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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

__________________

FORM 10-Q

__________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

COMMISSION FILE NUMBER: 000-24539

ECLIPSYS CORPORATION
(Exact name of registrant as specified in its charter)

|                         |  |                                     
|------------------------ |  | ------------------------------------
|DELAWARE                 |  | 65-0632092                          
|(State of Incorporation) |  | (IRS Employer Identification Number)

1750 Clint Moore Road
Boca Raton, Florida
33487
(Address of principal executive offices)

561-322-4321
(Telephone number of registrant)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing for the past 90 days. Yes [X]   No [  ]

Indicate the number of shares outstanding of each of the issuers classes
of common stock as of the latest practicable date.

|                             |                                         |  |            | 
|---------------------------- | --------------------------------------- |  | ---------- | 
|Class                        | Shares outstanding as of August 6, 2002
|                             |                                        
|Common Stock, $.01 par value |                                         |  | 44,778,081 | 



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ECLIPSYS CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2002

INDEX

|           |  |                                                                                                                         |  |     
|---------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I.    |  | Financial Information                                                                                                   |  | Page
|Item 1.    |  | Condensed Consolidated Balance Sheets (unaudited)  As of June
30, 2002 and December 31, 2001                           |  | 3   
|          
|           |  | Condensed Consolidated Statements of Operations (unaudited) 
For the Three and Six Months ended June 30, 2002 and 2001 |  | 4   
|          
|           |  | Condensed Consolidated Statements of Cash Flows (unaudited) 
For the Six Months ended June 30, 2002 and 2001           |  | 5   
|          
|           |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                        |  | 6   
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                                   |  | 10  
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                              |  | 19  
|PART II.   |  | Other Information                                                                                                       |  |     
|Item 1.    |  | Legal Proceedings                                                                                                       |  | 20  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                     |  | 20  
|Item 5.    |  | Other Information                                                                                                       |  | 20  
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                                        |  | 20  
|Signatures |  |                                                                                                                         |  | 21  

2



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PART I.

ITEM 1.

ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(IN THOUSANDS)

|                                            |                                      |   |               |          |                   |   |         |          |  
|------------------------------------------- | ------------------------------------ | - | ------------- | -------- | ----------------- | - | ------- | -------- | -
|                                            |                                      |   | JUNE 30, 2002 |          | DECEMBER 31, 2001
|                                            |                                      |   |               |          |                  
|ASSETS                                      |                                      |   |               |          |                   |   |         |         
|Current assets:                             |                                      |   |               |          |                   |   |         |         
|                                            | Cash and cash equivalents            |   | $             | 120,277  |                   |   | $       | 168,942  |  
|                                            | Marketable securities                |   |               | 60,974   |                   |   |         |         |  
|                                            | Accounts receivable, net             |   |               | 57,556   |                   |   |         | 66,094   |  
|                                            | Inventory                            |   |               | 581      |                   |   |         | 667      |  
|                                            | Other current assets                 |   |               | 14,147   |                   |   |         | 18,424   |  
|                                            |                                      |   |               |          |                   |   |         |         
|Total current assets                        |                                      |   | 253,535       |          |                   |   | 254,127 |         
|Property and equipment, net                 |                                      |   | 25,846        |          |                   |   | 21,675  |         
|Capitalized software development costs, net |                                      |   | 15,255        |          |                   |   | 13,831  |         
|Acquired technology, net                    |                                      |   | 858           |          |                   |   | 3,345   |         
|Intangible assets, net                      |                                      |   | 454           |          |                   |   | 628     |         
|Other assets                                |                                      |   | 7,599         |          |                   |   | 6,888   |         
|                                            |                                      |   |               |          |                   |   |         |         
|TOTAL ASSETS                                |                                      | $ | 303,547       |          |                   | $ | 300,494 |         
|                                            |                                      |   |               |          |                   |   |         |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY        |                                      |   |               |          |                   |   |         |         
|Current liabilities:                        |                                      |   |               |          |                   |   |         |         
|                                            | Deferred revenue                     |   | $             | 57,424   |                   |   | $       | 56,428   |  
|                                            | Other current liabilities            |   |               | 21,911   |                   |   |         | 22,748   |  
|                                            |                                      |   |               |          |                   |   |         |         
|Total current liabilities                   |                                      |   | 79,335        |          |                   |   | 79,176  |         
|Deferred revenue                            |                                      |   | 871           |          |                   |   | 2,418   |         
|Other long-term liabilities                 |                                      |   | 320           |          |                   |   | 699     |         
|Stockholders equity:                       |                                      |   |               |          |                   |   |         |         
|                                            | Common stock                         |   |               | 447      |                   |   |         | 444      |  
|                                            | Unearned stock compensation          |   |               |         |                   |   |         | (32      | )
|                                            | Additional paid-in capital           |   |               | 402,948  |                   |   |         | 400,242  |  
|                                            | Accumulated deficit                  |   |               | (179,788 | )                 |   |         | (182,051 | )
|                                            | Accumulated other comprehensive loss |   |               | (586     | )                 |   |         | (402     | )
|                                            |                                      |   |               |          |                   |   |         |         
|Total stockholders equity                  |                                      |   | 223,021       |          |                   |   | 218,201 |         
|                                            |                                      |   |               |          |                   |   |         |          |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY  |                                      | $ | 303,547       |          |                   | $ | 300,494 |         
|                                            |                                      |   |               |          |                   |   |         |          |  

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

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ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |         |  
|-------------------------------------------------- | ------------------------------------- | - | --------------------------- | ------ | ------------------------- | - | ------ | ------ | ---- | - | ------- | ------- |  | - | ------- | ------- | -
|                                                   |                                       |   | THREE MONTHS ENDED JUNE 30, |        | SIX MONTHS ENDED JUNE 30,
|                                                   |                                       |   |                             |        |                          
|                                                   |                                       |   | 2002                        |        | 2001                      |   | 2002   |        | 2001
|                                                   |                                       |   |                             |        |                           |   |        |        |     
|REVENUES                                           |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|                                                   | Systems and services                  |   | $                           | 51,732 |                           |   | $      | 56,021 |      |   | $       | 108,862 |  |   | $       | 108,460 |  
|                                                   | Hardware                              |   |                             | 2,520  |                           |   |        | 3,974  |      |   |         | 8,209   |  |   |         | 6,885   |  
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|TOTAL REVENUES                                     |                                       |   | 54,252                      |        |                           |   | 59,995 |        |      |   | 117,071 |         |  |   | 115,345 |        
|COSTS AND EXPENSES                                 |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|                                                   | Cost of systems and services revenues |   |                             | 28,424 |                           |   |        | 31,046 |      |   |         | 56,155  |  |   |         | 62,823  |  
|                                                   | Cost of hardware revenues             |   |                             | 2,202  |                           |   |        | 3,310  |      |   |         | 6,813   |  |   |         | 5,594   |  
|                                                   | Sales and marketing                   |   |                             | 11,856 |                           |   |        | 10,501 |      |   |         | 23,205  |  |   |         | 21,144  |  
|                                                   | Research and development              |   |                             | 11,216 |                           |   |        | 9,212  |      |   |         | 21,455  |  |   |         | 18,575  |  
|                                                   | General and administrative            |   |                             | 2,724  |                           |   |        | 3,049  |      |   |         | 5,258   |  |   |         | 5,396   |  
|                                                   | Depreciation and amortization         |   |                             | 2,043  |                           |   |        | 3,529  |      |   |         | 4,032   |  |   |         | 7,046   |  
|                                                   | Transaction costs                     |   |                             |       |                           |   |        | (472   | )    |   |         |        |  |   |         | (472    | )
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|TOTAL COSTS AND EXPENSES                           |                                       |   | 58,465                      |        |                           |   | 60,175 |        |      |   | 116,918 |         |  |   | 120,106 |        
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|(LOSS) INCOME FROM OPERATIONS                      |                                       |   | (4,213                      | )      |                           |   | (180   | )      |      |   | 153     |         |  |   | (4,761  | )      
|Interest income, net                               |                                       |   | 1,166                       |        |                           |   | 1,671  |        |      |   | 2,275   |         |  |   | 3,076   |        
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|(LOSS) INCOME BEFORE INCOME TAXES                  |                                       |   | (3,047                      | )      |                           |   | 1,491  |        |      |   | 2,428   |         |  |   | (1,685  | )      
|Provision for income taxes                         |                                       |   |                            |        |                           |   |       |        |      |   | 165     |         |  |   |        |        
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|NET (LOSS) INCOME                                  |                                       | $ | (3,047                      | )      |                           | $ | 1,491  |        |      | $ | 2,263   |         |  | $ | (1,685  | )      
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|BASIC NET (LOSS) INCOME PER COMMON SHARE           |                                       | $ | (0.07                       | )      |                           | $ | 0.03   |        |      | $ | 0.05    |         |  | $ | (0.04   | )      
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|DILUTED NET (LOSS) INCOME PER COMMON SHARE         |                                       | $ | (0.07                       | )      |                           | $ | 0.03   |        |      | $ | 0.05    |         |  | $ | (0.04   | )      
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|BASIC WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING   |                                       |   | 44,628                      |        |                           |   | 43,339 |        |      |   | 44,563  |         |  |   | 42,322  |        
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        
|DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING |                                       |   | 44,628                      |        |                           |   | 47,381 |        |      |   | 46,853  |         |  |   | 42,322  |        
|                                                   |                                       |   |                             |        |                           |   |        |        |      |   |         |         |  |   |         |        

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

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ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN THOUSANDS)

|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |         |        |        |         |  
|---------------------------------------------------------------------------------------- | ------------------------------------------- | -------------------------------------------- | ------------------------- | --------------------------------------------------------------------------------------------- | ------ | ---------------- | ------- | ------- | ------ | ------ | ------- | -
|                                                                                         |                                             |                                              |                           |                                                                                               |        | SIX MONTHS ENDED
|                                                                                         |                                             |                                              |                           |                                                                                               |        | JUNE 30,        
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                 
|                                                                                         |                                             |                                              |                           |                                                                                               |        | 2002             |         | 2001   
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|OPERATING ACTIVITIES                                                                     |                                             |                                              |                           |                                                                                               |        |                  |         |        
|Net income (loss)                                                                        |                                             | $                                            | 2,263                     |                                                                                               |        | $                | (1,685  | )      
|Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |                                             |                                              |                           |                                                                                               |        |                  |         |        
|                                                                                         |                                             | Depreciation and amortization                |                           |                                                                                               | 10,154 |                  |         |         | 18,892 |       
|                                                                                         |                                             | Provision for bad debts and discounts        |                           |                                                                                               | 500    |                  |         |         | 1,835  |       
|                                                                                         |                                             | Stock compensation expense                   |                           |                                                                                               | 32     |                  |         |         | 72     |       
|                                                                                         |                                             | Changes in operating assets and liabilities: |                           |                                                                                               |        |                  |         |         |        |       
|                                                                                         |                                             |                                              | Accounts receivable       |                                                                                               |        | 7,414            |         |         |        | (2,828 | )      
|                                                                                         |                                             |                                              | Inventory                 |                                                                                               |        | 86               |         |         |        | 149    |        
|                                                                                         |                                             |                                              | Other current assets      |                                                                                               |        | 4,276            |         |         |        | (1,389 | )      
|                                                                                         |                                             |                                              | Other assets              |                                                                                               |        | (1,556           | )       |         |        | (1,963 | )      
|                                                                                         |                                             |                                              | Deferred revenue          |                                                                                               |        | (550             | )       |         |        | 4,542  |        
|                                                                                         |                                             |                                              | Other current liabilities |                                                                                               |        | (838             | )       |         |        | (5,261 | )      
|                                                                                         |                                             |                                              | Other liabilities         |                                                                                               |        | (379             | )       |         |        | (272   | )      
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|                                                                                         |                                             |                                              |                           | Total adjustments to reconcile net income (loss) to net
cash provided by operating activities |        |                  | 19,139  |         |        |        | 13,777  |  
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|                                                                                         |                                             |                                              |                           | NET CASH PROVIDED BY OPERATING ACTIVITIES                                                     |        |                  | 21,402  |         |        |        | 12,092  |  
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|INVESTING ACTIVITIES                                                                     |                                             |                                              |                           |                                                                                               |        |                  |         |        
|                                                                                         | Purchase of property and equipment          |                                              |                           | (7,405                                                                                        | )      |                  |         | (8,016  | )     
|                                                                                         | Purchase of marketable securities           |                                              |                           | (61,178                                                                                       | )      |                  |         | (50,135 | )     
|                                                                                         | Capitalized software development costs      |                                              |                           | (4,214                                                                                        | )      |                  |         | (3,381  | )     
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|                                                                                         |                                             |                                              |                           | NET CASH USED IN INVESTING ACTIVITIES                                                         |        |                  | (72,797 | )       |        |        | (61,532 | )
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|FINANCING ACTIVITIES                                                                     |                                             |                                              |                           |                                                                                               |        |                  |         |        
|                                                                                         | Issuance of common stock in public offering |                                              |                           |                                                                                              |        |                  |         | 123,231 |       
|                                                                                         | Payments on borrowings                      |                                              |                           |                                                                                              |        |                  |         | (1,491  | )     
|                                                                                         | Exercise of stock options                   |                                              |                           | 1,450                                                                                         |        |                  |         | 5,097   |       
|                                                                                         | Employee stock purchase plan                |                                              |                           | 1,259                                                                                         |        |                  |         | 1,239   |       
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|                                                                                         |                                             |                                              |                           | NET CASH PROVIDED BY FINANCING ACTIVITIES                                                     |        |                  | 2,709   |         |        |        | 128,076 |  
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|EFFECT OF EXCHANGE RATES ON CASH AND
CASH EQUIVALENTS                                    |                                             |                                              | 21                        |                                                                                               |        |                  | (79     | )      
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     |                                             |                                              | (48,665                   | )                                                                                             |        |                  | 78,557  |        
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           |                                             |                                              | 168,942                   |                                                                                               |        |                  | 20,799  |        
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                 |                                             | $                                            | 120,277                   |                                                                                               |        | $                | 99,356  |        
|                                                                                         |                                             |                                              |                           |                                                                                               |        |                  |         |        

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

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ECLIPSYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.     BASIS OF PRESENTATION

The condensed consolidated financial statements include all adjustments
that, in the opinion of management, are necessary for a fair presentation of
the results for the periods presented. All such adjustments are considered of a
normal recurring nature. Quarterly results of operations are not necessarily
indicative of annual results. Certain prior period amounts have been
reclassified to conform to the 2002 presentation (See note 7). The Company
manages its business as one reporting segment.

Certain financial information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These unaudited condensed
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and the notes thereto included in the
Companys Annual Report on Form 10-K filed March 25, 2002.

2.     MARKETABLE SECURITIES

Marketable securities consist of funds that are highly liquid and are
classified as available-for-sale. Marketable securities are recorded at fair
value, and unrealized gains and losses are recorded as a component of other
comprehensive income.

3.     ACCOUNTS RECEIVABLE

The non-current portion of unbilled accounts receivable was $1.7 million
and $1.8 million as of June 30, 2002 and December 31, 2001, respectively, and
is included in other assets in the accompanying condensed consolidated balance
sheets.

Accounts receivable was comprised of the following as of:

|                               |                                                                               |   |                |        |              |   |        |        | 
|------------------------------ | ----------------------------------------------------------------------------- | - | -------------- | ------ | ------------ | - | ------ | ------ | 
|                               |                                                                               |   | June 30,       |        | December 31,
|                               |                                                                               |   | 2002           |        | 2001        
|                               |                                                                               |   |                |        |             
|                               |                                                                               |   | (in thousands)
|Accounts Receivable:           |                                                                               |   |                |        |              |   |        |       
|                               | Unbilled accounts receivable related to
long-term contracts (current portion) |   | $              | 2,142  |              |   | $      | 3,212  | 
|                               | Other unbilled accounts receivable, net                                       |   |                | 4,228  |              |   |        | 6,768  | 
|                               |                                                                               |   |                |        |              |   |        |       
|                               | Total unbilled accounts receivable, net                                       |   |                | 6,370  |              |   |        | 9,980  | 
|                               | Billed accounts receivable, net                                               |   |                | 51,186 |              |   |        | 56,114 | 
|                               |                                                                               |   |                |        |              |   |        |       
|Total accounts receivable, net |                                                                               | $ | 57,556         |        |              | $ | 66,094 |       
|                               |                                                                               |   |                |        |              |   |        |       

4.     OTHER COMPREHENSIVE INCOME

The components of other comprehensive (loss) income were as follows (in
thousands):

|                                                                                             |  |                    |        |                  |  |      |       |      |  |   |       |   |  |   |        |  
|-------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ------ | -
|                                                                                             |  | Three Months Ended |        | Six Months Ended
|                                                                                             |  | June 30,           |        | June 30,        
|                                                                                             |  |                    |        |                 
|                                                                                             |  | 2002               |        | 2001             |  | 2002 |       | 2001
|                                                                                             |  |                    |        |                  |  |      |       |     
|Net (loss) income                                                                            |  | $                  | (3,047 | )                |  | $    | 1,491 |      |  | $ | 2,263 |   |  | $ | (1,685 | )
|Unrealized gain (loss) on
available-for-sale marketable
securities arising during the period |  |                    | 89     |                  |  |      | (98   | )    |  |   | (205  | ) |  |   | (98    | )
|Foreign currency translation adjustment                                                      |  |                    | 21     |                  |  |      | (6    | )    |  |   | 21    |   |  |   | (79    | )
|                                                                                             |  |                    |        |                  |  |      |       |      |  |   |       |   |  |   |        |  
|Total comprehensive (loss) income                                                            |  | $                  | (2,937 | )                |  | $    | 1,387 |      |  | $ | 2,079 |   |  | $ | (1,862 | )
|                                                                                             |  |                    |        |                  |  |      |       |      |  |   |       |   |  |   |        |  

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5.     LEGAL ACTION

In July 2002, our company and three of its officers (Messrs. Colletti,
Patton and Wilson) were named in four complaints filed by shareholders in the
United States District Court, Southern District of Florida, West Palm Beach
Division. The complaints allege that our company and the named officers
violated federal securities laws. We believe that the actions are
without merit, and intend to conduct a vigorous defense against these
allegations.

6.     PUBLIC OFFERING

During the quarter ended March 31, 2001, the Company completed a follow-on
public offering for 5,750,000 shares of its common stock. Net proceeds from
the offering were approximately $123.2 million.

7.     RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142 Goodwill and
other Intangible Assets. Under this new standard, the FASB eliminated amortization
of goodwill and created indefinite life intangible assets and established new
impairment measurement procedures for goodwill. In accordance with SFAS 142,
goodwill is no longer amortized, but instead tested for
impairment at least once annually. There was no impairment of goodwill upon
adoption of SFAS 142, and amortization ceased as of January 1, 2002, leaving a
recorded balance of $454,000 for goodwill as of December 31, 2001 and June 30,
2002. The effect of adopting SFAS 142 was to reduce depreciation and
amortization expense by $227,000 and $454,000 for the three and six months
ended June 30, 2002, respectively. Net income and earnings per share for the
three and six months ended June 30, 2001 adjusted to exclude amortization
expense is as follows:

|                                               |                                      |                                                 |   |                                           |       |                  |   |        |      | 
|---------------------------------------------- | ------------------------------------ | ----------------------------------------------- | - | ----------------------------------------- | ----- | ---------------- | - | ------ | ---- | 
|                                               |                                      |                                                 |   | Three Months Ended                        |       | Six Months Ended
|                                               |                                      |                                                 |   | June 30, 2001                             |       | June 30, 2001   
|                                               |                                      |                                                 |   |                                           |       |                 
|                                               |                                      |                                                 |   | (in thousands, except earnings per share)
|Net income:                                    |                                      |                                                 |   |                                           |       |                  |   |       
|                                               | Reported net income (loss)           |                                                 | $ | 1,491                                     |       |                  | $ | (1,685 | )   
|                                               | Goodwill amortization                |                                                 |   | 1,244                                     |       |                  |   | 2,488  |     
|                                               |                                      |                                                 |   |                                           |       |                  |   |       
|                                               |                                      | Adjusted net income (loss)                      |   | $                                         | 2,735 |                  |   | $      | 803  | 
|                                               |                                      |                                                 |   |                                           |       |                  |   |       
|Basic and diluted net income (loss) per share: |                                      |                                                 |   |                                           |       |                  |   |       
|                                               | Reported net income (loss) per share |                                                 | $ | 0.03                                      |       |                  | $ | (0.04  | )   
|                                               | Goodwill amortization                |                                                 |   | 0.03                                      |       |                  |   | 0.06   |     
|                                               |                                      |                                                 |   |                                           |       |                  |   |       
|                                               |                                      | Adjusted basic and diluted net income per share |   | $                                         | 0.06  |                  |   | $      | 0.02 | 
|                                               |                                      |                                                 |   |                                           |       |                  |   |       

As of June 30, 2002, the Company had the following balances for acquired
technology and other intangible assets (in thousands):

|                               |                     |  |                |        |              |  |             |        |  |  |   |     | 
|------------------------------ | ------------------- |  | -------------- | ------ | ------------ |  | ----------- | ------ |  |  | - | --- | 
|                               |                     |  | Gross Carrying |        | Accumulated  |  |             |        | 
|                               |                     |  | Amount         |        | Amortization |  | Net Balance
|                               |                     |  |                |        |              |  |            
|Amortized intangible assets:   |                     |  |                |        |              |  |             |        |  |  |   |    
|                               | Acquired technology |  | $              | 95,795 |              |  | $           | 94,937 |  |  | $ | 858 | 
|                               | Customer base       |  | $              | 10,690 |              |  | $           | 10,690 |  |  | $ |    | 
|Unamortized intangible assets: |                     |  |                |        |              |  |             |        |  |  |   |    
|                               | Goodwill            |  |                |        |              |  |             |        |  |  | $ | 454 | 

7



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Amortization of acquired technology and customer base for the three and
six months ended June 30, 2002 was $400,000 and $2,547,000, respectively. The
estimated amortization expense for the next five fiscal years is as follows (in
thousands):

|                         |       |   |       |       | 
|------------------------ | ----- | - | ----- | ----- | 
|For year ending 12/31/02 |       | $ | 3,252 |      
|For year ending 12/31/03 |       |   | 267   |      
|Thereafter               |       |   |      |      
|                         |       |   |       |      
|                         | Total |   | $     | 3,519 | 

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which is effective for fiscal
years beginning after December 15, 2001. This statement supercedes FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. However, it retains the fundamental
provisions of SFAS 121 for the recognition and measurement of the impairment of
long-lived assets to be held and used and the measurement of long-lived assets
to be disposed of by sale. Impairment of goodwill is not included in the scope
of SFAS 144 and will be treated in accordance with the accounting standards
established in SFAS 142. According to SFAS 144, long-lived assets are measured
at the lower of carrying amount or fair value less cost to sell, whether
reported in continuing or discontinued operations. The statement applies to
all long-lived assets, including discontinued operations, and replaces the
provisions of APB Opinion No. 30, Reporting the Results of Unusual and
Infrequently Occurring Events and Transactions, for the disposal of segments
of a business. The adoption of SFAS 144 has had no impact on the Companys
financial position or results of operations.

In November 2001, the FASBs Emerging Issues Task Force (EITF) reached a
consensus on EITF Issue 01-09, Accounting for Consideration Given by a Vendor
to a Customer or a Reseller of the Vendors Products, which is a codification
of EITF 00-14, 00-22 and 00-25. This issue presumes that consideration from a
vendor to a customer or reseller of the vendors products is a reduction in
the selling prices of the vendors product and, therefore, should be
characterized as a reduction of revenue when recognized in the vendors income
statement and could lead to negative revenue under certain circumstances.
Revenue reduction is required unless the consideration related to a separate
identifiable benefit and the benefits fair value can be established. The
Company adopted EITF 01-09 effective January 1, 2002, and it did not have a
material impact on the consolidated financial statements.

In January 2002, the EITF reached a consensus on EITF Issue 01-14, Income
Statement Characterization of Reimbursements Received for Out-of-Pocket
Expenses Incurred. This consensus requires that reimbursements received for
out-of-pocket expenses incurred be characterized as revenue in the income
statement. The Company adopted EITF 01-14 effective January 1, 2002 and has
made the appropriate reclassifications as required by EITF 01-14. The effect
of adopting EITF 01-14 was to increase revenues and expenses by the following
identical amounts (in thousands).

|                            |  |      |       |      |  |   |       | 
|--------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                            |  | 2002 |       | 2001
|                            |  |      |       |     
|Three months ended June 30, |  | $    | 770   |      |  | $ | 795   | 
|Six months ended June 30,   |  | $    | 1,352 |      |  | $ | 1,474 | 

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146 requires that a
liability for a cost that is associated with an exit or disposal activity be
recognized when the liability is incurred. It nullifies the guidance in
EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). Under EITF Issue No. 94-3, an entity
recognized a liability for an exit cost on the date that the entity committed
itself to an exit plan. In SFAS 146, the Board acknowledges that an entitys
commitment to a plan does not, by itself, create a present obligation to other
parties that meets the definition of a liability. SFAS 146 also establishes
that fair value is the objective for the initial measurement of the liability.
SFAS 146 will be effective for exit or disposal activities that are initiated
after December 31, 2002. The Company does not expect the adoption of SFAS 146
to have a significant impact on the Companys financial position or results of
operations.

8



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8.     AMENDMENT TO STOCK OPTION PLANS

At the Annual Meeting of Stockholders of the Company held on May 8, 2002,
the shareholders voted to approve the amendment and restatement of the
Companys 2000 Stock Incentive Plan, 1999 Stock Incentive Plan, 1998 Stock
Incentive Plan and Amended and Restated 1998 Employee Stock Purchase Plan to
reflect an increase in the number of shares of Voting Common Stock authorized
for issuance under all of the Companys stock plans (the 2000 Stock Incentive
Plan, the 1999 Stock Incentive Plan, the Amended and Restated Employee Stock
Purchase Plan, the 1998 Stock Incentive Plan and the 1996 Stock Plan) from
12,000,000 to 15,000,000.

9



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PART I.

ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

This report contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words believes, anticipates, plans, expects, intends, and similar
expressions are intended to identify forward-looking statements. The important
factors discussed under the caption Risk Factors, presented below, could cause
actual results to differ materially from those indicated by forward-looking
statements made herein. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

OVERVIEW

Eclipsys is a healthcare information technology company that provides
software and services to help healthcare organizations improve the quality of
care and the level of patient satisfaction, while reducing costs and enhancing
revenues.

We believe our mission of better healthcare through knowledge aligns
with our customers objectives, and our software solutions help them improve
their workflow processes and implement best practices in their organizations.
To these ends, we design and offer a comprehensive package of software
applications and services that together enable providers in a variety of
healthcare settings to improve the effectiveness of their operations and the
quality of care as measured by clinical outcomes.

Our software and services provide comprehensive functionality to help
healthcare organizations solve the clinical problems and business issues they
face and achieve balanced outcomes through an appropriate and sustainable
combination of clinical quality, resource utilization and patient satisfaction.

We believe the open, modular nature of our software architecture reduces
the overall cost of ownership and reduces the time to productive use because
our solutions do not require the initial investment and disruption associated
with a complete replacement of a customers existing systems. To facilitate
rapid adoption by our customers, we have engineered our solutions to take
advantage of Web-based technologies. Our software applications are available to
our customers for implementation in-house or through our remote hosting
service, and are designed to work in a variety of healthcare settings.

In addition, we provide a wide range of complementary services to our
customers, including implementation, integration, support, maintenance and
training. We also provide outsourcing, remote hosting, network services and
business solutions consulting to assist customers in meeting their healthcare
information technology requirements. Through this comprehensive service
offering and our integrated software components, we provide our customers with
solutions for their clinical, financial and administrative information needs.

We maintain decentralized sales and customer support teams in each of our
six North American regions to provide direct, sustained customer contact. We
market our solutions primarily to large healthcare organizations, particularly
academic medical centers. We have one or more of our products installed or
being installed in over 1,500 facilities worldwide.

CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with
accounting principles generally accepted in the United States. Our significant
accounting policies are discussed in detail in Note 2 to the consolidated
financial statements contained in our Form 10-K, filed on March 25, 2002. Some of these accounting policies as discussed below
require management to make estimates and assumptions about future events that
could materially affect the reported amounts of assets, liabilities, revenues
and expenses and disclosure of contingent assets and liabilities.

10



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For contracts using which we recognize revenue using the
percentage-of-completion method, revenues are recognized based upon the
proportion of labor hours incurred in relation to the total labor hours
estimated under the agreement. The percentage-of-completion method is used when
management determines that services are essential to the functionality of the
software sold. Determining factors for percentage-of-completion include the
nature of services required and the provision for payments of software and
services upon the achievement of implementation milestones. Under the
percentage-of-completion method, revenue and profit are recognized throughout
the term of the contract, based upon estimates of the total labor hours to be
incurred and revenues to be generated throughout the term of the contract.
Changes in estimates of total labor hours and the related effect on the timing
of revenues and profits are recognized in the period in which they are
determinable. Accordingly, changes in these estimates could occur and could
have a material effect on our operating results in the period of change.

In evaluating the collectibility of our accounts receivable, we assess a
number of factors including a specific customers ability to meet its financial
obligations to us, as well as general factors, such as the length of time the
receivables are past due and historical collection experience. Based on these
assessments, we record both specific and general reserves for bad debt to
reduce the related receivables to the amount we ultimately expect to collect
from customers. If circumstances related to specific customers change or
economic conditions worsen such that our past collection experience is no
longer relevant, our estimate of the recoverability of our accounts receivable
could be further reduced from the levels provided for in the consolidated
financial statements.

At each balance sheet date, we perform a detailed assessment of our
capitalized software development costs to be marketed which includes a review
of, among other factors, projected revenues, customer demand requirements,
product lifecycle, changes in software and hardware technologies and product
development plans. Based on this analysis, we record adjustments, when
appropriate, to reflect the net realizable value of our capitalized software
development costs. The estimates of expected future revenues generated by the
software, the remaining economic life of the software, or both, could change,
materially affecting the carrying value of capitalized software development
costs as well as our consolidated operating results in the period of change.

RESULTS OF OPERATIONS

Total revenues decreased $5.7 million, or 9.6%, to $54.3 million for the
quarter ended June 30, 2002, compared with $60.0 million for the second quarter
of 2001. For the six months ended June 30, 2002, total revenues increased $1.7
million, or 1.5%, to $117.0 million, compared to $115.3 million for the same
period in 2001. Systems and services revenues decreased $4.3 million, or 7.7%,
to $51.7 million for the quarter ended June 30, 2002, compared with $56.0
million for the second quarter of 2001. This decrease was primarily a result
of a shortfall in new contract signings and the corresponding lower software
license fees in the second quarter of 2002. For the six months ended June 30,
2002, systems and services revenues increased $0.4 million, or 0.4%, to $108.9
million, compared to $108.5 million for the same period in 2001. The increase
in systems and services revenues for the six months was primarily attributable
to revenue generated under contracts signed during the last several quarters,
partially offset by the previously mentioned new contract signings shortfall in
the second quarter. During the past several quarters, due to capital pressures
and other industry trends, we have been encountering proportionately
more interest in our comprehensive solutions offerings. These comprehensive
offerings may bundle software license fees (including the right to future
products within the applicable suite), implementation, maintenance,
outsourcing, remote hosting, networking services and other related services
into comprehensive contracts that generally provide for monthly or annual
payments over the term of the contracts. Revenues under these arrangements are
generally recognized on a monthly basis over the term of the contract, which
typically ranges from seven to ten years. In the event that we experience a higher percentage
of new contracts under the comprehensive solutions contracting model, our operating results will reflect
lower revenues and cash flows, compared to traditional licensing arrangements, during the
initial portion of the contracts.

Hardware revenues decreased $1.5 million, or 36.6%, to $2.5 million for
the quarter ended June 30, 2002, compared with $4.0 million for the second
quarter of 2001. The decrease during the second quarter was a result of lower
hardware shipments compared to the second quarter in the prior year, primarily
as a result of fewer contract signings. For the six months ended June 30,
2002, hardware revenues increased $1.3 million, or 19.2%, to $8.2 million,
compared to $6.9 million for the same period in 2001. The increase in hardware
revenues for the six months ended June 30, 2002 was primarily due to increased
shipments under contracts entered into in recent quarters, partially offset by
lower hardware shipments during the second quarter of 2002, compared to 2001.

11



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Cost of systems and services revenues decreased $2.6 million, or 8.4%, to
$28.4 million, or 54.9% of systems and services revenues, for the quarter ended
June 30, 2002, compared to $31.0 million, or 55.4% of systems and services
revenues, for the second quarter of 2001. For the six months ended June 30,
2002, cost of systems and services revenues decreased approximately $6.6
million, or 10.6%, to $56.2 million, or 51.6% of systems and services revenues,
compared to $62.8 million, or 57.9% of systems and services revenues, for the
same period in 2001. These costs decreased primarily from lower amortization
of acquisition related acquired technology and network services assets that
amounted to $0.4 million and $2.4 million for the quarter and six months ended
June 30, 2002, compared to $4.2 million and $8.9 million for the same periods
in 2001. These cost savings were partially offset by higher amortization of
capitalized software development costs that amounted to $1.5 million and $2.8
million for the quarter and six months ended June 30, 2002, compared to $1.1
million and $2.3 million for the same periods in 2001. The higher amortization
was due to the Company releasing certain clinical products of its new
SunriseXAtm product line during the first quarter of 2002. Another factor
offsetting the decrease for the second quarter of 2002 was $0.8 million higher
costs associated with delivering remote hosting and networking services
revenues, as compared to the second quarter of 2001.

Cost of hardware revenues decreased $1.1 million, or 33.5%, to $2.2
million for the quarter ended June 30, 2002, compared to $3.3 million for the
same period in 2001. For the six months ended June 30, 2002, cost of hardware
revenues increased $1.2 million, or 21.8%, to $6.8 million, or 83.0% of
hardware revenues, compared to $5.6 million, or 81.2% of hardware revenues, for
the same period in 2001. The fluctuations in the cost of hardware revenues for
the quarter and six months ended June 30, 2002, as compared to the same periods
in 2001, were directly attributable to the fluctuations in hardware revenues.
Also, pricing pressure in the hardware sector resulted in lower margins
associated with hardware revenues in 2002. This resulted in the cost of
hardware revenues increasing to 87.4% of hardware revenues for the quarter
ended June 30, 2002, compared to 83.3% of hardware revenues for the same period
in 2001.

Sales and marketing expenses increased $1.4 million, or 12.9%, to $11.9
million, or 21.9% of total revenues, for the quarter ended June 30, 2002, from
$10.5 million, or 17.5% of total revenues, for the same period in 2001. For
the six months ended June 30, 2002, sales and marketing expenses increased $2.1
million, or 9.7%, to $23.2 million, or 19.8% of total revenues, compared to
$21.1 million, or 18.3% of total revenues, for the same period in 2001. The
increase in sales and marketing expenses was primarily due to a program we
initiated, during the fourth quarter of 2001, to significantly increase the
size of our sales and marketing organization. This program is expected to be
completed by the end of 2002 and will result in higher expenses. The program
was implemented to increase the sales presence of our sales organization and
enhance the market awareness of our company and its products and services.
Additionally, there were an increased number of marketing events held in the
first quarter of 2002, as compared to the same period in 2001.

Research and development expenses increased approximately $2.0 million, or
21.8%, to $11.2 million, or 20.7% of total revenues, for the quarter ended June
30, 2002, compared to $9.2 million, or 15.4% of total revenues, for the same
period in 2001. For the six months ended June 30, 2002, research and
development expenses increased $2.9 million, or 15.5%, to $21.5 million, or
18.3% of total revenues, compared to $18.6 million, or 16.1% of total revenues,
for the same period in 2001. The increase in research and development expenses
was due primarily to a program we implemented in the fourth quarter of 2001.
This program accelerates the development of our products with respect to our
SunriseXA(TM) initiative, which, among other things, will migrate our products
onto the Microsoft.NET platform. This initiative is expected to be
substantially completed within the next 12 to 18 months and to result in
continued heightened research and development expenses over this period. The
percentage of research and development expenditures capitalized for the quarter
ended June 30, 2002 was 16.6%, compared to 15.4% for the same period in 2001.
Research and development expenses that were capitalized amounted to $2.2
million and $1.7 million for the quarters ended June 30, 2002 and 2001,
respectively. The percentage of research and development expenditures
capitalized for the six months ended June 30, 2002 was 16.4%, compared to 15.4%
for the same period in 2001. Research and development expenses that were
capitalized amounted to $4.2 million and $3.4 million for the six months ended
June 30, 2002 and 2001, respectively.

General and administrative expenses decreased approximately $0.3 million,
or 10.7%, to $2.7 million, or 5.0% of total revenues, for the quarter ended
June 30, 2002, compared to $3.0 million, or 5.1% of total revenues, for the
same period in 2001. For the six months ended June 30, 2002, general and
administrative expenses decreased $0.1 million, or 2.6%, to $5.3 million, or
4.5% of total revenues, compared to $5.4 million, or 4.7% of total revenues,
for the same period in 2001. The decrease for the quarter was attributable to
a bad debt provision recorded in the second quarter of 2001. For the six
months ended June 30, 2002, this was partially offset by higher legal and
insurance costs, as well as expenses related to the relocation of our corporate
offices to Boca Raton, Florida.

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Depreciation and amortization decreased nearly $1.5 million, or 42.1%, to
$2.0 million, or 3.8% of total revenues, for the quarter ended June 30, 2002,
from $3.5 million, or 5.9% of total revenues, for the same period in 2001. For
the six months ended June 30, 2002, depreciation and amortization expenses
decreased $3.0 million, or 42.8%, to $4.0 million, or 3.4% of total revenues,
compared to $7.0 million, or 6.1% of total revenues, for the same period in
2001. The decrease was primarily the result of the complete amortization of
certain intangibles, which became fully amortized during the fourth quarter of
2001, as well as the adoption of SFAS 142, which eliminated the amortization of
goodwill, partially offset by higher depreciation of fixed assets purchased
during 2001. Included in depreciation and amortization for the quarter and six
months ended June 30, 2002 were acquisition related amortization of $0.2
million. This compares to $1.8 million and $3.5 million, respectively, for the
quarter and six months ended June 30, 2001.

Transaction costs incurred during the quarter ended June 30, 2001 were
($0.5) million as the result of the completion of certain activities related to
prior pooling of interest transactions which were completed for less than
original estimates.

Interest income decreased $0.5 million, or 30.2%, to $1.2 million for the
quarter ended June 30, 2002, from $1.7 million for the same period in 2001.
For the six months ended June 30, 2002, interest income decreased $0.8 million,
or 26.0%, to $2.3 million, compared to $3.1 million for the same period in
2001. This decrease was due to a significant decline in interest rates
partially offset by higher balances of cash and marketable securities. Cash
and marketable securities increased primarily due to the public offering in
January 2001, as well as cash generated from operations.

During the first quarter of 2002, a provision for income taxes was
recorded for $165,000. Based upon current estimates, no
additional provision for income taxes was recorded during the second quarter of
2002.

As a result of these factors, we had a net loss of $3.0 million for the
quarter ended June 30, 2002, compared to net income of $1.5 million for the
same period in 2001. For the six months ended June 30, 2002, net income was
$2.3 million, compared to a net loss of $1.7 million for the same period in
2001.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 2002, operations provided $21.4
million of cash. Investing activities used $72.8 million of cash, of which
$61.2 million was for the purchase of marketable securities, $7.4 million was
for the purchase of fixed assets and $4.2 million was for the funding of
development costs. Financing activities provided $2.7 million of cash, as a
result of the exercise of stock options and the purchase of common stock under
our employee stock purchase plan.

As of June 30, 2002, our principal source of liquidity is our combined
cash and marketable securities balance of $181.3 million. Our future
capital requirements will depend upon a number of factors, including our sales
volumes and the timing and level of research and development activities. As of
June 30, 2002, we did not have any material commitments for capital
expenditures. We believe that our available cash and cash equivalents and
anticipated cash generated from our future operations will be sufficient to
meet our operating requirements for at least the next 12 months.

RISK FACTORS

There are a number of important
factors that could affect our business and future operating results, including without
limitation, the factors set forth below. The information contained in this report
should be read in light of such factors. Any of the following factors could harm
our business and future operating results.

Given the length of our sales and implementation cycles, if a significant
number of our customers delay implementation, our future operating results may
suffer

We have experienced long sales and implementation cycles. How and when to
implement, replace, expand or substantially modify an information system, or
modify or add business processes, are major decisions for healthcare
organizations. Furthermore, the solutions we provide typically require
significant capital expenditures by the customer. The sales cycle for our
systems has ranged from 6 to 18 months or more from initial contact to contract
execution. Historically, our implementation cycle has ranged from 6 to 36
months from contract execution to completion of implementation. During the
sales cycle and the implementation cycle, we will expend substantial time,
effort and financial resources preparing contract proposals, negotiating the
contract and implementing the solution. We may not realize any revenues to
offset these expenditures, and, if we do, accounting principles may not allow
us to recognize the revenues during corresponding periods, which could harm our
future operating results. Additionally, any decision by our customers to delay
implementation may adversely affect our revenues.

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The healthcare industry faces financial constraints that could adversely affect
the demand for our products and services

The healthcare industry has faced, and will likely continue to face,
significant financial constraints. For example, the shift to managed healthcare
in the 1990s put pressure on healthcare organizations to reduce costs, and the
Balanced Budget Act of 1997 dramatically reduced Medicare reimbursements to
healthcare organizations. Our solutions often involve a significant financial
commitment by our customers, and, as a result, our ability to grow our business
is largely dependent on our customers information technology budgets. To the
extent healthcare information technology spending declines or increases more
slowly than we anticipate, demand for our products would be adversely affected.

We have a history of operating losses, and we cannot predict future
profitability

We had a net loss of $3.0 million during the
second quarter of 2002, and, prior to 2001, we incurred net losses in each year since our inception,
including net losses of $126.3 million in 1997, $35.3 million in 1998, $9.4
million in 1999 and $34.0 million in 2000. Although we had net income in 2001,
we had a loss from operations of $1.6 million. We may continue to incur net
losses and cannot predict when or if we will be profitable in the future.

Our operating results may fluctuate significantly and may cause our stock price
to decline

We have experienced significant variations in revenues and operating
results from quarter to quarter. Our quarterly operating results may continue
to fluctuate due to a number of factors, including:



| |  |  | the timing, size and complexity of our product sales and
implementations;                      
| | - |  | -----------------------------------------------------------------------------------------------
|
| |  |  | overall demand for healthcare information technology;                                          
|
| |  |  | the financial condition of our customers and potential customers;                              
|
| |  |  | market acceptance of new services, products and product enhancements by
us and our competitors;
|
| |  |  | product and price competition;                                                                 
|
| |  |  | the relative proportions of revenues we derive from systems and
services and from hardware;    
|
| |  |  | changes in our operating expenses;                                                             
|
| |  |  | the timing and size of future acquisitions;                                                    
|
| |  |  | personnel changes;                                                                             
|
| |  |  | the performance of our products; and                                                           
|
| |  |  | fluctuations in general economic and financial market conditions,
including interest rates.    

It is difficult to predict the timing of revenues from product sales
because the sales cycle can vary depending upon several factors. These factors
include the size of the transaction, the changing business plans of the
customer, the effectiveness of the customers management and general economic
conditions. In addition, depending upon the extent to which our customers
elect to license our products under comprehensive bundled arrangements, the
timing of revenue recognition could vary considerably. Under comprehensive
bundled arrangements, revenues are recognized under the terms of the contract
consistent with the timing of performance of all services offered under the
arrangement. Generally, less revenue is recognized under these arrangements
during the first 12 to 24 months compared to our more traditional licensing
arrangements. We will also continue to offer contracts using our more
traditional licensing arrangements, under which revenue is recognized on a
percentage-of-completion basis. For these contracts, the revenue recognition
will depend upon a variety of factors including the availability of
implementation personnel, the implementation schedule and the complexity of the
implementation process. Because a significant percentage of our expenses will
be relatively fixed, a variation in the timing of sales and implementations
could cause significant variations in operating results from quarter to
quarter. We believe that period-to-period comparisons of our historical results
of operations are not necessarily meaningful.

14



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You should not rely on these comparisons as indicators of future performance.

We operate in an intensely competitive market that includes companies that have
greater financial, technical and marketing resources than we do

We operate in a market that is intensely competitive. Our principal
competitors include Cerner Corp., McKessonHBOC, Inc., Quadramed, IDX Systems
Corp. and Siemens. We also face competition from providers of practice
management systems, general decision support and database systems and other
segment-specific applications, as well as from healthcare technology
consultants. A number of existing and potential competitors are more
established than we are and have greater name recognition and financial,
technical and marketing resources than we do. We expect that competition will
continue to increase. Increased competition could harm our business.

If the healthcare industry continues to undergo consolidation, this could
impose pressure on our products prices, reduce our potential customer base and
reduce demand for our products

Many healthcare providers have consolidated to create larger healthcare
delivery enterprises with greater market power. If this consolidation
continues, it could erode our customer base and could reduce the size of our
target market. In addition, the resulting enterprises could have greater
bargaining power, which may lead to erosion of the prices for our products.

Potential regulation by the U.S. Food and Drug Administration of our products
as medical devices could impose increased costs, delay the introduction of new
products and hurt our business

The U.S. Food and Drug Administration, or FDA, is likely to become
increasingly active in regulating computer software intended for use in the
healthcare setting. The FDA has increasingly focused on the regulation of
computer products and computer-assisted products as medical devices under the
federal Food, Drug and Cosmetic, or FDC Act. If the FDA chooses to regulate
any of our products as medical devices, it can impose extensive requirements
upon us, including the following:



| |  |  | requiring us to seek FDA clearance of a pre-market notification
submission demonstrating that the product is substantially equivalent to
a device already legally marketed, or to obtain FDA approval of a
pre-market approval application establishing the safety and effectiveness
of the product;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | requiring us to comply with rigorous regulations governing the
pre-clinical and clinical testing, manufacture, distribution, labeling
and promotion of medical devices; and                                                                                                                         
|
| |  |  | requiring us to comply with the FDC Acts general controls, including
establishment registration, device listing, compliance with good
manufacturing practices, reporting of specified device malfunctions and
adverse device events.                                                               

If we fail to comply with applicable requirements, the FDA could respond
by imposing fines, injunctions or civil penalties, requiring recalls or product
corrections, suspending production, refusing to grant pre-market clearance or
approval of products, withdrawing clearances and approvals, and initiating
criminal prosecution. Any final FDA policy governing computer products, once
issued, may increase the cost and time to market of new or existing products or
may prevent us from marketing our products.

New and potential federal regulations relating to patient confidentiality could
depress the demand for our products and impose significant product redesign
costs on us

State and federal laws regulate the confidentiality of patient records and
the circumstances under which those records may be released. These regulations
govern both the disclosure and use of confidential patient medical record
information and may require the users of such information to implement
specified security measures. Regulations governing electronic health data
transmissions may change rapidly and be unclear or difficult to apply.

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On August 22, 1996, former President Clinton signed the Health Insurance
Portability and Accountability Act of 1996, or HIPAA. This legislation required
the Secretary of Health and Human Services, or HHS, to adopt national standards
for some types of electronic health information transactions and the data
elements used in those transactions, to adopt standards to ensure the integrity
and confidentiality of health information, and to establish a schedule for
implementing national health data privacy legislation or regulations. In
December 2000, HHS issued health data privacy regulations that will require
health care providers, health plans and health care clearinghouses conducting
electronic transactions to comply therewith by April 14, 2003. Among other
things, these regulations will (i) restrict the use and disclosure of
personally identifiable health information without the prior written permission
of the patient; (ii) guarantee a patients right to be informed regarding how
his or her personally identifiable information is used; (iii) provide patients
with rights to access and amend their or obtain an accounting of disclosures
concerning their personally identifiable information; and (iv) impose
conditions on the disclosure of personally identifiable information to business
associates of entities that maintain such information. In August 2002, HHS
amended the final privacy rules, but did not extend the April 2003 compliance
date.

In addition, HHS has issued final rules that impose mandatory code sets
and transaction standards for electronic health care transactions. These rules
have a compliance date of October 16, 2002 (or October 16, 2003 for entities
that obtain an extension by submitting a written compliance plan). HHS has
also issued proposed rules for protecting the security of health care
information, but has not yet finalized those requirements. Conversely, HHS has
not as yet issued final rules on other topics under HIPAA, and has yet to issue
proposed rules on additional topics. The final rules on such additional topics,
if and when issued, may differ from the proposed rules. We cannot predict the
potential impact that these future rules as finally approved may have on our
business. In addition, other federal and/or state privacy legislation may be
enacted at any time.

These laws or regulations could restrict the ability of our
customers to obtain, use or disseminate patient information. This could
adversely affect demand for our products and force us to re-design our products
in order to meet the requirements of any new regulations. We have included
security features in our products that are intended to protect the privacy and
integrity of patient data. Despite the existence of these security features,
these products may be vulnerable to break-ins and similar disruptive problems
that could jeopardize the security of information stored in and transmitted
through the computer systems of our customers. We may need to expend
significant capital, research and development and other resources to modify our
products to address evolving data security and privacy issues.

Our products are used to assist clinical decision-making and provide
information about patient medical histories and treatment plans, and if these
products fail to provide accurate and timely information, our customers could
assert claims against us that could result in substantial cost to us, harm our
reputation in the industry and cause demand for our products to decline

We provide products that assist clinical decision-making and relate to
patient medical histories and treatment plans. If these products fail to
provide accurate and timely information, customers could assert liability
claims against us. Litigation with respect to liability claims, regardless of
its outcome, could result in substantial cost to us, divert managements
attention from operations and decrease market acceptance of our products. We
attempt to limit by contract our liability for damages arising from negligence,
errors or mistakes. Despite this precaution, the limitations of liability set
forth in our contracts may not be enforceable or may not otherwise protect us
from liability for damages. We maintain general liability insurance coverage,
including coverage for errors or omissions. However, this coverage may not
continue to be available on acceptable terms or may not be available in
sufficient amounts to cover one or more large claims against us. In addition,
the insurer might disclaim coverage as to any future claim. One or more large
claims could exceed our available insurance coverage.

Highly complex software products such as ours often contain undetected
errors or failures when first introduced or as updates and new versions are
released. It is particularly challenging for us to test our products because it
is difficult to simulate the wide variety of computing environments in which
our customers may deploy them. Despite extensive testing, from time to time we
have discovered defects or errors in our products. Defects, errors or
difficulties could cause delays in product introductions and shipments, result
in increased costs and diversion of development resources, require design
modifications or decrease market acceptance or customer satisfaction with our
products. In addition, despite testing by us and by current and potential
customers, errors may be found after commencement of commercial shipments,
resulting in loss of or delay in market acceptance.

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If we undertake additional acquisitions, they may be disruptive to our business
and could have an adverse effect on our future operations and the market price
of our common stock

An important element of our business strategy has been expansion through
acquisitions. Since 1997, we have completed eight acquisitions. Any future
acquisitions would involve a number of risks, including the following:



| |  |  | The anticipated benefits from any acquisition may not be achieved. The
integration of acquired businesses requires substantial attention from
management. The diversion of the attention of management and any
difficulties encountered in the transition process could hurt our
business.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In future acquisitions, we could issue additional shares of our capital
stock, incur additional indebtedness or pay consideration in excess of
book value, which could have a dilutive effect on future net income, if
any, per share.                                                    



| |  |  | New business acquisitions must be accounted for under the purchase
method of accounting. These acquisitions may generate significant
intangible assets and result in substantial related amortization charges
to us.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If we fail to attract, motivate and retain highly qualified technical,
marketing, sales and management personnel, our ability to execute our business
strategy could be impaired

Our success depends, in significant part, upon the continued services of
our key technical, marketing, sales and management personnel and on our ability
to continue to attract, motivate and retain highly qualified employees.
Competition for these employees is intense. In addition, the process of
recruiting personnel with the combination of skills and attributes required to
execute our business strategy can be difficult, time-consuming and expensive.
We believe that our ability to implement our strategic goals depends to a
considerable degree on our senior management team. The loss of any member of
that team could hurt our business.

Changing customer requirements could decrease the demand for our products,
which could harm our business and decrease our revenues

The market for our products and services is characterized by rapidly
changing technologies, evolving industry standards and new product
introductions and enhancements that may render existing products obsolete or
less competitive. As a result, our position in the healthcare information
technology market could erode rapidly due to unforeseen changes in the features
and functions of competing products, as well as the pricing models for such
products. Our future success will depend in part upon our ability to enhance
our existing products and services and to develop and introduce new products
and services to meet changing customer requirements. The process of developing
products and services such as those we offer is extremely complex and is
expected to become increasingly complex and expensive in the future as new
technologies are introduced. If we are unable to enhance our existing products
or develop new products to meet changing customer requirements, demand for our
products could suffer.

We depend on licenses from third parties for rights to the technology used in
several of our products, and if we are unable to continue these relationships
and maintain our rights to this technology, our business could suffer

We depend upon licenses for some of the technology used in our products
from a number of third-party vendors, including Computer Corporation of
America, Computer Associates, Oracle Corporation and Microsoft. We also have
licenses from Premier, Inc. for comparative database systems and other software
components and clinical benchmarking data. Most of these licenses expire within
one to four years, can be renewed only by mutual consent and may be terminated
if we breach the terms of the license and fail to cure the breach within a
specified period of time. We may not be able to continue using the technology
made available to us under these licenses on commercially reasonable terms or
at all. As a result, we may have to discontinue, delay or reduce product
shipments until we obtain equivalent technology, which could hurt our business.
Most of our third-party licenses are non-exclusive. Our competitors may obtain
the right to use any of the technology covered by these licenses and use the
technology to compete directly with us. In addition, if our vendors choose to
discontinue support of the licensed technology in the future, we may not be
able to modify or adapt our own products.

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Our products rely on our intellectual property, and any failure by us to
protect our intellectual property, or any misappropriation of it, could enable
our competitors to market products with similar features, which could reduce
demand for our products

We are dependent upon our proprietary information and technology. Our
means of protecting our proprietary rights may not be adequate to prevent
misappropriation. The laws of some foreign countries may not protect our
proprietary rights as fully as do the laws of the United States. Also, despite
the steps we have taken to protect our proprietary rights, it may be possible
for unauthorized third parties to copy aspects of our products, reverse
engineer our products or otherwise obtain and use information that we regard as
proprietary. In some limited instances, customers can access source-code
versions of our software, subject to contractual limitations on the permitted
use of the source code. Although our license agreements with these customers
attempt to prevent misuse of the source code, the possession of our source code
by third parties increases the ease and likelihood of potential
misappropriation of such software. Furthermore, others could independently
develop technologies similar or superior to our technology or design around our
proprietary rights. In addition, infringement or invalidity claims or claims
for indemnification resulting from infringement claims could be asserted or
prosecuted against us. Regardless of the validity of any claims, defending
against these claims could result in significant costs and diversion of our
resources. The assertion of infringement claims could also result in
injunctions preventing us from distributing products. If any claims or actions
are asserted against us, we might be required to obtain a license to the
disputed intellectual property rights, which might not be available on
reasonable terms or at all.

We face litigation that could force us to pay significant damages and could
distract our management team

We and several of our executive officers are named as defendants
in four shareholder derivative lawsuits alleging the violation of federal securities laws. Although we believe that these actions
are without merit, we cannot assure you that they will not, if successful, require that we pay substantial damages. Regardless
of the outcome of these matters, we might incur substantial defense costs and defending the actions may cause a diversion of
management time and attention.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not currently use derivative financial instruments. We generally
buy investments that are highly liquid. Based upon the nature of our
investments, we do not expect any material loss from our investments.

Investments in both fixed rate and floating rate interest earning
instruments carry a degree of interest rate risk. Fixed rate securities may
have their fair market value adversely impacted due to a rise in interest
rates, while floating rate securities may produce less income than expected if
interest rates fall. Due in part to these factors, our future investment
income may fall short of expectations due to changes in interest rates, or we
may suffer losses in principal if forced to sell securities that have seen a
decline in market value due to changes in interest rates. The following table
illustrates potential fluctuation in annualized interest income based upon
hypothetical values for blended interest rates and cash and marketable
securities account balances.

Annualized interest income based upon hypothetical values for cash and
marketable securities combined balances and interest rates:*

|              |  |                                    |           |                 |  |                 |           |  |  |  |           | 
|------------- |  | ---------------------------------- | --------- | --------------- |  | --------------- | --------- |  |  |  | --------- | 
|              |  | Combined cash and cash equivalents
|              |  | and marketable securities balances
|Hypothetical  |  |                                   
|Interest Rate |  | $ 150,000,000                      |           | $ 170,000,000   |  | $ 190,000,000  
|              |  |                                   
|1.5%          |  | $     2,250,000                    |           | $     2,550,000 |  | $     2,850,000
|2.0%          |  |                                    | 3,000,000 |                 |  |                 | 3,400,000 |  |  |  | 3,800,000 | 
|2.5%          |  |                                    | 3,750,000 |                 |  |                 | 4,250,000 |  |  |  | 4,750,000 | 
|3.0%          |  |                                    | 4,500,000 |                 |  |                 | 5,100,000 |  |  |  | 5,700,000 | 
|3.5%          |  |                                    | 5,250,000 |                 |  |                 | 5,950,000 |  |  |  | 6,650,000 | 
|4.0%          |  |                                    | 6,000,000 |                 |  |                 | 6,800,000 |  |  |  | 7,600,000 | 

*   (This sensitivity analysis is not a forecast of future interest income.)

We account for cash equivalents and marketable securities in
accordance with SFAS No. 115. Accounting for Certain Investments in Debt and
Equity Securities. Cash equivalents are short-term highly liquid investments
with original maturity dates of three months or less. Cash equivalents are
carried at cost, which approximates fair market value. Marketable securities
consist of funds that are highly liquid and are classified as
available-for-sale. Marketable securities are recorded at fair value, and
unrealized gains and losses are recorded as a component of other comprehensive
income.

We do not currently enter into foreign currency hedge transactions.
Through June 30, 2002, foreign currency fluctuations have not had a material
impact on our financial position or results of operations.

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PART II.

ITEM 1. LEGAL PROCEEDINGS

In July 2002, our company and three of its
officers (Messrs. Colletti, Patton and Wilson) were named in four complaints filed by shareholders in the
United States District Court, Southern District of Florida, West Palm Beach
Division. The complaints allege that our company and the named officers
violated federal securities laws. We believe that the actions are
without merit, and intend to conduct a vigorous defense against these
allegations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The results of voting by the shareholders, at the Annual Meeting of
Shareholders of the Company, held May 8, 2002, were included in the Companys
Form 10-Q for the quarterly period ended March 31, 2002, filed on May 13, 2002
(File No. 001-16059).

ITEM 5. OTHER INFORMATION

On July 15, 2002, Mr. Paul Ruflin joined the Company as its Chief
Executive Officer and President. Under his employment arrangement
with the Company, Mr. Ruflin will be paid a base annual salary of $750,000, and will
be eligible to receive an incentive bonus of up to $250,000 under the Companys
Executive Compensation Program for senior executives. Mr. Ruflin also
received a restrictedstock grant effective July 15, 2002 of 150,000 shares of the Companys
common stock subject to a five-year vesting schedule, plus an option to purchase 850,000 shares the
Companys common stock, with vesting over a five-year period. In the event that
Mr. Ruflins employment is terminated other than for cause or on a voluntary
basis, he is entitled to severance benefits equal to 18 months of his base pay,
target bonus and benefits, together with the continued vesting of his
restricted-stock and common stock options for twelve months from termination.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits: See Index to exhibits.

(b)  Reports on Form 8-K:



| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | (1)     No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended June 30, 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                      |  |                                                                                                                                                     
|--------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|                      |  | ECLIPSYS CORPORATION                                                                                                                                
|                     
|Date: August 13, 2002 |  | /s/ Robert J. CollettiRobert J. Colletti
Senior Vice President and Chief Financial Officer
(Principal financial officer and duly authorized officer)

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ECLIPSYS CORPORATION
EXHIBIT INDEX

|            |  |                                                                                                                    
|----------- |  | -------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |  | DESCRIPTION                                                                                                        
|           
|3.1 *       |  | Third Amended and Restated Certificate of Incorporation, as amended                                                
|4.1**       |  | Rights Agreement, dated July 26, 2000, by and between Eclipsys Corporation and Fleet National Bank, as Rights Agent
|10.1        |  | Amended and Restated 1998 Stock Incentive Plan                                                                     
|10.2        |  | Amended and Restated 1999 Stock Incentive Plan                                                                     
|10.3        |  | Amended and Restated 2000 Stock Incentive Plan                                                                     
|10.4        |  | Second Amended and Restated 1998 Employee Stock Purchase Plan                                                      
|10.5        |  | Employment letter for Paul L. Ruflin, dated May 5, 2002                                                            
|99.1        |  | Certification Pursuant to 18 U.S.C. Section 1350                                                                   



|*  |  | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000 (File No. 001-16059).
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | Incorporated by reference to the Registrants Current Report on Form 8-K
filed on August 8, 2000 (File No. 000-24539).                    



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