##### 



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

---

FORM 10-K/A
Amendment No. 1

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[X]  |  | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934    
|     |  | For the fiscal year ended December 31, 2002 or                                          
|[  ] |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



Commission File Number: 000-24539
ECLIPSYS CORPORATION
(Exact name of registrant as specified in its charter)




|                                  |  |                                                   
|--------------------------------- |  | --------------------------------------------------
|Delaware
(State of Incorporation) |  | 65-0632092
(I.R.S. Employer Identification Number)

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

(561) 322-4321
(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value, and Preferred Stock Purchase Rights

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 requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act rule 12b-2). Yes [X] No [  ]

The aggregate market value of the common stock held by non-affiliates of the
registrant as of June 28, 2002 based upon the closing price of the Common Stock
on the Nasdaq National Market for such date, was $234,313,808.

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

|                             |  |                   |            | 
|---------------------------- |  | ----------------- | ---------- | 
|                             |  | Shares           
|                             |  | Outstanding as of
|Class                        |  | March 19, 2003   
|Common Stock, $.01 par value |  |                   | 45,218,965 | 

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Companys definitive Proxy Statement to be used in
connection with the annual meeting of stockholders for the year 2003 will be
incorporated by reference into Part III of this Form 10-K.


1



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##### 



EXPLANATORY NOTE

The purpose of this Amendment No. 1 to the Annual Report on Form 10-K of
Eclipsys Corporation (the Company) for the year ended December 31, 2002 (the
Original Form 10-K) is to revise the pro forma disclosure information
that is required by Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, for each of the years ended December
31, 2000, 2001 and 2002. The revised disclosure is contained in Note 2 to
the Companys consolidated financial statements under the caption Stock-Based
Compensation.

The Company has amended in its entirety Item 8 Financial Statements and
Supplementary Data of the Original Form 10-K, which is the only Item affected
by the revision. The Company has also amended in its entirety Item 15
Exhibits, Financial Statement Schedules, and Reports on Form 8-K of the
Original Form 10-K to reflect the refiling of Exhibits 23 and 99.1 thereto.
This Amendment No. 1 does not reflect events occurring after the filing of the
Original Form 10-K, or modify or update any disclosures contained in the
Original Form 10-K (including disclosures relating to risks, uncertainties and
other factors that may affect the Companys future performance), in any way,
except as required to revise the pro forma disclosure.

2



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Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements:

Financial Statements:

|                                                                                                                 |  |      |    | 
|---------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                 |  | Page
|                                                                                                                 |  |     
|Report of Independent Accountants                                                                                |  |      | 4  | 
|Consolidated Balance Sheets as of December 31, 2001 and 2002                                                     |  |      | 5  | 
|Consolidated Statements of Operations for the years ended
December 31, 2000, 2001 and 2002                       |  |      | 6  | 
|Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 2001 and 2002                       |  |      | 7  | 
|Consolidated Statement of Stockholders Equity for the years
ended December 31, 2000, 2001 and 2002              |  |      | 8  | 
|Notes to the Consolidated Financial Statements                                                                   |  |      | 9  | 
|                                                                                                                
|Financial Statement Schedules:                                                                                   |  |      |    | 
|                                                                                                                
|Schedule II  Valuation of Qualifying Accounts for each of
the three years in the period ended December 31, 2002 |  |      | 26 | 

All other schedules are omitted as they are not applicable
or the required information is shown in the financial
statements or notes thereto

|               |  |  |    | 
|-------------- |  |  | -- | 
|              
|Signatures     |  |  | 30 | 
|Certifications |  |  | 31 | 

3



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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and the Stockholders of Eclipsys Corporation:

In our opinion, the consolidated financial statements listed in the
accompanying index on page 31 present fairly, in all material respects, the
financial position of Eclipsys Corporation and its subsidiaries at December 31,
2001 and December 31, 2002, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States
of America. In addition, in our opinion, the financial statement schedule
listed in the accompanying index on page 31 presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Companys
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

As described in Note 2 to the consolidated financial statements, the
Company has revised the pro forma
disclosure information that is required by Statement of Financial
Accounting Standard No. 123, Accounting for Stock-Based Compensation.

As discussed in Note 2, the Company adopted statement of Financial
Accounting Standards No. 142 Goodwill and Other Intangible Assets as of
January 1, 2002.



|PricewaterhouseCoopers LLP
|--------------------------

Atlanta, Georgia
January 24, 2003 except for the disclosure information in Note 2
under the caption Stock-Based Compensation, for which the
date is May 22, 2003

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ECLIPSYS CORPORATION
Consolidated Balance Sheets
(in thousands, except share and per share data)

|                                            |                                                                                                                              |                                            |        |          |         |              |        |          |         |  |  | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | -------- | ------- | ------------ | ------ | -------- | ------- |  |  | 
|                                            |                                                                                                                              |                                            |        |          |         | December 31,
|                                            |                                                                                                                              |                                            |        |          |         |             
|                                            |                                                                                                                              |                                            |        |          |         | 2001         |        | 2002    
|                                            |                                                                                                                              |                                            |        |          |         |              |        |         
|Assets                                      |                                                                                                                              |                                            |        |          |         |              |        |         
|Current assets:                             |                                                                                                                              |                                            |        |          |         |              |        |         
|                                            | Cash and cash equivalents                                                                                                    |                                            | $      | 168,942  |         |              | $      | 183,500  |        
|                                            | Accounts receivable, net of allowance for doubtful accounts of $5,572
and $3,412 at December 31, 2001 and 2002, respectively |                                            |        | 66,094   |         |              |        | 46,822   |        
|                                            | Inventory                                                                                                                    |                                            |        | 667      |         |              |        | 656      |        
|                                            | Other current assets                                                                                                         |                                            |        | 18,424   |         |              |        | 16,921   |        
|                                            |                                                                                                                              |                                            |        |          |         |              |        |         
|                                            |                                                                                                                              | Total current assets                       |        |          | 254,127 |              |        |          | 247,899 | 
|Property and equipment, net                 |                                                                                                                              |                                            | 21,675 |          |         |              | 26,800 |         
|Capitalized software development costs, net |                                                                                                                              |                                            | 13,831 |          |         |              | 16,375 |         
|Acquired technology, net                    |                                                                                                                              |                                            | 3,345  |          |         |              | 267    |         
|Goodwill, net                               |                                                                                                                              |                                            | 454    |          |         |              | 454    |         
|Intangible assets, net                      |                                                                                                                              |                                            | 174    |          |         |              |        |         
|Other assets                                |                                                                                                                              |                                            | 6,888  |          |         |              | 9,402  |         
|                                            |                                                                                                                              |                                            |        |          |         |              |        |         
|                                            |                                                                                                                              | Total assets                               |        | $        | 300,494 |              |        | $        | 301,197 | 
|                                            |                                                                                                                              |                                            |        |          |         |              |        |         
|Liabilities and Stockholders Equity        |                                                                                                                              |                                            |        |          |         |              |        |         
|Current liabilities:                        |                                                                                                                              |                                            |        |          |         |              |        |         
|                                            | Deferred revenue                                                                                                             |                                            | $      | 56,428   |         |              | $      | 79,235   |        
|                                            | Accrued compensation costs                                                                                                   |                                            |        | 12,219   |         |              |        | 14,442   |        
|                                            | Other current liabilities                                                                                                    |                                            |        | 10,529   |         |              |        | 13,854   |        
|                                            |                                                                                                                              |                                            |        |          |         |              |        |         
|                                            |                                                                                                                              | Total current liabilities                  |        |          | 79,176  |              |        |          | 107,531 | 
|Deferred revenue                            |                                                                                                                              |                                            | 2,418  |          |         |              | 843    |         
|Other long-term liabilities                 |                                                                                                                              |                                            | 699    |          |         |              | 226    |         
|Commitments and contingencies (See note 8)  |                                                                                                                              |                                            |        |          |         |              |        |         
|Stockholders Equity:                       |                                                                                                                              |                                            |        |          |         |              |        |         
|                                            | Common stock, $0.01par value, 200,000,000 shares authorized;
issued and outstanding, 44,382,413 and 45,088,872               |                                            |        | 444      |         |              |        | 451      |        
|                                            | Additional paid-in capital                                                                                                   |                                            |        | 400,242  |         |              |        | 405,380  |        
|                                            | Unearned stock compensation                                                                                                  |                                            |        | (32      | )       |              |        | (1,021   | )      
|                                            | Accumulated deficit                                                                                                          |                                            |        | (182,051 | )       |              |        | (211,814 | )      
|                                            | Accumulated other comprehensive income                                                                                       |                                            |        | (402     | )       |              |        | (399     | )      
|                                            |                                                                                                                              |                                            |        |          |         |              |        |         
|                                            |                                                                                                                              | Total stockholders equity                 |        |          | 218,201 |              |        |          | 192,597 | 
|                                            |                                                                                                                              |                                            |        |          |         |              |        |         
|                                            |                                                                                                                              | Total liabilities and stockholders equity |        | $        | 300,494 |              |        | $        | 301,197 | 
|                                            |                                                                                                                              |                                            |        |          |         |              |        |         

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

5



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ECLIPSYS CORPORATION
Consolidated Statements of Operations
(in thousands, except share and per share data)

|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |            |         | 
|--------------------------------- | -------------------------------------------------- | ------------------------ | ------- | ----------------------- | ------- | ---- | ------ | ---------- | ------- | - | ------- | ---------- | ------- | 
|                                  |                                                    |                          |         | Year Ended December 31,
|                                  |                                                    |                          |         |                        
|                                  |                                                    |                          |         | 2000                    |         | 2001 |        | 2002      
|                                  |                                                    |                          |         |                         |         |      |        |           
|Revenues:                         |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|                                  | Systems and services                               |                          | $       | 208,224                 |         |      | $      | 223,171    |         |   | $       | 203,218    |        
|                                  | Hardware                                           |                          |         | 13,094                  |         |      |        | 16,505     |         |   |         | 14,850     |        
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|                                  |                                                    | Total revenues           |         |                         | 221,318 |      |        |            | 239,676 |   |         |            | 218,068 | 
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|Costs and expenses:               |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|                                  | Cost of systems and services revenues              |                          |         | 145,153                 |         |      |        | 124,255    |         |   |         | 119,044    |        
|                                  | Cost of hardware revenues                          |                          |         | 10,350                  |         |      |        | 13,571     |         |   |         | 12,270     |        
|                                  | Sales and marketing                                |                          |         | 40,143                  |         |      |        | 42,698     |         |   |         | 53,175     |        
|                                  | Research and development                           |                          |         | 37,382                  |         |      |        | 37,034     |         |   |         | 46,228     |        
|                                  | General and administrative                         |                          |         | 10,380                  |         |      |        | 10,278     |         |   |         | 12,434     |        
|                                  | Depreciation and amortization                      |                          |         | 13,442                  |         |      |        | 13,900     |         |   |         | 8,531      |        
|                                  | Pooling and transaction costs                      |                          |         | 1,900                   |         |      |        | (472       | )       |   |         |           |        
|                                  | Restructuring charge                               |                          |         | 1,198                   |         |      |        |           |         |   |         |           |        
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|                                  |                                                    | Total costs and expenses |         |                         | 259,948 |      |        |            | 241,264 |   |         |            | 251,682 | 
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|Loss from operations              |                                                    |                          | (38,630 | )                       |         |      | (1,588 | )          |         |   | (33,614 | )         
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|Interest income, net              |                                                    |                          | 1,075   |                         |         |      | 5,996  |            |         |   | 4,016   |           
|Other income, net                 |                                                    |                          | 3,596   |                         |         |      |       |            |         |   |        |           
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|(Loss) income before income taxes |                                                    |                          | (33,959 | )                       |         |      | 4,408  |            |         |   | (29,598 | )         
|Provision for income taxes        |                                                    |                          |        |                         |         |      |       |            |         |   | 165     |           
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|Net (loss) income                 |                                                    | $                        | (33,959 | )                       |         | $    | 4,408  |            |         | $ | (29,763 | )         
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |            |        
|Net (loss) income per share:      |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|                                  | Basic net (loss) income per common share           |                          | $       | (0.92                   | )       |      | $      | 0.10       |         |   | $       | (0.67      | )      
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|                                  | Diluted net (loss) income per common share         |                          | $       | (0.92                   | )       |      | $      | 0.09       |         |   | $       | (0.67      | )      
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|                                  | Basic weighted average common shares outstanding   |                          |         | 36,765,975              |         |      |        | 43,243,512 |         |   |         | 44,710,754 |        
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           
|                                  | Diluted weighted average common shares outstanding |                          |         | 36,765,975              |         |      |        | 46,795,361 |         |   |         | 44,710,754 |        
|                                  |                                                    |                          |         |                         |         |      |        |            |         |   |         |           

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

6



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ECLIPSYS CORPORATION
Consolidated Statements of Cash Flows
(in thousands)

|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |         |         |        |        | 
|----------------------------------------------------- | -------------------------------------------------------------------------------------------------- | -------------------------------------------- | --------------------------- | ---------------------------------------- | ------ | ----------------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------ | ------ | 
|                                                      |                                                                                                    |                                              |                             |                                          |        | Year Ended December 31,
|                                                      |                                                                                                    |                                              |                             |                                          |        |                        
|                                                      |                                                                                                    |                                              |                             |                                          |        | 2000                    |         | 2001    |         | 2002   
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |        
|Operating activities:                                 |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|                                                      | Net (loss) income                                                                                  |                                              | $                           | (33,959                                  | )      |                         | $       | 4,408   |         |         | $       | (29,763 | )      
|                                                      | Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities: |                                              |                             |                                          |        |                         |         |         |         |         |         |         |        
|                                                      |                                                                                                    | Depreciation and amortization                |                             |                                          | 36,418 |                         |         |         | 36,472  |         |         |         | 19,576  |       
|                                                      |                                                                                                    | Provision for bad debts                      |                             |                                          | 3,855  |                         |         |         | 4,305   |         |         |         | 2,205   |       
|                                                      |                                                                                                    | Write-down of accounts receivable            |                             |                                          | 9,400  |                         |         |         |        |         |         |         |        |       
|                                                      |                                                                                                    | Write-down of investment                     |                             |                                          | 836    |                         |         |         |        |         |         |         |        |       
|                                                      |                                                                                                    | Gain on sale of investment                   |                             |                                          | (4,462 | )                       |         |         |        |         |         |         |        |       
|                                                      |                                                                                                    | Stock compensation expense                   |                             |                                          | 144    |                         |         |         | 144     |         |         |         | 134     |       
|                                                      |                                                                                                    | Changes in operating assets and liabilities: |                             |                                          |        |                         |         |         |         |         |         |         |         |       
|                                                      |                                                                                                    |                                              | Accounts receivable         |                                          |        | (1,061                  | )       |         |         | (6,487  | )       |         |         | 16,443 |       
|                                                      |                                                                                                    |                                              | Inventory                   |                                          |        | (880                    | )       |         |         | 202     |         |         |         | 11     |       
|                                                      |                                                                                                    |                                              | Other current assets        |                                          |        | 6,349                   |         |         |         | (11,570 | )       |         |         | 1,503  |       
|                                                      |                                                                                                    |                                              | Other assets                |                                          |        | (1,825                  | )       |         |         | (684    | )       |         |         | (4,203 | )     
|                                                      |                                                                                                    |                                              | Deferred revenue            |                                          |        | (7,911                  | )       |         |         | 7,617   |         |         |         | 21,233 |       
|                                                      |                                                                                                    |                                              | Other current liabilities   |                                          |        | (16,184                 | )       |         |         | (5,613  | )       |         |         | 5,547  |       
|                                                      |                                                                                                    |                                              | Other long-term liabilities |                                          |        | (1,387                  | )       |         |         | (928    | )       |         |         | (473   | )     
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|                                                      |                                                                                                    |                                              |                             | Total adjustments                        |        |                         | 23,292  |         |         |         | 23,458  |         |         |        | 61,976 | 
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|                                                      |                                                                                                    |                                              |                             | Net cash (used in) provided by operating |        |                         | (10,667 | )       |         |         | 27,866  |         |         |        | 32,213 | 
|Investing activities:                                 |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|                                                      | Purchase of investments                                                                            |                                              |                             | (7,905                                   | )      |                         |         |        |         |         |         |        |        
|                                                      | Sale of investments                                                                                |                                              |                             | 12,432                                   |        |                         |         |        |         |         |         |        |        
|                                                      | Purchases of property and equipment                                                                |                                              |                             | (8,019                                   | )      |                         |         | (11,601 | )       |         |         | (12,857 | )      
|                                                      | Capitalized software development costs                                                             |                                              |                             | (6,407                                   | )      |                         |         | (6,876  | )       |         |         | (8,823  | )      
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|                                                      |                                                                                                    | Net cash used in investing activities        |                             |                                          | (9,899 | )                       |         |         | (18,477 | )       |         |         | (21,680 | )     
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|Financing activities:                                 |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|                                                      | Borrowings                                                                                         |                                              |                             | 2,012                                    |        |                         |         |        |         |         |         |        |        
|                                                      | Payments on borrowings                                                                             |                                              |                             | (521                                     | )      |                         |         | (1,491  | )       |         |         |        |        
|                                                      | Exercise of warrants                                                                               |                                              |                             | 4                                        |        |                         |         |        |         |         |         |        |        
|                                                      | Sale of common stock                                                                               |                                              |                             |                                         |        |                         |         | 123,231 |         |         |         |        |        
|                                                      | Exercises of stock options                                                                         |                                              |                             | 4,330                                    |        |                         |         | 14,683  |         |         |         | 1,470   |        
|                                                      | Employee stock purchase plan                                                                       |                                              |                             | 1,492                                    |        |                         |         | 2,498   |         |         |         | 2,552   |        
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|                                                      |                                                                                                    | Net cash provided by financing activities    |                             |                                          | 7,317  |                         |         |         | 138,921 |         |         |         | 4,022   |       
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|Effect of exchange rates on cash and cash equivalents |                                                                                                    |                                              | 92                          |                                          |        |                         | (167    | )       |         |         | 3       |        
|Net (decrease) increase in cash and cash equivalents  |                                                                                                    |                                              | (13,157                     | )                                        |        |                         | 148,143 |         |         |         | 14,558  |        
|Cash and cash equivalents  beginning of year         |                                                                                                    |                                              | 33,956                      |                                          |        |                         | 20,799  |         |         |         | 168,942 |        
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |        
|Cash and cash equivalents  end of year               |                                                                                                    | $                                            | 20,799                      |                                          |        | $                       | 168,942 |         |         | $       | 183,500 |        
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |         |        
|Cash paid for interest                                |                                                                                                    | $                                            | 388                         |                                          |        | $                       | 51      |         |         | $       |        |        
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |         |        
|Cash paid for income taxes                            |                                                                                                    | $                                            | 62                          |                                          |        | $                       | 69      |         |         | $       | 110     |        
|                                                      |                                                                                                    |                                              |                             |                                          |        |                         |         |         |         |         |         |         |        

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

7



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ECLIPSYS CORPORATION
Consolidated Statement of Changes in Stockholders Equity
(in thousands)



|                                        |  | Voting and   |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|--------------------------------------- |  | ------------ | ---------- | ---------- |  | -------- | --- | ------------ |  | ------------- | ------- | ------------- |  | ------------- | ------ | ----- |  | - | -------- | ----------- |  | - | ------- | - |  | -
|                                        |  | Non-Voting   |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          | Accumulated |  |   |         |  
|                                        |  | Common Stock |            | Additional |  | Unearned |     |              |  |               |         |               |  |               |        | Other |  |   |          |            
|                                        |  |              |            | Paid-in    |  | Stock    |     | Accumulated  |  | Comprehensive |         | Comprehensive |  |               |        |      
|                                        |  | Shares       |            | Amount     |  | Capital  |     | Compensation |  | Deficit       |         | Income (Loss) |  | Income (Loss) |        | Total
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |      
|Balance at December 31, 1999            |  |              | 36,303,825 |            |  | $        | 363 |              |  | $             | 254,085 |               |  | $             | (320   | )     |  | $ | (152,500 | )           |  |   |         |   |  | $
|Exercise of stock options               |  |              | 495,328    |            |  |          | 5   |              |  |               | 2,988   |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Employee stock purchase plan            |  |              | 296,203    |            |  |          | 3   |              |  |               | 2,704   |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Exercise of warrants                    |  |              | 40,765     |            |  |          |    |              |  |               | 4       |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Compensation expense recognized         |  |              |            |            |  |          |     |              |  |               | 122     |               |  |               | 144    |       |  |   |          |             |  |   |         |   |  |  
|Net loss                                |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   | (33,959  | )           |  | $ | (33,959 | ) |  |  
|Foreign currency translation adjustment |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   | 92      |   |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Other comprehensive income              |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   | 92      |   |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Comprehensive income                    |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   | (33,867 | ) |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Balance at December 31, 2000            |  |              | 37,136,121 |            |  |          | 371 |              |  |               | 259,903 |               |  |               | (176   | )     |  |   | (186,459 | )           |  |   |         |   |  |  
|Exercise of stock options               |  |              | 1,317,632  |            |  |          | 15  |              |  |               | 14,668  |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Employee stock purchase plan            |  |              | 178,660    |            |  |          |     |              |  |               | 2,498   |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Public offering                         |  |              | 5,750,000  |            |  |          | 58  |              |  |               | 123,173 |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Compensation expense recognized         |  |              |            |            |  |          |     |              |  |               |         |               |  |               | 144    |       |  |   |          |             |  |   |         |   |  |  
|Comprehensive income:                   |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Net income                              |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   | 4,408    |             |  |   | 4,408   |   |  |  
|Foreign currency translation adjustment |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   | (167    | ) |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Other comprehensive income              |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   | (167    | ) |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Comprehensive income                    |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   | 4,241   |   |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Balance at December 31, 2001            |  |              | 44,382,413 |            |  |          | 444 |              |  |               | 400,242 |               |  |               | (32    | )     |  |   | (182,051 | )           |  |   |         |   |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Exercise of stock options               |  |              | 190,917    |            |  |          | 2   |              |  |               | 1,468   |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Employee stock purchase plan            |  |              | 365,542    |            |  |          | 4   |              |  |               | 2,548   |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Issuance of restricted stock            |  |              | 150,000    |            |  |          | 1   |              |  |               | 1,122   |               |  |               | (1,123 | )     |  |   |          |             |  |   |         |   |  |  
|Compensation expense recognized         |  |              |            |            |  |          |     |              |  |               |         |               |  |               | 134    |       |  |   |          |             |  |   |         |   |  |  
|Comprehensive income:                   |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Net loss                                |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   | (29,763  | )           |  |   | (29,763 | ) |  |  
|Foreign currency translation adjustment |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   | 3       |   |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Other comprehensive income              |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   | 3       |   |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Comprehensive income                    |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   | (29,760 | ) |  |  
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  
|Balance at December 31, 2002            |  |              | 45,088,872 |            |  | $        | 451 |              |  | $             | 405,380 |               |  | $             | (1,021 | )     |  | $ | (211,814 | )           |  |   |         |   |  | $
|                                        |  |              |            |            |  |          |     |              |  |               |         |               |  |               |        |       |  |   |          |             |  |   |         |   |  |  

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

8



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     Organization and Description of Business

Eclipsys Corporation (Eclipsys) and its subsidiaries (collectively, the
Company) is a healthcare information technology company. Eclipsys designs
and offers 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. Eclipsys advanced software solutions and
services assist healthcare organizations (HCOs) in improving their outcomes by
augmenting the quality of care and the level of patient satisfaction, reducing
costs and enhancing revenues. Eclipsys products perform the core information
technology functions required by healthcare organizations and other healthcare
providers throughout the healthcare enterprise. Eclipsys services offerings
include consulting, outsourcing, remote hosting, networking technologies and
other related services.

2.     Summary of Significant Accounting Policies

Principles of Consolidation

The financial statements include the accounts of Eclipsys and its wholly
owned subsidiaries. All intercompany transactions have been eliminated in
consolidation. The Company manages its business as one reporting segment.

Use of Estimates

The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses and disclosures of
contingent assets and liabilities. The estimates and assumptions used in the
accompanying consolidated financial statements are based upon managements
evaluation of the relevant facts and circumstances as of the date of the
financial statements. Actual results could differ from those estimates. The
most significant potential differences relate to the allowance for doubtful
accounts, revenues recognized under the percentage-of-completion method, the
amounts recorded for capitalized software development costs and the valuation
allowance for deferred tax assets.

Reclassifications

Certain prior period amounts have been reclassified to conform to the 2002
presentation. See discussion of EITF Issue 01-14, under New Accounting
Pronouncements, herein.

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents. Cash equivalents are stated at cost
plus accrued interest, which approximates market value.

Revenue Recognition

Revenues are derived from licensing of computer software, software and
hardware maintenance, remote hosting and outsourcing, training, implementation
assistance, consulting and the sale of computer hardware. The Company
recognizes revenue in accordance with the American Institute of Certified
Public Accountants Statement of Position 97-2 Software Revenue Recognition
(SOP 97-2) which requires, among other matters, that there be a signed
contract evidencing an arrangement exists, delivery of the software has
occurred, the fee is fixed or determinable and collectibility of the fee is
probable.

9



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

2.     Summary of Significant Accounting Policies  (Continued)

Systems and Services Revenue

Multiple Element Arrangements

The Company generally contracts under multiple element arrangements, which
include software license fees, hardware and services including consulting,
implementation and software maintenance for periods of 3 to 7 years. Under
these arrangements, where vendor specific objective evidence (VSOE) exists
for all undelivered elements, the Company accounts for the delivered elements
in accordance with the residual method prescribed by the AICPA Statement of
Position (SOP) 98-9, Modification of SOP 97-2, Software Revenue Recognition,
With Respect of Certain Transactions. For arrangements in which VSOE does not
exist for each element, including specified upgrades, revenue is deferred and
not recognized until delivery of all of the elements without VSOE has occurred.
For software license arrangements that are bundled with services and
maintenance where services are considered essential to the functionality of the
software and provide for payments upon the achievement of implementation
milestones, we recognize revenues using the percentage-of-completion method.
Under these arrangements, software license fees and implementation fees are
recognized over the implementation period, which has typically ranged from 12
to 24 months.

In 2000, the Company began entering into long-term multiple element
arrangements in which it provides its customers with comprehensive technology
solutions. These arrangements typically include multiple software products
(including the right to future products within the suites purchased),
implementation and consulting services, maintenance, and, where desired by the
customer, outsourcing and remote hosting services. The customer is entitled to
these elements throughout the term of the arrangements, which range from seven
to ten years. Payments are due yearly, quarterly or monthly over the
arrangement term. The Company bundles all fees due under these comprehensive
multiple element arrangements and recognizes the revenue ratably over the
contract term. Additionally, these contracts may contain provisions by which
the Company may earn additional fees based on customer savings or other
objectives, as defined in the arrangements. These additional fees are
recognized as revenues upon receipt of payment from the customer. In addition,
the Company capitalizes related direct costs consisting of third party software
costs and direct software implementation costs. These costs are amortized over
the term of the arrangement. During 2002, we began to enter into arrangements
that consist of fees for a multi-year, time-based software license, hardware
and services including implementation, consulting and software maintenance.
The Company recognizes the revenue under these arrangements in accordance with
SOP No. 97-2, including the AICPA Software Revenue Recognition Task Force
Technical Practice Aid 5100.54.

Revenue from other software license fees, which are bundled with long-term
maintenance agreements (with terms from 3 to 7 years), is recognized on a
straight-line basis over the contracted maintenance period. Other software
license fee arrangements relate to certain add-on modules sold to customers
in the installed base. Because the Company does not sell the add-on modules
or the associated extended term maintenance elements separately, the entire
arrangement fee is recognized as revenue over the contracted maintenance period
in accordance with paragraph 12 of SOP 97-2.

Services

Remote hosting and outsourcing services are marketed under long-term
arrangements generally over periods from 5 to 10 years. Revenues from these
arrangements are recognized as the services are performed.

Software maintenance fees are marketed under annual and multi-year
agreements and are recognized as revenue ratably over the contracted
maintenance term. The Companys software maintenance arrangements include when
and if available upgrades and do not contain specific upgrade rights.

10



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

2.     Summary of Significant Accounting Policies  (Continued)

Implementation revenues and other services, including training and
consulting are recognized as services are performed for time and material
arrangements and using the percentage of completion method based on labor input
measures for fixed fee arrangements. The Company sells these services
separately and accordingly has sufficient vendor specific objective evidence of
the element to recognize revenue.

Hardware Sales and Maintenance Revenue

Hardware sales are generally recognized upon delivery of the equipment to
the customer. Hardware maintenance revenues are billed and recognized monthly
over the contracted maintenance term.

Unbilled Accounts Receivable and Deferred Revenue

The timing of revenue recognition and contractual billing terms under
certain multiple element arrangements may not precisely coincide, resulting in
the recording of unbilled accounts receivable or deferred revenue. Customer
payments are due under these arrangements in varying amounts upon the
achievement of certain contractual milestones throughout the implementation
periods, which generally range from 12 to 24 months. The current portion of
unbilled accounts receivable is included in accounts receivable in the
accompanying financial statements.

In addition, the Company maintains certain long-term contracts used to
finance a portion of certain customer hardware and software fees owed. These
arrangements generally provide for payment terms that range from three to five
years and carry interest rates that range from 7% to 10%. Such amounts are
recorded as non-current unbilled accounts receivables until the customers are
billed which is generally on a monthly basis. The non-current portion of
amounts due related to these arrangements was $1.8 million and $1.5 million as
of December 31, 2001 and 2002, respectively, and is included in other assets in
the accompanying financial statements. The current portion of amounts due
related to these arrangements is included in accounts receivable in the
accompanying financial statements. Accounts receivable was composed of the
following as of December 31, (in thousands):

|                               |                                                                               |   |        |        |      |   |        |        | 
|------------------------------ | ----------------------------------------------------------------------------- | - | ------ | ------ | ---- | - | ------ | ------ | 
|                               |                                                                               |   | 2001   |        | 2002
|                               |                                                                               |   |        |        |     
|Accounts Receivable:           |                                                                               |   |        |        |      |   |        |       
|                               | Billed accounts receivable, net                                               |   | $      | 56,114 |      |   | $      | 42,280 | 
|                               | Unbilled accounts receivable related to
long-term contracts (current portion) |   |        | 3,212  |      |   |        | 2,860  | 
|                               | Other unbilled accounts receivable, net                                       |   |        | 6,768  |      |   |        | 1,682  | 
|                               |                                                                               |   |        |        |      |   |        |       
|                               | Total unbilled accounts receivable, net                                       |   |        | 9,980  |      |   |        | 4,542  | 
|                               |                                                                               |   |        |        |      |   |        |       
|Total accounts receivable, net |                                                                               | $ | 66,094 |        |      | $ | 46,822 |       
|                               |                                                                               |   |        |        |      |   |        |       

Inventory

Inventory consists of computer equipment, parts and peripherals and is
stated at the lower of cost or market. Cost is determined using the first-in,
first-out method.

Capitalized Software Development Costs

The Company capitalizes a portion of its computer software development
costs incurred subsequent to establishing technological feasibility. These
costs include salaries, benefits, consulting and other directly related costs
incurred in connection with programming and testing software products.
Capitalization ceases when the products are generally released for sale to
customers. Management monitors the net realizable value

11



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

2.     Summary of Significant Accounting Policies  (Continued)

of all capitalized software development costs to ensure that the investment
will be recovered through margins from future sales. Capitalized software
development costs were approximately $6.4 million, $6.9 million and $8.8
million for the years ended December 31, 2000, 2001 and 2002, respectively.
These costs are amortized over the greater of the ratio that current revenues
bear to total and anticipated future revenues for the applicable product or the
straight-line method over three years. Amortization of capitalized software
development costs, which is included in cost of systems and services revenues,
was approximately $2.9 million, $4.5 million and $6.3 million for the years
ended December 31, 2000, 2001 and 2002, respectively. Accumulated amortization
of capitalized software development costs was $14.1 million and $20.4 million
as of December 31, 2001 and 2002, respectively.

Acquired Technology and Intangible Assets

Acquired technology and intangible assets are amortized on a straight-line
basis over their estimated useful lives. The carrying values of acquired
technology and intangible assets are reviewed if the facts and circumstances
suggest that they may be impaired and goodwill is reviewed at least annually.
This review indicates whether assets will be recoverable based on future
expected cash flows. The gross and net amounts for acquired technology,
goodwill and intangible assets consisted of the following as of December 31,
(in thousands):

|                                     |                                |   |         |        |      |   |       |       |     |   |             |        |  |   |     |     |  |  |             |  | 
|------------------------------------ | ------------------------------ | - | ------- | ------ | ---- | - | ----- | ----- | --- | - | ----------- | ------ |  | - | --- | --- |  |  | ----------- |  | 
|                                     |                                |   | 2001    |        | 2002 |   |       |       |    
|                                     |                                |   |         |        |      |   |       |       |    
|                                     |                                |   | Gross   |        | Net  |   | Gross |       | Net |   | Useful Life
|                                     |                                |   |         |        |      |   |       |       |     |   |            
|Amounts subject to amortization:     |                                |   |         |        |      |   |       |       |     |   |             |        |  |   |     |     |  |  |             | 
|                                     | Acquired technology            |   | $       | 95,795 |      |   | $     | 3,345 |     |   | $           | 95,795 |  |   | $   | 267 |  |  | 3 - 7 years
|                                     | Ongoing customer relationships |   |         | 10,690 |      |   |       | 174   |     |   |             | 10,690 |  |   |     |    |  |  | 5 years    
|                                     | Network services               |   |         | 5,764  |      |   |       |      |     |   |             | 5,764  |  |   |     |    |  |  | 3 years    
|                                     |                                |   |         |        |      |   |       |       |     |   |             |        |  |   |     |     |  |  |             | 
|                                     |                                |   | 112,249 |        |      |   | 3,519 |       |     |   | 112,249     |        |  |   | 267 |     |  |  |             | 
|Amounts not subject to amortization: |                                |   |         |        |      |   |       |       |     |   |             |        |  |   |     |     |  |  |             | 
|                                     | Goodwill                       |   |         | 17,834 |      |   |       | 454   |     |   |             | 454    |  |   |     | 454 |  |  |             |  | 
|                                     |                                |   |         |        |      |   |       |       |     |   |             |        |  |   |     |     |  |  |             | 
|                                     |                                | $ | 130,083 |        |      | $ | 3,973 |       |     | $ | 112,703     |        |  | $ | 721 |     |  |  |             | 
|                                     |                                |   |         |        |      |   |       |       |     |   |             |        |  |   |     |     |  |  |             | 

Amortization of acquired technology and ongoing customer relationships for
the year ended December 31, 2002 was $3,078,000 and $174,000, respectively.
The ongoing customer relationships became fully amortized during the first
quarter of 2002. The estimated amortization expense for the next five fiscal
years is as follows (in thousands):

|                         |       |  |     |     | 
|------------------------ | ----- |  | --- | --- | 
|For year ending 12/31/03 |       |  | 267 |    
|Thereafter               |       |  |    |    
|                         |       |  |     |    
|                         | Total |  | $   | 267 | 
|                         |       |  |     |    

Amortization of the acquired technology and network services assets is
included in the cost of systems and services revenues.

In June 2001, the Financial Accounting Standards Board (FASB) issued
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 2002. The

12



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

2.     Summary of Significant Accounting Policies  (Continued)

effect of adopting SFAS 142 was to reduce depreciation and amortization expense
by $454,000 for the year ended December 31, 2002. Net income and earnings per
share adjusted to exclude amortization expense is as follows for the years
ended December 31, (in thousands, except earnings per share):

|                                        |                                       |                                       |   |         |         |      |   |       |       | 
|--------------------------------------- | ------------------------------------- | ------------------------------------- | - | ------- | ------- | ---- | - | ----- | ----- | 
|                                        |                                       |                                       |   | 2000    |         | 2001
|                                        |                                       |                                       |   |         |         |     
|Net income:                             |                                       |                                       |   |         |         |      |   |      
|                                        | Reported net income                   |                                       | $ | (33,959 | )       |      | $ | 4,408 |      
|                                        | Goodwill amortization                 |                                       |   | 5,061   |         |      |   | 4,636 |      
|                                        |                                       |                                       |   |         |         |      |   |      
|                                        |                                       | Adjusted net income                   |   | $       | (28,898 | )    |   | $     | 9,044 | 
|                                        |                                       |                                       |   |         |         |      |   |      
|Basic and diluted net income per share: |                                       |                                       |   |         |         |      |   |      
|                                        | Reported basic net income per share   |                                       | $ | (0.92   | )       |      | $ | 0.10  |      
|                                        | Goodwill amortization                 |                                       |   | 0.13    |         |      |   | 0.11  |      
|                                        |                                       |                                       |   |         |         |      |   |      
|                                        |                                       | Adjusted basic net income per share   |   | $       | (0.79   | )    |   | $     | 0.21  | 
|                                        |                                       |                                       |   |         |         |      |   |      
|                                        | Reported diluted net income per share |                                       | $ | (0.92   | )       |      | $ | 0.09  |      
|                                        | Goodwill amortization                 |                                       |   | 0.13    |         |      |   | 0.10  |      
|                                        |                                       |                                       |   |         |         |      |   |      
|                                        |                                       | Adjusted diluted net income per share |   | $       | (0.79   | )    |   | $     | 0.19  | 
|                                        |                                       |                                       |   |         |         |      |   |      

Fair Value of Financial Instruments

The carrying amounts of the Companys financial instruments, including
cash and cash equivalents, accounts receivable, and other current liabilities,
approximate fair value.

Income Taxes

The Company accounts for income taxes utilizing the liability method, and
deferred income taxes are determined based on the estimated future tax effects
of differences between the financial reporting and income tax basis of assets
and liabilities and tax carry-forwards given the provisions of the enacted tax
laws.

Stock-Based Compensation

The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. Under
this method, compensation cost for stock options is measured as the excess, if
any, of the estimated market price of the Companys stock at the date of the
grant over the amount an employee must pay to acquire the stock. Accordingly,
the Company provides the additional disclosures required under Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation as amended by SFAS No. 148 Accounting for Stock-Based
Compensation  Transition and Disclosure.

The Company has adopted the disclosure only provision of SFAS No. 123. On
May 19, 2003, the Company revised its SFAS No. 123 pro forma stock option
disclosure presented below to reflect the proper calculation of pro forma stock
option expense for all periods presented. Had compensation cost for the
Companys stock option grants described above been determined based on the fair
value at the grant date for awards in 2000, 2001 and 2002, consistent with the
provisions of SFAS No. 123, the Companys net loss and loss per

13



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

2.     Summary of Significant Accounting Policies  (Continued)

share would have been increased to the pro forma amounts indicated below for
the years ended December 31, (in thousands, except per share data):

|                                     |                                                                                                                                    |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                     |                                                                                                                                    |  | 2000 |         | 2001 |  | 2002
|                                     |                                                                                                                                    |  |      |         |      |  |     
|Net (loss) income:                   |                                                                                                                                    |  |      |         |      |  |      |         |   |  |   |        
|                                     | As reported                                                                                                                        |  | $    | (33,959 | )    |  | $    | 4,408   |   |  | $ | (29,763 | )
|                                     | Add: Stock-based employee
compensation expense
included in reported net
(loss) income, net of
related tax effects                  |  |      | 144     |      |  |      | 144     |   |  |   | 134     |  
|                                     | Deduct: Total stock-based
compensation expense
determined under fair value
based method for all awards,
net of related tax effects |  |      | (23,793 | )    |  |      | (26,036 | ) |  |   | (24,182 | )
|                                     |                                                                                                                                    |  |      |         |      |  |      |         |   |  |   |        
|                                     | Pro forma as revised                                                                                                               |  | $    | (57,608 | )    |  | $    | (21,484 | ) |  | $ | (53,811 | )
|                                     | Pro forma originally reported                                                                                                      |  | $    | (45,032 | )    |  | $    | 1,252   |   |  | $ | (33,419 | )
|Basic net (loss) income per share:   |                                                                                                                                    |  |      |         |      |  |      |         |   |  |   |        
|                                     | As reported                                                                                                                        |  | $    | (0.92   | )    |  | $    | 0.10    |   |  | $ | (0.67   | )
|                                     | Pro forma                                                                                                                          |  | $    | (1.57   | )    |  | $    | (0.50   | ) |  | $ | (1.20   | )
|Diluted net (loss) income per share: |                                                                                                                                    |  |      |         |      |  |      |         |   |  |   |        
|                                     | As reported                                                                                                                        |  | $    | (0.92   | )    |  | $    | 0.09    |   |  | $ | (0.67   | )
|                                     | Pro forma                                                                                                                          |  | $    | (1.57   | )    |  | $    | (0.50   | ) |  | $ | (1.20   | )

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 2000, 2001 and 2002: dividend
yield of 0% for all years, risk-free interest rate of 5.75% for 2000, 4.27% for
2001 and 3.11% for 2002, expected life of 9.88, 6.81 and 4.61 years based on
the plan and volatility of 100% for 2000, 93% for 2001 and 92% for 2002,
respectively.

Basic and Diluted Net (Loss) Income Per Share

For all periods presented, basic and diluted net (loss) income per common
share is presented in accordance with SFAS 128, Earnings per Share, which
provides for the accounting principles used in the calculation of earnings per
share. Basic net (loss) income per common share is based on the weighted
average number of shares of common stock outstanding during the period.
Diluted net income per share reflects the potential dilution from assumed
conversion of all dilutive securities such as stock options and warrants.
Stock options to acquire 9,148,878, 8,006,072 and 9,020,711 shares of common
stock at December 31, 2000, 2001 and 2002, respectively, and warrants to
acquire up to 5,160 shares of common stock at December 31, 2000, 2001 and 2002,
were the only securities issued which would be included in the diluted earnings
per share calculation, if dilutive. In 2000 and 2002 the inclusion of stock
options and warrants would have been

14



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

2.     Summary of Significant Accounting Policies  (Continued)

antidilutive due to the net loss reported by the Company and therefore excluded
from the calculation. The computations of the basic and diluted per share
amounts were as follows for the years ended December 31,:

|                                    |                                  |   |            |            |      |   |            |            |  |   |            |            | 
|----------------------------------- | -------------------------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                    |                                  |   | 2000       |            | 2001 |   | 2002      
|                                    |                                  |   |            |            |      |   |           
|Basic Earnings Per Share:           |                                  |   |            |            |      |   |            |            |  |   |            |           
|Net (loss) income (in thousands)    |                                  | $ | (33,959    | )          |      | $ | 4,408      |            |  | $ | (29,763    | )         
|Weighted average shares outstanding |                                  |   | 36,765,975 |            |      |   | 43,243,512 |            |  |   | 44,710,754 |           
|                                    |                                  |   |            |            |      |   |            |            |  |   |            |           
|Basic (loss) earnings per share     |                                  | $ | (0.92      | )          |      | $ | 0.10       |            |  | $ | (0.67      | )         
|                                    |                                  |   |            |            |      |   |            |            |  |   |            |           
|Diluted Earnings Per Share:         |                                  |   |            |            |      |   |            |            |  |   |            |           
|Net (loss) income (in thousands)    |                                  | $ | (33,959    | )          |      | $ | 4,408      |            |  | $ | (29,763    | )         
|Weighted average shares:            |                                  |   |            |            |      |   |            |            |  |   |            |           
|                                    | Outstanding                      |   |            | 36,765,975 |      |   |            | 43,243,512 |  |   |            | 44,710,754 | 
|                                    | Effect of dilutive stock options |   |            |           |      |   |            | 3,551,849  |  |   |            |           | 
|                                    |                                  |   |            |            |      |   |            |            |  |   |            |           
|                                    | Total shares                     |   |            | 36,765,975 |      |   |            | 46,795,361 |  |   |            | 44,710,754 | 
|                                    |                                  |   |            |            |      |   |            |            |  |   |            |           
|Diluted (loss) earnings per share   |                                  | $ | (0.92      | )          |      | $ | 0.09       |            |  | $ | (0.67      | )         
|                                    |                                  |   |            |            |      |   |            |            |  |   |            |           

Concentration of Credit Risk

The Companys customers operate primarily in the healthcare industry. The
Company sells its products and services under contracts with varying terms.
The accounts receivable amounts are unsecured. Management believes the
allowance for doubtful accounts is sufficient to cover credit losses. The
Company does not believe that the loss of any one customer would have a
material effect on the financial position of the Company.

Foreign Currency

The financial position and results of operations of foreign subsidiaries
are measured using the currency of the respective countries as the functional
currency. Assets and liabilities are translated at the foreign exchange rate
in effect at the balance sheet date, while revenue and expenses for the year
are translated at the average exchange rate in effect during the year.
Translation gains and losses are not included in determining net income or loss
but are accumulated and reported as a separate component of stockholders
equity. The Company has not entered into any hedging contracts during the
three-year period ended December 31, 2002.

Comprehensive Income

Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income requires that the total changes in equity resulting from
revenue, expenses, and gains and losses, including those that do not affect the
accumulated deficit, be reported. Accordingly, those amounts, which are
comprised solely of foreign currency translation adjustments, are included in
other comprehensive income in the consolidated statement of changes in
stockholders equity.

New Accounting Pronouncements

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

15



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

2.     Summary of Significant Accounting Policies  (Continued)

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 had no material impact on the Companys
financial position or results of operations.

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 both revenues and expenses by
$4,780,000, $2,682,000 and $2,990,000 for 2000, 2001 and 2002, respectively.

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 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 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 became effective for exit
or disposal activities that were 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.

In November 2002, the FASB reached a consensus on EITF Issue 00-21,
Accounting for Revenue Arrangements with Multiple Deliverables (the Issue).
The guidance in this Issue is effective for revenue arrangements entered into
fiscal years beginning after June 15, 2003. The Issue addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. Specifically, the Issue
addresses how to determine whether an arrangement involving multiple
deliverables contains more than one earnings process and, if it does, how to
divide the arrangement into separate units of accounting consistent with the
identified earnings processes for revenue recognition purposes. The Issue also
addresses how arrangement consideration should be measured and allocated to the
separate units of accounting in the arrangement. We currently follow the
appropriate accounting pronouncement as discussed in our Revenue Recognition
policy note and anticipate that the Issue will have no impact on the results of
operations, financial position or cash flows.

16



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

2.     Summary of Significant Accounting Policies  (Continued)

In November 2002, the FASB issued FASB Interpretation 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others. This interpretation clarifies the
requirements of SFAS 5, Accounting for Contingencies, relating to guarantors
accounting for, and disclosure of, the issuance of certain types of guarantees.
This interpretation is intended to improve the comparability of financial
reporting by requiring identical accounting for guarantees issued with a
separately identified premium and guarantees issued without a separately
identified premium. The interpretations provisions for initial recognition
and measurement are required on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective
for financial statements of both interim and annual periods that ended after
December 15, 2002. We have adopted the disclosure provisions of this
interpretation and it did not have a material impact on our financial position,
results of operations, or cash flows. We will adopt the remaining provisions
on January 1, 2003 and believe that this Interpretation will not have a
material impact on our financial position, results or operations, or cash
flows.

In December 2002, the FASB issued SFAS 148, Accounting for Stock Based
Compensation-Transition and Disclosure- an Amendment to SFAS 123. SFAS 148
provides two additional transition methods for entities that adopt the
preferable method of accounting for stock based compensation. Further, the
statement requires disclosure of comparable information for all companies
regardless of whether, when, or how an entity adopts the preferable, fair value
based method of accounting. These disclosures are now required for interim
periods in addition to the traditional annual disclosure. The amendments to
SFAS 123, which provides for additional methods, are effective for periods
beginning after December 15, 2002, although earlier application is permitted.
The amendments to the disclosure requirements are required for financial
reports containing condensed financial statements for interim periods beginning
after December 15, 2002. We anticipate that we will adopt the additional
disclosure requirements in our interim and annual filings of SFAS 148 and will
continue to account for stock based compensation under APB No. 25.

In January 2003, the FASB issued FASB Interpretation 46, Consolidation of
Variable Interest Entities. This interpretation of Accounting Research
Bulletin 51, Consolidated Financial Statements, addresses consolidation by
business enterprises of variable interest entities that possess certain
characteristics. The interpretation requires that if a business enterprise has
a controlling financial interest in a variable interest entity, the assets,
liabilities, and results of the activities of the variable interest entity must
be included in the consolidated financial statements with those of the business
enterprise. This interpretation applies immediately to variable interest
entities created after January 31, 2003 and to variable interest entities in
which an enterprise obtains an interest after that date. We do not have any
ownership in any variable interest entities as of December 31, 2002. We will
apply the consolidation requirement of the interpretation in future periods if
we should own any interest in any variable interest entity.

3.     Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization
are provided for using the straight-line method over the estimated useful
lives, which generally range from two to seven years. Computer equipment is
depreciated over two to five years. Office equipment is depreciated over two
to seven years. Purchased software for internal use is amortized over three
years. Leasehold improvements are amortized over the shorter of the useful
lives of the assets or the remaining term of the lease. When assets are
retired or otherwise disposed of, the related costs and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in income. Expenditures for repairs and maintenance not considered
to

17



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

3.     Property and Equipment  (Continued)

substantially lengthen the property and equipment lives are charged to expense
as incurred. The balances for property and equipment were as follows as of
December 31, (in thousands):

|                                                |  |      |         |      |  |   |         |  
|----------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                |  | 2001 |         | 2002
|                                                |  |      |         |     
|Computer equipment                              |  | $    | 18,204  |      |  | $ | 25,702  |  
|Office equipment and other                      |  |      | 5,824   |      |  |   | 6,561   |  
|Purchased software                              |  |      | 6,633   |      |  |   | 11,084  |  
|Leasehold improvements                          |  |      | 7,183   |      |  |   | 7,972   |  
|                                                |  |      |         |      |  |   |         |  
|                                                |  |      | 37,844  |      |  |   | 51,319  |  
|Less: Accumulated depreciation and amortization |  |      | (16,169 | )    |  |   | (24,519 | )
|                                                |  |      |         |      |  |   |         |  
|                                                |  | $    | 21,675  |      |  | $ | 26,800  |  
|                                                |  |      |         |      |  |   |         |  

Depreciation and amortization expense of property and equipment totaled
approximately $5.7 million, $6.7 million and $8.4 million in 2000, 2001 and
2002, respectively.

4.     Stockholders Equity

Restricted Stock Grant

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 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 of the Companys common
stock at a price of $7.50, with vesting over a five-year period. During 2002,
stock compensation related to this restricted stock grant amounted to $103,000
and as of December 31, 2002, the Company had unearned stock compensation of
$1,021,000 recorded in stockholders equity.

Undesignated Preferred Stock

The Company has available for issuance, 5,000,000 shares of preferred
stock. As discussed below under Shareholder Rights Plan the Board has
designated 100,000 of the 5,000,000 authorized shares of preferred stock as
Series A Junior Participating Preferred Stock. The Company has a balance of
4,900,000 authorized shares of undesignated preferred stock (the Undesignated
Preferred). The liquidation, voting, conversion and other related provisions
of the Undesignated Preferred will be determined by the Board of Directors at
the time of issuance. Currently, there are no outstanding shares.

Shareholder Rights Plan

On July 26, 2000, the Board of Directors of the Company declared a
dividend of one Right for each outstanding share of the Companys Common Stock
to stockholders of record at the close of business on August 9, 2000. Each
Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred Stock,
$.01 par value per share, at a Purchase Price of $65.00 in cash, subject to
adjustment. The Rights will initially trade together with the Eclipsys Common
Stock and will not be exercisable. If a person or group (other than an exempt
person) acquires 15% or more of the outstanding shares of Eclipsys Common
Stock, the Rights generally will become exercisable and allow the holder (other
than the 15% purchaser) to purchase shares of Eclipsys Common Stock at a 50%
discount to the market price. The effect will be to discourage acquisitions of
15% or more of Eclipsys Common Stock without negotiations with the Board. The
terms of the Rights are set forth in a Rights Agreement dated as of July 26,
2000 (the Rights Agreement) between the Company and Fleet National Bank, as
Rights Agent. The Board

18



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

4.     Stockholders Equity  (Continued)

has designated 100,000 of the 5,000,000 authorized shares of preferred stock as
Series A Junior Participating Preferred Stock.

Secondary Offering of Common Stock

On January 23, 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.

5.     Proposed Merger

During the quarter ended March 31, 2000, the Company recorded a gain on
its investment in Shared Medical Systems Corp. (SMS) of approximately $4.5
million. The investment was made in connection with a proposed merger with SMS
that was not consummated. In connection with the proposed merger, the Company
recorded transaction costs of approximately $50,000.

On March 30, 2000, the Company entered into a definitive merger agreement
to merge with Neoforma.com, Inc. (Neoforma) of Santa Clara, California.
Neoforma is a provider of business-to-business e-commerce services in the
medical products, supplies and equipment industry. During the quarter ended
June 30, 2000, the Company and Neoforma agreed to terminate the Merger
Agreement between them without the payment of a termination fee. Transaction
costs incurred in connection with the proposed merger were approximately $1.9
million.

6.     Income Taxes

The income tax provision / (benefit) is calculated as follows for the
years ended December 31, (in thousands):

|                                   |                     |   |      |         |      |   |      |      |   |   |     |         |  
|---------------------------------- | ------------------- | - | ---- | ------- | ---- | - | ---- | ---- | - | - | --- | ------- | -
|                                   |                     |   | 2000 |         | 2001 |   | 2002
|                                   |                     |   |      |         |      |   |     
|Current Tax Provision / (Benefit): |                     |   |      |         |      |   |      |      |   |   |     |        
|                                   | Federal             |   | $    |        |      |   | $    |     |   |   | $   |        |  
|                                   | State               |   |      |        |      |   |      |     |   |   |     | 165     |  
|                                   |                     |   |      |         |      |   |      |      |   |   |     |        
|                                   |                     | $ |     |         |      | $ |     |      |   | $ | 165 |        
|                                   |                     |   |      |         |      |   |      |      |   |   |     |        
|Deferred Provision / (Benefit):    |                     |   |      |         |      |   |      |      |   |   |     |        
|                                   | Federal             |   | $    | (10,734 | )    |   | $    | (171 | ) |   | $   | (10,076 | )
|                                   | State               |   |      | (1,257  | )    |   |      | (20  | ) |   |     | (1,180  | )
|                                   | Valuation allowance |   |      | 11,991  |      |   |      | 191  |   |   |     | 11,256  |  
|                                   |                     |   |      |         |      |   |      |      |   |   |     |        
|                                   |                     | $ |     |         |      | $ |     |      |   | $ |    |        
|                                   |                     |   |      |         |      |   |      |      |   |   |     |        
|                                   |                     |   |      |         |      |   |      |      |   |   |     |        
|Total Provision / (Benefit)        |                     | $ |     |         |      | $ |     |      |   | $ | 165 |        
|                                   |                     |   |      |         |      |   |      |      |   |   |     |        

19



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

6.     Income Taxes  (Continued)

A reconciliation of the effect of applying the federal statutory rate and
the effective income tax rate on the Companys income tax provision is as
follows for the years ended December 31, (in thousands):

|                                                     |  |      |         |      |  |      |        |   |  |   |         |  
|---------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------ | - |  | - | ------- | -
|                                                     |  | 2000 |         | 2001 |  | 2002
|                                                     |  |      |         |      |  |     
|Statutory federal income tax rate                    |  | $    | (11,546 | )    |  | $    | 1,499  |   |  | $ | (10,119 | )
|State income taxes                                   |  |      | (1,345  | )    |  |      | 175    |   |  |   | (1,013  | )
|Non-deductible amortization                          |  |      | 2,640   |      |  |      | 1,943  |   |  |   |        |  
|Other                                                |  |      | 301     |      |  |      | 344    |   |  |   | 479     |  
|Valuation allowance, includes effect of acquisitions |  |      | 9,950   |      |  |      | (3,961 | ) |  |   | 10,818  |  
|                                                     |  |      |         |      |  |      |        |   |  |   |         |  
|Income tax provision                                 |  | $    |        |      |  | $    |       |   |  | $ | 165     |  
|                                                     |  |      |         |      |  |      |        |   |  |   |         |  

The significant components of the Companys net deferred tax
assets/(liabilities) were as follows as of December 31, (in thousands):

|                          |                                              |   |        |         |      |   |         |         |  
|------------------------- | -------------------------------------------- | - | ------ | ------- | ---- | - | ------- | ------- | -
|                          |                                              |   | 2001   |         | 2002
|                          |                                              |   |        |         |     
|Deferred tax assets:      |                                              |   |        |         |      |   |         |        
|                          | Intangible assets                            |   | $      | 40,823  |      |   | $       | 37,804  |  
|                          | Allowance for doubtful accounts              |   |        | 3,241   |      |   |         | 2,725   |  
|                          | Accrued expenses                             |   |        | 203     |      |   |         | 2,442   |  
|                          | Other                                        |   |        | 1,719   |      |   |         | 2,274   |  
|                          | Net operating loss carryforwards             |   |        | 48,419  |      |   |         | 60,396  |  
|                          |                                              |   |        |         |      |   |         |        
|                          |                                              | $ | 94,405 |         |      | $ | 105,641 |        
|                          |                                              |   |        |         |      |   |         |        
|Deferred tax liabilities: |                                              |   |        |         |      |   |         |        
|                          | Unbilled accounts receivable                 |   | $      | (5,647  | )    |   | $       | (3,798  | )
|                          | Depreciation                                 |   |        | (500    | )    |   |         | (1,362  | )
|                          | Capitalization of software development costs |   |        | (5,250  | )    |   |         | (6,217  | )
|                          |                                              |   |        |         |      |   |         |        
|                          | Net deferred tax asset                       |   |        | 83,008  |      |   |         | 94,264  |  
|                          | Valuation allowance                          |   |        | (83,008 | )    |   |         | (94,264 | )
|                          |                                              |   |        |         |      |   |         |        
|                          |                                              | $ |       |         |      | $ |        |        
|                          |                                              |   |        |         |      |   |         |        

At December 31, 2002, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $153.2 million. The carryforwards
expire in varying amounts through 2022. Of this amount, $40.4 million relate
to stock option tax deductions, which will be tax-effected and the benefit
credited as additional paid-in-capital when realized. Additionally, the
Company has Canadian net operating loss carryovers of approximately $5.9
million that expire in varying amounts through 2009.

Under the Tax Reform Act of 1986, the amounts of, and the benefits from,
net operating loss carryforwards may be impaired or limited in certain
circumstances. The Company experienced an ownership change as defined under
Section 382 of the Internal Revenue Code in November 1998. As a result of the
ownership change, net operating loss carryforwards of approximately $16 million
at November 1998, which were incurred prior to the date of the change, are
subject to annual limitations on their future use. As of December 31, 2002, a
valuation allowance has been established against the deferred tax assets that
management does not believe are more likely than not to be realized.

20



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

7.     Employee Benefit Plans

1996 Stock Option Plan

In April 1996, the Board of Directors of the Company (the Board) adopted
the 1996 Stock Plan (the 1996 Stock Plan). The 1996 Stock Plan, as amended,
provided for grants of stock options, awards of Company stock free of any
restrictions and opportunities to make direct purchases of restricted stock of
the Company. The 1996 Stock Plan allowed for the issuance of options or other
awards to purchase up to 2,500,000 shares of Common Stock. Pursuant to the
terms of the 1996 Stock Plan, a committee of the Board was authorized to grant
awards to employees and non-employees and establish vesting terms. The options
expire ten years from the date of grant. No additional options or other awards
may be granted under the 1996 Stock Plan.

1998 Stock Incentive Plan

In January 1998, the Board adopted the 1998 Stock Incentive Plan (the
Incentive Plan). The Incentive Plan provided for the granting of stock
options, stock appreciation rights, restricted stock awards or unrestricted
stock awards. No additional options or other awards may be granted under the
Incentive Plan.

1999 Stock Incentive Plan

In February 1999, the Board adopted the 1999 Stock Incentive Plan (the
1999 Plan). The 1999 Plan provided for the granting of stock options,
restricted stock, or other stock-based awards. No additional options or other
awards may be granted under the 1999 Plan.

2000 Stock Incentive Plan

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 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. There were 2,194,120 shares available for future issuance under
all of the Companys stock plans as of December 31, 2002. A summary of stock
options transactions were as follows during the years ended December 31,:

|                                     |           |  |           |           |                |   |                  |       |                |  |           |            |                  |   |       |       |  |  |                  |           |   |   |       |       | 
|------------------------------------ | --------- |  | --------- | --------- | -------------- | - | ---------------- | ----- | -------------- |  | --------- | ---------- | ---------------- | - | ----- | ----- |  |  | ---------------- | --------- | - | - | ----- | ----- | 
|                                     |           |  | 2000      |           | 2001           |   | 2002            
|                                     |           |  |           |           |                |   |                 
|                                     |           |  |           |           |                |   | Weighted Average |       |                |  |           |            | Weighted Average |   |       |       |  |  | Weighted Average
|                                     |           |  | Options   |           | Exercise Price |   | Options          |       | Exercise Price |  | Options   |            | Exercise Price  
|                                     |           |  |           |           |                |   |                  |       |                |  |           |            |                 
|Outstanding at
beginning of the
year |           |  | 5,494,673 |           |                | $ | 16.98            |       |                |  | 9,148,878 |            |                  | $ | 12.87 |       |  |  | 8,006,072        |           |   | $ | 12.22 |      
|                                     | Granted   |  |           | 4,977,159 |                |   |                  | 8.46  |                |  |           | 1,196,284  |                  |   |       | 14.70 |  |  |                  | 1,922,925 |   |   |       | 8.20  | 
|                                     | Exercised |  |           | (510,253  | )              |   |                  | 6.62  |                |  |           | (1,342,619 | )                |   |       | 10.96 |  |  |                  | (195,277  | ) |   |       | 7.53  | 
|                                     | Forfeited |  |           | (812,701  | )              |   |                  | 17.71 |                |  |           | (996,471   | )                |   |       | 22.89 |  |  |                  | (713,009  | ) |   |       | 15.14 | 
|                                     |           |  |           |           |                |   |                  |       |                |  |           |            |                  |   |       |       |  |  |                  |           |   |   |       |      
|Outstanding at end
of year           |           |  | 9,148,878 |           |                |   | 12.87            |       |                |  | 8,006,072 |            |                  |   | 12.22 |       |  |  | 9,020,711        |           |   |   | 11.23 |      
|                                     |           |  |           |           |                |   |                  |       |                |  |           |            |                  |   |       |       |  |  |                  |           |   |   |       |      
|Exercisable at end
of the year       |           |  | 2,319,237 |           |                |   |                  |       |                |  | 3,425,434 |            |                  |   |       |       |  |  | 4,960,438        |           |   |   |       |      
|                                     |           |  |           |           |                |   |                  |       |                |  |           |            |                  |   |       |       |  |  |                  |           |   |   |       |      

21



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

7.     Employee Benefit Plans  (Continued)

|                                   |  |                  |      |               |  |                  |      |               |  |                  |       |               |  |   |       |  |  |   |      |  |  |   |      | 
|---------------------------------- |  | ---------------- | ---- | ------------- |  | ---------------- | ---- | ------------- |  | ---------------- | ----- | ------------- |  | - | ----- |  |  | - | ---- |  |  | - | ---- | 
|                                   |  | 2000             |      | 2001          |  | 2002            
|                                   |  |                  |      |               |  |                 
|                                   |  | Weighted Average |      | Weighted Fair |  | Weighted Average |      | Weighted Fair |  | Weighted Average |       | Weighted Fair
|Option Granted During the Year     |  | Exercise Price   |      | Market Value  |  | Exercise Price   |      | Market Value  |  | Exercise Price   |       | Market Value 
|                                   |  |                  |      |               |  |                  |      |               |  |                  |       |              
|Option price > Fair market
value   |  |                  |     |               |  |                  |      |               |  |                  |      |               |  |   |       |  |  |   |     |  |  |   |      | 
|Option price = Fair market
value   |  | $                | 8.46 |               |  |                  |      |               |  | $                | 14.70 |               |  |   |       |  |  | $ | 8.20 |  |  |   |      | 
|Option price < Fair market
value   |  |                  |     |               |  |                  |      |               |  |                  |      |               |  |   |       |  |  |   |     |  |  |   |      | 
|Weighted Fair Market Value
Options |  |                  |      |               |  | $                | 7.98 |               |  |                  |       |               |  | $ | 10.70 |  |  |   |      |  |  | $ | 6.59 | 

The following table summarizes information about stock options outstanding at
December 31, 2002:

|                        |  |                     |           |                     |  |                  |      |                    |  |                  |       |  |  |  |           |  |  |   |       | 
|----------------------- |  | ------------------- | --------- | ------------------- |  | ---------------- | ---- | ------------------ |  | ---------------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                        |  | Options Outstanding |           | Options Exercisable
|                        |  |                     |           |                    
|                        |  |                     |           |                     |  | Weighted Average |      |                    |  |                  |       |  |  |  |           |  |  |  
|                        |  |                     |           |                     |  | Remaining        |      |                    |  |                  |       |  |  |  |           |  |  |  
|                        |  | Number Outstanding  |           | Contractual Life    |  | Weighted Average |      | Number Exercisable |  | Weighted Average
|Range of Exercise Price |  | at 12/31/02         |           | (in years)          |  | Exercise Price   |      | at 12/31/02        |  | Exercise Price  
|                        |  |                     |           |                     |  |                  |      |                    |  |                 
|$0.10-$6.44             |  |                     | 1,316,169 |                     |  |                  | 8.53 |                    |  | $                | 5.88  |  |  |  | 394,594   |  |  | $ | 5.63  | 
|$6.50-$7.50             |  |                     | 1,326,440 |                     |  |                  | 7.74 |                    |  |                  | 7.17  |  |  |  | 396,840   |  |  |   | 6.59  | 
|$8.25-$8.25             |  |                     | 2,572,894 |                     |  |                  | 7.53 |                    |  |                  | 8.25  |  |  |  | 1,755,474 |  |  |   | 8.25  | 
|$9.06-$13.20            |  |                     | 996,222   |                     |  |                  | 7.83 |                    |  |                  | 11.60 |  |  |  | 468,247   |  |  |   | 10.74 | 
|$13.21-$15.13           |  |                     | 1,274,287 |                     |  |                  | 7.35 |                    |  |                  | 14.63 |  |  |  | 808,971   |  |  |   | 14.69 | 
|$15.63-$22.00           |  |                     | 911,816   |                     |  |                  | 7.44 |                    |  |                  | 18.42 |  |  |  | 540,798   |  |  |   | 18.71 | 
|$23.00-$23.38           |  |                     | 522,611   |                     |  |                  | 6.23 |                    |  |                  | 23.35 |  |  |  | 495,242   |  |  |   | 23.35 | 
|$25.71-$25.71           |  |                     | 22,049    |                     |  |                  | 4.11 |                    |  |                  | 25.71 |  |  |  | 22,049    |  |  |   | 25.71 | 
|$35.83-$35.83           |  |                     | 39,374    |                     |  |                  | 4.58 |                    |  |                  | 35.83 |  |  |  | 39,374    |  |  |   | 35.83 | 
|$43.57-$43.57           |  |                     | 38,849    |                     |  |                  | 4.88 |                    |  |                  | 43.57 |  |  |  | 38,849    |  |  |   | 43.57 | 
|                        |  |                     |           |                     |  |                  |      |                    |  |                  |       |  |  |  |           |  |  |   |       | 
|                        |  |                     | 9,020,711 |                     |  |                  |      |                    |  |                  |       |  |  |  |           |  |  |   |       | 
|                        |  |                     |           |                     |  |                  |      |                    |  |                  |       |  |  |  |           |  |  |   |       | 

Employee Savings Plan

During 1997, the Company established a Savings Plan (the Plan) pursuant
to Section 401(k) of the Internal Revenue Code (the Code), whereby employees
may contribute a percentage of their compensation, not to exceed the maximum
amount allowable under the Code. At the discretion of the Board, the Company
may elect to make matching contributions, as defined in the Plan. For the years
ended December 31, 2000, 2001 and 2002, the Board authorized matching
contributions totaling $801,000, $532,000 and $750,000, respectively.

1998 Employee Stock Purchase Plan

Under the Companys 1998 Employee Stock Purchase Plan (the Purchase
Plan) (implemented in April 1998), employees of the Company, including
directors of the Company who are employees are eligible to participate in
quarterly plan offerings in which payroll deductions may be used to purchase
shares of Common Stock. The purchase price of such shares is the lower of 85%
of the fair market value of the Common Stock on the day the offering commences
and 85% of the fair market value of the Common Stock on the day the offering
terminates.

22



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

8.     Commitments and Contingencies

Noncancelable Operating Leases

The Company leases its office space and certain equipment under
noncancelable operating leases. Rental expense under operating leases was
approximately $10.6 million, $11.4 million and $11.8 million for the years
ended December 31, 2000, 2001 and 2002, respectively. Future minimum rental
payments under noncancelable operating leases as of December 31, 2002 are as
follows (in thousands):

|                         |  |   |        | 
|------------------------ |  | - | ------ | 
|Year Ending December 31, |  |   |        | 
|2003                     |  | $ | 10,185 | 
|2004                     |  |   | 8,244  | 
|2005                     |  |   | 5,997  | 
|2006                     |  |   | 5,478  | 
|2007                     |  |   | 3,885  | 
|Thereafter               |  |   | 3,270  | 
|                         |  |   |        | 
|                         |  | $ | 37,059 | 
|                         |  |   |        | 

Subsequent to December 31, 2002 the Company contracted for a minimum
number of hours for airplane charters with a related (note 9). The minimum
commitment amounts to $761,000 per year for 2003 through 2005.

Litigation

From July through September 2002, the Company and three of its officers
(Messrs. Colletti, Patton and Wilson) were named in seven complaints filed by
purported shareholders of the Company in the United States District Court,
Southern District of Florida, West Palm Beach Division (the District Court).
Each complaint seeks certification as a class and monetary damages and alleges
that the Company and the named officers violated federal securities laws. The
Company believes that the actions are without merit, and intends to conduct a
vigorous defense against these allegations.

In September 2002, various parties filed motions to be appointed as lead
plaintiffs and to consolidate all of the shareholder suits described above. On
February 4, 2003, the District Court issued an order consolidating all seven
cases into one single case and appointing the City of Philadelphia Board of
Pensions and Retirement, Louis Giannakokas and Norman K. Mielziner to serve as
lead plaintiffs (the Consolidation Order). The Consolidation Order also sets
certain timelines by which responsive pleadings must be filed by the Company
and the lead plaintiffs in the consolidated case. Under the Consolidation
Order, the lead plaintiffs have until March 31, 2003 to file an amended,
consolidated complaint. Once the amended, consolidated complaint is filed, the
Company shall have sixty (60) days from such date to answer or move to dismiss
the amended complaint.

The Company is involved in other litigation incidental to its business
from time to time. In the opinion of management, after consultation with legal
counsel, the ultimate outcome of such litigation will not have a material
adverse effect on the Companys financial position or results of operations or
cash flows.

9.     Related Party Transactions

Eclipsys has a policy that all transactions between it and its executive
officers, directors and affiliates must be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties. Additionally,
these transactions must be approved by a majority of the members of the Board
of Directors and by a majority of the disinterested members of the Board of
Directors.

23



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

9.     Related Party Transactions  (Continued)

The Company leases office space in Boston, Massachusetts from a former
stockholder of SDK, who is a current employee. During the years ended December
31, 2000, 2001 and 2002 the Company paid $849,000, $692,000 and $579,000,
respectively, under this lease. The lease, which was amended to increase the
space at the end of 1999, is noncancelable and expires in 2009.

The Companys Chairman Emeritus, Harvey J. Wilson, owns a company, which
leases an aircraft to a charter company. The charter company provides aircraft
charter services to Eclipsys as well other outside parties. Mr. Wilson has no
ownership or other interest in the charter company. Eclipsys paid the charter
company $412,000, $775,000 and $885,000 in 2000, 2001 and 2002, respectively,
for charters using the aircraft owned by Mr. Wilsons company. Eclipsys also
paid the charter company $43,000 and $265,000, in 2001 and 2002, respectively,
for charters of other aircraft, not owned by Mr. Wilsons company. Mr.
Wilsons company received $298,000, $481,000 and $533,000 during 2000, 2001,
and 2002, respectively, from the charter company for these transactions.
Subsequent to December 31, 2002 Eclipsys contracted for a minimum number of
hours for airplane charters to extend the current pricing terms. The minimum
commitment amounts to $761,000 per year for 2003 through 2005.

In July 1999, Eclipsys invested in HEALTHvision, Inc. (HEALTHvision,) a
Dallas-based, privately held internet healthcare company, in conjunction with
VHA, Inc. and investment entities affiliated with General Atlantic Partners,
LLC. HEALTHvision provides Internet solutions to hospital organizations to
assist them in improving patient care in the local communities they serve.
Eclipsys purchased 3,400,000 shares of common stock for $34,000, which at the
time represented 34% of the outstanding common stock on an if converted basis.
As of December 31, 2002 the Companys shares represented 28% of the common
stock of HEALTHvision on an if converted basis. The Company accounts for the
investment in HEALTHvision using the equity method of accounting. Due to
losses recognized under the equity method, the recorded balance of the
investment in HEALTHvision was $0 as of December 31, 2002. In connection with
the Companys relationship with HEALTHvision, Eclipsys entered into a joint
marketing arrangement under which both organizations agreed to jointly market
products and services to their customers. Under this agreement, Eclipsys paid
HEALTHvision $2,247,000 during 2002 and owed HEALTHvision $432,000 as of
December 31, 2002. Also during 2002, the Company earned revenues from
HEALTHvision of $1,043,000 for hosting and other related services and had
accounts receivable due from HEALTHvision of $353,000 at December 31, 2002.
Additionally, the Company has a note receivable from HEALTHvision for $293,000
as of December 31, 2002, bearing interest at the prime rate, with repayments
due quarterly beginning March 31, 2004. For the year ended December 31, 2002,
HEALTHvision, Inc had total revenues of approximately $21.9 million (unaudited)
and a net loss of approximately $4.6 million (unaudited) with total assets of
approximately $12.2 million (unaudited) as of December 31, 2002. The Companys
Chairman Emeritus, Harvey J. Wilson also serves as co-chairman of HEALTHvision.
Eclipsys is not required to provide funding to HEALTHvision and has made no
guarantees on their behalf.

The Company has a license agreement with Partners HealthCare System, Inc.
(Partners). Under the terms of this license, the Company may develop,
commercialize, distribute and support certain technology and license it, as
well as sell related services, to other healthcare providers and hospitals
throughout the world (with the exception of the Boston, Massachusetts
metropolitan area). Prior to the Companys initial public offering, no sales
of products incorporating the licensed technology were made and, consequently,
no royalties were paid by the Company pursuant to the license with Partners.
The royalty arrangement under the license terminated upon the Companys initial
public offering. After the Companys initial public offering, the Company sold
products incorporating the licensed technology. The Company is obligated to
offer to Partners and certain of its affiliates a license for internal use,
granted on most favored customer terms, to all new software applications
developed by the Company, whether or not derived from the licensed technology,
and major architectural changes to the licensed technology. Partners and
certain of its affiliates are also entitled to

24



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##### 



ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

9.     Related Party Transactions  (Continued)

receive internal use licenses, also granted on most favored customer terms, for
any changes to any module or application included in the licensed technology
requiring at least one person-year of technical effort.

Additionally, as part of the agreement, the Company has provided
development services to Partners related to commercializing the intellectual
property. Fees paid to the Company for these development services totaled
$274,000 for the year ended December 31, 2000 and were included as a reduction
in research and development expenses. No amounts were paid in 2001 and 2002.

In 2001, Partners entered into a contract with the Company for the license
of a new software application and related professional services. This new
software application consisted of an upgrade to an existing software
application that Partners had licensed from Transition Systems, Inc, an entity
that was acquired by the Company in December 1998. Under this new contract,
Partners paid the Company $954,000 in 2001 and $1,032,000 in 2002. As of
December 31, 2002, Partners owed the Company $98,000 related to this new
contract. Jay Pieper, a director of the Company, is Vice President of
Corporate Development and Treasury Affairs for Partners. Partners was not
affiliated with the Company at the time of the negotiation of the Partners
license from Transition Systems, Inc.

25



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##### 



ECLIPSYS CORPORATION
SCHEDULE II-VALUATION OF QUALIFYING ACCOUNTS
For Each of the Three Years in the Period Ended December 31, 2002

|                  |                                            |  |                     |        |           |  |            |        |        |  |   |         |                   |  |   |        | 
|----------------- | ------------------------------------------ |  | ------------------- | ------ | --------- |  | ---------- | ------ | ------ |  | - | ------- | ----------------- |  | - | ------ | 
|                 
|                  |                                            |  | Balance at          |        |           |  |            |        |        |  |   |         | Balance at End of
|                  |                                            |  | Beginning of Period |        | Additions |  | Write-offs |        | Period
|                 
|December 31, 2000 |                                            |  |                     |        |           |  |            |        |        |  |   |         |                   |  |   |       
|                  | Allowance for doubtful accounts            |  | $                   | 3,692  |           |  | $          | 13,255 |        |  | $ | (11,291 | )                 |  | $ | 5,656  | 
|                  | Valuation allowance for deferred tax asset |  |                     | 70,826 |           |  |            | 11,991 |        |  |   |         |                   |  |   | 82,817 | 
|December 31, 2001 |                                            |  |                     |        |           |  |            |        |        |  |   |         |                   |  |   |       
|                  | Allowance for doubtful accounts            |  |                     | 5,656  |           |  |            | 4,305  |        |  |   | (4,389  | )                 |  |   | 5,572  | 
|                  | Valuation allowance for deferred tax asset |  |                     | 82,817 |           |  |            | 191    |        |  |   |         |                   |  |   | 83,008 | 
|December 31, 2002 |                                            |  |                     |        |           |  |            |        |        |  |   |         |                   |  |   |       
|                  | Allowance for doubtful accounts            |  |                     | 5,572  |           |  |            | 3,533  |        |  |   | (5,693  | )                 |  |   | 3,412  | 
|                  | Valuation allowance for deferred tax asset |  |                     | 83,008 |           |  |            | 11,256 |        |  |   |         |                   |  |   | 94,264 | 

26



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##### 



Quarterly Results (Unaudited)

The following table presents quarterly statement of operations data for
each of the eight quarters in the years ended December 31, 2001 and 2002. The
statement of operations data for the quarters are unaudited, and in the opinion
of management, include all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial data for such periods.
Additionally, the statement of operations data is derived from, and are
qualified by reference to, Eclipsys audited financial statements, which appear
elsewhere in this document.

ECLIPSYS CORPORATION
For the Year Ended December 31, 2001
(In thousands, except per share data)

|                                    |  |         |        |         |  |         |        |         |  |      |        |  |  |   |        |  |  |   |         | 
|----------------------------------- |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------- | 
|                                    |  | First   |        | Second  |  | Third   |        | Fourth  |  |      |        | 
|                                    |  | Quarter |        | Quarter |  | Quarter |        | Quarter |  | Year
|                                    |  |         |        |         |  |         |        |         |  |     
|Revenues                            |  | $       | 55,351 |         |  | $       | 59,995 |         |  | $    | 63,096 |  |  | $ | 61,235 |  |  | $ | 239,676 | 
|Gross profit margin                 |  |         | 21,290 |         |  |         | 25,639 |         |  |      | 28,496 |  |  |   | 26,426 |  |  |   | 101,850 | 
|Net (loss) income                   |  |         | (3,176 | )       |  |         | 1,491  |         |  |      | 3,965  |  |  |   | 2,128  |  |  |   | 4,408   | 
|Basic net (loss)
income per share   |  | $       | (0.08  | )       |  | $       | 0.03   |         |  | $    | 0.09   |  |  | $ | 0.05   |  |  | $ | 0.10    | 
|Diluted net (loss)
income per share |  | $       | (0.08  | )       |  | $       | 0.03   |         |  | $    | 0.08   |  |  | $ | 0.05   |  |  | $ | 0.09    | 

ECLIPSYS CORPORATION
For the Year Ended December 31, 2002
(In thousands, except per share data)

|                                    |  |         |        |         |  |         |        |         |  |      |         |   |  |   |         |   |  |   |         |  
|----------------------------------- |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                    |  | First   |        | Second  |  | Third   |        | Fourth  |  |      |         |  
|                                    |  | Quarter |        | Quarter |  | Quarter |        | Quarter |  | Year
|                                    |  |         |        |         |  |         |        |         |  |     
|Revenues                            |  | $       | 62,819 |         |  | $       | 54,252 |         |  | $    | 47,549  |   |  | $ | 53,448  |   |  | $ | 218,068 |  
|Gross profit margin                 |  |         | 30,507 |         |  |         | 23,626 |         |  |      | 14,146  |   |  |   | 18,474  |   |  |   | 86,754  |  
|Net income (loss)                   |  |         | 5,309  |         |  |         | (3,047 | )       |  |      | (17,174 | ) |  |   | (14,852 | ) |  |   | (29,763 | )
|Basic net (loss)
income per share   |  | $       | 0.12   |         |  | $       | (0.07  | )       |  | $    | (0.38   | ) |  | $ | (0.33   | ) |  | $ | (0.67   | )
|Diluted net (loss)
income per share |  | $       | 0.11   |         |  | $       | (0.07  | )       |  | $    | (0.38   | ) |  | $ | (0.33   | ) |  | $ | (0.67   | )

27



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##### 



Part IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements included in Item 8 of this report on Form 10-K
2. Financial Statement Schedules included in Item 8 of this report on Form 10-K
3. The following exhibits are included in this report:

|            |  |                                                                                                                                                                                                                                                         
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1*        |  | Agreement and Plan of Merger dated as of October 29, 1998 by
and among the Registrant, Exercise Acquisition Corp. and Transition
Systems, Inc.                                                                                                          
|2.2**       |  | Agreement of Merger among Alltel Healthcare Information
Services, Inc., Alltel Information Services, Inc., Eclipsys
Corporation and Eclipsys Solutions Corp. dated as of January 24, 1997                                                               
|2.3**       |  | Amended and Restated Stock Purchase Agreement among Eclipsys
Corporation, SDK Medical Computer Services Corporation and the
Selling Stockholders listed therein dated June 26, 1997                                                                     
|2.4**       |  | Asset Purchase Agreement by and among Motorola, Inc. Eclipsys
Corporation and Emtek Healthcare Corporation dated January 30, 1998                                                                                                                       
|2.5****     |  | Agreement and Plan of Merger dated as of February 5, 1999, by and
among Eclipsys PCS and Sub                                                                                                                                                            
|2.6****     |  | Escrow Agreement dated as of February 17, 1999, by and among
Eclipsys, Sub, PCS and the PCS Stockholders and Noteholders                                                                                                                                
|2.7*****    |  | Stock Purchase and Sale Agreement dated as of March 6, 1999 by
and among Sun Gard Data Systems Inc., Sun Gard Investment Ventures,
Inc., Med Data Systems, Inc., Intelus Corporation, and Eclipsys
Corporation and Eclipsys Solutions Corp              
|2.8******   |  | Agreement and Plan of Merger dated as of June 17, 1999, by and
among Eclipsys Corporation, Eclipsys Merger Corp., MSI Solutions,
Inc., MSI Integrated Services, Inc., Anna L. Bean, Michael R. Cote,
Robert J. Feldman and the 1997 Feldman Family Trust
|2.9*******  |  | Asset Purchase Agreement by and among Quadramed Corporation,
Eclipsys Corporation and Med Data Systems, Inc. dated July 1, 1999                                                                                                                         
|3.1***      |  | Third Amended and Restated Certificate of Incorporation of the Registrant                                                                                                                                                                               
|3.2**       |  | Third Amended and Restated Bylaws of the Registrant                                                                                                                                                                                                     
|3.3******** |  | Certificate of Designation of Series A Junior Participating Preferred                                                                                                                                                                                   
|4.1**       |  | Specimen certificate for shares of Common Stock                                                                                                                                                                                                         
|4.2******** |  | Rights Agreement, dated July 26, 2000, by and between Eclipsys Corporation and Fleet National
Bank, as Rights Agent                                                                                                                                     
|10.1**      |  | Second Amended and Restated Registration Rights Agreement                                                                                                                                                                                               
|10.2**      |  | Second Amended and Restated Stockholders Agreement                                                                                                                                                                                                      
|10.5**+     |  | Information Systems Technology License Agreement, dated as of May
3, 1996, by and among Partners Healthcare System, Inc. and Integrated
Healthcare Solutions, Inc.                                                                                      
|10.6**      |  | Preferred Stock Purchase Agreement by and among Eclipsys
Corporation, General Atlantic Partners 47, L.P. and GAP Coinvestment
Partners, L.P. dated February 4, 1998                                                                                     
|10.7**      |  | 1996 Stock Plan                                                                                                                                                                                                                                         

28



---



##### 



|                 |  |                                                                                                                               
|---------------- |  | ------------------------------------------------------------------------------------------------------------------------------
|10.8*********    |  | Amended and Restated 1998 Stock Incentive Plan                                                                                
|10.9*********    |  | Second Amended and Restated 1998 Employee Stock Purchase Plan                                                                 
|10.13**          |  | Settlement of Claims Agreement, dated as of March 13, 1998, between ALLTEL Information Services, Inc. and Eclipsys Corporation
|10.14*********   |  | Amended and Restated 1999 Stock Incentive Plan, as amended                                                                    
|10.15*********   |  | Amended and Restated 2000 Stock Incentive Plan                                                                                
|10.16*********   |  | Employment Agreement for Paul L. Ruflin                                                                                       
|10.17*********** |  | Resignation Letter from Harvey J. Wilson                                                                                      
|21**********     |  | Subsidiaries of the Registrant                                                                                                
|23               |  | Consent of PricewaterhouseCoopers LLP                                                                                         
|99.1             |  | Certification Pursuant to 18 U.S.C. Section 1350                                                                              



---

|            |  |                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|+           |  | Confidential treatment granted on August 6, 1998 in connection with the Registrants initial public offering                                           
|*           |  | Incorporated by reference to the Joint Proxy Statement/ Prospectus
included in the Registrants Registration Statement on Form S-4 (File No.
333-68353)
|**          |  | Incorporated by reference to the Registrants Registration Statement on
Form S-1, as amended (File No. 333-50781)                                      
|***         |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended June 30, 1998 (File No. 000-24539)                   
|****        |  | Incorporated by reference to the Registrants Current Report on Form 8-K
dated March 3, 1999 (File No. 000-24539)                                      
|*****       |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended March 31, 1999 (File No. 000-24539)                  
|******      |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended June 30, 1999 (File No. 000-24539)                   
|*******     |  | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 (File No. 000-24539)              
|********    |  | Incorporated by reference to the Registrants Current Report on Form
8-K dated August 8, 2000 (File No. 000-24539)                                     
|*********   |  | Incorporated by reference to the Registrants Quarterly Report on
Form 10-Q for the quarter ended June 30, 2002 (File No. 000-24539)                   
|**********  |  | Incorporated by reference to Exhibit 21 of the Registrants Annual
Report on Form 10-K for the year ended December 31, 2001 (File No.
000-24539)       
|*********** |  | Included in the Original Form 10-K (File No. 000-24539)                                                                                                

(b)  Reports on Form 8-K.

None.

29



---



##### 



Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.

|                       |  |                                                                                             |  |             
|---------------------- |  | ------------------------------------------------------------------------------------------- |  | ------------
|Signature              |  | Title                                                                                       |  | Date        
|                       |  |                                                                                             |  |             
|                      
|/s/ PAUL L. RUFLIN     |  | President, Chief Executive Officer, Director (Principal Executive Officer)                  |  | May 22, 2003
|Paul L. Ruflin         |  |                                                                                             |  |             
|                      
|/s/ ROBERT J. COLLETTI |  | Senior Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) |  | May 22, 2003
|Robert J. Colletti     |  |                                                                                             |  |             
|                      
|/s/ STEVEN A. DENNING  |  | Director                                                                                    |  | May 22, 2003
|Steven A. Denning      |  |                                                                                             |  |             
|                      
|/s/ G. FRED DIBONA     |  | Director                                                                                    |  | May 22, 2003
|G. Fred Dibona         |  |                                                                                             |  |             
|                      
|/s/ EUGENE V. FIFE     |  | Director                                                                                    |  | May 22, 2003
|Eugene V. Fife         |  |                                                                                             |  |             
|                      
|/s/ BRADEN KELLY       |  | Director                                                                                    |  | May 22, 2003
|Braden Kelly           |  |                                                                                             |  |             
|                      
|/s/ JAY B. PIEPER      |  | Director                                                                                    |  | May 22, 2003
|Jay B. Pieper          |  |                                                                                             |  |             

30



---



##### 



CERTIFICATIONS

I, Paul L. Ruflin, certify that:

1.     I have reviewed this annual report on Form 10-K, including this
Amendment No. 1 on Form 10-K/A, of Eclipsys Corporation;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)      designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;



| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b)      evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c)      presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)      all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b)      any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officers and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                    |  |                                                         
|------------------- |  | --------------------------------------------------------
|Dated: May 23, 2003 |  | /s/ Paul L. RuflinPaul L. Ruflin
Chief Executive Officer

31



---



##### 



CERTIFICATIONS

I, Robert J. Colletti, certify that:

1.     I have reviewed this annual report on Form 10-K, including this
Amendment No. 1 on Form 10-K/A, of Eclipsys Corporation;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)      designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;



| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b)      evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c)      presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)         all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



| |                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b)         any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officers and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                    |  |                                                                 
|------------------- |  | ----------------------------------------------------------------
|Dated: May 23, 2003 |  | /s/ Robert J. CollettiRobert J. Colletti
Chief Financial Officer

32