Allscripts

Historical

{a}

NantHealth

Business

Historical

{b}

NantHealth

Business

Pro Forma

Adjustments

Pro Forma Allscripts and NantHealth Combined

ASSETS

Current assets:

Cash and cash equivalents

$

89,114

$

73

$

(1,742

)

{c}

$

87,445

Accounts receivable, net

420,116

831

420,947

Prepaid expenses and other current assets

113,563

5,065

(3,271

)

{d}

115,357

Total current assets

622,793

5,969

(5,013

)

623,749

Available for sale marketable securities

63,450

-

(63,450

)

{c}

-

Fixed assets and capitalized software

   development costs, net

353,390

11,470

(3,922

)

{e}

360,938

Intangible assets, net

698,950

35,469

(23,069

)

{f}

711,350

Goodwill

1,929,283

-

29,094

{g}

1,958,377

Deferred Taxes and other assets

116,189

4,966

22,700

{c}

139,078

(4,777

)

{d}

Total assets

$

3,784,055

$

57,874

$

(48,437

)

$

3,793,492

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

114,725

$

225

$

114,950

Accrued expenses

136,630

1,354

787

{n}

138,771

Deferred revenue

388,647

8,206

(2,911

)

{h}

393,942

Current maturities of long-term debt and capital lease

   obligations

32,446

-

32,446

Total current liabilities

672,448

9,785

(2,124

)

680,109

Long-term debt and capital lease

   obligations

1,314,083

-

1,314,083

Deferred revenue

18,871

5,695

(3,132

)

{h}

21,434

Deferred Taxes and other liabilities

203,554

-

203,554

Total liabilities

2,208,956

15,480

(5,256

)

2,219,180

Redeemable convertible non-controlling interest -

   Netsmart

409,610

-

409,610

Stockholders’ equity

1,165,489

-

(787

)

1,164,702

Net assets acquired and liabilities assumed

0

42,394

(42,394

)

{i}

-

Total liabilities and stockholders’ equity

$

3,784,055

$

57,874

$

(48,437

)

$

3,793,492

Allscripts

Historical

Netsmart

Historical for Period

1/1/16 to 4/19/16

Netsmart Pro Forma Adjustments

{a}

HealthMEDX

Historical for Period

1/1/16 to 10/27/16

HealthMEDX Pro Forma Adjustments

Pro Forma Allscripts, Netsmart and HealthMEDX Combined

Revenue

$

1,549,899

$

62,302

$

22,319

{h}

$

22,764

$

(925

)

{h}

$

1,644,005

(12,354

)

{j}

Costs and expenses:

Cost of revenue

878,860

33,554

4,377

{f}

7,209

2,011

{f}

915,731

(12,180

)

{j}

1,900

{k}

Selling, general and administrative expenses

423,362

72,708

(3,577

)

{l}

14,562

(873

)

{l}

451,238

5,640

{f}

(2,504

)

{f}

(52,627

)

{m}

(49

)

{m}

(5,404

)

{n}

Research and development

187,906

5,984

(1,900

)

{k}

3,245

195,235

Total costs and expenses

1,490,128

112,246

(63,771

)

25,016

(1,415

)

1,562,204

Income (loss) from operations

59,771

(49,944

)

73,736

(2,252

)

490

81,801

Interest expense

(68,141

)

(17,363

)

4,758

{o}

(266

)

(2,194

)

{o}

(83,206

)

Goodwill impairment loss

-

-

-

-

Other (expense) income, net

(6,414

)

-

123

(6,291

)

Income (loss) before income taxes

(14,784

)

(67,307

)

78,494

(2,395

)

(1,704

)

(7,696

)

Income tax benefit (provision)

17,814

20,818

(31,398

)

{p}

-

682

{p}

7,916

Net income (loss)

3,030

(46,489

)

47,096

(2,395

)

(1,022

)

220

Net income attributable to

   non-controlling interest

(146

)

-

-

-

-

(146

)

Accretion of redemption preference

   on redeemable convertible

   non-controlling interest - Netsmart

(28,536

)

-

(16,637

)

{q}

-

-

(45,173

)

Net loss attributable to Allscripts

   Healthcare Solutions, Inc.

   stockholders

$

(25,652

)

$

(46,489

)

$

30,459

$

(2,395

)

$

(1,022

)

$

(45,099

)

Loss per share - basic attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.14

)

Loss per share - diluted attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.14

)

Weighted-average shares outstanding:

Basic

186,188

Diluted

186,188

Pro Forma Allscripts, Netsmart and HealthMEDX Combined

NantHealth

Business

Historical

{b}

NantHealth

Business

Pro Forma

Adjustments

Pro Forma Allscripts, Netsmart, HealthMEDX and NantHealth Combined

Revenue

$

1,644,005

$

19,976

$

(3,673

)

{h}

$

1,660,308

Costs and expenses:

Cost of revenue

915,731

28,226

(6,496

)

{f}

937,482

21

{r}

Selling, general and administrative expenses

451,238

18,435

(2,516

)

{f}

469,177

2,020

{r}

Research and development

195,235

14,327

991

{r}

210,553

Total costs and expenses

1,562,204

60,988

(5,980

)

1,617,212

Income (loss) from operations

81,801

(41,012

)

2,307

43,096

Interest expense

(83,206

)

(83,206

)

Goodwill impairment loss

-

(51,062

)

(51,062

)

Other (loss) income, net

(6,291

)

2,534

(3,757

)

(Loss) income before income taxes

(7,696

)

(92,074

)

4,841

(94,929

)

Income tax benefit (provision)

7,916

-

(1,936

)

{p}

5,980

Net income (loss)

220

(92,074

)

2,905

(88,949

)

Net income attributable to

   non-controlling interest

(146

)

(146

)

Accretion of redemption preference

   on redeemable convertible

   non-controlling interest - Netsmart

(45,173

)

(45,173

)

Net loss attributable to Allscripts

   Healthcare Solutions, Inc.

   stockholders

$

(45,099

)

$

(92,074

)

$

2,905

$

(134,268

)

Loss per share - basic attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.72

)

Loss per share - diluted attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.72

)

Weighted-average shares outstanding:

Basic

186,188

Diluted

186,188

Allscripts

Historical

{a}

NantHealth

Business

Historical

{b}

NantHealth

Business

Pro Forma

Adjustments

Pro Forma Allscripts and NantHealth Combined

Revenue

$

839,566

$

6,121

$

(821

)

{h}

$

844,866

Costs and expenses:

Cost of revenue

473,423

14,531

(3,026

)

{f}

484,251

(677

)

{r}

Selling, general and administrative expenses

238,085

8,682

(1,258

)

{f}

245,218

(291

)

{r}

Research and development

95,691

7,943

(166

)

{r}

103,468

Total costs and expenses

807,199

31,156

(5,418

)

832,937

Income from operations

32,367

(25,035

)

4,597

11,929

Interest expense

(40,470

)

(40,470

)

Impairment of long-term investments

(144,590

)

(144,590

)

Other income, net

282

1,371

1,653

(Loss) income before income taxes

(152,411

)

(25,035

)

5,968

(171,478

)

Income tax benefit (provision)

835

-

(2,387

)

{p}

(1,552

)

Net income (loss)

(151,576

)

(25,035

)

3,581

(173,030

)

Net income attributable to

   non-controlling interest

(189

)

(189

)

Accretion of redemption preference

   on redeemable convertible

   non-controlling interest - Netsmart

(21,925

)

(21,925

)

Net loss attributable to Allscripts

   Healthcare Solutions, Inc.

   stockholders

$

(173,690

)

$

(25,035

)

$

3,581

$

(195,144

)

Loss per share - basic attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.96

)

$

(1.08

)

Loss per share - diluted attributable to

   Allscripts Healthcare Solutions, Inc.

   stockholders

$

(0.96

)

$

(1.08

)

Weighted-average shares outstanding:

Basic

181,193

181,193

Diluted

181,193

181,193

Cash

$

1,742

NantHealth common stock

42,750

Less: Value assigned to modification of existing commercial agreement with NantHealth

(22,700

)

Total consideration for NantHealth provider/patient engagement solutions business

$

21,792

Cash and cash equivalents

$

21

Accounts receivable, net

2,078

Prepaid expenses and other current assets

1,806

Fixed assets

7,099

Intangible assets

12,400

Goodwill

9,058

Other assets

205

Accounts payable and accrued expenses

(1,575

)

Deferred revenue

(9,300

)

Net assets acquired

$

21,792

(a)

Represents the consolidated balance sheet and statement of operations of Allscripts, Netsmart and HealthMEDX as reflected in Allscripts Quarterly Report on Form 10-Q as of and for the quarterly period ended June 30, 2017.

(b)

The NantHealth business’ fiscal year consists of 52 or 53 weeks ending the Sunday closest to December 31^st, with quarters of 13 or 14 weeks ending the Sunday closest to March 31^st, June 30^th, September 30^th, and December 31^st. the NantHealth business’ 2016 fiscal year is comprised of 52 weeks ended on January 1, 2017 and the first half of fiscal 2017 is comprised of the 26 weeks ended July 2, 2017.

(c)

Reflects adjustments to record the consideration paid for the Nanthealth business, including the divestiture of NantHealth common stock held by Allscripts and the recognition of the fair value assigned to modification of the existing commercial agreement with NantHealth, Inc.

(d)

Adjustment to write-off deferred implementation costs as part of the preliminary allocation of the NantHealth business’ purchase price.

(e)

Adjustment to write-off capitalized internal software development costs as part of the preliminary allocation of the NantHealth business’ purchase price.

(f)

Reflects the adjustment of the NantHealth business’ historical intangible assets acquired to their estimated fair values. As part of the preliminary valuation analysis, we identified intangible assets, including technology, product trademarks and customer relationships. The fair value of identifiable intangible assets is determined primarily using the “income approach,” which requires a forecast of all expected future cash flows. The following table summarizes the estimated fair values of the NantHealth business’ identifiable intangible assets and their estimated useful lives:

Estimated Fair Value

Estimated Useful Life in Years

Year ended

December 31, 2016 Amortization Expense

Six Months ended

June 30, 2017 Amortization Expense

Technology

$

3,000

5 years

$

600

$

300

Product Trademarks

200

5 years

40

20

Customer Relationships

9,200

19 years

484

242

Total

$

12,400

$

1,124

$

562

Less: Historical amortization expense - Technology

(7,096

)

(3,326

)

Less: Historical amortization expense - Customer Relationships and Other

(3,040

)

(1,520

)

Pro forma adjustments to amortization expense - Technology

$

(6,496

)

$

(3,026

)

Pro forma adjustments to amortization expense - Customer

   Relationships and Product Trademarks

$

(2,516

)

$

(1,258

)

Year ended December 31,

Year 2 after acquisition

$

1,124

Year 3 after acquisition

1,124

Year 4 after acquisition

1,124

Year 5 after acquisition

911

Year 6 after acquisition

484

Total

$

4,767

Estimated Fair Value

Estimated Useful Life in Years

Year ended

December 31, 2016 Amortization Expense

Technology

$

144,000

10 years

$

21,157

Corporate Trademark

27,000

indefinite

-

Product Trademarks

8,500

10 years

805

Customer Relationships

230,000

12-20 years

17,112

Total

$

409,500

$

39,074

Less: Historical amortization expense - Technology

(16,780

)

Less: Historical amortization expense - Customer Relationships and Other

(12,277

)

Pro forma adjustments to amortization expense - Technology

$

4,377

Pro forma adjustments to amortization expense - Customer Relationships

   and Product Trademarks

$

5,640

Year ended December 31,

Year 2 after acquisition

$

38,170

Year 3 after acquisition

40,891

Year 4 after acquisition

40,516

Year 5 after acquisition

39,313

Year 6 after acquisition

35,737

Total

$

194,627

Estimated Fair Value

Estimated Useful Life in Years

Year ended

December 31, 2016 Amortization Expense

Technology

$

11,410

10 years

$

2,011

Product Trademark

680

10 years

76

Customer Relationships

8,850

14 years

592

Total

$

20,940

$

2,679

Less: Historical amortization expense - Technology

-

Less: Historical amortization expense - Customer Relationships and Trademark

(3,172

)

Pro forma adjustments to amortization expense - Technology

$

2,011

Pro forma adjustments to amortization expense - Customer Relationships and Trademark

$

(2,504

)

Year ended December 31,

Year 2 after acquisition

$

2,640

Year 3 after acquisition

2,565

Year 4 after acquisition

2,682

Year 5 after acquisition

2,413

Year 6 after acquisition

1,941

Total

$

12,241

(g)

Reflects adjustment to remove the NantHealth business’ historical goodwill and record goodwill associated with the NantHealth business acquisition in the amount of $29 million. This goodwill amount is different from the goodwill amount shown in Note 3 above of $9 million, since it is based on the assumption that the NantHealth business acquisition occurred on June 30, 2017 for purposes of the pro forma combined abbreviated balance sheet presentation. The value of the NantHealth common stock decreased by $21 million during the period of July 1, 2017 to the transaction date of August 25, 2017.

(h)

Represents the estimated adjustments to decrease the assumed deferred revenue obligations to fair value and related amortization of such adjustments. The fair value was determined based on the estimated costs to fulfill the remaining performance obligations plus a normal profit margin. After the acquisitions, this adjustment will have a continuing impact and will reduce revenue related to the assumed performance obligations as these obligations are satisfied.

(i)

Represents the elimination of the historical difference between the net assets acquired and liabilities assumed of the NantHealth business.

(j)

Reflects the elimination of the impact of historical transactions between Allscripts and Netsmart.

(k)

Reflects the reclassification of the historical Netsmart amortization of technology from research and development expenses to cost of revenue to conform to Allscripts presentation.

(l)

The following table summarizes the changes in the estimated Netsmart depreciation expense to reflect the adjustment to the basis in the acquired Netsmart fixed assets to estimated fair value. The estimated remaining weighted-average useful life is 4.5 years.

Year ended December 31, 2016

Estimated depreciation expense

$

5,964

Less: Historical depreciation expense

(9,541

)

Pro forma adjustments to depreciation expense

$

(3,577

)

Year ended December 31, 2016

Estimated depreciation expense

$

190

Less: Historical depreciation expense

(1,063

)

Pro forma adjustments to depreciation expense

$

(873

)

(m)

The Netsmart pro forma adjustment reflects the elimination of the impact of the annual management fee paid by Netsmart to its former parent, plus direct expenses incurred, since such fee was terminated following the acquisition of Netsmart. In addition, the Netsmart pro forma adjustment includes the elimination of accelerated stock-based compensation expense recognized upon the settlement of Netsmart outstanding equity-based awards at the time of acquisition. The HealthMEDX pro-forma adjustment reflects the amortization of the unfavorable lease liability obligation.

(n)

Adjustment to reflect transaction-related costs incurred in connection with the Netsmart and the NantHealth business acquisitions as if such acquisitions occurred on January 1, 2015 and January 1, 2016, respectively.

(o)

The net increase to interest expense resulting from interest on the new debt incurred to finance the acquisition of Netsmart and the amortization of related debt issuance costs is as follows:

Year ended

December 31, 2016

Elimination of historical debt-related interest expense and

   amortization of net debt issuance costs - Netsmart

$

41,308

Interest expense on new first lien term loan - Netsmart

(22,400

)

Interest expense on new second lien term loan - Netsmart

(17,536

)

Interest expense on revolver borrowings - Allscripts

(956

)

Amortization of new discount and debt issuance costs - Netsmart

(3,894

)

Pro forma adjustments to move debt issuance costs write-off from

   April 2016 to January 2015

8,236

Pro forma adjustment to interest expense

$

4,758

Year ended

December 31, 2016

Elimination of historical debt-related interest expense - HealthMEDX

$

237

Interest expense on new incremental term loan - Netsmart

(1,963

)

Amortization of new deferred debt issuance costs - Netsmart

(88

)

Pro forma adjustments to move expensed debt issuance costs from

   October 2016 to January 2015 - Netsmart

80

Incremental interest expense accretion related to contingent

   consideration

(460

)

Pro forma adjustment to interest expense

$

(2,194

)

(p)

Reflects the income tax effect of pro forma adjustments based on the estimated blended federal and state statutory rate of 40%.

(q)

The redeemable convertible non-controlling interest represents preferred units of Netsmart issued to GI Netsmart Holdings LLC in exchange for a cash contribution and preferred units issued to Netsmart’s management as part of the management rollover. The preferred units provide for a liquidation preference equal to the greater of (i) a return of the original issue price plus a preferred return (accruing on a daily basis at the rate of 11% per annum and compounding annually on the last day of each calendar year) or (ii) the as-converted value of the units. The unaudited pro forma combined abbreviated statement of operations for the year ended December 31, 2016 gives effect to the accretion of the 11% redemption preference as part of the calculation of net loss attributable to Allscripts stockholders.

(r)

Reflects the reversal of deferred implementation costs to conform to Allscripts presentation.