.34 | ) |   | NM |   | (3 | ) |   | NM |   | (3 | ) |   | NM |   |

| (1) | Results displayed are for the period April 1, 2010 to April 27, 2010. |
|-----|-----------------------------------------------------------------------|

| (2) | Results displayed are for the period April 28, 2010 to June 30, 2010. |
|-----|-----------------------------------------------------------------------|

| (3) | Amounts are not meaningful due to the acquisition by Merge |
|-----|------------------------------------------------------------|

| P. | Supplemental Disclosure of Cash Flow Activities |
|----|-------------------------------------------------|

| Q. | Subsequent event |
|----|------------------|

----

INDEX

| Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
|---------|--------------------------------------------------------------------------------------|

| Item 9A. | CONTROLS AND PROCEDURES |
|----------|-------------------------|

| (a) | Disclosure Controls and Procedures |
|-----|------------------------------------|

| (b) | Management’s Report on Internal Control Over Financial Reporting |
|-----|------------------------------------------------------------------------|

| (c) | Report of Independent Registered Public Accounting Firm |
|-----|---------------------------------------------------------|

----

INDEX

|              | /s/ BDO USA, LLP |
|-------------------|------------------|
| Chicago, Illinois |             |
| February 27, 2012 |             |

| (d) | Changes in Internal Control Over Financial Reporting |
|-----|------------------------------------------------------|

| Item 9B. | OTHER INFORMATION |
|----------|-------------------|

| Item 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
|----------|--------------------------------------------------------|

----

INDEX

| Item 11. | EXECUTIVE COMPENSATION |
|----------|------------------------|

| Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
|----------|------------------------------------------------------------------------------------------------|

| Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
|----------|---------------------------------------------------------------------------|

| Item 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
|----------|----------------------------------------|

| Item 15. | EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES |
|----------|---------------------------------------------|

|   | · | Consolidated Balance Sheets of Merge Healthcare Incorporated and Subsidiaries at December 31, 2011 and 2010; |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | Consolidated Statements of Operations of Merge Healthcare Incorporated and Subsidiaries for each of the three years ended December 31, 2011, 2010 and 2009; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Consolidated Statements of Shareholders’ Equity of Merge Healthcare Incorporated and Subsidiaries for each of the three years ended December 31, 2011, 2010 and 2009; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

INDEX

|   | · | Consolidated Statements of Cash Flows of Merge Healthcare Incorporated and Subsidiaries for each of the three years ended December 31, 2011, 2010 and 2009; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Consolidated Statements of Comprehensive Loss of Merge Healthcare Incorporated and Subsidiaries for each of the three years ended December 31, 2011, 2010 and 2009; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Notes to Consolidated Financial Statements of Merge Healthcare Incorporated and Subsidiaries; |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | Consolidated Balance Sheets of Merge Healthcare Solutions Inc. (formerly known as AMICAS, Inc.) at December 31, 2011 and 2010 (Successor Company); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Consolidated Statements of Operations of Merge Healthcare Solutions Inc. for the year ended December 31, 2011 (Successor Company), the period ended December 31, 2010 (Successor Company), the period ended April 27, 2010 and the year ended December 31, 2009 (Predecessor Company); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Consolidated Statements of Shareholders’ Equity of Merge Healthcare Solutions Inc. for the year ended December 31, 2011 (Successor Company), the period ended December 31, 2010 (Successor Company), the period ended April 27, 2010 and the year ended December 31, 2009 (Predecessor Company); |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Consolidated Statements of Cash Flows of Merge Healthcare Solutions Inc. for the year ended December 31, 2011 (Successor Company), the period ended December 31, 2010 (Successor Company), the period ended April 27, 2010 and the year ended December 31, 2009 (Predecessor Company); and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Notes to Consolidated Financial Statements of Merge Healthcare Solutions Inc. |
|--------|--------|-------------------------------------------------------------------------------|

----

INDEX

| 2.1   |   | Agreement and Plan of Merger, dated as of May 30, 2009, by and among the Registrant, Merge Acquisition Corp., a wholly owned subsidiary of Registrant, and etrials Worldwide, Inc. (A)                        |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.2   |   | Agreement and Plan of Merger, dated as of August 7, 2009, by and among the Registrant, Merge Acquisition Corporation, a wholly owned subsidiary of the Registrant, Confirma, Inc. and John L. Brooks (B) |
| 2.3   |   | Agreement and Plan of Merger, dated as of February 28, 2010, by and among the Registrant, Project Ready Corp., a wholly owned subsidiary of the Registrant, and AMICAS, Inc. (C)                              |
| 2.4   |   | Stock Purchase Agreement, dated as of July 2, 2010, by and among Stryker Corporation, Stryker Imaging Corporation and the Registrant (D)                                                                      |
| 2.5   |   | Asset Purchase Agreement, dated as of July 30, 2010, by and between the Registrant and Merrick Healthcare Solutions, LLC d/b/a Olivia Greets (E)                                                              |
| 2.6   |   | Agreement and Plan of Merger, dated as of June 5, 2011, by and among the Registrant, ES Acquisition Corp., a wholly owned subsidiary of the Registrant, and Ophthalmic Imaging Systems (F)                    |
| 3.1   |   | Certificate of Incorporation of the Registrant as filed on October 14, 2008 (G)                                                                                                                          |
| 3.2   |   | Certificate of Merger as filed on December 3, 2008 and effective on December 5, 2008 (G)                                                                                                                 |
| 3.3   |   | Series A Preferred Stock Certificate of Designations as filed on April 26, 2010 (H)                                                                                                                      |
| 3.4   |   | Amendment to the Certificate of Incorporation of the Registrant as filed on September 27, 2010 (I)                                                                                                  |
| 3.5   |   | Bylaws of Registrant (G)                                                                                                                                                                                      |
| 10.1  |   | Registration Rights Agreement, dated June 4, 2008, by and between the Registrant and Merrick RIS, LLC (J)                                                                                                     |
| 10.2  |   | Securities Purchase Agreement, dated May 21, 2008, by and among the Registrant, the subsidiaries listed on the Schedule of Subsidiaries attached thereto, and Merrick RIS, LLC (K)                       |
| 10.3  |   | Employment Letter Agreement between the Registrant and Justin C. Dearborn entered into as of June 4, 2008 (L)*                                                                                                |
| 10.4  |   | Employment Letter Agreement between the Registrant and Steven M. Oreskovich entered into as of June 4, 2008 (L)*                                                                                              |
| 10.5  |   | Employment Letter Agreement between the Registrant and Nancy J. Koenig entered into as of June 4, 2008 (L)*                                                                                                   |
| 10.6  |   | Employment Letter Agreement between the Registrant and Antonia A. Wells entered into as of June 4, 2008 (L)*                                                                                                  |
| 10.7  |   | First Amendment, dated July 1, 2008, to that certain Securities Purchase Agreement, dated as of May 21, 2008, by and among the Registrant, certain of its subsidiaries and Merrick RIS, LLC (M)               |
| 10.8  |   | Consulting Agreement, effective as of January 1, 2009, by and between the Registrant and Merrick RIS, LLC (G)                                                                                                 |
| 10.9  |   | 1996 Stock Option Plan for Employees of the Registrant dated May 13, 1996  (N), as amended and restated in its entirety as of September 1, 2003 (O)*                                                |
| 10.10 |   | 1998 Stock Option Plan for Directors (P)*                                                                                                                                                                |
| 10.11 |   | 2000 Employee Stock Purchase Plan of the Registrant effective July 1, 2000 (Q)*                                                                                                                          |
| 10.12 |   | 2005 Equity Incentive Plan (as amended through the third amendment thereto) (R)*                                                                                                                              |
| 10.13 |   | First Amendment, effective as of January 1, 2010, to that certain Consulting Agreement, effective as of January 1, 2009, by and between the Registrant and Merrick RIS, LLC (S)                               |
| 10.14 |   | Employment Agreement by and between the Registrant and Jeffery A. Surges entered into as of November 5, 2010 (D)*                                                                                             |
| 10.15 |   | Master Services Agreement, effective as of December 30, 2011, by and between Merge Healthcare Canada Corp., a wholly owned subsidiary of the Registrant, and higi llc**                                       |
| 10.16 |   | Assignment of Sublease Agreement dated February 24, 2012, by and between the Registrant and Merrick Ventures, LLC**                                                                                           |
| 10.17 |   | Second Amendment, effective as of January 3, 2012, to that certain Consulting Agreement, effective as of January 1, 2009, by and between the Registrant and Merrick RIS, LLC**                                |
| 14.1  |   | Code of Ethics (G)                                                                                                                                                                                            |
| 14.2  |   | Whistleblower Policy (G)                                                                                                                                                                                      |
| 21    |   | Subsidiaries of the Registrant**                                                                                                                                                                              |

----

INDEX

| 23.1 |   | Consent of Independent Registered Public Accounting Firm – BDO USA, LLP – Chicago, for the Registrant’s financial statements**                                                                                                                                                                                                                                                                                                  |
|------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 23.2 |   | Consent of Independent Registered Public Accounting Firm – BDO USA, LLP – Chicago, for the Merge Healthcare Solutions Inc.’s financial statements**                                                                                                                                                                                                                                                                             |
| 31.1 |   | Certificate of Chief Executive Officer (principal executive officer) Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934**                                                                                                                                                                                                                                                                                                       |
| 31.2 |   | Certificate of Chief Financial Officer (principal financial officer) Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934**                                                                                                                                                                                                                                                                                                       |
| 32   |   | Certificate of Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***                                                                                                                                                                                                |
| 101  |   | The following materials from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011 formatted in Extensible Business Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Consolidated Statements on Comprehensive Income (Loss)*** |

----

| (A) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated May 30, 2009.                                        |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
| (B) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated August 7, 2009.                                      |
| (C) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated March 4, 2010.                                       |
| (D) |   | Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.               |
| (E) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated July 30, 2010.                                       |
| (F) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated June 6, 2011.                                        |
| (G) |   | Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.               |
| (H) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated April 30, 2010.                                      |
| (I) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated September 30, 2010.                                  |
| (J) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated June 6, 2008.                                        |
| (K) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated May 22, 2008.                                        |
| (L) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated July 15, 2008.                                       |
| (M) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated July 7, 2008.                                        |
| (N) |   | Incorporated by reference from Registration Statement on Form SB-2 (No. 333-39111) effective January 29, 1998.                              |
| (O) |   | Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2003. |
| (P) |   | Incorporated by reference from the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997.             |
| (Q) |   | Incorporated by reference from the Registrant’s Proxy Statement for Annual Meeting of Shareholders dated May 8, 2000.                 |
| (R) |   | Incorporated by reference from the Registrant’s Proxy Statement for Annual Meeting of Shareholders dated April 22, 2011.              |
| (S) |   | Incorporated by reference from the Registrant’s Current Report on Form 8-K dated April 2, 2010.                                       |
| *   |   | Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K.              |
| **  |   | Filed herewith                                                                                                                              |
| *** |   | Furnished herewith                                                                                                                          |

----

INDEX

|                    | Merge Healthcare Incorporated |
|-------------------------|-------------------------------|
|                    |                          |
| Date: February 27, 2012 | By:                           | /s/ Jeffery A. Surges |
|                    |                          | Jeffery A. Surges |
|                    |                          | Chief Executive Officer |
|                    |                          | (principal executive officer) |

| Date: February 27, 2012 | By:    | /s/ Michael W. Ferro, Jr.             |
|-------------------------|--------|---------------------------------------|
|                    |   | Michael W. Ferro, Jr.                 |
|                    |   | Chairman of the Board                 |
|                    |   |                                  |
| Date: February 27, 2012 | By:    | /s/ Dennis Brown                      |
|                    |   | Dennis Brown                          |
|                    |   | Director                              |
|                    |   |                                  |
| Date: February 27, 2012 | By:    | /s/ Gregg G. Hartemayer               |
|                    |   | Gregg G. Hartemayer                   |
|                    |   | Director                              |
|                    |   |                                  |
| Date: February 27, 2012 | By:    | /s/ Richard A. Reck                   |
|                    |   | Richard A. Reck                       |
|                    |   | Director                              |
|                    |   |                                  |
| Date: February 27, 2012 | By:    | /s/ Neele E. Stearns, Jr.             |
|                    |   | Neele E. Stearns, Jr.                 |
|                    |   | Director                              |
|                    |   |                                  |
| Date: February 27, 2012 | By:    | /s/ Jeffery A. Surges                 |
|                    |   | Jeffery A. Surges                     |
|                    |   | Chief Executive Officer               |
|                    |   | (principal executive officer)         |
|                    |   |                                  |
| Date: February 27, 2012 | By:    | /s/ Justin C. Dearborn                |
|                    |   | Justin C. Dearborn                    |
|                    |   | President and Chief Financial Officer |
|                    |   | (principal financial officer)         |
|                    |   |                                  |
| Date: February 27, 2012 | By:    | /s/ Steven M. Oreskvich               |
|                    |   | Steven M. Oreskvich                   |
|                    |   | Cheif Accounting Officer              |
|                    |   | (principle accounting officer)        |

----