MEDecision Reports Second Quarter 2008 Financial Results

Share Name	Share Symbol	Market	Type
Medecision (MM)	NASDAQ:MEDE	NASDAQ	Common Stock

Medecision (MM) (NASDAQ:MEDE)
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MEDecision, Inc. (NASDAQ: MEDE), a leading provider of collaborative health care management solutions, today reported total revenues of $14.2 million for the second quarter of 2008, compared to $9.7 million for the same period last year, and a net loss of $0.3 million, or $0.02 per basic and diluted share, for the second quarter of 2008, compared to a net loss of $2.5 million, or $0.16 per basic and diluted share, for the same period last year. Significant items during the second quarter included: Total revenue was $14.2 million for the second quarter of 2008 compared to $9.7 million in the second quarter of 2007 and included revenue from new contracts executed with Blue Cross Blue Shield of Florida and DC Chartered Health Plan; Gross margins were 62.6% in the second quarter of 2008, an increase from the 54.0% gross margin reported in the second quarter of 2007, reflecting primarily improvements in gross margin for term licenses; and Total operating expense as a percent of revenue declined to 64.1% in the second quarter of 2008 from 80.0% in the second quarter of 2007, a decrease primarily attributable to declines in general and administrative expenses as a percentage of revenue, partially offset by other expenses totaling $1.5 million relating to the pending merger with Health Care Service Corporation (HCSC). �The highlights of our second quarter were the two new contracts that we signed during the quarter and the announcement of the pending merger with HCSC,� said David St. Clair, Founder and Chief Executive Officer of MEDecision. "The first agreement is with Blue Cross Blue Shield of Florida for our Alineo collaborative health care management platform, marking our twenty-fourth Blue Cross Blue Shield plan and affiliate and adding 3.8 million more covered lives to our book of business. The second agreement was with DC Chartered Health Plan a Medicaid provider with approximately 75,000 members. MEDecision will also host the solution as an Application Service Provider (ASP). We also announced the transaction with HCSC, which is proceeding as planned. We have scheduled the special shareholder meeting to vote on the transaction for August 14, 2008.� Total revenue for the quarter ended June 30, 2008 was $14.2 million, a 45.9% increase compared to $9.7 million for the quarter ended June 30, 2007. The revenue by category for quarter ended June 30, 2008 was as follows: Subscription, maintenance and transactions fees of $8.2 million; term license revenue of $2.6 million and professional services revenue of $3.4 million. Gross margin for the second quarter of 2008 was $8.9 million with gross margin as a percentage of revenue of 62.6%, compared to gross margin of $5.3 million with gross margin as a percentage of revenue of 54.0% in the second quarter of 2007. Total operating expenses for the second quarter of 2008 were $9.1 million including $1.5 million in other expenses relating to the pending transaction with HCSC, resulting in a loss from operations of $0.2 million. This compares to $7.8 million in total operating expenses in the second quarter of 2007, resulting in a loss from operations of $2.5 million in that period. For the three months ended June 30, 2008, the company reported a net loss to common shareholders of $0.3 million, or $0.02 per basic and diluted share based on weighted average shares outstanding of 16.3 million shares. Net loss available to common shareholders for the three-month period ended June 30, 2007 was $2.5 million, or $0.16 per basic and diluted share based on 15.3 million weighted average shares outstanding. Conference Call Information MEDecision will also host a Web cast and conference call at 8:30 am ET on June 24, 2008 to discuss results for the second quarter of 2008 and the outlook for 2008. A live Web cast of the conference call will be available online from the investor relations page of MEDecision's corporate Web site at www.MEDecision.com. The dial-in numbers are (877) 407-0784 for domestic callers and (201) 689-8560 for international callers. After the live Web cast, the call will remain available on MEDecision's Web site until August 7, 2008. In addition, a telephonic replay of the call will be available until July 31, 2008. The replay dial-in numbers are (877) 660-6853 for domestic callers and (201) 612-7415 for international callers. Please use account number 3055 and conference ID number 291630. About MEDecision MEDecision offers collaborative health care management solutions that provide a simplified and smart way to manage the health of members and member populations which can improve the quality and affordability of care. Based on state-of-the-art technology, MEDecision's solutions include Alineo(TM), a collaborative health care management platform for managing case, disease and utilization management and Nexalign(TM), a collaborative health care information exchange service. MEDecision believes that, in the aggregate, its health care payer customers insure or manage care for approximately one in every six people in the U.S. with health insurance. For more information, please visit www.MEDecision.com. Forward-Looking Statement This release contains, and the conference call will contain forward-looking statements within the meaning of the "safe harbor" provisions of the federal securities laws, including, without limitation, statements about the expected timing, completion and effects of the proposed merger between MEDecision and HCSC. These forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from such statements. MEDecision may not be able to complete the proposed merger because of a number of factors, including, among other things, the failure to obtain shareholder approval or the failure to satisfy other closing conditions. Other risks and uncertainties that may affect forward-looking statements are described in the "Risk Factors" section and elsewhere in the company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) on March 28, 2008 and the company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission (SEC) on May 9, 2008. MEDecision undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. MEDecision is a trademark of MEDecision, Inc. The MEDecision logo and product names are also trademarks or registered trademarks of MEDecision, Inc. MEDE-E MEDecision, Inc. Consolidated Statements of Operations (in thousands except per share data) � � Three Months Ended June 30, � Six Months Ended June 30, 2008 2007 2008 2007 (unaudited) (unaudited) Revenue Subscription, maintenance & transaction fees $ 8,206 $ 6,053 15,112 $ 11,764 Term licenses 2,616 299 2,865 1,866 Professional services 3,367 � 3,372 � 6,974 � 5,911 � Total revenue 14,189 9,724 24,951 19,541 � Costs of revenue Subscription, maintenance & transaction fees 2,738 2,408 5,502 4,773 Term licenses 612 440 1,204 1,041 Professional services 1,956 � 1,627 � 3,883 � 3,105 � Total cost of revenue 5,306 4,475 10,589 8,919 � Gross margin Subscription, maintenance & transaction fees 5,468 3,645 9,610 6,991 Term licenses 2,004 (141 ) 1,661 825 Professional services 1,411 � 1,745 � 3,091 � 2,806 � Total gross margin 8,883 5,249 14,362 10,622 � � Operating expenses Sales and marketing 2,858 2,232 4,797 4,473 Research and development 997 1,561 3,095 3,289 General and administrative 3,784 3,988 7,653 7,937 Other operating 1,456 � - � 1,456 � - � Total operating expenses 9,095 7,781 17,001 15,699 � Loss from operations (212 ) (2,532 ) (2,639 ) (5,077 ) � Interest (expense) income, net (103 ) 7 � (185 ) 51 � � Loss before income taxes $ (315 ) $ (2,525 ) $ (2,824 ) $ (5,026 ) � Provision for income taxes (35 ) - � (35 ) - � � Loss available to common shareholders $ (350 ) $ (2,525 ) $ (2,859 ) $ (5,026 ) � Loss available to common shareholders, basic and diluted $ (0.02 ) $ (0.16 ) $ (0.18 ) $ (0.33 ) � Weighted average shares used to compute loss available to common �shareholders per common share, basic and diluted 16,338,104 � 15,344,853 � 16,310,520 � 15,264,375 � MEDecision, Inc. Consolidated Balance Sheets (in thousands) � � June 30, December 31, 2008 2007 (unaudited) Assets Current assets Cash and cash equivalents $ 9,343 $ 9,857 Accounts receivable, net of allowance for doubtful accounts of $81 (unaudited) and $72, respectively 8,196 9,991 Prepaid expenses 1,417 1,572 Other current assets 80 � 225 � Total current assets 19,036 � 21,645 � � Property and equipment Computer equipment and software 10,898 10,328 Leasehold improvements 3,399 3,389 Office equipment and furniture 2,076 � 1,918 � 16,373 15,635 Less: accumulated depreciation and amortization (7,802 ) (6,522 ) Net property and equipment 8,571 9,113 � Capitalized software, net of accumulated amortization of $9,058 (unaudited) and $8,054, respectively 8,401 7,475 Other non-current assets 990 � 995 � Total assets $ 36,998 � $ 39,228 � � Liabilities and Stockholders' Equity Current liabilities Current portion of capital lease obligations $ 1,805 $ 1,899 Notes payable and current portion of long-term note payable 330 587 Accounts payable 3,404 3,934 Accrued payroll and related costs 1,045 867 Other accrued expenses 1,598 1,338 Deferred license and maintenance revenue 10,134 8,554 Deferred professional services revenue 1,023 � 1,495 � Total current liabilities 19,339 � 18,674 � � Long-term liabilities Capital lease obligations 2,383 2,642 Note payable 397 472 Deferred rent 2,425 2,428 Deferred license and maintenance revenue 189 � 323 � Total long-term liabilities 5,394 � 5,865 � � Commitments and contingencies � Stockholders' equity Common stock 106,744 106,309 Accumulated deficit (94,479 ) (91,620 ) Total stockholders' equity 12,265 � 14,689 � � � Total liabilities and stockholders' equity $ 36,998 � $ 39,228 � MEDecision, Inc. Consolidated Statements of Cash Flows (in thousands) � � Three Months Ended June 30, � Six Months Ended June 30, 2008 � 2007 2008 � 2007 (unaudited) (unaudited) Cash flows from operating activities Net loss $ (350 ) $ (2,525 ) (2,859 ) $ (5,026 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 777 663 1,522 1,329 Amortization of capitalized software 530 267 1,004 551 Stock-based compensation expense 54 311 377 523 Amortization of deferred financing cost 15 27 31 50 Provision for doubtful accounts - 27 9 23 Loss on disposal of asset 1 15 2 15 Decrease (increase) in assets: Accounts receivable 1,366 522 1,786 1,826 Prepaid expenses and other assets 44 246 258 (117 ) (Decrease) increase in liabilities: Accounts payable 552 (74 ) (530 ) (276 ) Accrued payroll and related costs 238 (165 ) 184 (392 ) Other accrued expenses 538 209 258 87 Deferred revenue 1,729 � (308 ) 974 � (464 ) Net cash provided by (used in) operating activities 5,494 (785 ) 3,016 (1,871 ) � Cash flows from investing activities Capitalized software (1,439 ) (1,103 ) (1,930 ) (1,962 ) Purchase of property and equipment (69 ) (196 ) (215 ) (477 ) Net cash used in investing activities (1,508 ) (1,299 ) (2,145 ) (2,439 ) � Cash flows from financing activities Proceeds from exercise of common stock options 23 74 71 334 Repurchase of common stock to satisfy tax obligations (1 ) - (4 ) - Repayment of capital lease obligations (610 ) (580 ) (1,120 ) (1,028 ) Repayment of insurance note payable (89 ) (104 ) (178 ) (207 ) Repayment on equipment note payable - (25 ) - (50 ) Repayment on maintenance note payable (67 ) - � (154 ) - � Net cash used in financing activities (744 ) (635 ) (1,385 ) (951 ) � Net increase (decrease) in cash and cash equivalents 3,242 (2,719 ) (514 ) (5,261 ) Cash and cash equivalents, beginning of period 6,101 � 14,866 � 9,857 � 17,408 � Cash and cash equivalents, end of period $ 9,343 � $ 12,147 � 9,343 � $ 12,147 � � Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 127 � $ 112 � 260 � $ 245 � � Supplemental disclosures of noncash investing and financing activities: Property and equipment acquired under capital leases $ 272 � $ 87 � 767 � $ 87 �

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MEDE Medecision (MM)