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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-KSB

|ý                                                            | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934    
|------------------------------------------------------------ | ---------------------------------------------------------------------------------------
|For the Fiscal Year Ended December 31, 2002                 
|                                                             | TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934
|For the Transition Period
From                            to

Commission File Number 000-29367

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VantageMed Corporation(Exact name of Registrant as specified in its charter)

|Delaware                                                       |  | 68-0383530                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

3017 Kilgore Road, Suite 180, Rancho Cordova, California 95670
(916) 638-4744

(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

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

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Check
whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 ý    No o

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B in this form and if no disclosure will be contained, to the best of
issuer's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. o

Issuer's
revenues for the year ended December 31, 2002 were $21,744,000.

As
of February 28, 2003, the aggregate market value of the voting and non-voting common equity held by non-affiliates was approximately
$1.9 million, based upon the last reported sales price of our common equity as reported by the Over-The-Counter Bulletin Board on that date of $0.30 per share.
Determination of affiliate status for this purpose is not a determination of affiliate status for any other purpose. We had 8,473,999 common shares outstanding at February 28, 2003.

Part III
incorporates by reference information from our proxy statement for our annual meeting of stockholders to be held on May 28, 2003.

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VantageMed Corporation  Index

|Item
Number |  |                                                                                            |  | Page
|----------- |  | ------------------------------------------------------------------------------------------ |  | ----
|            |  | PART I                                                                                     |  |     
|Item 1      |  | Business                                                                                   |  | 1   
|Item 2      |  | Properties                                                                                 |  | 8   
|Item 3      |  | Legal Proceedings                                                                          |  | 9   
|Item 4      |  | Submission of Matters to a Vote of Securities Holders                                      |  | 9   
|            |  | PART II                                                                                    |  |     
|Item 5      |  | Market for Registrant's Common Equity and Related Stockholders Matters                     |  | 10  
|Item 6      |  | Management's Discussion and Analysis of Financial Condition and Results of Operations      |  | 11  
|            |  | Risk Factors                                                                               |  | 21  
|Item 7      |  | Financial Statements                                                                       |  | 27  
|Item 8      |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure       |  | 46  
|            |  | PART III                                                                                   |  |     
|Item 9      |  | Directors and Executive Officers of VantageMed (incorporated by reference)                 |  | 48  
|Item 10     |  | Executive Compensation (incorporated by reference)                                         |  | 48  
|Item 11     |  | Security Ownership of Certain Beneficial Owners and Management (incorporated by reference) |  | 48  
|Item 12     |  | Certain Relationships and Related Transactions (incorporated by reference)                 |  | 48  
|Item 13     |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                           |  | 48  
|Item 14     |  | Controls and Procedures                                                                    |  | 50  
|            |  | Signatures                                                                                 |  | 51  
|            |  | Certifications                                                                             |  | 52  

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This report contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 and Section 27A of the
Securities Act of 1933. These forward-looking statements involve a number of risks and uncertainties, including those identified in the section of this Form 10-KSB entitled "Risk
Factors," that may cause actual results to differ materially from those discussed in, or implied by, such forward-looking statements. Forward-looking statements within this
Form 10-KSB are identified by words such as "believes," "anticipates," "expects," "intends," "may," "will" and other similar expressions. However, these words are not the only means
of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We are
not obligated and expressly disclaim any obligation to publicly release any update to any forward-looking statement. Our actual results could differ materially from those anticipated in, or implied
by, forward-looking statements as a result of various factors, including the risks outlined elsewhere in this report. Readers are urged to carefully review and consider the various disclosures made by
VantageMed Corporation in this report and in our other reports filed with the SEC, and available on their website at www.sec.gov, that attempt to advise interested parties of the risks and factors
that may affect our business.

PART I

Item 1.    Business

The Company

VantageMed Corporation is a national provider of healthcare information systems and services distributed to over 12,000 customer sites through a network of
regional offices. Our suite of software products and services automates administrative, financial, clinical and management functions for physicians, dentists, behavioral health professionals, and
other healthcare providers. Given our strong existing customer relationships, we are uniquely positioned to manage their transition from legacy products to our advanced Windows®-based
products and services. We will increase our customers' access to information and their ability to communicate with numerous healthcare participants, such as third-
party insurance payers, by facilitating Federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) compliant transactions with our products.

Our
recurring revenues were approximately 70% of total revenues in 2002 and 64% of total revenues in 2001. We define recurring revenues as any revenues derived from software maintenance
and hardware support contracts as well as revenues derived from billing and electronic services. In an attempt to increase recurring revenues, we are expanding our service offerings and migrating
existing customers to our Windows-based products and services, and expanding our electronic services. With the release of our SecureConnect electronic transaction services we will be able to provide
and support electronic clearinghouse services for all of our customers and leverage the HIPAA transaction standards. Refer to Item 6 Management's Discussion and Analysis of Financial Condition
and Results of Operations for more information about our recurring revenues.



Our software products and services have positioned us to address the information needs of healthcare providers through the development of integrated clinical and
administrative solutions.

We
offer Windows-based healthcare information systems that reduce the growing impact of economic pressures, administrative burdens and increased information requirements now faced by
healthcare providers. Our products enable our customers to access and process information more efficiently and reliably, reduce staff time, and more effectively meet the challenges of healthcare cost
containment while improving patient care. With our regional sales offices, we are well positioned to take advantage of the opportunities that result from the increasingly complex needs of the
healthcare industry.

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Our
objective is to expand our market share and increase our recurring revenues in order to strengthen our position as one of the leading suppliers of information systems and services to
healthcare providers. We intend to increase our revenues and market share through growth strategies that focus on:



Principal Products

We classify our software products as "Windows-based" or "legacy". Our Windows-based products are the primary products offered to our customers and are the primary
focus of our ongoing product development efforts. Our Windows-based products provide our customers with software designed to automate administrative, financial, practice management and clinical
requirements of a practice. These products offer advanced functionality and are compatible with the latest generation of operating systems and hardware platforms and can accommodate from one to
hundreds of healthcare providers and users.

As
a result of our acquisitions, we support 16 legacy systems. These systems operate on variations of UNIX or DOS-based platforms and generally lack the current
state-of-the-art technology of our Windows-based products, but provide similar functionality. These systems provide significant ongoing revenues derived from
support services, software and hardware upgrades, and electronic transaction services. We are in the process of migrating customers from these legacy systems to our Windows-based products and believe
this represents a significant sales and marketing opportunity.

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We
have designed our products to enable our customers to transition from their legacy systems to Windows-based products and services. The features, functions and primary customers of our
Windows-based products and services are described below.

|Windows-based Products and Services |  | Features and Functions                                                                                                                                                                     |  | Primary Customer or
Type of Practice                            
|----------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------
|RidgeMark®                          |  | Practice managementScheduling, billing, patient registration, electronic claims, reporting, collections, Palm Pilot enabled                                                               |  | Primary and specialty medical practices                         
|Northern Health Anesthesia®         |  | Practice managementScheduling, billing, patient registration, electronic claims, reporting, collections, quality management, automated anesthesia recording system and hospital interface |  | Anesthesia and pain management practices                        
|Therapist Helper®                   |  | Patient registration, scheduling, billing, managed care tracking, electronic claims and reporting, Palm Pilot and credit card processing enabled                                           |  | Psychologists, psychiatrists and behavioral health practitioners
|DentalMate                         |  | Practice managementScheduling, billing, patient registration, electronic claims, reporting, collections, charting, Palm Pilot enabled                                                     |  | Dental practices                                                
|ChartKeeper®                        |  | Electronic storage and tracking of patient charts, transcription notes, document imaging, security and authentication and electronic chart distribution                                    |  | Primary and specialty medical practices                         
|SecureConnect                      |  | Electronic Data Interchange (EDI) clearinghouse application for translation and communication of HIPAA compliant transactions                                                              |  | Healthcare providers submitting electronic transactions         
|CodeAdvantage®                      |  | Coding Assistant to improve the accuracy and efficiency of medical coding                                                                                                                  |  | Primary and specialty medical practices                         

BillAdvantage, ChartKeeper, CodeAdvantage, DentalMate, Northern Health Anesthesia, RidgeMark, SecureConnect and Therapist Helper are either registered trademarks
or trademarks of VantageMed Corporation. All other trademarks are the property of their respective owners.

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Electronic Services

Our products enable electronic data interchange, or EDI, functions through our SecureConnect services. EDI improves a healthcare practice's cash flow and
operations by converting costly paper and telephone-based communications into cost-efficient electronic transaction processing of patient statements, accurate and timely submission of
claims to third-party payers, and more timely receipt of payer reimbursements. Our centralized SecureConnect services, some or all of which are available for each of our products, currently include
the following:



We
generate revenues by providing these SecureConnect services on a per transaction or flat monthly fee basis. We expect that the HIPAA mandate requiring third-party payers to support
all standardized electronic transaction sets will increase physician adoption of electronic services. As new HIPAA transactions are defined and payers begin support of these new transactions,
SecureConnect will expand on these service offerings to include all HIPAA-supported transactions, including eligibility verification, referral authorization and claims status services. The continued
development of our SecureConnect services will add further differentiation for all of our product offerings.

Support Services

We believe that customer satisfaction with support and services is critical to our success. Our support services include software and hardware installation,
training, software maintenance, data conversion, network support and hardware maintenance. To achieve a higher level of customer satisfaction, many of these services are performed at the customer's
site. Our technical service is organized by regional office and by product. In addition to providing on-site training for many of our product lines, we maintain classroom-based training
facilities and offer on-line Web-based training options. We publish periodic newsletters and sponsor user group conferences. These forums provide the user with current
information and offer us an opportunity to demonstrate our new products and services.

We
provide our customers with ongoing software support and services under monthly, quarterly and annual maintenance agreements. These agreements provide for help desk support, software
maintenance, upgrades (when and if available) and remote diagnostics. As of December 31, 2002, our customer service and support groups consisted of 148 employees, or approximately 68% of our
employee base.

Hardware and Supplies

In many cases, the sale of our software products is combined with the sale of third-party software, hardware systems and installation services. Because many
medical practices require additional hardware as their practices grow, we also offer computer, peripherals and computer supplies as part of our product offerings. We typically receive installation and
ongoing maintenance revenues as a result of these hardware sales.

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Product Development

In June 2002, we implemented a restructuring plan that included a re-evaluation of all product development initiatives and focused our efforts
on improving the functionality and performance of our Windows-based products and on developing new products that operate on a common architecture. As of December 31, 2002, our Windows-based
product development organization consisted of 13 employees. Our development teams are organized by product. Each product team has a product manager and various developers. In certain cases, we have
contracted with third-party development groups to assist us with the development of our products. Our quality assurance and testing teams follow established guidelines. Subject matter experts and
analysts contribute to work flow design, content and business rule development. A formalized process for software enhancement requests provides feedback from customers and our sales teams. Project
management tools, project schedules and distribution of technical and training notes are managed through our corporate Intranet. Refer to
Item 6 Management's Discussion and Analysis of Financial Condition and Results of Operations for more information on our restructuring plan.

Privacy and Security Issues

Because our products and services are utilized to transmit and manage highly sensitive and confidential medical information, we provide security and
confidentiality solutions for our customers and their patients helping them comply with the HIPAA privacy regulations. To enable the use of our products and services for the transmission of protected
health information (PHI), we utilize advanced technology designed to provide a high degree of security. This technology includes:



We
intend to comply with all HIPAA privacy and security rules and timeframes. We help each of our customers to implement their own privacy and security measures including training
programs and firewall solutions to protect the confidentiality of information being transferred into and out of their computer network.

Internally,
we work to ensure the safe handling of PHI by:



We
monitor proposed regulations that might affect our software products and services in order to ensure that we comply with such regulations when and if they are adopted. We are also
evaluating the

5

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physical layout and access controls of our operating facilities to minimize the risk of incidental disclosure of PHI to individuals not directly required to view such data.

Sales and Marketing Strategy

We manage our sales and marketing efforts to serve our customers on both a regional and a national basis. This allows us to meet the unique needs and expectations
of each customer. Organized by specialty practice area and product line, the members of our sales force focus on maintaining strong customer relationships within regional markets to gain market share
and build recurring revenues. Within our existing customer base, we promote and sell hardware upgrades, maintenance services, add-on software modules and electronic data interchange
services. Our sales force focuses on cross-selling and migrating our legacy customers to our Windows-based products as well as attracting new customers.

As
of December 31, 2002, we had 18 sales and marketing personnel, including sales management and sales representatives.

Competition

The healthcare information systems market is highly competitive on both a regional and a national level. We believe that the primary competitive factors in this
market are:



We
believe that our principal competitive advantage stems from our focus on quality customer support and training programs, offerings of feature-rich Windows-based products,
our substantial installed customer base, our network of regional offices with highly-experienced staff and management and our SecureConnect HIPAA-compliant transaction solutions available to all
customers.

Our
principal competitors include practice management systems and Internet companies. Industry competitors include organizations such as Medical Manager, VitalWorks, Inc.,
PracticeWorks, Inc., Misys Healthcare Systems, Quality Systems, Inc., Millbrook Corporation (recently acquired by GE Medical Systems) and Dentrix Dental Systems, Inc.
Additionally, within each regional market there are several smaller competitors who have developed niche products offered at varying price points. Many of our competitors have greater financial,
development, technical, marketing and sales resources than we do. These competitors may be able to respond more rapidly to new or emerging technologies and regulations and changes in customer
requirements than we can. In addition, as the market for our products develops, additional competitors may enter the market and competition may intensify, requiring us to lower the prices of our
products and services.

Acquisitions

Prior to our initial public offering in February 2000, we completed 26 acquisitions. Due to the volatility of the financial markets and the uncertainty in
the healthcare industry, we have not pursued any acquisitions since 2000; however, we may pursue additional acquisitions in the future as opportunities arise. As part of our integration process, we
integrated all accounting, administrative and

6

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sales functions within our corporate infrastructure. Customer support for legacy products is managed through a combination of regional and national support resources.

Intellectual Property

Our success is dependent, in part, on our ability to protect our proprietary software and confidential information from unauthorized use and disclosure. We rely
on a combination of trade secrets, common law intellectual property rights, license agreements, nondisclosure and other contractual provisions and technical measures to establish and protect our
proprietary rights in our intellectual property and confidential information. We do not own and have not sought any patents on our products. Employees, technical consultants and contractors are
required to execute agreements with us providing for the confidentiality of information and the assignment to us of all proprietary rights. The legal protections afforded to us or the steps taken by
us may not be adequate to prevent misappropriation of our technology and confidential information. In addition, these protections do not prevent independent third-party development of competitive
products or services. We believe that our proprietary rights do not infringe upon the proprietary rights of third parties. However, third parties may assert infringement claims against us in the
future and any such assertion may require us to enter into a license agreement or royalty arrangement with the party asserting the claim or require us to simply cease the infringing actions.
Litigation may be necessary in the future to enforce our intellectual property rights, to protect our confidential information or trade secrets, or to determine the validity or scope of the rights of
others. Litigation could result in substantial costs and diversion of management and other resources and could seriously harm our business.

Government Regulation

The confidentiality of PHI and the circumstances under which such information may be used or released are subject to substantial regulation by state and federal
laws and regulations. Regulations governing the electronic transmission of PHI are covered by HIPAA guidelines which are often vague with proper application appropriate for a specific environment left
open for interpretation.

HIPAA
was enacted in 1996 and required the Department of Health and Human Services, or HHS, to adopt national standards for the electronic transmission of healthcare transactions, and to
adopt standards to ensure the privacy and security of such information.

HHS
proposed federal privacy regulations (the Regulations) in 1999 and, after reviewing and considering thousands of comments on them, published final Regulations in
December 2000. In March 2001, HHS received thousands of additional comments after the Bush administration requested further public input on the Regulations. Those comments and other
public input were used to develop certain proposed changes which were published in the Federal Register on March 27, 2002, with a 30-day comment period. The final rule was published
on August 14, 2002. The regulations impose significant regulatory burdens on health care providers, health plans and health care clearinghouses, as well as these entities' business associates. The
covered entities have until April 14, 2003 to comply with the Regulations. Under the law, certain small health plans have until April 14, 2004 to comply. We are in the process of taking
steps to ensure that we are fully compliant in advance of the compliance deadline.

In
general, the Regulations apply to any health care provider, health plan or health care clearinghouse (covered entities) that electronically transmits PHI in connection with certain
standard transactions, such as a claim for payment of provision of health care. Certain of our activities may fall under the definition of a health care clearinghouse and therefore those functions are
expected to be subject to the Regulations. The Regulations are intended to protect the privacy of PHI that is transmitted in any format, including electronic media, paper or verbal. The general rule
is that PHI may not be used or disclosed unless the disclosure is either authorized by the patient (or someone able

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to act on the patient's behalf) or is specifically required or permitted under the Regulations for treatment, payment or healthcare operations. Patients are also granted several rights under the
Regulations, including a right to receive a description of a covered entity's privacy practices, a right to access PHI, a right to request amendment of PHI and a right to request restrictions on
communication of PHI by covered entities.

Because
we also provide services to many covered entities, we have entered into agreements with certain of our customers to provide assurances that we will appropriately safeguard any
PHI we receive from such customers. The contracts establish the permitted and required disclosures of PHI, preclude use or further disclosure of the information in a manner that would violate the
Regulations and allow the covered entity to pursue remedies outlined in HIPAA or terminate the contract in the case of a material breach by us. We are allowed to use, and in certain instances
disclose, PHI for proper management and administration of our business, carrying out our legal responsibilities and other permitted uses. We can disclose PHI to certain third parties so long as we
obtain reasonable assurances from such third parties that the information's privacy will be safeguarded. We are also required to make available any PHI we have in response to proper requests by
customers, provide customers with an accounting of the disclosures and make our internal records relating to compliance available for inspection by HHS. We continue to monitor HIPAA activity and are
prepared to incorporate any changes to our software products or our operations that are necessary to ensure compliance.

The
U.S. Food and Drug Administration (the FDA) has jurisdiction under the 1976 Medical Device Amendments to the Federal Food, Drug, and Cosmetic Act to regulate computer products and
software as medical devices if they are intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease in humans. We believe that our healthcare information systems products
are not medical devices currently subject to FDA regulation. However, FDA regulations are constantly
changing and the FDA may promulgate regulations, or interpret current regulations in a way that would cover our products. In addition, we may develop products that subject us to FDA regulation.
Compliance with FDA regulations could substantially increase our cost of doing business and may limit the extent of our planned product development.

The
Federal Drug Enforcement Agency has promulgated regulations that may prohibit a pharmacy from the initial dispensing and/or refilling of certain controlled substances through an
electronically transmitted prescription. A violation of these regulations may result in civil and criminal penalties. Such regulations may limit the scope of our planned prescription ordering and
refill functions.

Employees

As of December 31, 2002, we employed 217 persons, including 18 in sales and marketing, 148 in customer support services, 13 in product development and 38
in administration, finance and management. In order to augment our hiring of ready-to-work skilled individuals, we utilize several programs to educate and train our work force.
Our employees are not represented by a labor union and we have not experienced any work stoppages and consider relations with our employees to be good.

Item 2.    Properties

We currently lease approximately 8,800 square feet at our principal executive and corporate headquarters at 3017 Kilgore Road, Suite 180, Rancho Cordova,
California (which location also includes one of our regional offices), that expires in December 2004. We also lease space at each of our regional offices throughout the United States, with
lease terms expiring at various dates through 2007. We believe that these regional facilities are adequate for our current operations, and additional leased space can be obtained as needed. We are
actively seeking to sublease the space we have leased in Boulder, Colorado. This lease expires in July 2007 and the property was vacated by us in June 2002.

8

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Item 3.    Legal Proceedings

Beginning on March 13, 2000 a series of similar securities class action lawsuits were filed alleging that VantageMed and certain directors and officers
violated the Securities Act of 1933 and 1934. These actions were consolidated into a single action in the United States District Court for the Eastern District of California entitled Zinno v.
VantageMed Corporation, et al., No. CIV.S-00-0523 MLS DAD.

Plaintiffs
purported to represent a class of all persons who purchased our common stock pursuant to our February 15, 2000 IPO. The Plaintiffs alleged that the prospectus pursuant
to which the IPO was effected contained materially false and misleading statements and it did not state that we would be delayed in introducing a new version of its RidgeMark product, and did not
state that sales of our eMCee product would be lower than expected. Plaintiffs have also named our underwriters, J.C. Bradford and Advest, Inc., and our prior accountants, Arthur Andersen LLP,
as defendants.

We
believed these actions were without merit and defended ourselves against them vigorously. However, to avoid the costs and uncertainties of further litigation, we entered into a
memorandum of understanding to settle the litigation. The settlement was approved by the court in July 2002. Under the terms of the settlement, all claims against us and all other defendants
were dismissed without admission of liability or wrongdoing. The shareholder class received a cash payment of $2.5 million, of which $1.3 million was paid by VantageMed in
December 2001, representing our portion of the settlement.

Following
our announcement in February 2002 that our independent accountants at that time, Arthur Andersen, had resigned due to its disagreement with our accounting for the sale
of our dental business, the staff of the SEC commenced an informal inquiry into our accounting practices with respect to the sale of the dental business. We are cooperating with the SEC's inquiry.

We
are party to various legal actions arising in the normal course of business. Matters that are probable of unfavorable outcome and which can be reasonably estimated are accrued. Such
accruals are based on information known about the matters, our estimates of the outcomes of such matters and our experience contesting, litigating and settling similar matters. None of the actions are
believed by management to involve amounts that would be material to our consolidated financial position, operations, or liquidity after consideration of recorded accruals.

Item 4.    Submission of Matters to a Vote of Securities Holders

None.

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PART II

Item 5.    Market for Registrant's Common Stock and Related Stockholders Matters

VantageMed's common stock was listed on the Nasdaq National Market under the symbol "VMDC" from February 15, 2000 (the date of our initial public offering)
through April 17, 2002. On April 18, 2002, due to the late filing of our Annual Report on Form 10-K for the year ended December 31, 2001, the ticker symbol for
the Company's common stock changed to "VMDCE" and on September 24, 2002, our securities were delisted for failure to comply with the minimum bid price per share ($1.00) requirement. Our
securities currently trade on the OTC Bulletin Board. The following table shows the high and low closing prices for our common stock as reported by the exchanges listed above:

2002

2001PeriodHigh

Low

High

LowFirst Quarter

$
1.29

$
0.58

$
1.63

$
0.94Second Quarter

$
0.75

$
0.30

$
1.20

$
0.65Third Quarter

$
0.54

$
0.12

$
1.50

$
0.70Fourth Quarter

$
0.36

$
0.10

$
1.04

$
0.72


As
of March 25, 2003, we had 133 registered owners of our common stock and a substantially greater number of beneficial owners.

We
have not declared any cash dividends on our common stock since our inception in 1995. We currently intend to retain any future growth and, therefore, do not anticipate paying cash
dividends in the foreseeable future.

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Item 6.    Management's Discussion and Analysis of Financial Condition and Results of Operations

This report contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 and
Section 27A of the Securities Act of 1933. These forward-looking statements involve a number of risks and uncertainties, including those identified in the section of this
Form 10-KSB entitled "Risk Factors," that may cause actual results to differ materially from those discussed in, or implied by, such forward-looking statements. Forward-looking
statements within this Form 10-KSB are identified by words such as "believes," "anticipates," "expects," "intends," "may," "will" and other similar expressions. However, these words
are not the only means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-
looking statements. We are not obligated and expressly disclaim any obligation to publicly release any update to any forward-looking statement. Our actual results could differ materially from those
anticipated in, or implied by, forward-looking statements as a result of various factors, including the risks outlined elsewhere in this report. Readers are urged to carefully review and consider the
various disclosures made by VantageMed Corporation in this report and in our other reports filed with the SEC that attempt to advise interested parties of the risks and factors that may affect our
business.

Overview

VantageMed is a national provider of healthcare information systems and services headquartered in Sacramento, California with regional offices in Alabama,
Arkansas, California, Hawaii, Massachusetts, Michigan, Missouri, New Jersey, North Carolina, Pennsylvania, Texas and Washington. We develop, sell, install and support software products and services
that assist physicians, dentists, behavioral health professionals and other healthcare providers in the operation of their practices. We have assembled regional sales offices by acquiring established
regional healthcare practice management systems companies to sell and support our new Windows-based software and services.

The
practice management software products we offer provide physicians and other healthcare professionals with comprehensive office management software designed to automate the
administrative, financial, practice management and clinical requirements of a practice. These systems range in capacity from one to approximately one hundred users. We also provide software, network
and hardware support, training, electronic claims processing, electronic statement printing and mailing, and electronic remittance advices.

Our
strategy is to continue to expand our customer base primarily through internal growth and possibly through additional acquisitions of established regional healthcare products and
managed care systems companies who will sell and support our new software products and services to an existing and expanding customer base. We plan to grow our recurring revenues by increasing our
electronic services product offerings and we expect to generate non-recurring revenues through the migration of our current customers from legacy systems to our Windows-based software
products and electronic services, while at the same time continuing to expand both our market penetration and product offerings.

We
derive revenues from three sources. Software and systems revenues result from the licensing of our proprietary software, as well as the sale of third-party software (primarily desktop
operating systems and standard communication/security software), computer hardware and supplies. Customer support revenues are derived from software maintenance and customer service, network and
computer hardware support, billing services, training, data conversion and system installation services. Electronic services revenues are generated by electronic insurance claims processing,
electronic patient statement printing and mailing.

Our
revenues include both recurring and non-recurring revenue streams. We define recurring revenues as any revenues derived from software maintenance and hardware support
contracts as well as revenues derived from billing and electronic services. We consider our non-recurring revenues to be revenues generated from sales of software and systems and related
training, data conversion and

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installation services which can vary significantly from period to period depending on market conditions and our ability to sell our products. Over time, we believe that recurring revenues will
continue to represent a significant portion of our overall revenues. Recurring revenue is not a measurement defined by US GAAP and should not be considered an alternative to, or more meaningful than,
revenues as defined by US GAAP. Not all companies calculate recurring revenues in the same manner as we do or at all. Accordingly, our recurring revenue data may not be comparable with that of other
companies. We have included the following information concerning recurring revenues because we believe recurring revenues provide useful information regarding our overall revenue mix.

Years Ended December 31,2002

2001Recurring

$
15,304

$
15,365Non-recurring


6,440


8,570Total revenues

$
21,744

$
23,935


Cost
of revenues consists primarily of the costs of software and computer hardware products sold to customers and associated shipping costs, third-party costs for supplies and electronic
services and salary and benefit costs for employees performing customer support. Selling, general and administrative expenses include the salaries, commissions and benefits of sales staff, executive
and administrative personnel costs, advertising and promotional materials costs and travel, communications, facilities, insurance and other administrative expenses. Product development expenses
consist primarily of compensation and related costs for employees and fees for independent contractors and relate primarily to the development of our Windows-based products.

Since
our inception, we have invested approximately $20.3 million in product development. These amounts have been primarily invested in our Windows-based products and have been
expensed as they have been incurred.

As
of December 31, 2002, we had post-acquisition federal and state net operating loss carryforward benefits of approximately $41 million and $9 million,
respectively, available to offset future taxable income, if any. These benefits will begin to expire incrementally at various dates ending in 2022 and as of December 31, 2002, have been fully
reserved on our balance sheet.

We
have acquired companies with technology that enhances our overall product offerings or that contributed to our customer base. Our acquisitions have produced an established
distribution channel of regional sales offices nationwide, provided us access to an existing customer base, new product offerings, and helped us to build our management team. We have not completed any
acquisitions since 1999. Currently, our strategic focus is on substantially reducing our cash usage and recurring operating losses. On June 10, 2002, we initiated a comprehensive restructuring
plan that included a re-evaluation of our product development initiatives, consolidation of certain operating facilities and a reduction of approximately 30% of our total workforce at that
time. See Note 2 to our Consolidated Financial Statements included in this Form 10-KSB.

Since
July 1997, we have developed a customer base of over 12,000 sites through both acquisitions and internal growth. We expect our revenues to increase primarily through
internal growth and potentially through acquisitions. We believe that the migration of existing customers to our Windows-based products, the marketing of these products to new customers and increasing
our electronic services revenues through expanded service offerings and increased customer penetration are the keys to our internal growth strategy. Our internal growth model is therefore focused on
increasing revenues from software licensing and electronic transaction services, as well as maintaining recurring support revenues.

12

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Fees
from licenses are recognized as revenue in accordance with AICPA Statement of Position 97-2, (SOP 97-2) "Software Revenue Recognition" and Staff
Accounting Bulletin No. 101 (SAB 101) "Revenue Recognition," when all shipment obligations have been met, fees are fixed and determinable, collection of the sale proceeds is deemed probable and
persuasive evidence of an arrangement exists. Multiple element arrangements generally include a proprietary software license, third-party software, hardware, and implementation, training and other
specified services. The fee for multiple element arrangements is allocated to the various elements based on vendor-specific objective evidence (VSOE) of fair market value established by the price of
the elements sold separately. If an element is not yet being sold separately, the residual method is used when VSOE exists for the undelivered elements, primarily post-contract support and
training. In accordance with SOP 97-2, software subscription license fees and revenue from annual support agreements are recognized ratably over the contract term. Revenues from the sale
of computer hardware and supplies are recognized as products are shipped and revenues from other services, including training, data conversion, electronic services and billing services are recognized
as services are rendered. Provisions for product returns and product warranties are estimated based on historical experiences and are evaluated regularly.

The
selected consolidated financial data set forth below are derived from our audited financial statements and should be read in connection with our consolidated financial statements and
related notes included in this Form 10-KSB.

Selected Consolidated Financial Data  (In thousands, except per share amounts)

|                                             |                                             | Years Ended December 31, |       
|-------------------------------------------- | ------------------------------------------- | ------------------------ | ------
|
|Consolidated Statement of Operations Data:   |                                             |                          |       
|Revenues:                                    |                                             |                          |       
|                                             | Software and systems                        |                          | $     
|                                             | Customer support                            |                          |       
|                                             | Electronic services                         |                          |       
|                                             |                                             |                          |       
|                                             |                                             | Total revenues           |       
|                                             |                                             |                          |       
|Cost of revenues:                            |                                             |                          |       
|                                             | Software and systems                        |                          |       
|                                             | Customer support                            |                          |       
|                                             | Electronic services                         |                          |       
|                                             |                                             |                          |       
|                                             |                                             | Total cost of revenues   |       
|                                             |                                             |                          |       
|Total gross margin                           |                                             |                          | 9,245 
|                                             |                                             |                          |       
|Operating expenses:                          |                                             |                          |       
|                                             | Selling, general and administrative         |                          |       
|                                             | Product development                         |                          |       
|                                             | Depreciation and amortization               |                          |       
|                                             | Restructuring, impairment and other charges |                          |       
|                                             |                                             |                          |       
|                                             |                                             | Total operating expenses |       
|                                             |                                             |                          |       
|Loss from operations                         |                                             |                          | (7,670
|Shareholder litigation settlement            |                                             |                          |      
|Interest and other income (expense), net     |                                             |                          | 7     
|                                             |                                             |                          |       
|Loss before income taxes                     |                                             |                          | (7,663
|Income tax provision                         |                                             |                          |      
|                                             |                                             |                          |       
|Net Loss                                     |                                             | $                        | (7,663
|                                             |                                             |                          |       
|Basic and diluted loss per share(1)          |                                             | $                        | (0.90 
|Weighted-average shares-basic and diluted(1) |                                             |                          | 8,493 

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|                                                  |  | As of December 31, |        
|------------------------------------------------- |  | ------------------ | -------
|
|Consolidated Balance Sheet Data:                  |  |                    |        
|Net working capital                               |  | $                  | (1,093 
|Cash, cash equivalents and short-term investments |  |                    | 2,682  
|Long-term investments                             |  |                    | 804    
|Total assets                                      |  |                    | 9,964  
|Long-term debt, net of current portion            |  |                    | 555    
|Accumulated deficit                               |  |                    | (69,470
|Total stockholders' equity                        |  | $                  | 3,077  

---

Results of Operations

The following table sets forth certain data expressed as a percentage of total revenues for the periods indicated.

Years Ended
December 31,2002

2001Revenues:Software and systems

23.7
%
29.1
%Customer support

55.1

51.9Electronic services

21.2

19.0Total revenues

100.0

100.0Cost of revenues:Software and systems

8.5

10.1Customer support

34.4

30.4Electronic services

14.6

12.6Total cost of revenues

57.5

53.1Total gross margin

42.5

46.9Operating expenses:Selling, general and administrative

52.4

51.3Product development

13.7

21.4Depreciation and amortization

5.4

13.7Restructuring, impairment and other charges

6.3

24.2Total operating expenses

77.8

110.6Loss from operations

(35.3
)
(63.7
)Interest and other income (expense), net

0.0

(2.9
)Loss before income taxes

(35.3
)
(66.6
)Income taxes

0.0

(0.1
)Net loss

(35.3
)%
(66.7
)%


Results of Operations for the year ended December 31, 2002 compared to the year ended December 31, 2001

Revenues.Total revenues decreased $2.2 million, or 9.2%, from $23.9 million for the year ended
December 31, 2001 to $21.7 million for the year ended December 31, 2002. Substantially all of this decrease came from a $2.1 million decrease in non-recurring
revenues. Non-recurring revenues (revenues generated from sales of software and systems and related training, data conversion and installation services) decreased $2.1 million, or
24.9%, from $8.6 million in 2001 to $6.4 million in 2002. Recurring revenues (revenues derived from software and hardware maintenance, billing and electronic services) decreased $61,000,
or 0.4%, from $15.4 million in 2001 to $15.3 million in 2002.

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Cost of Revenues.Total cost of revenues decreased $222,000, or 1.7%, from $12.7 million in 2001 to
$12.5 million in 2002. Gross margin (total revenues less cost of revenues divided by total revenues) decreased 4.4% from 46.9% in 2001 to 42.5% in 2002. This decrease was primarily due to the
decrease in software and systems sales which typically carry higher gross margins. To a lesser extent, the re-deployment of certain regional personnel from product development activities
to customer support activities to enhance the overall quality of customer support services contributed to the decrease in gross margins. These increases were partially offset by a reduction in
customer support personnel in June 2002 when we centralized customer support operations for our core Windows-based products.



15

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Selling, General and Administrative.SG&A expenses consist primarily of salaries, commissions and benefits of sales staff,
executive and administrative personnel, advertising and promotional materials and travel, communications, facility costs and insurance. SG&A expenses decreased $892,000, or 7.3%, from
$12.3 million, or 51.3% of revenues, in 2001 to $11.4 million, or 52.4% of revenues, in 2002. The reduction in SG&A expense was primarily due to a reduction in headcount and the closure
of three operating facilities as a result of our restructuring plan announced in June 2002. These cost savings were partially offset by the increases in expense related to severance costs for
employees who provided other than transition services during the period of time between the announcement of the restructuring and their ultimate termination, legal expenses related to an internal
investigation and the ongoing informal inquiry being conducted by the Securities and Exchange Commission as well as other one-time expenses. Also partially offsetting the 2002 decrease in
SG&A expense was the reversal of $140,000 of legal expense in 2001 for the formal resolution of an issue pertaining to outstanding legal fees that were expensed in previous years, but remained unpaid.

Product Development.Product development expenses consist primarily of compensation and related costs for employees and fees
for independent contractors and relate primarily to the development of our Windows-based products. In June 2002, we implemented a restructuring plan that included a re-evaluation of
all product development initiatives and that focused our efforts on improving the functionality and performance of our Windows-based products and on developing new products that operate on a common
architecture. As a result, product development expenses decreased $2.2 million, or 42.0%, from $5.1 million, or 21.4% of revenues in 2001 to $3.0 million, or 13.7% of revenues in
2002. Our restructuring plan included a reduction in headcount from 39 at December 31, 2001 to 13 at December 31, 2002 as well as the closure of our development facility in Boulder,
Colorado in connection with our restructuring plan implemented in June 2002. Additionally, certain employees were re-deployed from product development to customer services
activities to enhance the overall quality of customer support services.

Restructuring, Impairment and Other Charges.In June 2002, we implemented a restructuring plan that was aimed at
substantially reducing our monthly cash usage while refocusing on the delivery of superior customer service and federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) compliant
products. The restructuring plan included a re-evaluation of all product development initiatives, consolidating certain operating facilities and a reduction in personnel by approximately
30% of our workforce including 20 sales and administrative employees, 27 product development employees and 27 customer service personnel. As of December 31, 2002, all but one of these employees
was terminated. We recorded an expense of $1.4 million in connection with this restructuring program representing severance payments, an expected loss on leased facilities that were being
consolidated as well as write-downs of property and equipment that would no longer be used.

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The components of our 2002 restructuring provision and activity in the related reserve are as follows (in thousands):

|                          |  | Severance |      | Leased
Facilities |   | Fixed
Assets |   | Total |    
|------------------------- |  | --------- | ---- | ----------------- | - | ------------ | - | ----- | ---
|2002 provision            |  | $         | 733  |                   | $ | 534          |   | $     | 98 
|Non-cash charges          |  |           |     |                   |   |             |   |       | (98
|Cash payments             |  |           | (729 | )                 |   | (111         | ) |       |   
|                          |  |           |      |                   |   |              |   |       |    
|December 31, 2002 balance |  | $         | 4    |                   | $ | 423          |   | $     |   
|                          |  |           |      |                   |   |              |   |       |    

Severance
payments are expected to be completed in the first quarter of 2003 and the lease payments will be made through the end of the lease terms (December 2007).

In
2001, a review of the recoverability of our intangible assets and property and equipment resulted in an impairment expense of $5.6 million for certain intangible assets where
it was determined that we would not be able to recover the value of certain of the assets. Also, in May 2001, we made the decision to close the Salt Lake City regional office. This closure
resulted in an impairment write-down of $161,000 on certain intangible assets and other charges in connection with this closure totaling $22,000.

Depreciation and Amortization.Depreciation is expense recognized on a straight line basis over the estimated useful lives of
our fixed assets and decreased $99,000, or 11.7% from 2001 to 2002 primarily due to certain fixed assets that became fully depreciated during 2002. To a lesser extent, the fixed assets written off in
connection with our June 2002 restructuring had an impact on the decrease. Amortization is expense recognized on a straight line basis over the estimated useful lives of our intangible assets
and decreased $2.0 million, or 82.0%, from 2001 to 2002. The decrease was primarily due to the $5.6 million goodwill impairment expense recorded in the fourth quarter of 2001, which
reduced the remaining balance subject to future amortization and to a lesser extent, the adoption of SFAS No. 142 on January 1, 2002, under which goodwill is no longer amortized.

Shareholder Litigation Settlement.Beginning in March 2000, a series of similar securities class action lawsuits were
filed alleging that VantageMed and certain directors and officers violated the Securities Act of 1933 and 1934. We believe these actions were without merit and defended ourselves against them
vigorously. However, to avoid the costs and uncertainties of further litigation, we entered into a memorandum of understanding to settle the litigation in 2001. Under the terms of the settlement, all
claims against us and all other defendants were dismissed without admission of liability or wrongdoing. The shareholder class received a cash payment of $2.5 million of which $1.3 was paid by
VantageMed and was recognized as expense in the fourth quarter of 2001. See Item 3Legal Proceedings for additional information.

Interest and Other Income (Expense), Net.Interest income decreased $542,000, or 73.9% from 2001 to 2002 primarily due to a
$6.0 million, or 63.3%, decrease in our cash and investment balances from December 31, 2001 to December 31, 2002. To a lesser extent, a decrease in interest rates contributed to
the decrease in interest income. Interest expense and other, net increased $65,000 from 2001 to 2002.

Income Taxes.We did not record a provision for income taxes in 2002, as we did not generate book or taxable income. The
$15,000 provision for income taxes in 2001 represented the minimum tax liability in several states that require such payment. At December 31, 2002, we had net operating loss carryforwards for
federal and state income tax purposes of approximately $41 million and $9 million, respectively, that expire in various years through 2022. These future tax benefits have not been
recognized as an asset on our balance sheet due to uncertainties surrounding our ability to generate

17

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sufficient taxable income in future periods to realize the benefits. The extent to which these loss carryforwards can be used to offset future taxable income may be limited.

Critical Accounting Policies

Certain of our accounting policies are particularly important to the presentation of our financial position and results of operations and require the application
of significant judgment by our management. As a result, they are subject to an inherent degree of uncertainty. In applying those policies, we use our judgment to determine the appropriate assumptions
to be used in the determination of certain estimates. Those estimates are based on our historical experience, terms of
existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Our critical accounting
policies include:

Revenue Recognition.We enter into license agreements with customers, which allow for the use of our products, usually
restricted by the number of employees, the number of users, or the license term. Fees from licenses are recognized as revenue in accordance with AICPA Statement of Position 97-2, (SOP
97-2) "Software Revenue Recognition" and Staff Accounting Bulletin No. 101 (SAB 101) "Revenue Recognition," when all shipment obligations have been met, fees are fixed and
determinable, collection of the sale proceeds is deemed probable and persuasive evidence of an arrangement exists. Multiple element arrangements generally include a proprietary software license,
third-party software, hardware, and implementation, training and other specified services. The fee for multiple element arrangements is allocated to the various elements based on vendor-specific
objective evidence (VSOE) of fair market value established by the price of the elements sold separately. If an element is not yet being sold separately, the residual method is used when VSOE exists
for the undelivered elements, primarily post-contract support and training. In accordance with SOP 97-2, software subscription license fees and revenue from annual support
agreements are recognized ratably over the contract term. Revenues from the sale of computer hardware and supplies are recognized as products are shipped and revenues from other services, including
training, data conversion, electronic services and billing services are recognized as services are rendered. Provisions for product returns and product warranties are estimated based on historical
experiences and are evaluated regularly.

Allowance for doubtful accounts.We review accounts receivable and provide a reserve for amounts we estimate will not be
collectible. During our review, we consider our historical experience, the age of the receivable balance, the credit-worthiness of the customer and the reason for the delinquency.

Inventories and related reserves.Inventories are stated at the lower of cost (specific identification method) or market and
consist primarily of supplies and new computer equipment purchased to fill customer orders. Reserves are provided for excess or obsolete inventory, which are estimated based on the age of the items
and our ability to utilize the items in future sales. Generally, items that are greater than one year old are reserved and the related charge is recorded as cost of revenue.

Long-lived Assets.For certain long-lived assets, primarily fixed assets and intangible assets, we
estimate the useful life of the asset and recognize its cost as an expense over the estimated useful life. We use the straight-line method to expense long-lived assets, which
results in an equal amount of expense in each period. Additionally, pursuant to applicable accounting rules, we periodically assess whether long-lived assets have been impaired. We deem an
asset to be impaired if its estimated fair value is less than the cost at which it is recorded on our balance sheet. Our estimate of fair value is based on the net present value of expected future
cash flows attributable to the asset. Predicting future cash flows attributable to a particular asset is difficult, and requires the use of significant judgment.

Accrued liabilities.Certain of our accrued liabilities are based largely on estimates. For instance, we record a liability
on our balance sheet each period for the estimated cost of goods and services

18

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rendered to us, for which we have not received an invoice. Additionally, our restructuring reserve includes an estimate for the loss we expect to incur for excess leased facility space. This estimate
is based on numerous assumptions and estimates, such as the market value of the space and the time it will take to sublease the space. Our estimates are based on historical experience, input from
sources outside the company, and other relevant facts and circumstances.

Income taxes.We use the asset and liability method of accounting for income taxes under which deferred income taxes are
provided based upon enacted tax laws and rates applicable to the periods in which taxes become payable. A valuation allowance is provided against the future benefits of deferred tax assets if it is
determined that it is more likely than not that the future tax benefits associated with the deferred tax asset will not be realized. This determination is based upon our limited operating history,
history of losses and the possibility that we may never achieve profitability. As of December 31, 2002, we had net operating loss carryforwards for federal and state income tax purposes of
approximately $41 million and $9 million respectively, that were fully reserved and therefore are not recorded on the balance sheet as an asset.

Liquidity and Capital Resources

Since 1996, we have financed our operations primarily through a combination of indebtedness, capital leases, private equity financing and an IPO. Approximately
82% of the consideration paid for our acquisitions was paid with our stock or stock options. The balance of the consideration was promissory notes and cash.

Net
cash used for operating activities was $5.4 million and $7.2 million in 2002 and 2001, respectively. In 2002, net loss excluding depreciation and amortization was
$6.5 million which accounts for substantially all of the $5.4 million of cash used for operating activities in 2002. In 2001, our net loss excluding depreciation, amortization and
impairment charges was $6.9 million which accounts for substantially all of the $7.2 million of cash used for operating activities in 2001.

Investing
activities provided $4.5 million in cash in 2002 and $6.6 million in 2001. In both years, net proceeds from the sale of investments provided substantially all of
the cash. This source of cash was partially offset by capital expenditures of $171,000 and $252,000 in 2002 and 2001, respectively.

Net
cash used in financing activities was $496,000 and $469,000 in 2002 and 2001, respectively. In both years, payments on debt were the primary reason for the use of cash. In 2001, we
used $107,000 of cash to repurchase shares of our common stock.

At
December 31, 2002, we had a negative working capital position, and had negative cash flow during the quarter and during the year. We implemented a restructuring plan in
June 2002 aimed at substantially reducing monthly cash usage while refocusing on the delivery of superior customer service and quality HIPAA compliant products. This plan included
re-evaluating all product development initiatives, consolidating certain operating facilities and the reduction of personnel by approximately 30% of our workforce, at that time. The
restructuring efforts are substantially complete. These actions have substantially reduced our monthly cash usage and we expect to make additional expense reductions that will further decrease our
monthly cash usage. During the first six months of 2002, cash used for operations totaled $4.4 million. Subsequent to our restructuring, cash used for operations was reduced to $978,000 in the
last six months of 2002.

At
December 31, 2002, we had $3.5 million of cash, short and long-term investments. Based on our current forecast sales forecast and planned operating
expenditures, we believe that our cash, short-term and long-term investments will be sufficient to meet our cash flow needs through at least December 2003. However, we
may seek to raise additional funds to cover unexpected losses, fund expansion, fund additional marketing expenditures, enhance our operating infrastructure, respond to competitive pressures, or
acquire or develop complementary businesses or necessary technologies.

19

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Additional financing may not be available on terms favorable to us, or at all. If adequate funds are not available on acceptable terms, our ability to fund our operations, take advantage of
opportunities, develop products or services or otherwise respond to competitive pressure could be significantly limited. Capital expenditures for equipment, furniture and software are expected to be
limited during the next 12 months.

Debt and Lease Obligations

At December 31, 2002 we had $726,000 in debt primarily issued in connection with our acquisitions. Interest rates on these notes range from 3.90% to
11.98%. In addition, we lease certain computers and office equipment under lease agreements accounted for as capital leases. These leases mature from February 2003 to May 2005 and many
of them include end of lease bargain purchase options, which we intend to exercise. Our obligations under these lease arrangements are secured by the leased equipment. At December 31, 2001, we
had $1.0 million in assumed debt or promissory notes issued in connection with acquisitions and $460,000 in capital leases.

We
lease space at our principal executive and corporate headquarters and at each of our regional offices throughout the United States, with lease terms expiring at various dates through
2007. We are actively seeking to sublease the space we have leased in Boulder, Colorado. This lease expires in July 2007 and the property was vacated by us in June 2002.

Future
minimum payments under all debt and lease obligations at December 31, 2002 are as follows (in thousands):

|Year Ending December 31,                                                |                        | Debt |      | Capital
Leases |   | Operating
Leases
|----------------------------------------------------------------------- | ---------------------- | ---- | ---- | -------------- | - | ----------------
|2003                                                                    |                        | $    | 343  |                | $ | 189             
|2004                                                                    |                        |      | 250  |                |   | 126             
|2005                                                                    |                        |      | 133  |                |   | 63              
|2006                                                                    |                        |      |     |                |   |                
|2007                                                                    |                        |      |     |                |   |                
|                                                                        |                        |      |      |                |   |                 
|                                                                        | Total minimum payments |      |      | 726            |   |                 
|                                                                        |                        |      |      |                |   |                 
|Less: interest on capital lease obligations at rates of 4.45% to 24.31% |                        |      |     |                |   | (50             
|Less: current maturities                                                |                        |      | (343 | )              |   | (156            
|                                                                        |                        |      |      |                |   |                 
|Long-term portion                                                       |                        | $    | 383  |                | $ | 172             
|                                                                        |                        |      |      |                |   |                 

Recent Accounting Pronouncements

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses issues
regarding the recognition, measurement, and reporting of
costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The scope of SFAS No. 146 also includes costs related to
terminating a contract that is not a capital lease and termination benefits received by employees who are involuntarily terminated under the terms of a one-time benefit arrangement. SFAS
No. 146 requires that an expense associated with an exit or disposal activity be recognized when the liability is incurred, and that fair value is the objective for initial measurement of the
liability. Under EITF 94-3, an expense was recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 is effective for all exit or disposal activities that are
initiated after December 31, 2002. We do not expect the adoption of SFAS No. 146 to have a material impact on our results of operations or financial condition.

20

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In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based CompensationTransition and Disclosurean amendment of SFAS
No. 123. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation and requires more
prominent disclosures regarding the method of accounting chosen. The transition and disclosure provisions of SFAS No. 148 are effective for our year ended December 31, 2002. The
implementation of SFAS No. 148 did not have a material impact on our results of operation or financial condition. However, effective January 1, 2003, we will begin to account for stock
options using a fair value method, as allowed under SFAS No. 148.

In
November 2002, the Emerging Issues Task Force (EITF) issued EITF 00-21 "Revenue Arrangements with Multiple Deliverables." EITF 00-21 prescribes a method
to account for contracts that have multiple elements or deliverables. It provides guidance on how to allocate the value of a contract to its different deliverables, as well as guidance on when to
recognize revenue allocated to each deliverable over its performance period. The provisions of EITF 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after
June 15, 2003. We do not expect the adoption of EITF No. 00-21 to have a material impact on our financial statements.

Risk Factors

Risks Associated with our Business

Our Stock Has Been Delisted From The NASDAQ National Market

On September 24, 2002, our stock was delisted from the NASDAQ Stock Market for failing to meet the minimum bid price requirement of $1.00. As a result, our
stock now trades on the OTC Bulletin Board. Stockholders may have difficulty buying and selling our stock on the OTC. Since the OTC is broker driven marketplace, we are dependent on professional
market makers to facilitate trading of our stock
on the OTC. If market makers do not register to trade our stock on the OTC, stockholders may not have a public market for the purchase and sale of our securities. In addition, because the market price
for our stock remains below $1.00, the stock may be deemed a penny stock, which would subject the stock to additional sales practice rules on broker-dealers who sell the Company's securities. As a
result of these additional obligations, some brokers may not effect transactions in our stock, which could adversely affect the liquidity and pricing of our stock.

The Resignation by Our Independent Auditors has Prompted Inquiries by the SEC

The resignation of Andersen on February 8, 2002 and the subsequent independent investigation by our Audit Committee and outside counsel has prompted an
informal inquiry by the SEC. Senior management and the Audit Committee have met with the SEC and have cooperated with the SEC staff and will continue to cooperate with the SEC staff in its inquiry. We
have taken proactive measures to enhance internal controls and enhance our senior management team and board of directors.

There
can be no assurances that the SEC will not bring an administrative or civil action against the Company as a result of the events surrounding the resignation of Andersen.

Our Restructuring Plan May Not Be Successful

During the second quarter of 2002, we developed and implemented a restructuring plan aimed at substantially reducing our monthly cash usage while refocusing on
the delivery of superior customer service and quality HIPAA compliant products. The restructuring plan included reevaluating all product development initiatives, consolidating certain operating
facilities and reducing personnel by approximately 30% of the Company's total workforce. There can be no assurances that our reduction in

21

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force will not restrict our ability to increase sales, execute our product development and customer support strategies or achieve profitability.

We Have A Limited Operating History, A History Of Losses And We May Never Achieve Profitability

We have incurred operating losses and have generated cash flow deficits since our inception in April 1997 and as of December 31, 2002, our
accumulated deficit is $69.5 million. Our business strategies may not be successful and we may not be able to achieve or sustain revenue growth or profitability.

Our Need For Additional Financing Is Uncertain, As Is Our Ability To Raise Further Financing, If Required

We expect our cash and other current resources to sustain us through at least December 2003. However, we may need to raise additional funds to respond to
business contingencies which may include the need to: cover unexpected losses; fund expansion; fund additional marketing expenditures; enhance our operating infrastructure; respond to competitive
pressures; or acquire or develop complementary businesses or necessary technologies. Further, even if no unexpected contingencies arise, we can offer no assurances that our current resources will
sustain us beyond December 2003.

Additional
financing may not be available on terms favorable to us, or at all. In the event that such financing requires the issuance of additional shares of our capital stock, a
shareholder will experience dilution in their ownership. If adequate funds are not available or are not available on acceptable terms, our ability to fund our operations, take advantage of
opportunities, develop products or services or otherwise respond to competitive pressure could be significantly limited.

If We Fail To Generate Recurring Revenues and Sustain Margins From Our Customers, We May Be Unable To Achieve Or Sustain Revenue Growth And Profitability

Our financial success depends upon our ability to increase revenues and sustain margins on our products and services. To this end, we focus our marketing efforts
on upgrading existing systems, providing new software that enables our customers to migrate from legacy to Windows-based products and to increase the use of electronic services. If existing customers
fail to upgrade or migrate to our newer systems, we may not be able to increase our revenues or obtain profitability in the near term or at all.

If The Definition And Adoption Of Electronic Transactions In The Healthcare Information Technology Industry Sector Grows At A Slow Pace, We May Be Unable To Achieve Or Sustain
Revenue Growth And Profitability From Electronic Services

Our current systems and anticipated future services are dependent on the use of the electronic transaction processing. To the extent that the HIPAA transactions
are not defined and adopted and do not further penetrate the healthcare information technology industry, our ability to realize revenue from electronic services will be limited and we may not be able
to increase our revenues.

Internet Or Telecommunication Service Or Performance Problems Or Software Errors Arising After The Installation Of Our Software At Customer Sites Could Delay Market Acceptance
Of Our Products, Lead To Customer Dissatisfaction, Loss Of Revenue Or Increase in Expense And Injure Our Business Reputation

The performance of our products depends upon the efficient operation and timely installation of Internet and telephone connections, web browsers and Internet
service providers and upon the reliability of our software, including third-party software incorporated into our software. The Internet and telecommunication related equipment can experience
operational problems, delays or outages. In

22

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addition, software errors that we fail to detect may result in software performance problems. The occurrence of any of these problems could cause customers to experience system delays, failures and
loss of data. Such problems could delay market acceptance, lead to customer dissatisfaction, a loss of revenue or increase in expense or injure our business reputation.

We May Be Subject To State or Local Taxes That Could Harm Our Business

In the past, we have not consistently collected sales or local taxes on revenues from customers located in states other than the state where the sale originated.
We are monitoring our state-by-state obligations to collect sales tax and have made provisions, where considered necessary, in the event one or more states seek to impose sales
tax collection obligations on out-of-state companies similar to ours. We have also entered into agreements, or intend to enter into agreements, with tax reporting jurisdictions
and have revised our tax collection procedures. However, based on the nature of our operations and the acquisitions we have made, the determination of our obligation to collect taxes in certain
jurisdictions is complex and requires significant judgment. A successful assertion by states where we have not made provisions for sales and local taxes could seriously harm our business.

If Security And Legal Liability Concerns Make Customers Unwilling To Utilize Our Products And Services To Transmit Medical Information Electronically, The Demand For Our
Products May Diminish And We May Be Unable To Achieve Or Sustain Profitability

Potential customers may choose not to utilize our software products because of concerns related to the electronic transfer and management of protected health
information (PHI), including: security of PHI being transferred; errors in the transmission of PHI; legal liability for data security failures or transmission errors; and regulatory burdens imposed on
healthcare participants who transfer PHI electronically.

If
these concerns prevent potential or existing customers from buying or continuing to use our products, our revenues may not increase and we may be unable to achieve or sustain
profitability.

Breaches Of Network Security Could Damage Our Business Reputation, Lead To Customer Dissatisfaction, Delay Market Acceptance Of Our Products And Result In Legal And Financial
Liability And A Loss Of Revenue

Our electronic transaction services involve the storage and transmission of PHI through our network data centers over the Internet and over dedicated private data
lines. Despite the implementation of security measures, our infrastructure may be vulnerable to physical break-ins, computer viruses or similar disruptive problems. In the event of such a
security breach, proprietary and confidential information could be misappropriated or our operations could be interrupted. These problems could damage our business reputation, lead to customer
dissatisfaction and delay market acceptance of our products. We may also incur legal and financial liability and a loss of revenue as a result of such problems.

Fluctuations In Our Quarterly Operating Results May Cause Volatility Or Decline In The Market Price Of Our Common Stock

It is possible that our revenues and operating results may fall below the expectations of securities analysts or investors in future quarters and years. If we
fail to meet or surpass the expectations of securities analysts or investors, the market price of our common stock will most likely decline. We expect that our quarterly revenue and operating results
may fluctuate as a result of a number of factors, including: future acquisitions; entry into new healthcare markets; introduction of new products and service offerings and reductions in prices of
products by our competitors; delays in development

23

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and other quality factors; changes in customer demand for our applications and services; and changes within the healthcare industry.

We
base our expense levels in part upon our expectations concerning future revenues, and these expense levels are relatively fixed in the short term. If we have lower revenues, we may
not be able to make corresponding reductions in our spending in the short term. Any shortfall in revenues would have a direct impact on our results of operations. Fluctuations in our quarterly results
or the failure to meet analysts' expectations could affect the market price of our common stock in a manner unrelated to our long-term operating performance.

If We Are Unable To Protect Our Intellectual Property We May Lose Assets Or Incur Costly Litigation To Protect Our Rights

We rely primarily on a combination of copyrights, trademarks, trade secret laws and restrictions on disclosure to protect our intellectual property. We currently
have no patents and limited registered copyrights covering technology related to our products. We have no plans to seek such legal protection and, if we do, protection may not be granted.

Despite
our efforts to protect our intellectual property, a third party or a former employee could copy, reverse engineer or otherwise obtain and use our intellectual property or trade
secrets without authorization or could develop software competitive to ours

Our
intellectual property may be misappropriated or infringed upon or may infringe upon the rights of others. Consequently, litigation may be necessary in the future to enforce our
intellectual property rights, to protect our confidential information or trade secrets, or to determine the validity or scope of the rights of others. Litigation could result in substantial costs and
diversion of management and other resources and may not successfully protect our intellectual property. Additionally, we may deem it advisable to enter into royalty or licensing agreements to resolve
such claims. Such agreements, if required, may not be available on commercially reasonable or desirable terms or at all.

The Loss Of Experienced Personnel To Competitors Or Our Inability To Attract And Retain Qualified Personnel Could Significantly Interrupt Our Business Operations

Our future success will depend, to a significant extent, on the ability of our management to operate effectively, both individually and as a group. The loss of
the services of any of our senior management could negatively impact our ability to carry out our business plan. We are dependent on our ability to attract, retain and motivate high caliber key
personnel. Competition for qualified personnel in our industry is intense, and we may not be successful in attracting and retaining such personnel. There are a limited number of persons with the
requisite skills available to serve in these key positions and it may become increasingly difficult to hire such persons. Our business will suffer if we encounter delays in hiring these additional
personnel. Competitors and others have in the past and may in the future attempt to recruit our employees.

Delaware Law And Our Charter Documents Contain Provisions That Could Have The Effect Of Delaying Or Preventing A Corporate Takeover, Even If Such A Transaction Would Be
Beneficial To Our Stockholders

Some provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, may discourage, delay or prevent a merger or acquisition
that a stockholder may consider favorable. These provisions include: authorizing the board to issue additional preferred stock; limiting the persons
who may call special meetings of stockholders; prohibiting stockholder actions by written consent; creating a classified board of directors pursuant to which our directors are elected for staggered
three-year terms; and establishing advance notice requirements for nominations for election

24

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to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

We May Not be Able to Realize the Benefits of Our Marketing Programs and Relationships

We have entered into certain marketing agreements intended to increase the awareness of our Company in the market and increase future revenues. The marketing
programs may not be successful nor generate the level of interest we expect and we may not be able to realize revenues from these programs.

Risks Associated with our Industry

Intense Competition In The Market For Healthcare Information Systems And Services Could Prevent Us From Increasing Or Sustaining Revenues And Prevent Us From Achieving Or
Sustaining Profitability

Our competitors vary in size, geographic coverage and scope of products and services offered. The market demand for certain products varies across geographic
territories. Our principal competitors include practice management systems and Internet companies. Industry competitors include organizations such as Medical Manager, VitalWorks, Inc.,
PracticeWorks, Inc., Misys Healthcare Systems, McKessonHBOC, Quality Systems, Inc., Millbrook Corporation (recently acquired by GEMedical Systems), and Dentrix Dental
Systems, Inc. Additionally, within each regional market there are several smaller competitors who have developed niche products at varying price points. Finally, with the integration of
clinical information systems into practice management systems, several well-funded pharmaceutical, medical supply and biotech companies have entered the practice management systems market.
Many of our competitors have greater financial, development, technical, marketing and sales resources than we do. These competitors may be able to respond more rapidly to new or emerging technologies
and regulations and changes in customer requirements than we can. In addition, as the market for our products develops, additional competitors may enter the market and competition may intensify,
requiring us to lower the prices of our products and services.

Economic And Cost Reduction Pressures Faced By Healthcare Providers May Limit The Ability Of Our Customers To Buy Our Products And Services And Could Limit Our Profitability

Economic and cost reduction pressures may limit the ability of healthcare providers to make expenditures for new software systems or for upgrades to existing
software systems. A reluctance or inability on the part of healthcare providers to make such expenditures could result in fewer sales and could limit our ability to achieve or sustain profitability.

If There Is A Delay In The Release Of Products and If We Fail To Respond To The Rapidly Changing Technology That Characterizes Our Market, Our Products May Be Rendered
Obsolete, We May Lose Our Market Opportunity And Fail To Achieve Or Sustain Profitability

We can make no assurances that delays in product releases will not occur in the future. The market for our products is highly competitive and changes rapidly.
Therefore, timely development and introduction of new products, features and services to existing customers will significantly impact our future success. We will be required to meet rapidly changing
market demands, respond to market requirements, develop new proprietary solutions, and successfully market new products and enhancements to new customers and our existing customer base.

25

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Any Failure To Comply With Regulations Governing The Confidentiality And Integrity Of PHI Could Result In Severe Legal And Financial Liability, Harm Our Business Reputation And
Result In A Significant Loss Of Customers

Federal regulations under HIPAA governing the confidentiality and integrity of PHI transmitted electronically are complex and are evolving rapidly. Any failure on
our part however to comply with current or future regulations could subject us to severe legal and financial liability. Such failures could also result in harm to our business reputation and a
significant loss of customers.

Our Billing And Claims Services Are Subject To Federal And State Regulation And Any Non-Compliance With These Regulations Could Lead To Civil, Criminal And
Financial Liability

The performance of our billing and claims services are governed by numerous federal and state civil and criminal laws. Increased scrutiny has been placed on the
billing and collection practices of healthcare providers and related entities. Although we believe that we are in compliance with any such regulations that may relate to the provision of our billing
and claims services, any non-compliance could lead to civil monetary penalties, criminal fines, imprisonment or exclusion from participation in
Medicare, Medicaid and other federally funded healthcare programs for us and the customer involved in the non-compliance.

Regulations That Restrict The Ability To Dispense Or Refill Controlled Substances Through An Electronically Transmitted Prescription Could Limit The Functionality Of Our
Software Products And Could Diminish The Revenue Generated From These Products

The Federal Drug Enforcement Agency has promulgated regulations that may prohibit a pharmacy from dispensing and refilling controlled substances through an
electronically transmitted prescription. These regulations may limit the scope of the prescription ordering and refill functions in our current and future software products and may diminish the
revenues we obtain from the sale of these products.

If Our Software Products Are Deemed Medical Devices, We Will Be Subject To Additional Regulation That Could Result In Criminal, Civil And Financial Liability, Increase Our
Costs And Delay The Marketing Of Our New Or Existing Products

The U.S. Food and Drug Administration has jurisdiction under the 1976 Medical Device Amendments to the Federal Food, Drug and Cosmetic Act to regulate computer
products and software as medical devices if they are intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease in humans. We believe that our healthcare information
systems are not subject to FDA regulation. If, however, the FDA determined that our products were subject to regulation, non-compliance with applicable requirements could result in, among
other things, fines, injunctions, civil penalties, total or partial suspension of production, refusal by the government to approve products, revocation of approval or clearance previously granted and
criminal prosecution. Future FDA policies, laws or regulations concerning the development or marketing of healthcare information systems may cause our products to be subject to FDA regulation, which
could increase our costs or delay the marketing of new or existing products.

Future Regulations Enacted By Congress Or By State Governments May Adversely Impact The Healthcare Industry In Ways That Could Damage Our Business Opportunities Or
Profitability

The healthcare industry is highly regulated and has been the subject of increasing levels of government regulation during the past several years. We cannot
predict with any certainty the types of regulations that might be imposed or the impact that those regulations might have on our business. The adoption of regulations currently unanticipated by us or
by the healthcare industry could impose burdensome requirements or restrictions on our products or on the activities of healthcare providers.

26

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These restrictions could decrease the demand for our products and could prevent us from growing our business and attaining profitability.

Item 7.  Financial Statements

The Company's Consolidated Financial Statements are located on the pages indicated below:

INDEX TO FINANCIAL STATEMENTS  VANTAGEMED CORPORATION

| |  | Page
| |  | ----
| |  |     

|                      |                                                                                                                  | Page
|--------------------- | ---------------------------------------------------------------------------------------------------------------- | ----
|Financial Statements: |                                                                                                                  |     
|                      | Report of Independent Public Accountants for 2002 and 2001                                                       |     
|                      | Consolidated Statements of Operations for the two years ended December 31, 2002                                  |     
|                      | Consolidated Balance Sheets as of December 31, 2002 and 2001                                                     |     
|                      | Consolidated Statements of Stockholders' Equity and Comprehensive Loss for the two years ended December 31, 2002 |     
|                      | Consolidated Statements of Cash Flows for the two years ended December 31, 2002                                  |     
|                      | Notes to Consolidated Financial Statements                                                                       |     

27

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Report of Independent Certified Public Accountants

Board
of Directors
VantageMed Corporation

We
have audited the accompanying consolidated balance sheets of VantageMed Corporation (a Delaware corporation) and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, stockholders' equity and comprehensive loss, and cash flows for the years then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of VantageMed Corporation and
subsidiaries as of December 31, 2002 and 2001, and the results of their consolidated operations and their cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

/s/Grant
Thornton LLP
San Francisco, California
February 26, 2003

28

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VANTAGEMED CORPORATION        CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands, except per share amounts)

|                                          |                                     | Year Ended
December 31,           |       
|----------------------------------------- | ----------------------------------- | --------------------------------- | ------
|
|Revenues:                                 |                                     |                                   |       
|                                          | Software and systems                |                                   | $     
|                                          | Customer support                    |                                   |       
|                                          | Electronic services                 |                                   |       
|                                          |                                     |                                   |       
|                                          |                                     | Total revenues                    |       
|Cost of revenues:                         |                                     |                                   |       
|                                          | Software and systems                |                                   |       
|                                          | Customer support                    |                                   |       
|                                          | Electronic services                 |                                   |       
|                                          |                                     |                                   |       
|                                          |                                     | Total cost of revenues            |       
|                                          |                                     |                                   |       
|                                          |                                     | Total gross margin                |       
|                                          |                                     |                                   |       
|Operating expenses:                       |                                     |                                   |       
|                                          | Selling, general and administrative |                                   |       
|                                          | Product development                 |                                   |       
|                                          | Depreciation and amortization       |                                   |       
|                                          | Restructuring and impairment        |                                   |       
|                                          |                                     |                                   |       
|                                          |                                     | Total operating expenses          |       
|                                          |                                     |                                   |       
|Loss from operations                      |                                     |                                   | (7,670
|                                          |                                     |                                   |       
|Other income (expense):                   |                                     |                                   |       
|                                          | Shareholder litigation settlement   |                                   |       
|                                          | Interest income                     |                                   |       
|                                          | Interest expense and other, net     |                                   |       
|                                          |                                     |                                   |       
|                                          |                                     | Total other income (expense), net |       
|                                          |                                     |                                   |       
|Loss before income taxes                  |                                     |                                   | (7,663
|Income taxes                              |                                     |                                   |      
|                                          |                                     |                                   |       
|                                          |                                     | Net loss                          |       
|                                          |                                     |                                   |       
|Basic and diluted net loss per share      |                                     | $                                 | (0.90 
|                                          |                                     |                                   |       
|Weighted-average sharesbasic and diluted |                                     |                                   | 8,493 
|                                          |                                     |                                   |       

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

29

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VANTAGEMED CORPORATION        CONSOLIDATED BALANCE SHEETS        (In thousands, except share and per share amounts)

|                                               |                                                                                                                                                    | 2002                                       |       | 2001    |       
|---------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----- | ------- | ------
|ASSETS                                         |                                                                                                                                                    |                                            |       |         |       
|Current assets:                                |                                                                                                                                                    |                                            |       |         |       
|                                               | Cash and cash equivalents                                                                                                                          |                                            | $     | 1,440   |       
|                                               | Short-term investments                                                                                                                             |                                            |       | 1,242   |       
|                                               | Accounts receivable, net of allowance of $109 and $171, respectively                                                                               |                                            |       | 1,912   |       
|                                               | Current portion of notes receivable                                                                                                                |                                            |       | 81      |       
|                                               | Inventories, net of reserve of $50 and $96, respectively                                                                                           |                                            |       | 210     |       
|                                               | Prepaid expenses and other                                                                                                                         |                                            |       | 354     |       
|                                               |                                                                                                                                                    |                                            |       |         |       
|                                               |                                                                                                                                                    | Total current assets                       |       |         | 5,239 
|Long-term investments                          |                                                                                                                                                    |                                            | 804   |         |       
|Notes receivable, net of current portion       |                                                                                                                                                    |                                            | 5     |         |       
|Property and equipment, net                    |                                                                                                                                                    |                                            | 655   |         |       
|Intangibles, net                               |                                                                                                                                                    |                                            | 3,261 |         |       
|                                               |                                                                                                                                                    |                                            |       |         |       
|                                               |                                                                                                                                                    | Total assets                               |       | $       | 9,964 
|                                               |                                                                                                                                                    |                                            |       |         |       
|LIABILITIES AND STOCKHOLDERS' EQUITY           |                                                                                                                                                    |                                            |       |         |       
|Current liabilities:                           |                                                                                                                                                    |                                            |       |         |       
|                                               | Current portion of long-term debt                                                                                                                  |                                            | $     | 499     |       
|                                               | Accounts payable                                                                                                                                   |                                            |       | 829     |       
|                                               | Accrued liabilities                                                                                                                                |                                            |       | 2,248   |       
|                                               | Customer deposits and deferred revenue                                                                                                             |                                            |       | 2,756   |       
|                                               |                                                                                                                                                    |                                            |       |         |       
|                                               |                                                                                                                                                    | Total current liabilities                  |       |         | 6,332 
|Long-term debt, net of current portion         |                                                                                                                                                    |                                            | 555   |         |       
|                                               |                                                                                                                                                    |                                            |       |         |       
|                                               |                                                                                                                                                    | Total liabilities                          |       |         | 6,887 
|                                               |                                                                                                                                                    |                                            |       |         |       
|Commitments and contingencies (Notes 6 and 10) |                                                                                                                                                    |                                            |      |         |       
|Stockholders' equity:                          |                                                                                                                                                    |                                            |       |         |       
|                                               | Common stock, $0.001 par value, 20,000,000 shares authorized; 8,473,999 and 8,535,831 shares issued and outstanding in 2002 and 2001, respectively |                                            |       | 8       |       
|                                               |                                                                                                                                                    | Additional paid-in capital                 |       |         | 72,511
|                                               | Accumulated other comprehensive income                                                                                                             |                                            |       | 28      |       
|                                               | Accumulated deficit                                                                                                                                |                                            |       | (69,470 | )     
|                                               |                                                                                                                                                    |                                            |       |         |       
|                                               |                                                                                                                                                    | Total stockholders' equity                 |       |         | 3,077 
|                                               |                                                                                                                                                    |                                            |       |         |       
|                                               |                                                                                                                                                    | Total liabilities and stockholders' equity |       | $       | 9,964 
|                                               |                                                                                                                                                    |                                            |       |         |       

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

30

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VANTAGEMED CORPORATION        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS        (In thousands, except share amounts)

|                                                                   |                    |                                |           |   |    |   |   | Unrealized
Gain (Loss)
On Available
For-Sale
Securities |        |   |    |    |     |     |  
|------------------------------------------------------------------ | ------------------ | ------------------------------ | --------- | - | -- | - | - | ------------------------------------------------------- | ------ | - | -- | -- | --- | --- | -
|
|
|
|Balance, January 1, 2001                                           |                    | 8,625,971                      |           | $ | 9  |   | $ | 72,654                                                  |        | $ | (3 | )  | $   | (32 | )
|Exercise of stock options                                          |                    | 17,367                         |           |   |   |   |   | 2                                                       |        |   |   |    |     |    |  
|Repurchase of common stock                                         |                    | (107,507                       | )         |   |   |   |   | (107                                                    | )      |   |   |    |     |    |  
|Amortization of deferred compensation                              |                    |                               |           |   |   |   |   |                                                        |        |   |   |    |     | 32  |  
|                                                                   |                    |                                |           |   |    |   |   |                                                         |        |   |    |    |     |     |  
|                                                                   | Subtotal           |                                | 8,535,831 |   |    | 9 |   |                                                         | 72,549 |   |    | (3 | )   |     | 
|                                                                   |                    | Unrealized gain on investments |           |  |    |   |  |                                                         |        |  |    |    | 43  |     |  
|                                                                   |                    | Net loss                       |           |  |    |   |  |                                                         |        |  |    |    |    |     |  
|                                                                   |                    |                                |           |   |    |   |   |                                                         |        |   |    |    |     |     |  
|                                                                   | Comprehensive loss |                                |           |   |    |   |   |                                                         |        |   |    |    |     |     |  
|                                                                   |                    |                                |           |   |    |   |   |                                                         |        |   |    |    |     |     |  
|Balance, December 31, 2001                                         |                    | 8,535,831                      |           |   | 9  |   |   | 72,549                                                  |        |   | 40 |    |     |    |  
|Repayment of notes receivable with common stock held as collateral |                    | (61,832                        | )         |   | (1 | ) |   | (38                                                     | )      |   |   |    |     |    |  
|                                                                   |                    |                                |           |   |    |   |   |                                                         |        |   |    |    |     |     |  
|                                                                   | Subtotal           |                                | 8,473,999 |   |    | 8 |   |                                                         | 72,511 |   |    | 40 |     |     | 
|                                                                   |                    | Unrealized loss on investments |           |  |    |   |  |                                                         |        |  |    |    | (12 | )   |  
|                                                                   |                    | Net loss                       |           |  |    |   |  |                                                         |        |  |    |    |    |     |  
|                                                                   |                    |                                |           |   |    |   |   |                                                         |        |   |    |    |     |     |  
|                                                                   | Comprehensive loss |                                |           |   |    |   |   |                                                         |        |   |    |    |     |     |  
|                                                                   |                    |                                |           |   |    |   |   |                                                         |        |   |    |    |     |     |  
|Balance, December 31, 2002                                         |                    | 8,473,999                      |           | $ | 8  |   | $ | 72,511                                                  |        | $ | 28 |    | $   |    |  
|                                                                   |                    |                                |           |   |    |   |   |                                                         |        |   |    |    |     |     |  

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

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VANTAGEMED CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands)

|                                             |                                                                              | Year Ended
December 31,                  |      
|-------------------------------------------- | ---------------------------------------------------------------------------- | ---------------------------------------- | -----
|
|Cash flows from operating activities:        |                                                                              |                                          |      
|                                             | Net loss                                                                     |                                          | $    
|                                             | Adjustments to reconcile net loss to net cash used for operating activities: |                                          |      
|                                             |                                                                              | Depreciation and amortization            |      
|                                             |                                                                              | Loss on disposal of assets               |      
|                                             |                                                                              | Bad debt expense                         |      
|                                             |                                                                              | Impairment of intangibles                |      
|                                             |                                                                              | Amortization of deferred compensation    |      
|                                             | Changes in assets and liabilities:                                           |                                          |      
|                                             |                                                                              | Accounts receivable                      |      
|                                             |                                                                              | Inventories                              |      
|                                             |                                                                              | Prepaid expenses and other               |      
|                                             |                                                                              | Accounts payable and accrued liabilities |      
|                                             |                                                                              | Customer deposits and deferred revenue   |      
|                                             |                                                                              |                                          |      
|                                             | Net cash used for operating activities                                       |                                          |      
|                                             |                                                                              |                                          |      
|Cash flows from investing activities:        |                                                                              |                                          |      
|                                             | Purchases of property and equipment                                          |                                          |      
|                                             | Purchase of investments                                                      |                                          |      
|                                             | Proceeds from maturities of investments                                      |                                          |      
|                                             | Proceeds from sale of property and equipment                                 |                                          |      
|                                             | Notes receivable payments received                                           |                                          |      
|                                             |                                                                              |                                          |      
|                                             | Net cash provided by investing activities                                    |                                          |      
|                                             |                                                                              |                                          |      
|Cash flows from financing activities:        |                                                                              |                                          |      
|                                             | Issuance of common stock                                                     |                                          |      
|                                             | Repurchase of common stock                                                   |                                          |      
|                                             | Proceeds from issuance of long-term debt                                     |                                          |      
|                                             | Payments on long-term debt                                                   |                                          |      
|                                             |                                                                              |                                          |      
|                                             | Net cash used for financing activities                                       |                                          |      
|                                             |                                                                              |                                          |      
|                                             | Net decrease in cash and cash equivalents                                    |                                          |      
|Cash and cash equivalents, beginning of year |                                                                              |                                          | 2,792
|                                             |                                                                              |                                          |      
|Cash and cash equivalents, end of year       |                                                                              | $                                        | 1,440
|                                             |                                                                              |                                          |      
|Supplemental cash flow information:          |                                                                              |                                          |      
|                                             | Cash payments for interest                                                   |                                          | $    
|                                             |                                                                              |                                          |      
|                                             | Cash payments for taxes                                                      |                                          | $    
|                                             |                                                                              |                                          |      
|                                             | Liquidation of stock for payment on note receivable                          |                                          | $    
|                                             |                                                                              |                                          |      
|                                             | Acquisition of property and equipment under capital lease arrangements       |                                          | $    
|                                             |                                                                              |                                          |      

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

32

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VANTAGEMED CORPORATION    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

VantageMed Corporation was incorporated in California on June 1, 1995 and on April 9, 1997, we reincorporated in Delaware. In February 2000,
we completed our initial public offering (IPO) of 3 million shares of our common stock, the gross proceeds of which aggregated approximately $36 million. VantageMed is a diversified
healthcare information systems supplier headquartered in Sacramento, California with regional offices in Alabama, Arkansas, California, Hawaii, Massachusetts, Michigan, Missouri, New Jersey, North
Carolina, Pennsylvania, Texas and Washington. We develop, sell, install and support software products and services that assist physicians, dentists, behavioral health professionals, and other
healthcare providers in the operation of their practices and organizations. We have built a national distribution network by acquiring established regional healthcare practice management systems
companies to sell and support our new Windows-based software and services.

The
practice management software products we offer provide physicians and other healthcare professionals with comprehensive office management software designed to automate the
administrative, financial, practice management and clinical requirements of a practice. These systems range in capacity from one to hundreds of users. We also provide software, network and hardware
support, training, electronic claims processing, electronic statement printing and mailing, and electronic remittance advices.

Basis of presentation

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us
to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial
statements include the accounts of VantageMed
Corporation and the accounts of our subsidiaries after elimination of intercompany balances and transactions. Certain prior year amounts have been reclassified to conform to the current year
presentation.

Risks and uncertainties

We have suffered from recurring losses from operations since our inception. These losses have resulted in negative operating cash flows and negative working
capital. We may never be able to achieve positive operating cash flow, working capital or profitability. We are also subject to a number of additional risks, including, but not limited to, risks
associated with our acquisitions (successful integration, operation and transition of products, technologies and businesses), uncertainties in the healthcare industry, and dependence on the medical
market. We believe that our cash, short-term and long-term investments are sufficient to meet our cash flow needs through at least December 2003. See Risk Factors in
Part II, Item 6 of this Form 10-KSB for additional information.

Revenue recognition

We generally charge a one-time license fee for the right to use our proprietary software. The amount of the license fee is fixed and based on a
specific number of users specified at the inception of the license agreement and is generally part of a multiple element arrangement. The license fee is not subject to adjustment based on future usage
or an obligation to distribute further copies. Payment of the license fee is due upon delivery and acceptance, generally 30 to 45 days from the date of contract execution. The Company does not
offer extended payment terms or cancellation provisions. Fees from licenses are recognized as revenue in accordance with AICPA Statement of Position 97-2, (SOP 97-2)

33

---

"Software Revenue Recognition" and Staff Accounting Bulletin No. 101 (SAB 101) "Revenue Recognition," when all shipment obligations have been met, fees are fixed and determinable, collection
of the sale proceeds is deemed probable and persuasive evidence of an arrangement exists. We also license one of our proprietary software products on a monthly subscription basis. No
long-term commitment is required and the customer can cancel the subscription agreement at any time. Under the subscription agreement, license fee revenue is recognized ratably over the
license period.

Multiple
element arrangements generally include a proprietary software license, third-party software, hardware, and implementation, training and other specified services. The fee for
multiple element arrangements is allocated to the various elements based on vendor-specific objective evidence (VSOE) of fair market value established by the price of the elements sold separately. If
an element is not yet being sold separately, the residual method is used when VSOE exists for the undelivered elements, primarily post-contract support and training. Upon contract
execution, we collect a deposit, which can vary from 0% to 50% based on the customer's credit profile and previous relationship with us, if any. Revenue is recognized when all of the criteria of SOP
97-2 are met. Deposits received in advance of revenue recognition are recorded as deferred revenue.

We
also provide post-contract support under annual maintenance and support agreements as well as other services including electronic claims processing, electronic statement printing,
mailing, data processing and other services provided independent from software licensing activities. Annual support agreements are billed either annually, quarterly or monthly and all other services
are billed as the services are rendered. In accordance with SOP 97-2, software subscription license fees and revenue from annual support agreements are recognized ratably over the contract
term. Subscription and support fees received in advance of revenue recognition are recorded as deferred revenue. Revenue from all other services is recognized as the services are rendered.

We
offer a limited return provision for 60 days from the date of purchase, for one of our off-the-shelf software products. Based on historical information
available to us based on past sales and returns experience, we are able to reasonably estimate future product returns and make adequate provision for returns expected on sales made within
60 days of each reporting period.

Software development costs

To date, all of our costs for research and development of software products have been expensed as incurred since the amount of software development costs incurred
subsequent to the establishment of technological feasibility, evidenced by establishment of a working model, have been immaterial.

Allowance for doubtful accounts

We review accounts receivable and provide a reserve for amounts we estimate will not be collectible. During our review we consider our historical experience, the
age of the receivable balance, the credit-worthiness of the customer and the reason for the delinquency.

Inventories and related reserves

Inventories are stated at the lower of cost (specific identification method) or market and consist primarily of supplies and new computer equipment purchased to
fill customer orders. Reserves are provided for excess or obsolete inventory, which are estimated based on the age of the items and our ability to utilize the items in future sales. Generally, items
that are greater than one year old are reserved and the related charge is recorded as cost of software and systems revenue.

34

---

Long-lived assets

For certain long-lived assets, primarily fixed assets and intangible assets, we estimate the useful life of the asset and recognize its cost as an
expense over the estimated useful life. We use the straight-line method to expense long-lived assets, which results in an equal amount of expense in each period. Additionally,
pursuant to applicable accounting rules, we periodically assess whether long-lived assets have been impaired. We deem an asset to be impaired if its estimated fair value is less than the
cost at which it is recorded on our balance sheet. Our estimate of fair value is based on the net present value of expected future cash flows attributable to the asset. Predicting future cash flows
attributable to a particular asset is difficult, and requires the use of significant judgment.

We
assign the following useful lives to our fixed assetsthree to five years for office and computer equipment and software and five to seven years for furniture and
fixtures. Leasehold improvements and assets held under capital leases are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life, which ranges
from two to five years. Repair and maintenance costs are expensed as they are incurred.

Cash equivalents and investments

We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We classify marketable
securities as available-for-sale in accordance with the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." These securities are carried at fair market value, with unrealized gains and losses reported as a separate component of stockholders' equity. Gains or losses on securities sold
are based on the specific identification method.

Short
and long-term investments were classified as available-for-sale securities and are reported at fair value as follows (in thousands):

|                                               |  | December 31, 2002
|---------------------------------------------- |  | -----------------
|
|Cash equivalents                               |  | $                
|Commercial paper                               |  |                  
|                                               |  |                  
|Total available-for-sale investment securities |  | $                
|                                               |  |                  

|                                               |  | December 31, 2001
|---------------------------------------------- |  | -----------------
|
|Cash equivalents                               |  | $                
|U.S. Government agency                         |  |                  
|Commercial paper                               |  |                  
|                                               |  |                  
|Total available-for-sale investment securities |  | $                
|                                               |  |                  

35

---

The
amortized cost and fair value of available-for-sale investment securities by contractual maturity, are as follows (in thousands):

December 31, 2002Amortized Cost

Fair ValueDue within one year

$
1,384

$
1,376Due after one, but within 5 years


768


804Total available-for-sale investment securities

$
2,152

$
2,180


December 31, 2001Amortized Cost

Fair ValueDue within one year

$
5,443

$
5,456Due after one, but within 5 years


2,556


2,583Total available-for-sale investment securities

$
7,999

$
8,039


Financial instruments

The fair values of financial instruments are the amounts at which the instruments could be exchanged in a current transaction between willing parties. We estimate
that the carrying amounts of the financial instruments included in the accompanying consolidated balance sheets are not materially different from their fair values. The carrying amounts reported for
cash and cash equivalents, accounts receivable and accounts payable are considered to approximate fair values based upon the short maturities of these financial instruments. The carrying amount of
short-term and long-term debt are also considered to approximate fair values based upon current interest rates.

Accrued liabilities

Certain of our accrued liabilities are based on estimates. For instance, we record a liability on our balance sheet each period for the estimated cost of goods
and services rendered to us, for which we have not received an invoice. Additionally, our restructuring reserve includes an estimate for the loss we expect to incur for excess leased facility space.
This estimate is based on certain assumptions, such as the market value of the space and the time it will take to sublease the space. Our estimates are based on historical experience, input from
sources outside the company, and other relevant facts and circumstances.

Legal Costs

Legal costs incurred by the Company arising in the normal course of business are expensed as incurred. Estimated future legal costs associated with loss
contingencies will be accrued when a liability is probable and the costs are reasonably estimable.

Warranty Costs

We provide a 90-day warranty on proprietary software and services delivered. No warranty is provided on third-party software or hardware. Although we
do not have a history of material warranty claims, the need for a warranty accrual is evaluated periodically in accordance with Statement of Financial Accounting Standard No. 5, "Accounting for
Contingencies."

Income taxes

We use the asset and liability method of accounting for income taxes under which deferred income taxes are provided based upon enacted tax laws and rates
applicable to the periods in which taxes

36

---

become payable. A valuation allowance is provided against the future benefits of deferred tax assets if it is determined that it is more likely than not that the future tax benefits associated with
the deferred tax asset will not be realized.

Net loss per share

Basic net loss per share is based on weighted average shares outstanding and diluted net loss per share is based on weighted average common shares and dilutive
equivalents outstanding, if any. As a result of our net losses, all common share equivalents would have been anti-dilutive and have therefore been excluded from the diluted net loss per
share calculation. The following table summarizes securities outstanding as of each period end, that were anti-dilutive and not included in the calculation of diluted net loss per share
(in thousands):

2002

2001Stock options

1,648

1,228Warrants to purchase common stock

30

43


Comprehensive loss

We report comprehensive loss and its components in accordance with Statement of Financial Accounting Standards No. 130 (SFAS 130),"Reporting
Comprehensive Income." Comprehensive income includes all changes in equity (net assets) during a period from non-owner sources. During 2002 and 2001, other comprehensive income consisted
of unrealized holding gains on available-for-sale investment securities.

Stock-based compensation

We account for stock-based compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees," and related interpretations, and comply with the disclosure provisions of Statement of Financial Accounting Standard No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based CompensationTransition and Disclosurean amendment of
SFAS No. 123. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation and requires more
prominent disclosures regarding the method of accounting chosen. The transition and disclosure provisions of SFAS No. 148 are effective for our year ended December 31, 2002. The
implementation of SFAS No. 148 did not have a material impact on our results of operations or financial condition. However, effective January 1, 2003, we will begin to account for stock
options using a fair value method, as allowed under SFAS No. 148.

37

---

Had
compensation cost for our option plan been determined based on the fair value at the grant dates for the awards, calculated in accordance with the method prescribed by
SFAS 123, our pro forma net loss would have been as follows (in thousands, except per share amounts):

Year Ended December 31,2002

2001Net loss, as reported

$
(7,663
)
$
(15,977
)Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects


592


655Pro forma net loss

$
(8,255
)

(16,632
)Basic and diluted loss per shareAs reported

$
(0.90
)
$
(1.86
)Pro forma

$
(0.97
)
$
(1.93
)


For
purposes of the pro forma disclosure above, the fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

2002

2001Dividend yield

0
%
0
%Risk-free interest rate

3.5
%
5.0
%Stock price volatility

223
%
130
%Expected life

3.5 years

6 years


The
resulting pro forma compensation cost may not be representative of that to be expected in future years.

Recent accounting pronouncements

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses issues
regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The scope of
SFAS No. 146 also includes costs related to terminating a contract that is not a capital lease and termination benefits received by employees who are involuntarily terminated under the terms of
a one-time benefit arrangement. SFAS No. 146 requires that an expense associated with an exit or disposal activity be recognized when the liability is incurred, and that fair value
is the objective for initial measurement of the liability. Under EITF 94-3, an expense was recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 is
effective for all exit or disposal activities that are initiated after December 31, 2002. We do not expect the adoption of SFAS No. 146 to have a material impact on our results of
operations or financial condition.

In
November 2002, the Emerging Issues Task Force (EITF) issued EITF 00-21 "Revenue Arrangements with Multiple Deliverables." EITF 00-21 prescribes a method
to account for contracts that have multiple elements or deliverables. It provides guidance on how to allocate the value of a contract to its different deliverables, as well as guidance on when to
recognize revenue allocated to each deliverable over its performance period. The provisions of EITF 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after
June 15, 2003. We do not expect the adoption of EITF No. 00-21 to have a material impact on our financial statements.

38

---

NOTE 2ASSET IMPAIRMENT AND RESTRUCTURING ACTIVITIES:

Asset impairment

During 2001, we determined that the carrying value of certain intangible assets acquired in connection with business combinations accounted for as purchases
exceeded their fair value and we recorded an impairment charge of $5.8 million. The impairment occurred due to changes in business conditions and products, in addition to current period
operating and cash flow losses combined with financial projections and forecasts that indicated continuing poor performance of certain acquired companies. The determination of the fair value of the
separately identifiable intangible assets arising from the purchase business combinations was determined using the present value of expected future cash flows from the acquired companies using a
discount rate commensurate with the risks involved.

Restructuring charges

In June 2002, we implemented a restructuring plan that was aimed at substantially reducing our monthly cash usage while refocusing on the delivery of
superior customer service and federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) compliant products. The restructuring plan included a re-evaluation of all product
development initiatives, consolidating certain operating facilities and a reduction in personnel by approximately 30% of our workforce including 20 sales and administrative employees, 27 product
development employees and 27 customer service personnel. As of December 31, 2002, all but one of these employees was terminated. We recorded an expense of $1.4 million in connection with
this restructuring program representing severance payments, an expected loss on leased facilities that were being consolidated as well as write-downs of property and equipment that would no longer be
used. The components of our 2002 restructuring provision and activity in the related reserve are as follows (in thousands):

|                          |  | Severance |      | Leased
Facilities |   | Fixed
Assets |   | Total |    
|------------------------- |  | --------- | ---- | ----------------- | - | ------------ | - | ----- | ---
|2002 provision            |  | $         | 733  |                   | $ | 534          |   | $     | 98 
|Non-cash charges          |  |           |     |                   |   |             |   |       | (98
|Cash payments             |  |           | (729 | )                 |   | (111         | ) |       |   
|                          |  |           |      |                   |   |              |   |       |    
|December 31, 2002 balance |  | $         | 4    |                   | $ | 423          |   | $     |   
|                          |  |           |      |                   |   |              |   |       |    

Severance
payments are expected to be completed in the first quarter of 2003 and the lease payments will be made through the end of the lease term (December 2007).

NOTE 3INTANGIBLE ASSETS

On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142 (SFAS No. 142), "Goodwill and Other Intangible Assets."
SFAS No. 142 supersedes Accounting Principles Board Opinion No. 17, "Intangible Assets," and discontinues the amortization of goodwill. In addition, SFAS No. 142 includes
provisions regarding: 1) reclassification of amounts between goodwill and identifiable intangible assets in accordance with the new definition of identifiable intangible assets set forth in
Statement of Financial Accounting Standards No. 141, "Business Combinations;" 2) reassessment of the useful lives of existing recognized intangibles; and 3) testing for impairment
of existing goodwill and other intangibles using the discounted cash flows method. In accordance with SFAS No. 142, beginning January 1, 2002, goodwill is no longer amortized, but is
reviewed periodically for impairment. We completed the first step of the transitional goodwill impairment test as of the beginning of fiscal 2002, and the results of that test indicated that our
goodwill and other intangible assets were not impaired at January 1, 2002. We did not identify any identifiable intangible assets to be reclassified to goodwill pursuant to the new definition
of intangible assets. Acquired software, customer lists and covenants not to compete continue to be amortized over their estimated useful lives of two to

39

---

four years, two to five years and two to ten years, respectively. No changes were made to the useful lives of amortizable intangible assets in connection with the adoption of SFAS No. 142.

Components
of intangible assets, including the reclassification of goodwill as of January 1, 2002, were as follows (in thousands):

|                                               |                   | December 31, |      
|---------------------------------------------- | ----------------- | ------------ | -----
|
|
|Intangible assets subject to amortization:     |                   |              |      
|                                               | Acquired software |              | $    
|                                               | Customer lists    |              |      
|                                               | Other             |              |      
|                                               | Goodwill          |              |      
|                                               |                   |              |      
|                                               |                   | $            | 9,641
|                                               |                   |              |      
|Intangible assets not subject to amortization: |                   |              |      
|                                               | Goodwill          |              | $    
|                                               |                   |              |      

Amortization
of intangible assets was $440,000 and $2.4 million for the years ended December 31, 2002 and 2001, respectively. Our net loss, excluding goodwill amortization
expense, for the year ended December 31, 2001 would have been as follows had we adopted SFAS No. 142 on January 1, 2001 (in thousands, except per share amounts):

Net loss-as reported

$
(15,977
)SFAS 142 amortization adjustment


419Net loss-adjusted

$
(15,558
)Basic and diluted net loss per share-as reported

$
(1.86
)Impact of SFAS 142 amortization adjustment


0.05Basic and diluted net loss per share-adjusted

$
(1.81
)


NOTE 4NOTES RECEIVABLE

We have four notes receivable at December 31, 2002. Two notes totaling $14,000, bear interest at 6 percent per annum, and are secured by irrevocable
letters of credit due March 31, 2003. One note totaling $18,000 is with one of our employees. This note bears interest at 8 percent per annum, is unsecured and is being forgiven on a
monthly basis through April 2004 in exchange for services rendered. Any loan amount not yet forgiven will become due and payable in full 90 days after the last day of employment.

Additionally,
we have a $200,000 note with a former officer and director that is secured by 300,000 shares of our common stock. Total principal and interest on this note, which bears
interest at the prime rate, became due and payable on November 3, 2002 and is currently in default. As of December 31, 2002, we have foreclosed on 41,832 shares we held as collateral and
have recorded a reserve of
$141,000 against the remaining balance. We have not recognized interest income on this note since April 2002.

A
note totaling $23,000 with one of our former employees, was paid in full with shares we held as collateral in June 2002.

40

---

NOTE 5BALANCE SHEET COMPONENTS

Property and equipment net, consisted of the following (in thousands):

December 31,2002

2001Office and computer equipment

$
2,163

$
2,654Furniture and fixtures


239


406Vehicles


20


47Leasehold improvements


176


1822,598


3,289Less: accumulated amortization and depreciation


(1,943
)

(2,021
)$
655

$
1,268


Depreciation
expense was approximately $744,000 and $843,000, for the years ended December 31, 2002 and 2001, respectively.

Accrued
liabilities consisted of the following (in thousands):

December 31,2002

2001Accrued payroll and related expenses

$
504

$
634State and Local taxes payable


533


85Restructuring (See Note 2)


427


Other


784


835$
2,248

$
1,554


NOTE 6DEBT AND LEASE OBLIGATIONS

At December 31, 2002 and 2001, we had $726,000 and $1.0 million, respectively, in debt primarily issued in connection with our acquisitions.
Interest rates on these notes range from 3.90% to 11.98% and in many cases, these notes are secured by our assets. The largest of these notes was issued to the owner of an acquired company, is
unsecured, bears interest at prime plus 1.5% (not to exceed 10.5%) and is due in full by August 2005. The balance due under this note was $593,000 and $822,000 at December 31, 2002 and
2001, respectively.

In
addition, we lease certain computers and office equipment under lease agreements accounted for as capital leases. These leases mature from February 2003 to May 2005 and
many of them include end of lease bargain purchase options, which we intend to exercise. Our obligations under these lease arrangements are secured by the leased equipment. At December 31, 2002
and 2001, we had $328,000 and $460,000 in capital leases.

We
lease space at our principal executive and corporate headquarters and at each of our regional offices throughout the United States, with lease terms expiring at various dates through
2007. We are actively seeking to sublease the space we have leased in Boulder, Colorado. This lease expires in July 2007 and the property was vacated by us in June 2002.

41

---

Future
minimum payments under all debt and lease obligations at December 31, 2002 are as follows (in thousands):

|Year Ending December 31,                                                |                        | Debt |      | Capital
Leases |   | Operating
Leases
|----------------------------------------------------------------------- | ---------------------- | ---- | ---- | -------------- | - | ----------------
|2003                                                                    |                        | $    | 343  |                | $ | 189             
|2004                                                                    |                        |      | 250  |                |   | 126             
|2005                                                                    |                        |      | 133  |                |   | 63              
|2006                                                                    |                        |      |     |                |   |                
|2007                                                                    |                        |      |     |                |   |                
|                                                                        |                        |      |      |                |   |                 
|                                                                        | Total minimum payments |      |      | 726            |   |                 
|                                                                        |                        |      |      |                |   |                 
|Less: interest on capital lease obligations at rates of 4.45% to 24.31% |                        |      |     |                |   | (50             
|Less: current maturities                                                |                        |      | (343 | )              |   | (156            
|                                                                        |                        |      |      |                |   |                 
|Long-term portion                                                       |                        | $    | 383  |                | $ | 172             
|                                                                        |                        |      |      |                |   |                 

Rent
expense was approximately $1.2 million and $1.3 million for the years ended December 31, 2002 and 2001, respectively.

NOTE 7STOCKHOLDERS' EQUITY

Stock Repurchase Program

On May 13, 2001, we announced a stock repurchase program whereby we can repurchase from time to time at management's discretion, up to 250,000 shares of
our common stock in the open market or in private transactions. In 2001, we repurchased 107,507 shares at an average price of $0.99 per share in the open market.

Warrants

In August 1999 in connection with an acquisition, the Company issued 30,000 warrants at an exercise price of $11.10 per share that expire on
August 1, 2003. The fair value of these warrants was recorded as additional purchase price. In October 1999, in connection with the issuance of a convertible promissory note, the Company
issued warrants for 13,333 shares exercisable at $7.20 per share. These warrants expired unexercised on October 6, 2002. The fair value of these warrants of approximately $80,000 was calculated
using the Black-Scholes option pricing model and was amortized to interest expense over the term of the note.

Stock Option Plans

Under the Stock Option/Stock Issuance Plan (1998 Plan) the Board of Directors is authorized to grant options to purchase our common stock to employees, directors
and consultants at prices not less than the fair market value at date of grant for incentive stock options and not less than 85% of fair market value for non-statutory stock options. The
1998 Plan is divided into two programs: the Option Grant Program under which eligible persons may be granted options to purchase shares of common stock and the Stock Issuance Program under which
eligible persons may be issued shares of common stock
directly, either through the immediate purchase of shares or as a bonus for services rendered the Company. The stock options generally vest 25% in the first year and ratably over the following
three-year period and expire ten years from the date of grant. At December 31, 2002, there were

42

---

approximately 282,000 shares available for issuance under the 1998 Plan. A summary of stock option activity and related information is as follows (in thousands except per share amounts):

|                             |  | Year Ended December 31,
|---------------------------- |  | -----------------------
|
|
|Balance, beginning of period |  | 1,228                  
|Granted                      |  | 1,305                  
|Exercised                    |  |                       
|Cancelled                    |  | (885                   
|                             |  |                        
|Balance, end of period       |  | 1,648                  
|                             |  |                        

The
following table summarizes information about our outstanding stock options at December 31, 2002 (in thousands, except per share amounts):

|             |  | Options Outstanding |  | Options Exercisable
|------------ |  | ------------------- |  | -------------------
|
|$0.12-$0.37  |  | 320                 |  | 9.52               
|$0.40-$0.47  |  | 759                 |  | 9.48               
|$0.55-$1.00  |  | 315                 |  | 8.60               
|$1.56-$2.88  |  | 194                 |  | 7.45               
|$7.50-$52.32 |  | 60                  |  | 6.21               
|             |  |                     |  |                    
|Total        |  | 1,648               |  | 8.99               
|             |  |                     |  |                    

The
weighted-average grant date fair value of options granted was $0.44 and $0.87 per option during 2002 and 2001, respectively.

NOTE 8401K SAVINGS PLAN

We maintain a 401(k) Savings Plan (the Plan) under which employees may elect to contribute up to 15% of their pre-tax compensation to the Plan. All
employees are eligible to participate in the Plan upon performing 90 consecutive days of service. Employee contributions are 100% vested at all times. We may make discretionary contributions to the
Plan, which vest annually over a six-year period. We made no discretionary contributions to the Plan in 2002 or 2001.

43

---



NOTE 9INCOME TAXES

No provision for income taxes was recorded in 2002 since we generated both book and tax losses. Our provision for income taxes in 2002 and 2001 consisted of (in
thousands):

December 31,2002

2001Current:Federal

$


$
State





15Total current

$


$
15Deferred:Federal

$
(3,931
)
$
(4,766
)State


628


(726
)Total deferred


(3,303
)

(5,492
)Change in valuation allowance


3,303


5,492Net income tax provision

$


$
15


Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. At December 31, 2002, we had net operating loss carryforwards for federal and state income tax purposes of approximately $41 million and $9 million,
respectively, that expire through 2022. The extent to which these loss carryforwards can be used to offset future taxable income may be limited. The components of our deferred income taxes were as
follows (in thousands):

December 31,2002

2001Deferred tax assets:Net operating loss carryforwards

$
15,071

$
13,653Accruals and reserves not currently deductible


2,068


796Difference between book and tax basis of intangibles





10417,139


14,553Deferred tax liabilities:Depreciation


(217
)

Difference between book and tax amortization related to acquired identifiable intangibles other than goodwill





(934
)(217
)

(934
)Net deferred tax asset before allowance


16,922


13,619Valuation allowance


(16,922
)

(13,619
)Net deferred tax asset

$


$



We
believe that available objective evidence creates sufficient uncertainty regarding the realizability of deferred tax assets, and therefore we have recorded a full valuation allowance
to reduce the carrying value of such assets to zero. We will continue to assess the realizability of deferred tax assets based on

44

---

actual and forecasted operating results. Our effective tax rate differs from the federal statutory tax rate due to the following (in thousands):

Year Ended December 31,2002

2001Expected tax benefit

$
(2,605
)
$
(5,427
)Decrease in income taxes resulting from:State income benefit


(447
)

(931
)Increase in deferred tax asset valuation allowance


3,303


5,492Nondeductible expenses


169


954Other, net


(420
)

(73
)Net income tax provision

$


$
15


NOTE 10LITIGATION AND CONTINGENCIES

Beginning on March 13, 2000 a series of similar securities class action lawsuits were filed alleging that VantageMed and certain directors and officers
violated the Securities Act of 1933 and 1934. These actions were consolidated into a single action in the United States District Court for the Eastern District of California entitled Zinno v.
VantageMed Corporation, et al., No. CIV.S-00-0523 MLS DAD.

Plaintiffs
purported to represent a class of all persons who purchased our common stock pursuant to our February 15, 2000 IPO. The Plaintiffs alleged that the prospectus pursuant
to which the IPO was effected contained materially false and misleading statements and it did not state that we would be
delayed in introducing a new version of its RidgeMark product, and did not state that sales of our eMCee product would be lower than expected. Plaintiffs have also named our underwriters, J.C.
Bradford and Advest, Inc., and our prior accountants, Arthur Andersen LLP, as defendants.

We
believed these actions were without merit and defended ourselves against them vigorously. However, to avoid the costs and uncertainties of further litigation, we entered into a
memorandum of understanding to settle the litigation. The settlement was approved by the court in July 2002. Under the terms of the settlement, all claims against us and all other defendants
were dismissed without admission of liability or wrongdoing. The shareholder class received a cash payment of $2.5 million, of which $1.3 million was paid by VantageMed in
December 2001, representing our portion of the settlement.

Following
our announcement in February 2002 that our independent accountants at that time, Arthur Andersen, had resigned due to its disagreement with our accounting for the sale
of our dental business, the staff of the SEC commenced an informal inquiry into our accounting practices with respect to the sale of the dental business. We are cooperating with the SEC's inquiry.

We
are party to various legal actions arising in the normal course of business. Matters that are probable of unfavorable outcome and which can be reasonably estimated are accrued. Such
accruals amounted to $121,000 at December 31, 2002, and are based on information known about the matters, our estimates of the outcomes of such matters and our experience contesting, litigating
and settling similar matters. This amount is included in accrued liabilities in the accompanying consolidated balance sheet. None of the actions are believed by management to involve amounts that
would be material to our consolidated financial position, operations, or liquidity after consideration of recorded accruals.

NOTE 11SEGMENT REPORTING

We have re-evaluated our approach for making operating decisions and assessing the performance of our business and have determined that we have three
reportable segments: software and systems, customer support and electronic services. The software and systems sales group sells and licenses

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practice management software products to physicians, and other professionals with comprehensive office management software designed to automate the administrative, financial, practice management and
clinical requirements of a practice. The customer support group provides software, network and hardware support, training, installation services. The electronic services group provides electronic
claims processing, electronic statement printing and mailing and electronic remittance advice services.

The
accounting policies of the segments are the same as those described in the summary of significant accounting policies. We evaluate performance based on margin level before selling
general and administrative and other operating costs and do not manage costs below margin by segment. Additionally, we do not track long-lived assets by segment and therefore asset
disclosures are not
relevant and are not presented. Our reportable segments offer different products and services, which are sold and serviced by the same selling and support personnel. The accompanying statements of
operations disclose the financial information for these reportable segments for 2002 and 2001.

NOTE 12UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA:

|      |                                      | Quarter |   |        |  
|----- | ------------------------------------ | ------- | - | ------ | -
|
|
|2002: |                                      |         |   |        |  
|      | Total Revenues                       |         | $ | 5,386  |  
|      | Gross margin                         |         |   | 2,273  |  
|      | Net loss(1)                          |         |   | (2,121 | )
|      | Basic and diluted net loss per share |         | $ | (0.25  | )
|2001: |                                      |         |   |        |  
|      | Total Revenues                       |         | $ | 6,422  |  
|      | Gross margin                         |         |   | 3,103  |  
|      | Net loss(2)                          |         |   | (2,330 | )
|      | Basic and diluted net loss per share |         | $ | (0.27  | )

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Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

On February 8, 2002, Arthur Andersen LLP (Andersen) resigned as our independent auditors. The decision to accept the resignation of Andersen and to seek
new accountants was approved by both the Audit Committee and its Board of Directors.

Andersen
stated that the reason for its resignation was that it was unable to continue to rely on management's representations on certain issues concerning the financial statements
because of a disagreement between Andersen and us as to whether certain information concerning the funding of the sale of our dental care business had been timely provided to Andersen. We sold our
business to a third party in the quarter ended September 30, 2001. We had recognized $30,000 of revenue previously deferred and a $391,000 gain in connection with the sale of the dental
business, which was credited to selling, general and administrative expenses, in our third quarter Form 10-Q. The third party purchaser of our dental business subsequently defaulted
under the terms of the sale and we regained possession
of the dental business assets and operations. Andersen advised our Audit Committee that the third quarter financial statements for the period ending September 30, 2001 should be restated. In
addition, Andersen stated that it believed we had a material weakness in internal controls related to our current lack of a chief financial officer with the appropriate knowledge, experience, and
background for a publicly traded entity.

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Our
Audit Committee, with the assistance of outside counsel, has conducted and completed an internal investigation related to the issues raised by Andersen in its resignation as our
independent auditors, including the accounting treatment of the sale of our dental business. The investigation found no evidence of manipulation on the part of VantageMed or its management, but
determined that the issues raised by Andersen were the result of inadequate internal controls. As a result of the investigation, we have instituted certain measures to improve internal controls, and
have reversed the gain from the sale of our dental business and restated our financial statements for the third quarter period ending September 30, 2001.

On
April 3, 2002, VantageMed Corporation and Grant Thornton LLP entered into an engagement letter whereby Grant Thornton agreed to serve as our new independent auditors. Prior to
engaging Grant Thornton, neither we, nor anyone on our behalf, consulted Grant Thornton regarding the application of accounting principles to a specified transaction, either completed or proposed, or
the type of audit opinion that might be rendered by Grant Thornton on our financial statements. In addition, apart from the disclosure as to the mere fact of the resignation of Andersen, neither we,
nor anyone on our behalf, consulted Grant Thornton regarding our previous disagreement with Andersen or the resignation of Andersen.

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PART III

Certain information required by Part III is omitted from this Report on Form 10-KSB in that the Registrant will file its definitive
Proxy Statement for its Annual Meeting of Stockholders to be held in June of 2002 pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the Proxy Statement), and
certain information included in the Proxy Statement is incorporated herein by reference.

Item 9.  Directors and Executive Officers of the Registrant



The
disclosure required by Item 405 of Regulation S-K is incorporated by reference to the section entitled "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement.

Item 10.  Executive Compensation

The information required by this Item is incorporated by reference to the sections entitled "Compensation of Executive Officers" in the Proxy Statement.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by reference to the sections entitled "Principal Share Ownership" and "Security Ownership of Management" in
the Proxy Statement.

Item 12.  Certain Relationships and Related Transactions

The information required by this Item is incorporated by reference to the section entitled "Certain Transactions" in the Proxy Statement.

Item 13.  Exhibits and Reports on Form 8-K



|Exhibit
Number |   | Exhibit Title                                                                                                                                                      
|-------------- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            | * | Merger Agreement with Mariner Systems, Inc.                                                                                                                        
|2.2            | * | Assignment and Assumption Agreement (Mariner Systems, Inc.) by and between VM1 Acquisition Corp. (Assignor) and VM4 Acquisition Corp. (Assignee).                  
|3.1            | * | Form of Registrant's Amended and Restated Form of Certificate of Incorporation.                                                                                    
|3.2            | * | Form of Registrant's Amended and Restated Bylaws.                                                                                                                  
|4.1            | * | Form of Registrant's Specimen Stock Certificate.                                                                                                                   
|10.1           | * | Lease Agreement, dated November 1, 1996 between Registrant and Dr. Jun Hasegawa and Noriko Hasegawa, as Trustees for the Hasegawa Family Trust, dated June 8, 1999.
|10.2           | * | Lease Agreement between Registrant and Jun and Noriko Hasegawa, as Trustees for the Hasegawa Family Trust dated January 18, 1999.                                  
|10.3           | * | Lease Agreement between Registrant and Jun and Noriko Hasegawa, as Trustees for the Hasegawa Family Trust dated August 20, 1999.                                   
|10.4           | * | Employment Agreement dated August 6, 1999 entered into between Registrant and James Seiler.                                                                        

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|10.5  | * | Secured Convertible Promissory Note, dated October 7, 1999, issued to Friedli Corporate Finance.                                                                                                    
|----- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.6  | * | Convertible Promissory Note dated October 7, 1999 issued to Friedli Corporate Finance.                                                                                                              
|10.7  | * | Secured Promissory Note, dated January 3, 2000 issued to Friedli Corporate Finance.                                                                                                                 
|10.8  | * | Warrant dated August 6, 1999, issued to Pine, Inc.                                                                                                                                                  
|10.9  | * | Warrant dated August 6, 1999, issued to Pine, Inc.                                                                                                                                                  
|10.10 | * | Warrant dated October 7, 1999, issued to Peter Friedli.                                                                                                                                             
|10.11 | * | Promissory Note dated July 15, 1997, issued to Richard Pendleton.                                                                                                                                   
|10.12 | * | Consulting Agreement dated July 27, 1998, entered into between Registrant and Peter Friedli.                                                                                                        
|10.13 | * | VantageMed's Amended and Restated 1998 Stock Option/Stock Issuance Plan.                                                                                                                            
|10.14 | * | Form of Indemnity Agreement entered into by Registrant with each of its officers and directors.                                                                                                     
|10.15 | * | Non-Exclusive Software License Agreement, dated December 31, 1998 between Registrant and QuadraMed Corporation.                                                                                     
|10.16 | * | Change in Control Agreement dated July 23, 1998, between Registrant and with Thomas A. McCreery.                                                                                                    
|10.17 | * | Employment Agreement dated April 30, 1998, between Registrant and with Gregory Vap.                                                                                                                 
|10.18 | * | Management Employment Agreement dated July 31, 2000, between Registrant and with Joel Harris.                                                                                                       
|10.19 | * | Secured Promissory Note, dated November 3, 2000 and Stock Pledge Agreement issued by Richard W. Pendleton to Registrant.                                                                            
|10.20 | * | Amendment 1 to the Management Employment Agreement with Joel Harris dated September 18, 2000.                                                                                                       
|10.21 | * | Amendment 1 to the Management Employment Agreement with James Seiler dated September 18, 2000.                                                                                                      
|10.22 | * | Separation Agreement and Release with James Seiler dated April 19, 2002                                                                                                                             
|10.23 | * | Separation Agreement and Mutual General Release of Claims with Joel Harris dated May 13, 2002                                                                                                       
|10.24 | * | Employment Agreement dated August 7, 2002, between VantageMed Corporation and Richard Brooks (previously filed as Exhibit 10.1 to the Form 10-Q filed by VantageMed Corporation on August 14,
2002) 
|10.25 | * | Employment Agreement dated August 7, 2002, between VantageMed Corporation and Gregory B. Hill (previously filed as Exhibit 10.2 to the Form 10-Q filed by VantageMed Corporation on August 14,
2002)
|10.26 |   | Employment Agreement dated February 18, 2003, between VantageMed Corporation and Richard Altinger                                                                                                   
|21.1  | * | Subsidiaries                                                                                                                                                                                        
|23.1  |   | Consent of Independent Public Accountants                                                                                                                                                           
|24.4  | * | Power of Attorney (included on signature page)                                                                                                                                                      
|99.1  |   | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                    
|99.2  |   | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                    

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On
October 10, 2002, we filed a current report on Form 8-K announcing the appointment of Steve Simpson to and the resignation of John Stevens from our Board of
Directors.

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Item 14.  Controls and Procedures

Disclosure Controls and Procedures

Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management,
including our President and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to
Rule 13a-15b under the Securities Exchange Act of 1934. Based on their review of our disclosure controls and procedures, the President and Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to us that is required to be included in our periodic SEC filings.

Internal Controls and Procedures

There were no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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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, in the City of Rancho Cordova, State of California, on the 31st day of March 2003.

| |  | VANTAGEMED CORPORATION
| |  | ----------------------
| |  | By:                   

Pursuant
to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.

|Signature                       |  | Title                                                               |  | Date          
|------------------------------- |  | ------------------------------------------------------------------- |  | --------------
|                                |  |                                                                     |  |               
|/s/RICHARD BROOKSRichard Brooks |  | President and Chief Executive Officer (Principal Executive Officer) |  | March 31, 2003
|/s/PETER FRIEDLIPeter Friedli   |  | Director                                                            |  | March 31, 2003
|/s/DAVID PHILIPPDavid Philipp   |  | Director                                                            |  | March 31, 2003
|/s/STEVE SIMPSONSteve Simpson   |  | Director                                                            |  | March 31, 2003
|/s/DAVE ZABROWSKIDave Zabrowski |  | Director                                                            |  | March 31, 2003

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CERTIFICATION OF  CHIEF EXECUTIVE OFFICER

I,
Richard Brooks, certify that:





|                      |  |                                                                                                    
|--------------------- |  | ---------------------------------------------------------------------------------------------------
|                      |  | /s/RICHARD BROOKSRichard Brooks President and Chief Executive Officer
(Principal Executive Officer)
|Dated: March 31, 2003 |  |                                                                                                    

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CERTIFICATION OF  CHIEF FINANCIAL OFFICER

I,
Gregory Hill, certify that:





|                      |  |                                                                                                 
|--------------------- |  | ------------------------------------------------------------------------------------------------
|                      |  | /s/GREGORY HILLGregory Hill Chief Financial Officer
(Principal Financial and Accounting Officer)
|Dated: March 31, 2003 |  |                                                                                                 

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