The Lease provides that, effective May 1, 2004, the rent payable by us shall be an aggregate annual rent of $594,678 over a ten year term, plus expenses related to real estate taxes, utilities and maintenance. Annual rent increases will be based upon the Consumer Price Index plus 2.5% subject to a maximum annual cap of 3.5%. The Lease expires ten years from the occupancy date of May 1, 2004.
Net cash provided by operating activities was $7.7 million for the fiscal year ended June 30, 2006 as compared to $10.3 million for the fiscal year ended June 30, 2005. This decrease of $2.6 million is primarily the result of a $43.6 million decrease in claims payable to pharmacies, a $3.9 million decrease in trade and other payables and accrued expenses, a $9.0 million increase in rebates receivable from manufacturers, and a $2.3 million increase relating to excess tax benefits from the exercising of stock options in accordance with FASB statement No. 123(R). These decreases were partially offset by a $48.0 million reduction in accounts receivable through improved collection efforts which led to the decrease in claims payable to pharmacies and the decrease in trade and other payables and accrued expenses as noted above. The decreases are further offset by a reduction in prepaid expenses and other current assets, primarily due to the release of the escrow in connection with the Inteq acquisition.
We used the remaining proceeds from the issuance and sale of the series A preferred stock of approximately $24 million, excluding expenses related to the closing of the New Mountain Transaction, for the Inteq acquisition and working capital purposes.
The following unaudited financial data has been restated for the quarters ended December 31, 2005 and March 31, 2006. This restatement reflects the correction of two rebate cash receipts from one pharmaceutical manufacturer which resulted in NMHC recognizing additional rebate revenue during the quarter ended December 31, 2005. The impact of this was a misstatement on our income statement and a resulting overstatement of $662,000 ($380,000 tax effected) of operating income for the quarter ended December 31, 2005 and an understatement of $662,000 ($380,000 tax effected) of operating income for the quarter ended March 31, 2006. There was no impact on our results of operations or cash flows for the fiscal year ended June 30, 2006. (All amounts are in thousands, except per share amounts):
Internal Use Software We invest heavily in developing software in order to enhance our operations as well as meet the needs of our client. We apply the provisions of the American Institute of Certified Public Accountants Statement of Position (“SOP”) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Under this SOP, certain costs of computer software developed or obtained for internal use are capitalized and amortized on a straight-line basis over three years. Costs for general and administrative expenses, overhead, maintenance and training, as well as the cost of software coding that does not add functionality to the existing system, are expensed as incurred. Reductions, if any, in the carrying value of capitalized software development costs to net realizable value are expensed.