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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission File Number 000-22052
 PROXYMED, INC.
 (Exact Name of Registrant as Specified in Its Charter)
 Florida
    
    65-0202059(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)1854 Shackleford Court, Suite 200, 
Norcross, Georgia(Address of Principal Executive Offices)
    
    30093(Zip Code)
 Registrants telephone number, including area code:
(770) 806-9918
 Securities
registered pursuant to Section 12(b) of the Act:
 Title of
Class
    
    Name of Each Exchange on which
RegisteredCommon Stock, $.001 Par Value
    
    The NASDAQ Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act:
None
 o þ
 o þ
 þ o
 o þ
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBIT INDEXEX-10.53 WAIVER AND AMENDMENT AGREEMENTEX-10.54 SEPARATION AGREEMENT AND RELEASEEX-21 SUBSIDIARIES OF THE REGISTRANTEX-23.1 CONSENT OF DELOITTE & TOUCHE LLPEX-23.2 CONSENT OF UHY, LLPEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO    Table of Contents  
 PART I
 
 ITEM 1. BUSINESS
 The Company
   Business Development
       1




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Our Values
   Terms and Phrases
  .
    
    Claims processor means a company that receives electronic health insurance claim
information from a provider, checks it for accuracy, transfers the data to a payer and
returns transaction details to the provider. These companies are sometimes called
clearinghouses..
    
    Provider means any person or facility that provides healthcare services. Examples
include, but are not limited to, doctors, therapists, hospitals, clinics, medical
laboratories and pharmacies..
    
    Payer means an organization that pays medical insurance claims such as insurance
companies, Health Maintenance Organizations, self-insured corporations and Taft-Hartley
Plans..
    
    Preferred Provider Organization is a network of providers which accept reduced
payments for services rendered in return for more patients being directed to them..
    
    Transaction is the electronic transfer of data. Examples from our business include
verification of a patients insurance, approvals on referrals to other providers, claim
submission, claim status inquiry and remittance information from the payer.
 2




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Description of Business
  Transaction Services and Products
  Transaction Processing
 Phoenix
   Claims Processing
 Real-Time
  myMedAvant
  Electronic Attachments
   Front door Pre-Adjudication Services
  Same Session
  3




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Preferred Provider Organization (PPO)
  Providing Electronic Prescription Management
 TM TM
 Laboratory Communication Solutions and Products
 Printing Technology
  Pilot
  Fleet Management System, (FMS)
  Competitive Challenges
  Competitive Strengths
  Sales and Marketing
  Locations
  Legislation and Regulation
  4




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.
    
    Mandated basic healthcare benefits;
 .
    
    Controls on healthcare spending through limitations on the growth of private health
insurance premiums and Medicare and Medicaid reimbursement;.
    
    The creation of large insurance purchasing groups;.
    
    Enforcement actions of Federal and State privacy laws;.
    
    Medicare or Medicaid prescription benefit plans;.
    
    State licensing requirements; or.
    
    Patient protection initiatives.
 National Provider Identification
  HIPAA
     Gramm-Leach-Bliley
  Internet Privacy and Regulation
  Patient/Consumer Protection Initiatives
  Provider Contracting and Claims Regulation
   5




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Summary
   www.medavanthealth.com
 Intellectual Property and Technology
  Employees
  Available Information
 www.medavanthealth.com
 Segment Financial Information
  6




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##### Table of Contents



ITEM 1A. RISK FACTORS
 FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS  FINANCIAL CONDITION OR BUSINESS
  RISKS RELATED TO OUR BUSINESS
 General
 We have senior and subordinated debt that matures during 2008 and 2010.
  We incurred net losses in 2005, 2006 and 2007. We may not be able to generate positive earnings in
the future and this could have a detrimental effect on the market price of our stock.
  Our auditors have issued a going concern opinion. This means we may not be able to achieve our
objectives and may have to suspend or cease operations.
  Management changes may disrupt our operations and we may not be able to retain key personnel or
replace them when they leave.
  Our insurance coverage may not be adequate.
  An inability to maintain effective internal controls over financial reporting, as required by the
Sarbanes-Oxley Act of 2002, could have an adverse impact on our stock price.
  7




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Transaction Services Segment
 Changes that reduce payer compensation for electronic claims may reduce our revenue and
margins.
  As electronic transaction processing penetrates the healthcare industry more extensively, we will
face increasing pressure to reduce our prices which may cause us to no longer be competitive as a
result of potential declining margins.
  Consolidation in the healthcare industry may give our customers greater bargaining power and cause
us to reduce our prices.
  Our business and future success may depend on our ability to cross-sell our products and services.
  We depend on electronic connections to insurance companies and other payers, and if we lose these
electronic connections, our service offerings would be limited and less desirable to healthcare
providers.
  We have important business relationships with other companies to market and sell some of our
clinical and financial products and services. If these companies terminate their relationships with
us, or are less successful in the future, we will need to add this emphasis internally, which may
divert our efforts and resources from other projects.
  A significant amount of the revenues in our Transaction Services segment is from one customer. Loss
of this relationship may adversely affect our profitability.
  The adoption of electronic processing of clinical transactions in the healthcare industry is
proceeding slowly; thus, the future of our business could be uncertain and this may have an adverse
impact on our operations.
  An error by us in the process of providing clinical connectivity or transmitting prescription and
laboratory data could result in substantial injury to a patient, and our liability insurance may
not be adequate in a catastrophic situation, adversely impacting our
business or operations.
 8




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Our businesses have many competitors.
  9




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Our PPO accounts receivable are subject to adjustment.
  The NPPN Stock Purchase Agreement governing the sale of our NPPN business may expose us to
contingent liabilities.
  Laboratory Communication Services Segment:
 Our Laboratory Communication Services Segment has a high customer concentration.
  RISKS RELATED TO OUR INDUSTRY
 Government regulation and new legislation may have a negative impact on our business and results of
operations.
     We are dependent on the growth of the Internet and electronic healthcare information markets.
  RISKS RELATED TO OUR TECHNOLOGY
 Evolving industry standards and rapid technological changes could result in our products becoming
obsolete or no longer in demand.
  10




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We depend on uninterrupted computer access for our customers. Any prolonged interruptions in
operations could cause customers to seek alternative providers of our services.
   Computer network systems like ours could suffer security and privacy breaches that could harm our
customers and us.
  The protection of our intellectual property requires substantial resources.
  11




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We may be subject to infringement claims.
  If our ability to expand our network infrastructure is constrained, we could lose customers, and
that loss could adversely affect our operating results.
  RISKS RELATED TO OUR STOCK
 We may issue additional shares that could adversely affect the market price of our Common Stock.
  .
    
    raising additional capital or financing acquisitions;.
    
    exercise, conversion, or exchange of outstanding options, warrants and shares of convertible preferred stock;.
    
    in lieu of cash payment of dividends; or.
    
    our articles of incorporation, as amended, authorize the issuance of up to 30,000,000
shares of Common Stock and 2,000,000 shares of blank check preferred stock with such
designations, rights and preferences as may be determined from time to time by our board of
directors.
  The trading price of our Common Stock may be volatile.
  .
    
    quarterly variations in operating results and overall financial condition;.
    
    economic and political developments affecting the economy as a whole;
 12




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.
    
    our largest holder liquidating their position would likely serve to compress our share price;.
    
    short-selling programs;.
    
    the stock markets perception of the healthcare technology industry as a whole;.
    
    changes in earnings estimates by analysts;.
    
    additions or departures of key personnel; and.
    
    sales of substantial numbers of shares of our Common Stock, or securities convertible into or exercisable for our Common Stock.
 Our Common Stock may be delisted from the NASDAQ Global Market, which could negatively impact the
price of our Common Stock and would constitute an event of default
under our senior debt obligations.
  We do not plan on declaring or paying dividends on our Common Stock.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  13




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ITEM 2. PROPERTIES
 Properties
  Business Segment
    
    Location (1)
    
    DescriptionTransaction Services
    
    Norcross, Georgia
    
    Corporate headquarters/operations office/data centerSanta Ana, California
    
    Operations office/data centerMiddletown, New York
    
    Operations office/data centerPlantation, Florida
    
    Operations officeTampa, Florida
    
    Operations officeLaboratory Communication 
Solutions
    
    Jeffersonville, Indiana
    
    Operations office/warehouse
 
     
 ITEM 3. LEGAL PROCEEDINGS
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  14




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
  2007:First Quarter
    
    $
    5.71
    
    
    $
    2.85Second Quarter
    
    $
    3.33
    
    
    $
    1.98Third Quarter
    
    $
    3.97
    
    
    $
    1.96Fourth Quarter
    
    $
    2.96
    
    
    $
    1.202006:First Quarter
    
    $
    7.50
    
    
    $
    3.71Second Quarter
    
    $
    8.36
    
    
    $
    6.26Third Quarter
    
    $
    7.30
    
    
    $
    4.00Fourth Quarter
    
    $
    6.00
    
    
    $
    3.88
   15




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COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 
  16




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Securities Authorized for Issuance Under Equity Compensation Plans
  Number of SecuritiesRemaining Available forNumber of Securities to
    
    
    Weighted-Average
    
    
    Future Issuance Under Equitybe Issued upon Exercise
    
    
    Exercise Price of
    
    
    Compensation Plansof Outstanding Options,
    
    
    Outstanding Options,
    
    
    (Excluding SecuritiesWarrants and Rights (1)
    
    
    Warrants and Rights
    
    
    Reflected in Column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity Compensation Plans approved by security holders
    
    
    1,919,434
    
    
    $
    7.66
    
    
    
    665,028Equity Compensation Plans not approved by security holders
    
    
    13,333
    
    
    
    15.00
    
    
    
    Total
    
    
    1,932,767
    
    
    $
    7.71
    
    
    
    665,028
 
  Recent Sales of Unregistered Securities
  17




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ITEM 6. SELECTED FINANCIAL DATA
   Year Ended December 31,(In thousands except for share and per share amounts)
    
    2007
    
    2006(1)
    
    2005
    
    2004(2)
    
    2003(3)STATEMENT OF OPERATIONS DATA:Net revenues
    
    $
    54,123
    
    
    $
    65,462
    
    
    $
    77,519
    
    
    $
    90,246
    
    
    $
    71,556Operating loss
    
    
    (29,073
    )
    
    
    (3,370
    )
    
    
    (103,177
    )
    
    
    (1,974
    )
    
    
    (3,642
    )Loss from continuing operations
    
    
    (36,788
    )
    
    
    (6,610
    )
    
    
    (105,294
    )
    
    
    (3,800
    )
    
    
    (5,000
    )Net loss applicable to common shareholders
    
    
    (36,788
    )
    
    
    (6,610
    )
    
    
    (105,294
    )
    
    
    (3,800
    )
    
    
    (5,000
    )PER SHARE DATA:Basic and diluted net loss per share of common stock:Net loss
    
    $
    (2.72
    )
    
    $
    (0.50
    )
    
    $
    (8.29
    )
    
    $
    (0.33
    )
    
    $
    (0.74
    )Basic and diluted weighted average common shares outstanding
    
    
    13,513,027
    
    
    
    13,207,789
    
    
    
    12,707,695
    
    
    
    11,617,601
    
    
    
    6,783,742DIVIDEND DATA:Dividends on non-cumulative preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003BALANCE SHEET DATA:Working capital (deficiency)
    
    
    ($30,812
    )
    
    
    ($7,636
    )
    
    $
    15
    
    
    
    ($1,664
    )
    
    $
    10,512Convertible notes
    
    
    13,137
    
    
    
    13,137
    
    
    
    13,137
    
    
    
    13,137
    
    
    
    13,137Other long-term obligations
    
    
    953
    
    
    
    6,171
    
    
    
    5,898
    
    
    
    1,069
    
    
    
    3,518Total assets
    
    
    40,655
    
    
    
    72,240
    
    
    
    75,641
    
    
    
    184,403
    
    
    
    73,130Stockholders equity (deficit)
    
    
    (6,986
    )
    
    
    27,424
    
    
    
    32,904
    
    
    
    135,082
    
    
    
    45,778
 
 (1)
    
    includes operations of Zeneks, from February, 14, 2006, and Medical Resources, LLC from October 10, 2006(2)
    
    includes operations of PlanVista from March 2, 2004(3)
    
    includes operations of MedUnite from January 1, 2003 18




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Overview
  Recent Developments
 Sale of NPPN Business
    Laurus Revolving Line of Credit
    Management Changes
  Business Description
  Transaction Services and Products
  19




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Transaction Processing
 Phoenix
   Claims Processing
 Real-Time
  myMedAvant
  Electronic Attachments
   Front door Pre-Adjudication Services
  Same Session
  Preferred Provider Organization (PPO)
  Providing Electronic Prescription Management
 TM TM
 20




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Laboratory Communication Solutions and Products
 .
    
    Printing Technology.Our intelligent printing technology is integrated into printers
for labs to purchase and install in physician offices. This allows for the secure
transmittal of laboratory reports. Laboratories also purchase support, maintenance and
monitoring programs to manage printers that have our integrated technology..
    
    Pilot.This patent-pending web-enabled device sits in a providers office and is used
to transfer lab reports in virtually any format to a printer, a personal computer or a
hand-held device. It integrates with most Practice Management Systems and usually saves the
provider the cost of a dedicated phone line. Labs either purchase Pilot devices with an
annual support program or they subscribe to Pilot with a program that includes support
services..
    
    Fleet Management System, (FMS).Labs use this online tool to monitor printers in
provider offices and receive alerts for routine problems such as a printer being out of
paper or having a paper jam. FMS can also be used to monitor printer inventory and schedule
regular maintenance. Labs pay a monthly fee per printer to use FMS.
 21




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Key Indicators of Financial Condition
    Industry Trends and Financial Strategies
  .
    
    Acquisitions, Divestitures and Realignments.
    
    Advanced Technology.
    
    Reduced Payments to Providers.
    
    Shifting Responsibility for Medical Care.
    
    Increasing Demand for Data and Analytics
 Acquisitions, Divestitures and Realigments
       Advanced Technology
  22




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.
    
    Providers want medical laboratory results to be automatically merged with their
patients Electronic Medical Records (EMR) rather than having to manually transfer
information from a lab report. In March 2006, we announced that our Pilot device was being
used to bridge laboratory report data to a resident EMR application..
    
    The November 7, 2006, issue of USA Todaysaid fraud is estimated to account for 3% to
10% of the nations $2trillion health care spending tab. Several companies have launched
fraud detection software to mine claim data for suspicious patterns. We are exploring a
potential marketing campaign for our fraud detection component of our claims processing in
2008.
 Reduced Payments to Providers
 Physicians Practice
      Shifting Responsibility for Medical Care
   Increased Demand for Data and Analytics
  Application of Critical Accounting Policies and Estimates
   23




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Revenue Recognition
         Goodwill
 Capitalized Software Development and Research and Development
 Purchased Technology and Other Intangibles Assets
 Reserve for Doubtful Accounts/Revenue Allowances/Bad Debt Estimates
 24




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Results of Operations
 Year Ended December 31, 2007, Compared to Year Ended December 31, 2006
 Net Revenues.
 2007
    
    
    2006(In thousands)Transaction Services
    
    $
    45,922
    
    
    $
    53,983Laboratory Communication Solutions
    
    
    8,201
    
    
    
    11,479$
    54,123
    
    
    $
    65,462
    Cost of Sales.
 2007
    
    
    2006(In thousands)Transaction Services
    
    $
    10,953
    
    
    $
    13,658Laboratory Communication Solutions
    
    
    3,998
    
    
    
    5,675$
    14,951
    
    
    $
    19,333
   25




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Selling, General and Administrative Expenses.
 2007
    
    
    2006(In thousands)Transaction Services
    
    $
    38,169
    
    
    $
    39,140Laboratory Communication Solutions
    
    
    2,182
    
    
    
    2,647$
    40,351
    
    
    $
    41,787
   Depreciation and Amortization.
 2007
    
    
    2006(In thousands)Transaction Services
    
    $
    6,126
    
    
    $
    7,076Laboratory Communication Solutions
    
    
    291
    
    
    
    303$
    6,417
    
    
    $
    7,379
  Litigation settlement.
 Write-off of impaired assets.
 Operating Income (Loss).
 26




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2007
    
    
    2006(In thousands)Transaction Services
    
    $
    (28,691
    )
    
    $
    (6,210
    )Laboratory Communication Solutions
    
    
    (382
    )
    
    
    2,840$
    (29,073
    )
    
    $
    (3,370
    )
 Interest Expense, net.
 Net Loss.
 Year Ended December 31, 2006, Compared to Year Ended December 31, 2005
 Net Revenues.
 2006
    
    
    2005(In thousands)Transaction Services
    
    $
    53,983
    
    
    $
    66,042Laboratory Communication Solutions
    
    
    11,479
    
    
    
    11,477$
    65,462
    
    
    $
    77,519
    27




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Cost of Sales.
 2006
    
    
    2005(In thousands)Transaction Services
    
    $
    13,658
    
    
    $
    20,523Laboratory Communication Solutions
    
    
    5,675
    
    
    
    6,301$
    19,333
    
    
    $
    26,824
   Selling, General and Administrative Expenses.
 2006
    
    
    2005(In thousands)Transaction Services
    
    $
    39,140
    
    
    $
    45,296Laboratory Communication Solutions
    
    
    2,647
    
    
    
    2,666$
    41,787
    
    
    $
    47,962
   Depreciation and Amortization.
 2006
    
    
    2005(In thousands)Transaction Services
    
    $
    7,076
    
    
    $
    8,788Laboratory Communication Solutions
    
    
    303
    
    
    
    517$
    7,379
    
    
    $
    9,305
 28




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29




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Litigation settlement.
 Write-off of impaired assets.
  Operating Income (Loss).
 2006
    
    
    2005(In thousands)Transaction Services
    
    $
    (6,210
    )
    
    $
    (104,415
    )Laboratory Communication Solutions
    
    
    2,840
    
    
    
    1,238$
    (3,370
    )
    
    $
    (103,177
    )
 Interest Expense, net.
 Net Loss.
 Liquidity, Capital Resources and Financial Position
     30




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31




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(Dollars in millions)
    
    2007
    
    2006
    
    2005Net cash (used in) from operating activities
    
    $
    (0.0
    )
    
    $
    (0.1
    )
    
    $
    5.2Cash-on-Hand
    
    $
    1.4
    
    
    $
    0.7
    
    
    $
    5.5
        2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012(In thousands)Interest on convertible notes (1)
    
    $
    525
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest on senior and other debt
    
    
    1,809
    
    
    
    1,696
    
    
    
    1,584
    
    
    
    1,532
    
    
    
    Convertible notes (1)
    
    
    13,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Senior debt
    
    
    1,071
    
    
    
    1,071
    
    
    
    982
    
    
    
    
    
    
    
    Revolving credit line (4)
    
    
    14,847
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Notes payable (2)
    
    
    895
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Litigation settlements (3)
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital lease obligations (2)
    
    
    891
    
    
    
    474
    
    
    
    51
    
    
    
    
    
    
    
    Operating leases
    
    
    1,421
    
    
    
    1,290
    
    
    
    556
    
    
    
    79
    
    
    
    29TOTAL
    
    $
    35,846
    
    
    $
    4,531
    
    
    $
    3,173
    
    
    $
    1,611
    
    
    $
    29
 32




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##### Table of Contents



(1)
    
    Assumes no conversion of convertible notes; notes mature in December 2008 and are classified as current(2)
    
    Includes principal and interest(3)
    
    Net of insurance reimbursement(4)
    
    Revolving credit line is categorized as current due to the subjective acceleration clause and lockbox arrangement with our senior lender    New Accounting Pronouncements:
 Accounting for Uncertainty in Income Taxes
      33




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Forward-Looking Statements
 Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform
Act of 1995
     
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Concentration of Credit Risk
  Interest Rate Risk
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
     34




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##### Table of Contents



ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control
  Managements Annual Report on Internal Control Over Financial Reporting
  1)
    
    pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect our transactions and dispositions of
our assets;2)
    
    provide reasonable assurance that transactions are recorded as
necessary to permit preparation of consolidated financial statements
in accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made only in accordance with
authorizations of our management and board of directors; and3)
    
    provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the consolidated financial
statements.
   
 ITEM 9B. OTHER INFORMATION
  35




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##### Table of Contents



PART III
   Name
    
    Age
    
    PositionEric D. Arnson
    
    
    36
    
    
    Chief Revenue OfficerEdwin M. Cooperman
(2) (3)
    
    
    64
    
    
    DirectorPeter E. Fleming,
III
    
    
    50
    
    
    Interim Chief Executive Officer and DirectorLonnie W. Hardin
    
    
    53
    
    
    President and Chief Operating OfficerGerard M. Hayden,
Jr.
    
    
    53
    
    
    Executive Vice President, Chief Financial Officer & TreasurerJames Hudak (1) (2)
(4)
    
    
    60
    
    
    Chairman of the BoardAdnane Khalil
    
    
    39
    
    
    Executive Vice President, TechnologyAllison W. Myers
    
    
    30
    
    
    Executive Vice President, Human ResourcesSamuel R. Schwartz
(1) (3)
    
    
    58
    
    
    DirectorTeresa D. Stubbs
    
    
    49
    
    
    Executive Vice President, Marketing and Corporate CommunicationsEugene R. Terry (1)
(3)
    
    
    69
    
    
    Director
 
 (1)
    
    Member of the Audit Committee. Mr. Schwartz is currently the Chairman.(2)
    
    Member of the Compensation Committee. Mr. Cooperman is currently the Chairman.(3)
    
    Member of the Nominating Committee. Mr. Terry is currently the Chairman.(4)
    
    Appointed chairman in February, 2007. Eric D. Arnson,
 Edwin M. Cooperman
 Peter E. Fleming, III
 Lonnie W. Hardin
 36




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##### Table of Contents



Gerard M. Hayden, Jr.
 James B. Hudak
 Adnane Khalil
 Allison W. Myers
 Samuel R. Schwartz,
 Teresa D. Stubbs
 Eugene R. Terry
 37




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##### Table of Contents



PART IV
 
 ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Page(a)
    
    
    (1
    )
    
    The following consolidated financial statements are included in Part II, Item 8:Reports of Independent Registered Public Accounting Firms
    
    F-2, F-3Consolidated Balance Sheets  December 31, 2007 and 2006
    
    F-4Consolidated Statements of Operations  Years Ended December 31, 2007, 2006 and 2005
    
    F-5Consolidated Statements of Stockholders Equity (Deficit)  Years Ended December 31, 2007, 2006 and 2005
    
    F-6Consolidated Statements of Cash Flows  Years Ended December 31, 2007, 2006 and 2005
    
    F-7Notes to Consolidated Financial Statements
    
    F-8(2
    )
    
    The following schedule for the years 2007, 2006 and 2005 is submitted herewith:Schedule II  Valuation and Qualifying Accounts  Years Ended December 31, 2007, 2006 and 2005
    
    F-33(3
    )
    
    Exhibits required to be filed by Item 601 of Regulation S-K as exhibits to this Report are listed in the
Exhibit Index appearing on pages 40 through 44
 38




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##### Table of Contents



SIGNATURES
  PROXYMED, INC.By:
    /s/  Peter E. Fleming, IIIPeter E. Fleming, IIIInterim Chief Executive Officer   Signature
    
    Title
    
    Date/s/ Peter E. Fleming III
    
    Director, Interim Chief Executive Officer
    
    April 15, 2008Peter E. Fleming, III
    
    (Principal Executive Officer)/s/Gerard M. Hayden, Jr.
    
    Chief Financial Officer
    
    April 15, 2008Gerard M. Hayden, Jr.
    
    (Principal Financial and Accounting
Officer )/s/ James Hudak
    
    Chairman of the Board
    
    April 15, 2008James Hudak/s/ Edwin M. Cooperman
    
    Director
    
    April 15, 2008Edwin M. Cooperman/s/ Eugene R. Terry
    
    Director
    
    April 15, 2008Eugene R. Terry/s/ Samuel R. Schwartz
    
    Director
    
    April 15, 2008Samuel R. Schwartz




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description2 .1
    
    Agreement and Plan of Merger, dated as of December 5, 2003, by and
among the Registrant, Planet Acquisition Corp. and PlanVista
Corporation (incorporated by reference to Annex A of the
Registration Statement on Form S-4, File No. 333-111024).2 .2
    
    Agreement and Plan of Merger and Reorganization, dated December
31, 2002, between ProxyMed, Inc., Davie Acquisition Corp., and
MedUnite Inc. (incorporated by reference to Exhibit 2.1 of Form
8-K, File No. 000-22052, reporting an event dated December 31,
2002).2 .3
    
    Asset Purchase Agreement, dated July 30, 2002, between ProxyMed,
Inc., and MDIP, Inc. (incorporated by reference to Exhibit 2.1 of
Form 8-K, File No. 000-22052, reporting an event dated July 31,
2002).2 .4
    
    Stock Purchase Agreement, dated May 6, 2002, between ProxyMed,
Inc., and KenCom Communications & Services, Inc. (incorporated by
reference to Exhibit 2.1 of Form 8-K File No. 000-22052, reporting
an event dated May 6, 2002).2 .5
    
    Stock and Warrant Purchase Agreement between ProxyMed, Inc., and
General Atlantic Partners 74, L.P., GAP Coinvestment Partners II,
L.P., GAPCO GmbH & Co., KG and GapStar, LLC (incorporated by
reference to Exhibit 10.1 of Form 8-K, File No. 000-22052,
reporting an event dated March 26, 2002).2 .6
    
    Asset Purchase Agreement, dated June 28, 2004, between ProxyMed,
Inc., and Key Communications Services, Inc., and Key Electronics,
Inc. (incorporated by reference to Exhibit 2.1 of Form 8-K, File
No. 000-22052, reporting an event dated July 30, 2004).3 .1
    
    Articles of Incorporation of the Registrant, as amended
(incorporated by reference to Exhibit 3.1 of the Registration
Statement on Form SB-2, File No. 333-2678).3 .2
    
    Bylaws of the Registrant, as amended (incorporated by reference to
Exhibit 3.1 of the Registration Statement on Form SB-2, File No.
333-2678).3 .3
    
    Articles of Amendment to Restated Articles of Incorporation of the
Registrant dated March 1, 2004 (incorporated by reference to
Exhibit 3.1 of Form 8-K, File No. 000-22052, reporting an event
dated March 2, 2004).3 .4
    
    Articles of Amendment to Articles of Incorporation of the
Registrant dated May 22, 2002 (incorporated by reference to
Exhibit 3.4 of Form 10-K for the period ended December 31, 2003).3 .5
    
    Articles of Amendment to Articles of Incorporation of the
Registrant dated December 21, 2001 (incorporated by reference to
Exhibit 3.1 of Form 8-K, File No. 000-22052, reporting an event
dated December 13, 2001).3 .6
    
    Articles of Amendment to Articles of Incorporation of the
Registrant dated August 21, 2001 (incorporated by reference to
Exhibit 2.2 of Form 8-K, File No. 000-22052, reporting an event
dated August 17, 2001).3 .7
    
    Articles of Amendment to Articles of Incorporation of the
Registrant dated July 25, 2001 (incorporated by reference to
Exhibit 2.1 of Form 8-K, File No. 000-22052, reporting an event
dated August 17, 2001).3 .8
    
    Articles of Amendment to Articles of Incorporation of the
Registrant dated July 7, 2000 (incorporated by reference to
Exhibit 3.8 of Form 10-K for the period ended December 31, 2003).3 .9
    
    Articles of Amendment to Articles of Incorporation of the
Registrant dated June 15, 2000 (incorporated by reference to
Exhibit 3.4 of Form 10-Q/A for the period ended June 30, 2000).4.1
    
    Form of 7% Promissory Note, dated October 10, 2006, issued in
connection with the Purchase Agreement, October 5, 2006 by and
among ProxyMed, Inc., on the one hand, and Medical Resource, LLC,
a Delaware limited liability company (MRL), all of the members
of MRL (the MRL Members), National Provider Network, Inc., a
Delaware corporation (NPN), the sole stockholder of NPN,
Residential Health Care, Inc., a New Jersey corporation (RHC)
and all of the shareholders of RHC, on the other hand
(incorporated by reference to Exhibit 4.7 of Form 10-Q for the
period ended September 30, 2006).
 40




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##### Table of Contents



ExhibitNo.
    
    Description10.1
    
    Amended and Restated Registration Rights Agreement, dated March 2, 2004, among the Registrant, General Atlantic
Partners 77, L.P., General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GAP Coinvestments
III, LLC, GAP Coinvestments IV, LLC, GapStar, LLC, GAPCO GmbH & Co. KG, PVC Funding Partners, LLC, ComVest
Venture Partners, L.P., Shea Ventures, LLC, and Robert Priddy (incorporated by reference to Exhibit 4.1 of Form
8-K, File No. 000-22052, reporting an event dated March 2, 2004).10.2
    
    Stock Purchase Agreement, dated as of December 5, 2003, among the Registrant, General Atlantic Partners 77,
L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG, PVC Funding Partners, LLC, ComVest
Venture Partners, L.P., Shea Ventures, LLC, and Robert Priddy (incorporated by reference to Exhibit 2.2 of the
Registration Statement on Form S-4, File No. 333-111024).10.3
    
    Registration Rights Agreement, dated April 5, 2002, among the Registrant General Atlantic Partners 74, L.P., GAP
Coinvestment Partners II, L.P., GapStar, LLC and GAPCO GmbH & Co. KG (incorporated by reference to Exhibit 10.3
of Form 8-K, File No. 000-22052, reporting an event dated March 29, 2002).10.4
    
    Registration Rights Agreement, dated December 31, 2002, among ProxyMed, Inc., and the holders of the 4%
Convertible Promissory Notes (incorporated by reference to Exhibit 10.2 of Form 8-K, File No. 000-22052,
reporting an event dated December 31, 2002).10.5
    
    Form of Indemnification Agreement for all Officers and Directors adopted May 22, 2002 (incorporated by reference
to Exhibit 10.55 of Form 10-K for the period ended December 31, 2002).10.6
    
    Registration Rights Agreement, dated May 6, 2002, between ProxyMed, Inc., and Deborah M. Kennedy and Colleen
Phillips-Norton (incorporated by reference to Exhibit 10.1 of Form 8-K, File No. 000-22052, reporting an event
dated May 6, 2002).10.7
    
    Registration Rights Agreement between ProxyMed, Inc., and General Atlantic Partners 74, L.P., GAP Coinvestment
Partners II, L.P., GapStar, LLC, and GAPCO GmbH & Co. KG (incorporated by reference to Exhibit 10.3 of Form 8-K,
File No. 000-22052, reporting an event dated March 26, 2002).10.8
    
    Employment Agreement between ProxyMed, Inc. and Lonnie W. Hardin, dated March 29, 2001, (incorporated by
reference to Exhibit 10.1 of Form 10-Q for the period ended March 31, 2001).*10.9
    
    Purchase Agreement, dated June 27, 1997, by and between the Company and Walgreen Co. (incorporated by reference
to Exhibit 10.41 of Form 10-K for the period ended December 31, 2004).10.10
    
    2006 Outside Director Stock Option Plan (incorporated by reference to Appendix D of the Proxy Statement filed on
April 21, 2006).10.11
    
    2002 Stock Option Plan, as amended, as restated effective April 18, 2006 (incorporated by reference to Appendix
C of the Proxy Statement filed on April 21, 2006).10.14
    
    2002 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.23 of Form 10-K for the period ended
December 31, 2003).*10.15
    
    2001 Stock Option Plan (incorporated by reference to Exhibit B of the Proxy Statement filed on June 22, 2001).*10.16
    
    2000 Stock Option Plan (incorporated by reference to Exhibit B of the Proxy Statement filed on June 12, 2000).*10.17
    
    2001/2 Stock Option Plan (incorporated by reference to Exhibit C of the Proxy Statement filed on June 12, 2000).*10.18
    
    1997 Stock Option Plan (incorporated by reference to Exhibit A of the Proxy Statement filed on May 6, 1997).*10.19
    
    Amended 1993 Stock Option Plan (incorporated by reference to Exhibit A of ProxyMeds Proxy Statement for its
1994 Annual Meeting of Shareholders).*
 41




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##### Table of Contents



ExhibitNo.
    
    Description10.20
    
    1995 Stock Option Plan (incorporated by reference to Exhibit 3.1
of the Registration Statement on Form SB-2, File No. 333-2678).*10.21
    
    Subscription Agreement, dated December 21, 2001, for the private
placement issuance of up to $8,000,000 of ProxyMed, Inc., common
stock (incorporated by reference to Exhibit 10.1 of Form 8-K, File
No. 000-22052, reporting an event dated December 13, 2001).10.22
    
    Placement Agency Agreement, dated December 18, 2001, between
ProxyMed, Inc. and Commonwealth Associates, L.P. for the private
placement issuance of up to $8,000,000 of ProxyMed, Inc., common
stock (incorporated by reference to Exhibit 10.2 of Form 8-K File
No. 000-22052, reporting an event dated December 13, 2001).10.23
    
    Conversion Agreement for Series C 7% Convertible Preferred Stock
shareholder pursuant to conversion offer dated December 13, 2001
(incorporated by reference to Exhibit 10.3 of Form 8-K, File No.
000-22052, reporting an event dated December 13, 2001).10.24
    
    Designation and Subscription Amendment Agreement for Series C 7%
Convertible Preferred Stock shareholder pursuant to conversion
offer dated December 13, 2001 (incorporated by reference to
Exhibit 10.4 of Form 8-K File No. 000-22052, reporting an event
dated December 13, 2001).10.25
    
    Loan and Security Agreement, dated December 4, 2003, by and
between ProxyMed, Inc., Key Communications Service, Inc.,
MedUnite, Inc., and Wachovia Bank, National Association
(incorporated by reference to Exhibit 10.34 of Form 10-K for the
period ended December 4, 2003).10.26
    
    Revolver Note, dated December 4, 2003, issued in connection with
the Loan and Security Agreement by and between ProxyMed, Inc., Key
Communications Service, Inc., MedUnite, Inc., and Wachovia Bank,
National Association, dated December 4, 2003 (incorporated by
reference to Exhibit 10.35 of Form 10-K for the period ended
December 31, 2003).10.27
    
    Patent and Trademark Security Agreement effective as of December
4, 2003, between ProxyMed, Inc., Key Communications Service, Inc.,
MedUnite, Inc., and Wachovia Bank, National Association,
(incorporated by reference to Exhibit 10.36 of Form 10-K for the
period ended December 31, 2003).10.28
    
    Letter Agreement, dated March 8, 2005, between ProxyMed, Inc., and
Lonnie J. Hardin (incorporated by reference to Exhibit 10.43 of
Form 10-K for the period ended December 31, 2004).*10.29
    
    Security and Purchase Agreement, dated December 7, 2005, entered
into between the Company, its various subsidiaries, and Laurus
Master Fund, Ltd. (incorporated by reference to Exhibit 10.33 of
Form S-1, File No. 13133, filed with the Securities and Exchange
Commission on January 27, 2006).10.30
    
    Secured Term Note, dated December 7, 2005, entered into between
the Company, its various subsidiaries, and Laurus Master Fund,
Ltd. (incorporated by reference to Exhibit 10.34 of Form S-1, File
No. 13133, filed with the Securities and Exchange Commission on
January 27, 2006).10.31
    
    Secured Revolving Note, dated December 7, 2005, entered into
between the Company, its various subsidiaries, and Laurus Master
Fund, Ltd. (incorporated by reference to Exhibit 10.35 of Form
S-1, File No. 13133, filed with the Securities and Exchange
Commission on January 27, 2006).10.32
    
    Registration Rights Agreement, dated December 7, 2005, entered
into between the Company and Laurus Master Fund, Ltd.
(incorporated by reference to Exhibit 10.36 of Form S-1, File No.
13133, filed with the Securities and Exchange Commission on
January 27, 2006).10.33
    
    Stock Pledge Agreement, dated December 7, 2005, entered into
between the Company, PlanVista Corporation, and Laurus Master
Fund, Ltd. (incorporated by reference to Exhibit 10.37 of Form
S-1, File No. 13133, filed with the Securities and Exchange
Commission on January 27, 2006).10.34
    
    Employment Agreement, dated May 17, 2006, entered into between the
Company and Emily J. Pietrzak (incorporated by reference to Form
8-K filed with the Securities and Exchange Commission on May 23,
2006).10.35
    
    Employment Agreement, dated May 17, 2006, entered into between the
Company and Allison Myers (incorporated by reference to Form 8-K
filed with the Securities and Exchange Commission on May 23,
2006).
 42




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##### Table of Contents



ExhibitNo.
    
    Description10.36
    
    Employment Agreement, dated May 17, 2006, entered into between the Company and Douglas J. ODowd
(incorporated by reference to Form 8- K filed with the Securities and Exchange Commission on May 23, 2006).10.37
    
    Employment Agreement, dated May 17, 2006, entered into between the Company and Eric Arnson (incorporated by
reference to Form 8- K filed with the Securities and Exchange Commission on May 23, 2006).10.38
    
    Purchase Agreement with Medical Resource, LLC, a Delaware limited liability company (MRL), all of the
members of MRL, National Provider Network, Inc., a Delaware corporation (NPN), the sole stockholder of NPN,
Residential Health Care, Inc., a New Jersey corporation (RHC) and all of the shareholders of RHC
(incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on October 23,
2006).10.39
    
    Employee Lease Agreement, dated October 10, 2006, between ProxyMed, Inc. and Residential Health Care, Inc.
(incorporated by reference to Form 10-Q filed with the Securities and Exchange Commission on November 9,
2006).10.40
    
    Assignment and Assumption Agreement, dated October 10, 2006, between ProxyMed, Inc. and Residential Health
Care, Inc. (incorporated by reference to Form 10-Q filed with the Securities and Exchange Commission on
November 9, 2006).10.41
    
    Non-Competition and Non-Solicitation Agreement, dated October 10, 2006, between ProxyMed, Inc. and Harvey
Mitgang (incorporated by reference to Form 10-Q filed with the Securities and Exchange Commission on November
9, 2006).10.42
    
    Non-Competition and Non-Solicitation Agreement, dated October 10, 2006, between ProxyMed, Inc. and John Zubak
(incorporated by reference to Form 10-Q filed with the Securities and Exchange Commission on November 9,
2006).10.43
    
    Employment Agreement dated March 22, 2007, by and between ProxyMed, Inc. d/b/a MedAvant Healthcare Solutions,
and Peter E. Fleming, III (incorporated by reference to Exhibit 10.43 of the Form 10-Q for the period ending
March 31, 2007, filed on May 10, 2007).10.44
    
    Purchase Agreement dated April 30, 2007, by and between SureScripts, LLC, and ProxyMed, Inc. d/b/a MedAvant
Healthcare Solutions. (incorporated by reference to Exhibit 10.44 of the Form 10-Q for the period ending
March 31, 2007, filed on May 10, 2007).10.45
    
    Escrow Agreement dated April 30, 2007, by and among SureScripts, LLC, ProxyMed, Inc. d/b/a MedAvant
Healthcare Solutions, and SunTrust Bank (incorporated by reference to Exhibit 10.45 of the Form 10-Q for the
period ending March 31, 2007, filed on May 10, 2007).10.46
    
    Non-Competition Agreement dated April 30, 2007, by and between ProxyMed, Inc. d/b/a MedAvant Healthcare
Solutions, and SureScripts, LLC. (incorporated by reference to Exhibit 10.46 of the Form 10-Q for the period
ending March 31, 2007, filed on May 10, 2007).10.47
    
    Letter of Termination, dated April 30, 2007, of Purchase Agreement, as amended, dated June 27, 1997, between
Walgreen Co., and ProxyMed, Inc. d/b/a MedAvant Healthcare Solutions (incorporated by reference to Exhibit
10.47 of the Form 10-Q for the period ending March 31, 2007, filed on May 10, 2007).10.48
    
    Employment Agreement, dated May 31, 2007, by and between Proxymed, Inc d/b/a MedAvant Healthcare Solutions
and Gerard M. Hayden, Jr. (incorporated by reference to Exhibit 10.48 of the Form 8-K, File No. 000-22052,
reporting an event dated May 31, 2007).*10.49
    
    Omnibus Amendment dated June 21, 2007, to that certain Security and Purchase Agreement, dated December 6,
2005, by and between ProxyMed, Inc d/b/a MedAvant Healthcare Solutions and Laurus Master Funds Ltd.
(incorporated by reference to Exhibit 10.49 of the Form 10-Q for the period ending June 30, 2007, filed on
August 14, 2007).10.50
    
    Overadvance Side Letter agreement, dated June 21, 2007 by and between ProxyMed, Inc d/b/a MedAvant Healthcare
Solutions and Laurus Master Fund Ltd. (incorporated by reference to Exhibit 10.50 of the Form 10-Q for the
period ending June 30, 2007, filed on November 16, 2007).10.51
    
    Overadvance Side Letter Agreement dated October 10, 2007 by and between ProxyMed, Inc. d/b/a MedAvant
Healthcare Solutions and Laurus Master Fund Ltd. (incorporated by reference to Exhibit 10.51 of the Form 10-Q
for the period ending September 30, 2007, filed on November 16, 2007).10.52
    
    Stock Purchase Agreement dated November 8, 2007, by and among Coalition America, Inc., CCB Acquisition, LLC
and ProxyMed, Inc. (incorporated by reference to Exhibit 10.52 of the Form 10-Q for the period ending
September 30, 2007, filed on November 16, 2007).10.53
    
    Waiver and Amendment Agreement by and between the Company and Laurus Master Fund, Ltd. (Filed herewith).
 43




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##### Table of Contents



ExhibitNo.
    
    Description10.54
    
    Separation Agreement and Release between the Company and John G. Lettko (Filed herewith).14.1
    
    Code of Business Ethics (incorporated by reference to the Companys web site at www.medavanthealth.com under
the heading of Investor/Media Relations).16.1
    
    Letter from Deloitte & Touche LLP to the SEC dated December 26, 2007 (incorporated
by reference to Exhibit 16.1 of the Form 8-K, File No. 000-22052, reporting an event dated December 18, 2007).21
    
    Subsidiaries of the Registrant (Filed herewith).23 .1
    
    Consent of Deloitte & Touche
LLP (Filed herewith).23.2
    
    Consent of UHY LLP (Filed herewith).31.1
    
    Certification by Peter E. Fleming, III, Interim Chief Executive Officer, pursuant to Exchange Act Rules
13a-14(A) and 15d-14(A) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).31.2
    
    Certification by Gerard M. Hayden, Jr., Chief Financial Officer, pursuant to Exchange Act Rules 13a-14(A) and
15d-14(A) as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Filed herewith).32.1
    
    Certification by Peter E. Fleming, III, Interim Chief Executive Officer, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (Filed herewith).32.2
    
    Certification by Gerard M. Hayden, Jr., Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (Filed herewith).
 
 *
    
    Denotes management contract or compensating plan or arrangement. 44




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##### Table of Contents



PROXYMED, INC. AND SUBSIDIARIES
 Index to Consolidated Financial Statements and Schedule
 PageReports of Independent Registered Public Accounting Firms
    
    F-2, F-3Consolidated Balance Sheets  December 31, 2007 and 2006
    
    F-4Consolidated Statements of Operations  Years Ended December 31, 2007, 2006 and 2005
    
    F-5Consolidated Statements of Stockholders Equity (Deficit)  Years Ended December 31, 2007, 2006 and 2005
    
    F-6Consolidated Statements of Cash Flows  Years Ended December 31, 2007, 2006 and 2005
    
    F-7Notes to Consolidated Financial Statements
    
    F-8Schedule II  Valuation and Qualifying Accounts  Years Ended December 31, 2007, 2006 and 2005
    
    F-33
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
        
 F-2




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Report of Independent Registered Public Accounting Firm
 
       
 F-3




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##### Table of Contents



PROXYMED, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands except for share and per share data)
 December 31,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,390
    
    
    $
    682Accounts receivable  trade, net of allowance for doubtful accounts of $8,668 and $3,777
respectively
    
    
    12,772
    
    
    
    15,045Other receivables
    
    
    89
    
    
    
    91Inventory, net
    
    
    434
    
    
    
    759Other current assets
    
    
    1,190
    
    
    
    1,295Total current assets
    
    
    15,875
    
    
    
    17,872Property and equipment, net
    
    
    3,396
    
    
    
    5,555Goodwill
    
    
    11,870
    
    
    
    26,480Purchased technology, capitalized software and other intangible assets, net
    
    
    9,084
    
    
    
    19,702Other long-term assets
    
    
    430
    
    
    
    2,631Total assets
    
    $
    40,655
    
    
    $
    72,240LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable, accrued expenses and other current liabilities
    
    $
    13,339
    
    
    $
    10,842Current portion of capital leases
    
    
    790
    
    
    
    1,041Notes payable and current portion of long-term debt
    
    
    31,975
    
    
    
    12,512Deferred revenue
    
    
    346
    
    
    
    439Income taxes payable
    
    
    237
    
    
    
    674Total current liabilities
    
    
    46,687
    
    
    
    25,508Income taxes payable
    
    
    
    
    
    
    238Convertible notes
    
    
    
    
    
    
    13,137Other long-term debt
    
    
    
    
    
    
    3,992Long-term portion of capital leases
    
    
    506
    
    
    
    1,296Long-term deferred compensation and other long-term liabilities
    
    
    447
    
    
    
    645Total liabilities
    
    
    47,640
    
    
    
    44,816Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity (deficit):Series C 7% Convertible Preferred Stock  $.01 par value. Authorized 300,000 shares;
issued 253,265 shares; outstanding 2,000; liquidation preference $100
    
    
    
    
    
    
    Common Stock  $.001 par value. Authorized 30,000,000 shares; issued and
outstanding 13,782,915, and 13,210,188 shares, respectively
    
    
    14
    
    
    
    14Additional paid-in capital
    
    
    245,763
    
    
    
    243,387Accumulated deficit
    
    
    (252,762
    )
    
    
    (215,977
    )Total stockholders equity (deficit)
    
    
    (6,985
    )
    
    
    27,424Total liabilities and stockholders equity (deficit)
    
    $
    40,655
    
    
    $
    72,240
  F-4




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PROXYMED, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(amounts in thousands except for share and per share data)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Net revenues:Transaction fees, cost containment services and license fees
    
    $
    47,978
    
    
    $
    56,240
    
    
    $
    67,909Communication devices and other tangible goods
    
    
    6,145
    
    
    
    9,222
    
    
    
    9,61054,123
    
    
    
    65,462
    
    
    
    77,519Costs and expenses:Cost of transaction fees, cost containment services and
license fees, excluding depreciation and amortization
    
    
    11,183
    
    
    
    13,944
    
    
    
    20,674Cost of laboratory communication devices and other tangible
goods, excluding depreciation and amortization
    
    
    3,768
    
    
    
    5,389
    
    
    
    6,150Selling, general and administrative expenses
    
    
    40,351
    
    
    
    41,787
    
    
    
    47,962Depreciation and amortization
    
    
    6,417
    
    
    
    7,379
    
    
    
    9,305(Gain)/ loss on disposal of assets
    
    
    (74
    )
    
    
    12
    
    
    
    14Litigation settlements
    
    
    
    
    
    
    321
    
    
    
    175Write-off of impaired assets
    
    
    21,551
    
    
    
    
    
    
    
    96,41683,196
    
    
    
    68,832
    
    
    
    180,696Operating loss
    
    
    (29,073
    )
    
    
    (3,370
    )
    
    
    (103,177
    )Other income, net
    
    
    
    
    
    
    
    
    
    
    1Interest expense, net
    
    
    (7,715
    )
    
    
    (3,240
    )
    
    
    (2,118
    )Loss before income taxes
    
    
    (36,788
    )
    
    
    (6,610
    )
    
    
    (105,294
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (36,788
    )
    
    $
    (6,610
    )
    
    $
    (105,294
    )Basic and diluted weighted average shares outstanding
    
    
    13,513,027
    
    
    
    13,207,789
    
    
    
    12,707,695Basic and diluted loss per share
    
    $
    (2.72
    )
    
    $
    (0.50
    )
    
    $
    (8.29
    )
  F-5




---



##### Table of Contents



PROXYMED, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders Equity (Deficit)
(amounts in thousands except share data)
 Years Ended December 31, 2007, 2006 and 2005
 Series C Preferred Stock
    
    
    Common Stock
    
    
    Additional
    
    
    UnearnedNumber of
    
    
    Par
    
    
    Number of
    
    
    Par
    
    
    Paid-in
    
    
    Compen-
    
    
    AccumulatedShares
    
    
    Value
    
    
    Shares
    
    
    Value
    
    
    Capital
    
    
    sation
    
    
    Deficit
    
    
    Total(Amounts in thousands except for share and per share data)Balances, December 31, 2004
    
    
    2,000
    
    
    $
    
    
    
    
    12,626,182
    
    
    $
    13
    
    
    $
    239,255
    
    
    $
    (113
    )
    
    $
    (104,073
    )
    
    $
    135,082Compensatory option charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173
    
    
    
    73
    
    
    
    
    
    
    
    246Issuance of Common Stock
    
    
    
    
    
    
    
    
    
    
    577,520
    
    
    
    1
    
    
    
    2,869
    
    
    
    
    
    
    
    
    
    
    
    2,870Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105,294
    )
    
    
    (105,294
    )Balances, December 31, 2005
    
    
    2,000
    
    
    
    
    
    
    
    13,203,702
    
    
    
    14
    
    
    
    242,297
    
    
    
    (40
    )
    
    
    (209,367
    )
    
    
    32,904SFAS
123R adoption
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,067
    
    
    
    40
    
    
    
    
    
    
    
    1,107Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    6,486
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    23Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,610
    )
    
    
    (6,610
    )Balances, December 31, 2006
    
    
    2,000
    
    
    
    
    
    
    
    13,210,188
    
    
    
    14
    
    
    
    243,387
    
    
    
    
    
    
    
    (215,977
    )
    
    $
    27,424Share
based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,244
    
    
    
    
    
    
    
    
    
    
    
    1,244Issuance of Common Stock
    
    
    
    
    
    
    
    
    
    
    572,727
    
    
    
    1
    
    
    
    1,132
    
    
    
    
    
    
    
    
    
    
    
    1,133Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,788
    )
    


    
    (36,788
    )Balances, December 31, 2007
    
    
    2,000
    
    
    $
    
    
    
    
    13,782,915
    
    
    $
    15
    
    
    $
    245,763
    
    
    $
    
    
    
    $
    (252,765
    )
    
    $
    (6,985
    )
  F-6




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##### Table of Contents



PROXYMED, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(amounts in thousands)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (36,788
    )
    
    $
    (6,610
    )
    
    $
    (105,294
    )Adjustments to reconcile net loss to net cash used in operating
activities: by operating activities:Depreciation and amortization
    
    
    6,417
    
    
    
    7,379
    
    
    
    9,305Provision for doubtful accounts
    
    
    1,675
    
    
    
    
    
    
    
    Provision for obsolete inventory
    
    
    65
    
    
    
    31
    
    
    
    214Non-cash interest expense
    
    
    4,452
    
    
    
    1,033
    
    
    
    Loss on settlement of liability
    
    
    
    
    
    
    321
    
    
    
    175Write-off of impaired assets
    
    
    21,551
    
    
    
    
    
    
    
    96,416Share based compensation
    
    
    1,244
    
    
    
    1,104
    
    
    
    246(Gain)/ loss on disposal of fixed assets
    
    
    (42
    )
    
    
    20
    
    
    
    14Changes in assets and liabilities, net of effect
of acquisitions and dispositions:Accounts receivable and other receivables
    
    
    600
    
    
    
    1,004
    
    
    
    1,615Inventory
    
    
    260
    
    
    
    240
    
    
    
    531Other current assets
    
    
    (1,011
    )
    
    
    (471
    )
    
    
    706Accounts payable, accrued expenses and other current
liabilities
    
    
    2,497
    
    
    
    (3,157
    )
    
    
    (678
    )Deferred revenue
    
    
    (93
    )
    
    
    91
    
    
    
    (357
    )Income taxes payable
    
    
    (675
    )
    
    
    (712
    )
    
    
    1,471Other, net
    
    
    (198
    )
    
    
    (396
    )
    
    
    819Net cash (used in) provided by operating activities
    
    
    (46
    )
    
    
    (123
    )
    
    
    5,183Cash flows from investing activities:Acquisition of businesses, net of cash acquired
    
    
    
    
    
    
    (3,300
    )
    
    
    Capital expenditures
    
    
    (378
    )
    
    
    (856
    )
    
    
    (2,295
    )Capitalized software
    
    
    (649
    )
    
    
    (1,405
    )
    
    
    (557
    )Proceeds from sale of fixed assets
    
    
    487
    
    
    
    4
    
    
    
    57Decrease in restricted cash
    
    
    
    
    
    
    75
    
    
    
    Net cash (used in) investing activities
    
    
    (540
    )
    
    
    (5,482
    )
    
    
    (2,795
    )Cash flows from financing activities:Net proceeds from sale of Common Stock
    
    
    
    
    
    
    
    
    
    
    500Net proceeds from exercise of stock options and warrants
    
    
    
    
    
    
    23
    
    
    
    Draws on line of credit
    
    
    43,374
    
    
    
    57,707
    
    
    
    47,015Repayments of line of credit
    
    
    (38,992
    )
    
    
    (54,742
    )
    
    
    (39,517
    )Payment of related party note payable
    
    
    
    
    
    
    
    
    
    
    (18,894
    )Borrowings on notes payable
    
    
    
    
    
    
    
    
    
    
    4,070Debt issuance costs
    
    
    
    
    
    
    (261
    )
    
    
    (857
    )Payment of notes payable, long-term debt and capital leases
    
    
    (3,088
    )
    
    
    (1,986
    )
    
    
    (1,533
    )Net cash provided by (used in) financing activities
    
    
    1,294
    
    
    
    741
    
    
    
    (9,216
    )Net increase (decrease) in cash and cash equivalents
    
    
    708
    
    
    
    (4,864
    )
    
    
    (6,828
    )Cash and cash equivalents at beginning of period
    
    
    682
    
    
    
    5,546
    
    
    
    12,374Cash and cash equivalents at end of period
    
    $
    1,390
    
    
    $
    682
    
    
    $
    5,546
  F-7




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##### Table of Contents



PROXYMED, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 (1) Business and Summary of Significant Accounting Policies
 Business
 Going Concern
    Principles of Consolidation
 Use of Estimates
 Revenue Recognition
    F-8




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##### Table of Contents



Fair Value of Financial Instruments
 Cash and Cash Equivalents
 Reserve for Doubtful Accounts/Revenue Allowances/Bad Debt Estimates
 Inventory
 Property and Equipment
 Intangible Assets
 Goodwill
 Other Intangibles
 F-9




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##### Table of Contents



Purchased Technology, Capitalized Software and Research and Development
 Income Taxes
 Net Loss Per Share
 2007
    
    
    2006
    
    
    2005(In thousands except for share and per share data)Net loss applicable to common shareholders
    
    $
    (36,788
    )
    
    $
    (6,610
    )
    
    $
    (105,294
    )Common Shares outstanding:Weighted average common shares used in computing basic
and diluted net loss per share
    
    
    13,513,027
    
    
    
    13,207,789
    
    
    
    12,707,695Plus incremental shares from assumed conversions:Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    Stock options
    
    
    
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares used in computing basic
and diluted net loss per share
    
    
    13,513,027
    
    
    
    13,207,789
    
    
    
    12,707,695Basic and diluted net loss per common share:
    
    $
    (2.72
    )
    
    $
    (0.50
    )
    
    $
    (8.29
    )
  2007
    
    2006
    
    2005Convertible Preferred Stock
    
    
    13,333
    
    
    
    13,333
    
    
    
    13,333Stock options
    
    
    1,919,434
    
    
    
    1,769,917
    
    
    
    1,750,167Warrants
    
    
    
    
    
    
    13,333
    
    
    
    857,2151,932,767
    
    
    
    1,796,583
    
    
    
    2,620,715
 F-10




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##### Table of Contents



Share-based Compensation
    2005Net loss applicable to common shareholders, as reported
    
    $
    (105,294
    )Deduct: Total stock-based employee pro forma compensation
expense determined
under fair value based method for all awards, net of related
tax effects (1)
    
    
    (1,393
    )Add back charges already taken for intrinsic value of options
    
    
    73Pro forma net loss
    
    $
    (106,614
    )Basic and diluted net income (loss) per common share:As reported
    
    $
    (8.29
    )Pro forma
    
    
    (8.39
    )Risk-free interest rate
    
    
    4.0-4.6
    %Expected life
    
    6 yearsExpected volatility
    
    
    82%-85
    %Dividend yield
    
    
    0
    %
 New Accounting Pronouncements
 F-11




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##### Table of Contents



(2)Acquisitions of Businesses and Sale of Assets
 Medical Resources
    (dollars in thousands)Cash
    
    $
    3,000Notes Payable
    
    
    2,000Other
    
    
    75Purchase Price
    
    $
    5,075Allocation of Purchase Price:Customer Relationships
    
    $
    516Provider Network
    
    
    4,555Equipment
    
    
    4Total
    
    $
    5,075
  F-12




---



##### Table of Contents



Unaudited (dollars in thousands, except per share data)Net revenues
    
    $
    66,627Cost of Goods Sold
    
    
    19,525Selling, General and Administrative Expenses
    
    
    42,008Operating Loss
    
    
    (2,633
    )Interest Expense
    
    
    (3,710
    )Net Loss
    
    
    (6,343
    )Basic and Diluted Net Loss per Share of Common Stock
    
    $
    (0.48
    )
 Zeneks
  (dollars in thousands)Cash
    
    $
    225Assumed Liabilities
    
    
    79Purchase Price
    
    
    304Allocation of Purchase Price:Customer Contracts
    
    
    104Provider Network Payable
    
    
    136Accounts Receivable
    
    
    24Equipment
    
    
    5Goodwill
    
    $
    35
 (3)Equity Transactions
   Series C Preferred Stock
 Other Warrants
  Other
 (4) Segment information
  F-13




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##### Table of Contents



SM
 Years Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Net revenues by operating segment:Transaction Services
    
    $
    45,922
    
    
    $
    53,983
    
    
    $
    66,042Laboratory Communication Solutions
    
    
    8,201
    
    
    
    11,479
    
    
    
    11,477$
    54,123
    
    
    $
    65,462
    
    
    $
    77,519Net revenues by geographic location:Domestic
    
    $
    54,123
    
    
    $
    65,462
    
    
    $
    77,519$
    54,123
    
    
    $
    65,462
    
    
    $
    77,519Operating income (loss) by operating segment:Transaction Services
    
    $
    (28,691
    )
    
    $
    (6,210
    )
    
    $
    (104,415
    )Laboratory Communication Solutions
    
    
    (382
    )
    
    
    2,840
    
    
    
    1,238$
    (29,073
    )
    
    $
    (3,370
    )
    
    $
    (103,177
    )Depreciation and amortization by operatingTransaction Services
    
    $
    6,126
    
    
    $
    7,076
    
    
    $
    8,788Laboratory Communication Solutions
    
    
    291
    
    
    
    303
    
    
    
    517$
    6,417
    
    
    $
    7,379
    
    
    $
    9,305Capital expenditures and capitalized
software by operating segment:Transaction Services
    
    $
    901
    
    
    $
    2,121
    
    
    $
    2,355Laboratory Communication Solutions
    
    
    93
    
    
    
    140
    
    
    
    497$
    994
    
    
    $
    2,261
    
    
    $
    2,852Total assets by operation segment:Transaction Services
    
    $
    26,322
    
    
    $
    57,145
    
    
    $
    63,186Laboratory Communication Solutions
    
    
    14,333
    
    
    
    15,095
    
    
    
    12,455$
    40,655
    
    
    $
    72,240
    
    
    $
    75,641
 F-14




---



##### Table of Contents



(5) Inventory
  2007
    
    
    2006(In thousands)Materials, supplies and component parts
    
    $
    193
    
    
    $
    262Work in process
    
    
    62
    
    
    
    87Finished goods
    
    
    179
    
    
    
    410Total
    
    $
    434
    
    
    $
    759
  (6) Property and Equipment
  2007
    
    
    2006
    
    
    Estimated useful lives(In thousands)Furniture, fixtures and equipment
    
    $
    1,549
    
    
    $
    1,872
    
    

    4 to 7 yearsComputer hardware and software
    
    
    14,920
    
    
    
    14,354
    
    

    2 to 5 yearsService vehicles
    
    
    21
    
    
    
    86
    
    
    5 yearsLeasehold improvements
    
    
    528
    
    
    
    521
    
    
    The shorter of the estimated useful life, or lease termRevenue earning equipment
    
    
    510
    
    
    
    1,246
    
    

    3 to 5 years17,528
    
    
    
    18,079Less: accumulated depreciation
    
    
    (14,132
    )
    
    
    (12,524
    )Property and equipment, net
    
    $
    3,396
    
    
    $
    5,555
  (7) Goodwill and Other Intangible Assets
 Goodwill
   F-15




---



##### Table of Contents



LaboratoryTransaction
    
    
    CommunicationServices
    
    
    Solutions
    
    
    Total(In thousands)Balance as of
December 31, 2005
    
    $
    24,342
    
    
    $
    2,102
    
    
    $
    26,444Goodwill acquired
during 2006
    
    
    36
    
    
    
    
    
    
    
    36Balance as of
December 31, 2006
    
    
    24,378
    
    
    
    2,102
    
    
    
    26,480Impairment Charge
    
    
    (12,508
    )
    
    
    (2,102
    )
    
    
    (14,610
    )Balance as of
December 31, 2007
    
    $
    11,870
    
    
    $
    
    
    
    $
    11,870
 Other Intangible Assets 
 December 31, 2007
    
    
    December 31, 2006Carrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetCapitalized software
    
    $
    4,933
    
    
    $
    (3,350
    )
    
    $
    1,583
    
    
    $
    4,476
    
    
    $
    (2,219
    )
    
    $
    2,257Purchased technology
    
    
    8,501
    
    
    
    (7,786
    )
    
    
    715
    
    
    
    8,992
    
    
    
    (6,815
    )
    
    
    2,177Customer relationships
    
    
    13,765
    
    
    
    (13,765
    )
    
    
    0
    
    
    
    13,765
    
    
    
    (6,997
    )
    
    
    6,768Provider network
    
    
    12,180
    
    
    
    (5,394
    )
    
    
    6,786
    
    
    
    12,120
    
    
    
    (3,620
    )
    
    
    8,500$
    39,379
    
    
    $
    (30,295
    )
    
    $
    9,084
    
    
    $
    39,353
    
    
    $
    (19,651
    )
    
    $
    19,702
  Estimated Useful LivesCapitalized software
    
    
    3 to 5 yearsPurchased technology
    
    3 to 12 yearsCustomer relationships
    
    7 yearsProvider network
    
    7 years
 F-16




---



##### Table of Contents



(In thousands)2008
    
    $
    2,9752009
    
    
    1,8322010
    
    
    1,3932011
    
    
    1,2922012 and beyond
    
    
    1,592$
    9,084
 (8) Accounts Payable and Accrued Expenses
  2007
    
    
    2006(In thousands)Accounts payable
    
    $
    5,542
    
    
    $
    2,635Accrued payroll and related costs
    
    
    2,218
    
    
    
    3,722Accrued vendor rebates and network fees payable
    
    
    2,552
    
    
    
    1,905Accrued professional fees
    
    
    326
    
    
    
    89Accrued settlement
    
    
    250
    
    
    
    321Other accrued expenses
    
    
    2,448
    
    
    
    2,170Total accounts payable and accrued expenses
    
    $
    13,336
    
    
    $
    10,842
  (9) Debt Obligations
 Revolving Credit Facility and Term Debt
   F-17




---



##### Table of Contents



Convertible Notes
 F-18




---



##### Table of Contents



2007
    
    
    2006(In thousands)Convertible debt
    
    $
    13,137
    
    
    $
    13,137Line of credit
    
    
    14,847
    
    
    
    10,464Notes payable
    
    
    3,991
    
    
    
    6,04031,975
    
    
    
    29,641Less: current maturities
    
    
    
    
    
    
    (12,512
    )$
    31,975
    
    
    $
    17,129
  (In thousands)2008
    
    $
    29,9232009
    
    
    1,0712010
    
    
    9812011
    
    
    2012
    
    
    $
    31,975
 (10) Income Taxes
  2007
    
    
    2006
    
    
    2005$ Amount
    
    
    %
    
    
    $ Amount
    
    
    %
    
    
    $ Amount
    
    
    %(In thousands)Federal income tax
benefit at
statutory rate
    
    $
    (12,508
    )
    
    
    (34.0
    )
    
    $
    (2,247
    )
    
    
    (34.0
    )
    
    $
    (35,799
    )
    
    
    (34.0
    )State income tax
benefit
    
    
    (1,404
    )
    
    
    (3.8
    )
    
    
    (212
    )
    
    
    (3.2
    )
    
    
    (2,562
    )
    
    
    (2.4
    )Non-deductible items
    
    
    450
    
    
    
    1.2
    
    
    
    429
    
    
    
    6.6
    
    
    
    13,907
    
    
    
    13.2Increase in
valuation allowance
    
    
    13,462
    
    
    
    (36.6
    )
    
    
    2,030
    
    
    
    30.6
    
    
    
    24,454
    
    
    
    23.2Total provision
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
 F-19




---



##### Table of Contents



2007
    
    
    2006(In thousands)Net operating losses  Federal
    
    $
    88,607
    
    
    $
    84,486Net operating losses  State
    
    
    10,318
    
    
    
    9,838Depreciation and amortization
    
    
    14,362
    
    
    
    7,135Other  net
    
    
    5,399
    
    
    
    3,769Total deferred tax assets
    
    
    118,686
    
    
    
    105,228Less valuation allowance
    
    
    (118,686
    )
    
    
    (105,228
    )Net deferred tax assets
    
    
    
    
    
    
    
     (11) Stock Options
  Options
    
    
    
    
    
    
    WeightedAvailable for
    
    
    Options
    
    
    Average ExerciseGrant
    
    
    Outstanding
    
    
    Price of OptionsBalance, December 31, 2004
    
    
    577,395
    
    
    
    1,812,909
    
    
    $
    17.04Options granted
    
    
    (991,938
    )
    
    
    991,938
    
    
    $
    5.90Options exercised
    
    
    
    
    
    
    
    
    
    
    Options expired/forfeited
    
    
    1,054,680
    
    
    
    (1,054,680
    )
    
    $
    18.40Balance, December 31, 2005
    
    
    640,137
    
    
    
    1,750,167
    
    
    $
    9.91Options authorized
    
    
    200,665
    
    
    
    
    
    
    
    Options granted
    
    
    (540,500
    )
    
    
    540,500
    
    
    $
    6.79Options exercised
    
    
    
    
    
    
    (6,486
    )
    
    $
    3.55Options expired/forfeited
    
    
    514,264
    
    
    
    (514,264
    )
    
    $
    10.96Balance, December 31, 2006
    
    
    814,566
    
    
    
    1,769,917
    
    
    $
    8.67Options authorized
    
    
    
    
    
    
    
    
    
    
    Options granted
    
    
    (315,429
    )
    
    
    315,429
    
    
    
    3.19Options exercised
    
    
    Options expired/forfeited
    
    
    165,912
    
    
    
    (165,912
    )
    
    
    9.92Balance, December 31, 2007
    
    
    665,049
    
    
    
    1,919,434
    
    
    $
    7.66
 F-20




---



##### Table of Contents



WeightedAverageRemaining
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Contractual Life
    
    
    Average
    
    
    Number
    
    
    AverageRange of Exercise Prices
    
    Outstanding
    
    
    (Years)
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$2.65  $5.34
    
    
    573,657
    
    
    
    8.74
    
    
    $
    3.74
    
    
    
    158,205
    
    
    $
    4.22$5.65  $6.17
    
    
    25,000
    
    
    
    8.62
    
    
    $
    5.93
    
    
    
    6,249
    
    
    $
    6.13$6.45  $6.45
    
    
    602,500
    
    
    
    3.38
    
    
    $
    6.45
    
    
    
    376,666
    
    
    $
    6.45$6.50  $107.85
    
    
    718,277
    
    
    
    4.92
    
    
    $
    11.87
    
    
    
    500,777
    
    
    $
    13.791,919,434
    
    
    
    
    
    
    
    
    
    
    
    1,041,897
    
    
    $
    9.64
  2007
    
    2006
    
    2005Number exercisable
    
    
    1,041,897
    
    
    
    675,244
    
    
    
    737,714Weighted average exercise price
    
    $
    9.64
    
    
    $
    12.09
    
    
    $
    14.27
  2007
    
    2006
    
    2005Risk-free interest rate
    
    
    5.44
    %
    
    
    4.97
    %
    
    
    4.43
    %Expected life
    
    6 years
    
    
    6 years
    
    
    6 yearsExpected volatility
    
    
    68.00
    %
    
    
    51.00
    %
    
    
    84.00
    %Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
      F-21




---



##### Table of Contents



(12)Supplemental Disclosure of Cash Flow Information
 Year Ending December 31,2007
    
    
    2006
    
    
    2005(In thousands)Cash paid for interest
    
    $
    2,896
    
    
    $
    2,144
    
    
    $
    2,053Cash paid for income taxes
    
    
    999
    
    
    
    913
    
    
    
    813Increase in purchase price of acquisition of PlanVista
related to settlement of New York state income tax
liability
    
    
    
    
    
    
    
    
    
    
    875Acquisition of businesses:Common Stock issued for business acquired
    
    
    
    
    
    
    
    
    
    
    Debt issued for business acquired
    
    
    
    
    
    
    2,000
    
    
    
    Other acquisition costs accrued
    
    
    
    
    
    
    
    
    
    
    Other non-cash adjustments
    
    
    
    
    
    
    
    
    
    
    Details of acquisitions:Working capital components, including cash acquired
    
    
    
    
    
    
    8
    1
    
    
    Property and equipment
    
    
    
    
    
    
    9
    
    
    
    Goodwill
    
    
    
    
    
    
    35
    
    
    
    Intangible assets acquired:Customer relationships
    
    
    
    
    
    
    620
    
    
    
    Purchased technology
    
    
    
    
    
    
    
    
    
    
    Provider network
    
    
    60
    
    
    
    4,555
    
    
    
    Long-term debt
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities, net
    
    
    
    
    
    
    
    
    
    
    Cash acquired in acquisitions
    
    
    
    
    
    
    
    
    
    
    Net cash acquired from acquisitions
    
    $
    
    
    
    $
    
    
    
    $
    Non-cash financing activities:Issuance of 573,000 shares of Common Stock in conjunction with an
amendment to the credit facility and term debt with Laurus Master Fund, Ltd
    
    $
    1,133
    
    
    $
    
    
    
    $
    Issuance of 500,000 shares of Common Stock in conjunction with
revolving credit facility and term debt with Laurus Master Fund, Ltd
    
    $
    
    
    
    $
    
    
    
    $
    2,370Capital leases of telecommunications and computer equipment
    
    $
    
    
    
    $
    3,013
    
    
    $
    
 (13) Concentration of Credit Risk
    (14)Employee Benefit Plans
 401(k)Savings Plan
 F-22




---



##### Table of Contents



Deferred Compensation Plan
 (15)Contingencies
    (16)Commitments and Other
 Leases
 Capital
    
    
    Operating(In thousands)2008
    
    $
    891
    
    
    $
    1,4222009
    
    
    474
    
    
    
    1,2912010
    
    
    51
    
    
    
    5562011
    
    
    
    
    
    
    792012
    
    
    
    
    
    
    29Total minimum lease payments
    
    
    1,416
    
    
    $
    3,377Less amount representing interest
    
    
    120Present value of minimum lease payments
    
    $
    1,296
  Employment Agreements
 (17) Related Party Transactions
   F-23




---



##### Table of Contents



(18) Quarterly Financial Data (unaudited)
    2007 Quarter EndedMarch 31
    
    
    
    
    
    September 30(1)
    
    June 30
    
    (1)
    
    December 31(In thousands except share and per share data)Net revenues
    
    $
    14,996
    
    
    $
    14,286
    
    
    $
    12,040
    
    
    $
    12,801Gross margin (2)
    
    $
    10,811
    
    
    $
    10,130
    
    
    $
    8,300
    
    
    $
    9,931Operating loss
    
    $
    (21,242
    )
    
    $
    (3,151
    )
    
    $
    (3,828
    )
    
    $
    (852
    )Loss from continuing operations
    
    $
    (22,195
    )
    
    $
    (4,143
    )
    
    $
    (5,192
    )
    
    $
    (5,258
    )Net loss applicable to common
shareholders
    
    $
    (22,195
    )
    
    $
    (4,143
    )
    
    $
    (5,192
    )
    
    $
    (5,258
    )Net loss per share (basic and diluted)
    
    $
    (1.68
    )
    
    $
    (0.31
    )
    
    $
    (0.38
    )
    
    $
    (0.39
    )Basic and diluted weighted average
Common
Shares outstanding
    
    
    13,210,188
    
    
    
    13,266,831
    
    
    
    13,782,915
    
    
    
    13,513,027
 2006 Quarter EndedSeptember 30March 31
    
    June 30
    
    (3)
    
    December 31Net revenues
    
    $
    18,075
    
    
    $
    15,557
    
    
    $
    15,983
    
    
    $
    15,848Gross margin (2)
    
    $
    12,201
    
    
    $
    11,004
    
    
    $
    11,404
    
    
    $
    11,381Operating loss
    
    $
    (887
    )
    
    $
    (1,043
    )
    
    $
    (839
    )
    
    $
    (601
    )Loss from continuing operations
    
    $
    (1,573
    )
    
    $
    (1,839
    )
    
    $
    (1,596
    )
    
    $
    (1,602
    )Net loss applicable to common
shareholders
    
    $
    (1,573
    )
    
    $
    (1,839
    )
    
    $
    (1,596
    )
    
    $
    (1,602
    )Net loss per share (basic and diluted)
    
    $
    (0.12
    )
    
    $
    (0.14
    )
    
    $
    (0.12
    )
    
    $
    (0.12
    )Basic and diluted weighted average
Common
Shares outstanding
    
    
    13,203,702
    
    
    
    13,204,842
    
    
    
    13,210,188
    
    
    
    13,210,188
 
 (1)
    
    Includes an impairment charge of $19.5 million and $2.1 million for the quarters ended March 31 and September 30,
respectively. See Note 7.(2)
    
    Gross Margin includes depreciation for direct revenue generating assets.(3)
    
    Includes an impairment charge of $96.4 million, see Note 7. (19) Subsequent Events (unaudited)
 Departure of John Lettko
  F-24




---



##### Table of Contents



(c)
 Sale of NPPN Business
    Sale of NPPN Business
 General Information
   
    
    Transaction The proposed sale of substantially all of the net assets of the Companys
Cost Containment Business to Coalition America, Inc, (CAI) in exchange for $23.5 million
in cash. At closing, $3.0 million of the cash proceeds will be placed in escrow to cover
possible indemnification claims, $4.0 million will be used to pay transaction costs and
certain Cost Containment Business liabilities, and the remaining $16.5 million will be used
to pay down a portion of the Companys senior debt.
    F-25




---



##### Table of Contents



ProxyMed, Inc. and Subsidiaries
Pro Forma Balance Sheets
As of December 31, 2007
(Unaudited)
 ProxyMed,Inc.Historical
    
    
    Cost
    
    
    ProformaConsolidated
    
    
    Containment
    
    
    Adjustments
    
    
    Pro Forma(a)
    
    
    Business (b)
    
    
    ©
    
    
    Consolidated(amounts in thousands)Cash and Cash Equivalents
    
    $
    1,390
    
    
    $
    224
    
    
    $
    20,500
    1
    
    $
    1,390(20,500
    )  2224
    3Accounts Receivable, Net
    
    
    12,772
    
    
    
    8,096
    
    
    
    
    
    
    
    4,676Note and Other Receivables
    
    
    89
    
    
    
    0
    
    
    
    
    
    
    
    89Inventory
    
    
    434
    
    
    
    0
    
    
    
    
    
    
    
    434Other Current Assets
    
    
    1,190
    
    
    
    395
    
    
    
    
    
    
    
    795Total Current Assets
    
    
    15,875
    
    
    
    8,715
    
    
    
    224
    
    
    
    7,384Property and Equipment, Net
    
    
    3,396
    
    
    
    71
    
    
    
    
    
    
    
    3,325Goodwill, Net
    
    
    11,870
    
    
    
    8,176
    
    
    
    
    
    
    
    3,694Purchased technology, capitalized software and other intangibles, net
    
    
    9,084
    
    
    
    6,861
    
    
    
    
    
    
    
    2,223Other Assets
    
    
    430
    
    
    
    98
    
    
    
    
    
    
    
    332Total Assets
    
    $
    40,655
    
    
    $
    23,921
    
    
    $
    224
    
    
    $
    16,958Accounts payable, accrued expenses, and other current liabilities
    
    $
    13,339
    
    
    $
    2,153
    
    
    $
    (2,000
    )         5
    
    $
    9,186Current portion of capital leases
    
    
    790
    
    
    
    0
    
    
    
    
    
    
    
    790Notes payable and current portion of long-term debt
    
    
    31,975
    
    
    
    0
    
    
    
    (16,500
    )         6
    
    
    14,853(622
    )         7Deferred revenue
    
    
    346
    
    
    
    0
    
    
    
    
    
    
    
    346Income taxes payable
    
    
    237
    
    
    
    0
    
    
    
    
    
    
    
    237Total Current Liabilities
    
    
    46,687
    
    
    
    2,153
    
    
    
    (19,122
    )
    
    
    25,412Income Taxes Payable
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Other long-term debt
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Long term capital leases
    
    
    506
    
    
    
    0
    
    
    
    
    
    
    
    506Long term deferred revenue and other long-term liabilities
    
    
    447
    
    
    
    0
    
    
    
    
    
    
    
    447Total Liabilities
    
    
    47,640
    
    
    
    2,153
    
    
    
    (19,122
    )
    
    
    26,365Stockholders EquityPreferred Stock
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Common Stock
    
    
    14
    
    
    
    0
    
    
    
    
    
    
    
    14Additional Paid-In Capital
    
    
    245,763
    
    
    
    230,483
    
    
    
    230,483
    8
    
    
    245,763Retained Earnings (Deficit)
    
    
    (252,762
    )
    
    
    (208,715
    )
    
    
    (230,483
    )         8
    
    
    (255,184
    )224
    3(1,200
    )         920,500
    1(178
    )         7Total Stockholders Equity
    
    
    (6,985
    )
    
    
    21,768
    
    
    
    19,346
    
    
    
    (9,407
    )Total Liabilities and Stockholders Equity
    
    $
    40,655
    
    
    $
    23,921
    
    
    $
    224
    
    
    $
    16,958
  F-26




---



##### Table of Contents



ProxyMed, Inc. and Subsidiaries
Pro Forma Consolidated Results of Operations
Twelve Months Ended December 31, 2007
(Unaudited)
 ProxyMed,Inc.Historical
    
    Cost
    
    Pro FormaConsolidated
    
    Containment
    
    Adjustments
    
    Proforma(a)
    
    Business (b)
    
    (c)
    
    ConsolidatedNet revenues:Transaction fees, cost containment services
and license fees
    
    $
    47,978
    
    
    
    18,987
    
    
    
    
    
    
    
    28,991Communication devices and other tangible goods
    
    
    6,145
    
    
    
    0
    
    
    
    
    
    
    
    6,14554,123
    
    
    
    18,987
    
    
    
    
    
    
    
    35,136Costs and expenses:Cost of transaction fees, cost containment
services and license fees, excluding
depreciation and amortization
    
    
    11,183
    
    
    
    5,612
    
    
    
    
    
    
    
    5,571Cost of laboratory communication devices and
other tangible goods, excluding depreciation
and amortization
    
    
    3,768
    
    
    
    0
    
    
    
    
    
    
    
    3,768Selling, general and administrative expenses
    
    
    40,351
    
    
    
    12,652
    
    
    
    
    
    
    
    27,699Depreciation and amortization
    
    
    6,417
    
    
    
    1,919
    
    
    
    
    
    
    
    4,155Write-off of impaired assets
    
    
    21,551
    
    
    
    14,409
    
    
    
    
    
    
    
    7,485Other expense, net
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0(Gain)/Loss on disposal of assets
    
    
    (74
    )
    
    
    0
    
    
    
    
    
    
    
    (74
    )Litigation settlements
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Total Expenses
    
    
    83,196
    
    
    
    34,592
    
    
    
    0
    
    
    
    48,604Operating income (loss)
    
    
    (29,073
    )
    
    
    (15,605
    )
    
    
    0
    
    
    
    (13,468
    )Other (Income), net
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Interest expense, net
    
    
    7,715
    
    
    
    
    
    
    
    (6,815
    ) 1
    
    
    900(Gain)/Loss on sale of business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Income (loss) before income taxes
    
    
    (36,788
    )
    
    
    (15,605
    )
    
    
    6,815
    
    
    
    (14,368
    )Provision for income taxes
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Net Income (loss)
    
    $
    (36,788
    )
    
    
    (15,605
    )
    
    
    6,815
    
    
    
    (14,368
    )Basic and diluted weighted average shares
outstanding
    
    
    13,513,027
    
    
    
    13,513,027
    
    
    
    13,513,027
    
    
    
    13,513,027Basic and diluted loss per share
    
    $
    (2.72
    )
    
    
    (1.15
    )
    
    
    0.50
    
    
    
    (1.06
    )
  F-27




---



##### Table of Contents



ProxyMed, Inc. and Subsidiaries
 Pro Forma Consolidated
Statement of Operations
Twelve Months Ended December 31, 2006
(Unaudited)
 ProxyMed, IncHistorical
    
    
    Cost Containment
    
    
    Pro Forma
    
    
    Pro FormaConsolidated (a)
    
    
    Business (b)
    
    
    Adjustments (c)
    
    
    Consolidated(In thousands except for share and per share data)Net Revenues:Transaction fees, cost containment services
and license fees
    
    $
    56,240
    
    
    $
    23,886
    
    
    
    
    
    
    $
    32,354Communication devices and other tangible goods
    
    
    9,222
    
    
    
    0
    
    
    
    
    
    
    
    9,22265,462
    
    
    
    23,886
    
    
    
    
    
    
    
    41,576Cost and expenses:Cost of transaction fees, cost containment
services and license fees, excluding
depreciation and amortization
    
    
    13,944
    
    
    
    6,869
    
    
    
    
    
    
    
    7,075Cost of laboratory communication devices and
other tangible goods, excluding depreciation
and amortization
    
    
    5,389
    
    
    
    0
    
    
    
    
    
    
    
    5,389Selling, general and administrative expenses
    
    
    41,787
    
    
    
    11,830
    
    
    
    
    
    
    
    29,957Depreciation and amortization
    
    
    7,379
    
    
    
    2,919
    
    
    
    
    
    
    
    4,460Write-off of impaired assets
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Other expense, net
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0(Gain)/Loss on disposal of assets
    
    
    12
    
    
    
    (7
    )
    
    
    
    
    
    
    19Litigation settlements
    
    
    321
    
    
    
    0
    
    
    
    
    
    
    
    321Total Expenses
    
    
    68,832
    
    
    
    21,611
    
    
    
    0
    
    
    
    47,221Operating income (loss)
    
    
    (3,370
    )
    
    
    2,275
    
    
    
    0
    
    
    
    (5,645
    )Other (Income), net
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Interest expense, net
    
    
    3,240
    
    
    
    0
    
    
    
    (2,340
    ) 1
    
    
    900Income (loss) before income taxes
    
    
    (6,610
    )
    
    
    2,275
    
    
    
    2,340
    
    
    
    (6,545
    )Provision for income taxes
    
    
    0
    
    
    
    887
    
    
    
    887
    2
    
    
    0Net Income (loss)
    
    $
    (6,610
    )
    
    $
    1,388
    
    
    $
    1,453
    
    
    $
    (6,545
    )Basic and diluted weighted average shares
outstanding
    
    
    13,207,789
    
    
    
    13,207,789
    
    
    
    13,207,789
    
    
    
    13,207,789Basic and diluted loss per share
    
    $
    (0.50
    )
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    (0.50
    )
  F-28




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##### Table of Contents



ProxyMed, Inc. and Subsidiaries
 Pro Forma Consolidated
Statement of Operations
Twelve Months Ended December 31, 2005
(Unaudited)
 ProxyMed, IncHistorical
    
    
    Cost Containment
    
    
    Pro Forma
    
    
    Pro FormaConsolidated (a)
    
    
    Business (b)
    
    
    Adjustments (c)
    
    
    Consolidated(In thousands except for share and per share data)Net Revenues:Transaction fees, cost containment services and
license fees
    
    $
    67,909
    
    
    $
    27,943
    
    
    
    
    
    
    $
    39,966Communication devices and other tangible goods
    
    
    9,610
    
    
    
    0
    
    
    
    
    
    
    
    9,61077,519
    
    
    
    27,943
    
    
    
    
    
    
    
    49,576Cost and expenses:Cost of transaction fees, cost containment services
and license fees, excluding depreciation and
amortization
    
    
    20,674
    
    
    
    10,265
    
    
    
    
    
    
    
    10,409Cost of laboratory communication devices and other
tangible goods, excluding depreciation and
amortization
    
    
    6,150
    
    
    
    0
    
    
    
    
    
    
    
    6,150Selling, general and administrative expenses
    
    
    47,962
    
    
    
    12,826
    
    
    
    
    
    
    
    35,136Depreciation and amortization
    
    
    9,305
    
    
    
    4,421
    
    
    
    
    
    
    
    4,884Write-off of impaired assets
    
    
    96,416
    
    
    
    70,313
    
    
    
    
    
    
    
    26,103Other expense, net
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0(Gain)/Loss on disposal of assets
    
    
    14
    
    
    
    0
    
    
    
    
    
    
    
    14Litigation settlements
    
    
    175
    
    
    
    175
    
    
    
    
    
    
    
    0Total Expenses
    
    
    180,696
    
    
    
    98,000
    
    
    
    0
    
    
    
    82,696Operating income (loss)
    
    
    (103,177
    )
    
    
    (70,057
    )
    
    
    0
    
    
    
    (33,120
    )Other (Income), net
    
    
    (1
    )
    
    
    0
    
    
    
    
    
    
    
    (1
    )Interest expense, net
    
    
    2,118
    
    
    
    0
    
    
    
    (1,218
    ) 1
    
    
    900Income (loss) before income taxes
    
    
    (105,294
    )
    
    
    (70,057
    )
    
    
    1,218
    
    
    
    (34,019
    )Provision for income taxes
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Net Income (loss)
    
    $
    (105,294
    )
    
    $
    (70,057
    )
    
    $
    1,218
    
    
    $
    (34,019
    )Basic and diluted weighted average shares outstanding
    
    
    12,707,695
    
    
    
    12,707,695
    
    
    
    12,707,695
    
    
    
    12,707,695Basic and diluted loss per share
    
    $
    (8.29
    )
    
    $
    (5.51
    )
    
    $
    0.10
    
    
    $
    (2.68
    )
  F-29




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##### Table of Contents



ProxyMed, Inc. and Subsidiaries
 Pro Forma Consolidated
Statement of Operations
Twelve Months Ended December 31, 2004
(Unaudited)
 ProxyMed, IncHistorical
    
    
    Cost Containment
    
    
    Pro Forma
    
    
    Pro FormaConsolidated (a)
    
    
    Business (b)
    
    
    Adjustments (c)
    
    
    Consolidated(In thousands except for share and per share data)Net Revenues:Transaction fees, cost containment services and
license fees
    
    $
    73,538
    
    
    $
    26,913
    
    
    
    
    
    
    $
    46,625Communication devices and other tangible goods
    
    
    16,708
    
    
    
    0
    
    
    
    
    
    
    
    16,70890,246
    
    
    
    26,913
    
    
    
    
    
    
    
    63,333Cost and expenses:Cost of transaction fees, cost containment services
and license fees, excluding depreciation and
amortization
    
    
    22,626
    
    
    
    8,788
    
    
    
    
    
    
    
    13,838Cost of laboratory communication devices and other
tangible goods, excluding depreciation and
amortization
    
    
    11,586
    
    
    
    0
    
    
    
    
    
    
    
    11,586Selling, general and administrative expenses
    
    
    48,023
    
    
    
    10,967
    
    
    
    
    
    
    
    37,056Depreciation and amortization
    
    
    9,763
    
    
    
    4,123
    
    
    
    
    
    
    
    5,640Write-off of impaired assets
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Other expense, net
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0(Gain)/Loss on disposal of assets
    
    
    47
    
    
    
    0
    
    
    
    
    
    
    
    47Litigation settlements
    
    
    175
    
    
    
    175
    
    
    
    
    
    
    
    0Total Expenses
    
    
    92,220
    
    
    
    24,053
    
    
    
    0
    
    
    
    68,167Operating income (loss)
    
    
    (1,974
    )
    
    
    2,860
    
    
    
    0
    
    
    
    (4,834
    )Other (Income), net
    
    
    (134
    )
    
    
    0
    
    
    
    
    
    
    
    (134
    )Interest expense, net
    
    
    1,920
    
    
    
    0
    
    
    
    (1,020
    ) 1
    
    
    900Income (loss) before income taxes
    
    
    (3,760
    )
    
    
    2,860
    
    
    
    1,020
    
    
    
    (5,600
    )Provision for income taxes
    
    
    40
    
    
    
    1,115
    
    
    
    1,115
    2
    
    
    40Net Income (loss)
    
    $
    (3,800
    )
    
    $
    1,745
    
    
    $
    (95
    )
    
    $
    (5,640
    )Basic and diluted weighted average shares outstanding
    
    
    11,617,601
    
    
    
    11,617,601
    
    
    
    11,617,601
    
    
    
    11,617,601Basic and diluted loss per share
    
    $
    (0.33
    )
    
    $
    0.15
    
    
    $
    (0.01
    )
    
    $
    (0.49
    )
  F-30




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##### Table of Contents



ProxyMed, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Consolidated Financial Information
 (19) Subsequent Events (unaudited) (continued)  Sale of NPPN Business
 I. Adjustments to unaudited pro forma consolidated balance sheet
 (a) ProxyMed, Inc.
  (b) Cost Containment Business
   (c) Pro Forma Adjustments
          II. Adjustments to unaudited pro forma consolidated statements of operations
 a) ProxyMed, Inc.
  b) Cost Containment Business
   F-31




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##### Table of Contents



c) Pro forma adjustments
   Pro-forma interestAmount of
    
    
    expense  twelveInterest expense (in thousands)
    
    Total rate
    
    
    borrowing
    
    
    month periodsSenior debt
    
    
    10.0
    %
    
    $
    1,690
    
    
    $
    169Convertible debt
    
    
    4.0
    %
    
    $
    13,137
    
    
    $
    525Other
    
    
    7.0
    %
    
    $
    1,479
    
    
    $
    104Total interest expense
    
    
    
    
    
    
    
    
    
    $
    798Amortization of deferred financing costs (in thousands)Senior debt
    
    
    
    
    
    
    
    
    
    $
    102Total amortization of deferred financing costs
    
    
    
    
    
    
    
    
    
    $
    102Total interest expense and amortization of deferred financing costs
    
    
    
    
    
    
    
    
    
    $
    900
 ProxyMed, Inc. HistoricalInterest and amortization expense (in thousands)
    
    Consolidated
    
    Pro forma AdjustmentTwelve months ended December 31, 2007
    
    $
    7,715
    
    
    $
    6,815Twelve months ended December 31, 2006
    
    $
    3,240
    
    
    $
    2,340Twelve months ended December 31, 2005
    
    $
    2,118
    
    
    $
    1,218
  Laurus Revolving Line of Credit
    F-32




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##### Table of Contents



PROXYMED, INC., AND SUBSIDIARIES
 SCHEDULE II  Valuation and Qualifying Accounts
 Allowance for Doubtful AccountsAdditionsChargedBalance at
    
    toBeginning of
    
    Costs and
    
    Charged to Other
    
    Deductions
    
    Balance atYear Ended December 31,
    
    Year
    
    Expenses
    
    Accounts (1)

    
    (2)
    
    End of Year(In thousands)2007
    
    $
    3,777
    
    
    
    2,895
    
    
    
    703
    
    
    
    1,295
    
    
    
    8,6702006
    
    $
    5,525
    
    
    
    641
    
    
    
    8,416
    
    
    
    10,805
    
    
    $
    3,7772005
    
    $
    3,168
    
    
    
    695
    
    
    
    4,777
    
    
    
    3,115
    
    
    $
    5,525
 
 (1)
    
    Includes amounts charged against revenue in 2005, 2006, and 2007 of, ($4,777), ($2,209) and ($1,598), respectively.(2)
    
    Primarily write-off of bad debts and amounts charged against revenues, net of recoveries. F-33